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Natural Capitalism: Creating the Next Industrial Revolution by Paul Hawken, Amory Lovins and L. Hunter Lovins

1999; 288 pp. $16.95, Little, Brown and Company.

The concept and strategies of Natural Capitalism hold immense promise for one of the true challenges of our times: bringing our way of living in industrial societies into harmony with the natural systems of which we are but one small part.

Natural Capitalism holds out the promise for businesses to "do well by doing good." It presents an elegant, intuitive systems framework to guide enterprises in pursuing the elusive aim of "sustainability." The book centers on four "basic shifts in business practices":

Shift #1: Radical Resource Productivity.

Shift #2: Ecological Redesign (closed-loop production models).

Shift #3: Service and Flow Economy (solutions-based business models).

Shift #4: Investing in Natural Capital.

I fear that this great strength of Natural Capitalism will also prove its limitation. Managers are used to piecemeal, formulaic solutions to complex problems. The key to natural capitalism as a foundation for building the post-industrial economy is that it is imperative to pursue all four basic shifts .

In particular, many business enterprises today are pursuing the first of these shifts, resource productivity or, as it is commonly called, "eco-efficiency" (getting more output per natural resource input). Natural Capitalism is full of impressive examples of the business potential of this kind of radical resource productivity, and I suspect many business leaders not currently pursuing eco-efficiency will begin, on reading this book, to see its potential. The basic case is compelling: using more resources than required is tantamount to having higher costs than needed. Waste equals cost. Lowering waste can lower costs and improve profitability. Yet it is easy to see that, for the natural system as a whole, it is possible to increase resource productivity but do more harm to nature.

To see this, consider the stock-and-flow diagram above. It shows how the industrial production system nests within the larger natural system. Starting with "Natural Capital," we see that all industrial products are created using resources extracted from nature, either biotic (i.e., living) or abiotic (non-living). This flow of timber, grain, minerals, land, energy, wood, water, and so on is processed through the many stages ("Extraction" and "Manufacturing") to eventually become the products sold to consumers. But actually only a tiny fraction of extracted material becomes products sold?less than 6 percent (by weight) when the entire industrial system is taken into account. The other 94 percent becomes waste?the primary output of the present industrial system! Eco-efficiency not only leads to gains in production, it increases the ratio of production to extraction, reducing the proportion of waste generated. Potentially, society wins and nature wins.

But this is only one facet of a larger system. Products sold become goods in use, all "the stuff" owned by consumers and producers, from washing machines and PCs to airplanes and machine tools. And, of course, this stuff must go somewhere once its productive lifetime is over. Typically, it too becomes waste. Moreover, other types of waste are generated from the products in use, such as emissions from automobiles and industrial smokestacks. Waste from all three of these sources?production, use, and eventual discard of goods?accumulates in nature, some for a very long time. This accumulated waste is not benign?much of it interacts with nature's own regenerative processes, thereby reducing the rate at which the stocks of some natural resources replenish themselves.

All of this is illustrated in the more elaborate diagram, opposite. From the diagram, we can also see where the other three "basic shifts" of Natural Capitalism come in, and why they are so important. Closed-loop production models (Shift #2) reduce the waste by making one industrial process's waste another's nutrient, just as occurs in living systems. Solutions-based business models (Shift #3) reduce the waste by showing customers and vendors that what matters is the service a good provides, not its intrinsic ownership. Such radical business models are vital to achieve dramatic increases in the percentage of goods that are re-manufactured after use. (A powerful illustration in Natural Capitalism is the highly successful new Xerox 265 digital copier: 98 percent of its 200 parts are recyclable.)

Lastly, investing in natural capital (Shift #4) focuses everyone's attention on conserving the stock of natural resources and nature's regenerative capacity, including the losses of natural resources to "development," as occurs when we pave over forests or wetlands. The entire system depends on this regenerative capacity and the ecosystem services provided by the current stock of natural resources?our natural capital.

This picture of the system as a whole shows how the four tenets of Natural Capitalism fit together, and how neglecting any one can undermine the whole. From a business perspective, the real payoffs will, I suspect, often come from the synergies among the four?for example, how profits realized from initial investments in resource productivity can enable investment in closed-loop production and in new business models.

In summary, my fear is that businesses will lock onto resource productivity?eco-efficiency?alone, and see it as sufficient basis for environmental responsibility. Of the four tenets of Natural Capitalism it is the least threatening to the status quo. What business would not want to eliminate input costs, and thereby increase profit? But, what will then happen with the increased profits? Will they be invested in pursuing the other three basic shifts, as Hawken and the Lovinses hope, or will they be invested in simply creating more growth of traditional products and processes?

Growing more rapidly at less resource intensity is not even necessarily a step forward in total resource extraction: if the rate of growth swamps the rate of eco-efficiencies (especially on a global scale), extraction and wastes can actually increase. Nature does not care about eco-efficiencies, if it ends up that we extract and waste still more. And it could.

These matters, all discussed in Natural Capitalism , couldn't be more timely. I believe there is a real awakening among business leaders around the world today toward a genuine desire for greater stewardship of our natural resources. And, because this represents a deep set of societal needs, there are real opportunities to build healthy businesses by meeting those needs. In other words, the free market need not be the enemy of nature. But aligning free-market forces with nature's realities will require a systemic, not a fragmented, understanding.

If we truly seek new ways of living that can assure the vitality of our great grandchildren, we must attend to the system as a whole, and that means the synergies among the four basic shifts?the real message of Natural Capitalism .


ISBN: 0316353000

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