Wednesday, June 2, 2010

Natural Capitalism: A System

Businesses and corporations are slowly moving towards sustainable strategies that provide a return on investment, and also creates a system of returning capital to natural processes, the very things that create the world we live in. A discussion about creating the Next Industrial Revolution reflects the current thinking on this concept.

It comes from the original Road Map for Natural Capitalism (Harvard Business Review) by Amory B. Lovins, L. Hunter Lovins, Paul Hawken. This article was originally published in May-June 1999 and was republished in July-August 2007 as an HBR Classic. The article includes a one-page preview that quickly summarizes the key ideas and provides an overview of how the concepts work in practice along with suggestions for further reading.

To quote the article:

No one would run a business without accounting for its capital outlays. Yet in 1999, when this article was originally published, most companies overlooked one major capital component--the value of the earth's ecosystem services. It was a staggering omission: Calculations at that time placed the value of those services--water storage, atmosphere regulation, climate control, and others--at $33 trillion per year. Not accounting for that cost has led to waste on a grand scale, the authors maintain. This article shows how a few farsighted companies, like DuPont and Xerox, were able to find powerful business opportunities in conserving resources on a similarly grand scale. Their early embrace of natural capitalism is even more important to emulate today. Natural capitalism comprises four major shifts in business practices. The first involves dramatically increasing the productivity of natural resources--by as much as 100-fold. In the second stage, companies adopt closed-loop production systems that yield no waste or toxicity. The third stage requires a fundamental change of business model--from selling products to delivering services. For example, instead of selling light bulbs, a manufacturer sells lighting services, with both the seller and the customer benefiting from the development of extremely efficient, durable bulbs. The last stage involves reinvesting in natural capital to restore, sustain, and expand the planet's ecosystem. Because natural capitalism is both necessary and profitable, it will subsume traditional industrialism, the authors argue, just as industrialism subsumed agrarianism. And the companies that are furthest down the road will have the competitive edge.

Patagonia's founder Yvon Chouinard is extremely pessimistic about the outlook for true sustainability:

I believe the accepted model of capitalism that demands endless growth deserves the blame for the destruction of nature, and it should be displaced. Failing that, I try to work with those companies and help them change the way they think about our resources.