If planet earth were a corporation, what would its annual report to the shareholders look like? Not good, says professor Robert Costanza, director of the University of Vermont's newly formed Gund Institute for Ecological Economics. He and a multidisciplinary band of colleagues, along with Maurice Strong, the organizer of the original, 1992 Earth Summit, are getting ready to present the United Nations with "Earth Inc.," the planet's first report to shareholders.
According to Costanza, gross national product may be on the rise in many countries, but once you take into account the costs of environmental degradation and a flat or declining quality of life, the earth looks like a case study in bad management.
Costanza is no hippie idealist. His approach is a kind of environmentalism in business attire. Rigorous and data intensive, ecological economics builds on the idea that natural resources are as valid a form of capital as oil rigs. In the journal Science, for example, Costanza and others have argued that electing not to develop the planet's remaining unspoiled land could yield a 100-to-1 return on investment.
"There has been a very polarized debate, going back a long time," Costanza explains. "One extreme says that nature is totally replaceable. The other extreme is that these are priceless resources. We're espousing a third view: The environment is, in fact, part of the economy. It's a major form of capital."
He recalls a study that he conducted in Louisiana. "For flood-prevention purposes, the U.S. Army Corps of Engineers put levees along the side of the Mississippi River all the way out to the end of the delta," Costanza says. But those levees denied the delta replenishing river sediment, just as oil prospectors began to dredge coastal wetlands. Soon, the Louisiana coastline began to sink into the Gulf of Mexico, 40 square miles a year. Never mind the significant ecological damage. The region suffered costly economic losses too: a vital storm buffer for New Orleans, hunting and recreation land, proper conditions for lucrative offshore fisheries, and more.
Costanza's shareholders report will total up four global balance sheets. In addition to built capital and natural capital, the traditional core of ecological economics, Earth Inc. will tally up two new resources: human capital (such as educational infrastructure) and social capital (like membership in civic organizations). "It's in everybody's interest to have the earth be a viable enterprise that's producing high-quality output — which is quality of life for people," Costanza says.
Earth Inc., Costanza hopes, will prompt people to expect smarter resource management from governments and inspire firms to be sensitive to the social costs of their industries. "We are making trade-offs," Costanza says. "So as a society, we are implicitly putting a value on these resources. Let's make it more explicit. Let's be up front about our choices."
Learn more about Robert Costanza and the Gund Institute for Ecological Economics on the Web (www.uvm.edu/giee).
A version of this article appeared in the April 2003 issue of Fast Company magazine.