Exploring Sustainability Notes (Economy and Governance) PDF

**Economy** "An economy is a system of production and consumption activites that determine how resources are allocated among all of its participants" - Traditional economic system - Command system (more government, socialism) - Free market (less government, capitalism) - Mixed (all coun...

**Economy** "An economy is a system of production and consumption activites that determine how resources are allocated among all of its participants" - Traditional economic system - Command system (more government, socialism) - Free market (less government, capitalism) - Mixed (all counties have a mixed system) **From Trading Economy to Business Economy** The role of businesses in an economy - Specialization role: Best at something vs. OK with everything - Scale-economy role: More for less - Knowledge creation role: Who gets what - Social responsibility role: be a good citizen **Corporate citizenship** Definition: A corporation, just as a citizen of a society, have legal and social rights and responsibilities to buy, own, and sell properties, and to sue and be sued in court as a legal entity. - It was meant to regulate the behavior of corporations by outlining their rights and responsibilities. - The ultimate goal of corporate social responsibility is to cultivate good corporate citizens. - Legal citizenship: explicit rights and responsibilities outlined by law, violation leads to legal sanctions. - Social citizenship: implicit rights and responsibilities set out by the society, violation leads to social sanctions. **Issues with corporate citizenship** - Often, rights are emphasized, and responsibilities are ignored. - Citizenship are used as shields for consequences of business wrongdoings. - Coercive power on society due to size and wealth. **Economic Sustainability: The UN Perspective** Economic sustainability refers to practices that support long-term economic growth without negatively impacting social, environmental, and cultural aspects of the community. SDG 7: Affordable and Clean Energy SDG 8: Decent work and economic growth SDG 9: Industry innovation, and infrastructures SDG 12: Responsible consumption and production **What is the problem with economic growth?** GDP growth is not the problem. The problem is how GDP growth is fueled. - GDP growth is highly correlated with material extractions and GHG emissions. - GDP cannot grow forever on the finite planet - GDP growth destroys nature in developing countries as the production sites - The growth is not fairly distributed among countries and social classes - Rich people and developed countries benefit more - Some of us are producing and consuming more than the capacity of the earth **Sustainability Inequality Induced By Garbage** - Shipping garbage to the developing countries has been a common practice for all developed countries, including Canada. - This creates tremendous environmental concerns in the recipient countries. - In the meantime, developed countries have been criticizing the worsening environment in developing countries such as India, China, Malaysia, and Vietnam, all of which are dumping yards for the Western world. What happens if we reduce consumption - Reduction in consumption would: - Reduce production - Reduce GDP growth and Job creation (contradiction with goal 7) - Reduce materialistic lifestyle conveniency - However, it can - Help saving environment - So, SDG 12 cannot be achieved by current way of living, and we need innovation Economic Feasability Definition: the degree to which the economic advantages of something to be made, done, or achieve are greater than the economic costs. - Differentiate economic feasibility to a business vs to society. - To a business, economic feasibility simply means that the production of a product/providing of a service brings non-negative profitability to the firm. - To society, economic feasibility means that the social benefit of an activity outweighs the social cost. - The two may contradict each other. - Damage the environment to increase efficiency -- benefit the firm but generate negative social benefit. - Innovation spill over -- benefit to the society but not necessarily feasible to businesses. **Government Intervention to Address Economic Feasibility** When a project is socially beneficial but not economically feasible to businesses, government intervention is usually necessary. - Takeover: education, healthcare, utility, insurance, infrastructure. - Tax incentives: innovation, NPOs, eco-products - Direct subsidies: R&D, transportation, renewable energy - Legal protections: Patent, copyrights, license The goal is to transfer at least partial costs and risk to the public and to inspire the desired types of innovation. Product Life Cycle In the sustainability consideration, product life cycle refers to the life of a product from raw material to waste after consumption. A diagram of a product Description automatically generated **Issues with the Current Model** - Capability Issues: Customers don't have the ability to recycle. - Incentive Issues: No incentive for businesses to help easte control. - Practicality issues: Costly recycling, inconvenience - Legislation issues: - Difficulties to meaningfully sanction individuals - Difficulties to set legislation on businesses. **What Happens to Products After Use?** They typically go to landfill. - Domestic landfill -- dump it in our backyard. - International disposal -- dump it elsewhere. And the cost is bore by the customers and the government. **Global Waste** - The accumulation of discarded materials including solid waste, pollutants, and debris, on a global scale. - Waste generation is expected to jump to 3.4 billion tons over the next 30 years, compared to 2.2 billion in 2019. - The United States is the world's most wasteful country, which each American producing 809kg of waste every year. - Canada 706kg per person per year **Measuring Success Differently: Alternatives to GDP** GDP is a one-dimensional measurement of growth: Only financial considerations. Other options: - Genuine Progress Index: The GPI consists of 26 indicators, grouped into three categories (social, economic and environmental). - Happy Planet Index: Measures what matters: sustainable wellbeing for all. It tells us how well nations are doing at achieving long, happy, and sustainable lives. - Sustainable Development Goals The key takeaway is that growth should be measured in connection with sustainability criteria. **Doughnut Economy** Balance the needs of humanity with the ecological limits of the planet - Inner circle (social foundation) - Outer circle (ecological ceiling) - Change in defining success **Post-Growth Economy** - Steady economy, degrowth, post-growth - Growth of underdeveloped, degrowth of developed - Focus on distribution of wealth rather than increasing it - Local/global balance - Long-term thinking - Quality over quantity - Consumption reduction and circular processes **The Circular Economy** Ideally, the society would benefit from a circular product life cycle. Definition: Instead of the make-use-dispose style of product life cycle, a product will be reused, repaired or recycled after it completes its life cycle. This is still an ownership model. **Circular Economy Challenges** - Fear of change - Consumer awareness and behavior - Self-esteem - Infrastructure for waste management - Technology and innovation for material recovery - Supply chain complexity: customers role **Do we even need to own what we need? Can we share what we need?** - Sharing economy: a social-economic system whereby consumers dhare in the creation, production, distribution, trade and consumption of goods and services. - There is a non-ownership model **Sharing Economy: The Challenges** - Self-interest driven nature of humanity - Regulation and compliance - Trust and safety - Quality control - Insurance and liabiolity - Inequality and access - The reverse environmental impact - Co-potation From Profit Maximization to Making Enough Profit - Psychological Perspective: Self-interest vs. Virtue - Is money a tool to facilitate exchanges, or a proxy of happiness? - Do we as humans have intrinsic desire for virtue? - Business perspective: Profit vs. impact - Capitalism: profit = motivations - Alternative thinking: Should businesses also have an intrinsic desire to make social impact. - Profit maximization vs. enough profit. - Social perspective: wealth creation vs. wealth distribution - Financial incentive vs. social incentive - Role of the legal system. **From Profit Maximization to Making Enough Profit** - Definition: A business with certain social objectives as its primary goal while using a commercial structure to run the organization. - For-profit or not-for-profit. - Reinvest a major portion of its profit to serve the social objectives. **Consumer Sovereignty and Different Types of Market** - Buyer's Market: An environment or a type of products that favours buyers over sellers - Seller's Market: An environment or a type of products that favours sellers over buyers. - Consumer sovereignty is usually more prominent in buyer's markets, and less powerful in seller's markets. - Using of Intermediary is a typical strategy consumers use to combat sellers in a seller's market. **Our responsibilities as consumers** Responsible consumption: Buyers need to make purchasing decisions based on not only the cost-benefit consideration but also take into consideration of environmental and social impacts. SDG goal 12: Sustainable consumption and production. **[Governance]** **Colonialism** Colonialism is defined as "control by one power over a dependant area or people". It generally involves one country taking control of another, often amid violence and involving killing, displacing, and/or marginalizing the existing population. Nowadays, colonialism takes many forms and is less obvious. **Neocolonialism** The control of less developed countries by developed countries through indirect means. - Financial controls - Resource exploitation - Exportation of ideology and culture - Climate colonialism **So what is climate colonialism?** There are three main ways to look ar climate change in the context of colonialism 1. Historic injustices: The first is about the historical causes of climate change. The Global North is responsible for the climate crisis we're currently living through -- in fact, Global North countries are responsible for over 92% of carbon emissions since 1850. 2. Further exploitation: The second way climate colonialism is manifesting is through the exploitation of the resources of the Global South by countries in the Global North, to further their climate agendas. 3. First moreover advantage: The Global North has been shifting the economic structure from pollution incentive industries. It outsources pollution incentive industries to the global south but enjoys the products. **The concept of Governance** Governance is about the act of governing Add "good" and the picture becomes pomplicated. - How do we balance between individual will and collective interest? - How do we balance between democracy and efficiency? - How do we address conflicting interests in our society? - How do we view the role of the government in a Capitalist society? **Principals of Good Governance** - Trust and Just are the two keys to a good governance - Healthy legal framework - Effectiveness and efficiency - Democracy, decentralization and participation in decision making - Transparency and accountability - Equity, fairness and caring **What does governance for sustainability mean?** - A multi-dimensional concept covering different actors, processes, structures and institutions involved in decision-making and implementation of sustainability-related issues. - International organizations - International agreements - National and local governments - Private sector and corporations - Civil society organizations **Global Governance** Global governance functions through a set of institutions, rules, and processes that aim to manage cross-border issues -- such as trade, financial transactions, migrations, and climate change. - Address collective concerns and mediate common interests. - Create both privileges and obligations for the public and private sectors. - Essential for solving shared problems: pandemics, wars, and financial crises. - Compromised of a vast network of collaborative processes, relationships, guidelines, and monitoring mechanisms. **The United Nation** - Founded post WWII (1945) - Place on earth where all world's nations can gather together, discuss common problems and find shared solutions that benefit all of humanity. - Sustainability becomes a main objective since 2000 (The MDGs) - UN Sustainable Development Group is the governing body for sustainability issues. - The latest legal binding sustainability agreement: The Paris Agreement (2015) **USMCA (Formally NAFTA)** - Us, Mexico, Canada Agreement - Mostly about free trade and free flow of labour. **Democratic Governance** - Liberal Democracies: Characterized by free and fair elections, protection of civil liberties, the rule of law, and often a separation of powers among the branches of government. - Social democracies: combine elements of democracy with a strong emphasis on social rights and welfare policies, aiming to reduce inequality and provide a broad social safety net. **Autocratic Governance** - Refers to a system of government in which a single entity or leader holds absolute power, with little to no input or opposition from other members of the government or governed population. - This type of governance is characterized by centralized decision-making, with the autocrat making decisions without the need for consensus from a legislative body or the electorate. **Issues With a Small Government** Certain industries are just too important to be privatized. - Utility - Education - Healthcare Certain industries are too important to be left unchecked regularly. - Financial industry - Insurance - Military contractors - Mercenaries **National Governance** - Laws and Regulations - Dedicated Ministries/Agencies - National Strategic Plans and Incentives - Incentives - Monitoring and Reporting **Provincial Governance: Nova Scotia** - Ministry of Environment and Climate Change - Inspection, compliance, and enforcement division - Policy - Sustainability and applied science - The Sustainable Development Goals Act since 2007 - Green and inclusive community buildings program - Atlantic salmon conservation - Energy reform act in spring 2024 **Municipality -- The City of Halifax** Ample green spaces and an expensive open waterfront **Challenges of domestic governance for sustainability** - Bureaucratic delays - Over-dependency on government - Inefficiency and resource misallocation - Stakeholder engagement and participation - Political influence - Lack of international view **Why aren't we having sufficient and effective governance?** - Economic concerns - Political will - Short-termism and self-interest - Difficulty in global coordination - Combat colonialism - Influence of special interests **Why do Organizers Attempt to Influence Policy?** - Legitimacy - Companies need to appear legitimate in society. - Competitive Advantage - Companies are profit-driven. Political influence may provide competitive advantage. - Leader's personal reasons - Self-actualization/esteem **Businesses' Influence on Institutional Governance Policies** - Legal - Lobbying - Business-government collaborations - Illegal - Bribery/Corruption - Gray - Collusive exchange - Revolving Door Appointment **Legal Channel: Business Lobbying** Definition: The "oral or written communication with a public official to influence legislation, policy or administrative decisions" - Lobbyists (a legal/formal job) have some tools: - Fundraising for political campaigns. - Providing expertise. - Organize grassroots efforts to rally public support for or against specific policies. - Cultivate relationships with lawmakers and their staff. **Business Lobbying: Common Channels** - Umbrella/peak associations - Members from different industry - Trade associations - Members from one industry - Ad hoc organizations, corporate front groups, coalitions - For a specific issue/or limited time - Think tanks and foundations - Research groups - Grassroot Lobbying - Influence important stakeholders **Aid from trade associations opposing climate change policies in the US, 2008-2018 Spendings** Definition: A peak trade association is a major interest group or organization that represents an industry in a country. Canadian Examples: - Canada Cleantech Alliance - Mining Association of Canada - Association of Canadian Port Authorities **Legal Channel: Business-Government Collaboration** Business-government collaboration refers to the cooperative efforts between private sector companies and government entities to achieve shared objectives that contribute to economic growth, public welfare, or societal progress. - Public-Private Partnership (PPP) - Innovation and R&D - Workforce Development - Sustainability Initiatives - Regulatory Collaboration **Illegal Channel: Corruption and Bribery** Bribery refers to the act of offering, giving, receiving, or soliciting something of value -- such as money, gifts, favours, or services -- to influence the actions or decisions of an individual or organization, typically for personal or corporate gain. Corruption refers to the abuse of entrusted power for private gain. Undermines sustainability efforts. The two often come together. Corruption is often solicited by businesses through under-the-table trade or bribery. - Diverts of resources - Distorts policies - Weakens institutions - Lack of accountability/transparency - Inequality - Undermines international cooperation **Collusive Exchange** Definition: Collusive exchange involves secret or illicit agreements between business leaders and government officials, where favors, information, or financial benefits are exchanged to influence policy, regulatory decisions, or resource allocation in favor of the business. - Sometimes through family members of government officials - Personal benefit over social benefit - Unethical, sometimes even illegal - Threat to institutional integrity - Threat to fairness in the market system **Revolving Door Appointment** Definition: The movement of individuals between infuential roles in government and high-level positions in the private sector, often within the same industry, which can lead to conflicts of interest and undue influence on public policy. - Could be beneficial given the expertise. - Potential conflict of interest and erosion of public trust. - Influence on policy and regulations before and after revolving door appointments. **How is Business Governance Related to Sustainability?** - Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. - The goal of corporate governance is to manage the business to maximize long-term value while safeguarding the interests of all stakeholders. - Businesses need to have clear policies and practices for boards, and managers to support sustainability. **Important Components** - Board members and managers with sustainability orientation - Setting goals and KPIs on social and environmental aspects - Considering social and ecological risks - Third party auditors and certifiers - Connecting executive compensations to sustainability performance - Creating dedicated teams: sustainability committee, officers - Sustainability reporting: ESG, SGDS, CSR, SASB, TCFD reporting **Role of board members and managers** A board sets broad policies and makes important decisions as a fiduciary on behalf of the company and its shareholders Board composition: - Board with socio-ecological mindsets - Board from diverse backgrounds - Female board members - Promoting long-term thinking **Considering social and ecological risks** Companies with regulatory and reputation risks associated with climate change are likely to have established governance structures and knowledge related to climate risks.  **Connecting Executive Compensations to Sustainability Performance** Among S&P 500 companies, approximately 32% (n=159) include an "E" performance metric in their incentive plans, with the most common metric being related to Carbon Footprint and Emission (43%). Crediting Dedicated Teams A diagram of a company\'s structure Description automatically generated **Our Role as Individuals** - Voting and political engagement, Vote as a citizen. - Vote as a shareholder. - Engage as a community member. - Advocacy and Activism, rally for social and ecological causes. - Support for local economies. - Be knowledgeable about socio-ecological issues to make inform decisions rather than being impacted by Think Tanks.