Regulation and Re-design (2003)

Tapping Innovation and Creativity to Preserve the Commons

Over the past several years our description of environmental regulations as “a signal of design failure” has often been taken as an outright rejection of regulations of any kind. This interpretation couldn’t be further from the truth. We need regulations to protect our air, water and soil precisely because design failures are so prevalent.

But regulations are not the answer to our environmental woes. Traditional regulations are aimed at limiting environmental destruction, and if a system is highly destructive regulations will never be able to compensate for poor design. Regulated efficiency gains in West Germany through the 1980s, for example, left its ecological health in no better shape than East Germany’s, where there were no regulations at all. So when regulations are relied on as the exclusive means of protecting the environment they can become part of the problem, a way of diluting pollution without examining the design flaws at its source.

There is an alternative. When we see a heavily regulated industry, rather than condemning either the industry or the regulations, we see an opportunity for re-design, a chance to make energy and manufacturing systems so inherently healthful, productive and socially beneficial regulations become unnecessary. This shift from mere compliance to creative innovation is a key to competitive advantage in the global marketplace.


Regulations In A Time of Change

The transition, however, is just under way. We have only begun remaking the way we make things. While new designs are yielding products and processes that create habitat or purify water or safely generate renewable energy, strong signals of design failure persist and regulations still have a role. When women’s breast milk is regularly contaminated with persistent organic pollutants the chemical companies that produce them need to be regulated until they have redesigned the products and processes that cause harm. This is especially urgent: Over the past 19 years, frequent testing in the countries of the EU has not revealed a single case in which a woman’s breast milk would be allowed as drinking milk.

Regulations, then, are a legitimate transitional response. And when technologies such as nuclear energy and genetic engineering threaten to generate irreversible environmental changes, perhaps more urgent action is called for. Addressing the possible impacts of these industries would be an expression of democracy, for irreversible ecological change robs future generations of the right to choose: Once you’ve altered the genetic code there’s no turning back; once a species is lost, it is lost forever. As Thomas Jefferson said, “life is for the living,” and diminishing the life and the choices of our children and grandchildren is a kind of remote tyranny. Regulations that preserve choice and environmental health preserve democracy.

How do we create an effective regulatory framework for this transitional moment? How do we know when to regulate and when to give commerce free rein? Unfortunately, the conventional regulatory apparatus doesn’t provide much clarity. But there are some basic, principled guidelines that can make regulations a more effective protector of the public realm while also allowing the marketplace, and even regulation itself, to stimulate the innovation and creativity needed to redesign human industry.


Regulations and the Commons

First, it’s important to understand that commerce—in fact, all human activity—occurs in a shared ecological context, the commons. The commons includes the air we breathe, the water we drink, the sunlight and soil that provide our nutrition. These are our shared birthright, our inheritance and our legacy. These are the things we keep healthy for everyone’s benefit—for this generation and all generations hence. That’s why our design standards are so high; we believe the things we make should generate health and well being for all the children, of all species, for all time. And that’s why we say: Don’t mess with the commons.

There is also a commercial commons—the realm of markets, trade, and material flows— which is embedded in and dependent on the biological commons. While the biological commons is governed by the laws of nature, the commercial commons is governed by the laws of the state and by business ethics.

That’s where regulations come in. It is the government’s job to protect the shared benefits of the biological commons for all to enjoy. Ideally, regulations create a social framework in which commerce can operate responsibly and freely. If a company’s commercial activities are beneficial to the public realm, it has voluntarily accepted its responsibility to the commons and reaps the benefits of being a fast, agile, productive player in the marketplace. If a company puts a burden on the public sphere, if it destroys the water, pollutes the air, or degrades the land, it is the government’s responsibility to step in and regulate its activities. The smart company pursues the carrot; the conventional company bears the brunt of the stick.


Setting the Bar Too Low

What’s been missing in the regulatory framework is a carrot big enough to be a stick. Regulations typically don’t drive innovation and often the stick alone is not enough to protect the environment. Consider water quality. Sediments and microorganisms not covered by the Clean Water Act continue to pollute 44 percent of U.S. waters. And when polluting substances are regulated, that doesn’t always lead to the remediation of environmental harm, a problem illustrated by the 20-year battle between the EPA and General Electric over the clean-up of PCBs in the Hudson River. If, under current conditions, protecting environmental health has proven so difficult, how will regulations deal with a projected 5-fold increase in economic activity over the next fifty years?

Even when companies voluntarily comply with regulations, such as the EPA’s annual Toxic Release Inventory, industry can still harm people and the environment. Established in 1986, the TRI gathers data from industrial facilities, which are required to report on the release of hazardous chemicals, as well as the location and quantities of stored chemicals. The reporting is designed to notify nearby communities of possible public health problems. While the most recent TRI data shows that chemical releases have decreased roughly 48 percent since 1988, industrial facilities in 2000 released 7.1 billion pounds of toxic substances, including persistent bio-accumulative chemicals, such as dioxins, mercury and PCBs. A separate EPA report, released just weeks after the 2002 TRI, declared that 20 million Americans live in areas where elevated levels of toxic chemicals pose a cancer risk 100 times greater that the levels at which EPA pollution reduction programs typically target cancer-risk sources.

As evidence mounts that even tiny amounts of dangerous emissions can have harmful effects on biological systems over time, it seems prudent, if not urgent, to add some new options to the repertoires of both business leaders and the guardians of the public realm—and even build cooperative relationships between them.


A New Paradigm for Re-design

The first step might be a commitment to environmental protection that begins not with aiming to simply reduce the release of dangerous chemicals but attempting to eliminate waste and toxic emissions altogether and restoring the health of the air, water, and soil—by design. Traditional manufacturing creates such a bevy of negative consequences, and thus needs to be regulated, because it is built on a cradle-to-grave model that generates products designed for a one-way trip to the landfill and incinerator. The World Resources Institute estimates that “one-half to three-quarters of annual resource inputs to industrial economies are returned to the environment as wastes within one year.” Attempts to limit manufacturing waste tend to dilute pollution and slow the loss of natural resources without changing the design paradigm. The result: business strategies and a regulatory environment built on restricting industry and curtailing growth—a dispiriting commercial and environmental dead end.

But what if our designs were so ecologically intelligent and generated so much social and environmental value, we could actually celebrate the things we make? The strategy we call Cradle-to-Cradle Design allows us to do so. Modeled on the perpetual flows of energy and nutrients that make the biological commons so wonderfully generative, Cradle-to-Cradle Design applies the intelligence of natural systems to product, process and facility design.

From an industrial design perspective, this means creating products, supply chains and manufacturing processes that support life by replacing industry’s cradle-to-grave model with systems modeled on nature’s cradle-to-cradle cycles, in which one organisms waste becomes food for another and every material is a nutrient. When designers and engineers apply these principles to product conception and material flows management, they can begin to create goods that flow effectively within closed loop systems, providing after each useful life either nourishment for nature or high quality materials for new industrial products. This strategy grows and celebrates the biological and commercial commons rather than depleting them. Ultimately, we think Cradle-to-Cradle Design can lay the foundation for an industrial system that restores the natural world, eliminates the concept of waste, and creates enduring wealth and social value.

In other words, we are offering a complement—and ultimately an alternative—to environmental regulation. This is not pie in the sky dreaming. While some corporations still see regulations as obstacles to profitability and spend undue energy looking for loopholes to protect the bottom line, others are making environmental responsibility an integral part of their business agenda—and benefiting from doing so.

Shaw Industries, for example, the largest producer of commercial carpet in the world, has adopted the cradle-to-cradle design paradigm as its core business strategy. The company is not only producing safe, healthful, perpetually recyclable carpet tile, but will soon be doing so with manufacturing plants powered by solar energy. Why? Because it makes good business sense: it produces a product that is more profitable. This required a massive investment in change rather than in the perpetuation of conventional industry practices.


A New Path for Government and Industry

This is clearly an example of the carrot being far more compelling than the stick—an idea not lost on the EPA. In March 2003, the EPA Office of Solid Waste, in partnership with McDonough Braungart Design Chemistry, announced the launch of the Cradle to Cradle Design Challenge for E-Commerce Shipping Packaging and Logistics. The purpose of the challenge is to generate creativity and innovation in the industry with an invitation to rethink and redesign e-commerce packaging for a cradle-to-cradle life cycle. Designs will consider packaging and its complementary life cycle, including the systems needed to facilitate cyclical material flows; the ecological and human health characteristics of the materials; and how physical design facilitates reuse and recyclability.

The industry, meanwhile, is considering forming an ongoing working group dedicated to cradle-to-cradle packaging. At a July workshop co-hosted by MBDC and the Darden School of Business, and conducted by the Green Blue Institute, participants from companies such as Alcoa, Coca-Cola, Dow Chemical, Hewlett-Packard, Pepsi and Starbucks, along with EPA, met to discuss cradle-to-cradle principles and the business case for developing cyclical material flows.

Clearly, the design challenge and EPA’s outreach to industry represent a novel approach to addressing the problem of e-commerce packaging waste, which has become an increasingly large portion of the waste stream. Rather than regulating the industry, EPA is challenging it to do better voluntarily. In effect, the industry is being given the opportunity to win the right not to be regulated. EPA is not telling the industry how to innovate. It is not diminishing its speed, mobility or creativity. It is instead playing its role as steward of the commons by becoming a driver of quality and innovation.

Wouldn’t it be marvelous if the EPA could create a new relationship with commerce that encouraged new designs to emerge and evolve throughout American industry? Imagine the EPA offering incredibly sweet carrots to industries hungry for new ideas. Imagine the agency supporting innovative, ecologically intelligent designs. Or developing cradle-to-cradle benchmarks for materials, products and facilities and presenting them to industry as practical, productive strategies that effectively protect the commons.

As EPA policy analyst Angie Leith said, “regulations play an important role in our mission, but if we are going to take the next step in environmental protection we are going to have to work on a voluntary basis with industry to get there.”

Admittedly, EPA’s pro-active projects in Green Chemistry, Design for the Environment, and Product Stewardship are small efforts in the grand scheme of things, but they show that the agency has made a commitment to a new approach and has something it can grow.

“Looking into the future,” said Leith, “we see we have to look upstream. We have to look at material flows management not waste management. We have to think of cradle-to-cradle rather than cradle-to-grave. That’s the direction we want to go.”

When sufficient energy develops within the EPA to vigorously pursue this new path, the benchmarks are out there to be studied and presented to industry. Ford Motor Company, for example, has employed a living roof and constructed wetlands and swales to manage stormwater runoff at its restored Rouge River manufacturing site. Replacing an expensive water treatment plant, the system allows water to flow and filter in natural cycles, exceeding standards set by regulation with first cost savings of $35 million. One among many examples, it shows how ecologically intelligent design can meet the expectations of both the guardian of the commons and the business executive.


Innovation and Competitive Advantage

The EPA and other government agencies could encourage designs such as these, supporting industry with information and know-how, allowing the U.S. to become a supportive home for intelligent design and resource recovery. The result: A healthy environment, a growing economy and a better quality of life for its citizens—and for the rest of the world.

This is not just a nice idea; it’s a crucial step for the survival of American industry. In recent years, as trade has rendered the boundaries between nations more fluid, American manufacturing has undergone a transformation. Corporations bent on achieving global reach have increasingly moved manufacturing operations overseas to nations that provide cheap labor and a less strict regulatory environment. This has proved to be a double-edged sword. While many businesses see their bottom line growing, they are increasingly reliant on factories and supply chains they do not own or manage. Consequently, few products are completely produced in the U.S and few American companies know what’s in their products—consumers and regulators don’t know either. The international recycling of computers is just one example of how toxic products are made offshore, used by U.S. consumers and then shipped back overseas, creating a toxic flow of liabilities.

We need to reinvent our global business strategy. We need to re-design our manufacturing model so we can offer the world a system built on product quality, on design protocols founded on a thorough understanding of the chemistry, the value, and the beneficial effects of industrial materials. If we begin now to develop our commercial industries around cradle-to-cradle protocols, the U.S. can become the world leader in high-quality product design rather than competing on uneven and unhealthy terms within the old industrial system. This would not only protect the health of the American economy, it would also strengthen the world economy, yielding exceedingly smart, effective benchmarks to export to developing nations, rather than exporting harm. And as we renew product quality, we will also be developing an intellectual infrastructure supporting the making of things that will give us long-term prosperity rather than short term gain.

What an interesting irony that the protection of the commons, long considered the bane of business productivity, could drive this bold, environmentally sound vision for American economic strength and the economic vitality of all nations.


© 2003 William McDonough & Michael Braungart, green@work