Regional preparatory meeting (Europe & North America) for the World Summit For Sustainable Development
Geneva, 24-25 September 2001

Ministerial panel on "Governance for sustainable development"
25 September 2001

Sir Mark Moody-Stuart: Business Action for Sustainable Development

The International Chamber of Commerce and the World Business Council for Sustainable Development have set up Business Action for Sustainable Development, not as an organisation but as an initiative to forward the business contribution to WSSD. So I am delighted that in this regional meeting for the WSSD that business is given an opportunity to participate. I believe this reflects a timely realisation that it is essential that the economic leg of the sustainable development tripod of should be healthy, and that the views of business as to how to make sure that that health is maintained, and on governance for Sustainable Development, are of value.

During the last ten years business has also come to realise that our contribution to the other two legs of sustainable development - the environment and society - is also essential. A major business with excellent economic performance which damages the environment will be punished in the market place. Equally if the activities of business are not seen to benefit society at large, not just their shareholders or customers, it becomes unsustainable in the long run. But a business which is not economically sound, however good its environmental and social performance is, ceases to be a business and shortly thereafter ceases to exist.

The WBCSD, reflecting the broad views of some 30 national and regional business organisations and some 700 business leaders around the world, has just produced a Document on "The Business Case for Sustainable Development", reflecting a belief that Sustainable Development is also good business.

This is easy to say, but not so easy in practice. How does a business set about improving its sustainability? And how can society ensure that the sustainability of business activities in general are continuously improved?

First, a business cannot do it on its own. Consultation is at the very heart of the matter. A business must consciously and openly consult with those involved and affected, not just its customers. Second, openness is essential, with reporting against published targets. This openness builds trust and allows all to see what progress is being made.

There are some excellent examples in various business sectors. I would draw your attention to the Marine Stewardship Council's work with major retailers on sustainable fisheries. Or the work done on Sustainable Forestry, again a collective effort between business and NGOs. Work done co-operatively in the clothing and footwear manufacturing industry on child labour. Or the excellent collaborative industry work done in the Global Mining Initiative and Mining and Minerals and Sustainable Development. Or the work done in the electricity, cement or fertilizer industry. Or the chemical industry's Responsible Care programme.

And in open reporting there are increasing numbers of major companies reporting in a verified way, not just on their financial performance which they have done for years, but on their environmental and social performance as well. There are examples here in the pharmaceutical industry, the insurance industry and the energy industry.

You will note that in all of these, the initiatives are on a sectoral basis. The critical issues are very different for the energy industry, the financial industry. And the civil society organisations involved, be they NGOs or Labour organisations, tend also to focus on particular issues or industries. So in preparing the agenda for Johannesburg we believe that it is important to have a sectoral element as well as addressing the many cross cutting issues. If we are looking for real concrete examples and commitments for the future they will be developed on a sectoral basis rather than across industry as a whole. But they will also involve all those involved or impacted in that sector - governments, representatives of affected populations, NGOs, Labour, scientists and so on.

Fine for enlightened business, you will say, but what about the unscrupulous or those who are just plain slow on the uptake? Should we not introduce some regulations to make sure they fall in line? That is what we really mean by "Governance".

I believe that from some of the examples I have quoted we can see a practical route evolving. An issue is identified, perhaps by an industry sector itself, but equally perhaps by others - governments, NGOs, affected communities. There is much discussion and open consultation on how to address it. Leading companies begin to take steps in line with the practical way forward developed from those open discussions. There will undoubtedly not be complete agreement on what needs to be done. Consumers play a key role in this process, rewarding leading companies with their business, with those not complying with improved practice being gradually shunned. Leading companies work with their suppliers, often in developing countries to ensure that there is capacity to deliver in line with the improved methods. That sector takes a step forward. An excellent example is in sustainable forestry. Arising from collaborative industry work, and actions by some leading retailers, coupled with consumer demand and pressure, there has been a step change in the nature of the wood products business.

But you might ask whether this would not all have happened more rapidly if we had just introduced national regulation upfront? Or international regulation if we could get agreement? This is where I believe we have to be very careful. Regulation introduced on a national basis before the actual practicalities of supply are worked out, before the impact of certain apparently desirable actions on industry and livelihoods in for example developing countries is seen can have unfortunate consequences. Not least of these consequences may be to damage the economic leg of the sustainable development tripod. There is a place for regulation to bring the real laggards into line, but we need to be absolutely sure that we know what the consequences are. This is best achieved by open consultation and practical experimentation.

Having said that, a regulatory framework may well be essential to encourage sustainable development. Let me give you an example from Texas, quoted in the Report of the G8 Task Force on Renewable Energy. Prudently, Texas wants a small percentage of renewable energy in its electricity supply. Consumers will support this provided it does not have a noticeable price impact. A regulation was introduced that suppliers can either generate the energy themselves or trade it in - or be fined more than the market clearing price. The low percentage and some federal tax breaks means this has a negligible impact on costs. So consumers support it. As a result of this regulation-driven but market-based approach targets for renewable energy have been exceeded - mostly from wind as ranchers are happy to lease land to wind developers.

I believe these examples show us what we need in governance for sustainable development and what we need at Johannesburg. We need to ensure that issues can be addressed on a sectoral basis, for many of the issues are complex and industry specific. The identification of issues, and the mapping of desirable sectoral targets, with commitments where possible, must be done through wide consultation.

There must be very open reporting on both the targets and industry performance against those targets. Consumers must be mobilised, through accurate information, so that they can make informed choices, rewarding leading companies and shunning laggards. There is a role for regulation to ensure that the laggards or unscrupulous fall in line, but it is wise to wait until we fully understand the consequences on all concerned and the practicalities before rushing in. Regulation should take the form of providing a framework in which market forces can operate to find the most effective economic solution.

We in Business look forward to co-operating in this process.