The Ecology of Commerce – A Declaration of Sustainability by Paul Hawken

“The dirty secret in environmentalism is that there is no such thing as sustainability. Habitats can endure over millennia, but it’s practically impossible to calculate the sustainability of specific fisheries, tracts of land, and actual forests. We have also probably already passed the point where present planetary resources can be relied on to support the population of the next forty years. Any viable economic program must turn back the resource clock and devote itself actively to restoring damaged and deteriorating systems–restoration is far more compelling than the algebra of sustainability.” (Paul Hawken)

“The language of commerce sounds specific, but in fact it is not explicit enough. If Native Hawaiians had 138 different ways to describe falling rain, we can assume that rain had a profound importance in their lives, so important that over many generations they learned to discern the different types of rainfall and then passed that knowledge on to their descendants. Business, on the other hand, only has one word for profit. The extraordinarily complex way in which a company ends up with a profit is reduced to a single concept, numerically neat and precise, but eliminating distinctions as to how the profit was made, whether people or places were exploited, resources depleted, communities enhanced, lives lost, or whether the entire executive suite was in complete and utter turmoil requiring stress consultants and outplacement services for the victims. In other words, it does not discern whether the profit is one of quality, or mere quantity.” (Paul Hawken)

“Why, then, do we accept the excuses? Why do we hand business a blank check and exempt enterprise from the responsibility for maintaining social values? One reason might be that . . . we have only a piecemeal view of events. We have no [way to] accumulate the overall image of cumulative destruction. Furthermore, their actions are defended–I daresay have to be defended–because most of us are dependent upon them for our livelihood. Even a declining General Motors still employs nearly 600,000 people. A supermarket chain such as American Stores employs 200,000 or more. The 400 companies profiled in Everybody’s Business Almanac employ or support one-fourth of the U.S. population. . . . The average large business is 16,500 times larger than the average small business. And since much of the population is now employed by these large corporations, they naturally see their interest as being linked to the success and growth of their employers. Such fealty resembles the allegiance that sustained feudal baronies; the vassal serfs believed that the lord who exploited them was better than the uncertainty of no lord at all. But in the competitive world of modern commerce, loyalty to the system prevents an objective examination of how market capitalism can also work against those who serve it.” (Paul Hawken)

“We should not be surprised then, that there is deep-seated unwillingness to face the necessary reconstruction of our commercial institutions so that they function on behalf of our lives. Business believes that if it does not continue to grow and instead cuts back and retreats, it will destroy itself. Ecologists believe that if business continues its unabated expansion it will destroy the world around it. This book will discuss a third way, a path that restores the natural communities on earth but uses many of the historically effective organizational and market techniques of free enterprise.” (Paul Hawken)

The need to redesign business and the economy

Before undertaking the writing of his most recent book, Hawken’s research included reading 200 books and 1000 papers, more than 20,000,000 words in all. He said that the more he read, the more depressed he became about the actual state of the world today. It is in a lot worse state than he had imagined.

Every natural system in the world today is in decline. The loss of habitat and of biodiversity is not only continuining, but is in fact accelerating.

A large array of toxic waste products are being released into the environment where they will never be broken down – chemical compounds such as chlorinated hydrocarbons have no counterparts in nature, and therefore there are no natural processes to assimilate them. They include the CFC’s that are depleting the ozone layer, as well as the millions of gallons of herbicides that are applied annually to North American lawns.

The current method of increasing profits for corporations and their shareholders is to eliminate employees. In California, PacBell has told its telephone operators that they can no longer use the word “please”. This will save enough time to allow them to lay off enough operators to save 5 million dollars per year. California is also currently building the world’s largest penal colony and calling it “economic development”.

At the turn of the century, the total number of human beings that inhabited the planet was 1.5 billion. In the preface to his book, he states: “The problems to be faced are vast and complex, but come down to this: 5.5 billion people are breeding exponentially. The process of fulfilling their wants and needs is stripping the earth of its biotic capacity to produce life; a climactic bust of consumption by a single species is overwhelming the skies, earth, waters and fauna . . . Making matter worse, we are in the middle of a once-in-a-billion-year blowout sale of hydrocarbons. They are being combusted at a rate that will effectively double-glaze the planet within the next fifty years . . .”

Underlying all of these is the fact that over the agrarian, industrial and current information ages, the primacy of economy has overtaken the primacy of ecology in the bid to meet the (so-called) needs of 5.8 billion people breeding exponentially. The top quintile metabolizes 83% of the world resources in the process while the remaining 17% is shared by the other 4.5 billion. Economic practices and “principles” are outstripping the ecological resources of the planet faster than nature can replace them and what we are doing now in the face of accelerating decay is the equivalent of “trying to bail out the Titanic with teaspoons.” The age of industrialism, as we know it, has come to an end; and we are confronting a global ecological crisis that is considerably more acute than most of us realize.

Hawken squarely points the finger at business for plundering these resources but makes the salient point that all these problems derive not from management problems per se but fundamentally from business design problems. The way business and economy is designed is the key problem. Bad business is the result of bad design. Bad business behaviour and impacts is the result of bad design. What we need to do is redesign business and the role it plays in human life.

As an illustration, businesses can buy all the recycled paper and recycle all the toner cartridges they want, but that won’t make a sufficient difference. If every business in the world emulated environmental leaders such as 3M and Ben & Jerry’s, it still will not be enough to reverse the environmental decline. In order to solve the problem, we must first define it in real terms. The first half of Hawken’s book does this with an in-depth look at today’s envronmental problems – they must be understood before solutions can be designed. He states: “Although I think the problems are actually more severe than we realize, embedded in each one of them is a realizable and crucial design solution.”

These facts both mean that businesspeople must dedicate themselves to transforming commerce to a restorative undertaking. They simply have no other choice as we are exceeding the carrying capacity of the planet — the maximum level of life an ecosystem can sustain. To quote Hawken: “At the heart of the (new) design is a system of commerce and production where each and every act is inherently sustainable and restorative. Business will need to integrate economic, biologic and human systems to create a sustainable method of commerce.”

Creating a restorative economy means rethinking the fundamental purpose of business, according to Hawken. It is not simply a means of making money or a system of making and selling things. “The promise of business,” he writes, “is to increase the general well-being of humankind through service, a creative invention and ethical philosophy. Making money is, on its own terms, totally meaningless, an insufficient pursuit for the complex and decaying world we live it.” We have the capacity to create a very different kind of economy, one that can restore ecosystems and protect the environment while bringing forth innovation, prosperity, meaningful work, and true security, Hawken says. “If this scenario sounds dreamy and Arcadian it is because we assume that economic forces only exploit and destroy.” But this behavior is not “the inherent nature of business, nor the inevitable outcome of a free-market system. It is merely the result of the present commercial system’s design and use.”

Because the restorative economy, as Hawken envisions it, inverts ingrained beliefs about how business functions, it may produce unusual changes in the economy. As he shows with numerous examples and practical recommendations, the restorative economy will be one in which some businesses get smaller but hire more people, where money can be made by selling the absence of a product or service (for instance, where public utilities sell efficiency rather than additional power), and where profits increase when productivity is lowered.

The drive to develop a restorative economy must come from businesses themselves, Hawken insists, for “no other institution in the modern world is powerful enough to foster the necessary changes.” The key is to inspire a willing, uncoerced, and even joyous redesign of the way we conduct business. What is needed are not new government bureaucracies or legislative mandates but incentives that will redefine the basis on which companies make decisions — from short-sighted commercial gain to long-view ecological and commercial sustainability.

A litany of environmental disasters is chronicled as a necessary preface to solutions. One hundred and fifty years ago there seemed no need to understand the relationship between business and a healthy environment because natural resources seemed unlimited. Now the challenge is for business, the single biggest organism in this ecology of commerce, to redesign themselves because natural resources are depleting at alarming rates. We cannot save the environment by destroying business, but rather must save business so it can save the environment–we must help business understand that doing more with less is what they must do to survive.

How to redesign business and the economy

Business has three basic issues to face, Hawken says: what it takes, what it makes, and what it wastes. That is, the harmful way it exploits natural resources; the excessive amounts of toxins and pollutants it produces and the excessive energy it consumes in the process; and the extraordinary wastes it leaves behind. We must develop a system of commerce that is patterned according to basic ecological principles. In nature, waste equals food, all growth is driven by solar energy, and the overall well-being of the system depends on diversity and thrives of difference. An ecological model of commerce would imply that all waste has value to other modes of production so that everything is either reclaimed, reused, or recycled. It would depend not on carbon but chiefly on hydrogen and the sun for its energy. And it would be highly varied and specific to time and place.

Several years ago he calculated that in order to reverse the current trend and live on current solar income instead of spending our capital, we need to reduce the throughput of energy and resources per person by 80 percent. This was considered a radical idea at the time, but recently a Swiss research group has come up with a figure that is closer to 90 per cent. We are all stressed out, in debt, and working long hours. This is it. This is as fast as it gets. We’ve reached the limit.

Despite the recent right wing shift in politics, Hawken believes that the growing movement towards sustainability is beyong right-left politics. The political right has appropriated the moral high ground when in fact they have no solutions to offer. The only solution offered by the right is to bring everyone in the world up to North American consumption levels through trickle down economics. Rather than reducing throughput by 80%, this would require a global increase of 20,000%, a clear physical impossibility. We have to stop being such political wimps. It is for the sustainability movement to reclaim the moral high ground.

He then proposes a set of eight design objectives. In his opinion, business is the only entity with the resources and skills to implement such a large undertaking. Briefly, the design solutions will:

• Reduce absolute consumption of energy and natural resources in the North by 80 percent within the next half century.
• Provide secure, stable, and meaningful employment for people everywhere.
• Be self-actuating as opposed to regulated or morally mandated.
• Honor market principles.
• Lead to a way of life that is more rewarding than our present one.
• Exceed sustainability be restoring degraded habitats and ecosystems to their fullest biological capacity.
• Rely on current income.
• Be fun and engaging, and strive for an aesthetic outcome.

A good part of the book focuses on the need to eliminate waste, what some call “cradle to cradle” (waste must be fully absorbed of other pieces of the system), and where waste cannot be eliminated, to include the cost of its storage in the price of the product, requiring producers of products to take them back (e.g. refrigerators).

Some examples of action towards these goals are already evident in several European countries, including Germany and Sweden. In Germany, there is now cradle-to-grave accountability in several industries, including the auto industry. When BMW sells you a car, their responsibility for its environmental impact doesn’t stop when you drive it off the lot. When you are done with it, they have to take it back. Federal law puts all manufacturers on a level playing field, and strong economic signals encourage them to design for recyclability. The Japanese challenged this as an unfair trade practice. They lost. When you wrap your Toyota around a tree in Germany, Toyota either has to recycle it in Germany or ship it back to Japan.

An even more radical change is currently being discussed in Sweden, and is in fact agreed on by all political parties. It is known as the “tax shift”. Hawken believes that this will eventually become the economic model here in North America. It involves a complete restructuring of the tax system. Taxes will be taken off of income and profits, and placed instead on emissions, energy, resources and pollution.

An example of how this would work in the United States is as follows: to minimize economic dislocation, the tax change is phased in over 20 years. This allows companies to write off existing investments in plant and equipment. The tax is made revenue neutral for low and middle income earners. So, for example, a 3 dollar per gallon carbon tax is added to gasoline to more accurately reflect the true costs associated with consuming it. This would mean an increase of 2,400 dollars per year in the gasoline bill for the average American. To make it revenue neutral, the average income tax is reduced by a corresponding 2,400 dollars. Therefore, it doesn’t cost you one penny extra to run your car. However, you are now living in an economy that is giving you more accurate information about the impact of your actions on the environment. You have a lot more incentive to buy an energy efficient car, and the auto industry has more incentive to design and build one. Right now, the tax on gasoline is about 2.50 per gallon in Germany. In the United States it is 38 cents, the lowest in the industrialized world. Which signal do you think places you in a better position to thrive in a future economy?

With a cost structure that is more in line with environmental costs, businesses will be able to lower their costs by lowering their environmental impacts, instead of achieving low prices by externalizing costs such as toxic waste production onto the public at large. Why should a coal fired power plant in the Ohio Valley be able to discharge sulphur into atmosphere that reduces the growth rate in my 60 acres of Quebec hardwood forest? Am I not entitled to damages, and should these damages not be assessed against the electricity consumers of Ohio? If they are not getting this signal, then it needs to be designed into the economic system. 200,000 people in Bhopal, India, had their health seriously and permanently damaged by the Union Carbide Company. They haven’t been paid. Why are corporate lawyers the only winners in this scenario?

Reducing resource and energy consumption may sound to many people like a pipedream, but isn’t really that difficult to achieve, according to Hawken: ” In material terms, it amounts to making things last twice as long with about half the resources. We already have the technology to do this in most areas, including energy usage.”

Quotes from “The Ecology of Commerce”

“Because the restorative economy inverts ingrained beliefs about how business functions, it may precipitate unusual changes in the economy . . . the restorative economy will be one in which some businesses get smaller but hire more people, where money can be made by selling the absence of a product or sevice, as is the case where public utilities sell efficiency rather than additional power, and where profits increase when productivity is lowered. Corporations can compete to conserve and increase resources rather than deplete them. Complex and onerous regulations will be replaced by motivating standards.”

“One statistic makes clear the demand placed on the earth by our economic system: every day the worldwide economy burns an amount of energy the planet required 10,000 days (27 years) to create.”

“Biologic diversity, in the end, is the source of all wealth, and with a developed and practiced knowledge of nature, it could be even more so.”

” . . .Germany, formerly the most wasteful nation in Europe, now (is) the leader in recycling. (But they still have a ways to go, still averaging yearly 824 pounds of waste per household. At 1900 pounds per household, we Americans have even farther to go; we’re the world’s worst wasters. With just 5 percent of the world’s population, we produce 50 percent of its solid waste.)”

“Markets are superb at setting prices, but incapable of recognizing costs . . . The answer cuts right through abstract political philosophy: We cannot return to the era of local markets, but we can regain control of the larger markets by enforcing the payment of costs–total costs . . . The incentive to lower costs is the same as the one that presently operates in all businesses, but in this case the producer’s most efficient means to lower them is not externalizing these costs onto society, but implementing better design.”

“. . . none of the producers (of coal) are held accountable for the effect coal is having on the atmosphere–the prospect of global warming. The result? Planet Earth is having a once-in-a-billion-year carbon blow-out sale, all fossil fuels priced to move, no reasonable offer refused. And when this eon’s hydrocarbons are sold, they’re gone, never to be seen again.”

“Another way of imagining the scale of the carbon dioxide problem is by removing its two oxygen molecules. Looked at that way, every time you fill up . . . you are depositing into the atmosphere the equivalent of a 100-pound sack of pure carbon. It stands to reason that coal should be the most expensive form of energy, not the least expensive. The only reason that it is now the cheapest is that the newer technologies (solar, biomass, etc), . . . more accurately internalize their costs to the environment and future generations.”

“The cumulative impact of corporate crime is a deep-seated, ‘free-floating’ cynicism and distrust regarding big business. If we are to create a commercial culture that does no harm to natural and human communities, society will have to define commercial crime more effectively, and begin to see it as something less than inevitable, and more than excusable.”

“What misleads citizen in the richer nations is that we in the industrialized North are very well provided for indeed: with some notable exceptions, we either don’t see, don’t experience, or choose to ignore the impact our lives have. It is difficult for us to imagine that the ecological principle of carrying capacity can significantly affect us. Between the advertisements for Eddie Bauer, Jeeps, the suburbs, and the mall, we assume that we’re not taking too much from our environment, or we would see more signs of stress and deterioration around us. Our comfort and abundance is the foundation for the great differences we see in public debate and private discussions about the environment. . . . We confuse our rate and ability to consume with the capacity of living systems to provide for those wants.”

“Those who argue that we need to grow our way out of ecological problems do not acknowledge a profound and troubling contradiction: If the population of China lived as well as the population of Japan or France or the United Stated, we would endure untold ecological devastation. Even as we invoke economic pieties to justify multinational expansion and ‘freer’ trade policies, the actual result of helping the world raise itself by its bootstraps has been the opposite: By 1990, the lowest quintile in the world income had become twice as poor when compared to the top quintile than it was in 1960. The benefits of global expansion are highly concentrated in the northern countries, and in the hands of corporations and their owners. . . you cannot grow out of a problem if it is embedded in the thing that is growing, or as the Somalians say, you cannot wake up a man who is pretending to be asleep.”

“We may have already surpassed the point at which we can sustainably support the world’s population using present standards of production and consumption. That disturbing possibility should impel us to seek, as sensibly and quickly as possible, an integration of our wants and needs as expressed and served by commerce, with the capacity of the earth, water, forests, and fields to meet them. Thus, this book proposes three approaches, all guided by the example of nature. The first is to obey the waste-equals-food principle and entirely eliminate waste from our industrial production. . . . The second principle is to change from an economy based on carbon to one based on hydrogen and sunshine. . . . Third , we must create systems of feedback and accountability that support and strengthen restorative behavior, whether they are in resource utilities, green fees on agricultural chemicals, or reliance on local production and distribution. . . . All three recommendations have a single purpose: to reduce substantially the impact that each of us has upon our environment. . . . We have to be able to imagine a life where having less is truly more satisfying, more interesting, and of course, more secure.”

References

1. Towards a Sustainable Masonry Heater a review of The Ecology of Commerce by Norbert Senf
2. A review at tictap.com
3. Another review at tictap.com
4. A review in Whole Earth Review, Winter, 1993 by Art Kleiner
5. A review at EcoBooks.com
6. A review by Scott London