*{GLOBAL AGENDA ATELIER WORKSHOP ON ENVIRONMENTAL SUSTAINABILITY [http://www.weforum.org/pdf/Atelier/Environmental.pdf]

GENEVA, SWITZERLAND 10-11 JULY 2001

Expectations for the World Summit on Sustainable Development

Background}

The 1992 "Earth Summit" in Rio de Janeiro, Brazil, is recognized as having set the stage for a decade of subsequent summits focusing on various aspects of development as outlined in Agenda 21 (Social: Copenhagen 1995; Women: Beijing 1996; Human Settlements: Istanbul 1997). In creating the Commission on Sustainable Development (CSD), the Rio process not only attracted more high-level government representation than other summits, but also mobilized grass-roots participation and activism on an unprecedented scale.

Rio exposed a rift between Northern and Southern perceptions of priorities in sustainable development, with developed countries focusing on environmental conservation and developing countries emphasizing their social and economic rights to development. As Rio itself was a tenuous compromise between the contending priorities of North and South, the World Summit on Sustainable Development ("Rio+10") in Johannesburg in September 2002 will again have the difficult task of realigning social and environmental sustainability.

The WSSD is expected to focus on:
natural resources: water, biodiversity and climate;
integration of poverty reduction and environmental conservation objectives with a focus on synergies, i.e., under what circumstances does environmental protection contribute to poverty eradication?;
examination of the pace of implementation of Agenda 21 goals (national strategies are due to be completed by 2002) and integration of sustainable development principles into governmental and UN policies;

*partie=titre Stakeholder Expectations *partie=nil

Expectations from different stakeholders vary drastically in anticipation of the WSSD agenda. Many participants believed the intergovernmental aspects of the summit will be unlikely to yield substantial deliverables. There was also concern that the different stakeholder groups, including the private sector, will not be given an adequate opportunity to engage in productive dialogue. The summit might also be dominated by entrenched positions in which representatives from the South will continue to push for the inclusion of a social agenda, highlighting the insufficiency of resource transfers from the North, while Northern representatives will emphasize environmental concerns. Participants indicated that the summit is most likely to deal mainly with social sustainability, health and development rather than with the environment.

Given the perceived lack of progress resulting from previous environmental and development conventions, there is a danger that the summit could heighten concerns about the weakness of global environmental governance, disillusionment in the developing world and overall scepticism as to the efficacy of UN summitry. This may be a function of overly ambitious goals and processes in the context of Agenda 21, which have contributed to expectations that governments and industry are unlikely to be able to meet. Indeed, there is little optimism that official development assistance will rise substantially, underscoring the importance of foreign investment in poor countries. And there is widespread scepticism that developed or developing countries will sacrifice economic growth for environmental objectives.

For its part, the scientific community does not consider itself to be sufficiently included as a contributor to the Rio debate, as there is little connection between research on the issues and the intergovernmental process.

Concern was expressed more generally by some participants that despite the active interest and involvement of multiple stakeholders, reports that there may be separate venues established in Johannesburg for business, civil society and government would make the desired integration of issues and interaction among stakeholders difficult to achieve. The UN was encouraged to take these concerns into account, which it reportedly has begun to do.

*partie=titre Business as Part of the Solution *partie=nil

The summit will therefore provide an unusual opportunity to discuss and influence public perceptions about environmental sustainability and the private sector's role in it. Though business has made specific contributions to the advancement of environmental sustainability, the governmental preparatory process for Johannesburg has not thus far adequately integrated these contributions. The traditional reluctance of the business community to be involved in long-term political processes like those of the UN system has probably been a contributing factor in this regard.

Business Action for Sustainable Development (BASD), a partnership between the World Business Council for
Sustainable Development (WBCSD) and the International Chamber of Commerce (ICC), is helping to organize the business community's involvement in the summit. It is working in particular with industry associations to develop a plan to highlight business contributions to sustainable development in a number of areas as well as to stimulate thinking on additional initiatives. Such areas include the development of new technologies that contribute to environmental sustainability and the implementation of best practices regarding technology transfer and investment in the developing world. In the months leading up to Johannesburg, BASD will aim to partner with other stakeholders in a wide variety of sustainable development initiatives with a commitment towards openness and transparency.

Business has an important role to play in developing concrete propositions and action items to move the global environmental agenda forward. It should systematically incorporate into business processes policies and practices that enhance environmental sustainability. And it should further explore the potential for marrying the expertise and energy of NGOs with its own considerable resources and reach. For example, the greatest success on biodiversity has come thus far from NGO-led initiatives – in some cases in cooperation with individual companies. At the same time, voluntary business measures have made significant contributions to emissions reductions. A focus on the potential uses of technology may help to find a common trajectory for all parties. Greater interaction could also foster the integration of environmental policy into areas such as health and trade, helping to overcome obstacles blocking intergovernmental progress in these and other areas.

Business should communicate and build upon successful initiatives such as:
certification programmes, for example on marine and forest stewardship;
standard setting processes in corporate social responsibility;
individual partnerships between NGOs and the private sector in various industry sectors such as tourism and mining.

A climate must be created to foster business involvement and investment in environmentally sustainable development, also in the context of foreign direct investment.

*partie=titre Climate Change and the Role of the Private Sector *partie=nil

*{Background}

Climate change is one of the most pressing items on the global agenda with respect to environmental sustainability. Beyond its highly adverse impact on global ecosystems, it will also have negative repercussions on the private sector and its different industries. Rising temperatures, for example, will lead to rising sea levels which impact the longevity of infrastructure such as ports and harbours, subsequently affecting the capacity of marine transport. Furthermore, an accelerating northward and upward shift in ecosystems is adversely affecting the agricultural sector.

*partie=titre Business Awareness *partie=nil

Participants expressed that thus far it has been difficult to demonstrate to the broader business community causal connections between climate change and risks to physical investments. Business has not picked up on the findings of the Intergovernmental Panel on Climate Change (IPCC) and how they affect them.

However, many incentives for business to engage proactively in the climate change arena do exist.

Government regulation: Business is largely unprepared for potential carbon "liabilities" and the possible concomitant lowering of credit ratings. The impact of climate change on business plays out over long timeframes, but regulatory costs would be felt immediately. Hence companies must begin to control emissions with a long-term view.
Financing of risk: Business has underestimated the climate change premium, and companies may seek insurance from carbon cost regulation. Involving the financial sector will help companies control their risk profile.
Public image: As consumer behaviour changes, increased market pressure leads companies to develop emissions reduction strategies.
Lawsuits: The possibility exists of anti-tobacco style lawsuits against businesses emitting GHG due to the consequences of climate change.
Shareholder activism: Social and ethical investment funds are becoming increasingly prominent, and corporate culture must adapt to reflect the voices of change within companies themselves. Employee retention rates have been shown to be higher in companies with sound environmental policies.

*partie=titre Industry-led Emissions Trading: Pros and Cons *partie=nil

Participants felt that the Kyoto process raised expectations very high, but governments have not followed through. *{1} The effectiveness of existing corporate rules, protocols and guidelines will remain limited if governments do not either quickly introduce additional incentive structures such as subsidies and tax breaks or regulatory mechanisms serving business as reliable yardsticks. Indeed, some participants believed that not enough incentives exist for purely voluntary schemes to succeed in the long term. Currently, CO2 regulation is minimal and dispersed, which raises the question as to how long corporations will voluntarily pay for something which is free. Significant private sector movement therefore requires overcoming the assumption that top-down regulation must exist for companies to reduce emissions. Virtually all automotive companies, for example, have programmes related to emissions reduction, but public perceptions do not acknowledge this commitment. Additionally, several companies are already engaged in internal emissions trading schemes to meet internal targets.

*{1 Note: This workshop took place before the COP6 meeting in Bonn, 16-27 July 2001.}

A proposal was put forth for the establishment of a credible organizational platform to encourage "voluntary, real, measurable internal emissions targets." In the absence of official rules and caps, agreed protocols for voluntary reductions as well as for emissions trading are necessary for companies to retain the flexibility to adapt to changing schemes which expand to scale. Such protocols include practices regarding the base measures, inventory accounting, standard setting, and mechanisms for monitoring and implementing standards. It was suggested that the World Economic Forum might be an appropriate facilitator for the harmonization of protocols and registration of voluntary commitments. Some groups have begun work in these areas, including the World Resources Institute (WRI) and WBCSD as well as major accounting firms and the International Emissions Trading Association (IETA); however, these efforts are in their infancy. Major accounting firms employ carbon cost advisers, but the market as a whole remains difficult to understand as no standard industry-wide accounting system exists.

Integral steps for making substantive gains in voluntary business efforts to reduce emissions are:
refining and potentially harmonizing inventory protocols for measurement and accounting of GHG emissions;
expanding registration of voluntary reduction targets;
committing to significant emissions targets;
expanding intra-sectoral emissions trading.

A major criticism of industry-specific emissions schemes is that they would circumvent or not be recognized by international rule-making processes. Transitioning from a voluntary to a mandatory system would require regular interaction with governments to share knowledge and information, increase transparency and eventually integrate bottom-up and top-down programmes. The Chicago Climate Exchange is an example of the successful combination of private sector and public institutions. Challenges also exist concerning the recognition of prior business steps once regulation is implemented, for example with respect to the relative base years used in various schemes.

It is essential that coordination exist between the private sector and government on emissions reduction schemes. Though some participants maintained that governments must set the framework and others argued that voluntary action by business will actually influence government to take action, all agreed that measures must be taken to respond to current emissions, not just to potential regulation in the future.

*partie=titre Making Markets in Environmental Products and Technologies *partie=nil

Although most debate on the market for environmental products centres around belief and value systems, participants felt there is a clear need for more fundamental applied research in the environmental field to investigate how technologies can be properly deployed and how scientific knowledge can shape consumer preferences.

Shareholder resolutions, product boycotts and protests have thus far been the most serious single causes of changing corporate behaviour towards the "greening" of products. However, as the relative share of consumers committed to environmentally labelled products is very small, governments and NGOs need to focus on the demand side for these products, in turn giving cause for companies to market products as environmentally friendly. Though it must still be determined which sectors remain untapped for cooperation on sustainable product development, it is clear that shifts in consumer demand are an integral part of the solution.

There is latent demand in the private sector for joint initiatives in "collective marketing" with NGOs, which represents a tremendous potential gain for companies in terms of reputation and market share. Many business sectors need to better communicate their existing policies beyond defensive measures to preserve their reputation, but are often afraid to do so for fear of precipitating greater scrutiny from NGOs.

Competitiveness is driven by resource efficiency; therefore innovation and efficiency are driven by high environmental standards. Markets can facilitate the implementation of environmental standards, even without agreements on these standards. Though it is difficult to balance between the supply of labelling mechanisms and the demand for labelled products, evidence suggests that the market is not satisfied in terms of the development of environmentally friendly products and sustainable production methods.

Product development can be risky and costly, however, as evidenced by the failure of GM's electric car. Environmental friendliness is still not the primary decision factor for consumers; price, value and performance are still dominant considerations. Green products will only be preferred if the quality and price are competitive. Most participants believe, however, that markets can still be "turned onto a greener path."

Discussions of consumers and sustainability must also look at the majority of the world population which has not yet joined the global market. The developing world still uses resources in an unsustainable manner. Only collective action to create a market of sustainable products and technologies can confront the challenge of the increased masses of consumers in the future.

*{Conclusion}

The following specific suggestions for the future activities of the Forum arose from the workshop:

Highlight the need for the integration of business into the core of the World Summit on Sustainable Development proceedings.
Highlight the contribution of business to environmental progress since Rio 1992 in part by supporting the efforts of Business Action for Sustainable Development (BASD), a partnership of WBCSD and ICC.
Explore potential for Forum to facilitate partnerships and initiatives involving businesses on specific environmental challenges. Water, biodiversity, energy and climate were cited as areas of particular promise and need in this respect.
Promote better integration of international trade and environmental policy objectives, by working with the WTO, its members, environmental groups and businesses to improve mutual understanding of concerns and pending proposals.
Explore scope for closer examination of the implications for business of the findings of the Intergovernmental Panel on Climate Change (IPCC), perhaps by commissioning specific research or encouraging the IPCC to involve business directly in future research, for example through scenario development.
Facilitate a closer examination of the implications of climate change by the financial services industry, with respect to risk assessment regarding insurance products and the financing of long-term capital investments.
Explore scope for cooperation within industry sectors on climate change, with respect to the sharing of information on the business case for taking climate change seriously in company operations, making an inventory of emissions, and opportunities and techniques for voluntary reduction targets.
Explore scope for creation of an international hub to facilitate expanded voluntary emissions planning, targeting and trading by companies through the facilitation of better coordination and mutual recognition of accounting systems and protocols as well as creation of an internationally recognized registry for voluntary commitments.