Sustainability & Global Politics A Primer for MBAs Presentation at the HHL - Leipzig Graduate School of Management, 17 March 2004 Detlef Sprinz PIK - Potsdam.

Sustainability & Global Politics A Primer for MBAs

Presentation at the HHL - Leipzig Graduate School of Management, 17 March 2004

Detlef SprinzPIK - Potsdam Institute for Climate Impact Research &University of Potsdamhttp://www.sprinz.org

Overview

Relevance of Sustainability for BusinessWhat is Sustainability & Global Politics?Measuring SustainabilityPolitics & Institutions for SustainabilityResearch Agenda

Relevance of Sustainability for Business

Part of Good Corporate CitizenshipBecomes Part of Regular Reporting for Leading Companies Vulnerability in Case of Gross Violation

NikeBrent Spar

DJ Sustainability IndexNuts & Bolts of Sustainability for an MBA

Sustainable DevelopmentWorld Commission on Environment and Development/Brundtland Commission (1987)

“Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

• Needs, esp. of the poor, to be met• Intra- and intergenerational equity

Sustainable Development as the historic compromise between developing and developed countries at the 1992 Rio UN Conference on Environment and Development

Sustainability

Environmental Economics (Turner 1993)Very weak sustainability

• Km, Kh, Kn: completely substitutable• Kc: non-existent• Sustainability achieved if K ≥ 0

Weak sustainability• Km, Kh, Kn: partially substitutable• Kc: exists and should be preserved unless

opportunity costs are too high• Sustainability achieved if K ≥ 0 and Kc ≥ 0 unless

opportunity costs are too high

Sustainability

Strong sustainability• Km, Kh, Kn: partially substitutable

• Kc: exists and should be preserved

• Sustainability achieved if K ≥ 0 and Kc ≥ 0

Very strong sustainability• Km, Kh, Kn: perfectly complementary

• Sustainability = stationary-state economy, moral/ethical capital ≥ 0

Sustainability – Broadly Defined

AGENDA 21 (UN):EnvironmentalEconomicSocial

AGENDA 21 TopicsAgriculture International law Atmosphere International cooperation for an enabling

environment Biodiversity Institutional arrangements Biotechnology Land management Capacity-building Major groups Consumption and production patterns Mountains Demographics National sustainable development strategies Desertification and drought Oceans and seas Education and awareness Poverty Energy Science Finance Small islands Forests Sustainable tourism Freshwater Technology Health Toxic chemicals Human settlements Trade and environment Indicators Transport Industry Waste (hazardous) Information for decision-making & participation

Waste (radioactive)

Integrated decision-making Waste (solid)

Sustainability – Broadly DefinedLong-Term Societal Issues

Management of Public DebtsManagement of Public Entitlements Across Generations

• Prior commitments of the social welfare state– $ 44 trillion (quoted in Heller, IMF, 2003)

– = ca. four times 2004 forecasted GDP for USA (Economist)

– Health insurance– Publicly mandated retirement plans– Catastrophic health care

Stability of the Global Trading and Financial Systems

Global Politics

Authority Patterns That Transcend the Individual Nation-State

No need for governments: Bluetooth, Linux OS, etc.Governments Often Involved:

• Creation of the market for GSM communication

Public-private partnerships• Germany has a long tradition:

welfare organizations since 19th century, TÜV, etc.

Global Politics

Lack of Central Authority at the Global Level

International treaties (mostly) cannot be enforced• Few powerful sanctioning systems• Exception: WTO (yet decentralized

execution)

Even in a unipolar global systemRule-creation and implementation is decentralized

Global Politics

Challenge of Global PoliticsCreate and maintain authority patterns where markets produce clearly sub-optimal outcomesObserve subsidiarity in multi-level governance• Nation-states are often better legitimized• Resources are largely controlled by

nation-states

Measuring Sustainability & Global Governance

Measuring Sustainability

UN Commission on Sustainable Development (CSD)

-> Institutions

Theme Sub-theme Indicator

Strategic Implementation of SD

National Sustainable Development Strategy

Institutional Framework

International Cooperation

Implementation of Ratified Global Agreements

Information Access Number of Internet Subscribers per 1000 Inhabitants

Communication Infrastructure

Main Telephone Lines per 1000 Inhabitants

Science and Technology

Expenditure on Research and Development as a Percent of GDP

Institutional Capacity

Disaster Preparedness and Response

Economic and Human Loss Due to Natural Disasters

Source: http:/ / www.un.org/ esa/ sustdev/ natlinfo/ indicators/ isdms2001/ table_4.htm

Measuring Sustainability & Global Governance

World Economic Forum & CIESIN: Environmental Sustainability Index (2002)

ESI: Components of Environmental Sustainability

Component Logic

Environmental Systems

Reducing Environmental Stresses

Reducing Human Vulnerability

Social and Institutional Capacity

Global Stewardship Source: World Economic Forum (2002, 5)

Measuring Sustainability & Global Governance

World Economic Forum & CIESIN: Environmental Sustainability Index (2002)

2002 ESI rankings by country

Rank Country ESI 1 Finland 73.9

2 Norway 73.0 3 Sweden 72.6

4 Canada 70.6 5 Switzerland 66.5

33 France 55.5 34 Netherlands 55.4

35 Chile 55.1 45 United States 53.2

50 Germany 52.5

91 United Kingdom 46.1 129 China 38.5

136 Ukraine 35.0 137 Haiti 34.8

138 Saudi Arabia 34.2 139 Iraq 33.2

140 North Korea 32.3 141 United Arab Em. 25.7

142 Kuwait 23.9 Source: http:/ / www.ciesin.columbia.edu/ indicators/ ESI/ rank.html

Measuring Sustainability & Global Governance

Measuring Global Regime Effectiveness

NR AP CO

Degree of Instrument Use (e.g., emission reductions in %)

Effectiveness Score EAP NR

CO NR

Sensitivity of Effectiveness Score dAP

dE

NRCOE

NRCO

NRAPS

11

Notes: NR = no-regime counterfactual = LB = lower bound CO = collective optimum= UB = upper bound AP = actual performance Source: Helm and Sprinz 2000, 637 (modified).

Politics & Institutions for Sustainability

National: German Council for Sustainable Development

Founded in 2001Mission:

• Consult government• Facilitate societal dialogue

First National Strategy (2002): “Perspectives for Germany”Current emphasis of national strategy on

• Climate & energy; mobility; environment, food & healthFuture

• Inter alias, increased incorporation of older generationsImpact

• Too recent to judge

Global: UN Commission for Sustainable Development (CSD)

World-wide forum created after 1992 UN Conference on Environment & DevelopmentMeeting-intensiveIndicator development, but national reports have divergent scopeImpact: unclear

Politics & Institutions for Sustainability

Politics & Institutions for Sustainability

Need for Long-Term Strategies, Resources, Implementation and EvaluationWorld Environment Organization

Biermann, WBGU, and othersEnhanced UN governance system

Politics & Institutions for Sustainability

ChallengeInadequate attention to where most long-term decisions are made and where legitimacy predominantly “resides”• Family, local, national, some supranational:

EU

How to organize a decentralized system of governance that improves on the status quo?

Research Agenda

Assessing the Effect of Global Governance

Further develop the “Oslo-Potsdam solution” of effectiveness toolSeparating and aggregating effects across international treaty regimesAssessing regime effectiveness over timeInvestigate non-regime cases, andExplain the variation in regime effectiveness-> assist in regime design.

Research Agenda

Feasibility of Long-Term PolicyCurrent institutions created for short-term governance

• Constitutional provisions not specific enough (and are often ignored, e.g. public debt)

Examples for Research• Long-term climate policy (“prevent dangerous

interference”)• Intergenerational obligations (social security

system)• Sectoral policies (e.g., Airbus)

Conclusions

Sustainability Is a Business IssuePotentially Wide-Ranging ConceptAssessment of Progress Towards Sustainability is Possible (Effectiveness)The Challenge of Credible Long-Term Policy Remains

Additional Sources

Presentationhttp://www.sprinz.org

Links and Additional Information:PolitikON(line) Course “International Environmental Policy”Contact:

[email protected] [email protected]