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Why sustainability is good for competitiveness

David Bent, December 1st 2008, Business

Have you ever been told that this sustainability stuff is all very well but it undermines UK competitiveness? That companies will go bust, jobs will be lost and that the Chinese will do it any way all because of you pesky, naïve lefty environmentalists? Ever wanted to answer back?

A few years ago here at Forum we felt that frustration. So, we looked at the latest research on sustainability and competitiveness, and we found there is no inherent conflict between the two. Instead, we need to create a system of competitiveness which is as beneficial as possible to society and the world we all live in.

Plenty of people have legitimate fears that addressing sustainability, or other issues under the label of ‘social responsibility’, will harm the competitive edge of their firm and the comparative advantage of the nation. The business of business is business, they say. Any firm that acts beyond compliance with its legal responsibilities for the sake of it is more than wasting its shareholders' money, they say. It is also imposing costs on wider society, which retard economic growth and harm competitiveness, they say.

We agree.

The key thing is whether a company can make a return from going 'beyond compliance'. Sustainability issues such as climate change are now so important that they drive the context in which businesses make money. So, companies that integrate sustainability into their core business are not wasting shareholders' money, they are protecting – or even growing – it. Good sustainability strategies are driving profits and reducing risk by preventing pollution and exercising good product stewardship. Companies are finding a path to growth through cleantech innovation or by meeting needs at the bottom of the pyramid.

At an economy level, California proves that more stringent environmental regulation can be good for business. Done well, regulation forces companies to innovate - driving profits and creating future markets for success.

So, there is no inherent conflict between sustainability and competitiveness. If you go for sustainability as a bolt-on or through inappropriate regulation then yes, it imposes extra costs. But sustainability is a vital component for success of the core business. Done well, sustainability can create the best future for a business and we believe it should be integrated throughout a firm’s operations.

There is plenty more detail in the briefing on Competitiveness and Sustainability we have published with the Institute of Chartered Accountants in England and Wales (ICAEW), Europe's largest accounting institute.

Finally, I just want to salute the ICAEW's sustainability journey. I am an accountant who sits on ICAEW's corporate responsibility advisory group. Five years ago the ICAEW and the profession was not paying attention to sustainability. Thanks to the diligent work of their CR team, the institute now has lots of activity. This briefing is the first of several in the pipeline. There is work with the Chinese government on environmental accounting. There is the new on-line training programme on Business Sustainability. The ICAEW is helping the profession understand that sustainability is important, which is crucial because accountants have a fundamental role bringing information together and analysing it for decision-making.

All too often finance directors have said no because sustainability sounds like a waste of money. The ICAEW is enabling their members to see that sustainability is part of the future of their business and career.

Green at last? If only...

Jonathon Porritt, November 28th 2008, General

All sorts of things about the Pre-Budget Report are to be wholeheartedly welcomed – not least the Labour Party’s re-discovery of the moral case for redistribution – or ‘fairness’, as they choose to describe it. Hang on in there a little bit longer, and they’ll soon re-discover the concept of social justice.

More broadly, there’s no doubt that a stimulus pack of one kind or another has to be welcome. The Government’s continuing boldness here is admirable. And there are a few good dollops of cash in the package. Much of it recycled or brought forward, for instance, spending of around £500 million on insulating homes and energy efficiency initiatives, and another £800 million brought forward on big capital projects such as Building Schools for the Future.

It looks like there’s £100 million of genuinely new money to help low income home-owners cut their energy bills (through the Warm Front programme that was cut back last year!) and £150 million (possibly new money) on building more affordable homes. Treasury claims this is all adds up to around £500 million for a ‘green stimulus package’, but, as ever, such figures have to be treated with great caution.

But beyond that, what a massively wasted opportunity!

No hint of the “Green Industrial Revolution“ that Government Ministers have been heard talking about over the last year or more. Ironically, Peter Mandelson was banging that very drum at a CBI meeting on the very same day, about the importance of manufacturing in the UK and the importance of green technology within manufacturing. Even the CBI has been calling for Government to be spending ten times more on green technology – up from £250 million today to £2.5 billion.

No hint of any kind of broader ‘Green New Deal’, as in a major economic stimulus package to prioritize investments in the low carbon sustainable economy – as is the case with Barack Obama’s $150 billion package. The contrast here is brilliantly highlighted in the text copy of the latest Greenpeace ad – see below

"If only we could turn every building into a power station.
If only we could build high-speed train links to every city.
If only every building in the country was well insulated.
If only we could develop video conferencing that made you feel you were actually there.
If only all vehicles were super-efficient, like plug-in hybrids.
If only we invested in better public transport that everyone wanted to use.
If only industry used energy efficient electric motors.
If only we could harness the world's largest nuclear power station: the sun.
If only every power station could use its wasted heat to warm our homes and offices.
If only there were giant North Sea wind farms, made in Britain.
If only we could create hundreds of thousands of green collar jobs.
If only Britannia could rule on wave and tidal power.
If only there was a Green Investment Bank to finance a low carbon infrastructure and industry.

If only, if only, if only...

If only we had political leaders with the vision to see the economic benefits of green technology.
If only we had politicians with the resolve to put long-term investment ahead of short-term interests.
If only we could secure jobs and the economy while at the same time securing the future of our planet.

Well, we can.

The Future is green.

Greenpeace"

And no hint at all of any shift in the ambition level of the government as a whole in terms of addressing climate change – notwithstanding the passage of the Climate Change Act with all its new targets and renewed sense of urgency.

What have we got instead of that? Promises of more detailed proposals on the low-carbon economy and the green industrial revolution, following yet more consultations. That should take us through 2009 without too much having to happen. At the heart of the package is the reduction in VAT to encourage consumers to spend more money.

Surreal! At exactly the point where the Government has belatedly recognised the grotesque irresponsibility of having driven the economy via massive, utterly unsustainable credit bubbles (in house prices, personal debt and so on), the answer from Government is to get out and persuade people to spend even more to maintain very high levels of debt, and to massively increase levels of national debt.

Worse yet, the vast majority of commentators seem to think it will make no difference whatsoever to consumers’ readiness to start spending again. The cost to the taxpayer – at least £9 billion over the next 13 months. All of which will have to be paid back by higher taxes from 2010 onwards.

So what kind of government deploys that kind of money to ramp up further unsustainable consumption rather than invest in our sustainable future? Mind-boggling.

See the full Greenpeace ad here: http://www.greenpeace.org.uk/files/images/climate/IfOnly.jpg

Sustainable Cities Index 2008 - update

Peter Madden, November 25th 2008, Built environment

Today we republish the rankings in our second annual Sustainable Cities Index. I'd like to take this opportunity to apologise on behalf of Forum for the Future for the clerical error which distorted our original tables.

We take the index very seriously. We have chosen our indicators because they measure things which councils can act on to improve the quality of their citizens' lives, the environment of their cities, and to future proof against a changing climate.

We know that councils benchmark their performance against this data and therefore it’s essential for it to be accurate. So when we were made aware of an error in our air quality figures we took the report off our website and launched a thorough review of all our data. We will be learning lessons to make sure this does not happen again.

What has changed as a result? Not much. The top eight cities are still in the same positions. Liverpool, Birmingham and Hull remain in the bottom four places. There have been minor moves: Liverpool is up two places; Coventry down two; London, Bradford, Sunderland and Leeds are all up one; Nottingham, Glasgow and Birmingham are down one.

The fact is that the revised index still paints much the same picture as the original one. Individual cities may have moved slightly in comparison with each other, but it still tells the same story about where each has been successful and what challenges they still face.

The index has received widespread coverage. We are now reviewing the media articles and where we feel the new figures fundamentally change the published story we will contact the newspaper, magazine or website concerned.

We will be releasing a revised report on our 2008 Sustainable Cities Index on our website in the next few days and we will send complementary copies to councils in all 20 cities. In the meantime, here are the correct 2008 rankings.

2008 rank (2007 rank)
1 (3)    Bristol
2 (1)    Brighton & Hove
3 (4)    Plymouth
4 (8)    Newcastle
5 (6)    Cardiff
6 (2)    Edinburgh
7 (7)    Sheffield
8 (14)   Leicester
9 (10)   London
10= (9) Bradford
10= (11) Nottingham
12 (13)  Sunderland
13 (5)    Leeds
14 (17)  Coventry
15 (12) Manchester
16 (16) Wolverhampton
17 (20) Liverpool
18 (15) Glasgow
19 (19) Birmingham
20 (18) Hull

Translating risk into action

Alice Chapple, November 25th 2008, Projects

Few now question the fact of climate change. Yet in business and as individuals we are all struggling to find practical ways to translate that knowledge into action.

The UK insurance industry’s world-leading ClimateWise initiative is an attempt to do just that. Member companies commit to take climate change into account throughout their operations. By assessing the risk it poses to individual companies and accurately pricing it the industry seeks to drive change throughout the economy.

We’ve just conducted the first annual independent review of the initiative, and we’ve found that despite being at the forefront of analysing the risks from climate change, the insurance industry also shares the problem of translating knowledge into action.

Our report, released today, is based on reports submitted by the 41 members of ClimateWise, representing 60% of the UK’s general insurance industry. While leading companies are innovating in some areas, we find that more needs to be done to act on climate change across all of their operations.

Many companies are undertaking research, insuring new technologies and launching carbon-relevant products and services, both encouraging reduced emissions and climate-resilience. The majority of ClimateWise members are also calling for public policy to create and support stronger carbon reduction targets. The leading insurance companies are developing tools to raise customer awareness of climate change.

But the report shows that knowledge of the risks from climate change does not always translate into effective action across the board. Firstly, many of the ClimateWise members, despite the evidence of their research on climate change, have not fully explored the impacts on their investment portfolios. Insurance companies have around $15 trillion of assets under management, so their influence on the climate change strategy of these companies could be significant.

The best companies demonstrated that they understand the financial impacts of climate change and have already adopted measures to take this into account in assessing their holdings. But some still talk about investment in clean technologies without reference to the risks in the rest of their portfolios. Others refer to climate change as a corporate responsibility issue rather than a critical driver of value. And some simply leave the decisions to fund managers, without questioning their competence in this area.

Secondly, no reports in this first year of ClimateWise explored how companies that are either carbon-intensive or poorly adapted to climate change might end up being liable for resulting damages. The availability and pricing of corporate liability insurance for climate change could send a powerful message to companies and individual board members about their emerging responsibilities.. This could act as a strong incentive for companies across the economy to adopt more effective strategies in response to the potential impacts of climate change on their activities.

Thirdly (and probably the most difficult area), insurers’ current business models appear to have no mechanism for reflecting the known long-term risks from climate change in the premiums they charge carbon-intensive industries. We know that continuing high levels of carbon emissions will create risk for the economy as a whole, and the insurance industry in particular. Yet there is currently no suitable way to build this into premiums that are calculated on an annual basis.

Of course regulation will play a vital role in making these connections, and ClimateWise can help by being a powerful voice in public policy-making. A higher carbon price would help to shift investment and company behaviour, as would more specific regulations relating to energy efficiency or climate-resilience.

But the insurance industry can itself be a powerful force driving companies throughout the economy to make more effective connections between climate change and their own operations, so helping to ensure that risks remain (more or less) manageable into the future. The role of ClimateWise is to support the insurance industry in translating that understanding of current and future risks into more urgent action.

What's in yer drawers?

James Taplin, November 19th 2008, General

With a bit of luck the answer isn’t a mobile phone since, having succumbed to the flash gadgetry of the latest music-playing-media-streaming-film-making-photo-taking-GPS- locating-file-sharing-life-organising-multichannel-communicating device, you will have recycled your old handset to a sustainable organisation that sends it for reuse in developing markets.

But what happens next?

On the plus side, mobile phones allow developing countries to leapfrog fixed-line technologies, avoiding the costly infrastructure they require. The supply of your affordable, reliable, refurbished handset facilitates this growth and helps deliver the huge social benefits that flow from connectivity and access to information.

The downside is that, in many developing countries, the explosion in consumption of electronic goods (like mobile phones or computers) has not been matched by growth in the management infrastructure needed to deal with these new materials when they eventually become waste. In the worst cases this has led to serious environmental contamination from unregulated dumping of toxic components, and damaged human health from informal backyard processing of precious metals.

Forum and Vodafone have explored these issues in some detail over the last few years, with a particular emphasis on Kenya. In common with much of East Africa, the strong reuse and recycling culture in Kenya has helped fulfil the growing demands of new mobile users by ensuring that each handset is used by multiple users (passed on to friends or family members when the previous user has finished with it).

As a result, there is not yet a problem with large volumes of mobile phone electronic waste (e-waste) but this situation is unlikely to last . As the market becomes more saturated and sophisticated, and as technological developments lead to ever-cheaper new handsets, it ' s probable that they will be replaced more often, and the demand for second- (or third-) hand phones will fall. In effect, Kenyan consumption patterns could begin to look more and more like our own.

Knowing this, we therefore have a huge opportunity to instigate collection and recycling schemes now that effectively prevent mobile phone electronic waste becoming a problem in the future. Exploring how such a scheme could work has been the primary focus of some of our recent work with Vodafone, and some of our findings are presented in a brief document being published in support of Vodafone’s latest dialogue paper on the same subject.

The good news is that we know what the scale of the problem is and that there is individual, business and political will to do something about it. The great news is that getting a scheme sorted in Kenya could show us how to apply similar proactive solutions in many other developing markets. But maybe the best news of all is that such collection and recycling schemes should be financially sustainable as well by being able to pay for themselves.

In summary - everyone’s a winner.

Download the report here.