Business and The Environment

Business & Environment, two systems that for almost a century have been so repulsive to each other that discussing them together is no doubt a grand task. Businesses in the process of making profits humiliating the environment and the environment now in its imbalanced self pressing the need to make fundamental changes in which we do our business. Business was created for social well being but now has only been reduced to a profit making organization. The fundamental flaw with businesses is to break all limits and grow no matter even the limit is ecological.

A beautiful example outlining the differences between the two, is cited by Paul Hawken in his universally acclaimed book The Ecology of Commerce. He talks about the definition of 'resource' in the two different perspectives. The economics of business defines it as something that does not exist as long as its not mined, extracted, and made available for consumption. The ecology/environment side of it is a total reverse.

So how can the two co-exist if the fundamentals are so different? Will we ever be able to change the way we carry out business to protect our environment?

A lot of companies, today have conjugated 'sustainability' as part of their business needs. Investments made, profits sacrificed to have less impact on the environment. But is this the solution?? In a market based economy, can a business thrive by not making huge profits? It defies the whole idea of conducting business. This method of capital investment based - environmental protection contradicts and endangers the sole existence of a business.

But why is it costly for a business to make environmental friendly moves? If only we could reverse that!!

The answer is simple and lies in the very heart of how business is conducted, where the cost incurred to conduct one is only monetary, not considering the environmental impacts as included costs. This would not affect the fundamental thinking behind a business and would also be a motivation to care for the environment, which in turn would make huge profits and would make a business market competitive. No doubt something to think about!

The ideas presented in this post are a lot inspired by Paul Hawken's book The Ecology of Commerce - a must read for all.

Building Renewables!

Is the future of renewables also dependent on fossil fuels of today? Are depleting and more expensive fossil fuels also taking away the last hope we have?

Oil, Coal and Natural gas, the fossil fuels that drive our economy, have seen rising price trends (Figures provided: U.S. specific trends: Source: http://rn-economicanalysis.com/) in the past decades, which does not come as a surprise. To the extent, that the price of oil has multiplied 4 times since 2000, natural gas 3 times and coal approximately doubled its monetary (nominal) value since January 2000. Again, all these prices also reflects global trends, except for may be natural gas where the U.S. market for natural gas is highly domesticated.

The economic growth (as defined by economists) is dependent on a trend of infinite production and consumption, expansion, more extraction. Not realizing that all this takes place in a context of a limited planet, finite resources. The economic progress is only defined by high GDP' s with no ecological perspective and also no measure of social well being (that's where sustainability comes in). Fossil fuels that took millions of years to form and accumulate have been used to mark human progress over the past century. To the extent that we are so dependent on these depleting fossil fuels that we might find it very difficult to sustain it.

Yes, this is where we talk of the renewable energy options in the form of wind, solar, biomass, geothermal. Each of these technologies has its own problems of intermittent supply, storage etc. and so the future plan may be to develop an energy mix that will not be completely dependent on only one of these technologies. But, looking at the price trends for fossil fuels (85% of energy we consume today) are we in a position to build a renewable energy supported economy??

Its only an irony, that even building such a clean energy economy (over a period of decades) requires massive amounts of fast depleting fossil fuels. Also, a higher price over fossil fuels makes building a new technology on a vast commercial scale more expensive and hence less viable economically. The best time to start building such a technology will be right now, before we consume the resource for its own existence.

End of Easy Energy

The 'End of Easy Energy' has been much talked about in the past few years. Geologists call it the 'peak oil', economists measure it with 'rising oil prices', academia finds it in textbooks and news columns, but is each one of us aware of one of the most important events in the history of mankind and the impact its going to have on our lives?

Lets make it very simple. Three steps and you will know what the talk is all about.

One, we do know that all growth is dependent on use of energy be it taking a ride down the road or building the whole civilization. 40% of that energy comes from oil. (relatively cheap at the moment). More than 90% of that oil goes into fueling the transportation sector. Another industry that oil affects considerably, is the agricultural sector. The food products that we use would downsize by a third if the oil was not used to run the heavy agricultural machinery for production. (more on the impact of oil on agriculture later).

Two, is the economics of oil pricing, that people tend to follow to measure peak oil. So, what keeps the prices of oil still low? Lets get rid of this deception which has been confusing all.
The current price of oil, which is determined by simple economics of demand (consumer controlled) and supply (supplier controlled), can be explained by the declining economies of the world - less consumption (and thus less demand) - less depletion of oil resources. Thus, today the only oil in competition to determine oil price is the cheap oil. The problem lies ahead with reviving economies and growing demand, with rising marginal prices when the relatively expensive (hard to extract) oil comes into the picture.

Three, is the over dependence on oil that explains all our growth that we have had in the past century. Agriculture, transportation, buildings - every other form of human defined growth that we can think of is some way or the other driven by cheap oil. This prosperity will decline with the decline of oil.

Our cheap and luxurious lifestyle is on the verge of collapse. The more we ignore it, the more difficult the survival is going to be.
I invite my readers to please comment.