Business

 

 

Reviewed by Johanna Goetzel, Lead Researcher for Environmental Debt.

 

Environmental Debt: The Hidden Costs of a Changing Global Economy connects the financial and environmental crises – both causes and solutions. Author Amy Larkin shows how the costs of climate change, extreme weather and pollution combine to wreak havoc on the economy, as well as the earth, creating what she calls, “environmental debt”. Larkin proposes a new framework for 21st century commerce to empower profitable business that coexists with the environment. As she succinctly states: “No nature, no business.”

Intended for business leaders as well as those who acknowledge that ’business as usual’ cannot continue, Environmental Debt presents complex and provocative ideas in easy-to-read prose and includes numerous cultural touchstones to help ground the reader. Larkin artistically combines her expertise as an entrepreneur, producer and environmental activist, to deliver an approach for business to succeed without compromising nature.

Larkin introduces the “The Nature Means Business Framework”, comprised of three tenants: (1) Pollution can no longer be free and can no longer be subsidized; (2) The long view must guide all decision-making and accounting and (3) Government plays a vital role in catalyzing clean technology and growth while preventing environmental destruction.

Pollution can no longer be free and can no longer be subsidized.

In this first section, Larkin focuses on the example of externalities from coal production. A study developed by Greenpeace and researchers at Harvard showed that in just the United States, the full cost of coal extraction and combustion to society on top of the coal companies’ costs is $350 – 500 billion a year. These hundreds of billions of dollars, called externalities in economics, represent actual bills paid by fisheries, businesses, schools, municipal water systems, and unwitting families and their healthcare providers. Despite conventional wisdom, coal is not a cheap energy. Its price is cheap only because it is subsidized by its own victims. Larkin included two similar studies that estimate the externalities of oil in the United States at over $800 billion annually. In total the external costs of coal and oil is well over $1.1 trillion, the annual 2012 United States deficit. The section concludes that environmental debt is a serious contributor to fiscal instability. Larkin and her team at Greenpeace, where she worked as the Solutions Campaign director for six years, decided to take their names off the Harvard report so that it would have more salience in the business community.   As an environmental activist and businesswoman, Larkin and her book navigate this space expertly, drawing on personal anecdotes and peer-reviewed publications.

The long view must guide all decision-making and accounting.

This section recounts the catastrophic 2011 floods in Thailand and the historic land degradation that compounded the impact. These intense storms became catastrophic because of massive deforestation, much of which occurred in the 20th century. Without enough trees, the ground was unable to soak up the floodwater.   Local Thai factories that produced car parts were closed for months. These closures caused shortages for Toyota and Honda, and both companies were forced to suspend manufacturing in Kentucky, Singapore and the Philippines. Toyota alone suspended production of 260,000 vehicles (3.4% of its previous annual output) and tens of thousands of workers lost their jobs. Larkin explains how the logging in 20th century Thailand caused financial havoc around the world in 2011 — a good 20 years after it occurred. The people of Thailand, several governments, numerous companies and shareholders from around the world all paid the logging’s environmental debt. This section stresses the importance of long term planning with regard to business decision-making. Larkin commends Unilever, the first multinational corporation to do away with quarterly earning reports. Taking the long view requires a more holistic view of business success, focusing on the means to justify the ends.

Government plays a vital role in catalyzing clean technology and growth while preventing environmental destruction.

Calling on government to help support changes to the business world, Larkin focuses on how funding infrastructure has benefits for businesses and individuals. She provides the example of the Internet, one of the pieces of government-funded infrastructure we most take for granted today. The Department of Defense began work in the 1960s and 70s, and it was later catapulted to its full potential by the High Performance Computing Act of 1991, and is now used by everyone, thanks to government support. With regard to the role the government can play for energy transformation, Larkin suggests that it will inevitably end up spending billions of dollars to keep the lights on, as “this is government’s job.” The choice is whether to pay now for clean technology or pay later with environmental debt.   Larkin re-frames the current energy debate with this in mind.

Conclusion

Environmental Debt is Not Doom and Gloom

One of the book’s surprising revelations is that large numbers of multinational corporations are pushing for smart regulation in concert with activist non-profits and are implementing environmental changes in their own operations ahead of regulation. Environmental Debt showcases the courageous work of Coca-Cola, McDonald’s, Tiffany’s, Unilever, Walmart and others as well as the frontier of innovation in design, financial reporting, and biomimicry to name a few. The emphasis on leaders within corporations helping to transform the Consumer Goods sector (a consortium of 400 of the world’s leading consumer brands and retailers) is inspiring. Larkin’s personal experience with these senior leaders allows her to draw on numerous examples of ‘revolutionaries in suits’ changing the world of business practice.

The book resonates with readers of all ages and no mater where they are in their professional careers by localizing examples of how transformations are possible. She concludes, “Today, wherever you are, there is a sense that the ground is moving, both financially and environmentally. We need to reboot a crashing system. There is a real hunger to build a foundation so that the twenty-first century doesn’t feel so bloody scary. Look around your office, your home, your school, your government. We are all facing very difficult choices. It is time to work together.”

Johanna Goetzel worked with Amy Larkin developing the content for the book, providing editorial support and guidance. Previously Goetzel and Larkin worked together on the Greenpeace Solutions campaign, helping transforming the business sector in the US and abroad. Goetzel now works on environmental health policy, focusing on the ROI for population and planetary health. She eared her Masters in Climate and Society at Columbia University and a Bachelors of Arts from Wesleyan University. She can be reached at jgoetzel@gmail.com