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    Natural Capitalism
    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.

    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.

    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.

    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.

    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.

    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.

    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.

    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."

    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.

    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.


    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.

    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

    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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