Will Old Europe Become the New World of Sustainability in 2011?

Authors

• Peder Michael Pruzan-Jorgensen

  Former Senior Vice President, BSR

European companies, government officials, and civil society representatives have tended to scoff at their American cousins’ approach to sustainability, and also at the perceived fundamental disregard for the environment and human rights in BRIC countries. But as we make our way into 2011, I sense a shift in Europe toward a more somber mood, similar to the sobriety that comes to a soccer team the day after an unexpected defeat by a mignon competitor: heads down, feet dragging, and a realization that something different has to be done.

In a previous Insight article, BSR President and CEO Aron Cramer noted that “the market meltdowns of 2008 are receding from view,” and the world is again starting to see the structural challenges we all need to face. This is partially true for Europe: The financial meltdown seems to continue with one economy after another on the brink of financial collapse, and at the same time, more Europeans are beginning to realize that changes are taking place East, West, and South—but not Center. But the larger system in which European consumers and businesses operate—the regulations and standards that provide incentives and inform decisions—continues to lock in responses and habits that make it difficult to make meaningful progress toward addressing pressing global challenges.

2011 will be a patchy year for “European sustainability.” While the economic woes suffered by the EU and its member states will likely put a break on the EU’s appetite to push ahead with ambitious sustainability agendas, we will see individual member states take the more aggressive approach, and we will see major European corporations push ahead with strong agendas influenced by a global perspective. Climate change, reporting, and human rights will likely be areas to see the most progress. But the vital agenda of “sustainable consumption and production” likely will make limited progress (although to be fair, it is not clear how much Europe can learn from others on this agenda).

Climate Change: An “Unsynchronized” Effort

Climate change will likely remain a top priority for the EU in 2011. The 27-member bloc has made a leadership claim on the international agenda with its desire to commit to a 30 percent reduction by 2020, adding another 10 percentage points to the already-committed 20 percent by 2020—but only if others follow suit. This seems quite unlikely unless significant developments take place in the global negotiation landscape.

What the EU may be incapable of doing may be realized in individual member states. The British government, which has already committed to an 80 percent reduction by 2050, is said to be seriously considering legally adopting a commitment to a 60 percent cut by 2030. This follows a series of proposals from the UK’s Committee on Climate Change, whose previous recommendations to earlier governments have been passed into law. The implementation of recommendations will come about only if the country is successful in turning its electricity system into a zero-carbon affair, and if it can replace the country’s current car fleet with some 11 million electric or plug-in hybrids.

Similarly aggressive approaches are taken by other European countries such as Sweden and Norway: both aim for zero carbon emissions by 2050 and are focused on radically transforming their energy mix and how their citizens use energy.

Reporting: One Europe, Two Models

In 2011, the European Commission is set to make the final deliberations between two models for annual CSR reporting. The “French model,” soon in place for French companies including subsidiaries of foreign companies with more than 500 employees, is a prescriptive approach to corporate reporting that will require companies to report on a specific set of KPIs. In contrast, the “Danish model” is a “comply and explain” approach that leaves it up to the individual company to decide how to report given a set of principles.

The odds suggest that the “Danish model” will win favor with the majority of the member states but there is also the possibility that the European Commission will stop short of regulation and instead publish a set of voluntary guidelines.

Will the OECD Give Life to Ruggie?

As noted in almost any article attempting to forecast sustainability in 2011, the “Protect, Respect, and Remedy” Framework proposed by the Special Representative to the UN Secretary General for Human Rights and Business (SRSG), Professor John Ruggie, will enjoy considerable attention, also in Europe. The European twist on human rights is the revision of the OECD Guidelines on Multinational Enterprises, which are a set of recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from the adhering countries. The revised Guidelines are due in June 2011, shortly after the SRSG will present his recommendations to the UN Human Rights Council.

The Guidelines have long lived in the shadow of its younger, less detailed, but more broadly endorsed cousin, the UN Global Compact. However, whereas the Global Compact is a voluntary set of principles, the OECD Guidelines are a government-adopted set of recommendations that also include a national complaint mechanism called the National Contact Point (NCP). The NCP allows stakeholders to submit complaints related to alleged corporate abuses in developing countries. The update of the Guidelines is interesting for three reasons: First, the complaint mechanism looks set to be strengthened, which may lead to significantly increased use of the NCPs. Second, the revised Guidelines will henceforth also apply to a company’s supply chain. And third, under great influence of the work by the SRSG, the new Guidelines will likely include a significantly more detailed and more comprehensive set of human rights responsibilities. This development will be particularly interesting to watch unfold in Europe where in recent years several governments, such as Norway, the Netherlands, and the United Kingdom, have taken steps to strengthen their NCPs while others—Denmark and Sweden—are currently considering revising their set-ups to facilitate stakeholders’ access to the NCPs. It seems that irrespective of how the Human Rights Council will receive Ruggie’s recommendations, the OECD seems set to welcome them.

Sustainable Consumption and Production

The European consumer will also feel the changing winds with new regulation affecting the products they buy and the labels that cover them. In 2011, a host of new and updated directives will take effect that will put the European consumer in a position where he/she can make better and more informed choices about the products he/she buys. The key initiatives to follow include Energy Labeling, Ecolabel, and Ecodesign directives, and the ROSH (chemicals in electronics) and WEEE (electrical and electronic waste) directives, which are likely to be updated.

These initiatives make up the bulk of the EU’s approach to sustainable consumption, which are simultaneously depressing and encouraging. Encouraging because as a group, these directives do protect European consumers and allow them to be more informed consumers. For example, the REACH directive effectively drives the global elimination of chemicals from clothes, toys, and other consumables. But on the flip side, these directives represent a policy of incrementalism that is unlikely to help us make real and meaningful progress towards addressing those structural changes we know we have to face up to. This was, ironically and only implicitly, recognized in the European Environment Agency’s 2010 annual report.