OPINION: Business as usual destroys more capital than it creates.
Business schools purvey the amassed experience of successful entrepreneurs from the last few hundred years. The problem with that is this experience is based on the availability of increasingly vast quantities of energy and cheap raw materials, along with licence to basically release waste straight out into the environment. This two century’s worth of “business” experience treats nature as an unlimited resource store and waste dump. An out-of-date mindset. We have moved on. There is a need for a new way of doing business: a system that takes into account the limitations of the planet and needs to maintain human well-being. That system is called circular economy.
What is called “Business as usual” is actually an outdated mindset from the last century.
For several generations, students have been sitting in business school lectures learning that business is all about driving growth of the firm to give capital owners an increasing share of the wealth. The notion that business involves selling things/services and making enough to pay the bills and have some left over to live on is absent.
In terms of the social good that business does, wealth trickles down, they are told, from capital owners to benefit everyone.
The results of “Business as Usual” are not pretty
The results of this business mindset are hitting society hard: phosphorus and nitrogen cycles are close to breaking down, there are unsafe levels of carbon dioxide in the air, and toxins (along with micro-plastics) are increasing in nature. There is more money than ever in circulation, yet we see an alarming inequality; people are suffering from hunger and homelessness even in the so-called developed countries. Not trickling down at all. If we go on like this we will end up with a vastly depleted population trying to scratch a living off depleted soil.
The ideas don’t work
Suppose everyone followed the principles of “business”. Suppose all companies pushed wages down (including manager’s wages) and pushed prices down based on the savings. This would create a society with cheap products nobody would buy because their wages were too low. We are on our way there now, and capital owners are responding by pursuing less sociable strategies like earning money on the sick, children and even prisoners.
We need to abandon what the schools are teaching us about “business” and let go of outdated economic theory. Old models that exploit nature and exploit people must disappear. Leadership from politicians should produce policy changes that offer a framework within which it is profitable to develop non-extractive, regenerative business models.
Real capital is natural, built, human or social
The circular economy mindset is one that sees nature as a library where you borrow stuff and return it in the same condition. The regenerative mindset is one where business practices build up social, human, natural and infrastructure capital. In practice, it means that you reuse, recycle or repurpose the components and products you produce. This could actually increase economic growth without sacrificing the resources of the world – if growth is worth having as a goal at all. The goal is for people to afford to consume in a way that builds different forms of capital; natural capital, social capital, human capital and infrastructure for future generations. This instead of putting more and more financial capital into fewer and fewer hands.
Leadership and courage are needed for this transition
Neither ideas nor inventions are lacking. What is missing is changes in policy, regulations and the investment that would follow.
Let’s hope for political courage from the established parties or a new party.
In the meantime, we are doing our bit by starting a school for circular economy. Visit the school at http://circleeconomy.teachable.com
Stephen Hinton, Investor in Peace and Educator in Circular Economics.
Johan Brändström, Master of Science in Engineering Physics, runs the blog klimatfokus.se
Columbia University presents the Inclusive Wealth Index. An alternative to GDP, the Inclusive Wealth Index measures all assets which human well-being is based upon, including manufactured, human and natural capital.