By Paul Hawken
It is appropriate that a growing number of companies ask themselves, how do we conduct business honorably in the latter days of industrialism and the beginning of an ecological age?
The question is, can we create profitable companies that do not destroy, directly or indirectly, the world around them?
As hard as we may try to become sustainable on a company-by-company level, we cannot fully succeed until the institutions surrounding commerce are redesigned.
We need to get the true cost of production integrated into market prices so that purchasing choices lead to optimum outcomes.
Our human destiny is inextricably linked to the actions of all other living things. Respecting this principle is the fundamental challenge and changing the nature of business.
Chapter 1: A Teasing Irony
The promise of business is to increase the well-being of humankind through service, creative invention, and ethical action.
Having expropriated resources from the natural world in order to fuel a transient period of materialistic freedom, we must now restore those resources and accept the limits and discipline inherent in that relationship.
Business has three basic issues to face: what it takes, what it makes, and what it wastes.
The solutions for these problems are the fundamental principles that govern nature. First, waste equals food second, nature runs off current solar income. Third, nature depends on diversity, thrives on differences, and perishes in the imbalance of uniformity.
We need to rethink markets entirely, asking ourselves how it is that products, which harm and destroy life, are sold more cheaply than those that don't.
The single greatest flaw of modern accounting is that the cost and losses of destroying the Earth are absent from the prices in the marketplace.
Human beings mature from a state of grasping ego gratification to some degree of ethical awareness.
Chapter 2: The Death of Birth
An ecosystem evolves from pioneering, immature states that emphasize growth through several intermediate stages until it evolves into mature systems that are efficient and resource-conserving. Mature climax systems comprise an association of organisms that reach a state of equilibrium that leaves habitats stable from year to year. Because the environment remains unchanged, even climax communities do not last forever, but they are the most diverse, lasting, and complex of communities and are thus more resilient to disturbances in the greater environment.
All present agriculture, whether it is slash and burn or industrial, involves the reversion of a climax system to a pioneering one. We exchange stability and sustainability for short-term abundance and production.
Like pioneer plants, we are aggressive and competitive. We emphasized untrammeled growth and didn't worry about efficiency, conservation, or diversity.
The ability to overexploit the Earth's stored-up supply of resources is what we call economic progress.
Of the total net primary production (NPP) of 225 billion metric tons, the sum of all photosynthetic production minus the energy required to maintain and support those plants, 60% is produced on land and 40% in the oceans.
The demise of a species is the loss of a biological library.
If capitalism has a pervasive myth, it is the tacit assumption that business is an open, linear system: that through resource extraction and technology, growth is always possible.
It is only in the fullest context of the world as it is presented to us, and not as we manipulate it, that we may celebrate our humanity and create true prosperity.
Chapter 3: The Creation of Waste
The environment can absorb waste, redistributing and transforming it into harmless forms, but just as the Earth has a limited capacity to produce renewable resources, its capacity to receive waste is similarly constrained.
Hazardous wastes are the result of an industrial system that is linear, one in which products are neither recycled nor returned. Nature is cyclical; biological waste in the natural world provides food for other life forms.
Organochlorines make up most of human-made hazardous waste, of which dioxins are the most dangerous.
For every 100 tons of trash, incinerators produce 30 tons of fly ash, a granular substance that contains most of the toxins. The fly ash is trucked to a landfill, where it has to be enclosed in plastic liners.
In the corporate version of Abraham Maslow's hierarchy of needs, environmental concerns are a higher need that can only be acted upon in a condition of rising affluence.
We need a different kind of growth, one that reduces and changes the inputs of raw materials and energy and simultaneously eliminates the outputs of waste.
The transition from immature to mature ecosystems is called ecological succession. What we must now create is a commercial succession. Rather than argue about where to put our waste, who will pay for it, and how long it will be before toxins leak into the groundwater, we should be trying to design systems that are elegantly imitative of ecosystems found in nature. Companies must re-envision and reimagine themselves as cyclical corporations, whose products either literally disappear into harmless components or are so specified and targeted to a specific function that there is no spillover effect, no waste, no random molecules dancing in the cells of wildlife in short, no forms of life must be adversely affected.
Chapter 4: Parking Lots and Potato Heads
If this book has one purpose, it is to imagine and describe how businesses can act in ways that are restorative to society in the environment.
We have received a nearly unpayable bill for the industrial world for its past and ongoing excesses. But the industrial economy is not an inevitable form; growth does not necessarily mean more waste, and prosperity does not have to be described by kilowatts, used, auto produced, hamburgers, flipped, and consumed. Value is what we ascribe. Prosperity is what we make it to be. So what will it be?
What Interface learned was simple. Eliminate waste; educate every employee about the environment and what's at stake; give each person the knowledge and tools to contribute; take the savings from waste elimination and invest in new energy and material-saving technologies and product innovation.
There are currently two main proposals that are being tried out that align environmental policy with governmental and business objectives. The first is the imposition of green, or Pigovian, taxes on emissions, products, or activities that are to be discouraged. The second is the issuance of pollution permits, credits that are auctioned off or granted to industry that allow a given amount of atmospheric discharge per credit bought and sold.
Under the products-of-service concept, manufacturers would view both the materials and the methods of production in an entirely new way, since they would always have to imagine how they would reuse and reclaim the product upon its return. This calls for novel principles of design that mimic what nature does: waste equals food. Instead of thinking of the value of the product, only as it goes out the door, the manufacturer has to consider its value when it comes back in the door.
A cyclical, restorative economy thinks cradle to cradle, with every product or byproduct imagined in its subsequent forms even before it's made. Designers must factor in the future utility of a product and the avoidance of waste from its inception.
Chapter 5: Pigou's Solution
Markets are superb at setting prices but incapable of recognizing costs. Free markets cause harm to both natural and human communities because markets do not reflect the true cost of products and services.
We embrace the free market for one supreme important reason: it is better at creating wealth than any other system known.
Markets are the place where production becomes consumption, but at present they do not recognize the cost of attendant destruction and waste.
Market-based economics assumes that the extraction of natural resources, our natural capital capital, is equivalent to due to current income. This conceit is carried on despite the fact that every business person knows that on a corporate level, transferring capital assets from the balance sheet to the income ledger is fraudulent and is the sheer path to bankruptcy. Capital is not income.
Resources to supply the needs of one generation have to be used in a manner that does not compromise the ability of future generations to fulfill those same needs.
Market prices reflect the present and only the present. Social justice and the environment represent the future, and integrating them requires regulation.
Pigou's solution was to impose a "tax to correct mail adjustments" on producers, a tax that would be comparable to the avoided cost or unborn expense. Taxes aimed at internalizing external costs are sometimes called Pigovian taxes.
Integrating cost with price does not raise the overall expenditures of the consumers of society, but rather places them where they belong. It provides information so that the consumer and the producer can respond intelligently.
We have a long political tradition in this country of arguing for the cheapest price for everything, decrying any regulation or law that would inflate prices as being punitive to the little guy.
Businesses must be able to make money sustaining living systems or global restoration will never happen.
The ultimate point of cost-price integration is to fully enfranchise all businesses into the process of environmental restoration. It shouldn't be so hard to do the right thing.
Chapter 6: The Size Thing
By making the global economic system exchangeable on a moment's notice, we have in essence set up a new standard against which all economic activity is measured. We have created a common global value system that is measured in monetary terms alone, one that has little or nothing to do with the search for a sustainable future that will support human civilization. What should the world earn on its money? 7%? 5%? 3%? As currencies become integrated and markets become globalized, an investor can pick up the phone and buy German bonds if they pay better than US treasuries. Why should investors be concerned about the use of their money when money is entirely abstract anyway?
When long-term value is reduced or tantamount to net present value, the corporation has only one choice if it is to maximize return for shareholders and attain returns greater than the discounted rate of capital growth as expressed in financial markets.
If something is too big to fail, it is too big. Everything in nature is designed to fail.
The most well-meaning of businesses, whatever their size, cannot restore society or the environment if they neglect the small things that need caring for. In fact, you could almost define the restorative economy as one that turns his attention in a big way to small things.
Chapter 7: When an Ethic Is Not an Ethic
We are speeding up our lives and working harder in a futile attempt to buy us the time to slow down and enjoy our lives.
"An ethic is not an ethic, and a value is not a value, without some sacrifice for it, something given up, something not taken, something not gained." - Jerry Kohlberg
Chapter 8: Restoring the Guardian
Business did not anticipate a time when those resources would diminish or run out. It was inconceivable that the vast plains and forests of the New World could be exhausted, or that the abundant new fuels of coal could produce enough waste to fill the air and the seas, or that the use of oil could eventually lead to global climate change. So the system of rewarding the lowest price, impelling companies to exploit the cheapest sources of labor and materials, could not anticipate a time on the lowest price would no longer be the lowest cost, when seeking the cheapest means to get a product to market would end up costing society, the most in terms of pollution, loss of habitat, degradation of biological diversity, human sickness, and cultural destruction. Although the symptoms of this dysfunction were evident at the outset, they seemed minor when compared to the abundance of the world or, in the case of colonialism, justified by the doctrine of economic and racial supremacy today, each of us who works in or manages a business is essentially guided, even coerced, by these models.
The role of government is to assume those functions that cannot be undertaken by citizens or private institutions. The true purpose of politics is to create and sustain the conditions for community life.
In any endeavor, good design resides in two principles. First, it changes the least number of elements to achieve the greatest result. Second, it removes stress from a system rather than adding it. Bad design is pinning our hopes for environmental and cultural survival and a change in human consciousness and behavior alone, because we therefore depend on the highest number of uncontrollable elements, such as people, to undergo a great likewise, bad design must institute several hundred thousand rules and restrictions under the jurisdiction of the government and expect businesses to obey them. Good design makes process simpler (but not simplistic). Good design seems natural and unaffected and appeals to common sense. Good design for the commercial system accounts for and appeals to the innate behavioral modes of both governance and commerce. Let governance govern with a minimum of intrusion and with a genuinely conservative approach; let businesses be businesses at their best: humane, creative, and efficient.
In short, we must design a marketplace that obviates acts of environmental destruction by making them expensive and rewards restorative acts by bringing them within our means.
Green taxes would create, perhaps, for the first time since the industrial age began, the closest thing to a free market, with many costs that are now externalized fully accounted for.
With Green taxes, rather than becoming more efficient at planetary degradation, we become more efficient at planetary restoration. Rather than lowering costs by harming the environment, we lower costs by enhancing it.
Substantial green fees may improve the quality of life for citizens, but they also make obsolete capital and investments in outdated, polluting equipment and processes. In some cases, they may completely eliminate certain businesses. Severance taxes on heavy metals would reduce the need for new mined metals but would create in their place companies that would recapture heavy metals from industrial waste streams.
We have to imagine green fees as a way to rearrange the economic game, a way that produces better results for all. We are so battered by the insults of the existing system that we fail to see how creative the alternatives are.
Chapter 9: Pink Salmon and Green Fees
Given the time-honored definition of economy as the careful management of the wealth and resources of a community, we can find areas of potential agreement between economists and ecologists. First, anytime there is any efficiency in the form of pollution or waste, it is uneconomic and, therefore, more costly. Second, increases in efficiency will not only reduce global warming gases but also save money and improve the economy.
Of all the possible Green fees, taxing energy would be the most fruitful and beneficial, and it would provide the greatest short-term and long-term benefits. Attacks on the carbon content of fuels is a green tax that raises the price of energy sources proportionate to their emission of carbon, thereby providing users of those fuels with positive incentives to switch to more efficient combustion methods and less polluting forms of energy.
Fossil fuels give us a false and deceptive view of our carrying capacity with respect to the environment. No business in the world can long survive on its capital reserves. No civilization will long survive drawing down its energy capital. The task in energy, as in food, clothing, and shelter, is to create an economy that lives off current income, not capital resources. A green tax raises the economic stakes to the level where we cannot afford to live off capital, where it simply becomes prohibitively expensive to deforest, degrade, or destroy the environment.
We must go further than merely loving a carbon tax on energy and issue significant green taxes on chlorinated hydrocarbon-based chemicals, replacing them with processes derived from organic, non-polluting, renewable resources.
From a strategic point of view, the choice is clear. When everyone is faced with two different paths, each with its certainty and unknowns, the cardinal rule and strategic planning is to take a path that allows you to shift to the other path if your initial decision should prove wrong.
Green taxes on energy increase prices for industrially produced food and enfranchise localized food, production, family, farms, and sustainable agriculture.
An efficient farm is one that most effectively internalizes all of its costs. This is a farm that builds topsoil, sequesters carbon, uses water sparingly and thrifty, deploys pesticides rarely, if at all, and understands that the secret to healthy plants is healthy soil, not deadly chemicals. Thus, not only should energy use be taxed more heavily, but so, too, should all agricultural and chemicals, from artificial fertilizers to toxic pesticides.
As it stands now, people employing sustainable methods of agriculture need to charge more in order to make a decent living since they compete against producers who are externalizing costs.
In the current system, food is inexpensive because price comes first, and years later, we pay the costs.
The true costs of traffic stoppages are externalized throughout society. If tolls were placed on highways to count for these costs, automobile usage would drop, investment in public transport would increase, traffic patterns would change, revenues would accrue, and congestion would be reduced.
A variation on automotive green fees is a long-standing proposal by financial author Andrew Tobias to charge for auto insurance at the pump as a tax per gallon.
The solution to Garrett Harden's dilemma of a deteriorating open access system would be a commons utility. Utilities are hybrid enterprises because they combine two unusual features. First, they are regulated by their constituencies through public utility commissions or other forms of public sector input. In return for accepting regulation, they are given quasi or total monopolies and guaranteed a certain level of profit. In other words, by allowing some form of public control, they receive a guaranteed return on their investment, a relationship that allows them to create and execute long-term projects and attract capital while paying lower interest rates because of the security of their bonds. Once there is a utility, it is possible to make money by selling the absence of something, as contrasted to its presence. For example, many power utilities have some form of conservation rebate, where they pay the consumer to purchase energy, efficient appliances, or retrofit houses with insulation, new efficient windows, solar panels, and so on.
Most resource systems in the world are over-exploited and could benefit from becoming a utility that is publicly regulated, privately managed, and market-based.
No program of green fees will be effective if companies can circumvent them by bringing in products from overseas.
As we reduce pollution or resource usage in one area, thus reducing paid-in fees, we would have to institute new fees to replace them. There is no equilibrium point. Like nature, it will be dynamic and restorative.
Chapter 10: The Inestimable Gift of a Future
A critical basis for change and consensus is to find a way to introduce and discuss ecological principles in society in a manner that draws people together rather than repelling or deterring them.
Underlying all ecological science is the fact that, given a chance, the Earth will restore itself. The salient question we need to discuss in our communities and businesses is whether humankind will participate in that restoration or be condemned by our ignorance.
Without question, the most important principle is carrying capacity. What is the rate at which and the manner in which the world can sustain the human population that exists and is growing?
From business and government, we are still presented with overly optimistic assessments, a school of thought that biologist E. O. Wilson calls exemptionalist. This line of thinking relies on the ability of human beings to overcome ecological laws through invention, ingenuity, and technology. For every problem presented by environmentalists, optimists have an answer: desalinization, deep-sea mining, space, bioengineering.
The view I choose is this: the underlying principles informing the cautionary predictions are correct; the timing of earthly and climatological limits is not. This means that the optimists who say we will be taken care of in the future will be correct for the time being, right up until the day they are wrong, when we will all be in big trouble. The environmentalists, warning of impending catastrophe, will usually be wrong with regard to specific predictions, but they are right in principle. What does this tell us? It suggests we find a path of existence that recognizes limits while using our innovative capacity to invent and reimagine our world to increase efficiency, decrease harm, and improve our existence.
We cannot outfox carrying capacity. Our ability to increase production does not increase the carrying capacity of the environment; it only temporarily insulates us from the rest of our actions. We confuse our ability to consume with the capacity of earth to provide.
The moral of all exponential growth stories is the same: when a species grows exponentially without regard to carrying capacity, it will suffer and ignoble fate. So even if we can increase food, forest, fuel, and water production by 50 to 100% over the next 50 years, we have not truly solved—or even changed—the nature of the problem.
You cannot grow out of a problem if it is embedded in the thing that is growing; or, as Somalis says, you cannot wake up a man who is pretending to be asleep.
This book proposes three approaches, all guided by the example of nature. The first is to entirely eliminate waste from our industrial production. The second principle is to change from an economy based on carbon fuels from the past, what author Thom Hartmann calls ancient sunlight, to one based on current sunshine, including photovoltaic, solar, thermal, wind, and waves. Third, we must create systems of accountability and response that support and strengthen restorative behavior, whether they are in resources, utilities, green fees on polluting chemicals, or reliance on local production and distribution.
The thrust of a restorative economy will comprise two key issues. The first is to learn how much each of us can humanly take while we are on earth. The more of us, the less we can take, but on the other hand, the better we design our economy and commercial systems, the less we need. The second issue is to restore much of what we have lost.
The cash register is the daily voting booth in democratic capitalism.
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