Ashridge

Virtual Learning Resource Centre

Capitalism as if the world mattered

Book cover

by Jonathon Porritt, Earthscan Publications Ltd, 2005.

Abstract

This book is one of the most well balanced surveys of the issues facing the earth to ensure sustainable development, rather than unfettered destructive growth. It considers the limits to growth, while recognising that some forms of growth are positive. It distinguishes between the pursuit of financial wealth and happiness and wellbeing. It believes that capitalism can be beneficial, but searches for a new model which will spread the benefits more equally. It also offers alternative types of globalisation. Capital is defined as natural, human, social, manufactured and financial. A new business excellence model aims at the removal of world poverty. There is a basic optimism in the book, coupled with a challenge to ensure the creation of a sustainable future, rather than a picture of doom.

(Reviewed by Edgar Wille in September 2006)

(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.

We aim to give enough information to enable readers to decide whether a book fits their particular concerns and, if so, to buy it. There is no substitute for reading the whole book and our reviews are no replacement for this. They can give only a broad indication of the value of a book and inevitably miss much of its richness and depth of argument. Nevertheless, we aim to open a window on to some of the benefits awaiting readers of management literature.)

A new model of capitalism

Jonathon Porritt has been active in the protection of the environment and the sustainable usage of earth’s resources for over 30 years, and is currently programme director of the sustainable development charity "Forum for the Future". He undertakes advisory roles to the Government and coordinates the Prince of Wales’ Business and the Environment programme.

His book is a comprehensive guide to the issues involved in "sustainable development", but is notable for its even handedness, being free of extremism and mere prejudice. This makes what he has to say all the more effective and far from reflecting any "lunatic fringe". He believes that we have to work within the capitalist system and recognise that there are benefits as well as costs in the globalisation process, with its market based and for-profit economic systems. Nevertheless he does challenge our dependence on today’s particular model of capitalism and searches for one which does recognise the need for sustainable development.

He looks at the issues from two main perspectives: the social one, which is concerned about the inequality and extreme poverty of the majority of humankind, and the ecological one, which is concerned with the ongoing destruction of natural capital – Earth’s resources. He wants to move on from merely trying to improve situations which pose a threat to human life on earth, toward positive concepts of sustainability and wellbeing.

Back to the top

Human wellbeing and economic growth

Porritt emphasises the need to wake up to the fact that human wellbeing cannot be achieved only by the medium of constant economic growth; governments need to address the promotion of wellbeing and contentment, rather than just economic growth as such. Increased personal consumption is not the solution; we need to consider whether people might be able to live in a safer world with less consumption. Porritt is optimistic that such hard truths may be learned in time. Our lives are lived within the boundaries of two great opposites: one which says that if we go on consuming at the present rate, extinction beckons; the other that we still want to better our material standard of living, year by year.

On the one hand it cannot be denied that forests, wild life, coral reefs, fishing grounds and wetlands are all under threat. Soil erosion, water shortages, air pollution and many other factors add to the degradation of the eco-systems essential to our lives. On the other hand, it is not denied that the past 50 years have seen many improvements to human wellbeing, but the costs have to be recognised, not least of which is the fact that the poor, worldwide, bear a disproportionate share of these costs.

Life on Earth requires provision of food, shelter and energy; their production and distribution; the control of floods, disease and food and water provision; and also cultural opportunity for recreation, aesthetic and spiritual experience and education. Everyone requires freedom of choice and action – the opportunity to achieve what they value being and doing, through security, basic materials, health and good social relations.

There’s more to life than mere survival, though that is all life means to a majority of the earth’s ever-growing population. Even that survival is under threat if as a race we do not mend our ways. In pursuit of material prosperity we have allowed the laying waste of Earth's resources – forests, seas, air, topsoil – and we cover large parts of the earth with cement and tarmac and contribute to unfavourable climate change. There may be debates about how much longer we have before disaster strikes, but that the situation is dangerous, few will deny, though we usually manage to put it out of our minds, while we worship at the shrine of short termism and momentary satisfaction.

Back to the top

Sustainable wellbeing without asceticism

Yet Porritt recognises that everyone wants to better themselves and that mere asceticism is not a viable option. There is no chance of an altruistic drive to reduce our demands on resources, even with a partly self inflicted level of climate change staring us in the face. The market based system is not going to be rejected. But Porritt declares that we must get beyond the earlier environmental struggles, where we knew what the agitators were against rather than what they were for. We do need fair prices in properly regulated markets, efficient and reliable public services, access to job opportunities and fulfilling work. Porritt is not a "hair shirt ascetic", but seeks less frenetic consumerism, less conspicuous consumption, less waste, less keeping up with the Joneses and more time to do the things that currently we say we have no time to do.

He says that we will not make progress by threatening people with doom. We have to stick with the market economy, but find a way of following it which will reconcile ecological sustainability with the pursuit of prosperity and personal wellbeing. We need a different model of capitalism which will not accelerate the liquidation of natural capital and worsen the gap, worldwide, between rich and poor.

Sustainability is defined as "the capacity for continuance into the long term future". Sustainable development describes the steps we take to gain and maintain that goal. And they go beyond the merely economic, to include health, education, democracy and freedom, to ensure that none suffer from deprivation of the basic capabilities for life well lived. Growth in economic prosperity alone will not secure this. Aggregated financial figures will not give a true picture. Export led commodity production will not bring prosperity to everyone in a country. A sustainable society will not take ever increasing amounts from nature’s supply; it will avoid waste; it will not physically degrade nature; it will seek to meet the needs of all people in the world, so that the minority don’t live at the expense of a poverty stricken majority.

This boils down to living within the Earth's current capacity; using technology to enhance efficiency rather than increase throughput; harvesting no more from the Earth than can be regenerated; incurring no more waste emissions than can be assimilated by nature, using non renewable resources no more quickly than substitutes can replace them. This is positive and can exercise the minds of innovators to ensure that we need not go back to the Dark Ages.

Back to the top

The triple bottom line

Business will have to pay attention to the "triple bottom line"; not just the economic bottom line, but also the environmental and social bottom lines as well. This goes beyond the view that the only purpose of business is to increase the wealth of the shareholder. This is countered by an increasing recognition that there are other stakeholders besides shareholders. On the other hand it is only slowly being recognised that corporate social responsibility must mean more than corporate philanthropy. The fears implicit in these issues are well voiced by a quotation from Sir Geoffrey Chandler:

Capitalism, the most effective mechanism the world has so far known for providing goods and services and creating financial wealth, is under threat from itself and its lack of underlying principle, not from without.

In contrast, neo conservative political and financial circles still strongly propound the view that "progress is best served by the uncomplicated pursuit of ever higher levels of economic growth and personal consumption".

Back to the top

The limits to growth

Porritt recognises that economic growth of some kind is to be welcomed and that billions of Earth’s population would wish for a lot more of it. But he asks what kind? For whom? And within what limits? He goes back to the famous book The Limits of Growth which aroused concern over 30 years ago (Meadows, Randers and Behrens, Pan Books, 1972,), with a "30 year update" in 2005. The latter warns of limits overshoot, intensifying and leading to a stage where Earth increasingly fails to sustain the wellbeing of life.

"No subsystem can expand beyond the capacity of the total system of which it is a part". Paul Hawken is quoted: "The capacity of the Earth’s systems is regulated ultimately by sunlight and photosynthesis, not by economic theory or politics. Today’s extraction and processing of resources is overwhelming that capacity, while the waste from these processes systematically builds up in our water, air, soil, wildlife – and in ourselves" (The Ecology of Commerce, Weidenfield and Nicholson 1993). Economic growth which involves increased physical production and throughput has been for some time exceeding this capacity. This leads to entropy – the second law of thermodynamics – which implies that eventually an amount of energy reduces to the point where it is no longer capable of further conversions to perform useful work.

Back to the top

Economic growth and happiness

Porrit brings together various writers who have talked of raising the happiness stakes, described by the King of Bhutan as "gross domestic happiness". Increased economic and purely physical growth is, from this perspective, subject to limits. Growth seen from a broad value perspective, not restricted to the purely economic, is less limited, but difficult to decouple from the physical. Growth in economic welfare, which does not transgress such limits, is hard to calculate.

Development, measured by income, does not appear to make people happier, as numerous surveys have shown. Boredom, fatigue, depression, anxiety and apathy stalk our society, leading to more search for hedonistic relief and more misuse of Earth’s resources. Economists concentrate on people’s purchasing power, rather than on how happy they are.

Back to the top

A genuine free market

The end of cheap oil is seen as a force which could help us to move from the "live for today, live for yourself" lifestyles which have become so destructive, and yet are the main attractions offered by politicians. Porritt refers to the ecological abyss that necessarily awaits us "if nine billion people are ‘permitted’ to acquire trinkets, get obese, travel the world, and own several cars along the lines of the Californian model." Natural capital is being obliterated at ever faster rates. George Soros, who has profited from economic capitalism and yet used his wealth to try to benefit society, says: "The main enemy of the open society is the capitalist threat", and he means "The untrammelled intensification of laissez faire capitalism". (Open Society: Reforming Global Capitalism, Little Brown, 2000; and Soros on Globalisation, Perseus Books, 2002)

Jonathon Porritt goes on to consider the feasibility of developing a genuine free market "which is free for everyone, rather than one in which the powerful are free to squeeze economic life out of everyone else". This does mean a stronger state which can force "producers and consumers to carry their own costs, rather than dumping them on to other people or on the environment". In economic jargon we all have to internalise (pay for) our externalities, and this will mean laws and law enforcement. This goes against the grain in current thinking, but it will come to it, in the interests of mere survival, if we do not do something voluntarily. We have to move on from short term profit maximisation and share price inflation to the recognition of all the stakeholder interests. We are challenged to develop a new model of capitalism.

This would involve a putting of economic value on natural capital and bringing what we have seized from nature as though it were free, into the calculations of the market economy. This would include insisting that corporations accept the obligations to manage and conserve natural capital in exchange for the right to the benefits from selling the outcomes. This is described as "privatising natural capital and ecosystem services" to "enlist self interest and the profit motive in the cause of the environment". The difficulties involved are not ignored, not least how to define the distinction between needs and wants.

The underlying philosophy of competition is discussed. The survival of the fittest theme, adapted from nature, is set side by side with many examples in nature of mutual aid and interdependence. The lack of a moral basis in the unsustainable society is highlighted. Hermann Daly is quoted as pointing out that "on the demand side of the market, the glorification of self interest and the pursuit of ‘infinite wants’ leads to a weakening of the moral distinctions between luxury and necessity" (Beyond Growth, Beacon Press, Boston, 1996). Economic growth is enhanced by the demand for junk. Capitalism has to adapt to an approach in which the long term self interest of everyone on the planet has to replace the self interest of the few.

Back to the top

Globalisation and sustainability

The next question addressed is whether a new model of sustainable capitalism means an end to the public institutions (eg World Bank, IMF and WTO) and large multinational corporations which have spread capitalism to every corner of the world, and are accused by anti-globalists of having drastically degraded the environment and made the lives of the poor even worse. Can they be re-engineered to become a force for good?

The arguments surrounding capitalism take on added dimensions when seen in the perspective of globalisation. On the one hand technology is seen as placing in the hands of capitalism the tools of human ingenuity to find substitutes for all harmful products and trends. The efficient allocation processes of the free market will find and guide resources into beneficial paths. On the other hand there is a wide range of perspectives which agree that the power of global markets takes us beyond the physical and social limits which the earth can sustain. These viewpoints are presented with varying expressions of antagonism, some involving ill disciplined protest, but all believe (in principle if not in practice) that human survival demands cooperation, and that human happiness is not just a function of consumption.

The solutions of the protestors vary considerably, but all seem to stand for increased decentralisation of power; global and national regulation of large corporations; and community based and local enterprise as a complement to international trade. And some call for a wider definition of development to include freedom from disease; freedom from extreme poverty; freedom from exclusion from the benefits of the market. Amartya Sen expresses this approach in his groundbreaking book, Development as Freedom, Oxford University Press, 1999.

Back to the top

Alternative forms of globalisation

Of these solutions a common thread is finding a more secure and sustainable balance between trade and local production. This contrasts with Percy Barnevik’s definition of globalisation as being the freedom of groups to invest where they please, when they please, in order to produce what they want by getting supplies and selling wherever they want, supporting as few constraints as possible regarding workers’ rights and social conventions. (He was the CEO of the multinational ABB.) Little wonder then that the really poor of the earth have seen little of the supposed "trickle down" effect of the growth policies of the multinationals.

A distinction is made between corporate globalisation, which follows the principles elaborated by Barnevik, and democratic globalisation, which envisages a world that is home to a flourishing plurality of cultures, and that recognises the fundamental rights of every world citizen. Porritt wishes to be objective and agrees that globalisation has brought benefit in many countries, and that this has lifted many of their inhabitants out of poverty, but on the other hand the gap between the rich and poor is actually increasing. Globalisation as we know it today does appear to be inherently incompatible with pursuing ecological sustainability or social justice.

The so called "Washington Consensus" is compared with an alternative scenario. The former is based on structural adjustment which depends on opening capital exchanges, freeing trade, advancing export led growth, limiting government activity and expenditure, and privatising economic activity. The proposed alternative is based on the principles of building prosperity globally, by building local capital, limiting global capital flows, regenerating local economies, organising debt free international resource transfers and investing in human infrastructure. How this alternative is to be implemented is not easy to see, particularly if we go on electing governments which license multinationals to create wealth, often at the expense of people and planet.

Porritt is nevertheless heartened by signs that the dangers of globalisation and unfettered capitalism are being recognised to a larger extent than was once the case. He is critical of assuming that the enthusiasm for corporate social responsibility (CSR) is a solution. Often this is a matter of nice-to-do add-ons which do not question the core business models. He points out that corporations could do a lot more good if they would spend less effort, legal though it might be, in getting round tax legislation and making money (not wealth) out of exchange rate manipulation and rather paying up all the taxes they owe in any particular country, than contributing quasi-philanthropic handouts to it. Nevertheless he believes that even improvement at the margins and even superficial engagement with social responsibility is to be welcomed as a small step in the right direction.

He ends Part One of the book on a positive note; that the sheer weight of sustainability problems may force corporations and governments to action. He welcomes the first few faltering steps and the attention which the issues are receiving, even though not matched by enough action. He tells us that he writes his book to generate more debate on the situation, aiming to find ways of developing a socially just and ecologically balanced society. He considers that this does not mean going back to a primitive and ascetic society. A positive approach looks for new opportunities for entrepreneurs, new sources of economic prosperity and jobs, a higher quality of life for people, safer, more secure communities, a better work-life balance, so that the wellbeing stakes have to be raised in tandem with the better husbanding of Earth’s resources. He offers a vision of a more sustainable world in which everyone would get better value for money, lower energy bills, better food, less hassle in commuting, improved health, more jobs in state of the art developments, cleaner air, "more convivial communities, more time at home or reconnecting with the natural world".

Back to the top

A framework for sustainable capitalism

Capital is what lies behind capitalism. It is said to describe a stock of anything from which anyone can extract a revenue or a yield. On this basis Porritt believes that it is impossible to reform capitalism without adopting some of its insight, tools and drivers. This part of the book is based on the hypothesis that "there is no inherent, fixed or non negotiable aspect of capitalism in general (rather than today’s particular form of capitalism) that renders it for all time incompatible with the pursuit of a sustainable society".

The Forum for the Future, of which Porrit was the co-founder, has taken as its definition of capital "a stock of anything that has the capacity to generate a flow of benefits which are valued by humans". This flow, normally of goods and services of benefit to people, makes the capital stock an asset; its value is derived directly from the lifetime value of the flows to which it gives rise. Such stocks are conventionally thought of as land, machines and money. The Forum divides capital stock into five categories:

  • natural
  • human
  • social
  • manufactured
  • financial.

These are reviewed below.

Natural capital, also referred to as environmental or ecological capital, includes resources which are renewable, such as fish, timber, grain and water. Then there are non renewable resources, such as fossils and fossil fuels. Significantly, there are also sinks which absorb wastes, recycle or render them harmless. Climate and adaptation to it lie at the root of the existence and use of natural capital. Natural capital is the basis not only of all production, but also of life itself.

Human capital includes the knowledge, skill and health of human beings, together with their drives and motivation. Without all these there would be no productive work. They include people’s emotional and spiritual capacities. Human capital is enhanced by education and training, without which the economy cannot flourish.

Social capital includes the institutions, structures, networks which are based on the relationships between human beings. They enable people to develop human capital in partnership with each other and find synergy in creating together more than they could by working on their own. The collective activities of society are included here, ranging from families and communities to businesses and trade unions, voluntary organisations to legal and political systems, health and educational bodies.

Manufactured capital comprises material items needed in the production process but not embodied in the output. Examples are tools, machines, buildings and related infrastructure, without which goods and services could not be produced from natural capital.

Financial capital is what most people think of when they use the word "capital". It enables the other forms of capital to be owned and traded. It has a purely representative value to be used in exchanging the other forms of capital. Financial capital, such as shares, bonds or banknotes, represents the other four forms of capital, by assigning them a financial value. In itself it has no value.

These five forms of capital are combined by entrepreneurs as the essential elements of modern industrial production. Natural and human capital are the primary forms of wealth; from them social and manufactured capital are derived. Financial capital is in a different category and is the lubricant to facilitate the operation of the whole system.

Back to the top

The role of natural capitalism

When there was no scarcity of natural capital, because the world’s population was lower and the opportunities for using the Earth’s resources were more limited, then there was no brake on its use. Now however, we have to adapt to a scarcity of these resources relative to the population and the wide range of uses to which natural capital can be applied. We have to face up to the fact that the situation has changed in the last fifty years. To add value we have to combine what we put in with what nature provides. We know people are a cost, yet we treat natural resources as if they were a free gift.

There have been a number of attempts to put a measurable value on natural capital. The Massachusetts Institute of Technology (MIT) made one such attempt and identified 17 different provisions depending on natural capital, including pollination, water supply, waste assimilation, food production from the wild, climate control – anything rooted in natural factors that humans don’t create. They then sought to evaluate their economic value to mankind by putting a figure on what it would cost to provide substitutes to these features. It came to 33 trillion dollars per annum, give or take a few trillions. It is understandable that many are sceptical of these figures, but they do make the point that our dependence on natural capital is so great that we make a serious mistake in taking it as if it were a free gift.

Others have calculated the cost of conservation at but a fraction of such figures. An example is given of New York City investing money in getting the farmers and others in the area from which their water supply came, to manage it in a way which would maintain the quality of the water used in the city. Other examples are given of preserving natural resources by cooperation with local inhabitants in such a way that they could reap benefits, while serving the wider purpose of conservation. These examples were of humans and nature being brought into partnership, instead of treating the natural world in an instrumental, extractive, abusive and controlling way.

Back to the top

The role of human capital

Human capital is defined as the physical, intellectual, emotional and spiritual capacities of any individual. The human ability to reflect and to act upon the reflection marks out the race and bestows upon them the ability to integrate with all the other four forms of capital. Integrated thinking will have a beneficial effect upon health, for example in resisting destructive forces such as industrial waste and pollution, and maximising the benefits of lives made fruitful by a countryside preserved by conservation. Human capital includes not only logical capacity, represented by IQ but also emotional capacities, the relational, cultural, ethical and spiritual aspects of life. All these, functioning against a background of and respect for natural capital, along with a recognition of the value of social capital – that no one is an island – create wellbeing, and take us beyond merely evaluating life in terms of financial income.

You can’t divorce the conduct of business from the ultimate ends of being human. Those who have one track minds, who think in terms of only the financial element of the triple bottom line, themselves suffer from lives which are deficient in the most meaningful elements. One business leader envisaged business taking responsibility for the world in which it operates and from which it creates its wealth. She envisages herself becoming one of those business leaders who are "servant leaders"….who serve the community, planet, humanity, the future and life itself as well as shareholders and consumers. (The term "servant leaders" come from Robert Greenleaf whose book on servant leadership is on our list for a review).

The media gives great space to the diminishing of human capital by such means as alcohol and drug abuse, violence, sexual extremes and crime, but there is a capacity within human beings to work with the grain of life, if they are given half a chance.

Back to the top

The role of social capitalism

Porritt poses the question as to when a person’s stock of human capital becomes a community’s stock of social capital? He answers his own question by saying it doesn’t really matter, as long as they are mutually reinforcing and help to secure a better quality of life for the greatest number of people in any particular area. He speaks of types of social capital, in terms of good networks, trust, shared initiatives, and solidarity – "the ‘social glue’ that keeps things bound together, often in the teeth of increasingly ‘atomised’ life styles, with each individual going his or her own way regardless of the impacts upon society, community or family."

The institutions that encourage such mutuality are considered – outward looking and bridging; inward looking and bonding. These are value neutral terms, as they can be beneficent or malevolent, but obviously are considered here in the former sense.

Some measures of social capital are offered by bringing together the number of activities in community, political, religious, voluntary and charitable settings in which people engage. Informal socialising is important but less easy to measure. People who are active in one field are also often active in others. The synergy of people working together to solve common problems is high.

In April 2002 the UK Prime Minister’s Strategy Unit looked at the benefits of social capital. There was evidence that high social capital could facilitate higher levels of GDP, more efficient functioning of job markets, higher levels of educational attainment, lower levels of crime, and contribute to better health. It could also improve the effectiveness of governmental institutions and the satisfaction of living in a harmonious neighbourhood and workplace.

These ideas all suggest that "capital", as in "capitalist", could do with a more extensive definition which goes beyond purely financial terms.

Back to the top

The role of manufactured capitalism

The distinction made in the short definition above of manufactured capital is important. It is not necessarily what you manufacture, but the means used to do the manufacturing. So you need buildings in which to carry out the manufacturing, buildings and related communities for the employees to live in. You need infrastructure such as transport, schools, hospital, media and communications, energy, sewerage and water systems. Then you need technology – tools and machines, large and small, information hardware and software, biotechnology and engineering.

Of course a large proportion of these manufacturing supports are themselves manufacturing outputs – cranes, robots, assembly lines, building materials, bulldozers, trucks, steel reinforcement, drills large and small, and so on. The means for manufacturing need themselves to be manufactured – hence the word "necessarily" in the second sentence of the previous paragraph.

When we list these manufactured supports it may look as if there is no answer to the ongoing use of more resources than Earth can spare us. But an increasing number of environmentalists are emphasising the innovative development of technology so that it minimises the amount of material required, reduces waste to a minimum and improves flow and timing of the manufacturing process. (The principles of lean manufacturing and of miniaturisation come to mind). The use of technology to reduce the call upon natural resources, directly or indirectly, will at the same time reduce costs and therefore be economically beneficial to the corporate financial bottom line. Sustainable production methods ought thus to be a high priority even when seen through the lens of shareholder value.

Much greater progress needs to be made in the move away from "make, use and dispose" policies. More than 90% of all the materials extracted to manufacture ordinary consumer products end up as waste; in other words only 10% ends up in the product itself. Such issues are being addressed, but the search for solutions needs greater attention if a real difference is to be made. The tantalising fact is that it could improve profits for the manufacturers and reduce prices for the consumers.

Some of the most advanced thinking about sustainability looks forward to a revolutionary use of technology which will reduce waste, reduce the materials that go into products and produce goods which will be even more user friendly. Their philosophy is not one of doom, gloom and sinking into a deprived existence. Their watchword is "abundance" – a different picture than one often envisaged when we think of environmental concern.

Back to the top

The role of financial capital

Money has no intrinsic value and financial capital simply provides a means of exchange for the fruits of other categories of capital. Money is really a form of social capital, but it has a huge impact on whether a sustainable society can be developed. Money helps to fill the gaps in the imperfect information on the basis of which investment has to take place; it can deliver resources today in exchange for payment tomorrow; it depends on social convention which accepts it without question as a means of payment, whatever its particular physical form, from dogs’ teeth to oyster shells, to notes, to bank deposits.

The flow from the stock of financial capital runs the medium of exchange (money); transfers resources from savers to borrowers; selects and monitors projects; transfers, shares, pools and diversifies risk; and influences the economy at a macro level. It is difficult for it to work effectively if governmental systems are weak and there is no clear mechanism for enforcing contracts and acknowledging property rights, for preventing corruption and ensuring open dealings. This is one of the problems of the least developed countries (LDCs) as Hernando de Soto has shown (see the review of The Mystery of Capitalism; why capitalism triumphs in the West and fails everywhere else, 2000).

However in the developed countries problems are different. Porrit discusses the fact that return to shareholders has largely become the sole defining factor of financial success of corporations, even though there is no commitment or loyalty on the part of investors, who do not act as one would expect owners to do. Experts with no interest in the actual functions and contributions of a company are busy tracking minute changes in the value of stocks to make money out of money, instead out of real things. The magnitude of this money making function is larger by far than trade in real things.

Henry Mintzberg refers to this detachment of shareholders from the mission of the companies in whom they invest, when he says: "Shareholder value drives a wedge between those who create economic performance and those who harvest its benefits". ( Memo to CEOs in Fast Company, June 2002).

Porritt acknowledges that there has been progress in some companies in some situations in adopting the principles of corporate social responsibility (CSR). But they are still a minority and he supposes that the reason for this slow uptake is that too often the devotees of CSR have worked on the basis of moral imperatives, whereas they should be showing that there is actual value for the bottom line in adopting CSR principles.

It is not only a matter of highlighting CSR in order to gain a good reputation, or purely for altruistic reasons. Careful attention to the principles of sustainability increases efficiency and effectiveness in the world in which we live and the problems it faces of resource and growth limits. Waste reduction and finding technological substitutes for unsustainable products are sound business propositions, which shareholders should welcome.

David Korten is quoted as summarising the failure to put financial capital into perspective in an article in Yes! A journal of positive futures (1997). He describes the financial system as predatory – driven by the single imperative of making more money for those who already have lots of it. This approach in his view is rapidly depleting the real capital on which our wellbeing depends. Money which was intended to facilitate commerce has come to define the purpose of individual and social life. We have failed to recognise that "money is not wealth". (One of the strengths of Porritt’s book is its continual use of well chosen quotations, so that to read it is to have a good idea of the most significant literature from varying perspectives on sustainability issues.)

Back to the top

Political prioritisation

The third and final part of Porritt’s book is a positive attempt to think through a way towards better lives in a better world. He recognises that the world has a lot on its plate and that this has caused the Millennium Development Goals (MDGs) approved by the nations at a UN summit in 2000 to lose impact. The representatives vowed to create a partnership which would cut world poverty by half in 15 years; secure education for all, remove gender distinctions, reduce the enormous number of children dying before their fifth birthday and women dying in childbirth, reverse the spread of HIV and the loss of environmental resources and provide clean water for all in the same period.

Perspective is difficult to maintain in the light of events such as 9/11, when 3000 people died, yet, without diminishing the awfulness of that and other terrorist attacks, the New Internationalist is quoted as giving figures of other disasters that occurred on 11 September 2001. 24,000 people died of hunger, 6020 children died through diarrhoea, 2700 through measles. At the same time there were 1100 million people with no access to safe drinking water; 2400 million people without adequate sanitation, 1.1 million African children with HIV, 1.2 million children in that year made homeless and another 200,000 year killed in conflict. These figures give some sense of proportion about life on earth today.

Nevertheless environmentalists and conservationists still fail to get their message across; they fail to secure a marriage between vision, values and policy, which people will buy into. If things are really to move forward, Porritt believes that governments must be fully engaged and we are a long way off their taking a lead.

Back to the top

Measuring progress

Toward the end of the book there is an interesting chapter on the way we measure progress towards a sustainable world.

Gross domestic product is often used, but double counting is involved in regarding both sides of a problem as adding to the measure. For example, the lifestyles that lead to accidents and illness as well as the cost of putting them right are both additions to the GDP – the more of them you have, the better the figures! And certainly GDP would look different if the cost of exploiting non renewable natural capital were deducted.

Porritt believes that capitalist society needs some kind of economic growth to remain viable and to push for zero growth would probably set back the cause of sustainability. He discusses ways of subtracting the sustainability gap from the GDP; they might be analogous to the treatment of depreciation in normal accounting. An Index of Sustainable Economic Welfare is discussed; it subtracts the value of activities which are traded, but do not contribute to human welfare. The Resource Efficiency Index looks at how much economic value we can derive from ever lower levels of material throughput, eg by decoupling economic growth from greenhouse gas emission, from its impact on river quality, from the generation of solid waste, and from other harmful environmental impacts.

Others have tried to introduce feeling into the metrics; feeling good, feeling safe, feeling loved, feeling connected, having fun and satisfying work are all features which contribute to "gross domestic happiness".

Policies have also been discussed of reflecting the depletion of resources in price structures, so that the idea that the environment provides free goods is discouraged. New economic approaches to taxation are presented; these would include taxes to discourage the use of non renewable resources, on speculative currency transactions, on value which people subtract by their impact on the environment, instead of tax on value they add (like VAT, income tax and company tax). The revenue from taxing currency and similar financial speculation, which is the main activity of many company treasury departments, and often the main money earner, would pay for many of the needs of the people at the bottom of the world’s economic pyramid.

A balance sheet of a low carbon economy is proposed in which winners would include bus and bicycle manufacturers and losers car manufacturers; winners – domestic tourism, losers – overseas tourism; winners – international communications systems, losers – airlines; and so on. Again one wonders whether introducing such policies would sound the death knell of a political party, though in the UK all three main parties are singing from the green songsheet.

Back to the top

Business excellence

Sustainable development does not have to be anti-business and anti-prosperity. The market forces which support the current world trends can be made be most powerful drivers of beneficial change. It does mean bringing in the longer term needs of all stakeholders and not only the short term concerns of shareholders for maximum returns. Examples of potential business benefits of sustainable development are listed under the headings of eco-efficiency, quality management, licence to operate, market advantage, sustainable profits.

Two useful tables are offered, one which details the benefits for businesses and another on the benefits for society, each under the headings of the five different forms of capital – natural, human, social, manufactured and financial. Porritt’s view, shared by a number of others, is that sustainable development is good for business, and goes well beyond corporate social responsibility, which often consists of "superficial add-on palliatives to inherently unsustainable business models". He believes that companies often pack their company ‘good stuff’ into a self contained CSR box, while they carry out their core businesses in much the same way as before. He admits that CSR may help in raising awareness and reaching the first base camp along the road to genuine sustainability.

He acknowledges that countless good deeds are done in the name of CSR, but he believes that they will remain marginal unless serious analysis is undertaken by business leaders into the nature of the challenges facing them in an unsustainable world. A more direct link is called for whereby business and society forms real links, without which business itself and therefore shareholders will suffer. This means a deliberate attempt by business to influence the failings in society connected with the unrelenting pursuit of growth and profit. It is part of the business of business to be concerned about issues like human rights, freedom of association, child labour, discrimination, corruption and environmental protection. Such concern, clearly demonstrated in action, ought to be part of their licence to operate.

Back to the top

World poverty

Stuart Hart is much quoted in this part of Porritt’s book. Subscribers to Ashridge VLRC can read a review of his book Capitalism at the crossroads, in which they will also see that involvement with the desperately poor two third of the world’s population should be a legitimate and actually profitable part of a corporation’s agenda. A way is proposed in which innovation can be tried out in small scale incubators of the less developed world and then transferred into the developed world, with significant impact on the solving of sustainable resource problems. There is a lot of potential intellectual capital to be tapped in the "Third World", rooted in a different set of experiences from those in the West.

Hart’s book and CK Prahalad’s The Fortune at the Bottom of the Pyramid (BOP) have led to a growing interest in engaging with the bottom of the economic pyramid. (Prahalad’s book is also reviewed on the VLRC). The strategic thrust of these books is supported by the World Business Council for Sustainable Development (WBCSD) comprising a membership representing nearly 200 major companies – and this gives cause for hope. Their 2004 booklet, Doing business with the poor; a field guide provides examples of ways in which multinational companies are already trying to blend social and financial value. The whole booklet can be downloaded from the Internet, using the full title in searching.

Many companies see their Western markets becoming saturated and are seriously looking at markets that they hitherto had thought of as too poor to warrant their attention. Thus Proctor and Gamble have invented a cheap chemical powder which can have a crucial effect in making water drinkable. Many at the BOP can afford it and if a billion could, that would make a substantial profit for the company in addition to the social impact. This profit would then eventually encompass the other three billion at the BOP. BP have brought small to medium firms into their supply chain to alleviate poverty in the Caucasus region where their oil production is active. Shell is bringing inexpensive solar energy provision to some six LDCs. Other companies are bringing access to credit to small entrepreneurs in their supply chain, small scale generation of electricity independent of the grid, and the idea of partnership with small enterprises in poverty stricken rural areas, though it has a long way to go.

Hart is quoted: "Only through a concerted focus on the base of the pyramid will it be possible for large corporations to combine a humanitarian, even activist, orientation with the conventional motivations of growth and profitability". Local partnerships will be the key to success. Such work will automatically bring new light on sustainability, whereby the large companies can learn from the local experience.

Back to the top

A sustainability balanced scorecard

Means of measuring and controlling such innovative activities are discussed, such as a special application of the balanced scorecard approach and other methods of environmental accounting, to which the UK Chartered Institute of Management Accounting (CIMA) has made a valuable contribution by indicating methods of tracking the costs and benefits of avoiding environmental damage and identifying the externalities involved. This may be referenced by consulting CIMA’s publication list.

Porritt reviews the contributions of non governmental agencies to all these issues, under the heading of civil society. The role of sustainable procurement can have a major effect to which the large procurement responsibilities of government can contribute. He suggests that the emphasis on choice in political debate could do with soft pedalling. Provision of needless alternatives can run counter to sustainable consumption. Individual rational choices by individuals do not add up to the best overall outcomes. Think of the pros and cons of unfettered car ownership, setting congestion against mobility in the search for an optimal transport policy.

Local democracy is seen as a factor which could lead to more effective and acceptable decisions.

Back to the top

A vision of a sustainable future

The book ends with two visions. One is of a world where the idea of sustainable development is unsellable and we are left with unsustainable capitalism with all the destructive trends discussed in the book. The other is of a world which faces up to the fact that continued growth along current lines is unsustainable and will bring disaster when nine billion people inhabit the planet, if not before – a world which uses human ingenuity and creativity to harness technology and cooperation to achieve a way of life which is different but actually more conducive to wellbeing and happiness.

He tells us the story of the book Ecotopia which imagines a merging of three US states to form a new country. Its constitution is based on sustainable development. Everything that green people have talked about is there, from low population growth to hyper efficient transport and a lot of cycling and walking; close knit communities, balanced diets, work equitably shared, buildings made of biodegradable materials and of course no pollution. It sounds out of this world and will produce a smile from the sceptic and cynic, but we need to think whether anything else will do if any sort of worthwhile life is to survive for the human race. And in the story they did it without becoming totalitarian. Income tax, sales taxes and property taxes were replaced by a turnover tax on productive enterprises.

Porritt appeals for some faith in human ability to achieve some such dream. To see human nature as incapable of rising to such a vision is to think of our whole existence negatively. It may hit many obstacles on the way, but we don’t really have any option but to move in this direction, involving everyone in the democratic struggle to get there.

The Prince of Wales is quoted on the disastrous consequences of ignoring the hunger for transcendence which is found in human nature as well as more selfish tendencies. The latter are presented in a picture of year on year, a few more tens of millions being "conscripted into a global ’consumertariat’ – the sole task of which is to keep on shopping, then throwing away, and then shopping some more".

Jonathon Porritt, unlike many authors, finishes on a high note rather than with a whimper. His last two paragraphs are worth reproducing:

I have set out to demonstrate in this book that the bipolar challenges of, on the one hand, the biophysical limits to growth and, on the other, of the terrible damage being done to the human spirit through the pursuit of unbridled materialism, will compel a profound transformation of contemporary capitalism – and sooner rather than later if we want to avoid dramatic social and economic disruption. Hence this book has advocated the idea of capitalism as if the world matters, an evolved, intelligent and elegant form of capitalism that puts the Earth at its very centre (as our one and only world) and ensures that all people are its beneficiaries in recognition of unavoidable interdependence.

And I have argued, perhaps more controversially, that it is only sustainable development that can provide both the intellectual foundations and the operational pragmatism upon which to base such a transformation. That is why sustainable development remains for me the only serious ‘big idea’ that can bear the weight of that challenge, and why the core values that underpin sustainable development – interdependence, empathy, equity, personal responsibility and intergenerational justice – are the only foundation upon which any viable vision of a better world can possibly be constructed.

Back to the top