They were right, the world has ended. The world as we knew it came to an end more or less when the Mayan calendar ran out, on winter solstice, 2012.
The old world that died in 2012 had a stable climate, cheap commodities, governments managing change, high growth in output and consumption, and corporations driving economies and serving societies all deeply infused with a blind belief in free markets.
The new world that begins now, in 2013, will be defined by frightening climate instability, commodity and food prices ratcheting skywards, impotent governments reduced to spectators in their own countries, continuing recession, and corporations either being hounded as common criminals or laurelled as champions of virtuous change. An internet-enabled anarchy of the wronged will pull entire countries along unplanned roller-coaster rides through a Disneyland world of commotion and crises. Briefly, here is why I think so.
Breaching the limits of the world’s ecosystems
Our world is rapidly approaching planetary boundaries – across climate, biodiversity, nitrogen, phosphorous, ocean acidification, freshwater scarcity, inter alia. Economies worldwide are still headed in the wrong direction – towards resource exhaustion, social disparities, and persistent poverty. What we need is change at the speed of light, driven by bold leaders. What we have is change at the speed of change, hesitantly nudged by cautious governments. Too little, too late, such prevarication will spill into natural disasters. We saw some as 2012 ended – we shall see more as the earth’s ecosystems do what all systems in equilibrium try their best to do: stay in equilibrium, until they simply cannot. Until what we call “resilience” is replaced by “thresholds” being breached, planetary boundaries being crossed.
Breached thresholds will lead ecosystems into new states of equilibrium, which may not be any good for human life, society, or economy.
The vulnerable will suffer most
Increasing climate disruptions will cause higher price volatility in agricommodities, due to crop failures and crop losses. The world is over-invested in intensive agriculture, and due to a corresponding lack of investment to improve yields and resilience for smallholder farming, the poor will actually suffer the most from these supply disruptions and price shocks.
In the absence of political leadership, others will provide bold leadership, such as corporations, who are the lion’s share of today’s economy, GDP and jobs.Some have already shown real leadership in 2012, such as by measuring anddisclosing their externalities (Puma), or lengthening their investor and analyst horizons by stopping quarterly reports (Unilever). Many more will follow these trendsetters in 2013.
An end to crony capitalism
At the same time, adherents of the old model of corporation – profit-fixated, externality-churning, disconnected from social purpose – will find the going tougher. Public patience with being exploited by the freedoms of freemarket capitalism is running thin. Public outrage at investment banking excesses has not died even four years after the global financial crisis. ”Corporate externalities” is no longer an obscure term hidden at the end of economics textbooks, but a common phrase in news media.
Corporations that habitually free-lunched off global and national governance weaknesses and cheap natural resources will realise that their free lunch is nearly over; mainly because the “crony” governments of their crony-capitalist alliances are either emaciated, or bankrupt, or cannot toe the line of corporate profitability any longer in the face of scientific evidence and citizen activism.Indeed, from the first Arab Spring uprising to a campaign of moral outrage in Britain over corporate tax avoidance, which immediately yielded millions from Starbucks, the internet-enabled anarchy of the wronged has become the vehicle of successful change.
Many years ago, Arundhati Roy, author of The God of Small Things said: “Another world is not only possible, she is on her way. On a quiet day, I can hear her breathing.”
Winter solstice, 2012, was a quiet day. The earth’s magnetic field did not flip. Planes did not fall out of the sky. A nuclear holocaust was not launched. A giant meteorite did not slam into earth.
But if you had listened for a quieter strain, you would have heard her. A new world had begun.
I’ve been a week at Hyderabad, attending CBD COP-11, the bi-annual conference of parties to the UN Convention on Biological Diversity. Over 170 of the 193 signatories to the Convention worked away feverishly at Hyderabad till early Saturday morning, negotiating an outcome document as heavy as they always are. My recent work as chair of the High-level Panel on estimating the financing required to meet the 20 targets agreed at the previous COP at Nagoya, in Aichi Prefecture, Japan, two years ago, was among the inputs to their process.
As I came away from Hyderabad, with COP-11 discussions leading to a doubling of international commitments to biodiversity, from US$ 6 billion to US$ 12 billion out to 2015, I wondered if I should be pleased or disappointed? Our report on financing the Aichi Targets had not made things any easier for the negotiators: our estimates of what was needed truly to achieve the 20 Aichi Targets were an order of magnitude higher than existing baselines as well as commitments made.
Would this increase in billions make a difference when financing needs are in tens and hundreds of billions? Biodiversity is the living fabric of this planet, its ecosystems, species and genes. Conserving biodiversity includes reducing forest losses and restoring forest cover (Aichi Targets #5 and #14) to increase soil fertility, prevent droughts, mitigate flood damage, arrest the ingress of desertification, and provide better livelihoods for the world’s 1.3 billion small farmers. Increasing marine protected areas (part of Aichi Target#11) means increasing the stocks of fish in the sea, which provide the main source of animal protein for over a billion in the developing world. Controlling pollution (Aichi Target #8) will not just reduce biodiversity loss, it will improve human health, freshwater, agriculture, fisheries.. the list goes on. These Aichi Targets are a large part of Sustainable Development for the world – no wonder that their financing is not small change.
The results of COP-11 discussions were not disappointing in themselves, but it was sad that the wider goals of sustainable development for which they are essential were not receiving more urgent and widespread attention. Meanwhile, the need for transitioning to a ‘green economy’ to deliver these goals grows more palpable and urgent every year. The ‘silos’ in which we all operate are part of the problem. Desertification and Climate Change fall under separate UN Conventions (all born on the same day in Rio, 1992) even though they are inextricably linked to the maintenance and restoration of ecosystems, the large-scale layer of biodiversity.
But it is difficult to see anything in perspective if one is immersed in it, so I am lucky that I had to fly from Hyderabad to Bhutan just after COP-11, to attend a conference of Tiger Range countries, organzied by the World Bank’s Global Tiger Initiative.
You drive along the breathtaking Paro river valley from the airport to Thimphu, Bhutan’s capital. All along, you are greeted by legions of fluttering prayer-flags dancing out their hymns to the drumbeat of a bracing mountain wind. Far below, the crystal waters of the Paro sparkle in rhytmic company, flashing clear Himalayan sunlight. And carpets of red chillies, carefully laid out to dry on the low sloping tin roofs of Bhutanese homes, soak in this bright hot sun.
Biodiversity – the living fabric of the planet – is everywhere around you, abundant, healthy. People love it and respect it. This is the kind of world that those 20 Aichi Targets seek to achieve.
And yet, there are no billions being raised to finance this biodiversity conservation. It is engrained in the culture and history of the land. Their constitution commits 60% of Bhutan to forest cover. Their Agriculture and Forests minister, speaking at the conference says “there can be no justice unless other living beings have equal rights of existence on this planet”. We often hear of rights-based approaches to biodiversity conservation, but for the people of Bhutan, this is not just dreamy talk, it is their reality.
Which environmental economist said: “We need to take stock and attach value to our natural resources and ecosystems such that we may include their value in planning and decision making processes as well as in our national accounts and balance sheets.” ?
The answer is, none. That was President Ian Khama of Botswana, speaking at a Summit for Sustainability in Africa, hosted in his capital city, Gaborone, by his Government and Conservation International, 24th- 25th May. Other participants at this meeting included the heads of state of Liberia, Namibia, and Mozambique and the vice president of Tanzania.
Botswana is the size of France, but it has just 2.2 million people. It is Africa’s largest beef exporter. It also has a huge population of 150,000 wild elephants , and is a growing eco-tourism destination. The summit held here in Gaborone was remarkable for four reasons : because of who participated, when it was held, what was committed and why.
Who participated ? Ten African nations who are all interested in progressing a ‘Green Economy’ transition in their respective countries, whilst others in G-77 still think ‘Green Economy’ is a devious Western capitalist plot to hold back development.
When was it held? Less than a month before ‘Rio+20’, so that the ‘Gaborone Declaration’ can feed into the discourse at Rio+20, and actually deliver a serious outcome at Rio+20 – so long as other nations endorse it .
So what exactly was agreed ? The signatories agreed to develop ecosystem accounting in order to adjust national accounts (System of National Accounts, SNA) as well as Corporate Performance for the invisible impacts that government policies and business activity have on natural capital. They also agreed to annual reporting of progress on these fronts.
Why did they commit this ? Because, they all see natural capital is as their biggest “asset for development” (in the words of President Khama) and believe that its economic invisibility has been a reason for its neglect and sub-optimal management, and they clearly want this to stop. This is also what the G8+5 project TEEB ( see www.teebweb.org ) has been saying in its series of reports at COP-9 and COP-10 of CBD.
Another participant at this ‘Summit for Sustainability in Africa’ summarized the challenge thus : “Natural capital – our ecosystems, biodiversity, and natural resources – underpins economies, societies and individual well-being. The values of its myriad benefits are, however, often overlooked or poorly understood. They are rarely taken fully into account through economic signals in markets, or in day to day decisions by business and citizens, nor indeed reflected adequately in the accounts of society”.
This participant was not an environmental economist either. It happens to be President Ellen Johnson Sirleaf of Liberia.
Fortune’s “Brainstorm Green” meeting, at a sunny beach resort in California this week, could not have been better timed. It is exactly two months to Rio+20. So much intellectual energy was present here, so many great ideas, that the question begs to be asked : will those 193 government delegations at Rio+20, gathering in Rio in June to debate ‘Green Economy’ and global environmental governance deliver even a fraction of this energy, this thinking ?
We all know planetary boundaries are being approached or breached across several critical axes – including GHG emissions, nitrogen, biodiversity. Significant changes are urgently needed in the way we deal with earth’s resources.
Inter-governmental efforts so far have failed miserably. Founded at the first Rio summit, UNFCCC has failed to get governments to arrest GHG emissions. Its unequal twin UNCBD has been unable to get governments to slow down the rate of loss of biodiversity. These failures point to the need to recognize the vital role of the private sector in determining economic direction and hence resource use globally. The corporate world has to be brought to the table as responsible stewards of shared planetary resources, and not as value-neutral, self-interested exploiters of common wealth.
The private sector today produces almost everything we consume, generating 60% of global GDP and employment. Their advertising drives all consumer demand. Their production feeds this demand, and drives economic growth. Their growing profits and assets are the main magnets for global investment. We have become a ‘corporate’ world in more ways than one. Yet these are the good side of today’s corporation – there are also the bad. Corporate externalities, the unaccounted costs to society of “business as usual”, are an estimated US$ 4 Trillion, or 7% of GDP, every year.
Corporate lobbying often influences national policies to the detriment of the public good. Advertising often converts human insecurities into consumer demand. And excessive demand has already made our ecological footprint exceed the planet’s bio-capacity by 35%. We are now consuming nature’s capital, not its interest.
There is leadership for change (we saw great examples from CEO’s at the Fortune meeting) but it is too little, too late. I believe the “rules of the game” must be changed so that corporations are able to compete on the basis of innovation, resource conservation, and satisfaction of stakeholder demands – and not on the basis of who can best influence government regulations, avoid taxes, obtain subsidies. CSR will never suffice to lead us to tomorrow’s “Green Economy”: we need a new Corporate model .Corporations that discover, measure, and manage down their negative externalities. Corporations that work in a business environment free of perverse subsidies, and work for stakeholders, not just shareholders.
However, that new model will not just happen, it needs to be fed by investment, it needs a level playing field, and it needs new regulation in place. That means eliminating a trillion dollars per year of perverse subsidies for fossil fuels & unsustainable agriculture & fisheries. It means investing in a green economy. And it means making it mandatory to disclose corporate externalities. But who is to eliminate subsidies, seed investments, change corporate reporting ? Why, it is those same 193 governments who will meet at Rio+20 in two months! So, I do hope that the only thing in common between these two meetings will not just be two beautiful, sunny beaches.
Every day, we use materials from the earth without thinking, for free. But what if we had to pay for their true value: would it make us more careful about what we use and what we waste? Think of Pavan Sukhdev as nature’s banker — assessing the value of the Earth’s assets. Eye-opening charts will make you think differently about the cost of air, water, trees ..
This is in essence a debate about valuation, in particular, about how people should value nature. Whether we call it “wildness” as Thoreau did, “untouched wilderness” as this motion does, “wild nature” as do some nature valuation experts, or the more prosaic “ecosystems and biodiversity” is perhaps less important than addressing what the institution of valuation means and does.
Following Douglass North, if we see institutions as “rules of the road” in an economy (laws, taxation, market regulations, as well as informal norms such as habits, conventions and ideologies), then valuation is another important human institution. Valuation can help us rethink our relationship with nature, alerting us to the consequences of our choices and behaviours. Valuation raises fundamental questions such as what influences our relationship with nature? How does nature shape social and personal identities? What are the social and environmental consequences of different ways of relating to and using nature? Such questions are a form of self-reflection. Indeed, valuation is a tool for self-reflection, and can be an important feedback mechanism for a society that has increasingly distanced itself from the natural world from which it derives identity, culture and vital resources.
Norms and conventions are part of every culture, and each culture may give a different answer to why and how we should value nature. Judaeo-Christian culture and beliefs see humans as inheritors of the Earth, owners or custodians of the wilds for their use. This underlies a utilitarian view of “valuation” as economic valuation, albeit in the broad sense of including both use values (such as consuming fisheries, wild foods, fuelwood, etc, and non-consumptive uses such as regulating water and soil quality, etc) as well as non-use values (such as the satisfaction of holding nature as a bequest for future generations or for its own sake). Intrinsic value is acknowledged, outside this utilitarian frame, as value independent of its usefulness. However, this view contrasts with naturist views, such as those of tribes in Amazonian rainforests. The rainforest defines who they are. It forms a communal home, a place of ceremony and worship, a source of livelihood, as well as a safety net for daily needs—food, water, fuel and shelter.
Another dimension of valuation is its socioeconomic context. Fuelwood from forests may be of little relevance to the average reader of The Economist, but to two-fifths of humanity it is cooking fuel. Ecosystem services may be quantified as a few invisible percentage points of national income in countries such as Brazil, India and Indonesia, but they comprise an estimated 45-90% of the household incomes of rural farmers and forest dwellers.
As this piece is meant to inform a debate, let me also comment on two interesting implications of the title of the motion being debated.
First, are there any “untouched wildernesses”? The world’s forests provide sustenance to over 1 billion people around the world—fuelwood, bush-foods and forest products—for which they stray into those wildernesses. Wetlands, coastlines and coral reefs are fished by locals everywhere. The high seas might have been the ultimate “untouched wilderness”, but they are instead our protein hunting grounds. Of late, they are even the final dumping grounds of plastic waste: the “Great Pacific Garbage Patch” in the North Pacific Ocean is over twice as large as Texas. And if we include indirect human impacts on “untouched wildernesses”, climate risks from anthropogenic emissions count among the largest threats to biodiversity.
Human intervention, whether intentional or not, whether for conservation or conversion, seems to be the destiny of wildernesses: they are all touched by human hand. The question is how are we touching wild nature? As planetary locusts or as planetary stewards? If we are behaving as locusts, might that be due to an error of valuation? Perhaps we are discounting future benefits and insurance against disasters too deeply as a society, compared with current utilities. Perhaps we are confusing social discount rates (which ought to determine societal choices for public assets) with market discount rates (which determine market prices for private assets). And if we are trying to be planetary stewards, what rules of engagement, restraint, valuation and discounting are we employing as we pursue this stewardship and make our choices and trade-offs? The key issues in either scenario revert to what this debate is about: valuing nature.
Second, in economics, is there any such thing as “value beyond resources and other utility”? So by the very framing of this motion, we are being invited to a debate beyond the remit of economics, straying into moral philosophy. This thought sits oddly with our times, but it is perhaps appropriate. After all, that venerable Scotsman who taught at Glasgow University, Adam Smith, was a professor of moral philosophy.
Scarcely a day can pass when my happiness is not affected by family, friends, colleagues, work, leisure, traffic, pollution, weather, crime. We seek “well-being.” And so, at a personal level, we all do what we can to nurture our most cherished relationships, balance work with our personal lives to combine professional success and free time, avoid bad traffic conditions, choose to go out when it’s balmy, and live in clean, green, and safe areas.
We may also vote for politicians and purchase from corporations who make us believe their plans and products will increase our “well-being.” The problem is, they might not deliver. Indeed, well-being is hardly measured, and what is not measured cannot be managed.
Instead, modern society measures production, profits, savings, and wealth—all of which might contribute to well being, but are hardly equivalent. The environment is sometimes measured quantitatively—emissions, pollution levels—but then left to the mercy of uninformed economic trade-offs and policy choices. It is time for that to change. The economic invisibility of nature must end. Policymakers, administrators, and businesses must recognize the economic value of a clean environment and take that into account in their decision-making. Otherwise, we can forget about improving our “quality of life.”
From Manaus, the capital city of Amazonas state in Brazil, it takes six hours by tourist boat along the Rio Negro, a tributary of the Amazon, to reach the village of Tumbira, the main outpost for Fundacion Amazonas Sustentovel (FAS).
Manaus is located at the confluence of the Negro and the Amazon. It is 1,600 km up the Amazon from the Atlantic Ocean, but the river here is no less than EIGHT kilometres wide. A veritable sea of freshwater. At Tumbira, a small village six hours upstream, with a school, a football field and a brand-new church (the three institutions of rural Brazil) the Negro river is still two kilometres wide. One could easily mistake it from anywhere along the journey as a rather large lake of freshwater.
All along the journey, dense rainforests tower on both sides, and in the distance, vast grey curtains of rain float gracefully down, creeping slowly along the horizon, fading away. Freshwater is everywhere, absolutely everywhere.
This is the greatest river system on Earth, and by far its most impressive and majestic manifestation. This single system empties one-fifth of all the freshwater that flows into the world’s oceans. But that’s not all.
Evapo-transpiration from the Amazon rainforest is estimated at 20 billion tonnes per day. Animated satellite pictures (Prof. Virgilio Viana, head of Fundacion Amazonas Sustentovel (FAS), or Amazonas Sustainable Foundation, has them on his laptop) show us another, invisible, “river” system: a global flow of airborne water vapour, which some scientists say is a source of rainfall not just for South America, but around the world. It is impossible not to be filled with a sense of awe by a journey along the Amazon. If the Earth had lungs, they would be the Amazon rainforest. And if it had pulmonary arteries, they would be the Amazon river system and its many branches and tributaries.
But the Amazon system is at risk, deforestation rates have ticked up again, and a forest code amendment just enacted by the parliament is cause for concern. At Tumbira is the FAS education and convention centre, where Prof. Viana and his dedicated colleagues are busy implementing and monitoring a scheme called “Bolsa Floresta” (or ‘forest market’ loosely translated). The idea is elegant. It signs up and rewards forest dwelling communities for responsible, sustainable use of the rainforest. It is actually a large, privately funded “Payments for Ecosystem Services” (PES) scheme, which provides the average participating family with BRL 1,360 (about US$ 850) of value every year. About BRL 600 of that is a monthly cash payment to housewives, which is the most visible and appreciated component, but the other elements are more interesting from a medium-term perspective. On average about BRL 350 goes to promote sustainable harvesting for forest products – Brazil Nut being the best known. Another BRL 350 per family on average is spent on health and education for local communities. And a final BRL 60 is spent on building rudimentary business infrastructures so that forest communities may begin to think in terms of organized and sustainable business, a great way to give them income and profit opportunity.
So far, over 8,000 families have benefited from ‘Bolsa Floresta’. It can and should be scaled for several reasons. Firstly, it is ‘eco-development’ in its best sense – providing forest dependent communities a well-rounded package of business capacity building, financial support, employment, health and education benefits in order to make sustainable use of the Amazon rainforests. Secondly, it provides a good base for a future landscape-based and multi-benefit model for REDD+, as it already has most of the elements involved. If and when it adds biodiversity measurement and management to its income streams (an addition being explored right now by Prof Viana and Victor Salviati at FAS) it would truly become a societal model and anchor for a bottom-up, beneficiary-tiered, multi-service, successful REDD+ scheme for the future, which reaches the poor and is effective in carbon sequestration.
However, there is more to the threats facing Amazonas rainforest than the speed at which schemes such as ‘Bolsa Floresta’ can be replicated and scaled. The city economy of Manaus, dependent for long on its Free Trade Zone, may loose steam as its benefits gradually reduce or are matched by other states. The declining market share of IT goods (Amazonas had over 22% market share in 2004, but in 2010 it was down to 9%) is a case in point. Declining opportunities and competing subsidies may move money and entrepreneurship back to ‘old’ ways, seeking resource-extracting profits and jobs, which may well be unsustainable. Keeping the city economy of Manaus as diverse as possible, and building pools of human capital there to create competitive critical mass in different areas has to be a priority for the governments of both Amazonas and of Brazil. Employment follows investment, and investing in ‘new’ avenues is therefore essential. These should include areas such as bio-technology, REDD+ development, freshwater PES development, forestry management technology, and harvesting, processing and packaging sustainable forest produce to capture more of the value-chain of foods. These are all avenues in which public investment, incentives and tax breaks should be targeted – to solve tomorrow’s problems.
A sustainable future for the Amazonas state and conservation of its remarkable rainforest and river system is not only desirable and possible, it is essential. And it needs multiple efforts on multiple fronts. Not looking after Earth’s lungs and pulmonary arteries cannot be a good economic strategy for anyone – businesses, the state, the nation, or the world.
As part of the D4 TEEB for Citizens, TEEB teamed up with Mofilm to run a film competition. Participants were asked to submit videos which communicated “Why Nature is so precious to me.” ’Your Invoice’ ended up winning the 3rd prize.
The Economics of Ecosystems and Biodiversity (TEEB) teamed up with Mofilm to run a film competition to help communicate the value of nature. Participants were asked to submit videos which communicated “Why nature is so precious to me.” The response to the competition was extraordinary with entries coming in from talented filmmakers around the world. The top five wining videos were showcased at the CBD COP 10 meeting in Nagoya on Monday October 25th and the winning video, Little Things, went on to win the grand prize from Mofilm at at the International Rome Film Festival.
Pavan Sukhdev is Founder-CEO of GIST Advisory, a specialist consulting firm which helps governments and corporations discover, measure, value, and manage their impacts on natural and human capital. He is a Visiting Fellow at Yale University, where he was awarded the 2011 McCluskey Fellowship and wrote his book “Corporation 2020”. Earlier, he was Special Adviser and Head of UNEP’s Green Economy Initiative, and lead author of their report “Towards a Green Economy”. He was also Study Leader for the G8+5 commissioned project on The Economics of Ecosystems and Biodiversity (“TEEB”). Pavan was appointed to lead TEEB by the EU Commission and Germany, and delivered its “Interim Report” whilst still working full time at Deutsche Bank in 2008. A career banker, Pavan then took a sabbatical from the Bank to lead TEEB & the Green Economy Initiative for UNEP. While at Deutsche Bank, Pavan had founded (2006) and then chaired Global Markets Centre – Mumbai, a leading-edge front-office offshoring company. Pavan was a speaker at the World Economic Forum meetings at Davos in 2010 and 2011. He serves on the boards of Conservation International and the Stockholm Resilience Centre.