“We Can’t Go Back to Business as Usual”: How Can the Economic Sector Act for the Environment?

In 2021, the COVID-19 pandemic is still impacting everyone’s lives. While we are starting the hope of going “back to normal”, the health crisis is not over, and yet the prospect of an environmental crisis is likely to become reality. According to the World Health Organization (WHO), 24% of all global deaths each year are linked to Climate Change and the environment1. Certainly, with the increasing human pressure on the natural environment, leading to the emergence of infectious diseases from wildlife, Climate Change is linked to the COVID-19 pandemic2. Besides, this pandemic has been more than just a health crisis as it also affected societies and economies by increasing poverty in some countries3.

This very year, Earth Day’s slogan is “as the world returns to normal, we cannot go back to business as usual”4. Bearing in mind that a new crisis would not only be environmental but also socio-economic5, this article aims to give an overview of the globalized economic system and its impacts on the environment and how a sustainable future can be achieved through business investments and public/international policies.

How the global economy impacted the environment

While anthropogenic effects on the natural environment have always been important throughout human history, the negative human activity impact on the environment can be retraced to the industrial era and is today exacerbated by globalization6.

Globalization can be defined as: “the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade”7. While Globalization contributes to economic growth, it also impacts the environment and sustainable development in a variety of ways: “by accelerating structural change, thereby altering the industrial structure of countries and hence resource use and pollution levels. Globalization diffuses capital and technology; depending on their environmental characteristics relative to existing capital and technology, the environment may improve or deteriorate”8. Future foresight, according to reports from the Intergovernmental Panel on Climate Change (IPCC) is for the temperature to go to 1.5 degree above pre-industrial levels due to Climate Change9.

For some industrialized countries like the United States, the economic success the previous years has resulted in growing environmental pollution10. Indeed: “The 20th century was an age of unprecedented growth in the use of natural resources and materials. Global raw materials use rose during the 20th century at about twice the rate of population growth. In the last decades, the rate of growth was, not surprisingly, fastest in rapidly developing economies”11. However, with a still growing world’s population, the use of materials is expected to grow in the coming decades and according to the OECD this would lead to: “fostering the demand for raw materials extraction, processing and end-of-life management. The use of materials throughout their lifecycle bears substantial negative impacts for the environment, underscoring the need for policies that promote resource efficiency and the transition to a circular economy”.

Electricity and heat production are the sectors that have the most impacts on the environment, followed by transportation, manufacturing, construction and agriculture12. The agricultural sector, which is unsustainable, may be the first to suffer from the impacts on the environment with poor countries bearing the burden of it5. Marco Lambertini, Director General at WWF and speaker during the Conference of Montreal 2020, shared that: “To reverse nature’s decline, and for humanity to enjoy a sustainable and prosperous future, we urgently need transformational change across our economic and financial systems, so they are geared towards delivering long-term sustainable development, and the protection and restoration of nature”13.

What are the upcoming challenges for businesses to tackle in the future?

Overall, the world we know is facing an unprecedented challenge: an environmental future that will put the economy at risk. It is difficult to imagine how the current GDP model can be a sustainable in the long run to protect the environment10. In order to protect the environment, new (stricter) policies must be implemented. When speaking about Climate Change during the 2019 conference of Montreal, Gina McCarthy, former Administrator of the US Environmental Protection Agency (EPA) stated that what is important is to change the way we communicate on the environmental question, for everyone to understand how this impact one’s own life14.

Besides finding a new way to communicate, it is important for businesses to support new economic models that are more sustainable. When speaking at 2020 Conference of Montreal, conference, Marco Lambertini, stated that some concrete targets would be: “to have more protection of land and seas as less than 8% of the ocean is protected; to stop the over exploitation of living organisms; and to be careful on investing in sectors such as agriculture, fisheries, forest and infrastructure which are the sectors with the most negative environmental impact”13.

In terms of changes to be made, the agricultural sector, which is one of the most polluting, must undergo major changes. When speaking about the topic, Marco Lambertini highlighted the importance to change by making better consumption choices, producing more sustainable food and avoid to waste food13. By example, companies going towards plant-based food are contributing to more sustainable solutions. As a matter of fact, in addition of depleting valuable resources, producing meat contributes at a staggering level in greenhouse gas emissions4. In some cases, companies may, be reluctant to shift towards sustainable practices as it can, according to CEO’s opinion affect their competitiveness15. However, as sustainability will always be part of development, “going greener” will not affect competition and actions need to start through laws and regulations.

Certainly, Climate Change and its consequences also depends on policies. Therefore, there is a need for the international community to implement environmental protection and policies. The last OECD report presents international co-operation as forms of international co-ordination that include: “harmonizing carbon prices (e.g. through linking carbon markets), extending the coverage of pricing schemes, phasing out fossil fuel subsidies, developing international sectoral agreements, and establishing co-ordination mechanisms to mitigate carbon leakage”16. International co-operation can deliver both economic and environmental benefits that tend to be higher with broader participation of countries, broader coverage of emissions and sectors and more ambitious policy goals.

Co-operation is also essential to avoid telecoupling, the process in which resource extraction and primary production occur in one region of the world to satisfy the needs of consumers elsewhere, who tend to be unaware of and take no responsibility for the environmental damage caused5. More than co-operating, it is also important for governments to ensure that countries are taking responsibilities for their own environmental footprints and not shift environmental damages to one another.

Finally, for Marco Lambertini, “COVID-19 has taught us a big lesson that should reflect in environmental agreements”13. All efforts must be combined through investments towards new sustainable models and stricter governmental policies. For Gina McCarthy, the investor community need to change their way of communicating: “People need to think of Climate change as a wakeup call. It is not question of sacrifice but to run towards a better future. We are missing inspiration for us to share moral values and to do something”14.

Conclusion

 

The world economic globalization has largely contributed to Climate Change and with its socio-economic consequences, it is urgent to shift towards more sustainable economic models.

While businesses fear the risk of losing competitiveness, insisting on changing where to drive private investments will be necessary13. Sustainable goals from the United Nations are intertwined, showing the interconnexion of social, economic and environmental goals. This connection also demonstrates the importance of international cooperation in order to resolve this issue and the country leading this change will have an important role. The new-elected president of the United States, Joe Biden will invite 40 world leaders to a Summit on Climate on April 22 and 23, going towards a renewal of its intentions of being back to the Paris Accords. The US politics under Biden clearly showed its attention to center the environment at the heart of policies and the Biden’s administration allowed “$6 billion allocation for climate restoration research and development in the last stimulus package”4.

The pandemic was a warning to show how fragile an interconnected world is. In the future2, strengthening health systems, improved surveillance of infectious disease in wildlife, livestock and humans, and greater protection of biodiversity and the natural environment, should reduce the risks of future outbreaks of other new diseases.

Sources

 

  1. World Health Organization, environmental health
  2. World Health Organization, COVID-19 and diseases
  3. UNDP – COVID-19 and socio economic impacts
  4. Earth Day 2021
  5. WWF report – Global Future
  6. Environmental Crises in World History
  7. Investopedia
  8. Harvard Working Paper
  9. IPCC
  10. Columbia University Blogpost
  11. OECD report: Policy scenarios for a transition to a more resource efficient and circular economy
  12. emissions by sector
  13. The Race to Build a Sustainable Global Food System
  14. Conference of Montreal 2019 – Wednesday, June 12 – Fireside Chat – WHAT ROLE FOR GOVERNMENTS IN MITIGATING CLIMATE CHANGE?
  15. Harvard Business Journal – sustainability driver of innovation
  16. OECD report: The economic and environmental benefits from international coordination on carbon pricing: Insights from economic modelling studies

Author: Aurore Saccagi, Advisor, Content and Program