An Integrated Capital Framework

1 • Integrated Wealth Creation• © 2009 by Innovation Network for Communities. • www.in4c.net • All Rights Reserved.

An Integrated Framework for Wealth Creation in

Businesses

John Cleveland

Innovation Network for communities


An Integrated Framework for Wealth Creation

Wealth creation involved the creation of assets (or “capital”) that increase one’s choices in life. The difference with “sustainable” businesses is that they define wealth in a broader, more holistic and integrated way than traditional businesses. Sustainable businesses will typically focus on four major categories of “capital formation”:

•Financial capital (economic value-added)

•Human capital (knowledge value-added)

•Social capital (community value-added)

•Natural capital (ecological value-added)

By holding themselves accountable for superior performance in each of these four areas, the companies adopt what has been referred to as a “multiple bottom line” business strategy, seeking performance outcomes beyond simple financial ones.

The key premise to this approach is that these four domains of business performance reinforce each other – that instead of requiring trade-offs (i.e. I have to sacrifice profits to achieve higher environmental performance), an integrated approach improves overall competitiveness (better environmental performance spurs innovation and creates new efficiencies that improve profits).

Defining the Four Forms of Capital:

Financial capital: Company assets that can be readily converted into some form of money (stock; cash; property; equipment; licenses; etc.). Financial capital is developed through the process of customer value creation.

Human capital: The physical, mental, emotional and spiritual capabilities of employees, as well as legally protected intellectual property. Human capital is created through the processes of learning, creativity and personal development.

Social capital: The social relationships (and the institutions they are embedded in) that constitute the “social fabric” of the community a company is located in. Social capital is developed through processes that build trust and reciprocity in relationships.

Natural capital: The natural resources and ecologies that a company depends on for its raw material inputs, as well as the environment in which it and its employees live. Natural capital is created through the natural processes of water, mineral, energy and biotic cycles.


Integrated Performance Outcomes

An integrated business model requires that there be clear performance outcomes that reflect the business approach – the “multiple bottom lines” need to be defined in ways that are measurable and that create accountability.

CAPITAL WHAT SUCCESS LOOKS LIKE

Financial Capital The enterprise creates sufficient economic value added to:•Generate competitive rates of return for its investors•Pay above-average compensation to its employees that exceeds “livable wage” standards

Human Capital The enterprise nurtures the intellectual, physical, psychological and spiritual growth of its employees in ways that:•Result in higher rates of innovation and intellectual property creation•Minimize unwanted employee turnover•Encourage entrepreneurial spin-offs•Inspire a sense of contribution to the greater good

Social Capital The enterprise contributes to the economic, social and environmental well-being of the communities that it is located in, and deliberately structures its core business processes to contribute to the growth of social equity.

Natural Capital The enterprise radically reduces consumption of minerals, biological products, energy and water in an effort to eventually become part of a “closed loop” industrial ecology. Long-term, the enterprise contributes to the “re-weaving” of the natural ecology that has already been destroyed (restoration).


Integrated Wealth Creation

Financial

NaturalSocial

Core Process: Customer value creation.

Embodied in: Money, physical assets, “good will.”

Core Process: Building trust and reciprocity.

Embodied in: Social relationships and social institutions.

Core Process: Learning and personal development.

Embodied in: Physical, mental, emotional, spiritual capabilities; and intellectual property.

Core Process: Water, mineral, energy and biotic cycles.

Embodied in: Natural system resilience and productivity; raw material inputs.

Human

Human capital is at the middle of the triangle, because it is the basis for a company’s ability to contribute to capital formation in the three other domains.

OUR FOCUS IS HERE


Financial Capital and Economic Value Added

This is the capital that most business enterprises focus on almost exclusively. It encompasses company assets that can easily be converted into monetary value, including currency instruments (stock, cash, accounts receivable, etc.) and physical property (buildings, machinery, inventory, etc.). It also includes things that are of financial and business value that are more difficult to monetize, such as “customer capital” – the structural relationships the enterprise has with its customers, including brand identity, market positioning and other elements of strategic differentiation (often referred to as “good will” in valuation terminology).

The core process of financial capital formation is customer value creation.

Business Practices

Sustainable enterprises adhere to a rigorous set of world-class business principles that maximizes financial capital formation and economic returns to investors and shareholders. These practices include:

•Strategic focus, market differentiation and customer selection

•Use of balanced scoreboards and key performance indicators

•Rapid product design and development

•Lean production systems

•Use of Continuous Improvement and Kaizen events for rapid improvement

•Quality systems (including ISO certification where appropriate)

•Workplace organization and visual control (“5S”)

•Supply chain management and lean supplier strategies

•Team-based structures and decentralized decision-making

•State of the art information and production technologies, including use of E-commerce

•Advanced financial analysis and planning tools such as target costing, Activity-Based Costing, lean accounting and Economic Value Added (EVA)


Human Capital and Knowledge Value Added

Human capital includes both the physical, mental, emotional and spiritual capabilities of employees, as well as formally protected intellectual property. Human capital is embedded both in individuals, and in sets of relationships between individuals that in aggregate constitute unique capabilities of the organization.

Value is created by people, and therefore people are truly our most important asset. The largest waste in most organizations is failing to nurture and tap the capabilities of the individuals who work in those organizations. Therefore, multiple bottom-line enterprises emphasize enterprise practices that build human capital and invest in the continuous learning and development of employees and of the organization as a whole.

The core processes of human capital formation are learning, creativity and personal development.

Business Practices

A focus on human capital development is critical to attracting the “best and the brightest” in the labor market. Typical practices include:

•Organizational learning networks within and between companies

•Continuous training and development

•An emphasis on innovation and creativity

•Aligning work with personal values and meaning

•Competitive “livable” wages with full benefits

•“Family-friendly” workplace practices

•Opportunities for employee ownership and other forms asset accumulation, such as Individual Development Accounts

•A focus on employee health and wellness

•Support for employees who want to start their own businesses

•“Preferred provider” relationships with banks, insurance companies, real estate firms, and others that can reduce the cost of living for our employees

•Autonomous teams and decentralized decision-making


Social Capital and Community Value Added

The concept of “social capital” is relatively recent, and received popular attention primarily as a result of Robert Putnam’s research on the role of social capital in economic prosperity. The term refers to the strength of the social fabric in a community.

Healthy enterprises depend on healthy communities. Therefore, multiple bottom line companies have a strong culture of community contribution.

These practices are driven by a conviction that increased integration in the lives of our communities will bring long-term returns to our enterprises, particularly in the human capital domain. The commitment to community development enlivens and deepens the sense of purpose and values in an organization, which is a key source of loyalty and innovation.

The core process of social capital is the building of trust and reciprocity between individuals and institutions in a community.

Business Practices

•School-to-career links with the local educational systems

•Engagement in community improvement activities and community service projects

•Financial investments and contributions to community development institutions

•Location of facilities to support community development

•Systems to hire low-income or disadvantaged populations

•Products targeted to underserved markets

•Support for minority and women-owned suppliers

•Support of minority ownership within Integral Assets companies

•Procurement strategies that emphasize local suppliers

•“Walk to work” and other strategies that improve the neighborhoods in which our firms are located

The focus on social capital also leads to development of non-profit enterprises that strengthen the social systems of a community, such as charter schools; philanthropic enterprises; community design institutions; etc.


Natural Capital and Ecological Value Added

Natural capital refers to the ecosystem assets that provide the raw material inputs that enterprises use in their value creation processes. The “foundation cycles” of natural capital include water cycles, energy cycles, mineral cycles and plant and animal population cycles. Generally, business enterprises aren’t engaged in natural capital formation unless they are natural resource-based (such as forestry, farming, fishing, etc.). Instead, the focus is on reducing impact on current natural capital productivity.

A focus on natural capital is premised on the understanding that human economic systems are a subset of global ecosystem metabolics, as opposed to natural resources being a subset of (or input into) human economic metabolics. Therefore, it is our responsibility to devise ways to create wealth that do not deplete these foundations of our well-being.

Water, mineral, energy, plant and animal cycles are the core processes for creating natural capital.

Business Practices

Some natural capital business practices include:

• ISO 14000 certification and other elements of an Environmental Management System (EMS)

•Emphasis on closed-loop production

•Product design for reduced impact and recyclability

•Product development focused on original equipment and components for “disruptive” sustainable technologies

•Facilities design based on “green building design” principles

•Purchasing policies that reward sustainable supplier practices and that increase the use of recycled and/or sustainably-produced materials

•Operations management to reduce wastes and pollution

•Reduced and returnable packaging

•Transportation and logistics strategies to reduce fossil fuel use

•Sales and marketing to educate consumers and promote sustainable practices

•Emphasis on business designs that sell solutions rather than products, thereby allowing both our firms and our customers to be rewarded for resource productivity

•Participation in community sustainability initiatives


At the Intersection of Two Practice Fields

“For-Profit” “For-Benefit”Social Venturing:

“Both/And” not “Either/Or”


Integrating Two Cultures

Thinkers Names for the “For Profit” Culture

Names for the “For Benefit” Culture

Robert Reich Business Culture Civic Culture

Jane Jacobs Commercial Syndrome Guardian Syndrome

Ken Wilber Agency Communion

Alan Fiske Market Pricing Communal Sharing

Values The Cultures Emphasize

•Individualism •Community

•Autonomy •Belonging

•Freedom •Obligations

•Choice •Responsibilities

•Private good •Public good

•Individual initiative •Shared purpose

•Risk-taking •Safety net

•Competition •Cooperation

•Markets •Regulated monopolies

•Wealth creation •Wealth distribution


Typical Business Practices

FINANCIAL HUMAN SOCIAL NATURAL

•Strategic planning•Balance scorecards•Rapid product development•Lean enterprise systems•Continuous improvement and Kaizen•Quality systems (ISO 9000)•Workplace organization and visual controls (5S)•Supply chain management•E-Business•Activity-Based Costing•EVA

•Organizational learning networks•Continuous learning and development•Innovation and creativity in the workplace•Livable wages with full benefits•Family-friendly workplaces•Opportunities for employee ownership and asset accumulation•Employee health and wellness•Entrepreneurial incubators•Autonomous teams and decentralized decision-making

•School to career links•Community service•Financial investments and contributions to community institutions•Facility location to support community development•Hiring of low income or disadvantaged populations•Support for minority and women-owned suppliers•Support of minority ownership•Procurement from local suppliers•Neighborhood improvement

Closed loop production•Design for Environment•Green building design for facilities•Green supply chain development•ISO 14000 certification•Reduced and returnable packaging•Reduced fuel use•Customer education about sustainable practices•Selling solutions rather than products•Participation in community sustainability initiatives

Most enterprises are strong in one or two areas of capital formation, but weak in the others. The “signature” of true multiple bottom-line companies is a commitment to competence in all four areas of capital formation.


Connecting Four Capitals to Core Business Processes

Enterprise Dimensions How It Can Influence the Four Capitals

Mission What its purpose is; what its long term vision is; how it communicates to stakeholders

Leadership What it values; who it recruits; how it develops leadership

Marketing and Product Development

Who it sells to; what it sells; how it designs products and services; where it sells

Production How it produces; how much waste it creates; technology it uses

Human Resources Who it hires; how many; how diverse; how it develops them; where they are located

Supply Chain Management What it buys; where it buys it; who it buys from; how it develops its supply base

Facilities Where it locates; how it constructs its facilities

Finance Where it borrows money; where it invests funds; how it distributes profits/surplus

Community Relations Who it gives money to; how it contributes to the community; who they lobby/influence and on what issues


A Spectrum of Practice

“For-Profit” Culture“For-Benefit” Culture

Traditional Non-Profits:

Purpose: Improve the welfare of a target population.

Products: Services designed to achieve a specific social outcome.

Processes: Oriented towards involvement and intention.

Profits: Funded through grants, transfer payments; third parties pay costs. Target is break even

Performance: Impact on quality of life.

“Dual Purpose” Enterprises:

Purpose: Create social and financial capital.

Products: Designed to generate margins and create social benefit.

Processes: Designed for both efficiency and social impact.

Profits: Revenues from multiple sources. Margins and social contributions.

Performance: Social impact and wealth creation.

Traditional For-Profits:

Purpose: Create wealth for owners.

Products: Products and services that provide value to customers.

Processes: Oriented towards cost and quality efficiency.

Profits: Customer pay for products and services. Target is maximum profit.

Performance: Profit margin; return on investment; growth.

Non-profits become more “business-like”

(Mission unchanged)

For-profits pay attention to

social outcomes (Mission

unchanged)


Developing An Integrated Strategy

Enterprise Dimensions Capital Formation Strategies

Financial Capital

Natural Capital

Social Capital

Human Capital

Mission

Leadership

Marketing and Product Development

Human Resources

Supply Chain Management

Facilities

Finance

Community Relations


Relevant Fields of Knowledge

FINANCIAL CAPITAL:

•Strategy development (Porter; Slywotzky; Gould et al)

•Lean production and total quality (Deming, Juran, Toyota Production System)

•Activity-Based Costing; EVA; Lean Accounting

HUMAN CAPITAL:

•Learning theory and developmental psychology (Kenan; Goleman; Wilber)

•Organizational learning (Nonaka; Senge)

•Intellectual capital formation (Stewart; Edvinsson)

SOCIAL CAPITAL:

•Social capital formation (Putnam)

•Corporate social responsibility (Business for Social Responsibility)

•Corporate involvement in Community Development

NATURAL CAPITAL:

•Ecological economics (Costanza, Daly)

•Holistic management (Savory)

•Industrial ecology

•Green design (McDonough)


A Focus on Natural Capital and Environmental

Performance


Environmental Performance

With the undisputed (at least in the scientific world) emergence of global warming that is altering climate patterns around the globe, and the continued rapid depletion of many natural resources stocks (especially fresh water), there are increasing pressures on the business sector to improve their environmental performance.

While the U.S. has been slow to respond to these trends compared to our developed trading partners (e.g. Canada, Japan, and Europe) the effect is already being seen in our manufacturing markets.

Consumer acceptance of “green” products is high and manufacturers are responding by implementing strategies to “green” their supply bases.

Increasingly, ISO 14000 certification is becoming a condition of doing business with many larger firms. (Ford, for instance, has announced its intention to require it for all suppliers.)

In addition, states such as California are taking the lead in imposing new environmental requirements for some sectors (such as emission levels for vehicles, which will likely spur implementation of new engine and transmission technologies for that state).


Environmental Performance

“Companies that ignore climate change will be lower on the learning curve; innovations developed in other markets may disrupt their markets and they will be forced to play a game of technological catch up. Perhaps more importantly, they will lack the management know-how and familiarity with energy and climate change issues to operate effectively in a carbon-constrained world.”

(The Conference Board)

Many emerging economies have much less strict environmental regulations than the U.S. This puts our manufacturers at a competitive disadvantage. There is evidence that some of the more polluting processes are moving overseas to take advantage of these unregulated environments.

Environmental degradation brings not only the challenge of improved performance, but also opportunities to create and market new products and services.

One such opportunity is the booming market for fresh water products and services including a global boom in construction of desalination facilities, as well as the emergence of a $35 billion global bottled water market.


Elements of a Strategic “Map”This “map” of economic development strategies to support growth through improved environmental performance has four different dimensions:

•Firm behavior. These are the different elements of a company’s environmental performance, including environmental aspects, impacts and goals for improvement.

•Level of intervention. This refers to the level at which an economic development strategy seeks to influence environmental performance. Options include at the level of the sector; supply chain; individual firm; or a specific product, process or resource input.

•Economic development purpose. This refers to the specific type of economic development strategy that is pursued. Options include business attraction; business retention and growth; and new business formation.

•Lever for change. This refers to the specific value-added input that economic development players choose to use to influence firm environmental performance. Examples include financial incentives; consulting advice; information; demand creation; providing new inputs; regulatory reform; etc.

These four levels provide a wide variety of individual strategies to be developed. For instance, one strategy could be to: “Reduce energy use in electric motors used by existing metal forming companies, through in-plant consulting and subsidies for new motor purchases.”

Firm Behavior

Level of Intervention

Levers for Change

Strategy

•Product or process

•Firm

•Supply chain

•Sector

•Environmental aspects

•Environmental impacts

•Improvement goals

•Business attraction

•Business retention and growth

•New business formation

•Invest

•Subsidize

•Regulate

•Engage

•Provide inputs

•Create demand

•Advise/consult

•Inform

•Educate


Firm BehaviorThe environmental performance of firms can be looked at from at least three different useful dimensions:

•Environmental impacts. The facet of the natural ecology that is being affected (what ISO 14000 referrs to as “environmental impacts”)

•Environmental aspects. The dimension of the company’s operations that can have an impact on the environment (what ISO 14000 refers to as “environmental aspects”)

•Improvement goals. The generic strategies that can be deployed to reduce environmental aspects and impacts.

Each of these is described more fully in the following pages. As a summary, these three dimensions are then represented in a three-D diagram.

ENVIRONMENTAL IMPACTS

This dimension of environmental performance refers to the aspect of natural capital that company activities are most likely to affect. The four main categories are linked to the four primary natural cycles that sustain us:

•Energy cycles. Energy cycles represent the pathways through which energy is captured, stored, and used. Congressman Vern Ehlers refers to three different energy “pathways” – energy “income” which is reflected in direct solar absorption, biomass storage, wind, and hydro power; energy “savings” which is our store of fossil fuels; and energy “inheritance” which is our store of nuclear and geothermal energy.

•Mineral cycles. These are the cycles of minerals from underground to above ground and back to the earth. In natural systems, this occurs through plants and the soil, which makes minerals available for use by living species. Mining and other human cycles accelerate and disrupt these cycles.

•Water cycles. Waste moves through a continuous cycle of evaporation, precipitation, percolation and infiltration. Disruptions to the natural water cycles affect its quality, quantity and timing.

•Animal and plant population cycles. Plant and animal ecologies depend on energy, mineral and water cycles. When we disturb these cycles, we affect both individual species and entire eco-systems.

At the heart of the current crisis in economic theory and practice is the fact that we are consuming the earths resources beyond its sustainable capacities of renewal, thus running down that capacity over time that is, we are consuming natural capital while calling it income. (Herman Daly, Beyond Growth, P. 61.)


Firm Environmental PerformanceThe environmental performance of firms can be looked at from at least three different useful dimensions:

Environmental impacts

The facet of the natural ecology that is being affected (what ISO 14000 refers to as “environmental impacts”)

Environmental aspects

The dimension of the company’s operations that can have an impact on the environment (what ISO 14000 refers to as “environmental aspects”)

Improvement goals

The generic strategies that can be deployed to reduce environmental aspects and impacts.


Environmental ImpactsThis dimension of environmental performance refers to the aspect of natural capital that company activities are most likely to affect. The four main categories are linked to the four primary natural cycles that sustain us.

Cycle Description

Energy Energy cycles represent the pathways through which energy is captured, stored, and used. There are three different energy “pathways” – energy “income” which is reflected in direct solar absorption, biomass storage, wind, and hydro power; energy “savings” which is our store of fossil fuels; and energy “inheritance” which is our store of nuclear and geothermal energy.

Mineral These are the cycles of minerals from underground to above ground and back to the earth. In natural systems, this occurs through plants and the soil, which makes minerals available for use by living species. Mining and other human cycles accelerate and disrupt these cycles.

Water Waste moves through a continuous cycle of evaporation, precipitation, percolation and infiltration. Disruptions to the natural water cycles affect its quality, quantity and timing.

Animal and plant populations

Plant and animal ecologies depend on energy, mineral and water cycles. When we disturb these cycles, we affect both individual species and entire eco-systems.


Market Drivers for Sustainable Commerce

External Drivers

•Consumer preferences

•OEM requirements

•Regulatory requirements

•Development of new markets

Internal Drivers

•Leadership values

•Employee values

•Waste reduction & cost saving opportunities

•Innovation opportunities


Environmental Aspects (Company Systems)The West Michigan Sustainable Business Forum has developed an excellent framework and set of tools for thinking about a company’s environmental aspects (i.e. those dimensions of its operations that can be changed to alter its environmental performance.) This framework is displayed below.

Environmental Management•Environmental policy•Continuous improvement•Pollution prevention•EMS

Product Design•Sustainability mandate•Environmental impact score•Life-cycle thinking

Facilities•Energy conservation•Water conservation•Indoor air quality•Construction materials•Landscaping •Biological diversity

Purchasing•Whole cost accounting•Supplier sustainability guidelines•Green supplier development

Operations•Process redesign•Pollution prevention•Standard operating procedures•Waste reduction tracking•Hazardous/toxic materials

Packaging•Green packaging guidelines•Supplier waste reduction•Minimum recycled content•Returnable packaging

Transportation•Energy use•Greenhouse emissions•Waste reduction

Sales and Marketing•Measure customers green demands•Promotion of sustainability•Education of customers•Use of green literature

SUSTAINABLE BUSINESS

PRACTICES


Improvement GoalsGoal Strategic Focus

Reducing the intensity of material or energy use

•This strategy focuses on simply using less of whatever is already being used to produce a product or service.

•It is important to look at this both at the level of the individual user, and at the aggregate level. So, for instance, we can have more fuel efficient cars that use less gas per mile, but experience an increase in miles driven that effectively negates any aggregate energy savings.

•This strategy encompasses activities focused on increasing the “yield” levels in manufacturing, and reducing the level of waste produced in the process.

•It also encompasses strategies designed to replace materials with services.

Increasing use of renewable material and energy sources

•Changing the sourcing mix – switching from fossil fuels to wind energy, for instance; or substituting bio-based materials for petroleum-based polymers.

Increasing the level of material reuse

•Increasing the use of recycled materials as inputs, and increasing the recyclability of both products and waste streams

Extend service and function

•Increasing the length of service of a product, so that it needs to be replaced less frequently.

Reduce health and pollution risks

•Reducing the toxicity intensity of both materials and practices.

Restoration •Restoring the ecological productivity of damaged ecosystems


Some Principles to Guide Improvement

The Natural Step Scientific Principles

“Mother Nature’s Quality Requirements”

1. Substances from the earth’s crust must not systematically increase in nature.

2. Substances produced by society must not systematically increase in nature.

3. The physical basis for productivity and diversity of nature must not be systematically deteriorated.

4. The use of resources must be efficient and just with respect to meeting human needs.

Eco-efficiency vs. sustainability.

•Improvements strategies that reduce the impact of businesses on natural systems are referred to as “eco-efficiency” strategies.

•These are to be differentiated from “sustainability” strategies, which eliminate impacts (total closed loop) or reverse impacts (restoration).

Principles of “Natural Capitalism”

•Dramatically increase the productivity of our resource use.

•Shift to biologically-inspired production models.

•Move to a solutions-based (vs. product-based) business model.

•Reinvest in natural capital.

(Source: Natural Capitalism)


PURPOSE

PROCESSPEOPLE

Eliminate 8 Deadly Wastes:

•Overproduction

•Inventory

•Waiting

•Motion

•Transportation

•Non-value added processing

•Defective parts

•Not using people’s abilities

“Lean”

Eliminate Wastes of Natural Resources

•Material

•Water

•Energy

•Pollution

“Green”

Eco-Efficiency Results:

•Reduced consumption

•Source changes

•Pollution reduction

•Ecological restoration

Business Results:

•Cost reduction

•Product innovation

•Consumer acceptance

•Reduced liability

From “Lean” to “Green”


Business Strategy Map for Environmental Sustainability

External Drivers

•Consumer preferences

•OEM requirements

•Regulatory requirements

•New markets

Internal Drivers

•Leadership values

•Employee values

•Waste reduction opportunities

•Innovation opportunities

Environmental Performance Outcomes

•Reduced intensity of material or energy use.

•Increased use of renewable materials & energy sources.

•Increased level of material reuse.

•Extended service & function.

•Reduced health & pollution risks.

•Restoration of ecosystem resilience.

Business Outcomes

•Cost reduction.

•Product innovation.

•Consumer acceptance.

•Reduced liability.

Innovation Opportunities

•Policy and management systems

•Product design

•Facilities

•Purchasing

•Operations

•Packaging

•Transportation & Logistics

•Sales and Marketing


Summary Dimensions of Firm Behavior

Product Design

Operations

Facilities

Transportation

Etc.

Energy Impact Mineral Cycle Impact

Water Cycle Impact

Plant & Animal Population

Impact

Reduce Use Intensity

Increase Renewable Resources

Reduce Health and Pollution Risk

Increase Degree of Reuse

Extend Service & Function

ENV. IMPACT

GOALS

Environm

ental A

spect (Co. S

ystem

s)

Environmental Impact

Improvement Goals


You Can Focus At Many Different Levels of the Economy

Level Focus

Community •Advance and support community sustainability initiatives.

•Develop a sustainable business cluster in a region (Michael Porter’s cluster strategy)

Sector •Examples would include manufacturing (or sub-sectors, such as automotive, metal forming, plastics, raw materials, leather processing, plating, etc.), farming, forestry, real estate development, tourism, health services, etc.

•Sector strategies are designed around the idea that companies in a sector will have common environmental issues, and that a higher scale of impact can be accomplished by working through existing sector-based infrastructure (such as trade associations, professional associations, etc.).

Supply Chain •This approach focuses on the supply chain within an industry.

•An example would be the EPA Green Supplier Network, which in Michigan is focusing its work on the automotive and furniture supply chains.

Individual Company •Many initiatives are focused on the individual company, and supporting either general improvements in their environmental performance, or improvements linked to a specific environmental impact or aspect.

Specific Environmental Aspect or Impact

•Some strategies are focused on specific environmental “value streams” – e.g. water, toxic chemicals, energy use, etc., whether at the company, supply chain or sector level.


Strategies to Support Sustainable Commerce

Strategy Description

Invest Invest, either directly or indirectly (i.e. through equity or debt funds) in the growth of existing companies or the creation of new ones that demonstrate superior environmental performance (e.g. “green gazelles”).

Subsidize Underwrite some cost of doing business (e.g. tax abatements; tax credits; equipment purchase; land and utilities; etc.) that help companies improve environmental performance.

Regulate Change regulatory incentives and penalties to encourage environmental performance.

Create New Inputs

Through R&D and other investments, create new products, materials, or intellectual property that can improve firm environmental performance (e.g. university research institutes for alternative materials).


Strategies to Support Sustainable Commerce (cont’d)

Strategy Description

Create Demand Be a customer for products or services that exhibit improved environmental performance (e.g. buy green buildings; purchase green power); aggregate demand among many customers to make the sale more feasible.

Advise and Consult

Provide consulting services to companies (such as MMTC’s “lean and green” services; or the Green Supplier Network assessments)

Inform Provide market research; tool kits; and other information materials. Create indicators of environmental performance for firms and sectors.

Educate Develop curricula (credentialed and non-credentialed) and educational programs to provide the knowledge and skills that companies need to improve environmental performance.

Network Create relationships between players that would not happen in the normal course of their business.


References

USEFUL REFERENCES

Author Title

Paul Ekins The Gaia Atlas of Green Economics

Ray Anderson Mid-Course Correction

Janine M. Benyus Biomimicry: Innovation Inspired by Nature

John Elkington Cannibals With Forks, The Triple Bottom Line of the 21st Century Business

Paul Hawken Ecology of Commerce: A Declaration of Sustainability

Paul Hawken, Amory & Hunter Lovins Natural Capitalism: Creating the Next Industrial Revolution

Brian Nattrass & Mary Altomare The Natural Step for Business

Livio DeSimone & Frank Poposff Eco-Efficiency – The Business Link to Sustainable Development

Claude Fussler Driving Eco-Innovation

Lester Brown Eco-Economy – Building An Economy for the Earth

Robert Costanze et al An Introduction to Ecological Economics

National Academy of Engineering The Greening of Industrial Eco-systems

Allan Savory Holistic Resource Management


The INC Mission is to develop and spread scalable innovations that transform the performance of community systems.

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Pete Plastrik

231-448-3169

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John Cleveland

616-240-9751

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Documents

An Integrated Capital Framework