Analysis: Capitalism Could Conserve the Planet or Consume It

By Mark Rowe

BRISTOL, UK, October 28, 2004 (ENS) - Environmentalists and social development activists have traditionally been wary of working with the corporate world. Today, however, engagement with business is increasingly seen as an effective way to safeguard our environment and enhance local livelihoods. The role of business and, more generally, markets in pursuing sustainable development, including biodiversity conservation, is to be addressed at the upcoming 3rd IUCN World Conservation Congress.

The 3rd IUCN World Conservation Congress will be held from November 17-25, 2004 in Bangkok, Thailand, under the theme "People and Nature – only one world."

Conservationists, along with many community activists, have tended to see business and markets as major threats to the environment and local communities. Cases of ecological and social tragedies attributable to ‘big business’ abound. Wildlife loss, critical habitat destruction and excessive pollution affect local communities and can often be linked to commercial activities such as mining, logging operations and intensive agriculture. Similarly, social instability can, in some cases, be amplified by trade liberalization and market globalization.

Bridge to ecotourist delights in Costa Rica's Monteverde Cloud Forest Bioreserve (Photo courtesy Costa Rica Map)

Business is increasingly seen as an essential partner in conserving biodiversity and improving livelihoods. By working with business, conservationists and others are able to challenge unsustainable or inequitable practices and policies. The market is a powerful beast. How best to turn it to the advantage of the environment and local communities?

"Some far-sighted conservationists and entrepreneurs are asking how they can generate business opportunities out of environmental protection and social development," said Dr. Joshua Bishop, senior adviser on economics and the environment at IUCN. "We are seeing important developments in pollution control, renewable resource management, organic agriculture and eco-tourism. Doing good is good business."

True, moving towards sustainability typically increases upfront costs, and the jury is still out on whether it eventually pays back to go "clean and green." On an individual level, the sums are often clear enough: buy a modern, energy efficient refrigerator and the greater initial cost will be compensated by lower electricity bills.

Matters are sometimes more complex at the company and national level. While eco-efficiency saves costs, the return from investing in biodiversity may be difficult to measure.

Part of the challenge in convincing business and government leaders to take a greener approach is that the statistics by which we measure profit and progress are weighted against the environment and the poor. It is difficult to prove that environmentally and socially good practice helps the bottom line or contributes to national development.

Iisaak is an ecologically sensitive forest services company built on traditional values and respect for the environment. Iisaak operates exclusively within Clayoquot Sound, British Columbia. (Photo by Cindy Hazenboom courtesy Conservation Economy)

"We don’t have the data, so governments and companies can’t compare the true costs and benefits involved," said Dr. Bishop. "At the moment, most governments make little effort to quantify and report on environmental change in economic terms." New frameworks, however, such as the Global Reporting Initiative, are helping companies – and some non-profit organizations – shift from narrow financial to "triple bottom line" reporting, which includes social and environmental as well as economic impacts.

Environmental policies can also be undermined by trade rules promulgated by the same countries through the World Trade Organization (WTO). Some argue that all too often, trade takes precedence over environmental concerns.

In the early 1990s, for example, some European governments considered banning imports of timber from tropical forests, based on concerns about the link between logging and deforestation. The proposals were dropped as they would have been illegal under WTO rules.

Similarly, recent concerns in Europe about the spread of genetically modified organisms have come up against WTO rules on the free movement of goods. Conflict between WTO rules on intellectual property and the international commitment to equitable sharing of the benefits of genetic resources under the Convention on Biological Diversity ratified by over 180 countries is yet another unresolved issue.

"Existing trade rules are ambiguous when it comes to whether countries can discriminate in favour of sustainably produced goods and services," said Dr. Bishop. "This is an issue that has not really been resolved. Many consumers want to make decisions on this basis, but the existing trade rules often seem to rule out such distinctions."

Another example of using markets to achieve environmental aims is the Clean Development Mechanism (CDM). The CDM is designed to make it less costly - and thus politically more acceptable - for industrialized countries to meet their obligations under the Kyoto Protocol to reduce greenhouse gas emissions.

NEPC-Micon Limited/Omnion Power Engineering Corporation is installing a ground mounted 100 kilowatt photovoltaic system, at a NEPC-Micon wind farm south of Coimbatore, India. (Photo courtesy Applied Power Corporation/NREL)

However, there is still work to be done on perfecting the CDM. "The CDM has given an important push to certain types of projects, such as reforestation and renewable resources," said Maria Socorro Manguiat, legal officer for the Bonn based IUCN Environmental Law Centre. "But CDM requires stringency to ensure that it works. That involves costs and at grass-roots level that becomes more of a challenge because of the small size of the projects."

In addition to carbon, IUCN is investigating many other opportunities to develop market-based incentives for ecosystem services. These can generate new investment in conservation and encourage sustainable and equitable use.

In parts of Brazil, for example, farmers pay bee-keepers to maintain hives near their crops. Farmers recoup this additional cost thanks to enhanced pollination.

In Costa Rica, one brewery pays farmers upstream to reduce their fertilizer use and to retain trees along the river’s edge to help with filtration. The result? Better beer for the consumer, increased income for the farmer and reduced environmental impacts.

On an international scale, such incentives can be more challenging. How do you compensate poor countries that depend on logging for the lost opportunities of forest conservation? How can you compensate people concerned about habitat loss for the impacts of mining? One possible response is illustrated by a natural gas project in Indonesia, where private investors have agreed to create a protected area and to fund local environmental agencies as partial compensation for the unavoidable impact of the project.

Along the same lines, IUCN is working with Insight Investment, part of the Halifax and Bank of Scotland group, to explore how such biodiversity offsets might work, examining opportunities to minimize the environmental footprint of companies while contributing to local economic and social development.

"We need better mechanisms to ensure that economic activities are not detrimental to the environment," said Dr. Bishop. "Mining and petroleum companies, utilities and agribusiness, development banks and many others are all involved in projects that negatively impact on habitat and sometimes also on local communities. The question is whether companies should be granted access to certain low-priority areas in return for landscape restoration and conservation investments in high-priority conservation sites."

How can conservationists be sure that the companies they work with aren’t merely seeking a greenwash? "It is complex," admits Dax Lovegrove, company relations manager for WWF-UK, which was heavily criticized by other conservation organizations in the 1990s when it accepted US$20 million from HSBC to fund a freshwater program.

"We work with business when it helps us in our work. If we are going to take a cooperative approach with business then we have to be very selective about who we show public support for. We have certain no-go areas, such as tobacco and animal testing."

WWF operates a "due diligence" approach, which means that it works with external consultants to assess the environmental performance of any company it is considering getting involved with, and, says Lovegrove, WWF reserves the right to criticize business partners when it sees fit. "Companies that undertake Corporate Social Responsibility realize that it is good for them. There is pressure pushing companies from their stakeholders and consumers for more ethical products and policies."

Pressure can also come directly from company shareholders. Although ethical investing goes back many decades, new instruments and metrics are helping mainstream socially responsible investing.

Recent years have thus seen the emergence of non-financial rating agencies and ethical stock market indices. Leading asset managers are looking into the materiality of biodiversity. Banking institutions, more generally, are also looking into the sustainability of their lending operations.

Over 25 financial institutions have, for instance, adopted the Equator Principles. Based on the World Bank group’s policies and procedures, these voluntary guidelines help evaluate and manage environmental and social risks in project financing.

Companies see both short and long term benefits from working with environmental organizations. For example, Shell has already exchanged staff on work placements at senior level with IUCN. According to Dr. Richard Sykes, Shell’s group environmental adviser, this makes good business sense.

Shell Solar manufacturing robots frame the laminate of cells at Shell's factory in Camarillo, California. (Photo courtesy Shell Solar)

"In the short term we are going to grow oil and gas production because it is still the cheapest and most available source of energy. But after 2010 that sector is going to be suppressed."

No doubt many will read this article with an underlying scepticism about Shell’s intentions. After all, Shell makes no secret that, since oil and gas are the cheapest and most available sources of energy, production will increase by around 30 per cent over the next 10 years. And the company, while promising not to conduct any operations in World Heritage sites, hasn’t yet agreed a similar policy with regard to protected areas in IUCN categories one to four.

So, when a business gets good publicity will they simply revert to the bad old ways? "I’m an optimist, not a cynic," said Dr. Bishop. "To suppose that all companies only act when they are under pressure just isn’t accurate. Brands are enormously important to business and the value of a brand depends on reputation. Many companies and entrepreneurs want to make money in ways that is acceptable to their conscience, their employees, the community around them and to their shareholders. While there’s no question that some companies out there continue to harm the environment and neglect social needs, more and more of them want to do the right thing."

{Published in cooperation with the IUCN-World Conservation Union online at: www.iucn.org}