JUNE 2008

Big ideas '08

Business philosopher Paul Hawken speaks to Paddy Manning. Accompanying transcript to the article "Grass-roots manifesto " in JUNE Boss

Transcript

Paddy Manning: In Ecology of Commerce 15 years ago, you wrote that the pace of change in business was “agonisingly slow”. How would you describe the pace today?

Paul Hawken: Agonisingly quicker! Corporations are still fiddling, really, on the whole, but better companies are different. But you have to be careful not to generalise. You’re painting everybody with a broad brush and I won’t do that. It depends on which country. Very different in the Europe than it is in the US, very different in Korea, than Australia, than China. You have to be specific. In general the rate of change in business now is phenomenal and it’s speeding up very quickly, and much of what’s happening is not known, is not publicised; it’s internal. So people just don’t know how fast the rate of change is occurring, and I don’t think people can fully appreciate the literacy that business has now with respect to science and biology and climate and water and other resources that it simply didn’t have before. There’s an intelligence that is quite impressive really.

PM: How do we know when we’re doing enough though? There are no benchmarks.

PH: There’s no precedent for where we are today, therefore there’s no measure, no metrics. One way of looking at it is, what aren’t we doing? Again you have to be very careful which country… but we’re not really educating ourselves very well. There’s still a lot of ignorance. We’re doing OK with our kids, but… So the rate of change is hindered by the rate of understanding. One way to measure it is what we are doing – pell-mell increasing our demand on resources with no end to the demand in sight. (There’s an end in sight to everything else.) The fossil food system cannot endure. I think the feedback loops are very powerful in many other ways that will inhibit food production. I am not speaking only climatically but in terms of peak energy – oil really is peaking in production. Anthracite coal is peaking, and water peaked a long time ago, and soil is peaking. These feedback loops are going to play out profoundly and powerfully into the mix of economic growth in a way that I think will really shock and surprise people soon.

PM: It feels like it’s happening now, with rising food prices and the UN talking about food shortages – and the weather being a significant factor.

PH:Even before weather, though, it’s a fossil food system. The inputs have doubled in price, in some cases more, in the last 12 months. At the same time there is pressure from bioethanol, biodiesel – which took a lot of land and diverted it and raised demand for staple crops – and then on top of that Chindia wants to be more carnivorous, particularly China. So that just absorbs a lot of soy beans and grain and corn as well, and people move up higher in the food chain, and you haven’t even got to climate. Just that alone is going to be a powerful force. When you then factor in the drought in Australia, which has really affected productivity in terms of the Murray, and wheat, the rust that’s in Asia (in Kazakhstan there’s a really persistent form of rust that’s affecting the wheat) and we’re having a good year in weather in North America, we should be ok, but the point is reserves are at all-time lows.

We get what you call the red queen dilemma, from Alice in Wonderland – we keep putting more inputs into farming or industry but the outputs don’t go up. Because if you look at what’s going on in the world in terms of water, the price of coal in Australia has really essentially doubled in the last 12 months, and that means electricity is going up in price. It’s coal, electricity, oil, cars and planes fundamentally. So the boreholes are going down deeper because the water is being mined out, the price of electricity is going up so the price of water is going up, and that is irrigation for foodstuffs, and then the price for the lower-grade ores is going up because it takes more energy to get a tonne of copper, zinc or nickel from the lower-grade ores into the higher-grade ores. And then we’re moving into marginal land in terms of farming, because all the good lands have been farmed for some time so you need more fossil fuel, whether it’s in the form of natural gas or fertiliser or diesel for tractors, or crushing equipment for mines.

So what you have on a productivity level is that the inputs are going up geometrically but not the outputs. The outputs are going up arithmetically. That puts increasing demand on oil and electricity, so they go up even higher in price and that has a doubling effect – that’s a positive feedback loop – into the price of food and water and industrial products and plastics and clothing and all that sort of stuff. We may be in a situation where the economy’s tipped over from one where that’s been subsidised by fossil fuels for a good long time to one where we start to lose our ability to increase our productivity.

I think we’re there in the next five to 10 years, and I don’t think people are looking very well at the dynamics here. You’re seeing brownouts in Chile and Argentina and South Africa. There have always been brownouts in India, of course. But people can’t get coal, they can’t keep the plants going, they’re shutting down smelters in China, they’re shutting down smelters in South Africa, they’re cancelling plans to build things, and then you have food riots and you start to see these signs.

I’m not saying commodity prices couldn’t go down again – they will, they vary, prices don’t all just go up – but the trend lines are so strongly in price data.

PM: Australia is becoming scarily dependent on commodities. The economy is narrowing.

PH: Right, the ships are lined up. Australia is the lucky country, OK…

PM: We’ve got it made? We’ll be rich, just selling our commodities?

PH: Yep, if there’s a world to sell them to.

PM: What should Australia do with its wealth?

PH: It’s a split country because you’ve got the east and west – the west is just booming. What should Australia should do? All these things we need as transition fuels. We need coal and oil as transition, no question about it. But Australia should be using the wealth that is pouring into the country to accelerate the transition to a non-carbon economy. It’s not just about putting solar panels on roofs in Melbourne. Australia is an amazingly inventive country. I bet the inventors per capita there and in NZ are much higher than almost any place in the world – maybe parts of California, really – but Australia could take its wealth, which isn’t going to go away soon, and really plough it into innovation and technology so that it’s making its transition to a post-carbon economy and really leading the way, as opposed to just collecting coupons from China and India and then building big houses and getting rich. Obviously some people will. But as a whole the country is in a really great position to be a leader. And I mean the US isn’t leading – at least the government isn’t. We have a lot of really great technologies here but the government is just completely asleep. We’ve lost eight years of traction … and so did you. But I think Australia – you know it’s not right to say look, you shouldn’t have coal, it’s destroying the atmosphere – which it is – but there are ways to sequester coal emissions, there are technologies that Australia could contribute to and create and innovate at RMIT, and all these places that would really take it into the next era. That’s the question Australia has to ask itself: all this money is to what end?

PM: In Blessed Unrest you talk about the wisdom of indigenous cultures. I wanted to ask about the idea that poorer is greener. Don’t they want what we’ve got?

PH: First of all, no. And there’s no “they” there – there are 6000 different cultures around the world. When we talk about indigenous people we have to be so careful not to speak about “them” or on behalf of them.

In my book, talking about a Native American tribe, it’s not that they don’t want the opportunities we have; of course they do. But the values that underlie those cultures are very, very different. All I’m saying in Blessed is that you’re starting to see a converging of the environmental, social justice and indigenous movements. I’m not saying we should all go and sit at the feet of indigenous leaders – I’m not saying that’d be such a bad thing either.

PM: Can we have more wealth and less impact?

PH: It depends what wealth is. Is wealth having time? Is wealth having really delicious food? Is wealth having a healthy life? Is wealth being able to spend time with your children? Is wealth living in communities that are secure and safe? Is wealth not having a society that’s drinking itself and smoking itself to death and taking anti-depressants? Is wealth living where the water’s pure and you can breathe the air? Is wealth having rich fisheries and biodiversity around you? Those things you can have and be very wealthy without consuming more. In fact, we only do that by consuming less.

So it really depends how you define wealth. If wealth is accumulation of material goods, accumulation of property, accumulation of larger houses, accumulation of toys and cars and things that are big energy hogs, well of course not.

PM: How can the free market adjust?

PH: By cost and price. Number one, it’s not a free market. It’s highly manipulated by business. There’s huge perversion and distortion in the markets because of subsidies and depletion allowances. At the time I wrote Natural Capitalism eight years ago there was a $1.5-trillion transfer per year from the poor to the wealthy, and mostly they’re wealthy corporations, and that has done nothing but go up. Number two, by having a market where you pay full cost instead of just the price. So we know enough now to know the full cost of coal is not $118 or $108 a tonne – that’s not the cost, the cost is quite a bit higher than that. And I’m not talking about the price the mines are getting for coal; I’m talking about what it costs society. When you factor in costs like that then clean and renewable technologies become less expensive and more competitive.

We have manipulated markets for so long, and called them free for so long, that we have no idea what a free market is. And if free means free to harm, we have one. But if we mean by free market that there is full information and pricing, that everybody’s responsible for the cost and damage and harm that they do, then that market works because it gives people the proper signals and they get the right information and they act on that information. Markets are information, and right now there’s a lot of noise, a lot of static, a lot of bad information in pricing – even though pricing’s going up it’s still a lot of bad information. People, when they get good information, generally make very, very good decisions.

PM: What about bans (on pollution, say)? Half the time you will hear from business that they don’t care what the rules are so long as they apply equally to their competitors. Do we need tougher regulation, to get a quantum leap going?

PH: Yeah, that’s what governments are for, that’s what we do, we try to protect ourselves, we form governments to do something we can’t do in smaller units – like neighbourhood or community or a village. We form governments to undertake functions that can’t be done on a smaller scale. Those things are not always popular in the short term, or necessarily convenient. In a globalised world it becomes more difficult...

I think the price of energy goes to $200-250 a barrel pretty soon, and we’re going to have to look a lot at consumerism and where things comes from and all of a sudden local is going to become a lot more interesting economically, not just as a conceptual idea. Where food comes from, how transport works … when I first went to Australia everyone was advertising beams from Oregon; they were cheap. Now of course they’re prohibitively expensive. That era of just transporting stuff all around the world, when Australia had all the wood it needed, is just going to come to a close rather rapidly. It already is in some ways.

PM: Can I ask about Wiserbusiness?

PH: It doesn’t exist yet. When it exists let’s talk about it.

PM: The movement you describe in Blessed – what are the implications for business?

PH: I have no idea. I have been about business all my life, and I wrote about civil society. I didn’t write it with business in mind or not in mind. I wrote it because I thought it was a phenomenon that was vastly under-reported and misunderstood, and of a scope and scale that I think is not well understood. I wrote it for the same reason I write everything, which is because I learn when I write. It’s fascinating. And I’ve been watching for years and years and years so it wasn’t like I was just passing by. I just loved doing it.

PM: Business is part of it, isn’t it? I mean there are plenty of businesses that have an environmental purpose. Everyone has a sustainability report – even Exxon!

PH: You’ve got to start somewhere. Hypocrisy is one place to start. I say that quite honestly. It’s human nature to start little white lies before you actually change what you really think. So business is telling lots of white lies, and not so white. But pretty soon people ask them questions and one things leads to another, you know; it’s not very pretty. I think everybody I know who takes this seriously thinks we need a mobilisation in the world, the kind we had in World War II. Marshall Plan? Yeah. I don’t want to say there’s a war, because it’s not a war. If there’s a war it’s a war we’re committing upon ourselves. But I do think we need that kind of mobilisation where everybody knew there was a task at hand and everybody was very willing to contribute and jump in and work and make sacrifices, for the longer term. And we don’t have that sense, I understand that, but that’s what we’re going to need. It’s not like a Marshall Plan, it’s more like a Manhattan project – like a little bit of both. It’s just mobilisation of the citizenry and businesses.

At the same time I think the thing that’s really overlooked probably more than anything else is that we also need a Manhattan project on the demand side. As I’ve written before, we can reduce our demand by 90 per cent and increase the quality of our standard of living, so it’s not like going backwards – it’s going forwards. Because 98 per cent of all energy is wasted, it doesn’t do anything at all, whether it be electricity or oil or gas. So if we have an 80 to 90 per cent reduction in demand it makes it very, very doable to substitute on the supply side. But all the projections on energy are always based on the idea that everybody’s going to use energy the way they do now, as much as they do now, and that everybody wants more, and will use more. And I just think, that won’t happen, it can’t happen, it’s impossible physically – so it’s a good time to start thinking about the alternatives. And the biggest oilfield in the world is on the demand side, not in the ground. The most effective collective energy is the thing that expends energy.

PM: So “bigness” is part of the answer, isn’t it? Big solar?

PH: Yeah, but in a centralised way? No, I don’t think so. Is there a role for big business right now? A huge role, a huge role. I’m not saying big business should disappear; that’s a stupid thing to say. I would never say that. I’m just saying, the answers don’t lie in monolithic corporations. That’s not where the answer lies. There is nothing that we need from monolithic corporations. Nothing. Not one thing.

PM: How should corporations deal with, engage with, NGOs?

PH: NGOs exist. They exist because institutions that we have normally relied upon … have failed them. [It happens when] people experience something that affects their livelihood, their water, soil, children, their future, their culture, their security … and they feel assaulted or threatened or harmed and they look around for a societal response, an institutional response, and find out that it’s a business that’s doing it and the government is looking the other way; it’s corrupt, or standards that the government is applying have been set by the corporations and their lawyers, working through legislators. And the people that are left out – the village, the town, the community, the valley, the culture, the tribe – they’re the ones that got left out of the equation. So they organise. And that’s why NGOs often look a little bit amateurish, sometimes … it’s not like you go to NGO school. You can get an MBA but it’s not like you can get an MNA – you know, non-profit. (That’s changing, I think, NGOs are becoming very, very well run.) Nevertheless that’s why oftentimes you have that amateurish quality, and that’s why there’s so many of them – you know there’s 2 million of them addressing environmental and social justice issues in the world.

So, what can business and government learn from them? A lot. Because they’re leading indicators of change. The NGOs that warned about climate change in the seventies, and were widely derided and criticised and mocked right through the nineties, ended up in the US writing the five competing energy goals that are up in Congress to combat climate change. So the problem that people in business and government have is that we don’t listen to the NGOs sooner.

Business will look for the protest or the odd kind of thing that happens and then globalise that as being the whole world of NGOs As far as I can tell only 1 per cent of civil society is about resistance and protest. The other 99 per cent is about solutions and innovation. I think that corporations should listen to both. The activists are like an early warning system and the other 99 per cent are an early solutions system. I don’t think corporations benefit very much if they stay in their insulated world of the Financial Times and the Wall Street Journal … if they don’t gain a biological, scientific, environmental literacy – but also social literacy. They need to understand, they need to see the world out of their framework, the way other people see it, otherwise it makes for a difficult conversation.

I have a friend Peter Raven, who’s a biologist, and he was speaking to executives at a big corporation and he said, “You don’t let Nature and Science magazine choose your portfolio, so why would you let the Wall Street Journal choose your science?” And that’s exactly right. So the breadth of knowledge and literacy that the corporations need to employ to be effective in these discussions is much broader than it was even 10 to 20 years ago.

PM: Are there examples of successful collaboration between business and NGOs?

PH: If they’re looking for a veneer of credibility … it’s critical that NGOs engage in a way that maintains their integrity. I think Wal-Mart did a good job – I mean they’re hugely criticised here. The NGOs just gave them what they wanted to know. You know, “What should we do?” The NGOs just said “Here’s what you should do.” I don’t think the NGOs wanted the money. That’s not their function, to take money from Wal-Mart; their function is to get things right. And if somebody asks, well then you talk to them. And that’s what they did. And I think everybody came off OK on that one, because nobody felt that their credibility or integrity was compromised. That doesn’t mean they agree with Wal-Mart. It means they want to move things forward in whatever way they can.

Some within the community sector say any strategy that relies on NGOs is flawed, because they don’t have the resources. They can’t replace government.

No, they’re not supposed to replace business or government or anything. Their role is to permeate institutions with new ways of thinking and acting. Their role isn’t to take over, their role is to infect – in a good way – with new ideas, new ways of seeing the world, new ways of understanding…

PM: If you have to ask what needs doing, you don’t care? Shouldn’t it be obvious?

PH: I think if they ask it’s a good sign. It means they have some humility. It means they know what they don’t know.

PM: What is the purpose of wiser business?

PH: I just think the socially responsible businesses of the world need to share best practices and they need a forum to do that. Businesses are just like the rest of us, they’re learning organisations, or the good ones are. It’s a real need, to have a forum, and that just doesn’t exist for small to medium type businesses. Big businesses … are not going to go there. Small companies that are more willing, more avid, more purposeful, more dedicated to change – they have less resources than big companies.

PM: The UN’s Principles for Responsible Investment have an open forum online...

PH: Principles are great; it depends how you apply them. Nothing wrong with principles. Wiserbusiness is very open source. People learn best from each other.

PM: This is our Big Ideas issue, but it may be that the big idea from this interview is that there is no solution – it might be that “here is the problem we face” is in fact the crux of the article.

PH: If you talk about the problems we’re facing … people will say, well, that person is a doomer. Which is like, I don’t want to hear that. If you’re trying to work on solutions and trying to re-imagine the future, in a sense, whether you’re in business or in government or an architect or a designer … all I’m saying is, to be a great designer, whether you’re a CEO or an engineer, a naturopath or a social activist, you need to know what the problem is. The more refined the definition and understanding of the problem, the more applicable and useful – and I would say commercially successful too – will be the solution. So the purpose of a doomer is to make designers brilliant. The purpose of a designer is to make doomers wrong. That’s very important. You need both. If you don’t have the scientists and activists issue warnings – even though we all go through the process of denial (first we laugh), nevertheless it’s an incredibly important aspect of the whole system we’re involved in.

You’ve just had Phil Sutton down there from Friends of the Earth Code Red report on climate change. It makes me sound like Holly Golightly. This stuff is coming out everywhere and it’s pretty good science. It’s pretty good. You don’t want to use exclamation points, but all we’re saying is business as usual isn’t going to cut it. Because this world is unusual, so therefore it’s going to have to be business as unusual. What business has done is say, I’m being rewarded on the short term. Business is rewarded on the short term. Until the short term radically changes, and when it radically changes business is hugely punished, and so is government and so are the people. And the concern is, what happened to the long term? Some people… doesn’t matter about the science, they just don’t believe it. It’s not like negative or positive. There’s a dynamic here; there are people who are responding quickly and people [who are responding] not so quickly.

Paul Hawken spoke to Paddy Manning.