Reasons to Be both Hugely Disappointed and Very Excited

2012•09•07 Charles Arthur Making It Magazine

Sustainability specialist Paul Hohnen answers questions about ‘greenwash’, sustainable development and what governments and the UN need to do to save the planet. 

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You have worked on economic and environmental issues for over three decades, as an Australian diplomat, as a Director of Greenpeace International, as Strategic Director of the Global Reporting Initiative and now as a consultant, advising governments, inter-governmental agencies, businesses and non-profit organizations. What are the main changes that you have seen in the field of sustainable development during that time?

Looking back, there are reasons to be both hugely disappointed and very excited. On the negative side, it is clear that, since the first Earth Summit in 1992, governments have not shown the necessary follow-up and seriousness in relation to the commitments they made. Equally, on the business side, we can see that the majority of companies around the world are still not routinely integrating sustainable development considerations into their daily operations. Too often, the polluting and destructive old business model is still practised.

The good news is that there has also been a vast array of positive developments. We see these in: legislative changes promoting such things as green energy, particularly in the European Union; changes in corporate management and strategy integrating sustainability issues; the development of new international instruments, such as the ISO 26000 standard on social responsibility and the updated OECD Guidelines for Multinational Enterprises. Twenty years ago there was no mechanism for companies to measure, monitor and report their progress against environmental, social and economic indicators. Since the launch of the Global Reporting Initiative in 2002, there now is.

We know that 80% of the leading blue chip companies on the Global 250 list now routinely measure and voluntarily report some aspects of their sustainability performance to investors and the wider public. This is helping to give a better understanding of what sustainability means in practice and has helped the development of management tools and practices that enable companies to integrate sustainability considerations into their business strategies.

Also, on this positive side of the equation, we see the emergence and maturation of new technologies; wind and solar power, for example, have moved from being fringe to fast growing and increasingly mainstream energy providers in many countries; energy-efficiency technologies are enjoying rapid market growth; mobile telephony and computing are among the leading examples of how to get more services from less materials.

There is an endless list of potential markets for sustainable goods and services, and smart businesses are now targeting these with an eye on future growth and profits. Smart governments also see the potential to use sustainable development to drive innovation, stimulate economic growth and create new jobs.

That is quite an upbeat appraisal. How do you respond to the charge of ‘greenwash’ — that companies are saying they do one thing but are really carrying on with ‘business-as-usual’?

I agree that it’s essential that we remain alert to the risks of false or overstated claims of ‘green-ness’. The United Nations Conference on Trade and Development estimates that there are something like 77,000 multinational corporations around the world. In addition there are countless small and medium-sized enterprises. The majority of these companies are, as far as we know, not routinely measuring or trying to improve their social and environmental impacts. Most managers, regulators, consumers and investors have no idea whether a particular company has a positive or negative impact on sustainable development. This situation makes one cynical about advertisements which give the impression we are living in the Garden of Eden.

A small but growing number of major global companies now recognize that the future of business, the future of humankind and indeed of this planet, depends on a major transition to a new and sustainable business model.

 

Paul Hohnen addressing the United Nations Industrial Development Organization (UNIDO) Green Industry conference in Manila, the Philippines, in 2009. Photo: UNIDO.

There are undoubtedly large companies saying ‘green’ but not doing ‘green’. These should be called to account. But equally it’s vital to recognize and nurture progress. A small but growing number of major global companies now recognize that the future of business, the future of humankind and indeed of this planet, depends on a major transition to a new and sustainable business model. Their CEOs are speaking out on the challenges and making corporate commitments that go beyond regulated requirements. They are often leading the debate.

Let us be clear. All the scientific evidence points to the fact we are crossing — or might have already crossed — planetary system boundaries. These include changes to atmospheric chemistry (with resulting changes in climate and ozone depletion), to the nitrogen and phosphorus cycles (affecting river and marine ecosystems), to biodiversity loss and profound changes in land use. We need to understand that these are not irrelevant or remote developments that might only affect, say, one kind of insect in a rainforest somewhere. These are changes that will sooner or later affect every species on Earth. It is essential to keep in mind that our current political, social and economic systems — and any hope of sustainability — are built on a healthy and self-replenishing ecosystem. The sooner our political and business models incorporate this reality, the sooner we can put ourselves on a sustainable path.

There are many causes of the current situation. To my mind, the main issue is one of market failure. It has been caused by governments not translating into policy and regulation the awareness and concerns they expressed in 1992. Only when the market sends a price signal for the social damage and pollution we create will the necessary corrections take place. It has also caused by governance failures on the part of companies, which have ignored or even argued against the laws of physics and biology in their pursuit of profit based on the unsustainable use of raw materials. This is beginning to change however. Major companies and consulting firms such as McKinsey and KPMG are now using language and concepts that Greenpeace talked about twenty years ago. Failing to understand these underlying shifts in the business environment will probably be seen by historians as the largest single political and commercial mistake that governments and companies can make at this point.

One way of describing sustainable development would be that is the process of providing more while using less. How are we going to square the aspirations of people all over the world, who want to escape poverty and prosper, with the declining availability of resources and with the effect of increases in the emission of greenhouse gases? For example, greater access to energy will surely improve people’s lives but won’t it also result in increased levels of production, increased consumption and increased use of resources that are running out?

Sustainable development has both social and environmental dimensions. Humankind can’t be sustainable unless, as you say, we learn to do more with less, and ensure the continued health of the ecosystem. This certainly means more material efficiency and substituting one material for another. On the other hand, we won’t have the political and social support for such a transition unless we have a population that understands these challenges and can help support the change that is needed. Broadly speaking, two roads lie ahead. One takes us to a world of winners and losers where there is increased competition for declining resources and where capacity to adapt is decisive but not shared. The other takes us to a world where we use our understanding to forge a common approach, where these historic challenges are seen as opportunities to create new industries, jobs and development models.

This puts a lot of responsibility on consumers in the developing countries — the new middle class — who won’t be able to follow the same patterns of consumption that we see in the developed countries. Yet these patterns are still being promoted, still being advertised. Global businesses are going to have to quickly and fundamentally change their products.

Yes and no. ‘No’, there is no hope that, based on the current resource-intensive model, the emerging middle class in the developing world can hope to have all the benefits enjoyed during the last century by the developed world. We would need another planet to provide the raw materials and absorb the waste! But, ‘yes’, we have not yet explored the full potential of delivering essential goods and services with hugely reduced material inputs. The leading companies know they will have to change their products and their marketing. We are already seeing signs of this happening. Look at the rise of solar and wind power in China, almost all of it domestically manufactured. Consider how detergent manufacturers have moved to products that use less energy, water and chemicals and use advertising to raise awareness among consumers. However, we still see too many companies talking ‘green’ but promoting large, inefficient cars and lifestyles that are unattainable in much of the developed world, let alone in the developing countries. This is not a sustainable situation. A new model is evolving but there is still too little leadership. Politically, these are not popular messages, but they are essential if we are to survive the 21st century.

So, what is going to happen if governments and business fail to react to this danger?

Here’s the great irony of our current situation. If we fail to choose to make orderly and strategic changes to prevent the profound system changes that are in the pipeline, these changes will take place. We will then be forced to respond in a probably disorderly and non-strategic manner, where the social, political and economic costs will be significantly higher. We will be forced to become energy efficient because we will have run out of affordable oil and gas and failed to build a renewable energy-based system. We will be forced to develop new ways of growing food more efficiently, with less water, because there will be less water available. We will be forced to live in different ways and places because climate change will make some places unlivable.

The reality is, however, that if we continue to follow the 19th and 20th century development model, we will undermine any chance of sustainable development.

If people only react when they have to, won’t it then be too late to stop the effects of climate change?

There is an increasing number of scientific experts who think it is too late already. We are fast reaching a point when it will be too late to prevent progressive and possibly very rapid change in the climate system, as well as other parts of the Earth’s physical processes. Many, including myself, think we should be now thinking of sustainable development really as a self-defence issue. While remaining humble about our understanding of all the dynamics and timings involved, we should be preparing for disruptive changes that will affect everyone. I make the defence or insurance analogy because it can help put the risks in context, and justify the defence and war-time sized budgets and measures that will be necessary to protect our future. One of the great failures in global governance has been the failure to communicate the scale and urgency of the changes we face. Climate change, for example, will affect every part of the planet. Initially, some parts of the world — like the poles and already desertified areas — will be hit earlier and harder. Countries with greater economic strength will have greater initial capacity to adapt. We will see more people forced to relocate their families or businesses.

It’s worth recalling that most of the major shifts in human population since we began to spread out from Africa 60-80 thousand years ago were driven by climate change. The important differences now are that there are 7 billion of us and we are triggering the climate change by our own behaviour. There are no walls or policies or systems that will stop the great climate and resource migrations that could take place as a result of raised sea levels or changing rainfall patterns.

It is an illusion to think that in the current nation-state system it will be possible to protect one’s own territory, culture or economic system from major change. Only determined collective action will have any impact, as we saw with the largely successful measures to prevent ozone depletion. While these are issues that should have long been a permanent feature at the UN Security Council, they are still not given the attention they deserve. Increasingly, however, ordinary people are now talking about them over the dinner table. There is a rising sense of fear that the future has little to offer the young. Few politicians now promising that the next generation will ‘have it better’. Even mainstream economic newspapers are now raising the question of whether the free market system can save itself.

What should our governments do in the short-term?

We are in a phase where governments, including those in the developing world, continue to publicly subscribe to the myth that a resource-driven economic recovery is the best policy for the next decade or two. The rationale for this is superficially appealing — the idea that we can recover from the 2008-2009 global recession by going back to a ‘business-as-usual’ model, creating more jobs and more export-led growth based on cheap raw materials and labour. The reality is, however, that if we continue to follow the 19th and 20th century development model, we will undermine any chance of sustainable development. This approach will only accelerate dangerous climate change, potential resource wars (think of oil and petrol) and the collapse of public confidence in free markets. While it may take some people out of poverty for a while, it is likely to expose them — and everyone else — to greater problems mere decades later.

Governments should be honest about the scale of the problems, which they are not at the moment. They need to be honest and open about the difficulty of making the transition. There is no single, simple answer to this. It means moving towards green industry, to a green economy that prizes and prices raw materials effectively and that takes us to a world that is solar-powered and wind-powered, uses renewable energy, and creates biological reserves that allow fish stocks and forests to recover and to spread. And they need to be prepared to pay for this. We readily pay trillions of dollars a year for defence systems and wars, yet we are not paying the same amount to protect ourselves from climate change, poverty alleviation and so forth. That is poor insurance, poor policy. Governments need to recognize that they should that put a price on carbon because, if they don’t, we will be paying far more, not only financially, but also in terms of the very future of cultures and ecosystems, and the political systems that we have built up over the last 4,000 years of city-based civilization.

You recently participated in the annual UN Private Sector Focal Points meeting. How does this relate to what you have been saying?

I think this an example of a positive development in terms of international governance. When I started my career as a young diplomat, relations between government and the private sector were not unlike trench warfare. Governments usually sat in one building, discussing policy issues, occasionally calling in business or civil society representatives to offer a view. This created a hostile atmosphere, where those who felt excluded either ignored the intergovernmental processes, or made loud noises to attract attention. That is all changing now and business and civil society — quite rightly — are seen as important partners. The UN Private Sector Focal Points process has recognized that governments alone, business alone, civil society alone, cannot successfully address the problems of sustainable development. They can only do it collectively. The UN-Business Partnerships initiative, which is still in its early stages, is a positive response, trying to bring the key players together.

Do you think that the United Nations Industrial Development Organization (UNIDO) has an important role as a bridge between the UN, governments and the business sector?

The UN is increasingly ignored or written off by many observers, including in the private sector, either because it isn’t responding to the key challenges ahead, or is seen as excessively slow and bureaucratic. While the UN needs to remain sensitive to these critiques, I think it still has a huge and not fully exploited role to play. There is no other global institution with the legitimacy, wealth of expertise and experience of the UN system. This gives it a unique moral and political leadership role.

The UN Secretary-General’s Sustainable Energy for All Initiative (which is chaired by UNIDO Director-General, Kandeh Yumkella) and UNIDO’s Green Industry Platform, which was recently launched at the Rio+20 Conference, are pioneering a new level of global issue focus and partnership with industry. Initiatives such as these are essential to drive the transition to a new model of sustainable development and economic growth, which draws on the combined strengths of the public, private and civil society sectors.

I am personally a big supporter of UNIDO’s Green Industry Platform, which I think represents a historic opportunity to bring together United Nations bodies with the business community to profile and promote best practices and inspire policy and technology innovations to advance Green Industry. This is our best hope of delivering, not only the continued development and economic growth needed for poverty alleviation and job creation, but also of preserving and restoring the ecosystems on which our collective future depends.

About Paul Hohnen

Paul Hohnen is the managing director of Sustainability Strategies. He has worked intensively since 1975 on a range of global economic, development and environmental issues as a diplomat, international civil servant, Director of Greenpeace International, and Strategic Director of the Global Reporting Initiative. Now an independent consultant, his clients include governments, intergovernmental agencies, business and non-profit organizations.

Trained as an international lawyer, Hohnen worked from 1975 to 1989 as an Australian diplomat at the OECD in Paris, to the EU institutions in Brussels, and in Fiji and Sri Lanka. He was closely involved in the 1992 and 2002 Earth Summit processes, and has participated in the negotiation of a wide range environmental conventions, including on climate change. He has also been involved in the development and promotion of the Global Reporting Initiative’s Sustainability Reporting Guidelines, the OECD Guidelines for Multinational Enterprises and the ISO 26000 Social responsibility guidance.

Hohnen conducts executive level workshops on embedding sustainability in business strategies and is an expert on materiality and sustainability reporting. Frequently invited to act as a conference facilitator, Hohnen has been a keynote speaker at a variety of high-level global business, government and NGO forums. His work has been featured in mainstream and speciality press and he is a regular contributor to Ethical Corporation http://www.ethicalcorp.com/ magazine and The Guardian Sustainability Blog.

Hohnen is an Associate Fellow of the Royal Institute for International Affairs (Chatham House) in London, which published his paper ‘The Future of Sustainability Reporting’ in 2012.

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