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Session 10

A Road map for natural capitalism

Idea : the earths ability to sustain life is threatened by the way the different stakeholdersuse earths resources

capitalism needs to be revamped

Problem at a company point of view : companies are interested in using exploitableresources of the earths ecosystem. However, they dont take into account what ecosystem

services offer for free.

The purpose of this article is to provide an approach considering not only the biosphereprotection but also the improvement of profit and competitiveness. The idea is to makeresources more productive.

Definition of natural capitalism :What capitalism might become if its largest category of capital-the natural capital of

ecosystem services-were properly valued

The issue today is that the concept of cost of destroying ecosystem services emergesoften too late

Example : deforestation in Chinas Yangtze basin in 1998flooding that killed 3,700 people

Why are companies and governments so prodigal with ecosystem services?-Value of ecosystem services doesnt appear on their balance sheet!

-Nevertheless, according to journal Nature : earths ecosystem services= $33 trillion a year

Earth

Resources Ecosystem

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Journey to natural capitalism, 4 major shifts : Dramatically increase the productivity of natural resource. The purpose is to

develop dramatically more efficient production processes.

Shift to biologically inspired production model. The purpose is to manage to havean activity without any waste like in nature.

Change your business model. The firm needs to considerate to shift from a sellingproduct business model to a providing services one. This model entails a new

vision of value.

Reinvest in natural capital. It is theultimate stage. The purpose is to reinvest inrestoring, sustaining and expanding the natural habitat and biological resource base

of the firm. It could help it to gain public reputation for environmental responsibility.

This will translate later into profitability.

The different steps to the journey to natural capitalism seem to be crystal clear

However, some pending issues :

Lets considerate how companies make purchasing decisions. Decision making isbased on initial cost rather than full life-cycle cost

waste

Often, saving resources represent a very small percentage of total costsexecutives pay really little attention to saving resources

Many executives think they have already shifted from inefficiency to efficiency inthe 1970s

previous organization was revamped because of oil shock

Rewards for some jobs create perverse incentivesexample : architects and engineers are rewarded for what they spend and not for

what they save

Why is natural capitalism so important for companies?

Pioneer will have an undeniable competitive advantage.

The other companies will be lagging behind.