Interview with Eckart Wintzen

Colleen Burke

"Look around you—everything you see is stolen goods. You haven't paid the real price of anything you own because the resources that were extracted and the pollution that was created to produce those goods were considered to be free. But they aren't free.

"Have you recently gotten a bill for the oxygen you use? You should, because there is a real cost—especially if you turn it into carbon dioxide. How many square miles of trees would you have to plant to recreate the oxygen used up or to counter the surplus carbon dioxide created by the used energy?"

With bracing observations such as these, World Business Academy board member Eckart Wintzen, president and managing director of BSO/Origin (formerly BSO/Beheer) of the Netherlands, initiates a most thought-provoking interview, uniting economy with ecology and bringing environ-. Mental issues directly to the bottom line.

BSO is imbued with Wintzen's visionary philosophy, from its organizational structure to its accounting procedures. BSO is in the international service business, providing broad support to customers in the introduction of new technologies, with an emphasis on information technologies. BSO's specialized companies support customers in the design, realization, and implementation of automated systems, and technical infrastructures. In addition, BSO provides training, education, multimedia applications and organizational consulting. With 4,000 employees in fifteen countries, BSO achieved sales of 542 million Dutch guilders (about $400 million U.S.) in 1991.

The organization reflects the concept of cell division based on the idea that there is an optimum size for any company.

BSO functions as a holding company, a conglomerate of small companies or cells that operate highly autonomously but collaborate closely when necessary. The organization reflects the concept of cell division based on the idea that there is an optimum size for any company. When one of the companies expands beyond its optimum size, a process of fission takes place: part of the management and staff form a new cell that focuses on a specific market area or technical specialization. Part of the existing customer base tags along with the new company to give it viability from the start.

BSO has determined that the optimum size is from sixty to one hundred employees, which allows for extremely short lines of communication. The small size of the individual companies keeps the organization extremely flexible. Management is able to stay close to the market and employees, who are highly committed to "their" little company, place strong emphasis on individual responsibility. An extremely flat organization, BSO has two staff departments. The individual cells are dependent on the holding company for central financing and infrastructure only.

While the organizational structure bows to the wisdom of nature by reflecting the process of cell division, the accounting procedures at BSO go even further to embrace the interdependence of economy and ecology. Eckart Wintzen has taken the lead in creating a ledger of environmental accounts that parallel the company's financial accounts.

BSO's stunningly aesthetic and uniquely readable 1990 annual report outlines the concepts behind environmental accounting. Wintzen opens the report with the story of how, as the great Titanic slid beneath the waves, the ship's band played on undaunted. Now we, in the next generation, look back at the absurdity of that situation and ask, How was it possible?

The analogy to our current times is not lost. As daily news carries endless stories of environmental disasters that threaten our planet, our financial markets surge, playing on undaunted. But, Wintzen warns, "we must not play on as though nothing is wrong, so that future generations will ask, How was it possible?"

In the text of the annual report, Wintzen calls for a fundamental change in business "so that economic value added genuinely takes into account the loss of ecological value. All economic processes, with a few exceptions, are destructive to the environment. That cannot be avoided, but we can start to relate the ecological costs to the economic benefits.

What good, after all, is a profit and loss account that fails to take account of the costs of our own survival?

"Like traditional accounts, 'eco-accounts' must be measurable and verifiable and must therefore be based on agreed standards. Only then can ecological progress be accurately assessed and discussion of environmental impact placed on a more rational footing."

The report goes on to explain that "Environmental accounts express a company's environmental impact in financial terms. They can be used to calculate a net value added, representing the company's net return after taking into account its effect on the environment." In addition to calculating value added, an environmental account includes "value extracted", "the cost of the company's environmental impact less its expenditure to control that impact.... Environmental accounts are comparable to income and expenditure accounts. The value added is stated on the credit side and the value extracted from the planet on the debit side. This produces a new value added."

The report projects that "Once we have established the real ecological cost of products and services, this will provide an impetus for effective recycling, effective control of energy consumption, and ecologically efficient production." Taking the idea to the national level, Wintzen suggests that "Just as corporate value added is calculated to determine gross national product, value lost should now be calculated to determine national loss. We could call the difference net national ecological product."

BSO's annual report's powerful conclusion reads, "What good, after all, is a profit and loss account that fails to take account of the costs of our own survival? And one that passes on the bills to future generations, without even an apology?"

Answering those initial eye-opening questions about stolen goods and oxygen bills, BSO's environmental accounts cover sources of atmospheric emissions, including road traffic, air traffic, waste incineration, electricity and natural gas consumption. They then calculate and deduct the company's environmental expenditures, such as fuel levies, water treatment, and waste processing, to determine the net value extracted.

Clearly enthusiastic about this courageous though embryonic beginning of assigning real value to earth's resources, Wintzen notes that "the old values and the old systems are dead. The old models don't work anymore. Traditional economists tend to take for granted that the resources are free. If you combine that belief with a commitment to a free market economy, it is no surprise that our planet is considered to be free. When you hand something to humans for free, they will not value it."

He continues, "Bookkeeping would look a lot different if you would pay for what you are essentially stealing from this planet—stealing from generations after us, and stealing from the other creatures."

Bookkeeping would look a lot different if you would pay for what you are essentially stealing from this planet.

Wintzen goes on to note that the "free market economy looked beautiful in the 1950s and even in the 1970s, but the free market does not work any more. Neither capitalism nor the free market won the cold war. No one won the cold war. Neither system—capitalism nor communism— works anymore."

Citing President Bush's well-publicized trip to Japan with car manufacturers as an example of economic stupidity, Wintzen states, "Bush thinks that if there are more cars produced in the U.S., there are more jobs. That might be right, but, in fact, there are more and more materials used with less and less employment. Producing more goods with less people eats up more resources and leads to more unemployment. If you have warm feelings about this planet, you don't produce more cars. This is the end of the old paradigm."

So how do we move to something new? "Everything went wrong because of an outdated tax structure. We have to change the tax system to raise both employment and ecological effectiveness. If you lower the tax on employment and raise the tax on materials, business will look for products that need human intervention (known as employment), and less material. With such a tax, you will have more employment and less products."

Wintzen explains his tax theory using the example of the simple repair of an automobile headlight: "Let's say that just the glass is broken on your headlight. If you take it to the shop for repairs, the entire light—chrome frame, bulb, electrical socket, and wiring—will be removed as a unit and thrown away. A full new unit will be plugged in, resulting in a minimum of human labor and a maximum of material usage. If the tax structure were flipped, taxing the materials, not the labor, only the glass would be carefully replaced in the old unit by human hands. Employment would be up and environmental destruction down."

With seemingly limitless inspiration, Wintzen goes on, "We need to start taxing the extracted value of materials up to 100 percent end then use those tax dollars for recycling end clearing the environment. If we were to use such a tax system, the real power of the free market economy would be shown as the companies now making products from 'stolen' materials will shift their market targets to products with smaller material end a bigger employment content such as software end services. And, they will do this for economy end not for idealistic reasons."

Wintzen concludes that "you can't change the system by yourself, because you can't compete if you are the only one placing real value on the resources you use. But we can begin to turning everything back to dollars end cents—which is what people understand when they are talking about value. We need to take two steps: First, we need to change the mindset through awareness, publicity, end networks like the World Business Academy. Then, we need to change the law. You can't do it the other way around."

Colleen Burke, Harvard M.B.A. 1970, entrepreneur, professor of business, and futurist, contributes frequently to World Business Academy Perspectives.

Such is the nature of truth that all it asks, and all it wants, is the liberty of appearing.

—Thomas Paine