WBCSD Sustain Magazine October 2009 - Energizing development in a changing climate

Issue 31 October 2009 Special double issue Development Energy Energy Climate Climate Development In this issue Planetary shifts: Energy, climate and development Inclusive business: Profitable business for successful development A low-carbon pathway to development Technology in the climate change negotiations Developments in product carbon footprinting Sustain issue 31 October 2009 1

Contents Issue 31 October 2009 Planetary shifts: Energy, climate 2 and development The WBCSD recognizes the urgent need for companies to support development About the WBCSD while spurring a move toward a global The World Business Council for Sustainable low-carbon economy, the economy of Development (WBCSD) brings together some 200 the future. international companies in a shared commitment to sustainable development through economic Copenhagen and the “AFT” 4 growth, ecological balance and social progress. Our of the solution members are drawn from more than 36 countries Copenhagen has become synonymous and 22 major industrial sectors. We also benefit from with an agreement on climate change a global network of about 60 national and regional that could result in far reaching changes business councils and partner organizations. in the way global society functions. Our mission is to provide business leadership as a catalyst for change toward sustainable Inclusive business: 6 development, and to support the business license to Profitable business for successful operate, innovate and grow in a world increasingly development shaped by sustainable development issues. The notion of inclusive business may be an innovative idea that is at last ready to Our objectives include: achieve ground-breaking results. Business Leadership – to be a leading business advocate on sustainable development; Policy Development – to help develop policies How to make the CDM more 10 that create framework conditions for the business effectively tackle technology contribution to sustainable development; transfer Business can help technology transfer by The Business Case – to develop and promote the advocating for rational policy shifts. business case for sustainable development; Best Practice – to demonstrate the business contribution to sustainable development and share best practices among members; A low-carbon pathway to 12 Global Outreach – to contribute to a sustainable development future for developing nations and nations in Access to energy is one of the key drivers transition. of economic growth and an essential element to progress in meeting such basic Sustain is published by the Communications Department of the WBCSD. needs as health, housing and education. Printer: ATAR Roto Presse SA, Geneva Paper: Containing 40% recycled content and 60% from mainly certified forests Sectoral approaches to 14 (FSC and PEFC). 100% Chlorine free. managing climate change ISO 14001 certified mill. The concept of sectors of industry playing Copyright: © WBCSD, October 2009 ISBN: 978-3-940388-52-0 roles in mitigating climate change Picture credits: Allianz, ArcelorMittal, Flickr (joiseyshowaa, ktylerconk, marieII, melinka, pareeerica, sewaburkina), GDF SUEZ (Abacapress / Bizzarri Giuseppe), GE, IADB, iStockphoto, Newmont, Vestas, World Bank, World Resource Institute. What prospects for pro-poor 16 World Business Council for Sustainable Development commercial forestry? An interview with Gary Dunning of The Switzerland Forests Dialogue and James Mayers of the International Institute for Environment and Development

www.wbcsd.org Technology in the climate 18 Making the case change negotiations Whatever agreement governments Duke 8 reach in Copenhagen on a new climate Save-a-watt model framework, business will be responsible for delivering the technology solutions. Pronoca 8 Inclusive business in the agribusiness sector Washington and Copenhagen 21 The US government has been having a very hard time developing, out of a nation EcoSecurities 8 disunited on climate, a united position for From three-stone fires to a better life the Copenhagen negotiations. GDF SUEZ 13 Business solutions to energy poverty Mobility for development 22 Mobility is essential to economic and social development. It enables people to ArcelorMittal 15 access goods, services and information, as Steel’s contribution to green construction well as jobs, markets, family and friends. GE 18 Jenbacher engines turn waste into value China: Opportunities of limits 24 Due to the size of its market, and, more importantly, the size of its potential Vestas 20 future market, China’s government has Spreading clean energy technology in China unparalleled opportunities to avoid locking into a high-carbon future. Allianz 23 Protecting the poor through microinsurance Measuring the “win-win” 26 In 2006, some 20 WBCSD companies began a two-year project to help Anglo American 25 companies measure their impact Investing in local enterprise development on society. Newmont 30 Supporting local economic growth in Ghana Developments in product 28 carbon footprinting Product carbon footprinting is becoming Coca-Cola 30 one of the core elements of any robust Innovating distribution business strategy on climate change. Philips 30 The economic and ecological benefits of Energy efficiency in buildings 32 energy-efficient lighting Unless we transform the building sector we won’t make the essential transition to a low-carbon world.

Emerging and developing countries will be the source of the majority of greenhouse gas (GHG) emissions in the future. While some people in many of these countries have Planetary shifts: income over the last ten years, many still live on less than US$ 2 a day and Energy, rely on traditional means of lighting, heating and transport and have less capacity to adapt to the negative aspects of climate change. Energy, climate climate change and development are them together we won’t win the battle against any of them. and The WBCSD recognizes the urgent need for companies to support development development while spurring a move toward a global low-carbon economy, the economy of the future. As people – rich and poor, in emerging and developed nations try to develop along low-carbon lines, the Council’s Development Focus Area and Energy and Climate Focus Area are cooperating more closely and engaging in a number of Shanghai, China complementary activities. Energy & Climate Development For the last 2 years, the Energy & Climate Focus Area has focused its work around ensuring that the business economic and political power from the traditional base of voice is heard in the United Nations international climate industrialized countries in Europe, North America and Japan negotiations. As the main source of innovation and capital, to emerging economies. business will have an integral role in any transformation to a low-carbon world. A new climate agreement will require Managing the rapid population growth, urbanization and international cooperation, partnerships, and clear roles for growing aspirations of the middle class in these countries will government, business, the consumer and civil society. demand major investments in infrastructure and innovation to support better living standards while reducing the pressure on The 2009 publication, Towards a Low-carbon Economy: the world’s ecosystems. A business contribution to the international energy and climate debate, provides a business perspective on the key issues The WBCSD believes that the leading companies of the future under negotiation – mitigation, technology, finance and will be those that align their business goals to address key adaptation. sustainability challenges. With the appropriate incentives, business can be a provider of solutions to these challenges and These elements are at the core of business activity and support the transition to a sustainable pathway to development. operations. Business innovates, develops and deploys technology on a daily basis. Finance flows through business The Development Focus Area seeks to create awareness transactions and projects globally. Businesses are already among business on risks and opportunities in managing key adapting infrastructure and operations to the impacts of development challenges and advocates business perspectives 2 Sustain issue 31 October 2009

climate change. An effective international framework that to policy-makers and other stakeholders on the role of leverages business engagement and enables business to business in development. contribute to solutions is essential. The Focus Area provides various platforms for companies to The climate negotiations in Copenhagen in December will learn, lead, act and advocate. Through member-led initiatives mark a watershed in the international negotiations. There is and a regional engagement program, companies promote a need for governments to reach an agreement on targets business solutions and develop policy messages on topics such and a framework to guide efforts to meet these targets. as mobility and energy for development. In close collaboration with its Regional Network partners, the WBCSD also identifies Beyond Copenhagen, the WBCSD will focus on the and brokers business opportunities such as those being continued need for business to help design the institutions, implemented through the Council’s Alliance with the SNV mechanisms, innovative technologies, solutions and tools Netherlands Development Organization in Latin America. needed to deliver emissions reductions. To enhance these efforts, the WBCSD has consolidated lessons One of the key tools will be the Greenhouse Gas learned and best practice in the form of tools. One example Protocol Corporate Accounting and Reporting Standard, is the recently released Measuring Impact Framework, which developed by the WBCSD and World Resources Institute. helps companies understand their contribution to society to The framework gives business and organizations an make better operational and long-term investment decisions internationally accepted methodology to help quantify and and have better-informed conversations with stakeholders. report the direct and indirect greenhouse gas emissions associated with their operations. As an advocate for business, the Focus Area provides business input into key platforms at the United Nations and multilateral Two new Greenhouse Gas Protocol standards – focused on development banks. product-level and corporate-level supply chain emissions – currently under development will provide a standardized Going forward, the Development Focus Area will continue methodology to inventory the emissions of products both to be a source of thought leadership on key business and internally and along a company’s value chains. development issues, with the ultimate aim of defining the role of business in transitioning to a more inclusive, low-carbon www.wbcsd.org/web/energy.htm and resource-efficient economy. www.wbcsd.org/web/development.htm “Development and climate change are the central problems of the 21st Century. If the world fails on either, it will fail on both. Climate change undermines development. No deal on climate change which stalls development will succeed.” Sir Nicholas Stern, economist and author of the Stern Review Report on the Economics of Climate Change “In our increasingly globalized world, companies are major economic actors who can play a significant role in areas like poverty alleviation, climate change, trade liberalization, supporting good governance, technology transfer and capacity-building.” Cynthia Carroll, CEO, Anglo American Sustain issue 31 October 2009 3

Copenhagen Copenhagen has become synonymous with an agreement on climate and the change that could result in far reaching changes in the way global society “AFT” of the solution functions. Solid scientific evidence shows that human activities, notably the way we produce and use energy, have resulted in an increase in global atmospheric concentrations of greenhouse gases There is ample evidence that we need to do something now to avoid a warming of more than 2°C, which is the accepted limit to prevent dangerous climate change. (GHGs) that are linked Glaciers are melting, heat waves are more frequent in temperate lands, disease to global warming. The patterns are changing, crop seasons are being affected – are these not strong enough signals? energy continues and unless we decouple the link The global response has been slow – slow to flag the problem, slow in between economic growth acknowledging, slow in negotiating and painfully slow in acting on it. and GHG emissions we will Copenhagen provides a window of opportunity to do something before it is create a situation that is consumers are becoming more numerous and more demanding – yet the scientific irreversible. consensus is that our global emissions must be reduced at least by 50% from 1990 levels by mid century. This is an ambitious and challenging target, which will require each of us to play our part. The challenge is that despite action, global warming will get worse before it gets better – but we must persevere. Climate change was recognized as an international issue in the late 1980s. The concerns, fueled by environmental groups, resulted in the United Nations Framework Convention on Climate Change (UNFCCC) being adopted at the Earth Summit in Rio in 1992. The Convention, which has almost universal membership, requires developed countries to report their GHG emissions and carry out national strategies to reduce them, support developing countries in their efforts and to carry out adaptive measures. Although the aim is to reduce the GHG emissions of developed countries to their 1990 levels, there are no binding commitments and GHG emissions continue to rise. The principles of common and differentiated responsibilities with developed countries taking the lead and the actions of developing countries being dependent on developed country financial support and technology transfer are embedded in the Convention and remain critical negotiating issues today. 4 Sustain issue 31 October 2009

Shortly after the Convention kicked adaptation, technology and finance. factor behind the negotiations – where in, it became obvious that more This track encompasses all countries, the money will come from and where drastic measures were necessary as including the US. The second track is will it be directed. This is big money the global warming phenomenon focused on ensuring a continuation and could trigger big changes. continued unabated. Hence in 1997 of the Kyoto Protocol and hence the Kyoto Protocol was adopted. defining further targets for developed Whatever the answer is it will be The Kyoto Protocol committed 37 business that will need to implement developed countries and the European US. The negotiations have increased in the solutions by deploying Community to reduce their GHG intensity and yet at 4 months before technologies, investing in new clean emissions collectively to an average of Copenhagen it is unclear what form 5% below their 1990 levels between any agreement could take. capacity. Enhanced and interconnected 2008 and 2012. It was an uphill markets will fuel the efforts. task to get countries to sign on to The key issues remain the same – who the Kyoto Protocol, despite the fact will play, who will pay and how much. The answers to the climate change that it contained various financial The world has changed since 1992. dilemma lie in the letters AFT – A for mechanisms to assist countries in The International Energy Agency (IEA) America and Asia, F for Finance and T reducing their emissions at the forecasts in its 2008 World Energy for Technology. lowest possible cost. This was mainly Outlook that China and India will have because it took time for the financial GDP growth rates of over 6% between America is back in the picture. After mechanism rules to be decided and 2006-2015. Compare that with the years in the wilderness, the US is again because the United States, one of the US at just over 2%. The per capita a committed multilateral leader on chief architects of the Protocol, refused emissions of both China and India are global issues. It needs to deliver on to sign on. low compared to OECD countries. The climate change at a national level, major emerging countries have a long commit internationally and spearhead In 2007 in Bali, at the annual meeting way to go to catch up but they are support for developing countries. of the members of the UNFCCC, the sprinting. It is critical that they develop Bali Road Map was launched beginning along low-carbon pathways if the Asian giants need to show their own a two year process geared at providing planet is to survive. commitment to actions and willingness an international agreement allowing to join the fight, but they will not do for a seamless transition to a global Whatever the developed countries so until developed countries fulfill their agreement building on the Kyoto do to reduce their emissions in the part of the bargain – being serious about reducing emissions at home 2012. This process, which culminates on global warming unless we reduce and supporting developing countries at Copenhagen, needs to provide the the rate at which emissions are rising through financing, which will drive signals to allow a global response that in developing countries. The major technology investments and support will initiate actions to slow down the developing countries are poised on adaptation. It looks easy: strong targets rise of global GHG emissions, allowing the brink of becoming premier league by developed countries would create them to peak in 2020 and then to players and are in a strong position a demand for emissions reductions further reduce them to 50% of 1990 to transform their economies to low- that would drive investments into levels by mid-century. carbon pathways. They are growing, clean energy technologies. These they are investing, they are consuming would occur principally in developing This will require enormous effort, and they see the opportunities. They countries where many of the low particularly by developed countries, that are rightly not prepared to limit their hanging fruits lie. must simultaneously allow for economic own development or emissions unless growth in developing countries and developed countries fulfill their side of Why does this not happen? It costs provide assistance to the most vulnerable the bargain. money. It creates a different playing field countries that bear no responsibility. where the developed and the developing However, a global deal is essential to The IEA estimates that 1.1 trillion US world are brought closer together. It will providing a truly global solution. require bold global leadership built on necessary to bring global emissions trust, vision and the understanding that So where are we now? Two-track down to 50% of current levels by the world has changed. negotiations have been laboring on 2050. While some of this investment since December 2007 – both tracks will bring down emissions in are working to define a way forward developed countries, the lion’s share post-2012. The first track defines long- will be more effectively invested in term cooperative action on mitigation, developing countries. This is the key Sustain issue 31 October 2009 5

Inclusive business: Profitable business for successful development The notion of inclusive Simply put, inclusive business involves future. Already accounting for more doing business with low-income than half of the world’s gross domestic business may be an populations across companies’ value product, their economic weight is innovative idea that is chains, incorporating them in the likely to increase substantially over the at last ready to achieve supply, production, distribution and coming decades. Inclusive business ground-breaking results. marketing of goods and services. This helps companies reach these markets, generates new jobs, income, technical and at the same time can help provide skills and local capacity. Likewise, poorer the economic growth that is the key to consumers can benefit from products poverty alleviation. and services that meet their needs in affordable ways. “Given that most economic activity now occurs in developing The WBCSD and its members have countries, and given that over 90% been pioneering work on inclusive of population growth will happen business since the 1990s, and it there, the companies that master has become a mainstay of the inclusive business will be those Development Focus Area. who realize great success in the coming decades,” noted Samuel A. You will read elsewhere in this issue DiPiazza, Jr., former Global Chairman about how the Allianz Group is tapping of PricewaterhouseCoopers and growth opportunities in emerging Chairman of the WBCSD during 2008 economies, aiming to reach 3 million and most of 2009. clients with micro-insurance products by the end of 2009. Coca-Cola has WBCSD members believe that created a vast network of manual globalization can be made more distribution centers in Africa, generating inclusive and that the leading global over 12,000 jobs and more than companies of the future will be those US$ 500 million in annual revenues. that do business in ways that address Myriad other examples can be found in the world’s major challenges, including the WBCSD case study library. poverty and inequity. Inclusive business is one way companies can contribute to Several technological developments tackling development challenges. promise to lower the transaction costs of inclusive business and The Council’s inclusive business work make it a much bigger business and has centered on communicating development opportunity. These how companies design, develop and include the ability to move money by implement inclusive business models mobile phones, the development of in a wide range of publications, case “smart cards” for poorer customers, studies, guides and a blog. and growing access to computers and connectivity in the developing world. In 2006, the WBCSD adopted a more aggressive inclusive business strategy Emerging and developing countries by joining forces with SNV Netherlands represent the growth markets of the Development Organization to form 6 Sustain issue 31 October 2009

the Alliance for Inclusive Business gathering some 80 executives from Emerging and in Latin America. The Alliance is national and international companies. active in nine countries where the developing countries WBCSD has national business partner “The biggest challenge we face is represent the growth organizations: Bolivia, Chile, Colombia, to create the ‘snowball effect’ in the Ecuador, El Salvador, Honduras, business community,” said Salas. markets of the Nicaragua, Panama and Peru. “We therefore need to move from ‘nice stories’ to real examples of future. The Alliance has reached out to 300 value creation. We also need to move companies in these countries, and has from pilot projects to activities with generated some 40 inclusive business relevant results. The network will help leading global The ideas, now being implemented in areas such as agriculture, low-income us promote leading-edge thinking and to innovate in the ways in which companies of the housing, micro-insurance, mobile we communicate our perspectives on future will be those that banking, forestry and biofuels. The Inter-American Development Bank has inclusive business.” do business in ways been keen to promote and fund some The WBCSD and SNV are exploring that address the world’s of these initiatives. how best to build on their successful work in Latin America, to expand major challenges, Many of the ideas generated are the uptake of inclusive business by including poverty facing hurdles from national business starting activities in Asia, Africa and the environments and regulatory regimes. Middle East. Projects have begun in and inequity. The Alliance works with business and Zimbabwe, Mozambique and Vietnam. other stakeholders at the national level to identify the critical challenges www.inclusivebusiness.org and address them in a collaborative manner. For example, the Alliance’s collaboration with the Ecuadorian government has resulted in the concept of inclusive business being written into the national public policy agenda, with a target of creating a quarter of a million new jobs and a commitment of some US$ 90 million in public funds to co-finance projects. To keep this momentum going, the Council has been coordinating a Latin American Network of Inclusive Business Leaders, led by Roberto Salas, CEO of the Latin American holding company GrupoNueva. The network’s aim is to engage CEOs to champion the cause of inclusive business to both their peers and governments: promoting inclusive business in their own companies, sharing learning with others, and contributing to a common, business-based voice to government for framework conditions that support inclusive business practices. The Council and its Regional Network partners have convened national-level meetings in Colombia, Argentina, Ecuador, Chile, Brazil and Peru, Sustain issue 31 October 2009 7

Duke Energy PRONACA The save-a-watt model Inclusive business in the agribusiness sector It is often called “the fifth fuel.” for each kilowatt-hour of electricity Beyond coal, natural gas, nuclear, consumed. Simply stated, with the save- and renewable energy lies the a-watt model, the company would be largely untapped resource of allowed to earn a return on investments energy efficiency. that help customers save energy. According to US Department of Energy The save-a-watt model treats investments in energy efficiency in a way that is similar to investments in a new generating even higher in faster-growing regions. As station. This benefits customers, the such, all five fuels will be needed. company and the environment. The traditional answer to meeting rising Under the program, Duke Energy electricity demand has been to increase would earn a rate of return based on supply – to build more power plants. a percentage of what it would have However, Duke Energy believes that cost to build and operate a plant to energy efficiency can play an important produce the amount of electricity that role in reducing customer demand. the program saves. Under this plan, all customers will receive a discount, Because the cleanest power plant is the even if they do not participate in an one that is never built, Duke Energy efficiency program. Those that actively EcoSecurities believes energy efficiency should play a participate in the programs will see key role in reducing greenhouse gases in lower power bills – that more than From three- the near term. offset the cost to implement the save- a-watt programs. stone fires to Utilities have offered demand-side programs for years – with varied results. In 2007, Duke Energy would be rewarded only a better life Duke Energy worked with a number of for the energy savings that are actually stakeholders to develop a different model, realized by customers. Each year, an called “save-a-watt.” Today it is backed independent auditor would verify by many consumer and environmental actual energy savings achieved through groups, and in December 2008, the first energy efficiency programs. This is of the company’s five state regulatory fundamentally different than the “cost commissions approved the concept. plus” approach electric utilities have traditionally used in being compensated The save-a-watt model is designed to help for investments in energy efficiency. Duke Energy’s customers save energy – and money – and still earn a return for The Alliance to Save Energy, the the company’s investors. Under current American Council for an Energy-Efficient regulations, utilities make money by Economy, and the Energy Future earning a return on their investment for Coalition endorse the initiative as “an physical assets such as power plants, poles innovative and promising new direction and wires, and by charging customers for the company and its customers.” 8 Sustain issue 31 October 2009

“What if we focus on small with a proposal to develop an inclusive The initiative created 234 new jobs and farmers?” This was the question business model for maize production, many other indirect social benefits. Prior to that Rodolfo Benitez, Agricultural through which farmers would increase their the project, only 60% of the small farmers Division Manager of PRONACA productivity, and the company would cover received informal credit and most of them (Procesadora Nacional de Alimentos more of its demand via local production, were unaware of the high interest rates they or National Food Processor in thereby lowering production costs. were paying. The small producers gained English) asked during an executive access to formal credit lines and market committee meeting. The initial pilot began with 80 small maize rates through PRONACA, which facilitated producers, and has now grown to 200, the process of opening bank accounts for PRONACA is one of the largest companies with plans to increase to 650 producers in the small producers at Banco Pichincha. In in Ecuador, with an annual turnover of more the coming year. The initiative includes a addition, by joining the formal economy than US$ 500 million, in addition to being training program for the small producers, and having bank accounts, the farmers gain the country’s leading buyer of yellow maize. coupled with facilitated access to credit and access to social benefits, reduce the time new technology, the combination of which spent in bank lines and reduce the security The majority of maize growers in Ecuador allows them to double their productivity risks from carrying large amounts of cash. are small producers, cultivating up to and to raise their income from US$ 0.63 20 hectares with a productivity level to US$ 2 per capita per day. Interestingly, The project is scheduled to last 3 years well below the international average. even though the farmers faced an initial and PRONACA is financing nearly half the Consequently, PRONACA could only meet increase in costs of about 15% incurred costs, while the Multilateral Investment 40% of its maize demand (which totals by these investments, they increased their Fund of the Inter-American Development some 450,000 tonnes annually) through productivity by one-fifth. Bank covers the other half. Building on its local production, primarily through commitment to investing in sustainable medium and large-scale growers, and had The initial results indicated a total volume business models, the company is currently to import the other 60% at a higher cost. of 7 tonnes produced by local farmers. exploring new opportunities to incorporate PRONACA regards this as a promising start, small producers of artichoke, rice, palm and In early 2007, the WBCSD-SNV Alliance for and projects that within the next two years possibly sorghum in its value chain. Inclusive Business approached PRONACA, they will produce roughly one-tenth of a member of BCSD Ecuador (CEMDES), their local purchases. The three-stone fire, centuries digesters to developing countries. to aggregate these carbon credits and sell old, is a simple cook stove made MFIs can use their long-term local them to the worldwide carbon market. up of three similarly sized stones presence and client relationships to placed in a fire. If used inside, the broaden the scope of services they There are numerous ways buyers of fire produces toxic fumes that can provide to include access to clean energy offsets can invest in these projects; cause health problems, particularly solutions. Grameen Shakti, the renewable however, a popular option is to lung disease for the family. If used energy business of the Grameen Bank, purchase emission reductions from outside, the cook and the fire are has demonstrated that this can be done these micro-scale projects backed exposed to the elements. successfully. However, due to lack of with an equal number of third-party expertise and funding there is currently Verified Emission Reductions (VERs). Improved cook stoves are cleaner, safer more demand for such programs than This provides a win-win situation for and reduce the amount of time needed there are programs available. sustainable development in developing to collect fuel wood. But how can poor countries and for companies interested families in developing countries afford To date, MFIs have not been able to in meeting carbon neutrality goals such stoves? leverage carbon finance for small scale or enhancing their corporate social projects due to the high transaction responsibility strategy by using VERs that EcoSecurities, a leading company in the costs related to the Clean Development have been approved by an established business of sourcing, developing and Mechanism (CDM). and recognized standard such as the trading emissions reduction credits, Voluntary Carbon Standard is working with MicroEnergy Credits In response, EcoSecurities and MEC devised (MEC) to provide financing for such an innovative approach to help facilitate Investing in the MEC and EcoSecurities stoves and other cleaner, more efficient carbon finance investment on a micro partnership enables MFIs to benefit technologies. MEC is a social enterprise scale and enable MFIs to offer clean energy from clean energy investment dedicated to helping Microfinance solutions to their clients. MEC purchases opportunities within the carbon markets Institutions (MFIs) provide clean energy carbon credits on a pay-as-you-go basis, and to support sustainable livelihoods technologies such as improved cook rather than requiring a minimum project in the developing world. stoves, solar home systems and biogas size. EcoSecurities then uses its expertise Sustain issue 31 October 2009 9

How to make the Clean Development Mechanism more effectively tackle technology transfer By Marc Stuart and Sonia Medina, EcoSecurities “Analysis of Technology Transfer in CDM Projects”, UNFCCC, December 2008, found at www.scidev.net/en/capacity-building/key-documents/reports/.) found Combating climate change that only slightly more than one-third of CDM projects involve technology transfer will require the transfer of in the form of equipment or knowledge, mainly from Japan, Germany, France, the a great deal of technology. UK and the US. The Kyoto Protocol requires all parties The CDM principal of “additionality” contains the premise that projects that to cooperate in “the development, reduce emissions are more greenhouse gas friendly than “business as usual”, a application, diffusion and transfer of premise that would seem to inherently promote technology upgrading. However, environmentally sound technologies additionality is not based simply upon a technology benchmarking approach, but that are in the public domain.” It often requires demonstration of intent and financial additionality. commits developed country parties to provide financial resources for As we get past the “low-hanging fruit” that characterize the bulk of the initial technology transfer. This can be CDM projects, finding new pockets of deliverable emissions reductions under the accomplished by a variety of policy current additionality construct becomes more difficult, especially for dispersed and mechanisms that reward accelerated smaller GHG interventions. dissemination of key greenhouse gas (GHG) management tools: subsidies, Therefore, the Copenhagen agreement needs to provide clear financial incentives to identify and develop smaller carbon-reduction projects, and technology transfer and others. However, the elegance and must play a crucial role. Lighting, heating, cooling, transport, process controls and scale of the carbon market means that other technology interventions are needed to reorient the world to a low-carbon it is by far the most obvious financial future. Yet none these fits well in the CDM architecture because of their individual tool to try to harness on a global basis. small size and widely distributed nature. The Protocol’s Clean Development Consider lighting – it is a key aspect of national development paths, but those Mechanism (CDM) does not have an paths now lead to far higher emissions. Some 8% of all energy in the US goes to lighting, and 90%-plus of the energy delivered to incandescent bulbs is wasted as However, the CDM’s dual role – to heat. Changing the technology around lighting could have dramatic impacts on achieve cost-effective emissions emissions. How can those potential avoided GHG emissions be used as a financing reductions (for the benefit of high-cost tool to accomplish this technology change across the world? industrial nations) and sustainable development (to benefit the less A series of improvements would need to occur for carbon markets to truly developed host nations in which CDM encourage technology transfer and sustainable development in rapidly growing projects occur) – would seem a vehicle economies. With thousands of projects already in the pipeline, the CDM has for technology transfer. Yet a recent shown the effectiveness and allure of the carbon trading mechanism and has report from the UNFCCC Registration gathered enormous amount of data that can be used to craft an effective & Issuance Unit (Seres, Stephen, technology transfer mechanism. For that to occur the world would need to 10 Sustain issue 31 October 2009

address the concerns of countries Several changes are required: like the United States that want technology transfer coupled with 1. A longer crediting period is protection of intellectual property (IP). necessary to encourage cutting- edge technology investment in A significant amount of emissions larger and longer-term projects reductions can be achieved with (renewable energy, energy efficiency, carbon capture and effectively identify and reward storage). The current discussions accelerated technology deployment in around 2050 targets are a the appropriate situations are the key positive sign. to this. Most of these tools and policy 2. Methods to aggregate dispersed recommendations have been identified emissions reductions should be by the WBCSD in its booklet Power to promoted to enable developers Change. of distributed clean technologies (energy-efficient lighting, smart The WBCSD and business in general grid IT, transport efficiency, etc.) can help this process by advocating for to use carbon finance more rational policy shifts that lower barriers effectively. to rational technology upgrades, that take into account technology 3. There should be a move innovation cycles, and that provide away from project-by-project economic incentives to seek out additionality assessment to a emissions performance throughout the system that is more focused economy, not just the largest and most on individual benchmarks obvious assets. and uses statistical analysis for evaluating likely performance. Benchmarking would lower transaction costs, which would also make the system more accessible to smaller projects. 4. Linking the forthcoming US cap-and-trade market with the CDM and other future carbon mechanisms will create sizeable financial incentives for companies to invest in low-carbon and efficiency technology overseas more rapidly. 5. A reasonable compromise is needed between IP protection for new technologies deployed and reasonable licensing agreements that can help accelerate dissemination across new markets. Sustain issue 31 October 2009 11

Access to energy is often described as “the missing A low-carbon pathway to Millennium Development Goal.” It is one of the key drivers of economic growth and an essential element to progress in meeting such basic needs as health, housing, and education. development Global energy demand is forecast to increase 40% by 2030, with the majority Living without coming from developing countries, whose share of greenhouse gas (GHG) emissions electricity can be people lack access to electricity, and about 2.4 billion people do not have clean and safe cooking fuels. Current trends suggest that by 2030, electrification rates will not As the main source of to be spending US$ 5-15 per kilowatt/hour for energy versus 15 cents per kWh for technological innovation, and candles for lighting range from 10 billion to 30 billion US dollars. business has a role This, combined with the ambitions to reduce global carbon emissions, presents the to play in helping bring world with the dual challenge of providing access to energy and its accompanying energy solutions to both development opportunities while shifting to low-carbon energy sources to manage rural areas where climate change. access is minimal and Is there a low-carbon path to global development? Much attention is given to urban areas where technologies that would allow developing countries to “leapfrog” past polluting technologies such as open fires. Leapfrogging has a precedent in the successful energy supply can be spread of the cell phone in developing countries, which allowed countries to skip the building of vast grids of phone lines. Skipping to cleaner, renewable energies forms the basis of many recommendations around financial and technology unreliable. transfers at climate negotiations in Copenhagen. As the main source of technological innovation, business has a role to play in helping bring energy solutions to both rural areas where access is minimal and urban areas Electricité de France (EDF), ABB, General Electric (GE), GDF SUEZ and Philips are already innovating to meet the cooking, lighting and heating needs of thousands of people around the world. EDF worked closely with NGOs and government to form the first Rural Energy Services Company in Mali to provide low-cost electricity through solar home systems and low-voltage village micro-networks. Philips has launched an affordable wood cooking stove for Indian consumers, designed to reduce deforestation and indoor air pollution. ABB joined forces with WWF to engage communities in the installation of diesel-powered electricity mini-grids in rural Tanzania. In Pakistan, GE’s Jenbacher biogas engines are powering the country’s first sugarcane biogas plant, which generates enough power to support more than 50,000 homes. 12 Sustain issue 31 October 2009

Barriers remain in making many of replicable energy projects beginning Both Energy Poverty Action and Energy the energy access solutions profitable, in Africa. One of the core concepts for All rest on the understanding that scalable and sustainable: high up- of the EPA model is local autonomy, reaching communities without electricity front costs, capitalizing on the carbon i.e., building the necessary local requires new business models and new markets, governance and tariff capacity to empower users to manage, policy frameworks. Depending too structure, local capacity to implement operate and maintain the projects in a much on business to invest in distributed solutions, and insufficient information- sustainable manner energy schemes in the developing sharing platforms and collaboration world is unrealistic, given the lack of at a regional level. Companies cannot The second is Energy for All, an initiative evidence that such investments are tackle the challenge alone. bringing diverse groups and businesses profitable in the short run. However, together and hosted by the Asian with the right enabling framework at The WBCSD is engaged in two Development Bank. Its goal is to provide the international level, and the policy initiatives that emphasize multi- access to safe, clean, affordable modern incentives, governance structure and stakeholder collaboration to identify energy to an additional 100 million appropriate technologies at the local sustainable business models to bridge people in the region by 2015. level, it is possible to bring about massive the energy divide. change in the provision of energy in The Asian Development Bank recognizes the developing world and bring clean The first, Energy Poverty Action, is a a number of successful models for solutions to those that need them most. joint initiative with the World Economic providing off-grid access to energy in Forum, the World Energy Council, and Asia including Grameen Shakti’s efforts www.weforum.org/en/initiatives/ several companies, including Vattenfall, to install more than 205,000 solar home BC Hydro and Eskom. The aim is to systems through rural energy microcredit schemes in Bangladesh. The www.adb.org/Clean-Energy/energyforall- practices to reduce energy poverty by Bank is now looking at the potential for partnership.asp developing innovative, scalable and replication throughout the region. natural gas, upstream and downstream. often leading to serious accidents. In the GDF SUEZ is also helping local communities late 1990s, LYDEC set up an innovative to access energy through tailor-made partnership with local authorities and GDF SUEZ solutions and investment in dedicated communities to provide legal access to a Business solutions projects to support access to energy for low-income populations. safe and reliable electricity supply system. The electrification program has allowed to energy poverty more than 30,000 households (amounting In Brazil, the company inaugurated the São to some 200,000 inhabitants) to connect Salvador dam in 2009, which will generate to the electricity supply system under a enough electricity to supply a city of one management approach that uses “street Energy is a key driver for economic million people. 54% of the 10,000 direct representatives” from the local community development and social progress, and indirect jobs the project created have to manage and coordinate daily operations yet access to sustainable energy been filled by local workers and more than and provide technical support to users. services remains a challenge for low- 10% of the total investment was dedicated The program has been incorporated into income communities in developing to social and environmental programs, countries. To reach communities which included relocating displaced poverty where the aim is to connect more that do not have energy access populations and protecting fauna and flora. than 145,000 households to essential today, new business models, In Estreito, where the company is building urban services, including water, waste and supported by appropriate policy a large hydroelectric plant, GDF SUEZ has electricity, by the end of 2009. frameworks, are needed. committed 130 million Euros to social and environmental programs, including access GDF SUEZ is integrating energy poverty GDF SUEZ believes that the private sector to energy, which will be implemented in issues into its sustainable development has an important role to play in designing collaboration with the local communities. strategy, with a declared ambition to and delivering innovative solutions to “redefine the relationship between people bridge the “energy divide” and support a In Morocco, GDF SUEZ has developed an and energy, to make energy a source of transition to a low-carbon energy future in initiative, through the Group’s subsidiary progress and sustainable development the developing world. LYDEC, to support electrification in several (energy accessible to as many people as dozen shantytowns in Casablanca. Prior possible, more reliably, consumed more The company is active across the entire to the initiative, inhabitants resorted to efficiently, and showing greater respect for energy value chain, in electricity and illegal leaks and network connections, human beings and their environment).” Sustain issue 31 October 2009 13

Sectoral approaches a series of carefully developed and implemented policies and supporting mechanisms at both national and international levels would be essential to managing to enhance sector action. Bringing these differing sector perspectives together to develop climate change a comprehensive proposal on an international “cooperative sectoral approach” under the UNFCCC has been the challenging task of the Sectoral Approaches Task Force of the WBCSD. With representatives from a range of sectors, the WBCSD has developed The 2007 Bali Action plan introduced the concept of sectors of a proposal for how such a sectoral industry playing roles in mitigating climate change, and since approach might function, and specifies then this idea has rapidly gained momentum. The question the various objectives that it could serve. that many have since been trying to tackle is: What does this WBCSD companies have suggested that concept mean, and how would it work in practice? sectoral approaches can be developed as a new, large-scale tool within the international framework. It would focus on establishing activities to support enhance the implementation of Article 4.1 (c) of the United Nations Framework emissions reductions across countries Convention on Climate Change (UNFCCC), which says that government parties to and sectors, drawing from incentive and the UNFCCC shall: support mechanisms provided by the international framework. “Promote and cooperate in the development, application and diffusion, including transfer, of technologies, practices and processes that control, reduce and prevent Individual agreements could be created anthropogenic emissions of greenhouse gases not controlled by the Montreal through the voluntary participation Protocol in all relevant sectors, including the energy, transport, industry, agriculture, of countries – developed and forestry and waste management sectors.” developing – and businesses working together to achieve emissions While the proposed function of sectoral approaches appears to be clearly articulated reductions or increase sequestration in the Bali Action Plan and the Convention, fierce debate related to its objectives, in different sectors through different what it might entail, and how it may be implemented has taken place since the activities. The details related to the Bali meetings. Many individual sectors and governments have come forward with specific mechanics are outlined in different ideas and proposals resulting from a broad interpretation of the concept. the publication Towards a Low-carbon Economy: A business contribution to the Some governments have proposed the use of cooperative sectoral approaches international energy & climate debate. to conduct bottom-up analysis to understand mitigation potential; others have In addition, the WBCSD Cement suggested the establishment of sector benchmarks and “no-lose”1 targets in Sustainability Initiative has undertaken developing countries to support sector-specific mitigation actions. Another suggestion proposed fostering initiatives in R&D, capacity building, and cooperation options for an environmentally effective on technology under the sectoral cooperation banner. and economically efficient, international sectoral approach for the cement sector. This diversity has created some confusion and skepticism among governments and stakeholders, but it has also fostered an enhanced dialogue between governments Even since the publication of the and the private sector, and sparked creativity in policy thinking. WBCSD’s proposal in early 2009, the concept of cooperative sectoral The WBCSD has used sector projects for many years to analyze sector-specific approaches has seen an evolution. What climate change and sustainable development challenges, find cost-effective solutions at the time was seen as a framework through business actions, and propose policy measures to enhance the contribution to foster cooperation between nations of business to solutions. This work has demonstrated that a “one size fits all” policy on sector-specific mitigation actions now focuses on unilateral actions within 14 Sustain issue 31 October 2009

Cement Sustainability Initiative on sectoral approaches ArcelorMittal The Cement Sustainability Initiative developed an economic model to Steel’s contribution to green better understand the impacts of different carbon policies on emissions construction reductions, global trade and regional market shares in the cement sector. The model compares the emissions reductions resulting from policies with different levels of global coverage and stringency of emissions goals (such as caps, global emissions intensity goals, sectoral approaches) against a scenario in which no In the United States, buildings thickness, a very high-yield strength, commitments are made. The results account for 38% of CO2 emissions, superior toughness at low temperatures show that significant reductions can 40% of raw material use, 30% of and outstanding weldability – properties be achieved with a sectoral approach, waste output and 14% of water that had traditionally been considered particularly because it offers a way consumption, according to the US incompatible. HISTAR® satisfies the needs for developing countries to formulate Green Buildings Council. of the construction industry for light and nationally appropriate, sector- economical structures that meet both based climate policies that do not ArcelorMittal, the world’s leading steel safety and sustainability criteria. jeopardize their economic growth. company, with operations in more than 60 countries, strongly believes that steel Substituting HISTAR® steel for standard For more information see: steels achieves an average weight reduction construction can lower those percentages www.wbcsdcement.org/sectoral all over the world. It is committed to of 32% in steel columns and 19% in offering a wide range of solutions that will beams. This reduces CO2 emissions by up developing country sectors. Linking to help to reduce the environmental footprint to 30% during construction by making it another concept that is articulated in of construction. Steel solutions can make possible to create lighter structures without the Bali Action Plan, that of “nationally buildings more environmentally friendly, comprising strength or durability. In 2007, more energy efficient and less costly to more than 50,000 tonnes of HISTAR® appropriate mitigation actions”, the operate. Steel is indefinitely recyclable steel were produced by ArcelorMittal, prevailing view in the negotiations is without any loss of quality. Water use, representing a savings of 14,000 tonnes of that of nationally focused “cooperative waste generation, dust emissions, traffic CO2, or about as much as 4,000 vehicles sectoral approaches and sector-based and noise pollution are considerably lower emit annually. actions.” when using steel construction techniques. All of these advantages are especially “HISTAR® is 100% recyclable and made One government party stated that “for relevant for construction in urban areas. from recycled steel, and we are proud developing country parties, domestic that HISTAR® meets environmental sectoral efforts may be one option in the ArcelorMittal has developed a lighter steel requirements and sustainability that reduces greenhouse gas emissions by The final verdict will certainly not emerge up to 30% during construction, benefitting head of Technical Advisory until meetings in Copenhagen – and the construction industry, their buildings for ArcelorMittal. it may not emerge then. But from a and their clients. business perspective, the development HISTAR® steel sections have been used of an effective future international energy Working with the Centre de Recherches in several hundred structures throughout and climate treaty that builds on business Métallurgiques in Liège, Belgium, the world: high-rise buildings, structures ArcelorMittal was able to develop an in seismic areas, sport stadiums, bridges, through sector-based initiatives and stations, car parks and hospitals, as well innovative “in line” quenching and self- projects would be a positive outcome. as industrial structures such as large tempering (QST) process that enables cost- effective production of a high-strength steel warehouses, factories and power plants. 1 - The concept of “no-lose” targets suggests called HISTAR®. Structures that are being built with that developing countries take an emission reduction target within a given sector and HISTAR® steels include the Freedom Tower receive benefits (potentially in the form of The development of HISTAR® steels allows in New York, the Emirates Tower in Dubai, credits) if they achieve reductions below the given target. No penalties are imposed if the ArcelorMittal to produce new structural the Federation Tower in Moscow, and the target is not met. steels that combine increased product Shanghai World Financial Center in China. Sustain issue 31 October 2009 15

What prospects for pro-poor commercial forestry? Why don’t more of the economic benefits of the forestry industry reach poor people in forest rich countries? benefits of commercial forestry. However, we learned through TFD dialogues that governance is a product of a country’s culture, history, abundance of resources, etc. and thus it is difficult to change/address quickly. In South Africa, government mandated land reform created the necessary motivation to work with companies, so you see a lot of engagement by large companies with communities. In Indonesia, companies like APRIL are taking a classic approach to community development through the building of schools and hospitals, and providing other services that the government is not able to. In Bolivia, the resource is less abundant and policies don’t favor large forest enterprises, so you see virtually no big companies. Forestry is almost all managed by indigenous communities or small-scale forest enterprises. Russia faces different challenges in bringing pro-poor Interview with Gary commercial forestry back. With the change in government in the early 1990s, Dunning, The Forests the youth left rural areas for economic opportunities elsewhere leaving very few Dialogue (TFD) and James people with very traditional lifestyles, relying on pensioners’ income.” Mayers, International Institute for Environment James Mayers, Head of Natural Resources at the International Institute for Environment and Development (IIED), offered “three main barriers to progress: and Development (IIED) firstly, the governance structures don’t always reflect reality. Many are based on the belief that large scale is best yet the countries have more small-scale forestry enterprises and rarely do they ask how much these enterprises can contribute to sustainability and poverty reduction. The second is the lack of trickle-down effect, with local benefits. A lot of money that is destined for government coffers either doesn’t make it there or doesn’t actually reach the people who need it most. Thirdly, there is too little reinvestment by companies in community development.” Mayers added that he had “seen a lot of really good work by companies to develop outgrower and outproducer schemes as well as joint ventures that 16 Sustain issue 31 October 2009

generated useful lessons. What we Dunning pronounced himself “overall REDD (the Reducing Emissions from see in South Africa is a stick and confident. One positive aspect is the Deforestation and Forest Degradation carrot situation, with both markets way companies are taking a lead. program being discussed at the and policies at play. The Black The reality of resourcing timber on climate talks) could also change Economic Empowerment initiative the ground and the pressure from everything. If the money from required a lot of companies to invest civil society towards more earth- northern governments intended to in small scale enterprises, which has and human-friendly products is curb deforestation and degradation stimulated innovative approaches to pushing companies to address the does not get into the hands of local development. Something that was ‘development’ issue. Retailers like people in developing countries, then originally government policy has, Kimberly-Clark are working with REDD will not succeed in mitigating over the years, become part of core their suppliers in the pulp and paper climate change and supporting business. The restitution of rights to industry to demonstrate what they sustainable development. Companies the original landholders has also led are doing in terms of sustainability. have the resources, they just need companies to address the rights of If companies see they can get a the incentives to create win-win people dependent on forests more premium in the market by developing opportunities to work with those that concertedly than in other countries. pro-poor forestry policies, then these need it most.” Making the links between commercial forestry and small-scale forestry is TFD grew out of a series of meetings between necessary if the industry is going Mayers noted that overcoming CEOs of the forestry industry and environmental to play a role in lifting people out these challenges could have huge groups hosted by the World Bank in the late of poverty. Policies are needed to development potential, adding: “We 1990s. The parties agreed that there was a need to continue the dialogue and as a incentivize this but companies can also estimated that small and medium scale result, TFD was created with support from the take a lead.” forestry enterprises currently add value WBCSD’s Sustainable Forest Products Industry working group. It has recently hosted a series of in developing countries to the tune of dialogues on the topic of forestry and poverty in Dunning agreed that “governments about 130 billion US dollars. Imagine South Africa, Indonesia, Bolivia and Russia. need to create policies which foster what it would be like if policy actually www.theforestsdialogue.org or, at least, do not block relationships favored these enterprises and helped www.wbcsd.org/web/sfpi.htm between companies and communities. them achieve sustainability.” IIED is a policy research organization that works Another key factor in overcoming locally and globally to help provide a voice to some of the barriers is empowering Dunning added that “if the resources vulnerable communities in the policy arena. Forestry is part of its natural resources research communities by giving them the stay in government’s control, the agenda, which works with local partners in training and developing their development potential is suboptimal. Africa, Asia and Latin America on the equitable and sustainable use of resources with the capacity to take advantage of the We need more locally controlled purpose of pursuing local ownership and resources, as well as encouraging the forests. If communities have more management. entrepreneurial spirit to seek creative control, then companies will want www.iied.org arrangements with producers.” and need to work with communities. Asked how confident he was that commercial forestry stakeholders could overcome these challenges, Mayers said he was “optimistic and pessimistic at the same time. While I see continued trashing of the resource, there are some encouraging prospects. One new measure that has a lot of potential to improve the situation is the EU voluntary partnership agreement with developing countries to reduce illegal logging. The first agreement was signed between the EU and Ghana in September 2008 and commits the EU to only importing timber from legal sources. This could improve livelihoods by setting the rules of the game in a way that helps rural- based enterprises thrive.” Sustain issue 31 October 2009 17

GE Technology Jenbacher engines turn climate waste into value negotiations Customers all over the world are In a sprawling commercial tomato turning to new ways of capturing greenhouse outside of Amsterdam, the and using gas to meet their world’s first commercial 24-cylinder gas energy needs through onsite engine is in operation. The Royal Pride power generation. Many of Holland project is made possible by two these customers are using GE’s Jenbacher units, which were installed in a Whatever agreement governments Jenbacher gas engines to generate pilot project to demonstrate the engine’s power reliably while in many cases commercial viability for the horticultural reach in Copenhagen on a new cutting greenhouse gas emissions. industry. It highlights the increased climate framework, business will emphasis on combined heat and power be responsible for delivering the In Australia, the Jenbacher gas engine in Europe as the region increases its focus technology solutions needed and business has contributed to several on energy efficiency. consumers will have to contribute of the country’s largest coal mine Thousands of miles to the east, Jenbacher to the transition by changing their methane projects, including a power plant commissioned in 2008 operating gas engines are at work in a far different consumer patterns and behavior. on Jenbacher coal mine methane gas way, using biogas created from chicken engines. The methane-rich gas coming manure to generate power and heat at a large chicken farm north of Beijing. The first steps to engage the private from the mine is used to generate onsite The plant is the first of its type in China, sector in the international debate were power at Anglo Coal’s Moranbah North and could pave the way for similar taken in the 2007 Bali Action Plan, mine in the state of Queensland, helping to reduce the amount of greenhouse applications in the future. which stated that the future regime gas that escapes into the atmosphere. will be informed by “insights from the Through the capture and use of mine Providing 14,600 MWh of electricity business and research communities and gas, the Moranbah North project per year, the project is designed to help civil society”. This set a precedent for will deliver significant environmental reduce suburban electricity shortages. By more open business engagement and benefits, reducing about 1.5 million using the biogas for power generation consultation over the past two years. tonnes of CO2 equivalent per year. instead of coal , the new project is expected to reduce greenhouse gas The Bali Action Plan calls for measurable, In Mexico, Jenbacher engines are at the emissions by about 95,000 tonnes of reportable and verifiable emissions heart of a newly expanded landfill gas- CO2 equivalent per year. reduction commitments by developed to-energy project, hailed by President countries. It also considers, for the first Felipe Calderón as “a model renewable time, the involvement of developing energy project” for Latin America. The countries in mitigation efforts through 12 MW project converts gas from the non-binding “nationally appropriate Simeprode landfill near Monterrey into mitigation actions”, which must be electricity, which is used to support the supported by financing, capacity solid waste facility‘s operations as well as building and technology transfer from Monterrey‘s light-rail system during the developed countries. day and city street lights at night. Technology transfer in the climate negotiations means the development and transfer of technologies to 18 Sustain issue 31 October 2009

developing countries and between technology’s full life cycle and enable in the developed and developing countries. The discussion on the barriers to a portfolio of technologies to be developed in parallel, not sequentially technology diffusion has been going on (See Towards a Low-carbon Economy, change for decades. The climate negotiations WBCSD, 2009). It is important to involve many different regional interests consider the life cycle and turnover and links with other multilateral negotiations, such as the trade talks. new low-carbon technologies are Thus surprising issues have acquired an phased in and new long-term energy unusual importance in the debate, such infrastructure is built. as intellectual property rights, which are seen by some to be a barrier to the Second, there is a large disparity in transfer of technologies. the estimates of financing needed to deploy the necessary technologies, Some countries suggest removing this due to the different assumptions “barrier” through compulsory licensing made on “financing the additional for specific patented technologies, costs” and due to biased subjectivity. pooling and sharing publicly funded What is the business as usual scenario? technologies, taking into account other What is the cost of the technologies in decisions made in the public health each country? How does the cost of technologies reduce over time? How that patents are not a barrier to their much is the return on those “additional daily operations and that technology investments”? transfer involves much more than developing countries to support intellectual property rights, and the Third, research and development in new mitigation actions funded by developed barrier to technology diffusion relates technologies are crucial. There needs countries. more to economics and markets, to be a concerted and international which include the lack of capacity, effort to invest in developing new Developed countries shall finance the technological and business know-how, technologies that will be able to make incremental cost of the technology consumer information and education deep, long-term emissions cuts. The needed for such actions in a measurable, and regulatory stability, among others. debate is focusing on what framework reportable and verifiable manner. There is best suited to channel public and are crucial issues to be resolved: Which Business is responsible for 80% of private investments – regional centers technologies should be used? How global investment and owns 90% of is incremental cost measured? How the patents registered worldwide. The How can others learn from private sector does one account for the cross benefits WBCSD and its member companies generated? Who should pay? How much are working to inform the debate shared and protected? of that mitigation effort is additional? and educate business and society by providing facts, business realities Business is meant to play a key role Measurement of technology transfer and guidance on technology issues, in the implementation of the new is difficult because the concept has intellectual property rights and how climate agreements. It will provide the become very broad. Indeed, the to overcome the barriers for greater majority of the investments needed. concept has moved from the North diffusion. However, there is uncertainty as to to South “transfer” of machinery and how to implement this new era of equipment through foreign direct There is a general consensus that collaboration between governments investment or trade, aid and licensing technology transfer will be a key element (developed, developing and emergent agreements toward domestic capacity of the future international agreements countries) and the private sector building. It now seems clear that on climate change. However, there are (big multinational and small and effective and sustainable technology several elements that need to be clarified medium enterprises). A post-2012 transfer requires building the capacity and could facilitate the agreement. legal framework is likely to assign to operate new technologies efficiently private actors an even stronger role and to modify, adapt and improve First, most of the needed technologies in the implementation of treaty imported technology. commitments. It therefore makes stimulate investment in appropriate sense that they be represented in a In fact, technologies are now being technologies at the right time and formalized way and included in the transferred in all directions among place, countries should consider governance structure. Sustain issue 31 October 2009 19

Vestas Spreading clean energy technology in China Emerging markets demand clean terrain but promising wind resources; it This project demonstrates that energy technologies but are also is also easier and less costly to maintain technology diffusion works best under concerned about flexibility and than previous turbines. And more than market conditions. Private sector costs. Vestas manages these needs 90% of the model is made in China. In companies are highly responsive to with an ambitious localization its design process, a 50-person team policy initiatives that stimulate market strategy in China and other of technical experts was established in demand and are able to disseminate emerging markets. China to further adapt existing turbines technology and expertise that countries and design new models. like China need to meet their climate This aggressive localization approach change targets in a faster and more provides clean energy products that are The production of the turbine, using efficient manner. With more localized locally sourced and manufactured as well local suppliers and components that technologies, these countries can do as specifically designed for the resources adhere to the company’s global so more economically and at the same and requirements in these countries. quality standards, will encourage the time build stronger and more sustainable Emerging markets benefit from more development of the local wind industry, domestic industries. affordable climate change technologies and specifically the development of a and growing sustainable and globally strong domestic wind energy component competitive domestic clean energy manufacturing sector. industry value chains. Vestas, active in more than 60 countries, gains growth Localizing the whole value chain benefits potential and increased competitiveness China in both its climate change and through local sourcing. industry development efforts. For the Hohhot project, Vestas is using As the world’s leading wind turbine 20 local suppliers and has begun manufacturer, Vestas is a major new partnerships with an additional disseminator of climate technology. 75 component suppliers, sourcing The best place to witness its localization over 2,000 parts for the turbine’s strategy is remote Hohhot in northern development. China. On the windy steppe of Inner Mongolia, Vestas has opened a new The commitment to developing local factory complex dedicated to producing suppliers aims at establishing win-win a turbine model tailored for local markets partnerships that raise the domestic and wind conditions. The V60-850 kW partners’ competitiveness to international turbine is designed specifically to help levels. This collaboration centers around unlock the potential of China’s abundant transferring state-of-the-art technology low and medium wind energy resources. and know-how, which ranges from product improvement programs and The new model was created in China sharing of industry-leading specifications to meet the needs of customers who to the enhancement of processes and wanted an advanced turbine that management systems for manufacturing is easier to transport and install in excellence, quality control, and health, challenging sites, such as hilly, high safety and the environment. altitude areas, or sites with difficult 20 Sustain issue 31 October 2009

free allowances, new technologies and Washington behavioral changes, and impacts on corporations and their profits.” and President Obama had promised while campaigning that all permits would be Copenhagen auctioned off, but the bill gives 85% of them away for free and moves to a full auction only in 2030. A study by the US government’s Environmental Protection Agency found that the large volume of foreign The US government has been having a very hard time “offsets” – projects such as tree developing, out of a nation disunited on climate, a united planting that count towards domestic position for the Copenhagen negotiations. emissions credits – means that US emissions could actually increase between now and 2025. Earlier this year, the US House of “The atmosphere in the Senate is just Representatives managed to pass by a short of mutinous. The mandatory Both sides see climate legislation as an narrow vote (219 to 212) the nation’s cap on emissions has virtually no economic security issue. Opponents first-ever climate legislation, a move Republican support,” pronounced argue that it will raise energy costs and hailed by President Obama as “a bold the New York Times in a 10 August thus threaten the competitiveness of and necessary step,” but decried by 2009 editorial. It added that 10 key US industry. Proponents argue that a many climate activists as one in the Democrats from states that produce failure to move swiftly to cleaner energy wrong direction. coal or depend on energy-intensive systems will rule the US out of growing industries “said they could not support world markets for such systems. “In order to get the votes, the bill’s any bill that did not protect American managers have taken off most of its Proponents also warn that climate environmental edge,” said Rob Shapiro, that did not impose similar restraints change poses a threat to national chairman of the US Climate Task Force. on emissions.” security in that drought, famine, He added that if “a toothless bill like disease and mass migration could this” becomes law, “we would probably The Republican Party and its lawmakers unleash regional conflicts and draw in have to wait five or 10 years for another are opposed to the bill, as are the the US military to help keep the peace chance to do it right.” US Chamber of Commerce and the or to defend allies. Security arguments National Association of Manufacturers. usually play well in Congress. James Hansen, director of the Goddard Many leading US-based multinationals Institute for Space Studies at the support it. Little in the bill requires The lead climate negotiator for the US National Aeronautics and Space sacrifices by any person or sector, which US, Jonathan Pershing, said in Bonn Administration (NASA), wrote that “the makes the fierceness of the opposition that the US focus was “not to repeat only defense of this monstrous absurdity all that more surprising. Kyoto,” referring to the protocol that [cap-and-trade] that I have heard is ‘Well, the US helped to negotiate but the you are right, it’s no good, but the train The opposition Republicans attacked Senate refused to ratify. He added that has left the station.’ If the train has left, it the bill on what it would cost average he thought the agreement that would had better be derailed soon, or the planet, citizens. However, the bipartisan emerge from Copenhagen would and all of us, will be in deep do-do.” Congressional Budget Office reckoned be targets that would be “conceived that it would cost the average country by country” rather than a Before it could become law, the House’s household only US$ 175 a year mandated single percentage cut for cap-and-trade bill faces a session in the by 2020. The poorest 20% of US every developed nation. households would actually receive a much rougher ride. However, there are US$ 40 benefit in 2020 from the law. As for Hansen, who says his indications from leading figures in the grandchildren are the main reason Senate that it might not take up the bill According to The Washington Post, behind his activism, he was arrested this year, suggesting that the US will not the costs “would result from higher in June while demonstrating outside a have a bill passed ahead of the global prices for carbon-based fuels, offset coal mine in West Virginia. negotiations in Copenhagen. Sustain issue 31 October 2009 21

third fastest growing city in Africa, is a vibrant East African port. Car ownership is low by international standards: only 6% of households but growing. Yet Mobility for congestion is already a huge problem, with minibuses, cars, handcarts, peddle carts, cycles and pedestrians fighting for space on poorly controlled city streets. development Dar residents make an average of four trips per day, half of these on foot. The port has just 11 berths, only three of which are for containers. But container handling is available only at the port and some railheads, so most containers are transported inland by This was the way five corporate leaders trucks, which then return empty. “Mobility is essential described why they put so much The nation’s 85,000-km road network to economic and social effort into the WBCSD Mobility for (only 5,000 km of which are paved) development. It enables Development project. As with energy, carries 70% of the country’s freight and people to access goods, mobility is crucial for development, but 90% of its passenger traffic. The low services and information, as the Council’s Mobility 2030 report percentage of all-weather roads means had frankly proclaimed earlier in the that there are months during which it is as well as jobs, markets, decade: “Today’s system of mobility hard for rural people to move, or move family and friends. Mobility is not sustainable. Nor is it likely to their produce, or get the goods and can enhance quality of become so if present trends continue.” services they need. life, but the development of mobility in today’s The project studied mobility in four It is also hard to get goods and people conditions also brings world cities: Bangalore (India), Dar es from Dar through Tanzania to the congestion, air pollution, Salaam (Tanzania), São Paulo (Brazil) land-locked countries that depend on and Shanghai (China). It concluded Tanzania’s port and transport systems: traffic-related accidents that in developing world cities “rapid Malawi, Zambia, Democratic Republic and the environmental growth, population density, poverty and of Congo, Rwanda, Burundi and costs of transportation.” inequality, limited public capacity and Uganda. Likewise, it is hard for these resource shortages add further to the countries to get their goods to Dar and challenge of enabling people and goods out to world markets. to move about sustainably.” The African Union is now concentrating Overall, the mobility opportunities development efforts along the old in all four cities are expanding, but transport corridors such as the rail for the poor the mobility situation line and road that connect Dar to the is deteriorating. Pedestrians, cyclists copper mines of Zambia. The idea is and bus passengers have to travel on to use these corridors to move minerals, increasingly congested city streets get farm goods to market and fertilizer, and poor sidewalks. Transport-related seeds and market information to health and safety risks remain a serious farmers. problem. The bad state of roads and vehicles, poorly controlled intersections The Tanzanian government knows and inexperienced drivers are the main that transport is crucial to developing causes for transport-related deaths and farming, mining, manufacturing injuries. Congestion is getting worse. and tourism, and has set a goal of providing reliable road access to 95% A focus on Dar es Salaam and the of the rural population by 2015. It is nation of Tanzania shows how mobility trying to install in Dar a “bus rapid challenges for individuals become transit” system to move people along challenges for a whole region. Dar, the dedicated bus lanes. 22 Sustain issue 31 October 2009

Three common themes emerged from the Mobility for Development work in the four cities, aside from the main theme that sustainable mobility is a key Allianz contributor to development. First, cities can learn from one another and from Protecting the poor history. Cities are different, but the ones studied and others around the world through microinsurance share common issues. Stakeholders can and bad – of other cities and apply this learning to their own situation. Second, each component of society has a role to play, both individually and in collaboration with others. The Allianz Group, a leading out to clusters of villages across southern Government at national, regional and global provider of insurance, India, Indonesia, Egypt and soon West municipal levels, business as both a banking and asset management, Africa. provider and user of mobility solutions, has been active in the and citizens as individuals and as microinsurance industry since members of civil society organizations 2005, when the South-East Asian subsidiary Bajaj Allianz joined forces with must join together in the search for tsunami devastated communities CARE International to launch a three- appropriate local solutions. and left many families homeless. year partnership aimed at providing microinsurance to people in the southern Third, it takes motivated and The company realized that the risks Indian state of Tamil Nadu, one of the committed leadership to create a the poor face are much the same as areas hardest hit by the 2004 tsunami. functioning mobility system. Cities need those for others; but without insurance, overarching institutions to coordinate the financial impacts of disasters are The project was designed to deliver transport and regional development, obviously greater. Yet less than 80 million affordable life and non-life insurance and accountable leadership capable of people in the 100 poorest countries products catered specifically to farm mobilizing stakeholder support, setting have access to insurance (3% of the workers and fishermen in the coastal overall priorities for transport systems population). communities of Tamil Nadu. The premium for the micro-life insurance and associated financing, and ensuring This is a significant business opportunity: policies covering risks of accident, death, effective coordination between microinsurance in emerging economies loss of household assets, natural disasters institutions. represents a market of great potential and fire is 1 euro per year, which growth and profitability, as insurance provides families with € 370 of coverage The project did much of its information markets in many rich countries become in the event of a natural or accidental gathering through dialogues held in saturated. Worldwide, Allianz predicts death. Currently, this covers around each of the four cities, listening to that by 2011 the microinsurance 200,000 people. government leaders and citizens. As one market will double the size it was in participant concluded at the Shanghai 2008. Through innovative products and In the short-term Allianz acknowledges dialogue: “It is hard to imagine distribution methods, Allianz believes that the scale of microinsurance will economic growth without transport.” that the hundreds of millions of people not translate directly into profits, but living on less than US$ 2 per day can adapting product and service offerings Moving ahead, the Mobility for become viable clients for insurers. to the needs of the poor will help unlock Development work will feed into this market’s potential for the future and an initiative on the challenges solidify the company’s presence in new and opportunities of sustainable administrative costs associated with markets. Offering microinsurance in new urban infrastructure, with a view markets also provides critical learnings servicing thousands of small-premium to contributing to the creation of a about emerging markets and builds insurance policies, and local distrust have systems-based approach to providing kept insurers from reaching low-income relationships with customers whose urban infrastructure that fosters populations in the developing world. wealth may grow in the coming decades. sustainable development. However, Allianz found that by working in partnership with local organizations, Allianz aims to reach 3 million clients such as NGOs, trade unions, and globally with microinsurance products by microfinance institutions, it can reach the end of 2009. Sustain issue 31 October 2009 23

To varying degrees, a country’s development and GDP growth has seen parallel increases in its greenhouse gas (GHG) emissions and China is no exception. In the 29 years from 1978 to 2007, total GDP increased 14 times, with an annual average China: growth rate of 9.8% (IMF). Since 1981, the estimated Opportunities of limits share of the population Accompanied by its growing integration with the world economy, China’s rapid living on less than US$ 1 growth has led it to become the world’s second largest energy consumer (the US is per day has been slashed the largest), the largest coal consumer, the second largest oil consumer (the US is the from 64% to 16%, lifting largest) and the third largest net oil importer (the US and Japan are the largest and over 400 million people the second largest respectively).2 Since 1993 when China became a net importer of out of absolute poverty. petroleum, its import dependency has risen every year, now reaching almost 52%. Accompanying this The International Energy Agency (IEA) projects that it will import up to 82% of its oil remarkable economic by 2030. It also relies on external sources for other vital natural resources (copper, steel, etc.). This dependency, while not only being a determining factor in its foreign growth, China for the relations, is also pushing China to change its development path and decouple national first time in 2008 became prosperity from energy- and resource-intensive production and corresponding GHG the world’s largest GHG emission increases. emitter. China is now responsible for roughly China very clearly sees threats to its domestic social stability and national security a quarter (24%) of total arising from an increase in climate-related natural disasters. Already heavily burdened by natural disasters (between 1990-1999 China accounted for two-thirds of people global emissions1 and stricken by natural disasters globally), China clearly sees a risk in subjecting its people China’s economic to more disasters, on top of severe air, water and soil pollution. growth shows no signs of leveling off. The toxicity and carbon intensity of China’s development path is also potentially threatening its ability to trade with many parts of the developed world. Amid melamine and other contamination scandals, people are increasingly demanding more tightly controlled environmental standards for imports in Europe and the US. In addition, there is serious discussion about the need to impose border taxes on imports from countries not within a climate treaty, in order to counterbalance the competitiveness pressures on domestic companies. As one of the main drivers of GDP growth – making up about 35% of China’s GDP – exports are under threat. China is now responsible This has led China’s government to require in its 11th 5-year plan a 20% reduction in energy consumption per unit of GDP by 2010. The plan also set out a target of for roughly a quarter 2% of GDP to be spent on R&D activities in an effort to match developed country (24%) of total global expenditures (Japan’s per capita R&D expenditure is US$ 1,000, while China’s is only US$ 140). Additionally, in June 2007, the State Council made it clear that meeting emissions and China’s energy saving and emission reduction targets could be the decisive “one-vote veto” in assessing local leaders’ political performance – in other words, they risk their political economic growth shows careers if they fail to save energy. no signs of leveling off. While protecting itself from climate change and adapting its economic structure could be costly, China nevertheless could gain a lot from a rapid transformation to a low- carbon economy. China has been the world’s largest Clean Development Mechanism 24 Sustain issue 31 October 2009

supplier for the third consecutive year according to statistics published by The World Bank in 2008 – China supplied 73% of all Mechanism projects in the Anglo American market in 2007. China is also a major supplier of battery technologies (there Investing in local are more than 30 million electric scooters on the streets of China) and enterprise development solar energy components, boasting the world’s largest solar manufacturer. Indeed China’s renewable energy sector has taken off. The installed capacity of wind farms grew by over 60% in 2005, and doubled in 2006 and 2007, making the country the 5th largest in Supporting local enterprise growth be included in Anglo’s value chain. The wind installations by the end of 2007. not only expands economic businesses supported by Anglo have a The country’s 2020 target for wind was opportunities for individuals and 85% survival rate. Anglo American has also 30 GW, but a few months back, China communities where companies worked with the South African government realized it would break through that operate but can also help secure to manage and co-fund its business level much earlier and instead more companies’ license to operate and development program for small mining than tripled it to 100-120 GW. Similar improve access to stable sources of companies – known as the Anglo Khula target upgrading was made for nuclear supply and distribution outlets for Mining Fund. (doubled the target to 80 GW) and solar goods and services. (tripled the target to 10 GW). Anglo American, one of the world’s largest enterprise development efforts to Chile, Due to the size of its market, and, more diversified mining companies, sees local where since its inception in 2006 the importantly, the size of its potential enterprise development as a key part of its Emerge Program has already helped some future market, China’s government commitment to helping build a sustainable 20 SMEs involved in the mining sector and has unparalleled opportunities to avoid future for communities surrounding the more than 2000 start-up entrepreneurs company’s mines. In 1989, it started its servicing a range of markets. locking into a high-carbon future. The sheer scale of demand that could be first small and medium enterprise (SME) development initiative in South Africa, with One such benefactor is Tecnoseal, a unleashed for low-carbon products the aim of investing in black empowered small company that manufactures and and services in the case of aggressive SMEs demonstrating a commercially viable maintains hydraulic and pneumatic governmental regulation could rapidly and sustainable business plan. components for machinery. The company bring down their costs, making them wanted to become a mining sector attractive to the rest of the world. Called Anglo Zimele (the Zulu word for supplier and needed money and a clear Choices made in China will shape the “independence”), the scheme aims to business plan. The Emerge Program global markets for such goods. And increase employment and entrepreneurial invested US$ 30,000 in Tecnoseal and contrary to public opinion, it seems like opportunities for historically disadvantaged provided it with hands-on management China is making a number of very far- South Africans in the framework of the and business planning support. sighted choices. company’s obligations to engage black 1 - Netherlands Environmental Assessment economic empowerment enterprises in its Anglo Chile also formed an alliance with Agency, ”China now no. 1 in CO2 emissions; business activities. Fondo Esperanza, a non-profit microcredit USA in second position”, www.pbl.nl/ organization to help make loans available en/dossiers/Climatechange/moreinfo/ Chinanowno1inCO2emissionsUSA Run on commercial lines, Anglo Zimele to more than 6,000 small businesses insecondposition.html develops local entrepreneurial capacity across the country by 2010 through the 2 - Energy Information Administration (EIA), to support both Anglo’s procurement Emerge program. China Energy Profile, tonto.eia.doe.gov/ requirements and broader local business country/country_energy_data.cfm?fips=CH and consumer needs. It has helped more In 2007, Anglo American was awarded than 520 local companies across a wide a Bicentenary Seal by the Chilean range of industries and sectors by providing government for its commitment to fostering business development services aimed at the development of SMEs, one of the only strengthening SMEs, most notably through seven handed out by the government to equity, loans and short-term minority stakes recognize initiatives to create a more as well as by facilitating opportunities to socio-economically equitable Chile. Sustain issue 31 October 2009 25

Measuring the “win-win” By offering direct employment, appropriate indicators, how to assure creating local suppliers, training objectivity, and how to answer the “so The Council’s Development distributors and selling innovative and what” question of what 1,000 jobs Focus Area has long affordable products and services that really means to the society in which a championed “win-win” improve quality of life, companies can company operates. solutions to business help uplift people and societies out dilemmas and development of poverty and support companies’ The Framework, which was launched in challenges. bottom-line. Yet how can companies 2008, is based on a four-step process. measure whether they are really It begins with the business perspective achieving the win-win? by asking a company to set the scope in terms of geographical boundaries In 2006, some 20 WBCSD members and core business activities to be began a two-year project to help assessed. The Framework suggests companies answer that question. activities ranging from the creation They wanted an approach to measure of infrastructure to the generation their impact on society, particularly in of jobs to the sale of products. Step supporting development, and tools to two involves identifying indicators to communicate these impacts internally measure the impacts arising from these and externally. Some of the companies activities, mapping out which impacts had already done pioneering work the company controls (direct) and in this area. Unilever worked with which it influences (indirect). Oxfam to study the company’s impact on poverty reduction across Step three asks the company to its value chain in Indonesia. Vodafone engage with stakeholders in defining monitored the effects of mobile phones development the way they do in order in Africa. Anglo American developed to understand what these measurements its “Socio-Economic Assessment mean in a development context. This is Toolbox.” Development organizations, the point at which the company assesses governments and global financial the overall contribution of its impacts to institutions such as the International the key development issues in the area. Finance Corporation (IFC), with their Finally the company is asked to identify experience monitoring and evaluating priority areas for action, appropriate project results, also offered useful management strategies, and indicators guidance on the way development to monitor progress. impacts can be measured. The published Framework contains However, questions still remained and three components. It offers the very little had been done to develop business case for measuring impact, a common approach to measurement entitled “Beyond the bottom line,” that could be used by any company, in highlighting the experience of several any sector, in any part of the world. WBCSD member companies. Next To develop the WBCSD Measuring comes the four-step methodology to Impact Framework, the companies identify, measure, assess, and manage had to tackle questions about how to impacts. And third is an Excel-based isolate effects caused by the business user guide that helps companies carry from other effects, how to choose the out an assessment. 26 Sustain issue 31 October 2009 r

The Framework is based on a business “Business knows that what gets measured - gets done. As perspective, but it was enhanced by more and more companies embed sustainable development World Resources Institute and the into their core business strategy, it is becoming increasingly Harvard Corporate Social Responsibility important that we are able to measure progress towards Initiative, among others. It aims to building a more sustainable and inclusive world.” help companies go beyond reporting to understand what business impacts WBCSD President Bjorn Stigson use this understanding to improve decision-making. Approach adopted in the Framework The Framework is based on a four-step methodology Step 2 - Measure direct and indirect impacts Identify and measure your direct and indirect impacts, The WBCSD encourages member mapping out what is within your control and what you can influence through your business activities. companies to look beyond philanthropy to identify ways their core business activities can be more Better relat io inclusive. Key to this commitment ns STEP 1 – Set boundaries Step 3 – Assess contribution to is the need to measure the impact Determine the scope and depth of Stakeholder development the overall assessment in terms of Assess what your direct and indirect engagement of these models and use the lessons geographical boundary and types impacts contribute to the development of business activities to be assessed. priorities in the assessment area. learned to modify the models and Be tte r decisions further optimize both business profitability and the business contribution to society as a whole. Step 4 – Prioritize management response Extract the key risks and opportunities relative to your societal impact and based on this, develop the management response. The Council sees a need to embed Measuring Impact Framework Decision by individual companies concepts of sustainability and inclusive business into overall business strategy in order for the positive impacts of WBCSD Future Leaders Team 2009 business to really reach the scale and This year, the members of the WBCSD Future Leaders Team are working depth needed to bring about broad- closely with the Development Focus Area to influence development outcomes based change. This means bringing through inclusive business models that create new revenue streams while all angles of the business together, serving the needs of low-income communities. The Future Leaders spent the including procurement specialists, last few months applying the Measuring Impact Framework in their respective human resources, engineers and so companies, providing valuable insight into redefining measures of success and on into the discussions about impact demonstrating the contribution of business to development. because it is really these actors that can initiate, embed and manage The Future Leaders come from different companies and regions of the world change. The WBCSD is now working and their Measuring Impact projects reflected that diversity. Some used the with companies and organizations to Framework at the beginning of a project to help inform strategy or support implement the Framework and looks decision making, whereas others used it in a more traditional way to assess forward to sharing the lessons learned in the months to come. impact of training programs on employee satisfaction and upward mobility, the impact of a landfill-gas-flare Clean Development Mechanism project on www.wbcsd.org/web/ measuringimpact.htm incomes of the poor in India. There was a clear consensus among the team that the Framework provides a that measuring impact can be helpful in the early stages of a project and will be most useful when embedded early in the decision-making processes of a company. While the Future Leaders found it challenging to limit the scope of the indirect impacts to those most relevant to the business, they felt that the Framework helped companies discover ways to be more inclusive, leverage other actors to support development and have informed conversations with stakeholders. Sustain issue 31 October 2009 27

Developments in product carbon footprinting By Rasmus Priess, Thema1 GmbH The measurement and reduction of greenhouse gas (GHG) emissions Supply chain partners and public stakeholders expect business action on climate associated with goods change – expectations that go beyond corporate citizenship and increasingly involve the core business activities of a company along its entire value chain. and services – also known as product carbon Companies around the world are developing the tools for managing product footprinting – is becoming carbon footprints internally and in cooperation with their stakeholders. Activities one of the core elements include developing standards for assessing GHG emissions associated with goods of any robust business and services, and developing approaches to communication with partners and strategy on climate change. customers along the value chain. The climate impacts of goods and services are being integrated into government programs and thinking, and companies are implementing individual and sector projects on the assessment of GHG emissions in their value chains and communication with stakeholders. Each area is evolving dynamically, challenging businesses to act. Reducing GHG emissions in the Standards development has been stimulated by the publication of the Publicly Available Specification (PAS) 2050 in the UK in October 2008. Two major international value chain demands standardization processes have since been started to provide more specification and collaboration orientation for assessing GHG emissions. The GHG Protocol Product and Supply Chain Initiative, run by the WBCSD and the World Resources Institute, builds on the widely and communication applied GHG Protocol for Corporate GHG Accounting and is to be published by the end with suppliers of 2010. Also, the International Organization for Standardization is developing a new upstream, customers standard, ISO 14067 “Carbon Footprint of Products,” due to be published in early 2011. All three norms build upon the established standards for conducting life-cycle downstream and assessments: ISO 14040 and ISO 14044. frequently with other Reducing GHG emissions in the value chain demands collaboration and stakeholders. communication with suppliers upstream, customers downstream and frequently with other stakeholders. After the British Carbon Trust launched its work on a carbon reduction label in early 2007, a number of other approaches have been emerging. The label 28 Sustain issue 31 October 2009

communicates a carbon footprint with respect to upstream and be independently verified and reduction commitment and – downstream processes, and transparent. This is particularly true depending on the label variety – also can increase awareness of GHG for the communication of aggregate a concrete figure of a product carbon emissions along the value chain carbon footprint figures, which can footprint. Similar labeling programs are and identify emission “hot spots.” differ widely, even within a certain being developed in Japan and Korea. It can also identify GHG emissions standard. These should always be In Switzerland and Sweden “climate reduction opportunities, inform the embedded in more comprehensive seals” are under development, aimed overall climate strategy, and help information, which may also include at promoting the least climate intensive companies evaluate the relevance other environmental impacts. products. of GHG emissions in comparison to other environmental impacts. Such Claims based on carbon footprints are Going beyond static carbon labels with assessments can help firms prepare entering the market place. Standards aggregate figures, the Product Carbon for legislative activities and future development and harmonization are Footprint (PCF) Project in Germany is consumer demand, and contribute crucial to harvesting the opportunities in building upon the developing standards to building stronger customer and product carbon footprinting. Standards for product carbon footprinting stakeholder relations. development must be brought down to to introduce more comprehensive sector and product category level while communications approaches with To realize the full benefits of these efforts, ensuring overall consistency. customers. The PCF Project is a joint companies must manage a number platform of NGOs, institutes and of challenges. For instance, the costs Yet, ultimately, managing climate change participating companies to promote and effort involved in product carbon will require competition over low-carbon products rather than over standards. and sensible communication in product Factors that can reduce costs include carbon footprinting. and improving the routine in involving Government programs increasingly suppliers and better data management. address GHG emissions associated with goods and services. The French Doing carbon footprint calculations government is developing a mandatory according to cross-industry standards environmental declaration scheme can reduce costs, as can using the best for products to be implemented from software developed for the purpose. The results of carbon 2011, and retailers are testing varieties of carbon labels. The results of carbon footprinting are footprinting are increasingly shared and communicated increasingly shared and with stakeholders. As long as standards communicated with are being developed, results and include criteria for GHG emissions and will underlying assumptions need to stakeholders. provide a guideline for companies wishing to undertake product carbon footprinting. The Japanese Ministry of Economy, Trade and Industry (METI) is establishing rules for calculating and labeling of CO2 emissions. The New Zealand government is working on carbon footprinting methods for the primary sector in close collaboration with the international standardization processes. Besides these more formalized collaborative initiatives, many companies undertake practical trials in product carbon footprinting, relying on a multitude of methodologies and resources. Assessing product carbon footprints can help companies create transparency Sustain issue 31 October 2009 29

Newmont Supporting local economic Coca-Cola growth in Ghana Innovating distribution In 2006, Newmont Mining can provide long-term sustainable business Corporation, a leading gold development services support. producer with operations on 5 continents, developed its first Newmont wanted to evaluate the project in Ghana’s Brong-Ahafo program’s impacts, particularly direct region. One of Newmont’s key benefits to communities, as a way to better values is to develop its business its measuring techniques and to assess the activities in an environmentally and value in replicating the program in other socially responsible manner, which parts of the world. in the Ghana case includes ensuring that local people benefit from a The company and the IFC integrated the strong local business sector. WBCSD Measuring Impact Framework with other approaches used by the Newmont and the International Finance company, in particular Newmont Ghana’s Corporation (IFC) established the Environmental and Social Responsibility and Ahafo Linkages Program to increase Monitoring Principles and IFC’s Monitoring the participation of local businesses in and Evaluation Framework and Indicators. Newmont’s supply chain and bring development benefits to surrounding communities. The two partners applied the Program, Newmont and the IFC found the WBCSD Measuring Impact Framework encouraging signs of growth in the small to the Ahafo Mine in Ghana to help them businesses in the 12 communities included Philips benefits at mid-term, and establish in the intervention area. Many were obtaining business registration certificates The economic a rigorous approach to measuring, monitoring and evaluating progress. and starting basic formal practices such as book-keeping. The number of local and ecological The mine is in the local cocoa-growing businesses commercially engaged with Newmont jumped from 25 to 125 with benefits of region of mid-western Ghana, in a district where more than half of adults and two- a total value of procurement nearly three times greater after the second year of the energy-efficient thirds of youths are illiterate. program. Of the 21 assessed, 52% were able to obtain bank credit and 21 new lighting Aside from providing jobs for 3,500 people, permanent jobs were created, 10% of the project has helped improve local which for women. There was also a 40% infrastructure: mobile phone coverage, upgrading roads and access to electricity. government met by the businesses. Newmont and IFC established the Ahafo Measuring the impact of the Ahafo Linkages Program to: help local businesses linkages program has informed Newmont’s enhance and develop suppliers to the decision-making process, supported mine; improve the competitiveness of local conversations with stakeholders and will non-mining related businesses to help inform the development of a long-term develop a diversified local economy; and evaluation plan to assess local economic growth in the area. business associations and institutions that 30 Sustain issue 31 October 2009

In the late 1990s, the Coca-Cola The outlets served are typically low- The MDCs also promote women’s Company realized that in order to volume, with high service frequency economic empowerment, in that 19% expand its reach into remote and requirements and limited cash flow, of owners and 8% of staff are women semi-urban areas in developing requiring fast turn-around of stock. The in Ethiopia, and in Tanzania the figure is countries, it would need to redesign MDCs deliver where roads are poor to 32% and 5%. its distribution systems to overcome a lack of road infrastructure as well small orders, and provide improved 80% of MDC owners have also received as limited cash flow and business customer service. training from the bottlers in areas such skills among small enterprises. as basic business skills, warehouse and To date, the Coca-Cola system has distribution management, account The largest non-alcoholic beverage created over 2,500 MDCs in Africa, development, and merchandizing and company in the world, Coke’s response generating over 12,000 jobs and more customer service, including one-on-one was the Manual Distribution Center than US$ 500 million in annual revenues. coaching. MDC employees also receive (MDC) model now used in nearly 25 MDC owners and employees support an training in customer service and sales and countries around the world. While it estimated 48,000 dependents. traffic safety. is an approach created to solve a core business need of the company, it has also A team from the Harvard Kennedy The model has proven scalable with more proven to make a positive contribution to School and the International Finance than 80% of the company’s products development in many African countries. Corporation recently studied the MDC currently distributed through the MDC model in Ethiopia and Tanzania. They model in Ethiopia and Tanzania. MDCs are independently owned, low- found that owners of these centers do cost manual operations created to not make up the poorest part of society The company plans to double the serve emerging urban retail markets and most had primary education. program and the impact by 2010 as where classic distribution models are However, in Ethiopia 75% of owners part of its commitment to the Business not effective or efficient. They include a were “new business owners” and in Call to Action, a global initiative that central point for warehousing products, Tanzania the figure was 32%. Each MDC mobilizes large companies to help reach which are distributed mainly manually, by employed an average 3.9 people in the Millennium Development Goals by pushcarts, to keep costs at a minimum. Ethiopia and 6.9 in Tanzania. harnessing core business competencies. The climate crisis, energy crisis and are equipped with controls to detect (complete electric light units), as well economic crisis are connected one daylight or the presence of people. as older, less efficient versions of its TL to another. fluorescent technologies. This is ahead of On 7 December 2006 Philips called EU legislation on energy efficiency that Philips is working to reframe this three- for a phase-out of energy-inefficient will come into force in 2010. pronged crisis as opportunities. incandescent light bulbs, a move aimed particularly at the 25% of lighting In January 2009 Philips launched an Like replacing energy-inefficient electricity consumption in homes. The initiative to accelerate the renovation of incandescent lamps in homes, a switch call has been taken up around the world, to energy-efficient lighting in cities and and the phase-out of incandescent lamps installations. It will help make energy- non-residential buildings offers a huge seems to have passed “the tipping point”. efficient lighting accessible to public opportunity to cut emissions and energy buildings, offices, factories, schools and use that we have barely begun to tap. It The opportunity is even larger with the shops – anywhere it is needed. The provides a triple win: End users benefit non-residential part of the equation, initiative consists of three elements: from lower costs and better quality given that in terms of electricity used assessment tools to calculate the energy light, economies gain from lower costs for lighting, public and commercial performance of a current installation and greater competitiveness, and the buildings represent 60% of the global and the costs of a new one; a complete environment wins due to lower energy total, and street lighting 15%. portfolio of energy-efficient products and use and lower emissions. system solutions; and financial support. Globally, using energy-efficient lighting Lighting accounts for 19% of the world’s in nonresidential buildings could save Philips is working with leading banks electricity consumption. However, the 62 billion euros and 330 million tonnes and finance companies to create financial of CO2. solutions to complement its lighting Philips research shows that 80% of solutions. Philips announced in July 2009 that residential buildings is out of date and it would phase out electromagnetic inefficient. And only 1% of buildings operating gear in its luminaires Sustain issue 31 October 2009 31

Energy efficiency in buildings Roughly 40% of the world’s energy is used in shops, offices, homes and other buildings – more than in any other sector. So it is vital to act on this important source of greenhouse gas emissions. Unless we transform the building sector we won’t make the essential transition to a low-carbon world. This can be done, but it is not going to be easy. Buildings stay around for decades, even centuries, so it cannot be achieved purely by introducing new models. Market imperfections don’t help – the building value chain impedes energy- efficient construction and the low profile of energy for building decision-makers means that price signals are not very effective in changing behaviors. The WBCSD’s Energy Efficiency in Buildings (EEB) project has grappled with this important challenge for the past four years, and is now gearing up to ask their members to take urgent measures to reduce energy use, with the project’s core group members preparing a manifesto. After studying six markets – Brazil, China, Europe, India, Japan and the US – the EEB project reported its conclusions earlier this year in Transforming the Market – Energy Efficiency in Buildings. It found that the building sector won’t transform itself. It needs a combination of new attitudes, new financing and new regulations to create the market push and pull that will make low-carbon buildings the norm. Part of the problem is ignorance – among building professionals and those of us who live and work in buildings. The project commissioned international research that found that building professionals typically underestimate how important a building’s contribution is to climate change, and overestimate how much it costs to make them more sustainable. Cost is certainly important if extra spending is needed, but it’s not just about cost. The timeframe typically used to judge such investment decisions rules out many potential energy-saving measures, even if they would more than pay for themselves over their lifetime. 32 Sustain issue 31 October 2009

These barriers can be overcome. But it Six broad actions are required: will not be as easy as making energy 1. Strengthen codes and labeling for increased transparency – Building codes and/or greenhouse gas emissions more include strict energy-efficiency requirements that are effectively enforced, with energy measurement and labeling mechanisms to savings from efficiency investments, provide transparency on energy performance levels shortening the payback period. But it 2. Provide price signals to incentivize energy-efficient investments seems that a higher price for energy or subsidies to help energy efficiency investments meet financial criteria carbon would have relatively little effect 3. Encourage integrated design approaches and innovations – Property developers unless the price goes through the roof. involve designers, contractors and end users early and as part of an integrated team; incentives for domestic energy–efficient improvements are related to an The EEB project tested such options by integrated approach rather than individual measures creating a computer model simulating decisions on investments in design and 4. Develop and use advanced technology – Governments provide support for research construction options, based on the and development to accelerate progress, while buildings are designed to use net present value over five years. The information and communication technology that minimizes energy use simulation uses a unique database of 5. Develop workforce capacity for energy saving – Energy-efficiency training for all those specific building energy and technical involved in the sector, vocational programs for those who build, renovate and maintain data assembled by the project. buildings, and a new “system integrator” profession to support retrofitting 6. Mobilize for an energy aware culture – Sustained campaigns to promote behavior The modeling work suggests that many change and to increase awareness of the impact of energy use in buildings. measures that would achieve significant energy reductions are unlikely to be These actions need to be applied appropriately to each building subsector, but chosen because they fail financial represent a comprehensive package that must be seen in totality, rather than as a investment requirements. set of options that can be implemented separately or sequentially. At today’s energy prices, the simulations And of course, we all need to pay more attention to the energy we use to heat, cool and power our home and work environments. financially viable investments could be made that would cut emissions by about 40% below the “business as usual” level in 2050. This would cost roughly US$ 150 billion a year. Stretching the investment time horizon to 10 years would increase the emissions savings to about 50% and add a further US$ 150 billion a year to the cost. But that still leaves a further 30% emissions cut to achieve transformation and meet an 80% reduction target. Even a US$ 40 per tonne carbon price would add emissions reductions of only three percentage points. Transformation will not occur solely through market forces because the financial, organizational and behavioral barriers are too significant. Stronger market signals and regulatory change are needed because most building owners and users don’t know enough and don’t care enough about energy consumption, while inertia is reinforced because first costs are too high and savings too low. Sustain issue 31 October 2009 33

Business leading A C T I O N now Friday, 11 December 2009 Confederation of Danish Industry Headquarters Who Business recognizes that there are challenges for all, Copenhagen Business Day – Leading ACTION is jointly for developing and developed countries, business and organized by the World Business Council for Sustainable consumers, and is ready to take a lead now. Business, Development and the International Chamber of Commerce governments and society are intricately linked – climate together with the Confederation of Danish Industry. change solutions will need all three to work together, to challenge each other, to support each other. Join us in Copenhagen to play your part in this process. What it is about Copenhagen Business Day – Leading ACTION will be the third global business day parallel to the United Nations Where Climate Change Conference. This will be a day for business Copenhagen Business Day – Leading ACTION will take leaders to explore, share and project their vision and place at the Confederation of Danish Industry headquarters commitment to implement climate solutions now and at H.C. Andersens Boulevard 18, Copenhagen, DK-1787 for the next four decades. The years ahead are pivotal in Copenhagen V determining the world future generations will inherit. Register to take part in the Copenhagen Business Day at www.copenhagenbusinessday.org 34 Sustain issue 31 October 2009

WBCSD Sustain Magazine October 2009 - Energizing development in a changing climate

0 comments

Notes on slide 1

Favorites, Groups & Events