The report, produced by the UN Environment Programme (UNEP) in partnership with SustainAbility and GlobeScan, uses compelling economic and scientific data and a wide-ranging collection of real-life case studies to demonstrate the advantages of the green economy in action.
According to experts, companies investing in sustainable innovation to increase resource efficiency and responsible operations ahead of formal regulatory frameworks are achieving competitive advantage by positioning themselves to capture the mainstream markets of the next decade.
UN Under-Secretary General and UNEP Executive Director, Achim Steiner, said, “Business can no longer afford to ignore the benefits that switching to a Green economy will bring. Pioneers that are leading the market are reaping the rewards and positioning themselves for sustained success that benefits their customers and communities.”
“Decoupling economic growth from environmental damage is required to prevent large scale economic as well as environmental impact. Rio+20 provides an unprecedented opportunity to scale-up and accelerate these efforts. As governments gather to consider future green economy frameworks, we invite business to step-up and show the role it can play in generating jobs, developing energy efficient technologies, in greening its supply chains and in integrating sound governance principles throughout their decision-making,” he added.
From utility companies in emerging markets to consumer goods companies in developed markets, sustainable goods and services are moving from niche to the mainstream.
Paul Polman, Unilever’s Chief Executive Officer, said, “At Unilever we see no conflict between sustainability and economic growth. We have to have both, and increasingly we see that one is not possible without the other. This new report from UNEP confirms this, with cases drawn not just from our own business but many others in a variety of sectors, exploring the ways in which sustainability reduces risk, generates cost savings, and creates opportunities for growth, providing the foundation for a new business model for the 21st century.”
Research shows that the provision of sustainable products and services bolsters sales growth, market share, brand value and reputation, while increasing customer loyalty.
Jeff Erikson, Senior Vice President at SustainAbility and a contributor to the report, said, “In the 25 years we have worked on corporate sustainability, we have witnessed time and again the multiple ways that sustainability delivers business value to companies that adopt it as a strategic principle.”
He added, “The companies currently leading the transition to the Green Economy realize it’s not about bravery – it’s about the bottom line.”
There is strong evidence that in recent years demand for sustainable products has been resilient, with many customers willing to pay a premium for sustainability credentials.
A National Geographic/Globe Scan survey in 2010 found that consumers in Brazil, India and China scored the highest in terms of environmentally sustainable consumer behavior.
Other survey results show that in future business-to-business and business-to-consumer transactions, customers will expect all products to be environmentally and socially responsible.
The new lifestyle markets, markets for sustainable cities, the service markets, the organics and certified markets are all examples of opportunities to be cultivated and seized.
Financial institutions play a dual role in the transition towards a green economy through both investing in sustainable projects and integrating environmental, social and governance indicators (ESG) into the decision making criteria of their everyday operation - from lending to investment and insurance.
ESG performance is increasingly seen as a proxy for management quality; hence the growing interest on the part of businesses in sustainability rating schemed.
Experts estimate that the annual financing required to create the green economy is in the range of US $1-2.5 trillion. The investment represents an opportunity for the private sector to provide the infrastructure, equipment, goods and services that will drive the transition.
Business alone, however, cannot deliver the speed and scale of change required. Collaboration with regulators, customers and the financial community is essential.
Public policies linked to clear principles of sustained economic success are necessary to support this transition.
Improving tax regimes to award sustainable innovation is seen as an important incentive.
Locations with higher environmental standards and tax subsidies are more attractive to investors.
In Guatemala, tax breaks are provided on equipment for projects designed to support the goal of generating 60 per cent of electricity from hydro and geothermal sources by 2022.
The OECD has confirmed a growing movement towards environmental tax breaks and tradable permits in OECD economies over the last decade. The value of green taxes to boost innovation is evident through increased investment in research and development and registration of patents on new, cleaner technologies.
Other examples of national and city-level tax incentives for cleaner energy include:
According to the report, businesses that have effective environmental and social risk management systems in place are in a position to secure a better risk profile, thus enabling them to obtain capital at lower cost.
It indicates that climate change, for example, is opening up new opportunities for sustainable products and services in the finance sector.
For instance, there is a pressing need to increase the availability of capital to further develop insurance schemes against environmental risk.
Equity Bank of Kenya made profits of over Ksh12.8 billion in 2011 by providing loans at competitive interest rates to farmers who introduce environmental practices such as drip irrigation and water efficiency projects.
In addition to that, the bank’s customer base reached Ksh7.15 million in the same year, making it the largest bank by consumer base in sub-Saharan Africa.
A survey of sustainability experts and practitioners - conducted by UNEP, GlobeScan and SustainAbility in 2011 - examined the reasons why more businesses are not joining the race towards a green economy transition.
Results of the survey indicate that the majority of stakeholders perceived a disconnect between the stated political goals of sustainability and actual policies on the ground.
If more business leaders and executives developed better understanding of the risks and opportunities that issues such as human rights, climate change, and water scarcity represented to their business, the pace of the transition would significantly increase.
International guidelines and standards such as the Global Reporting Initiative (GRI) and the ISO 26000 Social Responsibility Standards are being widely adopted by major corporations around the world, albeit on voluntary basis.
These leading businesses are now calling for mandatory social and environmental reporting to drive up performance and create fair market advantage.
Experts recommend businesses to adopt a set of transformative actions to help drive the transition to the green economy by:
According to the report, the successful transition to the green economy over the long term will require new skills, diverse collaborations, continuous innovation, investment s with uncertain return and a change in market values.
Companies, like governments, will need to choose wisely if they are to capitalize on the opportunities ahead.
The gathering of leaders from government, business and civil society at the Rio+20 UN Conference on Sustainable Development presents a historic opportunity to accelerate the transition to a Green Economy. While public policy is an essential ingredient in making the Green Economy a reality, it is the actions of the private sector that will ultimately determine the pace and shape of the transition.
Venue: Windsor Barra Hotel
UNEP, established in 1972, is the voice for the environment within the United Nations system. UNEP acts as a catalyst, advocate, educator and facilitator to promote the wise use and sustainable development of the global environment. To accomplish this, UNEP works with a wide range of partners, including United Nations entities, international organizations, national governments, non-governmental organizations, the private sector and civil society.
For more information, visit www.unep.org
For 25 years, GlobeScan has helped clients measure and build value-generating relationships with their stakeholders. Uniquely placed at the nexus of reputation, brand and sustainability, we partner with clients to build trust, drive engagement and inspire innovation within, around and beyond their organizations.
For more information, visit www.GlobeScan.com
SustainAbility is a think-tank and strategic advisory firm working to inspire transformative business leadership on the sustainability agenda. Established in 1987, SustainAbility delivers illuminating foresight and actionable insight on sustainable development trends and issues.
For more information, visit www.SustainAbility.com