Session Three Discussion

David Nissen: …solutions sort of on their end of the tug of war. Would the panel like to discuss how they would advise NGOs to proceed in their advocacies I helping us construct a better institutional structure so markets work better?

Stuart Hart: I think a useful way to think about a civil society and NGOs which are utterly crucial to all of this, they're really key players in making this whole enterprise-driven approach work. But just like the base of the pyramid is not homogenous, NGOs aren't homogenous, there are many different varieties and stripes of NGOs, and we should freely admit that. And there are some that are more ideologically driven, that are more geared toward direct action, there are some that are much more geared toward constructive engagement and collaboration, and it's important to recognize the distinction between the two. And by saying that I don't mean to suggest that companies should shun those are direct action oriented and ideologically driven, quite the contrary. It's just that I think the relationship or the role that's played with those types of NGOs is probably different than it would be with a collaborative constructive engagement oriented NGO. It's probably the latter type of NGO, the constructive engagement NGO, that you can actually partner on the ground with. Those that come in with preconceived ideas, with strong ideological stances, and with direct action can be very helpful in jolting you out of kind of your mindset, but they're not necessarily going to be the ones that work with you to actually implement it on the ground.

Abby Joseph Cohen: I agree 100%. I mean that's exactly our experience. I mean I think the activist organizations play a critical role, and I don't want them to stop doing it, as much as it can be a little aggravating in my role, it's really important because you need to listen to it, because they are sort of the voice for a lot of other people other than just themselves. But they're not necessarily the solution providers, and so some of the more traditional environmental NGOs specifically tend to be the solution providers. And you need to find a balance, we need to be talking about what it really means for business to operate, and then working together to try to find an achievable solution.

David Refkin: The campaigners certainly have their role, and let's face it, there are some companies who won't do things differently unless, you know, they're on the receiving end. But I think there is a huge opportunity for NGOs to look at collaboration. And I remember it was about twenty years ago when Fred Krupp from Environmental Defense wrote an op-ed piece in The New York Times talking about business isn't always bad, we have to work with them, they are a way to find the solution. And Fred was criticized for years, and probably still is by some people. But when you see the success that they've had, the great work that the World Resource Institute does, there are ways to work together. And you can do that still fulfilling the principles that you believe in. But at the end of the day it's about finding answers, and we need more answers in this world.

Amy Davidsen: The other panel members have already covered so many important points about this. Let me just add the following, and that is we have found that the relationships with NGOs work extremely well for both sides when there is cooperation in both directions. Just the way we have worked with NGOs to become more knowledgeable ourselves about things that they have been working on for a long time, we have felt pretty good about providing information in the other direction as well. We've spent quite a bit of time as we were developing our firm's environmental policy last year informing NGOs, and we still are doing so, with regard to the manner in which capital markets really work, the manner in which disclosures are really required by different governments, and how usable those disclosures from companies to government agencies such as the SEC have really proven to be. And so I would reiterate the comment that was made about cooperation. I think that we can get a great deal more done when we work together, bringing each party's relative advantages and knowledge bases together.

David Refkin: I'm kind of torn on this, because I've spent a lot of time working some of the NGOs and with businesses getting, for instance, companies to make greenhouse gas commitments, and you can achieve some real results there. But you know, there's no question that at the end of the day businesses are focused on shareholder value. And there's no value for sustainable development, there's no value for carbon dioxide, there's no value for avoiding the calamity that we're facing. So, you know, I think that businesses are very good at doing what they're doing, but you know, the shareholders of the planet Earth are the people, and they are the ones who are going to have to face the consequences of unsustainable development. So I actually think that the NGOs haven't done a good enough job of you know, creating a political framework in which sustainable development actually makes business sense, and that's why we have unsustainable development. So somehow there is going to have to be a radical political, NGO and business partnership that is going to dramatically change our direction, or we're going to end up where we're headed.

David Nissen: Joe, you focused I think brilliantly on coal, coal for power generation, power generation for transportation, so if there's any one thing that we've got to start to fix it's either the use of coal or the sequestration of the carbon associated with coal fire generation, both for the electricity bill and general. Now, everybody knows where most of the coal is going to get burned in the next fifty years, it's partly in the places that are already burning it, including the United States, but prominently it's going to be in China and India. And if your target is 55 [he meant to say 550, but he didn't] parts per million, and we started at 280, then we're a third of the way there, and that has been created by a sixth of the people in the world. So when we explain to our friends in China and our friends in India that we all have this big problem, they say you used twice your share already, so you pay. If you're going to put in place carbon trading, which will internalize to shareholder values the costs of coal, and you're going to allocate an entitlement to the carbon burning that's left you've got to deal with who pays. How do we proceed with that discussion, how do we proceed in a way that enterprise can then function within the context that we resulted?

Joseph Romm: There's obviously a very big disconnect between what we need to do and the politics in this country. There's no question that in this country it's taken for granted that we can't address this problem if China and India don't act, whereas obviously if you talk to people in China and India they rightfully say that we caused this problem and we need to go first. And that's how we solved the ozone depletion problem. In the Montreal Protocol the rich nations went first, at least as a sign of good faith, and also to develop the technology. And then as the problem ratcheted up, the developing countries were brought on board. You know, the problem in this world right is the United States of America. The other developed countries are fully prepared to take action, and every single one of them but Australia has in fact made a pretty strong commitment, which is the Kyoto commitment, you know, 5% reduction against 1990 levels by 2010. I think that if the United States does not radically reverse course and take a leadership role within the next five years, then from an equity point of view there's no possibility of solving this problem. There's no question that China and India will build enough coal plants to finish the job that we started, which is to destroy the climate and therefore make this planet relatively a ruinous place for the next hundred generations. So you know, I tend to think that it's going to have to start here in the United States of America, and you know, a lot of people focus on 550 parts per million, which is doubling from pre-industrial levels. I don't want to say time has run for 550 parts per million, but what needs to be done to achieve 550 parts per million is so far beyond what is politically acceptable in this country that again, you know, job one as I see it is a single issue voting populace has to emerge for whom this is the primary issue, because if the US doesn't get serious China and India, why would they get serious?

Abby Joseph Cohen: A point of information that I think is really critically important. You know, we've already heard here today and yesterday discussions about people wishing that the federal policy in the United States was somewhat different from what it is. But let's also recognize the reality that is being faced by many companies that are based, at least from a corporate standpoint, in the United States. Companies, multinationals, who are domiciled in the United States but are doing business elsewhere that have adopted Kyoto have adopted Kyoto. Businesses that operate in states that have adopted standards dramatically above federal standards are also following through. And one of the interesting things that we hear from companies who want to do a right thing, however you define that, but they want to do the right thing, are expressing extraordinary frustration by the patchwork quilt of regulatory standards that they must face. It's the beauty of our federal system in the United States where different communities, state and local governments, can set standards by themselves different from the federal government, and so on. And when we speak to corporations based in any number of industries, what they are asking for more than anything else is clarity. They'd like to know what the standards will be so that today they can start building the right plant, the right facility, because they are very loath to start preparing for one set of standards only to be fearful that five or ten or fifteen years from now that the facilities they thought were in compliance are not. So perhaps one of the messages that I will pull together from this is to say that we need to send out that message in terms of not just having the right standards but having consistent standards so businesspeople can plan accordingly.

Stuart Hart: I guess I would just suggest that just like it's difficult to paint NGOs with one brush, as though they're all the same, or those in the base of the pyramid, I think it's difficult to paint businesses as though they're all the same, because they're not. There are companies that have strategies that differ from others, there are industries that face different conditions, and they're in different positions. So I firmly believe there is value in sustainable development, there is shareholder value to be earned in moving toward sustainable development, not for all companies but for some, and for a growing number. And the problem is that we have a set of industries that are being artificially supported, and most of those are in sunset industries. And it's the entrepreneurs who are trying to kind of beat down the door to get to get to the next generation of the technologies that are being held back. And so from my point of view what we really need to do is unleash the power of entrepreneurship, and then I think we've got a shot at it. But I think the problem is that so much is being run by incumbents that don't want to see the change.

David Nissen: Let me ask a question about the appropriate sustainable development policies for the very poor. I'm going to start directing this question at Stuart. One of the things I've learned working with the Millennium Development Goal efforts that are going on in the Earth Institute is that there's a simple number to remember, and that is that if you have commercial energy to the tune of a million BTU per year delivered to the pot and then you have to back out the efficiencies, you have accomplished the transition to commercial energy at the very poor level and gotten rid of the health effects and the women's time and provided the basic productivity substrate for development. That's about two million barrels a day when you work it out, it's the kind of energy impact that we could mitigate with a modest change in fuel standards in the United States, so that the poor at the basic level of the two billion people that don't have access are not an environmental problem. Nevertheless policymakers in the multinationals look at the technologies for this and they often propose to impose very expensive solutions at the $200 a year economy, which if effective stifle the prospects of development in conjunction with sustainable. So let me start by asking Stuart how do we think about the sustainable of economic development for the very poor?

Stuart Hart: Well again I think you began with a starting point that typically those in the base of the pyramid are badly served. That's point number one. And that often means whatever service there is is high cost and usually not very good quality. So when it comes to the functionality that power might bring in, say, a rural area that's achieved now, if it's not a generator then it's candles or kerosene or lanterns or dry cell batteries, I mean that's how it's achieved. Those are high cost, polluting, breathing in the fumes, tens of thousands of people kicking over kerosene lanterns and burning to death kinds of solutions. It turns out that distributed generation and solar technologies and a variety of others if you compare cost per kilowatt hour of dry cell battery generated electricity compared to solar, solar kicks it. So what we lack is the imagination to develop a business model, a commercial model, to bring that sort of technology to bear there. Now there are NGOs out there in the world that have already shown how to do it. As some of you may know, there's an NGO in Canada called Light Up The World, a wonderful NGO started by a single guy, basically an engineering professor in Calgary, who has over the last ten years shown, he sources from the Chinese and the Indians primarily small solar collectors, small solar panels, and then LED bulbs. Because when you combine LED with solar, because it's so energy efficient you can dramatically reduce the size of the solar generating required. Some wires, some controls, a little battery, and you've got a rural lighting system. You know, he's in a position to bring that to market for about $75 retail. And it's no surprise that companies like Phillips and others have caught onto that. I personally think there is an enormous business opportunity there. So a household that makes $250 a year, which would be the target market, obviously can't afford it for cash, but if you put a microfinance platform on top of it they can, pay for two of three years, pay off the system and the energy's free from that point on. Is there a business there? I think so. Is that how we might incubate the solar and the LED markets and turn them into mass markets? I think so. And I think ultimately that's how we drive cost down, that's how we drive functionality up, and then over time those might become so good that they migrate up market. That's the way that I try to think about this, that that's the likely place. In other words, where's all the solar going now? It's going to Germany primarily because such massive governments incentives have put in place that that's where the market for it is, which in my mind is kind of crazy because as soon as those subsidies dry up then the market's dead.

David Nissen: I think we've come to the end of the time. This purpose of this panel was to broaden our understanding of the role of enterprise in the sustainable development pursuit. My own view is that our panel has done a remarkable job, and we owe them a great thank you.

John Mutter: I'd like to thank David and the panel. We can now take lunch for about an hour. Box lunches are outside. We'll commence at around 1:30 if at all possible. The afternoon is going to run a little differently from advertised because of the change in one of the speakers. Thank you all again, thank you panel, thank you, David. See you this afternoon.