Natural Capitalism by Rajat Jhingan

 Environment is not just a corporate social responsibility slogan but an important aspect of corporate governance. Capitalism is driving the profits and efficiencies of the businesses, but the perception of capital which is limited to money or people has been a barrier for growth to many companies. To go to the ideological roots of capitalism, one thing that underlines the ideology is to economize the scarce resource. This ‘scarce resource’ is not a fixed thing but changes with time. During 1700s the scarce resource was people, so we built machines to upgrade their efficiencies manifold. These efficiencies were used to exploit the gifts of nature. In current era, people are in abundance and what is scarce is the ‘nature’ itself. Environment is not a cost center of businesses but a profit center.

Modern day business are deriving profits not just from markets but also integrating their production lines, processes and aligning them with the environment. How come? If a company create products for the market, why should it create products which are not saleable? Some from the furnace, the waste chemicals, inefficiently used energy etc. These wastes accounts to billions if turned to profits. As we say that the money saved is money earned. Business across the globe are subsets of environment and not vice versa.  Those services provided by the environment is cannot be accounted and liquidated, does not mean that they are not valuable. Smart business has integrated the ‘economization of nature’ as a part of their capital conservation and growth. Saving through smart designs and earning via turning waste to saleable products have contributed to increasing the shareholder’s wealth and net profits.

Natural capitalism imbibes smartly designing business to minimizes their waste production and maximize the use of energy and raw-materials. It is like maximizing every penny on the energy spent by increasing efficiency and milking revenues from the processed wastes which can be raw material for other players in the supply chain. Natural capitalism comprises of four pillars which are interdependent and mutually reinforce eachother. The first is 10 to 100 times utilization of resources. It significantly brings down raw material costs and frees your working capital and reflect healthily in balance sheet. The second pillar is to redesigning business processes in accordance to biological principles with closed loops, thus no waste, no toxicity. When the waste is treated and remanufactured, what was earlier flushed as garbage now generates revenues and open new market avenues. Moreover it cuts down on disposal expenditure too. The third pillar of natural capitalism is to evolve the business from merely selling products to providing services that caters to customers ever changing needs. Instead of selling air conditioners, provide cooling services, instead of selling bulbs provide lightening services. As we adhere to the tenents of capitalism, we reach to our fourth pillar of reinvesting capital for prospering of scarce resource i.e. environment and harvesting invaluable services. Firms which have down-sized their wastages and inefficiencies prosper providing jobs and security.

 

This concept of ‘Natural Capitalism’ is doing business with the nature. Business are a part of nature. The services of nature are sometimes liquidated and sometimes cannot be accounted. But a better alignment of business but nature brings profits. Environment is not just a jingoism but a workable business strategy enabling edge in the competitive environment. With the advent of green accounting, carbon credits and environment bonds, natural capitalism is a pro-active step which ensures a better surviving and thriving business.