Natural Capitalism: Creating The Next Industrial Revolution

Natural Capitalism: Creating the Next Industrial Revolution is a 1999 book co-authored by Paul Hawken, Amory Lovins and Hunter Lovins. It has been translated into a dozen languages and was the subject of a Harvard Business Review summary.

In Natural Capitalism the authors describe the global economy as being dependent on natural resources and ecosystem services that nature provides. Natural Capitalism is a critique of traditional "Industrial Capitalism", saying that the traditional system of capitalism "does not fully conform to its own accounting principles. It liquidates its capital and calls it income. It neglects to assign any value to the largest stocks of capital it employs- the natural resources and living systems, as well as the social and cultural systems that are the basis of human capital."

Natural capitalism recognizes the critical interdependency between the production and use of human-made capital and the maintenance and supply of natural capital. The authors argue that only through recognizing this essential relationship with the Earth's valuable resources can businesses, and the people they support, continue to exist.

Their fundamental questions are: What would an economy look like if it fully valued all forms of capital? What if an economy were organized not around the abstractions of neoclassical economics and accountancy but around the biological realities of nature? What if Generally Accepted Accounting Principles recognized natural and human capital not as a free amenity in inexhaustible supply but as a finite and integrally valuable factor of production? What if in the absence of a rigorous way to practice such accounting, companies started to act as if such principles were in force.

The Authors of Natural Capitalism say that these choices are possible and "such an economy would offer a stunning new set of opportunities for all of society, amounting to no less than the next industrial revolution. The book has many practical suggestions for companies interested in a sustainable future.

According to the authors, the "next industrial revolution" depends on the espousal of four central strategies: "the conservation of resources through more effective manufacturing processes, the reuse of materials as found in natural systems, a change in values from quantity to quality, and investing in natural capital, or restoring and sustaining natural resources".

While traditional industrial capitalism primarily recognizes the value of money and goods as capital, Natural Capitalism extends recognition to natural capital and human capital. Problems such as pollution and social injustice may then be seen as failures to properly account for capital, rather than as inherent failures of capitalism itself.

The fundamental assumptions of Natural Capitalism are as follows:

1. The limiting factor to future economic development is the availability and functionality of natural capital, in particular, life-supporting services that have no substitutes and currently have no market value.
2. Misconceived or badly designed business systems, population growth, and wasteful patterns of consumption are the primary causes of the loss of natural capital, and all three must be addressed to achieve a sustainable economy.
3. Future economic progress can best take place in democratic, market-based systems of production and distribution in which all forms of capital are fully valued, including human, manufactured, financial, and natural capital.
4. One of the keys to the most beneficial employment of people, money, and the environment is radical increases in resource productivity.
5. Human welfare is best served by improving the quality and flow of desired services delivered, rather than by merely increasing the total dollar flow.
6. Economic and environmental sustainability depends on redressing global inequities of income and material well-being.