Environment and economy: until death do them part
Delivered by Thomas D’Aquino, President and CEO of the Business Council on National Issues, at a conference on sustainable development in Winnipeg. This address follows in the wake of the formation of a Business Council Task Force on the Environment and the Economy chaired by Thomas Kierans,
President of ScotiaMcLeod Inc. and composed of twenty-five chief executives. The Task Force has begun its work of encouraging greater environmental awareness and the development of effective and practical ways of integrating the environment and the economy.
When I first read this opening line of the Brundtland Report, I was struck that so few words could deliver such a strong message. The image of two starkly contradictory realities crossed my mind.
At this ground-breaking conference hosted by the Government of Manitoba, we are grappling with what some consider to be the irreconcilable forces that flow from these two realities — a wholesome environment and vigorous economic development. It is my belief that these are not irreconcilable. Far from it, they can and must be made mutually reinforcing. There no longer can be any doubt — the cost of failure will be fatal and will lead inevitably to the destruction of planetary life as we know it. Hence my choice of title “Environment and Economy — Until Death Do Them Part.”
As part of this panel session on “Perspectives on Sustainable Development,” I have been asked to present mainly a business perspective. Let me say at the outset that the business leaders who make up the Business Council on National Issues share my conviction that reversing the deterioration of the environment on a global basis is the most important challenge facing Canadians and citizens of the world. My colleagues and I are equally convinced that the response to this challenge will be found primarily in vigorous but responsible economic development — economic development which harnesses and adapts the positive creativity of technology and market forces; economic development based on enlightened public policies capable of drawing from the private sector the highest level of commitment; economic development that can contribute towards our health and the health of our environment.
Meeting the challenge will be tough, costly, and at times painful. But I have not come here today to present you, with a gloomy message about the elusiveness of the finish line. On the contrary, I am reasonably confident, despite the massive obstacles, that environmentally sustainable development is attainable and that the business community will play a central role in reaching this goal.
AN ENCOURAGING BEGINNING
Let me begin with a brief progress report. When I think of the environmental challenge, at times I experience a strong sense of deja vu. For years we have been warned about the deterioration of our ecosystem. I quote from The Environmental Handbook. published by Friends of the Earth in 1970: “There is a generation … demanding better answers … about our environment. They speak out in this book with an urgency born of the realization that time is running out…. In many cases we have damaged the environment beyond repair.” These words, although published almost two decades ago, are painfully relevant today.
But let us look at the positive side. Twenty years ago, concern about the environment was mainly a preoccupation of the young. Our hair was longer then, we talked of new streams of consciousness, we questioned the impact of “mindless” technology. With few exceptions, politicians, business people, and the public generally did not understand or care much about what we were saying.
Contrast this with the scene today. In Canada alone the environment has become a major concern of citizens in all walks of life and of all age groups. People in growing numbers are asking what they can do to help. Media coverage is unprecedented. Environment Canada has become a senior ministry strongly supported by the Prime Minister. The work of the Brundtland Commission, a major force in increasing our awareness and a much-needed catalyst in pushing the environment to the top of the policy agenda, has been widely acclaimed in this country. The Canadian Council of Resource and Environment Ministers (CCREM) National Task Force gave further impetus to the environmental cause with an action-oriented report in 1987. And more recently the momentum has accelerated with the establishment of provincial and national Round Tables.
Faced with this astonishingly rapid series of events, the Canadian business community is confronted by the dual challenge of adapting to change and providing convincing evidence to the public that it is committed to protecting our environment and safeguarding our health. In politics, pictures are worth more than a thousand words — they are the lasting images which frame public perceptions. Who among us will ever forget the television footage of the oil slick spreading its deadly net across Prince William Sound in Alaska? One of the side-effects of this kind of unqualified disaster is that it can negate many environmental corporate success stories which often go unnoticed, causing people to ignore the progress of business in responding to the environmental challenge.
Let there be no doubt, the progress is real and it is significant. Businesses that have been environmentally active for years are now being joined by a host of others. For example, the Canadian Petroleum Association has developed an Environmental Code of Practice. The Mining Association of Canada has adopted an Environmental Policy. The Canadian Chemical Producers’ Association has established a comprehensive “Responsible Care Program” designed to minimize the risks that chemicals pose to the environment. The Grocery Products Manufacturers’ Association and the Society of the Plastics Industry are developing waste management programs. Other business associations, including the Canadian Chamber of Commerce and my own Business Council on National Issues, have formed task forces to design practical recommendations on integrating environmental enhancement with economic development. At the corporate level, many companies are working to make their organizations environmentally conscious in every activity, whereby all decisions eventually will require explicit consideration of their environmental effects.
This encouraging news of course is not limited to Canada. The leadership challenge is being readily grasped by a growing number of global enterprises.
Take for example the announcement two weeks ago by E. S. Woolard, the newly appointed Chairman of E.I. du Pont de Nemours and Company. “Our continued existence as a leading manufacturer requires that we excel in environmental performance,” he said. And he left no doubt as to his role, pointing out: “that as Du Pont’s chief executive, I’m also Du Pont’s chief environmentalist.”
Environmental consciousness is not confined to heavy industry. A major Quebec financial services group is devising an environmental code of ethics: subscribing members will not lend money to borrowers that fail to meet provincial environmental guidelines.
These and other unpublicized examples are no cause for complacency, but I hope they will help people understand that the business community is embracing the precept that proper environmental management is good business — for everyone.
THE CHALLENGES AHEAD
Even in light of some constructive activities and other positive signs, I still ask, are we moving far enough or fast enough in achieving an environmentally sustainable society? I will address this point by describing some of the challenges I see.
The first, and perhaps the most important, concerns our values and attitudes and the way we think about our environment. How are we going to convert our approach of the past, which has led to our current predicament, to a new, environmentally compatible one that will lay the foundation for a long-term balance between environmental and economic interests? How will we promote a much higher level of societal awareness, one that will help us to better understand the implications of environmental degradation for the way in which we go about our lives? How do we make ourselves and others more intolerant of waste, of needless despoliation, or of unnecessary use of non-renewable resources? We can be heartened somewhat by the successes of, for example, the anti-smoking campaign and blue box programs — but not too much, since the changes we must make must be much wider and deeper. As an illustration, consider the potential lifestyle changes implicit in a concentrated attack on greenhouse gases: among other things, we will have to cut down the emissions of carbon dioxide from internal combustion engines that power our vehicles.
A second challenge is related to this. The Western world consumes a disproportionate share of the world’s resources. It is said that the United States, for example, with 6% of the world’s population, uses 30% of the resources. Developed countries are now banning products such as chlorofluorocarbons (CFCs) and adopting new standards for effluents, such as those from vehicle emissions and coal burning, which are harmful to the environment. Such measures are costly, of course. Developing countries can be expected to argue that they cannot afford to adopt them. This poses, then, a double dilemma for Western economies. Will our new, cleaner industries be forced to compete against cheaper, “dirty” producers in the Third World? Or, will we find it necessary to transfer large amounts of capital and technology to developing countries to enable and encourage them to keep pace? Any plans for implementing environmentally sustainable development must come to grips before long with the world’s economic disparities.
My third point also is connected to the first, but I mention it separately for emphasis: the preponderance of short-term thinking, especially among governments and some businesses. Given the lengths of political mandates, it is inevitable that politicians will pass laws that deliver short-term results. However, this can easily lead to reactive, piecemeal solutions, often focussing on symptoms rather than the real problems. In a paper submitted to the Brundtland Commission, three American experts noted some of the difficulties of relying upon short-term goals. For example, they claimed that legislative emphasis on “end-of-pipe” pollution controls has led to a regulatory mentality that relies on controls to solve environmental problems at the expense of alternatives. They suggest that the high expense of complying with control regulations has resulted in a commonly held view that there must be a trade-off between jobs and environmental protection. How will we promote a longer-term focus so that government and industry can encourage the development of better alternatives and help give the lie to the need for trade-offs? Since business responds much better to market and fiscal carrots than to regulatory sticks, what economic incentive models can be developed to help attain public and private sector environmental objectives?
Industry, for its part, has been criticized, sometimes justifiably, for its preoccupation with quarter-to-quarter results. The paper to which I have just referred provocatively poses some questions for executives to ask when considering a new product. “Will manufacture or use of this product be harmful to people and/or the environment?” “Is this the best design … built to last…easily reparable or recyclable?” “Is there a real need for this product, or is it merely our perceived need?” The authors imply that management will have to answer more questions like these if corporations are to make a positive contribution towards long-term sustainability. Whether you agree with that or not, it is hard to ignore one of the paper’s conclusions: corporations have an enormous responsibility to subject their activities to an environmental litmus test in order to help propel society toward long-term sustainability.
My fourth point concerns the need for more cooperation and consultation, especially among those whose relationships historically have been adversarial. Both the Brundtland Commission and the CCREM Task Force are testimonies to the ability of groups with widely different views to reach substantive common agreement on important issues. In such cooperation lie the seeds of more creative and thorough solutions to our problems. The challenge will be to design the mechanisms and, more than likely, new national and international institutions such as the Round Tables, and to make them work.
Yet another challenge is for economists and accountants to develop new macroeconomic tools to assess the societal implications of environmental changes. The economists’ traditional approach — measuring marginal costs against benefits and weighing alternative uses of the environment — is inadequate due to poor or unavailable data. Related to this, parenthetically, is the need for a satisfactory environmental data base. It is heartening to note that Statistics Canada is a leader in this area through its work on adjusting the National Accounts.
New economic methodologies are needed. For example, there must be practical and fair ways to ascribe a value to air and water and to their use. From a corporate perspective, new ways must be found to allow companies to measure environmental improvements which would justify optimum technology and result in higher long-term returns — to the corporation and to society. Improved accounting techniques are needed to assess the potential liabilities of businesses arising from delays or gaps in investments in environmental measures. These and other fundamental issues must be addressed before environmental factors can be fully recognized in investment decisions — as they must be — and better understood in public policy debates.
Finally there is the fiscal dimension. Meeting the environmental challenge will require a significant reordering of global economic priorities, to be sure. And what about Canada? We are a country plagued by chronically high public sector deficits and skyrocketing debt. The costs of fiscal mismanagement will impede our ability to reorder our own economic priorities. The hard fact is that our will to address environmental imperatives must be backed up by strong national and provincial fiscal positions. Have we really understood this yet? I do not believe so.
The size of these challenges is daunting. But it is important that we not tackle them so slowly that we let ourselves become discouraged. We therefore must move away from an “ad hoc” approach to one that is more systematic, one in which our leaders articulate a vision and set priorities.
THE RESPONSIBILITIES OF BUSINESS
The business community, no less than any other, has to face up to its responsibilities and exercise leadership. My next comments apply not only to those firms that are moving to operate more sustainably, although unfortunately they are in a minority, but to almost every business, large or small, dirty or clean. The task must be to integrate the environment and the economy in decision-making as if your lives depended on it!
Up to now, environmental considerations often have been treated as an “add-on” to business decision-making. In the future, they will have to become as systemically a part of the management process as financial matters. In other words, the environmental effects of every decision, whether it deals with safety standards, products, investments, new processes, purchasing, office management, or factory design, will have to be recognized.
Improved front-end planning to assess the potential risks of new activities is only the first step. This must be accompanied by effective environmental management and control measures and emergency response plans. Reclamation systems as part of the life-cycle management of industrial activities should be developed. Invariably, there will have to be more vigorous self-regulation by corporations and industry associations.
These approaches often will result in new planning and decision-making processes and revised corporate structures and responsibilities. For example, accountability for decisions affecting the environment must be clearly defined and the reward systems modified accordingly. The changes can be complex and interrelated, so they must be handled systematically and not allowed to develop in an “ad hoc” way.
There are some who may be deterred by the perception of increased expenses or capital investments with no corresponding financial return. I have two responses to this point of view. The first one is that tougher environmental measures will come sooner or later so it is better to take the lead rather than be legislated into compliance. Besides, the cost argument is a weak defence for any corporation resisting environmental change. Any idea that profits should take precedence over public health is unacceptable to the public, let alone politicians or even the shareholders and employees. Nor, in many cases, does it make sense financially because it is more advantageous and often less expensive to prevent environmental problems than to clean them up after they have occurred.
More important, though, business has to recognize its ethical responsibilities. As part of the problem it also must be part of the solution, and the key here is that solutions need not impose unmanageable financial burdens. Creative and common-sense approaches such as selling recaptured and recycled waste and marketing new technologies have often led to gain, not pain. Furthermore, there are advantages from investing in long-term technology whose environmental benefits exceed current or even planned standards. By leap-frogging current norms, corporations can gain financially by reducing their expenditures below what they will have to spend to catch up. Indeed, businesses can improve their competitiveness in the market-place by positioning themselves as environmental leaders. The introduction of “environmentally friendly products” in Canada is just one such opportunity. In macroeconomic terms, the experience of member countries of the Organization for Economic Cooperation and Development (OECD) has shown that measures to protect and improve the environment can generate employment and other significant economic spin-offs.
Some senior executives may be uncomfortable in adapting to such new circumstances. To them I emphasize that the commitment to make these changes must come from the very top. Progress will be slow for those firms that fail to recognize that changing the attitudes and processes which make up a corporate culture needs unwavering support and example at board and senior management level. Once commitment has been secured, everyone in the business must become involved to help ensure success.
Successfully managing change, of course, requires a long-term perspective. This will require that management look well beyond its own industry to environmental impacts on other industries and on society in general. This is not to suggest that this process does not now exist; rather, that it should occur more often and more broadly, and the sooner the better.
As I have said, the business co=unity in Canada is responding to the call for environmentally sustainable development. The person in the street would be pleasantly surprised at the actions behind the scenes. I am confident that a year from now I will be able to provide many substantive examples of improvements arising from current initiatives.
We are willing — and indeed it is critical for us — to discuss environmental issues with other groups in society, including governments, and work with them toward solutions. The Business Council on National Issues Task Force on the Environment and the Economy is charged with this responsibility. But I emphasize that consultation will not finish on publication of our findings. If ever an issue were designed for consensus-building, the environment and the economy is it. I would add that this applies both domestically and internationally for business, governments, NGOs and the scientific community. Together we should be providing multi-stakeholder input to questions such as ”who pays?” the polluter, the consumer or the taxpayers? And we should be taking steps to better understand and resolve macro environmental issues such as global warming, nitrogen oxide build-up, and world deforestation, where industry’s technical expertise and know-how can be put to greater use.
This appeal for co-operative action is based on two deeply held convictions on my part. First, the challenge we face is so great and so urgent that it demands an approach that sets aside many of our practised differences and works vigorously towards “our common future.” Second, business is vital to our economic development and a key participant in the search for environmental solutions. Old attitudes towards business must not stand in the way of the development of new working relationships among all players in the community.
THE EARTH IS ONE BUT…
In sharing these thoughts with you today, I return to where I began and the opening line of the Brundtland Report. Sadly, it remains largely true that ‘The Earth is one but the world is not.” But the world is rapidly changing. Powerful messages are blowing in the winds, floating in our waters, and criss-crossing our lands. The messages are ones that leaders everywhere are beginning to understand — that the family of man is indeed one, that our common life supports are in danger, that time is running out, that in cooperation lies our only salvation.
I must credit Dr. Digby McLaren, President of the Royal Society of Canada, for finding words that so aptly sum up what I am trying to say. At the end of a superb article on the Health of the Planet, he quotes Chief Seattle of the Suquarnish people of the Pacific Northwest who wrote to President Pierce in 1855:
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