‘The Ecology of Commerce’: still relevant after 20 years?

This year, I made a resolution to read one sustainability-related book per month. January’s book is The Ecology of Commerce, first published in 1993. 

I first read The Ecology of Commerce, Paul Hawken’s treatise on a truly ecological capitalism, while I was studying for my Masters degree. I had a thousand questions: what does sustainability actually mean? What do we have to do? How can I help?

This time, I read it with a single question in mind: how has it weathered the 20 years since it was written?

I’m pleased to report that Hawken’s vision of a more sustainable economy is as eloquent and compelling as I recall. There aren’t many sustainability books that weave together a vision of ecological capitalism with the limitations of the long hours we work in the modern world, and who note our very real need for ‘human-scale’ activities.

The book begins, of all places, in the Waldorf-Astoria ballroom, where Hawken is receiving a prize for environmental stewardship. He has a sudden realisation of a sobering fact: “If every company on the planet were to adopt the best environmental practices of the ‘leading’ companies… the world would still be moving toward sure degradation and collapse.”

Since then, we’ve made real progress, even if there are still plenty of laggards who still see running a sustainable enterprise as “driving with the brakes on”. The early corporate paper- and energy-saving campaigns have (mostly) given way to sustainability plans that encompass the whole value chain. It’s great that a few leading companies (I’m not going to list them; by now we all know who they are) have understood that there are opportunities to be grasped by making deeper changes to their business models.

Markets work… but not for the environment

But have we made enough progress to make Hawken’s realisation obsolete? If all companies had their own Plan A or Sustainable Living Plan, would it halt or even reverse the degradation of ecosystems?

I think not, and I suspect Hawken would agree. Because while individual companies (and whole industries) have made strides towards a sustainable future, we haven’t yet addressed a more fundamental problem. The economy within which these companies exist still has the design flaw Hawken identified in the 1990s: “Markets are superb at setting prices, but incapable of recognizing costs.”

That’s nothing new to us working in sustainable business. We understand the need to internalise environmental costs: put a financial value on environmental services, goes the theory, and the market will value it properly. This approach has its limits – does it diminish the environment to suggest that its value is merely financial? – but it may turn out to be a vital component of our collective efforts to create a more sustainable economy.

For Hawken, though, our failure to incorporate environmental costs into price isn’t just bad for the environment: it’s also bad for the market. Markets need accurate prices in order to work effectively, and if companies seek to externalise environmental costs, the result is a simple market distortion.

That’s what makes the central argument of The Ecology of Commerce so clear and compelling – and palatable for business. Hawken is no revolutionary, at least not in the government-overthrowing sense, but a believer in the power of markets who simply wants to make them work better. To paraphrase GK Chesterson, there is nothing wrong with a free market, it is just that no-one has tried it out yet.

An unpopular solution

Hawken’s vision is “a system of commerce and production where each and every act is inherently sustainable and restorative.” In practical terms, the bedrock of this change is a programme of smart green taxes – not to raise revenue, but to “undo the distortions created by the relentless pursuit of lower prices, and to reveal true costs to purchasers”.

If the problem is market distortion, this solution seems logical. But regulation and taxation have rarely been as unpopular as they are right now.

The economic crisis has sent politicians racing down Maslow’s hierarchy of needs, looking to reassure the electorate that they will fix the economy first. Even before the recession, the political tide was against tax and regulation as the preferred method of changing behaviour. One of the first acts of the current British government was to propose a ‘bonfire of regulations’. Nowadays, we favour behavioural economics to ‘nudge’ our citizens towards beneficial behaviours.

And as the evidence for climate change has grown stronger, the debate about the most appropriate response has become increasingly politicised – and, to many politicians, toxic. Last year’s Earth Summit wasn’t so much a failure as a non-event, prioritising economic growth over environmental protection.

It’s hard to escape the feeling that we’ve given up on the tools of government as a force for creating a more environmentally sustainable economy.

Don’t give up on government

So perhaps this is where The Ecology of Commerce is most relevant today.

Perhaps we need a reminder that, as laudable as today’s big sustainability goals, green marketing strategies and studies in behavioural economics are, we mustn’t forget to change the framework in which they operate.

Perhaps it’s time to re-think our attitude to green taxes as an instrument for changing behaviour. The recent high-profile stories on taxation – the proposed Robin Hood tax in the UK, and the public scandal around the amount of tax paid by Starbucks – show that taxation is a hot topic. At the same time, the devastation caused by superstorm Sandy has brought the realities of extreme weather events home to the residents of developed countries, and their leaders are beginning to react.

Perhaps now is the time to re-read The Ecology of Commerce and get some 90s perspective on our 21st century challenges.

Image: The Action of New York City by Trey Ratcliff is licensed under CC BY 2.0