Green Economy to Ensure Sustainable Business

Dr. Iyad Abumoghli
Regional Representative and Director
Regional Office for West Asia – Bahrain
United Nations Environment Programme

Green Economy to Ensure Sustainable Business


“The United Nations Environment Programme have concluded in Nairobi a historical First Universal Governing Council session where 193 countries, for the first time in 40 years, since the foundation of UNEP, have agreed to establish the United Nations Environment Assembly with the same authority of the United Nations General Assembly. This comes as a direct implementation to the outcomes of the Rio+20 Sustainable Development summit called "The Future We Want" that was held in Rio de Janeiro in June 2012. This decision does not only strengthen UNEP as an organization with the authority to set global environmental policies, but puts the Environment in its precise position as the third strand of sustainable development along with social and economic development. The decision was a result of the work for months and contributions from governments, nongovernmental organizations, youth groups and other major groups including the private and the business sectors.

Twenty years ago, business representation was not as numerous – a testament to evolution in our common understanding that the path to a more resource efficient and Green Economy requires the private sector to take a leading role. In a world where resources are extracted in one country, processed in another, then sold as products manufactured in yet another, there can be no doubt that a global commitment to safeguarding our planet, and the resources it provides, is imperative. We live in a world now so interconnected that a drought or flood in one part of the globe can soon challenge supply chains or move commodity markets in another with profound implications for the poor and the vulnerable.

Today, we are facing global challenges, financial and economic crisis, food security, resource depletion and climate change. These challenges highlight even more the need for decoupling economic growth from environmental degradation to achieve sustainable development. Business as usual is not an option.

Green Economy might mean different things to different sectors and in different countries, but simply put: Green Economy is one that results in improved human wellbeing and social equity, while significantly reducing environmental risks and ecological scarcities. The green economy is an agenda for sustainable growth and decent job creation.

Businesses rightly seek high returns on investment. Therefore, facing these global challenges we need to adopt a Sustainable Return on Investment concept. This concept builds upon UNEP’s work on the Green Economy and its subsequent engagement with the private sector and clearly shows that business cannot afford to ignore that switching to a resource efficient and Green Economy will bring benefits.

Compelling economic and scientific data demonstrate the advantages for the financial bottom line, and companies from developed and developing countries, from small sized to large multinationals are already taking the challenges on board and offering their experience on realworld examples of the Green Economy in action.

HSBC Green Insurance products in Brazil, for example, are linked to investment to preserve forests. For motor insurance, HSBC commits to preserving 88m2 of forest for five years; and for home insurance, 44m2 for the same period.

Working with the Asian and African Development Banks, UNEP is now running a Seed Capital Assistance Facility (SCAF) which is helping leading actors in the investment community overcome lack of enterprise development support services and financing. Six commercial investment funds have been engaged to date in Asia and Africa .

General Motors saved more than US$ 30 million in 6 years through their resource productivity programme, they also reduced waste volume by 40 per cent. PUMA developed an Environmental Profit and Loss Account (EP&L). Kenya’s Equity Bank joined with partners and provides loans to smallholder farmers enabling access to water-efficient irrigation technology at a low interest rate.

Green Economy to Ensure Sustainable Business

Therefore, it makes sense that as we switch to a more resource efficient and Green Economy – one in which economic growth, social equity and human development go hand-in-hand with environmental well-being business and industry will be a key driving force.

The Gulf Cooperation Council countries together own 30% and 20% of the world’s proven oil and natural gas reserves, respectively, and are highly dependent on related export revenues. Surging domestic energy consumption in the Gulf region is increasingly threatening oil and gas export revenues leading to diminishing energy return on investment in energy (EROIE). In the past decade, the GCC states’ domestic electricity demand has grown at an extremely rapid pace, on average 8% per year in 2000-2009. High average consumption rates of electricity amounting to 3-5 times per capita global consumption.

The GCC countries rely heavily on desalination plants to meet water demand, with high footprint impact. Demand for water 50 billion cubic meters in 2010 to 75 billion in 2020, 85% of which goes to agriculture. This demand growth is due to the rapid growth of GCC populations; Population grew from 5 million in 1950 to 45 million in 2015 and expected to be 65 million in 2020

GCC spending on food imports is projected to more than double from US$24 billion in 2008 to US$49 billion by 2020. An important reason for this growth in imports is water scarcity, which means that domestic agricultural production tends to be costly. GCC countries will explore wide-ranging purchases of agricultural land in regions such as Africa, Central Asia and Southeast Asia, in order to strengthen food security.

Almost 100% of population, except in Saudi Arabia, lives on coastal areas. The coastal and marine environments are facing threats due to pressures from the urbanization of coastal zones, tourism, maritime and oil traffic, rapid industrialization, reclamation and overfishing. Thus, wasteful consumption patterns among consumers, disregard for energy efficiency in the construction sector, and large, high-consumption vehicles in transport predominate.

For GCC, the most appropriate areas for a green economy approach are Energy, Infrastructure and buildings, Water Resources Management, Coastal Zone Management, Transportation, and Food security. It is estimated that 50% greening of the Arab transport sector generates savings of US$23 billion annually.

Some reports estimates that spending US$100 billion in greening only 20% of the existing building stock in the Arab countries over the next 10 years, mainly for retrofitting, is expected to create 4 million jobs. If Arab governments commit to greening the construction sector, spending will have to increase by about 20% resulting in additional investments of about US$30 billion, and the creation of 10% more jobs. A reduction in average per capita consumption of electricity in Arab countries to the world average, through energy efficiency measures, would generate savings of $73 billion annually. A 25% reduction in energy subsidies would free up over $100 billion over a three year period, that can be shifted to green energy and millions of jobs.

Green economy creates decent jobs in a wide range of sectors with high labour productivity as well as high eco-efficiency and low emissions, hold the promise to provide rising incomes, spur growth and help to protect the climate and the environment. There are a number of policies that national governments might consider adopting or strengthening in order to stimulate green investment and enable a green economic transition, ranging from regulatory and economic instruments to public-private partnerships and voluntary initiatives. One of the most direct ways for governments to promote a green economy is through public finance and fiscal measures. For instance, public expenditure on research and development can be an effective means of stimulating the innovation necessary to transition to a green economy. Additionally, governments can correct for negative externalities by ensuring that prices reflect the actual costs of goods and services, including the environmental costs which are often not captured by the market.

Delivering results requires a combination of technology, investment, governance and management measures, together with sustainable consumption and production patterns.

Therefore Green businesses would ensure:
  • More resilient supply chains
  • New investment opportunities
  • Increased consumer demand for sustainable goods and services
  • Sales growth and longer duration of sales
  • Training and job creation
  • Reduced dependency on natural resources

The companies here can provide more concrete examples of the win – win opportunities that integrating sustainability can bring. For these pioneering enterprises, the Green Economy is more than a theory -- it is a practice already reaping rewards for them -- their customers and communities.

As governments gather to discuss frameworks they need to put in place to protect our future, we invite business to step up and show the role it can play in generating decent jobs, in developing energy efficient technologies and industrial processes, in greening its supply chains and in integrating environmental, social and governance principles throughout its lending, investment and insurance decision-making. To help provide transparent and clear understanding of progress and contribution to sustainable development, sustainability disclosure should become a regular requirement and global commitment. The time is ripe for a global policy framework on corporate sustainability reporting and is essential in order to move forward and assist in fast tracking a transition to a global Green Economy. The Rio+20 outcome document highlighted this enhance commitment to sustainability reporting in paragraph 47.

The financial sector has a unique and important role to play in transitioning to green economy. Not just due to its ability to finance, invest in, and insure sustainable assets and activities at scale, but even more so in light of its potential to influence and align the activities of all its clients and investee companies with long-term sustainability goals. Through the integration of sustainability issues directly into their core decision-making processes, financial institutions (FIs) can fundamentally contribute to the greening of business and industry, job creation and social inclusion, thus helping society to address sustainability challenges such as social inequity, climate change, resource scarcity and biodiversity loss.

UNEP's Finance Initiative has recently launched the Principles for Sustainable Insurance - a set of voluntary and inspirational global principles and actions to address environmental, social and governance issues in the insurance sector; UNEP also launched the Global Initiative for Resource Efficient Cities, which builds in many ways upon existing cooperation with the private sector, such as in the building and construction sectors through the Sustainable Building and Climate Initiative. UNEP's lead 10 Year Framework of Programmes on Sustainable Consumption and Production is a Global Framework for Action to enhance international cooperation to support regional and national initiatives accelerating the shift towards sustainable consumption and production in both developed and developing countries. The framework will support capacity building, and provide technical and financial assistance to developing countries for this shift. The 10YFP will encourage innovation and cooperation among all stakeholders: government, business, civil society, researchers, UN Agencies and financial institutions, among others. Private sector participation in the 10YFP is crucial for its implementation. Private sector can contribute through an active role in showcasing business added value of sustainable consumption and production, as well as through participation in the clearinghouse, and sharing information on initiatives. UNEP announced the launch of the International Sustainable Public Procurement Initiative (SPPI) during Rio+20. Supported by over 30 governments and institutions, the SPPI aims to scale-up the level of public spending flowing into goods and services that maximize environmental and social benefits.

0n 19 February 2013 in Nairobi, UNEP launched the Partnership for Action on Green Economy (PAGE) which supports countries interested in pursuing inclusive, resource-efficient, low-carbon economies. Between now and 2020, PAGE aims to catalyze the transformation process of 30 countries’ economies by shifting investment and policies towards the creation of a new generation of assets: clean technology, well-functioning ecosystems, a skilled labour force with green jobs driven by strong institutions and good governance.

We recognize that a lot has been done in this region and in particular in the United Arab Emirates in many domains from renewables, to transportation to Corporate Social Responsibility (CSR) among businesses.

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