The Downside to Our Growth Story…
Industrial revolution was triggered in the early 1820s when James Watt’s improved steam engine concept was first applied to an industrial operation – the spinning of cotton. This break-through innovation marked the beginning of an era that hastened the pace of economic development as levels of mechanization, automation and productivity increased. Everything from cannons to ships, textiles to bricks, started using the steam engine technology to the fullest. Then came the rail-road in 1829 which created a new ‘mental geography’ and engulfed the western world in the biggest boom mankind had ever witnessed. As technology advanced, this phenomenal change process tilted economic power of nations. Countries that participated in this ‘tumultuous expedition’ bore rewards in due course. A new economic order emerged that was able to fuel peoples’ expectations and drive them to think beyond boundaries.
The industrial revolution era also saw the rise of a society whose hopes and aspirations were liberally fed by the strong economic sense that dominated. The imperatives “narrowed down” to growth, self-reliance and self-sufficiency. Nature was considered to be endowed with abundant resources that needed to be exploited. This belief was reinforced when those who maximized the use of natural resources made significant progress and become wealthier. Nature’s resources – air and water – were considered public goods which belonged to everybody but none had the exclusive right or claim over it.
This phase never saw any reason to worry about environmental considerations as the priorities were different. The world was fascinated and enthralled by the wonder-inventions that took place that, as a natural extension, also laid foundations of economic models which recognized only three factors of production – land, labor and capital.
These early economic models centered on ‘labour productivity’, ‘comparative advantage’ (Ricardian Model); ‘international factor movements’, ‘mobility’, ‘wages’, etc. Then we talked of all kinds of growth – ‘balanced growth’, ‘sustained growth’ and ‘accelerated growth’, but there was no reflection of natural wealth that was perhaps understood to be of ‘zero-value’, ‘free’ or ‘never ending’. We crunched numbers and came up with astounding figures to represent a nation’s advancement while at the same time depletion of natural resources and the unnoticed threats to biodiversity, air, water, land, went on at increased pace and without much notice.
The speed of industrialization took its toll on society in time. The extent of this is well-depicted in Charles Dickens’ novel – ‘The Hard Times’ – or Richard Lewellyn’s book – ‘How Green Was My Valley’. Under the blinding influence of economic prosperity, a key factor – Sustainability – got excluded from the ‘society’s vision. This was never factored into our thinking.
Economic models have since then evolved considerably. We have accounted for a host of new factors but have still carefully avoided addressing social and environmental issues upfront. Business organizations that have emerged or evolved over the past two centuries are no exceptions. It is now understood that economies, societies and businesses are inter-dependent systems and cannot progress or exist in isolation. But the assumptions that have prevailed for long have gained deep roots that cannot be shirked off easily.
Climate Change is a Truly Cross-Cutting Agenda
Governments & Agreements
Low-carbon growth models are a necessity and some countries like Denmark have already begun implementing changes. Though the reversal process has started, the longing to reach higher levels of development are still deeply-rooted for many nations,i.e., those who started their journey late perhaps due to various reasons – colonial rule, wars or poor economic conditions. These issues would perhaps take a longer time to resolve on a global platform. The reversal process has begun but the speed with which it has to happen is slow. According to a report published by Mckinsey Global Institute on “The Carbon Productivity Challenge”, (2008), “a carbon revolution needs to be three times faster than the industrial revolution’s rise in labour productivity’.
Civil Society & Rights Activism
The level of awareness among people in general has also risen exponentially. Ecological disasters like BP Oil Spill near Mexico, destruction of Indonesian forests by Sinar Mas – the last resort for Orangutans – destruction of mountain-tops by mining companies like Big Coal, Vedanta Resources, etc., have exposed the vulnerability of human race against Nature’s wrath. The rights activism has gained momentum and the focus is obviously Industry and Government. The compensation suits filed against BP have reached a staggering value, Sinar Mas was recently forced to stop cutting forests, same applied to Vedanta Resources – local communities are up against new industrial projects that do not guarantee safety, protection of livelihood, alternate sources of living, compensation, etc.
Industry & Future Challenges
Future organizations would be dealing with “Sustainability” as the major challenge that has the potential to impact both its survival and growth. The opportunity for organizations is to take a proactive stance and lead this change process. The underpinning is that Industry cannot wait for government reforms. By the time all parties agree to a common approach and the roll-out happens, it might be just too late for the industry.
Infact, it would be better for the company if they lobby for the appropriate issues through industry associations, strategic alliances, etc., which would enhance their brand image and also improve their products’ positioning.
The scenario is changing fast. The factors that were kind of ‘overlooked’ earlier have become relevant now, and have put to question the very fundamentals of our growth philosophy. New factors – carbon intensity, sustainability, life cycle inventory, etc. – have emerged that are as important as the traditional factors of production. Now-a-days, we talk of low carbon growth models seeking to control and monitor the GHG emissions. Markets have also become a natural mechanism to provide level playing field. They have the potential to internalize the cost of harming the environment and enforce new rules that incorporate the missing factors and adopt an inclusive approach by adding up the cost of polluting environment and creating hazards to society.
Today, environment has taken the center stage. Yet most companies have not been able to take concrete steps towards addressing the sustainable development issues. Future organizations can survive only if they are able to integrate sustainability into their business strategies.
The challenge for “progressive organizations” would be to take a proactive step towards becoming eco-friendly organizations. There is ‘value’ in this approach as markets are sensible enough to reward lasting sustainable strategies. Whether nations together are able to reach a consensus or not, markets have the power to act and enforce conditions that promote sustainability.
The author is currently Vice President (Sustainable Strategies) at ThinktoSustain.com – a market space for ideas…
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