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Sustainable development: business has a long way to go

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Elephants in the room: the role of governments and financial markets in sustainable development. Photograph: EPA


Powered by article titled “Sustainable development: business has a long way to go” was written by Paul Hohnen, for on Friday 13th September 2013 19.13 UTC

A question that will be on everyone’s minds at the forthcoming Global Compact Leaders Summit in New York is how to bridge the gap between what business is doing on sustainable development and what it still needs to do.

The centrality of this issue has been underlined for me recently by three developments.

The first was the release by the Global Compact of ‘The Global Corporate Sustainability Report 2013‘. As readers of Jo Confino’s analysis will recall, the report provides a summary of the state of corporate sustainability that is, at once, both encouraging and deeply troubling.

Reflecting the views of 25% of the Global Compact’s global corporate membership base (and thus probably those most advanced along the sustainability road), the report makes one point abundantly clear.

This is that while many companies have made a range of credible commitments on their social and environmental goals and policies, and generally seem to understand the serious sustainability risks and opportunities for the future of business, they are finding it difficult to implement these either quickly or consistently, whether internally or along their supply chains.

While they are strong on developing codes and supplier policies, issues remain in relation to providing the needed staff incentives and training, monitoring of performance, and stakeholder dialogue. In short, significant implementation gaps remain.

Given that the 8,000 corporate participants reflect ‘just a sliver’ of the world’s estimated 70,000 multinationals (and many millions of SMEs), the report rightly concludes that ‘even those committed to sustainability still have a long journey ahead…’.

Here we have both an engagement gap and a timing gap. More broad-based and faster change is needed.

These points are also emphasised in the report of the UN High-Level Advisory Panel (HLAP) on The United Nations in the Age of Sustainable Development (PDF), released this week.

Taking as its starting point the proposition that ‘achieving sustainable development will be the overriding challenge of this century’, the report calls for ‘a new era of change’, including on the parts of government, the UN system and the private sector. The crises of sustainable development, it concludes, ‘have already become crises of national and global security.’

The changes proposed include new UN bodies and summits, built around achievement of ten yet-to-be-agreed Sustainable Development Goals (SDGs) that will follow on from the Millennium Development Goals.

Recognising the size and power of the corporate sector, the report notes that ‘private business dominates the world economy’, holding the intellectual property of key technologies and constituting ‘the most effective large-scale management systems in the world’.

While expectations of business are set to grow, we do not have the institutional architecture to align the public policy and business drivers.

The final ‘elephant in the room’ is the role of financial markets. Not mentioned in the Global Corporate Sustainability Report, and not discussed in any depth in the HLAP report, everyday experience shows that economic incentives remain insufficient for business to make the sustainability transition.

Interviews I have been doing with the investor community on the subject of sustainable finance, point to a concern that mainstream investors are becoming increasingly blind to the long-term issues at the heart of sustainable development. Pressures to take ever-shorter investment time horizons, indeed, appear to be increasing.

While many analysts acknowledge the very real risks of sustainable development issues such as climate change to future asset values (e.g. coal), they are not prepared to act as regulators. This means they will not – as a group – unilaterally demand legislation or standards, for example, requiring that environmental, social and governance (ESG) factors be given greater weight in investment and ratings decisions, even if they believe this would be the sensible thing to do.


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