Three Forms of Capital

The sustainability revolution is based on the fundamental recognition that there are three forms of capital essential to the creation of genuine prosperity. In addition to economic capital (financial and manufactured), there are two other forms – natural and social.

Natural Capital

The economy operates within design limits inherent in the natural environment. If the economy disrupts the environment it disrupts itself, at great financial cost to society and to individual businesses.  Historically corporations have often treated natural capital like a ― free asset to be exploited on a first come, first serve basis. As a result, enormous resources have been lost that were once, in fact, provided for free by intact ecosystems. Conversely, the sustainability revolution recognizes the economy‘s dependence on the environment for fresh air, clean water, climate stability, renewable energy, and a thriving eco-system.

Businesses need to derive value from the eco-system without disrupting it. In fact, the human economy is really a subset of the natural economy rather than vice-versa.  As the sustainability revolution proceeds, true cost pricing and true cost accounting to value major contributions of the natural world are emerging.

Social Capital

A prosperous economy depends on a stable society with an effective workforce. The economy threatens its own foundations if it disrupts society by allowing an extreme gap to emerge between the very wealthy few and the rest of the population or by inadequately supporting society‘s ability to ensure public safety, an effective educational system, a well trained workforce, and quality affordable health care. At the same time, a prosperous economy contributes to a stable society by creating the jobs, the opportunity for productive work, and the income that people need to live satisfying lives. The sustainability revolution recognizes the profound contribution of social capital to a prosperous economy and builds social capital by paying its fair share of taxes and making investments in a healthy society in many other ways.

Economic Capital

Economic Capital is most widely understood by economists and policy makers. It includes the finance, manufacturing, production, and physical infrastructure (energy, water, transportation, and information). Sustained economic prosperity requires that both the private sector and the public sector operate according to sound financial principles. Private and public players need to live within their means and continuously reinvest in their Economic Capital. The real estate meltdown and the resulting great recession is an example where economic policies led to a destruction of Economic Capital.

Sustainable Economic Development

The field of Sustainable Economic Development posits that the best economic development strategy is a strategy that simultaneously builds natural, social, and economic capital.  Given that the natural world and the society establish the essential foundations for the economy, any economic development strategy that destroys its social and natural foundations will, eventually, destroy itself.  Conversely, any economic development strategy that builds economic capital in ways that are in harmony with and strengthen its social and natural foundations will, eventually, attain dramatic strategic advantage.

The Four Greens