NATURAL CAPITALISM Creating the Next Industrial Revolution
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VOLUME XV NUMBER II ROCKY FALL 1999 MOUNTAIN INSTITUTE NEWSLETTER NATURAL CAPITALISM Creating the Next Industrial Revolution efore the Industrial Revolution, there And it’s already under way. Bwere few machines to multiply labor. A That’s the message of Natural Capitalism: worker’s output was essentially fixed, like a Creating the Next Industrial Revolution, the horse’s: if you wanted two horsepower, you new book by bestselling author Paul Haw- literally had to have two horses. ken and RMI co-founders Amory and Now, of course, we Hunter Lovins. A can fit several hundred groundbreaking blueprint horses under the hood of for a new economy, it a car, and our per-capita describes a hopeful future output is vastly higher in which business and than what our ancestors environmental interests produced with hand merge, and in which cor- tools and beasts of bur- porations will play a piv- den. Which is the main otal role in bringing reason material standards humanity back within its of living have risen so planetary limits. dramatically over the past couple of centuries—and AS IF why labor productivity “Natural capital” refers remains one of econo- to the natural resources mists’ and industrialists’ and ecosystem services— chief preoccupations. air and water purifica- But conditions have changed since the tion, climatic stabilization, waste detoxifica- start of the Industrial Revolution. Then, nat- tion, and so on—that make possible all eco- ural resources were abundant, people rela- nomic activity, and indeed all life. Ecosystem Contents tively scarce. Now, there’s a surplus of peo- services are of immense economic value; some are literally priceless, since they have no Bad Guys & Good Business 5 ple, while nature is in decline. Saddled with an outdated view of the world, our econom- known substitutes. Case in point: in Practice Makes Perfect 6 ic system wastes both resources and people. 1991–92, the $200-million Biosphere II The Green Dream Factory 7 The next industrial revolution, like the project in Arizona was unable to sustain Building a Better Workplace 8 last one, will be a response to changing pat- breathable air for eight people. Biosphere I —Earth—performs this task daily at no Hypercar, Inc. Hits the Road 9 terns of scarcity. It will transform industrial processes and business practices to econo- charge for six billion. Night of the Living Dam 10 mize on what is now the limiting factor of Current business practices essentially All Change at RMI 11 production—natural capital. It will create assign no value at all to ecosystem services Financial Recap 13 undreamed-of new wealth for its practition- other than the indirect costs imposed by Institute Supporters 14 ers and for society. (continued on next page) FALL 1999 ROCKY MOUNTAIN INSTITUTE NEWSLETTER (continued from page 1) nologies and techniques, the business one is worth doing on its own, but the environmental regulations. As a result, opportunities are increasing all the time. greatest benefits come from implementing “industrial capitalism” defies its own logic. Natural Capitalism offers hundreds of all four together. Instead of reinvesting in its largest stock of examples of companies that are pioneering RESOURCE PRODUCTIVITY capital, it’s spending its 3.8-billion-year the next industrial revolution by availing store of natural capital as if it were themselves of these opportunities. They’re Back in the mid-1700s, if anyone had income—and at the current burn rate it’ll improving their bottom lines today and predicted that in 70 years one person could do the work of 200, he would have been laughed out of the pub. In the same way, Nat Cap Fact: most of today’s leaders scoff at the idea that a gallon of gasoline or a board-foot of lum- Today’s best techniques for using wood fiber more productively could supply ber could be used ten or 100 times more all the paper and wood the world currently requires from an area productively than it is now. about the size of Iowa. Yet given finite resources and a growing population, that’s what must happen if we hope to enjoy sustained prosperity while be largely gone in a century. That’s not a giving themselves a competitive edge for enabling poorer nations to satisfy their good survival strategy for a company or for tomorrow. Not only that, their leaders and aspirations. its customers. employees are feeling better about what As it happens, we’re so darned wasteful Maybe someday business will be forced they do: firing the unproductive tons, gal- now that it shouldn’t be hard to achieve to value natural capital properly, but don’t lons, and kilowatt-hours often makes it such radical gains in efficiency. Only six hold your breath. Fortunately, we don’t possible to keep the people, who foster the percent of the vast flow of materials in the have to wait. It’s usually more profitable to innovation that drives future success. U.S. economy—more than a million do business as if natural capital were prop- The journey to natural capitalism pounds per American per year—ends up in erly valued, even when (as now) it’s valued involves four major shifts in business prac- products, and much of that is packaging. at zero. And thanks to efficient new tech- tices. They go together as a package: any The efficiency of converting fuel from a power plant into light from a standard bulb is only three percent. And after a cen- Natural Capitalism on the Web tury of development, today’s cars use only one percent of their fuel energy to move the driver. The difference between these dubious achievements and what’s possible represents a vast business opportunity worth several trillion dollars a year in the United States alone. If this article makes you Advanced resource productivity is the want to know more about no-brainer of natural capitalism. Efficient Natural Capitalism—heck, even if it doesn’t—check new products—from lighting to air-han- out www.naturalcapital- dling systems to vehicles—are readily avail- ism.org. The site is chock- able and constantly improving, the savings full of information, includ- are reasonably quantifiable, and almost any ing the entire book in business can make stellar returns by invest- downloadable format, browsable excerpts, discus- ing in efficiency. Moreover, efficiency typi- sion groups, updates, cally produces collateral benefits such as reviews, a calendar of greater comfort (efficient buildings are less events, and media materi- drafty), cleaner air, less noise, and greater als. All that and not a sin- employee satisfaction (which, incidentally, gle tree cut down! can translate into higher productivity). Natural Capitalism is full of examples of profitable advances in resource productivity in the automobile, real estate, timber, man- ufacturing, agriculture, and water indus- www.naturalcapitalism.org tries. 2 VOLUME XV NUMBER II ROCKY MOUNTAIN INSTITUTE NEWSLETTER FALL 1999 With resource productivity, no one has capacity to provide materials and absorb more common in the United States if gov- to choose between business and the envi- wastes isn’t really the concern of this ernment subsidies didn’t reward waste and ronment: what’s good for one is good for model. Needless to say, it’s processes like maintain artificially low prices for virgin the other. In fact, the massive inefficiencies this that are eroding our stock of natural materials. In Germany, where most com- that are causing environmental degradation capital by depleting resources and replacing panies are legally responsible for disposing almost always cost more than the measures that would reverse them. Resource efficiency postpones depletion Nat Cap Fact: while improving environmental health, STMicroelectronics—the world’s ninth-largest semiconductor firm, and a buying time for even better techniques. client of RMI’s Natural Capitalism Practice—announced in October its And the money it saves can finance invest- ment in natural capitalism’s other three commitment to zero net carbon dioxide emissions by 2010. The company principles. plans to meet that target through a combination of cogeneration, efficiency, and tree planting. ECOLOGICAL REDESIGN The standard industrial model of our age is a linear sequence of “take, make, and them with wastes. of their products, manufacturers are moti- waste.” Raw materials come from some- Biological systems, in contrast, operate vated to design cars and computers for where (enter nature, stage left); products in closed loops. There’s no waste—every remanufacture, turning waste back into are made; and the wastes from production output either is returned harmlessly to the value. processes, and soon the products them- ecosystem as a nutrient, like compost, or But even without such legislation, the selves, are somehow disposed of some- becomes an input for another process. economics of resource productivity are where else (exit waste, stage right). Nature’s Closed-loop industrial systems would be (continued on next page) Nat Cap Buzz The buzz about Natural Capitalism Capitalism. and Hunter Lovins called Natural started before it even hit the bookstores. 30 September: The American edition Capitalism, and if you read it, you will be Here’s a sampling of news bulletins report- of Natural Capitalism sold out before its convinced that whatever you’re doing and ed at www.naturalcapitalism.org: publication date, and publisher Little, however well you’re doing it, you could 22 August: Hunter and Amory Lovins Brown rushed it into a second printing make a lot of money on the side by get- managed to catch a few minutes with (it’s since gone into a third printing, and a ting into alternative sources of energy and President Bill Clinton and First Lady fourth is planned). A separate British edi- energy conservation.