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Hunter Lovins, coauthor with Amory Lovins and Paul Hawken of Natural Capitalism: Creating the Next Industrial Revolution, took time out of a schedule that, by comparison with my own grumblings about too much to do in too little time, makes me look like an Olympian slacker. Lovins is co-CEO of Rocky Mountain Institute, a nonprofit organization that she and her husband Amory established in 1982 in Snowmass, Colorado. RMI has been instrumental in giving alternative food for thought to corporations, governments, gas and utility companies, and other think tanks, particularly in the area of resource efficiencies.
Hunter assisted in the establishment of the California Conservation Project that conducts urban forestry and environmental education. And if developing and enlightening leaders worldwide wasn’t enough, she manages to ensure that her volunteer commitments don’t get shortchanged. Our interview was delayed the afternoon we were scheduled to speak because she got beeped away to help put out a fire — literally; she’s a volunteer firefighter.
In my humble opinion, Hunter Lovins is nothing short of brilliant. I didn’t agree 100 percent with her every view, but her assessments were thought-provoking and well founded. So get ready for a mental exploration of business and economics, philosophy, biology, and a plug for the way nature works.
Conscious Choice (CC): In your book, you explain that natural capitalism consists of the ecological systems and natural resources that give "life-support services" to all living organisms. You point out that these "services" have tremendous economic worth, particularly the ones for which no substitutes exist. Many (if not most) business models and practices tend to disregard the value of these "assets" and engage in extremely wasteful use of resources. How does a natural-capitalism business model offer a practical, sustainable alternative?
Hunter Lovins (HL): Capitalism as currently practiced is an aberration, not because it is capitalistic, the greatest known system for creation of wealth that the planet has ever known, but because to date it is violating its own logic. It is not valuing, but rather is liquidating the most important forms of capital: the natural capital, the resources and ecosystem services that make possible all life. These include the ability of the planet to maintain a stable climate, to assimilate and detoxify society’s wastes, to maintain biodiversity and soil fertility, [and sustain] the productivity of wetlands, estuaries, and coral reefs. The best technologies cannot substitute for these and hundreds of other ecosystem services, but their very real value is nowhere counted on anyone’s balance sheet. In a perfect world, such services would be properly valued, and this would drive economic decisions. In our very imperfect one, it is better to be approximately right than precisely wrong. Natural capitalism offers businesses a way to enhance their profits while behaving as if the ecosystem services were properly valued, even if conventional accounting fails to do this.
Conventional economic wisdom, stemming from the first industrial revolution, seeks to increase the productivity of people, substituting the use of resources and ecosystem services for human labor, as if people were scarce and nature abundant. But the conditions that may have pertained in the 1700s do not fit today’s realities. Therefore, a good profit-maximizing capitalist will seek to economize on what is scarce, and use more of what is plentiful. This will inevitably lead to a world in which we seek to use more people and dramatically increase the productivity with which we use natural resources.
CC: One of the premises in your book is that the way we respond to the changes in the patterns of scarcity will lead to what you say is the next industrial revolution, where not only will some chaos take place but where business opportunities will emerge. You claim that the way for business to take advantage of these opportunities is to follow a natural-capitalism model. This can be done, you say, by incorporating the four primary tenets of natural capitalism: (1) Radically increase natural resources productivity; (2) work toward production models and materials that are biologically inspired; (3) migrate to a "service-and-flow" business model; and (4) reinvest capital. Could you describe how those four principles work and give us a real-life example?
HL: The Interface Carpet Company is a multibillion-dollar company that makes a product that is typically purchased and laid down using toxic materials (carpet glues, and so on). Twenty percent of the product gets 80 percent of the wear but in ten years all of it is torn up and sent to landfills, where it lasts for 20,000 years. The carpet is made from oil, it contains such toxic components as PVC — you can scarcely think of a less sustainable way to soften our floors.
Interface’s visionary Chair Ray Anderson, on reading Paul Hawken’s book The Ecology of Commerce, said "My company is the problem and we’re not going to be that anymore. We are going to be the first company of the next industrial revolution." So, he has committed himself to implementing the four principles of natural capitalism. The first thing Anderson did was put the company on a systematic quest to eliminate waste in its worldwide operations. During 1994 through 1998 just looking to use resources more efficiently added ninety million dollars to the company’s bottom line. Pursuing the first principles of natural capitalism enabled the company to begin funding the transition by eliminating waste.
Second, Interface implemented the principle of biomimicry. Interface is looking to nature as the mentor, and asking "How would nature do this?" "How does nature provide floor covering?" And "How can we change our business model so as to do more of what nature does?" In nature there is no waste. You can seek to eliminate the waste in your current production, but it is much better to design a production process in which all of the loops are closed, where materials flow round and round in "nutrient" cycles, as they would in nature.
Interface realized that carpet making now is a one-way street. You pull the oil out of the ground, convert it into nylon, put it into carpet, put various toxic materials into the carpet and the backing, lay it down on the floor, only to tear it up and send it to the landfill. So Interface developed a new kind of carpet called Solenium which can be completely remanufactured into itself with the exception of about 3 percent of some material that is used to bind the face to the backing. They take the nylon face and make it into new nylon, take the old backing and make it into new backing. This severs the connection to the oil well at the front end and the landfill at the back end of the industrial process.
When Ray said to his designers "Go out and do this," they looked at him as if he was crazy. "No one has ever done it, we don’t know how to do it," they said. So he said, "Well, do it anyway. Nature does it — there has to be a way." I remember the day the designer came in and showed us the new carpet. His eyes got huge, and he said, "God must be an environmentalist."
The carpet that resulted from getting the design principles right was a superior product. It is four times as durable as other carpets. It’s nontoxic and virtually stain proof. You can clean it with water, and it uses one third fewer materials. Its production is climate neutral. It is cheaper to make, and Interface can sell it for more money because it provides a better product. Again, this is why we think natural capitalism is inevitable. The resulting products of this mind-set, of this way of thinking, are superior, and they’ll provide a higher profit.
Interface is also implementing the third principle of natural capitalism, which is to shift from a business model in which you make and sell things to one in which you provide to your customer a continuous flow of value and service. Nobody really wants to own industrial carpet. What customers want is the service of beauty, softness, dust absorption, and noise reduction on the floor. So Interface created a service called Evergreen Lease, whereby they provide the service of floor covering rather than selling carpet. In place of a big sheet of broadloom carpet they use carpet tiles. Remember 80 percent of wear is on 20 percent of the carpet. Interface replaces that 20 percent as needed. What previously had been a cost to your business is now a tax-deductible operating lease, not a capital expenditure. When you combine Solenium’s quadrupled durability, one-third fewer manufacturing materials, and four-fifths reduction in materials flows from only changing the worn bits, it reduces the flow of energy and materials to provide this service by 97 percent.
The fourth principle is to create an economy based on restoration. Any good capitalist reinvests in productive capital, but the capital that is in short supply now is not necessarily the financial or manufacturing capital we typically count as capital; it is, rather, the natural capital. So a natural capitalist will reinvest in restoring degraded natural capital and enhancing natural productive capital to better profit in the future. So Interface is exploring how to get its feedstocks from renewable materials. This is an archetype of the industry of the future. It also means that Interface will now have to specify how those products are grown so that they can ensure use of a truly restorative product.
This is just one example of the sorts of opportunities that are available throughout industry. Many companies are implementing one or more of the principles of natural capitalism to increase their shareholder’s value. Few have made as fundamental a commitment as Interface has, but an increasing number are expressing interest. Such behavior is why we believe the corporate sector will take the lead in creating a world in which all life can prosper. In a world in which the business sector is the only institution left on the planet big enough, well enough managed, resourceful enough to lead this transition, this is a very good thing. Governments have taken a shot at it and haven’t done all that well.
CC: What role do average citizens have to play in the natural capitalism model, and what steps would you encourage them to take in support of such a model?
HL: There are a number of sectors in society, and each has an important role. Perhaps the most overlooked sector is that of individuals and of civil society — nonprofit organizations, small groups of people working for a better world.
Often these groups think their actions are unimportant. Let me tell you a story that illustrates how wrong this is. In the last couple of years there has been a growing consciousness about the inappropriateness of modifying the genetic structure of living things, sometimes called genetic engineering. In fact that is a terrible name. Engineers, when they set out to build a bridge, know precisely the weight that materials can withstand, exactly what materials to spec for the performance they desire. On the other hand, genetic manipulation is blindly injecting viruses, bacteria, and other materials into species where such thing would never occur naturally, without a clue what the outcome will be.
For instance, some of the properties of the Brazil nut were injected into soybeans, ignoring that a huge part of the population is allergic to nuts. The product was pulled when critics pointed out that it could cause anaphylactic shock. The genes of an arctic flounder have been put into a strawberry. Or how about this one: inserting pig genes into other food. What about the religious implications of that? A year or so ago, it looked as if soon all our food inevitably would be tampered with. The big companies were making money at it. Stock of companies like Monsanto was booming.
I sat at the World Economic Forum in Davos, Switzerland, a year ago and listened to Al Gore essentially say to the Europeans, "You are going to accept American biotech products. It’s inevitable."
It wasn’t. A few activists in England used the Internet to organize mothers to get them concerned about what was going into the food their babies were eating. These moms went to the supermarkets and said, "We don’t want to eat this, and we don’t want our kids eating this." Supermarkets got so much pressure that they went to their suppliers and said, "We have to know which food is genetically modified and which is not, and we are not going to buy the modified varieties." Individuals raising a concern, going into the marketplace, and exerting their power as customers may not sound very threatening, but consider what happened.
About six months ago, the Deutsche Bank announced that genetically modified organisms (GMOs) were dead, that non-GMO materials were trading at a premium, and that GMO material was trading at a discount. Last December Monsanto as a company was dismembered. It was sold for the value of its pharmaceuticals group. A Wall Street Journal article valued its agrochemical group at zero. This is an example of the role of the individual. We need to stand up and say what kind of a world we want to live in, and then act on that commitment. Every time we buy something, we vote with our dollars. You can choose to buy products made by companies that have made a commitment to natural capitalism, to becoming restorative companies. Or you can waste your vote.
Citizens are becoming active in other ways: with the choices they make about their lives. As many Americans get increasingly wealthy in a conventional sense, more are experiencing an increasing poverty of the soul. [There’s a growing] realization that stuff doesn’t equal happiness, that working harder and longer, spending less time with one’s family and in the community, commuting longer hours in a car just to get the money to buy more things is not a recipe for happiness. Organizations like Center for a New American Dream or A New Roadmap Foundation are showing people how to get off that treadmill, how they can live with greater satisfaction and fewer things.
[Ask yourself,] "Is what I’m going to buy truly going to contribute to my happiness?" Sometimes the answer is yes, but a lot of the time the answer is no. Then you don’t have to buy it. Take that money and donate it to your favorite nonprofit. Or use it to take your kids on vacation, take a long walk in the country. Connect with the natural world, and put that money in the bank.
CC: It has been said that we are moving away from a product-based economy to one that is service and information oriented. The third principle in natural capitalism states that business needs to migrate from selling products to delivering an ongoing flow of service as well as value. Do you think the similarities in these trends are coincidental, or do they point to something else that’s occurring in society?
HL: Businesses are realizing that they can make more money by meeting customers’ real needs as opposed to simply producing a product. Now, when you make something, it is perceived to be in the interest of the business to make it so that it doesn’t last very long. This way you can sell more. This is not in the interest of the customer.
On the other hand, industries that shift to what Womack and Jones in the book Lean Thinking call a "solutions economy," based on the provision of service to the customer at the demand of the customer, suddenly find that it’s in the interest of both the provider and the customer to make money by finding more efficient and mutually beneficial solutions. Companies like Shindler, the European elevator company, are leasing "vertical transportation services" rather than selling elevators. Electrolux is leasing the performance of professional floor cleaning to commercial food service equipment rather than selling the equipment. In one area of Sweden, the company is giving away washing machines, and charging by the load of wash. After 1,000 loads, you get a new machine. Dow and SafetyKleen lease dissolving services rather than selling the solvents.
There is a growing interest in this in Europe and Japan with what are called "product take-back laws" that specify that if you make something, you own it ever after. You can sell it, but when the customer is done with it, you have to take it back. This makes it very much in a company’s interest to make it recyclable, remanufacturable, and reusable.
CC: What are the effects of population and carrying capacity in a natural-capitalism model?
HL: Ultimately the population issue is the environmental issue. You might say that the notion of unrestrained growth is the ideology of a cancer cell. Ultimately, no species can reproduce perpetually and have exponential growth. Such growth obviously will exceed the carrying capacity of any ecosystem.
What is interesting though is that in countries where there is relative economic prosperity, population goes down. To some extent that isn’t true in this country because of immigration. Take away immigration, though, and the United States is at almost zero population growth. Which is to say we have a real stake in increasing the economic viability of the countries from which all these immigrants are coming. By increasing female literacy, infant health care, decent nutrition, land reform, you can go a long way toward reducing the crush of population.
Where you reduce starvation and enable people to have a decent standard of living, population growth goes down. The countries that are developing have a greater stake in natural capitalism than the industrialized countries because they cannot afford to develop in the way that we did. They can’t make the same mistakes of going through the heavy industrial period with its attendant wastes and toxins.
So an increasing number of rural villages are investing in renewable energy as a way of meeting their needs. It’s about the only thing that makes sense. Once you invest in that, you can’t afford to invest in inefficient energy-using devices. And that is what most of our tech transfer sends to developing countries — technologies that we are done with. It’s incumbent upon those of us in the rich countries to help those in the poorer countries develop in ways that can endure.
CC: Can natural capitalism bring about a more balanced society despite often-conflicting goals among business, labor, and environmentalists?
HL: We believe so based on the businesses that are coming to us and starting to implement the principles of natural capitalism. I don’t think the goals are so much in conflict as are the techniques that people have chosen to move toward their goals.
Some people define the way to happiness as the accumulation of wealth and things, and feel that the business community has to be unfettered in its development of prosperity for all of us. That is essentially the rationale of the World Trade Organization. Others feel that you have to have stern government regulations, while someone else is telling everybody else how those same end goals of happiness and prosperity are going to be achieved.
What we have found with the four principles of natural capitalism is that business can better prosper by behaving in the way in which the environmentalists would like everyone to behave. Ultimately, we think federal regulations will be anachronisms because companies that need them won’t be profitable. There is obviously a long way to go to get there, but an increasing number of companies are coming to RMI and asking, "How do we implement this?" I have seen business plans for major U.S. industrial companies (companies with household names) that read as if written by a Greenpeace activist. There is almost a religious transformation going on in the heads of a large number of corporate executives as they realize, as Ray Anderson did, that the way in which they are doing business is killing the planet. In some cases, the changes are profit driven. Take the recent announcement from Dupont, for example, stating that the company intends to reduce its CO2 emissions by 65 percent from 1990 levels, and to get a tenth of its energy and a fourth of its raw materials from renewables by 2010. Dupont is doing this in the name of increasing shareholder value. Whatever is driving this transition, it indicates that we are standing on the threshold of a profound transformation of industry. Paul Hawken called it the next industrial revolution, and I don’t think that is too presumptuous a term.
Even if you work inside a company that is polluting or wasteful, the best way to ensure the economic viability of that company is to help it turn around, help it implement natural capitalism. Customers will achieve higher standards of living by investing in efficient technologies and those that are restorative. In every aspect of our lives, just keep asking each day, "How am I part of the solution?"
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