Topics in Economics and Environment Jour 2024-2025 PDF

Topics in Economics and Environment Jour Philippe Roman ICHEC Brussels Management School 2024-2025 1 4. What is a sustainable business? 2 4.1. Corporate responsibility and sustainability: an in...

Topics in Economics and Environment Jour Philippe Roman ICHEC Brussels Management School 2024-2025 1 4. What is a sustainable business? 2 4.1. Corporate responsibility and sustainability: an introduction 3 Waves of corporate environmentalism (Hoffman and Bansal, 2011) 1° 1960s and 1970s: “regulatory compliance”. Environmental management externally treated, with marginal role, focused on legal obligations. 2° 1980s and 1990s: “strategic management”. More pro-active stance. Environment integrated into process and product choices. Waste minimization, pollution prevention… Bhopal (1984), Exxon Valdez (1989) 3° 2000s: “sustainability”; merging of environmental and social issues in a globalised economy. Expansion of the scope. 4 Companies between denial and active engagement Companies, especially big multinational ones, have been lobbying against strict(er) environmental regulations and financing “merchants of doubt” for long. → Naomi Oreskes and Erik Conway, Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming, 2010. (New York: Bloomsbury Press.) But not all companies are lobbying against ambitious climate targets and measures. Some are even pro-actively campaigning for carbon pricing. → The Carbon Pricing Leadership Coalition contains lots of multinational companies (https://www.carbonpricingleadership.org/competitiveness) → At a totally different level, the Kaya Coalition campaigns in Belgium for ambitious environmental actions, among which the creation of a “Environmental Value Added Tax” (taxation proportional to environmental damage). 5 Companies between denial and active engagement Carbon pricing seems to be the preferred solution to the climate issue. → Many firms could take (financial) advantage of transitioning to a zero-carbon world (new, low-carbon products, replacement of ’old’ cars by electric ones, shift in energy supply, mining activities necessary to turn cities and nations electric and connected etc.). → Some are eager to anticipate future legislations and to build new comparative advantage. → Big companies are actively committed to green growth policies and narratives (cf. Chapter 4 and the World Business Council for Sustainable Development). Carbon pricing is probably seen by firms as the most flexible and business- friendly way to go ahead with carbon targets. → Remember the theoretical “deadweight loss” of command-and-control approaches vs market-based (or “economic”) approaches. 6 7 Waves of corporate environmentalism (continued) Some critical authors argue that companies have streamlined environmental or sustainability discourse by softening and hollowing it. From denial to accommodation of constraints to delay discourses? https://www.cambridge.org/core/journals/global-sustainability/article/discourses-of-climate- delay/7B11B722E3E3454BB6212378E32985A7 8 9 The sustainability spectrum 10 Stages of corporate sustainability 11 Environmental risks rank high for business 12 13 Climate mitigation: The big business view 14 15 How would you characterise the WBCSD’s “pathway to a sustainable world”? 16 Defining corporate sustainability Based on the Brundtland report, the International Institute for Sustainable Development (IISD) defined corporate sustainability as “business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future” (in Business Strategy for Sustainable Development: Leadership and Accountability for the 90s, IISD, DT and BCSD, 1992) Upward and Jones (2016: p. 103) define strong sustainable business as “an organization that only enabled strongly sustainable outcomes as one that creates positive environmental, social, and economic value throughout its value network, thereby sustaining the possibility that human and other life can flourish on this planet forever”. 17 John Elkington and the Triple Bottom Line 18 Corporate Social Responsibility Corporate social responsibility (CSR) is often presented as sustainable development at the the firm level. → Appears in the 1960s CSR refers to decentralised and voluntary practices by firms and a broader structuring dynamics. Importance of including a diversity of stakeholders in strategic decisions. → ISO 26000 norm Endorsed and championed by international institutions: OECD, World Bank, European Commission, United Nations Environment Programme (Global Reporting Initiative) But pretty weak and reversible compromises. Up to now, they have had little potential to change the overall business landscape. 19 20 Environmental labelling Initiatives taken by civil society, associations and corporations; growing intervention of the public sector. Tension between multiplication of labels and their trustworthiness ; who defines them? Who ensures they are implemented? Etc. → For instance, in the textile sector, dozens of labels coexist. → Both multiplication and opacity Many labels are created by brands themselves (ex: Renault ECO2…) The B-Corp label Policymaking enters into play → Mandatory information : ex. “étiquette énergie” (EU) and “indice de réparabilité” (France) on household appliances, … → Quality labels, for instance “entreprise écodynamique” (Brussels) etc. 21 22 23 Corporate climate pledges of ‘net zero emissions’ New dominant corporate environmental narrative. → The Climate Pledge (Amazon…) → Race to Zero (UNFCCC) → Science Based Targets To understand what this means: https://theconversation.com/net-zero-carbon-neutral-carbon-negative-confused-by-all-the-carbon-jargon-then-read-this- 151382 To see pledges and actions towards ‘net zero’, see: https://zerotracker.net Some see it as the way forward, https://theconversation.com/net-zero-despite-the-greenwash-its-vital-for-tackling-climate-change-160329 others are more sceptical: https://theconversation.com/new-net-zero-emissions-target-wont-end-uks-contribution-to-global-warming-heres-why-116386 https://theconversation.com/why-corporate-climate-pledges-of-net-zero-emissions-should-trigger-a-healthy-dose-of- skepticism-156386 A list of articles on ‘net zero’ initiatives and their limits: https://theconversation.com/uk/topics/net-zero-emissions-2050-79283 24  https://ghgpr otocol.org/ PWC on the importance of scope 3 emissions: https://www.pwc.com/u s/en/services/esg/library /scope-3-emissions.html 25  Disclosure at a crossroads? Several competing frameworks for disclosure/reporting In the EU, convergence around CSRD and ESRS. California just passed a Climate Corporate Data Accountability Act 26 Towards « authentic » sustainability assessment? Read the UNRISD report Authentic Sustainability Assessment A User Manual for the Sustainable Development Performance Indicators at least up to p. 18. Answer the questions: What are the main flaws of current ESG/sustainability reporting the report wants to address? What does the report mean by “authentic”? Would you say the report follows a weak or a strong sustainability approach? What do you think of the proposed framework? Are there elements missing? 27 Existing methods for strong sustainability assessments of companies Context-Based Sustainability Assessment, Absolute Environmental Sustainability Assessments (AESAs) in the field of LCA, or planetary boundaries assessments. One Planet Thinking initiative → Proposes a framework for how planetary boundaries can be used to calculate strong sustainability targets for companies. Specifically for climate change, the Science Based Targets initiative provides a methodology for companies to calculate future GHG emissions targets that are “aligned” with a global emission reduction pathway informed by climate science. UNRISD Authentic Sustainability Assessment The new EU framework: CSRD and ESRS Read this short presentation of the CSRD and with the help of this FAQ and the ESRS Delegated Act, try to answer the following questions: What does “materiality” mean? What does “double materiality” mean? What does “due diligence” mean? Who decides whether an impact is material? Take a look at the feedback provided on the draft act (read just a couple of feedbacks), for example the one by the Chaire Comptabilité Ecologique. → List at least 2 criticisms waged against the draft act. 29 4.2. Looking for sustainable businesses 30 Finding a balance between the 3 pillars of sustainability Let’s look at potential synergies and contradictions. Could you propose one example for: → An eco-efficient business? → A socio-efficient business? → An eco-just business? 31 Source: Bocken, N.M.P., Short, S.W., (2016), « Towards a sufficiency-driven business model: Experiences and opportunities », Environmental Innovation and Societal Transitions, 18, p. 41–61. 32 Could you give (at least) one illustration for all of these 8 operational sustainability principles? 33 Hierarchising the environmental potential of business model innovation Source: Bocken, N.M.P., Short, S.W., (2016), « Towards a sufficiency-driven business model: Experiences and opportunities », Environmental Innovation and Societal Transitions, 18, p. 41–61. 34 Do governments promote highest-impact approaches? Forum du Management Responsable - 24 septembre 2024 35 Source: Axel Sommer, Managing Green Business Model Transformations, Springer. 36 37 38 Sustainable business model “archetypes” Source: Ritala et al., (2018), “Sustainable business model adoption among S&P 500 firms: A longitudinal content analysis study”, Journal Of Cleaner Production, 170. 39 Source: Bocken, 2014 40 41  Do big companies promote highest-impact approaches? Innovations sociales et organisationnelles Innovations techniques Source: Ritala et al., (2018), “Sustainable business model adoption among S&P 500 firms: A longitudinal content analysis study”, Journal Of Cleaner Production, 170. Forum du Management Responsable - 24 septembre 2024 42 Sufficiency in business Source: Bocken, 2014 43 Source: Bocken, N.M.P., Short, S.W., (2016), « Towards a sufficiency-driven business model: Experiences and opportunities », Environmental Innovation and Societal Transitions, 18, p. 41– 61. 44  Degrowth in business → In your opinion, what are the main barriers to degrowth in business? Source: Y. Khmara, J. Kronenberg / Journal of Cleaner Production 177 (2018) 721-731 45  “There is a persistent concern that as long as firms are profit-driven, this might keep them from being strongly sustainable, sufficiency-based, or focused on social benefit (…). Indeed, much post-growth literature claims that the profit-driven way of organizing business generates the macro-scale dynamics of economic growth, consumerism and inequality, as well as the associated environmental damage (…). In response to this concern, some authors claim that not-for-profit forms of business offer a way of addressing these dynamics (…).” Doing business in the Doughnut? (35 min) Watch the video: https://www.youtube.com/watch?v=-M1uOvU_q8c Read the text: https://www.weforum.org/agenda/2018/01/how-to-do- business-with-doughnuts/ Answer the questions: 1. According to Raworth, what are the key ingredients of a 21st century business? 2. According to Raworth, what are the current obstacles to having 21st century businesses developing in the right direction? 49 4.3. Sustainable business models in their context 50 51 Ecologies of business models 52 Key questions associated with The Ecology of Business Models Experimentation (EBME) mapping 53