Natural Capitalism: Path to Sustainability?

Corporate Environmental Strategy
July 2001

In this article, the Lovins’2 explain what is meant by Natural Capitalism, four principles that enable business to behave responsibly towards both nature and people while increasing profits, inspiring their workforce and gaining competitive advantage. It combines radically increased resource productivity; closed-loop, zero-waste, nontoxic production; a business model that rewards both; and reinvestment in natural capital. The article describes how, even today, when nature and people are typically valued at zero, protecting and restoring nature, culture and community can be far more profitable than liquidating them.

L. Hunter Lovins , RMI’s co-CEO (Strategy), holds BAs in political science and sociology from Pitzer College, and a JD from Loyola University School of Law. A member of the California Bar, she co-founded the California Conservation Project  (Tree People). She lectures extensively, including at the World Economic Forum at Davos, and consults for corporations and communities. She has co-authored nine books and numerous papers, most recently a piece in Harvard Business Review, and the 1999 book, Natural Capitalism. She has held visiting chairs at Dartmouth College and the University of Colorado. She serves on the Boards of one government group, two private corporations, and many public interest groups.

Amory B. Lovins, Rocky Mountain Institute’s co-CEO (Research), has worked on energy and environmental policy in more than thirty countries for as many years. He has received an Oxford MA, a MacArthur Fellowship, the Onassis Foundation’s first Delphi Prize, and the Heinz Award, and published 26 books and hundreds of papers, many with Hunter Lovins. The Wall Street Journal’s Centennial Issue named him among the twenty-eight people most likely to change the course of business in the 1990s. Car magazine listed him as the 22nd most powerful person in the global automotive industry.

The late 20th century is witnessing two great intellectual shifts. The first is the fall of Communism, with the apparent triumph of market economics. The second, now emergent in a rapidly growing number of businesses, is the end of the war against the earth, with the eventual competitive victory of a new form of economics we call Natural Capitalism.

The term emphasizes that industrial capitalism, as it is now practiced, is unnatural. It is defying its own logic by not valuing but rather by liquidating, the most important forms of capital, especially natural capital. According to the United Nations, the World Bank, and the World Resources Institute, ‘‘There are
considerable signs that the capacity of ecosystems, the biological engines of the planet, to produce many of the goods and services we depend on is rapidly declining’’.

Ecosystem services include cycling nutrients and water, regulating atmosphere and climate, providing pollination and biodiversity, controlling pests and diseases, and assimilating and detoxifying society’s wastes. These services provide tens of trillions of dollars of worth each year — more than the global economy. Indeed, their value is nearly infinite, since without them there is no life and therefore no economic activity. But none of their value is reflected on anyone’s balance
sheets.

Deficient logic of this sort can’t be corrected simply by monetizing natural capital. Many key ecosystem services have no known substitutes at any price. The $200-million Biosphere II project, despite a great deal of impressive science, was unable to provide breathable air for eight people. Biosphere I, our planet, performs this task daily at no charge for six billion of us.

This is not to say that commodities are scarce. Prices for such resources as oil (despite the recent price spike) and copper are low and will trend downwards for some time. This is in part because powerful extraction technologies look cheap, especially if their environmental costs are not counted. Instead what is limited is the ability of deteriorating living systems to sustain a growing human population.

Industrial capitalism was born a quarter-millennium ago in the first Industrial Revolution.

Sometimes the cost of destroying ecosystem services becomes apparent only when the services start to break down. In China’s Yangtze basin in 1998, for example, upstream deforestation triggered flooding that killed 3,700 people, dislocated 223 million and inundated 60 million acres of cropland. That $30 billion disaster forced a logging moratorium and a $12 billion crash program of reforestation. Economic losses due to extreme weather have been rising since the 1950’s when there were 20 ‘‘great catastrophes’’and steeply since the 1970’s, when there were 47 disasters, to now $608 billion in the 1990’s, which suffered 87 weather related disasters. Such losses reflect gaps in the ideology of industrial capitalism, which for example, harvests wood fiber in a way that prevents forests from properly regulating watersheds to prevent flooding, or provides energy in a way that damages the self-stabilization of the earth’s climate.

Industrial capitalism was born a quarter-millennium ago in the first Industrial Revolution. Before that time, it was inconceivable that people could work more productively. If you needed two horsepower, you needed two horses, and if you wanted more cloth, you had to hire more skilled weavers — if you could find them. Substituting machines and abundant nature enabled the relatively scarce people to do more work. The textile mills introduced in the late 1700s that enabled one Lancashire spinner to produce as much cloth as 200 weavers were only one of many technologies that increased the productivity of workers, and increased prosperity. As these technical and organizational innovations spread, affordable mass goods, purchasing power, a middle class, and everything we now call the Industrial Revolution, emerged.

The logic of economizing on the scarcest resource, because that is what limits human progress, remains perennially true. What has changed — indeed, reversed — is the pattern of scarcity. Today we have abundant people and scarce nature, not the other way around. Now, as the economic gurus call for even greater labor productivity, as if people were still scarce and nature still abundant, a completely different approach is needed.

Today it makes sense to use more people and more brains to wring four, ten or even 100 times as much benefit from each unit of energy, water, materials, or anything else borrowed from the planet. Success at this will be the basis of competitiveness in the decades to come. Increased resource productivity will be the hallmark of the Next Industrial Revolution.

Cutting such waste represents a vast business opportunity.

It is also the first principle of Natural Capitalism, offering not only increased profits, but also the solution to most of the environmental dilemmas today. It slows depletion of resources and the discharge of pollution. As a result, it creates profits from not having to pay for either. And it also buys time, forestalling the threatened collapse of natural systems.

That time should then be used to implement the other three principles of Natural Capitalism.
These are:

  • eliminate the concept of waste by redesigning the economy on biological lines that close the loops of materials flows;
  • shift the structure of the economy from focusing on the processing of materials and the making of things to the creation of service and flow; so as to reward resource productivity and loop-closing; and
  • reverse the planetary destruction now underway with programs of restoration that invest in natural capital.

Together the four principles of Natural Capitalism enable businesses to behave as if ecosystem services were properly valued, reversing the loss of such services, all the while increasing profits.

Increasing Resource Productivity
It is profitable to use resources more efficiently because they are currently used wastefully. The stuff that drives the metabolism of industry currently amounts to more than 20 times your body weight every day, or more than a million pounds per American per year.

Globally, the economy mobilizes a flow of half a trillion tons of materials per year. But only about 1% of that flow ever gets embodied in a product and is still there six months after sale. The other 99% is waste. Cutting such waste represents a vast business opportunity.

The opportunities for savings are easiest to see in energy. The U.S. has already cut its annual energy bill by $200 billion since the first oil shock in 1973, but still wastes $300 billion worth of energy each year. Just the energy thrown away by U.S. power stations as waste heat equals the total energy Japan uses for everything.

However, many companies have shown how to reduce such waste and increase profits.

Southwire Corporation, an energy intensive maker of cable, rod and wire, halved its energy per pound of product in six years. The savings roughly equaled the company’s profits during that period when many competitors went bankrupt. The energy efficiency effort retained 4000 jobs at ten plants in six states.

State-of-the-shelf technologies can make old buildings three- to four-fold more energy-efficient…

Dow Chemical’s Louisiana Division implemented more than 900 worker-suggested energy-saving projects during 1981–1993, with average annual returns on investment in excess of 200%. Both returns and savings tended to rise in the latter years, even after the annual savings had passed $100 million. This is because the engineers were learning new ways to save energy faster than they were using up the old ones.

State-of-the-shelf technologies can make old buildings three- to four-fold more energy efficient, new ones nearer to 10-fold — and are cheaper to build. Examples include large and small buildings in climates ranging from well below freezing to sweltering. For example:

  1. At Rocky Mountain Institute in Colorado, we grow bananas despite freezing winters, with no furnace. The superwindows, superinsulation, and ventilation heat recovery system that keep the building warm without artificial heat, cost less than installing a furnace.
  2. Other buildings achieve normal or better comfort with no air-conditioning equipment at outdoor temperatures up to 1158F, and cost less than normal to build.
  3. A California office building was retrofitted to save more than 90% of its air-conditioning energy while improving comfort and saving money.
  4. A 200,000-ft2 glass office tower in Chicago can save three-quarters of its energy, while making the people more comfortable, healthy, and productive — at no more cost than the normal 20-year renovation that would have resulted in nothing being saved.

Industries can achieve similar savings:

  1. Thirty-five improvements can save about half the energy in existing industrial motor systems Žwhich use three-fourths of industrial electricity. with returns on investment approaching 200% per year.
  2. Radical changes in process technology can, for example, often condense a big chemical plant into the size of a large melon, using microfluidics.
  3. Revolutions in product lifetime, design and manufacturing with minimum materials can produce the same flow of products and services with far less manufacturing. The heat, beat and treat requirements are mostly replaced or completely removed from the process.

How can such big savings be captured?

Inventor Edwin Land once remarked that ‘‘People who seem to have had a new idea have often just stopped having an old idea’’. The world’s leading interiors company, Interface, recently experienced what Land called ‘‘a sudden cessation of stupidity’’ when redesigning a standard industrial pumping loop for installation in a new Shanghai factory. The original, supposedly optimized, design needed 70.8 kW for pumping. Interface engineer, Jan Schilham, made two simple design changes that cut the requirement to only 5.3 kW, a 92% reduction. Yet the redesigned system cost less to build, and worked better. This required no new technology but only two changes in the design mentality.

First, Engineer Schilham chose big pipes and small pumps rather than small pipes and big pumps. The friction in a pipe falls as nearly the fifth power of its diameter. Normal engineering balances the higher capital cost of a fatter pipe against the present value of the pumping energy that the pipe’s lower friction will save over time.

But this textbook optimization ignores the capital cost of the pumping equipment — the pump, motor, variable-speed electronic control, and electrical supply — that must be big enough to overcome the pipe friction. Ignoring the potential to make that equipment much smaller, and optimizing one component (the pipe) in isolation, pessimizes the system. Optimizing the whole system instead, and counting savings in capital cost as well as in energy cost, makes the whole system cost less but work better. (As the price of energy escalates, so will the savings…)

Schilham’s second innovation was to lay out the pipes first, then the equipment. The normal sequence is the opposite: install the equipment in traditional positions (far apart, at the wrong height, facing the wrong way, with other things in between., then tell the pipefitter to hook it all up. The resulting long, crooked pipes have about 3–6 times as much friction as short, straight pipes. Pipefitters like this approach: they’re paid by the hour, they mark up a profit on the extra fittings, and they don’t pay for your larger pumping equipment and its electric bills. But using short, straight pipes cuts both capital and operating costs. In this case, it also saved 70 kW of heat loss, with a 3-month payback, because straight pipes are easier to insulate.

Pumping is the biggest user of electricity worldwide.

Why does this matter? Pumping is the biggest user of electricity worldwide. Electric motors use three-fifths of all electricity. Every unit of friction saved in the pipe saves about ten units of fuel, cost, pollution, and climate change at the power station. Most importantly, the thought process of whole-systems thinking, and of optimizing for multiple benefits, applies to almost every technical system that uses energy and resources. Optimizing a whole pumping system, a whole building, a whole factory, a whole economy, can typically yield resource savings of 3- to 10-fold, yet cost less to build.

Design integration applies to real-estate development, too. Typical developments drain storm water in costly underground pipes. Village Homes, an early solar housing development near Sacramento, California, instead installed natural swales in the landscaping. After a storm, they would fill with rainwater that soaked into the ground, recharging the groundwater. Not needing the pipes saved $800 per house. The developer then used the saved money to pay for extensive edible landscaping that provided shade, nutrition, beauty, community focus, and crop revenues to support more amenities. The landscaping, plus people-centered site planning (pedestrian/bike greenways in front of the houses, cars around the back on narrow, tree-shaded streets), saved more land and money. It also cooled the microclimate, yielding better comfort with little or no air-conditioning, and created safe and child-friendly neighborhoods that cut crime by 90%. Real-estate agents once described the project as weird. It is now the most desirable place to live in the whole town, with market values averaging $11/sq.ft above average and sales three times faster than average.

Combining many new technologies with the new design thinking can yield unexpected breakthroughs. For example, Rocky Mountain Institute’s HypercarSM design can produce a large sport-utility vehicle that gets 100 miles per gallon-equivalent, powering its electric propulsion motors with an onboard fuel cell using compressed gaseous hydrogen. Made of advanced composites like carbon fiber, the SUV would be ultra-light, weighing only 1700 pounds, but could carry six adults and 140 ft2 of cargo with Mercedes comfort and safety, even if it hits one, yet with the performance of a BMW. Its body materials wouldn’t dent or rust. It would be ultra-reliable and emit only hot drinking water. The car could also be plugged back into the electric grid when parked, becoming a minipower-plant on wheels, selling back to the grid enough power to earn its owner up to half the cost of buying the car.

This combination of technologies — to which roughly $10 billion has already been committed by automakers — will ultimately save about as much oil as OPEC now sells. It probably spells the end of the car, oil, steel,aluminum, nuclear, coal, and electricity industries as we know them and the beginning of successor industries that are cleaner and more profitable. Ford Motor Company Chairman William Clay Ford, Jr., has predicted that hybrid-electric cars and trucks could account for 20% of vehicle sales by 2010. (President Okuda of Toyota even envisaged 33% by 2005).

Mr. Ford, like the Chairman of General Motors, also predicted that both engine-driven hybrids and traditional cars would eventually be replaced by fuel-cell vehicles. At least eight major automakers have announced volume production of fuel-cell cars in model years 2004–2005. Hypercars with the sorts of advanced characteristics mentioned above should be available within five years, dominant in ten; the old car industry will be toast in about 20 years.

All of these ways of saving energy mean that global climate change can be prevented

All of these ways of saving energy mean that global climate change can be prevented at a profit, because saving fuel costs less than buying fuel. Leading companies are starting to capture this potential. DuPont recently announced that by 2010, it will reduce its CO2 emissions by 65% from 1990 levels, raise its revenues 6% a year with no increase in energy use, and get a tenth of its energy and a quarter of its raw materials from renewables— all in the name of increasing shareholder value. ST Microelectronics, the world’s sixth-largest chipmaker, has set a goal of zero net carbon emissions by 2010 despite a 40-fold increase in production from 1990, again in pursuit of commercial advantage.

This is why the European Union has already adopted at least a fourfold (‘‘Factor Four’’) gain in resource productivity as the new basis for sustainable development policy and practice. Holland and Austria, have declared this a national goal. The OECD Environment Ministers, the government of Sweden, and leaders in Europe, Japan, and elsewhere have gone even further, adopting Factor Ten improvements as their goal. The World Business Council for Sustainable Development and the United Nations Environment Programme have called for Factor Twenty. There is growing evidence that even such ambitious goals are feasible and achievable in the marketplace. They may, in fact, offer even greater profits.

Eliminating the Concept of Waste

Resource efficiency is Natural Capitalism’s cornerstone, but is only its beginning. Natural Capitalism doesn’t mean merely reducing waste; it means eliminating the entire concept of waste by adopting biological patterns, processes, and often materials. This implies eliminating any industrial output that represents a disposal cost rather than a sale-able product. DesignTex, a subsidiary of Steelcase (the world’s largest maker of office furniture) commissioned the architect Bill McDonough to design a ‘‘green’’ textile for upholstering office chairs. The fabric it was to replace used such toxic chemicals to treat and dye the cloth that the Swiss government had declared its edge trimmings to be a hazardous waste (so what’s the middle of the cloth that we’re sitting on?.. McDonough’s team screened more than 8000 chemicals, rejecting any that were persistently toxic, built up in food chains, or caused cancer, mutations, birth defects, or endocrine disruption. They found only 38 that weren’t harmful. From these, however, they could make every color. The cloth looked better, felt better in the hand, and lasted longer, because the natural fibers weren’t damaged by harsh chemicals. Production also cost less, because it required fewer and cheaper feedstocks and caused no health and safety concerns: there was nothing that could harm the workers or the neighbors.

When the Swiss environmental inspectors tested the plant, they thought that their equipment was malfunctioning: the water coming out was cleaner than the Swiss drinking water going in, because the cloth itself acted as an additional filter. More important, the redesign had eliminated any waste and toxicity. As McDonough put it, ‘‘they took the filters out of the pipes and put them where they belong, in the designers’ heads’’. The University of Zu¨ rich’s basic chemistry lab course was turning pure, simple reagents into mainly hazardous wastes, incurring costs at both ends. The students were also learning once-through, linear thinking. Professor Hanns Fischer partly reversed some of the lessons so that students turned the toxic wastes back into pure, simple reagents. Waste production declined 99%, costs fell by about $20 000 a year and the students learned the closed-loop thinking that must ultimately save the chemical industry.

Ultimately, companies that need environmental regulation will not be around, because they will not be profitable. In such a world, the design lessons of nature will improve business — as well as health, housing, mobility, community, and national security. In this coming world, companies will take their values from their customers, their designs from nature and their discipline from the marketplace. Companies ignore this at their peril.

The Solutions Economy

The third principle of Natural Capitalism is to shift the structure of the economy from focusing on making and selling things to providing what the customer wants, a continuous flow of value and performance.

This change in the business model incentivizes elimination of waste, because it structures the relationships so that the provider and customer both make money by finding more efficient solutions that benefit both. That contrasts sharply with the sale or leasing of physical goods, where the vendor wants to provide more things more often — increasing waste — and at a higher price, while the customer has the opposite interests. But in a ‘‘solutions economy’’, both the provider and the customer are rewarded for doing more and better, with less, for longer.

For example, in Europe and Asia, Schindler leases vertical transportation services instead of selling elevators, because its elevators use less energy and maintenance than others do. By owning the elevators and paying their running cost, Schindler can provide to customers, at higher profit and lower cost, what they really want, which is not an elevator but the service of being moved up and down. Similarly, Electrolux/Sweden leases the performance of professional floor cleaning and commercial food service equipment rather than the equipment itself, and is experimenting with leasing household ‘‘washing services’’ charged by the weight of clothes washed. Dow leases dissolving services rather than selling solvents. Most French commercial buildings are heated by chauffagistes — ‘‘heat contractors’’ who provide the service of thermal comfort. In all these cases, both customer and provider profit from minimizing the flow of energy and materials.

Companies that need environmental regulation will not be around« because they will not be profitable.

Or consider the Films Division of DuPont. Once nearly defunct, it leads its 59-firm market because it is able to make films ever thinner, stronger, and better matched to customers’ needs. The film is more valuable to customers and hence fetches a higher price, but contains fewer molecules and costs less to make. Rather than using virgin raw materials, DuPont recycles nearly a billion dollars of used film per year, recovered from customers using ‘‘reverse logistics’’, a new topic of study in business schools. Jack Krol, past Chair of DuPont, has remarked that he sees no end to DuPont’s ability to profit from doing ever more and better with less material — until ultimately the company is selling almost nothing but ideas.

Reinvesting in Natural Capital

The fourth principle of Natural Capitalism is to reverse the planet-wide destruction of ecosystems by reinvesting profits, achieved by eliminating waste, in restoring natural capital.

If natural capital is the most important, valuable, and indispensable form of capital, then a wise society will restore it where degraded, sustain it where healthy, and expand it wherever possible — in order to create wealth and sustain life. This is occurring first in forestry, farming, and fishing, whose success depends directly on the health of the natural systems. But it is starting to spread to other industries as the primary inputs to manufacturing come to be grown, not mined. Restoring ecosystem services might sound expensive. But whole-system solutions can cost less. For example:

  • Allan Savory, a wildlife biologist from Africa, has redesigned ranching to mimic the migration of large herds of native grazers that co-evolved with grasslands. This can improve the carrying capacity even of arid and degraded rangelands, which turn out to have been not overgrazed but undergrazed, out of ignorance of how brittle ecosystems evolved;
  • The California Rice Industry Association partnered with environmental groups to switch from burning rice straw to flooding the rice fields after harvest. They now flood 30% of California’s rice acreage, harvesting a far more profitable mix of free cultivation and fertilization by millions of wild ducks and geese, lucrative hunting licenses, groundwater recharge, with rice as a byproduct;
  • Dr. John Todd’s biological ‘‘Living Machines’’ make sewage treatment plants that look like a garden — because they are. They make sewage into clean water, plus valuable flowers, an attractive tourist venue, and other byproducts, with no toxicity, no hazard, no odor, and lower capital costs. The plant can easily be small enough to serve an urban neighborhood or even a single building. Such ‘‘Bioneers’’ are also using living organisms to ‘‘bioremediate’’ toxic pollutants into forms that are harmless or salable or both.

Some of the most exciting developments are modeled on nature’s low-temperature, low-pressure assembly techniques, whose products rival anything manmade. Janine Benyus’s book Biomimicry points out that spiders make silk, strong as Kevlar but much tougher, from digested crickets and flies, without needing boiling sulfuric acid and high-pressure extruders. The abalone makes an inner shell twice as tough as ceramics and diatoms make seawater into glass; neither need furnaces.

What would a company that used Natural Capitalism look like?

We may never be as skillful as spiders, abalone, or diatoms, but such benign natural chemistry may be a better model than industrialism’s primitive approach of ‘‘heat-beat and-treat’’. These practices adopt the design experience of nearly four billion years of evolutionary testing in which products that didn’t work were recalled by the Manufacturer.

Putting it all Together

What would a company that used Natural Capitalism look like? A striking example is
emerging at the Atlanta interiors company, Interface. Most broadloom carpet is replaced every decade because it develops worn spots. An office is shut down, furniture removed, carpet torn up and sent to landfill.

(The millions of tons deposited each year will last for 20,000 years…) New carpet is laid down, the office restored, operations resumed, and workers possibly sickened from the carpet-glue fumes.

Its visionary chair, Ray Anderson, committed Interface to systematically implement the
principles of Natural Capitalism. First, its staff has sought to increase the productivity with which they use energy and materials. Theyimplemented the QUEST program to eliminate waste in its worldwide operations. From 1994 to mid-2000, this added $167 million to the bottom line, and now provides 27% of the company’s operating profit.

Second, Interface is closing the loops of materials flows. It is implementing a program to recycle carpet. Other companies that claim to recycle carpet actually ‘‘downcycle’’ it, chopping used carpet up into lower-grade products such as carpet backing. But this wastes the embodied energy in the nylon ‘‘face’’ of the carpet, requiring more oil to make new nylon for new ‘‘face’’. In contrast, Interface’s new ‘‘Solenium’’ product, released in 1999, is almost completely remanufacturable into identical carpet. This severs the connection to the oil well at the front of the production cycle and to the landfill at the back end.

Solenium also provides better service. The new floor-covering, which may be leased or sold, is nontoxic, virtually stainproof, easy to clean with water, four times as durable, one-third less materials-intensive, climate neutral (the climate impacts of making and shipping) it have all been offset., and in appropriate applications, superior in every respect. It also turns the avoided waste into profit.

Interface implements the third principle by preferring to sell floor covering services rather than new carpet. People want to walk on and look at carpet, not own it. Under Interface’s Evergreen Service Contract, the company will install carpet tiles, which Interface will own. As needed, Interface will replace the 10–20% of the carpet-tiles that show 80–90% of the wear. This provides better service at lower cost. It also increases net employment, eliminates disruption (worn tiles are seldom under furniture) and turns a capital expenditure into a tax-deductible operating lease.

Solenium’s quadrupled durability and one-third lower materials intensity, coupled with the four-fifths lower materials flow from replacing only the worn parts, will cut Interface’s net flow of materials and embodied energy by 97% even before the remanufacturing of the Solenium begins.

Natural Capitalism creates an extraordinary outpouring of energy, initiative, and enthusiasm throughout a company.

Finally, Interface is initiating a program to grow its feedstocks, mindful that this will require them to ensure that their suppliers practice sustainable farming. This will put them in the forefront of making a steady market for organic farmers who restore the land through their practices — and will ultimately free this once petrochemical-intensive firm entirely from its dependence on oil.

Interface’s first four years on this systematic quest returned doubled revenues, tripled operating profits, and nearly doubled employment. Its latest quarter-billion dollars of revenue have been produced with no increase in energy or materials inputs, just from mining internal waste, closing the loops, eliminating toxics, and shifting to a service model. Interface is finding that implementing Natural Capitalism creates an extraordinary outpouring of energy, initiative, and enthusiasm throughout a company. It removes the contradiction between what people do at work and what they want for their families when they go home.

Beyond Profits: What’s in it For Us

Civilization in the 21st Century is imperiled by three problems: the dissolution of civil societies into lawlessness and despair; weakened life support systems; and the
dwindling public purse needed to address these problems and reduce human suffering.
All three share a common cause — waste. Its systematic correction is a common solution, equally unacknowledged yet increasingly obvious, the reduction of this waste and the implementation of the principles of Natural Capitalism.

Worldwide, the leaders in eliminating waste will be companies. But there remains a vital role for governments, and for civil society. It is important to remember markets’ purposes and limitations. Markets make a splendid servant but a bad master and a worse religion. Markets produce value, but only communities and families produce values. A society that substitutes markets for politics,ethics, or faith is dangerously adrift. Commerce must be in the vanguard of creating a durable system of production and consumption by properly applying sound market principles. Yet not all value is monetized; not every priceless thing is priced. Nor is accumulating money the same thing as creating wealth or improving people. Many of the best things in life are not the business of business. And as the Russians and Somalis are finding under ‘‘gangster capitalism’’, unless there are democratic ways to establish and maintain a
level playing field, only the most ruthless can conduct business.

But governments, though vitally important, cannot solve all our problems. Today over
half the world’s 100 largest economic entities are not countries, they’re companies. Corporations may well be the only institution in the world today with the size, skills, resources, agility, organization, and motivation to solve the toughest problems. Such business leaders as Ray Anderson of Interface, Mark Moody-Stuart of Royal/Dutch Shell, and Pasquale Pistorio of STMicroelectronics are redefining what corporate responsibility means. As we cross the threshold into the next industrial revolution, many changes will beset us: technological and institutional. In this turbulent time, companies seeking stability and profit are turning to Natural Capitalism.

Companies — and countries — that conscientiously pursue the four principles of Natural
Capitalism, profiting from advanced resource productivity, closing materials loops and
eliminating waste, providing their customers with efficient solutions, and reinvesting in natural capital, will gain a commanding competitive advantage. They’ll be behaving as if natural and human capital were properly valued. But they’ll also be making a profit today, when these values are set at zero. And as Ed Woollard remarked, companies that take these opportunities seriously will do very well. Those that don’t won’t be a problem, because they won’t be around.

Perhaps the only problem with capitalism — a system of wealth creation built on the productive flow and expansion of all forms of capital — is that it is only now beginning to be tried.

Endnotes
1. For more information on these ideas, please see our latest book, Natural Capitalism, Creating the Next Industrial Revolution, published in 1999 by Little, Brown, written with the business author, Paul Hawken. The examples cited in this paper are documented there at the website www.natcap.org. or www.naturalcapitalism.org or contact: Rocky Mountain Institute, 1739 Snowmass Ck. Rd., Snowmass, CO 81654, USA.
2. The Lovins’ research has laid the foundation for many new disciplines and enterprises, including the $5-billion-a-year ‘‘negawatt’’ industry and the emerging Hypercar industry. Together they founded Rocky Mountain Institute, an independent fifty-person nonprofit resource policy center in 1982, and have consulted for scores of industries and governments worldwide. They both have received various honorary doctorates, shared a 1982 Mitchell Prize, a 1983 Right Livelihood Award (often called the ‘‘alternative Nobel Prize’’), the 1993 Nissan Prize, and the 1999 Lindbergh Award. In 2000 they were named Time Magazine Heroes of the the 1993 Nissan Prize, and the 1999 Lindbergh Award. In 2000 they were named Time Magazine Heroes of the Planet.

Posted in Articles, Corporate Environmental Strategy, Hunter Lovins