Restorative Economy

Land-of-Sky Regional Council is exploring a new "lens" through which to view rural economic development in its regional strategic plan, Regional Vision 2010. This element of RV 2010 is called the Restorative Economy Project. RV 2010 is funded by EDA as a model CEDS (Comprehensive Economic Development Strategy) for its Economic Development Districts. AdvantageWest is a co-funder. The North Carolina Rural Economic Development Center is funding the Restorative Economy Project. 

Contents

• Background and 1st. six months' summary
• Natural Capitalism in the Land-of-Sky Region
• Modeling a new "Lens" for Regional Economic Development
• Principles of Natural Capitalism
• Potential Benefits of Natural Capitalism
• Natural Capitalism and Regional Vision 2010
• Green Infrastructure presentation 

Background and 1st. six months' summary

Rural Center Research & Demonstration Grant Proposal

In December 2000, the Council applied to the North Carolina Rural Economic Development Center (Rural Center) for a Research & Demonstration grant to add the Restorative Economy Project to its CEDS regional strategic planning effort. The Rural Center grant proposal describes the need for the project, and proposes to use the relatively new concept of Natural Capitalism as the basis for the project. Further information on Natural Capitalism can be found at www.natcap.org.
Land Use and Sense of Place

As the CEDS/Regional Vision 2010 project began to identify its vision and mission in the spring of 2001, the Steering Committee and its External Scan Work Group identified Sense of Place as a key concern. Maintaining our connection to the land that sustains us, as well as the rich history and culture of our region, locally-owned businesses and vibrant, high-quality public spaces and our enticing natural environment is challenged by increasing economic and population growth. These forces and the consequent sprawling patterns of development are leading to rapid consumption of developable land, increased vehicular traffic, and air quality problems as well as rapid loss of agricultural lands.
Green Infrastructure

It became apparent to staff and the Steering Committee that the restorative economy "lens" had to apply to land use, growth management, transportation and other land-related issues. Whereas Natural Capitalism provides a good conceptual model for the overall Restorative Economy Project, Green Infrastructure provides a structured approach to the land use element. For a comprehensive look at Green Infrastructure, see www.greeninfrastructure.net . Together, Natural Capitalism and Green Infrastructure help to define the new paradigm or worldview that is the "lens" of the Restorative Economy project.

-top of page-

Natural Capitalism in the Land-of-Sky Region

Land-of-Sky Regional Council is exploring a new business model called Natural Capitalism in its regional strategic plan, Regional Vision 2010. RV 2010 is being funded by EDA as a model CEDS (Comprehensive Economic Development Strategy) for its Economic Development Districts. Co-funders include the North Carolina Rural Center and AdvantageWest.

CEO Ray Anderson's vision for the Interface Corporation -- a worldwide manufacturer of commercial floor coverings -- exemplifies a new business model called "natural capitalism," which involves the following principles:

1.  Radically improved resource productivity (getting more product out of less energy & raw materials, for example);

2.  Biomimicry (copying nature's designs, in which there are no "waste" products to dispose of, and in which no toxics are produced that cannot be recycled by ecosystems);

3.   Providing services (such as comfort) rather than selling products (such as air conditioners);

4.  Investing in natural and human capital** (thus preserving and restoring the basis of the entire economy and of all life). This is the origin of the term, "restorative economy." An example is making prices of goods reflect the true cost of their manufacture, use and recycling, thus rewarding efficiency, durability, and less-polluting alternatives)

** Natural capital is defined as high-quality natural resources; ecosystem services; and scenic beauty.

Natural Capitalism is described in a 1999 book of that title by Paul Hawken and Amory and Hunter Lovins. According to the authors, benefits of applying natural capitalism to business and commerce include:

It is profitable. Improving efficiency and reducing waste improves companies' bottom lines (more of the feedstock gets into the product and less into the waste stream), reduces risk of liability (for toxic spills, for example) and waste disposal and regulatory costs.

It is strategic. By responding directly to the external threats of increasing resource scarcity and ecosystem degradation worldwide, it can be used to position a company or community for future economic advantage.

It is market-driven. For example, by redesigning price signals to account for the value of our natural capital, it becomes cheaper to operate in a more environmentally sound manner. Market signals can then make regulations obsolete, saving the cost to businesses, government and citizens of drafting, enforcing and litigating the regulations.

It can reduce conflicts among business, environmental interests and government that have their roots in conflicts between the dominant business model and nature.

The Council's grant from the North Carolina Rural Center can help us to answer questions like these about natural capitalism:

How can we use it to help our citizens to create a better quality of life for all?

Can it help us to resolve difficult economic development conflicts, such as the one between a robust economy and healthy air?

Can it help us to avoid "loving the region to death" or "killing the goose that laid the golden egg?" regarding our scenic beauty.

Can we use it to address our land use and growth management problems in a more productive, less contentious, non-regulatory way that honors local property rights traditions?

Can we use it to help to position Region B not only to survive but to prosper in times of energy disruptions, increasing energy costs, destructive weather patterns, the commoditization of water resources, and the decline of fossil fuel usage?

Might natural capitalism reveal some opportunities and threats to Region B that we might otherwise miss in our External Scan?

How can government at all levels support business and industry in their efforts to become more efficient, eliminate waste and "invest in natural capital"?


Land-of-Sky Regional Council
Region B, North Carolina
May 31, 2001

-top of page-

Modeling a new "Lens" for Regional Economic

Contents:

    •  Purpose Statement
    •  Need Statement
    •  The "Gap" the project will address
    •  Project overview
    •  Background to the Council's CEDS Project
    •  Incorporating the Restorative Economy Model
    •  A Word about the Budget
    •  Expecting Results: Project Objective and Potential
    •  Outcomes
    •  Relationship to the Building Blocks

Purpose Statement

The purpose of this proposal is to fund the development, application and documentation of a "restorative economy" model for local and regional strategic economic development planning for rural areas in North Carolina. The model will be a new "lens" through which rural communities can envision and create local economies that restore natural systems.

Need Statement

The article, A Road Map for Natural Capitalism in the May-June, 1999 edition of the Harvard Business Review introduces the need for this project:.

"The earth's ability to sustain life, and therefore economic activity, is threatened by the way we extract, process, transport, and dispose of a vast flow of resources -- some 220 billion tons a year…. With dangerously narrow focus, our industries look only at the exploitable resources of the earth's ecosystems -- its oceans, forests and plains -- and not at the larger services that those systems provide for free.…The reason companies (and governments) are so prodigal with ecosystem services is that the value of those services doesn't appear on the business balance sheet. But that's a staggering omission. The economy, after all, is embedded in the environment. Recent calculations published in the Journal Nature conservatively estimate the value of all the earth's ecosystem services to be at least $33 trillion a year. That's close to the gross world product, and it implies a capitalized book value on the order of half a quadrillion dollars. What's more, for most of these services, there is no known substitute at any price, and we can't live without them." (p. 146)

The "linear" design of our current business model, in which natural resources and energy are extracted and processed to produce saleable products and waste (also called "economic throughput"), is causing the decline of living systems worldwide. These living systems are what provide the "ecosystem services" of storing and purifying our water, cleaning and re-circulating the air we breathe, and absorbing and rendering harmless the waste materials we put into the soil. Through our business and commerce, we spend this natural capital as if it were income. Depletion of natural resources and "depreciation" of natural capital does not show up on the books of individual business or our national accounts. The economy lacks feedback signals to encourage preservation and restoration of this natural capital -- indeed, some of our tax and subsidy policies even encourage its destruction. Our national Gross Domestic Product accounting erroneously treats both the activities that pollute our air and the resultant health care costs of poor air quality as positive contributions to the nation's economy and well-being. Such social costs are considered "external" to economic decision making.

As a result of these design flaws, business and commerce often work against nature, which sustains them. When population was smaller, and workers were scarce and not very productive, the penalties for treating natural capital as free services provided by "the commons" were small and not noticeable. Today, with world population at 6 billion, scarcity of natural resources -- rather than labor -- is becoming the limiting factor of production. In addition to the decline of natural systems, the opposition between commerce and nature is expressed in our day to day life as:

•  Environmental regulations costly to business and government to promulgate, implement, enforce and litigate;
•  Polarization of economic developers and businesses against environmentalists and the government; and
•  Confusion between growth (more economic throughput) and development (a better economy to meet people's needs while preserving natural capital).

-Modeling Menu-
-top of page-

The "Gap" the project will address

The "gap" the proposed project will address is the failure of local and regional economic development planning to address the above global realities. Past and current planning models applied at the community, county and regional levels in North Carolina and nationwide ignore the above design flaws of the business model and commerce, and are unable to anticipate threats to natural capital and respond in a proactive manner. Well-meaning economic activities and projects have caused unsafe ozone levels in the mountains, severely-depleted aquifers in eastern North Carolina, and other environmental problems listed on page 24 of the Rural Center's Choices for a New Century. Our mental planning models continue to view the economy, "environment" and social systems in separate compartments when in reality they are all part of one highly-interrelated -- and interdependent -- web. We plan as though the economy were a free-floating circular flow of goods, services and income with no intimate connection to the ecosystems of which it is a subsystem. Former World Bank economist Dr. Herman Daly likens this model to imagining an animal with a circulatory system but no digestive system.

Two books -- The Ecology of Commerce by Paul Hawken (Harper Collins, 1993) and Natural Capitalism by Paul Hawken and Amory and Hunter Lovins (Little Brown, 1999) -- provide the basis for redesigning commerce and the business model so that they are not only "sustainable" (able to stem further damage to living systems), but restorative, i.e., so that our economic activities actually restore already-damaged systems as well as preventing future damage. They define "Natural Capital" as natural resources (renewable and non-renewable) + ecosystem services + scenic beauty (a key element of North Carolina's tourism economy). Articulating four principles with which to accomplish this, Natural Capitalism proclaims that the thousands of businesses in the U.S. estimated to be implementing elements of natural capitalism are creating "the next industrial revolution." Furthermore, because the four principles tend to eliminate the opposition of business to natural laws, restorative economics is highly profitable for companies and society. The four principles are:

1. Advanced resource productivity. Through fundamental changes in production design and technology, leading organizations are making natural resources stretch 5, 10, even 100 times further than before. This slows resource depletion, reduces pollution and waste, and provides a basis to increase employment with meaningful jobs. The resulting savings in operational costs, capital, and time quickly pay for themselves, and in many cases initial capital investments actually decrease.

2. Ecological redesign (biomimicry). Natural Capitalism seeks not merely to reduce waste but to eliminate the concept altogether. Closed-loop production systems, modeled on nature's designs, return every output harmlessly to the ecosystem or create valuable inputs for other manufacturing processes. Industrial processes that emulate nature's benign chemistry reduce dependence on nonrenewable inputs, eliminate waste and toxicity, and often allow more efficient production.

3. Service and flow. The business model of traditional manufacturing rests on the sporadic sale of goods. The Natural Capitalism model delivers value as a continuous flow of services—leasing an illumination service, for example, rather than selling light bulbs. This shift rewards both provider and consumer for delivering the desired service in ever cheaper, more efficient, and more durable ways. It also reduces inventory and revenue fluctuations, disposal liabilities, and other risks.

4. Reinvestment in natural capital. Any good capitalist reinvests in productive capital. Businesses are finding an exciting range of new cost-effective ways to restore and expand the natural capital directly required for operations and indirectly required to sustain the supply system and customer base. Governments can help by encouraging full-cost accounting and reversing some of the perverse taxation and subsidy policies that discourage resource productivity.

-Modeling Menu-
-top of page-

Project Overview

The premises of this project are:
• That the above concepts can be applied to economic development at the community and regional levels, not just to individual businesses and national economic policy;
• That by applying these concepts in planning for and implementing economic development, rural people can achieve restorative economies that will result in more satisfying lives and a more secure future.

The purpose of the project is to take the first steps in demonstrating the above premises by incorporating restorative concepts into a strategic regional economic development planning "CEDS" process soon to be started by Land-of-Sky Regional Council in Region B (Buncombe, Henderson, Madison and Transylvania counties), North Carolina. In addition to adapting the restorative concepts to strategic economic development planning, the Council will apply them in a real-time, stakeholder-driven regional planning process and then document the "restorative economy" planning model for statewide and nationwide use. A broad range of stakeholders from all walks of life will be included in the project.

-Modeling Menu-
-top of page-

Background to the Council's CEDS Project

The Economic Development Administration Reform Act of 1998 makes a Comprehensive Economic Development Strategy (CEDS) a requirement to be eligible for assistance under EDA’s Public Works and Economic Adjustment programs. As a result, over 320 economic development districts (EDDs) across the United States, many in the Southeast, are required to develop a CEDS. Most EDDs have limited experience in strategic planning. The Council has done pioneering work in strategic planning for economic development, beginning with its Regional Vision 95, completed in 1991, and shortly thereafter developing a strategic planning manual -- now available from the National League of Cities -- entitled Shaping a Region’s Future: A Guide to Strategic Decision Making for Regions.

EDA-Region 4 (Atlanta) has contracted with Land-of-Sky Regional Council to develop and test methods for a cost-effective CEDS that can be made available as guidance to districts throughout the Southeast and the nation, and to draft a concise manual to guide districts in selecting the techniques and practices that will be most effective given their limited time and money for strategic economic development planning. The 21-month project is scheduled for October 2000 - June 2002.

The Council also will develop a website (proposed to be maintained on a permanent basis by EDA) that will make the manual and other project materials accessible on the internet, along with linkages to other sites that will be helpful to districts in their planning. This will include linkage to suitable sites related to sustainable development and smart growth. The Council also will develop and present a PowerPoint presentation at an EDA regional workshop(s). It will also publicize the results and the availability of the deliverables from the project, regionally and nationally, through association newsletters and meetings (such as NADO, NARC, CUED and CfED) and through other public information activities.

The documented model will be produced in the last nine months (October 2001- June 2002) of the 21-month project. They will be based upon "lessons learned" during the first phase of the project (October 2000 through September 2001), during which time the Council will develop a CEDS for the Land-of-Sky region, testing various techniques of data collection and analysis, stakeholder input, and plan development. The environmental scan will make optimal use of existing local and regional data and plans that are available (including those of the EDA University Center at Western Carolina University). It will also test the use of an interactive website for public input, and a list serve for two-way communication with the CEDS Stakeholder Group. A popular brochure and media releases will supplement the effort to obtain regional input. This will include use of the Council’s existing Speakers Bureau by making a component of the PowerPoint presentation about the CEDS available to speakers.

Throughout the 21-month project, the Council will evaluate the effectiveness of various techniques used to publicize the planning effort, to obtain public input, and to develop the plan. Focus groups will be used in various stages of the district planning process -- e.g., problem/need identification and developing details of the strategies selected.

-Modeling Menu-
-top of page-

Incorporating the Restorative Economy Model

Development of the CEDS for the four counties will include four main components, described briefly below. After each component, an italicized summary of how "restorative economy" thinking will be incorporated appears. After Rural Center board approval of this proposal, more detail can be provided in the contractual scope of services.

1. Identify problems, needs, potentials, and resources, primarily through an environmental scan:

• Self-education of Council staff and of the CEDS steering committee on the concepts of restorative economics will be the first order of business. A combination of outside speakers, workshops, audio-visual media, articles and discussion fora, will be devised for this purpose.

• The "external scan" portion of the environmental scan will be expanded to include global, national, regional and local trends involving (1) damage to natural capital (Threats), and (2) restorative economic solutions already in progress (Opportunities). This will be accomplished via a combination of Council staff, EDA University Center resources at WCU, and Environmental Studies and Economics student interns at UNCA. An example of both an opportunity and a threat might be the growing worldwide interest in commercializing the provision of potable water to dry areas -- a relatively water-rich area such as Region B could become the target of interbasin transfer attempts.

• The "internal scan" portion of the environmental scan -- during which Region B's strengths and weaknesses with which to address the most important external opportunities and threats will be identified -- also will be opened up to reveal capabilities related to restoration and protection of natural capital. An example might be our ability to influence state or national legislative and regulatory systems to replace incentives to pollute with incentives to reinvest in natural capital. Another example: the Council's Waste Reduction Partners program is a "strength" with which to help business and industry to redesign their business models.

2. Develop regional vision/goals

• The visioning and goal development processes will be expanded to give the stakeholders the information and psychological "permission" to envision a restorative economy in Region B. As is standard practice in Council projects, the work groups, focus groups and steering committee process will be facilitated on the basis of "informed free choice." This means that the stakeholders will be free to choose restorative approaches to their CEDS based upon the self-education and external scan information provided in step 1 above -- but they will not be forced or coerced to make such choices. This is in keeping with our desire to enlist a high degree of stakeholder ownership in the CEDS, and their consequent high desire to implement it.

3. Set regional directions

• Often referred to as Strategic Initiatives, these will comprise the broadest level of the strategic action plan in our CEDS. The CEDS working groups will be at choice to target one or more of these "regional directions" specifically at restorative economics. They also may choose to incorporate restorative strategies throughout the objectives and action steps of the action plan (step 4 below).

4. Develop an action plan that identifies priority programs and projects and includes information on each strategy that address the key issues of when, who, how much, (cost) resources/commitments, funding sources, and other supporting programs and projects.

• The action plan will spell out the practical implications of whatever restorative projects, activities and techniques the CEDS working groups develop.

5. Document the model

• The model will be documented in the form of a guidance manual for economic developers and development districts to use in their own planning efforts.

• The manual will include educational approaches, materials and resources to help economic development planners to inform themselves and stakeholders on the restorative economy, natural capitalism, etc.

• Methods will be described for incorporating the "bigger picture" external scan required to enable a restorative approach to local/regional economic development

• The Council's experience in facilitating the visioning process in a way that enables participants to envision what a restorative economy would "look and be like" in their region will be imparted in the model

• A flow chart of the planning process will show how the restorative economy 'lens" can be most effectively applied to the overall strategic planning framework

• The actual Strategic Action Plan developed for the CEDS will provide examples of how our region applied the restorative economy model, and the resulting strategies and projects.

6. Publish and Publicize the CEDS and the Model

• The CEDS and the restorative economy planning model will be published in hard copy and on the World Wide Web

• They will be publicized regionally, statewide and nationally via association newsletters, the World Wide Web, e-mail, and through the Council's Speaker's Bureau

• A limited number of presentations and consultations with other organizations will be conducted through the project period as appropriate to help them to understand and use the restorative planning model

-Modeling Menu-
-top of page-

A Word about the Budget

The budget for this project is presented in Attachment 1. Over 85% of the budget is devoted to the staff-intensive tasks of researching, organizing, coordinating, facilitating, communicating and documenting required to carry out the stakeholder-driven planning process. The remainder supports the costs of educational materials, workshops, speakers fees, etc. needed to introduce the new restorative economy concepts, and the costs of publishing and publicizing the CEDS plan and model planning process. The proposed Rural Center funding of $30,000 represents 21% of the total budget of $140,000. The remainder of this sum is being provided by the U.S. Department of Commerce EDA ($100,000) and AdvantageWest ($10,000). This represents a 370% leveraging of Rural Center funds ($30,000 leverages an additional $110,000). The timing of the Rural Center funds as proposed is ideal, because the viewing of the CEDS process through a new, restorative "lens" must be built in from the very beginning of the project if it is to be effective.

Expected Results: Project Objectives and Potential Outcomes

The objectives for the proposed project and corresponding potential outcomes are listed in tabular form below:

Relationship to the Building Blocks

The two Building Blocks of Rural Economic Development affected most by the proposed project are Business Development and Civic Infrastructure Development. The restorative economic model introduces the new Natural Capitalism business model, which has implications for incentives, tax policy, infrastructure and global market access. The model and the planning project upon which it will be developed are both good examples of Civic Infrastructure, and the restorative model will represent a powerful new tool to build the capacity of rural leaders to better their communities and regions.

-Modeling Menu-
-top of page-

Principles of Natural Capitalism

Ray Anderson's vision for Interface exemplifies a revolutionary new business model called "Natural Capitalism," which involves the following principles:

1.  Radically improved resource productivity (getting more product out of less energy & raw materials, for example);
2.  Biomimicry (copying nature's designs, in which there are no "waste" products to dispose of, and in which no toxics are produced that cannot be recycled by ecosystems);
3.  Providing services (such as comfort) rather than selling products (such as air conditioners);
4.  Investing in natural capital* (thus preserving and restoring the basis of the entire economy and of all life). This is the origin of the term, "restorative economy." An example is making prices of goods reflect the true cost of their manufacture, use and recycling, thus rewarding efficiency, durability, and less-polluting alternatives).

* Natural capital is defined as high-quality natural resources; ecosystem services; and scenic beauty. Examples: high quality natural resources such as a hardwood forest's wood products; ecosystem services provided by the forest such as absorption of rainwater that provides flood control and topsoil conservation; scenic beauty provided by forested landscape (very important to WNC tourism industry).

-top of page-

Potential Benefits of Natural Capitalism

According to the authors, benefits of applying natural capitalism to business and commerce include:
• It is profitable. Improving efficiency and reducing waste improves companies' bottom lines (more of the feedstock gets into the product and less into the waste stream), reduces risk of liability (for toxic spills, for example) and waste disposal and regulatory costs.

• It is strategic. By responding directly to the external threats of increasing resource scarcity and ecosystem degradation worldwide, it can be used to position a company or community for future economic survival.

• It is market-driven. For example, by redesigning price signals to account for the value of our natural capital, it becomes cheaper to operate in an environmentally sound manner. Market signals can then make regulations obsolete, saving the cost to businesses, government and citizens of creating, enforcing and litigating the regulations.

• It can reduce conflicts among business, environmental interests and government that have their roots in the conflicts between the dominant business model and nature.

-top of page-

Natural Capitalism and Regional Vision 2010

 The Land-of-Sky Regional hopes to answer questions like these about Natural Capitalism during the course of the Regional Vision 2010 project.:

1.  How can we use it to help our citizens to create a better quality of life for all?

2.  Can it help us to resolve difficult economic development conflicts, such as the one between a robust economy and healthy air?

3.  Can it help us to avoid "loving the region to death" or "killing the goose that laid the golden egg?" regarding our scenic beauty?

4.  Can we use it to address our land use and growth management problems in a more productive, less contentious, non-regulatory way that honors local property rights traditions?

5.  Can we use it to help to position Region B not only to survive but to prosper in times of energy disruptions, increasing energy costs, destructive weather patterns, the commoditization of water resources, and the decline of fossil fuel usage?

6.  Might natural capitalism reveal some opportunities and threats to Region B that we might otherwise miss in our External Scan?

7.  Can we not only encourage business and industry to climb Ray Anderson's "mountain" -- but climb it with them by applying natural capitalism to the governmental, nonprofit and residential sectors as well?

-top of page-

Green Infrastructure Web Site

-top of page-