What Is Natural Capitalism?
The Industrial Revolution made people vastly more productive when low per-capita output and a relative scarcity of people were limiting progress in exploiting a seemingly boundless natural world. Today we face a different pattern of scarcity: abundant people and labor-saving machines, but diminishing natural capital.
Natural capital refers to the earth's natural resources and the ecological systems that provide vital life-support services to society and all living things. These services are of immense economic value; many are literally priceless, since they have no known substitutes. Yet current business practices and public policies typically ignore their value. As a result, natural capital is being degraded and liquidated by the wasteful use of energy, materials, water, fiber, topsoil, and ecosystems.
The next Industrial Revolution, already emerging, is a response to the changing pattern of scarcity. It will transform industrial processes and business practices to economize on what is now the limiting factor of production: natural capital. Our experience shows that firms typically enjoy increased profit and distinct competitive advantages by doing business as if natural capital were properly valued, even when (as now) it is valued at zero.
"Companies that adopt these principles will
do very well, while those that do not won't
be a problem, since ultimately they won't
-- Edgar Woolard, former chair of Dupont
Natural Capitalism is a new business model that involves four major and synergistic elements:
1) Advanced resource productivity. Through fundamental changes in production design and technology, leading organizations are making natural resources stretch 5, 10, even 100 times further than before. The resulting savings in operational costs, capital, and time quickly pay for themselves, and in many cases initial capital investments actually decrease.
2) Ecological redesign (biomimicry). Natural Capitalism seeks not merely to reduce waste but to eliminate the concept altogether. Closed-loop production systems, modeled on nature's designs, return every output harmlessly to the ecosystem or create valuable inputs for other manufacturing processes. Industrial processes that emulate nature's benign chemistry reduce dependence on nonrenewable inputs, eliminate waste and toxicity, and often allow more efficient production.
3) Service and flow. The business model of traditional manufacturing rests on the sporadic sale of goods. The Natural Capitalism model delivers value as a continuous flow of services-leasing an illumination service, for example, rather than selling light bulbs. This shift rewards both provider and consumer for delivering the desired service in ever cheaper, more efficient, and more durable ways. It also reduces inventory and revenue fluctuations, disposal liabilities, and other risks.
4) Reinvestment in natural capital. Any good capitalist reinvests in productive capital. Businesses are finding an exciting range of new cost-effective ways to restore and expand the natural capital directly required for operations and indirectly required to sustain the supply system and customer base.
Innovative organizations are already prospering from these four principles. Their leaders and employees are also feeling better about what they do: firing the unproductive tons, gallons, and kilowatt-hours makes it possible to invest in human capital-the people who foster the innovation that drives future success.
This thesis is fully developed in Natural Capitalism: Creating the Next Industrial Revolution, co-authored (with Paul Hawken) by Rocky Mountain Institute co-CEOs Amory Lovins and Hunter Lovins. See http://www.naturalcapitalism.org
"A Road Map for Natural Capitalism" (downloadable PDF). A good overview, from the May-June 1999 issue of Harvard Business Review. http://www.naturalcapitalism.org/images/other/HBR-RMINatCap.pdf
"Natural Capitalism." The book's first public incarnation, an article in the March/April 1997 issue of Mother Jones. http://bsd.mojones.com/mother_jones/MA97/hawken.html
"Natural Capitalism" Natural Capitalism is based on respecting and learning from the natural order of things. Amory Lovins is interviewed by Satish Kumar in this article from the January/February 2000 issue of Resurgence. http://www.resurgence.org/
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