Introduction to Sustainable Development & Corporate Sustainability

Tata L. Raghu Ram raghutata@xlri.ac.in Contact: 3196 / 9934360121

Biography
Masters in Limnology Wildlife Institute of India Dehra Dun Ph.D. Biodiversity impact assessment of 2 large dams in Narmada Valley 43000 ha forest cleared / 180000 people displaced BIA & social impact assessment More questions than answers National Project Coordinator: PA Network Cell IGIDR Capacity building for introduction of environmental economics into decision making Capacity building in Environmental Economics Research 61 research studies / 33 Universities / 23 research institutions and NGOs IIMC: Taught business and environment Fulbright Environmental Leadership Fellow, Harvard University With XLRI since August 2006

What is this course about?

Is there a limit for natural resources? Can society operate without natural

resources? Is there an interrelationship between resources? Is there an interrelationship between the rich and the poor? What is globalization? What is sustainable development? How can we create a world with a balance in economic activities, social stability, and environmental quality?

SD concerns create
Business risks as well as opportunities

1. Managers should be able to take advantage of the business opportunities inherent in societys demands for SD. 2. Should be able to turn risk into opportunity

Suggestions.
Plagiarism: ZERO tolerance Time: Be in the class, before I walk in NO walking out walking into the class Groups: 3 students/group Seating arrangement: Group wise

Sustainable Development- A Context & Direction

Sustainable Development

Development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs

Redesigning our business systems to be sustainable requires that we first understand how nature works.
What are the root causes for industrial systems to cause environmental degradation? Where might these environmental trends create a barrier or problem for our business in the future?

Understanding these issues can contribute to creating a strategy that avoids these problems and finds the growth opportunity.

An organisms survival depends on two critical functions from its environment: provision of resources and absorption of wastes.

Source Provide resources: Water Clean air Nutrients

Environment
Organism

Sink Absorb wastes and by products

The same principle applies at larger scales, e.g., to a company, industry, or economy.

To maintain the integrity of these valuable services, we need to understand how nature works.

Nature works in cycles There is no waste - what is unused by one species becomes nutrients for the next

No Waste

The suns energy drives the process:

Green celled plants using photosynthesis create net concentration and structure

In contrast, our industrial system functions primarily in a linear fashion.

Take Make Waste

Take natural capital, valuable material, and process it into unusable waste

Only 6% of material flow ends up in products

Source: Hawken, Lovins, Natural Capitalism

This industrial system, operating on an ever larger scale, is embedded in and affecting natures cycle.

The impact of our expanding industrial system on the environment affects both sources and sinks.
Sinks Sources
Key resource bases are being exploited at rates faster than their ability to regenerate. Environment Economy
Urban development Deforestation Desertification

The available land area where nature can break down and recycle wastes is shrinking.
The quantity and types of wastes created by industrial societies cannot be fully absorbed and recycled by nature.

Forests Fisheries Topsoil Groundwater Freshwater

CO2 NOx Synthetic compounds (CFCs, DDT)

Where is a company potentially vulnerable when considering these impacts?

Sources Are we dependent on a threatened or sensitive natural resource?
Environment Economy

Sinks What sinks are we dependent on that may reach capacity, for example: Global atmosphere? Local air quality? Human/wildlife capacity to absorb toxic substances?

Raw material Labour Energy

Product

The Means of production

Money

Non-Product

Resource flushed through Industry

Raw material Labour Energy

Product

The Means of production

Money

Multi media waste

Air

Land

Water

Environmental Protection Act, 1986

Compliance costs, Laws & Regulations

Closed loop: recycle, reuse, resource efficiency, pollution prevention

Raw material Labour Energy Product

Efficient Means of Production

Valuable energy

Money

Marketable energy

Valuable feedstock

Marketable feedstock

Pollution Prevention Paradigm

Companies evolved in how they manage environmental and social issues.

Sustainable Development

Risk Management

Environmental Compliance End-of-pipe Limit impact of current activities Pollution prevention; Management systems Strategic integration Change activities and design of industrial system

Redesign to eliminate impacts of activities

Global Trends
The challenge of sustainable development arises from two major converging trends. Decline in resource availability and ecosystem services

Diminishing margin for action

Sustainability

Impact = Population x Consumption x Technology

Global Trends
At the same time, millions of people worldwide are struggling to meet their basic needs.
Distribution of Total World Income

1.3 billion people live in absolute poverty, with incomes less than $1/day (World Bank) 841 million people in developing countries suffer from basic protein-energy malnutrition (UN Food and Agriculture Organization) Nearly 1 billion people either cannot work or are employed in jobs where they cannot support their family (International Labor Organization)

Richest Fifth

82.7%

11.7%

2.3%

1.9%
Poorest Fifth

1.4%

(UNDP, Human Development Report 1992)

Why do we degrade Environment?

Environmental resources are CPR No well defined property rights Belongs to all while using, to no-one while paying Leads to The tragedy of Commons Results in Externalities Impact on environment is external to the profit & loss calculations of the economic agent - eg. Car users (-ve), plantations (+ve)

 Stakeholders polluters, affected, controllers etc.. Sustainable Development Environmental resources are to be shared across generations Possible that future generations may prefer natural capital over man made capital

History of Sustainable Development

1962 - Rachel Carson publishes "Silent Spring". This book brought together research on toxicology, ecology and epidemology to suggest that agricultural pesticides were building to catastrophic levels. This was linked to damage to animal species and to human health. It shattered the assumption that the environment had an infinite capacity to absorb pollutants. 1968 - The Club of Rome, is established by 36 European economists and scientists. Its goal is to pursue a holistic understanding of the 'world problematique'. It commissions a study on global proportions to model and analyse the dynamic interactions between industrial production, population, environmental damage, food consumption and natural resource usage. 1969 - Friends of the Earth forms as a non-profit organization dedicated to protecting the planet from environmental degradation; preserving biological, cultural, and ethnic diversity; and empowering citizens to have an influential voice in decisions affecting the quality of their environment -- and their lives.

1971 - Greenpeace starts up in Canada and launches an aggressive agenda to stop environmental damage through civil protests and non-violent interference.

History of Sustainable Development

1971 International Institute for Environment and Development (IIED) is established in Canada with a mandate to seek ways to make economic progress without destroying the environmental resource base. 1972 United Nations Conference on the Human Environment, Stockholm. Only one Earth - led to the development of The United Nations Environment programme (UNEP) 1972 Club of Rome publishes "Limits to Growth" (Meadows et.al) report Best seller in several languages. It described the use of a computer model World 3 - to study the implications of continuing exponential growth in five interconnected trends of global concern: industrialisation, population growth, widespread malnutrition, depletion of nonrenewable resources and ecological damage. The report adopts a pessimistic view of development, warning of severe resource shortages if development were to maintain its current momentum. Extremely controversial - Northern countries criticising it for not including technological solutions and Southern countries criticising it because it advocates abandonment of economic development.

History of Sustainable Development

1974 Rowland and Molina release seminal work on CFCs in Nature magazine. They calculated that if human use of CFC gases was to continue at an unaltered rate the ozone layer would be depleted by many percent after some decades. 1983 World Commission on Environment and Development forms. The commission works for 3 years to weave together a report on social, economic, cultural, and environmental issues. 1984 Worldwatch Institute publishes its first State of the World Report. The report monitors changes in the global resource base, focusing particularly on how changes there affect the economy. It concludes that "we are living beyond our means, largely by borrowing against the future." 1985 Antarctic ozone hole discovered by British and American scientists. 1987 World Commission on Environment and Development publish - Our Common Future (The Bruntland Report) in response to the request from the UN general assembly to propose long-term environmental strategies for achieving sustainable development by the year 2000.

History of Sustainable Development

1987 Montreal Protocol focused on the depletion of the stratospheric ozone layer and eliminating substances that cause this (HCFCs). Has since been strengthened twice - London and Copenhagen. Production of CFCs in North stopped by 1996, countries in the South (China and India) to end production by 2006.

1988 Inter-Governmental panel on Climate Change Resulted in the framework convention on climate change signed by 153 countries + the then EU, dealing with the threat of global warming Thought lacked firm agreements on targets, did aim to stabilise 1990 levels of CO2 and other greenhouse gases
1992 Meadows, D. B., Meadows, D. L. and Randers, J., Beyond the Limits, London: Earthscan. Using a computer model to map patterns of growth, the report concluded that environmental collapse was inevitable. 'If the present growth trends on world population, industrialisation, pollution, food production and resource depletion remain unchanged, the limits to growth on this planet will be reached some time within the next 100 years'.

History of Sustainable Development

1992 United Nations Conference on Environment and Development (UNCED) held in Rio de Janeiro, Brazil The Earth Summit. 179 countries participated in this conference working towards reconciling the impact of human socio-economic activities on the environment. Outcomes: Convention on biological diversity Framework convention on climatic change Principles of forest management Agenda 21 The Rio declaration on environment and development

1994 Law of the Sea national sovereignty of off-shore waters and the national responsibility for the ecosystems within these waters (re. dumping waste, & fish stocks etc.)
1997 Kyoto Protocol Worlds Governments met in Japan to negotiate a treaty to start dealing seriously with climate change to reduce emissions of serious greenhouse gases CO2, CH4, NO, + 3 types of fluorinated gases.

History of Sustainable Development

1997 - Earth Summit+5 - A five year review of Earth Summit progress was made by the United Nations General Assembly. The final document adopted by delegates from over 165 countries -- while taking small steps forward on a number of issues, including preventing climate change, forest loss and freshwater scarcity - disappointed many in that it contained few new concrete commitments on action needed. 2001 Climate Summit, Bonn 178 countries developed a framework of how to implement the 1997 Kyoto Protocol 2002 - Earth Summit 2002, Johannesburg, South Africa. Rio+10 - World Summit on Sustainable Development -people, planet, prosperity,

Savings is the Key to Sustainability

S
y
Savings as percentage of GNP

d
>=

KH

KM

KN

y
Depreciation of Human Knowledge

>=

Depreciation of Man-made Capital

Depreciation of Natural Capital

Weak Sustainability requires the sum of all forms of capital to be constant or increasing over time Strong Sustainability requires each component to be constant or increasing over time

9 Ways to Achieve Sustainability

1. Leave everything in its pristine state or return it to its pristine state. 2. Develop so as to not overwhelm the carrying capacity of the system. 3. Sustainability will take care of itself as economic growth proceeds. 4. Polluter and victim can arrive at an efficient solution by themselves.

5. Let the markets take care of it.

6. Internalize the externalities. 7. Let the national economic accounting systems reflect defensive expenditures. 8. Reinvest rents from non-renewable resources (weak & strong sustainability). 9. Leave future generations the options or the capacity to be as well off as we are.