Natural Capitalism on the U.S.-Mexican Border Michael Kinsley, Community Development Specialist Hunter Lovins, Co-CEO Rocky Mountain Institute 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 capital—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 natural capital 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 sustainability. 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