“Why firms, cities and governments aim to reduce their carbon emission to seek growth.”
By Jeremy Ron Teboul
Sustainable development, the balance between economic, social and environmental development, has been at the center of growth-related talks for nations and firms in 2017. While it is a common misconception that governments are the ones to fiscally pressure companies to limit their carbon footprint, certain occurrences might prove the opposite: Companies might as well return the favor by acting effortlessly for the sake of the environment, complementing any lack of actions from their administrators. In any case, private firms have realized that ecological development, more precisely the dissolution of externalities, is the decisive move to progress from a two-sided equitable state to a three-sided sustainable equilibrium.
Firms are leading the path to ecological development, and it makes sense!
As world leaders are freshly back from promising engagements taken at the COP22 conference on climate change last November in Marrakesh, big corporations are shaping their current procedures to become more environmental-friendly, leading the way to sustainable development. Forbes reports that “executives at 80% of Global 100 firms receive higher bonuses if the company meets sustainability targets.”
This is the case at Siemens, one of the world’s most accomplished companies in terms of contribution to the environment, which defines sustainable development as “the means to achieve profitable and long-term growth.” As one of the largest environmental technology providers and global powerhouses for over 160 years, Siemens has been actively consistent in its contribution to protecting the environment, reducing its carbon footprint and investing into R&D for sustainable development research. In 2016, the company generated more than 36 billion Euros from its “environmental portfolio.” This portfolio represents almost half of Siemens’s revenue, and is exclusively dedicated to environmental development. Headquartered in Germany, Siemens’s green revenue model not only satisfies its shareholders, but also contributes to Germany’s environmental-friendly international reputation and gives confidence to many of its citizens.
Similarly, in Sweden, IKEA has been implementing green policies, reducing adversities to the environment. With innovative ways to improve its carbon footprint, the Swedish company knows how to keep up with its image as a Scandinavian green leader; in January 2017 it began constructing the largest solar rooftop array in Washington state. As one of the world’s most environmentally sustainable country according to the Sustainable Development Goal Index, Sweden facilitates the road for many of its companies, such as IKEA, to implement internal environmental regulations and find innovative ways to make profit while benefitting – or simply not harming – the planet.
Whether pressured or not by local governments, Siemens and IKEA both reflect the success of companies making high profit off sustainable development and positive environmental action.
Eco-friendly cities that invest in the environment are also stimulating markets!
On a larger scale, cities investing in the environment are bringing considerable hope to investors all around the world. In China, the Tianjin eco-city project, which targets 350,000 new homes, shows an honest effort from the world’s largest emitter of carbon dioxide to equalize socio-economic development with environmental growth. This joint venture project between China and Singapore shows that South and East Asian powers are keeping up with the microeconomic trend of investing considerable amounts in sustainable development. The ownership of this 50 billion Chinese Yuan project is equally divided between Chinese agents which include the China Development Bank and TEDA investment holdings, versus Singapore’s Keppel group.
Western Asia is also showing a strong commitment to sustainable projects by building new environmentally friendly cities, most commonly known as eco-cities, and even improving existing infrastructure to make it greener. In December 2016, the World Bank’s board of directors approved a $132 million loan to Turkey for a sustainable city project; this loan represented over 80% of the cost needed to complete the project.
GreenBiz, an online media outlet specialized in technology, business and environmental sustainability, asserts that 2017 is the year to invest in green bonds, as “the market is expecting to reach $100 billion,” and that cities are major leaders in this industry. It also predicts that investors will gain more access to environmental data, following 2016 incidents such as the Volkswagen scandal.
However, the greatest effort remains for governments.
Despite many efforts to “build green,” firms and cities have limits to their operational power and must comply with their government’s target goals.
On the one hand, in China, the top-down strategy approach makes the enforcement of environmental policy smooth on all domestic scales. According to Forbes, the Chinese Communist Party is becoming tougher in terms of environmental policy. In December, it announced it was “increasing its standards for gasoline and diesel in order to cut emissions,” in 2017. With more than 170 million vehicles, China has positioned itself to clearly limit its emission over the next five years. This comes after a rough “year of the monkey,” spent under the spotlight of the global conferences of Paris and Marrakesh.
On the other hand, the Trump Administration, still not at full capacity, has not repositioned itself from its campaign promise to shift towards a ‘laissez-faire’ position on environmental policy. Several foreign leaders and key actors in global environmental institutions have announced their lack of confidence for Scott Pruitt, President Trump’s pick to operate the Environmental Protection Agency (EPA). The coming months will be critical to analyze the United States federal government’s eventual compliance on the actions it agreed on in Paris.
In 2017, cities represent the battlefield for firms to enhance environmental experiments favoring sustainable development. Despite strong budget and operational constraints, as opposed to governments, cities and firms are working together to achieve ‘the sustainable equilibrium’ by enforcing stronger environmental policies to balance their current economic and social status. ‘Eco-city projects’ display the conclusive and cooperative entanglement between massive corporations and cities of all sizes to achieve environmental sustainability. While governments seem to monopolize policy enforcement to respect equitable share between economic, social and environmental development, it seems that their scope of action will be limited by internal disagreements.
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