The UN development summit took some laudable steps towards a sustainable future – among them acknowledgement that the world economy needs to change. But the outcomes were hardly earth-shattering
If there was one big takeaway from June’s United Nations development summit in Rio it was this: the world has a new way of writing the rules for sustainability that is both bottom-up and leader-driven. We’re seeing emerging countries, local communities and global corporations make meaningful commitments to investing in the value of nature.
These efforts are being assisted by various UN agencies, but the UN-sponsored multilateral negotiating process itself has seemingly done very little to reverse the intransigence of world leaders.
The process for developing sustainable development goals – a set of benchmarks to guide countries in achieving targeted outcomes within a specific period – had been a key issue in the negotiations for the main outcome document.
Environmentalists wanted mandatory measures with timelines on the core areas of food, water and energy security, but instead UN member countries delivered an agreement whose generalised tone exposed a lack of urgency or will to take immediate action.
The final text omitted a clause calling for governments to phase out fossil fuel subsidies, which have nearly tripled since 2009, despite a pledge by G20 countries to eliminate them. An eagerly awaited decision on a governance structure for the high seas was also postponed for three years, after the United States, Japan, Canada, Russia and Venezuela opposed strong language to implement it.
Speaking as the conference drew to a close, Kit Vaughn, climate change advocacy coordinator at aid NGO Care, said the document represented “business as usual”. The UK deputy prime minister, Nick Clegg, described the outcome of the conference as “insipid”, while Gro Harlem Brundtland, the former prime minister of Norway and chair of the UN commission that helped establish the concept of sustainable development, was also critical.
Friends of the Earth International referred to the declaration as “a gift to corporate polluters” and said it would do “nothing to address the environmental and social crises that the world is facing”.
Lights in the gloom
Those who welcomed the declaration mostly did so in qualified tones – though there were some bright spots. Principal among these was the explicit valuing of nature both by governments and the private sector. For the first time the so-called “natural capital” of biodiversity and ecosystem services is being valued in newly announced national accounting initiatives and through a number of collaborative declarations launched by individual companies, institutional investors and the banking industry.
“We saw both governments and businesses explicitly recognising that natural capital is the essential core element of sustainable development and that healthy ecosystems must be the foundation of human well-being,” says Russell Mittermeier, president of Conservation International. “This is an extraordinary and transformative change in mindset, as it finally moves the environment from a marginal issue to a central component of future development strategies.”
Jim Leape, director general of WWF International, speaks of a “coalition of the committed” among businesses. “Many [companies] aren’t stepping up,” Leape says, “but among leading companies we have seen a shift in the issue of corporate social responsibility to include sustainability as a core business interest.”
The next step now is to figure out how to elevate the scale of action.
Andrew Deutz, director of international government relations at The Nature Conservancy, says the reason the conference fell short has to do with an understanding of what has already been accomplished since the landmark accords signed at the 1992 Earth Summit in Rio first integrated the environment into the UN’s developmental agenda. Rio 92 resulted in the creation of the Global Environment Facility (GEF) and the drafting of three UN conventions covering climate change, biodiversity and desertification.
Most developing countries at that time didn’t have environmental regulations or even a policy agenda that looked towards the environment. “Twenty years later,” Deutz says, “it’s not about putting the policy framework in place, but about making sure it’s effectively implemented.”
With governments strapped for cash, that’s meant an increased role for business in helping to shape the green economy – a major transformation of the current modes of production and consumption aimed at curbing pollution and the exhaustion of natural resources that will alleviate poverty and bring more jobs. Formulation of the “green economy” concept was in some ways a distraction, for it aligned much of civil society against business involvement.
The expectation was that business would move away from a profit-driven capitalist model as a prerequisite for them to truly align with the objectives of a green economy, says William Bulmer, director of the International Finance Corporation’s environment, social and governance department.
“I don’t think that is the case,” Bulmer says. “Most business will continue to be driven by a profit motive, but with a much greater appreciation of the risks and opportunities that they are now facing in this period of green growth.”
In that equation of risk and opportunity, increasingly it’s the latter factor that is driving the business sustainability agenda, even in the absence of clear regulation. “What I see a lot is a private sector saying ‘sure, we’re concerned about what is happening to the climate’, but also that these things happily coincide with self-interest,” Bulmer says.
Of the UN’s eight Millennium Development Goals, by far the most successful effort has been in halving poverty rates by 2015. That’s brought a lot more consumers into the market and opens the door to investment in a range of low-carbon goods and services impacting health delivery, water access and energy, to name but a few.
Nearly all UN initiatives coming out of the conference are dependent upon private sector participation, none more so than the UN’s Sustainable Energy for All initiative, which mobilised $50m from Bank of America alone, and an unprecedented show of public-private partnership support gathering in more than 100 commitments, including from many developing world governments and a range of corporate and financial donors.
Aimed at transforming the world’s energy systems to ensure universal access to modern energy services by 2030, it’s one of the key outcomes the UN secretary-general, Ban Ki-moon, highlighted before the summit conclusion as a “powerful new model for the future”.
“The UN is bringing all key stakeholders to the table to work in common cause for the common good,” Ban said. “This initiative shows the power of partnership and ability of the United Nations to spearhead transformational change.”
Kandeh Yumkella, director-general of the UN Industrial Development Organisation and co-chair of Ban’s high-level working group on the project, says the initiative is a way to ensure that 1.3 billion people will gain access to clean energy and to ensure that sustainable development stays on the agenda even after the Rio talks close.
“We are emphasising economic opportunity,” Yumkella says. “If we’re talking about speed and scale it has to be a business model that is also profitable for some of these guys.”
Yumkella credits the initiative’s early success to its ability to convene key stakeholders and catalyse specific commitments around a “global action agenda” that has identified high impact opportunities that can guide the work of stakeholders across all sectors of the economy. But it’s not a giveaway to business, he stresses, and the focus will also include off-grid solutions which not only make energy accessible but affordable.
“We have made an effort to identify those who are working bottom-of-the-pyramid energy solutions linked with microfinance, and linked with agricultural production or water supply or health,” Yumkella adds. That network now includes more than 500 small NGOs and the challenge will be to make sure they are included. “We are emphasisingoff-grid solutions but they are not getting as much money as they should. We need to scale that up as well.”
Moving beyond GDP growth
Perhaps the most important outcome from Rio+20 was putting to rest the erroneous belief that protecting the environment comes at the cost of economic growth. The Rio text itself acknowledged the new impetus in calling for the need for “broader measures of progress to complement GDP” to better inform policy decisions. It also asked the UN Statistical Commission to launch a programme of work to build on existing initiatives.
On the sidelines there was considerable activity, with 10 African nations, united under the Gaborone declaration, signing up to national accounts aiming to place a commercial metric on the value of nature. This was followed by 49 other nations, developed and developing alike, in supporting the communiqué on natural capital of the World Bank. There are 86 companies now agreed to draw up “natural capital accounting” rules to implement the kind of changes long advocated by Paven Sukhdev, a former banker at Deutsche Bank credited with spearheading the initiative through the UN.
Common standards for world companies are likely to be ready in three to five years, with implementation coming within about seven years, predicts Sukhdev. He estimates that the top 3,000 companies fail to account for $2.1tn of charges related to the use or pollution of natural assets – say by releasing carbon dioxide into the air or waste into a river. That figure nearly doubles to $4tn, or about 6.7% of global GDP, when the world’s entire corporate sector is included.
“By 2020 corporations will measure and manage their externalities,” Sukhdev says, citing Puma’s experience with its environmental profit and loss statement as an example of what is possible.
Peter Bakker, president of the World Business Council for Sustainable Development, is reportedly developing natural capital accounting as a key strategic platform over the coming years. Other than Puma, however, no company is now measuring, let alone reporting effectively, on this.
“Valuing natural capital and having methodologies that go along with it is not as simple as it sounds,” warns Robert ter Kuile, PepsiCo’s senior director of environmental sustainability. “While water is a global challenge it is very much a local issue … different from the impacts of greenhouse gas emissions on climate change.”
The main impact of natural capital accounting in the near future will be in carbon disclosure and with more robust assessments by financial institutions driving change among stock exchanges and in leading companies.
“Hopefully the market will start taking account of that and pricing it through the price of their shares,” says William Bulmer. “So if, for example, energy companies are heavily dependent on fossil fuels and are not sufficiently transforming and mitigating risk in a balanced approach in how they are generating renewables, the market will take a view on that and price it accordingly.”
These developments are also taking hold in emerging markets where central banks are out ahead of their western counterparts. Countries such as India, Brazil and China are all now using their banking sectors to promote environmental and social regulations, said Bulmer.
Disappointingly, however, this hasn’t translated to these countries’ state enterprises. What was seen, instead, in Rio were multinational companies with their local heads engaged in the discussion. Companies from China were present, for example, but these were smaller and medium-sized enterprises whose leadership potential is somewhat limited.
In this regard, Brazil was criticised for not having summoned a larger, more broad-based private sector response. Its leadership seemingly rested upon co-ordinating a smooth-functioning dialogue and in not pressuring the UN bodies themselves to work together in collaboration rather than in competition.
“The risk is that the lack of a clearly defined process in the text means [UN agencies] could choose to compete rather than collaborate,” said Steve Waygood of Aviva Investors, which had been pushing for strengthened corporate sustainability reporting. “If they do this, the sum of the parts will be far less than the whole opportunity.”
Sustainable goals
Skilfully constructed to clear controversy and promote consensus, the final Rio summit communiqué established so-called sustainable development goals (SDGs) across core areas such as food security, water and energy that are intended to drive member states towards fast-track transition to low-carbon forms of green development.
These SDGs will probably build on and overlap with a current round of objectives known as the Millennium Development Goals, which UN members agreed to pursue at least to 2015.
The text commits to “take action to reduce the incidence and impacts of such pollution on marine ecosystems, including through the effective implementation of relevant conventions adopted in the framework of the International Maritime Organisation”. However, an eagerly awaited decision on a governance structure for the high seas was put off for a few years.
The agreement called for a new intergovernmental process to produce a report that evaluates how much money is needed for sustainable development, and what new and existing instruments can be used to raise funds.
The process will be led by a group of 30 experts, which will conclude its work by 2014. Although some developing countries had called for the creation of a $30bn sustainable development fund, the proposal did not make it into the text. Instead, the text “recognises the need for significant mobilisation of resources from a variety of sources”.
A decision to upgrade the United Nations Environment Programme – an international institution that coordinates UN environmental activities – to a UN agency with power equal to other UN bodies, did move towards implementation. Its final passage, however, awaits approval by the entire UN General Assembly, where countries such as the United States have vowed to oppose the measure when it comes up for a vote.
Regarding sustainability reporting – where progress had been expected – there still exists no compulsion or commitment to a UN process to mandate a minimum standard. Yet, backers of the proposal say they are pleased with the outcome given the scale of resistance from some countries and the lack of historic references to corporate transparency and accountability.
“I think getting reference to the importance of corporate sustainability reporting is useful,” says Steve Waygood of Aviva Investors. “I also think the UN-facilitated process provides a very useful potential mandate for the stakeholders and industry and interested governments to take this agenda further and faster than would otherwise have been the case.”
Sustainable exchanges
One of the heavily trailed issues for Rio was the further development of sustainability transparency and reporting. And at the business summit, held immediately before the main government level meeting, the role of the private sector in driving towards better reporting – as part of overall green economy efforts – was reinforced by a new stock markets-led initiative.
A group of stock exchanges, lead by Nasdaq OMX, and including the Johannesburg, Istanbul and Egypt exchanges, committed to promote long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among their listed companies. The commitment came during the Sustainable Stock Exchanges 2012 “global dialogues”. The SSE initiative has been co-developed by the Global Compact, UNCTAD, the Principles for Responsible Investment and the UNEP finance initiative.