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Australia in the Context
of a Sustainable Asia:
CONVENOR: We have come to the last part of our program this afternoon, our panel discussion. I now have pleasure to introduce to you, Mrs Maria Cattaui, the Secretary General of the International Chamber of Commerce. Mrs Cattaui will speak briefly on the International Chamber of Commerce's role in the sustainable development debate. She will then provide the summation of today's proceedings and open the floor to discussion. By way of introduction, Mrs Cattaui assumed the Secretary-General of the International Chamber of Commerce only six years ago, and represents the voice of international business to governments and inter-governmental organisations such as the OECD, the World Trade Organisation and the UN. Previously, Mrs Cattaui spent 18 years as Managing Director of the World Economic Forum. Would you join me in welcoming her. MRS CATTAUI: Our panellists have so fully, and from very different perspectives, looked at the issues of government and all the partners in sustainable development that I haven't got much to add. In fact, I am not going to address you but go right into our discussion, because I think many of you here have questions to ask. Suffice to say that the ICC has been very active on the environmental side of sustainable development for many years. It joined recently with the World Business Council for Sustainable Development to form what we called the Business Action for Sustainable Development (BASD), which in effect was an initiative to bring together and mobilise business to take an extremely active and central role during the discussions leading up to the preparatory WSSD meetings, as well as the summit itself in Johannesburg. The ICC represents businesses from 130 countries. Many of our members are from the developing world. It was necessary that they, and not just a handful of large companies, be a part of this. It was very important for us that it would be clear what is at stake. Companies, themselves, have a certain yearning to understand what kind of costs would be involved, what would change in their habits and how they should be influencing the discussions. It is not good enough that only a few initiated people would take part. For this reason, we gladly joined with the World Business Council for Sustainable Development to mobilise groups from all over the world. One of the things ICC did that was most important, but still not enough, was to set up something called the virtual exhibit that reached out of Johannesburg to over 1 million people. They interrogated it over the Internet for an average of approximately 10 minutes each, an enormous amount of time for people to spend on a site. We went out into the field to see how those partnerships are working, what people on site said about it, how they were reacting to what was happening in Johannesburg. It is sometimes necessary to bring in the voices that are not normally heard, because they are not financially or, for other reasons, able to travel. We have plenty of telecommunications possibilities today and we can reach out and get people to give their opinion, which is not always the opinion of the majority. From the ground up, ICC has worked on this issue. QUESTION: Peter Costella from Global Knowledge Ventures. My question picks up on a point made by Mr Bjorn Stigson about financial markets. We have heard in a couple of presentations today how innovative financing is going to be quite important to stimulate new markets, sustainable products and services in Asia. But very much the reality is that not a lot of mainstream providers of capital are actually engaged in this subject matter. Certainly in the local context, having advised a couple of major financial institutions on sustainability issues, I would suggest that the knowledge base is pretty low; that the tools and techniques being used are very much in niche areas of business like socially responsible investment; that analysts do not really understand the strategies for growth in some of the more enlightened companies that are based on sustainable development; and, there is very little investment proportionately in Asia. My question is, picking up on H L Kam's comments that if Australia is to lead the world in environment and sustainability, what can be done to accelerate the involvement of the mainstream providers of capital to catalyse more investment in sustainable development in Asia? MRS CATTAUI: H L, you are nominated to go first on this. I suppose the first thing is: how do you mobilise capital? MR KAM: Firstly, I share the view that for any company engaged in research, it is often very difficult to quantify in the bottom line. And at times, a lot of the analysts would not class investment in an asset as an expense. In the case of sustainable development, unless we can prove to the investment community that all this research is going to generate returns, it is very difficult for investors to invest in faith at the early stages. As far as Australia is concerned, I am very hopeful—mainly in the sense that I feel Australia is a country that particularly has one of the highest requirements for sustainable development. Those of you who travel would realise that, if you go to, say, Singapore, they announce in the plane that if you carry drugs into the country, the penalty is capital punishment. If you go to Australia, if you carry fruit into the country that will contaminate the environment, you will go to jail. So it looks like Australia is serious about health and how to help the environment. If sustainability is going to improve the profitability of the company, if that can improve mankind and therefore the economic system of the world—where then are the micro and macro benefits? If these are identified, then it will be easier for the investment community to put the investment dollars in. At this time, all I can say is that for the private sector in a company like ours, we just consciously do our own work, spending the necessary money to support whatever research and development is required. I hope forward-looking governments—the Australian government for one—will take a leadership role in providing national frameworks where private companies can work and make money, in partnership with NGOs and other industry colleagues work hard towards sustainability. MRS CATTAUI: Of course, your company has deep pockets. Hugh, from your side, how would you look at capital raising? MR MORGAN: I think in this debate, you open up the whole issue of the impatience of capital in a new era. There is no doubt, retrospectively, that long-term investments were ones which were more understandable and agreeable with the managers of capital. Owners of capital and the managers of the owners of the capital are pressurising corporations for responses and outputs tomorrow. The bulk of the investment managers I meet are on a competitive quarterly performance review at least, and, at the worst, on a daily review. So then, roll up and say, 'Boy, do I have a job for you. This thing is going to have a five-year maturity in a high risk venture but, who knows.' That does not sell easily. The response to the government is to seek R&D considerations, whether it is 130 or 150 per cent deductibility. This is probably the best you are going to do, rather than have government participate and get into the business of selecting winners. We have seen governments do that with huge catastrophic downside results in this state, and we wouldn't want to repeat that again. MRS CATTAUI: Bjorn? MR STIGSON: The financial markets are coming into this in a fast way. If we go back 10 years to Rio when Stephan Schmidheiny founded the World Business Council, he went around the world and gathered a group of 50 business leaders initially. He wanted someone from the financial sector and he could not find one single person from the financial sector who felt that sustainable development had anything to do with him. There was zero participation. Now 10 years later, it is a dramatically different situation and it is changing by the day. We have a member project called 'sustainability in the financial sector'. This project put together a report in Johannesburg, including a statement signed by 30 chief executives from some of the biggest banks in the world like Deutsche Bank, Allianz, both banks' insurance companies, the Dutch bank ABN Amro, UBS from Switzerland and so on. There is a financial sector initiative in this unit as well. What I see happening is that the financial sector is approaching this from two angles. One is the risk aspect, that people have seen the companies that are focused on sustainable development seem to be a lower risk. Then there is an opportunity aspect as well. We can see from our member companies there is an enormous fast-growing demand for information around these issues from different institutions. I believe that, today, about 50 per cent of all the managed investment funds in the US are now socially or environmentally screened, and that is increasing fast. Even if the financial markets have been latecomers into the game, they are catching up very quickly. They are catching up, as well, because they are managing money from pension funds. The pension funds take a long-term view and are requesting that the managers look at these issues. I can clearly say to you and companies that this is something that is going to come your way and, be prepared, it is coming fast. MRS CATTAUI: One of the issues a lot of people brought up is the incompatibility of criteria used by different sustainability indices. It is not easy for companies to know exactly what is required. About a year and a half ago, some of the sustainability indices were asking for a bit beyond what you were saying. Those that qualified as the best on the indices included, predominantly, telcos and IT companies, because they are less polluting than some of the heavy industries. But a lot of them came up against the problem of criteria. This problem is not going to go away, in my opinion. It is going to continue causing confusion in the marketplace as to what exactly is socially responsible or sustainability investing—and things of this kind, which are very fashionable, but very often not exactly rigorously measured. QUESTION (To DR SALIM): I was in Bali and Johannesburg, and sat in on a number of sessions that you chaired. The frustration, at times, was obvious with some of the processes, particularly the blocking factor to the United States and sometimes Australia. I thank you very much for your talk because it was very illuminating. The frustration came through subtly in some of the things you had to say in relation to the debate between multilateralism and unilateralism, and the reducing of targets and lack of targets in some areas. My question is for you, and perhaps Bjorn, who was also at Johannesburg and Bali and may be interested in some of the outcomes. What was the biggest achievement do you think that came out of the summit? What was the most frustrating aspect of the summit? DR SALIM: The biggest achievement is that there was an agreement, because you remember that agreement came about three hours before the summit was to close. So there was a position of, really, the world now is dominated by one major power. The inclination was to say that it is too hard, that all will follow what the great power wants. That was the unilateral element. The surprising element was the European Union: I understand because the European Union was also copying developing countries from Eastern Europe—Turkey and so on. There was an inclination of going into the same direction as the G77. This balancing of power allowed us to have a conclusion, and the conclusion makes it a bit balanced. The bottom result is that the conference was not dominated by the powerful. It really reflected the world as it is. The world is a world of diversity that requires a multilateral way to agreements. That, I think, is the major achievement. MRS CATTAUI: What was your biggest frustration? DR SALIM: You sit there and listen to speeches. Everybody has beautiful speeches. But when you really want to have agreement, then there is always rejection. So between the speech and the reality there is a gap—but that is politics. My frustration is that a lot of speeches were made, people talked the talk more than they walked the walk. Their talks were beautiful, but the walks were very small. MRS CATTAUI: That reminds me of two sayings: the devil is in the detail, we know that; the other is that if there is ever a division or a separation between plan and reality, we all know the plan prevails. MR STIGSON: I agree with Emil that the biggest achievement is there actually was an agreement. I had very low expectations coming to Johannesburg, and I didn't expect that there would be an agreement. The frustration is that, in spite of rhetoric before, the multilateral system did not manage to really integrate business and other civil society stakeholders into the proceedings. We ended up in a situation where there were three hubs in Johannesburg: one at the Central Convention Centre, where governments were meeting; another, a few blocks away, at the Nedcor Bank building, where the IUCN and WWF had their meetings and at the Hilton Hotel, where we from business met; and a third at the Ubuntu Exhibition Village and NASREC Area where the majority of NGOs gathered. We were not really able more than occasionally to bridge these gaps. We had Kofi Annan coming to our business day; we were participating in stakeholder dialogue; but it was really three worlds—business, government and the rest of society. MR MORGAN: Not having been there, although being involved in the preparation for it, my observation about Johannesburg is that it tracked what you should expect, that expectations ought not to be too high. When you get literally dozens of governments of varying powers and expectations, together with so many competing interests all wanting to help them, to think that you are going to end up with utopia is just somebody smoking something too much. It is part of a process. I think that the question of getting an agreement irrespective of anything else and lack of publicity in all sorts of things, that is part of the record. Rio was history. Johannesburg is history. There is an agreement. It will have consequences that last for a long time. I think that those who sought more ought to be pleased with actually what they have got. MRS CATTAUI: I was there and I simply want to say that I have always had, and continue to have, quite a lot of frustration about these very large UN summits. I think it is time now we started to break the problems down into chewable pieces—ones where even further action lines can be even better understood, discerned, delineated, acted upon and implemented. My frustration is that trying to do everything all together is very often difficult. QUESTION: Fiona Wain, Environment Business Australia. Bjorn, you mentioned a two-thirds growth in energy worldwide and huge technological advances coming forward. I would like to put forward that, without the correct catalyst for the marketplace to address the liabilities that are linked to continuing to operate in carbon constrained roles, the benefits will fall to the ninety-plus countries that have ratified the Kyoto Protocol, and Australia will really be sitting on the sidelines. Given that the government has committed to meeting the 108 per cent targets that we negotiated, which is a favourable target compared to other countries, would it not make sense to take advantage of low-cost mechanisms, such as the clean development mechanism and carbon trading, in spite of both government and industry trying to find ways around the signals they are getting back from the UNFCCC and ratifying countries that Australia will not be able to play in this game? It seriously concerns me as a representative of the
environment and sustainability industry. Does it not also concern
you that the right message is not being given to mainstream industry
to really develop the innovation and commercialisation so we will
get to the forefront in a world which is already differentiating
in favour of sustainable production and consumption? You have heard nothing about this process in the public debate. At best, there is some honest presentation, as I mentioned in my speech, that if the world achieves the cutbacks predicted at Kyoto, it really will have done nothing. Kyoto will not have made a major contribution towards fixing the problem. I will put my money on it. If I went outside and conducted a Gallup poll, 95 per cent of the people would say, 'If we fulfilled all that, it would be wonderful. We have fixed the problem.' There is no suggestion that there is any fix of the problem of addressing the atmospheric climate change issue by meeting the Kyoto Protocol numbers. It is the start of an adventure of which we know nothing about the outcome. We have been snowballed for years by the proposition that, if you are not inside the tent, you will not be able to influence the outcome. I have seen many arguments that our Department of Foreign Affairs and Trade get engaged because they need to be inside the tent rather than actually being critical of the outcome that follows. My example of the consequences would be the Cartagena Protocol agreement that we participated in on GMOs, not because we liked it, but because we finally felt that we should be in there inside the tent and not outside the tent. What has it provided for? It has provided for a mechanism to avoid everything to do with the WTO, to put in a new legislative and appeal program that goes to the UN, not to the WTO, and to incorporate the precautionary principle on GMOs. It has done everything it can to destroy the WTO. It has been an agreement lauded by the European Union in February last year. That agreement was signed, from memory, on 28 January. Four days later they have a publication saying, 'We have done it again. We have these principles. We have avoided going through the WTO.' I am not convinced about this argument that, if we are outside, that we suffer any loss. Under the present WTO, if there is any attempt to impose penalties on non-consenting third parties, that is illegal. There are about 23 Multilateral Environmental Agreements (MEAs). Five of those provide for penalties on non-conforming third parties. No government has yet had the guts to take it on, but there is no reason why governments should not take on the issue of imposing penalties on non-consenting third parties. Yet people in the Kyoto Protocol want to go and trade things between themselves—best of luck to them, if that's what they want to do—and impose this police force on top of them to assess greenhouse emissions. But to then say 'and we lock out everybody else who is not there' is in direct contravention of the WTO provisions. We should confront it. What we want is a decent agreement. If there is a real issue, if you are absolutely convinced that the world is going to heat up and the oceans are going to rise, we should undertake monumental tasks right now. That is not how the issues are presented to us at all. We are being offered a little bit as a seduction to get into a bureaucratic empire; this is a real potential problem to us. If we are honest and we wanted to change climate change, we would be cutting back energy consumption by about 60 per cent. You try that on the blue-collar worker and voter of Australia, and he will not have a bar of it. Neither will the United States. So I think people ought to be honest about what it is that we are heading into. And what is the status of the science that we need to have available to us beyond all reasonable doubt before we make huge leaps. My position is that you do not have to get in. You should pursue, in the meantime, the very best practices. There is really no easy way of getting out once you are in, and you do not know where it is going. QUESTION: If I could make a comment. Firstly, the Kyoto Protocol is a building block to a much stronger global framework. Secondly, we have heard already that we can expect overt and covert discrimination from the ninety-plus countries who are our trading partners and competitors that want to persuade Australia to play inside that club. Thirdly, the second commitment period—we re-negotiate that only if we are signatories to the original protocol. We are not invited to the table other than as with observer status, which means in your words, 'engage or have others represent your agenda,' which is a huge worry. MRS CATTAUI: Before I ask some of the other members of the panel to comment, I would like to make two small points. I do not mean to be rude to you, but at the ICC we have an allergy to the words 'precautionary principle'. First of all, it is not a principle by any mathematical extension whatsoever. I personally object to people loosely using, as many people do, scientific terms when they are talking about something a great deal warmer, fuzzier and looser. We call it the 'precautionary approach', because, at the moment, the exact impact is not measurable. I do not think we should go around thinking that somebody has made a wonderful study and ended up with some kind of mathematical principle. The other thing that we have to keep in mind about Kyoto, of which I have reminded myself continuously, is that China, potentially the largest emitter of greenhouses gases within the decade, is not even considered to be a part of this. That should cause us all some kind of concern when we are talking about 'are you inside or outside'. The biggest will be, in my opinion, without any question, outside of it anyway. MR STIGSON: As I said in my speech, the first thing that we have to remember is that the Kyoto Protocol does not exist yet. We do not even know if it is ever going to exist, because it depends on whether or not Russia will ratify. My understanding is that Russia's decision will depend on if they believe they are going to get more money as part of the Kyoto Protocol or outside the Kyoto Protocol. Lots of the discussions around the Kyoto Protocol are financial discussions. Why is the US not willing to sign the Kyoto Protocol? Because they believe that the EU got off easily with the targets because they are enlarging towards those that have a lot of hot air, so to say, in the old central European countries. So the US is feeling that they are at a disadvantage economically if they sign on to the Kyoto Protocol. The US will never accept the Kyoto Protocol, in my view, politically. So we will never get a one-Kyoto world. We may get a non-Kyoto part and a Kyoto part. But if Kyoto is ratified by the Russians, will there then be some negotiation between the Kyoto and the non-Kyoto parts—there probably will be at some stage. But we are talking about a huge uncertainty. I think that is important to understand. MRS CATTAUI: I understand, Bjorn, that many people are looking at the next step—the possible emergence of a new approach between those 'inside Kyoto' and those 'outside Kyoto', an approach working towards something that might achieve compatibility between the two. MR STIGSON: What I would also like to say is that there are three working groups or streams in the IPCC. One of them is 'science'. Another is 'adaptation'. How do you adapt to climate change and how do you mitigate climate change? There is a much bigger emphasis put now on the adaptation side. This is because there is a growing feeling that we will have climate change no matter what; we have to put more emphasis on how do we adapt to climate change, because we will not be able to mitigate it. We can start doing things now that will make the problem less severe down the track. But we are not in a situation where, as it now seems, we will not have climate change. We will have climate change. We will have to spend more time adapting, at the same time as we think about how do we deal with this for the future. The last point I want to make is what you talked about—market signals. I do not believe, when I look at the big companies, that there is any big company taking any decision on any big investment that is not factoring in what will be the consequence of climate change for this investment. I think it is internalised a lot into product development, infrastructure investments and investments in processes already with us today. So, the market signals are there, I think, to a high degree—but not with consumers. That will take a very long time. MRS CATTAUI: And as we all know, consumers are the biggest users of energy. QUESTION: My name is Dean Oldfield. I would like to say thanks very much to the panel. The world is increasingly dominated by performance measures, in terms of bottom line and triple bottom line. There are a number of variations on the theme. One of the concerns about business and sustainability is how to reconcile economic and environmental priorities. MRS CATTAUI: I will ask the two business leaders on the panel if they would like to look at this. MR KAM: We talk about consolidating 'triple bottom line' into 'bankers one bottom line'. Basically, what we are talking about is tangibles and intangibles. I think what we have to recognise is that a lot of the so-called intangibles can bring value to the company. It is a matter of whether they bring value tomorrow or three days after tomorrow. We have to believe that those intangibles are actually long-term financial assets to the company. We can then look at them as investments that actually have returns. As I mentioned earlier, I feel that, in a lot of cases, the attitude towards sustainable development has been due to it being classed as an expense, and therefore hurting the bottom line of today. The whole thing has gone back, as one of the speakers said, to a risk and opportunity analysis, and that actually there are a lot of opportunities. The Chinese word for ‘crisis’ consists of two Chinese characters. The first character means 'danger' and the second means 'opportunity'. So, the Chinese look at the word 'crisis' as representing what opportunity comes from managing the danger or the risk. We can see all problems, regardless of whether they are environmental problems or any other problems, as actually providing the motivation for us to overcome them. Once we overcome them, they become opportunities. Then they become financial assets. They become financial returns to the company. Of course, you are right. It is a matter of lead time too. But going back, investments—sometimes short-term investments, sometimes longer-term investments—can be quantified back. I think sustainability is a problem that is receiving a lot of attention now. There are actual cases when a problem surfaces relating, directly or indirectly, to sustainability that can actually be quantified as of long- or medium-term, or sometimes even short-term, benefit to the company. I think we can look at sustainability having a very positive approach. The whole thing, we have to believe in it and work towards quantifying the intangible. MR MORGAN: My take on this is that there is no escape, for the reasons I have said before, for corporations. They have to recognise that the community—both the people that come in to clock on each day and the community within which you operate—wants 'involvement'. So, the paradigm within which you operate has changed. It needs to be recognised that crisis is really equal to risk plus rage. The element that misses out in terms of the environmental debate is that within many of the productive or manufacturing sectors; it is small things that actually create the real problem. Therefore, it is a cultural change. People have to understand that it is not just a mathematical quantification of financial risk assessment; it is risk plus rage. It is the licence to operate that was referred to by Bjorn. So that what is at risk is your brand name. There are many examples; Coca Cola and the something or other in Brussels. There are a zillion examples where there has been a real misreading of what is really otherwise a very small environmental issue and the resulting damage that is done. The way to do this is actually publish or perish in some areas. You have to publish your position. Being totally transparent is actually the best policeman that you can get; it is the best demonstration internally that you are serious about what you are doing. It is the best way of demonstrating the targets that you are setting. You are opening yourself up for genuine criticism. Just as I learn from constructive debate, I think transparency and publication are things which should be looked at as learning experiences; this puts you in very good condition to participate in the community. MRS CATTAUI: That is a very interesting question that you raise. In addition to what companies are doing in the quadruple or triple bottom line reporting you are quoting, a lot of people are also questioning whether government statistics really reflect the full costing of policies, whether they also truly reflect a lot of issues like the quality of life and so forth. There are a lot of attempts in this way, but we are still, I think, in our infancy of learning how to measure, over time and validly, some of the issues that you are raising, issues that our business leaders have contributed to, having had to go through it themselves. I think we are coming to the end of our afternoon. Before closing, I would ask each of the panellists if they had one message to leave this group with right now on what they have said, and on where they think we are going. MR STIGSON: I think I have had the opportunity to comment on a number of things. I would like to add one thing, and that is what you were commenting on at the end, Maria, about transparency from other parts of society. At a stakeholder meeting within the Global Reporting Initiative, they have the WWF International propose the GRI should develop guidelines for reporting from the NGOs. There is an NGO-wide proposal to develop guidelines for the reporting of local communities, cities and local authorities. So to me, that is a very positive development. When we look at transparency and the discussion we have had here, it is not just about business, it is about more transparency and openness in society at large. I hope this will also come to governments on the national level at some stage. DR SALIM: The agreement reached in Johannesburg had as its title Government business in a civil society. So, the result of this depends very much on the three components. The question is then as the Business Council of Australia (BCA) asked, why are we not listened to enough? Governments, on the other hand, feel why do we need to listen, we are elected, we are government. This is a government conference. So, everybody feels they are important. Everybody feels that they need to do something. So, at the end, when somebody asks me, what do I think that each of them—business, government and civil society—get from this conference? You get what you are. You are what you get. MR MORGAN: My take would be get involved. Enter the debate, facilitate constructive tension, facilitate transparency of what is going on, be prepared to make mistakes and try and learn from them. MR KAM: In addition to the other speakers, I would like to add what I feel. While there are many forms of sustainable development, sustainable development is all about improving the quality of life. That is important. I urge all other parties, NGOs and government to work hard to make it happen. MRS CATTAUI: I want to thank all of you. I have a kind of a yardstick, a benchmark, when I go to a meeting—if I learn one thing per day, that is good. I learnt many things today from this panel. That has been absolutely outstanding. I have thought, 'Yes, I agree entirely with what you said.' Then the next one, 'Yes, he is absolutely right.' That is really the kind of stimulation we all need. I think we should say 100 times in completely contradictory ways, he was right, she was right, even though they are totally contradictory. Because, through those contradictions, through the different kinds of interests, we start to see the approaches that all of us are going to have to respond to. I want to thank them for having provoked us, for having given us many times the expression 'absolutely, that is it'. Even if they were contradictory, I think that has led to our richness. Please thank this panel for an outstanding afternoon. CONVENOR: Ladies and gentlemen, this concludes this session of the joint sustainable development forum. I would like to thank all our speakers for their presentations and thank you, Maria, for your very spirited, expert and energetic moderation of our panel discussion today. |
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