208-596-6500 | In short, the for-profit businesses with the strongest ecological values can be the most profitable, and can provide the most benefit to the health of people and the biosphere.
ABC's for...
30
Mar 08
Ecological Capitalism, Part 2
Over the last century, a lot of people, especially Americans, have become conditioned to think that environmental leadership is the realm of charities. Environmentally-minded people, and others interested in social values such as peace and equality, tend to habitually consider that charities are “good” and corporations and businesses are “bad”.
This acculturated point of view, when held and repeated as a “fact”, maintains a static, built in conflict between change advocates and the mainstream culture. This communications gap prevents environmentalism and the notions of ecology from becoming widely accepted by society.
Today, there are thousands of green businesses formed by environmentalists who are ready to try using the full range of financial tools and conversations available to for-profit companies in new ways, so they can break free of the cultural constraints to progress that come from viewing protecting the environment as a charity project.
Lately, I’ve noticed a lot of corporations are taking pride in their environmental policies and track records, and promoting this on their websites. While these companies deserve praise for taking steps forward, there is something still missing in society that a company would make their environmental record something to crow about. If we could imagine a future where all environmental issues are solved, no corporation would take special pride in their environmental achievements, just like no corporation today makes a big deal that they have a telephone system in place.
Fortunately, we now have some success stories that demonstrate how environmental values can become ubiquitous. The organic food industry provides the most obvious example. What makes a person choose to purchase an “organic” apple instead of an “industrial” apple? You can’t really see the difference at arm’s length. Perhaps you can taste the difference. But the real difference is a matter of cultural training. Those of us who purchase “organic” food have simply been trained that it is better for us than industrial food.
In the organic food business, like most other green businesses, this cultural training creates the primary financial value of the green product or service. This suggests that the more a green company can afford to teach ecology and environmentalism to the public, the more profitable that company can be, and the more progress it can achieve for the health of people and the biosphere.
The economy can become very dynamic as we move away from static notions of environmental good and bad and toward the notion of ubiquitous environmental understanding. During this dynamic phase, enterprises that understand that green education equals capital will emerge as the new economic leaders.
Until now, the job of teaching culture about the environment has been held by charities. Now, as it is becoming clear that this training creates a real monetary value in society, the role of educating society about nature and the environment will shift more and more to for-profit companies who have the financial tools to provide mass-education and to profit from the financial value created by that cultural training. Some green charities might want to take note, and jump on board before they become artifacts of history.
29
Mar 08
Ecological Capitalism, Part 1
In capitalism, the ability to “capitalize a cash flow” creates the potential to rapidly scale up a business with positive cash flow. The phenomenal growth of many companies under capitalism can be attributed directly to this feature of the philosophy. Many who care about the environment say this growth is causing the destruction of the planet’s life support system.
We are at a critical juncture. With ice sheets breaking off of Antarctica, should environmentally-concerned people attempt to change capitalism? Or, would it be more effective to incorporate the rapid-change aspects of capitalism into environmentalism so that solutions can be rolled out at a rate and scale appropriate to today’s challenges?
Most environmental leadership today comes from the arena of non-profit organizations. Like all businesses, non-profit organizations have cash flow. Unlike for-profit businesses, non-profit organizations voluntarily adhere to financial rules that prevent them from the power of capitalizing their cash flow.
If you look at the biggest and most influential businesses today, for the most part they are big because they are in the business of cultural-scale change. They preached a vision of the future, and sold society on that vision.
Most all environmental groups preach their vision of the future, and they sell that vision to society, creating cash flow. If someone in the business of preaching, say, a new way of looking at computers can enjoy the power of capitalizing their cash flow, why should someone in the business of preaching a positive environmental future tie their hands behind their backs by adhering to the rules of the non-profit game which prevents capitalizing their cash flow?
29
Mar 08
What is Capitalism?
The question in modern society is, can the conversation called “money” be reconciled with the conversation called “ecology”. To form an answer, it is helpful to understand “capitalism”.
If money is a conversation, then many different types of conversations have evolved and can evolve from the basic conversation. These evolved conversations elevate the complexity and sophistication of the original invented notion of money. Capitalism is a philosophy (complex conversation) of money that breaks the original notion of money into two major invented notions:
- Flowing money, called “cash flow”, “recurring revenue”, “annual earnings”, etc., and
- Stored pools of money, called “capital”, “equity”, “assets”, etc.
The relationship between these two invented notions creates powerful results for people who engage in the conversation called capitalism. The essence of this conversation follows these three steps:
- money is valuable because it can be used to buy things
- a flow of money is valuable
- therefore, money (capital) can be used to buy a flow of money (cash flow)
In capitalism a person who creates a recurring flow of money can sell that flow to someone else. I call this “capitalizing the cash flow”. This is the basis of all investing, including the stock market.
What does it cost to buy a cash flow? If you purchase a Certificate of Deposit (CD) at a bank that pays 5% interest annually, you are actually paying 20 times the cash flow to purchase that cash flow. If you “sell” your cash flow back to the bank, they stop paying you the 5%, and you get your capital back. In the language of the stock market, this CD would have a “price to earnings ratio” of 20 – the cost to purchase the cash flow is 20 times the annual cash flow.
13
Mar 08
What is Money?
Any discussion of the economy and business requires an understanding of money. What is money?
Money exists in the physical world, yet it is not really physical in itself. I’ve always thought it humorous that banks are so often built of such heavy stone, with sophisticated security, when all that is inside are little pieces of paper, some coins, and these days, computers.
Money only exists only for humans. We created it for ourselves. Dogs and cats don’t use it, just us. Even gold, when used as money, is just a human invention.
I’m not saying money isn’t valuable – it’s just that money’s value doesn’t come from it’s physical aspect. It is valuable because humans agree that it is valuable. In short, money is an agreement, a contract, a conversation in society.
The more people agree that money is an agreement, the more money is valued by people. Money is valuable because people say so. Because money is valuable because people say so, as people’s values change, as people change what they say is valuable, so changes the nature and purpose of money.
13
Mar 08
A Blog Book – ABC’s for Entrepreneurs & Investors
I once met a woman who said a life is complete if you plant a tree, raise a child, and write a book. Here I start my book.
The green economy is finally past its infancy. Rapid growth is on the horizon. A flood of new entrepreneurs and investors are entering the field. I want to share some simple yet powerful lessons I’ve learned from 25 years of labor in the Eco-Sector with them, and with you.
The result, I hope, will be a users’ manual for the green economy.
6
Apr 08
What is a green business?
If the ecological value set can create profits, what then is a green company?
At the EcoSector Portal, I like to showcase and help grow companies that expand the understanding of ecology and produce outcomes coherent with this value set.
In the end, it is not my definition of ecology that matters – the ultimate right to make that assessment exists in the collective mind of society. But perhaps I can influence that thinking a bit here…
Let’s look at Wal-Mart’s recent steps forward into the ecological value set. The story was first reported in the August 2006 edition of Fortune magazine. In March 2008, Wal-Mart announced the formation of a The Cleantech Accelerator Project in partnership with the Cleantech Group to recruit business partners for Wal-Mart that can help them achieve the following objectives:
Does this make Wal-Mart a “green” company? My short answer is, “not yet”.
In the interest of full disclosure, let me say I put in a fair amount of energy (successfully) fighting Wal-Mart’s attempt to knock out a farm and build a “supercenter” in my home town. For the moment, I want to set aside all the reasons I would fight such a proposal again, and instead look at certain fundamental issues that relate broadly to the notion of green business.
I say Wal-Mart is “not yet” a green company, because their primary mission is “not yet” to protect the health of the biosphere. In Wal-Mart’s own words, their mission is “Saving people money so they can live better.” This statement doesn’t reflect what I call an “ecological value proposition”.
So, Wal-Mart is “not yet” a green company because they are not yet driven by an “ecological value proposition”. However, they clearly have become a top-tier consumer of environmentally designed goods and services, which significantly distinguishes them from other major corporations. This is a form of leadership.
For them to become a green company in my view, I would like to see their mission become “Assuring the health and vitality of people and the biosphere”. Inside of this new mission, Wal-Mart’s core task, conveying goods to consumers, would become a way of producing this new outcome. By following ecological design, their products will naturally cost far less as the huge volume of waste that considered conventional today is continuously filtered out of their supply chain. So, they don’t need to give up their old mission to add this new one.
As a green investor, I’m much more excited by the companies Wal-Mart is hiring to provide the goods and services and design the strategies they are using to achieve their sustainability goals.
For example, wearing both my investor and environmental hats, I would much rather own shares of stock in Blu Skye, the consulting firm that sold Wal-Mart on the idea of going green in the first place. Now there’s a green growth company. They are in the business of shifting people’s mindset and their method involves providing consulting services that realign corporate cultures to the ecological value set. Here’s what, to me, makes Blu Skye an exciting green business:
Unfortunately, most people can’t purchase shares in Blu Skye because the company, like most other leading firms in the Eco Sector, does not have publicly-traded stock.
Should you add Wal-Mart to your green investment portfolio? The question is worthy of consideration for green-minded investors who may not be able to invest in the privately-held green companies Wal-Mart is hiring to achieve their sustainability objectives. Here’s why…
Personally, I wish Wal-Mart would just stop building new stores – the very act of building new stores is among Wal-Mart’s most environmentally destructive activities. But compared to what is considered “normal” business in the world today, cutting energy costs by 45% is a big deal environmentally. And it also can create a lot of future profits for them. Via ecological redesign, similar savings are available across their entire range of business costs. Wal-Mart is so huge that every new step in the direction of ecological values can produce very significant growth in profits.