The natural advantage of nations: business opportunities, innovation, and governance in the 21st century PDF
Preview The natural advantage of nations: business opportunities, innovation, and governance in the 21st century
THE NATURAL ADVANTAGE OF NATIONS THE NATURAL ADVANTAGE OF NATIONS Business Opportunities, Innovation and Governance in the 21st Century Edited by Karlson ‘Charlie’ Hargroves and Michael H. Smith London • Sterling, VA First published by Earthscan in the UK and USA in 2005 Copyright © Karlson James Hargroves and Michael H. Smith, 2005 All rights reserved ISBN: 1-84407-121-9 Typesetting by MapSet Ltd, Gateshead, UK Printed and bound in the UK by The Bath Press Cover design by Andrew Corbett This publication was developed by The Natural Edge Project (TNEP) in collaboration with a range of international partners, co-authors, reviewers and supporters. For more information on TNEP please refer to www.naturaledgeproject.net For a full list of publications please contact: Earthscan 8–12 Camden High Street London, NW1 0JH, UK Tel: +44 (0)20 7387 8558 Fax: +44 (0)20 7387 8998 Email: [email protected] Web: www.earthscan.co.uk 22883 Quicksilver Drive, Sterling, VA 20166-2012, USA Earthscan publishes in association with WWF-UK and the International Institute for Environment and Development A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data The natural advantage of nations : business opportunities, innovation, and governance in the 21st century / edited by Karlson ‘Charlie’ Hargroves and Michael H. Smith. p. cm. Includes bibliographical references and index. ISBN 1-84407-121-9 (hardback) 1. Sustainable development. 2. Economic development—Environmental aspects. 3. Technological innovations—Environmental aspects. 4. Business enterprises— Environmental aspects. 5. Environmental policy—International cooperation. 6. Environmental protection—International cooperation. 7. Sustainable development—International cooperation. I. Hargroves, Karlson, 1974- II. Smith, Michael H., 1969- HC79.E5N3546 2004 338.9'27—dc22 2004019814 This book is printed on elemental chlorine free paper Until one is committed, there is hesitancy, the chance to draw back. Concerning all acts of initiative (and creation), there is one elementary truth the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way. Whatever you can do, or dream you can do, begin it. Boldness has genius, power, and magic in it. Begin it now. William H. Murray, The Scottish Himalayan Expedition (1951), incorporating the words of Johann Wolfgang von Goethe CONTENTS List of Figures and Tables xiii Forewords by Alan AtKisson xvii Amory B. Lovins xix William McDonough xxiii L. Hunter Lovins xxix Michael Fairbanks xxxv Preface by Karlson ‘Charlie’ Hargroves and Michael H. Smith xxxviii Acknowledgements xlii List of Acronyms and Abbreviations xlvi Introduction: Insurmountable Opportunities 1 SECTION 1: THE NEED FOR A NEW PARADIGM 1 Natural Advantage of Nations 7 Progress, competitiveness and sustainability 7 Significant potential for resource productivity improvements 12 Creating competitive advantage of the firm 14 A critical mass of enabling technologies 16 Externalities: who pays? 22 Benefits of valuing nature 24 Implications and benefits for global development 25 2 Risks of Inaction on Sustainable Development 34 A great transition 34 A sense of urgency 36 Declining ecosystems: a new limiting factor for growth? 39 Can we replicate nature’s services? 41 3 Asking the Right Questions 43 How should we measure growth? 43 What is meant when we speak of ‘sustainability’ and ‘sustainable development’? 45 Achieving sustainable genuine progress or sustainable development 46 Can we achieve no major trade-offs and win–win opportunities? 47 How do nations measure progress? 50 How do we design for legacy? 52 Can we turn ‘vicious cycles’ into ‘virtuous circles’? 54 viii The Natural Advantage of Nations 4 A Dynamic ‘Platform for Change’ 57 Economic policy: the broader context 57 The invisible hand 58 Collaborative approaches 60 Tripartite world 63 Whole of society approach 64 Importance of capacity building 67 5 Thinking Locally, Acting Globally 68 SECTION 2: NATURAL ADVANTAGE: A BUSINESS IMPERATIVE 6 Natural Advantage and the Firm 75 The changing nature of competition 75 Achieving competitive advantage through strategic positioning 81 What will be the major driver of innovation in the 21st century? 83 Moving early to exploit structural change 85 Why integrate sustainable development into corporate strategy? 87 Downsizing: a strategy that no longer cuts it 88 The shifting nature of competition in emerging economies 90 Additional drivers for sustainable development 94 Achieving radical resource productivity 98 New opportunities for product differentiation 101 Increasing profitability and minimizing risk (Porter’s 5 Forces Model) 104 Threats of new entrants 104 Threat of substitute products or services 105 Bargaining power of buyers 105 Power of suppliers 108 7 Innovation and Competitiveness through Industry Cluster Development 109 Cocoa beans… and what else? Michael Fairbanksand Andrew Smith 110 The cluster development process 111 Government role in promoting cluster competitiveness 116 A way forward 117 8 The Political and Social Context: A Sixth Force on Business? 118 Consumer demand change: knowing your market 118 Human resources: attracting the best people 120 Staying ahead of changes to government regulations 121 Can market based mechanisms be designed to assist firms to achieve competitive advantage? 121 Can regulation be designed to assist firms to achieve competitive advantage? 122 Raising the bar: independent certification schemes 123 The insurance industry: responding to climate change 124 The finance industry: a new paradigm in investment 127 The practice of ethical and socially responsible investment 130 9 Accelerating the Sustainability Revolution 135 Overcoming short-termism 135 Incentives for business leaders 136 Reform of fiduciary duty for pension and superannuation funds trustees L. Hunter Lovins and Walter Link 137 Contents ix Environmental management accounting in Japan Chika Saka, Roger Burritt, Stefan Schaltegger and Tobias Hahn 141 Grounds for change: the exciting developments in firm level economics 150 Efficiency gains within firms under voluntary environmental initiatives Bruce Paton 157 10 Operationalizing Natural Advantage through the Sustainability Helix 161 The business case for sustainability 161 The management helix for the sustainable organization (Sustainability Helix) 162 Sustainable Business Practice: The Fieldguide to Natural Capitalism 163 SECTION 3: ACHIEVING A NATURAL ADVANTAGE OF NATIONS 11 The Role of Government 171 The tragedy of the commons: 35 years on 178 Government mechanisms 181 The regulatory measure response 182 Mental models of voluntary environmental initiatives Bruce Paton 188 Voluntary agreements: effectiveness analysis – tools, guidelines and checklists Roger Burritt 193 Allars’ characteristics of effective voluntary agreements 193 The generic Canadian pro forma for voluntary initiatives 194 The United Nations Environment Programme’s (UNEP’s) Industry and Environment Technical Report 196 The Organisation for Economic Co-operation and Development’s (OECD’s) approach 199 Can regulation be designed to improve competitiveness? 200 Effective economic measures to complement either voluntary or regulatory approaches 202 Natural resources 205 Government–industry partnerships to improve innovation 208 From clusters to national systems of innovation Rob McLean with Jaya Pillia 209 Managing industry transitions through waves of innovation Philip Sutton 212 12 Towards a Deeper Understanding 217 Markets and efficiency 217 What is a market? 217 How do economists define efficiency? 218 The classical understanding 218 Perfect complete markets 219 The economics of information 220 Financial markets: what they do and why they are fragile 222 Anti-monopoly legislation: competition policy 224 Challenges to governments and institutions Stephen Dovers 226 Attributes of policy problems in sustainability 227 Clarifying government, governance and institutions 228 Available scales of sustainability governance 230 Scaling responses 231 Principles and elements of policy and institutional reform 233 Is there ‘credible commitment’ to sustainabilty? 236 National Councils for Sustainable Development Stephen Dovers 238 Features of NCSDs 239 x The Natural Advantage of Nations Specific NCSDs as examples 239 NCSDs and international agreements 242 General observations 243 13 National Systems of Innovation 244 Paul M. Weaver Practice makes perfect 244 Innovation systems are part of today’s development paradigm 246 The challenge to innovation systems 246 The Dutch National Sustainable Technology Development programme 253 The Netherlands context 255 Recent developments 258 Lessons from the Dutch and other programmes 260 Concluding remarks 264 14 Sustainability in the Wild West (State Government) 271 Peter Newman The Fremantle Declaration: ‘Passing the Torch to the Regions’ 272 The Western Australia State Sustainability Strategy: is change happening? 272 Process for developing the strategy 276 Public engagement 276 The policy change process 277 What have we learned? 282 15 Delivering Sustainability Through Local Action (Local Government) 285 A worldwide movement of local governments Wayne Wescott, Martin Brennan and Yolande Strengers 285 Sustainability Street: it’s a village out there Vox Bandicoot and Environs Australia Projects 288 Leadership in the local government sector: working from inside out Valerie A. Brown 289 Sustainability leadership in the local government sector 290 Profile of sustainability leadership 290 ‘When everything is said and done – more is said than done’ 293 Sector-wide action 294 Sustainability advocacy in the local government sector 295 SECTION 4: SUSTAINABLE CITIES: THE CHALLENGE OF THE 21ST CENTURY 16 Tomorrow’s Mega-cities: How Will They Develop? 301 Governance of municipalities: a snapshot of sustainable development in China Mark Diesendorf 303 The Goa 2100 Project: a breakthrough project from India Alan AtKisson 306 17 Profitable Greenhouse Solutions 316 Michael H. Smith and Alan Pears Energy systems: drivers for change 316 Vulnerabilities in the energy system 317 Threat of climate change 320 Greenhouse solutions that do not cost the earth 326 A historic opportunity 337 Issues identification 342 Contents xi 18 Greening the Built Environment 346 Cheryl Patenand Janis Birkeland with Alan Pears Building positive examples 347 The significance of greening the building and development industry 350 Perceived barriers to change 352 Information failures 352 Market failures 352 Institutional failures 352 From pioneers to systemic change: cultural reform 355 Information reform 356 Market reform 359 Institutional reform 360 Rating schemes 361 Design practice reform 364 Design process elements 364 Residential buildings 365 The future in design approaches 368 Summary 370 19 Sustainable Urban Transport 371 Jeff Kenworthy,Robert Murray-Leach and Craig Townsend Economic impacts of transport choices are significant 371 Methodology of the Millennium Cities Database 373 Characteristics of urban transport systems 373 Sustainable transport systems 380 The importance of urban form 381 Sustainable urban development 382 Designing around the mind: understanding behaviour 383 Civil society and business 384 20 Water: Nature’s Gold 387 Michael H. Smith with David Dumaresq Key drivers for change 388 Rationale for dams in the past 391 Creating a robust foundation and framework for water management 396 The Council of Australian Governments Agreements on Water Policy 398 The COAG communiqué to develop a National Water Initiative 399 A robust separation framework 401 Water access entitlements: allocations and use conditions 401 Conclusion 404 SECTION 5: A NATIONAL COLLABORATIVE APPROACH: THE BIGGER PICTURE – BUILDING RESILIENCE 21 Integrated Approaches to Sustainable Consumption and Cleaner Production 407 Christopher Ryan Consumption and low impact affluence 407 Patterns of consumption are a global issue 410 Policy approaches and action 411 Summary of policy approaches for sustainable consumption 412 Industry attention and action 417 Strategies for the future 418 Clarifying the focus for action on consumption 418
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