Sustainability: a global challenge and opportunity
As COP19 begins in Poland, Kersten-Karl Barth, Chair of the Commission on Environment and Energy at the ICC, discusses how the organisation is helping to ensure stronger participation from the private sector in the UNFCCC process
The Environment and Energy Commission at the International Chamber of Commerce (ICC) acts as a voice for global business, representing the interests of ICC members in global dialogues related energy and the environment. The Commission helps ICC act as business’s primary interlocutor and partner in key intergovernmental negotiations and dialogue, including at the United Nations Framework Convention on Climate Change, the UN Commission on Sustainable Development, and the UN Environment Programme. Kersten-Karl Barth tells us more about the Commission and how it is helping to ensure stronger participation from the private sector in the UNFCCC process.
The urgent need to address climate change and implement sustainable development is central to the agenda of the ICC. Could you tell us more about the Environment and Energy Commission and how it enables ICC to act?
Companies build a sustainable future every day by delivering and deploying their innovative products and services. For example, Siemens clearly identified sustainability as a global challenge and opportunity. Our Environmental Portfolio provides the company with a competitive advantage, e.g. as a driver of the transition to a low-carbon economy by making single components more efficient and developing more energy-efficient solutions.
But there is still much more that the private and public sector can and should do - with joint efforts - to promote a green transition that will reshape the way we consume resources, use energy, produce goods, transport people and promote health.
As the voice of world business, ICC, through its Commission on Environment and Energy, establishes the business stance on a broad range of environmental and energy policy and initiates business actions. An integral part of the commission’s approach to policy shaping for sustainable growth and development is fostering collaboration and seeking involvement with all stakeholders to exchange views and tap into their knowledge pools.
Over 300 members from multinational corporations like Bank of America, Bosch, Dow, GE, Li & Fung, Novozymes, Siemens or Tata to SMEs such as Inventec, industry associations and ICC national committees and chambers of commerce in more than 50 countries are working together and sharing their expertise. The commission’s mandate is implemented by crafting policy and technical guidance documents, sharing best practices among ICC member companies but also with government and academia, and monitoring a wide range of global policy issues and their relationships to sustainable development. Example issues include climate change, energy, financing and investment, resource efficiency, water and environmental fiscal instruments.
The ICC’s Green Economy Roadmap is a groundbreaking initiative that the Commission is promoting around the globe. Could you elaborate on the key objectives of the Roadmap, and where it has enjoyed particular successes?
The ICC Green Economy Roadmap sets out 10 conditions needed to drive growth and calls for innovation, collaboration and governance. It serves as both a tool for integrating sustainability into business strategies and government policies as well as a platform to share and scale-up best practices and initiate new activities.
"The ICC Green Economy Roadmap sets out 10 conditions needed to drive growth and calls for innovation, collaboration and governance"
ICC’s flagship green economy guide assists business, policymakers and the public in the development and implementation of policies and actions towards a “green economy”. To achieve success, we have to combine short-term profit requirements with longer-term strategies for shared value, bottom-up green growth and top-down green economy strategies. With the right policy frameworks, business can make the investments and create the business opportunities that the green transition promises. This is what the ICC Green Economy Roadmap is all about.
Launched at the Rio+20 UN Conference on Sustainable Development and since then presented at a great number of forums and workshops across the globe, the guide became widely read by business, policymakers and other stakeholder groups both within and outside ICC’s international membership.
Global climate change is no longer an issue for governments to resolve alone. The private sector needs to be better involved in decision making. How could the UNFCCC ensure and facilitate stronger engagement of business?
A climate agreement is critical to give businesses the certainty they need in order to scale up investments, innovation and technologies at the necessary speed to build low-emission societies.
Parties’ and UNFCCC decisions have repeatedly emphasised the role of the private sector in achieving climate goals. If we take into account the fact that business is a critical solution provider in tackling climate change, more comprehensive communication and participation avenues for the many different UNFCCC sub-groups and new bodies should be developed in close cooperation with business.
For the 2015 climate agreement and beyond, business is ready to discuss effective ways of contributing to the UN process and to implementing action. For example, according to McKinsey, already existing technologies are addressing around 70 per cent of the total CO2 abatement potential in 2030. Siemens’ Technologies are addressing 32 per cent of this abatement potential.
An ICC led event at the UNFCCC meeting at the COP18 in Doha (November 2012), facilitated by you, Mr Barth, brought together leading experts to deliberate financial and economic instruments that can be used for environmental policy-making. Could you tell us about some of the conclusions that were reached?
It was generally agreed that policy strategies should enable business to move forward on sustainability solutions. The necessary approaches discussed were manifold. Whether taxes, subsidies or other policy instruments are employed, they need to be based on sound cost-benefit analysis, transparent and economically, environmentally and socially effective.
The experts concluded that some market-adjustments need to be made to work for sustainable and low-emissions development. Prices are misaligned and fiscal policy can help align them properly by ultimately including the cost for externalities. However, while the concepts may be clear and understood, the required changes in fiscal policy still need to be developed.
Additionally, the group discussed that design parameters for environmental taxation should provide a framework which underpins environmental policies in the most economically efficient manner. Such a framework has to be designed within and be consistent with the overall context of the total fiscal framework. Otherwise, environmental taxes may increase the economic costs of taxation while providing only a limited environmental benefit.
The role of technology and finance is critical in achieving any carbon targets and there is a need for complementary policies and cooperation to support technology development and diffusion. Could you elaborate on some of the most effective examples from a business perspective?
In order to advance the deployment of low-carbon technologies, business believes that the most relevant trigger to foster low-carbon technology deployment is an enabling policy framework and mechanisms that work with the market, including a value of CO2. For example, emission trading schemes could provide clear incentives to invest in low-carbon technologies. However, current examples such as the European CO2 emissions trading scheme showcase that such a mechanism would need to be strengthened to be effective through an equitable, effective and stable global climate agreement. Another prerequisite for the deployment of low-carbon technologies is long-term investment security in order to reduce risk of sunk costs.
An overview of key enabling investment conditions can be found in the 2012 ICC Guidelines for International Investments as well as in ICC’s policy paper on energy efficiency which will be released before end of the year.
For Siemens, for example, responsible balance of the interests of society, the economy and the environment is a central element of our business strategy. As a trusted technology leader, we provide a wide range of efficient products, solutions and services, including the appropriate financing that is the key to increasing profitability and sustainability.
Financial solutions aim to offset the monthly cost of the new equipment against the energy savings it delivers across the financing term, effectively making the investment zero net cost or even cash positive. Siemens has, for example, helped the City of Houston to install ultra-modern traffic light technology which led to a reduction in energy costs by US$14 million and its operating costs by another US$5 million over a period of ten years. Siemens contractually guaranteed the potential savings in the framework of an energy-saving contract.
Energy savings performance contracting is a win-win solution as it eliminates financial risks while offering a number of practical benefits. As an example, Siemens retrofitted more than 160 mainly public buildings with its technology in Berlin (pictured right) which led to a 25 per cent CO2 reduction. The total invest was initially covered by Siemens and paid back via cost savings.
However, for the creation of a business environment that is conducive to large scale technology development, commercialisation and uptake, policymakers should take into account enabling factors such as education, stable regulatory environments, and appropriate market-based incentives when designing policies and instruments.
ICC has been collaborating with several United Nations Agencies and Institutions as well as international development agencies to address solutions to sustainable development challenges. Could you tell us a bit more about this collaboration?
ICC enjoys a close working relationship with the United Nations (UN) and has held consultative status with the UN and its specialised agencies since 1946. With a special regard to climate change and sustainability, ICC is a long-standing partner of the UNFCCC, serving as the business focal point, and providing expert input into the Climate Investments Funds, the UNEP International Resource Panel, and the UNEP/UNIDO Green Industry Platform, through ICC’s observer or steering committee status.
"ICC is a long-standing partner of the UNFCCC, serving as the business focal point, and providing expert input into the Climate Investments Funds"
Through the Environment and Energy Commission ICC engages in sustainability discussions under the post-2015 agenda and has been contributing to all UNCSD sessions in New York and the Rio+20 Conference through the ICC Task Force on Green Economy and Business Action for Sustainable Development (BASD 2012).
In addition, ICC, through its green economy and biodiversity working bodies, monitors and contributes to UN negotiations and discussions on natural capital at the United Nations Convention on Biological Diversity (UNCBD) and Intergovernmental Platform on Biodiversity & Ecosystem Services (IPBES). For example, a group of ICC business representatives joined the first session IPBES in Bonn earlier this year.
We also engage with development agencies such as, the German Agency for International Cooperation (GIZ) and the French Development Agency (AFD) for dialogues. We do this in the belief that to enable a sustainable development, all actors need to work together. To give an example, in 2010 in Berlin, in 2012 in Pretoria and in 2013 in Istanbul, ICC supported the International Business Forum, a GIZ organised multistakeholder dialogue series, which discusses what it takes from a business perspective to develop, replicate and upscale green business models.
All these engagements and partnership examples show how important it is for ICC to be present in all parts of the world. We need to get out into the field to see what is happening at the country and regional level to foster awareness and actions towards a “green economy” in an interdependent world.