1. Sustainability & Global Politics A Primer for MBAs Presentation at the HHL - Leipzig Graduate School of Management, 17 March 2004 Detlef Sprinz PIK - Potsdam Institute for Climate Impact Research & University of Potsdam http://www.sprinz.org

2. Overview Relevance of Sustainability for Business What is Sustainability & Global Politics? Measuring Sustainability Politics & Institutions for Sustainability Research Agenda

3. Relevance of Sustainability for Business Part of Good Corporate Citizenship Becomes Part of Regular Reporting for Leading Companies Vulnerability in Case of Gross Violation Nike Brent Spar DJ Sustainability Index Nuts & Bolts of Sustainability for an MBA

4. Sustainable Development World Commission on Environment and Development/Brundtland Commission (1987) “Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Needs, esp. of the poor, to be met Intra- and intergenerational equity Sustainable Development as the historic compromise between developing and developed countries at the 1992 Rio UN Conference on Environment and Development

5. Sustainability Environmental Economics (Turner 1993) Very weak sustainability K m, K h, K n : completely substitutable K c : non-existent Sustainability achieved if K ≥ 0 Weak sustainability K m, K h, K n : partially substitutable K c : exists and should be preserved unless opportunity costs are too high Sustainability achieved if K ≥ 0 and K c ≥ 0 unless opportunity costs are too high

6. Sustainability Strong sustainability K m, K h, K n : partially substitutable K c : exists and should be preserved Sustainability achieved if K ≥ 0 and K c ≥ 0 Very strong sustainability K m, K h, K n : perfectly complementary Sustainability = stationary-state economy, moral/ethical capital ≥ 0

7. Sustainability – Broadly Defined AGENDA 21 (UN): Environmental Economic Social

8. AGENDA 21 Topics

9. Sustainability – Broadly Defined Long-Term Societal Issues Management of Public Debts Management of Public Entitlements Across Generations Prior commitments of the social welfare state –$ 44 trillion (quoted in Heller, IMF, 2003) –= ca. four times 2004 forecasted GDP for USA (Economist) –Health insurance –Publicly mandated retirement plans –Catastrophic health care Stability of the Global Trading and Financial Systems

10. Global Politics Authority Patterns That Transcend the Individual Nation-State No need for governments: Bluetooth, Linux OS, etc. Governments Often Involved: Creation of the market for GSM communication Public-private partnerships Germany has a long tradition: welfare organizations since 19 th century, TÜV, etc.

11. Global Politics Lack of Central Authority at the Global Level International treaties (mostly) cannot be enforced Few powerful sanctioning systems Exception: WTO (yet decentralized execution) Even in a unipolar global system Rule-creation and implementation is decentralized

12. Global Politics Challenge of Global Politics Create and maintain authority patterns where markets produce clearly sub-optimal outcomes Observe subsidiarity in multi-level governance Nation-states are often better legitimized Resources are largely controlled by nation- states

13. Measuring Sustainability & Global Governance Measuring Sustainability UN Commission on Sustainable Development (CSD) -> Institutions

14. Measuring Sustainability & Global Governance World Economic Forum & CIESIN: Environmental Sustainability Index (2002)

15. Measuring Sustainability & Global Governance World Economic Forum & CIESIN: Environmental Sustainability Index (2002)

16. Measuring Sustainability & Global Governance Measuring Global Regime Effectiveness

17. Politics & Institutions for Sustainability National: German Council for Sustainable Development Founded in 2001 Mission: Consult government Facilitate societal dialogue First National Strategy (2002): “Perspectives for Germany” Current emphasis of national strategy on Climate & energy; mobility; environment, food & health Future Inter alias, increased incorporation of older generations Impact Too recent to judge

18. Global: UN Commission for Sustainable Development (CSD) World-wide forum created after 1992 UN Conference on Environment & Development Meeting-intensive Indicator development, but national reports have divergent scope Impact: unclear Politics & Institutions for Sustainability

19. Need for Long-Term Strategies, Resources, Implementation and Evaluation World Environment Organization Biermann, WBGU, and others Enhanced UN governance system

21. Politics & Institutions for Sustainability Challenge Inadequate attention to where most long- term decisions are made and where legitimacy predominantly “resides” Family, local, national, some supranational: EU How to organize a decentralized system of governance that improves on the status quo?

22. Research Agenda Assessing the Effect of Global Governance Further develop the “Oslo-Potsdam solution” of effectiveness tool Separating and aggregating effects across international treaty regimes Assessing regime effectiveness over time Investigate non-regime cases, and Explain the variation in regime effectiveness -> assist in regime design.

23. Research Agenda Feasibility of Long-Term Policy Current institutions created for short-term governance Constitutional provisions not specific enough (and are often ignored, e.g. public debt) Examples for Research Long-term climate policy (“prevent dangerous interference”) Intergenerational obligations (social security system) Sectoral policies (e.g., Airbus)

24. Conclusions Sustainability Is a Business Issue Potentially Wide-Ranging Concept Assessment of Progress Towards Sustainability is Possible (Effectiveness) The Challenge of Credible Long-Term Policy Remains

25. Additional Sources Presentation http://www.sprinz.org Links and Additional Information: PolitikON(line) Course “International Environmental Policy” Contact: dsprinz@pik-potsdam.de or dsprinz@rz.uni-potsdam.de