Business Community Leadership is Critical for a Healthy Environment

Sep 12, 2018 - 4:00pm

Vice President, Global Initiatives

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Forest in Millsfield, NH.
Forest in Millsfield, NH.

U.S. business is at the leading edge of change in global trade patterns, manufacturing distribution, pricing mechanisms, asset ownership schemes, consumer outreach, and information flows. Combined with access to finance, new opportunities for business arise from steady growth prospects at home and in other markets. But there is an overarching constraining factor for global growth: the finite nature of many of the resources that production depends on.

If financial assets can be created by a central bank, no human institution can create more metals, soil, sand or water. The resources available to underpin economic growth are sometimes difficult to locate, access to them is not always guaranteed, and price can be very volatile, while responsibility for the materials is often as long as the life cycle of the products of which they are made.

Worldwide consumption of primary materials in 2017 was around 90 billion tons. In twenty years, it is expected to double. While optimism prevails about economic growth in all major markets, companies are increasingly aware of the need to compete based on the efficiency of their resource use.

The good news is that the sky is not falling. A forthcoming report by the UN International Resource Panel of scientists says that with smarter policies, and assuming no disruptive innovation, natural resource use can be reduced by a third over the same period of time, with $2 trillion in estimated economic benefit as a result.

A great deal can be done to avoid a dystopian fight for dwindling natural resources. This conclusion is shared by public authorities in all major markets. Last month, the U.S. Chamber participated in the G20 Resource Efficiency workshop. Every delegation expressed a growing level of concern about the availability of resources and the cost of disposal of byproducts of growing production, consumption, urbanization, and infrastructure construction.

Just a few years ago, such a meeting was unimaginable without some politicians inveighing passionately against business, especially U.S. companies and larger multinationals that they claim are dismissive toward the earth. But this conversation didn’t center on hostility for the private sector. The business community is exercising increasingly responsible ownership and management of vast resources around the globe for the purpose of economic growth, and it is also seeing that sustainable business models can lead to operational improvements and cost savings. The private sector can and should be a catalyst for change, and collaboration with governments can accelerate this effort. Sustainable development is within reach when governments – through smart, flexible public policy – create an environment that enables companies to innovate.

Nevertheless, since markets typically reward expansion over frugality, valuations do not always fully capture longer-term investments in sustainability. In developing economies that face resource constraints, the incentive is often to be the first to use the resources, leaving the competition to pay a higher price for what is left.

Implementing a few public-policy fixes would help to more closely align higher profits with science-based resource efficiency, letting the markets work their magic in the interest of sustainable development. Companies will figure out how to invest and scale decomposing packaging, reuse materials, streamline logistics, and even reprocess litter. But this will require consistent representation at the table with top international policymakers.

At the upcoming meeting of the G7 Environment, Energy and Oceans ministers in Halifax, Canada, as well as during a meeting of the ministers of environment of all G20 countries in Japan next year, resource depletion will be on the agenda, and the business community will again stand tall as an agent of positive change. When business is free to innovate on the path of sustainability, all stakeholders can benefit.

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Vice President, Global Initiatives

Gary Litman is Vice President for Global Initiatives at the U.S.