Date: 2024-12-21 Page is: DBtxt003.php txt00016285
Initiative
Green Economy Coalition
The Vision and Method for the Green Economy Coalition
Peter Burgess
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Measuring & Governing We see that our institutions and reporting frameworks are not fit for grasping the opportunities and risks of the near future. We are working to align corporate and national reporting systems with the Sustainable Development Goals. “Running a country, city or business without knowing how many resources you use compared to how many you have is like flying a plane without a fuel gauge.” Mathis Wackernagel, President of Global Footprint Network Many of the institutions that govern our markets and economies were built for a different era: when populations were smaller, when markets were more contained, when natural resources were ample. Our finance institutions and banks, our statistical, regulatory and trade and organisations, even our government departments struggle to cope with the connections between social progress, environmental health and economic stability. In short, our institutions cannot cope with systemic risk. Key performance metrics give a limited picture of what is happening. GDP treats crime, divorces and natural disasters as economic gain; it ignores the functions of caring for children and elderly, and says nothing about how income is distributed. Quarterly financial reporting tells shareholders little about the stability of the company’s supply chains, their exposure to natural disasters or social upheaval, or the well-being of their employees. The opportunity In 2015, all governments agreed on a set of global Sustainable Development Goals (SDGs). The Goals are not just an innovation map of what government and markets need to deliver. In an increasingly interdependent world, the SDGs provide decision makers – national, corporate and community – with a framework to think strategically across a range of variables over a fifteen year period. If corporate and national strategies and measurements for success can be aligned to the SDGs, decision makers will be able to react to the trends and risks on the horizon and make better informed choices. For citizens, voters and communities, the SDGs offers the key for holding decision makers to account. Alternative indicators can sharpen the attention of governments to the needs of communities and societies and drive greater accountability between the citizens and decision makers. Our positions Our Coalition believes that the SDGs will prove transformational if they are applicable at different levels of operation – national, corporate and local. In the last few decades there has been a proliferation of different sustainability indices but most have been developed in isolation and for different purposes. The Coalition is working with accountancy bodies, national statistical bodies, governments and international institutions to align their measures of success with the SDGs. Read more about Measure What Matters. We see that the SDGs are an indivisible framework. While, the specifics of a given business model or national context might mean that some Goals are more relevant than others, we are keen to ensure that organisations do not cherry pick objectives at the expense of others. We are working with economists to understand the trade-offs between environmental, social and economic capital. See our Economics for Nature project.
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Reforming Financial Systems We know that the current financial system is the biggest blocker to achieving greener, fairer economies. The Coalition is leading a global campaign for the reform of the financial markets.
“Our financial systems are no longer fit for purpose. Thankfully, a quiet revolution is underway. ” Nick Robins, UNEP Finance Inquiry
Financial markets should be the life blood of economies. They can help new businesses grow and can spread the risk of investment. They can drive finance towards poorer countries and regions. They can help citizens save for retirement, buy land or homes, invest in their children.
But today's financial markets are not doing this. The majority of trading on Wall Street happens between funds, little reaches real firms. Money is being concentrated in a few 'too-big-to-fail' institutions, making economies vulnerable to financial crises. To compound the issue, investors are blind to the risks that are building as nature starts to struggle. Yet, reporting cycles are getting shorter, not longer.
It is people who pay the price. 120 million more people are living on less than US$2 a day because of the financial crisis.
“Changes to the physical environment driven by climate change, and society's response to these changes, could potentially strand entire regions and global industries within a short time-frame” Lloyds of London, 2017
The opportunity
The reward for financial reform is more stable and resilient economies. Ones that are alert to environmental and societal risks, and less prone to boom-bust cycles which hit the poorest the hardest. Ones that are rooted in the real economy, and leverage long term capital for companies to grow and employ people. Mounting evidence shows that lengthening investment cycles could combat secular stagnation in western markets.
Reform of the financial markets is well underway and is coming from unexpected corners of the globe. China has adopted a structural reform programme to green its financial system. Brazil's central bank has introduced requirements for all banks to establish socio-environmental risk systems. Some of the world's largest sovereign wealth funds are divesting from coal.
Our position
Our members see that prices need to reflect their full societal or environmental values. Putting a price on polluting activities, such as emitting carbon or contaminating water, helps to send the right signals to the financial markets of the value of our most precious societal and natural assets. (Read how Canada’s carbon tax is working).
But we also know that prices and disclosure alone will not be sufficient. Systemic change starts with central banks and monetary policy. Central banks have a mandate to support financial stability. By leading the way with stress testing and screening investment portfolios against environmental and social risks, central banks can show commercial banks the risks on the horizon. They can also take positive steps by shifting the capital and liquidity requirements for assets that will be good for nature and people.
We know that financial markets need to be diversified beyond institutions ‘too big to fail’. Smaller, community based banks have proved more resilient to financial shocks than their larger counterparts. They are also the ones that are investing in local economies.
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Greening Economic Sectors We see that a new industrial revolution is transforming our energy, food, transport, and infrastructure systems. We are supporting innovators and small businesses to develop tomorrow's green solutions.
“We're entering a new dawn of innovation. It is the pioneers, the disrupters, and the new thinkers who will win the race. ” Richard Spencer, ICAEW
A green economy is not just about wind turbines or solar farms. It is the next industrial revolution. Homes will be powered by new energy systems; food will be produced in alternative ways; buildings will be made from different materials.
The markets of the future are already here. A further 20 million electric vehicles will be on the road by 2020. Within the next four years the market size of organic fruits and vegetables is expected to reach $62.9 billion. Investment in decentralised power has hit $206 billion.
“Tackling the SDGs will generate 380 million new jobs by 2030” Sustainable Business Commission
The opportunity
Innovation is coming from lower income parts of the world. The Latin American country’s gas power plants are now more efficient than Germany’s. The city of Phnom Penh in Cambodia has become a world leader in preventing water waste by reducing leaks from its municipal water supply lines. China now has higher use of energy efficient LED lighting than Europe.
Transforming the brown economy is breathing life back into regions that globalisation has left behind. Hull, one of the poorest cities in the UK which lost its shipping and fishing industries to global competitors in the 1970’s, is becoming a world class hub for renewable energy. In Virginia, America, a new generation of industrialists are turning coal-fire power stations into biomass facilities.
The businesses that will flourish are those that go beyond seeing the bottom billion as a new commercial opportunity, but can rewire their operations with nature and society in mind. Umicore, once a mining company, is now a recycling powerhouse and has a turnover of Euros 10.4 billion; Amul, a half century-old dairy cooperative in India comprised of three million milk producers has become a market leader by offering its farmers 80% of the consumers dollar for milk.
“Just 0.3 percent of the sunlight that shines on the Sahara and Middle East deserts could supply all of Europe’s energy needs.” Institute for Energy
Our position
We believe that smaller businesses hold the key to a fair transition - it is the disrupters, the social enterprises, the innovators who wire social and environmental purpose into their core strategy. Our national hub partners are building small business networks in seven countries. We have connected over 100 small green businesses in Europe to connect through our online platform GreenEcoNet.
We also see that informal economy, where the majority of the world’s poorest live, trade and work, has been largely forgotten in the transition to greener economies. Only 25% of countries make mention of the informal economy in their ambitions of plans of action. Our members are leading the discussion on a new policy agenda on informality and green growth. One that supports informal workers to self-organise and considers different approaches to formalisation or legality. Read Tearfund's research of circular economy models in poorer countries, and IIED's work on the interface between green growth and informal economies.
For our members, resource efficiency alone is not enough. Rather, it has to be seen within a broader context of the limits of nature’s capital and societal health. We are supporting businesses and decision makers to align their understanding of progress within the SDGs. Find out more about our work on Measuring What Matters.
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Tackling Inequality We know that fairer economies are more resilient but they also have a smaller environmental impact. Our members are ensuring that poor people, informal workers and marginalised communities are being heard by economic decision makers.
“A global economy where 62 people own as much as the poorest half of the world's population is a failing economy” Mao Amis, AFRICEGE
A widening gap between rich people and poor people is not just a moral problem. Inequality cripples economies as well as peoples lives. The bigger the wealth gap the longer people become trapped in poverty. Whether in Dhaka or Detroit, it is the poorest who are hit the hardest when water becomes contaminated or air becomes polluted.
Nature suffers more in unequal societies. It is the richest people on the planet who consume disproportionately more than anyone else, while the poorest have the smallest ecological footprint.
“98% of 100 cities in low- and middle-income countries do not meet air quality standards” World Health Organisation
The opportunity
Green economies can be fair economies. The transition offers a chance to restructure markets and financial flows with people in mind. It means a shift towards community ownership of local natural assets and away from centralised utility companies that can concentrate wealth (read how communities in Denmark and Bangladesh have taken control of their energy systems). It can mean new streams of money from taxing pollution that can be spent on social services (read how British Colombia's carbon tax is putting money into low-income families). It is a chance for poorer countries to leap-frog traditional development pathways to develop locally-rooted industries and sectors (read Christian Aid's research on how African countries are avoiding the 'dirty-development' route).
Enterprises flourish in more stable and equal societies. The ‘millennials’, today's consumers, voters and employees, are restless for positive change. Business models built around cooperative collaboration, solidarity in the supply chain, long-term commitment to goals are already taking off: Fairphone, the first smart phone built from conflict-free materials, provides fair wages to the workers, and is built to last a lifetime is now trading all over the world; Narayana Health, an Indian hospital applying a cross subsidisation model that can cover low-income patients by treating the rich has grown to be a network of 32 hospitals across 20 cities employing over 15,000 people.
“By tackling gender equality $12 trillion could be added to global GDP by 2025” McKinsey
Our position
A fair transition starts with ensuring that people – particularly poorer and marginalised groups - have a voice in decision making. CAFOD's research shows that poorer communities are not being mentioned or consulted in green economy strategies. For this reason, the Coalition is focused on ensuring that communities, workers, informal enterprises have a place at the policy table. This does not mean cursory one-off meetings. It means ongoing social dialogue and participation. Read more about our national hubs.
For our members, making our economies fairer requires deep-rooted reform. We are working with governments to put societal and environmental goals at the core of their strategies and mandates. We are urging governments to support the smart devolution of natural resources access, use and governance to community levels. Read the ten key steps for ensuring a socially just transition.
We see that there will also be some ‘losers’ from the transition as industries and sectors change. Governments will need to put in place social protection schemes and safety nets to support people. There are innovative and practical examples to learn from. Ghana offset the removal of fossil fuel subsidies by making primary school free, capping bus fairs and raising the minimum wage. Our member are working with governments to make this a just transition. See ILO’s guidelines for a just transition.
Our Themes
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Valuing Nature Without nature there is no human life, there is no economy. But nature rarely features in government and company balance sheets. The Coalition is ensuring that nature has a voice in economic decisions.
“Nature is like an angel investor in the global economy: financially significant, yet widely unknown” Inger Andersen, Director General, IUCN
Nature is our global life support system. Without it our economies cannot function, our societies cannot survive. Yet clean air, healthy soils, or any of the countless value that nature provides rarely make it onto a government balance sheet or a company financial statement.
Consider for a moment that over 500 million smallholder farmers make their living from healthy soils. Or that the Great Barrier Reef is worth $56 billion to the Australian economy and employs 64,000 people. Or that half of the $640 billion global pharmaceuticals industry is based on the genetic diversity of wild species. Nature is an asset too important to fail.
“Over 500 million smallholder farmers make their living from healthy soils.”
The opportunity
As businesses and governments start to see nature as an asset to restore, rather than a set of resources to use up, they are finding new possibilities. By investing in mangroves to protect coastal regions in Thailand, the government has revived local fisheries. By restoring wetlands in South Africa over 50,000 jobs a year have been created for poor communities.
Businesses are seeing the rewards of looking after nature. Take Better Globe Forestry, a Kenyan company that provides smallholder farmers with resources to plant drought resistant trees on the lands—from seedlings and water supplies to training and microfinance— and then purchases the trees from farmers once they are mature, harvesting them and exporting them as timber. Or, the Mississippi River Basin, where businesses have clubbed together to restore 1 million acres of land to reverse the impact of large agricultural operations on the Gulf of Mexico where 6000 square miles have become an environmental dead zone.
“$1million investment in coastal restoration creates 17.1 jobs. $1million investment in offshore gas and oil development creates 8.9 jobs ” Oxfam America
Our position
For our members, valuing nature starts with people. We see that the people most connected to nature - poor people, indigenous communities, local groups - have the least economic power. They must have a voice at the policy table. We also see that resource efficiency alone will not be enough to reverse the decline of our natural world. What may seem economically rational at the level of a single business or locality, quickly becomes irrational in the context of a finite planet. Ecological limits must shape green growth plans or strategies at all levels of operation.
Our members understand that by putting a monetary value on nature can reveal how we all – communities, business, government – depend it. Quantifying the many economic, cultural, societal and spiritual benefits of say, a local wetland or global rainforest, can sharpen the minds of decision makers. Only when Costa Rica started to value their forests did the government see it's value as an asset to people as well as their economy. Only by quantifying how much of its financial capital relied on nature's capital did the UK’s largest landlord decide to invest in longer term climate change action.
But, for our members valuing nature can never just be an accounting exercise. Nature's value is as relevant in classrooms, church halls and homes as it is in boardrooms or statistical offices. Economic tools, such as natural capital accounts or payment for ecosystem services, must be accompanied by a wider and deeper conversation with relevant constituencies. Read more about our national dialogues.