Hunter Lovins is the founder of Natural Capitalism Solutions Inc., co-creator of Natural Capitalism Concept, co-author of Natural Capitalism, and co-founder of the Rocky Mountain Institute. Ms. Lovins also was named Time magazine’s “Hero for the Planet” in 2000. VerdeXchange News is pleased to present the following excerpts from an appearance made by Ms. Lovins in Los Angeles earlier this month, in which she details some of the businesses who are making extraordinary strides in the fight against global warming, as well as exposing some of the naysayers and myths in the ongoing debate about the proper solutions to this global crisis.
Hunter Lovins: When Royal Dutch Shell goes out to do what it calls “scenario planning,” it looks for what it calls “drivers of change.” These are signs that business as usual will not continue, and at the moment we’re facing a fair handful of them. We’re losing every major ecosystem on the planet. We’re facing a carbon-constrained world and durably high and rising energy prices. There are population and demographics challenges around the planet. Every bit of our infrastructure is vulnerable. Then there’s the advent of China and India entering the world market for potentially all commodities. That’s what I call the “sustainability imperative”....
...Everything that you would do if all you cared about was being a profit-maximizing capitalist is exactly what you would do if you were scared to death about climate change. And that’s why the financial community is jumping in. And the insurance industry: Swiss Re recently said to its major customers, “If you don’t, as a company, take your carbon footprint seriously, maybe we as a company don’t want to insure you or your officers and directors.” Now, imagine doing business without DNO insurance. JP Morgan Chase recently started indexing its bond insurances based on a company’s carbon footprint.
Civil society outfit out of the U.K. had been sending out questionnaires to the Financial Times 500, the 500 biggest companies on earth, and for years the companies had been ignoring it when they say, “What’s your carbon footprint?” Three years ago, 60 percent of the company answered the survey, and last year 70 percent answered. Why the difference? Well, it turns out that the project now represents institutional investors with $41 trillion in assets. If you’re going to go to the capital marketplace, you might want to answer their questions. And under U.S. law, if, as a corporate manager, you fail to disclose to shareholders information that can materially affect the price of the stock, you can be personally criminally liable. What’s your carbon footprint?
Wal-Mart recently hired the project to go into China, and ask companies in China that manufacture for Wal-Mart, “What’s your carbon footprint?” The U.S. argument is, “Well, we’re not going to abide by Kyoto because the Chinese aren’t.” I’ll make you a little bet: the Chinese will get a good handle on their carbon footprint a long time before we will. Because we’re finding out that we can protect the climate at a profit, and companies are doing it.
Dupont was one of the first in. They announced they were going to reduce their global greenhouse gas emissions 65 percent below their 1990 levels by 2010. The U.S. says we cannot possibly afford economically to abide by Kyoto, which would be a seven percent reduction by 2012. Dupont said that over the same time frame, they’re going to get ten percent of their energy and a quarter of their food stocks from renewables, just because they joined Greenpeace. And they just announced that in the name of increasing shareholder value. Here’s what they’ve done: they’ve already hit their target, reducing 67 percent for a savings of $3 billion. They’re not the edge of the envelope.
ST Microelectronics may be. Over the same time frame: zero net C02 emissions, carbon neutral, with a forty-fold increase in production. Now this is what you might call a BHAG. Jim Collins, the business author of the books Built to Last and Good to Great says, “If you want to be a great company, set a big, hairy, audacious goal.” This would qualify. What ST has found is that, when they made the announcement, they had no clue how to deliver on it, but figuring it out has driven their corporate innovation, taking them from the number 12 chipmaker in the world to the number six. They’re gaining market share. So they set even more ambitious renewables goals. They’re winning awards. They reckon by the time they’re carbon neutral, they will have saved about $1 billion.
This may have been the tipping point, when the company that, had there been a Fortune 500 in 1900 would have been on it, and are still on it today, announced Ecomagination. And interesting, when [GE CEO] Immelt made this announcement, he was joined on the podium by CEOs of major utilities and the World Resources Institute: “We believe we can help improve the environment, and make money doing it.” The enviros immediately jumped up and said, “This is greenwashing!” And they were absolutely right. What Immelt did was to badge products he already made as green products. But hypocrisy is the first step to real change. A year later, he noticed something. The products that he badged as green doubled in sales. The rest of the products only increased twenty percent. And so they have now announced an even larger commitment to Ecomagination. And in doing this greenwashing, they’re way ahead of their targets to reduce their carbon emissions....
....Well, here we are, less than a year later, and the Western states have signed on. The governors of the Western states have signed on to similar measures. The state of New Mexico even joined Chicago Climate Exchange. Now, what’s Chicago Climate Exchange? I think we’re reinventing institutions when we all know about Kyoto and haggled and got a bad compromise of the Kyoto Protocol. We’d done it. We had an international agreement to limit carbon emission–until the U.S. Senate said no. Darnit!
What’s it going to take? Governments don’t make markets; traders do. I’m a trader, let’s make the market.
So in December of ’04, Richard Sandor opened trading in reduction and carbon emissions with sixteen companies: Dupont, ST, World Resources Institute, the city of Chicago, and my little company. Thursday, the U.S. House of Representatives joined Chicago Climate Exchange. We now have over 300 members. 331 trading carbon in a country where there’s no law that says that you have to; when you join Chicago Climate Exchange (CCX), it’s entirely voluntary. But when you join, you make a legally binding commitment to reduce your emissions of carbon two percent a year over the period of membership. That’s the price of entry. If you fail, you have to buy emissions from somebody who has reduced it even further, and if you reduce even further, you create Carbon Financial Instrument, which you can now sell to people like me.
When public benefit corporations like mine join, they pledge to become carbon neutral, and we buy credits from, in my case, Baxter Health Care. What I’m doing is paying Baxter to innovate, to reduce their use of energy and therefore their emissions of carbon, and therefore become a more competitive company. This is a free market approach to reducing carbon. It was thought to be impossible; it was thought that you had to have a government mandate, and nobody would trade. Well, we’ve proved that wrong.
That said, everybody in CCX agrees, we need a government mandate— What [Governor Arnold Schwarzenegger] did here in California, and indeed some of us are trying to get California to join Chicago Climate Exchange, simply to take CCX to being the national exchange.
This is something each one of you can do. Write to your representatives, write to your state representatives, and say, “Look, why don’t we just join Chicago Climate Exchange? Why don’t we push for a national mandate? We have in place a trading regime; we know the market works. Let’s put in place the law so it’s true for everyone.”
My students are doing this....We got together and created a little business school in which sustainability is woven throughout the entire curriculum. So the students immediately said, “Well, the school should join CCX,” and went to the board and argued, and the board said, “Cool, we’ll join.” But business students make a business out of this, so the students created a program called Drive Neutral, which we’ve seen re-badged as Live Neutral. Here’s your homework: go on the web tonight to DriveNeutral.org, calculate the carbon footprint of your car, pay the equivalent of two fill-ups of gasoline, and your car will be carbon neutral for a year. The money will go to Chicago Climate Exchange to pay for actual reductions in companies that are becoming more energy efficient.
And this is important, not only if you want to be a part of the solution, but for our national economy. We are, right now, blowing money. In this country, we spend at least $300 billion a year buying and burning energy that we don’t need to deliver the services we want. I’m not talking about curtailing, driving less, living in a hotter building, producing fewer products. I’m simply talking about energy efficiency. We could cut $300 billion a year out of our costs. We know we can do this. After ’79 when we had the last price run-up, this country cut its use of oil 15 percent at the same time we grew our economy 16 percent just through more efficient vehicle standards....
...Cities are setting goals to reduce their carbon emissions. Salt Lake has already achieved 21 percent reduction below a 2001 baseline. You would expect cities like Portland and Berkeley to be doing it. They’re writing climate action plans, and you don’t have to start from scratch. Go on the web, download these plans, and simply copy them. There’s a whole array of best practices, everything from retrofitting your own buildings and setting good building standards, to neighborhood solar utilities. Berkeley set out to change its traffic lights from the ordinary traffic light to LED lights. They figured they’d save a little over $50,000 a year. They wound up saving almost $90,000. Scottsdale, Arizona: every new municipal building has to be a LEED gold, and they’re putting in place renewable energy, energy efficiency. San Francisco is going to biodiesel, and it has a huge array, but San Francisco’s Environment Department, run by Jared Blumenthal, is a great resource for what a city can do to implement green program. Radnor Township, Pennsylvania is buying wind power. Flower Mound, Texas has a program to teach the builders how to build energy efficient buildings. Ferndale: if you drive a Prius, you get preferred parking.
These are simple measures that every community can implement, and here’s the sort of benefit that you will get. A megawatt saved increases in the economy over $2 million. Wages up, business income up, and you will create more jobs. We now know a new study out from University of California Berkeley that investment in renewable energy gives you ten times the jobs of investment in any kind of fossil or nuclear plant.
We start with the built environment. If you care about reducing carbon emissions and saving energy, there are two really big places to start: buildings and cars. Buildings are a great place to start, because it’s where we spend most of our time. They waste a lot of energy, two thirds of the electricity, to produce a product that has indoor quality that’s frequently worse than the outdoor air quality that we regulate. And we know how to take any existing building and make it three-to-fourfold more efficient, and even ten times as efficient....
...It’s better if you combine renewable energy with conservation. Up in Sacramento, people voted about 15 years ago to shut down battery operating. It was a big decision. Here’s what happened: the utility lost 1,000 megawatts all at once, but rather than invest in any kind of conventional, coal-fired gas plant, they invested first of all in efficiency, then in every kind of renewable generation they could lay hands on: solar of all sorts, wind, biofuels, hydro, co-generation, fuel cells. Now, more than 15 years later, the econometrics are in; the entire region is economically healthier than had they just kept running the plant. The plant rates were projected to go up 80 percent, with no growth level for over a decade. This kept in place 2,000 jobs the company had said, “If the rates go up, we’re out of here.” They generated 880 new jobs, and the utility paid off its debt....
....This movement of ours is skyrocketing. It’s a who’s who of corporate America. Our job is to keep them honest, to remind them, even the academics, getting into the act. Michael Porter, the guru of competitiveness at Harvard Business: “Managers will start to recognize environmental improvement as an economic and competitive opportunity. It’s time to build on the underlying economic logic that links the environment, resource productivity, innovation, and competitiveness.”
These principles, with what we call natural capitalism, are buying time, pushing off the drivers of change, through efficiency, redesigning every product and process in society using approaches like biomimicry, and then managing all our institutions to be truly restorative of the forms of capital that are in short supply, the human and natural capitals. These are the basis of prosperity. My old boss Dave Brower used to say, “What do we want the earth to be like 50 years from now? Let’s do a little dreaming. Aim high....