European Business Environment MEB European School of Management Italia (C) Copyright 2004 European Business Environment MEB Green Economy /Clean economy for reshaping society Lecture 2: Political, social, business, ecological and environmental considerations Prof.ssa Carmen Pasca Website: http://www-users.york.ac.uk/~jdh1/ESCP/

Plan for today I remind you of the Group projects We look today at the economics, politics and business implications of moving from brown to green. We talk about the increasing interconnectedness of the globe. We worry about sustainability. We watch some videos. We share our views about the seriousness or otherwise of the present situation and what, if anything, needs to be done about it. 2 2

Recall! The assessment for this course is “50% class participation and group-work; 50% individual final exam”. In Lecture 4, you will do the class participation and group-work part, by presenting case studies in four or five groups each of some three or four students, endogenously formed. Each group will have 30 minutes to present their case study and each presentation will be followed by a question, answer and discussion session. On the slides in Lecture 1 were some suggestions as to how to find case studies, but you are free to choose your own. Can I ask you now which are the groups and what are your projects? 3 3

Brown politics Brown economics Brown business The old vicious cycle? 4

Green politics Green economics Green business A new virtuous cycle? 5

Brown and green economics A brown economy is one where production pollutes the environment and depletes un-replaceable natural resources. It is one which is not sustainable. Often the basic problem is that the natural resources are underpriced and that the polluters are not charged for their pollution. In contrast a green economy is one in which renewable resources are used in production and pollution is either minimal or paid for by the polluter and the fines used to clear up the pollution. Market liberals say that the solution is in free markets not distorted by government or interest parties intervention. Institutionalists and others say that the state has to intervene. 6 6

Brown and green business A brown business does not care about its impact on the environment and on sustainability, either because it feels that it does not have to or that its customers do not care. In contrast a green business IS worried about the environment and upon sustainability, perhaps not for ethical reasons but rather for business reasons. It sees that its customers care about environmental concerns and that it will lose business if it does not go green. Alternately it may see ‘going green’ as an excellent business opportunity to get one step ahead of its rivals. Or it may genuinely see that investment in, say, green energy technology, is a sound business investment. 7 7

Brown and green politics Brown politics are those fostered by short-term horizons of politicians, not realising that ‘brown everything’ is not sustainable. In contrast green politics encourages sustainability and sensible resource utilisation. Cynical politicians might ride on the green politics bandwagon as they can see that it is becoming increasingly popular with the electorate. 8 8

Green politics: a definition Green politics is a political ideology that aims to create an ecologically sustainable society rooted in environmentalism, social liberalism, and grassroots democracy. It began taking shape in the western world in the 1970s; since then Green parties have developed and established themselves in many countries across the globe, and have achieved some electoral success. Supporters of Green politics, called Greens (with a capital 'G'), share many ideas with the ecology, conservation, environmentalism, feminism, and peace movements. In addition to democracy and ecological issues, green politics is concerned with civil liberties, social justice, nonviolence, sometimes variants of localism and tends to support social progressivism. The party's platform is largely considered left in the political spectrum. 9 9

Economics, business and politics All three are inextricably interlinked and each feeds upon the others. It could be argued that all have to go green simultaneously.... ...that none of them could go green on its own. We shall see! 10 10

The ‘New Math’ for Business Six global trends: 1. Emerging markets increase their global power 2. Cleantech becomes a competitive advantage 3. Global banking seeks recovery through transformation 4. Governments enhance ties with the private sector 5. Rapid technology innovation creates a smart, mobile world 6. Demographic shifts transform the global workforce Three key drivers: Demographic shift Reshaped global powers Disruptive innovation. Innovations in technology (more on these on the next slide) 11 11

Three key drivers Demographic shifts. Population growth, increased urbanization, a widening divide between countries with youthful and quickly aging populations and a rapidly growing middle class are reshaping not only the business world, but also society as a whole. Reshaped global power structure. As the world recovers from the worst recession in decades, the rise of relationships between the public and private sectors has shifted the balance of global power faster than most could have imagined just a few years ago. Disruptive innovation. Innovations in technology continue to have massive effects on business and society. We’re now seeing emerging markets become hotbeds of innovation, especially in efforts to reach the growing middle class and low-income consumers around the globe. 12 12

Energy 2020 You may find interesting this document from the European Commission on the energy challenges facing Europe. 13 13

Let us recall our 4 ‘world views’ What might be needed and what might happen depends on your world view, which could be one of the following or some mix of them. Market liberals Institutionalists Bioenvironmentalists Social greens 14 14

Market liberals Essentially believe that the markets will naturally solve all the problems, and economic incentives are sufficient. Growth will naturally occur as humans pursue the profit motive. The search for the most efficient (and hence profitable) means of production will lead to better forms of production and to the invention of new technologies. This will particularly apply in alternative energy sources: as conventional carbon fuels diminish in supply and hence become more expensive, producers will turn to other sources, such as wind, sea and sun. Market liberals encourage globalisation as it leads to growth as well as global integration. Perhaps some markets need to be regulated and consumers and workers protected, but state intervention should be minimal.

Institutionalists While sharing many of the beliefs of market liberals, institutionalists see much more scope and necessity for institutions to intervene actively in markets. Institutions are needed to regulate markets, protecting workers and consumers and to help in the process of disseminating new technologies and in re-distributing resources to the poorer members of the world population. They therefore believe in the importance of world institutions, such as the United Nations (UN), the United Nations Environmental Program (UNEP) and the World Trade Organization (WTO). They point to the success, for example, of the Montreal Protocol for eliminating CFCs. They also believe in helping the poor develop themselves, and not just giving them aid.

Bioenvironmentalists Are concerned about the physical limits of the earth to support life. They regard the planet as fragile and that there are limits to what the earth can support and produce. They regard output as finite, and the market liberals belief that output can be increased indefinitely as simply false. They conclude that positive steps should be taken to limit the growth of the population and hence of output. They regard consumption, and its expansion, as not being the appropriate targets for the world, but that account should be taken of the environment and for other indicators of a good ‘standard of living’. They want the world to take positive, and urgent, steps to stop the world destroying itself.

Social greens They are motivated by radical social and economic concerns, and regard environmental and social problems as inevitably linked. They are worried about important social problems, relating, for example, to the treatment of women and the poor and disadvantaged in society, and regard these as essential issues when designing global strategies. They are concerned about the treatment of workers and their exploitation by employers who are motivated by profits. In some senses they are old-fashioned Marxists. They do not like small communities destroyed in the interests of capitalism. They overlap with the Institutionalists in their concern for globalization, and identify that as a cause of many of the world’s problems, but differ from them in solutions.

Summary of key features (table 2.2 of text) Category Focus on Market liberals Economies Institutionalists Institutions Bioenvironmentalists Ecosystems Social greens Justice

Summary of key features (table 2.2 of text) Category A global environmental crisis? Market liberals No. Some inevitable problems, but overall modern science, technology and money are improving the global environment Institutionalists Not yet. Potential for crisis unless we act now to enhance state capacity and improve the effectiveness of regimes and global institutions. Bioenvironmentalists Yes. Near or beyond earth’s carrying capacity. Ecological crisis threatens human survival. Social greens Yes. Social injustice at both local and global levels feeds environmental crisis.

Summary of key features (table 2.2 of text) Category Causes of problems Market liberals Poverty and weak economic growth. Market failures and poor government policy ... are also partly to blame. Institutionalists Weak institutions and inadequate global cooperation to correct environmental failures, underdevelopment, and perverse effects of state sovereignty. Bioenvironmentalists Human instinct to overfill ecological space, as seen by overpopulation, excessive economic growth and overconsumption. Social greens Large-scale industrial life (global capitalism), which feeds exploitation (of women, poor, etc) and grossly unequal patterns of consumption.

Summary of key features (table 2.2 of text) Category Impact of globalisation Market liberals Fostering economic growth, a source of progress that will improve the environment in the long run. Institutionalists Enhancing opportunities for cooperation. Guided globalisation enhances human welfare. Bioenvironmentalists Driving unsustainable growth, trade, investment and debt. Accelerating depletion of natural resources and filling of sinks. Social greens Accelerating exploitation, inequalities, and ecological injustice while concurrently eroding local autonomy.

Summary of key features (table 2.2 of text) Category The way forward Market liberals Promote growth, alleviate poverty and enhance efficiency, best pursued with globalisation. Correct market and policy failures, and use marker-based incentives to encourage clean technologies. Promote voluntary corporate greening. Institutionalists Harness globalisation and promote strong global institutions, norms and regimes that manage the global environment and distribute technology and funds more effectively to developing countries. Build state capacity. Employ precautionary principle. Bioenvironmentalists Create a new global economy within limits to growth. Limit population growth and reduce consumption. Internalise the value of nonhuman life into institutions and policies. Agree to collective coercion (world government?) to control growth, greed and reproduction. Social greens Reject industrialisation/capitalism and reverse economic globalisation. Restore local community autonomy and empower those whose voices have been marginalised. Promote ecological justice and local and indigenous knowledge systems.

The consequences of globalisation We start with a nice video clip talking about the economic, political and social consequences of globalisation. There is more on the interconnectedness of the world. But this clip highlights the disadvantages in ecological terms. And here we see some of the disasters already threatening the world. And here is the great Pacific garbage patch – between 700 thousand and 1.5 million square kilometers in size.

What is globalisation? “... Globalisation is the integration of everything with everything else ...” (Thomas Friedman) ... the widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary social life, from the cultural to the criminal, the financial to the spiritual...” (David Held) Left: the world from space.

What is driving it? What is it causing? Sometimes difficult to sort out cause and effect. New and faster communication facilities – telephones, faxes and e-mails. These spread information faster – particularly about new technologies. Newer and faster transportation facilities. Hence more international trade.

Global consciousness. When did it begin? Difficult to be precise. Possibly we can suggest the 1960’s (as recently as that). From that date, cross-border financial flows, foreign direct investment and international trade have grown phenomenally, partly because many governments have removed barriers to trade of various kinds. Rapid increase in the number of transnational companies and the growth of free trade areas (like the EU). Internationalisation of fashion trends and convergence of world preferences (to those of the west) Was this inevitable?

Uniformity and Diversity In the previous slide, we argued that there is more uniformity – in both preferences and consumption – and in methods of production. Western agricultural techniques are being used by/imposed upon less developed countries. But there are big diversities: there is a problem of obesity in the west, particularly in the US, while there are problems of starvation, particularly in Africa. We should distinguish between economic and social globalisation. Without doubt the world in aggregate economically better off with globalisation, but there are lots of inequalities and it is not clear that social globalisation is a good thing.

Global Positive There are clearly lots of positive effects of globalisation on the global environment: Global GDP per head has grown rapidly. This generates the wealth to pay for environmental improvements (according to the market liberals). Food production per head has increased rapidly (with new techniques). Health resources (vaccines, antibiotics and medical care) have improved rapidly. Life expectancy is much higher in general. More babies are born and survive. Some pollutants (most notably CFC – see Lecture 1) have been eliminated.

Global Negative But there are also lots of negative aspects of globalisation. Natural resources such as oil and coal are getting depleted. Water is becoming polluted. Trees are disappearing. The habitat is changing. Ice caps are disappearing. Pollution and waste sinks are getting worse (see the Pacific Ocean Garbage patch). Western governments are exporting their pollution to the less developed countries. The rich are getting richer and the poor are getting poorer. Traditional social lives are being destroyed and people marginalised. Even in the rich countries, things are not all that good – there is over-consumption, obesity, cancer and unhappiness.

Ecological consequences of globalisation In summary, there are good points and bad points. How these balance out depends on your point of view. Market liberals say that markets will naturally sort out most of these problems, with a little help from government. Institutionalists say that governments and global institutions should do more and be stronger. Bioenvironmentalists say that urgent action needs to be taken before the world destroys itself. Social greens say that the world needs to completely rethink – and put society before the world. What do you think?

The globalisation of environmentalism Over the years since the serious start of globalisation there has been a growth in concern with its effects. Chapter 3 and this part of this lecture looks at the major landmarks. Some of this started with pressure groups, such as Greenpeace and the CND, some with government action. There have been a number of major international conferences – some successful, some less so.

Major international milestones UN conference on the Human Environment in1972 in Stockholm The Brundtland Report of 1987 The Earth Summit 1992 in Rio World Summit on Sustainable Development in 2002 in Johannesburg Climate conference in 2009 in Copenhagen Rio +20 in 2012 in Rio (Video: what Ban Ki-moon wants.) There is a complete list in Table 3.2.

International cooperation This succession of conferences, often pushed by social demonstrations and political action, demonstrate that the world can be united but often is not, when individual states have self-interests that conflict with world interests.

What is possible? Here are two video-clips, one of which we have seen before. The first is by Shai Agassi saying what is possible in terms of getting rid of pollution caused by cars. The second (“green cars have a dirty secret”), is the one we have seen in Lecture 1, is by Bjorn Lomberg, who warns us of hidden costs. Note what is necessary in Shai Agassi’s solution – social and political cooperation. With which of our four categories is his solution agreeable? You should now look at this report on Wonkblog which suggests that it did not work out as Agassi’s had hoped. There is more in Yale’s Environment 360. And also President Obama has run into problems with his green ideas. This is what CNN Money has to say about sustainability.

Conclusion Once again, the conclusion one draws from all this analysis depends upon your world view. Clearly people throughout the world are getting more aware of the implications and consequences of globalisation. There are more attempts at global cooperation but what form this should take depends on your world view. For issues connected with more efficient energy usage you could click here. But let us conclude on a pessimistic note. I wonder what your views are.

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