Intrinsic Value Exchange: Using Market Forces to Help Heal the Planet
August 20, 2013
Our economy assigns values to just about everything except for the things that matter most. As far as the current economy is concerned, a tree holds value only if it is cut down, an animal only if it is slaughtered and a person only if they contribute to the GDP. When we are given the price of an item, many values and certain costs are often excluded, which results in the destruction of natural resources, decline in human health and an economy that is less productive than it could be.
The numbers say it all: While the total world economy is equal to roughly $70 trillion annually, nature provides services that can be valued as high as $700 trillion per year, according to for-profit social enterprise Intrinsic Value Exchange (IVE). These services include facilitating food, water and air production; minimizing storm damage and producing a wide range of natural medicines, among many others.
IVE says it has proposed the first-ever “Natural Trading Platform,” which is designed to value natural and societal assets just as existing global exchanges and financial markets, such as the Dow Jones Industrial Average and NASDAQ, value companies and commodities such as oil, gas, corn and gold.
“We want our powerful market economy to work with our plentiful natural and societal capital, not against it,” said Douglas Eger, founder of IVE. “We are going to take things that are not priced or valued properly and for the first time include them in our existing economy.”
IVE works with organizations including the Stanford Woods Institute and Keep Tahoe Blue to aggregate extensive data to generate an intrinsic value for natural and societal assets. The public then “votes” on the value of these assets — such as Lake Tahoe, bluefin tuna and healthy children —by investing in and trading them. Much like a traditional stock exchange, the market sets prices through trading. This allows the system to assign values to a tree in a forest and the forest itself without cutting it down — it reframes the idea of value and cost. For example, the IVE market may say a particular tree is worth $50,000 over its lifetime and only $400 if it is cut down.
The organization recently raised nearly $25,000 through an Indiegogo campaign; although it fell short of its goal of $200,000, Eger is unperturbed.
“We had two goals for the Indiegogo campaign,” he said. “One was to build momentum for the IVE movement, which we had great success with. It was really good to see what people connected with and what they didn’t. We saw that they care about environmental and social problems but the complexity of the solution can be overwhelming, which brings us to why we fell short with our second goal — the financial one.”
“IVE is an elegant solution to the intractable problem of externalities but it is not as simple as, say, a pair of affordable sunglasses or iPhone-controlled security system. As a concept, a market-oriented solution can be hard to grasp, as it requires an understanding of our current economy and how it works and where it fails,” Eger added.
IVE says the biggest barrier to building widespread support for an intrinsic value exchange is that it is not yet built. While the interest and support is there, many still have questions about how the system would work. The organization claims these questions can best be addressed by having the exchange up and running and allowing people to see and experience it for themselves.
To bridge this gap of understanding, IVE says it plans to use the $25,000, along with existing private resources, to build the beta version of the exchange and launch the initial product. Eger hopes to launch the exchange in January 2014.
IVE is not alone in striving to leverage market mechanisms to promote a more socially and environmentally balanced economy. A United Nations initiative called Reducing Emissions from Deforestation and Degradation, or REDD+, utilizes market and financial incentives to counter deforestation, which scientists say contributes more to global greenhouse gas emissions than all of the world’s cars, trucks and buses combined.
Many in the business community have shown strong support for REDD+, most recently in California where a large consortium of key stakeholders, including multinational corporations, global NGOs and indigenous community leaders rallied in support of the initiative. Signatories of the Code REDD Letter of Support include organizations such as Disney, Pacific Gas & Electric, the Skoll Foundation and the Rainforest Alliance.
The Climate Markets & Investment Association (CMIA), whose members include many of the world’s largest providers of low-carbon investment and services, such as Bank of America, Merrill Lynch, Norton Rose Fulbright, PwC, JP Morgan and KPMG, also issued a Letter of Support for REDD+.
Author, speaker and consultant Bob Willard says most companies still have no idea how compelling the business case for sustainability can be for them.
“There is a two-part business case for sustainability — to capture opportunities and avoid risks,” Willard said. “The upside is that if a typical company were to use best-practice sustainability approaches already being used by real companies, it could improve profits by at least 51 to 81 percent within three to five years.
“The downside is that companies expose themselves to a potential 16 to 36 percent erosion of profits if it takes no action on sustainability.”
In other words, by adopting sustainability plans and learning to quantify assets such as people and natural resources, companies have everything to gain in terms of increased competitiveness, higher profits and the long-term sustainability of their own business.
Business is driven by metrics, and as more methods for measuring natural and social capital such as IVE and REDD+ emerge, the business case for sustainability will become more widely understood. Next month, Sustainable Brands will hold its third annual New Metrics of Sustainable Business Conference, September 24-25 at the University of Philadelphia, which will examine new forms of value, or newly quantified existing economic, social and environmental impacts, on three fundamental levels: product & service value, organizational value and societal value.