Natural Capitalism: The next industrial revolution

Session EightENVI5050

Sustainable Business Models

• Industrial Ecology – emerged 1980’s

• The Natural Step (TNS) – early 1990’s

• Natural Capitalism – mid 1990’s

• The Triple Bottom Line – late 1990’s

            

Paul Hawken

•Has founded many companies since the 60’s: natural foods, catalogue, software

•1993 he wrote the seminal text ‘The Ecology of Commerce’

•Co-chair of The Natural Step Int.

•Acts as a consultant on sustainability issues

www.natcap.org/

              

Amory and Hunter Lovins•Amory is a physicists

•Hunter is an attorney

•Co-CEOs of the Rocky Mountain Institute a non-profit natural resource think tank (1982)

•Author of numerous books, incl. Factor Four (1998) co-written with von Weizsacker

•Consultants to large corporations and nation states

www.rmi.org/

   

Industrial Ecology

• Began to emerge in the 1980’s• Introduces ecology and

systems to our understanding of industrial process

• Leading proponents Brad Allenby, Hardin Tibbs, Frosch and Gallopoulos

Six Principles

1. Industrial metabolism2. Dematerialisation3. Life cycle analysis4. Energy systems5. Biosphere interface6. Policy innovation

Purpose• Achieve balance and harmony with

nature• Design closed industrial systems• Replace linear process with cyclical• Seek technical and managerial

solutions• Harnesses the innovation,

leadership, planning and entrepreneurial skills of business

Eco-efficiency• Coined in 1992 by WBCSD • Producing more with less • Factor 4 / Factor 10

– Estimated resource productivity targets

• Encourages business to become more competitive, more innovative and more environmentally responsible

• Similarities to quality

More than just eco-efficiency

“Natural capitalism is a larger message than just resource productivity … Narrowly focused eco-efficiency could be a disaster for the environment by overwhelming resource savings with even larger growth in the production of the wrong products, produced by the wrong processes, from the wrong materials, in the wrong place, at the wrong scale and delivered using the wrong business models”

Hawken, Lovins & Lovins, 1999

Natural Capital• Resources – water, minerals, oil, trees,

fish, soil, air, etc• Living Systems – grasslands,

savannas, oceans, rainforests, etc• Ecosystem Services – exchange of

carbon dioxide & oxygen, water storage, flood management, waste processing, buffering against extremes of weather, regeneration of the atmosphere

Agency-Structure Link

One emerging recognition is that, however much a single company may be able to do on the eco-efficiency front, in the end sustainability will depend on the progress of entire concentrations of industry, complete value chains and whole economies.

Elkington, 1999, p.237

Capitalism as if Living Systems Mattered

• The limiting factor to future economic development is natural capital, particularly life-supporting systems (no substitutes)

• Must address causes of loss:– Badly designed business systems– Population growth– Wasteful patterns of consumption

Natural Capitalism is ...

• Not a ‘how-to’ manual• NC is a portrayal of opportunities

– not only concerned with protecting the biosphere, but also for improving profits and competitiveness

• A systems view of our society and its relationship to the environment

• Based on the assumption: – What’s good for nature is good for us

Principle OneResource productivity

• Increasing resource productivity– Eco-efficiency, or doing more with less,

win-win solutions

• New profit opportunity for business– By develop new production techniques– Cleaner technology

• Result is lean manufacturing

Principle TwoBiomimicry

• Redesigning business process to reflect the circularity of biological systems

– industrial ecology model– remanufacturing to closed-looped business

systems– No waste or toxins to be sunk back in nature– Substitute non-renewable with renewable

resources

Principle ThreeService and Flow

• Shifting the measure of affluence from goods acquisition toward the provision of quality, utility and performance

• Service-Leasing business model• From product manufacturers to service

providers

Principle FourInvesting in natural capital

• Ecosystem services and natural resources need to be restored, sustained and expanded after decades of degradation

• Reward and invest in businesses that achieve the first three principles i.e. sustainable businesses

Questions: Why aren’t companies doing this if it is so simple and obvious?

Answer: The economic system too often rewards wasteful organisations and penalises productive organisations– Tax labour and subsidise resource use– Utility companies are not encouraged to

encourage consumer efficiency– Investment based on short term payback– Tax efficient to waste resources

Referred to as ‘The Broken Compass’