Rio+20: The future we want?

I consider this deceptive. The slogan seems to appeal to our sense of judgement, our free will and deliberate choice. As if we had a choice! In fact, the question boils down to when rather than whether we will learn to abide by the laws of sustainability. In essence, these laws are uncompromising and non-negotiable. I am not talking about some overstretched, watered-down notion of sustainability, but the real stuff. True sustainability is no arbitrary concept, but can only be realised within the biophysical limits of our planet. We simply cannot continue to grow, consume and pollute at the present rate; otherwise civilisation will sink. Business as usual is just not an option. If ten billion people, maybe more, are to reach a standard of living even remotely akin to what we would associate with a decent life, not to mention the lavish lifestyle we have become addicted to in the West, we will have to change the way we live and do business profoundly. I daresay that most of us, deep in our hearts, know this to be inevitable, but we obviously prefer to muddle through in a state of collective repression.

Thermodynamically speaking, the earth is a closed system, as it exchanges energy with space, but no material, at least not to any significant degree. So in the long run, we have no choice but to confine ourselves to the limits of our planet, unless we want to consider the colonisation of space as a realistic possibility. According to WWF’s recently published Living Planet Report, our ecological footprint is already 50% larger than the regenerative capacity of our planet, and on current trends we will need two planet Earths by 2050 to satisfy our ever increasing hunger for resources and absorb our waste and pollution. Year after year, we are thus running up an ecological debt that eclipses the staggering government debts, and there is no such thing in the natural world as a bail-out, another monetary easing or a straightforward default. When our environmental credit is used up, it is gone for good.

What we must do is change course now and finally switch to a truly sustainable mode of development, a conclusion that was drawn at the Rio Earth Summit 20 years ago, but tragically, was never followed up with meaningful action. We must start, without delay and without exception, to live up to the requirements of sustainability in all that we do, at least in its weak interpretation. ‘Weak’ in this context does not mean ‘feeble’ or ‘non-binding’. It means that we must substitute for our ongoing loss of non-renewable resources. Oil is a classical example. According to the concept of weak sustainability, even using a non-renewable resource until it is exhausted can be viewed as ‘sustainable’, if the proceeds are actually reinvested in the build-up of an adequate substitute that will yield the same level of service or consumption indefinitely into the future. Unfortunately, that is not what we are seeing in the real world. Oil dollars are still too often lining the pockets of undemocratic regimes with very limited or no trickle-down effect to the poor, and no serious investment in renewable energy infrastructure. However, a step in the right direction is being taken by the Norwegian Government Pension Fund, formerly and more prosaically known as the “Petroleum Fund”.

Originally created to invest the revenues from its North Sea oil into other productive assets for future generations, this sovereign wealth fund not only tries to honour the intergenerational dimension of sustainability but also to satisfy intra-generational sustainability principles by applying ethical minimum criteria in its investment policy and by engaging with companies who do not live up to expectations. It is a worthy and a necessary initiative, but much more will be needed. For only a tiny minority of companies today have business models that are truly sustainable, whereas the vast majority of companies, even if they may have put all sorts of Corporate Social Responsibility policies in place and therefore easily pass the ethical filter, remain at odds with fundamental principles of sustainability.

Resource efficiency is a key concept in our transition to a more sustainable world. We have to deploy all our research and development efforts to make more of less in every domain. Because water, energy and other natural resources are still far too cheap, we squander and spoil them for future generations.
However, we must be aware that efficiency can only be a first, albeit important, step. It is a necessary but not a sufficient condition for sustainability. Without an absolute cap on the scale of our human activity, efficiency will not be able to save us; it will merely prolong the decline. Efficiency gains are known to be eaten up swiftly by a corresponding increase in the absolute quantity of consumption. What is more, increased efficiency can even speed up the exhaustion of the resource it was meant to protect and spare, because efficiency improvements usually translate into lower input costs and thus induce us to consume even more of what we set out to preserve!

This perverse effect is also known as the Jevons paradox, named after the English economist who, more than a century and a half ago, predicted that English coal mines would soon be depleted if the production of coal became cheaper and more efficient all the time. The fact that the Jevons paradox did not hold for the very resource it was devised for disproves neither its author nor the principle itself. For even though it is true that coal is still by far the most abundant fossil resource we have, it is, as with every other finite resource, just that: finite. But then, in this case, finiteness is a luxury problem. We will not be able to extract and burn even a fraction of the reserves still in the ground without heating up our planet even further and making it a very inhospitable place to live.

The “green economy”, the main goal towards which the Rio+20 is supposed to progress, will to the largest possible extent have to be grounded on renewable resources and renewable energy. Why, for instance, continue to produce plastics and other artificial fibres from oil or coal through energy-intensive and polluting chemical synthesis if forests can do the job not only for free, without pollution, but even by filtering the air and the water, and sucking carbon dioxide from the atmosphere? But beware! Not every presumably ‘green’ solution also makes sustainable sense. To input large amounts of fossil fuels in the form of mechanisation, artificial fertiliser and crop protection chemicals to grow corn and soy for animal feed or fuel our cars makes no sense in a world where one billion people still go hungry. The remaining fossil fuels must be used much more wisely, and to a large extent spared to build up the renewable infrastructure that will help us to capture the sun, the wind and other renewable resources, and sustain us indefinitely.

Huge challenges and transformations lie ahead, and these have to be financed. This is where sustainable investment comes in. Governments are already hopelessly overstretched, and they cannot shoulder the necessary investments by themselves. However, they can, and doubtlessly will, do everything in their power to render the use of fossil resources more expensive while safeguarding the sustainable use of renewable ones by putting in place appropriate incentives and policies that will force the internalisation of harmful externalities. Our society simply cannot afford to accept that our most precious resources such as air, water, soil and biological diversity continue to be squandered just because market prices do not reflect their crucial importance for the survival of our own species and those we share the planet with.

In a not too distant future, companies will not have a choice. Those who fail to play by the new rules will disappear, in a process not unlike the one (to which they probably contributed) that led to the extinction of many plant and animal species. On the other hand, companies which understand that sustainability considerations must affect and inform each and every business decision, and not just their CSR reporting, will survive and prosper. Integrating the right environmental, social and governance criteria into our investment decisions can help us understand whether companies belong to the former or the latter category. Therefore, providing capital to those companies that operate responsibly within the means of our planet and without running up our ecological debt to future generations is not only the right thing to do but will, inevitably, also prove to be the more successful investment strategy in the long run.