Anyone who paid attention learned a lot from the global financial crisis of 2008. Here are three lessons that were burned into my brain:
1. Live within your means. Debt creates risk. When homeowners, investors or banks take on lots of debt, and something goes awry—and it will—they will pay, big time.
2. We’re interdependent. It’s not only those who take foolish risks who will pay; the rest of us will, too. The global financial system, for better or worse, is so interconnected that failure in one sector can become contagious.
3. Accounting matters. People at the banks didn’t understand what they owned, what it was worth or the risks. They got the numbers wrong.
All of this comes to mind this week because I’m attending (and speaking at) the Amsterdam Global Conference on Sustainability and Transparency of the Global Reporting Initiative (GRI). That’s a lot of words to describe an event that is, at heart, about…living within our means, understanding that we are interdependent and getting the accounting right.
Only this time the piling up of debt, failure to see connections and shaky accounting isn’t just about money. It’s about the earth. We’re living way beyond our ecological means.
What’s more, if you thought the meltdown we just went through was bad, well, just wait for the next one. Who’s going to bail out the earth if it can no longer support us in the ways to which we have become accustomed? Mars? Venus?
Let me step back and explain. The Global Reporting Initiative (GRI) is a network of businesses, NGOs, academics and government officials that for a decade or so has been dedicated to creating, improving and promoting sustainability reporting–that is, a form of full-cost accounting that measures not just dollars and cents but a company’s environmental and social impact and its governance. Developed in the late 1990s by the Boston nonprofit CERES, a coalition of institutional investors, environmental and public interest groups, GRI has grown to the point where it has its own jargon, a complex governance structure and the beginnings of a bureaucracy; this week’s event attracted 1,200 people from 77 countries.
One of the keynote speakers (by video) was HRH The Prince of Wales, who has been working on the issue of full-cost accounting for years, through his Accounting for Sustainability project. He said:
We are damaging and over-consuming the planet’s natural capital, on which we all depend for survival. We are depleting resources that were created by nature over billions of years…The grim reality is that our planet has reached a point of crisis.
Partly that’s because the environmental costs of the things we buy are not reflected in their price. This is a problem that comes up all the time, and that I’ve written about before. See, for example, The High Cost of Cheap Food, Your Forgotten Business Partner: Nature and The Anatomy of a Latte, all of which are about accounting for our environmental costs and valuing nature’s services. Here’s a three-minute video with Stephen Fry, put together by the Prince’s organization, that explains the issue in an accessible way:
One more way of illustrating our ecological debt comes from a nonprofit think tank called the Global Footprint Network. Several speakers at the GRI conference said we are currently using, on an annual basis, 130% to 140% of the earth’s biocapacity. As I understand it, that means we are using resources–energy, water, food and fiber, seafood, commodities and, most important, the atmosphere’s capacity to absorb carbon–in each year that take 1.3 or 1.4 years for the earth to replenish. Here’s a visual representation of that, on a country by country, and there’s much more, including a personal footprint calculator, at the Global Footprint Network website:
So what does this mean on a practical level? The GRI says that sustainability accounting and reporting are vital because they require companies to be more transparent about their environmental and social performance. Reporting helps spur competition among companies to be best in class. Most important–sustainability report brings to the forefront the uncomfortable truth that we are living beyond our ecological means.
As Mathis Wackernagel of the Global Footprint Network put it: “We’re liquidating our natural capital and, with it, us.”
The earth, alas, is not too big to fail.
{ 2 comments… read them below or add one }
Marc, Really excellent imagery from this entry. VERY scary. How do we strive for a point where we use LESS THAN 100% long enough to bring things back to balance. Anyone who has tried to pay off even a small loan (without interest!) knows how hard it is to climb out of debt. This gives ‘sustainability’ a personalizable benchmark. Can we think carefully about one person using half a tank of gas to drive around doing errands…picking up irresponsibly produced things (like a small plastic toy) shipped from halfway around the globe because it is cheaper? How does the cost of destroying natural food producing habitats (like….. the Gulf of Mexico, for example) figure into the cost of a European orange riding home in the back of a minivan? Thanks!
#1 makes a lot of sense to me, especially since if the bank or investors go wrong, you only have your own resources to rely on.
I imagine that you’re right. I don’t know if it’ll come in this century to be honest, but I do think that in time, the advances in technology and our standard in living will affect the environment so bad that unless we do some drastic changes, the planet’s damage willbe irreversible, and the only choice we’d have is to colonize other planets, which we don’t even know is possible.