The Nation Review:  Natural Capitalism

BUSINESS CREATES ECO-SIDE!

by WILLIAM GREIDER

Natural Capitalism is so informative and provocative--and so unfashionably
optimistic about the future of the planet--that I wonder why everyone in
public life is not reading it and arguing over the implications. The President
did volunteer a nice plug for the book when it came out a few months ago,
but it has yet to be reviewed by virtually any leading publication. Literary
culture doesn't grasp the high drama of industrial engineering. Newspaper
editors, like other Americans, are transfixed by business stories about
moguls and supermoguls from this gilded age and the previous one.

The book will find its audience, regardless. It is that important. The authors are
setting out a boldly different framework for understanding the ecological
crisis. It goes like this: The scale and pace of nature's destruction are
far more life-threatening than is commonly understood, yet should not be
regarded as overwhelming. The basis for a fundamental transformation of
industrial capitalism--new business concepts and technological processes
that can save the earth--already exists, not just as wishful theory but
as a set of successful and even spreading practices. These new approaches
to production and consumption will redefine economic life, not out of noblesse
oblige but because they deliver dramatic cost-saving efficiencies to the
bottom line, that is, higher rates of return for capital.

This perspective has something to offend nearly everyone: Business interests will choke on
the apocalyptic description of the earth in crisis but may be flattered
by the suggestion that they have the means to solve it. Most environmentalists
agree on the vast dimensions of the threat to nature but may dismiss the
authors' can-do optimism as dangerously naïve. I have particular doubts
of my own. Nevertheless, Natural Capitalism poses an intelligent challenge
to lazy assumptions on both sides of the political divide and ought to jump-start
a reinvigorated environmental debate.

Paul Hawken is a rare type--a green entrepreneur who built a successful enterprise,
Smith and Hawken, on eco-friendly terms and who wrote The Ecology of Commerce. The Lovinses are co-CEOs of the Rocky Mountain Institute, which over a generation has famously generated a stream of innovative ideas about how to save resources and eliminate the
vast industrial waste commonly known as pollution. If you know their previous
works, a lot of this will sound familiar. Indeed, Natural Capitalism recapitulates
important "new ideas" of the past two decades that are well-known to serious
ecologists on several continents, though not to the American public or its
political elites. The weight of this book lies in its comprehensive argument:
Ecological destruction is essentially a problem of system design that can
be solved. The evidence for this proposition is accumulating within business
itself, and the book describes scores (maybe hundreds) of startling examples.
The tone is slightly off-putting because it resembles the brisk self-confidence
of a business-management primer, but the authors are clearly trying to convince
corporate managers and investors, not eco-activists. Still, their larger
objective is radical. "Technology is revolutionizing our lives," they concede,
"[but] our purpose is almost the opposite. We are trying to describe how
our lives and life itself will revolutionize the technologies."

They start with the great fallacy of orthodox economics exposed by economist Herman
Daly in his landmark work For the Common Good more than a decade ago. Natural
capital--finite elements of the earth itself: land, air, water, the multitudes
of self-sustaining biosystems--does not appear anywhere in the account books
of capitalism. In the orthodox economist's model, nature is treated as an
infinite resource to be used as input for manufacturing and other human
activities (when one mineral is exhausted, another will be found to replace
it). Nature is "free" except for costs of extracting, transporting, altering
it. Nature is also a bottomless sink where the wasted materials are dumped.
Among many startling facts in this book is the estimate that in the vast
flows of natural materials devoured by the US economy every year, only 6
percent actually end up in products.

In real life, the economic model is nutty on this subject. But the system of false accounting endures as a profitable illusion--everything is made to seem cheaper than it truly is--and
very few "scientific" economists have the courage to challenge it. If the world's
accountants accepted that "natural capital" is neither free nor infinite,
the full crisis would become clear. Industrial capitalism (including all
of us who consume its output) is rapidly devouring the one form of capital
that cannot be replaced--not just air, water and the land's raw resources
but the life-supporting ecosystems themselves. Climate change and global
warming are a subset, not the whole, of what threatens. The evidence is
frightening, but the point of this book is not to scare people.
* * *
The social imperative is far more daunting than most people imagine--the objective
of zero waste, zero destruction. We need (and soon) an economic system that
mimics nature itself, where waste of one species becomes food for another,
where disruptions and imbalances occur but are self-correcting, self-restoring.
Thinking in these large terms does not trivialize the environmental progress
that has gone before, but it does make clear that the existing laws and
standards--based narrowly on whether human health is threatened or whether
business can "afford" to reduce pollution--are utterly inadequate to the crisis.

The usual conservative skeptics who front for business will attack
this formulation as a back-to-poverty recipe for destroying modern life.
But that leads to the truly radical core (and new evidence) of the Lovins-Hawken
argument. The industrial transformation is not only technically feasible
and already under way in some business practices but promises greater economic
returns, both for shareholders and workers. If industries would pursue these
possibilities aggressively in their own self-interest, environmental reform
may not even require negative incentives like "green taxes" on energy consumption
that are politically difficult and penalize the less affluent by raising
the cost of living.
* * *

Could this be true? In the $9 trillion US economy,
the authors explain, around
$2 trillion in spending is devoted to waste,
that is, activities or materials that yield literally no value to the buyer.
If that estimate is correct, there are incredible opportunities for genuine
efficiency--the engineer's version, not the stockbroker's. Because transformation
enhances productivity and will create new sectors of positive activities,
it should expand employment too.

Cost savings will flow from mundane matters--tightening
the factory plumbing and designing energy-efficient buildings--as well as
esoteric realms like nanotechnology, reconstituted materials and systems-design
integration. The payoff, as some industrial pioneers have already learned,
can be a factor of ten-, fifty-, even 100-fold. Steelcase, the largest maker
of office furniture, created an upholstery fabric that is disposed of by
composting. Remanufacturing firms in the United States now generate more
revenue than the consumer-durables industry. Anheuser-Busch saved 21 million
pounds of metal a year by knocking an eighth of an inch off the rim of its
beer cans.

To take an especially compelling example, consider the idea
of making manufacturers take responsibility for what ultimately happens
to their products, whether it's an automobile or dishwasher, packaging or
toxic chemicals. In the US political context, that sounds way too radical,
but actually, the principle is already in widespread use (and is better
known as leasing). Whether it's Volvo, Boeing or Carrier, the company retains
title to the leased car, jetliner or air-conditioning system, services it
conscientiously and eventually reclaims it for resale or disposal. The logic
of the relationship puts responsibilities on both producer and customer,
but especially gives the producer incentives to pursue the efficiencies
of long-life design and to minimize the costs of eventual disposal. Europe
is far ahead of the United States in exploring this mode of reform; several
nations already have "takeback" laws for cars, packaging and other goods.
America is not the world leader on eco-reform and hasn't been for many years.
The Lovins-Hawken perspective is a good fit with what's beginning to happen
at the community level in some places, where either private groups or local
governments are promoting dialogues on "redefining progress" aimed at reforming
industrial and consumption patterns. At a minimum, the book provides local
activists with a robust checklist of possibilities for waste reduction and
the evidence that major firms are actually making dramatic savings by doing
the right thing. These points seem especially relevant if public subsidies
are being used for a new factory or project. If the company gets a tax break,
shouldn't it be required to apply the best practices in design?

Other technological examples are numerous and fascinating (though a slog for readers
who don't have an appetite for this kind of stuff). As Natural Capitalism moved from
one domain to the next, piling up the success stories, I was eager to be
convinced. The more I read, however, the more unwanted doubt crept in. I
don't quarrel with their facts or have the expertise to judge the technological
claims. But the stories inspire this nagging question: If these innovations
so obviously benefit the companies as well as nature and society, why aren't
they being adopted everywhere? If the payoff is so darn good, why are major
sectors of industry still fighting the old wars, gutting environmental laws
when they can, stalling on compliance, propagandizing with scare stories
about how environmental values kill growth, jobs, profits?
* * *

The book, alas, doesn't confront the question squarely (a concluding chapter does
critique the blindness of markets but doesn't satisfy my doubts). Because
I was otherwise so impressed, this bothered me, so I called Paul Hawken
to ask about the gap between potential progress and the disappointing reality.
This gaudy financial boom, he observed, does not offer a propitious moment
to talk about the larger crisis and long-term solutions.

"Inertia momentum," he said with a sigh. "Business has so much inertia now that speed is at
such a premium. This boom is masking worldwide deflation, so people do not
see conserving energy or any other resources as cost issues."

The innovations that some companies have pioneered are still "unknown choices" to corporate
managers in general, he said, and especially to the Wall Street analysts
who judge their performance. Even if companies were aware of the potential,
I would add, investing capital in systemic reforms must compete with every
other opportunity for profitable investment, which may make long-term solutions
look like a loser.

"The people who control the flow of funds in this country
have a very narrow understanding of where you obtain financial returns,"
Hawken observed. "They have no familiarity with any of the subjects we describe
in this book. They have no training in these matters; they receive no pressure
from institutional investors or even the government to consider these choices.
They have no accountability for the results of not considering them."

OK,that takes the edge off the optimism expressed in the book. But it should
not discount the ideas and the abundant evidence that a larger, more aggressive
approach to the ecological crisis is plausible. If Wall Street and corporate
leaders won't take up the possibilities, others of us can talk about how their indifference
might be changed.

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William Greider, The Nation's national affairs correspondent, is author of One World,
Ready or Not: The Manic Logic of Global Capitalism (Touchstone), among other works.

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