During the last month, when I look at what’s going on in the world, I increasingly ask myself the question: “Whose responsibility is it?” Who decides what risks are worth taking and who is responsible for the consequences when reality turns out to be worse than the risk assessment?
Japan
The Fukushima nuclear plant was built with the approval of the Japanese authorities. It was designed to sustain an earthquake of 8.2 and a tsunami of 6 meters. The reality turned out to be an earthquake of 9.1 and a tsunami of 12 meters. The Japanese government has decided that all damages are to be paid for by TEPCO as the plant owner despite the Japanese law stating that the government should share in covering claims in case of disasters.
Germany
The German government has decided that all German nuclear plants are to be shut down by 2022 (only 11 years from now) following public anti-nuclear sentiments postFukushima. Yet the risks of operating nuclear plants in Germany versus Japan are clearly different. The German decision will have consequences for global reduction of GHG emissions and climate change. It will also impact German industry and have serious impacts on the ability to operate nuclear plants in other countries. It is hard for me to see how we can achieve the needed reductions in GHG emissions globally without a substantial share of electricity supply from nuclear. Yet who will pay the bill and take responsibility for the consequences of the German decision ?
U.S.
The U.S. has developed a way to exploit shale gas energy resources on a massive scale. The consequences of the extraction methodologies seem unclear. Some countries are showing caution at permitting the use of hydraulic fracturing, or “fracking”, that lies at the heart of the methodology. Who is deciding the tradeoff between national energy security and potential environmental damage? And who will pay the bill if there is a problem? Given what we have seen after the Deepwater Horizon platform in the Gulf and the Fukushima disaster, governments will be putting a large share of the blame and financial burden on business.
Africa
There is now an enormous land grab going on in Africa. International investors are acquiring huge tracts of land to produce wheat, rice and corn for consumption back home. Two of the favorite targets for land acquisition are Sudan and Ethiopia. The Nile Water Agreement in 1959 gave Egypt the right to 75 % of the Nile water’s flow and 25% to Sudan and Ethiopia. This is now changing due to the land acquisition in these countries. The competition for Nile water could be a serious threat to the new Egypt regime. Who’s responsible for facilitating a solution to the rights of the Nile water going forward ?
Biofuels
Development of biofuels as an alternative to hydrocarbons has been sponsored by a number of countries in the name of actions to reduce carbon emissions and address security of fuel supply. The cost for these fuels is, in most cases, very high and has a negative impact on food availability and food prices. Moreover, biofuel production is water intensive. In Africa, international investors are acquiring land in Zambia and the Congo to produce biofuels. Africa is a continent with food shortages. Whose responsibility is it to balance the needs of Africa with the interest for fuel in other parts of the world ?
GHG emissions
The EU is claiming that they have been successful in reducing CO2 emissions in line with its commitments under the Kyoto Protocol. If you just measure the emissions from consumption in the EU territory, this is correct. However, embedded carbon in the increased imports of products from China alone all but cancels out this reduction. If we include embedded carbon in imports from other countries the EU has a substantial increase in CO2 emissions. So, whose carbon is it ?
Pensions
As highlighted in the April 9 issue of The Economist, since 1971 the life expectancy of the average 65-year-old in the rich world has improved by four to five years. By 2050, forecasts suggest they will add a further three years to that. Until now, people have converted all that extra lifespan into leisure time. The average retirement age in the OECD in 2010 was 63, almost one year lower than in 1970. Living longer, and retiring early, might not be a problem if the supply of workers were increasing. But declining fertility rates imply that by 2050 there will be just 2.6 American workers supporting each pensioner and the figures for France, Germany and Italy will be 1.9, 1.6 and 1.5 respectively.
Most governments are already planning increases in the retirement age. America is heading for 67, Britain for 68. Others are moving more slowly. Belgium allows women to retire at 60, for instance and has no plans to change that. Under current policies the mean retirement age by 2050 will still be less than 65, barely higher than it was after the Second World War.
The huge cost of pension schemes is being dealt with in the private sector. Final-salary schemes are hardly ever offered to new employees these days. In the public sector, however, they are still standard. The public-sector pension problem is sharpest in American states. The deficits in their pension funds may amount to 3 trillion USD. Private-sector workers face a different problem. The demise of final-salary pensions leaves them facing two big risks: that falling markets will undermine their retirement planning and that they will outlive their savings.
So, who is responsible for the well being of the aging population ? How will democracies handle a situation where the older voters will have an increasingly stronger voice in favor of retirement benefits paid for by a diminishing number of working-age people ?
World Government
We live in a world with weakened intergovernmental processes. With diminishing resources the UN doesn’t have much authority apart from the Security Council. Nor do other intergovernmental agencies. So, whose responsibility is it to maintain a sustainable world when “nobody is in charge” ?
If we, as the World Business Council for Sustainable Development, want to talk to “world government” and we knock on their door, nobody is at home.
Concluding thoughts
My main purpose in highlighting these issues is to challenge us, the global business community, to address the question – If governments are not capable of creating a sustainable world, what is our responsibility ?
Are we silent bystanders saying we knew of the problem but could do nothing about it: “Sorry, we are just global business”. Or, do we have a broader responsibility, given the resources and competences we have? As a father of three and grandfather of eight, I believe we have a responsibility for the well being of future generations. The question is what are we prepared to do about it? What is our responsibility?
The Rio +20 process over the next year is an opportunity to use the visibility of this process to bring some serious messages from global business about how we see our role and the role of other key actors in society. There will be a lot of “grandstanding” by governments and accusations of blame between the developed and developing countries. Both are culpable for the present failure of global intergovernmental processes. However, let’s disregard that debate. Let’s tell our version of the story around making progress towards a sustainable future ?
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