If business as a discipline is to develop away from extractive practices we need to develop a mathematical language to help economists and policy makers model alternative approaches. Modelling – using both standard business calculations and simulation tools like those developed by Steve Keen – can help decision making at the level of the individual firm and policy level. We propose that adaptations of the Cobb-Douglas Equation can be used to help those doing macro-economic modelling of the sustainable economy. We hope this article contributes to knowledge. Continue reading “Towards a mathematical model of the economy that moves away from extractive business approaches”
Just as budgets steer every household and every corporation, so should every nation signed up to the Paris Agreement be steered by a carbon budget. This carbon budget should be treated like a monetary budget, the actions of the Swedish Government (even with the Green Party in power) up to now can only be described as fraudulent. This message comes from Climate Scientist Kevin Anderson, most recently in his presentation to the Swedish Climate Folk Parliament on the 5th May 2018 as it passed a motion to adopt such a budget. Continue reading “Swedish Climate Parliament passes motion for true carbon budget”
Most of us would like to think that people taking important decisions – ones that affect our lives deeply – would be basing their judgement on deep criteria. We hope that they are being reasonable and rational, balancing long-term and short term, what is fair and what is equitable etc. What many might suspect, however, is that decision-maker’s logic is more ruled by the economics of the situation and the budget covering just the domain of their decision. Indeed, many social experiments like the Stanford Prison Experiment show how authority and social pressure alter decision making. Of course economics are important but should they be the trump card that overrules compassion, equity, decency and plain common sense? The initiative Invest in Peace proposes a safe house for humanity. Continue reading “Envisioning a Safe House for Humanity”
As world population expands, and the demand for a better standard of living drives the world economy, it is becoming clearer to many that using up the world’s resources will actually put us at risk of ending up with a lower standard of living. It could even drive conflicts. Insecurity and lack of the capability to produce the basics are likely to fan the flames of conflict and undermine peace in the world. We urgently need a new mindset – one that focusses on bringing security of the basics to everyone whilst preserving and indeed increasing the capability of society to provide.
Part of this new mindset requires us to rethink capital. This article breaks down the importance of capital to society, and how the economy should manage capital if we are to transition to a sustainable and peaceful future. Continue reading “EXPLAINER: capital, sustainable development and peace”
What we call “technology” is actually a narrow description of a practice including mechanics, electronics and computer science. This confusion is hampering human development, especially when the expectation is on not developing financial and social technology but demanding mechanical solutions when simple agreements could suffice. Modern technology is failing, we are not addressing the challenges in front of us. Our very use of language in this case is holding us back and preventing us from thinking clearly.
Understanding the circular economy needs you to have a grounding in physics, biology, economics supply chain and several other disciplines.
To help you apply circular economy thinking in your work we have developed a series of guides, presentations, videos and workshops that gives you the essentials without having to study these disciplines.
First presented at the Caux Foundation conference on Trust and Integrity in the Global Economy (TIGE), a 40-minute overview of the absolute essentials explains:
- Two main cycles – and the absolutely essential crossover points that should always be monitored.
- Three elements of the circular economy, their cycles, their essential differences and why understanding them will help you grasp circularity.
- Four spheres, their interaction points essential to pinpoint in all supply chain and economic activity.
We often hear about how hard it is to change the course of large ships, and as an analogy our current economic system seems to be hard to turn away from its course of counter-sustainability. However, large tankers DO make it into port. I would like to offer the idea that our economy can change course too. As with large ships, we need to understand and master the controls. Very few talk about accounting and sustainability. That is a shame, as several built-in features (and some easy to build in) could offer a way to turn the economy around. It’s not rocket science and it would be a big leap forward!
Continue reading “OPINION: Accounting needs to adapt to the circular economy”
We can envisage a balance sheet from which it is possible to glean the current state of the firm’s investment in circularity. A worked example is given below. Note that by circular infrastructure we mean infrastructure that:
- runs (or can run) on renewable energy
- uses recycled materials and recycles materials
|THE TRANSITIONAL COMPANY|
|PERIOD ENDED 31/12/2016|
|CURRENT ASSETS||CURRENT LIABILITIES|
|Cash||200 000 €||Accounts payable||0 €|
|Accounts receivable||0 €||Accrued Expenses||0 €|
|Inventory||0 €||Taxes owed||0 €|
|TOTAL CURRENT ASSETS||200 000 €||Long term debt||0 €|
|TOTAL CURRENT ASSETS||0 €|
|PROPERTY AND EQUIPMENT|
|*Circular Infrastructure||100 000 €||LONG TERM DEBT|
|*Non-circular Infrastructure||50 000 €||*Loans for Circular investment||100 000 €|
|Less depreciation||-4 000 €||*Loans for other infrastructure investment||30 000 €|
|NET FIXED ASSETS||146 000 €||Other loans|
|TOTAL LIABILITIES||130 000 €|
|OTHER ASSETS||STOCKHOLDERS EQUITY|
|Licence||0 €||Paid in Capital||0 €|
|Goodwill||0 €||Retained Earnings||0 €|
|TOTAL OTHER ASSETS||0 €||TOTAL NET WORTH||0 €|
|TOTAL ASSETS||346 000 €||TOTAL LIABILITIES AND NET WORTH|
|*Percentage circular infrastructure value||67%||*Percentage investment loans for circular infrastructure||77%|
As the example above shows, the infrastructure is 67% circular. In terms of loans the 77% invested in circularity gives a degree of transparency for investors. For example, if investors think that regulations will become stricter in future, then the investment is sound.
Extended Profit and Loss Statement
An extended profit and loss statement can also be created as shown below.
From this you can derive measures like % of sales of circular products, cost of circular technology, circular vs non-circular expenses and trends over time. This again creates transparency for the capability of the firm to operate in an environmental way.
|PERIOD ENDED 31/12/2016|
|*Circular product sales||50 000 €|
|*Non-circular sales||100 000 €|
|Net sales||150 000 €|
|*Renewable energy||2 000 €|
|*Non-renewable energy||2 000 €|
|*Non-circular materials purchase||2 500 €|
|*Circular materials purchase||2 500 €|
|Other costs of good sold||100 €|
|GROSS INCOME||140 900 €|
|*Renewable energy||2 000 €|
|*Non-renewable energy||4 000 €|
|*Non-circular materials purchase||3 000 €|
|*Circular materials purchase||10 000 €|
|*Repairs and maintenance on linear infrastructure||20 000 €|
|*Repairs and maintenance on circular infrastructure||30 000 €|
|*Costs for waste elimination, non-recycled||2 000 €|
|TOTAL OPERATING EXPENSES||71 000 €|
|Other income||0 €|
|Other expenses||0 €|
|NET INCOME BEFORE TAXES||69 900 €|
|TAXES||25 000 €|
|NET INCOME||44 900 €|
|Circular products 50/150 75%
Renewable energy 2/6 50%
Circular materials 10/13 77%
Circularity lost to waste 15%
costs 30/50 60%
At a Stockholm seminar on the 18th January held by the Baltic Works Commission, scientists, government officials and NGOs came together to discuss the dying briny depths on their doorstep: the Baltic Sea. The general consensus is one of emergency where technology provides an as yet unproven ray of hope. Without bold investments, policy changes and some bold pilot studies – worst case – the whole sea could turn in to a dead and decaying algal soup. I presented a solution with economic incentives based on Environmental Fiscal Reform.
At a Stockholm seminar on the 18th January held by the Baltic Works Commission, scientists, government officials and NGOs came together to discuss the dying briny depths on their doorstep: the Baltic Sea. The general consensus is one of emergency where technology provides an as yet unproven ray of hope. This is only if the countries surrounding the Baltic are ready for bold investments, policy changes and some bold pilot studies. If nothing is done, the nutrients contained in the dead sea floor could flow into the water body and – worst case – cause the whole sea to turn in to a dead algal soup. Continue reading “The Baltic: a dying sea on the doorstep of industrial giants”
The idea seems logical: when a product or material enters the economy it should stay there – if it comes from below the ground. If it comes from nature it can return at a rate the eco-system can absorb it. The problem is, we are living in a society that has been weaving a complicated web of laws, rules and, taxes and fees since money was created. At the moment it just doesn’t pay. Ushering in the circular economy means making sure it pays by dismantling a few parts of this framework and replacing others. But where to start? Are there existing points of control that can be adapted to stimulate circularity? This article identifies a few essentials. Continue reading “A circular economy needs a framework of rules and financial incentives to work”