* Opinion Piece: Jem Bendell

By working together, non-governmental organizations and businesses have made some strides towards sustainable development, but as Jem Bendell explains, at Rio+20 governments need to join them.

Let us start with a reality check. Twenty years after the Rio Earth Summit the statistics on environment and development are not encouraging. As you read these pages, in the last 24 hours, 80,000 acres of tropical rainforest have been lost, whilst 98,000 people died of starvation, a large number of them children. In just a day, over a million tonnes of toxic waste have been released into our environment, and over 150 species have been driven into extinction. Although many of us have been engaged for a long time, along with the generations before us, these problems still persist. Why has the sustainable development agenda agreed on 20 years ago not been implemented in transformative ways?

Only if we learn from these failures and implement practical responses will we see significant change. The key failure, I argue, was not to focus on improving economic governance for sustainable development. The same side-lining of economic governance issues is risked in the current preparatory processes for Rio+20, in part because of the specialisms of the various participants from UN, governments, business and civil society, but also for a lack of ideas as to how governments can act on economic governance issues given national debts and the apparent fragility of the global economy. There is a need to shift from a focus on the “green economy” to greening the whole economy, and thus reconsidering the neglected pillar of sustainable development – economic governance. The 2011 World Investment Report from UNCTAD points to an emerging agenda for public policy innovation on economic governance for sustainable development. It is an agenda which civil society could support, as it involves government helping to scale innovations that many non-governmental organizations have been involved in and benefited from – non-statutory standards on responsible business practice. But first, let’s recap on why economic governance was sidelined at – and since – the original Rio summit, and why next year can be different, and provide an opportunity for a new agenda on sustainable economic governance to be agreed.

Many commitments have been made on the environmental and social pillars of sustainable development in the last decades. The third, economic, pillar of sustainable development was sidelined during that time due to primary focus on trade liberalization in the 1990s, on geopolitics and security in the 2000s, and an over-riding focus throughout that time on increasing economic growth. Reflection, learning and sharing of new practices for governing markets for sustainable development outcomes was therefore limited, and secondary to other drivers of international economic and political affairs. The original summit itself did not look closely at core economic issues, perhaps because the exuberance and hopes generated by the end of the Cold War shifted the focus away from the economic root causes of social and environmental problems. Discussing the flaws of capitalism was seen as neither helpful or hopeful. Instead, the focus was on practical action on a broad menu of social and environmental problems. As the conference drew to a close, Paul Lewis of The New York Times wrote that “The Earth Summit … has given the world the first real glimpse of the kind of global diplomacy that is becoming possible now that the Cold War is over.”

At the same time, the dominant Western nations were embracing a laissez faire approach to economic governance. The burden of action was shifted to non-state actors. Twenty years later, the continued lack of major global progress towards sustainable development, towards true integration of environmental and developmental priorities, should make us question this lack of attention to economic systems and government roles.

Indeed, over the last twenty years, we have seen non-state actors experiment in many new ways to advance a sustainable development agenda, including the forging of partnerships and voluntary standards to promote responsible enterprise and finance. One of the earliest successful examples is the Forest Stewardship Council (FSC), which is an international non-profit, multi-stakeholder organization which promotes responsible management of the world’s forests through standard setting, independent certification and labelling of forest products. It was established in 1993 after collaboration between environmental groups, timber retailers, foresters and others to provide customers around the world the ability to choose products from socially and environmentally responsible forestry and thereby reduce deforestation. Another example is the Fair Labor Association (FLA), a non-profit multi-stakeholder initiative founded in 1999 to bring together companies, colleges and universities, and civil society organizations to improve working conditions worldwide by promoting adherence to international and national labour laws. Data from the UNCTAD 2011 World Investment Report provides insight into the scale of these initiatives. The FSC certification system now covers about 11% of global forests used for productive activities. The Marine Stewardship Council certification system covers about 6% of global landed fish. Meanwhile the Fair Labor Association is estimated to cover 75% of the athletic footwear industry, while the Roundtable on Sustainable Palm Oil addresses about 10% of global palm oil production.

It’s been exciting and innovative work. However, despite our enthusiasm, these various experiments may be reaching the limits of what they can do to promote wider change. Leaders in business and civil society are therefore calling for governments to become involved to help mainstream the innovations in sustainable development governance. If Rio 1992 was about governments calling non-state actors to act, Rio 2012 is about non-state actors calling on governments to join them in creating greater change.

It is a call that may well be heard and acted upon. Today, there are non-Western nations, with more recent experience of strong government leadership, that have a greater influence in the inter-governmental arena. This influence is reflected in the work of the newly energized Group of 20 nations, or G20, who are currently developing an Action Plan on Private Investment and Job Creation that recognizes the potential role of governments in promoting the use of standards for social, environmental and developmental contributions of international business.

I see three implications from a stock take of what has happened (and not happened) since Rio, especially in the context of changes in global economic and political power. First, discussions of the appropriate regulation of business and finance required to achieve sustainable development will be more welcome in next year’s summit. Second, discussions and decisions can focus more directly on economics, and countering the perverse economic drivers of social and environmental problems. Third, innovations in private initiatives and standards on responsible business may be examined to see how they can be improved and scaled by governmental support. Taken together, this may begin a new arena of policy making for “collaborative economic governance.”

The growing focus on government roles in economic governance for sustainable development is reflected in the key theme for the Rio 2012 Summit to promote a “green economy.” This focus on a green economy is largely the result of the UN Environment Programme (UNEP), which has outlined a range of policy areas where governments can stimulate private sector investment in sustainable enterprise. Business sectors often considered to constitute that green economy include renewable energy, energy efficiency of buildings, resource efficiency, water conservation, forests, land and soil conservation, agriculture and food security, ocean ecosystems and ocean acidification, fisheries, sustainable waste management, natural resource extraction and the restoration of natural assets. Progress in these areas is critical and needs to be done with attention to the social implications of policy initiatives. Yet this should not be the sum of the economic governance agenda explored at Rio+20 and beyond. Instead, the utilising and scaling of voluntary responsible business initiatives is key, as well as a deeper analysis of the drivers of un-sustainability – discussed in turn below.

Since the Earth Summit, twenty years of private sector-led innovation, often with civil society, have led to a proliferation of private standards on responsible business practice, including many multi-stakeholder initiatives such as the previously mentioned FSC and FLA. Such non-statutory standards are helpful because they provide a way for consumers, investors, business partners, and staff to recognize best practice in the social or environmental performance of business, and thus encourage such performance. Whereas national regulations provide a baseline below which performance should not fall, voluntary standards are aspirational, evolving, and point towards the types of enterprise needed for a more just and sustainable world. Until recent times, such standards were regarded as beyond the interest of government, because of their voluntary character. However, as the usefulness of such standards is more widely recognized, UNCTAD reports in its new World Investment Report that governments are beginning to experiment with new ways of utilizing such standards.

Initial research shows that governments are doing this in four ways. First, governments can “prepare” conditions suitable for the development and uptake of responsible business standards. Second, governments can “prefer” responsible business standards by using them for their own operations, procurement and wholly-owned enterprises. Third, governments can “promote” responsible business standards, by assisting their adoption by enterprises or influencing the standards in some way. Fourth, governments can “prescribe” the use of a standard by enterprises through new regulations.

First, governments can “prepare” conditions suitable for the development and uptake of responsible business standards. The rule of law, basic human rights such as freedom of assembly, expression and association, good educational levels, and independent media, are important for civil society to function well and engage business on matters of public concern. Without such factors, it is not easy for credible corporate social responsibility (CSR) standards to emerge. Beyond these fundamentals, nation States can support each other with technical assistance to promote the development of the regulatory infrastructure necessary to facilitate standards and certification. Strengthening the ability of developing countries to implement and enforce their own policies and regulations, and to improve the monitoring of industries (e.g. provide statistical data and overview) can advance the adoption of international standards as for some standards. Governments can also signal to its industry that it wishes to see improvements in certain sectors on certain issues, and even provide support for the creation or further development of responsible business standards. This can take different forms, including material support, technical expertise, and convening power to mobilize the participation of relevant stakeholders. Development agencies have helped fund the development of standards covering international trade with, for instance, the German development corporation funding processes to create new responsible business standards in India and Africa, and the Dutch, British and Mexican governments funding processes to develop international certification on forests.

Second, governments can “prefer” responsible business standards by using them for their own operations, procurement and wholly-owned enterprises. Public spending is typically between 15 to 25 % of gross domestic product (GDP). Some governments have recognized the potential of public procurement to promote national sustainable development goals. Consequently, many governments have issued voluntary public procurement guidelines defining responsible business criteria government officials should take into consideration when making purchasing decisions. Some governments have even gone further and integrated sustainability criteria into national public procurement law. For instance, the German and Dutch governments have developed sustainable public procurement policies for timber, specifying the need for all timber suppliers to be certified to CSR standards. On a local level, British authorities are requiring schools to buy fish certified to the Marine Stewardship Council (MSC) as sustainable. In Sweden, state-owned enterprises are required to prepare corporate responsibility reports using the Global Reporting Initiative (GRI) standard.

Third, governments can “promote” responsible business standards, by assisting their adoption by enterprises or influencing the standards in some way. Governments can help increase general interest and demand for CSR standards, through funding public advocacy campaigns. Examples in UK and Germany include “Fairtrade fortnight” and “Fairtrade schools” initiatives. Policy makers sometimes develop capacity building and training programmes to assist enterprises to meet the qualifications of one or more popular private standards. To do so can help enterprises in lower income countries more easily access premium markets, thereby advancing poorer communities through trade. In Bolivia, for example, the government worked with USAID support to promote FSC certification among its forestry industry; this included capacity building for companies that wanted to be certified, and assistance linking certified companies with export markets. As a result, Bolivia now has the largest area of FSC-certified tropical forest in the world. In Gambia, USAID is assisting the Gambian Ministry of Fisheries in its efforts to obtain MSC certification for the country’s fisheries. Governments can also incorporate standard compliance as a criterion in outward investment promotion schemes. For example, US companies that apply for financial support at the Overseas Private Investment Promotion Corporation (OPIC), have to undergo an assessment of their sustainability management systems to verify that environmental and social aspects of a project can be effectively managed by the applicant. Bilateral trade agreements can also contain commitments or requirements on responsible business issues. The EU-Colombia trade agreement, for instance, includes requirements on responsible business, which can be demonstrated through adoption of non-statutory standards. That follows the decision of the European Parliament in 2010 for the European Commission to include a clause on responsible business in all of the European Union’s trade agreements. Governments can also promote the uptake of private responsible business standards by providing tax incentives for those that purchase retail certified products.

Fourth, government can “prescribe” the use of a standard by enterprises through new regulations. UNCTAD’s World Investment Report outlines how some governments are combining public sector regulation with private sector standard setting to arrive at a mixed regulatory regime. Such a regime utilizes standard setting by the private sector and civil society, while using public sector rule making to compel adherence. Among the advantages for governments of this type of arrangement is that the costs for standard setting and compliance are born by the private sector itself. A key way for governments to do this is to require certification to a voluntary standard for the issuing of a permit. For example, the government of Guatemala has made FSC certification mandatory for forestry firms operating in the Mayan Biosphere reserve. In other countries local authorities have made certification to a private CSR standard a requirement for obtaining a license for operating a tourist enterprise in a nature reserve. At a more generic level, the listing rules for corporations on stock markets can be upgraded to require compliance with a voluntary responsible business standard. For instance, the corporate reporting rules of South Africa require listed companies to prepare annual reports using the Sustainability Reporting Guidelines of the Global Reporting Initiative.

In some instances governments can take over the standard setting process itself, transforming it into a government standard. For example, in most countries organic food standards originated as CSR standards from civil society or industry associations, but today have become government standards. This way, governments can use the dynamic space of CSR standards as a laboratory for future government regulations.

Initial indications are that each form of engagement – from preparing, to preferring, to promoting, to prescribing – requires a deeper level of involvement by governments and offers potentially wider impact in economy and society. Taken together, such government support to mainstream appropriate standards of responsible business and finance can offer a new paradigm of collaborative economic governance, though it is one that requires new knowledge, insight and skill on the part of governments to manage well across all their departments and regulatory bodies. In particular, governments will need to become clearer in understanding what constitute fair and credible voluntary standards. In particular, the transparency and accountability of such standards to stakeholders in the industries, trades and communities that are affected is key.

If governments develop their activities to scale non-statutory responsible business standards, this will go some way to addressing the neglected economic pillar of sustainable development. However, in itself it will not be enough. Even if certifications to standards like the MSC and FSC double, or even triple, it is very unlikely this will address the scale and urgency of the sustainable development challenges we face. Instead, in many countries, and globally, growing inequality and financial instability threaten to compound the existing social and environmental challenges. Our focus needs to be not only on scaling innovative solutions, but also on how to address the root causes of problems. As such, business, trade, and monetary policies need to be examined from a sustainable development perspective.

A debate is already under way in both business and civil society circles about the type of economic system we need for a more fair and sustainable world. Although often rudimentary, and often misunderstanding what capitalism is, these debates show there is growing willingness to tackle issues at the depth and scale that matches their significance to our planet and people.

Twenty years after Rio, with the old debates and fears of the Cold War well gone, we should be able to show more maturity in exploring how systemic flaws in our economic systems could be changed to improve social or environmental outcomes. If it was practical not to discuss capitalism in 1992, given the shortcomings of our progress since then, it would not be practical to avoid discussing it today. In other words, Rio 2012 could be timely to globalize that conversation.

Whether the government delegations will be the ones to have that conversation is currently in doubt. The preparatory meetings for Rio 2012 have heard from governments and “major groups” of stakeholders that there is a need for new impetus in transforming the economic drivers on un-sustainability. Whether the discussions and commitments extend beyond the enabling of markets for cleaner technologies is in doubt. It remains important for more government action to speed the development of a “green economy,” if by that we mean promoting enterprise that benefits our biosphere in accountable and socially beneficial ways. Yet it is more important to green economies at large, by addressing the systemic flaws in corporate, trade and financial regulation that externalize costs, drive inequality, reduce accountability, and stoke destructive levels of consumption. It is key the summit agenda expand from helping the green economy to greening the whole economy, or it would fail to draw upon the lessons of twenty years of action and reflection for sustainable development.

It’s worthwhile noting that the Earth Summit was itself held to commemorate the twentieth anniversary of the 1972 UN Conference on the Human Environment in Stockholm. Canadian industrialist Maurice Strong headed that conference, and said at the time that “there can be no fundamental conflict between development and environment; they are integral and indivisible.” Twenty years later, after chairing the Earth Summit, Strong made the connection with economic governance very clear, commenting that the transition to sustainable development “requires a major shift in priorities for governments and people, involving the full integration of the environmental dimension into economic policies and decision-making in every sphere of activity.” In summarizing the Summit, The New York Times noted that “for many, the accord is important mainly as the start of a process that could eventually change the way the world approaches economic growth....” I recall these statements to highlight how the deeper analysis and the higher hopes that were already present back then failed to find traction in subsequent decades. That suggests to us that it will take effort and courage, rather than mere intellect, to articulate and implement a global policy agenda that tackles some of the economic causes of social and environmental problems.

What makes 2012 different from both the 1992 and 1972 summits is the new role played by the global South. Many countries in the global South have a more recent experience and expectation of government leadership on matters of collective concern. It is important that they are able to share their experiences with sustainable development at Rio 2012 and beyond. It is also important that they do not allow a few powerful nations and commercial institutions to frame the sustainable development agenda narrowly on environmental technologies and services, in ways that could compound social problems and avoid the key need to reform economic governance. If the economic pillar of sustainable development is not central to Rio+20 and beyond, then we risk the final collapse of the sustainable development project, and the lost chance to head off severe corrections and conflicts in future. Whether or not international cooperation in the G20 era will engage these issues in sufficient depth is not certain, for it very much depends on how we ourselves engage to solve global challenges, rather than dwell on our local or personal preoccupations.

Biography: Adjunct Professor, Asia-Pacific Centre for Sustainable Enterprise, Griffith Business School, Australia, Jem Bendell recently advised UNCTAD on how to promote responsible business and investment, including research for their 2011 World Investment Report . He provides board-level strategy advice on addressing global challenges. His latest book – Evolving Partnerships: Engaging Business for Greater Social Change – is published by Greenleaf Publishing, 2011. www.twitter.com/jembendell