1. Zaher Charara B200 AOU 1 Chapter 26 A Road Map for Natural Capitalism

2. Zaher Charara B200 AOU2 Introduction  When companies pollute or dump waste, they put the ecosystem (earth’s environment) at risk. Our ecosystem gives valuable services: forests provide wood, water storage, habitat, and regulation of the atmosphere and climate.  The value of our earth’s ecosystem services is estimated at $33 trillion a year. In China, deforestation triggered severe flooding.  We can’t live without our ecosystem’s services, and we need to preserve them.

3. Zaher Charara B200 AOU3 Natural Capitalism (Protecting Nature’s Ecosystem) Four major steps that businesses can take: 1.Dramatically increase the productivity of natural resources: Reduce waste and pollution in order to preserve nature’s minerals, water, and forests. Change production design and technology. 2.Shift to biologically inspired production models: return every output to nature as a nutrient, or use it to manufacture an other product. Don’t use toxic materials. 3.Move to a solutions-based business model: Delivering value instead of selling products (providing illumination rather than selling light bulbs). 4.Reinvest in natural capital: restore and expand the ecosystem. Consumers now have high environmental awareness.

4. Zaher Charara B200 AOU4 Dramatically Increase the Productivity of natural resources 1.Implementing whole-system design: The focus should be on output and cost of the whole system, not just one part. Saving a large fraction of resources gives expanding returns (lean manufacturing reduces waste and inventory). Savings can be in materials, electricity, heating, efficient designs. Reduce the use of paper to save more trees from being cut. 2.Adopting innovative technologies: Use technologies and designs that are environmentally friendly. The Hypercar was designed since 1993 to reduce fuel consumption and pollution (it’s made of carbon fiber, is aerodynamic, the wheels turn by electric motors and fuel cells, and transmission is replaced by electronics and software). Imitating nature works better than applying industrial brute force. Reduce waste, save energy, and don’t pollute.

5. 5 Redesign Production According to Biological Models  Closed loop manufacturing prevents waste. Manufacturing output should be composted or remanufactured (return to the ecosystem or recycle). Toxic materials are not to be used.  The USA has regulatory agencies to keep toxicity and pollution down (Environmental Protection Agency; Occupational Safety and Health Administration.)  CFC was banned because of ozone destruction.  Resource efficiency: Dupont Company recycles polyester films and gets better end products (better products at lower cost and higher profits.) Create a great product that best meets customers’ needs while protecting and nourishing natural capital (the ecosystem).  Interface is a Company that developed “Solenium”, which is better than carpets, lasts longer, is stain-proof, doesn’t grow mildew, and is better for the ecosystem.  Waste is “any measurable input that doesn’t produce customer value”. Fuel has some waste, and solar power is being used by many firms.

6. Zaher Charara B200 AOU6 Change the Business Model (to Solutions-based Business Model)  Interface transformed itself form a company that sells carpets to one that provides floor-covering services. Interface leases its service for a monthly fee to its customers who always have fresh and clean carpets and also save on taxes.  This “solutions economy” improves customer value.  Carrier is shifting its mission from selling air conditioners to leasing comfort. They help in making buildings and apartments more efficient (better comfort at lower cost).  Higher profits will come from providing better solutions rather than from selling more equipment.  The shift to a service business model benefits the whole economy. Less reliance on production of goods will reduce volatility and bring stability to businesses who will be leaner and stronger.

7. Zaher Charara B200 AOU7 Reinvest in natural Capital  Efficient industrialization can avoid deforestation, climate change, and natural disasters. Reinvest in restoring, sustaining, and expanding the natural ecosystem.  There will be shortages of ecosystem services if reinvestment in natural capital is not done.  Companies who are preserving the environment will have strong profitability and high ratings in the eyes of the public. A company (AES) was planting trees to offset the carbon emissions of its power plants. Companies can use biological living organisms to turn sewage into clean water. “Let nature do its work”.  Working with nature is more productive than working against it. Nature gives better yields than chemicals.

8. Zaher Charara B200 AOU8 A Broken Compass? (Why are companies heading the other way?)  Companies usually go after quick payback. But cheaper materials don’t give good long term results. Companies lay off engineers instead of using them to save resources.  The way incentives are designed, they don’t reward long term efficiency.  Tax laws penalize jobs and incomes, and subsidize resource depletion and pollution.  Use-it-or-lose-it water laws encourage inefficient water consumption.  There are outdated regulations. The USA wastes each year $300 billion in energy.

9. Zaher Charara B200 AOU9 Recognizing the Scarcity Shift  Fifty years ago, nature was abundant but people were scarce. Today, people are very productive but nature is being depleted and becoming scarce (fish, forests, fertile soils.)  Natural capitalism means reintegrating ecological with economic goals.  The companies that first make the changes suggested in this chapter will have a competitive advantage. Those who can’t make the shift won’t survive.