01/31/2014 05:13 pm ET | Updated Mar 31, 2014

Transcending the Tension Between Climate Change and Inequality

This year's gathering of the World Economic Forum at Davos was kicked off with the reading of a letter from Pope Francis, which ends: "I ask you to ensure that humanity is served by wealth and not ruled by it." One can almost feel the squirming.

I recently participated in a roundtable among leading thinkers, activists and social entrepreneurs on the need to put "system change," not just problem-solving on the agenda in places like Davos. This discussion is not about capitalism versus socialism. No existing system, not social democracies nor communist states, operate sustainably. As is often the case in these discussions, the inevitable and emotion-packed debate on priorities emerged.

Transcending the tension between climate change and inequality will demand the persistence and creativity of innovative "systems level entrepreneurs" in collaboration with social and business entrepreneurs, not a shouting match between conventional liberal and conservative politicians and their economics ideologues. In a nutshell, the tension can be simplified into a question: Is inequality more important or is climate change more important?

Of course the inequality dimension is a tapestry of social ills ranging from unjust exclusion from a secure life with dignity, to physical and mental health crises and education opportunity deficiencies that have the affect of reinforcing growing inequality, to the destruction of true democracy, as the rich and powerful use their position, in part, to further their interests. And the climate change dimension is but one of numerous ecosystem crises that include fresh water, desertification, deforestation, chemical toxins and dead zones at the mouth of all major river systems, all with consequences we barely understand.

Two statistics present these issues in stark relief:

Inequality: The world's wealthiest 85 people own as much financial wealth as the bottom half of the world's 7 billion people combined, according to a new report released by Oxfam International.

Overshoot: The global economy currently uses 1.5 times the earth's natural ability to regenerate natural capital, and is on a trajectory to require much more, according to the Global Footprint Network. In financial terms, we're eating into principal.

Now I can easily make the case that climate change trumps inequality, unless we want to share equitably in ecological catastrophe. The social (shared well-being) is dependent upon the biophysical (healthy ecosystem function) and not the other way around.

However, this is a false choice, as recent events in Europe (and common sense) make clear. Last week, the European Union scaled back its greenhouse emissions targets because of tougher economic conditions and the competitive disadvantage of higher energy costs, particularly relative to cheap U.S. natural gas. Everything is connected.

Notwithstanding the many win-win opportunities to create jobs by "greening the economy" through scaling up energy efficiency investments for starters -- thus saving money and the planet at the same time -- there is an elephant in the room. Any serious solution to reversing the alarming climate change trends we are already experiencing in a timeframe that matters will require putting a punitive price on carbon, which will have the same affect as a "tax" on economic activity, which will exacerbate unemployment and inequality. At least according to conventional wisdom.

We will fail, as we are doing today, to reign in greenhouse gas emissions in time if we cannot transform this tension into a catalyst for system transformation. We can begin to see the possibilities if we extrapolate what is happening with the Detroit Kitchen Connect project, now part of our Field Guide to Investing in a Regenerative Economy. These young social entrepreneurs did not shy away from the tension between, in this case, healthy, locally grown organic food with its associated higher cost and the very real need for affordable food access to feed one's family in the context of inner city life in Detroit. Instead, they insisted on doing the hard, and often uncomfortable, work of collaboration across traditional boundaries until they found inclusive solutions. But this required re-imagining the local food system broadly, inclusive of access to transportation for example. The solutions are not limited to farmers' markets versus Walmart.

System Shift

A shift from our mechanistic worldview to an ecological or living systems worldview provides the critical design principles we need to tackle the unsustainable economic system. Living systems are sustainable because they are regenerative (not merely resilient). In this sense, sustainability is an outcome, not an objective or design feature.

Similarly, I believe, inequality is best understood as an outcome of a system design, the same inadequate system design that leads to our multiple ecological crises. Sustainable natural systems evolve and adapt over time through a process known as "emergence". Our challenge is to find the design principles that will accelerate rather than impede the emergence of our economic system in such a way that it generates both sustainable and equitable outcomes. For example decentralized diversity in balance with centralized efficiency (for the benefit of the system) is a design principle of natural systems. Note to Jamie Dimon.

Ecologically sustainable is objectively definable -- living within planetary boundaries.

What is equitable is a question for philosophers and ethicists, and one I don't yet have a good answer for myself. But if Bill Gates alone had as much wealth as the bottom 99 percent of the global population, few would support that as an equitable or acceptable outcome. Nor would a functional economy (or polis) be feasible. So, inequality must have bounds, although finding common grounds on what those bounds are and how to achieve them is up for debate.

It is the design principles of an economic system that is both sustainable and equitable (however defined) that demands our attention. Much work at the edges of the system between the business community, the "environmental movement", various "social justice movements" lies ahead before holistic and therefore effective policy recommendations can emerge. Road-trip to Detroit?