Many of the most important resources our current civilisation depends on – all of them finite natural resources – form part of what historically would have been called ‘The Commons’: air; our oceans and waterways; wildlife; ground water; oil deposits underground; the diamonds, gold, silver or rare earths hidden deep underground. To just list the most evident ones.
In other words: “The Commons’ are at their origins the gifts that nature, planet earth, as bestowed on us.
More generally: A commons has three elements [Source]:
- A resource (natural or human-made)
- A community to steward it
- The community-determined rules to care for i
The term ‘The Commons’ expresses a very old idea: that some forms of wealth belong [at their origin] to all of us, and that these community resources must be actively protected and managed for the good of all. ‘The Commons’ are the things that humanity has access to just because we exist, and also what we created through joint effort, and that will (hopefully) last for many generations to come [Source]. Today, ‘The Commons’ is a general term for shared resources in which each stakeholder has an equal interest [Source], such as:
- Collaborative Commons
- Digital Commons
- Natural Commons
- Cultural and Intellectual Commons (also called Creative Commons)
- Urban Commons
- Knowledge Commons
The ‘Tragedy of the Commons’ then again, is the well observable fact that all players in our current civilisation tend to act independently according to their own self-interest, and often behave contrary to the common good of our global society by depleting or spoiling the shared resource – such as those mentioned above – through their collective action.
The Commons: Finite Assets (Capital), treated as Income
The Commons encompass some of our global society’s most valuable finite natural resource. From an economic point of view, they are for a reason also called ‘natural assets’ or ‘natural capital’. Most recent developments have even gone as far as to valuate them: i.e. calculate their monetary value equivalent. Because in the world we live in, what has no (preferably high) price tag attached to it, is worthless, useless … and therefore open to be used and abused by whomever, however, whenever, for whatever.
There are however, two minor (major!), but linked, fundamental malfunctions in this approach:
- These resources are in principle resources that belong to the global society as a whole. And yet they are ‘given away’ (typically in exchange of cash) by the most dominant local power in a geography, to the highest bidder. In doing so, these resources are converted from a finite asset, capital, into the origins of cash flow and thereby income.
- Income however, just as expenses, has some fundamentally different characteristics than capital: assets (capital) warrants a very careful use for their limited quantitative availability. Therefore, conserving them is of utmost importance. In contrast, ‘income’ is something that, at least in principle, has no limits, and maximising its rate is the purpose of just about any business globally.
Let’s just take oil as an example: if indeed it was truly treated as a valuable finite Common Asset of our global society, we would not only minimize its use, but also invest any funds obtained from its realisation (i.e. use) into efforts that would ultimately lead to true independence from any oil assets. Of course we know that as of today quite the opposite is true: Overall we have never been using as much oil (including its derivatives) as we do today, despite manifold pledges to the contrary.
The Corporate Board and The Commons: Mind the Balance Sheet Malfunction
Many a board falls into the trap outlined above: accepting that some critical asset (capital) is treated in fact as income upon which the company’s business model, profitability and future relies.
This is for instance, and without a shade of doubt, the case for companies and boards operating in any branch of the extractive industry as of to-date. But extractives are by far not the only, just the most evident, industry to do so: packaging, textiles, agriculture are other industries with the same issue, just coloured in a somewhat different shade of grey.
But what to do? For boards a good start would be to reassess the company’s balance sheets by doing a ‘simple’ piece of math, as discussed already in an earlier post:
- Look at and calculate openly and honestly the dependency on natural resources, and the associated limits on business growth as the business is defined today.
Any natural resource that turns up in the above equation – again, oil-derived products and resources are an evident example – should not be at the origins of a primary source of income, but rather be accounted for under finite assets (limited capital) and dealt with as ‘realisation of capital’.
A further step, and much more demanding in terms of today’s business attitudes, is to look at all the natural resources that somehow have a bearing on the company’s operations and profitability, and ask: Which ones of those – honestly speaking – form in reality part of ‘The Commons’?
- What does that mean for the company’s responsibility towards the community and our global society?
- How come that the company ‘owns’ parts of ‘The Commons’? What does this say about the company’s risks and dependencies in regards to its ‘license to operate’?
- What does the dependency on ‘The Commons’ mean for the viability of a company’s long-term future and prosperity?
Any business model that ‘has done the maths’ and the analysis accordingly to the above, and who has clarity on its dependency from The Commons, and how it is planning to address it, is a business model that at least in principle could be envisioned as a long-term viable undertaking.
For such businesses, there is and will be plenty of “room to grow’ – just differently than we can imagine it right now.
Further Learning:
Books
- Free, Fair & Alive: the Insurgent power of the commons https://www.freefairandalive.org/read-it/ (also available in print)
- The Wealth of the Commons: A word beyond market & state http://wealthofthecommons.org/contents (in some geographies still available in print)
The International Association for the study of the Commons offers publicly accessible resources:
- Coursera MOOC (Spanish only): https://www.coursera.org/learn/estudio-bienes-comunes
- Vocabulary of the Commons: https://www.slideshare.net/OpenSpace/vocabulary-of-commons
- Digital Library of the Commons: https://dlc.dlib.indiana.edu/dlc/
- Youtube Channel https://www.youtube.com/user/IascCommons including also videos by Elin Ostrom (THE researcher on the Commons)
