By Philip Monaghan
As a panel speaker at the 11th International Conference on Corporate Governance organized by the Institute of Directors India and the World Council for Corporate Governance in London this year, it was refreshing for me to hear how leading Eastern business powerhouses like Tata are shaping new international best practices on corporate responsibility.
What was most striking was the recognition that this shift in world GDP away from the West and toward the East and South has brought with it new obligations in ensuring the wellbeing of the rest of the planet. In particular, it posed the question whether sustainable economic growth was possible and what the implications could be for corporate governance.
Developing a number of scenarios over the next decade, my conference paper looked beyond such issues as integrated sustainability reporting to propose that a major source of risk and conflict will be the interface between the green economy and urban development. Like eco-labelling in the 1980s and social auditing in the 1990s, if things don’t go well, it is big business which – wrongly or rightly – will be blamed for its failing. More specifically, big business could find itself in the unenviable position of being accused of asset stripping communities.
Let’s start with a few facts about population shifts and trades patterns. According to the McKinsey Global Institute, cities account for 53 percent of global population, 80 percent of global GDP and 75 percent of global CO2 emissions. Consequently, a new generation of public-private partnerships (PPPs) are emerging to help deliver major low carbon urban infrastructure to ensure economic growth is as green as possible (e.g., rapid surface transport, district renewable energy schemes and smart grids, etc.).
By 2025, according to the Institute ‘mega cities’ (a population of more than 10 million inhabitants) like New York and Paris will be yesterday’s news, as migration will push the momentum to switch to ‘mid-sized cities’ (populations between 150,000 and 10 million inhabitants) in China (e.g., Guiyang), India (e.g., Surat, Gujarat) and Latin America (e.g., Cancun). Naturally, companies will follow the trade, bringing with them much-needed skills and investment. So far, so good, everyone wins.
But is corporate governance lagging behind?
I would argue that big business is repeating its past by not considering how this new wave of low carbon urbanization PPPs are best governed. After all, these energy, water and transport projects are huge and affect millions. For instance, are costs and profits being shared fairly? Will this help alleviate poverty? Does this lead to an upgrade in local skills and long-term, well-paid labor? Who owns the intellectual property rights? How flexible are these multi-general contracts?
In solving this conundrum, any green economy movement must bring together big business (e.g., BT, Cisco, GE, IBM, Phillips), respected parties from the OECD and UN, trade unions and NGOs in order to map out how these new PPPs will be designed and monitored. This framework has the true potential to show the real winners and losers and ensure that a transition to a green economy is smooth.
This will require being pro-business, but anti-weak governance. Smart business leaders will intuitively understand this.
About Philip Monaghan
Philip Monaghan is a writer and strategist in the fields of economic development and environmental sustainability. He is Founder & CEO of Infrangilis and the acclaimed author of the books How Local Resilience Creates Sustainable Societies (out February 2012) and Sustainability in Austerity (2010).
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