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If business leaders want to be part of the future, they...

Our Burning Planet

OUR BURNING PLANET OP-ED

If business leaders want to be part of the future, they need to stop investing in the past

(Photo: Unsplash / Markus Spiske)

The global economy is the outcome of the building blocks of decisions we make daily. We can choose to buy goods and services that have lower negative impacts on the environment or contribute to greater environmental integrity and a lower carbon future. These small gears will turn the big wheel.

The resolve is high at the beginning of 2021, the first year of the third decade of the first century of the third millennium (1-3-1-3). It’s odd and leapfrogs 2. Can this mean that we are indeed going to do different things and do things differently? Will we have a sense of adventure, particularly in Africa and the developing world, leapfrogging the conventional development steps of the North? If we are going to get anywhere close to our aspirations of a universally serviced world and the end of poverty in a low-carbon near future, we’ll have to.

A pivotal post-Covid-19 paralysis moment emerged at the beginning of this year that in many ways, if embraced, could be the beginning of an accelerated pathway to exactly that future. The virtual World Economic Forum began on 26 January 2021 with the central message, “The Great Reset”.

This is a powerful statement from the leaders of the global economy, from captains of industry to governments and the major civil society players. A tacit admission that we have been barreling down an unsustainable path. The Covid-enforced pause ironically created much-needed breathing space. A chance to reflect. An opportunity to see the possible.

Who would have thought that we would survive stopping the conveyor belt of the global economy for significant periods during the lockdowns over more than a year? But we did. With all the anxiety and pain that the pandemic brought, there were positives. Cities such as Beijing, Johannesburg and Delhi temporarily eased out of their oppressive air-pollution haze, wildlife re-entered cities, quiet returned.

But, with the promise of vaccines and slowing infection rates as we get past the northern winter, talk is firmly about recovery. Economic recovery for many goes hand in hand with a return to the familiar and the jealously guarded “way of life”. As President George Bush Sr famously remarked at the Rio Earth Summit in 1992, “the American lifestyle is not negotiable”. 

It is a sentiment that has had many resonant voices all over the world, including South Africa, with enormous costs to the world economy and the environment. Our very future is threatened by this declaration. But the sentiment expressed by United Nations Secretary-General António Guterres that we have to build back better post-Covid, is instructive.

In February 2021, the UK Treasury released The Economics of Biodiversity: The Dasgupta Review, seen as significant as the Stern Review on the Economics of Climate Change in 2006. One might argue it has a higher potential for change given that the world is in a more receptive environment in 2021. The key findings are powerful, not because they are new (the biodiversity and environment community of practice has been offering this view for many years), but because of where it originates. This analysis comes from folk who have been engaging this from an economics perspective.

The first headline from the Dasgupta Review is that all economies and livelihoods depend on nature. For many, this goes against the grain. In fact, part of the reason we as a species afford ourselves the title Homo sapiens is our ability to use our cerebral capacity to master nature. Our core development paradigm is to organise nature on tap to service all our needs while modifying nature to mitigate any risks that could harm us.

We re-channel rivers from their natural flow into concrete canals to control flooding, we clear out natural vegetation to satisfy our need for expanded human settlement and agriculture. In doing so we concomitantly destroy much of the world’s fauna as we destroy their habitats or protect our domesticated livestock. This returned understanding that our entire global economic machinery depends on nature and its continued integrity is absolute.

The environment, social and good governance principles are already making their mark on the investment landscape. By 2019, 75% of retail investors had at least a quarter of their portfolios in this domain. This portfolio is projected to be worth $35-trillion by 2025 in the US alone. We can easily double that for the global target.

The second conclusion of the review is that our supply/demand ratio is untenable. The current dominant economic model, and the way we live, means that already, for people all over the world to enjoy a minimum quality of life as mandated in the Bill of Rights, we need the resources of 1.6 Earths.

The principal drivers are unsustainable patterns of consumption and waste. We also need to return to the dialogue on the global commons, defining the rainforests of the Amazon and the African Great Lakes region as well as the high seas as Global Natural Assets. We must then develop mechanisms for global protection of these natural assets.

A major part of the challenge is how we measure economic health. There is a general consensus that just measuring the flow of money, as we do with gross domestic product indicators is woefully inadequate. We need to move to indicators that give us a sense of the stock of natural assets, using such measures as the Gross Ecosystem Product, with which China is experimenting.

The third conclusion is that our current actions are endangering not only the environment, but also future generations. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services concludes that one million animal and plant species are threatened with extinction, and the average abundance of nature’s species has fallen by 20%, or one fifth, since 1900. We have seen a massive deterioration of the natural world since the middle of the last century, with accelerated, fossil fuel-driven industrial expansion.

The fourth conclusion is that the primary reason for the current demise is institutional failure. Specifically, we have price distortions undervaluing the contributions and valuation of the environment that incentivise anti-sustainable development purchasing behaviour. In addition, governments as well as state and regional institutions actively subsidise nature-destroying activities and enterprises. This ranges between $4-trillion and $6-trillion each year. In addition, we have an institutional vacuum in the protection of the Global Commons.

The final conclusion of the Dasgupta Review is that the solution begins with the understanding and acknowledgement of the fundamental truth, that our economies are embedded in nature and not external to it. Dasgupta adds that “humanity faces an urgent choice. Continuing down our current path presents extreme risks and uncertainty for our economies. Choosing a sustainable path will require transformative change, underpinned by ambition, coordination and political will akin to, or even greater than, those of the Marshall Plan.”

This converges on the call for action to the Great Reset by the World Economic Forum and will be unpacked at several pulse points in 2021. These include WEF Singapore, the Global Climate Summit in the US, the Convention on Biological Diversity (COP 15) in Kunming China, and the Climate Change Convention (COP 26) in Glasgow, UK, in addition to the meetings of the G7, G20 and various multilateral bodies – 2021 has the greatest potential to be the year of the Great Turnaround.

But what do ordinary folk and companies do? The global economy is the outcome of the building blocks of decisions you and I, as well as my company and yours, make every day. Individually we have the power of purchase decisions. We can choose to buy goods and services that have lower negative impacts on the environment or, where possible, contribute positively to higher levels of environmental integrity and a lower carbon future. This is also true for the investment decisions we make, including our pension funds. These small gears will turn the big wheel.

The instrument that oils those gears is leadership. Courageous and forward-thinking leadership with a long-term outlook is paramount. It will have a significant input cost to catalyse the change, but once in motion, the dividends will pour in. Indicators are already strong in this direction.

The environment, social and good governance principles are already making their mark on the investment landscape. By 2019, 75% of retail investors had at least a quarter of their portfolios in this domain. This portfolio is projected to be worth $35-trillion by 2025 in the US alone. We can easily double that for the global target.

The key question is whether you and your company will be engaged in the eternal catch-up with the beginning of the curve, something too many South African companies have become used to. Or are you and your company going to be pioneers and early adopters and ride the wave of change from the front? DM

Dhesigen Naidoo is a member of the Presidential Climate Commission and CEO of the Water Research Commission. He writes in his personal capacity.

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