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A Business Built for Resilience

by James Magnus-Johnston

Johnston_photoWhat does business look like in a steady state economy? I’m often asked whether or not a steady state economy would somehow lead to the stagnation of free enterprise. Yet all around us today, we’re witnessing the flourishing of ‘social enterprise,’ a business model designed to maximize human and environmental wellbeing rather than accumulate profits for shareholders. From not-for-profit and cooperative models to the birth of the B Corp (benefit corporation), we find ourselves in the midst of a profound shift in business–away from growth and profit as an organizing principle, and towards one that respects the social and ecological limits to growth. With a planet under profound stress and a Ponzi-inspired economy poised for decline, there’s no harm in trying something a little different.

As policymakers waste time hand-wringing about embracing alternatives to growth, social enterprise provides individuals and communities with the ability to demonstrate the viability of the post-growth paradigm. Measuring social and ecological outcomes can be challenging, but some models (such as the B Corp) have adopted a specific method to measure outcomes using a point-based system. Others are using simple tools to reduce waste and ensure a fairer, more equitable working environment.

Fools&Horses

I have recently been involved in starting a pair of social enterprises, which stand as humble examples of business models for resilience rather than growth. The first is RISE Urban Incubator, which promotes and mainstreams innovations to reduce waste; the other is Fools & Horses, a coffee shop with a triple bottom line. Both businesses have been structured according to a relatively simple principle–do more good than harm–by tackling problems such as inequality and environmental degradation. Fools & Horses was named after the beloved British sitcom Only Fools and Horses, about a group of people who spend all their time trying to come up with “get rich quick schemes” and, ironically, work all the time. What better way is there to describe an economy designed for growth-at-all-costs?

Our Fools & Horses wants to demonstrate the benefits of a more flexible, equitable work arrangement for its employees. Workers earn a living wage when they join us, are invited to have a say in how the business should be run, and are given the opportunity to become owners. Worker-owners look forward to more than the accumulation of money and a periodic hike in their hourly rate. They are given greater autonomy in their work, freedom to experiment and innovate according to their talents, and enough flexibility in their schedule to pursue other interests or spend time with family and friends. Autonomy and flexibility are not just tolerated, they are encouraged.

More interestingly, perhaps, the coffee shop is designed to provide the incubator with the cash it needs to experiment with projects that systemically reduce waste, including the use of permeable pavement and solar technology. Any waste streams we do have are audited so the businesses will offset more waste and emissions than they create.

The businesses have also been designed to provide benefits to the local economy by keeping dollars circulating locally. Fools & Horses is designed to re-localize the economy wherever possible by supporting budding entrepreneurs in the local food industry, including farmers, bakers, craft brewers and roasters, and chefs. Eventually, we hope to help foster a network of local suppliers, which also helps reduce fossil fuel requirements. Each of our producers offers only the highest-quality products, fostering an economy of quality rather than an economy of quantity.

There are other sustainable business models out there, and people doing far more important and captivating things to shift the economy in a new direction. But this is one example of a small effort to demonstrate the shift in thinking at the macro level. One of the other, less intangible things Fools & Horses will foster is a sense of conviviality and good living. In Dutch, it’s called ‘gezellig,’ and in German, it’s called ‘gemütlichkeit,’ both of which connote a sense of warmth, coziness, and belonging. In a steady state economy, what we need to accomplish above all else is the re-connection of people with one another. Perhaps it says more about the present state of business–and the prevalence of monopolies–that it’s considered novel to do so.

A Practical Proposal to Erase Externalities

by Randy Hayes and Brent Blackwelder

As the global economy grows, it expands into pristine habitats, interferes with critical ecosystems, consumes more resources, and emits more pollutants. Many activities that fall under the banner of economic growth are undercutting the planet’s ecological systems. At the heart of this tragedy are pollution damages that are imposed on society but not factored into company costs. These damages are called externalities because they are externalized by the businesses generating them.

Every day, producers of myriad products impact the biosphere in ways unknown to customers, investors, and policy makers in both host and home countries. By not undertaking the measures necessary to protect ecosystems, these companies avoid responsibility for the damages. And because they have failed to account for the true costs of their businesses, they can sell their products at lower prices than more ecologically responsible companies, gaining an unfair advantage and reaping undeserved profits.

The consumption patterns in many product markets would change if the true costs of production were reflected in the prices of the products, or even if customers, investors, and policy makers had better access to accurate information. There are many possible paths to full internalization of these externalities, but there is no clear map of the territory. As the United Nations Environmental Programme puts it, “in the current absence of sufficient and comparable company disclosures on the environmental impacts of operations and supply chains,” it is difficult to puzzle our way out of the dilemma. In fact, it is virtually impossible to achieve a sustainable economy unless something is done about pollution externalities.

A true-cost economy would align our economic system with nature’s life support systems. Biologists teach us that each living system has feedback loops that allow it to adjust and operate within carrying capacity limits. The human economy is no exception, but we’ve short-circuited an important feedback loop by letting companies externalize the costs of their pollution. The time has come to adopt systematic rules that add pollution costs to the prices of goods and services. Such rules would provide critical information that is necessary to keep the scale of the economy within the planet’s carrying capacity. A true-cost system would solve real problems, but how can we put such a system in place?

A small change at SEC headquarters could have big effects.

The mission of the U.S. Securities and Exchange Commission (SEC) is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Although the SEC requires public companies to disclose certain financial information, it does not require them to disclose information about their health and environmental externalities. Changing the requirements could produce widespread positive impacts.

Public companies are responsible for as much as one-third or more of all pollution externalities. By requiring these companies to track and report the costs that they typically externalize, we would not only set a legal precedent, but we would also begin to instigate the much deeper social and cultural changes needed to achieve a true-cost economy. If we can compel the largest and often most intransigent corporations to disclose how they are impacting the planet, truth and honesty can begin to displace “dark costs” and secrecy. With such a cultural shift, we will perhaps no longer be talking about imposing disclosure requirements, but rather enjoying increased cooperation and forthrightness.

In the meantime, the transition to a true-cost economy calls for mandatory, annual disclosure of externalities — ecological impact disclosures — by every company that falls under SEC jurisdiction (effectively all U.S. public companies and some foreign issuers as well). Adoption of ecological impact disclosures can be done by successfully petitioning the SEC, passing federal legislation, or both.

CERES (a prominent nonprofit organization), religious groups, and pension funds have pushed for shareholder resolutions and achieved important successes toward institutionalizing broader disclosures. Other groups have petitioned the SEC to adopt a flexible environmental, social, and governance (ESG) reporting framework, such as that developed by the Global Reporting Initiative. These efforts are worth applauding, but we need a bigger, bolder solution that confronts the magnitude of the problem and paves the way for a sustainable, true-cost economy.

The best route is to empower the SEC to force each public company to provide an annual ecological impact disclosure. Such a disclosure would be more effective than a flexible or voluntary framework — it would require specific data, reported in standard forms. Each reporting company would provide information about its own operations as well as those of other companies in its supply chain. In addition to aggregate, company-wide information, companies would provide site-specific data so that the public can determine where impacts are occurring.

Many investors have been calling for this sort of information to help them make better decisions about where to put their money. But this is precisely the kind of information that has been kept from the public for the past century. Keep an eye on the efforts at Foundation Earth over the next year to remedy this situation.

Randy Hayes is the founder of the Rainforest Action Network. Brent Blackwelder, a regular contributor to the Daly News, is the president emeritus of Friends of the Earth.

Fictitious “Facts” Spur Students to Liquidate the Planet

by Rob Dietz

One reason that we have a culture dedicated to the myth of perpetual economic growth (a dedication that produces a pile of consequences such as climate chaos, financial fiascos, ecosystem eradication, and dismal disparity between the haves and have-nots) is that students are learning fictitious “facts.”  College students in the most common majors are repeatedly told that unlimited economic growth is a good thing, with no thoughtful analysis of the costs of growth.

According to the National Center for Education Statistics, the most popular major for U.S. college students is business.(1)  A whopping 21% of American undergraduates declared business as their major in the 2007-2008 school year.  All of these students take introductory business courses that describe rudimentary principles of economics.  After all, the economy is the environment in which businesses operate, so business students need to understand the economy.  They learn about supply and demand, business cycles, inflation and unemployment.  So when the topic of economic growth comes up in such a course, what sort of message do they receive?

It just so happens that my wife teaches an introductory college business course.  She was kind enough to let me borrow the textbook for her course – Exploring Business by Karen Collins – for a quick review.(2)  I took a look at it with great interest.  Chapter one is called The Foundations of Business, and right at the beginning, I came across a section on economic goals.  In this section, Collins states:

All the world’s economies share three main goals:

  1. Growth;
  2. High employment; and
  3. Price stability.

She goes on to explain the concept of prosperity:

During prosperity, the economy expands, unemployment is low, incomes rise, and consumers buy more products.  Businesses respond by increasing production and offering new and better products.

For anyone who has studied both the upsides and downsides of economic growth, a statement like, “All the world’s economies have a goal of growth,” raises some red flags.  Follow-up statements that equate prosperity with increased consumption raise even bigger and redder flags.  These assertions can be rewritten as 2 simple (and unsubstantiated) equations:

  1. Growth = Number 1 goal; and
  2. Prosperity = More stuff.

These equations raise the following questions in my mind:

  • Should all economies have growth as a goal?
  • Isn’t there a deeper meaning of prosperity – don’t we tend to value things in our lives beyond accumulation of more and better products?
  • With economic growth straining ecological health around the globe and compromising human health in the high-consuming nations,(3) shouldn’t we at least consider an optimal size for the economy rather than limitless expansion?

Exploration of such questions is not a part of the standard curriculum – Exploring Business doesn’t explore any of them.  With so much at stake (after all, a complete understanding of economic growth may help us build economic institutions that fit within ecological capacity), what can we do to help ensure that students obtain a more complete picture of economic growth?  Let’s turn to economics for help.  If we want professors and textbook writers to supply balanced coverage of economic growth, we need to demand it.  We can do so with civility and persistence.  These professors and writers aren’t villains – they are simply passing along knowledge, some of which is dangerously misguided, that was handed down to them.

Adbusters Magazine has launched a campaign called Toxic Textbooks to encourage schools and universities to use economics textbooks that engage honestly with the real world.  You can get involved with that campaign.  You can ask the writers of college textbooks (perhaps starting with Karen Collins) to make some changes.  If you’re taking a course in business or economics, you can certainly ask your professor to explain how we can have infinite growth on a finite planet.  And if these sorts of attempts fail, perhaps students will begin to select majors that are more in touch with what’s happening in the real world.


What exactly are we learning here?


(1)   U.S. Department of Education, National Center for Education Statistics, Higher Education General Information Survey (HEGIS), Integrated Postsecondary Education Data System.  Note that the second most popular major (with 10.7% of the student population) is social science and history, which includes an awful lot of economics majors who receive similar messages to business students.

(2)   Collins, Karen (2010). Exploring Business, Flat World Knowledge.

(3)   See, for example, Egger, Garry and Boyd Swinburne, 2010.  Planet Obesity: How We’re Eating Ourselves and the Planet to Death, Allen & Unwin.

Recession — An Opportunity We Should Not Pass Up

by Peter Seidel

We are currently facing a worldwide recession. Many people cannot find employment, and many things are poorly done or not done at all, because businesses and governments say they don’t have the money to fund them. Political and business leaders keep calling for more growth to get us out of this recession. I am not an economist nor do I have a complete understanding of the economy, nevertheless, like the boy who pointed out that the emperor was naked, I see things that strike me as odd.

Perpetually pursuing growth into the future, in a finite space with limited resources, is impossible. We have already exceeded the level of consumption our planet can sustain. According to the Global Footprint Network it would take 1.5 planets like our own to regenerate all the resources humanity now uses and assimilate our carbon dioxide emissions. If everyone lived like the average American, we would require the resources of almost 5 planets. Instead of growing, we need to scale back. Continued growth is suicide for our species. Now this may sound naïve, but why not employ people who have lost their livelihood to do things that urgently need to be done, and do this in a way that puts us back on the road to sustainability?

In trying to answer this question, more questions rise to the surface. How can we create enough jobs? Where do we get the money to pay for them? By focusing on efficiency, as we now do, and raising worker productivity, workers are continually producing more for each hour worked. Under this current economic system, people must consume more and more (at the same time placing more and more burden on the environment) just to maintain jobs. Outsourcing exacerbates employment problems, requiring even more consumption to make up for disappearing jobs. How will we ever return to earlier levels of employment with the increased efficiencies that businesses have introduced during the recession, and without the reckless spending habits people had before the recession? There are some simple ways to turn this around. We can hire more teachers to reduce class sizes in schools and restore subjects that enrich young people’s lives such as, art, music, and physical education. We can maintain our parks and protect the environment better. Employing more police, inspectors of the products we use, and people to review income tax returns would also help.

Shortening the work week and granting longer vacations would also create openings for unemployed workers, and provide more free time for all. As much of our life is spent at work, work should be less stressful, more enjoyable, something one can take pride in, and be adequately compensated for. In short, we should switch from an economy where we are slaves of the system and are obliged to consume more than we need in order keep it going, to one based on meeting human needs within the capacity of our planet.

Where can we obtain the funds to provide full employment in the kinds of jobs I have just described? Today, large numbers of people who are doing financially well simply don’t want to sacrifice for others or the common good, and there are politicians who tell them they don’t need to. When I was growing up, I was taught that it was the American way to pitch in and help one another when things were tough. Farmers helped their neighbors when their barn burned down, and we sacrificed during World War II by raising taxes and forgoing many things. Now we pass the burdens of war on to the socially disadvantaged (from whose ranks we populate our armed forces) and our children (who will end up paying the costs of war). And today our situation is far worse as we head for environmental troubles that will hurt everyone. A moderate tax increase on those who are fortunate enough to have reasonably paid jobs would solve this problem without decreasing the quality of their lives. Much research has shown that when one has enough to live comfortably, has friends, and is happy with what one does, more money does little to increase happiness. Education would help here.

New goals and mechanisms must be developed that put the long-term welfare of the planet, people, and communities above currently held beliefs and short-term profits for a few. We must replace the gross domestic product (GDP) with an indicator that includes the cost of the depletion of nonrenewable resources, pollution, medical bills, natural disasters, commuting, military expenditures, and crime. By the present means of computation, the more a nation pollutes and spends on cleaning it up, the greater the GDP! Instead we must turn to something like the Genuine Progress Indicator (GPI), which starts with the same personal consumption data that the GDP uses, but then adjusts for factors such as the fairness of income distribution, and adds factors such as the value of household and volunteer work, and subtracts factors such as the costs of crime and pollution. Instead of putting our faith in conventional economists who ignore the reality of the world beyond money and the limits of their models, we should turn to a breed of economists and thinkers now totally ignored by governments and business. Ecological economist Herman Daly, David Korten (President of the People Centered Development Forum), Peter Victor (Professor of Environmental Studies at York University), and Tim Jackson (independent advisor on sustainable development to the UK government) are good examples and have recently written books on sustainable economics.

In recent years, there has been an increasing separation of the control of business from the people and communities who are affected by those businesses. At one time business owners and their employees lived within the communities where the businesses operated, and people consumed the food that grew around them. Today, much business is owned by impersonal organizations headquartered elsewhere, and food comes from thousands of miles away. Such arrangements put people out of touch – it becomes very difficult for them to connect their choices to the consequences of those choices. Decisions tend to be based solely on monetary reasons, without regard to environmental and personal concerns. Corporations have only one obligation: making money for their stockholders without breaking the law. We need to initiate feedback systems and controls that bring environmental concerns and humanity back into business decisions.

To reach sustainability we must bring our economy back to reality. Doing so will require us to decrease human population, take money out of politics, return governments to the people, and free the media from concentrated ownership and corporate control. We need to reorient our goals and values. If the public ceased to admire conspicuous consumption and lavish living, and openly recognized the damage associated with such lifestyles, we could do away with harmful overconsumption and develop lifestyles that are healthy from both an environmental and economic perspective.

If we do not reach a level of sustainability, nothing else matters. I believe that a recession, with the suffering that goes with it, and an increased public awareness of environmental problems like those that we now have, is the easiest time to switch to a sustainable economy. Besides, it could be a seamless way to step beyond our recession into a saner, sounder future. If we do not grasp our current opportunity, when will we do what we must do?