Book: The Blue Economy. Cultivating a New Business Model for a Time of Crisis. by Gunter Pauli
"Mere months after the 2008 financial meltdown, the International Labor Organization (ILO) reported the loss of 50 million jobs. Developing economies were deeply affected by massive layoffs in the formal sector and the loss of income in the informal sector. It was a social shock that unsettled the world. In essence, the world economy for the past few decades was capitalized on money that simply did not exist. Downsizing and outsourcing were some of the key driving forces of every major industrial group. "Wealth" was generated by making "assets" appear as though by magic through leveraging credit and creating financial instruments that contributed not even remotely to the value of the business. Money was multiplied over and over in special accounts without risk, initiative, or production of real assets. Innovation was limited to investments that could produce multiple short term returns. Entrepreneurs, on the other hand, verged on becoming a vanishing breed.
The form of capitalism that has dominated world societies is entirely disconnected from peoples' real needs. Some two billion people struggle to get by on less than two dollars a day, lacking access to food, water, health, and energy, the most basic requirements for survival. Over 25% of the world's youth are unemployed. Yet one billion of us are overnourished and swim in 400 million tons of electronic waste with higher metal concentrations than the ores extracted from the earth. Conservatively, the top 70% of the world's wealth is concentrated in the top 10% of the population.
The business model that requires companies to invest more in order to save the environment will be replaced with a framework that permits less investment and more revenues while building social capital.
Fortunately, times are changing. This book is about that change. As the second decade of the 21st century sets the stage for a new economy, the core question we answer is, "What is the business framework we really need?"
Up to now, the model driving our economies depended on perpetual growth, requiring ever more resources and investments. This model has inherent flaws. It leads to unjust societies, highly skewed and exploitative economies, and devastated ecosystems. The business model that defines corporate environmental responsibility in terms of size of investment, and defines corporate success as increased shareholder value and grandiose executive compensation, must be replaced. The new economy must be more effective and more collaborative. It must become truly sustainable, introducing innovations that permit less investment, generate more revenues, and build the strengths of a community and builds up social capital - not debt. This is the business framework that will drive the new Blue Economy. This is the framework that will seek out and define true sustainability for all living species on Earth.
The prevailing economic model predicates that scarcity is the major limitation. Industry searches for ever higher agricultural yields and manufactory outputs, demanding that the Earth and human labor produce more. We must re-evaluate this notion and begin to more fully utilize what the Earth and labor produce, rather than demanding more materials and more output. It is time to end the insatiable quest for ever lower costs that drives business towards economies of scale through egamergers and acquisitions financed by billion dollar loans. It is time to adopt broad-based innovative strategies that generate multiple revenues and greater cash flows while creating more jobs. It is time for a Blue Economy.
In shifting our focus to economies of scope, the framework of the Blue Economy opens possibilities for a new generation of entrepreneurs who use what is available to sustainably address the needs of the Earth and all its citizens.
The shift from the model of core businesses based on a single core competence and economies of scale to a framework of multiple businesses with aligned economies of scope may sound unrealistic to the executive trained by any leading business school. However, the current global crisis highlights the need for an framework of economic development that is based on fundamental innovation and that will generate desperately needed jobs while sustainably addressing the needs of the earth and all its citizens. This "blue" approach is not only viable, it has already begun to take root. Four years of research has identified a portfolio of 100 innovations including whole systems models that have the potential to generate as many as 100 million jobs worldwide over the next 10 years."
The Red Economy
"In the ordinary market economy entrepreneurs and industries focus on one “core business” This means that it is one niche product that absorbs all the attention. The logic of a unique core competence requires low production costs, monocultures to scale up, out-sourcing and eliminating labour to produce more of the same. All progress is measured in cash-flow and companies depend on banks in order to invest in production. The core business mentality is a high risk game and that risk is only reduced by working in a globalized economy. This is the “Red Economy”- it takes from nature, it takes from humanity and the commons. It becomes more evident by the day that the dominant economy is morally and financially broken and has no future what so ever. In the dominant system if you have social or environmental concerns your business can’t survive, your communities are eradicated and massive unemployment and poverty are guaranteed. The original idea was the optimal allocation of resources but we messed up completely. Maybe we are able to consume things at comparatively low prices but effectively most things that we can opt for in a supermarket are low in quality as well – its all junk."
The Green Economy
Over the last decade many new ideas emerged for green technologies, renewable energies and alternative production methods and materials. Unfortunately in most cases the focus has only been on a single advantage and the effects on whole systems were ignored. For example using palm oil for the production of biodegradable soaps in Europe led to the destruction of primary rainforests in Indonesia. Similarly a growing consumption of shiitake mushrooms, as a delicious and vegetarian substitute for animal protein, has increased the logging of Chinese oak trees to grow them on.
The Green Economy is a step in the right direction but is it also a practicable alternative to the dominant business model? Finally solving a problem in one place while creating problems elsewhere is no option if we aim at harmonizing our relationship with the planet.
The Green Economy also requires bigger investments from companies in order to achieve a little bit more in efficiency or a little bit less of pollution. It is also more costly for consumers to buy green and it only works for the rich. In this commercialized world we came to accept that everything which is good and healthy for you is the much more expensive. But does it really have to be that way for a sustainable economy to function? Paying more was already challenging during times of economic growth. It is a solution that has little chance in a time of economic downturn like we live in today. Green products often depend on subsidies and again this means that the Green Economy is no good candidate for the future economy."
The Blue Economy
"It all began as a project to find one hundred of the best nature-inspired technologies that could affect the economies of the world and sustainably providing for all basic human needs. The Blue Economy tackles issues that cause environmental problems in new ways by connecting environmental problems with open-source scientific solutions.
Nature can easily be decompose all materials and transform them at low temperatures and low pressure. Water is the all-round solvent and carbon materials can be reused in a never ending series of life cycles. That is just one example why instead of using much chemistry most of the technologies and methods in the Blue Economy are based on physical processes that are spread widely throughout the natural world. As indicated by all natural systems Pauli’s models cover a number very different processes and smoothly weave them together in production systems that can restore the environment, provide many jobs, enhance skills and produce high quality and cheap products. The Blue Economy creatively works with what is available and aims at catalyzing a shift from scarcity to abundance."
The Blue Economy approach
"Gunter Pauli was one of the icons of the green economy until on a trip Indonesia he found out what the production of his bio-soaps caused to the forests of Indonesia. After this traumatic experience he decided to stop his business and started working on a whole range of innovative projects. For 12 years Pauli immersed into intensive studies and research always on the quest to develop new models of production that are inspired by nature. The outcome of his reflections during that period is astonishing. It is a visionary approach for new business models that contribute to the rehabilitation of society and the environment.
Gunter calls it The Blue Economy and his main inspiration was the scientist and systems thinker Fritjof Capra - who is a founding member of The Center for Ecoliteracy. He was also inspired by the blue colour of our planet, the water and the sky. Gunter summarized his 12 years of research in a report for the Club of Rome called “The Blue Economy – 10 Years, 100 Innovations, 100 million jobs”. When Gunter closed his eyes he could easily see how 100 million new jobs were created without a problem. The problem was that nobody else could see it, so for him there was only one response and that was to make it happen. Now there are a hundred model that target on all of the millennium development goals.
Through the ZERI Foundation a worldwide alliance of scientists, inventors and creative minds work towards the common goal of indentifying technical solutions that become the open source basis of the Blue Economy. ZERI (Zero Emissions Research and Initiatives) was established with its sole objective to implement pioneering cases that could demonstrate a scientifically feasible and economically viable model of production and consumption. ZERI’s design principles are modelled after the natural world and get many insights from the relationships that exist between “the 5 kingdoms of life” (bacteria, algae, plants, animals and fungi). New solutions are showcased to young and open minded entrepreneurs to equip them with business models that are creating multiple cash flows and that accelerate our transition from a product-based economy to a system-based economy.
Inspired by Natural Processes?
"Cascading Nutrients and Energy:
The central idea of The Blue Economy is the concept of cascading nutrients and energy. A cascade is a waterfall. It requires no power because it flows with the force of gravity. It transports nutrients between the 5 biological kingdoms where all absorbed minerals feed the microorganisms, which further feed the plants which the animals eat. The “waste” of one living being becomes nourishment for another.
Nature prefers to work with the unchangeable laws of physics. And nature has good reasons to do so because it has the advantage that no external energy inputs are required. Cascading nutrients and energy lead to sustainability because they reduce or eliminate the need for energy and also eliminate waste and its cost. Not just the cost that is created by pollution but the costs that arise from the inefficient use of all resources.
These same principles are becoming new standards in the Blue Economy. And they will not be easy to beat. Well designed systems are so efficient that they can even out-compete Chinese production methods - with the only difference that people and environment are benefitting.
In nature nothing is done for one reason only: Waste is regarded a precious resource and with creative thinking it can be used to create multiple enterprises from singular ones. The Blue Economy aims at creating decentralized clusters of various industries that today are unrelated and work separately.
Production will be redesigned with respect to the flow of cascading nutrients to create multiple cash flows and millions of jobs. All kind of technical innovations in energy generation, construction, food production and processing are aiming at no less than zero pollution while trying to benefit the commons such as air, water and soil fertility as well. The Blue Economy shows us that by aligning production schemes with natural material flows many problems of social and environmental degradation can be overcome. The elimination of waste represents the ultimate solution to problems with pollution. And for governments the full use of raw materials creates new industries, more employment and income while raising productivity.
An international community of companies, innovators and scientists support the concept, and provide open source access to develop, implement and share prosperous business models that aim at regenerating ecosystems and improving quality of life. Ideally the best and most healthy products should be the cheapest and further envisioned is an economy that can provide all of our basic human needs for free. An economy of abundance.
In order to get there Zeri begins with educating the next generation of ecological entrepreneurs, scientists and citizens starting from early in their childhood. ZERI members are now laying the foundation for introducing children all around the world to nature’s genius and its capability to innovate, finding solutions and adapting to always changing and evolving environments. Members explore the deep science in the workings of nature to teach them especially through children stories and fables that make them reflect being curious."
An assessment by Roberto Verzola
"I've gone throught the website you gave below and read the article carefully (as well as its continuation).
I like Pauli's positive approach of focusing on solutions rather than problems. I agree with many of his messages about possibilities of abundance and cascades (he uses this word too) of abundance.
I tend however to be more wary of technological solutions than he is. Every new technology must be thoroughly analyzed for hidden biases and built-in ideologies which might work against the values that we promote. I haven't done these with the technologies Pauli cites and therefore have little to say yet about each of the different new technologies he enthuses over.
I also tend to look for social solutions, more than technological solutions (often "fixes" that create their own problems).
I am not saying that Pauli's approach is wrong and mine is right, only that our approaches differ somewhat. Overall, it is important to explore different approaches, so it is still useful to explore the directions he is looking into. Perhaps many (or even most) of the technologies he cites will turn out to be actually useful. But we have also had many technologies that looked initially promising but whose unintended side-effects turned out later to cause serious problems. But we do need to look at every new technology and assess it, as Pauli is doing.
I would ask an additional question though: is there something we can simply do among ourselves -- as individuals, households, communities, societies -- to solve the same problem the new technology is trying to solve? Then I'd do a detailed comparison of the technological and social approaches. A few examples: - for couples who can't bear children, do we need new reproductive technologies (like test tube babies) or can't they simply adopt an orphan? - to solve electoral fraud, do we need to resort to automated voting and counting systems, or do we simply need to punish the cheats? - I heard this example from the late Teddy Goldsmith of The Ecologist: how did people deal with too much food when there were no refrigerators yet? (Ans.: they threw a party!)
Many times, of course, the answer is not either/or, so the choice between social and technological solution is not that simple.
My main issue with Pauli's approach, however, is what seems to be a glossing over of the power of corporations. I am not sure that this is a valid concern because I have not read his other publications. He might have covered this elsewhere. Given the extent of the political, economic and cultural power of today's corporations, any effort to reform them (like Pauli's, when he talks of "new business models" that corporations may adopt) must contend with corporate counter-efforts to stick to highly profitable but ecologically- and socially-damaging models. What if corporations adopt the technologies on Pauli's list because they are quite profitable, but subsequent unintended side-effects then require that the profitable technology be withdrawn from the market? Will the corporations withdraw them?
In fact, this is the greatest challenge of our era, from my perspective. It is not the search for new technologies for solving our current problems, but the search for ways to disable corporations who use their vast powers to continue their destructive ways because it is profitable for them to do so. It is a social problem, not a technological one.
That said, I would include Pauli and Zeri among my readings." (via email, December 2009)