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For the week of Sept. 15, 1999 through Sept. 22, 1999

Capitalism with honor and ecology in the 21st century

Commentary by DICK DORWORTH


Question: How can business be honorably conducted at the dawn of the 21st Century?

Answer, maybe: From four linked shifts in business practices.

The question was posed by Paul Hawken, author and founder of the Smith & Hawken retail and catalog company.

The answer is outlined in a book called Natural Capitalism: Creating the Next Industrial Revolution to be published later this month. It is co-authored by Hawken, Amory B. Lovins and L. Hunter Lovins. Amory Lovins is a MacArthur Fellow, author and consultant to governments and businesses, both large and small. Hunter Lovins, Amory’s wife, co-founded the Lovins’ non-profit Rocky Mountain Institute, a resource policy center, in Snowmass, Colo. in 1982, and serves as its CEO.

These three are bright people who believe that big business and the natural world are not the natural adversaries the present state of the earth makes them appear. They point out that current business practices are destroying the earth’s environment and are neither sustainable, necessary nor intelligent.

They are not neo-Luddites, but, rather, people who believe in technology as well as in the natural world. It is always worth the effort it takes to listen to and understand either of them. When the three team up to answer Hawken’s question, it may be a watershed event in both intellectual and business circles.

Their book should find a deserved place in the library of every well read businessman, environmental activist, government policy maker and informed citizen.

Hawken’s question implies that business in the 20th century has been conducted dishonorably. While honorable and dishonorable business dealings have flourished between people in the 20th century (as in all others), when what Hawken and the Lovins’ call "natural capital" is considered it has been a century and more of dishonor in the world of commerce.

Business has been conducted by dishonorably plundering its natural capital, the natural world and its resources, without addressing the stupidity of destroying the environment and biosphere, or including its real costs in the corporate balance sheets. Hiding the true costs of doing business is dishonorable practice by any but the most corrupt business standards.

The Lovins’ and Hawken propose a way that business can be honorably conducted in terms of both people and the natural world. The former depends on the latter, and, perhaps, in the 21st century the latter will be able to depend on honor from the former. It is a nice concept not beyond the realm of hope.

The logic of capitalism is to economize on the scarcest resource. At the beginning of the Industrial Revolution only 200 years ago, machines replaced workers, making them 100 times more productive, but there was a scarcity of skilled people to exploit seemingly boundless natural resources. Capitalism’s logic is still the same—economize on the scarcest resource—but the scarcity is different. People, skilled and non-skilled, are becoming more abundant; nature and natural resources are becoming more scarce.

They write: "The reason companies (and governments) are so prodigal with ecosystem services is that the value of those services doesn’t appear on the business balance sheets. But that’s a staggering omission. The economy, after all, is embedded in the environment. Recent calculations published in the journal Nature conservatively estimate the value of all the earth’s ecosystem services to be at least $33 trillion a year. That’s close to the gross world product, and it implies a capitalized book value on the order of half a quadrillion dollars. What’s more, for most of these services, there is no known substitute at any price, and we can’t live without them."

That’s a staggering omission.

They refer to natural capitalism as what capitalism might become "if its largest category of capital—the "natural capital" of ecosystem services—were properly valued. They propose four major interlinked shifts in business practices:

Dramatically increase the productivity of natural resources. Reduce the wasteful and destructive flow of resources through fundamental changes in both production design and technology. Farsighted companies are already developing ways to make natural resources—energy, minerals, water, forests—stretch five, 10, even 100 times further than they do today.

Shift to biologically inspired production models. This means not just reducing waste (garbage), but eliminating the very concept of waste. Closed-loop production systems, modeled on nature’s designs, returns every output to the ecosystem as a nutrient, like compost, or it becomes an input for manufacturing another product.

Move to a solutions-based business model. Instead of selling goods, business would deliver services—for example, providing illumination rather than selling light bulbs. The new perception of value would move from the acquisition of goods as a measure of affluence to one where well-being is measured by the continuous satisfaction of changing expectations for quality, utility and performance. (This would entail viewing the richest human life as a dynamic experience rather than possessing the largest architecturally chic warehouse.)

Reinvest in natural capital. Ultimately, businesses must restore, sustain and expand the planet’s eco-systems so they can produce their vital services and biological resources. Pressures to do so are mounting as human needs expand, the costs of deteriorating ecosystems rise and environmental awareness increases.

Why haven’t these practices already been embraced? The answer, they say, is simple: current practices reward companies for wasting natural resources and penalize them for boosting resource productivity. For example, most companies treat as income their consumption of raw materials, but treat resource-saving as expenses for purposes of their balance sheet. This distortion makes it more tax efficient to waste fuel than to invest in improving fuel efficiency.

That the current business practices of capitalism, communism, socialism and dictatorship alike will not long maintain is clear. The ideas presented in Natural Capitalism: Creating the Next Industrial Revolution could lead to some much needed and overdue changes. Check it out.

 

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