Sustainable development and business

As governments retreat from their wide-ranging role, the private sector must step into the breach. 

The striking feature of the global drive toward sustainable development is the extent to which the agenda has evolved since the 1992 ‘Earth Summit’ in Rio: at least, certainly the way in which the emphasis has changed. This has important implications and poses new challenges for business.

The immediate post-Rio focus for business was on how to marry economic efficiency with environmental excellence to ensure continued economic growth, while consuming the world’s resources and protecting its environment in a way that did not compromise the needs of future generations.

The business response was the concept of eco-efficiency: combining environmental and economic performance to create more value – for business itself and also, crucially, for the whole community – with less impact. Many companies are today well advanced toward eco-efficiency, and it has also become a widely accepted policy concept, endorsed by, among others, the OECD and the European Commission.

Of course, more in business need to adopt eco-efficiency, not only the multinationals based in the industrialised countries but also small and medium enterprises in all sectors in all countries. So the work of the WBCSD in pushing eco-efficiency further and faster within the whole business community remains of the utmost importance.

But sustainable development is built on three pillars: economic growth, ecological balance and social progress. These items have always been on the sustainability agenda, but until recently the third – the social pillar – has received less attention. That is changing: far greater emphasis is being placed now on social progress, and specifically on what business is doing to contribute to this goal, and how it is delivering its contribution. This has opened up a raft of issues.

One is globalisation with a human face, as UN Secretary-General Kofi Annan has described the issue. Opening up world markets has, without doubt, created unprecedented global economic growth – with the promise of even more prosperity. Unfortunately, the benefits of this have not been shared equally across the globe. This is leading, understandably, to some questioning about the role and function of free markets.

Clearly, business believes in free and open markets, but markets must work for everyone. That is why the WBCSD has accepted Kofi Annan’s invitation to engage in the process of developing a ‘Global Compact’ between the UN and business to promote a shared set of core values. The aim is to underpin globalisation and free, open markets with stable societies and a fair distribution of the benefits.

Of course, companies have long been responding to social changes and pressures. The difference now, as the emphasis is put more on the social pillar of sustainable development, is that corporate social responsibility has become an institutionalised element in the debate about what civil society expects from business.

Making markets work fits in with this. The question of sustainable production and sustainable consumption was raised at Rio in 1992, and will be a key theme for the third Earth Summit in 2002. Though it has more to do, business has largely got to grips with the production issues: the more difficult challenge is the consumption side of the equation – more difficult because it involves much more complicated trade-offs in society generally. The WBCSD’s working group on ‘sustainability through the market’ is using multi-stakeholder dialogues to try to develop and agree new solutions to this issue.

Transparency and accountability are further challenges for business. “Everyone knows everything about you all the time” in today’s information-driven, globalised world. The management of reputation thus becomes a central element in running a corporation, and this involves communicating, explicitly, the values and principles on which companies base their operations – and, centrally, how they live up to those values and principles. Corporations face increasingly intense scrutiny: to contend with this, they will have to enforce a set of globalised corporate values throughout their operations.

Changing roles 

Society’s expectations are indeed considerable, and they reflect a substantial shift in the political landscape since the 1992 Earth Summit. Then, the world was described as bipolar, with governments and non-governmental organisations. Today, there is general acceptance that the world is tripolar with governments, business and civil society. The challenge, of course, is how these three component parts can interact constructively to find solutions to the challenges of sustainable development.

Civil society has matured, at a time when governments have been weakened. This means that important decisions affecting society can no longer be pushed through without wide consultations with stakeholders.

Meanwhile, the role of business has strengthened as well: the more so when, in many parts of the world, governments retreat from their once wide-ranging role and the private sector is asked to step into the breach. As a consequence, business today is expected to produce results in areas previously the undisputed remit of governments. Overall, the three parts of society have to engage in partnerships to find solutions together with other stakeholders.

Another major item on the business agenda for sustainable development is innovation and technology.

Many people are suspicious of new technologies, as the debate over genetically modified organisms (GMOs) is demonstrating. Yet, new technologies will be a key contribution to sustainable development everywhere. Industry has the innovation and creativity to bring new technologies to the market, and is already engaged in large-sale technology transfer and cooperation with the developing countries. This is particularly important to help these nations ‘leap frog’ environmentally damaging manufacturing processes, develop the necessary skills, and introduce innovation into the marketplace.

Another area where technology is key is climate change. We have entered a new era, a carbon-constrained world in which carbon emissions will carry a cost. Obviously, the issues at stake are very different in the developed and developing world, and responses depend upon each country’s individual circumstances and requirements. Yet one thing is sure: the flexible mechanisms, in particular the Clean Development Mechanism, need to be made operational if the Kyoto targets are to be met.

All in all therefore, business has much to do to contribute to sustainable development, including to engage in areas with which it previously did not concern or involve itself. In fact, the redrawing of boundaries and the redistribution of roles and responsibilities within the new tripartite world have created two sustainable agendas for business.

One remains the business agenda: what companies need to continue to do in their everyday operations to become eco-efficient, to reduce environmental impact and create more value with reduced impact – in short, to “do more with less”. Corporations cannot be managed on the basis of philanthropic arguments: they must be able to demonstrate that sustainable development is good business.

The other is the political agenda set and steered largely by forces from outside the business sector, focused on the framework conditions within which business must work, and increasingly driven by what governments and civil society now expect from business.

Many – a fast-growing number – in business understand what is required of them on both fronts. But, and this needs stressing, it is not only business that has to deliver.

On the contrary, if tripolar governance is to work, all three key players – government, civil society and business – have to abandon old, out-dated antagonisms, forge new alliances, and co-operate together as partners to find and implement workable and sustainable solutions.

We all have to succeed – and it is this challenge that marks our arrival into a critically important new phase in the push for sustainable development.

©OECD Observer No 221/222, Summer 2000

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