How to reap profits and save the earth too

By Fiona Harvey

Financial Times

Published: November 7 2005

Businesses are used to the idea that no company has an automatic right to exist. Financial history is littered with household names that failed or were swallowed by upstart rivals. But the idea that we as a species have no guarantee of continued existence is one that most people find unsettling.

It is a notion that Jonathon Porritt says the human race needs to get used to, and quickly. “The damage that climate change is doing is serious. We are not doing what we should be to prevent it. But dealing with this is non-negotiable. It’s something we can’t ignore,” he argues.

If we do ignore the problem, the consequences could be catastrophic: rising sea levels, desertification in some regions, the cooling of others, extremely variable weather and the social ­collapse that will inevitably follow.

This vision may seem apocalyptic, but Mr Porritt insists it is justified. Many human societies have failed before now, and there is no reason to believe that just because we 21st-century beings are ostensibly much more advanced, we are immune to self-wrought destruction.

In his new book, Capitalism: As if the World Matters, Mr Porritt challenges business leaders as well as politicians to start reshaping the way that the world’s economies work in such a way as to limit the damage we are inflicting on the environment. He wants to correct the tendency of capitalism to seek short-term gains while ignoring any long-term harm that may result from exploiting the planet’s riches. But he wants to do it not by tearing down the constructs of market-based capitalism, in the way that some thinkers from the environmental movement have advocated, but by repairing those structures and leaving them intact. Ultimately, his work is a statement of faith in capitalism’s endless capacity for reinvention.

Mr Porritt has a long history of environmental activism, having founded the environmental charity Forum for the Future and led the UK’s Green party in the early 1980s. He was director of Friends of the Earth, the environmental pressure group, and now acts as chairman of the UK government’s Sustainable Development Commission, from which position he advises Tony Blair, the UK prime minister, on the environmental effects of his policies. As co-director of the Prince of Wales’s business and environment programme, he also advises Prince Charles on green issues, sometimes acting as conduit for or interpreter of the prince’s thoughts.

Key to Mr Porritt’s thesis is the notion of “sustain­ability”, a sometimes overused buzzword among environmentalists and green politicians. The concept itself is simple. Mr Porritt uses a definition from the influential 1987 United Nations’ Brundtland report: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. In other words, we may exploit our natural resources for our own gain, but we should do so in a way that does not destroy them for our children and grandchildren.

Mr Porritt’s insight has been that business itself prizes sustainability as one of its highest aims. Few businesses want to kill off the source of their profitability. Every chief executive dreams of finding a product or service that will continue to be in demand forever, whatever the vagaries of fashion.

The trick, as Mr Porritt sees it, involves harnessing that instinct in the service of environmental goods. Businesses must be made to see that they will gain more from adopting an attitude that protects the natural environment, and its diversity, than from the short-term returns to be had from plundering the earth.

Climate change is the most important example of this: our burning of fossil fuels releases carbon dioxide, a gas that has the effect of trapping heat on earth that would otherwise dissipate into space. Since the industrial revolution and our reliance on coal and oil, we have vastly increased the amount of CO2 in the earth’s atmosphere. But if we carry on at the same rate, scientists warn that we will all suffer as global warming will damage the world’s weather systems irrevocably. In order to avoid such a fate, Mr Porritt says: “Capitalism can be adapted and reformed – transformed would be a better word – to enable sustainability.”

But Mr Porritt’s latest book is, by his own admission, “contentious”. Businesses are used to being the target of the wrath of environmental campaigners. In this book, the green movement itself is subjected to attacks just as scathing.

Environmentalists are sometimes accused of being mere doom merchants, wearing people out with their endless prophesies of catastrophe, whose solution is to turn back economic progress. In his book, Mr Porritt acknowledges that this stereotyping is sometimes justified: “Conventional environmentalism is incapable of rising to that challenge [of confronting market liberalism]: its appeal is too narrow, too technical, too anti-business, too depressing, often too dowdy, and too ‘heard it all before’.” If environmentalists are to succeed, they must break out of this image and seek to mend capitalism rather than overthrow it.

This book comes at a propitious time for the relationship between businesses and the environmental movement. Old antagonisms have been set aside in the face of a growing awareness among the public of the consequences of environmental damage, and business leaders from Lord Browne of BP, the oil company, to Jeff Immelt of General Electric have spoken publicly of their desire to adapt their companies to promote environmental protection.

Some activists decry these statements as “greenwash” – a way of presenting oneself as environmentally friendly while continuing to deploy destructive tactics in the background. But environmental pressure groups have been reaching an accommodation with businesses, forming partnerships with companies in order to influence the way managers conduct their operations. Mr Porritt himself acts as an adviser to Unilever.

Mr Porritt seems anxious to cement these gains and encourage businesses to move further towards the goal of sustainability. He recognises how easy it would be for companies to backslide, if politicians lose the will to enforce environmental standards: “Nothing here is a given. We have to keep driving this message.”

One of the ways by which to accomplish the goal of environmental protection is to place a price on environmental goods. For instance, the European Union’s greenhouse gas emissions trading scheme limits how much CO2 companies in certain energy-intensive industries may produce, and lets them trade their allowances with one another. CO2 currently trades for about €22 a tonne within the EU. In making carbon a tradeable commodity, the European Commission hopes to engender an environmental awareness in businesses that will lower greenhouse gas emissions and help to stave off climate change. Mr Porritt waxes enthusiastic at the prospect, hoping to celebrate the first “ecobillionaire” to have made a fortune from carbon trading.

Although Mr Porritt remains critical of all the mainstream political parties, his book is a clear call for a “third way” for the environmental movement to mimic the success of the “third way” that transformed politics in the 1990s, negotiating a path between the traditional left and right wings to find common ground that appeals to the majority of the public. It is a message that businesses may find they are surprised to agree with.

HOW BUSINESSES CAN IMPROVE THEIR ENVIRONMENTAL CREDENTIALS

Companies hoping to burnish their environmental credentials should find it easier today than in the past, thanks in part to the efforts of environmental groups to work with businesses.

The first step is to ensure compliance with government regulations. Environmental regulation varies around the world, with the European Union widely acknowledged as probably the most zealous in the field. Rules cover broad swaths of business activities, from the materials that can be used in products to disposing of rubbish.

Companies operating in developing countries often face the lightest regulatory regimes. But many multinationals with operations spanning both the developed and developing world have learnt that lax standards in poorer countries can draw the ire of consumers in richer nations. Some now adopt the toughest regulations for all their operations.

In order to be seen to be environmentally sound, companies can go beyond regulations. This can sometimes reap benefits beyond the reputational – for instance, energy-efficiency measures help to combat climate change by cutting down on fossil fuel use, and can save money on energy bills.

Companies must examine their entire supply chain. The sourcing of materials is a key issue – for instance, ensuring timber comes from properly managed forests, not illegal logging operations.

Bringing in environmental organisations as advisers has become an increasingly popular step. WWF, the wildlife conservation charity, for instance, has partnerships with Lafarge, Nokia, Canon and HSBC.

Recycling is important, but more so is to cut down on waste in the first place, by examining processes to avoid the unnecessary use of materials or energy.