Welcome Address by Achim Steiner, UN Under-Secretary General and UNEP Executive Director, at the Opening Plenary of the B4E
Singapore, 19 April 2007 - I welcome you to this Global Business Summit for the Environment, a first business summit of this nature co-presented by UNEP and the UN Global Compact in Asia.
Let me also thank the Government of Singapore for hosting us and Sound Initiatives for its role in the organization.
It is our hope that you as senior business executives will be able to use the debates of the next two days to find new inspiration in advancing corporate environmental and social responsibility (CESR) though your operations in Asia and beyond.
UNEP has been active through its own networks and the UN Global Compact in advancing new ways of doing business--doing business in a manner that displays better and more intelligent ways of managing the environment and society and building the business case for sustainable development.
This is a business model based on performance goals such as resource productivity and driven by life cycle management approaches that move beyond re-active, end-of-pipe technologies.
It is a model seeking to add value by addressing environmental challenges as an opportunity-- using a triple bottom line approach-- as opposed to those who continue to operate on risk averse approaches that consider only short term financial results.
It is a model that reflects the challenges of our times where many of the wealth creating and poverty-alleviating nature-based resources - known as ecosystem services and ranging from forests to wetlands, soils and the atmosphere -are under pressure as never before.
Where - to cite just one example - scientists estimate that without action a once plentiful, renewable and economically significant resource like the world's commercial fisheries may have disappeared in less than five decades as a result of poor management including simplistic one-dimensional subsidies.
What in UNEP's view is the environmentally responsible company? It is the company that takes steps such as the following:
- Re-define company vision, policies and strategies to include the 'triple bottom line' of sustainable development.
- Develop sustainability targets and indicators (economic, environmental, social).
- Establish a sustainable production and consumption programme with clear performance objectives to take the organisation beyond compliance in the long-term.
- Work with suppliers to improve environmental performance, extending responsibility up the product chain and down the supply chain.
- Adopt voluntary charters, codes of conduct or practice internally as well as through sectoral and international initiatives to confirm acceptable behaviour and performance.
- Measure, track and communicate progress in incorporating sustainability principles into business practices, including reporting against indicators as found in the Global Reporting Initiative (GRI) Guidelines.
- Ensure transparency and unbiased dialogue with stakeholders.
Our world today is an interconnected, Wikipedia world of activist consumers and one that is - in the words of Thomas Friedman - "flat".
As competitive playing fields between industrial and emerging market countries are leveling, new questions are being asked about the standards of performance enforced through global supply chains.
Take the current hot topic of biofuels. Hailed by some as a way of reducing fossil fuel emissions from petrol and diesel cars while also offering an opportunity to diversify rural livehoods and incomes.
Yet voices of concern are now also being raised amid worries that biofuels may lead to wide-scale destruction of tropical forests as companies clear woodlands for sugar cane and palm or other oil bearing crops.
Consumers, currently wooed by the environmental benefits may soon turn against biofuels as a result of the damage to ecosystems-damage in reality or pecieved damage, it makes little difference.
Norms and standards are needed and perhaps market instruments and certification that ensure biofuels meet sustainability criteria that satisfy the demands of consumers - the group that in a very real sense gives companies their "license to operate".
UNEP has been approached by concerned energy companies seeking a sustainability solution to the dilema of biofuels. They fear that a backlash could undermine multi billion dollar investments in this field.
We are working through the G8 and other fora to try and devise a fair, equitable and sustainable biofuels industry.
It encapsulates a debate that increasingly focuses on "applied" corporate social responsibility. Like with the fledgling biofuels industry, UNEP is ready to work with companies willing to partner and build the capacities of their suppliers and manufacturers in global supply chains.
Indeed we have partnerships and initiatives with many sectors from construction and mining through to the IT and telecommunications industries and tourism.
The development of a new international guidance standard on social responsibility (SR) under the International Organisation for Standardisation (ISO) is reminding us of the
challenges faced in promoting basic norms among companies of all sizes in all regions of the world.
Fundamentally still, whether it is a large national company or a small multinational -everything is possible in the new economy today - companies are being asked to support shared values for the global market.
When he launched the Global Compact over seven years ago, the UN Secretary-General spoke of "corporate citizenship" and reminded us that the corporation, like any citizen, has both rights and duties.
Consider other challenges business faces today, for example: Expanding population in developing regions is creating large markets dominated by the young. In the next 20 years population will shrink or barely grow in the high-income countries, and most of the world's citizens will be born in low- and mid-income economies.
Some businesses have started to employ the "fortune at the bottom of the pyramid" model to adapt their products and services to local needs and capacities in poor communities. They are aware that rising consumption creates environmental risks and business opportunities for innovation. The world population is poised to expand 50% by 2050 and with it will come an extraordinary growth in consumption.
Over the past decades, consumption has radically evolved in terms of volumes and quality - partly as a result of demographics but mainly as a result of dramatic changes in consumption patterns now sweeping developed and many developing world markets.
In its 2006 State of the World Report, the Worldwatch Institute concluded: "China and India hold world in balance". Some of the data reported are:
- In 2005, China alone used 26 percent of the world's steel, 32 percent of the rice, and 47 percent of the cement. Though their per-capita resource consumption is still low, with their huge populations China and India are joining the United States and Europe as ecological superpowers with major demands on the world's ecosystems.
- China has only 8 percent of the world's fresh water to meet the needs of 22 percent of the world's people. In India, urban water demand is expected to double - and industrial demand to triple - by 2025.
- India's use of oil has doubled since 1992, while China went from near self-sufficiency in the mid-1990s to the world's second largest oil importer in 2004.
- China and India have the only large coal-dominated energy systems in the world today - coal provides more than two-thirds of China's energy and half of India's. Both countries are therefore central to future efforts to slow global climate change.
The reorganization and globalization of supply chains has disconnected consumers from the labour force, creating various social and economic side effects both in developed and developing countries.
High impact sectors such as oil and gas have observed over recent years how emerging corporate citizenship issues have moved beyond traditional hot topics such as oil spills and CO2 emissions to bigger picture questions such as socio-economic impacts and revenue sharing.
In the construction sector, transnational companies have been drawn into local governance issues when new infrastructure stimulates economic development and population growth.
Mining companies have dealt with HIV/Aids, introduced high quality health care for employees and encountered complicated relationships with the rest of society and local authorities. These examples show you that new business models also require new ways of co-operation between business and society.
Thinking of B4E, CESR and linking macro level trends with business action at the micro level: what is expected of individual companies? I remind you of the suggested actions for environmental responsibility that I listed a few minutes ago. This is where it starts. Every day we see closer links between the financial materiality of sustainability issues such as climate change, and the fiduciary duties of those responsible for our companies, capital markets and critical societal investment vehicles.
Here is a clear message for many business and industry sectors, particularly energy intensive ones with a heavy carbon footprint. Not adopting and adapting to a sustainability approach will increasingly be judged by the markets as ignoring issues which are financially material and -in doing so - not fulfilling the basic requirements of responsible management.
This is clear from discussions under the UN Global Compact, UNEP Finance Initiative and their jointly launched Principles for Responsible Investment (PRI) initiative.
The principles make explicit that environmental, social and governance issues, have an effect on the long-term performance of companies.
The PRI has as an overall goal the aim to help integrate consideration of ESG issues by institutional investors into investment decision-making and ownership practices, and thereby improve long-term returns to beneficiaries.
Companies from emerging markets such as India are learning quickly, and taking up the business case approach to CESR as opposed to the traditional approach of philanthropy and community development. And the question today is not only the practices of OECD-based multinationals in the Asia Pacific. There is growing interest is the investment and activities by for example companies from India and China in other parts of the world.
Corporate takeovers by Indian multinationals reached new heights in 2006. The high-profile Tata acquisition of Anglo-Dutch steel giant Corus was an early sign of things to come.
The challenge for foreign companies entering new markets would be to show sensitivity for local needs whilst applying international norms and standards such as those promoted under the UN system.
Thinking in terms of drivers for change, business needs to be driven by not only risks but also opportunities in taking on global environmental challenges.
Twenty years ago it was concluded in "Our Common Future" by the Brundtland Commission: "Looking to the future, a growing market for pollution control systems, equipment, and services is expected in practically all industrialised countries, including NICs (Newly Industrialised Countries)- today we would say "emerging market economies" and "industrialising countries".
Climate change represents the ultimate and perhaps over-arching challenge for CSR and is central in 2007. It is also now a major driving force towards that technological vision espoused 20 years ago.
The Intergovernmental Panel on Climate Change (IPCC) - co-founded in 1987 by UNEP and the World Meteorological Organization - is issuing its latest cycle of reports.
In February its Working Group I put a full stop behind the debate about whether humans are altering the climate. The 2,000 plus experts were "unequivocal" in concluding this.
Working Group II, whose findings were launched this month, present alarming findings on the likely impact of unbridled increases in greenhouse gases.
These findings, plus a new assessment issued yesterday by US military experts, are largely driving the debate this week in the UN Security Council on climate change.
In Bangkok, in May, the IPCC will publish its third report this year?essentially on ?what the devil do we do? and the opportunities for mitigation.
Business should have a direct interest in these issues. Instability and unpredictability is, unless you are of course a George Soros (a speculator), factors that are of the highest concern to companies and markets.
Thus every person in and outside this room should have a direct interest in insisting that governments-- meeting in Bali, Indonesia later in the year for the annual UN climate convention negotiations?make real and tangible progress towards a post 2012 emission reductions agreement.
There are other reasons for business and industry to be at the table and to take active engagement.
Climate change also represents one of the greatest investment, business and job creation opportunities of this generation as a result of newly emerging and new kinds of markets from carbon trading to renewable and cleaner energy generation and energy efficiency.
The Clean Development Mechanism of the Kyoto Protocol could soon trigger flows of finance from the North to the South of $100 billon into renewables, fuel switching and forestry projects.
I was struck by a new assessment by Roland Berger, a leading European consultancy who only a few days ago estimated that jobs in the renewable energy sector in Germany will, by 2020, out strip those in the car industry.
And it is not just developed countries. Long Yuan in China is among the top wind power operators in the world now and Suzlon in India ranked in the top five - if not higher -in terms of a wind power manufacturer.
Climate change has other potentially far reaching implications for business. It may, if we can move over 190 nations to a fair and equitable regime, be the trigger for a new global understanding between nations.
By addressing the mutual concerns of the North and the South, it can thus build confidence between the developed, developing and rapidly developing economies.
Confidence and trust that could spill over into resolving other tricky and environmentally, economically and socially-important negotiations including the question of access and benefit sharing of genetic resources.
And the stalled Doha round of the World Trade Organization (WTO).
Once again, thank you for inviting me to address the opening of B4E.