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Why the private sector is holding back on sustainability

Paul HohnenNext year’s UN conference on sustainable development in Rio de Janeiro will be my third such event. Already I am torn between disempowering premonitions of a “Rio lite” outcome, which fails to match the substance of its namesake 20 years earlier, and a sense of the historic opportunities it offers.

The 1992 and 2002 conferences were held in a context of rising public and media pressures to address a list of well-documented social, economic and environmental problems. On paper, at least, their outcomes were comprehensive and compelling. Rio’s agenda 21 and Johannesburg’s plan of implementation offered a clear (if dauntingly long) list of challenges and responses. The problem was, however, that few of the political commitments made have been implemented.

Now here we are again, two decades later, with what appears to be a reduced level of collective (including media) concern and little or no political leadership, this notwithstanding a measurably higher level of risk on all fronts. Wherever you look, the bio-physical underpinnings of sustained human welfare and economic growth are becoming more fragile – whether it is climate change, ecosystem meltdown or the build-up of waste. Tipping points are upon us.

So what do we need to do differently this time to improve our odds of surviving the 21st century?

Earlier this year, at the request of the UN environment programme (UNEP), I spent some time researching what the business sector had to say about sustainable development. It was informative and merits closer attention, especially by politicians and diplomats.

Surveys of business leaders’ attitudes over the last decade show a number of consistent themes. Notably, these include the views that sustainability is a real issue, and not a passing fad; is a “mega-trend” which will increasingly shape business strategy; and is not yet mainstreamed, but is well on the road to being so.

The mainstreaming referenced can be seen at a number of levels, from the growth of wind and solar power, to the growth of socially responsible investments and sustainability reporting, and the increased availability of more sustainable products and services. At a global level, however, most businesses are still far from engaged in any of these things.

So what is holding the private sector back from making a concerted push to sustainability?

Here, the business literature is especially enlightening. When asked about the obstacles to sustainable development, executives’ responses commonly highlight the following system challenges.

• Short-termism. The constant pressure for shareholder value and quick returns forces business decisions that focus on the near term. This is exacerbated by the investor trend towards investing for shorter periods.

• Value definition. At the national and company levels, accounting standards do not even recognise most sustainability issues, let alone reward better sustainability performance. But, as the management saying goes, “you can’t manage what you don’t measure”.

• Consumer inertia. What consumers say they want, and what they buy, are two different things. Many companies have rolled out more efficient products (remember the Smart car?) only to see a lukewarm market response. Green sells, but only if it’s the same price.

• Regulatory uncertainty. In most countries, policies to encourage sustainable development (ie through higher prices or incentives) either do not exist or have been unpredictable. Rising public debt problems are now eroding support for many green programmes.

• Transition pain. The shift from a brown economy to a green one will inevitably cost jobs. While “creative destruction” has always been a part of economic growth, a broad-based shift away from polluting industries will not always be compensated by net job creation.

Other challenges mentioned by business leaders include: the fact that many necessary technologies are still at a developmental stage (think carbon capture and storage); the need to meet the demands of a growing Chinese and Indian middle class; and the very real political problems everywhere of winning public support for what might be the most economically effective solutions (ie, a carbon tax).

This time around, the private sector needs to be engaged more substantively in designing the process, since it will be implementing most of them. The list above is a good starting point. Rather than adopting an issue-by-issue approach, we need to help our whole economic system work more effectively to meet human needs.

While it is impossible for a single conference to do everything, next year’s Rio conference will make a historic contribution to sustainable development if it calls for policies, practices and frameworks that encourage:

• Long-term investment in low-carbon and resource-efficient products and services and the growth of crucial sectors such as education and health care.

• Measurement and reporting of every organisation’s contribution to sustainable development and reform of national accounts systems to reflect key sustainability indicators.

• Education and research about sustainability risks and opportunities.

• Implementation of existing commitments (ie phasing out of harmful subsidies) and the creation of public dialogues on how to create greener and more just local economies.

• Integrated public decision-making which ensures that national economic, trade and environmental policies are consistent, and promotes a stronger business voice in how faster progress can be made towards a greener economy.

The worst thing that could happen now is that we let short-term financial challenges and interests tempt us into repeating the mistakes of a dying economic model. The best course is to seize the enormous opportunities of moving to a more equitable and resource-efficient economy. If we want there to be a long-term, Rio+20 is the place to show that we’re doing something about it.

First posted on the Guardian’s Sustainable Business Blog


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