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Book Data

ISBN: 9781933392233
Year Added to Catalog: 2006
Book Format: Paperback
Book Art: B&W Photographs, Resources, Index
Dimensions: 7 x 10
Number of Pages: 288
Book Publisher: Chelsea Green Publishing
Old ISBN: 1933392231
Release Date: February 28, 2007
Web Product ID: 213

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Ethical Markets

Growing the Green Economy

by Hazel Henderson, Simran Sethi

Foreword by Hunter Lovins

Introduction

This book is about the cleaner, greener, more ethical, and more female sectors of our U.S. economy‚??and many others around the world. These growth sectors can employ every man and woman able to work, and are the key to a sustainable and healthy future for humanity. These segments of the business market are here today and have been quietly growing for over twenty-five years, yet virtually ignored by mainstream financial media. How could this have happened? Why did it take until 2006 for a U.S. president to finally admit that the country is addicted to oil? I explored these issues in Politics of the Solar Age (1981, 1988) in the hope that the transition from fossil-fueled industrialism to renewable energy and sustainable technologies would begin in the 1980s. I outlined the case for this inevitable transition and pointed to all the emerging science and technologies to achieve this design revolution. I warned that all the entrenched industries based on fossil fuels, the powerful interest groups, and the conventional consumerism of commercial mass media would stand in the way. I even cited all the evidence of impending environmental depletion and pollution, and the faulty economics that blinded policymakers and private decisions. I failed to realize, however, in my optimism that full systemic social change would take another generation. Nonetheless, in spit of the blindness and incomprehension of mass media, the new ‚??sustainability‚?Ě sectors began to emerge in many countries.

Changes toward a green economy can be grouped into three main areas:

  1. The LOHAS (lifestyles of health and sustainability) sector: renewable energy and resource industries (solar, wind, biomass, oceans, hydrogen, fuel cells, etc.), those in recycling, remanufacturing, reuse, barter, and second-hand auctions (like eBay), those in preventive, alternative healthcare, wellness, fitness, etc., and those companies in clean food and organic agriculture (www.lohas.com).
  2. Socially responsible investing: the fastest growing segment of U.S. capital markets (representing about one in every $11 invested in publicly listed companies) or some $2.3 trillion; according to the Social Investment Forum (www.socialinvest.org).
  3. Corporate social responsibility: Management is increasingly focusing on their own social responsibility. Most global companies have forsaken orthodox economic ideologies of ‚??laissez-faire,‚?Ě unregulated markets, famously promoted by University of Chicago economists, including Milton Friedman that ‚??the only business of business is to make profits for shareholders.‚?Ě This view that relies on markets as self-correcting holds that government regulations are ineffective, self-defeating, and usually unnecessary. History has already overtaken these views. Companies today acknowledge that globalization of information technologies has morphed into a new Age of Truth. No corporate activity, which may affect society and other stakeholders (employees, suppliers, customers, host countries, and the environment), remains unnoticed. Thousands of civic groups, like Corpwatch.org, Global Exchange, The World Social Forum, and many focused on specific issues from GMO-foods to global warming, monitor every corporate move. Their Internet reports and blogs can break a precious corporate brand and stock prices in real time. Thus, corporate CEOs today have installed a myriad of in-house programs, often personally overseen by vice presidents of corporate responsibility. These new activities include hewing to new standards from ISO 14001 and EMAS to SA-8000 and many other ‚??good citizenship‚?Ě accreditations, labels including the U.S.A.‚??s Green Seal, Germany‚??s Blue Angel, and many others. In a 2005 poll of CEOs by the World Economic Forum and KPMG, 70 percent said that ‚??good corporate citizenship ‚??was vital to profitability.‚?Ě

So it becomes clearer why these three burgeoning sectors of the U.S. and global economy have been all but invisible on mainstream financial media: a fierce paradigm war of world views is underway. Most media outlets are owned by only a few, yet very large, conglomerates: News Corp, Time-Warner, Disney, GE, VIACOM and others. These companies are deeply embedded in unsustainable, wasteful, fossil-fueled and nuclear-powered sectors of the global economy, along with global banks and firms that finance their expansion. I described this new form of government, ‚??mediocracy,‚?Ě in Building A Win-Win World (1996). These three emerging sectors, which we cover in the ‚??Ethical Markets‚?Ě TV series and in this book, pose a direct challenge to the market dominance of the existing world economic players. No wonder reporting on the explosive growth of these new sectors is sparse. Those who discuss them are often trivialized as diehard hippies from the 1960s, unrealistic, and the start-up companies are seen as anomalies. Even many socially responsible funds with stellar performance (often outperforming mainstream portfolios) have been denied or disparaged. For decades, many brokers would tell their clients that they would lose their shirts investing in these funds. Even interviewers who are as skilled as Charlie Rose, Bill Moyers, and Lou Dobbs are still too immersed in the dominant paradigm to reject these fallacies. Getting hidden assumptions out onto the table not only enriches the discussion, but can relieve much social distress, and lead toward more realistic debates on public policy and priorities.

Our TV series was created to cover these three cleaner, greener, more transparent, and ethical parts of the economy, many of which are spearheaded and led by women. Along the way, it was necessary to unravel much of the now clearly obsolete thinking based on eighteenth and nineteenth century economic ideas‚??deep in textbooks and computer models. The word is out that economics, never a science, has always been politics in disguise. I have explored how the economics profession grew to dominate public policy and trump so many other academic disciplines and values in our daily lives. Economics and economists view reality through a monetary lens. Everything has its price, they believe, from rain forests to human labor to the air we breathe. Economic textbooks, Gross National Product (GNP), and the statistics on employment, productivity, investment, and globalization‚??all follow the money. Happily, all this focus on money exposes how money is designed, created, and manipulated. Our widespread focus on the politics of money is at last unraveling centuries of mystification.

Civic action with local currencies, barter, community credit, and the more dubious rash of digital cyber money reveal the politics of money. Traditional economics is now widely seen as the faulty source code deep in societies‚?? hard-drives, replicating unsustainability: booms, busts, bubbles, recessions, poverty, trade wars, pollution, disruption of communities, loss of cultural and biodiversity. Citizens all over the world are rejecting this malfunctioning economic source code and its operating systems such as the World Bank, the International Monetary Fund (IMF), the World Trade Organization (WTO), and imperious central banks. It‚??s hard-wired program‚??the now derided ‚??Washington Consensus‚?Ě recipe for hyping GNP-growth‚??is challenged by the Human Development Index (HDI), Ecological Footprint Analysis, the Living Planet Index, the Calvert-Henderson Quality of Life Indicators, the Genuine Progress Index, and Bhutan‚??s Gross National Happiness, not to mention scores of local city indices such as Jacksonville, Florida‚??s Quality Indicators for Progress, pioneered by the late Marian Chambers in 1983.

As with politics, all real money is local, created by people to facilitate exchange and transactions, which are based on trust. Events of the past twenty years have necessarily recast the story of how this useful invention, money, grew into abstract national fiat currencies backed only by the promises of rulers and central bankers. We witness how information technology and deregulation of banking and finance in the 1980s helped create today‚??s monstrous global casino where $1.5 trillion worth of fiat currencies slosh around the planet daily via mouse clicks on electronic exchanges‚??90 percent in purely speculative trading.

In view of these abuses, the task before us is nothing less than to redefine success, wealth, and progress for our massively changed circumstances in this twenty-first century. Our human family now has over six billion members and we consume 40 percent of all the primary photosynthesis-based production of the planet‚??s plants on which we depend. The biosphere and its thin layer of biodiverse life forms are now suffering their next biggest extinction in history. Even once-skeptical scientists confirm that burning fossil fuel, and other human activities, causes global warming, which has played a role in recent weather disasters: floods, droughts, and stronger, more frequent hurricanes. TIME‚??s cover story (March 27, 2006) and former Vice President Al Gore‚??s movie, An Inconvenient Truth at last broke the mass media‚??s avoidance of global warming‚??calling for immediate changes to limit C02 emissions. Even Wall Street is learning that ‚??business as usual‚?Ě is no longer an option. Hedge funds and pension plans are investing in ever-riskier asset classes such as catastrophe bonds‚??betting against insurance losses mounting rapidly from such natural disasters. In Britain, Colin Challen, chair of the All-Party Parliamentary Climate Change Group in a speech on March 28, 2006, called for the Contraction and Convergence plan of the Global Commons Institute, based in the U.K. (www.gci.org.uk) which calls for globally shared ‚??emission rights‚?Ě for every man, woman, and child, so that poorer people could sell theirs to the richer‚??thereby converging on equitable reductions of C02. This emissions-trading approach is similar to the proposal by Argentinean economist and mathematician Graciela Chichilnisky, the inventor of ‚??catastrophe bonds‚?Ě‚??for an International Bank for Environmental Settlements to administer such a global approach to equitable reduction of C02.

Thus, chapter 1 ‚??Redefining Success‚?Ě is an introduction to all these new views, sensibilities, lifestyle changes, employment and career goals, and investment strategies. We look at the new ways of measuring success, wealth, progress, productivity, efficiency, and so forth, and the broader, multi-disciplinary indicators emerging at all levels of societies worldwide that are helping steer humanity to a brighter future. This new world view underlies the strategies of the companies we feature in the book that employ the new ‚??triple bottom line‚?Ě accounting (people, planet, profit) and the eighty visionary CEOs and leaders we interviewed.

After redefining the terms for success we discuss ‚??Global Corporate Citizenship.‚?Ě The globalization of finance and technology and the increasing influence of global corporations now challanges the sovereignty of even the most powerful nations. The uproar in the United States over who should own, operate, and control U.S. ports and other basic infrastructure was emblematic of the growing debate over globalization. Outsourcing has become another flashpoint, as is immigration. The media picks up on these symptoms‚??but often ignore the deeper implications of current forms of globalization of technologies. Free market ideas about the merits of deregulation, privatization, and world trade are promoted as a win-win for all. These obsolete economic textbook formulas have caused widespread social, cultural, and environmental disruption. Today, these largely U.S.-driven globalization effects are finally being felt in the U.S. homeland. Yet we saw few commercial mass media stories attempting to unravel and analyze the globalization phenomena‚??due to shrinking foreign bureaus, shorter news, and sound byte coverage in the drive for profitability. Yet, all these trends affect the lives of people and countries‚??for better or worse. As we see from the blogosphere, there is worldwide, grassroots concern over corporate responsibility regarding human rights, workplace safety, decent wages and conditions, and protection of the environment. While the corporate scandals continue to mount, employees lose their jobs, life-savings and pension plans are in jeopardy. We interview leading socially responsible investors, managers of mutual funds, pensions, and church and university endowments who offer safer, healthier alternatives. They have joined civic groups, labor unions, women, environmentalists, and those concerned with social justice and human rights in calling for greater corporate accountability‚??particularly after their heavy losses in Enron and other companies. We describe ‚??involuntary investors‚?Ě (a significant percentage of the ninety million U.S. adults, who are invested in the stock markets) better ideas for their pension plans, 401K‚??s‚??which have recently lost so much value. These involuntary investors are calling for more transparent, ethical corporations that can restore their trust and promote their goals and values. We show how all the new initiatives in corporate social responsibility, socially responsible investing, and the LOHAS sector, as well as the more than 2600 companies who have signed on to the United Nations Global Compact described in chapter 2, are responding. We began to see the evolution of capitalism itself. More ethical markets are now necessary in the twenty-first century information age‚??now morphing into that new age of truth as global public opinion becomes the world‚??s newest superpower. Markets can only operate where there is trust, transparency, honesty, and fidelity in contracts‚??as well as service to customers and other stakeholders in society. The leaders we met understand the risks of corporate misbehavior to their revered brands and reputations. As a result, they are embracing social, environmental, and ethical auditing, the new scorecards are indexes and the redefinition of success, progress, efficiency, and productivity in the wider social context.

Most people are unaware that all the financial and business news, economic policies at state, local, and national levels‚??in all countries‚??are based on economic statistics that reflect only one half of the full range of production, services, investment, and exchanges in societies; only half of which is conducted in money. The equally important non-money sectors (in many countries much larger than the official, money-denominated sector traced by gross national product (GNP)/gross domestic product (GDP) and other macroeconomic measures) are in reality the core platform of social life. These non-monetary contributions form what we call the Love Economy‚??the families, communities, cooperatives, and voluntary sharing activities that underpin the competitive money-based sectors. We intro¬¨duce some of its most inspiring leaders. Unless policy makers and the public are clear about the vital role of this Love Economy, it is devalued, short-changed, and begins to crumble. Volunteers begin to disappear, joining the paid labor force. Economists erroneously categorize homemakers, stay-at-home moms and dads as ‚??not economically active.‚?Ě

The textbook model of human nature in economics is the ‚??rational economic man,‚?Ě who maximizes his own self-interest in competition with all others. In reality we know that people are also equally cooperative and enjoy sharing and giving. New brain science and microbiology now show that economics is founded on a set of core assumptions that are invalid (see www.hazelhenderson.com). For example, the Washington-based non-profit group, Voluntary Sector, has estimated that over eighty-nine million Americans volunteer at least five hours per week to their communities. In 1995, the United Nations Human Development Report found that unpaid work, and production of goods and services was equivalent to $16 trillion‚??simply missing from the official global GDP figure of $24 trillion. So two thirds of the world‚??s product went uncounted, unrecognized, and unappreciated. Such enormous value to societies represents a vast appreciating asset! Futurists Alvin and Heidi Toffler describe its dimensions in Revolutionary Wealth (2006). Similarly, nature‚??s wealth goes uncounted in GNP. New broader statistics on health, education, social capital, and ecological assets are now creating better scorecards of wealth and progress‚??beyond money and GNP. Life is rich in many dimensions and we know that money can‚??t buy many of the things we most desire‚??such as love and happiness.

Health is another universal aspiration. Green building and design offers hope of a healthier future built environment. An ‚??efficient‚?Ě building serves the broader bottom line‚??beyond money as covered in the PBS series Design e-2. Nature is often the unappreciated asset. Visionary architects, including Bill McDonough, are bringing free sunlight and fresh air back into offices. Increasingly, architects and planners are using rooftops to maximize energy efficiency and provide space for food production. As oil becomes more expensive and fossil fuels continue to pollute our atmosphere with CO2, all the old metrics are changing.

Our quality of life has much to do with the vitality of the community in which we live. Healthy communities typically have stable families, enjoyable neighborhoods, and businesses that revitalize the local economy. Because economists have not measured the deeper, broader kind of efficiencies provided by cohesive communities and the values of families and local cultures, these local living economies have been under-valued‚??until they break down. Then social services, unemployment, drug and crisis counseling, caring for homeless people require huge taxpayer costs. Today, many of the smartest investors, asset managers, and pension funds are joining with local leaders in re-investing in these vital community re-development efforts as described by Michael Shuman in The Small Reolution (2006). A new breed of accountants and statisticians are finding the hidden wealth and opportunities for new jobs, businesses, and residential developments in local communities as they embrace new definitions of success, wealth and progress.

A more dimensional understanding of these terms affects the global stage as well. Countries strive to be successful exporters. Economic textbooks claim that more trade‚??now worldwide‚??is good for ev¬¨eryone. The World Bank would advise countries how to ‚??grow their economies‚?Ě by exporting similar products to world markets, often glutting them. The World Trade Organization, set up in 1996, created its rules based on these assumptions. But the old textbook model of ‚??free trade‚?Ě assumed that capital stayed within countries‚?? borders and that all the trading countries would benefit, even those who had little power and were way behind in industrial development. So the economists‚?? recipes for economic development‚??measured as GDP-growth‚??urged them to open their borders, reduce tariffs, make their currencies convertible, privatize their main industries, and allow foreign capital to flow in and out freely‚??known as the ‚??Washington Consensus.‚?Ě These measures work for a big successfully industrialized country, but it is now well recognized that less powerful developing countries can lose out, with their weaker, smaller companies, and farmers being put out of business.

Today, battles rage over all these issues, as currency trading and herds of electronic bulls and bears create gigantic waves of ‚??hot‚?Ě money that sloshes around the planet daily. Even the most democratic and competent leaders lose control of domestic affairs, while local people stage demonstrations to prevent their water supplies, national resources, and biodiversity from being bought-up and privatized. Since its failed Doha Round in July 2006, the WTO has become almost irrelevant. The new ‚??resource-nationalism‚?Ě is evident as China and India scour the world buying up assets in the energy and resources sectors. In Latin America, resource nationalism has led to widespread rejection of the ‚??Washington Consensus‚?Ě formulas and a new group of leaders in Venezuela, Argentina, Brazil, Bolivia, Peru, Uraguay, and Chile are articulating more sustainable forms of development focusing on social equity and justice for their poorer, rural, and indigenous peoples. Argentina, Venezuela, and Brazil have now largely paid off their loans to the International Monetary Fund (IMF) to free themselves from Washington Consensus prescriptions and have saved several billions of dollars in interest payments.

Proponents of Fair Trade in many commodities support this new approach to development. Growing numbers of philanthropists, socially concerned investors, and entrepreneurs are creating healthier models of fair trade. They bring together local farmers and small producers to create eco-friendly, healthy products that benefit the local community. The new scorecards measuring wealth, progress, and quality of life are slowly steering policy makers at all levels to reevaluate which kinds of exports spread benefits more fairly. Subsidized tax-supported ports, transport, and facilities, as well as energy prices that ignore environmental and social costs underpin most conventional world trade today. If world trade were to fully account for these huge subsidies we would find that local and regional trade is more efficient. (More on these trends at www.Calvert-Henderson.com.)

Women own a great many fair trade and green businesses. In fact, women-owned businesses now represent some 50 percent of all privately held companies of all types‚??from construction and science to health care and environment. As they increasingly operate the world of commerce and industry, women are redefining success because their life goals differ from those of their male counterparts. Women business owners do not typically put making money at the top of their goals. Rather, they cite the need for personal autonomy and flexibility to manage their complex lives, the ‚??glass ceiling‚?Ě in so many corporations which limited their advancement; the satisfaction of personal creativity, and the freedom to address unmet needs with their business models. Women-owned and managed businesses now employ over nineteen million people. Women, as an enormous pool of natural assets, have been undervalued for decades. At last, society is beginning to appreciate their role in creating wealth and progress.

Many businesses, women-owned and otherwise, are leading the development of renewable energy. With advice from Amory and Hunter Lovins, John Todd, and other world-class experts, we examine the great transition from early industrialization based on fossil fuels to renewable forms of energy. The public debate about declining global oil production and global warming has at last begun. Rising oil prices have spurred a rethink of U.S. energy futures and how to reduce our vulnerability to foreign supplies. In spite of ana¬¨lytical habits that overlook the full value of investments in all forms of renewable energy and the huge savings from the technologies of efficiency‚??entrepreneurs, technologists, the inventors, and venture capitalists are now breaking the logjams. A cleaner, greener, more energy efficient future is coming into view. Europe and Japan are streaking ahead of the United States in solar and wind power.

China and India have much to teach us about traditional ways of meeting human needs while preserving natural resources and the environment. The Midwest has been described as our ‚??OPEC of Wind Energy‚?Ě and offers the possibility of meeting much of our own domestic electricity needs. The dimensions of this great transition to the solar age cover every sector of our economy: agriculture, construction, urban design, transportation, infrastructure, chemicals, and pharmaceuticals, as well as the new smart electricity grids. This energy transition can create millions of new jobs, clean our air and water, and reduce problems with CO2 buildup and global warming. The Carbon Disclosure Project, representing 211 investment mangers with $31 trillion in assets, asks major corporations to disclose their CO2 emissions and policies.

One of the most surprising aspects of the new twenty-first century capitalism is the rise of concerned, active shareholders. They invest not only for economic returns, but to help create a better world. You will meet some who attend annual company meetings and challenge management meetings on a host of issues that concern them such as: fair treatment of employees, pollution, outsourcing jobs to low-wage countries, minority rights, diversity of boards and management, climate change, and corporate governance. The active shareholders we interviewed are also influencing investment choices of pension funds, university endowments, foundations, and socially responsible mutual funds. Controversial in the 1970s, shareholder activism is now popular and widely recognized as a progressive movement in the evolution to more ethical twenty-first century capital markets. Shareholders love the extra psychological ‚??bang for their bucks,‚?Ě while the sheer power of the $2.3 trillion active investors wield is leading to a new model of the corporation managed not only to the benefit of shareholders, but all stakeholders including employees, customers, suppliers, community, and the environment. Stakeholder capitalism is the wave of the future‚??thanks to the millions of shareholder activists helping change the game and the scorecards of social progress and human development.

Changes at the top are affecting workers as well. In traditional societies, work is still often unpaid in local villages and rural agriculture, where people grow their own food, and build their own houses and community facilities in mutual cooperation. As the industrial revolution spread from Britain three hundred years ago, former peasants who used the village commons to graze their sheep, and weave their wool and clothing in their cottages were replaced by enclosure laws and factories. Millions who were denied the use of formerly common lands became impoverished and hungry. Industrialism also unleashed incredible creativity and technological innovation. Industrialism entailed labor saving‚??doing more with machines and energy rather than human beings. As globalization accelerates, these technological changes continue to change our workplace, careers, and opportunities, and create new training and education needs. Outsourcing is accelerating in the United States, shrinking our manufacturing and service sectors. No longer can people expect to make a lifelong career with one company or one industry. Most of us expect to be lifelong learners, while many can now opt to be self-employed or entrepreneurs, due to information technologies. In this book we explore the good and bad news for individuals, businesses, communities, and countries as they navigate these global transfor¬¨mations, and hear from thinkers like Jeremy Rifkin, Patricia Kelso, and CEOs of employee-owned companies.

The industrial revolution changed not just our work lives, but the goods we buy, including food. Many scary stories over the past twenty-five years concerning the industrialization of our food supplies have led to the explosive growth of the clean food and organic agriculture industries. Fears of mad cow disease, the effects of eating genetically modified foods, and ingesting toxic pesticide residues, and the rise in childhood obesity, have moved people to rediscover the health benefits of fresh, locally grown produce, free-range eggs, and foods free of allergy-causing additives and disruptive hormones. We solicit leaders from the pioneer Rodale Institute and many whole food companies to comment on this burgeoning new market, growing at an estimated 20 percent per year.

The current trend in favor of locally grown and organic foods coincides with changes in attitudes toward health care. Industrialized medicine has reached a crisis with widespread dissatisfaction among patients, doctors, nurses, hospitals, and all aspects of today‚??s medical-industrial complex. The United States spends more than any other country on medical costs per person‚??almost 16 percent of the GDP‚??with no better outcomes than countries spending one half of this amount. The failure of our medical programs has given rise to a rapidly growing new sector of our economy‚??based on the philosophies of prevention and natural (and cheaper) approaches to well¬¨ness. Nowhere is redefining success more emblematic than in this sector, where less is more, and love and personal caring are valued over high-tech interventions.

Lastly, we cover the emerging trends in socially responsible investing. At last, mainstream venture capitalists are following the lead of the many pioneers who have been funding companies in solar, wind, biomass, fuel cells, hydrogen, and more efficient technologies of all kinds. Leaders from D. Wayne Silby, founder of the Calvert Group, Robert Shaw of Ar¬źte, and Nick Parker of Cleantech Ventures, convey their enthusiasm for continually seeding these sustainability companies, many of which are destined to become the ‚??IBMs‚?Ě and ‚??Microsofts‚?Ě of the twenty-first century.


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