Notes From THE ECOLOGY OF COMMERCE by Paul Hawken (18 pages)
Why Business Must Be Re-Designed
Depend on Design Rather Than Intention
Government
Capitalism
Environment(effect upon)
The Control of Multi-National Corporations
World Trade
Nature Systems
Our World in Decline
Neurotic Behavior
Being Rewarded for Bad Behavior
Liberal & Conservative Excesses
Sane Behavior
Guardian & Commercial Systems
Solutions
Green Taxes
WHY BUSINESS MUST BE RE-DESIGNED
Awards to institutions that had ventured to the
environmental
margins only underlined the fact that commerce and
sustainability
were antithetical by design, not by intention. The problem
isn't
half measures, but the illusion they foster that subtle
course
corrections can guide us to a good life. Rather than a
management
problem, we have a design problem, a flaw that runs through
all
business. If every company on the planet were to adopt the
best
environmental practices of the leading companies (the Body
Shop,
Patagonia, or 3M), the world would still be moving toward
sure
degradation and collapse.
That the title of this book reads today as an oxymoron, speaks to the gap between how the earth lives and how we now conduct our commercial lives. Recycling aluminum cans in the company cafeteria and ceremonial tree plantings are about as effective as bailing out the Titanic with teaspoons.
Business is designed to break through limits, not to respect them. A dominant commercial culture believes all resource and social inequities can be resolved through growth. But rather than distributing the wealth of the present, we are stealing the wealth of the future.
The extraordinary complex manner in which a company recovers profit is reduced to a single numerically neat and precise concept. It makes no distinctions as to how the profit was made. Business does not discern whether the profit is one of quality, or mere quantity. The single most damaging aspect of the present economic system is that the expense of destroying the earth is largely absent from the prices set in the marketplace.
When the chairman of the board of Union Carbide first heard about Bhopal, he stated that he would devote his life to making right what had gone wrong for so many victims. Within weeks he was on record with a correction, saying that he had previously "overreacted", and then sought to limit compensation to the people killed and injured. (Most have still received no compensation, whereas on Wall Street, the company's share price has tripled since the disaster) The chairman's first reaction was the human one, but his second and crucial response was corporate.
(author Kirkpatrick Sale) Nothing less than a drastic overhaul of this civilization and an abandonment of its ingrained gods - progress, growth, exploitation, technology, materialism, humanism, and power - will do anything substantial to halt our path to environmental destruction, and it's hard to see how lifestyle solutions will have an effect on that.
DEPEND ON DESIGN RATHER THAN INTENTION
Just as every act in an industrial society leads to environmental degradation, regardless of intention, we must design a system where the opposite is true, where doing good is like falling off a log, where the natural, everyday acts of work and life accumulate into a better world as a matter of course, not a matter of conscious altruism. We have to work with who we are - which includes our strong instinct to shop the market and buy products of comparable quality at the lowest price. Good design can release humankind from its neurotic relationship to absurd acts of destruction, and aim it toward a destiny that is far more 'realistic' and enduring.
While everything individuals do helps, these efforts are relatively insignificant when compared to the demands placed upon the environment by corporations themselves. If all the items used in households in America were recycled, this would reduce our solid waste by only 1 to 2 percent.
Science teaches us that everything is interdependent.
We create business just as much as business creates our wants. Virtually no company exists or has been created to intentionally harm society, so we can assume that destructive acts of commerce are generally well intended, or based on knowledge that was available at the time of inception.
People are hungry for ways in which they can integrate their need to be employed and support their families with work that improves the world in which they live. But overall, we are not willing to sacrifice for the ethics and values we profess.
Only when the incentives to continue the manufacture of waste are removed, and only when the risks and costs far outweigh the gains and profits, will business turn its attention to safer alternatives. We use wasteful methods today because they are the "cheapest" solution. In a restorative economy, the least expensive means of manufacturing a product would also be the most environmentally benign and constructive means. Until this is so, there is an inherent design flaw in business: being "economic" and being sustainable remain in conflict and at odds.
Government has a critical role to play, but that role must coincide with the natural impulses in society. Humans want to flourish and prosper, and they will eventually reject any system of conservation that (they perceive as(my clarification)) interfering with these desires. Present-day limits need to become opportunities. Government, business, and environmental organization cannot create a sustainable society. It will only come about through the accumulated effects of daily acts of billions of eager participants.
Just as internal contradictions brought down the Marxist and socialist economies, so do a different set of social and biological forces signal our own possible demise.
Free marketeers will argue that whenever government sets prices, markets become inefficient. Indeed, it will be a long time before the world forgets the demise of the Soviet system and its conceit that trading and prices could be mediated by government. But what a government can and must do is set the conditions of market in order to enforce the payment of costs. Government did not wait to abolish slavery until the market 'regulated' itself. Where harm and suffering exist because of market dealings - when the real costs of that market are not factored into the price of goods and services - we require the government as representative of citizenry to step in to prevent those abuses, one way or another.
In nations where there is little if any regulation, business runs amok, and we end up with situations such as that in Mexico City, whose pollution problems make those of the LA basin look modest.
$21 trillion world economy grows at a rate of 2 to 3%
(Michael Novak) 'No system has so revolutionized ordinary expectations of human life - lengthened the life span, made the elimination of poverty and famine thinkable, enlarged the range of human choice - as democratic capitalism.'
Markets are superb at setting prices, but incapable of recognizing costs. Today we have free markets that cause harm and suffering to both natural and human communities because the market does not reflect the true costs of products and services. When prices rise, people have to reconsider usage patterns. This may be painful at first, but it generally results in innovation and creativity.
Gasoline is cheap in the US because its price does not reflect the cost of smog, acid rain, and their subsequent effects on health and the environment. Likewise, American food is the cheapest in the world, but the price does not reflect the fact that we have depleted the soil, reducing average topsoil from a depth of 21 to 6 inches over the past hundred years, contaminated our ground-water (farmers do not drink from wells in Iowa), and poisoned wildlife through the use of pesticides.
Markets arise spontaneously, separate from philosophy or religion or political belief, as the perfect mechanism for fostering trade everywhere. It is difficult to argue with markets. Marxism tried and failed.
The pell-mell effect of venture capital has a tendency to push fledgling companies into unsustainable rates of growth that drive founders and employees to stressful levels of activity and eventual dysfunction. There is no question that capital is needed in society, but the timing and movement of that capital have to be more humanely considered if we are to create healthy companies and communities.
The cash register is the daily voting booth in democratic capitalism.
The NPP (net primary production) of the planet is the sum of all photosynthetic production minus the energy required to maintain and support those plants. Of this, 60% is produced on land and 40% in the oceans. Our human economy uses 40% of the total NPP on land. Before we reach 60 to 70% of this, we will witness an ecological crash.
Every time you use a tank of gas in a medium-sized American car, you are depositing in the atmosphere 100 pounds of carbon (5.6 pounds for every gallon of gasoline).
The general rate of species extinction today is 1,000 to 10,000 times greater than the background level of extinction. The range of possible species that exists on the earth is between 10 and 100 million.
Before the Industrial Revolution, commerce and culture were powerfully regulated by natural energy flows - mainly, the solar energy captured by food, wood, and wind. With the wholesale extraction and exploitation of stored(long-term (>10K years)) solar energy, humans are no longer living in synchronization with natural cycles and have accepted, however reluctantly, industrialism's shadow - waste, degradation, and dehumanization. Corporations leave 11.4 billion tons of hazardous waste behind every year.
We are in the middle of a once-in-a-billion-year blowout sale of hydrocarbons . . with unknown climatic results. The immune system of every unborn child will soon be adversely and irrevocably affected by the persistent toxins in our food, air, and water.
Carbon dioxide is remarkable because relatively small amounts in the atmosphere(0.3% of the atmosphere) provide an exceedingly effective means to trap heat. We may have set off a series of feedback loops that will magnify and reinforce the greenhouse effect. Warming may cause methane release from the Arctic tundra, and methane is ten times as efficient as carbon dioxide as an agent of global warming. Rising temperatures will cause the retreat of the temperate forests, reducing the amount of oxygen producing, carbon dioxide absorbing plant life.
If we continue on the same path and find out fifty or 100 years from now that the scientific projections about global warming were correct, it may be too late to mount an effective counter strategy. On the other hand, if we choose to make the transition to an economy that runs on perpetual solar income and we later find out the carbon dioxide buildup was less a problem than anticipated, we are still ahead on every count.
We humans have yet to create anything that is as complex and well-designed as the interactions of the microorganisms in a cubic foot of rich soil.
THE CONTROL OF THE MULTINATIONAL CORPORATIONS
Nonrenewable energy has senators, CEO's, nonprofit institutes, television, economists, newspapers, and the largest chunk of the US economy, to cheer it on and make sure it wins.
The fact that the Washington, DC, metropolitan area is the wealthiest in the US, possibly the world, is not coincidental. One percent of American society owns nearly 60% of corporate equities and about 40% of the total wealth of this nation. These are the plutocrats who wield the power and control this preeminent "company town" while trying to convince the other 99% of the citizenry that the system works in our best interests, too. Adding insult to injury, the corporate activities that create this environment are deductible business expenses, while the individual taxpayer's contribution to an organization that does direct political lobbying is not tax deductible.
In Washington, DC, corporations act as they do in the marketplace: They play to win. The problem is how they win, for their usurpation of political power destroys the democratic process.
In 1991, the 10 largest businesses in the world had collective revenues of $801 billion, greater turnover than the smallest 100 countries in the world. The 500 largest companies in the world control 25% of the world's gross output while employing 0.05% of the world's population.
Even though smaller businesses have been responsible for the lion's share of new jobs in the past decade, "market share" for the Fortune 500 has continued to rise.
It would be easier to see the relationship between large-scale economic activity and environmental degradation if it weren't for the excellent job that corporations do of making us feel at ease with their bigness through advertising. We in the West are proud of our largest companies. But we are afraid to look at the enormity of their shadow, the rigidity of their thinking, their unbridled power hidden behind lobbyists, PR firms, and ad campaigns.
The positive feedback loop is the dilemma faced by all corporations. When long-term value is reduced to, or tantamount to, net present value, the corporation has only one choice if it is to maximize return for shareholders and attain returns greater than the discounted rate of capital growth as expressed in financial markets. Money, and only money, decides what is valuable, and why. Who determines this? No one, really. It is not a social or personal choice. It is a market choice.
The most profound act of leadership that could be exerted by business would be to admit that its influence over and manipulation of government is misguided.
Countries face the ominous dilemma of losing sovereignty for the sake of remaining internationally "competitive", because if they choose to resist such global integration they will find themselves in economic backwaters.
GATT(General Agreement of Tariffs and Trade) was formed in 1948 to lower tariffs and trade barriers in order to stimulate international trade. Many economists traced the pathologies that led up to the war, to the Depression and tariff-protected economic isolationism. On both accounts, trade liberalization was seen as a strong and vital remedy. Like the UN, GATT was seen as a potent force for multilateralism, although it would be an economic force rather than political. However, GATT did not end up being a free-trade agreement, but a "managed" trade agreement.
Just as it has with agricultural practices, GATT polices regarding tobacco force the world to devolve to the lowest common denominator of commerce, which is growth of sales, reduction of corporate costs, and enhancement of profit regardless of the impact on local societies or ecosystems. A government trying to conserve scarce resources by restricting their export will violate GATT. Conservation measures such as British Columbia's tree-planting program are being claimed as an "unfair" subsidy to Canadian timber companies. Denmark's attempts to require that all beverages be sold in returnable containers was struck down by the EC because it inhibited the free movement of goods. Undeveloped countries will be forced to open their borders to transnationals, providing cheaper food to their people in some cases, but potentially bankrupting local farmers and worsening urban slums as well. Although industrial countries protected their own industries throughout most of the twentieth century, those same industries, now grown into corporate behemoths, are demanding that the better capitalized countries of the north be able to compete on their own terms with weaker, indigenous companies in the Third World.
Green fees cannot function effectively if we continue to promote free-trade agreements that reward companies for externalizing their cost overseas.
It is tragic that America's largest export after food is weaponry, often sent to governments with repressive domestic polices, governments whose military superiority is frequently used to wrest resources away from indigenous cultures to pay the debts incurred in the first place by weapons purchases.
There is the irony that countries can always find money for war but peacemaking is rarely budgeted. More than half of all Third World debt is directly attributable to the purchase of weapons. This had led to pressure for hard currency. In Somalia since 1955, the export of livestock has increased ten- fold. This has led to a breakdown of the traditional nomadic system of grazing, leading in turn to soil erosion, food shortages and ultimately starvation.
Mature, climax systems are highly efficient and resource- conserving. They leave the habitat largely unchanged from year to year. They do not last forever, but they are the most diverse, stable, and complex of communities, and are thus more resilient to disturbances in the greater environment. In ecological terms, our present industrial economy is an immature ecosystem.
Darwin did not speak of survival of the fittest; rather, he described those who survived as fittest for a specific ecological niche.
Every threatened species potentially plays the role of the canary in the coal mine, signaling not merely its own demise, but possibly our own. Such perspectives can lead us to a very different type of economy and way of doing business, one that will be healthier for all species, not only the butterfly and the owl, but our own.
Natural and human history are full of examples in which a population exceeded carrying capacity and went into steep declines, or even extinction of the entire species. In 1944, 29 reindeer were imported to St. Matthew Island in the Bering Sea. It was calculated that the island could support a total population of around 2,000 animals. By 1957, the population was 1,350, but by 1963, with no natural controls or predators, the population had exploded to 6,000. This number vastly exceeded carrying capacity and was soon decimated by disease and starvation. This did not lead to restabilization at a lower level. The habitat was so damaged by the overshoot of the population that by 1966 there were only 42 reindeer left. As tragic as this example is, the resources used up by the reindeer will eventually return, whereas many of the resources we are exploiting will not.
Unlike nature's "waste" (which really is not waste at all), business wastes have no value to other species or organisms, and in fact may be fatal to them. Nature is by definition cyclical . . . If there were waste, we wouldn't have survived four billion years of evolution, because linear systems use up and exhaust resources.
20% of the earth's people are chronically hungry or starving.
Every day the worldwide economy burns an amount of energy the planet required 10,000 days to create.
During the past 20 years our standard of living has not increased, real wages have not risen, and for the very first time since the Industrial Revolution, our work week is getting longer, not shorter.
(former World Bank President Robert McNamara) Even if the growth rate of the poor countries doubled, only seven would close the gap with rich nations in 100 years.
We have lost 17% of the arable land in the world since WWII.
Overall world production of food is declining in relation to world population. Worldwide crop losses due to pollution (alone) are already estimated at between 5 and 10%.
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 US, we would endure untold ecological devastation.
Even though the GNP of the U.S. grew considerably during the 1980s, 3/4ths of the gain in pretax income went to the richest one percent. The majority of Americans had less money and lower incomes than they did when the decade began.
Farmers who use herbicides have six times greater risk of contracting certain types of cancer, and that children in homes that use pesticides have a seven times greater chance of contracting some form of leukemia.
Nothing in the modern workplace, and very little in society at large, encourages us to take our time, or be satisfied with what we have.
A dysfunctionality similar to schizophrenia can affect an entire society that knows the state of the world is one way, yet is told over and over again that the world is something else. By the time an American teenager graduates from high school, co will have seen 350,000 commercials. As an adult this will continue, seeing an average of 21,000 commercials a year. Of these, 75% are paid for by the 100 largest corporations in America. Corporations end up spending more money on advertising than we spend on all of secondary education in this country.
Mass-market advertising reinforces economic centralization because of the high costs involved; it is anti-democratic because it is not designed to allow dissenting voices that challenge the product's value or merits, and serves no social needs.
The government subsidizes farmers who grow tobacco, despite the fact that cigarettes kill more people per year than AIDS, automobile accidents, suicide, homicide, fires, heroin, alcohol, and cocaine together, but certainly no subsidy exists for a truck farmer who grows vegetables for local markets.
Despite the fact that death is inevitable in the case of terminal diseases, most insurance policies are written to cover only the cost of the "cure". Thus the relevant treating facility is required to treat the disease aggressively, resulting in treatments that are usually invasive, painful, disorienting, frightening, and always very expensive. Around a quarter of the health care cost in one's lifetime will occur during the final year of life, and half of those costs in the final ninety days. This corresponds to nationally spending $100 to $150 billion annually of a person's last three months of life.
Despite that the US spends more on health care as a percentage of GNP than any other country, when compared to other industrial nations, we have low rates of life expectancy and high rates of child mortality.
It is senseless to create packaging that last four hundred years to keep on a shelf for two months a product that we eat in two minutes. If economic growth is founded on an ever- increasing reliance on chemicals, toxins, poisons, and energy by-products, then we will choke on the growth that is supposed to save us. The solution is not to put better filters on our effluent pipes, or line the settling ponds with thicker plastic, or fire the incinerators fifty degrees hotter.
An argument put forth by chemical companies is that there are already naturally occurring carcinogenic compounds in foods . . the critical differences between natural carcinogens and synthetic ones, are that natural compounds are rarely persistent, do not bioaccumulate, are not stored in the fatty tissues of the body or in mother's milk, and rarely cause hormonal imbalances or disruption of the endocrine system. Furthermore, the human body has had many centuries to become accustomed to these compounds. Whenever we introduce synthetic toxins into the biological process, we are changing a cyclical process to a linear one.
The US and the USSR spent over $10 trillion on the Cold War, enough money to replace the entire infrastructure of the world. To now assert that we don't have the resources to build a restorative economy is ironic, since the threats we face today are actually HAPPENING, whereas the threats of the post- war nuclear stand-off were about the POSSIBILITY of destruction.
When the Thatcher government tried to privatize British nuclear plants, no company would buy them. No company would accept them free. When the cost of decommissioning and clean- up was accounted for, they were losers, and business knew it.
When you buy a TV today, you are purchasing some 4,000 chemicals, 10 to 20 grams of mercury, and an explosive vacuum tube. There is no safe place to dispose of a TV. If you transport 20 TVs, you are technically required to be licensed by the EPA as a toxic waste hauler. Today, many people's BODIES in industrial nations are, technically speaking, too toxic to be placed in landfills.
If former President Reagan had not in 1984 rolled back efficiency standards for American-produced automobiles, we would have been saving more oil than we were importing from the Gulf Region in 1991. We can be sure that if Kuwait were poor and devoid of resources, there would have been much less popular support for the war, and probably no invasion to begin with.
The second welfare system is large, expansive, and expensive (though it is much less controversial than the first welfare system (aid to the unemployed, dependent children, the poor and helpless)). It is giveaways of timber and mining rights on government lands, government-financed research in universities, revolving-door policies between the defense industry and government resulting in expensive, poorly planned procurement policies, and so on. Three times as much housing subsidy goes to the top fifth of the population as to the bottom fifth who need it the most. The continued bail-out of the failed deposits in the savings and loan industry represents an unintentional subsidy of several hundred billion dollars to golf courses, resorts, office buildings, and expensive housing stock that was built but proved to be mostly unneeded.
Instead of insisting that industry create its own insurance system for depositors, government guaranteed that protection directly and thereby gave private institutions every incentive to choose the riskiest investments for depositors' money.
Chairman Rawl of Exxon warns that if we don't open up the last and largest wildlife refuge in the US to oil drilling and exploration, that "the entire nation will forfeit . . . substantial economic benefits. The fact is that ceiling insulation and double-glazed windows can provide more oil than the Arctic National Wildlife Refuge at its most optimistic projections, at about one-twentieth the cost, with four times the employment per unit of energy conserved versus the energy consumed by burning oil. When, in 1976, Amory Lovins first published his article in 'Foreign Affairs' entitled "Soft Energy Paths", describing how the economy could grow and use less energy at the same time, he was viciously attacked by 'experts', including one from Exxon.
Every American produces twice co's weight per day in household, hazardous, and industrial waste, and an additional half- ton per week when gaseous waste such as carbon dioxide are included(my note - mostly from car exhaust I presume).
When all car mileage in a given year is divided by the time spent supporting the car, the average car owner is traveling at an average speed of five miles per hour. To attain the speed of a bicycle, we are devastating our cities, air, lungs, and lives, while bringing on the threat of global warming. The US has the lowest fleet mileage(MPG) in the world.
BEING REWARDED FOR BAD BEHAVIOR
Waste Management Inc.(WMX) is the largest trash hauler in the world. It has dumped PCBs in lagoons, mixed PCBs with waste oil and resold it as heating oil, and contaminated groundwater with chemical and nuclear wastes. WMX has been convicted of bid-rigging, fined for price-fixing, fined for conspiracy against trade, fined by the EPA for numerous violations of environmental laws, and had its executives jailed for bribes. Despite this, WMX continues to grow nicely, returning 20% pretax profits.
It is interesting to note that the death penalty for individuals is less controversial than the mere suggestion that a few corporations have forfeited their right to exist. How many people does a company have to hard before we question if it ought to exist?
The freedom of the outsized global marketplace means that corporations are even free to break the law, especially when penalties and litigation fees are far outstripped by the material advantages gained by illegal practices.
As it stands now, in the case of any fine levied against a corporation, the cost of accompanying litigation is a tax- deductible business expense. When GE was fined $69 million for conspiring to falsely invoice the US Government for parts not shipped or sold to Israel, you and I subsidized the $400 per hour lawyers who handled the case. Citizens are not allowed to deduct legal expenses when accused of crimes, and certainly not when convicted. By allowing corporations to do so, our tax laws imply that such deductions fall in line with normal business practice. By removing deductibility for crimes, we are taking a small but considerable step toward effective cost-integration, by placing those costs where they belong, at the feet of the perpetrator rather than the victim.
Two-thirds of the Fortune 500 companies have been involved in illegal behavior between 1975 and 1985. US News and World Report states that 115 of the 500 were convicted on a serious crime during the 1980s. Nine out of ten Americans believe that business will lie, deceive, harm, endanger, or cheat in order to make more money. The Senate Judiciary Committee has placed the cost of faulty products and monopolistic practices at between $174 and $231 billion per year.
In an economic study of the costs associated with cigarette smoking borne by Californians, $7.6 billion in yearly expenses were identified, mainly in lost wages and higher health care costs. This was the equivalent to $3.43 for every pack of cigarettes sold in the state. Even though individuals smoke, society shares the cost. And these costs are shared unevenly, just as the profits from selling them are garnered disproportionately.
Tobacco use costs society over $60 billion a year in health costs and in lost income and productivity, not to mention the fact that 35% of all house fires are caused by cigarettes, with the tobacco companies putting chemical additives in cigarettes to prevent them from going out.
A market cannot distinguish between a piece of wood harvested sustainably from a forest and one harvested from a clear-cut that has destroyed habitat and future productivity.
Drug companies precalculate the cost of lawsuits likely to be brought as the result of introducing new drugs and compare that figure with the upside profits that can be obtained. They may even raise the price further to compensate themselves for the additional burden of potential litigation.
The Menominee say that if they could get an extra 10% for their sawn timber, they could refurbish their mills, improve productivity and compete more effectively. But with whom are they competing? Corporations that either received their timber in the 19th century, when the government gave 183 million acres to the railroads, or are purchasing it from the Forest Service at prices far below market and replacement value. (This while)(according to Kenneth Sloan - a forest supervisor in Wisconsin's Dept. of Natural Resources) "The Menominees would no more separate the forest from its intrinsic ecological and societal value than we would separate one finger on our hand from another."
LIBERAL & CONSERVATIVE EXCESSES
All too often, the environmental movement has been the province of the upper-middle classes, both in concerns and in benefits, to the exclusion of lower-income and minority groups here and abroad who feel justifiably resentful that the gargantuan energy and resource appetites of the industrially privileged few should now force them to make sacrifices in their own lifestyles and chances for a more prosperous existence. The 50 million people who will be added to the US population over the next forty years will have approximately the same global impact in terms of resource consumption as 2 billion people in India. If there is to be an ecologically sound society, t will have to come from the grass roots up, not from the top down.
Business tries to sabotage government's regulations and nimbly sidesteps those regulations that are on the books; governance ups the ante and thereby becomes a hydra-headed bureaucratic monster choking off economic development while squandering money. This struggle plays out in virtually every industrialized country in the world as the classic two-party schism of liberal and conservative. When liberals are in power, they understandably propose controls and regulations on business; in the more extreme forms, liberal thought tries to unite the guardian and commercial responsibilities with the guardian role predominant, producing socialist enterprises of marginal efficiency. When conservatives are in power, they attempt to reverse the regulations and give business carte blanche, invoking pious homilies to the free market and human enterprise, creating the future seeds of backlash, while avoiding the real issues of health and habitat. Conservatism has its own radical school of thought, wherein guardian and commercial roles are united but with commercial powers in the primary role.
Guardianship and commerce are trapped in a positive feedback loop, and neither is likely to solve the problems of ecological degradation and scarcity when reacting only to the excesses of the other. We would do well to consider whether "bottom- line" blame should be placed on "unruly" businesses or "incompetent" government, rather than on the design of the system within which they function.
'In Business' estimates that 70,000 businesses in the US have express goal of cleaning up or improving the environment.
In 1975, the 3M Company developed a program called Pollution Prevention Pays(3P), the first integrated, intracompany approach to designing out pollution from manufacturing processes. The plan created incentives for the technical staff . . 3M has been able to save half a billion dollars, and reduced its solid waste alone by half a million tons.
In 1915,the US used 0.95 tons of petroleum to produce $1,000 (in constant dollars) of GNP. Today the figure is closet to 0.40 tons per $1,000. Cars weighed 20% less in 1985 than in 1975.
Energy conservation is a developmental business. Saving four- fifths of our current consumption of energy through efficiency and conservation is more productive than drilling or mining for energy, and it provides energy on a renewable basis. Conservation does not run aground in Prince William Sound. On the other hand, it is labor intensive, creates jobs and wealth, and promotes real economic prosperity while lowering our overall impact upon the environment.
Some utilities are probably the first corporate bodies that have invented a means to increase profitability by not growing, a paradox made possible by the fact that electricity derived from conservation costs only 10 to 20% as much as electricity that comes out of a new power plant.
During the Depression, a Farm Chemurgic Council, including members Henry Ford and George Washington Carver, tried to apply farm products to industrial uses. In 1941, Ford designed a prototype car which had a body made of soybean plastic, was powered by ethanol, and ran on tires made from goldenrod. Confident that oil prices would rise after the war, Ford believed that we would soon be "growing" our cars.
In Germany, industry insisted that legislation requiring 80% recycling was unworkable. Government gave companies the choice of compliance or a 30-cent surtax on all packages. Six hundred companies then formed Duales System Deutschland, which placed millions of recycling bins throughout Germany. Product packaging put in the bins must have the trademarked green-dot recycling symbol, for which their manufacturers pay the Duales System a fee, ranging from one cent to $2 depending on the package. Participating manufacturers must also guarantee they will recycle their packaging. Also in Germany, BMW has built a disassembly plant to recycle its older cars. Newer models are designed with disassembly in mind.
South Shore Bank (of Chicago) has worked diligently with lower-income people in their neighborhoods to insure business success, and has proved them to be creditworthy. Today the bank has $210 million in deposits, and its return on average equity averages 12%, and its capital-to-asset ratio is well ahead of government standards. During the 1980s, South Shore Bank was competing for deposits with various Sunbelt institutions that were offering unusually high rates of return, then turning around and buying junk bonds. Today, in order to insure that depositors will not lose their funds, the taxpayer is buying back those junk bonds at face value, though many have sunk to worthlessness. During those same years, South Shore Bank was reducing the load on local and federal government in terms of unemployment claims, welfare, and federal housing grants.
By training their customer to have only the highest expectations, the Japanese have made their companies the most competitive in the world. As a result, they are years ahead of American companies, not because they take our ideas and exploit them, not because they are better tinkerers, but primarily because they are customer-oriented. And though highly competitive, the Japanese do so within the larger cultural imperative of harmony, collaboration, and cooperation. Whereas much of our competitiveness is centered on an addiction to winning, to beating an opponent.
Curitiba, Brazil, solved its garbage problems by placing recycling bins around the sprawling slums and giving tokens to the city's transport system for the separated and therefore recyclable trash.
The guardian system is conservative and hierarchical, adheres to tradition, values loyalty, and shuns trading and inventiveness. The commercial system, on the other hand, is based on trading, and functions well when it is open, trusting of outsiders, innovative, positive, and forward-thinking. It values collaboration, contracts, initiative, and optimism.
Today, business is being asked by environmentalists to internalize some the costs that were formerly externalized and largely invisible, and thus is being forced to respond to conflicting signals. On the one hand, it is asked to deliver goods to the marketplace at the lowest possible price; on the other,it is asked to assume the "new" costs on environmental stewardship. If it performs the first function too well, it is held accountable and punished by government, if not by public opinion, because it cannot achieve the lowest price without some or many forms of environmental and societal compromises. If it performs the latter function well, its costs may be raised so high that it suffers in the marketplace.
In order for business to function both effectively and ecologically, the contradictions between guardian and commercial interests must be reconciled. We need a consensus- building, collaborative approach that both can support. Business is concerned that it is being regulated into oblivion, while governance has spun out of control, trying to take care of everyone and everything with its runaway budgets and deficits. We need to redesign the system that solves the malfunctions of both.
Politics has come to be more a matter of partisan winning or losing, of benefiting one party without regard to the interests of others. And when business introduces money into the discourse, it will by its very nature corrupt the dialogue.
Good design resides in two principles. First, it changes the least number of elements to achieve the greatest result. Second, it removes stress from a system rather than adding it. Bad design is pinning our hopes for environmental and cultural survival on a change in human consciousness and behavior alone, because we therefore depend on the highest number of uncontrollable elements - people - to undergo a great change. Likewise, bad design is having to institute several hundred throusand rules and restrictions under the jurisdiction of the government and expecting business to know them all, much less obey them. Good design seems natural, unaffected, and appeals to common sense.
We need business to thrive by exceeding regulatory standards rather than by challenging or circumventing them. Businesses should literally compete to be more ecological, not only on moral or ethical grounds or because it is "the right thing to do", but because such behavior squarely aligns with their bottom line. In short, we must design a marketplace that obviates acts of environmental destruction by making them extremely expensive, and rewards restorative acts by bringing them within our means. If we do this, environmental restoration, economic prosperity, job creation, and social stability will become equivalent.
If you are merely selling to a consumer, there are only two possible outcomes, sale or no sale. But if you undertake a service role to a customer, your outcome will always be successful, because your role is to inform and care for the customer. Even if this means "no sale", you have performed your role and are therefore successful. Plus, businesses perceived as caring for their customers will do better than those that do not, not merely because of the obvious reasons of customer loyalty and repeat sales, but because such a company is essentially evolving with their customer base, changing as they do, and modifying mutual behavior symbiotically.
Small, economically depressed towns are usually large net exporters of capital. If they would localize production and distribution, these communities would export less capital while depleting fewer resources. By closely reexamingin the ways in which money leaves a town, businesspeople can find tremendous opportunities opened up for small, locally owned companies. Furthermore, local ownership makes it easier for producers and customers to know, understand, and respond to one another. A community that can provide many of its necessities locally will be less affected by the roiling national and world economy. It can prosper in good times, but will be more resilient in bad. And the closer we live to the ground that we live from, the more we know about our economic liefe; the more able we will be to take responsibility for it.
Under the intelligent product system, (durable) products would not be sold, but would be licensed to the purchaser, with ownership retained by the manufacturer. Instead of thinking of the value of the product only as it goes out the door, the manufacturer has to consider its value when it comes back in the door. (Senator Max Baucus) 'Anyone who sells a product should also be responsible for the product when it becomes waste.'
The purpose of integrating cost into pricing is not to provide a toll road for polluters, but a pathway to innovation. The incentive to lower costs is the same 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. Integrating cost with price does not "raise" the over-all expenditures of the consumers of the society, but rather places them where they belong, so that consumer and producer can respond intelligently.
In the restorative economy, a company is based on the idea that its products or services will improve people's lives qualitatively, not quantitatively. It should provide a product or service that helps people develop their lives, and not merely increase the amount of their possessions.
If our economy was as energy efficient as that of Sweden or Japan, we would have been spending $200 billion a year less in energy during the past decade, an amount equal to the average annual Federal government budget deficit.
Using existing technologies, we can reduce present electrical consumption by 75% in homes and industry. Cars exist today that get nearly 100 mpg, and cars on the drawing board get as high as twice that. Already homes in Canada are being built that use one-tenth the energy of an American home. The Council on Economic Priorities reported that investment in energy- efficient technologies produces four times as many jobs as building new power plants. Wind farms should be generating electricity more cheaply than any other source except for hydropower by the end of the decade. Even in today's suppressed energy market, the real return on a compact fluorescent light bulb is between 20 and 30% a year.
The US has two vast, as yet largely untapped, oil fields greater than any we have yet discovered. Together they can produce 5 million barrels of oil a day for the indefinite future, at a cost of about $7/barrel. Oilfield #1 is largely based in Detroit and is created by scrapping old cars and exchanging them with high-mileage replacements. Oilfield #2 is spread around the country and consists of weatherization and insulation of attics, walls, and windows.
Under the auspices of the United Nations, an international tariff could be levied on weapons makers worldwide. This would provide the UN with its entire budget. The world must recognize that the suffering caused by weaponry is always greater than the economic "gain" dervied from its sale.
When integrating cost and price into the marketplace, we are essentially substituting positive feedback loops with negative one. A positive feedback loop keeps reinforcing behavior that is not in the interest of the party. Negative feedback loops, which are ubiquitous and omnipresent in nature, allow an organism to continuously adapt and respond to different inputs coming from its immediate environment.
The main function of green taxes is not to raise revenue for the government but to provide participants in the marketplace with accurate information about cost. Green taxes would create the closest thing approximating a truly free market. To paraphrase GK Chesterton, there is nothing wrong with a free market, it is just that no one has tried it out yet.
Because green taxes are incorporated into the price a company or customer pays for a resource, they create powerful incentives to revise and constantly improve methods of production, distribution, and consumption. The purpose of a green tax is to give people and companies positive incentives to avoid them. For example, if gasoline were taxed to a greater degree, we would pay more attention to alternatives. America uses about 110 billion gallons of gasoline a year. Americans pay one-eighth the taxes on gasoline that Europeans do. Green fees create adaptive behavior instead of the maladaptive behavior seen in the present tax code.
Of all the possible green fees, taxing energy would be the most fruitful and beneficial. This could work as a tax on the carbon content of fuels. Of the 22 billion tons of carbon dioxide released into the atmosphere every year, one-fourth comes from the US, although we have only 4% of the world's population. If the taxes on energy should go up overnight(as they did in effect during the 1973 oil embargo), they cause inflation, dislocation, and chaos. But if green taxes on energy are applied over a twenty-year period, producers and consumers have ample time to adapt, plan, and reinvent.
Green fees should also apply to agricultural chemicals. In the current system, food is inexpensive because the cheap prices come first, and years and decades later we pay the true costs in erosion, toxic wells, and posioned life, including our own. In the upside-down and inverted logic of the present economic system, we cannot imagine that there is a point where something is too cheap. But as the man at the farmer's market tells me, you get what you pay for.
No business in the world can long survive on its capital reserves. Every business person understands this, yet many ignore the fact that this same principle applies to energy and the environment. Thus, the purpose of green taxes is to raise the economic stakes to the level where we cannot afford to live off of capital - where it simply becomes prohibitively expensive to deforest, degrade, or destroy the environment.
Every incremental dollar collected from green fees should reduce income and payroll taxes equally, starting with the lowest income brackets and moving to the highest. This would mostly eliminate the present tax system that costs taxpayers and corporations $250 billion a year to keep-up with the paperwork that is required. For every dollar of tax revenue collected by the IRS, another 65 cents is spent on compliance, systems, forms, litigation, and data collection. This means that a government program that costs $10 billion actaully requires $16.5 billion.
Green fees would have to be recalibrated as time goes on. There is no equilibrium point. Like nature, it will be dynamic and restorative.