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 / Summer 2008 / Issue 51(originally published by Booz & Company)


The Critical Enabler

As businesses improve their environmental performance, government should be a powerful partner.

Illustration by Paul Wearing

Reports from corporations on their sustainability— self-portraits of their efforts to safeguard the environment while delivering acceptable returns to shareholders — are taking an increasingly common form. They start with sincere letters from the leadership, articulating lofty aspirations; they include examples of how technology and ingenuity have allowed new business models to take hold; and they substantiate genuine progress with fainter carbon footprints, increased community engagement, and improved financial health. Read a few of them, and you may get the impression that all the world’s ills are in retreat, and that the sort of full-scale environmental disaster depicted in Al Gore’s documentary An Inconvenient Truth has been largely forestalled.

Unfortunately, other reports — indicators of the actual state of the global environment — paint a much bleaker picture. The United Nations Intergovernmental Panel on Climate Change (IPCC), which shared the 2007 Nobel Prize with Gore, recently concluded that human activities have taken the planet to the edge of a massive wave of species extinctions and that continued global warming is “inevitable.” Other reports warn of the draining of water resources, decimation of fishing stocks, and destruction of natural habitats from coral reefs to forests. The net effect is a kind of cognitive dissonance. On the one hand, there’s the buoyancy of the private sector; on the other, the grim prognosis of the scientific establishment.

Neither view, however, represents reality. For one thing, the private sector has moved beyond stonewalling and “greenwashing” to seriously embrace sustainability. And yet the results are not nearly deep or broad enough to offset the ominous trends. The reason for this is simple, but is not generally acknowledged in business circles: The private sector, for all its energetic optimism and capability, is innately limited in what it can achieve on its own. The climate change problem will require a widespread change in thinking, both for business leaders and for consumers. Wholesale, dramatic changes in thinking are difficult to achieve, of course, and sometimes success comes only with the rise of a new generation. But the luxury of waiting that long doesn’t exist. The only way out is to foster, and accept, a kind of innovation that tends to be overlooked, or unfairly viewed as impossible: new thinking and practice in the public sector.

Government — at the national, state, and local levels — has a unique role to play in fostering sustainable practice, because of the role it already plays in the economic, legal, political, and cultural systems that make up human activity. (For example, government rules shape the market system in which companies operate and consumers make choices.) But the mechanisms through which policymakers and regulators have sought to achieve environmental protection over the past 30 years have proven inadequate. They have centered on governing corporate behavior through investments, legislative mandates, regulation, and taxation. Relatively little thought has gone into finding ways for government to be an innovative partner in solving complex environmental problems.

Three high-leverage strategies for this kind of partnership are visible today, at least in their early or prototypical forms: the resolution and creative alignment of incentives, the effective use of information, and the implementation of a comprehensive engagement model for collaborative, cross-sector decision making.

Incentives for Improvement
The need for energy efficiency has never before been so great. In the U.S., according to the National Association of Home Builders, the average size of a new house grew by nearly 20 percent between 1990 and 2005. Those homes must be heated and cooled, and most of them are filled with energy-intensive computers and­­­­­­­­­­­­­­­­­­­­ electronics. In metropolitan regions around the world, demand for electricity is growing at a much faster rate than the ability to deliver that electricity to end-users. The environmental effects of this are significant — buildings alone are responsible for a plurality of greenhouse gas emissions in most cities. (See “Building the Sustainable City,” by Nick Beglinger and Tariq Hussain, s+b, Summer 2008.) Environmental concerns are converging with near-term practical ones: Greater Wash­ington, D.C., for example, may face rolling blackouts within three years. Simply increasing transmission capacity can be challenging; transmission lines are difficult and expensive to build and can be controversial because of their effect on open space in populated areas.

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  1. Joe Cortright, “Portland’s Green Dividend” (PDF), CEOs for Cities white paper, July 2007: The economic benefits of holistic land use planning, which include saved time and a low spending on transportation.
  2. David Fahrenthold, Lisa Rein, and Kirstin Downey, “Threat of Power Shortages Generating New Urgency,” Washington Post, February 3, 2008: As goes Capetown, so goes the U.S. capital?
  3. Molly Finn, Gary M. Rahl, and William Rowe Jr., “Unrecognized Assets,” s+b, Autumn 2006: Example of an innovative land use strategy, finding hidden sources of value in environmental liabilities.
  4. Lawrence Frank, James F. Sallis, Terry L. Conway, et al., “Many Pathways from Land Use to Health: Associations between Neighborhood Walkability and Active Transportation, Body Mass Index, and Air Quality” (PDF), Journal of the American Planning Association, Winter 2006, 75–87: Linking suburban sprawl with poor human and biosphere health.
  5. William Fulton, Rolf Pendall, Mai Nguyen, and Alicia Harrison, “Who Sprawls Most? How Growth Patterns Differ Across the U.S.” (PDF), The Brookings Institution Center on Urban and Metropolitan Policy, July 2001: Analysis of density trends that shows how sprawl outpaces population — with damaging environmental effects.
  6. Mark Gerencser, Fernando Napolitano, and Reginald Van Lee, “The Megacommunity Manifesto,” s+b, Summer 2006: Overview of the three-sector engagement approach.
  7. Mark Gerencser, Reginald Van Lee, Fernando Napolitano, and Christopher Kelly, Megacommunities: How Leaders of Government, Business and Non-Profits Can Tackle Today’s Global Challenges Together (Palgrave, 2008): How collaborative engagement across the three sectors can help governments become critical enablers.
  8. Karlson “Charlie” Hargroves and Michael H. Smith, eds., The Natural Advantage of Nations: Business Opportunities, Innovation and Governance in the 21st Century (2005; Earthscan Publications, 2006). Case studies demonstrating that sustainable development leads to economic growth.
  9. Rajendra Pachauri and Andy Reisinger, eds., Climate Change 2007: Synthesis Report  (Intergovernmental Panel on Climate Change, 2008): Sobering overview of current environmental prospects.
  10. David Malin Roodman, The Natural Wealth of Nations: Harnessing the Market for the Environment (W.W. Norton, 1998): Argues for more effective government use of incentives in cutting pollution and waste.
  11. Ecolabelling Web site: Devoted to tracking and commenting on eco-labels.
  12. For more on global perspectives, sign up for s+b’s RSS feed.
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