The Eco-Capitalist Guidebook:

Chapter 2: A new form of capitalism: eco-capitalism

What if we could achieve a triple bottom line report card where each bottom line drove the next and everybody won? The more environmentally friendly the product was, the more socially responsible it was, the more profitable it was. If that were the case the triple bottom line report card would look as follows:

The implications would be tremendous. If scalable, this new model of manufacturing could quickly out compete all of the models and become the new dominant form of capitalistic manufacturing. It would combine the benefits of the classic for profit corporations and the classic not-for-profit corporations without any of the negatives. Is this utopian view bogus? Or can this become a reality?

The simple answer is that it can! And it's already happening. Over the past few years, a number of companies have emerged that have taken advantage of this approach. And all of these companies have something in common: they have all embraced the idea of waste.

To fully understand how this is done we need to examine what waste is and how it can be leveraged.

Simply speaking, waste is a commodity that its owner no longer wants and is willing to pay to get rid of it. This is what keeps waste management companies in business. People and companies currently pay waste haulers to remove their waste, and in turn these waste haulers then pay landfills to take it. By the way, if you don't currently pay for your waste then your municipal government does.

The best way to examine the idea of waste is to look at it in detail. One approach is to look at it through the eyes of supply and demand. All commodities can be evaluated through this matrix. Since there is only finite supply of a commodity, the more demand there is for that commodity the higher the price goes, and visa versa. Where the supply and demand curves intersect is the price of that commodity.

The supply and demand of waste is unlike any other commodity out there. It is the only one where there is negative demand, thus the intersection of supply and demand occurs below the $0 price range well into the negative actually.

Not to mention that one of the primary causes of the negative environmental bottom line of for profit companies is the waste their resource procurement, production and final products create.

As our economy and population continues to grow this compounded growth rate is dramatically increasing the supply of garbage that is out there. As you can see in the graph below, as we increase supply the lower the intersection between the supply and demand there is, and the resulting price goes deeper into the negative:

The Fresh Kills landfill that serviced New York City and the Keele valley landfill that serviced the city of Toronto both closed within the past five years. Both landfills took in over 10,000 tons of garbage per day. After these closings both cities had to find new homes for their ever increasing waste volume. Toronto now ships its waste to Michigan, and New York City ships its waste to various sites in New Jersey, Pennsylvania, and Virginia.

You can just imagine the pollution that is caused by the over 500 large waste trucks per city that are required to haul this waste hundreds of miles away. But assume that we don't even care about the environmental impact. Just think of the cost. On average a truck costs roughly $1 per mile to keep on the road. If this waste is trucked on average 200 miles (which for both of these sites is an understatement) and each site requires on average 500 trucks (which is also an understatement), then each city now has to pay over a hundred thousands dollars extra per day to get rid of their waste. That's an extra $36.5 million dollars per year just on trucking. This in the end all gets translated into higher waste costs to businesses and consumers alike.

Fundamentally there is a global relationship in developed countries between the cost of waste and the population density. The average tipping fee (what waste guys call the cost of putting one ton of waste into a landfill) in the US is roughly $50, in Europe roughly double, and in Japan or South Korea it's even higher, in some cases almost ten times higher.

This monumental garbage problem is also a recent phenomenon. As William McDonough stated in his book Cradle to Cradle: Remaking the way we make things, waste is a man made creation since there is no garbage in nature. That great cycle of life could only exist for billions of years if there was no garbage produced. For example, a lettuce plant grows and is then eaten by a rabbit, the rabbit may then be eaten by a fox who, if it has no predators, will die one day for one reason or another. The body of the fox, and for that matter all of the other by-products that are created in this chain (the lettuce that wasn't eaten, the poop of the rabbit and fox, etc.) are all returned and end up as compost from which another lettuce plant will grow. The only input is energy from the sun, and energy is also the only output. All matter is constantly recycled and reused.

So if nature has created a perfect and sustainable system, which we are a part of, why are we growing our unsustainable system? Most people don't want to hurt the environment, but most people also want a more comfortable life,which means lots of things that make life easy such as microwaveable food, cars, new cloths etc. And since we are willing to pay for these comforts and are not willing to pay extra for versions that don't harm the environment, and since corporations are exclusively profit driven, we find ourselves in the midst of this garbage problem.

The good news is that in the long run, as garbage prices rise, corporations will start looking more closely at how to manage this cost and will bring on more robust recycling programs. This is all well and good, but for those who are willing to leverage the idea of waste now there are millions to be made.

This is the premise of modern eco-capitalism: leveraging the idea of waste. Since waste is a commodity, if you use it as your raw material you will enjoy negative raw material costs. In other words, people are willing to pay you for your raw materials. Imagine the profit potential of such a paradigm. You get paid on both ends: you get paid for your raw materials and paid for your finished product. Not bad eh? And best of all, you are doing a good thing in the process and increasing your environmental bottom line.

If you take this one step further and look at all of the other undesired elements in our modern society you will see just how much waste there is: from people to buildings. Soon you may just have a corporation that has multiple negative cost items on its budget.

This is the basis of modern eco-capitalism. And don't forget: it's all for the sake of profit! You don't (and in my opinion shouldn't) have to be an environmentalist.

Disclaimer: These thoughts are pure musings on the potential of eco-capitalism in manufacturing. We must make generalizations to grasp macro thoughts. In other words, welcome to the rabbit hole.