CORPORATE SUSTAINABILITY HAS FAILED US:
Now What?
by Roland Geyer
This year marks the thirtieth anniversary of the Earth Summit in Rio de Janeiro, the seminal event that propelled environmentalism out of its niche existence and into the global mainstream. The Rio Conference set off an avalanche of governmental, civic, and corporate environmental activities and firmly embedded the notion of sustainability into everyone’s language and consciousness. Looking at it from this angle, the Earth Summit was a tremendous success and its anniversary should be cause for celebration.
Unfortunately, the mood among environmental scientists and activists is increasingly dark and desperate rather than celebratory and joyous. Thirty years after the United Nations convened the world’s leaders in Rio and urged them to “rethink economic development and find ways to stop polluting the planet and depleting its natural resources,” humanity is still not living any more sustainably. Instead, the three environmental crises of climate change, biodiversity loss, and pollution are still accelerating rather than slowing down. How is this reconcilable with thirty years of governmental and corporate sustainability efforts? Let’s take a moment to explore the events that led to the Earth Summit. It will help us understand what went wrong during and after the Summit and find a path forward that might finally reconcile human prosperity and environmental health.
A brief history of business and the environment
At the beginning of the 20th century, humanity’s impact on the environment was still negligible. Only a fraction of the 1.7 billion people on the planet had been industrializing their economies, using inefficient and limiting technologies. Annual global GDP was roughly 3 trillion 2010 dollars and annual fossil CO2 emissions were around 2 billion metric tons, almost all of which came from coal combustion. Despite the advances of the industrial revolution, planet Earth still seemed vast and the idea that humanity could alter its environment on a global scale seemed preposterous.
The next fifty years not only saw two devastating world wars, but also unimaginable scientific and technological advances. The electrification of factories made assembly lines and thus mass production possible. Mass produced automobiles fueled by leaded gasoline soon replaced horse-drawn carriages. The new ability to mass produce aluminum made commercial aviation possible. The invention of CFCs made compressor-based refrigeration and spray cans affordable and safe for households. Mass production of nitrogen fertilizer and synthetic pesticides, such as DDT, revolutionized and industrialized agriculture. The invention and mass production of synthetic polymers, known as plastics, paved the way to single-use packaging and products.
By mid-century, the environmental consequences of the relentless growth in industrial production and consumption became impossible to ignore. In 1948, smog caused by U.S. Steel’s zinc and steel plants in Donora, PA, killed twenty and sickened thousands. At the same time, the exhaust of millions of cars in the LA basin caused ever-worsening photochemical smog, while the Hooker Chemical Company polluted the Love Canal in Niagara Falls, NY, with toxic waste. Rivers, like the Cuyahoga, were so polluted that they kept catching on fire.
In the late 60s, people finally had enough and demanded change. It was the birth of the modern environmental movement. Industry was no longer exclusively seen as the generators of wealth and progress, but also as polluters who killed and sickened people and nature. 1970 saw two landmark events: The first Earth Day and the creation of the Environmental Protection Agency. Many environmental NGOs were founded in the late 60s or early 70s. The growth of the environmental movement is mirrored by the growth in environmental regulation and mandatory pollution control.
This period was characterized by conflict between industry on one hand and environmentalists or environmental regulators on the other. One side’s gain is the other one’s loss. Environmentalism is a threat to companies’ profits or even viability. Companies are unrelenting and unrepentant polluters. Despite some successes of the environmental movement, pollution did not end. By the early 90s, 5.5 billion people were generating a global annual GDP of 39 trillion 2010 dollars and annual fossil CO2 emissions of 22 billion metric tons. The United Nations became so worried about humankind’s trajectory that it organized the Earth Summit in Rio de Janeiro in June 1992.
The rise of win-win and eco-efficiency
The summit resulted in the Rio Declaration, the Agenda 21, the Forest Principles, and the Conventions of Climate Change and Biodiversity. Something equally momentous, but less apparent also had happened. Business and industry were suddenly no longer the enemy of the environment. Michael Porter, the leading business scholar at the time, started to suggest that “the conflict between environmental protection and economic competitiveness is a false dichotomy” and even went as far as claiming that pollution is simply resource inefficiency. For Stephan Schmidheiny, heir to the asbestos-cement empire Eternit and a key representative of global business at the Earth Summit, this meant that “business is good for sustainable development and sustainable development is good for business.” This view is also known as ‘win-win’ and quickly became the main paradigm of the newly emerging notion of corporate sustainability.
The linchpin that holds the vision of continued economic growth and environmental sustainability together is called ‘eco-efficiency.’ Eco-efficiency is about reducing the environmental impact per unit of product, like a car, or economic output, such as GDP. Doing so decouples economic output from environmental impact, so that the former can continue to grow while the latter is brought down to a sustainable level. After the Earth Summit, most of the governmental and corporate sustainability efforts were based on the promise of win-win and eco-efficiency. We now had thirty years of eco-efficiency efforts, and therefore thirty years of data to examine its effectiveness.
Unfortunately, the reality of eco-efficiency looks very different from its promise. Despite the increasing fuel efficiency of the U.S. vehicle fleet, for example, its fuel consumption is still increasing, simply because everyone keeps driving more year over year. Like many industrial processes, aluminum mass production has become much more energy efficient since it was invented around the turn of the last century, but this was no match for the dramatic growth in output. Since the Earth Summit alone, global annual aluminum production has almost tripled. Despite increased efficiency, global aluminum’s annual electricity consumption more than doubled since Rio. In fact, in every single industry examined by a seminal study, growth in total production and consumption outstripped efficiency gains. All data shows that our single-minded reliance on win-win and eco-efficiency has been a dismal failure.
Probably the most fateful letdown of eco-efficiency is climate change. While the global economy doubled in size since Rio to 84 trillion 2010 dollars, its carbon intensity only decreased by 25%. As a result, annual fossil CO2 emissions grew by over 60% in the last thirty years to 36 million metric tons, despite the fact that the Intergovernmental Panel on Climate Change urges us to bring them down to net zero as quickly as possible
What now?
The first task at hand right now is to fully recognize that the tenets of eco-efficiency and win-win have completely failed to deliver sustainability or even just modest environmental impact reductions. They have set us on the wrong course for the last thirty years and thus need to be thrown overboard. Encouragingly, even business scholars who made their name doing win-win research now call for its abandonment.
Next, we need new tools that can finally guide us to a more sustainable future or, at this point, even just help us to increase the likelihood of maintaining a livable planet. I am presenting and discussing such a set of tools in the second half of my book The Business of Less: The Role of Companies and Households on a Planet in Peril. The concept that I propose to replace eco-efficiency is called ‘net green.’ It emphasizes that the purpose of any environmental action is to reduce total environmental impact and not just impact per product.
I then apply the net green concept to the three pollution prevention principles of reuse and recycling, substitution, and source reduction. The net green lens reminds us that the sole purpose of recycling, for example, is to reduce the production and use of virgin materials. In other words, we need to use recycled materials instead of, not in addition to, virgin materials. It is encouraging to see that businesses, households, and legislators have shifted their attention from mere end-of-life collection and landfill diversion to making, buying, and mandating recycled content. The next step will be to adopt and support business models that entirely move away from selling more stuff year over year. Apparel rental, repair, and resale businesses offer some glimpses of a possible, dematerialized future.
Net green also tells us that the only point of green products and technologies is the reduced use or even phase out of old, non-sustainable ones. On a global level, the rise of renewable energy has yet to decrease the consumption of fossil fuels. I am heartened, though, by recent actions of the California Government. Senate Bill 100 essentially phases out fossil fuels from California’s grid mix, while Governor Newsom’s Executive Order N-79-20 calls for the elimination of internal combustion vehicles. Calls are also getting louder for legislation that effectively reduces the production and use of primary materials. This is particularly true for virgin plastic, which not only generates significant amounts of emissions during its production, but has also become a major environmental pollutant itself.
One powerful way to increase the sustainability of our economy is to shift business models and household spending from materials and energy to labor, i.e. people’s time and skills. While even green materials and renewable energy are not without significant environmental burden, pure labor has no impacts whatsoever. By increasing the labor share of their value creation and making sure living wages are paid all along their supply chains, businesses can reduce their environmental footprints. By supporting such businesses and overall shifting their spending from stuff to labor, households can reduce theirs. Legislators can support these efforts by shifting taxation from labor to materials and energy. All those actions would concurrently achieve environmental and social goals. Now there is a win-win I can get behind.
I still believe that there can be room for all species on this planet, but it will require that we abandon the empty promises of corporate sustainability and finally change the way we produce and consume. The Business of Less is my attempt to make the case for the former and provide a roadmap for the latter.
Roland Geyer is Professor of Industrial Ecology at the Bren School of Environmental Science Management, University of California, Santa Barbara. He fell in love with California in his mid-twenties and managed to move there ten years later. Learn more about Roland’s work on www.rolandgeyer.com.
