Natural Capitalism

Copyright © 1999 by Paul Hawken, Amory Lovins, and L. Hunter Lovins

All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the publisher, except by a reviewer who may quote brief passages in a review.

First eBook Edition: October 2007

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The authors are grateful to David Whyte for permission to use his poem "Loaves and Fishes" from The House of Belonging: Poems by David Whyte (Many Rivers Press). Copyright © 1996 by David James Whyte.

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ISBN: 978-0-316-03153-0

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ALSO BY PAUL HAWKEN

The Ecology of Commerce

Growing a Business

The Next Economy

ALSO BY AMORY AND L. HUNTER LOVINS

Energy/War: Breaking the Nuclear Link

Least-Cost Energy: Solving the CO₂ Problem (with Florentin Krause amp; Wilfrid Bach)

Brittle Power: Energy Strategy for National Security

Factor Four: Doubling Wealth, Halving Resource Use (with Ernst von Weizsäer)

ALSO BY AMORY LOVINS

World Energy Strategies: Facts, Issues, and Options

Non-Nuclear Futures: The Case for an Ethical Energy Strategy (with John Price)

Soft Energy Paths: Toward a Durable Peace

ALSO BY L. HUNTER LOVINS

Green Development: Integrating Ecology and Real Estate (with RMI colleagues)

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To Dana, David, Herman, and Ray

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LOAVES AND FISHES

This is not the age of information.

This is not

the age of information.

Forget the news,

and the radio,

and the blurred screen.

This is the time

of loaves

and fishes.

People are hungry,

and one good word is bread

for a thousand.

—David Whyte

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PREFACE

Natural Capitalism as an idea and thesis for a book emerged in 1994, the year after the publication of The Ecology of Commerce. After meeting with and speaking to different business, government, and academic institutions in the aftermath of the book's publication, it became clear to Hawken that industry and government needed an overall biological and social framework within which the transformation of commerce could be accomplished and practiced. To that end, articles and papers were written that became the basis of a book about natural capitalism. A key element of this theory was the idea that the economy was shifting from an emphasis on human productivity to a radical increase in resource productivity. This shift would provide more meaningful family-wage jobs, a better worldwide standard of living to those in need, and a dramatic reduction of humankind's impact upon the environment. So while the context for Natural Capitalism existed in a theoretical framework, the exposition did not.

Contemporaneously, Amory and Hunter Lovins were coming to the same conclusion: that a shared framework was needed that could harness the talent of business to solve the world's deepest environmental and social problems. Both were writing Factor Four: Doubling Wealth, Halving Resource Use for publication in Germany in 1995. The senior author of Factor Four, Ernst von Weizsäer, among Europe's top innovators in environmental policy, had teamed up with the Lovinses to pool the experience of their respective nonprofit research centers—Wuppertal Institute in Germany and Rocky Mountain Institute (RMI) in Colorado. The three authors had assembled fifty case studies of at least quadrupled resource productivity to detail how, across whole economies, people could live twice as well but use half as much material and energy. Factor Four showed that such striking gains in resource efficiency could be profitable, and that obstacles to their implementation could be hurdled by combining innovations in business practice and in public policy.

Both Factor Four and The Ecology of Commerce urged the private sector to move to the vanguard of environmental solutions. Factor Four described a creative policy framework that could foster fair and open competition in achieving that success. The Ecology of Commerce suggested techniques that when combined with business's unique strengths could enable it to meet this challenge successfully.

Hunter Lovins sent a draft of Factor Four to Paul Hawken in early 1995. He saw that it was the exposition that natural capitalism needed if it were to make its theoretical claims credible and demonstrable. The ideas not only meshed, they were absolutely complementary. We agreed to work together toward one book, under the title of Natural Capitalism, that would contain both theory and practice. After the work began, we discovered it wasn't that simple. Factor Four was anecdotal, Europe-oriented (by 1997 it had also been published in England after being a German bestseller for nearly two years), and written more for policy and environmental activists than for business practitioners. It needed not adaptation but complete rewriting. Further, the examples offered concentrated mainly on efficiency and did not take fully into account the need for the restoration of natural capital nor for several other important elements of natural capitalism that go far beyond mere resource efficiency. Fortunately, Rocky Mountain Institute's researchers in buildings, industry, water, agriculture, forestry, and vehicles had been compiling information on ways to turn the expanding returns of advanced resource productivity into a common business practice. Cultural shifts within the business community had started to accelerate the pace of change, providing practical examples even more compelling than those available in 1995. A wider and more ambitious agenda was becoming possible and profitable.

As we sought to make the American public aware of an emerging resource productivity revolution, we realized that there was a larger message. Eco-efficiency, an increasingly popular concept used by business to describe incremental improvements in materials use and environmental impact, is only one small part of a richer and more complex web of ideas and solutions. Without a fundamental rethinking of the structure and the reward system of commerce, narrowly focused eco-efficiency could be a disaster for the environment by overwhelming resource savings with even larger growth in the production of the wrong products, produced by the wrong processes, from the wrong materials, in the wrong place, at the wrong scale, and delivered using the wrong business models. With so many wrongs outweighing one right, more efficient production by itself could become not the servant but the enemy of a durable economy. Reconciling ecological with economic goals requires not just eco-efficiency alone, but also three additional principles, all interdependent and mutually reinforcing. Only that combination of all four principles can yield the full benefits and the logical consistency of natural capitalism.

Hundreds of exciting examples emerged from rapidly evolving business experience in many sectors: transportation and land use, buildings and real estate, industry and materials, forests, food, water. But as we sifted and distilled those new business cases, we realized that the conventional wisdom is mistaken in seeing priorities in economic, environmental, and social policy as competing. The best solutions are based not on tradeoffs or "balance" between these objectives but on design integration achieving all of them together—at every level, from technical devices to production systems to companies to economic sectors to entire cities and societies. This book tells that story of design integration, unfolding through the interaction of successive topical chapters and interleaved with explanations of the design concepts they reveal.

The story is neither simple nor complete. Each of these ideas deserves far greater explanation than space allows. Its conclusion is tantalizing if not yet wholly clear. Although it is a book abounding in solutions, it is not about "fixes." Nor is it a how-to manual. It is a portrayal of opportunities that if captured will lead to no less than a transformation of commerce and of all societal institutions. Natural capitalism maps the general direction of a journey that requires overturning long-held assumptions, even questioning what we value and how we are to live. Yet the early stages in the decades-long odyssey are turning out to release extraordinary benefits. Among these are what business innovator Peter Senge calls "hidden reserves within the enterprise"—"lost energy," trapped in stale employee and customer relationships, that can be channeled into success for both today's shareholders and future generations. All three of us have witnessed this excitement and enhanced total factor productivity in many of the businesses we have counseled. It is real; it is replicable; its principles and practice are documented in this book and its roughly eight hundred references.

The order of the chapters bears some explanation. Chapter 1, The Next Industrial Revolution, sets out the principles and underlying theory of natural capitalism. Here, the four main strategies are spelled out and elaborated. Chapter 2, about Hypercars and neighborhoods, demonstrates immediately how the four principles of natural capitalism are transforming one of the world's largest and most destructive industries—automobiles—and how sensible land use and fair competition between modes of access can reduce car dependence to an optimal level. Chapter 3, Waste Not, further establishes the foundation for radical changes in resource use. It tells how we are needlessly losing materials, energy, money, and even people, a critical point because the potential and opportunities inherent in natural capitalism cannot be fathomed or accepted without understanding the extraordinary wastefulness of the current industrial system. Chapter 4, Making the World, outlines the ingenious and fundamental principles of resource productivity in industry and materials. Chapter 5, Building Blocks, like the chapter on cars, shows how the natural capitalism principles are becoming manifest in revolutionizing the building and real estate industries. Chapter 6, Tunneling Through the Cost Barrier, returns again to a set of counterintuitive design principles to show that very large gains in resource productivity are often much more profitable than smaller ones. Chapter 7, Muda, Service, and Flow, describes how the relentless elimination of waste combined with business redefinition can vault companies into new commercial terrain and help to stabilize the entire economy. Chapter 8, Capital Gains, defines and addresses the loss of natural capital and 21 what can be done to reverse the loss of "our only home." The next three chapters discuss natural processes, showing how biologically inspired design can radically reduce human impact on farmland, forests, and water, while retaining the ability to increase the quality of life for all. Chapter 12, Climate, combines principles and examples to show how to literally end the threat of global warming at a profit to all nations, rich and poor. Chapter 13, Making Markets Work, explores the virtues and misconceptions surrounding market-based principles and how to harness them for both short-and long-term gains for all sectors. Chapter 14, about a near-legendary city in Brazil called Curitiba, describes how a small group of designers, with scant money but brilliant conceptual integration and entrepreneurship, changed the concept of what a city can be, vastly improving the quality of life of both citizens and the environment. Finally, chapter 15 explores how the move toward a durable and sustaining economy is becoming the most powerful movement in the world today, and what that augurs for the decades to come.

If the book seems more like a tapestry than a straight-line exposition of theory and fact, it is because the subject itself is far from linear. In all respects, Natural Capitalism is about integration and restoration, a systems view of our society and its relationship to the environment, that defies categorization into subdisciplines. Readers may wonder that the book largely ignores the market darlings of biotechnology, nano-technology, e-commerce, and the burgeoning Internet. There are armfuls of books describing how technology is revolutionizing our lives. While that is undeniably so, at least for a minority of the world's population, our purpose is almost the opposite. We are trying to describe how our lives and life itself will revolutionize all technologies. Regardless of whether a business is an Internet retailer in California or a tool-and-die shop in Cleveland or a software company in India, the reconciliation of the relationship between human, in this case business, and living systems will dominate the twenty-first century.

Critics on the left may argue that businesspeople pursue only short-term self-interest unless guided by legislation in the public interest. However, we believe that the world stands on the threshold of basic changes in the conditions of business. Companies that ignore the message of natural capitalism do so at their peril. Thus our strategy here is not to approach business as a supplicant, asking corporations to change and make a better world by respecting the limits of the environment. Actually, there are growing numbers of business owners and managers who are changing their enterprises to become more environmentally responsible because of deeply rooted beliefs and values. This is a wonderful change to witness. But what we are saying is more pressing than a request. The book teems with examples and references, included to show that the move toward radical resource productivity and natural capitalism is beginning to feel inevitable rather than merely possible. It is similar to a train that is at the station about to go. The train doesn't know if your company, country, or city is safely on board, nor whether your ticket is punched or not. There is now sufficient evidence of change to suggest that if your corporation or institution is not paying attention to this revolution, it will lose competitive advantage. In this changed business climate, those who incur that loss will be seen as remiss if not irresponsible. The opportunity for constructive, meaningful change is growing and exciting. If at times we seem to lean more to enthusiasm than reportage, it is because we can see the tremendous array of possibilities for healing the most intransigent problems of our time. This is what we have tried to share with you.

There are far too many good examples to include here. Many of the ideas beg for greater explication. Many more examples, and hundreds of notes amplifying the text, are therefore posted on the World Wide Web at http://www.natcap.org. Those postings will be frequently improved by incorporating new cases and discussions of ideas. Readers are warmly invited to add new cases through the website's interactive features, thereby making this book not a static document but a living body of practice.

In offering this book and site, we hope to serve a rapidly growing network of people in the world who see the world as it can be, not merely as it is. Wendell Berry writes in his Recollected Essays:

We have lived by the assumption that what was good for us would be good for the world. We have been wrong. We must change our lives, so that it will be possible to live by the contrary assumption that what is good for the world will be good for us. And that requires that we make the effort to know the world and to learn what is good for it. We must learn to cooperate in its processes, and to yield to its limits. But even more important, we must learn to acknowledge that the creation is full of mystery; we will never clearly understand it. We must abandon arrogance and stand in awe. We must recover the sense of the majesty of the creation, and the ability to be worshipful in its presence. For it is only on the condition of humility and reverence before the world that our species will be able to remain in it.

—PGH, ABL, LHLSausalito, California, and Old Snowmass, Colorado

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ACKNOWLEDGMENTS

It is not possible to mention all the individuals who have helped this book come to be. We have benefited from the work of many who have preceded us, as well as those we consider our colleagues in this work. We also acknowledge some of the many institutions that have served as laboratories, teachers, and supporters of our work. These include both for-and non-profits.

It was difficult to select, from a far larger set, the particular firms and examples presented in Natural Capitalism. Selection was based solely on substantive and pedagogic merit; no firm asked or paid to be mentioned. Nonetheless, since we are writing from our experience, much of it gained by working with and for companies mentioned in this book, it seems proper to declare that interest by listing our personal and institutional private-sector clienteles (omitting our larger public-sector and non-profit clienteles) during the past decade, ranging from one-day engagements to long-term consulting or research relationships. In listing the companies, no endorsement is implied or given, either from us or by the companies. In alphabetical order, these include: Aerovironment, American Development Group, Arthur D. Little, Ashland Chemical, Aspen Ski Co., Atlantic Electric, AT&T, Baxter, Bayernwerk, Bechtel, Ben amp; Jerry's, Bosal, Boston Consulting Group, Boston Edison, BP, Calvert, Carrier div. of UTC, Cesar Pelli, CH2M Hill, Ciba-Geigy, Citicorp, Collins amp; Aikman, ComEd, Continental Office, Daimler-Chrysler, Datafusion, Delphi, Diamonex, Dow Chemical, Emmett Realty, Esprit de Corps, First Chicago Building, Florida P&L, General Mills, GM, Gensler, Global Business Network, Grand Wailea Resort, Herman Miller, Hexcel, Hines, Honda, Hong Kong Electric, HP, IBM, Imagine Foods, Interface, Landis amp; Gyr, Levi Strauss amp; Co., Lockheed Martin, Michelin, Minnesota Power, Mitsubishi Electric, Mitsubishi Motor Sales America, Monsanto, Motorola, Nike, Nissan, Nokia, Norsk Hydro, Northface, NYSE&G, Odwalla, Ontario Hydro, OG&E, Osaka Gas, Patagonia, PG&E, PGE, Phillips Petroleum, Prince div. of Johnson Controls, Rieter, Royal Dutch/Shell, Sage J.B. Goodman Properties, Schott Glas, Schweizer, SDG&E, Searle, Shearson Lehmann Amex, STMicroelectronics, Stonyfield Farms, Sun Microsystems, Sun [Oil], Swiss Bank Corp./UBS, UniDev, Unipart, US West, Volvo, VW, Xerox, and Zoltek. Some of these companies have generously aided this research with data and insights, but no proprietary data have been used here. For this assistance, and for the help of their pioneering managers and practitioners, the authors are grateful.

Our research and work were partly supported by grants from the Surdna, Columbia, Geraldine R. Dodge, MacArthur, Energy, Joyce, Aria, William and Flora Hewlett, Sun Hill, Charles Stewart Mott, Turner, and Goldman foundations, as well as the Educational Foundation of America, Environmental Protection Agency, G.A.G. Charitable Corporation, Merck Family Fund, J. M. Kaplan Fund, and Wallace Global Fund. Our appreciation for this support extends far beyond the publication of this book. These and other funders are investing in the preservation and restoration of the life on this planet, and are leaders all.

A similar debt is owed to hundreds of other colleagues, researchers, and reviewers. Much of the underlying research was done by the staff of Rocky Mountain Institute. Chapter 2 reports the work of RMI's Hyper-car Center: Mike Brylawski, Dave Cramer, Jonathan Fox-Rubin, Timothy Moore, Dave Taggart, and Brett Williams. Chapter 5 summarizes the experience of RMI's Green Development Services, chiefly Bill Browning, Huston Eubank, Alexis Karolides, and Jen Seal-Uncapher, and of the ACT² experiment cosponsored by Pacific Gas and Electric Co., Natural Resources Defense Council, and Lawrence Berkeley National Laboratory. Chapter 9 (fiber) draws heavily on a Yale master's thesis by Chris Lotspeich and on outside collaborators in RMI's Systems Group on Forests, notably Dana Meadows, Jim Bowyer, Eric Brownstein, Jason Clay, Sue Hall, and Peter Warshall. Chapter 10 (agriculture) owes much to RMI director Dana Jackson and adviser Allan Savory. Chapter 11 relies on numerous studies by RMI water researchers Scott Chaplin, Richard Pinkham, and Bob Wilkinson. Much of the reported energy-efficiency work builds on the definitive research by RMI's COMPETITEK group, spun out in 1992 from RMI to its subsidiary ESOURCE, led then by Michael Shepard and now by Jim Newcomb. Chapter 14 could not have been written without the work and help of Jonas Rabinovitch, and was informed by the writings of Bill McKibben and the insights of RMI's Economic Renewal efforts led by Michael Kinsley. Many of the lean-clean-and-green concepts reported here were identified early by Joe Romm, who wrote Lean and Clean Management (1994) as an RMI researcher. We have relied frequently on the essential publications of our friends at Worldwatch Institute. And of course the godfather of our resource-productivity work is the lead author of Factor Four, now a member of the German Bundestag, the extraordinary Ernst von Weizsäer.

We want especially to acknowledge Herman Daly, whose pioneering work in ecological economics provided the basis for the thesis of this work. His seminal contributions to a truly integrated economics discipline are made all the more remarkable by his modesty and humility. Equal acknowledgment for her extraordinary contributions to understanding our society and environment as a system we extend to Dana Meadows. Her wisdom and balance are a touchstone to us and many others.

Much of what we've learned comes from other outstanding practitioners and teachers, many of whom were also reviewers of the manuscript. They include Rebecca Adamson, Jan Agri, Abigail Alling, Mohamed El-Ashry, Bob Ayres, J. Baldwin, Spencer Beebe, Janine Benyus, Wendell Berry, Paul Bierman-Lytle, Dick Bourne, Peter Bradford, Michael Braungart, Chip Bupp, Jody Butterfield, Ralph Cavanagh, Nancy Clanton, John Clarke, Jim Clarkson, Gordon Conway, Mike and Judy Corbett, Robert Costanza, Peter Coyote, Robert Cumberford, Mike Curzan, Gretchen Daily, Joan Davis, Steve DeCanio, Murray Duffin, Paul and Anne Ehrlich, John Elkington, Don Falk, Chris Flavin, Peter Forbes, Greg Franta, Ashok Gadgil, Thomas Gladwin, Peter Gleick, Jose Goldemberg, David Goldstein, Robert Goodland, Tom Graedel, Sue Hall, Ted Halstead, Stuart Hart, Randy Hayes, Allen Hershkowitz, Buzz Holling, John Holmberg, Wes Jackson, Dan Jones, Thomas B. Johansson, Joel Jamison, Greg Kats, Phillipp Kauffman, Yoichi Kaya, Byron Kennard, Tachi Kiuchi, Florentin Krause, Jonathan Lash, Eng Lock Lee, Nick Lenssen, Jaime Lerner, Paul MacCready, Bob Massie, Gil Masters, William McDonough, Dennis Meadows, Niels Meyer, Norman Myers, Steve Nadel, Jon Olaf Nelson, Jørgen Nørgård, Joan Ogden, Ron Perkins, John Picard, Amulya Reddy, Bob Repetto, Karl-Henrik Robt, Tina Robinson, Jim Rogers, Dan Roos, Art Rosenfeld, Marc Ross, Peter Rumsey, Wolfgang Sachs, Yasushi Santo, Robert Sardinsky, Anjali Sastry, Jan Schilham, Bio Schmidt-Bleek, Steve Schneider, Peter Schwartz, Floyd Segel, Sarah Severn, Ed Skloot, Rob Socolow, Jim Souby, Walter Stahel, Maurice Strong, David Suzuki, Nickolas Themelis, Sandy Thomas, Andy Tobias, John and Nancy Jack Todd, Michael Totten, Haruki Tsuchiya, Christine von Weizsäer, Stuart White, Bob Williams, Daniel Yergin, Susumu Yoda, and Vlatko Zagar.

Included in this group are a smaller group of reviewers—Alan AtKisson, Dave Brower, Fritjof Capra, Diana Cohn, Robert Day, Christopher Juniper, Fran and David Korten, Scott McVay, David Orr, Peter Raven, Bill Rees, Peter Senge, Frank Tugwell, Joanna Underwood, Sarah Van Gelder, Mathis Wackernagel, Peter Warshall, Jim Womack, and others—who provided exceptionally thoughtful critiques which greatly improved the book and for which we are both grateful and beholden. We are also hugely indebted to Bio Schmidt-Bleek and his pioneering work in resource productivity. His leadership has propelled the subject to the very top of the environmental agenda in Europe and richly informs this work. A very special mention goes to architect Tom Bender who was proposing the possibility of Factor Ten productivity in the early 1970s in the magazine RAIN, heard then by only a few, now echoed back in this and other works to many. Special thanks to Ray Anderson, Chairman of Interface, for his support and leadership, as well as his innovative colleagues including Charlie Eitel, Mike Bertolucci, Jim Hartzfeld, and John McIntosh, who are creating perhaps the best archetypal firm so far of the next industrial revolution.

Vital research support came from, among others, RMI's Dan Bakal, Jennifer Constable, Rick Heede, Ross Jacobs, Dan LeBlanc, André Lehmann, Louis Saletan, Auden Schendler, and Kipchoge Spencer, and from Paul Hawken's assistants—Kelly Costa, Andre Heinz, and Jeanne Trombly; special thanks also to Paul's associates at The Natural Step who were extraordinarily helpful and generous: Catherine Gray, Jill Rosenblum, John Hagen, Dane Nichols, Kate Fish, Karl-Henrik Robt, and Ed Skloot. Kerry Tremaine provided key insights and help in an early draft of a magazine article that preceded the book. We are also grateful for graphics help to Ema Tibbetts, for editorial counsel to Norm Clasen, Dave Reed, and Farley Sheldon, and for logistical support to JoAnn Glassier, Marty Hagen, Ruth Klock, Chad Laurent, Lisa Linden, Robert Noiles, Jennifer Schwager, and Marilyn Wien.

A special thank-you also to the following individuals whose contributions to this book cannot be easily summarized or acknowledged, but surpass expectations and generosity: Michael Baldwin, Jennifer Beck-man, Maniko Dadigan, Cindy Roberts, Reed Slatkin, and Roz Zander.

Ultimately, it is the editor who brings a work to life and the public. For his endurance, patience, and skill, we thank Rick Kot of Little, Brown. His belief in this work and its implications was invaluable.

Many of the facts, ideas, and lessons in this book have come from these hundreds of collaborators. Our interpretations, and any mistakes that eluded detection, remain our sole responsibility. Readers who point out errors and omissions, and who add even better stories and ways to tell them, will earn our special thanks and the gratitude of all who labor to build further on these foundations.

The authors can be reached at:

Paul Hawken

Natural Capital Institute

P.O. Box 2938

Sausalito, CA 94966

phone: 415/332-6990

fax: 415/332-7933

e-mail: info@naturalcapital.org

Amory B. Lovins

L. Hunter Lovins

Rocky Mountain Institute

1739 Snowmass Creek Road

Snowmass, CO 81654

phone: 970/927-3851