The "greening" of business
from The Jobs Letter No. 61 / 30 May 1997
by Paul Hawken
PAUL HAWKEN believes we can create new jobs, restore our environment, and promote
social stability through a new approach to business, one he calls `natural' capitalism. Hawken has a
long history of breaking the ground of refreshing ideas and action, both as an author
(The Next Economy, Growing a
Business) and as a businessman (former head of
Smith and Hawken, a US mail-order garden and tools company).
In a recent edition of Mother Jones magazine, Hawken outlines his vision for the `greening'
of business as we know it, and describes the first signs of many creative, practical, and
profitable solutions to business and social problems. In this special feature, we summarise some of the
key points of Paul Hawken's analysis and solutions.
- ON THE NEXT STEP IN ECONOMIC EVOLUTION
In 1750, few could imagine the outcome of industrialisation. Today, the prospect of
a resource productivity revolution in the next century is equally hard to fathom. But this is what
it promises: an economy that uses progressively less material and energy each year and where
the quality of consumer services continues to improve; an economy where environmental
deterioration stops and gets reversed as we invest in increasing our natural capital; and, finally, a
society where we have more useful and worthy work available than people to do it.
Ironically, organisations like Earth First!, Rainforest Action Network, and Greenpeace have
now become the real capitalists. By addressing such issues as greenhouse gases, chemical
contamination, and the loss of fisheries, wildlife corridors, and primary forests, they are doing more
to preserve a viable business future than are all the chambers of commerce put together.
While business leaders hotly contest the idea of resource shortages, there are few credible scientists
or corporations who argue that we are not losing the living systems that provide us with trillions
of dollars of natural capital: our soil, forest cover, aquifers, oceans, grasslands, and rivers.
Moreover, these systems are diminishing while the world's population and the demand for services
are growing exponentially.
It is difficult for economists, whose important theories originated during a time of
resource abundance, to understand how the decline in ecosystem services is laying the groundwork for
the next stage in economic evolution. As we surrender our living systems, social stability,
fiscal soundness, and personal health to outmoded economic assumptions, we are hoping that
conventional economic growth will save us.
It is difficult for economists, whose important theories originated during a time of resource abundance, to understand how the decline in ecosystem services is laying the groundwork for the next stage in economic evolution.
- ON NATURAL CAPITAL
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.
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 emphasise 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.
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.
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. We need to revise our economic thinking to give full value to our natural
resources. This revised economics will stabilise both the theory and the practice of
free-market capitalism. It will provide business and public policy with a powerful new tool for
economic development, profitability, and the promotion of the public good.
- ON SOCIAL WASTE
We do not perceive the nature or enormity of the threat presented by current
employment patterns. According to the International Labor Organisation in Geneva, 1 billion people (about
30 percent of the world's labour force) either cannot work or have such marginal and menial
jobs that they can't support themselves or their families. The United States is proud of its 5.4
percent unemployment rate and should be. European unemployment hovers at twice this rate.
But official US figures mask a more complex picture.
Of the 127 million people working in the US, 38 million work part time, and 35 million
have full-time work that doesn't pay enough to support a family. Then there are the actual
unemployed, who number 7.4 million, as well as another 7 million who are discouraged, forcibly retired,
or work as temps. Nineteen million people work in retail and earn less than $10,000 per year,
usually without any health or retirement benefits. For the majority of workers, wages are no higher
today than they were in 1973. Between 1967 and 1987, Chicago lost 326,000 manufacturing jobs;
New York lost over 500,000. Fifty years after World War II, Detroit, Philadelphia, and Newark
look bombed out, while Dresden, London, and Berlin are livable and bustling.
We cannot heal the country's social wounds or "save" the environment as long as we cling to the outdated industrial assumptions that commercial enterprise should use more stuff and fewer people.
Meanwhile, the United States has quietly surpassed the erstwhile Soviet Union and its
gulag as the world's largest penal colony. Over 5 million American men are in prison, waiting for
trial, on probation, or on parole. We have become so inured to criminality that rural counties
seek prison construction under the rubric "economic development."
- ON JOB CREATION THROUGH SAVING WASTE
Industry has always sought to increase the productivity of workers, not resources. And
for good reason. Most resource prices have fallen for 200 years due in no small part to the
extraordinary increases in our ability to extract, harvest, ship, mine, and exploit resources. If
the competitive advantage goes to the low-cost provider, and resources are cheap, then business
will naturally use more and more resources in order to maximise worker productivity.
We cannot heal the country's social wounds or "save" the environment as long as we cling to
the outdated industrial assumptions that commercial enterprise should use more stuff and
fewer people. Our thinking is backward: We shouldn't use more of what we have less of (natural
capital) to use less of what we have more of (people). While the need to maintain high labour
productivity is critical to income and economic well-being, labour productivity that corrodes society
is like burning the furniture to heat the house.
Our pursuit of increased labour productivity at all costs not only depletes the
environment, it also depletes labour. Just as overproduction can exhaust topsoil, overproductivity can exhaust
a workforce. The underlying assumption that greater productivity would lead to greater leisure
and well-being, while true for many decades, has become a bad joke. In the United States, those
who are employed, and presumably becoming more productive, find they are working 100 to
200 hours more per year than 20 years ago. Yet real wages haven't increased for more than 20 years.
In parts of the industrialised world, unemployment and underemployment have risen faster
than employment for more than 25 years. Nearly one-third of the world's workers sense that they
have no value in the present economic scheme. Clearly, when 1 billion willing workers can't find
a decent job or any employment at all, we need to make fundamental changes. We can't
whether through monetary means, government programs, or charity create a sense of value and
dignity in people's lives when we're simultaneously developing a society that doesn't need them.
The theologian Matthew Fox has pointed out that we are the only species without
full employment. Yet we doggedly pursue technologies that will make that ever more so. Today
we fire people, perfectly capable people, to wring out one more wave of profits. Some of the
restructuring is necessary and overdue. But, as physicists Amory Lovins and Ernst von Weizsacker
have repeatedly advised, what we should do is fire the unproductive kilowatts, barrels of oil, tons
of material, and pulp from old-growth forests and hire more people to do so.
In fact, reducing resource use creates jobs and lessens the impact we have on the
environment. We can grow, use fewer resources, lower taxes, increase per capita spending on the needy,
end federal deficits, reduce the size of government, and begin to restore damaged environments,
both natural and social.
- ON BAD INFORMATION
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.
Our financial system gives us improper information a classic case of "garbage in,
garbage out." Money and prices and markets don't give us exact information about how much our
suburbs, freeways, and spandex cost. Instead, everything else is giving us accurate information:
our beleaguered air and watersheds, our overworked soils, our decimated inner cities. All of
these provide information our prices should be giving us but do not.
We don't know if our economy is growing because the indices we rely upon, such as
the GDP, don't measure growth. The GDP measures money transactions on the assumption that
when a dollar changes hands, economic growth occurs. But there is a world of difference
between financial exchanges and growth. Compare an addition to your home to a two-month stay in
the hospital for injuries you suffered during a mugging. Say both cost the same. Which is
growth? The GDP makes no distinction.
Unfortunately, where economic growth is concerned, our governments use a calculator with
no minus sign. Currently, economists count most industrial, environmental, and social waste as
GDP, right along with bananas, cars, and Barbie dolls. Growth includes all expenditures, regardless
of whether society benefits or loses. Instead of counting decay as economic growth, we need
to subtract decline from revenue to see if we are getting ahead or falling behind.
- ON REDUCING INCOME TAXES
The theologian Matthew Fox has pointed out that we are the only species without full employment. Yet we doggedly pursue technologies that will make that ever more so.
We have to revise the tax system to stop subsidising behaviours we don't want
(resource depletion and pollution) and to stop taxing behaviours we do want (income and work). We
need to transform, incrementally but firmly, the sticks and carrots that guide business.
We subsidise the disposal of waste in all its myriad forms from landfills, to deep-well
injection, to storage of nuclear waste. In the process, we encourage an economy where 80 percent of
what we consume gets thrown away after one use.
What we hinder, through the tax system, is work and social welfare, since we mainly
tax labour and income, thereby discouraging both. In 1994, the US government raised $1.27
trillion in taxes. Seventy-one percent of that revenue came from taxes on labour income taxes
and Social Security taxes. Another 10 percent came from corporate income tax. By taxing
labour heavily, we encourage businesses not to employ people.
To create a policy that supports resource productivity will require a shift away from
taxing the social "good" of labour, toward taxing the social "bads" of resource exploitation,
pollution, fossil fuels, and waste. This tax shift should be "revenue neutral" meaning that for every
dollar of taxation added to resources or waste, one dollar would be removed from labour taxes. As
the cost of waste and resources increases, business would save money by hiring less-expensive
labour to save more-expensive resources. The eventual goal would be to achieve zero taxation on
labour and income.
- ON PRODUCTS AS SERVICE
The key to resource efficiency is to understand products as a means to deliver a service
to the customer, rather than thinking of them as things. This idea of "products as service" was
first put forth in 1993 by German chemist Michael Braungart and William McDonough, dean of
the University of Virginia's architecture school.
Products as service are usually durables such as cars, TVs, and refrigerators. Braungart
and McDonough argue that these products should be "licensed" in the same way that software
is today. The product would always belong to the manufacturer, but unlike software, it
would eventually get returned to the manufacturer, who would be responsible for recycling or
reusing the product. Manufacturers would have to design and create their products so that all the
components have value when they return (just as in nature), and not just when they leave the factory.
Take carpeting as an example. Modern carpeting remains on the floor for up to 12
years, after which it remains in landfills for as long as 20,000 years or more making it less than
.06 percent efficient as a product.
One CEO of a $1 billion multinational carpet and flooring company, Ray Anderson, has taken
the "products as service" concept to heart. Anderson has developed the "Evergreen Lease" to
transform his commercial product, carpet tiles, into a service. Normally, flooring companies just
sell carpet tiles, but Interface wants to lease the services of the carpets to building owners.
As carpet tiles wear out and are replaced, the old ones are recycled and made into new tiles
as part of the lease fee. The customer does not pay an installation cost, only a monthly fee for
constantly fresh- looking and functional carpeting. Over time, the amount of material used will
drop but employment will go up, all the while saving the customer money and providing a
superior product (the carpet never looks old, worn, or frayed).
With a "products as service" system, customers could keep a product indefinitely, or sell
it to others, just as they do now. The final user, when finished, would take it to a de-shopping
center that would return it to the manufacturer for reuse and remanufacturing. Of course, such an
approach requires entirely new thinking with regard to design and engineering.
Source from Paul Hawken's forthcoming book Natural Capitalism: The Coming Efficiency Revolution (New York:
Hyperion Press, 1998) with Amory and Hunter Lovins. Excerpts from Mother Jones Magazine March 1997 and available on the
internet at http://www.mojones.com/mother_jones/MA97/hawken.htm.
The MoJo Wire and Mother Jones are projects of the Foundation for National Progress, a nonprofit 501(c)3
organization, founded in 1975 to educate and empower people to work toward progressive change.
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