Wealth of the Nations Part 1 of 3

Adam Smith’s pioneering book on economics, The Wealth of Nations (1776), is one of the world’s most important books. I pioneered the concepts of specialization, Natural Price, GDP etc,  new principles that we still use fruitfully today. Smith outlined the concept of gross domestic product as the measurement of national wealth; he identified the huge productivity gains made possible by specialization; he recognized that both sides benefited from trade, not just the seller; he realized that the market was an automatic mechanism that allocated resources with great efficiency; he understood the wide and fertile collaboration between different producers that this mechanism made possible. All these ideas remain part of the basic fabric of economic science, over two centuries later.

According to Smith, a nation’s wealth is its per capita national product – the amount that the average person actually produces for any given mix of natural resources that a country might possess.

If we go one step further and extend the question of the natural price and thereby “natural costs” we need to take into account natural resources that a country might possess, the cost of the natural resource ( for example manufacturing processes using water seldom cost for that water) as well as the opportunity cost of the natural resource. For instance, when we deplete the resource, is it possible to rebuild it and if so what is the cost of that ? And if it is not possible to rebuild it, somewhere that cost, which may be borne later, needs to figure as well.  This would figure in with his earlier writing - The Theory of Moral Sentiments where he mentions something called  ‘prudence’. And he stresses that ‘justice’ – not harming others – is fundamental to a healthy human society. Not harming others can also be viewed as “not harming other generations” as well.

Thus, when we talk of the wealth of the Nations, not as a book but as a concept,  measuring the GDP alone  is not enough.  We have more pressing problems and challenges like socioeconomic and environmental justice.

Development and sustainable development.

In the 18^th , 19^th and 20^th centuries, while the world made great strides in development, the concern is – was our development really sustainable ? Or do we need to change the way we view and measure development.

Sustainable development is now become a catchword. The stakeholder theory also redefines business performance in line with sustainability and justice. The challenge remains on it’s measurement .  Many NGOs and economists including, Amartya Sen worked  hard to develop more holistic, inclusive standards and indicators of overall national health and well-being that consider social, natural resource and ecosystems health in addition to economic growth.

One of the models that seemed practical and holistic is the UN University’s first Inclusive Wealth Indictor (IWI) report,introduced during the June 2012 Rio+20 UN Conference on Sustainable Development. The Inclusive Wealth Report measures the wealth of nations by analyzing a country’s capital assets, including manufactured, human and natural capital, and their corresponding values. Reproduced below, one can see the changes in the ranking and index points in comparison to GDP rankings and ratings.

Credit: UNEP, UNU-IHDP

Despite its predominance and universal use, the limitations of GDP as an overall indicator of health and well-being have long been recognized by those working in a range of fields. As Hunter Lovins is fond of saying, cancer is great for GDP, but it ain’t great for the patient!

People , Planet and Profit- Part 2 of 3

People Planet & Profit : The Triple Bottom Line

In traditional business accounting, the "bottom line" refers to the sum of revenue minus expenses, which is either "loss" if negative, or "profit" if positive. The term originated because profit is always shown as the very "bottom line" on a statement of revenue and expenses. Over the last 50 years, environmentalists and social justice advocates have struggled to bring a broader definition of "bottom line" into public consciousness, by introducing full cost accounting. For example, if a corporation shows a monetary profit, but their asbestos mine causes thousands of deaths from asbestosis, and their copper mine pollutes a river, and the government ends up spending taxpayer money on health care and river clean-up, how do we perform a full societal cost benefit analysis?

The concept of a triple bottom line (TBL) adds two more "bottom lines"; social and environmental concerns. The three together are often paraphrased as "Profit, People, Planet".

The phrase, Triple Bottom Line,  was coined by John Elkington in his 1997 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business . Sustainability, itself, was first defined by the Brundtland Commission of the United Nations in 1987.

The concept of TBL demands that a company's responsibility lies with stakeholders rather than shareholders. This seems to be in line with Adam Smith’s Theory of Moral Sentiments where he mentions something called  ‘prudence’. And he stresses that ‘justice’ – not harming others – is fundamental to a healthy human society. Not harming others can also be viewed as “not harming other generations” as well.  In this case, "stakeholders" refers to anyone who is influenced, either directly or indirectly, by the actions of the firm.

 According to the stakeholder theory, the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximizing shareholder (owner) profit.

Sustainability

The approach of "People, planet and profit" succinctly describes the triple bottom lines and the goal of sustainability.

"People" pertains to fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well-being of corporate, labor and other stakeholder interests are interdependent.

"Planet" (natural capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and minimize environmental impact by, among other things, carefully managing its consumption of energy and non-renewable resources and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. Thi sis called the "Cradle to grave" approach and can be measured by the use of the life cycle assessment of products ( of which I talked about in m earlier post)  to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user

"Profit" is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a company or organization (which nevertheless remains an essential starting point for the computation

An example of an organization seeking a triple bottom line would be a social enterprise run as a non-profit, but earning income by offering opportunities for handicapped people who have been labeled "unemployable", to earn a living recycling. The organization earns a profit, which is controlled by a volunteer Board, and ploughed back into the community. The social benefit is the meaningful employment of disadvantaged citizens, and the reduction in the society's welfare or disability costs. The environmental benefit comes from the recycling accomplished.

“Only when companies measure their social and environmental impact will we have socially and environmentally responsible organizations.”

The Emergence of the New Enterprise - Part 3 of 3

Emergence of the new Enterprise

Given the compulsions of the world we have created and the world we leave behind, the emergence of the new enterprise was only a matter of time. The triple bottom line approach and theory, while being instituted in the 1990s, ignored mainly in the rest of the century, is now gaining momentum.

The stakeholder theory, as compared to the shareholder theory is gaining more and more acceptance. The emergence of the Social Enterprise will sooner or later become a threat to the traditional enterprise. In India, we will all remember the famous social enterprise of the 70s – AMUL.  Even today , AMUL is a huge threat and a powerful competition to modern day enterprises in the same industry.

We have to change the way we look, the way we act and the way we do our business. It is a radical change and as with every radical change there is an interim “change platform”.  In the case that platform can be the corporate social responsibility programs and policies of the enterprises.  

CSR RESPONSIBILITY AND THE TRIPLE BOTTOM LINE

In the private sector, a commitment to corporate social responsibility (CSR) implies a commitment to some form of TBL reporting. This is distinct from the more limited changes required to deal only with ecological issues.

For reporting their efforts companies may demonstrate their commitment to CSR through the following:

·         Top-level involvement (CEO, Board of Directors)

·         Policy Investments

·         Programs

·         Signatories to voluntary standards

·         Principles (UN Global Compact-Ceres Principles)

·         Reporting (Global Reporting Initiative)

Triple bottom line (TBL) accounting expands the traditional reporting framework to take into account social and environmental performance in addition to financial performance.

Corporate Social Responsibility (CSR)

The aptly named CSR view is that corporations are members of the moral community and these responsibilities fall into four groups: 

ü  Economic Responsibility

ü  Legal Responsibility

ü  Ethical Responsibility

ü  Philanthropic Responsibility

The Economic Responsibility is the responsibility of a business to make money

The Legal Responsibility is the responsibility to obey the law of the land as a proactive duty.

The Ethical Responsibility is the responsibility to do the right thing even when neither the spirit nor the letter of the law apply to the situation.

The Philanthropic Responsibility, is a responsibility "to contribute to society's projects even when they're independent of the particular business."

Triple Bottom Line Approach

Another theory of corporate social responsibility is the Triple Bottom Line. Like the CSR theory we just discussed, Triple Bottom Line works on the assumption that the corporation is a member of the moral community, and this gives it social responsibilities. This theory focuses on sustainability, and requires that any company weigh its actions on three independent scales: economic sustainability, social sustainability, and environmental sustainability.

These three tabulations are all aimed at long-term sustainability. 

Economic sustainability must focus on the long term because this is the nature of a persistent company. A decision which creates an economic boon in the short-term but causes long-term harm, would likely reduce this bottom line to such a degree that the action would be untenable.

Social sustainability gives precedence on the balance of economic power in the society. Competition in the business arena is common, and encouraged, behavior, but maximizing the bottom line in social terms requires that a business foster an environment in which all can succeed. This might seem counterintuitive, but in the big-picture it is better for a whole society to thrive than for one single corporation to thrive alone. “Co-optetion” rather than competition .

The requirement of environmental sustainability stems from the recognition that resources are not infinite, and leads to the reasoning that too much degradation will worsen the lives of us, our children and so on.

Business cannot operate in a world which is poisoned or "used up." Efforts have to be made to renew some of the environments that have been harmed in the past, and these environmental harms and gains belong on this bottom line.

The future enterprise lies in the triple Bottom line

If businesses calculate their gains and losses by  way of the TBL  they will be more likely to take actions which are to the benefit of both the business and the community.

The Triple Bottom Line requires that a business decision be composed of all of these elements from the beginning. When the data shows each of these dimensions along the same line, and measured with the same metric, it will be much easier to see the impact of a decision and to judge the fittingness of that decision.

This then is the future of businesses and enterprises. As we move forward we see more and more companies moving along the path from Traditional to CSR adoption and finally to the TBL approach. This is now not only limited to Social Enterprises but also to whole business ecosystem. 

The Social Enterprise

Much has been said about the social enterprise and much has been debated. It’s supposed to be the new wave of the future. But the arguments leave me confused. Totally.

What I understand and realize is this : When Carnegie came out with his Corporate Charity, later taking on the avatar of Corporate Social responsibility, to me that was the foundation of the social enterprise.

When an organization manufactures products, I feel there are two kinds of products that emerge:

1.       Economic products or commercial products. Products which are bought and sold for a profit and which are normally counted as growing the shareholder value.

2.       But, in addition, there are also social products which are generated alongside. Products which maybe intangible, which may be detrimental and which, if created knowingly, with positive intent, can contribute to the social environment thereby also contributing to the stake holder value. Today, these products also exist, mostly as by-products of our manufacturing or production process. And today, these are mainly detrimental.

The Social enterprise then, should look like a enterprise dealing in or working with the second category of products, that which have a positive value and therefore support the cause of sustainability and quality of life. These maybe in the area of food, energy, health, lifestyle, any aspect of our human life as we know it today. The success measurement of such products could be in terms of the natural resources they save or enhance, and the positive impact they create on our lives and that of our fellow men.

I think the call to action for our business leaders is very clear ! 

The future of business lies in building sustainable products.

Most of us think about sustainability as a far off effect of our lives on the ecosystem and nature that surrounds us. But think about this… everything we do or say, produce or consume, create or destroy , tangible or intangible , has a effect on the finite natural resources including our own psychology !

In a world fast depleting its resources, while we express our greatest concerns,  we continue to manufacture or produce products and articles which are depleting the same. Very soon there will be no “raw material” to produce from!

Today, the writing on the wall is very clear. The future of business lies in innovating and building sustainable products. Products whose life cycle is longer, and which at the end go back to reinstating the raw material it was made from. Not depleting it. Whether it is power, fuel or food, sustainable product development touches every aspect of our lives. Being “green”, “eco friendly”  etc are only buzz words at the end of the day. What and how these products use and deplete and how much they add back is what really matters.

As thought leaders and innovators, it’s time we all re-looked at the way we design and build products, measuring the amount of finite resources our products or their use will finally consume and how much they will add back. It’s time we even looked at the software games we build. Are they depleting us of our positive human emotions or are they building us into game warriors ? Just look around us, how many computer games we see which are based on education, peace, harmony etc.? How many computer games do we see that may educate us on the fact that the amount of poverty and the rate it’s growing is also leading us into a non sustainable mode ?

The future as we know it today is scary! Its time we went back to the drawing board ! 

Creating the E-STOVE

What is a thermoelectric module? Thermoelectric modules are solid-state integrated circuits that employ three established thermoelectric effects known as the Peltier, Seebeck and Thomson effects. It is the Seebeck effect that is responsible for electrical power generation and thus the foundation of our business. You can Google Peltier, and Thomson effect to learn more about those fascinating discoveries! How are thermoelectric modules made? Their construction consists of pairs of p-type and n-type semiconductor materials with a high thermoelectric coefficient. Although many different materials can be used a bismuth telluride alloy is the most common material in use today. This material is sliced into small blocks, one forms the p-type conductor and the other the n-type conductor. Each pair forms a thermoelectric couple (TEC). These thermocouples are most often connected electrically forming an array of multiple thermocouples (thermopile). One exception for example would be the temperature sensor inside of an oven or furnace, which usually consist of only one thermoelectric couple.

Most others use many thermoelectric couples that are sandwiched between two pieces of non-electrically conductive materials. It is also necessary for this material to be thermally conductive to ensure a good heat transfer, usually two thin ceramic wafers are used. This now forms what is called a thermoelectric module.

Each module can contain dozens of pairs of thermoelectric couples. These modules are called thermoelectric modules, TEC modules and sometimes Peltier or, Seebeck modules, which simply denotes whether they are being used to generate electricity (Seebeck) or produce heat or cold (Peltier). Functionally there is no difference between the two. They both are capable of producing heat and cold or generating electricity, depending on whether heat is applied or an electrical current.

There are however differences in performance between various modules depending on what they were manufactured for! For example, if a module is being manufactured for use in a 12 volt dc automotive cooler the thermoelectric couples will be of a thicker gage and so will the wire connecting the modules to the 12 volt dc power source. In most cases the module itself is quite large. This is simply because the module will be conducting a heavy load of currant and will need to be able to handle the load. Although these type modules can be used to produce electricity they are not well suited for the task because they have a high internal resistance (lowering output) and lower temperature solder that may melt if used for Seebeck purposes. Meaning the electrical connection may fail when the higher heat needed to produce significant amounts of electricity is applied to the module.

Now, if a thermoelectric module is being manufactured for use in a thermoelectric generator it has its own unique requirements. First they need to have lowest internal resistance possible and high temperature silver solder connecting the wires. In addition, heat resistant insulation made from PTFE is used to coat the wires. Braided fiberglass sleeves can also be slipped over the wires providing further protection from the high heat.

What is a TEG?

TEG is an acronym for ‘thermoelectric generator’. A TEG is a device utilizing one or more thermoelectric models as the primary component/s, followed by a cooling system that can be either passive or active. Such as an open air heat sink, fan cooled heat sink, or fluid cooled. These components are then fabricated into an assembly to function as one unit called a TEG.

When heat is applied to the hot side of a TEG, electricity is produced. Almost any heat source can be used to generate electricity, such as solar heat, geothermal heat, even body heat! In addition the efficiency of any device or machine that generates heat as a by-product can be drastically improved by recovering the energy lost as heat.

Can you really generate that much electricity from waste heat? You may be surprised just how much you can! Here is a small example of how much power you can generate. Below is a pot of hot water with 4-thermoelectric modules attached around the sides. The output from this simple thermoelectric generator (TEG) is about 8 watt and the light is a 12 volt auto lamp.

Thermoelectric generators have been in use for many years by NASA to power spacecraft and the oil and gas industry to power remote monitoring stations around the globe. Only in recent years has this technology become available to the general public and TEG Power is at the forefront of this thermoelectric energy revolution. We are the first manufacture to provide practical and affordable thermoelectric generators to the energy conscious consumer.

Almost any heat source can be used to generate electricity, such as solar heat, ocean heat, geothermal heat, even body heat! 

Technology: The end or the means

This question has intrigued me for quite a while.  Do we, the citizens of this modern world, view and use Technology as the means to an end  or the end itself ?

The Oxford dictionary, in 1931 defined Technology as – “a treatise on the arts”. The same dictionary in 1965 defines it as – a “science of the industrial arts”. Down the line, half a century later it defines it as – “the application of scientific knowledge for practical purposes, especially in industry: advances in computer technology”

As can be seen, the changing definition of technology reflects the changing use of it over the years. In earlier days the development of the tools of trade also was referred to as technology.

Today we refer to it and use it to enable a class of leisure in the modern global economy. Which is great.  But the changing definition, meaning and practical use of Technology also can pose a critical question : what are we using it for ? are we so concerned about technology itself that we forget what we needed it for in the first place?

In the current context, one such game changing & breakthrough Technologies is Mobile Telephony and the SMS . It has changed we way we communicate. It has changed the way we behave. It has also changed the way we socially interact or entertain ourselves. In gathering after gathering, I notice young people, besotted with their phones, either texting their friends, playing a game or in general just staring at the handset and  wondering what to do with it  J. Their social interaction with the rest of the group is near zero.

Similarly, when we are taking a drive through the country side , are we looking out the window and appreciating nature ? No. Mostly we are hearing our favorite music on our handset.

So, as the years go by, a simple talking device becomes wireless, a personal telegraph machine, a music box, a camera, a computer, a GPS receiver, a electronic games machine and so on and so forth ! Wow ! Amazing ! And all we wanted it for in the first place was to talk J

As time progresses, computers gain smaller footprints. (It does not matter how they affect the users eyes ), gain high and higher memory and storage space which will never be fully utilized anyway. I do remember not so very long ago when a famous software product company’s founder stated that64 KB of RAM was more than enough!

All in all, computers become smaller, mobiles become more and more invasive, cars start simulating homes, and we humans forget simple things like thinking, reading a book, writing a letter hampering our creativity and mental abilities.

My point is this – are we letting our penchant for technology drive it’s use in our lives or are we allowing the use to drive the choice of technology. Sadly I feel it’s the former. When we procure a product, we tend to compare the technical features (most of which we will never use) and then choose the T1 ( technically most superior) at a price ofL1 ( lowest bargained price). With the result we get an overdose of unused or unusable “technology” in our lives. Call this technical trash.

With the technical trash accumulating in this great wide world, is it a wonder then that we have pollution, unhealthy exposure to radiation and other forms of reactions caused the imbalance we have created in nature? Apart from the physical dangers we create for ourselves?

These choices we make are not only for our personal procurement decisions. They also include the professional procurement decisions we make.  We are buying products which are technically superior (no doubts on that) but which our requirements do not really need. With the end result that we are not only creating technical trash but also wasting finance and resources which are critically in short  these days.

One standing example is closer home, in India. We have spent Billions of Dollars in our effort to automate Citizen Services, make Governance more efficient, reduce corruption and finally make it possible for the citizen to receive a timely service. Do we define citizen as the 30% of our population who have access to a digital device to gain from such services or do we define citizens as including those who do not have such devices or such facilities and which are close to 70% of our population? If you total the money spent on such Infrastructure, I.T. hardware and application costs as well as the running cost and divide that by the actual number of “citizens “ who can use this infra, you will be astounded at the cost per citizen of any such services or initiatives.

How long then, can such wastage be afforded? Today we have once again changed the dictionary meaning of “Technology”.  When Oxford defines it as “the application of scientific knowledge for practical purposes, especially in industry”… our technology choices have dropped the ever important words– “practical purposes”. 

With the India  population rising, GDP falling, its time we ALL went down to the grass root and enable a contribution to the economy from that level.  After all, 70% of India does live there. Can we , here in the big cities , really afford to ignore them  as we all do ?

Consider the facts. In another 3-5 years India is poised to become the youngest country in the World.   Some people say the  largest youngest workforce. I would like to understand how ? Majority of  our educated youth are NOT job ready. The sunshine Industries do not find them  worthy of employment. We very proudly state that we will be the world’s largest market of consumers…  where majority Consumers who cannot afford to live let alone buy?

Many years ago when an old and retiring Chief Secretary of one of the states told and explained to me the concept of our country actually being two – India where all the city folk  , metro folk and urbanized folk reside and,…  Bharat- where 70% of the country’ s citizens reside. This was more than 10 years ago. But I have now only begun to realize what he meant and the impact of his observations ( which are mine now as well).

We, the citizens of India, are concerned with the Stock Market, the Gold Market, the corresponding inflation, increase of salaries, companies performance  etc. We think, we act. But our actions effect only 30% of our total economy.  Because, 70% of our country live in an  area called Bharat. There, they are more concerned on when and how they will get their next meal, or how they will pay the village money lender, or when they will get their next job.

So, the 70% of the so called largest workforce does NOT contribute to the economy, is NOT bothered  about buying choices in the market and is not worried  about the internet or 2G, 3G or 4G.

I feel, as educated (?)  Members of India, is it not time we went down to the Grass root and worked them into a “great workforce” ? It can be done IF we so decide.  Consider this :

A.    Every Villager has access to mobile Telephony  - whether their own or through a “village Mobile Service Providers”. ( yes that’s the way it actually is)

B.     Every villager has a bank account , either his / her own or through a central village bank provider ( J sounds funny but the truth)

C.     Most village women work  - more than the men ( woman power? ABSOLUTELY)

D.    60% of village folk have some excellence in trade. Be it a particular stream of Agriculture, Tailoring, Car Mechanics, weaving, knitting etc.)

My question to all and me is this. Is  not enough hard work for them? Do we really want to convert them all? Can they NOT contribute to our Country’s economy from where they are and what they do best?

My personal opinion and thought is that they CAN. And THEY WILL. Provided WE let them.  

So what is it we can do ?

A.    Create, help and recognize their skills .  How ? for example… how many of us or our children wear hand knitted , pure wool sweaters in the winter months ? Please take stock,  my guess is only a handful. Have we all forgotten the days when our mothers or grandmothers knitted ? Pure wool ? Are we so dependent on style today  that we have forgotten? No wonder Delhi folk suffer with cold and cough etc.  Believe me , we are NOT warm enough.

B.     Encourage them to create money – how?  Create a market for their products, whether agriculture, knitting, sewing , etc.  My question to all is this : when was the last time you or I ate a  home grown, small by nature, non chemical fertilizer vegetable ? 

C.     As real estate grows, do we recognize the fact that our agriculture land diminishes ? I am not really a Marxist or even a socialist ( though I thought  I was in my youth) BUT, as we , the consumers of the new  urban elite go on consuming Flats , residences ( for other purposes than living in one) ,  there will come a time when the fields will go and be replaced by high rise condominiums.  Which also means the end of Food INDEPENDENCE  !

Well that’s all I wanted to spell out. We the people of India, for  our, or our  children’s and our Country’s survival,  need to  do “something”.

What I that something is left you conscience…