|A Global and Business Challenge - the
need for Sustainable Development |
By John Baillie of Park Lane College, Leeds / UNITED
Contribution to the EDUVINET "Global Challenge" subject
The purpose of this report is to highlight some of the key issues, particularly the economic issues affecting business, to describe the difficulties and to put forward possible solutions and to provide a list of web sites containing useful information. An exploration of these web sites will uncover a large quantity of additional information and examples of up to date, practical environmental policies.
2. Key indicators - a selection of data
3. The Business-Environment Debate
The environment has become one of the key challenges facing the business sector. Large companies now build it into their plans and everyday activities but small companies still pay much less attention to it. This change reflects a broad shift in social attitudes among the public and among employees, and many companies, whilst operating under severe commercial pressures, devote a high level of human and financial resources to addressing the issues. Large companies with active environmental policies are listed in the collection of web-sites. However, the key question remains: how can companies reconcile wealth creation with environmental sustainability ?
4. Key concepts
1. Environmental /economic 'win-win'. Certain measures bring benefits in both environmental and economic performance. The statement is that 'environment is good for business'.
However, remaining competitive and delivering value for shareholders still remains the main objective of most commercial organisations.
5. International developments
The world's economy has become more tightly integrated as trade barriers have fallen and capital has become more mobile. Developing countries are expanding economic activity setting more complex competitive challenges.
Sustainability and the globalization of the world economy place competing demands on companies and countries and there have been a number of important global and European initiatives.
6. Environmental pressures on business
7. Environmental Challenges
Business has to address the environmental challenge in a more systematic and proactive manner. The main issues are: energy policy, transport-related environmental problems, land use planning, climate change and sustainable development. The human health issue is increasingly important. One success is that the UK's carbon dioxide stabilisation target for 2000 is likely to be met due to large-scale investment in gas-fired power stations. However, more demanding emissions targets were set at the Kyoto Conference.
The operation of the subsidiarity principle within the EU leaves more environmental regulation to the discretion of member states and local government is taking a more active role in policy making in transport related problems, especially air-pollution, and in land-use planning and also in ensuring that companies face up their responsibilities to the local community.
8. Environmental Policy Failures
The list of data illustrates a global failure to take the environment seriously and to implement the principles of sustainable development.
9. Major environmental accidents
The environmental accidents listed have helped to galvanise public opinion into demanding that there should be more regulation.
The leak at the Union Carbide plant in Bhopal , India, a chemical spill into the Rhine from a Sandoz plant in 1986, Chernobyl nuclear accident 1986, Exxon Valdez oil spill in Alaska 1989, the Braer spillage in 1995 and the Sea Empress spillage in 1996. Other events - the disposal of the Brent Spar oil platform in 1995.
10. Improving environmental performance
Factors driving companies to improve environmental performance are regulation, customer preferences or demand, relations with local communities and investor requirements.
Regulation plays a vital and successful role
- the UK environmental standard BS7750, the EU Environmental Management and Audit Scheme (EMAS) are slowly becoming more widely implemented. Setting such standards have had a significant impact on some company activities and should raise the environmental profile as more companies adopt them.
11. The Win-Win Scenario
This is about enhancing resource productivity hence economic competitiveness. By producing more for less and from cleaner production processes both shareholder value and the environment benefit. Sensible environmental standards act as a catalyst to firms to innovate and re-engineer their technology. This can result in processes that pollute less and lower costs or improve quality. An example is the Aire and Calder waste minimisation initiative in Yorkshire where companies involved are now saving £3.3 million a year. Combined-cycle gas turbines are an example of clean technology.
Investment bringing environmental benefit
However environmental investment does not always reduce costs. Unless compelled companies will not undertake investment on environmental grounds alone.
Stricter regulatory control could foster a more competitive environment. Companies in heavily polluting industries face extinction. Tougher and properly enforced standards are likely to mean more customers and hence increased profits and some companies can gain competitive advantage by anticipating higher environmental standards more quickly than their competitors.
12. Economic Instruments
Pollution and environmental degradation is the result of imperfections in the market system that have allowed private and social costs to diverge. Economic decisions have been made which do not accurately reflect the costs of environmental damage and tend to promote the overuse of natural resources. Industry is able to pollute and impose the costs of its activities, such as contamination of water and land resources on the rest of society because the market is sending out the wrong price signals.
Government must therefore intervene to align private and social costs and force industry to internalise the real costs previously imposed on society. Intervention can be standards and regulations or 'green' charges or taxes. Voluntary initiatives would form part of a balanced policy 'mix,. 'Getting the prices right' is the most important factor in the pursuit of sustainable development. The concept builds on the polluter pays principle'(PPP) adopted by the OECD and the EU.
Different types of environmental economic instruments are: Charges and taxes, deposit schemes, subsidies, market creations and enforcement incentives. Their advantage is that they can provide a flexible, cost-effective and market-bases solutions. Examples are a tax differential on unleaded fuel, taxes on disposable batteries and the imposition of a 100 lira charge on plastic bags in Italy.
The European Commission's proposal for a combined carbon/energy tax is very controversial and has met with intense and hostile industrial opposition. The principal objection was that it would impact on international competitiveness in global markets. The UK also abandoned the idea of tradable emission permits for Sulphur dioxide from power stations. The UK introduced the landfill tax in 1996. The tax is so low it may have little of the desired market effects but it is a practical success.
Economic instruments, apart from the polluter pays principle have not yet been very successful in the UK.
13. Environmental Strategies
Major companies are building environmental strategies into their daily planning. Examples of how this can be done are as follows:
14. Sustainable Development
This is defined as 'meeting the needs of the present without compromising the ability of future generations to meet their own needs'.
There are seven strategic imperatives": reviving growth, changing the quality of growth, meeting essential needs for jobs, food, energy, water and sanitation, ensuring a sustainable level of population, conserving and enhancing the resource base, reorienting technology and reducing risk, and merging environment and economics in decision-making.
The principal rationale for profit-motivated enterprise is that it represents the most efficient and effective way of marshalling resources - natural, financial and human to meet needs so sustainable development and the enterprise system 'seem' to fit together. Environmentalists and economists share a common interest in promoting efficiency. However reconciliation between sustainable development and business is not so simple and the evidence is that it is proving very difficult. On the wider scale, human needs in different societies are met to vastly different degrees. The word' needs' itself is unclear. For example , what are basic needs? - food, shelter and security or quality of life and appreciation of the landscape? On the smaller scale the impact of any practical business decision will have different consequences. For example, switching business to an alternative supplier may result in longer freight hauls and higher levels of vehicle emissions. There are gains and losses. A balance is needed so that debate, and detailed consultation and stakeholder involvement are essential.
15. Sustainability and the Market
A broad goal is to reduce the flow of materials required to generate 'value added'. It has been suggested that the developed economies need to reduce the production of materials by a factor of ten over the next 50 years as an ecological imperative. Also there is a recognition that value added is created in the shaping of products and services for the benefit of customers eg in the possibility of providing service packages which include energy efficiency or taking responsibility for the disposal of chemicals or potentially toxic materials. Some consumers appear more prepared to pay a premium for green products and bad companies are punished for 'bad' corporate behaviour. eg the consumer boycott of Shell concerning the disposal of the Brent Spar oil rig.
There is a need for ecological tax reform switching the burden of taxation from public goods -such as employment- to bads such as environmental pollution. This would provide incentives for appropriate modifications of business behaviour
Trade liberalization without adequate environmental safeguards will lead to environmental deterioration and trade liberalization and the increased revenues which it brings is an essential condition for the achievement of sustainable development.
Progress has been made in the direction of sustainability but there have been notable failures. Most of the OECD countries have failed to keep their greenhouse gas emissions at 1990 levels. Coal is subsidised in much of Europe and the Developing world as well as in Germany and Spain. Petrol in the US costs less in real terms than in 1949. However, there is a real belief that the capacity to earn sustained profits is intimately related with the achievement of high levels of environmental performance but changed conduct among large companies is not matched by changes in SMEs and major systemic environmental challenges at the global level have scarcely been addressed. The effort does not match the gravity of the situation and will not reduce sufficiently the environmental degradation as shown in the list of key data. It is not enough to rely on economic or market forces to drive forward the pressure for change and much tougher regulation is needed.
17. Useful web sites