(by Illana Lipsett & Zach Sharpe)
11 Dec 2012
As Natural Capitalism Solutions celebrates its tenth anniversary, Hunter Lovins reflects on what has changed in the sustainability world over the past decade, how companies have woken up to the profitability of sustainability, why things are going to get worse before they get better, and how small businesses and cities may hold the key to climate protection. Ilana Lipsett and Zach Sharpe of Sustainable Industries spoke with Lovins, and invite you to continue the conversation. Lovins answered reader questions through the Sustainable Industries web site and is happy to do so here as well.
Sustainable Industries: In your opinion, what is the most pressing sustainability challenge we are facing right now?
Hunter Lovins: Bill McKibben is right: It’s climate. We solve this one or we lose life as we know it on this planet. Three of the earth’s ecosystems are tipping into collapse: coral reefs, oceans, and the Amazon. If we continue business as usual, by the end of the century there will be no coral reefs because of warming water. The oceans are acidifying, and the Amazon is warming and drying. We could lose the earth’s lungs.
There are many challenges facing us. All of the worse ones tend to be tied to climate change. And it’s frustrating because as my recent book, The Way Out: Kick-starting Capitalism to Save Our Economic Ass, has shown, we have all the solutions. Implementing them would make us a great deal of money. … And at the end of the day, if climate change is a hoax we’ll just make a lot of money.
SI: How have you seen behaviors toward sustainability change in the last 10 years?
HL: We help companies understand the business case [for sustainability] and this is almost no longer a debate. We’ve gone from…arguing that there is a business case. Now it’s been proven. We have a report called Sustainability Pays. It’s a study of studies: 45 studies that show leaders in ESG have 25% higher stock value than less sustainable competitors, have the fastest growing stock value. They are well protected from value erosion even in a down economy. When those wild-eyed environmentalists from Goldman Sachs tell you that sustainable leaders are outperforming less sustainable peers, it’s a business case.
All the big academic business journals are talking about it. In the Harvard Business Review a study concluded that sustainability is not the burden on the bottom line it always was thought to be. It’s the touchstone of all of innovation. In the future, only companies that make it a goal will achieve a competitive advantage. MIT Sloan said much the same thing. When there are 45 [studies], the argument is over. There is a business case for sustainability.
Now the question is how do you implement it? That’s the work Natural Capitalism does. We work in 30 countries, in companies, and in communities around the world helping them implement more sustainability practices in ways that are profitable.
SI: We know from your work that business can profit – and profit handsomely – from sustainability. But how much is the sustainability movement profiting from business? Are we getting far enough fast enough with business today in addressing climate change?
HL: No. We are losing. The Doha climate talks are another example of how far behind we are falling. That said, of all the action that is being taken, business is the engine that’s driving it. In the last year the International Energy Agency and the Organization of Economic Cooperation and Development said that we’ve locked in two degrees Celsius warming. Sorry. Too late. We’ve already emitted carbon in the atmosphere that’s going to warm the planet two degrees. And all the impacts we are seeing now are from a warming of 0.8 degrees Celsius. We ain’t seen nothing yet. It’s going to get worse. And governments are obviously failing. Obama had four years and did nothing.
SI: Do you think he’ll do anything in the next four?
HL: I hope so. At Natural Capitalism we have a project called the Presidential Climate Action Project. We built a list of actions that the Executive Branch could take to drive climate protections. [Executive Director] Bill Becker said that now there’s real interest in it. So I’m cautiously hopeful that we will start to see the administration taking action.
The whole point of the book, The Way Out, is that there is a very strong business case for climate protection. But from standpoint of the economy, I think the only answer to the recession is to unleash the green economy. So hopefully the administration will be arguing for these measures as job creation measures. Take distributed generation as a measure to enable communities to withstand violent storms like Hurricane Sandy. It’s also a job creation measure; when you put solar on a building, it continues functioning even in a hurricane. And you create jobs in the community: to put panels on the building, to build the panels. In a green economy, a quarter of all the jobs are in manufacturing, compared to nine percent of jobs in the economy as a whole. If we want to bring manufacturing back to the United States, we know how to do it. Unleash the green economy.
SI: What can cities do to mitigate the effects of climate change?
HL: After Hurricane Sandy, New York Mayor Bloomberg said, “it’s climate change.” The first thing a city can do is admit that it is facing a real problem. They need to talk about it. Cities currently have half of people on earth. 80% of cities’ footprint comes from buildings. So look at building stock. Cook Fox Architects just completed a Bank of America building that is a LEED platinum skyscraper. What they are setting out to show is that energy savings will pay for themselves, but an increase in worker productivity because of green building will make it an extremely attractive investment. The first thing cities can do is put in green building codes. California’s AB1103, requiring owners of commercial buildings to implement energy efficiency, is a good thing. What California has done with the carbon market is global leadership.
SI: How can cities create an environment that enables the growth of sustainable businesses – not just sustainable in their physical space, but also in their values, visions, and practices?
HL: Most cities and most utilities pay attention to big business. But what about small business? The Kauffman Foundation did a study recently showing that since 1977, in all but 7 years, the job creation engine is not big but little businesses. So how can we support little businesses to implement more sustainable practices? At Natural Capitalism we have a tool called “Solutions at the Speed of Business” that helps a small businessperson look systematically at how they are using resources, and implement more sustainability practices to drive their profitability, because for small businesses, cash is king.
SI: Where do you see businesses really failing? Where are businesses falling behind? What’s the hold up?
HL: The lack of management attention. Most companies say, look, energy is a small cost of my cost of doing business. Which is why looking at increases in worker productivity from the green building technology is so important. You get a 6-16% increase in labor productivity as a result of measures that also cut your energy use, thus your carbon burn. You pay 100 times more for people than you pay energy…
SI: Would you say that worker productivity is a new trend in the argument for sustainability? USGBC has been talking about the impact of healthy buildings.
HL: It’s clearly not a new thing. We did one of the first studies on this back in the 1990’s. Herman Miller, when they put a green building in, got a 13% boost in productivity. What’s interesting is managers now, particularly in a down economy, looking at how to economize on cost. If you can enhance worker productivity, that’s considered to be the holy grail.
For example in the Bank of America building that is across the street from where I’m standing now, the building is designed so that everybody in the building has daylighting. It has raised flooring so that the HVAC system is in floor rather than pumping air which mixes all dirt and disease around. Workers have a little vent that enables them to control it. That ability to control your own workspace turns out to be incredibly important in worker satisfaction. The building has a cogeneration facility in the building. There are fuel cells in the building. And it’s beautiful! It’s a LEED platinum skyscraper. As a result, it’s more leasable; these green buildings sell for a higher rate, they lease at a higher rate. They lease faster. All of this is more money in a developer’s pocket.
Where the sustainability movement has fallen down is it allows advocates to make the argument based on moral arguments. It’s not the polar bears. This is jobs, this is prosperity, this is security, this is resilience in our communities. It’s the business case. And there is a role for government. Companies will keep on doing what they’ve always done as long as they can get away with it. So we have to have customers demanding it. And we are starting to see that. All things being equal, 82% of the buying American public prefers green. Patagonia is a good example of a company that says, “buy less of our products,” and their profits are going up. But ultimately, business will get it right or government will regulate them into it.
SI: A recent poll shows 69% of New Yorkers connect the dots between Hurricane Sandy and climate change. Will it take more extreme weather events to continue to change public opinion? Will changing public opinion be enough to make people change their behavior?
HL: Yes and Yes. We’ve been under a campaign for the last decade of deliberate disinformation. The Koch brothers et al. have poured billions of dollars into trying to convince the American people climate change is a hoax. If it’s a hoax, why take any action?
New Yorkers have woken up to climate change. They are talking about the next [storm]. In midtown there are at least 100 buildings that date back to the beginning of the last century. Single-paned glass, curtain-wall buildings…made to withstand 30 pounds of pressure. A hurricane will give you a great deal more than that. Can you imagine a hurricane through middle of Manhattan? Not only will you have no energy and no water, you’ll have nowhere to work because there will be glass in the street.
SI: What do you most want people to take away from this conversation if this is the only article they read all year? What can individuals do to contribute most to the fight against climate change?
HL: The first thing people should do is go out and read my book. Because it’s the good news. Nine chapters of what entrepreneurs, companies, communities, countries, are doing to solve the problem at a profit.
The next thing people ought do is look at their own life. … What is it that I do that’s contributing to the problem, and what can I do to become part of the solution? For example: lightbulbs. Most of us still have incandescent. Switch to compact fluorescent, consider going all the way to LED. What do you buy? Where did it come from? Was it made locally? Was it made by a company that has a commitment to behaving more sustainably? With food in particular, if you start buying local, you’ll have healthier and tastier food. Places like New York, San Francisco, but increasingly all across the country, the foodie movement is having people look at where their food comes from and what was involved in making it.
Ask questions: Get your morning coffee [and ask], where did the coffee come from? Was it fair-trade grown? Shade grown? The milk you put into it. Is it grass-finished cattle, or commercial cattle fed hormones and antibiotics? I’m working now with a company in Mexico, run by one of our entrepreneurs this summer at the Unreasonable Institute, where I’m a mentor. He inherited his family’s candy business. He realized candy is organic because growers are too poor to afford pesticides and fertilizers. So he started selling it to Trader Joe’s, Newman’s Own, badged as organic, ’cause it is. And he’s now beginning to reach out to other agricultural sectors, for example, chocolate. He’s doing it in a fair trade way that avoids the problems of child labor that Hershey’s got stung with buying cocoa from Africa. Now [he] wants to start producing a whole array of fruits and vegetables in Mexico in cooperation. He wants to open companies in the US so that the fruits and vegetables that we get are all organic, fair-trade, the money supports the growers in Mexico, enables them to have better quality of life.
SI: Which countries are doing exciting things right now?
HL: Iceland! Most countries in the Western economy allowed the banksters to drive the economy into ruin. Then we turned around and bailed them out at great taxpayer expense. Iceland turned around and put them in jail and then rewrote its constitution, crowdsourced. Iceland said to England and the Netherlands, to whom it owed all this debt, “Sorry we default. Go away.” Now they are going to rebuild their economy on renewable energy.
Bhutan’s a very cool example. The fourth king put forth this concept of gross national happiness, as opposed to gross national product, saying that what ought to be counted in judging your economy is not the flow of money and stuff but rather the overall well-being of people, the environment and the economy. And without the well-being of people and the environment, you’re not going to have a vibrant economy. This was back in 70’s… Then the economic collapse happened. Now a lot of people are starting to wonder if Bhutan is onto something. … The Prime Minister of Bhutan’s modest goal is to transform the global economic paradigm away from GDP to gross national happiness.
About 3 years ago, then-French president Sarkozy commissioned Joseph Stiglitz, Daniel Kahneman, Amartya Sen, a number of Nobel Laureates to look at how France keeps its national accounts, and question whether GDP is the best metric. What they concluded is that it’s a useful metric, and that it’s like trying to run a car on a heat gage; …it is wholly insufficient to cover a country. Since then Costa Rica has started keeping happiness metrics, the Brits are starting to do it.
SI: What industries are having the most impact? What trends are you seeing in the most innovative businesses?
HL: The work around biomimicry – Janine Benyus’ question of how does nature do business? Nature makes a wide array of products and services very differently than we do. Nature runs on sunlight, not big flows of fossil energy. In nature, carbon is not the world’s greatest poison – it’s the building block of life. … Coral reefs make structural material by taking carbon out of sea water, and turning it into limestone – calcium carbonate. … When we make concrete, we dig up old coral reefs (limestone), grind it up at great energy cost, calcify it at great energy cost, and then when it cures, it gives off CO2. The concrete industry is one of the most carbon intensive. [One company] is trying to make structural material in such a way that soaks up carbon. There’s a whole new industry of companies using carbon as a feedstock. … Trees have done this forever. Trees soak up carbon, can we do it artificially?
In Chile…whole sides of buildings are coated in plants. They have living buildings. The side of the McDonald’s in downtown Santiago has lattice work into which people plant plants. In their case, they are more interested in soaking up air pollution because Santiago is very polluted. The whole side of a building is growing plants. … Good city programs do outreach, have information plaques on the side of them so that people know what’s going on. If people don’t know what’s going on they can’t participate.
Reader Questions will be answered in the next post.