Natural on the U.S.-Mexican Border

Michael Kinsley, Community Development Specialist Hunter Lovins, Co-CEO

Some commentators argue that the climatic stability and detoxification of driving force behind the booming U.S.- human and industrial waste. Though Mexican border economy is cheap labor these services are fundamental to and lax environmental controls. If they business and to human life, along the are correct—and there’s much evidence border many are declining, some rapidly. to support their claims—the resulting Worse, many have no known substitutes distress rampant on the border would at any price. Unfortunately, the cost of argue that an alternative is needed. The destroying ecosystem services may good news is that there is an approach become apparent only when the services that can provide the economic vitality break down, such as the devastating l993 without creating unmanageable Tijuana flood. problems. The rapidly emerging practice Fortunately, the practice of Natural of Natural Capitalism offers a new Capitalism can protect living systems approach to business and economic while offering superior opportunities. It development that improves profits and involves four shifts in the way business competitiveness while protecting living and economic development is systems and the future. conducted: Simple changes to the way businesses First, dramatically increase the are run, built on advanced techniques for productivity with which resources are using resources more productively, can used: Through fundamental changes in yield startling benefits both for today’s both technology and production design, shareholders and for future generations. farsighted companies are implementing Also, straightforward changes to the way ways to make energy, water and community decisions are made, based on materials stretch many times further than realistic examination of the full range of they do today. Such savings pay for benefits and costs, can result in greater themselves and often yield higher social equity, environmental restoration, profits. Similar increases in resource and economic prosperity. productivity also build local economies, This new approach is called Natural but in ways that distribute benefits Capitalism because it’s what capitalism widely in the community, by increasing becomes when businesses behave as if self-reliance and reducing family costs. its largest category of —Nature’s The very fabric of a local economy can ecosystem services—were properly become more productive and generate valued. Everyone knows that living more wealth through such efforts as systems provide us with indispensable vendor matching, business mentoring, products—such natural resources as oil, import substitution, increasing local water, trees, fish, soil, and air. Less business ownership, and managing obvious is that they also provide us with growth. such equally essential services as storage The second shift in practice is to and cycling of fresh water, flood control, biologically inspired production models, not only to reduce waste, but to Pressures to move toward Natural eliminate the very concept of waste. In Capitalism are mounting, as human the closed-loop production systems of needs expand, the costs engendered by industrial ecology, every output either is deteriorating ecosystems rise and the returned to the ecosystem as a nutrient or environmental awareness of consumers becomes an input to manufacturing increases. This is not philosophical another product. Such systems often can speculation, but the reality facing most be designed to eliminate the use of toxic major businesses. For example, materials. As waste and toxics are consumer perceptions of company reduced and eliminated, so are costs. environmental practices are today Similarly, communities can identify dramatically effecting the market business opportunities in local material, position of major companies and their energy, and waste streams; and match supplier. those opportunities with local As parts of international supply businesses. Benefits include more jobs, chains, industries along the U.S.- lower costs, prolonged landfill life, and Mexican border are no exception. reduced pollution. Biological systems Regardless of whether local are powerful models for programs to environmental regulations are lenient or retain and expand business, salvage poorly enforced, many of these suppliers buildings, design growth correctly, and will be required by their buyers to control growth. continuously improve their The third shift toward Natural environmental practices. One principal Capitalism is to adopt a solutions-based mission of engineers and middle business model. The traditional managers in the most innovative multi- manufacturing model rests on the sale of national companies is to anticipate goods. In the new model, value is regulations and consumer perceptions instead delivered as a continuous flow of worldwide, to redesign products and services. Companies that are part of the processes accordingly, and to notify “solutions economy” provide what suppliers that they also must change. customers truly want: quality, utility, Suppliers that have improved their and continuous performance instead of practices ahead of these changes will be just more goods. For example, most far better positioned in the world offices buy copying services, not economy. They know that defining copiers. Creative communities will begin problems narrowly, without identifying to assist local businesses in shifting from their deeper causes or connections product sales to service leasing. merely shifts problems and obscures In the fourth shift, business and solutions. They are systems thinkers who communities reinvest in uncover lasting, elegantly frugal to restore and sustain ecosystems so that solutions with multiple benefits, they can produce both vital life-support including strengthened competitiveness. services and biological resources. The Natural Capitalist economic future’s strongest competitors will be development links people from industry, communities and businesses that the local government and the recognize their success is based on a full neighborhood. It optimizes the local complement of ecosystem services. wealth creating capacity of the whole community. It doesn’t merely seek to

2 spin the local economy as fast as communicated with Gerber and Heinz, possible. Rather, it builds a web of who then banned GMOs from their business relationships to create more products. jobs, income, and savings; cleaner air Simultaneously, major grocery chains and water; and a more equitable in Great Britain had become targets of distribution of the fruits of local labor. customers demanding GMO labeling. The stores had no easy way of knowing Supply Chains and Consumer the GMO content of their foods, but Perceptions consumers were embarrassing them by It is fashionable for corporate leaders spot testing products from their shelves to believe that their future is in their and exposing their GMO content. The hands. All they have to do is run a tight grocers’ only defense was to require ship, deliver value to their shareholders their suppliers to eliminate GMOs. Soon, and they will prosper. The concerns of non-GMO products were trading at a others outside the company are premium, while GMO-content foods irrelevant to their job. were trading at a discount. Within a Such a belief is increasingly risky. In year, the German national bank in an fact the future of any company depends influential report titled “GMOs Are not only on the ability to sell its product Dead,” advised its investors to sell any for less than it costs to make it, but on stock they owned in companies how its customers and others perceive promoting genetic engineering. The the behavior of the company. technology that was supposed to be a Increasingly customers are scrutinizing boon for U.S. agriculture actually cost it the environmental performance of $1 billion in lost exports in 1999, companies. Thus, any company that exacerbating a farm crisis that led to a $7 wishes to remain competitive in global billion congressional bailout. trade, even a small supplier located In December 1999, the Wall Street where environmental regulations are Journal reported that Monsanto’s lenient or poorly enforced, is subject to leadership in this field had caused its rigorous environmental policies. share price to plummet and forced it into Case in point: The Monsanto a shotgun merger with Pharmacia and corporation bet very heavily that its Upjohn. The merger terms imply a future profits would derive from creating valuation of Monsanto’s biotech division genetically modified organisms (GMO). at zero. Shareholders took a bath, and In particular it produced GMO corn and the CEO announced his retirement. soybeans, which are ingredients in a vast European giants Novartis and array of consumer products. It regarded AstraZenica likewise combined their resulting increases in agricultural output biotech divisions into a single unit to be as good for business and consistent with sold, “effectively washing their hands of its policy of environmental crop biotechnology,” according to the . Monsanto thought it was Wall Street Journal. doing the right thing. This cautionary tale is just the latest But a handful of consumers, example of the peril faced by a company especially in Europe, organized on the that ignores the discipline of the market. Internet to oppose GMOs. Many were Millions of consumers, whose mothers concerned about baby food who perceptions about environmental and

3 health issues differ from corporate they will most likely be cut from the conventional wisdom, can impose supply chain. precipitous changes in the fortunes of This phenomenon is not a fad that major multi-national corporations. will blow over. Ten years ago, Business The nearly 3,000 maquiladoras along Week reported that many corporations the U.S.-Mexican border could hardly be now regard pollution limits as faulted for thinking that they are immune minimums. Such companies seek to from such pressures. They appear to be exceed minimal compliance levels and anonymous links in international supply position themselves for future changes in chains. But, like the British grocery policy.1 Six years ago, The Economist stores, each chain is vulnerable to public argued that society is entering “the era of perceptions of any link in that chain. corporate image, in which consumers Recently, Rocky Mountain Institute will increasingly make purchases on the was invited to help a team of engineers basis of a firm’s whole role in society: and middle managers from a major how it treats employees, shareholders, multi-national electronics firm. Central and local neighborhoods” 2 to their daily work is anticipating The message is being carried by many regulations and consumer perceptions powerful voices. For example, GM, across this continent and Europe. When Ford, Nike and IBM are pressuring they see a change coming—a potential upstream companies to “get greener.” new regulation or a change in consumer GM’s 1998 Environmental, Health and perception—they look for ways to Safety Report says, “The same issues accommodate that change early, on their recognized within GM must be terms and less expensively than a new recognized throughout the supply chain: regulation might require. They know that continuous improvement, eco-efficiency, if they wait until a regulation is reducing waste in material, energy and instituted or a boycott is mounted, resource usage, design for the company risk and costs will multiply. environment, and recyclability.” Even Therefore, their mission is finding ways the U.S. Department of Defense will to constantly improve company require its suppliers to comply with ISO processes. Their latest challenge is to 14001 certification. implement the concepts of Sooner or later, maquiladoras and environmental sustainability across their other suppliers along the border will be company, not because they are required by their buyers to comply with environmentalists but because they environmental conditions that are believe that this will underpin the independent of, and often tougher than, company’s future profits. governmental regulations. Suppliers who One of their chief responsibilities is anticipate these requirements can notifying their suppliers that they also implement them on their own terms, less must change. Most suppliers have expensively and without disrupting their developed little or no capacity to operations. Smart companies are finding improve their environmental that this process also affords ways of performance, regardless of regulations. increasing the efficiency and Such companies can suddenly find profitability of their operations. Industry themselves in big trouble, scurrying to can do much to head off government build capacity to respond. If they fail, regulation and enforcement, little to

4 prevent rapid shifts in consumer demonstrates that the rise of perceptions. environmental concern is “perhaps the Even industry giants are subject to biggest opportunity for enterprise and this phenomenon. Like Monsanto, a invention the industrial world has ever large company that is stunningly seen.”3 influential in several countries, may find that it has little influence in other Essential Services from Living countries that are home to thousands, Systems even millions, of its consumers. If that One business opportunity arises from second group of countries develops a recognition that long-term strict new regulation, the company competitiveness depends upon the realistically can’t redesign its products viability not only of manufactured and for only that portion of its market. It financial capital, but equally importantly must either give up that market or of natural capital. Everyone knows that change its products for all consumers. living systems provide us with This can happen even within countries. indispensable products—such natural When California instituted energy- resources as oil, water, trees, fish, soil, efficiency requirements for refrigerators, and air. But this is only half of what manufactures were compelled to makes up natural capital. Less obvious is redesign all their products, not just those that it also provides us with such equally headed for the West Coast. essential ecosystem services as: So, what might buyers require border · Storage and cycling of fresh suppliers to do? If reports of border water conditions are correct, it’s good bet that · Cooling from shade trees many actions will be required. For · Flood control by root systems. example, companies will be forced to · Purification of water through find safe ways to store or dispose wetlands hazardous materials. They will have to · Purification of air by leaves demonstrate that they will no longer · Storage and recycling of pollute the air, rivers, and ground water. nutrients in roots They may be forced to stop using · Sequestration and detoxification hazardous materials entirely. of human and industrial waste Managers of some border industries through wetlands and ground will probably regard such environmental filtration pressures as threats. But managers who · Pest and disease control by have long experience with these insects, birds, bats, and other questions would disagree. Many organisms companies with whom RMI consults · Formation of topsoil and regard environmental policies as maintenance of soil fertility opportunities, ways for their companies Most of these services underpin the to improve competitiveness, upgrade ability of business to exist and of the products, and increase profits. And they maintenance of human life. are not alone. In Costing the Earth: The Unfortunately, along the border many of challenge for governments, the these services are declining, some opportunities for business, Frances rapidly. Worse, many have no known Cairncross, editor of The Economist, substitutes at any price. The only

5 businesses that don’t share the risk of caused by factors too distant for community loosing these services are those that action. This was also the belief of many businesses about the loss of climatic stability. An intend to simply move and leave their increasing number of businesses, however, are mess behind. And such behavior makes implementing policies to make themselves a company vulnerable to the market “climate neutral.” Doing so will save them forces described above. and enhance shareholder value. Unfortunately, the cost of destroying Collectively, such efforts by businesses are the best way to tackle such large problems and ecosystem services may become increase competitiveness. See apparent only when the services break www.coolcompanies.org down. For example, in l993 a flood devastated parts of Tijuana. On its face, Natural Capitalism such an event may seem like just another The rapidly emerging practice of natural disaster. But how natural was it? Natural Capitalism offers a new The area has been subject to occasional approach for enhancing business downpours for centuries. This time the profitability, while protecting ecosystem volume of rainfall was more than services and the future. Because it typically falls. As the climate is further improves profits and competitiveness, destabilized, such floods will become it’s attractive to those who’ve not yet more common. And the result was more recognized the value of ecosystem disastrous than in the past because cattle services. Simple changes to the way ranching, dry farming, sand and gravel businesses are run, built on advanced mining, and haphazard urbanization had techniques for using resources more removed natural vegetation that productively, can yield startling benefits previously had captured runoff both for today’s shareholders and for upstream. The loss of life and property future generations. resulted because of the loss of ecosystem This approach is called Natural services. With good intentions, people Capitalism because it enables companies planted crops, raised livestock, mined to behave as if the largest category of and built modest dwellings to improve capital—nature’s ecosystem services—is their lives. However, while the value of properly valued. The journey to natural these activities was obvious, the value of capitalism involves four strongly declining vital ecosystem services was intertwined and synergistic shifts in not considered. Because the value of the business practices: Dramatically increase ecosystem services is not counted on any the productivity of natural capital, shift balance sheet, each person optimizing to biologically inspired production his or her part of the larger system, models, move to a solutions-based ignoring the overall system. Ignoring the business model, and reinvest in natural whole system is bad for people and bad capital. for business. Note: The list of ecosystem services above does not include such services as noise 1. Dramatically increase the abatement and peaceful sanctuary because some productivity of natural capital. may regard them as non-essential. Neither does it Reducing the wasteful and destructive include such services as protection against flow of resources represents a major harmful cosmic radiation, distribution of fresh business opportunity. Through water, and regulation of the chemical composition of the atmosphere because some fundamental changes in both production may argue that the depletion of these services is and technology design, farsighted

6 companies are developing ways to make · Pacific Coca-Cola reduced a can such natural resources as energy, line’s need for rinse water by minerals, water and forests stretch five, 79% by using air instead of water ten, even 100 times further than they do to clean the insides of cans today. These major resource savings before filling. often yield higher profits than small · A North German manufacturer of resource savings do. Such investments paper products almost eliminated are not only paid for over time from the its water use by completely saved resources but also in many cases recycling its base supply in a may actually reduce initial capital sophisticated process that investment. A few examples: successfully sediments, floats, · Sony's Video Tec de Mexico and filters, the fiber and plant in Tijuana reduced the size particulate loads from the water. of a component of one of their · Gillette reduced the water used to TVs, substantially reducing make razor blades by 97%, and plastic material use, material that used to make pens by 90%. costs and wastes.4 Advanced resource productivity is · A new building in Bangkok was driven by the same logic as the first designed to save 90% of its air- Industrial Revolution. Early capitalism conditioning costs at no extra substituted the use of ecosystem services cost. and machines to make people 100 times · Cost-effective retrofits to a more productive because the relative California office saved 97% of scarcity of people was limiting progress. its air-conditioning costs. Today the pattern of scarcity has shifted · A comprehensive efficiency to just the opposite—abundant people retrofit of electrical motors and scarce natural capital. Profit typically saves about half their maximizing capitalists will now energy consumption and pays economize on the scarce back in around 16 months. resource—namely, natural capital. · An innovative design developed by Davis Energy Group uses 2. Shift to biologically inspired engineered wood products to production models. reduce the amount of wood Natural capitalism seeks not merely to needed in a stud wall by 70%. reduce waste but to eliminate the very The walls are stronger, cheaper, concept of it. In closed-loop production more stable, and insulated twice systems modeled on nature’s designs, as well, enabling the elimination every output either is returned of cooling equipment in a climate harmlessly to the ecosystem as a that reaches 1130F. nutrient, like compost, or becomes an · Skilled retrofits have saved 70- input to manufacturing another product. 95% of office, warehouse, and Such systems often can be retail lighting energy, yet the advantageously designed to eliminate the light quality is more attractive use of toxic materials, which hamper and the occupants can see better. nature’s ability to reprocess materials. Such measures typically increase · Hasbro Manufacturing Services, labor productivity by 6 to 16% Juguetrenes plant in Tijuana

7 saved $230,000 per year by The emerging discipline of industrial classifying, regrinding, and ecology is closed-loop production selling plastic wastes to applied at the scale of a facility or an recyclers.5 industrial park. · Sony's Video Tec de Mexico · The zero-emissions brewery in plant in Tijuana has increased is Namibia is a facility-scale volume of recycled material by industrial ecosystem that 45% annually since 1993. employs four times the people Combined revenue and cost and produces seven times the avoidance in 1995 was food, fuel, and fertilizer of $500,000.6 conventional operations. It sells · Interface’s Solenium carpet lasts not only beer, but mushrooms four times longer and uses 40% grown on spent fermentation less material than ordinary grain, and chickens fed on carpet, reducing its materials earthworms in what had intensity by 86%; and it doesn’t previously been waste grain. The contain the toxic materials fermentation process is fired by normally found in carpet. Sixty methane generated by a chicken- seven million dollars of the waste digester. The “brewery” companies 1994-1998 revenue also sells eight varieties of fish increase is directly attributable to fed by digester waste and reared its 60% reduction in landfill in ponds filled with brewery waste. Interface intends to wastewater. eliminate all waste in its · Kalundborg, Denmark is the traditionally waste-intensive leading example of an industrial business, power its factories with ecosystem park consisting of renewable energy, and get its several businesses in one feedstock from renewable community, each of which uses materials. the waste from another business. · Productos de Consumo It’s being imitated in places such Electrónicos Philips in Ciudad as Londonderry, New Juárez donates wooden and metal Hampshire; Chattanooga, pallets, wood from the crates, Tennessee; and Monterrey, cardboard from packaging and Mexico. styrofoam to needy families for One can’t help but wonder what use in home building. Philips business opportunities lie in the waste employees donate their time to and hazardous materials now being help build the structures.7 dumped along the border? · The U.S. remanufacturing industry in 1996 reported 3. Move to a solutions-based revenues of $53 billion, more business model. than consumer durables The business model of traditional manufacturing. (appliances; manufacturing rests on the sale of goods. furniture; audio, video, farm and In the new Natural Capitalist model, garden equipment.) businesses instead deliver a continuous flow of services—such as providing

8 illumination rather than selling light approach ahead of the sort of legislation bulbs. Services are delivered, too, within now entering law in Germany and Japan a relationship that aligns the interests of that requires manufacturers to take back providers and customers in ways that their products after their useful life and reward them for continuous recycle or remanufacture them. improvement in implementing the first When a company shifts from selling two innovations of natural to leasing a product, it then owns the capitalism—resource productivity and product throughout its lifecycle. As a closed-loop manufacturing. result, its relationship to the materials in Companies that are part of such a that product shifts too. Durability, “solutions economy” provide what reusability, and non-toxicity become customers truly want: quality, utility, attractive attributes that enhance and continuous performance instead of profitability. just more goods. For example, most offices buy copying services, not 4. Reinvest in natural capital. copiers. In some circles, damage to the · Instead of selling elevators, environment is regarded only as a loss of Schindler leases vertical non-essential amenities, luxuries that are transportation services insignificant compared to the benefits of · Under its Evergreen lease, business and economic development. Interface no longer sells carpets Efforts to protect these “luxuries” have but rather leases a floor covering been characterized as elitist and as service for a monthly fee, unrealistic constraints on business. accepting responsibility for However, while some environmental keeping the carpet fresh and concerns may be aesthetic, the depletion clean. Monthly inspections detect of natural capital is increasing being and replace worn carpet tiles. recognizes as limiting factor on future Since at most 20% of an area economic productivity. typically show at least 80% of Along the border, air and water the wear, replacing worn tiles pollution, and the accumulation of reduces the consumption of hazardous materials negatively effect materials by 80%. Combined human, business, and living systems. As with savings through its any prudent capitalist would do, business Solenium product, Interface must reinvest in restoring and enhancing achieves a 35-fold reduction in the natural capital so that it can produce the flow of materials, reducing both vital life-support services and extraction of virgin materials and biological resources even more production of vast quantities of abundantly. Pressures to do so are waste. mounting, as human needs expand, the The solutions model doesn’t suggest costs engendered by deteriorating that durable goods will no longer be ecosystems rise and the environmental produced. On the contrary, in the awareness of consumers increases. solutions economy, goods are so durable Fortunately, these pressures all create and valuable that companies prefer to business value. Some examples: keep and lease them, rather than sell · Thousands of ranchers are them. Smart companies will adopt this improving both their range and

9 their profits, using a grazing estuary; dump the material in the technique developed by Allan millpond; and restore the estuary. Savory of the Center for Holistic The mill happily invested Management in Albuquerque, $180,000 moving the fill. Then New Mexico. Savory’s approach townspeople and the U.S. Forest raises the carrying capacity of Service restored the estuary. By rangelands, which have often reinvesting in natural capital, been degraded not by everyone won. The mill received overgrazing but by undergrazing a return on its investment of and incorrect grazing. It keeps around 300%, while creating the cattle moving from place to land for an $8 million expansion, place, grazing intensively but which created 30 permanent jobs. briefly at one site, so that they The restored estuary is not only a mimic the dense but constantly vital natural habitat, it’s a town moving herds of native grazing park and a buffer between the animals that co-evolved with the growing tourism of downtown grasslands. and the industrial site · John Todd’s biological “Living Machines” turn sewage and Systems Thinking septage into exceptionally clean At the heart of Natural Capitalism is water, plus valuable flowers, an an approach to problem-solving called attractive tourist venue, and other “whole systems thinking”. Designers byproducts, with no toxicity, no and decision-makers too often define odor, and reduced capital costs. problems narrowly, without identifying · A half century ago, Port Angeles, their deeper causes or connections. This Washington, like many towns merely shifts or multiplies problems and seeking development built a obscures solutions. In contrast, systems seawall along the beaches, rocks thinking typically reveals lasting, and wetlands that face the Strait elegantly frugal solutions with multiple of Juan de Fuca. Behind the benefits, which enable decision-makers seawall, an industrial site was to transcend ideological battles, cross the created, which became home to a boundaries of occupation and discipline, timber mill and its mill pond, and unite all parties around shared goals. among other facilities. For years, Port Angeles officials could have rafts of cedar logs were towed to narrowly focused their tasks on Port Angeles and into the mill optimizing the Port’s market position. pond. But a few years back, the But as systems thinkers, they sought mill switched its raw material to ways to optimize the whole system and, cottonwood, which sinks. As in doing so, developed a brilliant, yet trucks and forklifts inefficiently simple solution that made all parties skirted the millpond, it became a winners and restored an eco-system. $150,000 annual liability. Systems thinkers are found at But Port Authority officials got a Interface too. They could do their bright idea: excavate a portion of business the way it’s always been done: the industrial site near the pond sell carpet and make money. Instead, where there had once been an they are exploring the entire value chain

10 of carpet production, from virgin in many circumstances. But when tax materials through to discarded materials. breaks, land, and infrastructure are Instead of regarding the tons of carpet offered with the sole purpose of securing that usually ends up in the landfill as jobs and without considering costs, the some one else’s problem, they embrace long-term community and environmental it, and many other problems in their consequences can be serious. value chain, as business opportunities. One area of confusion in the U.S.- The outcome: more profit and a healthier wide growth debate is the word itself. environment. “Growth” actually has meanings. Discussion about growth issues can Development and Expansion proceed intelligently only when those Growth and industrial recruitment are two meanings are distinguished. For the the usual strategies chosen for economic sake of this paper, the words assigned to development on the U.S.-Mexican those meanings are “expansion” and Border. Jobs are considered the measure “development.” Physical of success. While these strategies enlargement—more people, succeed in some circumstances, in others infrastructure, buildings, subdivisions, they generate substantial uncounted malls, etc., which may or may not costs, for example, pollution and loss in benefit the community—is called vitality of ecosystem services. Though “expansion.” In contrast, “development” these costs can undermine economic means betterment: living wage jobs, prosperity, they are seldom considered in increased income, greater savings and decision making. excellent quality of life. Ganster, Even the creation of some new jobs Sweedler and Clement distinguish may generate a net economic loss. between these two concepts in their According to one analyst, “Entry level paper, Development, Growth, and the [jobs] often require more in government Future of the Border Environment. services than they contribute in taxes.” Conventional strategies virtually never Throughput attempt to optimize the whole One concept that helps to clarify the community as a system to be sustained distinction between expansion and over the long run.8 development, and the health of such Systems thinking can inform this large systems as companies, ecosystems, dilemma. It’s just as applicable to a and communities is that of “throughput.” community’s economy as it is to To help understand how it informs issues industrial processes. Unfortunately, like of development and expansion, consider old industrial thinking, the conventional the story of the recently unemployed approach to economic development is to engineer: optimize an individual piece of the Undaunted by the downsizing, he system, for example, to focus narrowly buys a truck and a load of vegetables to on recruiting a new company regardless sell by the highway. After a terrific day, of its effects on the community. he’s sold out. Back home, he gushes to This is not to suggest that business his wife about his success. recruitment is always disadvantageous to “How much,” she asks, “did you a community. On the contrary, it has earn?” been, and can continue to be beneficial “Eighteen hundred bucks,” he crows.

11 “And how much did you pay for the boosters often ignore such costs as veggies?” traffic congestion, declining schools and Punching his calculator, he hesitantly other public services, increasing taxes, announces, “Two thousand.” groundwater pollution, depleted soils, “Hmm,” she says, “there seems to be and housing that residents can no longer a problem.” afford. In a mature economy, each Dreamily, he says, “Yeah, I need a additional unit of industrial production bigger truck.” can create a net loss that boosters He’s intoxicated by revenue. But assume will be made up in volume. veteran businesspeople know that what counts is profit. Increasing revenue is Natural Capitalist Development fine, until it’s outweighed by costs. The distinction between expansion Ironically, the same smart and development, and the concept of businesspeople often neglect to calculate throughput are important for two reason: net gain when promoting economic First, as mentioned, many expansion development. They seek to spin the options increase throughput but don’t economy as fast as possible—harvesting improve the community or its more grain or trees, making more environment. Second and less obvious, widgets, building more subdivisions, many development opportunities require attracting more tourists. These are ways little or no expansion. Those to increase throughput, the rate at which opportunities are part of Natural goods and services flow through an Capitalist Development. economy, and the rate at which Natural Capitalism offers a unique resources are turned into waste. But way to bring a community together. It’s increasing throughput does not attractive to business people because it necessarily lead to development, to offers ways to strengthen community prosperity and quality of life. competitiveness, while enhancing Community leaders should ask livability and reducing environmental themselves if increased throughput impacts. Innovative businesses can lead provides a net gain—that is, does it communities in adopting these principles increase the well being of citizens and and setting examples. strengthen the community? And does Natural Capitalism is a powerful continuously increasing throughput strategy for economic development—a leave a viable economy for their route to increased jobs, income, grandchildren, or is it an illusion that, commerce, savings, equity, and like selling more veggies, feels good in community well being that doesn’t the short term but hurts later on? These necessarily require community are not simple questions. But answers expansion. Because this kind of can be found by soberly comparing the development proceeds independent of economic, community and increases in the size of a community, it’s environmental costs with the benefits of attractive to both booming and declining specific growth proposals. communities. Unlike conventional Unfortunately, community and expansion schemes that concentrate environmental factors are seldom benefits in one or two places under the considered. Intoxicated by the prospect theory that benefits will trickle down to of an increase in throughput, growth everyone, Natural Capitalist

12 Development distributes benefits widely ways to squeeze more work out across the community. of the amount of water they had. The journey to Natural Capitalist So they worked with the Development involves four interrelated grassroots Mothers of East LA shifts in community decision making, who marketed a low-flush-toilet similar those described above for retrofit program that installed Natural Capitalist businesses. Listed 270,000 toilets in three years, under each are several representative returned $4 million to the community activities or programs. Many neighborhoods in jobs, water-bill are well known, others innovative. Most savings, and community of the listed activities require little or no programs, and saves over 3.4 community expansion. While not all billion gallons of water every apply to every community on the border, year. Efficiency programs don’t the length of this list indicates the curtail use, they make existing untapped wealth-generation potential in uses smarter. Well-designed virtually every community. community efficiency programs can cost-effectively reduce water 1. Invest in Resource Productivity use by as much as 40%. The A local economy is like a bucket that border is ripe for efficiency the community would like to keep full. investments. Del Rio, Texas, Growth and business recruitment are recently discovered that attempts to pour more money into the approximately half of it water bucket. But focusing entirely on more was lost between the source and ways to fill the bucket ignores vast the household tap. opportunities. Economic buckets · Energy efficiency programs will invariably have holes in them through create local jobs and save which dollars leak. Inefficiently using millions of dollars in any local resources—human, natural and community. Sacramento CA, business—enlarges those holes. invested $59 million to save Strategies that plug these leaks also electricity. This enabled utility increase self-reliance. They reduce the customers to save nearly that costs of doing business, but they also cut same amount. The program the costs of supplying the basic created 880 direct jobs, and necessities, thereby becoming especially increased regional income by valuable in areas with large numbers of $124 million. Though energy is a low-income people. Notice that leaks small portion of total costs, identified here are far more extensive saving energy will provide a than the narrowly defined “retail significant contribution to leakage.” company profits and community Smart communities seek profitable economic progress. As energy ways to keep the bucket full by plugging shortages develop in Mexico’s unnecessary leaks in one of more of the northern border cities and as following ways: rates increase dramatically, · Water efficiency: Los Angeles maquiladoras will realize big cost water officials had run out of savings by investment in energy new sources. They had to find efficiency programs.

13 · Local business ownership · Downtown revitalization reduces increases the wealth-creating economic leakage, builds pride, power of each transaction. Land encourages infill development, trusts and community stock preserves culture, celebrates corporations can ensure history, reuses resources, and permanent local ownership of reduces traffic. businesses by buying local · Community supported buildings and renting only to agriculture: CSAs contract residents (at cost). Example: The directly with their customers who Green Bay Packers are owned by then are repaid through shares in a corporation whose majority that year’s produce. Such stockholders are from Wisconsin programs provide capital to and who would never sell the preserve local farms, increase Packers to another city. productivity, and reduce costs. · Import substitution replaces · Business mentoring: Veteran “imports” with local products business people “adopt” start-up and services. Example: Seeking businesses, giving rookie ideas for a business start-up, high proprietors someone to talk with school students in tiny Tropic when things go wrong, helping UT, noticed tourists buying them understand and avoid bottled water from France. That pitfalls. Such programs observation became a local significantly reduce the high product replacing imports when failure rate of start-ups. they bottled local spring water · Community development and labeled it with a photo of corporations employ business nearby Bryce Canyon. skills and tools to benefit the · Vendor matching links local- overall community by, for business buyers with local example, developing affordable suppliers. Such a program in housing. Eugene OR, created 100 jobs in · Business “visitation” programs its first year without any physical enlist local leaders to visit expansion of the city. businesses to determine needs · Microcredit: Many low-income and concerns. Proprietors get the or impoverished people have the chance to offer suggestions to skills, but lack the credit to start a local governments and business. Tailored to very small, organizations regarding policy often home-based, start-up changes that could benefit local businesses; micro-loans aren’t business. given by most conventional · Growth management: In the banks because each transaction is U.S., tax revenues collected from too small to be profitable. subdivisions in previously Usually offered by nonprofit undeveloped areas are virtually organizations in conjunction with never sufficient to pay for the basic business training, public services demanded by microcredit often provides a way those subdivisions. As a result, out of poverty and off of welfare. taxpayers in expanding

14 communities unknowingly buyers; examples under subsidize sprawl unless impact or development include state user fees are charged to those programs in New Hampshire and newly developing areas. Local Michigan. Efforts by the governments that don’t charge Environmental Defense Fund in for the full cost of expansion are Ciudad Juarez and degrading their economic future. Brownsville/Matamoros seek “to · Affordable housing built through develop a workable community of private, public, and nonprofit manufacturing and service means and by requiring it as a businesses that promotes large portion of every economic efficiency by development proposal. facilitating interchanges of by- · Local currency: Ithaca’s currency products and wastes which one is accepted by 1,200 business company discards but another can and can’t be spent outside this use as a production input.” New York town. Such programs Another excellent border effort is encourage residents to support the Waste Wise program in their local businesses and recycle Tijuana/San Diego. dollars in the community. · Building salvage: Rather than · Community cash flow can also demolish a building, dismantle be captured through such and reuse its components. community enterprise as locally Southern California Gas saved based credit cards, debit cards $3.2 million or 30% of and phone service. construction costs on an office and education building by partly 2. Shift to Biologically Inspired dismantling and reusing an Economic Models (Biomimicry) existing building. The finished To be competitive, communities must building was 80% made of pursue development strategies that recycled materials, keeping 350 analyze local material, energy, and waste tons of material out of the landfill. streams; identify business opportunities; The Environmental Services and match those opportunities with local Department of the City of San businesses. Multiple benefits include Diego was salvaged and is now a more businesses and jobs, reduced green building. resource inputs (and, therefore, lower · Advanced business retention and costs), prolonged life of the local expansion programs mimic landfill, and reduced pollution. The biological systems by enhancing transition to bio-entrepreneurship has adaptation, competition, inter- begun: relationships, and information · Waste-matching: In addition to flow. Littleton, Colorado’s the examples noted earlier, the program created jobs at six times industrial ecology concept can be the rate of its earlier business applied also at the regional scale. recruitment efforts by offering Computer networks can make such services as problem research, “virtual” industrial ecosystems by competitor analysis, industry matching wastes with potential trend monitoring, video

15 conferencing, training, and market channelization of streams. mapping. Such local policies Phoenix AZ, redesigned urban enhance quality of life and watercourses with earth berms intellectual infrastructure. and natural vegetation to · Flexible business networks: maximize ground water recharge Several small businesses partner while controlling floods. A on contracts too big for any one of similar proposal is being them, not unlike coyotes who considered for the Rio Alamar in usually hunt on their own, but run urban Tijuana. in packs when seeking larger · Restrict community expansion game. through such means as tough zoning, urban growth boundaries, Successful community design mimics subdivision allotment systems biological systems: (that control growth rate), and · Design community expansion community land trusts. Failure to correctly by mixing compatible do this results in unmanageable, land-uses, clustering unfinancible megacities. development, and infilling rather than allowing sprawling 3. Join the Solutions Economy community expansion. Also, use This fundamental change in the traditional community design, relationship between producer and multiple transportation modes consumer boosts competitiveness by and natural infrastructure (e.g. more directly addressing customer for drainage and sewage). These needs. It also reduces materials input and strategies are especially crucial in pollution output, enables the provider to such rapidly expanding make more money, and the customer to communities as those along the save money. Waste is reduced, and border because they will reduce fewer raw resources are required. infrastructure costs by requiring Though the solutions economy is well fewer extensions. In requiring underway, vast markets remain fewer road extensions, infill can unexplored. Exciting opportunities also reduce air pollution. remain available to smart communities · Storm-water capture saves that understand this new economy and money, recharges groundwater, assist appropriate local businesses in and reduces flooding and shifting from product sales to service pollution by developing many leasing. These communities will offer kinds of structures to help rain incentives and research support and soak in the ground where it falls they’ll identify and overcome public and rather than collecting it into private sector barriers that keep local expensive centralized systems, businesses from making the shift to which, in some areas, selling solutions instead of products. overwhelms sanitary sewage systems resulting in significant 4. Reinvest in Natural Capital pollution. Examples include The future’s strongest competitors permeable parking lot surfacing, will be communities that recognize they natural swales and reversing the require a full complement of ecosystem

16 services. The Tijuana flood is an approach will be tossed by the winds of example of a community that suffered rapid change. Those who choose the first tragically, in part, due to the loss of option develop: crucial ecosystem services. · Leadership and civic capacity: · Port Angeles is an example of Through training, events, and industry, community and organizations, every community government working together to should commit local resources to restore an ecosystem, and helping existing leaders strengthen business understand new ideas and creative competitiveness and the local ways of making decisions. Also, economy. existing leadership must nurture · Such cities as Curitiba, Brazil and train the next generation of are creating urban ecosystems in leaders. For example, the Natural the form of bio-diverse parks Capitalist approach outlined in that are home to birds, bats, and this paper will soon be available frogs that eat pesky insects. The as a curriculum for young parks also help cool the city. business leaders through the · Arcata CA, restored a 154-acre Young Presidents Organization. wetland and used it to treat urban · Knowledgeable management: wastewater. The resulting marsh Leaders in rapidly expanding is now a wildlife habitat in communities should respond as if which salmon are reared. It was they were running an expanding created at a fraction of the cost company: Seek creative advice of conventional energy-intensive and support; hire planning and wastewater-treatment systems. management staff who have Other communities are experience with rapid change. protecting and enhancing Resisting change by “doin’ things vegetative cover, maintaining the way we’ve always done ‘em,” watersheds for flood control and will not forestall change. It just drinking water, and protecting means that the community will be ground water from chemical changed at the whim of outside contamination. forces. · Collaborative decision making: Building Community Capacity Develop working relationships How can a community implement among public, private, and Natural Capitalism? How does it start on nonprofit sectors. Thoroughly the road to a more sustainable involve people from all walks of development strategy? life in shaping important Effective leaders will help their decisions, not just commenting on communities take charge of the future decisions as they’re about to be and be a part of the new economy. In made. contrast, the “ol’ boy” approach to local · Alternative indicators of success: governance allows a small group to keep Rather than relying exclusively on decisions to themselves, and ridicules such traditional economic people who discuss innovative ideas. measures as sales revenues and Communities that cling to this outmoded property values, develop

17 community and environmental to intolerable, but by then unmanageable indicators in order to understand levels. fully the effects of decisions and Decision-makers can choose instead the direction in which the to respect border towns as real community is headed. If such communities. This path, however, important community requires that important development characteristics as the health of decisions consider the whole local ecosystem services, noise, system—communities, the environment air quality, or newborn birth- and the whole economy—not just how to weight are not measured, they secure more jobs. won’t be fully considered in There are encouraging signs that such decisions. . The border systemic thinking is beginning to take environmental indicators work of place. The last few years has seen the U.S. Environmental Protection significant improvements in cross-border Agency and SEMARNAP is a cooperation regarding the environment. step in the right direction. For example, the WasteWi$e program is reducing solid waste in the Tijuana-San Conduits or Communities Diego Border area with business Conditions on the border are an assistance, training and outreach, excellent example of incrementalization, particularly to maquiladoras, U.S. described by the well-worn parable of agencies are supporting and even the frog and the saucepan: Dropped into funding environmental efforts in a pan of hot water, the frog instantly Mexico; U.S. and Canadian chemical jumps out. But placed in cool water engineers are reaching out to their that’s gradually heated, the frog remains colleagues in Mexico. passive until it boils. Not noticing These efforts are moving beyond gradual change, it is incrementalized to conventional pollution treatment death. measures. To reach full potential, they Though expansion of communities at must include full collaboration among the border is rapid by every standard, the governments and industries, for actual changes effect residents example, to redesign all regional incrementally. For example, if traffic industrial processes as a whole gets slightly worse each day, it’s not system—to make one plant’s waste enough to inspire drivers to organize to another plant’s feedstock—efforts such do something about it. Leaders in such those in Juarez and communities are just letting the situation Brownsville/Matamoros. Cooperation on come to a boil. all border issues must take place, not Current conditions and trends suggest only across cultures and political that many border towns are regarded by jurisdictions, but across occupations and decision-makers as little more than disciplines. Well organized and conduits for international trade. Given supported, such efforts will significantly current capacity and willingness to reduce materials and energy inputs and tackle difficult problems, the projected waste output, and improve living twenty-year population doubling will conditions in industries’ host accumulate pollution and human misery communities.

18 While the approach discussed above approach that can successfully tackle the will benefit any community, it has magnitude of problems on the Border. special relevance to the Border. Because the location of maquiladoras is based primarily on their relationship to the Many of the success stories sited are U.S. economy, many are poorly from two Rocky Mountain Institute integrated into the local economies of books: their host communities. Their inputs · Lovins A. and Lovins H. 1998. come from outside the community; their Climate: Making Sense and Making outputs leave the community, which Money, RMI. serves as a conduit rather than a partner. · Hawken P, Lovins A., and Lovins Though some newer plants are H., . 1999. Natural Capitalism: improving, many receive as low as 0.5% Creating the Next Industrial of their inputs from local sources. Revolution, Little Brown. In contrast, a Natural Capitalist, www.naturalcapitalism.org whole systems approach to local economic development would optimize the local wealth creating capacity of the 1 Business Week. 1990. “The greening of whole community. Rather than simply corporate America.” April 23: 96-103 2 The Economist. 1994. “Brand new day.” June adding one plant after another, it would 19: 71-72 integrate existing plants into the local 3 Cairncross, F. 1992. Costing the earth: The economy. It would spin a web of challenge for governments, the opportunities for business relationships through such business. Boston: Harvard Business School efforts as vendor and waste matching, Press. 4 Waste Wise Program energy and water efficiency, import www.borderecoweb.sdsu.edu substitution, flexible business networks, 5 Waste Wise advanced business retention and 6 Waste Wise expansion programs, and increasing 7 Waste Wise 8 local ownership of plant suppliers. Each Ganster, Sweedler and Clement, Development, Growth, and the Future of the Border of these measures will create more jobs, Environment. , presented in 1999 at Border income and savings, regardless of Institute I. whether the community expands. Natural Capitalist economic development dramatically increases community productivity. It creates more wealth per unit of throughput, creating more jobs and income for each widget produced by local industry, whether or nor it’s a maquila. It builds the local community economy while minimizing and even reversing negative effects on the community and the environment. In its pure business form, it is considered by many business analysts as the future of industry. And it may be the only

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