Hi Alex here. What is natural capitalism? It is a way of doing business that
recognizes the value of natural and human resources and life supporting
ecological services. Here is a story to illustrate. In the nineteen fifties in
the Atlantic Northwest, equipment and technology made it possible to fish cod
faster than the fish stocks could replenish. The cod was treated like an
infinite resource no financial value was assigned to cod in the balance sheet
but income from selling the fish was. Using financial language, essentially we
liquidated our capital of cod and called it
income. In 40 short years, the northern cod biomass fell to 1 percent and in 1992
the Canadian government declared a moratorium ending the region's five
hundred-year-run with the northern cod. As discussed in our triple bottom line video,
the economy is part of society which is part of the environment.
This means all economic and social progress ultimately depends on the environment
the larger circle. That's natural capital: the ecosystem services and natural
resources that we need to survive and thrive. The middle circle represents
society, or the human capital. Our economy is the smallest circle because it is
governed by the rules, regulation and structures of the other two circles.
The economy depends on human capital and natural capital to thrive.
In the collapse of the Northern Atlantic cod fishery, the environment circle of cod
was destroyed when the fish were gone. Then the social circle of fishing
communities on the eastern coast of Canada was badly damaged when people
were out of work and with it the economic viability of the cod fisheries.
What would a natural capitalism approach to this issue have looked like?
Well it would have meant: feeding people and increasing material welfare by providing
fish without impacting our resources and ecological systems. Imitating nature
(also known as biomimicry) in the fishing processes and products. Managing cod as a
living resource and making sure it is not removed from the ocean faster than
it naturally replenishes. And focusing on the service being provided (feeding
people) and not only the product that provides it (the cod). This would have
helped to create sustainable business models that feed people and support
fishing communities while culling fewer fish. In other industries, focusing on the
service rather than to product is called "dematerialization" and this will be the
subject of another video. Here is another example about an everyday product that
we can all relate to. Say you are a clothing company making and selling jeans.
What would accounting for natural capital looks like? The value of cotton
fabric of course, but also the plants used to make the dye that gives the
jeans their colour, copper and steel for rivets and zippers, plastic and leather
for labels, and even the raw material for the machinery needed for dying, spinning,
weaving, etc.
It would also include the value of the human capital wherever the jeans are
made. All of this would be added to the production costs and compared with the
income generated by selling the clothes. Essentially, natural capitalism means
taking good care of the goose that lays the golden egg: what nature provides for
your business should be on your balance sheet.
Businesses all over the world are innovating and gaining competitive
advantage from applying the natural capital business model. I will share some
stories about some of these companies in future videos. I will also be sharing
videos on circular economy, biomimicry and the associated business
opportunities so stay tuned!
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