June 2000 Meeting with Paul Hawken

    from The Jobs Letter No.127 / 14 July 2000

  • The Redesigning Resources Conference
  • Redesigning Resources Website and Conference Report
  • What is Natural Capitalism?
  • Photos from the Hawken/Mayors meeting
  • At the REDESIGNING RESOURCES conference, held in Christchurch last month, 200 invited business, government, science, arts and community leaders spent two days in presentations and workshops around the theme of Natural Capitalism.

    The conference was hosted by the Christchurch Employers' Chamber of Commerce and the Christchurch-based Recovered Materials Foundation. It included presentations from Paul Hawken (co-author of the book Natural Capitalism), Ray Anderson (Chairman and CEO of the Interface Corporation, one of the world's largest carpet companies), and New Zealand Prime Minister Helen Clark (who shifted her weekly cabinet meeting in order to attend).

    PAUL HAWKEN argues that the environment cannot be "saved" — nor can unemployment be "solved" — as long as people cling to the outdated industrial assumption that the best business strategy is to use more natural capital, and fewer people. He told the conference that moving the economy toward greater resource productivity can drastically reduce the impact we have on the environment, while at the same time creating more profitable businesses and increasing the overall levels and quality of employment.

    Several members of the MAYORS TASKFORCE for JOBS also attended the conference, and took time for a special meeting with Paul Hawken to discuss sustainable cities, local government, and the employment advantages that come from following a Natural Capitalism agenda.

    In this special feature, The Jobs Letter gives an essential summary of Hawken's comments from this meeting.

    I spend most of my time with corporations — yet the most interesting conversation for me is about "cities", and how to re-imagine them. The fact is that cities are the basic unit of sovereignty in the world — they always have been, and still are. Cities are where the rejuvenation, and all the juice, is happening … they are where the most imagination is, and where the most impact on people is. In the next century, cities are where social entrepreneurship will be much more dynamic and interesting than business entrepreneurship.

    " In the next century, cities are where social entrepreneurship will be much more dynamic and interesting than business entrepreneurship."
    Paul Hawken

  • The largest corporate sector in the world is cities. It's not insurance, not energy, not transport, it's cities. And we forget that they are corporations. They don't have shareholders, but they certainly have stakeholders.

    But cities are just so much larger in scope and size than any other corporate sector, and yet they are always seen as "other", and we don't include them with business. But, without exception, a city of 100,000 people is far more complex than a company that turns over $100 billion in revenue. In other words your city is more complex than Royal Dutch Shell or Exxon or IBM or whatever.

    What all cities lack is the fact that they don't have a map of themselves. I don't mean a road map … I mean that cities have no idea what their inputs and outputs really are. They do know perhaps about their water, energy and things that they have direct responsibility for … but the fact is a city is a very complex organism indeed, and what they don't have is a map of their capital flows. Their capital flows are not just their natural capital flows, it's also the financial capital — all the forms of capital that are going in and out.

  • Generally speaking, what you find is that cities range between capital exporters and capital concentrators. Cities that are capital concentrators, like Auckland, do very well. It doesn't mean they don't have problems, it just means that they have a surplus of cash. But many cities are in fact capital exporters and they have no idea why. They wonder why they have trouble maintaining their tax base, why the kids are leaving, why their education is faltering, why the housing stock is slipping, etc. And they wonder about this because they actually have no map of the capital flows in their city.

    A city that is a capital exporter is just like an organism that is slowly starving itself. With people, it's called anorexia … an anorexic eats just a little bit less every day than the amount of energy they expend and they slowly degrade as an organism. First they become skinny but later it's a real internal breakdown in terms of the organism until they die. Now, cities don't die that way but the fact is that the analogy is perfectly apt.

    " So when mapping the capital flows in a city you are really starting to look and ask: Where is it leaking? Where's all the money going? Where's it coming in too? And when it comes in — keep it.... A healthy city is like a healthy watershed. A healthy watershed receives water quickly, sucks it right up and releases it slowly."
    Paul Hawken

    Whether cities are capital concentrators or capital exporters is something anyone can feel by looking at the revenues, or population demand, or housing stock or things like that. But in fact there is no map, there's no mechanism, software, or inventory that allows cites to really understand and measure their capital flows, and get to see the changes that are occurring.

    The problems attendant on capital exporters or concentrators are very different. The problems of capital concentrators are growth and sprawl and noise and traffic and pollution etc. The cities who are de-capitalising tend to have crime and unemployment and drugs, poor housing etc. But whether a city is capitalising or de-capitalising, the fact is that in both cases the strategies to create a more healthy city and more jobs is to actually the same. The strategy is to close the capital loops, and to plug the capital leaks. That's why it is important to understand what the leaks are.

  • If you had a meter somewhere that told you how many miles to the gallon every car in your city was getting per litre and you could see the amount of money that's being exported, say from Christchurch, every second. This is happening in terms of the car stock, in terms of petrol — putting aside any mention of damage to the atmosphere and pollution. This information would give you a picture of the true capital flow of what's going on in Christchurch. And you would be astonished.

    The fact is the money goes through the dealer ... but it keeps going right out of this country to Japan, to the rest of the world. The fact that money is being transacted is a good thing — but the point is that the transaction doesn't come back to New Zealand very much. Maybe they buy some lamb, maybe they buy some wool … but the fact is it is not coming back to you.

  • So when mapping the capital flows in a city you are really starting to look and ask: Where is it leaking? Where's all the money going? Where's it coming in too? And when it comes in — keep it. Keep it and have it turn around more there in your city. This will raise more real income. And the more people who are working, the better the tax base. And so you can actually lower taxes because your gross taxable revenues are going up. All this reinforces the kind of action that you want to take on behalf of social issues, environmental issues, and quality of life in the city.

  • So a healthy city is one in which you look at all the capital flows and start to close the loops. A healthy city is like a healthy watershed. A healthy watershed receives water quickly, sucks it right up and releases it slowly. A sick watershed, whether it is forested or overgrazed, receives water slowly ... the rain runs right off because the sick watershed gives it up very quickly. A sick economic watershed — such as a city — doesn't accept money very quickly. It accepts it slowly ... and the money goes right out of the city the next day.

    My colleagues and I have worked with cities to try to reverse capital flows. In the case of energy, we have worked with a town in the United States where they have hot summers and cold winters — so there was a lot of air conditioning in the summer and a lot of heating in the winter. It has a large population of people who were not that economically well-off, they could not afford the kind of housing stock that was well insulated and energy-efficient. A great percentage of their income was going out on their utility bills ... so of course that's money they're not spending on education, or on a lot of other things. Furthermore, the energy utility was not in their town, it was a nuclear utility 200 miles away and so that money was just gone … it didn't come back to town at all. Again, that's an unhealthy economic watershed.

  • What we did is we worked with a window company, to establish a factory that would be co-owned with the city. This company would retrofit all the substandard housing with thermal panes that were manufactured in the city and then installed directly. Actually this was cheaper than buying the windows through a dealer network, and it employed people in the city. The people whose houses the windows were installed in had to pay nothing. In fact they were paid five hundred dollars for the trouble and inconvenience of having all their windows replaced ... and also because the energy audit showed that the amount of money the customers were spending on energy was far greater than the cost of the retrofit even with interest payments.

    We were going to use the power of the city to borrow money — in the United States a city can issue industrial development bonds which are tax deductible which have very low interest rates. So we would use IDDs to finance the factory, finance the retrofit, and people would pay for the windows over time but they would pay for it in the savings of energy that they were getting from having their houses retrofitted ... which also included insulation and other types of energy conservation measures.

  • So now what you have is the people in the houses having better and more comfortable houses, and their utility bills were actually going down. The project was providing work in the town, and people who were jobless were now being trained. We were upgrading their skills, so that they would have skill sets that would be valuable after the town was retrofitted, which would take quite a number of years. So the "wins" went right across, because we were literally plugging the energy leaks — and closing the capital flow loops as well.

    The Environmental Protection Agency (EPA) mandated the same city to build a secondary wastewater treatment plant. The EPA said that the water that was running off the streets was polluted, which it was, because of cars. But it was going into the Tennessee River, which meant the city had to meet the new Clean Water Act, which also meant they had to built a $100 million secondary wastewater treatment plant.

    Well, it was the last thing the city wanted. They wanted clean water, but they didn't want to spend $100 million, and the last thing they needed was a higher tax rate. This is a city that had seen industry leave, not come … and they were trying to make the city more attractive to business, not less attractive with higher taxes.

    And so again they came to us and asked: "What would you do using natural capitalism?" We studied it and looked at it … and then we asked them a question: How were you going to tax the businesses on their water run-offs? They replied that they were going to tax businesses by the square footage of roof and parking lots. This makes sense — the bigger the footprint, the bigger the water runoff , and the more you pay a fair share. But we thought about it and said: Well, we think you should tax the runoff by the gallon, not by the square foot. They asked: What's the difference? The answer is that the businesses have no incentive not to have a runoff. There's no incentive at all.

  • We showed them a plan to retrofit all of the parking lots in town. They were all classic solid paved areas built with slopes starting in the middle and draining towards the edges so that the water would go to the streets and not leave the cars sitting in water.

    What we talked about is retrofitting them with permeable or pervious paving which is used in industrial parks all throughout Europe. It is standard operating procedure over there right now — but somehow America never figured that out.

  • At the same time we were doing work in the city on a design to make that part of the city into a botanical garden. This area in Tennessee is actually an area of the greatest botanical biodiversity in the United States. So that seemed like a good idea.

    What we suggested is making the parking lots — whether they be private or public — into "parks" that you park cars on. So not only was there pervious paving … but we also put very tough resistant sedges and grasses in these tiles so that they take up a tremendous amount of water, and act to recharge the groundwater. And in all the medians and perimeters of the parking lots, we planted trees that were water-loving and fast-growing that also reflected the variety of trees that were once in the area. We actually named them — just like in a botanical garden

  • The point is that if you did all this you wouldn't need a secondary wastewater treatment plant. This retrofitting of parking lots means you're not contracting to a big business in San Francisco to treat waste water in Tennessee. You're treating it right there using the ground, the earth, the rocks, the sand … which basically filter what pollutants are all in the water. So then we asked businesses: If retrofitting your parking lots is cheaper than paying the taxes, would you do it? And they said: That's a no-brainer, of course we'd do it!

  • This retrofitting is a classic local job scheme. It means you're giving people work over years and years of retrofitting … and it is good work, they're making beautiful places. They're not just working in the streets and digging them up, which is okay, but I mean they're actually making beautiful places.

    We suggested to the city that since they were going to pass a $100 million bond anyway (for the secondary wastewater treatment plant) that had to be paid for in perpetuity… we suggested that they pass a $10-15 million bond and this bond would be used to hire youth during the summer to maintain the parking lots — to trim the shrubberies, and the trees and the flowers and so forth, because this is when the trees grow the fastest, and you're gonna have to do some trimming work. So not only would you be employing in the summer the youth in the city, they'd also be learning the unique botany of the region.

    These examples give you a way of thinking about a city as an organism, how to think about the flows, how to imaginatively close the loops, plug the leaks, and how you create more jobs and you reduce taxes or don't raise them. You also employ more people in meaningful living wage jobs and you retain the money that the city has within the city.

    The normal idea is that, if you want to create jobs… you've got to spend a lot of money. People usually need money to make jobs. But the fact is these examples are taking the money people were already spending on their cities and re-circulating it in an entirely different ways to create local employment.

    And when you look at these examples, they end up with better cities to live in, they're better cities to walk in, they're better cities for business, and they raise property values. So again, the "wins" are so endless. It sounds ridiculous, but in fact as you can tell here that the solutions are cheaper than the problems as they existed. And yet you create jobs.

    Source — Paul Hawken meeting with the Mayors Taskforce for Jobs, Christchurch Conference Centre, 27 June 2000

    Redesigning Resources

    Redesigning Resources
    — growing the economy while healing the environment
    Christchurch Conference Centre
    25—27 June 2000

  • Many participants at the Redesigning Resources conference believe that Natural Capitalism is a ground-breaking paradigm for the new economy and one which could transform our fundamental notions about commerce and its role in shaping a sustainable future. The conference organisers repeated the recommendations of many world leaders, such as President Bill Clinton, who were heralding the growing corporate interest in its principles. (Tachi Kiuchi, Managing Director of Mitsubishi Electric Corporation and Chairman of The Future 500, describes Natural Capitalism as "a manifesto for the second industrial revolution…" )

  • The Christchurch conference brought together six leading companies and organisations who agreed to be "case studies" in workshops on how these businesses could be redesigned under a natural capitalism agenda.

    These included: The Warehouse (NZ's largest retail group), Macpac (manufacturers of outdoor and wilderness equipment), Landcare Research (a NZ Crown Research Institute), Orion NZ (A national electrical network management company), the Christchurch City Council, and the Shire of Yarra Ranges (the largest metropolitan council in Melbourne, Victoria).

    The workshops at the conference were challenging and creative … and sometimes combative and argumentative. It's not every day that six major companies and organisations open themselves up to direct and frank feedback from a cross-section of business, government and community leaders.

    But the Redesigning Resources organisers were clear from the outset that this conference was also designed to be a catalyst for action. At the end of the two-day workshops, these six "case study" organisations committed themselves to genuine progress on their own natural capitalism agenda. They drew up specific goals covering a two-year timeframe, and progress on these goals will be reported on in the Resigning Resources website … at www.redesigningresources.org.

  • The Mayors from the Mayors Taskforce for Jobs who attended the Christchurch forum included: Sukhi Turner (Dunedin), Garry Moore (Christchurch), Claire Stewart (New Plymouth), Jenny Brash (Porirua), Michael McEvedy (Selwyn), Jill White (Palmerston North), Tim Shadbolt (Invercargill) and John Chaffey (Hurunui).

  • For more information on the Redesigning Resources conference, contact Mark Prain at Redesigning Resources, P.O.Box 6320, Upper Riccarton, Christchurch phone 03-341-1959 email redesigningresources@hotmail.com

    Natural Capitalism

  • What is Natural Capitalism? Hawken says it's what capitalism might become if its largest category of capital — the "natural capital" of ecosystem services — were properly valued. Hawken and his co-authors, Amory and Hunter Lovins, describe a journey towards natural capitalism which involves four major shifts in business practices:

    Dramatically increase the productivity of natural resources.
    " Reducing the wasteful and destructive flow of resources from depletion to pollution represents a major business opportunity. Through fundamental changes in both production design and technology, farsighted companies are developing ways to make natural resources — energy, minerals, water, forests —stretch 5, 10, even 100 times further than they do today. These major resource savings often yield higher profits than small resource savings do and not only pay for themselves over time but in many cases reduce initial capital investments."

    Shift to biologically inspired production models (bio-mimicry).
    " Natural capitalism seeks not merely to reduce waste but to eliminate the very concept of waste. In closed-loop production systems, modeled on nature's designs, every output either is returned harmlessly to the ecosystem as a nutrient, like compost, or becomes an input for manufacturing another product. Such systems can often be designed to eliminate the use of toxic materials, which can hamper nature's ability to reprocess materials."

    Move to a solutions-based business model.
    " The business model of traditional manufacturing rests on the sale of goods. In the new model, value is instead delivered as a flow of services — providing illumination, for example, rather than selling light-bulbs. This model entails a new perception of value, a move from the acquisition of goods as a measure of affluence to one where well-being is measured by the continuous satisfaction of changing expectations for quality, utility, and performance. The new relationship aligns the interests of providers and customers in ways that reward them for implementing the first two innovations of natural capitalism —resource productivity and closed-loop manufacturing."

    Reinvest in natural capital.
    " Ultimately, business must restore, sustain, and expand the planet's ecosystems so that they can produce their vital services and biological resources even more abundantly. Pressures to do so are mounting as human needs expand, the costs engendered by deteriorating ecosystems rise, and the environmental awareness of consumers increases. Fortunately, these pressures all create business value."

    Source — Harvard Business Review (May-June 1999)

    • For a fuller overview of the principles of Natural Capitalism,
    see The Jobs Letter No.61), or visit the Natural Capitalism website at www.natcap.org.

    • For specific comments by Paul Hawken on employment issues from a Natural Capitalism perspective, see The Jobs Letter No.118 (our special issue on "Jobs from Waste").