Natural Capitalism & The Present Day
Posted on December 17, 2018Natural Capitalism
Natural Capitalism attempts to bridge the gap between the benefits of a capitalist model for the economy and the drawbacks of the existing model, which fail to take into account externalities of a profit-driven model on society and the natural world[1]. I believe many of the ideas presented are relevant to today’s global economy. I also see the potential for design to play a role in “intervening” to address some of these issues.
Some of these externalities may be represented by delayed feedback loops[2]. For example, environmental and global warming issues are a series of delayed feedback loops. The authors note that these issues get measured over months if not years. And so, I believe the ideas presented within this book are still relevant today – 19 years later.
One of the central ideas of Natural Capitalism is that the profit-driven model of capitalism ignores the negative effects of the model on society and nature. However, the model does not suggest simply discarding profit as a driver, but simply that these societal costs be incorporated into the model. We are seeing some similar applications of this thinking today.
ESG Investing
Many of the biggest investors in the world are pushing companies to focus on environmental, social and governance (ESG)[3] matters in addition to pure dollars and cents. BlackRock, the world’s largest investor, recently asked companies to demonstrate their “social purpose”[4]. The idea is that over the long term a company must operate within society and if it does not consider the long term implications of its business on ESG fronts, it will ultimately lose value. Some of the ESG type ideas that have already gained traction at large companies as a result of these efforts include efforts to put more women on boards of directors and climate change related issues at fossil fuel intensive companies.
Impact Investing
An even more direct approach to Natural Capitalism in the current day is so called impact investing[5]. That is investments that are focused directly at companies that make a social impact. The idea is that if the large investment funds direct money into companies that are actually set up to do good and to do well financially, we will see more sustainable and successful progress on these societal issues than simply relying on a nonprofit model.
B Corporations
One of the difficulties of trying to push change through companies is that companies are required by law to do what is best for their shareholders. A recent innovation that addresses this core issue is the public benefit corporation, which allows founders to establish companies that are allowed to consider other factors, including ESG or more specific goals that benefit society. B Corp[6] has evolved as a standard for this model, and a number of high profile companies have earned B Corp certification including Seventh Generation, Patagonia and Warby Parker.
What Can Design Do?
As Meadows’ mentions, no side is seeing the whole and I believe this is design’s responsibility and capability – to help individuals, organizations and countries be more empathic, recognize and go beyond their biases.
In the book, the authors mention that environmental and social solutions can emerge only when local people are empowered and honored[13]. I believe this is also the basis of design. As designers, our approach should be human-centered and our solutions should focus on the local context and lead to local empowerment. Ideo’s work in the DR Congo to bring clean water to the people of Kabare is a good example of such an approach. Over the span of four years, they worked together with the Kabare locals and the American Refugee Committee (ARC). Ideo has empowered the local people to utilize human-centered design to get clean water to other nearby communities as well.
In addition, the authors also make a very good point that solutions lie in understanding the interconnectedness of problems, not in confronting them in isolation[14]. I also believe this to be the basis of all design. It can recognize and leverage scale which are key to dealing with complexities of today such as global warming and water shortage.
As a society, we are still at a point in time where there is a difference between capitalism and natural capitalism. Our goal should be to make these social and responsibility driven models a part of capitalism. I believe this where design can make a difference in the conversations being had and the rate of adoption itself.
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References
[1] Hawken Paul., Lovins Armory., & Lovins L Hunter. Natural Capitalism: Creating the Next Industrial Revolution. 1999.
[2] Meadows, H. Donella. Thinking in Systems: A Primer. 2008.
[3] Kell, George. The Remarkable Rise of ESG. https://www.forbes.com/sites/georgkell/2018/07/11/the-remarkable-rise-of-esg/#6efdecab1695 Accessed 17 Dec 2018.
[4] Fink, Larry. A Sense of Purpose. https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter Accessed 17 Dec 2018.
[5] Pandit, Vivek., & Tamhane, Toshan. A Closer Look at Impact Investing. https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/a-closer-look-at-impact-investing Accessed 17 Dec 2018.
[6] https://bcorporation.net/ Accessed 17 Dec 2018.
[7] The Pride of Kabare. https://www.ideo.org/project/asili Accessed 17 Dec 2018.