Natural Capitalism: Creating the Next Industrial Revolution.

Imagine a world in which cities have become peaceful and serene because cars and buses are whisper quiet, vehicles' exhaust consists only of water vapor, and parks and greenways have replaced unneeded urban freeways. In this world, buildings actually produce energy rather than simply consume it, forest acreage is increasing rather than decreasing, atmospheric carbon dioxide levels are decreasing, industrialized countries have reduced resource use by eighty percent while improving the quality of life, and alliances have formed between businesses, unions, environmentalists, and governments to foster sustainable development.

The vision outlined above is not that of a utopia, according to the authors of Natural Capitalism: Creating the Next Industrial Revolution.(1) Rather, it is a vision of changes that could materialize in the decades to come as the result of economic and technological trends already in place. In Natural Capitalism, authors Paul Hawken, Amory Lovins, and Hunter Lovins(2) have collaborated to explore and define what could emerge as a new form of environmentally friendly capitalism based on an economic system that would value natural capital (natural resources, living systems, and ecosystems) and use radically less material and energy.

The basic premise of Natural Capitalism is that the earth's very ability to sustain life, and therefore economic activity, is now threatened by the extraordinarily inefficient way in which we extract, process, transport, and dispose of a vast flow of resources--some 220 billion tons per year.(3) Our current economic system and the businesses that operate within it value and focus only on exploitable natural resources while failing to value and account for such life supporting "services" as regulation of the atmosphere and provision of species habitat that are provided by the earth's ecosystems.

The authors note, however, that there is an increasing number of examples of highly profitable conservation-based production and design changes in businesses that could, if adopted by businesses and governments on a broad scale, reverse the trend of environmental exploitation and degradation.(4) The authors go further and suggest that a move toward radical resource productivity and natural capitalism, exemplified by these examples, is beginning to feel inevitable.

Natural Capitalism begins by introducing a framework of four interrelated strategies, which the authors claim would enable countries, companies, and communities to operate profitably and efficiently by behaving as though all forms of capital, including ecosystem services, are valued. The first strategy is Radical Resource Productivity.(5) By this concept the authors mean using resources much more efficiently--on the order of five, ten, and even one hundred times more so than at present. Achieving such efficiency gains is generally possible, the authors claim, by using "whole system design" when constructing or retrofitting industrial and commercial facilities--that is, designing for the most efficient overall operation rather than focusing on, and trying to save the costs of, system components in isolation, and by using new technologies based on natural processes and material. The second strategy is Ecological Redesign.(6) This strategy involves completely redesigning many industrial systems to maximally eliminate creation of waste through a move to closed loop production processes. The idea of the third strategy, Service and Flow Economy, is to shift economic activity and value from production and consumption of goods to provision of a continuous flow of services (for example, provision of illumination services in the most efficient form rather than merely manufacturing light bulbs).(7) The fourth strategy is Investing in Natural Capital.(8) Here, the authors contend that businesses must restore, sustain, and expand the stocks of natural capital, like forests, wetlands, and streams, so they can continue to provide vital life-supporting services.

In fifteen fact-filled yet concise chapters, Natural Capitalism provides examples of how the four general strategies are being or could be applied in the real business world. The topics covered include 1) a discussion of current gross inefficiencies in automotive design and realistic alternatives; 2) application of natural capitalism principles to the building and construction industry to maximize energy efficiency and reduce material consumption; 3) current inefficiencies and waste in fiber--textiles and wood products--and food production and practical alternatives; 4) realistic measures to end the threat of global warming due to humanmade greenhouse gases, at a profit to all nations; and 5) making markets work to promote sustainability.

The authors pull no punches. In essence, the book is an indictment of conventional modern capitalism and industrial design, as the following quotations demonstrate:

* Capitalism, as practiced, is a financially profitable, non-sustainable aberration in human development.(9)

* Virtually all the energy-using equipment now in use was designed using rules of thumb that are wrong.(10)

* [T]he present industrial system is, practically speaking, a couch potato: It eats too much junk food and gets insufficient exercise. In its late maturity, industrial society runs on life-support systems that require enormous heat and pressure, are petrochemically dependent and materials-intensive and require large flows of toxic and hazardous chemicals. These industrial "empty calories" end up as pollution, acid rain, and greenhouse gases, harming environmental, social, and financial systems.(11)

* [T]he U.S. economy remains astoundingly inefficient ... only six per cent of its vast flows of materials actually end up in products ... the ratio of waste to durable products that constitute material wealth may be close to one hundred to one. The whole economy is less than 10 per cent--probably only a few percent--as energy-efficient as the laws of physics permit.(12)

Throughout the book the authors present an array of conservation-based alternatives that, in their words, are real, practical, measurable, and documented. Examples include 1) office buildings that also produce oxygen, solar power, and drinking water; 2) deprintable and reprintable papers and inks that, together with other innovative fiber usage, could enable the sustainable growth of the world's supply of lumber and pulp in an area about the size of Iowa; 3) cellulose-based plastics that are strong, reusable, and compostable; and 4) roofs and windows designed to perform double duty as solar electric collectors.

The authors contend that in the U.S. economy there are one hundred to two hundred percent annual returns on investment in energy efficiency alone that have not yet been captured and that could probably save up to $1 trillion annually.(13) Every industry, including the computer chip industry--as the world's most advanced major business--has potential for radically better energy efficiency. Unfortunately, these opportunities are most often ignored. For example, consider an innovative company whose inhouse engineer, using whole-system design, reworked the typical plans--designed by a major contractor--of the company's new plant pumping system. The engineer reduced the need for pumping power by ninety-two percent, thus requiring smaller and cheaper pumps, which lowered the overall project cost and led to future energy savings. He simply substituted larger diameter pipes to reduce friction and laid out the pipe in a short and straight configuration rather than a long and crooked one. The authors explain that this seemingly small and mundane example actually has big implications if one realizes that pumping is the largest application of industrial motors, which use three quarters of all industrial electricity.(14)

Natural Capitalism unleashes too many concepts to fairly condense into a brief review. The reader, however, can get a feel for the magnitude of the design shifts envisioned by the authors by considering the example of the automobile--including cars, sport utility vehicles, vans, and pickups--provided in chapter two.(15) Among other evils, today's automobiles combust nine million barrels of oil per day, emit one fourth of U.S. greenhouse gases, result in seven billion pounds of unrecycled scrap and waste annually, and create pollution that has dramatically increased respiratory and other health problems.(16) Automobiles are, in the author's words, "embarrassingly inefficient."(17) Eighty percent of the energy in the fuel consumed is lost mainly as heat and exhaust, and only twenty percent is actually used to turn the wheels.(18) Ninety-five percent of the force generated moves the car, while five percent moves the driver (relative to their respective weights).(19) Therefore, only one percent of the useable energy actually moves the driver. The authors point out fundamental design problems with today's vehicles, such as that they are too heavy because the bodies are made principally of steel, they have too many parts, and they use the wrong fuel mix--fossil fuel.(20)

Using today's technology, vehicle fuel consumption can be reduced by up to eighty-five percent and material usage reduced by as much as ninety percent by redesigning vehicles to be two to three times lighter by using carbon fiber composites instead of steel, using aerodynamic design, and making the propulsion system hybrid electric.(21) All this can be done without sacrificing comfort or safety. The authors refer to such concept cars as "Hypercars" and optimistically predict that they should begin to displace conventional vehicles in the next several decades, thereby benefiting the environment and radically altering an industry that the authors characterize as having an infrastructure that is presently highly expensive and inefficient.(22)

Natural Capitalism offers many other examples of inefficiencies in production and products that result in huge waste and detriment to the environment. A particularly interesting example is that of the standard refrigerator. Refrigerators use one-sixth of U.S. household electricity, which is approximately the output of thirty giant power stations. Most units currently in-service are poorly insulated boxes with an inefficient compressor mounted at the bottom that allows generated heat to rise up into the food compartment, acting counter to the cooling properties. Furthermore, additional heat is generated by a refrigerator's typically undersized, dust-clogged, fan-cooled condenser; leaky air seals; internal heaters to prevent sweating caused by the thin insulation; and inefficient lights, fans, and defroster coils (my fridge to a tee). Yet highly efficient, properly designed refrigerators are available today and could be cost competitive if mass produced.

If, as the authors persuasively argue, profitable, cost-effective technology and design concepts exist that achieve the extraordinary resource savings envisioned in Natural Capitalism, the obvious question arises: Why are the necessary changes not being applied more rapidly and on a broader scale? The authors suggest that the answer is simply that scores of common practices in both the private and public sectors systematically reward companies for wasting natural resources and penalize them for boosting resource productivity.(23) For example, tax laws in nearly every country effectively penalize jobs and income while subsidizing resource depletion and pollution. The reader might suspect, however, that the answer is not so simple, because these practices are deeply rooted in cultural attitudes unattuned to ecological design and in social and economic power structures.

While Natural Capitalism is fascinating in its coverage of conservation and ecological design potential, its suggestion that the move toward radical resource productivity and natural capitalism is inevitable is somehow unconvincing. The examples of innovative, environmentally conscious businesses and processes provided by the authors tend to be the same relative few that are repeatedly cited in literature and at conferences on sustainable development.(24) It seems far too soon to proclaim, as the authors do, that "[t]here 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."(25) The authors themselves acknowledge that "[e]mphasizing resource productivity will require the reversal of two hundred years of policies in taxes, labor, industry, and trade meant to encourage extraction, depletion, and disposal.... At present, worldwide trade policies are going in exactly the opposite direction [from principles of natural capitalism]."(26)

Perhaps, in fairness to the authors, they are simply attempting to put a positive spin on what would otherwise appear to be the intractable problem of our current exploitative economic system. Yet the reader can not be certain whether the authors truly see a postmodern industrial efficiency revolution in the making with themselves as cheerleaders, or whether they are actually trying to help create that revolution against very great odds.

Natural Capitalism is written in nontechnical language suitable for reading by a wide audience. Law students and lawyers interested or involved in resource law and policy issues should find it highly thought providing.(27) The strategies and whole-system design approach inherent in natural capitalism provide a basis for rethinking the wisdom of our current fragmented regulatory approach to natural resource management and environmental protection. The examples and explanations provide convincing rebuttal to the familiar refrain that investment in conservation and ecological design is too expensive and impractical. Natural Capitalism demonstrates that it is too expensive not to make these investments.

(1) PAUL HAWKEN ET AL., NATURAL CAPITALISM: CREATING THE NEXT INDUSTRIAL REVOLUTION (1999) [hereinafter NATURAL CAPITALISM].

(2) For readers unfamiliar with these authors, it should be noted that they have been leaders in the sustainability movement for decades. Paul Hawken founded a highly successful and environmental award-winning garden tool business, Smith & Hawken. He is the author of several books, including THE ECOLOGY OF COMMERCE: A DECLARATION OF SUSTAINABILITY (1993). Amory and Hunter Lovins are cofounders of the Rocky Mountain Institute, a respected nonprofit resource policy center. Amory is a MacArthur Fellow who has written many publications and consulted on energy issues worldwide. He possesses a rare talent witnessed first hand by this reviewer that enables him to calculate on the back of an envelope such matters as the energy requirements necessary to modernize China using various mixes of power sources.

(3) NATURAL CAPITALISM, supra note 1, at 13.

(4) Id. at 2-3.

(5) Id. at 10.

(6) Id.

(7) Id. With this type of shift--already underway in some businesses that manufacture photocopiers and heating and cooling systems--manufacturers can cease operating as mere producers of products that are sold and that then become the responsibility of the consumer. Rather, the manufacturer becomes a long-term provider of a service that can be economically provided by efficient, long-lasting, upgradeable durables. Id.

(8) Id. at 11.

(9) Id. at 5.

(10) Id. at 64.

(11) Id. at 14.

(12) Id. at 14-15

(13) Id. at 57.

(14) Id. at 116-17. While the fatter pipe is more expensive, overall system savings are realized through the less expensive smaller pumps and reduced energy costs. Id.

(15) Id. ch. 2.

(16) Id. at 23.

(17) Id. at 24.

(18) Id.

(19) Id.

(20) Id.

(21) Id. at 24-25

(22) Id. at 24. The authors are not unmindful that building better cars will not in and of itself solve traffic or land use problems. "Mobilizing the ingenuity to create a better car must be matched by finding the wisdom to create a society worth driving around in--but less often." Id. at 47.

(23) Id. at 13, 15, 164.

(24) The authors have promised, however, to post many more examples and notes amplifying the text on an interactive World Wide Web site. Paul Hawken et al., Natural Capitalism (visited Oct. 4, 1999) <http://www.natcap.org>.

(25) NATURAL CAPITALISM, supra note 1, at xiii.

(26) Id. at 319.

(27) For those lacking the time or inclination to read the entire 322-page book, an abbreviated version may be found in the May-June 1999 issue of the Harvard Business Review. Amory B. Lovins et al., A Road Map for Natural Capitalism, HARV. BUS. REV., May- June 1999, at 145.

Larry Edelman, Senior Assistant Attorney General, Natural Resources Section, Oregon Department of Justice; Adjunct Professor, Northwestern School of Law of Lewis & Clark College and Willamette University College of Law.