The transformative role of investors in Regenerative Businesses

In an era where sustainability and long-term ecological health are becoming increasingly critical, traditional business models are being reevaluated. At the Butterfly School , we delve into these concepts through case studies. One of our case studies is about Nexans, a global leader in the cable transmission industry. This case study features insights from Christopher Guerin, CEO of Nexans, who shares compelling thoughts:

"The issue that keeps me awake at night is the pressure from analysts concerning the upcoming quarter. However, the focus on the next quarter is misplaced. The hyper-specialization of stock market models and short-term thinking do not align with the current global challenges."

Over the past 25 years, my experience across six companies has revealed a consistent focus on boosting revenue and reducing costs. Financial assessments were conducted quarterly or every four months, and depending on the revenue performance, annual forecasts were adjusted up or down. This dictated cost cuts to preserve profit margins, demonstrating a relentless and almost exclusive focus on financials—assumed to drive enterprise value up and necessary for continuing operations.

Rethinking investment in regenerative businesses

A regenerative company cannot exist in isolation; it thrives in conjunction with its ecosystem. Value creation extends beyond the company itself to include the entire ecosystem, encompassing all stakeholders—customers, partners, communities, the planet, and investors.

Investing in a regenerative company requires considering the entire ecosystem. The goal of a regenerative business is to enhance the vitality and viability of the living systems it interacts with, promoting further life. However, quantifying such capacity enhancement is challenging. How can we account for intangible value drivers that support the ecosystem sustainably and foster long-term resilience? Although a financial investor might see a slower return initially, a holistic investment in the ecosystem is likely to yield superior long-term profitability.

Transforming investors into ecosystem co-creators

The prevailing short-term (often quarterly) focus is incompatible with the sustainability of ecosystems, at least for as long as we do not know how to measure emerging potential and long-term, indirect impacts. It is an overly simplified viewpoint which in practice leads to constant short-term pressure and suppresses the potential for creative energy necessary for a thriving ecosystem. It's crucial to shift our perspective by reevaluating how we measure value and redefining the role of investors.

A regenerative view of ecosystems means every stakeholder thrives as a part of a wider whole, in right relationship with it and its other participants. Investors should transition from being isolated financiers to active co-creators of the ecosystem.

In this model, every participant becomes an investor, fostering reciprocal and mutually beneficial relationships, and expecting returns on their contributions. For instance, when the earth yields resources like wood, water, rocks, and air, it invests in humanity and expects a return on its investment. In return, it expects us to invest in developing its capabilities, something that rarely happens.

Regenerative enterprises should ensure that each ecosystem stakeholder becomes both a co-creator and a co-investor. Without embracing these roles, traditional transactional financial patterns are likely to persist - and sooner or later, the company needs to limit how much it interacts with its wider, finer ecosystem.

Shaping a new financial paradigm

There is an urgent need for a paradigm shift in how investors approach their roles in the ecosystem. Moving away from short-term gains towards a sustainable and regenerative model not only fosters resilience but also enhances the long-term viability and profitability of businesses, ensuring they operate as part of a wider ecosystem (of clients, society, natural ecosystems…) without which they cannot operate. This transformation requires innovative thinking and a willingness to rethink value and success in a way that benefits all stakeholders, including the planet.