“All life is problem solving”

We don´t really have a choice, we must create a more sustainable society. And one thing we have learned from the covid pandemic is that if we, as a society, really want to change then we can do a lot of things. I am optimistic.

Guest professor Frank Figge at the Umeå School of Business, Economics and Statistics (USBE), studies ways to create a more sustainable economy – and a more sustainable society.

– I like the metaphor of earth as a spaceship.  All resources are limited to what we have available at the start of our journey, except sunshine. Hence, we must use, recycle, and reuse those resources in the best and most efficient way. That is what we aim for when we investigate how to create a more sustainable and circular economy.

Increasing numbers of organizations strive towards sustainability, to reach the climate goals. For instance, the Swedish government recently announced that Sweden is transitioning into a circular economy.

– In a perfect circular economy, we have a closed loop. We use our resources in an ideal way, with no waste. I argue that this is an impossible goal. Resources, like certain metals, cannot be infinitely reused. The closed loop is nevertheless an objective to strive for. This means that we must change our behavior.

Evolving theory on circularity

Studies of circular economies are often based on single examples, in limited environments. Frank Figge aims to come up with overarching, integrative theories. In one of his latest publications, “Between you and I: A portfolio theory of the circular economy”, he proposes to use financial “portfolio theory” to manage the circular use of finite resources.

We must match resource supply and demand so that companies can use resources together and more efficiently. The idea is that the sum of their resource uses becomes smaller than the sum of the individual use.

– My theory is inspired by risk diversification strategies used by investors to maximize profit for a given risk. Consider the case of our phones. Many people have old smartphones in their drawers that they don’t use anymore. We assume that the best option is to reuse or recycle them. Yet we often export our phones to countries that cannot recycle them at the end of their second life, making it a less desirable option. Paradoxically, less reuse can lead to a higher degree of circularity. Getting the mix between recycling and reusing and refurbishing right is clearly complicated. So, we must match resource supply and demand so that companies can use resources together and more efficiently. The idea is that the sum of their resource uses becomes smaller than the sum of the individual use. That’s similar to financial risks where the risk of a portfolio is less than the sum of all risks in isolation. Only a very specific portfolio of assets minimizes risk/reduces overall resource use. Finding that portfolio is key.

 

ImageMostphotos/Gemena communication

More sustainability is the only option

Frank Figge is Professor of Sustainability at the ESCP Business School in Paris. He became interested in sustainability early in his career. As a student, he worked for banks to fund his PhD studies. That environment became a major influence, and made him reflect on ways to integrate theories and methods from business and banking in academic settings. He wanted to conduct research that made sense to practitioners, and by that also could be put into use.

– In some of my older research, also inspired by finance theory, I have looked at the problem of pricing emissions like CO2. The typical train of thought runs “What is the cost of climate change?” Depending on how you count, the price can differ a lot. The emission of one ton of CO2 can be priced at a single dollar, or it can be priced at a thousand. I suggest a solution inspired by the economic theory of opportunity cost of capital. Instead of concentrating on the damage or burden of each ton of CO2, I suggest that we concentrate on better uses of emissions like CO2 and these better uses set the standard. This is central to opportunity cost-based approaches: that the performance of an economic activity (in this case the level of eco-efficiency of a company) is compared to the performance of an alternative economic activity. Companies understand this, this is how they work, and that is important if we want the industry to collaborate.  

The typical train of thought runs “What is the cost of climate change?” Depending on how you count, the price can differ a lot. The emission of one ton of CO2 can be priced at a single dollar, or it can be priced at a thousand.

Frank Figge came into contact with Umeå University when he met Lars Hassel, former rector of USBE. That contact led to further collaborations and he has already visited Umeå several times. 

– During my time at USBE I wish that I can help younger researchers to enjoy our profession. We demand a lot from young academics today. I am also looking forward to working with new people and to push boundaries together. Because we don´t really have a choice, we must create a more sustainable society. And one thing we have learned from the covid pandemic is that if we, as a society, really want to change then we can do a lot of things. I am optimistic. I don’t want to live in a perfect world, I want to live in a world with problems that we can solve. Philosopher Karl Popper once wrote “All life is problem solving”, and I believe that as long as problems can be solved we can grow as a society. So, let’s solve sustainability problems together!