The Eco-Capitalist Guidebook:

Chapter 3: Why now?

In 2005 Venture Capital investments in eco-friendly companies hit a record $1.6 billion dollars (35% higher than the previous year). This trend is fueled by two highly related factors: popularity and economics. Both of these factors are in effect fueled by the environmental externalities of classical capitalism coming full circle.

One of the largest criticisms that environmentalists have of the capitalist system is that large companies are not forced to account for their negative environmental bottom line. In effect, that is why it has been so deeply negative. One of the most dramatic manifestations of this negative environmental bottom line is the noticeable climate change that has occurred over the past 50 years. The noticeable aspect of this climate change is not the slow warming of our earth (roughly 0.5 degrees in the past 50 years) but the effect of this warming. Natural disasters have been on the dramatic upswing over the past 50 years. For example, the number of Category 4 and 5 hurricanes has almost doubled in the last 30 years. Let's not forget that the average hurricane costs over a billion dollars and usually kills hundreds of innocent people (Hurricane Katrina in 2005 cost over $81 billion and killed over 1,830 people). As more and more hurricanes and tsunamis hit our cities, we quickly start looking for their cause. This is the primary reason that climate change (global warming) has seen a dramatic growth in headlines and ,in effect, popularity. A Gallup polling showed that the number of Americans who worry about the environment has increased 15% between 2004 and 2006. Over the same period of time memberships in the Sierra Club grew by roughly the same percentage.

In parallel, the cost of being green has been steadily dropping. This can be illustrated with the fact that the cost of green energy has dropped at a dramatic rate versus the cost of traditional (non-green) energy sources. For example, the cost of a new gas plant dropped by roughly 33% over the past 10 years while the cost of wind energy has dropped 45%. The cost of wind energy is expected to drop another 40% by the end of 2006.

Just as in the 1850's with child labor movement, when an issue becomes popular and affordable to act upon, more and more solutions are introduced. Perhaps the best example is the success of the hybrid car. In 2005 hybrid car sales increased by 81% over 2004 and spurred enough competitive reaction that the major automakers are planning to introduce about a dozen new hybrids over the next three years.

Even Wal-Mart, the world's largest retailer, has started to invest in going green. Recently, by changing it's wrapping on four kinds of produce to a polymer that is derived from corn instead of oil, the company claims to have saved just under a million gallons of gasoline. However, more in the vein of modern eco-capitalism, Wal-Mart recently saved over $3.5 million in trucking costs per year by "right-sizing" the boxes on just one line of toys so as to reduce the packaging.

With green becoming mainstream and more and more economical every year, the field is ripe for modern eco-capitalism to thrive,and in the process brining our economy closer to a "natural" tipping point.

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.