GPSolo Magazine - March 2005

Environmental Law

Natural Capitalism: Path To Sustainability?

Environmental lawyers frequently define their job as advising their clients on laws and the sorts of issues taught in law school. The challenges now facing the world, however, will require lawyers to redefine not only their jobs but also the whole of business. There is no longer any serious scientific doubt that all major ecosystems on the planet are in decline. In these times, environmental lawyers would do well to familiarize themselves not just with conventional legal issues, but also with the evidence now emerging from the earth and with the opportunities that a commitment to doing business in more sustainable ways can confer on companies, communities, and citizens.

Industrial capitalism, as it is now practiced, is unnatural—an aberration. It defies the logic of capitalism because it does not value, but rather is liquidating, the most important forms of capital, especially natural capital, the biological world whose resources and ecosystem services make all life possible.

Ecosystem services include such natural processes as the cycling of nutrients and water, regulation of atmosphere and climate, pollination and the maintenance of biodiversity, control of pests and diseases, and the assimilation and detoxification of society’s wastes. These free and automatic services provide tens of trillions of dollars of worth each year—at least as much as the known global economy. But none of their value is reflected on anyone’s balance sheets.

The economists say that if essential services are not being properly counted, then place a price tag on them and add them to the economic equation. But deficient logic of the sort now practiced by industrial capitalism can’t be corrected simply by monetizing natural, or indeed human, capital. Many key ecosystem services have no known substitutes at any price.

There is a growing consensus that there is a strong business case for behaving in more sustainable ways. The costs of natural disasters, aggravated by global warming, threaten to spiral out of control, forcing the human race into a catastrophe of its own making. Climate change is rising on the corporate agenda, as the economic costs of such disasters threatens to double to $150 billion a year in ten years, hitting insurers with $30 billion to $40 billion in claims annually. Climate change as a financial issue is still very much underestimated from the point of view of the insurance and reinsurance industry’s potentially rising costs and risks.

Within a few years, companies that have not proactively dealt with their carbon emissions could find themselves facing financial disaster. As states begin to regulate greenhouse gas emissions, companies that choose not to implement emissions reduction programs may face rising costs, plummeting share prices, desertion by senior executives, shareholder suits for violation of fiduciary responsibility, investigation by the SEC for failure to disclose carbon liability, canceled insurance policies, and suits by attorneys general in coastal states facing flooding from climate change.

So what is the job of an environmental lawyer in the face of such problems?

The logic of economizing on the scarcest resource, because that is what limits human progress, re-mains perennially true. What has changed—indeed, reversed—is the pattern of scarcity. Today we have abundant people and scarce nature, not the other way around. Now, as the economic gurus call for even greater efforts to increase labor productivity, as if people were still scarce and nature still abundant, a completely different approach is needed. Today’s patterns of relative scarcity and abundance dictate using more people and more brains to wring as much benefit from each unit of energy, water, materials, or anything else borrowed from the planet.

Radically increased resource efficiency is the first principle of Natural Capitalism. It offers not only the solution to most of the environmental dilemmas facing the world today, but also increased profits. Resource efficiency greatly slows depletion of resources at the front end of the economic process and diminishes the discharge of pollution—resources out of place—at the back end of the process. It creates profits from not having to pay for either.

Radically increased resource efficiency also buys time, forestalling the threatened collapse of natural systems. That time should then be used to implement the second and third principles of Natural Capitalism: biomimicry and ecosystem restoration. Biomimicry asks how nature would solve the problem. Nature makes a wide array of products and services very differently than we do. It means eliminating the concept of waste by redesigning the economy on biological lines that close the loops of materials flows. Restoration addresses the repair of earth’s ecosystems. Any good capitalist reinvests in the productive capital that is in short supply. The challenge facing business today is to reverse the planetary destruction now underway with programs of restoration that invest in natural capital.

Together, the three principles of Natural Capitalism enable businesses to behave as if ecosystem services were properly valued. Behaving in this way enables companies to begin to reverse the loss of natural capital and its valuable services while increasing profits. It makes it possible to profitably achieve a more sustainable economy in which there is no net loss of human or natural capital.

Worldwide, the leaders in eliminating waste will be companies advised by lawyers who understand that taking a Natural Capitalism approach can enable their clients to minimize risk and maximize competitive advantage. But there remains a vital role for governments and for civil society. It is important to remember markets’ purposes and limitations. Commerce must be in the vanguard of creating a durable system of production and consumption by applying sound market principles. Yet not all that matters is monetized. Nor is accumulating money the same thing as creating wealth or improving people.

Governments have many powerful tools to help clear the barriers to the market working more efficiently. People need information to capture the sorts of opportunities presented. Governments should continue to serve as information providers because in theory a true market cannot operate in information’s absence. Further, most of our economic infrastructure was created under very different conditions than now obtain. Such taxes as FICA and other penalties on employment that grew out of the first Industrial Revolution encourage companies to use more resources and fewer people. Today, groups like Redefining Progress have shown how government policies, such as gradual and fair tax shifting and desubsidization, can provide more jobs and income and less environmental and social damage.

But governments cannot solve all our problems. Today more than half the world’s 100 largest economic entities are not countries; they’re companies. Corporations may well be the only institutions in the world today with the size, skills, resources, agility, organization, and motivation to solve the toughest problems. Many corporate leaders are becoming pioneers in a growing movement to solve world problems in ways that enhance profitability, a more satisfying calling than working only for the interest of shareholders in the next quarter and a more honorable endeavor than the pursuit of narrow self-interest at shareholders’ expense. These business leaders are redefining what corporate responsibility means. In this turbulent time, companies seeking stability and profit, and the professionals who advise them, are turning to Natural Capitalism.

Companies, governments, and communities that conscientiously pursue the three principles of Natural Capitalism—advancing resource productivity, closing materials loops and eliminating waste, and reinvesting in natural capital—will gain a commanding competitive advantage.

L. Hunter Lovins is president of Natural Capitalism Inc. He can be reached at hlovins@natcapinc.com or www.info@natcapinc.com.

For More Information about the Section of Environment, Energy, and Resources

- This article is an abridged and edited version of one that originally appeared on page 3 of Natural Resources & Environment, Fall 2004 (19:2).

- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.

- Website: www.abanet.org/environ/.

- Periodicals: Natural Resources & Environment, quarterly magazine; Trends, bimonthly newsletter; The Year in Review, annual summary of legal developments.

- Books and Other Recent Publications: Environmental Aspects of Real Estate and Commercial Transactions, 3d ed.; Clean Air Act Handbook, 2d ed.; RCRA Practice Manual, 2d ed.; and the Basic Practice Series with titles including FERC, RCRA, CERCLA, EPCRA, Clean Air Act, ESA, FIFRA, and TSCA.

 

 

 

 

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