“We’ll know we’ve succeeded when we’ve made our work obsolete,” says Global Footprint Network’s new CEO. Read on as we take a deep dive into his thoughts on addressing humanity’s largest challenge.
COP27 just ended on a disappointing note, as governments failed to make headway on fossil fuels reduction. Is political action on climate at an impasse?
What recently unfolded in Sharm El-Sheikh reflects the inescapable fact that humanity acts like water in a riverbed: we tend to flow towards the lowest ground. Political rationality is no exception. In this case, it’s about going for what’s easier and less disruptive to entrenched interests. It’s all a fallacy, of course. This “lowest ground” is already costing us more in the short term and may well cause the kind of disruption that no entrenched interest can defend itself against in the long-term. I am confident however that there is ample room for diligent and impactful policy making, at the national and even regional and global levels, despite the COP27’s disappointing outcome.
What possible path out of the “lowest ground” do you see going forward?
A major reason we are stuck at that proverbial “lowest ground” is the extraordinary, multi-faceted and inter-connected complexity of the challenges we face: climate, of course, but also biodiversity, resources, and social issues including poverty, injustice, inequality. In addition, all those—and more—are compounded by armed conflicts, which only flares the resource, political, economic, and social crises.
Regarding action on climate – and more widely on natural resource security – constraints and limits are not a popular message. Politicians typically prefer the safe route of promising that technology will resolve everything while creating plethora of new jobs . As we’ve seen, this is an imperfect approach at best. So it’s essential now that policy makers – as well as business decision makers – be empowered with tools to cut through the noise and confusion, and take meaningful action that changes our course and creates lasting impact.
What would that look like?
The single largest challenge humanity faces is the negative externalities of human production and consumption, which greenhouse gas emissions are the most dramatic example of. These externalities need to be internalized so that their impact on the world can be mitigated, prevented even. This requires identifying the items and flows that need measuring. In the next phase, measuring and tracking allow for appropriate policy making designed to create and implement the correct incentives that, in turn, will guide efforts towards the goal of addressing negative externalities through elegant and creative solutions that transform habits. This is about creating new rules.
Now, ESG (Environment, Social, Governance), the externalities criteria that the business and financial community widely relies on, are typically represented as 3 equal intersecting circles, which I find incorrect and misleading. Rather, I see “ESG” as a pyramid where natural ecosystems (E) make up the foundation that supports and nurtures the social fabric (S), which itself is kept organized and stable through governance (G) on top—through the political will of the people in democratic regimes. The new rules I mentioned can guide action at the E and the G levels, benefiting S.
How is this articulated with the role of business and finance?
What we talked about earlier is changing the rules and regulations. The new rules and regulations can be summarized as “Do not create negative externalities, or you pay for them”. Once the new rules and regulations are established, businesses will adapt to and “play” within these. Clear rules and regulation are the basis for a compelling and competitive “game”, leading to new records and better performance. Just imagine the chaos during a game of soccer without any rules, nor referee.
Clearly, if we want to establish a better “game” in order to align business strategy with what society needs, it is up to policy makers to set the right rules and regulations.
What does that process look like?
CDP, for example, has shown that investors can be convinced to adopt new rules, which leads to businesses changing their ways. In general, establishing a new game through a voluntary scheme is a highly iterative process. This is a problem when resource depletion unfolds faster than the new game establishes itself and yields positive results, as reflected by the date of Earth Overshoot Day creeping up the calendar each year. The challenge is that, in this case, the players don’t fight for first-mover’s advantage, because there’s little financial benefit in doing so; rather, being a pioneer requires making costly mistakes and committing high budgets. Consequently, many businesses stay put unless they’re forced to take action through regulation. For example, the fiduciary responsibilities of asset owners in a country are typically defined by their ministry of finance, who ensures that minimal criteria are met. The ministry of finance could expand fiduciary duties to include negative externalities, or the harmful effects experienced by a third party as the consequence of an action. This creates ripple effects on asset managers and subsequently businesses that make up those institutional investors’ portfolio, as well as their suppliers and partners. It is a much more impactful and less disruptive approach than regulations that directly impact consumers, such as the hike on diesel tax that set off the 2018 social unrest movement of France’s “yellow vests.”
Can the Ecological Footprint support such new rules?
Definitely. The key advantage of the Ecological Footprint is that its methodology has been refined for over 30 years. It is transparent, open to scrutiny, and regularly peer-reviewed. Like anything, it is not perfect, but it is the most robust metric available because it is grounded in facts and science – starting with the very same vetted UN data that is used by the World Bank and other international agencies.
Additionally, it provides a uniquely comprehensive approach that takes into account natural ecosystems as a whole. Rather than siloing individual issues, it reflects the complex interactions within and between ecosystems, all boiled down to a single indicator. This is extraordinarily valuable because understanding whole ecosystem’s interactions is essential to resolving problems without creating new ones.
How can this be translated into actionable tools for decision makers in business and politics?
We need to figure out what tools policy makers, investors, and businesses need in order to play the “game” that society needs to achieve sustainability. It is not about prescribing solutions, but rather about creating the framework, or the “rules of the game”, to avoid negative externalities. Those rules can eventually become the necessary conditions a business abides by in order to participate in the market, i.e., their license to operate.
At the same time, it is important for civil society to remain well informed so they are receptive and willing to participate in the new “game”, responding to the right incentives within the new framework.
How do you intend to sail through the current choppy waters?
I come from a long lineage of trade ship captains out of Hamburg, Germany. I’m aware that ships are designed to sail through storms, not remain moored safely in harbors. And that no captain reaches his destination without his crew. I am passionate about teamwork. I take full responsibility for the journey, but my role is mostly about allowing everyone to thrive in their respective roles so that they can bring their best contribution on deck. This is true not only for our team at Global Footprint Network, but also our partners in policy and the private sector, as well as civil society. We’re embarking to resolve humanity’s largest challenge ever: the ecological deficit. We’ll know we’ve succeeded when we’ve made the work of Global Footprint Network obsolete.