The Business Case for a Green Economy

(Image: www.greenbiz.com)

Rio+20 Conference concluded on what many observers describe as a lackluster note: no grand agreements have been reached and even the closing paper ended up not being called a “Rio+20 Declaration” but more modestly Rio+20 Outcomes Document. Attendees did little more than reaffirm the original Rio Principles of twenty years ago (hence the “+20″ in the name) and the Universal Declaration of Human rights (adopted in 1948) while calling for new Sustainable Development Goals to complement the Millennium Development Goals.

But where heads of state and government and high-level representatives failed to reach any concrete commitments on pressing global sustainability issues, other Rio+20 participants demonstrated a parallel pathway towards the type of development the world needs. “The lack of political leadership,” writes former Irish President Mary Robinson, “was countered by the incredible vitality, determination and commitment of civil society – from young people, women, trade unions, grassroots communities, faith-based organizations and the private sector.”

The role of the private sector in particular was highlighted at the Rio+20 Corporate Sustainability Forum. Hosted by the UN Global Compact (UNGC), the Forum focused on the theme of “Innovation & Collaboration for the Future We Want,” and aimed to strengthen the contributions of business to sustainable development. The event gathered thought leaders from business, civil society, and governments to zero in on a key aspect of making the transition to a more sustainable growth model: the business case for a green economy.

In many respects, that business case has already been made. As Achim Steiner, Executive Director of the United Nations Environment Programme (UNEP), pointed out, businesses that are true long-term strategic planners very well understand the need for sustainability to be at the heart of economic decision-making, and the benefits thereof in terms of resource management, licenses to operate, and opportunities in new markets. But the way that most businesses — and economies — are structured makes green transitions difficult, because of the sunk costs of investments in older technology, the entrenched “grow now, clean up later” thinking, and a regulatory framework that reinforces both.

Therefore, Steiner noted, “the focus on business case today is not about the basic economics of business anymore: the question is how we accelerate and scale up this transition.” Interestingly, it may be easier in developing countries that do not have to deal with the same technological and economic legacies that industrialized countries do. According to the UNEP figures, for instance, last year China was the number one investor in renewable energy infrastructure.

Beyond the advances in green technology and investment, leadership at the company level is key in order for this transition to succeed. As Barbara Krumsiek, CEO of Calvert Investments, put it, “sustainability is not sustainable without board-level leadership.” This means that one-off sustainability initiatives are not sufficient; companies must integrate sustainability into their strategy and daily operations, and work with suppliers and business partners to incorporate sustainability in their strategies and goals as well. Developing metrics for tracking progress and linking improved sustainability to strong financial returns is crucial to making the business case for such changes.

Sustainability is not purely an aspirational goal: many companies around the world already make it a core part of their business, employing international best practices and standards such as the UNGC’s Ten Principles. Translating these principles into practice is a common challenge and it was the focus of a 2010 set of six case studies that CIPE, Social Accountability International, and UNGC co-authored: From Principles to Practice: The Role of SA8000 in implementing the Global Compact. One of the companies featured in these case studies, Brazilian firm Beraca, participated in the Corporate Sustainability Forum to share its experiences.

Finally, the Forum illustrated some reasons why the voice of the business community should not be overlooked in economic policy debates. If a critical mass of like-minded companies work together to “walk the walk” of making the green economy a reality in their countries, they can help shape the legal and regulatory environment to be conducive toward that transition in a way that fuels, not undermines, economic growth. It is a challenging transition too big for any single company or industry to tackle alone, and can only be achieved through closer cooperation between governments, private sector, NGOs, and other social actors.

“We are in a world of bottom-up social change,” emphasized UNGC’s Executive Director Georg Kell. “We hope that Rio+20 will mark the beginning of a new movement toward sustainability, a movement that is led also – and especially – by business through innovation but where all stakeholders: civil society, trade unions, the academia, investors in particular have a critical role to play to provide the incentives. … We need a long-term perspective to change the incentive structure toward sustainability.”

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