Rio+20: More Progress from Business Needed
This piece originally appeared in The Guardian.
Big business seemed to be everywhere at Rio+20, arguably more visible than the 100 or so heads of state and government, who arrived for the final few days.
Hundreds of business initiatives were announced through groups including Business Action for Sustainable Development and the UN Global Compact’s Corporate Sustainability Forum. And the corporate leaders who flocked to Brazil made all the right noises. “We have to bring this world back to sanity and put the greater good ahead of self-interest,” Unilever CEO Paul Polman told the Guardian.
But how much substance lies below the surface of these declarations?
The disappointing reality is that while a few of the business initiatives offer the promise of progress towards a more sustainable and inclusive global economy, most were incremental and unambitious. For a sector that prides itself on innovation, global companies largely failed to offer ideas commensurate with the challenges of climate change and over-use of natural resources.
Why, with so much business firepower at Rio, was this the case? We suggest three reasons:
First, the global financial crisis is stifling business activity and distracting CEO attention from what are (wrongly) viewed as longer-term challenges, such as sustainability. The same pre-occupation is true of governments, who underachieved as much, if not more, than business did at Rio. This is a missed opportunity as integrating sustainability into business plans can actually be part of pro-growth economic strategy, as GE, Siemens, Unilever, and many other companies are showing.
Second, increasingly multilateral global forums are not the settings for breakthrough innovation, tending to settle for lowest common denominator outcomes. More likely to make a difference are bottom-up solutions where companies, governments at all levels, and other constituents, such as NGOs and development banks, work as partners to solve specific sustainability problems. Sectors such as clean energy and water supply, in particular, lend themselves to such an approach.
Third, governments matter. Companies beholden to shareholders will only go so far on their own in embracing sustainable practices. While business is increasingly active in shaping the sustainable development agenda, governments must provide the paradigm-changing policies and incentives needed for global green markets and investments to flourish.
Fossil fuel subsidies, the subject of civil society protests at Rio, are a good case in point. Such subsidies dissuade energy companies from diversifying from coal and gas into cleaner, lower-emission sources and hold back the global growth of renewables. Yet governments declined to use the once-in-a-generation sustainable development summit as an opportunity to make progress on fossil fuel subsidy reform.
Potential for Progress
All this said, Rio+20 did produce some business-related outcomes with real potential for action on the ground, depending on sufficient follow-up progress.
Valuing Natural Assets
First were the multiple efforts by global corporations to do something about their huge impact on natural resources. The Natural Capital Leadership Compact, signed by 15 global companies, urged action to properly value and maintain the Earth’s natural capital; the Natural Capital Declaration saw similar commitments from 39 banks, insurers and investors; and an additional 24 companies, worth a collective $500bn (£403bn), reinforced the importance of accounting for natural capital as a business imperative.
More specifically, 45 chief executives, who belong to the Global Compact’s CEO Water Mandate, announced commitments to improve water management practices and pursuing public-private partnerships to solve the global water crisis.
Unfortunately, governments at Rio stepped back from the more ambitious proposals to embrace a GDP-plus approach to national accounting that incorporates natural assets. This is an area where forward-looking businesses can take the lead.
Corporate Disclosure and Reporting
Although the final Rio communiqué watered down a proposed requirement for large companies to report on sustainability, it still provided a push for voluntary global disclosure of private sector impacts. Also welcome was the UK government’s announcement that, in April 2013, it will introduce regulations to require publicly listed companies to fully report their greenhouse gas emissions – a move supported by Cisco, PepsiCo and Aviva Investors, among others.
Sustainable Transport Finance
While the groundbreaking commitment by eight multilateral development banks to provide $175bn (£112bn) over 10 years towards sustainable transport in developing countries was not a business-led initiative, it could help kick-start smarter and more innovative public-private sector co-operation, in a sector responsible for about one-quarter of global carbon dioxide emissions.
With initiatives like these, Rio provided modest progress on some areas, but the clock is ticking down to a time when humanity breaches Earth’s ecological limits with unknown consequences.
New ideas and enhanced cooperation between governments, the private sector, and civil society are needed now if we are to avoid this daunting scenario. Business must help lead this effort by doing what it does best – thinking up innovative solutions that can change the world and setting time-bound targets to bring them to scale.