Looking for a leader

13 October 2011 | Article

Businesses around the world are adjusting to a rapidly-shifting economic landscape but should we expect them to lead the way to a green global economy?

The concept of a green economy has been around for a while now. For many years there have been calls for a greater integration of environmental concerns into economic decisions. This, in essence, is what the green economy is about. More recently, the idea of making the global economy more sustainable has gained prominence because of the ongoing economic crisis.

Sustainable development with an economic makeover

The Green Economy Coalition which brings together environment, development, trade union, consumer and business sectors, defines the green economy as a resilient economy that provides a better quality of life for all within the ecological limits of one planet. According to UNEP, the United Nations Environment Programme, such an economy improves human well-being and brings about social equity whilst reducing environmental risks and ecological stress. It also includes the direct valuation of natural capital and ecological services.

Sustainable development with an economics makeover—a green economy certainly sounds like a remarkable idea. But how are we going to get there, who is currently in the driving seat and should someone else be taking over? And how relevant is it anyway? Some see the green economy concept as a repackaging of sustainable development and something that the environmental community has already been working towards for many years.

Smart moves

From a business standpoint, it increasingly makes good sense to factor sustainability into the equation, and many companies are doing just that.

The sport-lifestyle group, PUMA AG, for instance published a combined Financial and Sustainability Report in April followed by its first Environmental Profit and Loss Accounts in May showing an economic valuation of the environmental impacts caused by greenhouse gas emissions and water consumption. Similarly, in 2010, the world’s largest sportswear brand NIKE Inc. released its Environmental Apparel Design Tool to fast-track sustainable innovation and decrease the use of natural resources, and recently pledged to eliminate all hazardous chemical releases from its supply chains by 2020.

With sports companies sprinting towards greener horizons, other sectors are following suit. Unilever with its Sustainable Living Plan defines over 50 targets to halve the environmental impacts of its products, source 100% of agricultural raw materials sustainably, and help more than one billion people improve their health and well-being.

But are companies really embracing sustainability or are their moves mainly in response to pressure groups, consumer demands or government rules? Are consumers and shareholders being blinded by a belief that just because big brands are partnering with conservation organisations, their operations are responsible?

Greenpeace with its ‘Detox Challenge’ campaign was behind major brands agreeing to remove hazardous chemicals from their supply chains, and they are now also pointing the finger at VW Group (the owner of Volkswagen, Skoda, Audi and Seat) for trying to thwart the European Union’s 2020 emissions reduction plans, whilst also making less progress than its rivals on fuel efficiency.

But NGO and consumer pressure may not be enough; many believe governments should be setting the policy conditions (incentives, regulations and so on) that force businesses towards greener horizons.

Assertive action or moving in the shadows?

Governments across the world are showing a growing interest in playing their part in greening the economy, with some implementing measures designed to shift national economic thinking and allow them to compete for a slice of the ‘green cake’.

The UK for instance published its vision for “Enabling the Transition to a Green Economy” in August, describing the green economy as a transition involving all parts of business, government and society. The UK Environment Secretary, Caroline Spelman, was quoted as saying that “the government’s objective of reducing the deficit and strengthening the economy goes hand in hand with our ambition to be the greenest government ever.”

China has put in place aggressive regulatory and fiscal policy packages, in line with a five-year plan to underpin a ‘clean revolution’, whilst South Korea is seemingly sailing towards a green economy with a presidential commission on green growth set up in 2009; the Low Carbon and Green Growth Act passed the same year; and planned 30% greenhouse gas emissions cuts by 2020. Mark Clifford, Executive Director of the Asia Business Council, believes the country “has managed to dart past political lethargy and move forward with government policies that could serve as inspiration for others.” According to Green Growth Korea, South Korea’s government and private sector aim to invest 40 trillion won ($36 billion) in renewable energy by 2015.

But while some governments are shifting up a gear, most are still dithering as to the best course to take, or shying away from tougher decisions that would result in implementation on the ground. And what concrete implementation are we seeing beyond all the bold pledges?

In the case of the UK for example, the new vision for a green economy is not tied to policy announcements to turn it into reality. According to WWF, the measures proposed merely reflect the Government’s existing plans which are insufficient to meet the scale and urgency of the challenge.

Giulia Carbone, Deputy Director of IUCN’s Business and Biodiversity Programme believes there is much work to be done to make the green economy a reality given the current economic climate.

“For many countries, particularly in Europe that are struggling to survive, the environment and sustainability are generally still seen as a cost rather than an opportunity.” The same goes for business. Large multinational companies that are weathering the global financial crisis can still afford to address sustainability, but for small and medium sized enterprises, their main goal is survival.

Carbone believes it is up to governments to create the conditions needed to make the green economy a mainstream endeavour. Plenty of examples of ‘best practice’ exist, they just need to be scaled up. “Many companies are already taking the initiative and setting standards beyond what is required of them. But their action is not being matched by action from the policy makers. It’s not about business taking over responsibility of governments or vice versa. Effective results will only be achieved when corporate action is matched with the right policy framework.”

New players enter the field

Whilst UNEP has mapped a route to a green economy that involves investing 2% of global Gross Domestic Product (GDP) into 10 key sectors, backed by forward-looking national and international policies, other players are contributing their own thoughts and actions to the debate.

The World Health Organisation launched its “Health in a Green Economy” series in June, with initial findings that greener investments in transport, housing and household energy policies can help prevent significant cardiovascular and chronic respiratory disease, obesity-related conditions and cancers—further strengthening the case for a green economy.

At the institutional level, the UK’s University of Exeter is pioneering its One Planet MBA to be launched this September in partnership with WWF and 11 major businesses, with the aim of producing “unique planet-minded business leaders”. Others, such as the Lausanne Business School in Switzerland, are also offering MBAs in sustainable business.

In many parts of the world, entire communities have chosen their own path. The Transition concept—a community-led response to the pressures of climate change, fossil fuel depletion and economic contraction—has spread like wildfire, with more than 300 communities recognized as Transition Towns across the world. The point here is that these communities want sustainable living.

And when it comes to what people want, the creation of the Happy Planet Index, that takes sustainability into account and challenges development indices such as GDP and the Human Development Index, illustrates that there is indeed a shift in thinking.

Sally Jeanrenaud, Senior Research Fellow in Sustainable Development at the University of Exeter Business School, notes that the change in mindset can be seen everywhere, from the development of new MBA courses to young generations favouring alternative types of mobility— trains, bikes and shared cars.

Connecting all the pieces

For Steve Bass, Head, Sustainable Markets Group, at IIED, the International Institute for Environment and Development, defining who drives the green economy hinges on which angle you look from. He believes the first broad approach is to stimulate growth through green financing, investment and technology projects. The second approach relies on green policies, regulations and standards to alleviate the environmental and social problems of growth, whilst the third, largely adopted by academics and NGOs is about redefining the very purpose of growth to highlight wellbeing, equity and ecological limits.

One opportunity to address a green economy from all angles is coming up next year, with the Rio+20 Summit. In June 2012, the United Nations Conference on Sustainable Development will convene in Rio to “lay the foundations of a world of prosperity, peace and sustainability”. The Conference will focus on a green economy from the perspective of sustainability and poverty eradication, and the creation of an institutional framework for sustainable development.

IUCN is mobilizing itself to help ensure that the Rio Summit is successful in advancing the transition to a Green Economy. David Huberman, coordinator of IUCN’s work on greening the economy, sees Rio as: “a unique opportunity for the conservation community to ensure that nature is kept at the centre of Green Economy discussions. Rather than result in environmental degradation, economic development can thrive on the preservation, management, and restoration of ecosystems. Developing these nature-based solutions is essential for transitioning to a truly green economic system.”

Holding up the mirror

The waters are clearly stirring at different levels but will all this be sufficient? Will governments have the courage to sometimes be unpopular? Will the businesses who truly believe in a green economy be enough to sway the balance? Will the consumers who make informed decisions generate a global shift in responsible spending?

But more importantly, what are the alternatives? Is ‘business as usual’ still a desirable option? The current global economic turmoil might be a time of great opportunity in which the green economy paradigm gets a firm footing and gives rise to a new economic order.

At the end of the day though, businesses are driven by consumers and governments elected by voters. As each drop makes an ocean, now would be the time for each and every one of us to take a long, hard look at our ways.

Who do you think is responsible for leading us to a green economy? Let us know by posting your comments below.