A Road Map for Natural Capitalism

Last Updated Nov 7, 2007 3:31 PM EST


The Idea in Brief

The earth's ability to sustain life is in
peril—as companies consume natural resources in ways
that prevent ecosystems from regenerating our air,
water, and food supplies. For example, clear-cutting
forests for wood fiber damages forests' ability to store
water, provide animal habitats, and regulate climate.

Why such rampant exploitation? Unlike the value
derived from consuming natural resources, the value of
ecosystems' most crucial services don't appear on
balance sheets. Yet that value is worth $33 trillion a
year.

You can capture some of that $33 trillion
and help restore the planet by
practicing natural capitalism—conducting
business profitably while also protecting natural
resources. Some strategies suggested by Amory Lovins,
Hunter Lovins, and Paul Hawken: Adopt technologies that
extend natural resources' usefulness. Design production
systems that eliminate costly waste. And reinvest in
nature's capital; for instance, by planting trees to
offset power-plant carbon emissions.

Work with nature, and you boost
profitability—pulling ahead of rivals who continue to
work against nature.

The Idea in Practice

The authors recommend these steps to natural
capitalism:


Increase Natural Resources'
Productivity


Develop dramatically more efficient production
processes that stretch natural resources—energy,
minerals, water, forests—5, 10, even 100 times further
than they go today. You'll ensure that these resources
pay for themselves over time. And you may save on
initial capital investments.

In its new Shanghai carpet factory, Interface redesigned
their process for pumping liquids by using fatter-than-usual
pipes, which created less friction than thin pipes do. The move
cut power requirements by 92%. The new system also cost less to
build, involved no new technology, and worked better than
traditional systems in all respects.


Imitate Biological Production Models


In nature, nothing goes to waste. Ensure that
every output of your manufacturing processes is
composted into useful natural resources or recycled for
further production. You'll preserve ecosystems while
eliminating the cost of waste disposal.

Interface invented a new floor-covering material,
Solenium, which can be completely recycled into the identical
floor product, reducing landfill waste. Solenium lasts four
times longer and uses 40% less material than ordinary carpets.
It's toxin-free and stainproof, resists mildew growth, and is
easily cleaned with water. Between 1994 and 1998, Interface's
revenues rose by $200 million. Of those revenues, $67 million
has been attributed to the company's decreased
waste.


Change Your Business Model


Your customers don't necessarily need to
own your products. Often they
merely need to be able to use them.
Therefore, consider shifting your business model from
selling products to providing services.

Interface realized clients want to walk on and look at
carpets—not necessarily own them. So it transformed itself from
a company that sells carpets into one that provides
floor-covering services. It leases its service for a monthly
fee, taking responsibility for keeping its carpets clean and
replacing worn carpet tiles. This business model vastly reduces
the amount of carpeting sent to landfills. And it improves
customers' productivity by eliminating the need to close offices
and remove furniture to replace entire carpets.


Reinvest in Natural Capital


Reinvest in restoring, sustaining, and expanding
your natural habitat and biological resource base.
You'll gain a public reputation for environmental
responsibility—which translates into
profitability.

Engineering company Living Technologies has developed a
system that uses linked tanks of bacteria, algae, and plants to
turn sewage into clean water. Its approach yields cleaner water
at a reduced cost, with no toxicity or odor (making it
compatible with the company's residential
neighborhood).


Copyright 2007 Harvard Business School Publishing Corporation. All rights reserved.


Further Reading


Articles


Scorched Earth: Will Environmental Risks in China Overwhelm Its Opportunities?

Harvard Business Review

June 2007

by Elizabeth Economy and Kenneth Lieberthal


In China, where environmental degradation has
reached alarming levels, practicing natural
capitalism has become particularly urgent. The
authors suggest ways in which multinationals doing
business in China can avoid hazards associated with
environmental crises (such as lack of usable water)
by factoring those risks into their corporate
strategies. The article also provides ideas for
reducing your environmental footprint in China. For
example, Coca-Cola's bottling plants in China
operate with no net loss of water resources.
Finally, Economy and Lieberthal explain how to help
China restore its environment in ways benefiting
your company, too. For instance, GE works with
Chinese scientists to develop clean-coal
technologies it will use elsewhere.


Beyond Greening: Strategies for a Sustainable World

Harvard Business Review

January 1997

by Stuart L. Hart


Three decades into the environmental
revolution, many companies in the world's
industrialized nations have recognized that they can
reduce pollution and increase profits at the same
time. But beyond corporate "greening" lies an
enormous challenge: how to develop a sustainable
global economy that the planet can support
indefinitely. Hart identifies three stages of
environmental strategy: 1) pollution
prevention
through minimizing or
eliminating waste before it is created, 2)
product stewardship, or reducing
all environmental impacts associated with a
product's full life cycle, and 3) development
of clean technology
, such as power
systems that eliminate or neutralize greenhouse gas
emissions.