Ethical Markets is a pioneering venture in what will soon be seen as the largest and most important movement in human history: the effort to devise a way of living on earth that simultaneously enhances human well being and ecological integrity. Hazel Henderson has been one of the leading thinkers of this movement since its most recent inception in the early 1970s. One could well argue, however, that this has been a strain of human thought going back to the earliest religious leaders, the natu¬¨ral philosophers, and certainly such writers as Thoreau, John Muir, Aldo Leopold, and more recently Rachel Carson, Dave Brower, and Dana Meadows.
Hazel differs from these luminaries, chiefly in that, happily, she is very much alive and still creating innovative ways to carry the word to ever-broader audiences. But she is every bit their equal in stature and impor¬¨tance of her contribution.
The movement is perhaps even more important these days, when it has become clear that humans have the capacity to destroy whole environments. This is a relatively new realization. In 1930, the physicist Robert Milikin opined, ‚??There is no risk that humanity could do real harm to anything so gigantic as the Earth.‚?Ě Ironically, that was the same year that the engineer Thomas Midgely invented chlorofluorocarbons, the chemical that has been chewing a hole in the planet‚??s stratospheric ozone layer.
In 2005 the Millennium Ecosystem Assessment, a report by 1,360 scientists from ninety-five countries around the world, stated that ‚??human activity has polluted or over-exploited two-thirds of the ecological systems on which life depends. Human activity, the report stated, is putting such strain on the natural functions of the Earth that the planet‚??s ability to support future generations can no longer be taken for granted. Kofi Annan reacted to the assessment‚??s finding by saying ‚??the very basis for life on earth is declining at an alarming rate.‚?Ě1
Sobering words. What has brought us to this state of affairs? And what are we to do about it? The primary instrument of the destruction is business, as it seeks to meet our increasingly rapacious appetite for goods and services. A growing population becoming ever more affluent, at least in the West and in enclaves in every country, fuels the actions of companies. But business is also the most likely instrument of our delivery. Business leader Ray Anderson asked, ‚??What is the business case for ending life on earth?‚?Ě
Hazel is among the leaders of those proving that there is none, and that there is a very good business case for behaving in ways that not only generate profit, but that also protect people and the planet. This formulation, in John Elkinton‚??s words, of the triple bottom line2 is increasingly giving way to the integrated bottom line,3 to the realization that in a world beset with challenges of the likes of peak oil, climate change, loss of species, destruction of ecosystems, and rampant social inequities, companies that behave responsibly to all living things will enjoy increased profits because of this behavior.4 As Hazel shows in these stories, the reasons are varied. To start with, companies who manage to do no harm, and in fact serve life, manage to catch the sorts of irresponsibility that resulted in massive shareholder dissolution at Enron. They don‚??t make the sorts of costly mistakes that result in pollution. They don‚??t anger stakeholders, who, in an Internet-empowered world, can deny a company the franchise to operate.
Second, companies that manage responsibly, reduce their use of
resources because it is the right thing to do. But they also enjoy cost savings, and increased brand equity. Such behavior motivates their work force and they achieve higher productivity, and perhaps more importantly, the ability to attract and retain the best talent.
In a carbon-constrained world, reduction of waste cuts costs and vulnerabilities. Swiss Re, the major European re-insurer, recently stated to its customers that if they do not take their carbon footprint seriously, perhaps Swiss Re will not wish to insure them‚??or their officers and directors.5
For years a small non-profit in the United Kingdom, the Carbon Disclosure Project, has sent out a questionnaire to the Financial Times 500, the five hundred biggest companies in the world asking companies to disclose their carbon footprint. For almost a decade, fewer than 10 percent of the companies answered. In 2005, 60 percent replied. This was in part because the project now represents institutional investment funds with over $31 trillion dollars in assets. In addition, under the Sarbannes Oxley legislation, managers who fail to disclose information that could materially affect sharevalue can be personally, criminally liable. So, what‚??s your carbon footprint? In early 2006 the fund sent its question¬¨naire to the largest 1,800 companies in the world. Given the project‚??s financial backers, these are inquiries that will be hard to refuse.6
Companies that undertake an aggressive carbon reduction plan are finding dramatic savings (DuPont, which has already met its 2010 target of 65 percent reductions of emissions reckons to save $2 billion) and that such programs drive their innovation and increase market share (ST Microelectronics found that such efforts took their company from the number twelve chipmaker in the world to the number six, with projected savings of almost a billion dollars). Some financial advisors already state that a commitment to sustainability is the hallmark of good corporate governance and the best indicator of management capacity to protect shareholder value.7 Indeed, the Dow Jones Sustainability Index outperforms the general market, and the Domini Index of Socially Responsible Companies has outperformed the Standard & Poors for over a decade.
In the spring of 2005, the socially responsible investment research
firm, Innovest, released a report showing that in whole industry sectors, from forest products and paper, to oil and gas and electric utilities, the environmental leaders in the sector are outperforming the environmental laggards.
A corporate commitment to sustainability enhances every aspect of shareholder value. As the examples above show, using resources more efficiently, redesigning products in ways that mimic nature, and managing to restore and enhance human and natural capital offer ways to:
- Reduce costs, increase profitability, and financial performance
- Reduce risk
- Franchise to operate, legal liabilities
- Attraction and retention of best talent
- Ability to drive innovation
- Labor productivity‚??increased worker health
- Market share‚??enhanced brand equity
- Product differentiation
- Supply chain and stakeholder management
Taken together, the elements of sustainability confer the ability to be ‚??First to the future.‚?Ě The companies that practice this approach will be the billionaires of tomorrow.
In May 2005 Jeffrey Immelt, the man who replaced Jack Welch at the helm of General Electric, stood with Jonathan Lash, the president of World Resources Institute, a leading environmental organization, to announce the creation of GE Eco-magination. Immelt committed the only company, which had there been a Fortune 500 around in 1900 would still be on it, to implement aggressive plans to reduce emission of greenhouse gasses. In a joint article in the Washington Post, and subsequent ads purchased in major sporting events, GE trumpeted its commitment to behave more sustainably.
The point is not so much the substance of the announcement, which amounts to less than companies like DuPont (whose senior management was understandably annoyed that the newcomer was getting all this ink) actually do on a daily basis, and have, under
Chad Holliday‚??s leadership, for over a decade. Rather the announcement signaled a tipping point. How do you carve out a legacy when you follow the man widely credited with saving the company? You announce you are going to save the world. This book profiles the movement, now millions strong around the world, of companies and citizens who are doing just that. You can too.
L. Hunter Lovins
President Natural Capitalism Solutions
Professor of Sustainable Management
Presidio World College