Natural Capitalism

Fonte: Mother Jones

Somewhere along the way to free-market capitalism, the United States became the most wasteful society on the planet. Most of us know it. There is the waste we can see: traffic jams, irreparable VCRs, Styrofoam coffee cups, landfills; the waste we can’t see: Superfund sites, greenhouse gases, radioactive waste, vagrant chemicals; and the social waste we don’t want to think about: homelessness, crime, drug addiction, our forgotten infirm and elderly.

Nationally and globally, we perceive social and environmental decay as distinct and unconnected. In fact, a humbling design flaw deeply embedded in industrial logic links the two problems. Toto, pull back the curtain: The efficient dynamo of industrialism isn’t there. Even by its own standards, industrialism is extraordinarily inefficient.

Modern industrialism came into being in a world very different from the one we live in today: fewer people, less material well-being, plentiful natural resources. As a result of the successes of industry and capitalism, these conditions have now reversed. Today, more people are chasing fewer natural resources.

But industry still operates by the same rules, using more resources to make fewer people more productive. The consequence: massive waste — of both resources and people.

Decades from now, we may look back at the end of the 20th century and ponder why business and society ignored these trends for so long — how one species thought it could flourish while nature ebbed. Historians will show, perhaps, how politics, the media, economics, and commerce created an industrial regime that wasted our social and natural environment and called it growth. As author Bill McKibben put it, “The laws of Congress and the laws of physics have grown increasingly divergent, and the laws of physics are not likely to yield.”

The laws we’re ignoring determine how life sustains itself. Commerce requires living systems for its welfare — it is emblematic of the times that this even needs to be said. Because of our industrial prowess, we emphasize what people can do but tend to ignore what nature does. Commercial institutions, proud of their achievements, do not see that healthy living systems — clean air and water, healthy soil, stable climates — are integral to a functioning economy. As our living systems deteriorate, traditional forecasting and business economics become the equivalent of house rules on a sinking cruise ship.

One is tempted to say that there is nothing wrong with capitalism except that it has never been tried. Our current industrial system is based on accounting principles that would bankrupt any company.

Conventional economic theories will not guide our future for a simple reason: They have never placed “natural capital” on the balance sheet. When it is included, not as a free amenity or as a putative infinite supply, but as an integral and valuable part of the production process, everything changes. Prices, costs, and what is and isn’t economically sound change dramatically.

Industries destroy natural capital because they have historically benefited from doing so. As businesses successfully created more goods and jobs, consumer demand soared, compounding the destruction of natural capital. All that is about to change.

Natural Capital

Natural systems provide trillions of dollars in services that have no man-made substitutes, as Biosphere II’s failure shows.

Everyone is familiar with the traditional definition of capital as accumulated wealth in the form of investments, factories, and equipment. “Natural capital,” on the other hand, comprises the resources we use, both nonrenewable (oil, coal, metal ore) and renewable (forests, fisheries, grasslands). Although we usually think of renewable resources in terms of desired materials, such as wood, their most important value lies in the services they provide. These services are related to, but distinct from, the resources themselves. They are not pulpwood but forest cover, not food but topsoil. Living systems feed us, protect us, heal us, clean the nest, let us breathe. They are the “income” derived from a healthy environment: clean air and water, climate stabilization, rainfall, ocean productivity, fertile soil, watersheds, and the less-appreciated functions of the environment, such as processing waste — both natural and industrial. Nature’s Services, a book due out this spring edited by Stanford University biologist Gretchen C. Daily, identifies trillions of dollars of critical ecosystem services received annually by commerce.

For anyone who doubts the innate value of ecosystem services, the $200 million Biosphere II experiment stands as a reality check. In 1991, eight people entered a sealed, glass-enclosed, 3-acre living system, where they expected to remain alive and healthy for two years. Instead, air quality plummeted, carbon dioxide levels rose, and oxygen had to be pumped in from the outside to keep the inhabitants healthy. Nitrous oxide levels inhibited brain function. Cockroaches flourished while insect pollinators died, vines choked out crops and trees, and nutrients polluted the water so much that the residents had to filter it by hand before they could drink it. Of the original 25 small animal species in Biosphere II, 19 became extinct.

At the end of 17 months, the humans showed signs of oxygen starvation from living at the equivalent of an altitude of 17,500 feet. Of course, design flaws are inherent in any prototype, but the fact remains that $200 million could not maintain a functioning ecosystem for eight people for 17 months. We add eight people to the planet every three seconds.

The lesson of Biosphere II is that there are no man-made substitutes for essential natural services. We have not come up with an economical way to manufacture watersheds, gene pools, topsoil, wetlands, river systems, pollinators, or fisheries. Technological fixes can’t solve problems with soil fertility or guarantee clean air, biological diversity, pure water, and climatic stability; nor can they increase the capacity of the environment to absorb 25 billion tons of waste created annually in America alone.

Natural Capital as a Limiting Factor

The new limits to prosperity are natural systems — not boats, but fisheries; not sawmills, but forests.

Until the 1970s, the concept of natural capital was largely irrelevant to business planning, and it still is in most companies. Throughout the industrial era, economists considered manufactured capital — money, factories, etc. — the principal factor in industrial production, and perceived natural capital as a marginal contributor. The exclusion of natural capital from balance sheets was an understandable omission. There was so much of it, it didn’t seem worth counting. Not any longer.

Historically, economic development has faced a number of limiting factors, including the availability of labor, energy resources, machinery, and financial capital. The absence or depletion of a limiting factor can prevent a system from growing. If marooned in a snowstorm, you need water, food, and warmth to survive. Having more of one factor cannot compensate for the absence of the other. Drinking more water will not make up for lack of clothing if you are freezing.

In the past, by increasing the limiting factor, industrial societies continued to develop economically. It wasn’t always pretty: Slavery “satisfied” labor shortages, as did immigration and high birthrates. Mining companies exploited coal, oil, and gas to meet increased energy demands. The need for labor-saving devices provoked the invention of steam engines, spinning jennies, cotton gins, and telegraphs. Financial capital became universally accessible through central banks, credit, stock exchanges, and currency exchange mechanisms.

Because economies grow and change, new limiting factors occasionally emerge. When they do, massive restructuring occurs. Nothing works as before. Behavior that used to be economically sound becomes unsound, even destructive.

Economist Herman E. Daly cautions that we are facing a historic juncture in which, for the first time, the limits to increased prosperity are not the lack of man-made capital but the lack of natural capital. The limits to increased fish harvests are not boats, but productive fisheries; the limits to irrigation are not pumps or electricity, but viable aquifers; the limits to pulp and lumber production are not sawmills, but plentiful forests.

Like all previous limiting factors, the emergence of natural capital as an economic force will pose a problem for reactionary institutions. For those willing to embrace the challenges of a new era, however, it presents an enormous opportunity.

For a Finer Future, “We Need a New Story,” Says Hunter Lovins

On “Food Talk with Dani Nierenberg,” Hunter Lovins, President of Natural Capitalism Solutions—a non-governmental organization that educates business, governments, and communities about how to combine regenerative practices and profit—talks about her roadmap to a finer future. “We need a story of an economy in service to life, a world that works for everyone,” says Lovins. “People don’t have a sense that a finer future is possible.”

Lovins calls for a new economy, one that replaces the old, broken story of neoliberalism and instead encourages companies to devote themselves to strategies that benefit people, the planet, and profits. “We live in a very interesting time in history in which we find it easier to envision the zombie apocalypse than to think of a world that works for everyone,” says Lovins. “We have soaring levels of inequality, and we’re losing every major ecosystem on the planet: we need a new story.” In her new book, A Finer Future: Creating an Economy in Service to Life, Lovins re-writes the neoliberal story, showing enlightened entrepreneurship, technology, and policy will transform the economy, mitigating its effects on global warming and political disruption.

Hunter Lovins Sees Business Benefits of Climate Change Adaptation

Among the speakers at the BaseCamp SRI conference held last week in New York was Hunter Lovins, the president and founder of Natural Capitalism Solutions (NCS), an environmental advocacy and consulting organization. Lovins is also the author of Natural Capitalism and the recently published sequel, Climate Capitalism.

Lovins set aside sometime during the conference to talk, often humorously and always in great detail, with SocialFunds.com about the new book, the work of NCS, and the business opportunities waiting to be seized in response to the challenges presented by climate change.

"Climate Capitalism argues that even if you're a profit-maximizing capitalist who believes climate change is a hoax, you'll do exactly what you'd do if you were scared to death about climate change, because we know how to solve it at a profit," Lovins said. "You don't have to believe in the problem to believe in the solution. There are opportunities to make more money while solving the problem."

Of course, Lovins continued, "Climate change is real, is proximate, and is very serious. But it's only one of an array of problems facing capitalism as we know it, from peak oil to water to half the world's population living on less than $2.50 a day."

However, "U.S. legislators are intent upon denying that climate change exists and believing that it would be better to let our green tech jobs go to China," she said. "A number of countries are investing heavily in the green economy, or what the Chinese call the circular economy."

Germany is one country investing heavily in renewable energy technologies, in its case solar power. By the end of 2010, Germany had an installed solar capacity of over 17,000 MW, by far the most in the world. In May of this year, Germany announced that it would phase out all 17 of its nuclear power plants by 2022 and will rely on renewables instead.

"The German solar industry now has more jobs than the American steel industry," Lovins said. "How did the Germans get there? They have good policy, i.e. feed-in tariffs. A study by Deutsche Bank found that while electricity rates have gone up, they went up less than if the Germans did nothing." Feed-in tariffs are guarantees of payment at premium rates for electricity from renewable sources that is fed into the grid.

"If we want out of the recession, we know how to do it," Lovins said. "Those wild-eyed environmentalists over at Goldman Sachs have shown that companies that are leaders in environmental, social, and governance (ESG) policy have 25 percent higher stock value. The Economist Intelligence Unit has shown that ESG leaders have the fastest-growing stock value."

"We're already at the point where companies making an authentic commitment are driving their markets, gaining market share, and increasing labor productivity," Lovins continued. "All aspects of the integrated bottom line."

The first step toward a low-carbon economy is mitigation through energy efficiency measures, which Lovins described as "low-hanging fruit that grows back." Energy efficiency not only reduces reliance of fossil fuels, but also results in significant cost savings within a short period of time. A 2009 report [PDF] by McKinsey & Company, for example, projected that a comprehensive national approach to energy efficiency would lead to energy savings of $1.2 trillion by 2020, and reduce greenhouse gas (GHG) emissions by 1.1 gigatons per year.

"However much we'd like to think we can mitigate our way out of the climate crisis, it's a little too late," Lovins cautioned. "We're going to have to start adapting. The extreme weather events we've been seeing are exactly what climate scientists say to expect in an era of a warming earth."

"It will take the business community waking up and realizing that it is a competitive issue, an issue of the long-term share performance of companies," she said, "And the investment community realizing that if they put their money into the companies of the future, they'll do very well. Their money is at risk if they persist in putting it into companies that don't get it."

"It's going to take local action," she continued. "Policy is dead at the national level, it's probably dead at most state levels. It's almost like these people are intent upon creating another collapse."

"It is the diligent effort in how you transform how you do business that is taken seriously in the marketplace" and among key stakeholders, Lovins said, referring to her experience advising L'Oreal, the cosmetics company. Noting that the company practices energy efficiency, and even has a facility in Canada with a net zero carbon footprint, Lovins advised L'Oreal to "consider telling your very good story of authentic commitment to behaving in a sustainable way. This is what the young people of today want," she said, referring to studies that show sustainability issues to be important considerations for college graduates entering the workforce.

"Companies should have solid relationships with third-party verifiers and non-governmental organizations (NGOs) who will criticize them when they do something wrong," Lovins said. "Follow Global Reporting Initiative (GRI) protocols. Companies that are not GRI-compliant are putting themselves at risk."

While a majority of large companies seems to now understand the importance of sustainability reporting — the 2010 S&P 500 Report [PDF] of the Carbon Disclosure Project (CDP) found that 59 percent of companies in the index report on GHG emissions — smaller companies lag far behind, according to a report [PDF] published earlier this year by Pax World Management.

Lovins noted that a service provided by NCS "is aimed at small businesses, to help them implement sustainable procedures profitably." Referring to a taco maker in California who wanted to sell his product to Wal-Mart, Lovins observed that the first two questions Wal-Mart asks of its suppliers address reporting of GHG emissions and issuing a sustainability report. The Solutions @ the State of Business product offered by NCS, Lovins said, helped the taco maker save $450,000 through efficiency measures.

"The economy is clearly in trouble," Lovins said. "Is the economy going to go over a cliff again? It would not surprise me. Investors ought to be taking this very seriously." She praised the sustainable investment community for having "a disproportionate influence on the economy as a whole."