| Merging
Business and Environment -
Three Steps
to Leadership by Mr. Anand Punyarachun
Chairman,
Business Council for Sustainable Development (BCSD)
Chairman, Thailand
Business Council for Sustainable Development (TBCSD)
Asia Pacific 94: Merging
Business and the Environment
The Regent Hotel, Bangkok
7-8 December 1994 Mr.
Chairman, Distinguished guests, Ladies and Gentlemen, It
is a great pleasure to be among so distinguished a gathering, at such an important
conference. My sincere thanks go to the International Herald Tribune and to the
Thailand Environment Institute for making it possible. I
remember very well the previous conference they organized on “Merging Business
and the Environment” in January 1992. That was less than six months before the
Earth Summit – when the world’s attention was beginning to focus strongly on Rio,
and when there was a growing sense of expectation, not least among ordinary men
and women, about what would emerge from that great event. This
conference is being held in very different circumstances. Most major economies
have experienced serious difficulties since then, and even now, some have still
not fully recovered. This has had two consequences. One,
the environment has not been as prominent on the agenda as we hoped it would be
following Rio. Two, the expectations raised during the run-up to Rio, and especially
at the conference itself, have not been fulfilled to the extent we believed they
would. This is a great pity – and it is
urgent now that we act to ensure it does not become a tragedy. To
my mind, the real success of Rio was in forging a broad consensus in support of
change – in some areas, radical change towards sustainable development. And it
marked a particular milestone in drawing business into a process which hitherto
had been driven mainly by government and environmentalists. Through
organizations such as the Business Council for Sustainable Development, business
participated actively in the preparations for Rio, in the conference itself, and
in fashioning the post-conference action agenda agreed there. Crucially, Rio recognized
that the private sector had a major part to play in implementing that agenda. In
short, we can be encouraged that business as a whole has begun to develop new
attitudes and approaches – just as governments around the world have begun to
explore new strategies and policies to implement that agenda. Yet,
there is a sense of disappointment at what has actually been achieved during the
past two and a half years – and I personally share this. In Rio, the baton was
passed from the NGOs to the politicians. As a former Prime Minister of my country,
I know how difficult it can be to effect change: and I well understand how the
fierce winds of recession in the West pushed governments off course. Even
so, progress on the political front has generally been slow. For
example, it is hard to detect a real sense of urgency by governments on fulfilling
their commitment to accelerate the process of internalizing environmental costs
into market prices. Tackling the problem of subsidies also have replaced common
sense and business sense. One impediment
to change is the political process itself – the procedures for decision-making
in the current administrative structure are simply not up to the task. We need
to reinvent government. We also, let me
add, need to reinvent the international institutions. The United Nations, the
World Bank, regional development banks all ought to be the primary agents for
change towards sustainable development. But while some have started to come to
grips with what their role should be, their structures and systems weigh against
them. There is clearly something amiss for instance when by some estimates, the
World Bank now loans 20 times as much for the production of energy as it does
for energy conservation. It would be unfair
to suggest there is a political vacuum. Yet in my view, the baton is not being
moved forward at the political level as rapidly or with the sense of urgency that
is clearly needed. I believe therefore,
it is time now for business to seize that baton, and lead the race towards sustainable
development. I feel confident this will be welcomed. Indeed, I judge there are
growing public and political expectations of business to take the initiative. What
I would like to do in these brief remarks is identify three concrete and key steps
which business can, and should take to demonstrate a new level of leadership on
the environment. The first is accounting
for environmental costs Sustainable
development is a vision of economic activity that effectively manages the Earth’s
resources for sustained, equitable growth worldwide. This vision can best be realized
through market economies and economic incentives. That
is why it is imperative that governments move rapidly internalize environmental
costs, preferably through economic instruments. This will make producers pay the
costs of using the environment. It will spur companies to find new technologies,
new processes, even new products to use raw materials and energy more efficiently,
and reduce – ultimately eliminate – pollution. It will drive them to become eco-efficient. But
business does not have to wait for government to act. It can already move some
way in that direction through a two-stage strategy. The
first phase is to quantify and allocate existing environmental costs: to measure
the costs associated with product, production processes and their related waste
streams to find out the true costs of the products or services they currently
deliver to the market. Some companies are
doing this – Ontario Hydro led by Mr. Maurice Strong is one. Most are not. It
is time that accounting for environmental costs becomes the norm in business,
with those companies experienced in internal environmental accounting sharing
their knowledge with others. I believe, too, that various industry sectors should
begin to develop eco-efficiency criteria and indicators. The
second phase of the strategy is for companies to recognize and incorporate future
anticipated environmental costs connected with their operations. The key to this
is a life-cycle approach to the entire chain of production from natural resources
to disposal. Again, some companies are beginning to internalize these kinds of
costs. It is time now for all companies to start capturing environmental costs
they do not presently include. The second
area where business can demonstrate true leadership is on environmental reporting. The
Agenda 21-action program, approved in Rio, says that companies should be encouraged
to “report annually on their environmental records, as well as on their use
of energy and natural resources.” In
Changing Course, its report to the Earth Summit, the BCSD said that “a
vision and implementation strategy for sustainable development is most useful
if the resultant actions can be reported, offering chances for feedback and improvement.
Companies need to issue regular reports to their stakeholders on their
progress toward sustainable development.” At
the time that the report was written – nearly three years ago – a survey of business
in more than 30 countries found that most companies did not provide public information
on their environmental or sustainable development policies or activities. Today,
an increasing number of major companies produce annual environmental reports,
charting their progress in such grey areas as emissions, waste management and
resource use. Some of them – from Dow. Du Pont, Norsk Hydro, Ontario Hydro to
name a few examples – are excellent, not least because they show, with commendable
transparency, those companies’ shortcomings, as well as successes. Yet
the disappointing fact is that most companies – indeed, the overwhelming majority
– still do not issue environmental reports, and many even fail to disclose such
information in their corporate annual reports – and most companies have no plans
to do so. Their explanations are many and
varied. It will cost too much to audit their operations. There is actually no
pressure on them to report on their performance. If they do report, they will
bring unnecessary and unwelcome scrutiny to their company activities. If they
admit to problems with emissions and waste management, they will be accused as
polluters. Frankly, I am unpersuaded by
these arguments. In my view, when a company uses environmental resources, it should
report – to its shareholders, employees, customers, and to the public – on how
it is using them. As Norsk Hydro stated in its 1993 annual report: “Industrial
activity is followed critically by a concerned public. Much of the public distrust
is caused by industry’s own lack of openness.” Those
companies which do report believe that the benchmarking of corporate environmental
performance will emerge as a high priority issue. I believe they are right. And
I agree with those corporate leaders who foresee the corporate “responsibility”
agenda of the 1970s and1980s evolving into a more demanding “accountability” and
eventually “sustainability” agenda. Therefore,
it is time for all companies to include environmental reporting as a matter of
course in their overall reporting procedures, so that their shareholders can judge
their performance on such critical areas as material use, energy consumption,
air and water emissions, packaging waste, waste management/disposal, and product
impact. The third area – closely linked
to the question of environmental reporting – is the fixing and announcing of
clear, measurable goals for environmental performance. In
Changing Course, the Business Council stated: “The basis for reporting
is goals. Operational policies need to lay down corporate objectives and standards
in ways that can be measured, for as the business adage has it, “What gets measured,
gets done.” The report added: “A
decision to act without commitment to measurement is hollow.” Some
companies have publicly set clear and measurable targets. They include, to name
some AT&T – which has committed
itself to reduce reportable toxic air emissions by 95% by the end of 1995. S.C.
Johnson and Son, Inc. – which has pledged to reduce its air emissions, water
effluents and solid waste disposal in the company’s manufacturing operations by
50% as a ratio to total production by the end of 1995. Du
Pont – which has set out a series of specific environmental objectives, including
reducing or eliminating dangerous air emissions, hazardous waste, packaging waste
within clearly laid out timescales. These,
and other companies, are – to use another expression – prepared to “stand up and
be counted.” They are willing to be judged by failure as much as by success. It
is these companies which are today’s leaders in merging business and the environment. But
they remain the exception, not the rule in business. Too often, companies confine
their environmental commitment – that is, where they acknowledge the need for
such a commitment – to a well-written mission statement that reads well, but says
little of substance because it is long on generalities, while conspicuously absent
of hard-edged specifics. Those companies
believe this is enough to “get them off the hook”. In my judgement, they are unwise
to believe so. Hiding environmental performance behind fine-sounding words – worse,
substituting bland phrases for actual performance – is no longer an option. The
public and politicians expect more. And business must provide much more. I
am rather pleased to note that in Thailand, the Thailand Business Council for
Sustainable Development has begun taking up the challenge. Though it was only
established in October last year, it has moved rapidly to promulgate its own 10
points business agenda for sustainable development on which its members now subscribe. As
of June this year, an implementation plan is now in place for members to establish
their own corporate environmental policies, initiate environmental activities,
carry out self audits and to eventually publish environmental reports to the community
and the public. From these initiatives, I foresee that in the next few years,
I could be at liberty to mention some convincing examples of how Thai business
is demonstrating the new level of environmental leadership that I have just mentioned.
This I can say because I am witnessing this trend now being demonstrated by some
companies such as: - The Siam
Cement Company, Ltd. Is showing its social responsibility by establishing
its own Environmental Standards Coordinating Committee that overseas the implementation
and dissemination of information about their environmental policies to the public.
- Volvo (Thailand)
Co. is one among the many subsidiaries of the parent company to apply green
thinking in all its operations. It has spent 10-15 million baht over the last
5 years reducing its carbon monoxide emissions as well as cutting its solvent
use by 30%.
- Esso
Standard Thailand Ltd. Also takes care to address environmental needs
of the communities in which it operates. It has upgraded its response capability
by investing 100 million baht over the last 3 years for oil spill equipment and
founded the Oil Industry Environmental Safety Group, an organization set up to
share resources in the event of a major oil spill.
- Saha-Union Public Company, together with its business
partner, have invested more than 100 million Baht in the first half of 1993 on
ultra-purified water cleaning process for electronic components, thereby eliminating
the use of ozone-depleting substances or CFC’s (chlorofluoro-carbons) from its
manufacturing plant in Chonburi.
- Lever Brothers (Thailand) Limited has invested 300 million Baht in
a new plant to make naturally derived ingredients, a further 150 million Baht
in a facility to make powders by a process which uses no waste, 80% less energy
and produces no emissions. They have also installed automated pollution control
systems in their factory. In addition, Lever is responsible for a 50 million Baht
scheme to plant 1 million trees in Thailand over the next 2 years.
I
believe that every company CEO should now feel it is incumbent for his company
to announce specific commitments on what it intends to do to:
- achieve substantive energy efficiency improvements within
their organizations
- reduce emissions of pollutants into the air
- cut discharges of polluting effluents into seas, rivers and
other water sources
- increase the recycling of paper, cardboard, plastic, glass and other materials
in manufacturing and/or office facilities
- minimize the environmental impact of their products
In
other words, business should, across the board, commit to clear, measurable targets
for a range of key, urgent and specific environmental performance actions within
specific timeframes. I have tried to set
out a new three-point agenda for international business to implement to set us
back on the course agreed in Rio: an agenda which would enable business to demonstrate:
- positive action on environmental costs – through environmental
cost accounting
- true
accountability of their use of environmental resources – through full environmental
reporting
- real
commitment to environmental performance – through setting, clear, specific
and measurable goals
It can
be done. The best companies – those I have mentioned, and others – are doing it
already. And while of course, it presents a challenge – a tough one for many companies
– leadership is about accepting tough challenges. The
problem is that business is like a convoy – and even when it is heading as one
in the same direction, the speed is usually dictated by the speed of the slowest
members. It may take a combination of peer pressure and public pressure to convince
the rest to hurry up. But hurry up they must. For
there is a leadership role waiting to be filled in moving the post Rio agenda
on sustainable development forward, further and faster. If business can assure
the politicians and the public that it is serious about merging its agenda with
the environmental agenda, business will show its leadership credentials. Such
a leadership role is waiting to be filled. It is essential it is filled. Governments
have been distracted, and have yet to convince us that they will re-engage with
the same vigor and commitment they showed in Rio. There is therefore, an expectation
of business to assume the responsibility. It
is obvious that fundamental change is needed. We have two choices – to resist,
or join those shaping the future. I believe that in the end, it will be impossible
to resist. Therefore, I am inviting – indeed challenging – all my colleagues in
business to participate. It is the most rewarding option, and the right one. | 
