Happy 44th birthday, Earth Day. This year’s theme, championed by as many as a billion people worldwide, is ‘Green Cities.’ That is timely at a moment when we are becoming an urban species. But underlying the Earth Day agenda is a growing sense that tomorrow’s economies -- and tomorrow’s capitalism -- must be very different. So how about focusing Earth Day 2015 on tomorrow’s bottom line?
Anyone who was there knows that the world was a very different place when the first Earth Day launched on April 22, 1970. Business people were more likely to be the target of public outrage than engaged in the task of working out how our cities and economies could shift onto more sustainable trajectories. The chemical industry was under siege for its role in the production of weapons like napalm and Agent Orange.
Still, despite the ongoing horrors in Vietnam, hope was abroad. When we talked to the first Earth Day’s organizer, Denis Hayes, he recalled being much more optimistic in 1970 about the potential for radical change then than he is today. “In the United States,” he told us, “an aroused citizenry had recently scored huge victories over entrenched interests in civil rights and turned a President out of office over an unwise, unjust war. I thought the various battles facing environmentalism -- over pesticides, monocultures, air and water pollution, endangered species, freeways slashing through inner-city neighborhoods, and so on -- would be fairly easily won.”
But paradigms take a couple of generations to shift, partly because those infected by the old paradigm need to retire or die, as do many of those they taught or influenced. Over 50 years into a paradigm shift whose dawn was heralded by people like Rachel Carson, the fact that business CEOs and other leaders are now coming together to create new change platforms like The B Team signals that, at last, we may be breaking through into a new era.
Peter Bakker, president of the World Business Council for Sustainable Development, is among leaders who understand that we’re no longer simply talking about citizenship, responsibility and accountability. Business now must address the increasingly urgent need for system change. “It’s a big job and it will take time,” he told us. “But it’s the inevitable way. Either we throw away capitalism and start again, or we transform capitalism.”
Such people are well placed to see how everything in today’s world is now connected -- and connecting in new ways -- with profound implications for all of us, but particularly those locked into the status quo. Now, in a trend heralded by the natural capitalism movement, the spotlight is beginning to shift from scientists, activists and CEOs to accountants.
The world’s bean counters are not natural revolutionaries, but corporate accounting and reporting are evolving toward new ways of calculating the true costs of corporate operations -- and the true value corporations create. The focus is expanding from traditional physical and financial forms of capital, to new forms, among them the intellectual, institutional, human, social, cultural and natural varieties.
Coincidentally, 2014 also marks the twentieth birthday of the triple bottom line, which helped launch a wave of other accounting concepts, including the double bottom line, blended value and shared value. As we converge these different strands of accounting and valuation, tomorrow’s bottom line will evolve from a monocular perspective on value to something more complex, able to detect, value and track multi-dimensional forms of wealth creation.
Natural capital will be at the epicentre of this revolution -- as underscored by the pioneering work of former DeutscheBank managing director Pavan Sukhdev in his UN-backed inquiry into The Economics of Economics and Biodiversity (TEEB). For those wanting to know more, we also highly recommend the Natural Capital Hub. And take a look at the Glasa Awards this week, celebrating natural capital accounting.
When PUMA and its parent company Kering, working with PwC and Trucost, developed and published the first ever Environmental Profit & Loss (EP&L) account in 2011, PUMA reported that the environmental cost of its operations throughout its supply chain was €145 million for 2010. The E P&L has since been refined and improved by Kering to implement E P&L analysis’ across its Luxury and Sport & Lifestyle brands, to publish a Group E P&L in 2016.
Inevitably, pricing nature will uncover costs that companies would prefer to keep hidden. As nature’s needs become visible, businesses will be landed with stranded assets. On the other side of the coin, some argue that it is unethical to place monetary valuations on nature, which should be considered priceless. But in market economies, priceless doesn’t figure. So The B Team is committed to exploring how all of this will shape the future of the bottom line. Keep track of -- and contribute to -- our work here.
Jochen Zeitz is Co-Founder and Co-Chair of The B Team, Director of Kering and former Chairman and CEO of PUMA, where he conceived and pioneered Environmental Profit & Loss accounting. His new book, "The Breakthrough Challenge: 10 Ways to Connect Today’s Profits With Tomorrow’s Bottom Line," co-written with Volans Executive Chairman John Elkington, will be published by Jossey-Bass in September.
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