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The cusp of a crisis: Business needs to start considering its ecological debt

Dr Cle-Anne Gabriel /

For a business to merely survive, it needs to cocoon itself in a network of investors, capital and income. To profit and grow, it needs to critically analyse how to make that network sustainable and strong.

What happens when a company’s resources dry up, when its capital is spent and it can no longer generate profits at a level needed to sustain operations?

In the mainstream financial world, when a business begins to fail, government and industry bailouts such as loans or cash infusions may be offered as a safety net against bankruptcy. Imagine if we tried to apply that same business model to the planet’s ecological resources and natural capital?

What happens when those resources dry up, when natural capital is spent and we take more than we give back to nature?

For decades, global economies and individual businesses have capitalised on the appreciable monetary value of natural resources without considering the ecological impact.

If we compare the value of what businesses take from the environment, especially in emerging markets, to the value of what they give back, we can think of the current ecological crisis as being in a state of ecological debt.

The world’s economies, and businesses as their agents, can no longer live beyond their ecological means. It’s past time to start repaying ecological debt as there is no safety net against ecological collapse and no mechanism in place for business, industry or government to provide an effective ecological bailout.

Without nature — without its natural capital and ecosystem services — businesses cease to exist. The very survival of businesses is dependent on nature.

Ecological debt is the result of overspending our natural capital, especially in less wealthy economies, to the point where we use more ecological resources than the planet can renew in an entire year.

The international research organisation, Global Footprint Network, measures the growing divide between our demand for natural capital and the sustainable supply of ecological resources to calculate Earth Overshoot Day.

In short, this is the day we blow our annual ecological budget — and it’s getting earlier each year since calculations began in 1970. In 2019, Earth Overshoot Day is July 29.

Immediate action is needed for business to remain viable, the ecological crisis to abate and the relentless advance of Earth Overshoot Day to mitigate and retreat.

Business must substitute its desire for limitless profits and previous infinite growth strategies for ecological stocktaking and paying down ecological debt.

Fortunately, a few simple tools and tips already exist to help businesses get started from a strategic perspective.

Ecological budgeting and footprinting

To live and operate within their ecological means, businesses need to start budgeting. To develop an ecological budget, businesses must first establish their baseline. An ecological footprint measures the negative impact different business activities have on ecological resources.

For instance, a business can measure the carbon footprint of its logistics network or the water footprint of its manufacturing operations.

When a business knows its current impact, it can start budgeting and making improvements and reductions.

Practical tip

The key is to set specific limits and targets across different functions. For example, budget how much plastic is used in both product packaging and in workplace purchasing, or set CO2 emission targets for both corporate travel and staff commuting.

Life cycle analyses

Undertaking a life cycle analysis (LCA) on every product and service will pinpoint where a business is having the most negative ecological impact and provide a roadmap for where it can start making the most urgent and effective changes.

This process involves forensically examining the entire life cycle of a product: from the time raw materials are harvested, through to manufacturing and packaging, then to all aspects of the supply chain such as transport, storage and delivery, to the point of reaching the end-user, and finally, disposal.

Practical tip

After completing an LCA, businesses can adopt responsible product stewardship practices such as container deposit schemes and in-store recycling drop-off points.

Small-business approach

I acknowledge small business often lacks the means or capability to quantify footprints and conduct LCAs themselves.

Practical tip

Operate on the assumption your business has a significant and irreversible negative impact and take steps to improve and reduce natural resource throughput anyway.

The harsh truth

Customers are currently an influential force in enacting only incremental change. Their demand for environmentally sustainable products and services force businesses to take action to remain viable. Business, however, needs to take a more aggressive and proactive stance to pay down ecological debt, as all indications point to the cusp of ecological crisis.

When there are no more resources to mine or harvest, no amount of financial bailout will help business or our global market economy, and that is the harsh bottom line.

NOW READ: “We’ve saved a tonne of money”: Adore Beauty is on a mission to scrap plastic packaging

NOW READ: How Flora & Fauna offset the carbon footprint of more than 280,000 orders

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Dr Cle-Anne Gabriel

Cle-Anne is a lecturer in strategy and entrepreneurship discipline at the University of Queensland Business School.

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