Book 2

Green Business, Green
Values, and Sustainability

Routledge Studies in
Corporate Governance
1. Corporate Governance Around

the World
A. Naciri
2. Behaviour and Rationality in

Oliver Marnet
3. The Value Creating Board

Corporate Governance and
Organizational Behaviour
Edited by Morten Huse
4. Corporate Governance and

Resource Security in China
The Transformation of China’s Global
Resources Companies
Xinting Jia and Roman Tomasic
5. Internal and External Aspects of

Ahmed Naciri
6. Green Business, Green Values,

and Sustainability
Edited by Christos N. Pitelis,
Jack Keenan and Vicky Pryce
Green Business, Green
Values, and Sustainability
Edited by Christos N. Pitelis, Jack

Keenan and Vicky Pryce
New York London

First published 2011
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Simultaneously published in the UK

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Library of Congress Cataloging in Publication Data

Green business, green values, and sustainability / edited by Christos N. Pitelis, Jack
Keenan and Vicky Pryce.
p. cm.—(Routledge studies in corporate governance ; 6)
Includes bibliographical references and index.
1. Social responsibility of business—Great Britain. 2. Corporate governance—
Great Britain. 3. Industries—Environmental aspects—Great Britain. 4. Sustainable
development—Great Britain. I. Pitelis, Christos. II. Keenan, Jack,
1936– III. Pryce, Vicky.
HD60.5.G7G74 2011
658.4'083—dc22
2010040373
ISBN 0-203-82808-9 Master e-book ISBN
ISBN13: 978-0-415-88382-5 (hbk)

ISBN13: 978-0-203-82808-3 (ebk)
Contents
List of Illustrations vii
1 CIBAM and the Symposium on

“Green Business and Green Values” 1
CHRISTOS N. PITELIS
2 Humans: Then, Now, and Looking Ahead 31

SIR CRISPIN TICKELL
3 The End of Gucci Capitalism 39

NOREENA HERTZ
4 The Energy Challenge 45

EDWARD HYAMS
5 Economizing, Innovating and Sustainable Economic

Performance: A Business School Perspective 52
CHRISTOS N. PITELIS AND JOCHEN RUNDE
6 Green Values in Communities: How and Why to Engage

Individuals with Decarbonization Targets 67
MICHAEL POLLITT
7 Green Business and Green Values:

A Perspective from Government 81
ELIZABETH ANASTASI
vi Contents
8 Sustainability of Corporate Profit 94
JACK KEENAN
9 Doing Good Is Good Business 98

DAVID ROTH
10 Demonstrating Goodness 104

MICHAEL LITTLECHILD
11 Sustainable Special Economic Zones: A Call to Action 112

RICHARD BROYD, JEFF GROGAN, ALEXANDRA MANDELBAUM,
ALEJANDRO GUTIERREZ AND DEBRA LAM
12 Considering Green Business and Green Values 141

J. C. SPENDER
List of Contributors 155

Index 163
Illustrations
BOXES
6.1 The Suggestions for a Global Deal on Climate Change 71
FIGURES
8.1 A risk matrix. 96
11.1 Distribution of private sector and public sector zones

in developing and transition economies. 114
11.2 The composition of a region’s traded industry clusters. 120
11.3 Plastics subcluster. 122
11.4 Carbon footprint of example Chinese SEZ. 124
11.5 Comparative analysis of countries (per capita). 124
11.6 CO2 emissions reduction from 2007 baseline (cumulative). 129
11.7 Potential reduction of individual interventions. 130
11.8 The development life cycle and resource and waste

management 132
11.9 Illustration of resource exchange network. 134
12.1 Field of green 148
12.2 Principal modes of human knowing. 151

1 CIBAM and the Symposium
on “Green Business
and Green Values”
Christos N. Pitelis
INTRODUCTION
The aim of this chapter is to introduce the reader to the nature and philoso-
phy of the Center for International Business & Management (CIBAM) and
zero in on one of its major functions, the Symposium, in particular the one
in February 2009 on “Green Business and Green Values.” In addition, we
summarize the main points made at the introductory talk by the Director
of CIBAM (the present author). A short summary of all the proceedings, to
include some of the discussion, appears after the introduction—signed by a
group of Cambridge MBAs who attended the Symposium and co-authored
the report. Here, I will only refer to the topics covered, the authors and
rationale, as well as to the articles included in this book.
CIBAM AND THE CIBAM GLOBAL BUSINESS SYMPOSIA
CIBAM’s Identity and History

CIBAM is a research center established in 1995 within the Judge Busi-
ness School, at the University of Cambridge. It is the oldest such center.
It was co-founded by Professor John Child and the present author, with
John Child serving as the fi rst Founding Director, from 1995 to 1997. The
present author, who was then Associate Director, took over as a Director
of CIBAM in 1997. Noreena Hertz was appointed Associate Director. An
inaugural meeting-mini conference took place to mark this in July 1997 at
St. John’s College, Cambridge, attended by friends—academics and busi-
ness leaders, the last mentioned invited to join as advisory board members.
Founding Board Members included Sir Martin Sorrell, CEO WPP; Mr.
Jack Keenan, then CEO of the United Distillers and Vintners; Mr. Man-
fred Tuerks, Managing Director, AT Kearney, Automotives; and Marc Ver-
stringhe, then CEO of Catering and Allied.
Following presentations by some academics on issues they felt might
interest the business people present, the discussion zeroed in on what should
2 Christos N. Pitelis
be the nature, philosophy and function of CIBAM, to include the interac-
tions and divisions of tasks between the academics and business people.
The role of research centers within business schools is not as easy to
determine as in some other schools, for example mathematics or engineer-
ing. The aim of the theoretical mathematician, for example, is to come
up with fundamental research output that may or may not be of commer-
cial relevance. In an engineering or physics department, on the other hand,
research to output is normally expected to have clear, discernible com-
mercial applications. Business schools stand somewhere in between. The
research output of a business school is normally expected to be simultane-
ously rigorous and with clear implications to managerial practice, albeit
without necessary commercial applications. It is, so to speak, high-brow
potential prescription. Clearly the above description does not apply to all
business schools, or the other types of schools mentioned, but this is a usual
expectation.
When originally conceived by John Child as a Center for International
Management, the intention was to focus on research issues pertaining
to the management of international business, particularly multinational
enterprises (MNEs), what we call in academic circles International Man-
agement (IM). John Child, who moved to Birmingham University in
1997, is a global leader in this field. IM deals with issues pertaining to the
“insides” of MNEs, for example their internal organizational structure; the
link between structure, strategy and performance, the way through which
MNEs can leverage the skills of their subsidiaries, the role of autonomy
versus control of subsidiaries; how MNEs can deal with issues of organiza-
tional coordination and communication, whether and how to adapt to local
taste in “host” countries, or to aim for cost reductions through integration.
Issues of culture and inter-cultural management are critical in this context,
as they are the particularities of IM in emerging markets, such as China,
East Asia, Russia, India, Brazil and now Africa. Some of the founding aca-
demic members of CIBAM, notably Noreena Hertz, Malcolm Warner and
Charles Hampden-Turner, had unique knowledge and competence on these
issues, rendering these a natural original focus of CIBAM’s research.
Another aspect of International Business (IB) scholarship, as for exam-
ple practiced by associations such as the Academy of International Business
(AIB), and its European, regional and national counterparts, for example
the European International Business Association (EIBA), focus also on the
issues pertaining to the nature, objectives, growth, boundaries and strate-
gies of MNEs and the impact of the above on MNE performance. Focal
issues here include the choice of modality by MNEs (e.g., foreign direct
investment versus licencing/franchising, and inter-fi rm cooperation, such
as joint ventures and strategic alliances); how being an MNE can help
fi rms capture value from their advantages (whether through efficiency,
market power or a combination); the interactions between MNEs, regions
and nations; the competitiveness of fi rms, regions and nations; government
CIBAM and the Symposium on “Green Business and Green Values” 3
policies toward MNEs, to include trade, foreign direct investment (FDI),
and cluster and other microeconomic and macroeconomic policies that
can have an impact on MNE decisions. These aspects of IB are based more
on business economics and international political economy (IPE) founda-
tions. They are closely linked to IM concerns (e.g., a badly implemented
entry through FDI will lead to failure, even if FDI was the best entry
modality theoretically), and they also involve their special considerations.
These aspects of IB were the research focus of the present author, who
moreover was working at that time on the supply-side (industrial) and
catching-up strategies of East Asian countries, such as Japan and the Four
Tigers (Hong Kong, Singapore, Korea, Taiwan)—including their attributes
and policies towards FDI and MNEs—and compared them to Western
policies, and those of the emerging Central and Eastern European “tran-
sition” economies. Noreena Hertz, too, was working on international
competitiveness issues, in general and particularly in Russia, where she
had done work with Michael Porter. Peter Nolan, a founding academic
member, was carrying out research on the “global business revolution” in
general, and with particular reference to China, on which he is one of the
leading Western experts.
The complementarities, both conceptual and regional, were far too obvi-
ous for John Child to miss, and following a discussion with the present
author the two agreed to create a center with a BA between the CI and
the M—leading to CIBAM. The research focus of the center, as a natural
result would be:
• The nature, growth, boundaries and strategies of MNEs, to include

entry modalities, such as FDI, franchising and joint ventures;
• The competitiveness of fi rms, regions and nations and government
policies toward FDI and MNEs;
• The management of MNEs to include inter-cultural management
issues;
• The particularities and comparative analysis of emerging economies,
notably China, East Asia, Russia, Central and Eastern Europe vis-à-
vis mainly IM, but also IB-related concerns.
Identifying the focus, joint interests and complementarities, and aim-

ing to undertake collaborative research, and research-related activities by
building critical mass, is by itself an important enough reason to set up and
maintain a research center within a business school—provided the quality
of the people and their research interests and focus are sufficiently rigorous
and business relevant. But CIBAM was faced with a more specific chal-
lenge. At the inaugural meeting in St John’s and after having attended my
presentation, Sir Martin simply asked, “and what is in it for me?” This led
to the appreciation that thinking one is doing business-relevant research is
not enough; research needs to also be perceived as relevant by business. One
way to do this is by developing tools (such as Michael Porter’s five-forces
model) which distill the essence of academic research but target it specifi-
cally to business policy makers. This involves elements of both research and
consulting. However, it does remain at arm’s length, so to speak. The aca-
demic does the work, and he or she teaches it to, or consults, the business.
While there is nothing wrong with the above, and members of CIBAM
certainly do this too, there was and still is debate in business school cir-
cles of the need for deeper interaction between business and academia,
with each party contributing where they possess comparative advantage
and each getting what they need from this collaboration. Starting from
the objectives, both business and academics (as well as firms and indeed
regions and nations) share one objective in common: to capture value out
of their perceived to be value creating and appropriable advantages. What
differs is not so much the generic objective, but the metrics—what is being
measured. Businesses focus on the bottom line (profit), hopefully subject to
this being sustainable for them and the wider community, and they have
subsidiary interests on philosophical-academic issues and research, usually
to the extent it helps them leverage it for commercial purposes. Academics
in business schools aim for maximum impact through rigorous and rel-
evant top-quality research, published in scholarly journals, subject to mak-
ing a good living out of this activity, in terms of salary and consulting.
Wider, societal concerns are often (albeit not always, or perhaps as much as
they should) part and parcel of business school research: for example cur-
rent debates on Corporate Social Responsibility (CSR) and Business Ethics.
One way through which the mutual interests of both parties can be satis-
fied is by convening high-level events (call them colloquia, symposia, con-
ferences) where the two parties physically meet and exchange ideas on a
theme of business relevance. This is not consulting per se; it is not business-
funded research either. Instead, it is a genuine two-way street in which
both parties give and take. Academics give state-of-the-art knowledge and
rigor. Business provides topicality, immediacy, and foresight. As regards
business-relevant research, for example, it is difficult for an academic to be
aware of current and emerging (especially immediate) concerns of business.
In this context, business academics can get inside knowledge and insight
on what are also likely business concerns of the present and near future.
For example, at a time when for the present author, declining (but still at
around 7%) unemployment seemed to be an economic concern, Sir Martin
Sorrell suggested that “talent wars” (the attempt by business to acquire tal-
ent) was the critical issue for his business. That led to the fourth (July 2001)
symposium, “Talent Wars . . . Why and How to Compete.”
In addition to possessing more time for research, academics also possess
conceptual frameworks that can serve as a lens through which one can
analyze, propose solutions and even attempt to predict longer-term trends.
Now business academics and economists are notoriously bad of predict-
ing anything in particular with much success, but there are various cases
where a decent conceptual framework afforded impressive predictions.
An example is the father figure of IB, Stephen Hymer, who, back in the
early 1970s, predicted the far more recent trend toward outsourcing (see
Cohen et al., 1979), by analyzing the respective disadvantages of integra-
tion versus outsourcing and proposing that fi rms would gradually aim to
keep the advantages of both, by removing the disadvantages of outsourcing
(the lack of control) by developing brands and maintaining the control of
“intangibles” and some tangibles (e.g., the Coca-Cola secret recipe). There
are more such examples suggesting that business academics too can be of
further value to business.
Ideas such as the above led to the adoption of the Forum; initially named
Colloquium, it was subsequently renamed as Symposium (from Plato’s hom-
onymous book) to reflect the fact that the meetings involved not just the
interactions of ideas but also the consumption of food and drink, which is
far closer to the etymology of the “Symposium” (literally drinking together,
from syn = “together” and pinein = “drinking”!). Indeed, there has been
lots of drinking and eating since.
Based on the idea that businesses know better what they need to know
(an almost tautological statement, yet not necessarily always true, especially
on longer-term sustainability-related issues), the decision was for the global
advisory board to determine at a board meeting the topics of the Symposia.
The result was a resounding success and also rather surprising. It was sur-
prising because some of the issues selected (e.g., ”Ageing” or “Religion”)
did not quite strike, originally at least, as being too business-related—
rather they looked quite academic, not at least to this author. A resounding
success, not least because almost invariably the topics were selected well
before (often up to two years) the Symposium, the topics became headline
news at just about Symposium time. The Global Financial Crisis Sympo-
sium in February 2008 could not be a better example. When the topic was
proposed by CIBAM board member Jonathan Garner (managing director,
Morgan Stanley), the only interest anyone had on fi nancial markets was
how to make more money out of the relentless and apparently endless rally
of stocks and house prices. Jonathan instead was seeing clouds—a bear, I
thought, albeit he did not appear like one. Two years later, the crisis almost
coincided with the Symposium; it was hard to fi nd speakers as some were
losing, or moving, jobs; and there was some excitement, concern and, dare
I say, panic. Now, economists should be able to predict this (the conceptual
lens is defi nitely there), but few dared—perhaps it is the fear of reputational
loss. Jonathan did. This almost spooky predictive capability of the board
became a major reason for the success of the events. Others include the
venue, the format, the participants—in short the “business model and the
“value proposition.”
Much of the above is an evolutionary, learning, trial-and-error process.
The fi rst few meetings were one-day events, but soon we moved to a two-
day event involving one night stay in Cambridge, starting Friday afternoon
and ending Saturday evening with the board meeting. From 2005 we
decided to move it to start Thursday evening and finish Friday evening—all
in 24 hours, from 5:00 p.m. on Thursday to 5:00 p.m. on Friday, followed
by the board meeting.
Concerning the format, early events involved few (four or five) stand-
up talks, mainly by academics followed by some questions—admittedly a
rather tedious experience for people traveling from abroad for the purpose.
Through a continuous process of learning and (mostly) improvement, the
fi nal product involves as many as 15 to 20 speakers, panelists, chairs and
discussants, over the 24 hours. There are now panels, as well as stand-up
lectures. Speakers are allowed to talk for around half of their allocated
time (40 minutes for stand-up speakers, 10 to 15 minutes per panellist),
followed by very intensive and often heated debate.
Speakers involve a mix of around 50–70% business people and practi-
tioners (normally however with impressive academic credentials), around
30% academics and up to 20% policymakers or students, normally chosen
from the current Cambridge MBA class and some MBA alumni. All these
are carefully selected from a much wider link of potential speakers, created
mainly through the Network (the CIBAM members and friends) but also
through in-house research.
As the critical element of success is the dialogue and the exchange of
ideas, the number of participants is capped to a maximum of between 55
and 70, the usual number. From these around 30 are business people, 15
to 20 are academics, and up to 15 are MBA students and guests. The MBA
students are selected on the basis of background and interest in the topic,
and they are asked to help produce a report from the proceedings, such as
the one that follows this introduction.
In the early days the venue was a Cambridge College—preferably a dif-
ferent one each time. Following the completion of the new Judge Business
School building, the Thursday part takes place in a College and the Friday,
at the Judge. On Thursday evening there is a gala dinner at the College—
usually in one of the Grand Old Halls. Gradually there emerged the institu-
tion of informal drinks at the lobby bar of a Cambridge hotel by the river.
This turned out to involve lots of it, I am afraid some times up to 5:00
a.m. (with the Symposium recommencing at 9:00 a.m., usually proceeded
by breakfast at the hotel, at around 8!) In the bad old days, there was also
a fair amount of cigars, but this is now regarded as a terrorist act (at least
indoors)!
In addition to the Symposium, we gradually developed the CIBAM Dis-
tinguished Lecture series, usually once a year, lately combined with a panel.
The initial effort was to have this delivered by women, as a means of level-
ling the playing field, and mainly because so many excellent ones can some-
times be bypassed by equally deserving men. Noreena Hertz (2001), Vicky
Pryce (2002), and Dame Sandra Dawson (2004) gave some of the early
lectures. Gradually, we gave in to bringing in men (mostly for expediency
and the provision of more choice). David Teece (2006), Pankaj Ghemawat
(2007), former Prime Minister of Greece Costas Simitis (2008) and Alain
Verbeke (2009) gave these lectures. These are now also on a Thursday
evening and are followed by the usual gala dinner in a Cambridge Col-
lege—and the “informal drinks,” too (but thankfully with more than a
three-hour sleep time before Friday morning!).
The Cambridge-base of the Symposia (in effect the contribution of the
ingredients described above) proved a successful one. Attempts to move
out (e.g., an event took place at the WPP headquarters in London, hosted
by Sir Martin Sorrell) were not quite the same. On the other hand, the
Symposium on Southeastern Europe in Athens (2009) was a remarkable
success. So it is not easy to generalize. We often debate about this, not least,
for example, as to why some extremely busy people will almost invariably
make time to come from places such as the United States, Russia and Tai-
wan. It would appear that the Cambridge experience (being cut off, away
from it all), the concentrated intensive knowledge exchange over the 24
hours, and, of course, meeting up with old friends and a possible weekend
break, all contribute. Whatever it is, it seems to work.
This is also evidenced by many requests for knowledge transfer both
within Cambridge and internationally. For example, a variant of the Sym-
posium format was tried in St. Petersburg, where the author was visiting
in 2007; the CIBAM model was also used at the Center for International
Business and Innovation (CIBI) in Copenhagen Business School, with the
present author, as one of the two keynote speakers, discussing the CIBAM
experience.
Other CIBAM events include an internal seminar series at the Judge.
Other activities involve mainly selected research projects.
Research output has been of three main types. One is the CIBAM mem-
bers’ own research, which benefits from the interaction with the busi-
ness community by getting some inside knowledge as to what currently
matters for business. The present author, for example, regularly to issues
or ideas discussed at the Symposia in his papers. A second type involves
CIBAM-sponsored books and case studies; examples are the book detail-
ing the history of Catering and Allied and the case study on the Advanced
Management Program International (AMPI), which was the fi rst attempt
to transfer to the UK the Harvard experience, led by Harvard Professor
Harry Hansen. As a result the subsequently created Harry Hansen Trust
decided to continue its activities in collaboration with CIBAM. A third
type of output involves the proceedings of the events. These are published
as a CIBAM book (such as the present one), in journals and, when possible,
as special issue of journals. Such special issues included in the past Busi-
ness Ethics, Corporate Governance and Global Business and Economics
Review. The present book is another example. Other papers from Sympo-
sia presentations have been published in journals such as Contributions to
Political Economy. Collaborations, between CIBAM members resulted in
publications in the Journal of International Business Studies (see Dunning
and Pitelis, 2008) and Organization Science (see Mahoney et al., 2009).
Particularly striking has been the success of the Corporate Governance spe-
cial issue. The model (to include academic articles and articles by business
leaders, NGOs and activists) was a major success. A number of the ten most
cited articles from the journal were for some time from this special issue,
the one by Jack Keenan (CIBAM patron) was the second most cited article.
The article itself was a short account of Jack’s own personal experience
from boardrooms. Nothing very academic at all—it looks like there is a
need for more of that in business scholarship.
Membership
An organization is as good as its members. At CIBAM we have been priv-
ileged. Cambridge is an attractive place, with special people. This helps
attract more special people. Over time we were privileged to create a net-
work of business leaders, academics and some policymakers, all of the high-
est standing. Membership (and its type), much like everything else, evolved.
We started with a few intra-Judge academics and founding board busi-
ness members. At the time of writing this, there are four major categories:
global advisory board members, business associates, academic advisory
board members and Cambridge-based academics. The management mainly
includes the present author, the associate director, one research assistant
and one administrative assistant. Others, like our external liaisons person
(M. Vintiadis) and our academic advisory board, help and advise, as much
as they are able to, given the non-stipendary nature of the positions.
Critical for CIBAM’s progress has been its fi rst expansion phase that
took place in 1998–2000. That was mostly the result of the effort of CIB-
AM’s associate director Noreena Hertz. Noreena undertook the task to
prepare a value proposition, select possible board members, approach them
and invite them to apply to join the board. That led to some remarkable
additions to our board, such as Len Blavatnik, Jean-Michel Broun, Tommy
Helsby, Andrew Morgan and Vicky Pryce. For reasons to soon become
clear, CIBAM as it is now, would not be without this effort. We owe a big
thanks to Dame Sandra Dawson (then director of the Judge), who helped,
by waiving Judge overheads and liaising with and helping Noreena.
The academic advisory board was intentionally left rather small, and quite
exclusive. Currently it includes Peter Buckley, John Child and David Teece,
all known enough not to require further comment. The academic associ-
ates include selected leading academics from other universities. The business
associates are leading business people, albeit with less involvement on the
decision-making process, an issue to which I return. At the moment overall
membership exceeds 100 people, from many countries and continents, from
all types of business and from many top academic institutions. The full list
of current CIBAM members can be found in Appendix I of this introduction.
Drawing on the joint expertise of such a network for potential speak-
ers and other Symposium participants is a blessing. Combined with the
remarkable foresight of our board, that selects the Symposia topics, we
were privileged to deal with issues such as “Russia 2008—Putin’s Legacy
to his Successor” (back in 2004!). The issues of ethics, talent wars, ageing,
environmental sustainability, corporate governance, religion, media, and
security, terrorism and business were all remarkably topical and exciting
events. Just indicatively the event on media coincided with the publication
of cartoons offensive to the Islamic religion, the one on corporate gover-
nance was decided before, and took place soon after the Enron scandals. I
fi nd it hard to believe that this could have happened, were it not for the nose
and instinct of those on the ground (the business people), who both sense
such developments and have the high-power incentive to do something as
they feel their impact on their bottom line—current and emerging. Quite
often (but not always) the comments from the participants and the board
were that “that was the best Symposium yet!”
In addition to selecting the topics, helping to propose and bring in speak-
ers (usually in the form of an organizing committee of two or three who
proposed the topic and had special knowledge of, and interest in, it), and
getting involved themselves as speakers, panelists, chairs, or just a criti-
cal audience with astute questions, the function of the board at the board
meetings is to provide feedback and suggestions for improvement—on the
speakers, the format, the composition, the context, the venues, everything
pertaining to the Symposium. Most important, however, is the strategic
role—what we want to be; where are we heading; what we want to do next.
These are not easy issues, and there is often heated debate. For example, a
recurrent theme is whether we should remain an exclusive “boutique” or
aim to expand, with an eye to possibly becoming a mini-Davos, but with
a specific theme/focus for each meeting, as well on other different features
such as more intimacy and perhaps a more “critical” focus in the sense of
being cognisant of the need to deal with globalization’s potentially negative
“externalities.”
Such debates help us sharpen our understanding of what we are, what
we try to do and why. I believe that through an evolutionary process, there
is now at least an implicit understanding of the idea that we aim to explore
the interrelationship between practice, theory and policy, with an eye to pre-
scribing better policy and practice, for business fi rms, but also governments
and more widely (e.g., international organizations). In today’s world the most
critical issue is arguably how to achieve sustainability of the wealth creation
process at the global scale. Sustainability is not just environmental, it is also
social and economic; the three are related. Sustainability can be undermined
by limited rationality, imperfect knowledge and information, different and
potentially conflicting interests, embedded power structures, shortsighted-
ness, time inconsistencies, and a lot more. All these apply to business firms,
especially MNEs, but they also apply governments, regional blocks (e.g.,
EU) and international organizations (e.g., the IMF, World Bank, and WTO).
There appears to be a pressing need to increase the specialist information
available, to engender enlightened practices and policies, to align interests
and to try to address problems of time inconsistencies, and other constraints,
all with an eye to effect governance that favors sustainable global wealth
creation. This is in everybody’s interest.
Clearly a grand objective such as the above is rather pretentious to hope
to achieve, and indeed even too romantic. We are not deluded, we simply
feel that dialogue, mutual understanding, sharing of knowledge and learn-
ing, can help us improve things—not reach perfection (which is probably
a Chimera), but build on strength, and improve weaknesses to get better.
Certainly there are weaknesses to be improved. One of our global board
members once asked the delegates to tell him what was, in their view, the dif-
ference between the “Mafia” and “Big Business.” Following a short silence,
he continued that “the Mafia is organized crime, Big Business is very orga-
nized crime!” You need intimacy for such views to be aired by top business
people themselves. Important, however, was that this joke was made not
long before the Enron and similar scandals. Such scandals confirmed there
was more to that joke than one might wish. It also showed that sometimes
Big Business can also make mistakes, that policymakers now come to realize
this, and that sometimes it is even not so easy to tell who is who and what is
what. Unfortunately, things get far more tangled when it is recognized that
(apart from being definitely less organized) big governments and big interna-
tional organizations can be more of a problem that the solution, see Stiglitz
(2002). Analyzing and debating frankly these issues can be an eye-opener,
and help at least appreciate the enormity of what needs to be done, but also
the need to keep trying. In our own little way, at CIBAM we are.
I purposely left the issue of funding until last. There has been much debate
in the past 20 years or so about the importance of being self-funded, and
certainly CIBAM is based on this model. In practice this means that the vari-
ous CIBAM events and activities (which also include a bi-annual newsletter
entitled Gloquacious, an Annual Report and a Profiles Book) are funded by
the members. These cannot be the academics (who can hardly survive on
notoriously low academic salaries), so it had to be the business members. Of
course, it could well have been the government too, and also the university
and/or the school. These are vexed issues; with the government we did not try
enough due to the usual time pressures (although we were twice sponsored
by the DTI and BERR, thanks to the efforts and support of Vicky Pryce),
while to the university and the school, we pay overheads. Clearly, one can
understand universities which help create so much wealth, but only manage
to capture a tiny fraction of it, yet every case is different. I feel CIBAM and
“products” such as the Symposium are “public goods” with external spill-
overs which are often very hard to quantify. In such cases, we know from
our public economics, that non-excludability, non-revelation of preferences
and free-riding are likely to lead to under-provision. This may explain why
there are not many CIBAMs and that CIBAM itself is now at a crossroads.
CIBAM at a Crossroads
Throughout its existence CIBAM relied on an annual donation by its board
members, to fund its activities. No CIBAM member receives payment for
these, the funding covers the administrative and research support, as well as
the cost of the Symposia and the other activities. Over the years the activi-
ties have increased by a multiple of at least 10. Funding could not follow for
a combination of reasons that include increasing overheads by the univer-
sity and the school, little practical recognition of the work put into Sympo-
sia by the school (indeed changes in rules which recognize almost all other
“administrative tasks” but the Symposia); increasing “professionalization”
of the various functions in the school, such as human resources and fi nance,
which increase the costs of communication and coordination and can con-
tribute to making things sometimes unyielding; the need to cover expenses
for some eminent speakers (we normally relied on people paying themselves
for the “honor,” which does not work with some professional speakers,
who at the very least request, quite legitimately, their expenses) and others.
All these led to a very small group of people (mainly the director) spend-
ing increasingly more time at no financial benefit and gradually at a large
and increasing “opportunity cost,” in terms of foregone income (e.g., from
executive education) and time (e.g., for research). All these require substan-
tial additional funding, which in turn require time and other resources as
well as additional support from within and without the university and the
school. There has been progress in this direction under the inspired leader-
ship of the Judge by Arnoud De Meyer. De Meyer embraced the concept of
Centers and the Symposia and contributed to their success in various ways
(e.g., by waving overheads and organizing joint events, such as the present
one). Such help gives us optimism and keeps us walking!
THE SYMPOSIUM ON “GREEN BUSINESS

AND GREEN VALUES”
This section provides a summary of the Symposium’s proceedings; it has

been produced by Erik Lee, Zarko Maletin, Barclay Rogers, Igor Tumanov
(MBA students 2008/2009, Judge Business School). The articles included in
this volume elaborate on a selected number of the talks.
First Day—Thursday, 19 February 2009
Welcome Address
Dr. Christos Pitelis, CIBAM Director, welcomed the audience and noted
that the Judge Business School (JBS) was celebrating its 20th year and
recently ranked as the #3 business school in the United Kingdom by the
Financial Times. He then introduced Dr. Jochen Runde, director of the
MBA Program at JBS, who highlighted how sustainability is part of the
core of the MBA and how JBS will next year attempt to devote a specific
track to sustainability. He mentioned individuals associated with JBS who
have published items related to the environment and Judge’s association
with the Cambridge Center for Energy Studies, and its additional focus
upon green issues in general.
Introduction
Dr Pitelis reviewed the history of CIBAM, which was established in 1995 and
is a center within JBS. He mentioned how CIBAM explores the conditions
for sustainable wealth creation in the global environment and achieves this by
identifying the links between practice, theory and policy. CIBAM has been
focusing on the Global Business Symposium and is proud of the global advi-
sory board’s foresight to discuss topics such as corporate governance and secu-
rity, terrorism, and business before they became headline news. Due to time
constraints, Dr. Pitelis highlighted that enlightened self-interest and national
government regulation policies are necessary but not sufficient to create sus-
tainability values. Then Dr. Pitelis introduced the main topics of the sympo-
sium and left the floor to Dr. Noreena Hertz, CIBAM associate director.
Opening Panel: “Green Business and Green Values: Issues”

The opening panel was chaired by Dr. Hertz who invited the panelists to
introduce the crucial issues affecting green business and green values. She
mentioned that in the wake of recession there is talk about shifting focus
away from sustainability and human rights, but inferred that by the end of
the Symposium, it would be made clearer than ever that this is the moment
to address these issues.
“A Green Finance?”
Mr. James Twining (Associate Principal, McKinsey & Co.)
Mr. Twining focused his discussions around climate change and the econ-
omy: the myth versus realities. He mentioned the upcoming meeting in Copen-
hagen which will re-examine the Kyoto Protocol. Furthermore, he mentioned
how detractors have claimed that in light of the recession, the focus should be
on the economy, but Mr. Twining maintains that is the exact reason to look at
sustainability because focusing on sustainability will help the economy.
Mr. Twining then discussed six myths and provided evidence to support
his point of view which maintains that with market-based incentives, the
world can enjoy increases to the economy through sustainable recovery.
Myth 1: We can wait.

Reality: We have a decade or less to act; waiting will significantly increase
risks and costs. Research shows that there is an 80% chance of maintaining
a less than 2 degrees Celsius rise in temperature if we can limit carbon to
400 ppm; however, if carbon is reduced to only 500 ppm the chance of
maintaining a 2 degree Celsius temperature increase drops to 40%. The
longer we wait, the more we will have to do, and a delayed reaction may
render it impossible to keep carbon below 450 ppm.
Myth 2: We should fi x the economy fi rst.

Reality: Fixing the economy requires reducing fossil fuel dependence;
otherwise, we will sow the seeds of the next crisis. People say the subprime
crisis is the core issue, but as Thomas Friedman points out, borrowing
money from China to buy oil from the Middle East and then burning it,
doesn’t make much sense. The United States currently has 2.4% of reserves,
but uses 24% of the global oil. To avert a global oil crisis America must
make structural changes toward this.
Myth 3: Reducing emissions will cost too much.

Reality: The “costs” of reducing emissions comprises investments that
are manageable, and in many cases highly profitable. Mr. Twining presented
a global greenhouse gas (GHG) abatement cost curve which examined 200
choices versus their abatement potentials. Low-carbon technologies have
made great strides, and future learning curves will likewise be profitable.
The carbon count can be kept at 450 ppm if £800 million per year are
invested by 2020, £1.2 trillion by 2030.
Myth 4: Reducing emissions will reduce growth and cost jobs.

Reality: Clean energy investments will likely stimulate growth, create
jobs, and spur carbon productivity. Incremental costs boost investment for
GDP counts; the key is that incremental borrowing does not strain the
economy or borrowing rates. He showed evidence that potentially 3.5 mil-
lion jobs could be created in the United States by 2028.
Myth 5: Only developed countries need to (or should) act now; developing
countries can wait.
Reality: We won’t solve the problem unless developed and developing
countries act together . . . now! A reduction of 17 Gt CO2e is needed by
2020 and only a 5 Gt CO2e reduction can be achieved in developed coun-
tries utilizing current technologies. Mr. Twining claims the abatement
math does not add up and cannot be met without significant reductions
from developing countries. It is necessary for developing countries to hit
90% of abatements for 450 ppm to be achievable.
Myth 6. Markets and regulations are in opposition.

Reality: Market and regulation can play complementary roles. Cap and
trade, tax, and regulation are all methods and incentives that can be uti-
lized to structure for success. There is no silver bullet; incentives will help,
but government regulation is also required to hit targets.
In summary, Mr. Twining said that investments can stimulate growth
in jobs, near term, and help create a long-term stable economy. The costs
are manageable, but the key will be in achieving consensus among the192
nations in Copenhagen to work together on these very necessary and
important issues.
“Doing Good Is Good Business”

Mr. David Roth (CEO, The Store, The WPP Group)
Mr. Roth’s key message was that “doing good is good business” pre-
sented from a marketing and retailer’s perspective. He noted that unlike a
few years ago, sustainability, environment, and social responsibility were
never far from the headlines and boardrooms. CSR is not philanthropy
wherein you give away small fractions of profit, but rather, it is a mindset
that helps businesses think in terms of how to give the business direction,
accountability and clarity.
Mr. Roth said that sustainability business cases help improve corporate
profitability and reduce environmental impact—a win-win for both com-
panies and customers. Making these changes though is inherently complex
because the supply chain is long and interconnected. He asked the ques-
tion whether businesses should continue to purchase from suppliers that
were not doing good? Is it better for a company to walk away or should
they work with suppliers to improve their practices, which costs money and
time? He suggests that businesses should apply the following imperative: if
your products could tell their story from cradle to grave, from raw materi-
als to fi nished products, would you be ashamed or proud?
Mr. Roth noted that many retailers utilize sustainability as a marketing
ploy, but that it demands integrity. The rules are clear, that utilizing a thin
veneer is worse than not doing it at all because if a veneer is scratched and
exposed, brand damage in this area can be fatal. He also noted how cus-
tomers are requiring transparency, for example being able to trace jewelry
components down the supply chain. This new openness will be rewarded
by customers.
Mr. Roth then discussed how the marketing community has a respon-
sibility to be a driver in fostering societies where consumption is sustain-
able and excessive consumption is unfashionable. He said the marketer’s
message should shift to make durability a positive and disposability a
negative. Under the current economic climate, sustainability budgets
will come under pressure and will likely be scaled back. Customers will
spend less, but expect retailers and suppliers to be ethical on their behalf.
Mr. Roth closed his presentation by stating that businesses need to dem-
onstrate leadership and put forth a model for sustainable development,
and that partnership between business, government, and NGOs will be
required for success.
“Islamic Banking and Sustainability”

Mr. Khalid Abdulla Janahi (CEO, Dar al-Maal al Islami Trust)
Mr Janahi’s presentation focused on values and education. He started
his discussion focusing on green values and said that we are where we are
today because of a lack of overall values and because of greed. He contends
that it is a myth that developing countries want developed countries to suf-
fer and that we need to fi nd our real values as human beings. All the blame
that everyone tries to place on everyone else needs to stop and that internal
review must take place. He asked why trillions of China’s money is sitting
in the United States and not being used to improve conditions locally. He
said that the Middle East lacks good health services and schools and thinks
that treasuries will be the next bubble.
Mr. Janahi then turned the discussion to Islamic banking’s basic value—
asset-backed business, which adds value to community. Islamic banks
were not allowed to speculate or create hedge funds and could only con-
duct asset-backed business—which is why their bottom lines were not as
impacted by the recent fi nancial collapse. With over £1 trillion on the bal-
ance sheet, Islamic banking is projecting a15–20% growth per annum over
the next five years.
Mr. Janahi claims that education is the key to supporting green values.
Green business does not equal green values; he pointed out that companies
can be doing green business because they are greedy and want to make
money. Doing good and having green values, is on the education side. He
maintains that business is the main player, governments will be involved,
and NGOs will not play as strong of a role. While he understands the
importance of the environment, he believes that the future cannot be suc-
cessful without health, education, and then the environment.
“A Role for Government”

Ms Elizabeth Anastasi (Economic Adviser–Sustainable, BERR)
Mr. Paul Drabwell (BERR representative)
Ms Anastasi discussed the key low-carbon economy issues facing the UK
government. One fundamental issue is defi ning “green business” as this has
evolved over time from environmental issues, renewable energy, and waste
treatment to today’s issues of carbon management and social responsibility.
Britain has made a legally binding carbon reduction target of 80% (rela-
tive to 1990) by 2050. The whole economy must take account of carbon
commitments and to an extent “green” their operations with the empha-
sis that all businesses and sectors understand the implications of these
commitments.
Ms Anastasi relayed the current global size of the low-carbon economy,
as standing at £3 trillion, with the UK sector accounting for £100 billion,
employing 880,000 people, and a forecast growth rate greater than 4.5%
annually to 2015. These values are slightly higher than normal because
they include environmental goods and services, renewable energies, emerg-
ing low carbon, and waste treatment, so that it can illustrate how the entire
economy is impacted.
Ms Anastasi then noted that the low-carbon economy is expected to grow
strongly with increasing demand. She contends that the UK holds a compara-
tive advantage in a number of areas that can develop green business oppor-
tunities, such as software, electronic machinery and equipment, and business
and financial services; but she admits that barriers exist. Failures to take
up “negative cost” solutions from an abatement cost analysis perspective
suggests that limited availability of information, poorly aligned incentives,
or problems with accessing necessary finance reflect barriers in the market-
place. She said the government’s goal is to identify where issues exist and how
to help resolve them, as well as push through the necessary changes.
Ms Anastasi said, looking forward, that the current economic climate
has presented businesses across the board with considerable challenges
and likely pushed climate change and other environmental concerns to the
wayside, but that the longer-term challenges must not be lost. Short-term
actions such as improved energy or resource efficiency can achieve both
short- and long-term objectives, but the central issue is to ensure that busi-
ness continues to increasingly take account of their environmental footprint
in their day-to-day operations and investment decisions. Finally, a key issue
for government is to help business make the transition to a more sustain-
able, low-carbon future by ensuring that the supporting infrastructure is in
place—whether that is in terms of improving physical infrastructure, sup-
porting innovation and R&D, or ensuring that the skills of the workforce
are sufficient to meet these challenges.
Second Day—Friday, 20 February 2009
Opening Lecture
“Are Markets Enough?”

Sir Crispin Tickell (Director of the Policy Foresight Program at the James
Martin 21st Century School, Oxford University)
Sir Crispin said that the answer to the question Are markets enough?
was No. The current fi nancial crisis had been partly caused by unregulated
use of markets. It had served to obscure the still greater crisis over the
growing human impact on the environment. All this would be taken up at
Copenhagen in December later this year at the conference to replace the
Kyoto Protocol. The central message was that we had to think differently
across the spectrum, which included the place of market forces.
We had fi rst to recognize that our current situation was unique. Other
societies and civilizations had collapsed before for environmental and
other reasons, but the circumstances of today had not happened before.
As a title of a recent book put it: we had “Something New Under the
Sun.” The new circumstances included human proliferation, degradation
of land, dependence on energy from diminishing stocks of fossil fuels,
destruction of other species and damage to ecosystems, rise of sea level,
pollution of both salt and fresh water and not least destabilization of
climate worldwide. A new factor was the development of new technolo-
gies which, as the current president of the Royal Society had remarked,
meant that our civilization had no more than a 50% chance of surviving
this century.
Sir Crispin said that there was no such thing as a free market and never
had been. All markets operated within rules, whether explicit or implicit,
which together constituted a framework, which if it were any good should
be in the public interest and for the public good. The way in which we
measured current values in our consumer society was seriously askew. The
shortcomings of “growth,” GDP/GNP, and the like, were at last being rec-
ognized, notably in the Financial Times at the end of January this year.
New systems of economic measurement, to include externalities and true
costs, were now being examined by a group including Joseph Stiglitz and
Amartya Sen. Sir Crispin hoped it would bring out the artificiality of much
current economics including the current distinctions between developed,
developing, under-developed and even over-developed countries. In many
ways China and India came into all these categories.
Sir Crispin said that the change of mind necessary was already taking
place, not least in the business community. Here he referred to the Stern
review of November 2007 and Al Gore’s fi lm An Inconvenient Truth. He
referred to the importance of education in developing green values. The
best way to help people was to show them how to help themselves. Obvi-
ously, we needed to reduce carbon emissions and invest in new sources of
energy. We had to think again about the design of cities and the future
shape of business and industry. From his own contacts with business enter-
prises, top management was often less flexible than middle management
with whom the future lay.
In concluding Sir Crispin said that there were three main factors of
change, all of them flowing from proper appreciation of risk. We needed
genuine leadership from above; pressure from universities, business, and
the public generally from below; and, regrettably, benign catastrophes
where cause could be safely attributed to effect. To the question What’s in
it for business? the answer was survival: how to assess risks and make the
best use of opportunities.
Panel: “Challenges”
The panel was chaired by Dr. David Reiner, Director of the M.Phil. in
Technology Policy Program at Judge Business School, who introduced the
speakers of the panel.
“The Sustainability Challenge”

Prof. Charles Ainger (Visiting Professor in Engineering for Sustainable
Development, University of Cambridge)
Prof. Ainger started the presentation with a discussion of the triple bottom
line, which reflects a supposed balance between the environment, economy
and society from a business perspective. He stated that in the current world
he thinks too much emphasis is placed on the economy, causing a system
imbalance. He said we act as if the benefits of the economy override every-
thing else and that by following this path, damage is inevitable. For example,
we try to use technology to address identified environmental issues.
Prof. Ainger fi nds the paradigm of the triple bottom line out of date and
suggests that the correct structure would place society within the environ-
ment and the economy within the society. Society is an interface within the
environment through resources and waste. The environment places limits
on the society (through ecological and carbon footprints). Society is quali-
fied through the quality of life for people and their communities (human
development index, HDI). The economy creates jobs and wealth, and the
fair distribution of these by serving the other two components.
Prof. Ainger elaborated on the UK government’s Sustainable Develop-
ment Strategy and presented data about the measurement of ecological
footprints per person, by country, in 2005. Currently there is at average an
impact of 2.7 global hectares per person, but the target is 1.44 hectares per
person. He presented country data from 2006 for the HDI which measures
the fulfillment of social and economic needs. Currently the global average
is 0.747 with a target of 0.800, but there is a tremendous global imbalance.
He then reflected on Prime Minister Gordon Brown’s statement on a
“new deal for the world’s poor,” views of the J. Hansen Group about the
urgency to target atmospheric CO2 and John Schellnhuber’s view about
the need for a new “industrial revolution to start now.” Prof. Ainger then
proceeded to reflect on the opinion of Michael Porter, who believes that
a healthy rate of innovation increases the likelihood that new technolo-
gies will solve the problems of the current trade-off between goals such as
health, environment, safety and short-term economic growth.
At the end of his presentation, Prof. Ainger offered that business schools
fail to address these issues and in general do not teach sustainable business.
He reiterated the importance that businesses serve sustainable develop-
ment, both locally and globally.
“The Energy Challenge—Convenience, Cost and Climate”

Mr. Edward Hyams (Chairman, Energy Saving Trust)
Mr. Hyams started his presentation with a discussion of the geometric
rise in the use of energy-consuming equipment in business and in the home
over the past several years. This increase goes hand in hand with improving
lifestyles and well-being. He believes that society at large will be unwilling
to forego the potential benefits associated with the rise in energy consump-
tion even in the face of rising costs and climate worries.
Mr. Hyams illustrated this increase by presenting a graph on energy
usage in previous decades, showing that the average household 20 years ago
had 17 electric items, but by 2000 this had increased to 47. Energy is being
used more efficiently, but more energy is needed, and it is estimated that by
2020, we will use more energy on entertainment than all of the energy that
was used in 1970.
Mr. Hyams discussed how investments on the supply side are long term
and that the right price signals are necessary to be mobilized. At the same
time, governments are trying to force energy companies to bring the costs
down, so how do we fi nd the balance to make the proper new investments
without the upside of profit?
Mr. Hyams discussed The New Electricity Trading Arrangements
(NETA) and presented data from National Grid, showing that highly insta-
ble marginal energy prices do not support investments in the long run. He
offered that no one is going to invest in low carbon because the price sup-
port is not there. He argued that the price will not go down as long as the
politicians are involved in setting a cap.
Mr. Hyams discussed the UK target of 80% reduction by 2050, saying
he thought it was technically possible; however, he thinks that we need to
start now and use every tool available, including education. Mr. Hyams
made a reference to two research documents on the rise in domestic equip-
ment from the Energy Saving Trust: “The Rise of the Machines” and “the
Ampere Strikes Back.” These articles suggest that methods to improve the
situation include better use of renewable energy sources (solar, nuclear,
wind energy) and other approaches like proper investment of insulation in
old and new buildings.
From the business side, Mr. Hyams argues that there is a better under-
standing of the situation from large businesses, less so from small and
medium-sized businesses. In the end, he mentioned the need for an honest
approach in making a change, and addressed the lack of political will, in
the UK, in Europe and globally.
“The Challenge of Sustainable Games”

Mr. David Stubbs (Head of Sustainability, London Organizing Committee
of the Olympic Games and Paralympic Games Ltd.)
Mr. Stubbs detailed how the London 2012 Olympic and Paralympic
Games were planning to use the power of the Games to inspire change and
embed sustainability in the long term for everyone by providing an example
on the biggest stage.
Mr. Stubbs began with the idea that the key to sustainability is in
how to bring changes to a level that ordinary people can understand and
implement. He said that the Olympics are the world’s largest event which
could be used to promote sustainability with 2 million visitors, 10.5 thou-
sand athletes, many journalists, and countless viewers across the world.
While elaborating on the role of the organization for the London Games,
he provided examples of how they are striving to achieve sustainability.
One of the fi rst decisions was to choose Stratford as a place for over-all
activity since it offered 500 acres of land and a location close to the city
center. This area is among the poorest communities in London, but is very
multicultural with 300 spoken languages, and its construction provided the
opportunity to uplift the entire community area.
Mr. Stubbs elaborated on embedding sustainability in the day-to-day
activities of the organization while educating workers, including 70,000
volunteers, on the sustainability goals. He further explained the process of
providing sustainability with all of the activities organized, starting with
travel, accommodation, entertainment, food, heating, lighting and clean-
up. He said that opportunities existed to creatively solve sustainability
issues in terms of seating, cabins, cabling, safety barriers, and temporary
materials; and that the organization has engaged the best minds in the
country to address these issues. Further he discussed their joint efforts with
sponsors (Adidas, BP, BT and BA) in accomplishing sustainability through
their corporate responsibility programs.
At the end Mr. Stubbs addressed the issue of determining how to moni-
tor and measure the improvements that are being implemented, and how to
ensure that sustainability is a core value in all that we can do.
Panel: “Solutions 1: Business”

The panel was chaired by Mr. Peter Thoren, executive vice president at
Access Industries. Mr. Thoren briefly summarized the results of the previ-
ous discussions and touched upon safety, sustainability and green values
as achieved by Access Industries and then introduced the panel speakers.
“Governance and Sustainability”

Mr. Jack Keenan (CEO, Grand Cru Consulting Ltd.)
Mr. Keenan began by taking a different look at “sustainability,”
namely, the role of the board of directors in ensuring the sustainability
of profits in the company as the business reduces its impact on climate
change. He asked whether we could add mechanisms to the Combined
Code to ensure sustainable development of business. Mr. Keenan pointed
out that the UK Combined Code is a terrific model which is well estab-
lished and followed by many other countries, although it mostly contains
principles rather than rules. Every company in the UK must announce
that it complies with the code or explain why not. Mr. Keenan believes
that within the code today we already have everything we need to ensure
sustainability of a company, as managers must report the risk profi le
analysis to the board of directors twice a year. This risk profi le analysis
must contain the description of major risks threatening the company and
the plan to mitigate those risks. It is important to note that, over the past
year, of all of the major UK corporations none have claimed to have not
complied with this risk analysis principle.
Mr. Keenan then proceeded to present a simple tool for risk assess-
ment called the “Risk Matrix” which has been used at Diageo. It is a two-
dimension matrix, with the horizontal axis being the probability of a risk
a company might face, and the vertical axis being the costs of this risk, or
a potential loss caused by risk occurrence. Since you report to the board
twice a year, you can also show how the position of a particular risk has
changed since last time. It has proved very useful to assign a person respon-
sible for a certain risk in the matrix and its mitigation. Mr. Keenan then
mentioned a few practical examples illustrating the use of the Risk Matrix,
and also appropriate and inappropriate risk mitigations reported to boards.
According to Mr. Keenan, despite the fact that most companies in the
UK reported to the boards the analysis of their major risks, quantifica-
tion and mitigation of those risks, there have been a couple of cases in the
past when companies failed to comply. As an example, the head of the risk
assessment department for a large multinational bank had been fi red by the
CEO for identifying significant risks which the company faced at that time;
moreover, he was replaced by a person who had no prior risk assessment
experience. Furthermore, the auditors invited by the CEO said that the
fi red head of the risk assessment department had not been a team player.
Mr. Keenan wrapped up his presentation by saying that despite the fact
that risk assessment is a part of the Combined Code, sadly it has not been
followed rigorously enough by chief executives.
“Demonstrating Goodness”
Mr. Michael Littlechild (Director, GoodCorporation)
Mr. Littlechild suggested distinguishing between a company which pro-
fesses that it has green values, ethical behaviour and social responsibility and a
company which really is oriented around these values. The question he raised
was how we can understand whether a company is truly green-oriented and
whether green orientation is part of its approach toward doing good business.
Mr. Littlechild then discussed the three broad approaches which com-
panies utilize to demonstrate their goodness. The fi rst approach is re-
branding. As an example, BP—an oil company producing oil, gas, and
petroleum; drilling for oil; using pipelines and the like—has come up with
the green flower as a brand to show its new green approach. Second, com-
panies started clubbing (i.e., joining groups of businesses and associations
with similar high values for social responsibility). Business in the commu-
nity, for example, created the “Companies that Count leauge table.” The
third approach is that companies produce Corporate Social Responsibility
reports. These reports have become broader and may now cover various
topics from the environment to philanthropy, but Mr Littlechild doesn’t
believe that these reports are of much use to the general public.
Mr. Littlechild provided an example of the web report of Barclays Bank
where the CEO mentions the efforts put into achieving its CSR goals. This
was followed by information from a BBC investigation which revealed that
some of the bank’s employees from the call centers demonstrated complete
ruthlessness to the customers. Mr. Littlechild supported this “conflict of
deeds and words” with other examples in which the realities of companies’
attitudes to their clients were not as good as they were presented to the public.
According to Mr. Littlechild, this confl ict shouldn’t happen, as most
companies invite independent auditors to ensure the reports, but when
reading the fi ne print, the audits do not amount to substantial backing. Mr.
Littlechild provided an example of British Nuclear Fuels plc. This report
was checked and approved by Ernst & Young, with the disclaimer that the
non–Environment, Health & Safety data had not been examined.
Mr. Littlechild then stressed that the production of a single report
requires significant sums of money, including the auditors’ fees. Reports,
however, have many problems: data which is difficult to decipher, absolute
numbers that are difficult to compare with others, limited self cross-exam-
ination, opacity, and limitations of assurance. Mr. Littlechild asks whether
these are even worth doing.
Mr. Littlechild highlighted a few indexes that tell you how “good”
the business of a company is: ISO 14001, BITC Corporate Responsibility
Index, FTSE4Good, and the DowJones Sustainability Index. Mr. Littlechild
showed that the FTSE4Good actually underperformed the FTSE-AllWorld
index, and asked the audience members to arrive at their own conclusions.
Mr. Littlechild then introduced how GoodCorporation looks at the
actual steps and actions a company actually performs, as opposed to things
which it reports. Finally, he discussed what he thought companies should do
to be sustainable. In his opinion, companies shouldn’t publish any reports
but keep them on their websites instead and update them regularly. These
reports should reflect the real business practices, not just the trimmings,
and he also thought that companies should look for independent verifica-
tion of how they do business, not how good their reports look.
“Entering the New Era”

Dr. Noreena Hertz (Associate Director, CIBAM)
Dr. Hertz began by stating the importance of understanding the current
danger to our environment, climate and sustainable development, and the
fact that this threat has worsened with the current collective global fi nan-
cial crisis, which is distinctive from the Russian crisis, dot com crisis, and
other such crises. She remarked that this is the end of the era of old-type
Gucci capitalism, which is the Anglo-American version of capitalism when
the markets remained mostly unregulated and the governments preferred
not to interfere in them. The Gucci capitalism era was the time when the
power between the governments and businesses shifted toward businesses.
It was the era of religious beliefs in market stability, equity, justice, and
freedom, but in reality, it was the era when CEOs could earn up to a 1000
times the salary of their average worker, and hedge funds made billions of
dollars. It was the period in which success was measured by the amount
of money you had, and when it was a shame not to have a Gucci handbag.
Dr. Hertz says we are now entering the new era in which cooperation,
collaboration and communication are at the core, the era which she called
Coop capitalism. Dr. Hertz named five reasons why she thought we were
entering this new era:
1. The public is angry, and this anger is caused not just by the bank-
ers and their huge bonuses. Governments and businesses will have to
declare clearly whether they would like to take the public side or not.
2. We are at the period of history when governments have an unprec-
edented mandate to intervene. A recent study in the United States
showed that over the half of the population would now like the gov-
ernment to intervene directly in free markets. A few examples of
industries to watch for changes in soon are the fast food sector and
healthcare and pharmaceutical companies.
3. The downside of globalization is becoming apparent with the recent
global economic downturn. The fact that Taiwan predicts a huge
drop in the GDP in the coming year shows that we are now collec-
tively responsible and linked to the economic downturn. We now see
discussions about global regulatory mechanisms to deal with fi nance,
but politicians should also have the similar bodies to deal with the
environment and social issues.
4. It is no longer post-1945 settlement, and we are entering new geopolit-
ical configurations. There is little reason to feel that Anglo-American
values will remain dominant in the world. China, India and Brazil
have never had Gucci capitalism; instead, they had their own models
of development. These countries are going to have more of a voice on
the international stage, and the rest of the world will likely listen to
them in order to achieve collaboration.
5. Dr. Hertz doesn’t believe it’s just at the inter-governmental level where
more cooperation is forthcoming; it is also at the individual level. She
cites examples of individuals pulling together, similar to what was
seen during the Great Depression, where individuals are giving goods
away for free via the Internet instead of selling them.
Dr. Hertz ended by emphasizing the importance of the current moment

and noted that the audience consisted of very influential people from
business, government and academia. She implored that we make the effort
to pull together and make our next generation safe, secure and happy.
Panel: “Solutions 2: Government, NGOs, Academia”

The panel was chaired by Prof. J. C. Spender, Visiting Professor, Center
for Business Performance, Cranfield School of Management. Prof. Spender
introduced the speakers for the panel.
“Green Values in Communities: Origins and Practice”

Dr. Michael Pollitt (Assistant Director of the ESRC Electricity Policy
Research Group and Reader in Business Economics, Judge Business School)
Dr. Pollitt provided the ethical context for green values in commu-
nities. Dr. Pollitt addressed the ethics underlying the Stern Review and
drew attention to the importance of—and debates surrounding—the
Social Discount Rate. He explored the role of individual values as driv-
ers of individual action. In the absence of value drivers and social norms,
regulatory approaches are unlikely to work and may result in distribu-
tional problems with pricing (e.g., higher heating bills for the poor). He
discussed the roots of value drivers and highlighted the critical role of
religion in forming values. He explained that almost all major Christian
denominations in the United States have expressed strong support for sus-
tainable development and de-carbonization. According to Dr. Pollitt, the
moral case for action on climate change is strong, and companies may
play an important role in helping to weave the social fabric to support
climate change initiatives.
“A Green New Deal?”

Ms Ann Pettifor (Executive Director, Advocacy International)
Ms Pettifor put forth the case for a Green New Deal. Inspired by Frank-
lin D. Roosevelt’s New Deal program, The Green New Deal Group propose
a modernized version to tackle the current crash: the interlinked crises of
climate change, recession, and energy depletion. Ms Pettifor emphasized
the spreading usage of the Green New Deal concept and explained the need
to build an alliance among industry, labor, and the green movement “to
challenge the dominance of the finance sector over the real economy and
the ecosystem.”
Ms Pettifor set of the pillars of the Green New Deal as
• Policy autonomy for governments

• New checks, balances, and directions
• Low, low rates of interest—short and long, safe and risky
• Transforming our tax system
• Security for our pensions and savings
• Jobs, more jobs and secure jobs
• Warm homes in winter
• UK showing real-world leadership
Ms Pettifor argued for a fundamental re-formulation of our economy to

address the current challenges.
“A Low-Carbon Industrial Strategy”

Prof. Vicky Pryce (Chief Economic Adviser and Director General of Eco-
nomics, BERR)
Prof. Pryce addressed the transformation required to move to a low-
carbon economy. Prof. Pryce explained that carbon constraints will require
a shift in the way we work and live, and emphasized that “no sector and no
business will be unaffected.” She argued that the economic case for tack-
ling climate change urgently is clear—quoting from the Stern Review that
climate change is the “biggest market failure the world has seen.”
Prof. Pryce suggested that the government’s role was to set the frame-
work for moving forward. She argued that markets are vital to addressing
climate change but may not be sufficient. She highlighted several recent
government initiatives, including the incorporation of green objectives into
fiscal stimulus actions, measures to support business in the environmen-
tal and low-carbon areas, and support for the automotive industry based
around low carbon. She stated that government must show leadership,
and reinforced the importance of engaging with business in policymaking.
According to Prof. Pryce, “we’ve all become passionate believers in saving
the world.” The only question is how to best do it.
Summing Up
Prof Spender underscored the need for a new way of thinking to meet these
challenges. He explained that global destablization—climate change, bio-
diversity losses—suggests that the current system is broken. He stressed
the need to develop priorities as “this is a way to avoid people selling their
wares in new guises.” He also noted that it is difficult to drive a wedge
between image management and the global challenges. In Prof. Spender’s
view “CSR is another form of marketing.”
Prof. Spender opined that humans can only know things in two ways:
• As observers (our understanding of nature)

• As inventors (our understanding of our own creations)
According to Prof. Spender, humans cannot understand ecology because

“we didn’t create it.” We can, however, understand our own creations (e.g.,
economics). For this reason, he suggested that we focus on our own cre-
ations as a way to make progress.
CONCLUSION
Today greenness is goodness. Non-greenness is not an option. It is therefore

critical to advance thinking on why and how business, consumers and poli-
cymakers can contribute to the goal of sustainable global wealth creation.
The present volume aims to make a contribution in this direction.
REFERENCES
Cohen, R. B., Felton, N., Knoss, M., & Van Lier, J. (1979). The multinational cor-
poration: A radical approach. Cambridge: Cambridge University Press.
Dunning, J. H., & Pitelis, C. N. (2008). Stephen Hymer’s contribution to interna-
tional business scholarship: An assessment and extension. Journal of Interna-
tional Business Studies, 39, 167–76.
Mahoney, J. T., McGahan, A. M., & Pitelis, C. N. (2009). The interdependence of
public and private interests. Organization Science, 20, 1034–52.
Stiglitz, J. (2002), Globalization and its discontents, New York: W. W. Norton.
APPENDIX I
CIBAM Membership
Patron
Mr. Jack Keenan, CEO, Grand Cru Consulting Ltd.
Global Advisory Board

Sir Martin Sorrell, CEO, WPP, London (Chair)
Dr. Vassilis Apostolopoulos, CEO, G. Apostolopoulos Holdings SA
Mr. Len Blavatnik, President, Access Industries, Inc., New York
Mr. Michael Calvey, Managing Partner, Baring Vostok Capital Partners
Mr. Chun Chi Chou, Chairman, Sinyi Real Estate, Inc., Taipei
Mr. Jonathan Garner, Managing Director, Morgan Stanley
Mr. Tommy Helsby, Chairman—Eurasia, Kroll
Mr. Theodore Kyriakou, Group CEO and Vice Chairman, Antenna Group SA
Mr. Andrew Morgan, President—Europe, Diageo plc
Prof. Vicky Pryce, Semior managing Director, FTI Consulting
Mr. David Roth, CEO, EMEA and Asia, The Store—WPP
Mr. Andrew Smith, Chief Economist, KPMG Ltd.
Mr. Manfred Tuerks, Chairman, Sunwood International AG
Mr. Marc Verstringhe, Harry Hansen Fellow, CIBAM
Academic Advisory Board

Prof. Peter Buckley, Prof of International Business, Director of the Centre
for International Business, Leeds University, UK
Prof. John Child, Chair of Commerce, Birmingham University; CIBAM
Founding Director, UK
Prof. David Teece, Thomas W. Tusher Chair in Global Business, University
of Berkeley, USA
Global Advisory Board Representatives

Mr. Jean-Michel Broun, Director, Baring Capital Partners (representing
Mr Michael Calvey)
Mr. Eric Salama, CEO, The Kantar Group, WPP (representing Sir Martin
Sorrell)
Mr. Peter Thoren, Executive Vice President, Access Industries (representing
Mr Len Blavatnik)
Business Associates
Mr. Richard Broyd, Partner, Monitor Group, UK
Mr. Joseph Gold, CEO, Muza Gold Ltd, Israel
Mr. Marios Kyriacou, Senior Partner, KPMG, Greece
Mr. Patrice Muller, Partner / Director, London Economics, UK
Mr. Andrew Napier, Director, Prosequence Ltd., UK
Mr. Perran Penrose, Chairman, Penrose & Associates, UK
Mr. Kirill Slavin, Managing Partner, Slavin & Associates, UK
Mr. Minoru Tanaka, President, JMA Consultants Europe, Milan and
CEO, JMA Consultants Europe, The Netherlands
Mr. Anthony Travis, Principal, Cabinet Gainsbury & Consorts, Switzerland
Mr. Antonis Vgontzas, Attorney-at-law, Greece
Mr. Peter Ward, Managing Director, Telos Partners, UK
Academic Associates
Prof. Tamir Agmon, Graduate School of Business, College of Management,
Israel
Dr. Mie-Sophia Elisabeth Augier, Naval Postgraduate School and Stanford
University, USA
Prof. Thomas Bernauer, Swiss Federal Institute of Technology, Switzerland
Prof. Michael Best, University of Massachusetts, USA
Prof. Patrizio Bianchi, University of Ferrara, Italy
Prof. Max Boisot, ESADE & INSEAD, Europe
Prof. Thomas Clarke, University of Technology, Sydney, Australia
Prof. Stewart Clegg, University of Technology, Sydney, Australia
Prof. Simon Collinson, Warwick Business School, UK
Prof. Giovanni Dosi, Sant’Anna School of Advanced Studies, Italy
Prof. Stuart Evans, Carnegie Mellon University, USA
Prof. Bruno Frey, University of Zurich, Switzerland
Dr. Simona Iammarino, University of Sussex, UK
Prof. Michael G. Jacobides, London Business School, UK
Prof. Neil Kay, University of Strathclyde, UK
Prof. James Love, Aston Business School, UK
Prof. Anita McGahan, Rotman School of Management, University of
Toronto, Canada
Prof Paul McGuinness, Chinese University of Hong Kong
Prof. Lilach Nachum, City University New York, USA
Prof. Andy Neely, UK Advanced Institute of Management Research, UK
Prof. Mario Nuti, University of Rome, “La Sapienza”, Italy and CNEM,
London Business School, UK
Prof. Kenneth Oye, Massachusetts Institute of Technology, USA
Prof. Marina Papanastassiou, Copenhagen Business School, Denmark
Prof. Robert Pearce, Henley Business School, University of Reading, UK
Dr. Robert Pitkethly, University of Oxford, UK
Prof. Alan Rugman, University of Reading, UK
Prof. Hans Schenk, Utrecht School of Economics, The Netherlands
Prof. J. C. Spender, Cranfield School of Management, Leeds & Open Uni-
versity Business Schools, UK
Prof. Roger Sugden, University of Birmingham, UK
Prof. Haridimos Tsoukas, Athens Laboratory of Business Administration,
Greece & University of Warwick, UK
Dr. Alain Verbeke, Haskayne School of Business, University of Calgary,
Canada
Prof. Maurizio Zollo, Bocconi School of Management, Milan, Italy
Cambridge University
Dr. Shahzad Ansari
Prof. Jaideep Prabhu
Dr. Jane Collier
Dr. David Reiner
Dr. Gishan Dissanaike
Dr. Mark de Rond
Dr. Elizabeth Garnsey
Dr. Jochen Runde
Dr. Allègre Hadida
Prof. Ajit Singh
Dr. Charles Hampden-Turner
Dr. Philip Stiles
Ms Sally Heavens
Dr. Chander Velu
Dr. Chris Hope
Prof. Geoff Walsham
Prof. Martin Kilduff
Prof. Malcolm Warner
Prof. Stephen Littlechild
Prof. Peter Williamson
Dr. Michael Pollitt
Dr. Eden Yin
Director: Dr. Christos Pitelis

Associate Director: Prof. Noreena Hertz
External Liaison: Ms Marianna Vintiadis
Research Assistant: Ms Roumiana Theunissen
APPENDIX II
‘Green Business and Green Values’

Program of Events
Thursday, 19 February 2009, Judge Business School
16:30–17.00 Assemble with coffee—Judge Common Room

17.00–17:05 Welcome Address—Dr. Jochen Runde (Director of the MBA Pro-
gram, JBS)
on behalf of Prof. Arnoud De Meyer (Director of Judge Business
School)
17:05–17.20 Introduction × Dr Christos Pitelis (Director, CIBAM)
Lecture Theatre III
17.20–19.05 Opening Panel: “Green Business and Green Values: Issues”
Chair: Dr. Noreena Hertz (Associate Director, CIBAM)
Mr. David Roth (CEO, The Store, The WPP Group)—Doing Good
Is Good Business
Mr. James Twining (Associate Principal, McKinsey & Co.)—A
Green Finance?
Mr. Khalid Abdulla Janahi (CEO, Dar al-Maal al Islami Trust)—
Islamic Banking & Sustainability
Mr. Brian Titley (Director of Performance and Evaluation,
BERR)—A Role for Government
Lecture Theatre III
19.05–19.15 Transportation to Jesus College
19:15–19:40 Pre-dinner drinks—Jesus College, Prioress’s Room
19.40–21.30 Gala Dinner—Jesus College, Upper Hall
21.30– Informal drinks—Doubletree by Hilton (Cambridge Garden House
Hotel)
“GREEN BUSINESS AND GREEN VALUES”
Program of Events
Friday, 20 February 2009, Judge Business School
08:30–09.00 Assemble with Coffee—Judge Common Room

09:00–09.45 Sir Crispin Tickell (Director, the Policy Foresight Program, Oxford
University)—Are Markets Enough?—Lecture Theatre II
09.45–11.15 Panel: “Challenges”—Lecture Theatre II
Chair: Dr. David Reiner (Director of the M.Phil. in Technology
Policy Program, Judge Business School)
Prof. Charles Ainger (Visiting Professor in Engineering for Sustain-
able Development, University of Cambridge)—The Sustainability
Challenge
Mr. Edward Hyams (Chairman of the Energy Saving Trust)—The
Energy Challenge—Convenience, Cost, and Climate
Mr. David Stubbs (Head of Sustainability, London Organising
Committee of the Olympic Games and Paralympic Games Ltd)—
The Challenge of Sustainable Games
11.15–11.45 Coffee break—Judge Common Room
11.45–13.15 Panel: “Solutions 1: Business”—Lecture Theatre II
Chair: Mr. Peter Thoren (Executive Vice President, Access Indus-
tries)
Mr. Jack Keenan (CEO, Grand Cru Consulting Ltd.)—Governance
and Sustainability
Mr. Michael Littlechild (Director of Good Corporation)—Demon-
strating Goodness
Dr. Richard Broyd (Partner, Monitor Group)—Environment and
Business Strategy
13.15–14.30 Lunch—Judge Common Room
Global Advisory Board Meeting—W4.04
13:30–14:30 *Board Members Only*
14.30–16.00 Panel: “Solutions 2: Government, NGOs, Academia”—Lecture
Theatre II
Chair: Prof. J. C. Spender (Visiting Professor, Center for Business
Performance, Cranfield School of Management)
Prof. Vicky Pryce (Chief Economic Adviser and Director General of
Economics at BERR)—A Low-Carbon Industrial Strategy
Dr. Michael Pollitt (Assistant Director of the ESRC Electricity
Policy Research Group, Judge Business School)—Green Values in
Communities: Origins and Practice
Ms Ann Pettifor (Executive Director of Advocacy International)—A
Green New Deal?
16.00–16.30 Coffee break—Judge Common Room
16.30–17.00 Summing up: Professor Vicky Pryce (Chief Economic Adviser and
Director General of Economics at BERR)—Lecture Theatre II
2 Humans
Then, Now, and Looking Ahead
Sir Crispin Tickell
Humans are a remarkable animal species. Since the industrial revolution

some 250 years ago, they have been acting in ways and multiplying at rates
which affect the balance of life on the surface of the Earth as whole. The
past is not necessarily a guide to the future. If there is any lesson to be
learned from the past, it is that we have to think differently. The future is
an unknown country.
Even the past was relatively unknown until very recently. We now have
at last some idea of where we are coming from. Like all other living organ-
isms we are joined in common descent and mutual dependency. Over time
organisms tend to create and maintain the environment most favorable to
them. Occasionally the system tips one way or another to the detriment
of this or that among them. The biosphere is itself analogous to a living
organism which corrects itself in response to hazards from within and
without. As humans we are of course an infinitesimal part of the living
world (0.00007% of estimated living species). Each of us has ten times
more bacterial than body cells.
Our species is relatively new. No one was around to record the evolution
of the fi rst human-like creatures from ape-like ancestors in Africa some
four million years ago. They left the trees for the savannah, became rela-
tively hairless, and learned to walk upright on two legs, with consequences
for the physiology of their growing brains. By at least half a million years
ago, they had split into a variety of related strains. One of their offshoots
may still have been living on the Indonesian island of Flores as recently as
12,000 years ago (a mere blink in geological time). Our own lot can fi rst be
identified between 200,000 and 150,000 years ago.
So that is where human history begins. Through analysis of fossils and
work on current humans, we have been able to trace our genealogy back to
so-called mitochondrial Eve (the female line) over 150,000 years ago, and
Y chromosome Adam (the male line) between 90,000 and 60,000 years
ago. It may seem amazing but all living humans may be descended from
32 Sir Crispin Tickell
communities containing both, with of course millions of mixtures on the
way. All other branches of humans, including our cousins the Neanderthal-
ers, are now extinct.
It seems likely that there was some sort of crisis in human history which
drastically reduced numbers and eliminated some of the lines of descent.
Among the possibilities are abrupt climate change following the violent erup-
tion of Mount Toba in Indonesia some 73,000 years ago, which initiated a
severe cooling of the Earth within the Pleistocene ice ages. We know from
recent history what big effects volcanic eruptions can have (Mount Laki in
Iceland in 1783, Tambora in 1815 and Krakatoa in 1883), and Toba was a real
monster among them. But there are other possibilities: some major epidemic
like the Plague of Justinian in 540 AD, or the Black Death which devastated
populations worldwide in the 14th century; or even a hit from space (if the
object which devastated part of Siberia a hundred years ago on 30 June had
hit London, there would have been nothing left within the M25 ring road).
The survivors of this major crisis, whatever and whenever it was, would
have had many genes in common, and thereby influenced the character of
subsequent generations. All modern humans are fairly close cousins. There
are more genetic differences between Africans than there are between
Africans and other humans, thereby indicating our African origins. Some
recent work on the evolution of the bacterium Helicobacter pylori in our
guts well illustrates this point.
A question which still arouses much controversy is when and why
humans developed the attributes we all now take for granted: language,
music, symbolic and interconnected thought, art in its many forms, includ-
ing jewelry, advanced technical skills, and certain behavior patterns,
including respect for the dead. Did this grow gradually out of develop-
ment of tools for hunting, fishing and shelter, sexual competitiveness, the
management of community relationships, or something else? Or was it the
product of some genetic mutation which greatly advantaged some individu-
als and their descendants at the expense of others? Whenever the change
took place, the extraordinary development of human brainpower, which
has produced ourselves, occupies much less than 1% of all human history.
Over the last 40,000 years the human impact on the Earth has slowly and
then rapidly increased. Hunter gatherers fitted easily, although sometimes
uncomfortably, into the ecosystems of cold and warm periods of the Pleisto-
cene. People migrated in response to changing conditions. But farming with
land clearance between 10,000 and 8,000 years ago changed everything. It
may even have changed the climate and, by affecting emissions of carbon
dioxide and methane into the atmosphere, halted a return to colder condi-
tions. With a vast increase in human population came towns and eventually
cities. Tribal communities evolved into complex hierarchical societies.
Before the industrial revolution some 250 years ago, the effects of human
activity were local, or at most regional, rather than global. Now the impact
is indeed global.
Humans 33
The idea may be hard to accept, but in its long history with all its varia-
tions the Earth has never been in this situation before. In the words of the
title of a recent book on environmental history, we confront “Something
New Under the Sun.” The problem is almost on a geological scale. No
wonder the Nobel Prize winner Paul Crutzen with his colleague Eugene
Stoermer should have named the current epoch the Anthropocene, in suc-
cession to the Holocene epoch of the last 10,000 years.
There are six main factors which have driven this transformation. Of
these, population issues are often ignored as somehow embarrassing or
mixed up with religion and the ideology of development; most people are
broadly aware of land resource and waste problems, although far from
accepting the remedies necessary; water issues, both fresh and salt, have
had a lot of publicity, and already affect most people on this planet; climate
change with all its implications for atmospheric chemistry is also broadly
understood, apart from by those who do not want to understand it; how we
generate energy while fossil fuel resources diminish and demand increases
is another conundrum (now at last under serious discussion); but damage
to the diversity of life on which our species critically depends has somehow
escaped most public attention. Here we remain ignorant of our own igno-
rance. Yet in this area human destructiveness has been most evident over
the last 10,000 years. Current rates of extinction could in the long run be
the most important of all these factors for human welfare. All are inter-
linked, and all represent pressure on the natural environment.
There is now a seventh factor recent in human experience. They arise
from the introduction of new technologies. Damage to the ozone layer,
which protects ecosystems from harmful ultraviolet radiation from the
Sun, was the fi rst to receive major public attention. The eventual result was
to establish international agreements to ban the manufacture and use of
chlorofluorocarbons.
But this may only be the beginning. In a recent book by the President of
the Royal Society, Sir Martin, now Lord, Rees explored the dangers arising
from human inventiveness, folly, wickedness and sheer inadvertence. The
ramifications of information technology, nanotechnology, nuclear experi-
mentation and the rest have still to be understood and explored. His con-
clusion was to give our civilization only a 50% chance of survival beyond
the end of this century. In broad terms we suffer from creeping impoverish-
ment of the biosphere. As E. O. Wilson said in his book The Creation,
We have, all by our bipedal, wobbly-headed selves, altered Earth’s at-

mosphere and climate away from the norm. We have spread thousands
of toxic chemicals world wide, appropriated 40% of the solar energy
available for photosynthesis, converted almost all of the easily arable
land, dammed most of the rivers, raised the planet sea level, and now,
in a manner likely to get everyone’s attention like nothing else before it,
we are close to running out of fresh water. A collateral affect of all this
genetic activity is the continuing extinction of wild ecosystems, along
with the species that compose them. This also happens to be the only
human impact that is irreversible.
There has been some talk, notably among the religiously inclined, about
a human obligation of “stewardship” of the Earth. If so the Earth had to
wait a long time for the arrival of the stewards. Certainly the trilobites
managed for over 250 million years without them. Looking at the human
record of predation, exploitation and extinction of other forms of life since
the current version of humans appeared over 150,000 years ago, I am
reminded of James Lovelock’s remark that “humans are about as qualified
as stewards of the Earth as goats are gardeners.”
But unlike goats, humans can change their minds if they develop the will
to do so. Are we capable of establishing a lasting relationship of mutual
benefit to the living Earth and those of its unruly inhabitants who are our-
selves? How are we to recognize that the last 200 years or so have been a
bonanza of inventiveness, exploitation and consumption which may not
continue? All successful species, whether bivalves, beetles, bears or humans,
multiply until they come up against the environmental stops, reach some
accommodation with the rest of the environment and willy-nilly restore
some balance. Are we near to those stops? Or do we think we are different?
Of course we think we are different; and because we are different, there
is a lot we can do about the huge range of problems facing us. In fact most
of the solutions are well known. Briefly we have to re-think some of the
underlying assumptions on which we run our society. That means con-
fronting the major issue of our own proliferation in all its aspects; looking
again at a lot of economics; replacing consumerism as a goal; giving high
priority to conservation of the natural world; working out new ways of gen-
erating energy; dispersing and to some extent localizing the ways by which
we feed ourselves; managing and adapting to climate change, or as I prefer
to call it climate destabilization; and creating the necessary institutional
means of coping with global problems. In the future global village, we can-
not afford to have too many village idiots.
We all suffer from the disease of what has been called conceptual sclero-
sis. Little is more difficult than learning to think differently, above all when
problems go to the roots of the conventional wisdom. Old ideas haunt us
like ghosts.
For me an immediate priority, spurred on by the current economic crisis,
is to think differently about economics. Some, fortunately not all of us,
tend to believe that greater material prosperity is an overwhelming priority,
that resources can be exploited indefi nitely, and that growth on the usual
defi nition is good in itself: in other words ever upwards and onwards with
free markets, free trade and continuously rising consumption. This is the
philosophy of many economists and most politicians, at least until recently.
The problem is exacerbated by some ingrained beliefs: that technology can
Humans 35
always fi nd an answer; that “development” or industrialization will raise
living standards world wide; and that globalization will come to represent
a benign mutation in human civilization.
Now at least many are looking again at how to measure human wealth
and welfare. The key factor is costs. As has been well said, markets are
marvellous at fi xing prices but incapable of recognizing costs. Most costs—
or externalities—are long as well as short term. All markets operate within
rules, whether explicit or implicit, which together constitute a framework
which, if it is any good, should be in the public interest. Who decides what
is in the public interest? Most of the answer lies with governments, however
chosen, who have the particular responsibility of listening to and guiding
public opinion. This brings me back to the environment and the rest of the
living world. However we look at it, the economy—the human economy—
is a wholly owned subsidiary of the environment.
I turn to the future of our species in a world which is changing under
human pressure before our eyes. Bear in mind that nearly all forecasting
turns out to be wrong. We do well to expect the unexpected.
In his book The Meaning of the 21st Century, James Martin laid out
what he saw as the prospects.
The 21st century is like a deep river canyon with a narrow bottle neck
at its centre. Think of humanity as river rafters heading down stream.
As we head into the canyon, we’ll have to cope with a rate of change
that becomes much more intense—a white water raft trip down an un-
known river with the currents becoming much faster and rougher—a
time when technology will accelerate at a phenomenal rate.
He went on to identify the main challenges facing us. Some relate to

the Earth as a whole: for example the natural disruptions known through-
out history, volcanic explosions, earthquakes, impacts of extraterrestrial
objects, changing climates, and variations in ecosystems, including pat-
terns of disease, affecting all living creatures, from mushrooms to plants
and such animals as ourselves.
In the short term all this will affect human migration between coun-
tries and continents, widening divisions between rich and poor within and
between countries, increasing the already high vulnerability of cities, pro-
moting the growth of terrorism, increasing the risks of war with unimagin-
ably horrible weapons, and exhausting often irreplaceable resources. On
this reckoning we will be lucky to come out the other side of the deep river
canyon with anything like civilization as we know it.
But this is not the whole story. I want now to jump ahead a hundred
years and, from this vantage, look backwards. In doing so, I shall assume
(I hope correctly), that humans will have faced up to and coped with
at least some of these problems. People are not stupid. So what will the
world look like?
First they are likely to be living in a more globalized world. It should then
be clearer whether the mutation was benign or not. There will certainly be
a redistribution of political power away from the Unites States and Europe,
and toward such former leaders in science and authority as China, India,
and the Islamic world. This will be facilitated by rapid communication of
all kinds. Ideas, units of information—or memes—will pass almost instan-
taneously between countries, communities and individuals. The wiring of
the planet with fiber optics, cellular wireless, satellites and digital television
is already transforming human relationships. For the fi rst time there will be
something like a single human civilization. More than ever humans can be
regarded like certain species of ants, as a super-organism.
Human numbers in cities or elsewhere will almost certainly be reduced,
but some people will live much longer, bringing its own train of problems.
Their distribution will be different. It has been suggested that an optimum
population for the Earth in terms of its resources would be nearer to 2.5
billion rather than—as now—more than 6.5 billion, or even 9 billion later
this century.
Communities are likely to be more dispersed without the daily tides of
people flowing in and out of cities for work. Agriculture will be more local
and specialized with more reliance on hydroponics. Energy and transport
systems will be decentralized. Archaeologists of the future may even won-
der what all those roads were for.
Then there are other developments in information technology. They
raise the question of evolution itself. At present we can alter isolated genes
while disregarding the totality of what genes can do. James Martin has
distinguished what he has described as primary, secondary and tertiary
evolution. He suggests that:
Primary evolution is the mutation and natural selection of species—

a glacially slow process . . .
Secondary evolution refers to the intelligent species learning how
to create its own form of evolution. It invents an artificial world of
machines, chemical plants, software, computer networks, transport,
and manufacturing processes and so on. It learns how to manipulate
DNA . . .
Tertiary evolution refers to something which is just beginning on
Earth. An intelligent species learns to automate evolution itself.
The idea of automated evolution needs some explanation. In a phrase it

represents a vast acceleration of change. James Martin writes that with the
machines we envisage today, it could be a billion times faster.
Furthermore it will be incomparably more efficient. Darwinian evolu-

tion is described as being random, purposeless, dumb and Godless. Au-
tomated evolution is targeted, purposeful, intelligent, and has humans
Humans 37
directing it and changing its fitness functions on the basis of results. In
Darwinian evolution, the algorithm stays the same. In automated evo-
lution researches will be constantly looking for better techniques and
better theory. The techniques of evolvability will themselves evolve.
Other applications of information technology range far beyond enu-

meration. Already chips have been inserted into humans for a variety of
purposes. We can even insert extra chromosomes in the knowledge that
they would not be heritable.
On the one hand humans may thereby be liberated from many current
drudgeries. Soon houses may be able to clean themselves, robots may pro-
duce meals on demand, cars may drive under remote instruction, and evo-
lution of desirable characteristics could even be automated. All this seems
unimaginable when so many still have to trudge miles to collect fuel wood
and water.
On the other hand humans could well become dangerously vulnerable
to technological breakdown, and thereby lose an essential measure of self-
sufficiency. Already dependence on computers to run our complex systems,
and reliance on electronic information transfer, are having alarming effects.
Here industrial countries are far more vulnerable than others. Just look at
the effects of single and temporary power cuts. More than ever individuals
feel out of control of even the most elementary aspects of their lives.
There is also a more sinister possibility. Some might wish to develop a sub-
species of super-humans with genes tailored to specific requirements. In his
fantasy The Time Machine of 1898, H. G. Wells foresaw a genetic division of
humans into Eloi (or upper worlders) and Morelocks (or lower worlders). The
Eloi lived in a happy sunlit world while the Morelocks lived mostly in caves,
and did all the menial work for them: in short an exaggerated version of the
slave world of the South in the United States before the Civil War.
How will the world be governed a hundred years from now? It would
be romantic to think that democracy in one form or another will prevail
worldwide. In practical terms we can say that good regulation will be more
important than ever, particularly in nanotechnology. In the words of a
recent book, we have to recognize that most things fail, whether they be
organisms or human institutions. Already there is a movement of power
away from the nation-state: upwards to global institutions and corporations
to deal with global issues; downwards to communities of human dimen-
sion; and sideways by electronic means between citizens everywhere. It is
hard to believe that nation states will exist in their present form. Already
sovereignty of the kind enjoyed in the past has become an illusion. For
global institutions I have long urged the creation of a World Environment
Organization to bring together the present diverse and overlapping series
of limited environmental agreements, and to be the partner of the World
Trade Organization and other United Nations bodies and agencies. It might
become the most important among them.
Let us hope without total confidence that by 2100 humans will have
worked out and will practice an ethical system in which the natural world
has value not only for human welfare but also for and in itself. The human
super-organism must take its place alongside other super-organisms.For
the long term I hesitate to speculate. We all have our own Leviathan. As
Peter Ward once wrote: “The future stretches before us not as one long
dark tunnel but as a series of vignettes of variable clarity, like a long avenue
punctuated by street lights of differing luminosity.” Tectonic plate move-
ment will shift the relationship between land and sea. Changes in oxygen
levels in the atmosphere may affect the viability of life itself. The human
species may even change its shape, assuming some are still alive to tell the
tale. For example, given the evolutionary significance of our brains and the
current hazards of childbirth, we might imagine a sort of human marsupial
in which women gave birth earlier in the reproductive process, and devel-
oped a kind of pouch.
As Thomas Hobbes said, as he approached death: “I am about to take
my last voyage, a great leap in the dark.” That is true for all of us; however,
we measure and look forward to the future.
I sometimes wonder how long would it take for the Earth to recover
from the human impact. How soon would our cities fall apart, the soils
regenerate, the animals and plants we have favoured fi nd a more normal
place in the natural environment, the waters and seas become clearer, the
chemistry of the air return to what it was before we polluted it? Life itself,
from the bottom of the seas, to the top of the atmosphere, is so robust that
the human experience could become no more than a short and certainly
peculiar episode in the history of life on Earth.
Above all let us remember how small and vulnerable we are as creatures
of a particular environment at a particular moment in time. We are like
microbes on the surface of an apple, on an insignificant tree, in an insignifi-
cant orchard, among billions of other insignificant orchards stretching over
horizons beyond our sight or even our imagining.
3 The End of Gucci Capitalism
Noreena Hertz
THE NEW DAWN
There are some who say that this current global fi nancial recession, this
recession stroke depression that is being felt in London and New York, in
Madrid and Athens, will not impact upon the nature of capitalism. They
say that we have been here before—faced and navigated our way through
economic downturns—and that capitalism emerged unscathed. And they
go on to say that five years from now capitalism will basically look as it did
before the economic crisis began.
I understand this caution about predicting anything new, a reluctance to
call the past era of capitalism’s demise, but I do not agree with it. I believe
the conditions are in place for a markedly different economic model to
emerge from the carnage currently being wrought.
For I do not believe that what we are seeing today is just a variant of the
Russian crisis, the dot com crisis, the Japanese crisis, or other crises that
happened and had consequences but did not impact upon ideology or the
fundamental trajectory of political and economic policy. I do believe that
this fi rst full crisis of globalization, this fi rst collective lose-lose, this fi rst
blue- and white- and multicolored-collar recession is so profound, is already
negatively affecting so many people all over the world, and is beginning to
be generally admitted to being linked to the flawed ideological doctrine of
the past 30 years, that it has a good chance of catalyzing a radical change of
capitalism, catalyzing a radical change in the relationships between govern-
ment, business, and society. These changes will have massive implications
for nations, supranational institutions, corporations and individuals.
GUCCI CAPITALISM
I have named the past era of capitalism, Gucci capitalism. Gucci capitalism
was an ideology born in the mid-1980s, the love child of Ronald Reagan and
Margaret Thatcher with Milton Friedman its fairy godfather and Bernard
Madoff its poster boy. It was an era whose fundamental assumptions were that
40 Noreena Hertz
markets should be left to self-regulate, governments should practice laissez-
faire, and human beings are nothing more than rational utility maximizers.
In the era of Gucci capitalism shareholders were king, or rather those
with significant enough holdings to have some clout. Society, employees,
customers and those impacted by businesses’ decisions were decidedly rel-
egated to second place.
It was a period that promoted an almost religious belief in the market’s
ability to be not only a distributive mechanism but a deliverer of equity,
justice and even freedom, despite the mounting evidence that in reality that
wasn’t actually happening and that in the very countries that adopted Gucci
Capitalism most wholeheartedly, a gaping chasm was emerging between
the economy and social justice. Under Gucci capitalism, British bankers
took home salaries as much as 100 times that of an ordinary worker. In the
United States hedge fund managers could earn over a billion dollars. Social
mobility in both countries did not improve in 30 years.
It was a period in which Gordon Gekko’s “Greed is good” mantra
from the late 1980s movie Wall Street remained the motto for the next
two decades. Risk was promoted by politicians and lauded by society, but
responsibility was not accordingly aligned. It was an era in which success
increasingly became something that was only measurable with money, and
in which money became, in the fi nancial sector especially, increasingly
detached from physical assets or realizable potential. In the era of Gucci
capitalism, it became more shameful not to have the latest pair of Nike
sneakers or Gucci handbag than to be in debt. In the United States the aver-
age number of credit cards per person was nine.
It is no wonder that in an era with this its underlying ethos, regulators
were too weak, bankers were too powerful, and checks and balances were
not in place. In this era, the narrative that to be successful one had to have a
bigger house and the newest line of the most fashionable brand was actively
fed by bankers, mortgage brokers, credit card companies, and advertisers
alike. With this the driving force in society, it wasn’t a matter of if, it was a
matter of when, the whole pack of cards would come tumbling down.
Once it did fall, the hollowness of its fi rmaments, its lack of foundations,
was revealed for us all to see. Gucci capitalism was as lacking in real values,
as focused on meaningless consumption, as short-termist and as superficial
as its name suggests.
THE END OF A PARADIGM
But attacks and bouts of self-awareness can be short-lived, and paradigms

are notoriously hard to shift. Are the conditions in place for a new form
of capitalism, a form that I have named coop capitalism with values of co-
operation, collaboration, coordination, community and communication at
its heart, to emerge in its stead? I believe they are.
The End of Gucci Capitalism 41
There are three key reasons why I believe this is so.
1. The Old Ideology has been Intellectually Discredited

Under Gucci capitalism human beings became caricatured, super-rational,
selfish, profit and consumption maximizers. All the complexities of this
big messy world were attempted to be reduced into mathematical models,
charts, and matrices that could fit onto PowerPoint slides. And when the
facts didn’t fit the model, the matrix or the chart, they were not changed;
instead, they were brushed under the carpet.
This of course had consequences that we now are all too aware of. There
is now a recognition and a public admission that economists’ forecasts and
models were relied on far too heavily. And finally within economics and
within the social sciences in general a well due debate has begun on the lim-
its of the discipline and the beginnings of disentangling what were “truths”
and what were in fact ideologies rather than facts.
This disentangling will continue to gain momentum. Economists such
as myself and Paul Krugman, Joseph Stiglitz and Jeffrey Sachs, who had
come to be considered “alternative” over the past decade, are now those
being sought out to steer the recovery. Perhaps because we always real-
ized the limitations of economics, and the importance of a more holistic
approach. I, for one, have always incorporated sociology, history, behav-
ioural science, psychology and even anthropology in my analyses. And this
isn’t revolutionary or radical, the greatest economists of the past whatever
their political persuasion whether Schumpeter or Galbraith or Keynes or
Hayek all understood that economics could not be put in a silo, and that
to understand the world would take more than a few mathematical mod-
els. Adam Smith in addition to writing The Wealth of Nations wrote The
Theory of Moral Sentiment recognized that the market was amoral—and
that morality needed to be imposed upon it.
2. Governments now have a Mandate to Intervene

The second reason why a new model of economics looks likely to emerge is
because a new mandate for government to intervene is now present; it sim-
ply was absent over the past three decades. In a recent survey conducted in
the United States, the most traditionally hostile environment to government
intervention, more than half of those surveyed now say that the free market
should not be allowed to function independently. This is a seismic shift.
Banks are the fi rst to see the impact of this with interventions being
enshrined in law in the United States, the United Kingdom, and elsewhere.
Although I don’t predict such wholesale micromanagement by government
of the private sector as a whole—nor would I condone it—I would warn any
company that could be perceived to be acting against the public good that
it now risks standing in the line of fi re. Obvious industries to be targeted
42 Noreena Hertz
fi rst are the fast food industry and big pharma. With health costs soaring,
and governments needing to rein in expenditure, I predict more pressure
on fast food companies to take responsibility for the obesity crisis and on
pharmaceutical companies to deliver affordable medicines.
Under Gucci capitalism, mandating corporations to do things for a
greater public good was rare. Now, especially given the braying public and
media and a cycle of domestic elections looming, it will become increas-
ingly the norm.
3. Other Countries with other Mindsets are in the Ascendency

The third reason for why we are heading toward a new era of capitalism is
because a new configuration of geopolitical forces is emerging as a result
of the rise of China, Brazil and India and the emergence of the G20. A new
credible and cohesive body that is powerful, demands to be heard, and has
limited if any allegiance at all to Gucci capitalism.
But it’s not just that this new power bloc is likely to directly challenge
the intellectual hegemony of Gucci capitalism. Combine this with a new
U.S. administration, which already pre crisis talked about spreading the
wealth and is committed to a multilateral ideal, and the fact that Conti-
nental Europe having been hit particularly hard by the global recession has
a strong incentive to distance itself from an ideology that it did not spawn
and never sat that well with its inherent communitarian values, and we
have all the ingredients in place for a significant ideological shift.
THE RISE OF COOP CAPITALISM
Okay, so we are in the midst of an ideological shift. But am I right in pre-

dicting that it will take the form of coop capitalism?
Of course it is impossible to crystal ball gaze with absolute certainty. But
by combining an analysis of the reasons for the demise of Gucci capitalism,
with appropriate historical reference points, and on-the-ground observa-
tions with conversations with global movers and shakers and also polling
data from the general public, I think coop capitalism describes the contours
at least of what is likely to emerge from the ashes of the past.
Already we see evidence of new defi ning characteristics. We see a recog-
nition at last that an interconnected world needs interconnected solutions,
which of course doesn’t mean that every country is going to adopt the same
policy, nor that horse-trading will not take place (it already is), but that
there will be moves toward common solutions and shared goals.
Discussions persist with regard to the creation of a global financial regu-
latory system, for example, despite the efforts of industry lobbyists to sty-
mie its formation. But this is just the beginning. As we begin to see other
crises through the same lens as the fi nancial crisis (i.e., a collective and
The End of Gucci Capitalism 43
shared problem), it is likely that more global agreements, institutions and
arrangements will be set up to address the myriad of problems that are
generated by businesses and the collective actions of individuals, whose
consequences spill over to the general public at large both domestically and
overseas.
But it is not just at an intergovernmental level that we see the signs of
more cooperation. The assumption of Gucci capitalism that we, as indi-
viduals were selfish, super-individualistic beings who only cared about
maximizing our wealth, salaries, and resources, is proving to be more an
expediency and a failing of mainstream economists than an accurate depic-
tion of mankind.
While it is true that over the past two decades there has been a percep-
tible pressure to keep up with the Joneses, and a growing obsession with
material worth, this may be more a case of nurture than nature. Anthro-
pological studies show that societies that have less, share more, and recent
work in behavioural economics has confi rmed that benevolence is not alien
to human nature. So whilst it may have been true that under Gucci capital-
ism there was a tendency to bowl alone, it might just not be the case that
we are essentially individualistic.
More likely is that we are entering an age of pulling together, as was the
case during the Great Depression and the Blitz, and that this will be one of
this era’s key defi ning characteristics. Its early days to show mass manifes-
tation of this, but there are a few things we can point to the meteoric rise of
the global “free cycle” movement whose members give stuff away for free
rather than sell their goods on eBay; the rise in Japan of the notion of job
sharing—where rather than having swathes of employees sacked, employ-
ees are choosing to work fewer hours so as to soften the collective blow, a
principle now being copied in parts of Europe; or the fact that over a mil-
lion baby caps were knitted by Brits for babies in developing countries, not
before but since the fi nancial crisis began.
Interestingly some non-traditional business models seem to fit within the
coop capitalism rubric and are faring particularly well. One such business
model is the women-run fi nancial services company to which many Icelan-
dic depositors ran after their macho bankers pushed their country over the
edge. The brand “Innocent,” the smoothie juice maker, is another example.
This company is so committed to the environment that it pioneered making
plastic bottles completely recyclable and positioned itself from the start as
a company with values of social and environmental justice at its heart. And
it sold a 20% stake in its company to Coca Cola, right in the midst of the
fi nancial crisis.
Of the non-traditional models, the cooperative movement offers a
wealth of support for a cooperative model. From the cooperatives in Emilia
Romagna in Italy, a region that is one of the most successful economi-
cally in Europe and the home of over 8000 cooperatives, to the Desjardin’s
Group, the fi nancial cooperative in Quebec, that region’s leading employer,
44 Noreena Hertz
to Switzerland where cooperatives are the largest private employer, this
alternative model of organization has already made a huge impact on
employment and economic success.
And importantly in a time of crisis cooperatives seem to be able to endure
and survive longer than other companies. A recent Canadian government
study concluded that cooperative businesses tend to last approximately two
times longer than other businesses in the private sector. The stability of the
cooperative enterprise, indicated by a low number of bankruptcies and the
longevity of cooperatives, can be attributed in part to the fact that they are
locally rooted in their communities. A quality that in the coming months
of recession will in all likelihood help them endure better than other less-
rooted competitors.
Indeed whilst the fi nancial and ensuing economic crisis has had a nega-
tive impact on the majority of enterprises, cooperative enterprises around
the world are showing resilience to the crisis. Financial cooperatives remain
fi nancially sound; consumer cooperatives are reporting increased turnover;
worker cooperatives are seeing growth as people choose the cooperative
form of enterprise to respond to new economic realities.
And then of course there’s the rise and increased success of collabora-
tive cooperative sharing models on the Internet which should not be seen
as something apart from other sectors, but perhaps as a window into what
might now work elsewhere. iPhone and Facebook have encouraged pro-
grammers to create applications for them, social networking sites are on the
rise, and the open source movement with its poster boy stories—Linux and
Apache—have been successful. The “open movement” in general encom-
passes “open design” where, in Helsinki, for example, there has been a
revolution in the way old people’s homes are being designed with the elderly
being part of the design process, and open creation such as Wikipedia.
All these cooperative sharing models point to a multiplayer version of
capitalism which encourages all parties to work together in pursuit of a
common good.
Coop capitalism is the political-economic version of “Yes we can.” With
the emphasis on the “we,” coop capitalism is a system with the potential to
be more inclusive, more equitable and more participatory than what guided
the world in the past. This system tends to fair rules, social justice and
sustainability and reconnects the economy with what is right and just and
meaningful. It is a system that allows everyone the potential to collaborate
in common cause and doesn’t leave society or its institutions to be shaped
and fashioned only by those that shop at Gucci.
4 The Energy Challenge
Edward Hyams
UK emissions have to come down by at least 80% by the middle of the

century if we are to meet our targets and play our part in counteracting
man-made climate change. This is a big number, and it implies significant
changes—but it does not have to mean that we sacrifice the way of life we
are used to.
We have been used to having energy on tap—and to it being cheap. This
state of affairs is not going to last. Energy is going to get more expensive,
and what’s more, the UK will have to import more fuel as its supplies of
North Sea oil and gas run out. So fuel prices—for cars, for heating and
cooking and for running our homes—are going to go up at the same time
that we need to decarbonize our energy system. This gives us a double
incentive to become “greener.”
Becoming greener should not just be seen as being about making sac-
rifices—the huge changes that are needed will create massive opportuni-
ties for businesses throughout the supply chain and for customers to save
money. In these recessionary times, there is also the opportunity to create
large numbers of jobs in making and installing energy-efficient products to
provide a boost to the economy at the same time as decarbonizing it.
There is enormous scope, for example, to make our homes more energy-
efficient and we do not need to wait for some futuristic technology to be
developed. We could save 20% of emissions by installing readily available
technologies like loft and cavity wall insulation and gas-condensing boilers.
Many homes have solid walls so cavity insulation is not an option.
Properly insulating these homes produces even more savings, but it is more
expensive so we need to fi nd ways of bringing costs down through econo-
mies of scale and innovative funding schemes.
Of course, there will be improvements in future, making measures such
as floor insulation, improved glazing and LED lighting easily and cheaply
available. We need to encourage the development and deployment of these
technologies. The government has already taken some significant steps in this
direction, mandating that by 2016 all new homes must be zero-carbon. It is
not just the individual house that must be zero-carbon; developments must
take into account low-carbon transport and renewable energy supplies.
46 Edward Hyams
All current houses must now have an Energy Performance Certificate
when they are sold so buyers know the costs of buying a poorly insulated
home. This measure would be more effective if introducing energy saving
measures led to a reduction in council tax.
Another area that needs to be tackled is the private rented sector—land-
lords have no incentive to make their properties energy-efficient because it
is their tenants, not they, who reap the benefits.
SMALL IS BEAUTIFUL—THE RISE OF MICROGENERATION
The government has said that by 2020, every home must be equipped with
a smart meter. Smart meters are the building blocks of a smart grid, and
they herald a revolution in the way energy is produced, the way the grid is
managed and in the relationship between customer and supplier.
Smart meters mean that real-time communication between homes and
the energy companies is possible. Why does this matter? It opens up the
energy system in much the same way that the Internet did for the telecoms
sector. Suppliers get a much better picture of demand, allowing them to
manage the grid and their generating assets much more effectively. It also
allows them to offer customers incentives to move their demand away from
peak times, smoothing the demand profi le and making existing capacity
much more efficient.
But more importantly for customers, the smart grid will encourage them
to generate their own energy and sell it back to the energy companies. Com-
bined with the government incentive schemes for clean energy and renew-
able heat—to be introduced in 2010 and 2011, respectively—homes will
be paid to generate energy using solar panels, ground- and air-source heat
pumps, biomass and micro-CHP (combined heat and power) boilers, along
with a range of other technologies.
The cost of many technologies, such as solar photovoltaics (PVs), is com-
ing down significantly and over time we will probably see PVs routinely
integrated into building materials such as roof tiles. Ground and air-source
heat pumps will play a bigger role in heating, as will biomass, which has
probably been under-emphasized by the government.
Eventually, fuel cells will fi nally become a viable option to power cars
and homes. We may see renewable installations such as wind farms being
used to produce hydrogen at off-peak times when prices are low. How-
ever, it is unlikely that large-scale energy storage will play a large role in
the energy system in future. Instead, microgeneration will be widespread
enough for us not to need storage.
As homes create their own power, large-scale generation will be under-
going its own revolution at the same time. The smart grid will be far bet-
ter equipped to accommodate rising levels of renewable energy from wind
farms on and off shore, from wave and tidal power and from smaller-scale
The Energy Challenge 47
power stations generating energy from the waste that we throw away. Dis-
trict heating schemes will see more electricity generated at a local level, with
the heat created being piped into homes, schools, hospitals and businesses.
THE RISE OF THE MACHINES
We have seen a revolution in consumer electronics over the last three

decades—we have gone from households with one TV in the living room
to multimedia households with TVs in every bedroom, along with iPods,
mobile phones, digital cameras and computers scattered about the home. In
the kitchen, the stove has been joined by microwaves, juicers, bread makers
and coffee machines. The washing machine now has a tumble dryer and a
dishwasher for company and the fridge/freezer has bulked up and makes
ice cubes. Many of these appliances have digital clocks so people feel they
have to be kept on all the time.
Individually, all of these appliances have become much more energy effi-
cient over the years, but because they have become more affordable, they
have proliferated, and the net result is that energy use in the typical UK
home doubled between 1972 and 2002. By 2010, it will have risen a further
12% from 2002, to exceed 100 TWh.
The current design of many of these gadgets does not help: the advent of
remote controls means that some appliances no longer have off-switches,
only standby. Standby means that you are using power, and spending
money, even when you are not there—which will become increasingly
unacceptable in an age of high energy prices and low carbon that will drive
a push for energy efficiency.
Meanwhile, a whole new set of mobile devices has arisen because
advances in battery technology mean that they can be charged at home
and then travel with you. Mobile phones, MP3 players and digital cameras
cut the need for disposable batteries, but few people realize that leaving
their chargers switched on so they can plug in when they get home uses
electricity even when they are not charging. Individually, the energy con-
sumed is small, but if all homes in the UK (and every home has at least
one mobile phone) left their chargers on, they would use enough energy to
power 66,000 homes a year.
I can illustrate the extent of the changes from my own professional expe-
rience. I used to run an electricity transmission business, and 20 years ago,
if maintenance work was needed, it was possible to simply turn off the
supply for homes for a few hours overnight and no one would notice. Now,
if the supply cuts out for 30 seconds, everything starts flashing, and the
residents have to spend half an hour resetting everything.
Another factor in rising energy use has been the increase in the num-
ber of single-person households—the more people who live in a house, the
more energy efficient it is because you only need, for example, one washing
48 Edward Hyams
machine and one central heating system. The average number of people per
household has dropped from 2.9 people in 1971 to 2.3 now, as a result of an
increase in the number of divorces, longer life spans and the ability of more
single people to afford their own homes. Almost 70% of the expected rise in
households from 1996 to 2016 can be attributed to single-person households.
The upshot of all of these factors is that personal carbon emissions
account for 43% of the total, or about 235 Mt CO2 a year. Whatever the
causes, this rise in energy consumption must be reversed. An 80% reduc-
tion in these emissions equates to 18 Mt CO2 a year. This sounds like an
impossibly large amount, and many people see this as a threat to their way
of life. But we should be able to meet all of our climate goals without giv-
ing that up. It is possible to maintain our lifestyle but use much less high-
carbon energy. And although it often seems that only expensive or far-off
technological breakthroughs can make a difference, a low-carbon future
can be achieved with a combination of existing technology, bold policy
decisions and the right personal choices.
Communications equipment and other consumer electronics will con-
tinue to proliferate and will outpace the improvement in energy efficiency
of each individual device, so we need to be more enlightened.
THE EFFICIENCY IMPERATIVE
A range of measures can be taken. First, it is important to encourage the

most efficient products and phase out the most energy-hungry by making it
really clear which are the best performers and making that a real feature at
the point of sale. This is a process that is already under way, through labels
such as the “energy saving recommended label.” It is a process that will
accelerate as the EU’s Directive for Eco-Design of Energy-using Products,
which came into force in 2007, begins to feed through into the high street.
More “choice editing” of inefficient appliances—which could include
voluntary agreements, price signals or outright bans—would get around
the problems of energy ratings by simply ensuring that all household appli-
ances are maximally efficient. It can include setting maximum power levels
too, so there’s no need for people to agonize over buying decisions or the
interpretation of complex labeling.
We also need to give people clear messages so they know how to decar-
bonize their lives—but without overwhelming them with too much infor-
mation. And people need to be nudged in the right direction with policies
that make it easier to act in a sustainable way and harder to take the high-
carbon option. The most effective way to engage people is through the
concept of value—low-carbon options can save you money. However, often
there is a large up-front cost, so we need the right funding packages in place
to allow people to make the choices that are right for the environment and
right for them, too.
It is not just conserving energy that we need to tackle—the same approach
must be taken to saving water, reducing waste and using resources more
sustainably.
CULTURE SHOCK
All the changes brought in by government and the new technologies that
are coming on line are not enough. We need changes at a more fundamental
level—our attitudes regarding energy must change. The fi rst steps on this
road have been taken—since 2008’s rapid surge in fuel prices, people have
become more aware of energy use, and the advent of the carbon market has
for the fi rst time made the fact that there is a price to be paid for carbon
emissions explicit.
Using less energy—and water—has to become second nature, and this
is an area where smart meters can play a key role because the fi rst step is
to give people information about what they are using and how much that
costs them. As the technology develops, it will be able to help people make
the right choices automatically—turning off appliances when it senses no
one is home, for example, and turning on the heating when the residents are
on the way home from work.
In time, all homes will be zero-carbon, with many of them generating
their own electricity and selling it back into the grid. We will still have as
many gadgets as we do now, if not more, but they will be even more effi-
cient, and many functions now done separately by different devices will be
consolidated—one device may act as phone, MP3 player, digital camera,
video recorder, TV and laptop, for example. Our heating and hot water
may be provided by a district heating scheme, cutting costs—and carbon
emissions—dramatically.
We will look back at products such as patio heaters and bottled water
with amazement that we could ever have used such wasteful goods. We
are already seeing signs that sustainability is becoming aspirational—this
attitude will spread and become more mainstream.
THE RIGHT PRICE SIGNALS
But to get to this stage, on a broader level we need the right policies to
encourage the type of low-carbon generation technologies that can wean us
off our dependence on fossil fuels. No one will invest in new plant, whether
that is nuclear power, offshore wind or anything else, unless the long-term
signals are right because these are long-term investments where it takes 20
years to get a return on investment.
The Climate Change Act, the world’s fi rst climate change legislation that
was introduced at the end of 2008, has a very long-term target—out to
50 Edward Hyams
2050—but there are not enough policy support mechanisms to help us get
there. The EU’s Emissions Trading Scheme (ETS) is the main policy mecha-
nism, but many people are doubtful that it will provide sufficiently robust
long-term signals to get new low-carbon generation. It will be politically
compromised by arguments over the allocations to various industries, and
it is a relatively short-term mechanism in the context of the life of power
stations.
Ideally, we would move on from the ETS to something like a carbon tax,
but given where we are now, that would be difficult. The Climate Change
Act and the ETS are not going to be sufficient to ensure the investment
needed to decarbonize the grid. The market needs to believe that the ETS
will endure in its current or a similar form for several decades, and we need
something to supplement the ETS, such as a guaranteed floor price that will
provide the incentive and the certainty to encourage the industry to build
low-carbon generation.
The UK has to deal with the fact that most of the companies expected to
invest in new generation capacity are international and have choices about
where to put their money. They will only invest in the UK if the market
signals are at least as good as elsewhere.
Here, our deregulated market structure is starting to work against us—
it was fi ne when we expected most of Europe to follow suit, but that has
not happened. We fi nd ourselves at the western end of a gas market supply
chain that stretches all the way back to Russia—making the security of our
energy supplies a real concern.
The deregulated system will have to change. There will need to be more
prescription and clearer price signals. We need some kind of body that
specifies the proportion of energy generated by gas, nuclear and renewable
sources, and we can allow the gap to be generated by something else.
The price signals will be helped by the fact that the low oil prices we saw
in the early part of 2009 are unlikely to return. New exploration for oil
and gas needs a long-term price of about $75 a barrel, so that is likely to be
the floor price in the future. This price will also be needed to encourage the
building of new refi ning capacity—if that capacity is not built, we will see
big spikes in the price when demand picks up.
It is a sign of how quickly things have changed that, just over a year
ago, we would have thought $75 a barrel was a very high price. Having
seen prices soar to double that level and then crash to around $30 a barrel,
we have a new and probably more realistic perspective about the volatility
of energy prices and the havoc this uncertainty can wreak on the world
economy. As our imports increase, we will be unable to insure ourselves
against this rise in global prices with our own oil exports.
Of course we do not necessarily want to see more oil production; we
want to see a decoupling of fossil fuel use and economic growth. However,
for that to come about requires a critical mass of low-carbon generation
capacity, a big increase in energy efficiency and a reduction in demand.
For the foreseeable future, we will still need fossil fuels to provide basel-
oad power, but we need to decarbonize this as much as we can. At the same
time we need to maximize the amount of microgeneration capacity being
installed by customers.
The UK’s 80% reduction target by 2050 is achievable, but we will need
to throw everything at the problem—decarbonizing the grid and using
smart meters, smart appliances and the smart grid as well as more estab-
lished measures such as insulation to make buildings zero-carbon. We need
to focus on all the basic boring measures such as insulation, low-energy
light bulbs, and efficient appliances before we start thinking about more
esoteric solutions.
It is not enough to focus just on the 2050 targets—many scientists believe
we have only until 2015 to stabilise emissions—that is a real challenge. In
terms of current known technologies, the UK has probably lost the battle
to become a world leader. If we are really serious about building a UK
technology supply chain, we have to look at investing in next-generation
technologies such as carbon capture and storage, fuel cells and marine.
However, it also creates real opportunities in areas ranging from humble
home insulation and the production and installation of microgeneration to
tidal and wave power. Grabbing these opportunities means jobs and busi-
ness opportunities.
5 Economizing, Innovating, and
Sustainable Economic Performance
A Business School Perspective
Christos N. Pitelis and Jochen Runde
INTRODUCTION
The aim of this chapter is to revisit Lionel Robbins’s famous defi nition
of economics from a business school perspective and in the light of post-
Robbins developments in neoclassical economic theory, evolutionary eco-
nomics and management scholarship. The thrust of our argument is that
while economics in its Robbinsian “economizing” guise contains important
lessons for business school audiences, his insistence on economic analysis
proceeding by taking means-resources—what he calls the “ultimate data”
of “technique” and institutions (such as property rights)—as givens, may
actually divert attention from or even obscure various other issues of cen-
tral importance from a business school perspective. The reason for this is
that while business leaders and managers are certainly interested in ques-
tions of economizing, they are also interested in questions of innovation
and strategy. Many of the issues involved here are ones that have less to do
with the efficient allocation of given resources than with addressing ques-
tions of how resource constraints might be reduced (i.e., with technological
change, increasing returns, intertemporal efficiencies and the productivity-
enhancing effects of the co-evolutionary character of market structures,
organizations and technological change. These factors are vital determi-
nants of intertemporal efficiency and sustainable economic performance,
and therefore cannot be treated simply as parameters that are only interest-
ing insofar as they affect relative scarcities.
The chapter is structured as follows. We begin in the next section by
reviewing the defi nition of economics proposed by Robbins in his 1935
The Nature and Significance of Economic Science (henceforth NSES) and
argue that his particular view of economics as being purely about econo-
mizing is of a piece with his view that economics is not about the causes of
wealth or welfare. The section titled “The Economizing Conception and
Business School Economics” then looks at the influence of the Robbinsian
view on business school economics via post-Robbinsian economic theory.
The following section, “Robbins and Technique: Economizing or Inno-
vating?” discusses recent developments in neoclassical economic theory,
Economizing, Innovating, and Sustainable Economic Performance 53
evolutionary economics and management scholarship that focus on the role
of technological change and its relationship to market structures, organiza-
tions and institutions. We argue that these developments put into question
Robbins’s view that the economist should treat “technique” and “institu-
tions” as “ultimate data.” In particular, we argue that economizing cannot
always be treated as separate from innovating, and that in the business
world it is mainly through innovation and technological change that long-
term value maximizing can be effected. The fi nal section closes with some
concluding remarks.
ROBBINS’S DEFINITION OF ECONOMIC SCIENCE
According to Robbins’s famous defi nition, “Economics is the science which

studies human behaviour as a relationship between ends and scarce means
which have alternative uses” (Robbins, 1935, p. 16). By “ends” Robbins
means human objectives, possible states of affairs that can be can be
ranked in terms of their importance or desirability. By “means” he has in
mind the resources, including time, that could be deployed to achieve those
ends. Economic problems, as he conceives them, arise in situations where
there are competing ends of different levels of importance, and where the
available means could be put to more than one use and are scarce relative
to those ends. In situations of this kind economic choices have to be made:
when time and the means for achieving ends are limited and capable
of alternative application, and the ends are distinguishable in order of
importance, then behaviour necessarily assumes the form of choice.
Every act which involves time and scarce means for the achievement of
one end involves the relinquishment of their use for the achievement of
another. It has an economic aspect. (Robbins, 1935, p. 14)
Robbins thus characterizes economics in terms of what we will call an

economizing orientation, namely a concern with analyzing how scarce
resources may be put to their best use. He contrasts this conception with
what he calls the “materialist” conception that he associates with scholars
such as Cannan, Marshall, and even Pareto and J. B. Clark, and according
to which economics is about the “causes of material welfare” (Robbins,
1935, p. 4). Robbins is sharply critical of this conception and insists that
whatever economics may be about, it is not about the causes of material
welfare (Robbins, 1935, pp. 4–23). However, the target of Robbins’s criti-
cism is not so much the emphasis on the causes of welfare per se, but that a
focus on material welfare would render economics unable to accommodate
certain activities such as enjoyment of leisure and the services of an opera
singer on the grounds that these are not instances of material wealth (Rob-
bins, 1935, pp. 4–23).
54 Christos N. Pitelis and Jochen Runde
Robbins is surely right that leisure activities and the provision of services
should fall under the purview of economics. As he puts it:
is true that the scarcity of materials is one of the limitations of conduct.

But the scarcity of our own time and the services of others is just as im-
portant. The scarcity of the services of the schoolmaster and the sew-
age man have each their economic aspect . . . it is not the materiality
of even material means of gratification which gives them their status as
economic goods; it is their relation to valuations. It is their relationship
to given wants rather than their technical substance which is signifi-
cant. (Robbins, 1935, pp. 21–22)
However, accepting that the scope of economics extends to “non-mate-

rial” welfare and the implication that the materialist conception of eco-
nomics should be rejected for excluding them does not by itself imply that
economists should not be concerned with the causes of welfare in some
more general sense. That is to say, there is no logical barrier to allowing
that economics should be concerned with “economizing” in the Robbinsian
sense, at least in part, and also extend to the analysis of causes of welfare.
As far as Robbins himself is concerned, and while he is unequivocal in his
insistence that economics is not about the causes of material welfare in
Chapter I of NSES, he there does not explicitly deny that it might be about
the causes of welfare in a more general sense1.
In Chapter III Robbins goes on to claim that instead of dividing econom-
ics into the theory of production and the theory of distribution—where the
former is concerned with explaining “the causes determining the size of
the ‘total product’” and the latter with “the causes determining the pro-
portions in which it is distributed between different factors of production
and different persons” (Robbins, 1935, p. 64)—as Adam Smith and others
economists did, we now have “a theory of equilibrium, a theory of com-
parative statics and a theory of dynamic change” (Robbins, 1935, p. 68).
Robbins leaves his reader in little doubt about his position on the theory of
production:
We have all felt, with Professor Schumpeter, a sense almost of shame

at the incredible banalities of much of the so-called theory of produc-
tion—the tedious discussions of the various forms of peasant pro-
prietorship, factory organization, industrial psychology, technical
education, etc., which are apt to occur in even the best treatises on
general theory. (Robbins, 1935, p. 65)
And commenting on Adam Smith’s own excursions on this topic:
although Adam Smith’s great work professed to deal with the causes
of the wealth of the nations, and did in fact make many remarks on
the general question of the conditions of opulence which are of great
importance in any history of applied Economics, yet, from the point of
view of the history of theoretical Economics, the central achievement
of his book was his demonstration of the mode in which the division of
labour tended to be kept in equilibrium by the mechanism of relative
prices. (Robbins, 1935, p. 68)
The upshot of all this is that, for Robbins, it is never the ends and means
in their own right that are of significance for the economist, only the rela-
tionship between ends and means. That is to say, means (and ends) should
be treated as givens by economists, as “ultimate data” that it is not their
business to enquire into:
the subject matter of Economics is essentially a set of relationships—

relationships between ends conceived as the possible objectives of
conduct on the one hand, and the technical and social environment
[means] on the other. Ends as such do not form part of this subject mat-
ter. Nor does the technical and social environment. It is the relation-
ship between these things and not the things in themselves which are
important for the economist. (Robbins, 1935, p. 38)
And again:
Economists are not interested in technique as such. They are interested

in it solely as one of the influences determining relative scarcity. Con-
ditions of technique “show” themselves in the productivity functions
just as conditions of taste “show” themselves in the scales of relative
valuations. But there the connection ceases. Economics is a study of
the disposal of scarce commodities. The technical arts of production
study the “intrinsic” properties of objects or things. (Robbins, 1935,
pp. 37–38)
THE ECONOMIZING CONCEPTION

AND BUSINESS SCHOOL ECONOMICS
Robbins’s view had a revolutionary impact on economics (see, for example,

Baumol, 1984), as taught both in economics departments and in business
schools. In the case of business schools, much of the economics taught zeroes
on what we will call “core” microeconomics delivered in the familiar neo-
classical style of standard introductory and intermediate textbooks. While
the level and extent of provision varies quite significantly across schools, as
well as across different programs offered within the same schools, the kind
of topics that tend to be covered invariably include some elementary price
theory, the theory of the consumer, the theory of the fi rm (costs, revenues
and profit maximization), market structure, some managerial economics,
welfare economics and market failure (market power, externalities and
public goods).
Neoclassical microeconomics is widely regarded as the paradigm exam-
ple of economics in its Robbinsian guise, and this is true of economics texts
directed at a business school audience. Thus, UK-based authors Nellis and
Parker (2006) in their Principles of Business Economics declare that
Economics is concerned with the efficient allocation of scare resources.

When purchasing raw materials, employing labour and undertaking
investment decisions, the manager is involved in resource allocation.
(Nellis & Parker, 2006, p. 3, emphasis in the original)
Similarly, U.S.-based authors McKenzie and Lee (2006), in what is

described on the cover as “the first microeconomics text written exclusively
for MBA students,” distinguish the economist’s work from that of other
social scientists as follows:
Economists take a distinctive approach to the study of human behav-

iour, and they employ a mode of analysis based on certain presupposi-
tions. For example, much of economic analysis starts with the general
proposition that people prefer more to fewer of those things they value
and that they seek to maximize their welfare by making, reasonable,
consistent choices in the things they buy and sell. (McKenzie & Lee,
2006. 10)
While neither book mentions Robbins specifi cally and McKenzie and
Lee display a preference for American over British authorities, the spirit
of the Robbins view clearly shines through in the passages quoted above.
Further, it seems to us right that business school students be exposed to
the economizing perspective in the Robbinsian sense, since business lead-
ers, managers and entrepreneurs are often engaged in allocating resources,
in having to make difficult choices between competing ends under condi-
tions of scarcity and attempting to fi nd more efficient and cost-effective
ways to perform already-existing functions. Basic lessons about resource
allocation, opportunity costs, diminishing returns, marginal analysis and
so on are central to all this kind of activity and therefore valuable to the
students.
There are of course other reasons for teaching core microeconomics
to a business school audience. First amongst these is that it provides a
theory of price and insights into the operation of the price mechanism, a
characterization of the fi rm and different forms of market structure and
their effects—especially useful with respect to more mature and relatively
more stable sectors (Pitelis, 2007)—and the effects of market failure (the
last of which is becoming increasingly important because of increasing
concerns about the environment and relevant policy responses). Second,
microeconomics is in many ways a fundamental discipline that provides
the theoretical underpinning of parts of other subjects that students will
encounter on their courses, such as business strategy. Michael Porter’s
(1980) approach to competitive strategy, for example, derives from the
microeconomic market structure analysis. Third, a grounding in micro-
economics puts students in a better position to receive, interpret and
evaluate the many messages they will be receiving about the “economy”
during their working lives.
However, to say that the core microeconomics taught in business schools
is useful is of course not to say that there aren’t limitations to the material
and its potential relevance. Some of these limitations are directly related to
aspects of the economizing orientation articulated by Robbins, but others
have do with features of the discipline that have crystallized in ways that he
might not have imagined. Here are three features we regard as characteris-
tic of modern microeconomics and which we shall focus on below:
1. The assumption that actors are motivated purely by self-interest and

pursue this aim in a perfectly informed and perfectly consistent way,
maximizing utility if they are consumers or maximizing profits if
they are fi rms. In general, the methodology of core microeconomics
is to analyze economic phenomena as the outcome of the actions (and
interactions of) such rational agents. This approach is consistent with
Robbins’s conception of economics (Robbins, 1935, p. 78).
2. An emphasis on static allocative efficiency and the idea that this is
most likely to be effected by the desirable properties of certain “opti-
mal” market (industry) structures such as perfect competition, per-
fect contestability or Bertrand competition (see, for example, Varian,
1992). This emphasis is largely a post-Robbins development.
3. A failure to explore the full ramifications of the possibility that indus-
try structures which are optimal from the point of view of static effi-
ciency, may well be sub-optimal from the point of view of dynamic or
intertemporal efficiency. This failure reflects Robbins’s insistence on
treating “technique” as a datum, thereby discouraging the analysis of
the determinants of technological change2.
To appreciate these issues better, it is worth remembering that one of

the major achievements of this approach has been to prove that under con-
ditions of perfect competition, a market economy, will allocate (scarce)
resources in an efficient way. Economic efficiency is approximated by
Pareto efficiency, defi ned as a situation in which it is not possible to make
any one person better off without making someone else worse off. In addi-
tion, any Pareto efficient situation can be shown to correspond to a com-
petitive equilibrium, given an appropriate distribution of endowments (see
Dasgupta, 1986, for a critical assessment of these ideas).
These are powerful results. However, it is clear that they have been
achieved at the cost, not only of narrowing the scope of economics to what
we have called an economizing orientation concerned exclusively with the
efficient allocation of scarce resources as per Robbins, but also of leading
to a largely uncritical view of the virtues of highly idealized “optimal”
types of market structures. There has accordingly been a slew of criticisms
of this approach, of which we will briefly consider two. In the fi rst place
it has been pointed out that its emphasis on self-interest maximization has
rendered economics free of any considerations or virtuous behavior (Sen,
1987). Second, the alleged optimality of “optimal” industry structures such
as perfect competition and perfect contestability has been questioned. Both
of these structures are characterized by the presence of free entry and cost-
less exit by other fi rms, essential to establishing their “zero waste” prop-
erty. As Baumol (1991) puts it:
It is the costlessness of entry and exit under perfect competition or con-

testability that prohibits all inefficiency, because any fi rm that indulges
in wasteful expenditure cannot long survive the incursion of efficient
entrants. (p. 12)
Baumol goes on to show that for this very reason, fi rms in perfectly
competitive or contestable markets will have an incentive to degrade and
misrepresent product quality and to also abuse the environment. This will
be so even in “repeated games” provided that some players are “transient”3.
There are related issues in respect of “intertemporal” efficiency. One of
the stylized facts of the innovation literature is that it is neither the “midg-
ets” nor the “giants,” but rather medium-sized fi rms that innovate the
most. Indeed there is considerable evidence that the relationship between
the degree of competition within an industry on the one hand and its inno-
vation performance on the other is of the inverse U-shape-type (see Aghion
et al., 2005, for a recent re-statement). Large-sized fi rms are incompatible
with perfect competition, albeit compatible with contestability. However, as
Baumol (1991) notes, the conditions of free entry and costless exit deprives
fi rms of the very incentive to innovate, namely Schumpeter’s (1942) “tran-
sient” monopoly profit. Assuming that innovations are good for sustainable
economic performance, ceteris paribus, “optimality” of market structures
may be inimical to intertemporal efficiency.
Robbins’s conception of economics is more general than core microeco-
nomics as characterized in the three points listed above. One reason for
this is that he does not link his defi nition with ideal market structures that
can deliver the efficient allocation of scarce resources. Another and perhaps
more important reason is that Robbins is concerned not only with static,
but also with dynamic/intertemporal efficiency (see Robbins, 1935, pp. 68,
71, 79, 102–103, and below). Nevertheless, Robbins’s defi nition could lead
to some confusion and could be criticized on some counts. We will mention
two issues here, before moving on.
First, Robbins seems ambivalent as to the role of “time.” He refers to
one’s time and resources, raising the question whether or not time is a
resource. It could be argued that time is the ultimate resource as an indi-
vidual could not do very much in its absence. In addition, while from the
point of view of the individual time is the ultimate scarce resource—there
is little one can do to extend it at any given point in time. Over time, it is
possible to extend time, both at the individual level (for example through
increases in life expectancy) and at the aggregate level (through increases
in productivity and the size of the population). This challenges the notion
of the amount of time being given and the distinction between resource
allocation and resource creation, which we return to below.
A similar point can be made about knowledge. There is an extensive
literature on knowledge that points to its “public good” characteristics, as
well as its tacit, cumulative-increasing returns aspects (see Polanyi, 1966;
Buckley & Casson, 1976; Stiglitz, 1989, and the “endogenous growth” lit-
erature, for example, Romer, 1986)4. If knowledge is a resource (as argued
for example by Marshall, 1961 [1920]), and if it is not scarce, at least not
in all cases, Robbins’s defi nition may need reconsidering and the relation-
ship between knowledge, “technique,” market structures, institutions and
organizations, placed center stage.
ROBBINS AND TECHNIQUE:

ECONOMIZING OR INNOVATING?
We have seen that according to Robbins, economics should be conceived

as an approach that, beginning with the ultimate data of technology and
institutions, and the assumption of rational behavior, is concerned with
the efficient allocation of scarce resources. Reflecting on NSE in his Rich-
ard Ely lecture in 1981, Robbins (1984) restates these views but allows for
what he called “political economy” (as opposed to economic science) to go
further than economic science, by affording itself the luxury of becoming
involved with issues that require value judgments.
The great advantage of the “modern” approach to theoretical economics,
according to Robbins, is that it derives from a number of simple postulates:
The main postulate of the theory of value is the fact that individuals
can arrange their preferences in an order, and in fact do so. The main
postulate of the theory of production is the fact that there is more than
one factor of production. The main postulate of the theory of dynamics
is the fact that we are not certain regarding future scarcities. (Robbins,
1935, pp. 78–79)
Commenting on the apparently static conception of his approach, Rob-
bins suggests that one can use it to analyze dynamics in two ways.
In the fi rst place, we may compare the equilibrium positions, assuming

small variations in the data . . . [and we] may also endeavour to trace
out the path actually followed by different parts of a system if a state
of disequilibrium is given . . . And in so doing all this we make no as-
sumption that fi nal equilibrium is necessary. (Robbins, 1935, p. 102)
Finally, concerning “technical change and innovation” (Robbins, 1935,

p. 133)—which includes “changes in the legal framework” (Robbins, 1935,
p. 134)—Robbins asks the question “how can we tell in advance what
choice will be made?” (Robbins, 1935, p. 134). Accordingly given such
uncertainty “there are certain things which must be taken as ultimate data”
(Robbins, 1935, p. 135).
Our own concern in the remainder of this chapter, is to delve a bit
deeper into the following issues raised by Robbins. First, can the efficient
allocation of scarce resources be separated from resource creation? Sec-
ond to what extent do “technique” and “institutions” impact not only on
relative scarcities but instead co-evolve, thus impacting on technology and
resource-creation, and therefore on scarcity, innovation, intertemporal effi-
ciency and macroeconomic performance?
A useful point of departure is Kaldor’s (1972) observations on increasing
returns to scale:
When every change in the use of resources—every reorganisation of

productive activities—creates the opportunity for a further change
which would not have existed otherwise, the notion of an “optimum”
allocation of resources when every particular resource makes as great
or greater contribution to output in its actual use as in any alternative
use—becomes a meaningless and contradictory notion: the pattern of
the use of resources at any one time can be no more than a link in
the chain of an unending sequence and the very distinction, vital to
equilibrium economics, between resource-creation and resource-allo-
cation loses its validity. The whole view of the economic process as a
medium for the “allocation of scarce means between alternative uses”
falls apart—except perhaps for the consideration of short-run prob-
lems, where the framework of social organisation and the distribution
of the major part of available “resources”, such as durable equipment
and trained or educated labour, can be treated as given as a heritage of
the past, and the effects of current decisions on future development are
ignored. (pp. 1245–6, emphasis added).
For Kaldor (1972) economic theory went wrong when:

the theory of value took over the centre of the stage—which meant fo-
cusing attention on the allocative functions of markets to the exclusion
of their creative functions. (p. 1240)
Similar points are made, among others, by Nobel Laureate Douglass

North (1981, 1990, 1994). Moreover in contrast to Robbins, Kaldor asserts
that the most salient part of Adam Smith’s analysis pertains to the produc-
tivity benefits deriving from the division of labor through “dynamic econo-
mies of scale” (p. 1243) rather than the equilibrating role of markets. The
point here is that resource allocation and resource creation may be hard to
separate and that whether the creative or allocative functions in markets
are most important may well depend on the issue at hand. For example,
for issues involving change and economic development (North, 1994), or
the growth of fi rms (Penrose, 1959), a focus on the creative-developmental
aspects may be more appropriate than a focus on the allocative ones.
For North (1994), “Neoclassical theory is simply an inappropriate tool
to analyze and prescribe policies that will induce development. It is con-
cerned with the operations of markets, not with how markets develop. How
can one prescribe theories when one doesn’t understand how economies
develop?” (p. 359).
For Penrose (1959), moreover, the neoclassical “theory of the fi rm” “is
but part of the wider theory of value, indeed one of its supporting pillars,
and its vitality is derived almost exclusively from its connection with this
highly developed, and still basically unchallenged, general system for the
economic analysis of the problem of price determination and resource allo-
cation” (p. 11). While this theory serves a useful purpose, when “kept in its
habitat” (p. 13), “Difficulties arise when an attempt is made to acclimatize
the theory to an alien environment and, in particular, to adapt it to the
analysis of the expansion of the innovating, multiproduct, ‘flesh-and-blood’
organisations that businessmen call fi rms” (p. 13).
With respect to the relationship between technique, institutions and
scarcity, a number of authors have suggested that the single most impor-
tant determinant of the creation of knowledge and innovation in capitalist
economies has been the capitalist fi rm (Penrose, 1959; Chandler, 1962,
1990; Baumol, 1991). Now knowledge is a resource, and one subject to
increasing returns (Stiglitz, 1989). Institutions, intertemporal efficiency
through increasing returns and resource creation through knowledge and
innovation (intertemporal efficiency), are linked in such complex ways, that
to assert the exogeneity of technique and institutions may be questionable.
Critically, the production of knowledge engenders increasing returns and
questions the optimality of “optimal industry structures” such as perfect
competition and perfect contestability. This implies that apparently sub-
optimal industry structures, such as big business competition, as well as
non-collusive inter-fi rm cooperation (Richardson, 1972) may be more
“optimal” from the point of view of resource-knowledge creation and
(thus) intertemporal efficiency (Schumpeter, 1942; Penrose 1959; Chandler,
1962, 1990; Richardson, 1972; Nelson & Winter, 1982; Baumol, 2002).
The above suggest that both economizing and innovating should be part
and parcel of economic analysis, and that reducing the one to the other or
placing exclusive emphasis on the one at the expense of other may be unwar-
ranted. Indeed, neoclassical industrial organisation (IO) scholars have
spent significant resources in exploring the relationship between market
structure and technological change (Baumol, 1991; Scherer & Ross, 1991)
apparently disregarding Robbins’s advice. More recently whole schools of
economic thought dwell on the nature, role and significance of innovation,
see Fagerberg, Mowery and Nelson (2005) for a recent account. Some of
this work has found its place in leading economics journals, as in the cases
of Teece (1977), Dosi (1988), and Nelson and Winter (2002).
In addition and in partial recognition of their importance, some concerns
of evolutionary economists and management scholars (such as increasing
returns, knowledge spillovers, the importance of human capital and techno-
logical change) as well as the endogeneity of innovation have more recently
been recognized by endogenous growth theorists (e.g., Romer, 1986; Lucas,
1988) and scholars of comparative institutions (such as Richardson, 1972;
Williamson, 1985) and economic history such as Douglass North (1990,
1994). As already noted, the problem of some such scholars departs from
Robbins in some important ways (see Stiglitz, 1989; North, 1994).
To conclude, institutions and technique can affect relative scarcities,
as well as the very vehicles (such as market structures) that we rely on in
the study of economics. In this context considering them as data, outside
the scope of economic analysis, may well unduly restrict the scope of the
subject. The work of and indeed Nobel Prizes to Ronald Coase (1937,
1960) and Douglass North (1981, 1990, 1994), who used transaction cost
analysis to explain the fi rm and the law (Coase) and economic develop-
ment (North), attest to that. In addition technical change impacts on (and
is affected by) (optimal) market structures, making it difficult to explore
the one by taking the other as datum. Importantly, one could well be justi-
fied to question even the direction of causality. For example Schumpeter
(1942) and more recently the leading neoclassical scholar Harold Demsetz
(1972) suggest that it is superior innovative capability (Schumpeter), or
“differential efficiency” (Demsetz), that determine fi rm size and industry
structure. Put simply, it may be innovation and efficiency that cause mar-
ket structure, not the other way around. How interesting that Demsetz has
used his view as a critique of the mainstream structure, conduct, perfor-
mance model of IO!
In the past 30 years or so, business scholars responded to increasing
demands by students and business people alike to understand not just
the economizing aspects of modern capitalist fi rms but also its strategiz-
ing and innovating elements, by drawing on neoclassical, transaction
costs, resource-based, evolutionary and behavioral views, such as those
of Coase (1937), Schumpeter (1942), Penrose (1959), Cyert and March
(1963) and Nelson and Winter (1982). The result is some fascinating
work on the co-evolution of institutions, organizations, technological
change, transaction costs, resources and (dynamic) capabilities, and mar-
ket structures and sustainable economic performance; see for example
Nelson and Winter (2002) and Fagerberg et al. (2005)5. In a surprising
turn, the neoclassical market structure analysis has been used by Porter
(1980) to develop a “strategizing” (rent extraction through monopoly
power) approach to business strategy. Others, notably Oliver William-
son (1991) lamented this development, putting emphasis on economis-
ing, albeit in transaction (not production) costs. The resource-based
and dynamic capabilities views, have brought production costs back in
(see Penrose, 1959; Richardson, 1972; Wernerfelt, 1984; Barney, 1991;
Peteraf, 1993; Teece, 2007). The “systems of innovation” view drew on
the work of Schumpeter (1942), Nelson and Winter (1982) and others
to focus on the innovating aspects of organizations and institutions,
and market structures. None of these makes any value judgments and/
or interpersonal comparisons of utility, such as those that would lead
Robbins to exclude them from positive economic science on this basis.
With notable exceptions (such as Coase, Williamson and North), no
genuine inroads into mainstream economics have been made from such
approaches. This is despite the ultimate recognition by the profession
of many such scholars. Perhaps the time has come for the discipline to
embrace such contributions. As originally noted by Robbins, it seems to
us that it is not a waste of time to attempt this, but “a waste of time not
to do so” (Robbins, 1935, p. 3).
CONCLUDING REMARKS
Reflecting on his original essay in his Richard T. Ely lecture of 1981,

Robbins reiterates his view that economics should be about “economiz-
ing” and that “technique” and “institutions” should be viewed as ultimate
data. This view has been highly influential in the development of neoclas-
sical economic theory. What has been added since Robbins is the mod-
ern emphasis on the construct of optimal market structures as vehicles for
achieving static Pareto efficiency. It is this second feature, in our view, that
has led neoclassical economics astray in some important respects, not least
in encouraging a limited understanding of the relationship between market
structure and intertemporal efficiency.
Post-Robbins developments in neoclassical economic theory, notably
in IO, and endogenous growth theory depart from the Robbins’s tradi-
tion of conducting economic analysis on the assumption that “technique”
can be treated as a given. In so doing they acknowledge the importance
of concerns of evolutionary, Schumpeterian “systems of innovations” and
management scholars, who have traditionally emphasized the important
role of innovation and technological change, not merely in influencing rela-
tive scarcities but also in affecting market structures and fi rm, industry,
resource creation and macroeconomic performance. The contributions of
scholars such as Coase, Demsetz, Chandler, North and Stiglitz, have helped
to add legitimacy to such concerns.
From the perspective of business, and business school scholarship, econ-
omizing, strategizing and innovating are equally valid and interrelated con-
cerns. Building on the work of economists such as those mentioned above,
business school scholarship has developed some fascinating accounts of the
co-evolution of markets, resources, knowledge, innovation, institutions,
and fi rm and industry structures as well as sustainable economic perfor-
mance. From a business school perspective treating “technique” and “insti-
tutions” as data is limiting, perhaps even boring. Perhaps the time is ripe to
consider wealth creation and its key determinant (technological change and
innovation) as legitimate concerns of neoclassical economics, too.
NOTES
1. Indeed one may be forgiven in thinking that Robbins would not disagree
with this when he states that “The services of the opera dancer are wealth.
Economics deals with the pricing of these services, equally with the pricing
of the services of a cook” (Robbins, 1935, p. 9, emphasis added). Robbins,
however, goes on to say that economics should not, nevertheless, be con-
cerned with the determinants of the wealth of nations. This may strike his
readers as somewhat inconsistent.
2. Robbins does not focus on optimal industry structures. Credit for exploring
the link between market structure and technological change (or intertem-
poral efficiency) is due to neoclassical industrial organization scholars who
have attempted to test the so-called Schumpeterian hypothesis (see Baumol,
1991). With a few exceptions, however, notable amongst whom is Baumol,
they have subsequently failed to explore the relationship between optimal
market structures, static efficiency and intertemporal efficiency.
3. The performance of such market structures will instead be better in the case
of another aspect of virtuous behavior, that of racial, sex or other forms of
discrimination. “Zero waste” suggests a tendency against discrimination,
but here too the outcome is not always guaranteed (Baumol, 1991).
4. For Stiglitz (1989, p. 198), “Among the ‘commodities’ for which markets
are most imperfect are those associated with knowledge and information. In
many respects, knowledge is like a public good. Firms may have a difficult
time appropriating their returns to knowledge, resulting in an undersupply;
and to the extent that they are successful in appropriating, underutilization
results (since they will have to charge for its use).”
5. Note, however that it is far too risky to refer to particular references here, as
the work amounts to many hundreds of articles published in journals such as
Academy of Management Review, Organisation Science and Strategic Man-
agement Journal. Even a cursory look at any recent issue of these journals
would suffice to confi rm our claim.
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6 Green Values in Communities
How and Why to Engage Individuals
with Decarbonization Targets
Michael Pollitt
INTRODUCTION
It is a great pleasure to offer this paper as a contribution to the “Green

Values and Green Business” colloquium organized by the Centre for Inter-
national Business Administration & Management (CIBAM). As usual
CIBAM have managed to pick a topic which poses a significant but as
yet unresolved challenge for the business community. This Chapter is an
attempt to discuss some of the ethical issues associated with climate change
and to emphasize one important way forward toward a solution.
The substantial decarbonization of the global economy required by an
effective climate change policy has at its heart some highly debateable ethi-
cal assumptions. If anything the ethical challenges raised by climate change
are even greater than is generally acknowledged. There is a general assump-
tion that macro-level policy will be able to achieve decarbonization at rea-
sonable fi nancial cost and with limited impact on lifestyles. However this is
unlikely to be the case, with a clear trade-off between higher fi nancial costs
and lesser behavioral impacts on lifestyles.
Instead, we need a much more open and honest discussion of the sig-
nificant likely fi nancial and lifestyle costs of tackling climate change. We
suggest that engaging individuals and changing norms of behavior will
be crucial if decarbonization is to be achieved and if the full costs of cli-
mate change and related development challenges are to be willingly met by
democratic societies around the world. Engaging individuals and changing
norms fundamentally relate to individual moral values. This brings us to
a consideration of how organized religion can play a role in providing the
moral basis for individual action in this area. We also suggest how business
will need to engage with the challenges posed by decarbonization.
The chapter is organized in five sections. The second looks at the ethics
behind the recent Stern Review on The Economics of Climate Change (Stern,
2007) which makes the case for early action on decarbonization. The third
section examines how individual ethics and behavior can be changed to meet
climate change policy targets. The fourth looks at the implications for com-
pany behavior of these ethical changes, and the final section is a conclusion.
68 Michael Pollitt
ETHICS AND THE STERN REVIEW
The Stern Review, initially published in 2006, was a UK Treasury-sponsored

document produced by a team of civil servants led by Lord Nicholas Stern. It
was an important document in providing a basis for UK policy toward climate
change and in laying out a case for early action on decarbonization. It laid the
basis for the Climate Change Act 2008 which sets a binding commitment to
reducing UK carbon emissions by 80% of 1990 levels by 2050. Under the Cli-
mate Change Act the UK now produces five-year carbon reduction budgets, rec-
ommended by the Committee on Climate Change, which set targets for keeping
the UK economy on track to achieve its 2050 targets. The first three draft bud-
gets were published in late 2008 (Committee on Climate Change, 2008). The
government is legally required to take policy action to ensure that the UK is on
track with its carbon budgets. The recent annual government budget included
a substantial discussion of policy measures shaped by the Committee’s recom-
mendations (see HM Treasury, 2009). The Stern Review has partly inspired
international discussions on a “Global Deal” on climate change which formed
an important input into the UN climate conference in Copenhagen in late 2009.
Indeed, in subsequent work Lord Stern clearly lays out the suggested elements of
a Global Deal in the light of the original Stern Review (see Stern, 2008a, 2008b).
The Stern Review was noteworthy partly because it focussed on the
economic case for early action on decarbonization. In contrast to much
earlier economic work it suggested that the social cost of a tonne of CO2
(and other greenhouse gases—GHGs) produced now was much higher than
previously calculated. This calculation lies behind its call for deeper cuts
in GHG production sooner rather later. In broad outline, the Stern Review
suggested the cost of climate change under a business as usual trajectory
could rise to 5% of world GDP per annum (with a significant chance of
costs up to 20% of world GDP), while the cost of mitigating GHG reduc-
tion was around 1% of world GDP per annum, if we started to invest now.
At the real social discount rate assumed in the Review (1.4%), this implies
a strongly positive net present value (NPV) of action.
Critics of the Review focused their discussions on the calculation of the
social discount rate, on which the case for early action turns. According to
the theory of social discounting (see Evans, 2008):
SDR = r + e.g
SDR = social discount rate
r = pure rate of time preference
e = inequality aversion parameter
g = growth rate of consumption per head
r is a measure of extinction risk (i.e., the extent to which future gen-

erations will be around to enjoy the benefits of investments made now). It
reflects the risk that human civilization may disappear and hence it is not
worth making social investments at the expense of current consumption.
Green Values in Communities 69
e reflects societal preferences toward inequality across and between gen-
erations. A lower value implies we care less about inequality in the sense
that we would prefer to make investments rather than simply transfer cur-
rent consumption. Thus, low discount rates driven by this parameter mean
more investment, less current consumption and more current inequality.
g is a measure of economic growth. Higher expected growth rates mean
that future generations will be richer than the current one, and hence for
given preferences toward inequality, society should be less willing to reduce
current consumption to improve the wealth of future generations.
For many studies (see Weitzman, 2007) a common assumption is that
r = g = 2% and e = 2. This implies SDR = 6%.
The Stern Review assumes that r = 0.1%, g =1.3%, e =1. This implies
SDR = 1.4%.
Thus, the Stern Review assumes that global society faces a low extinc-
tion risk (r). The low inequality parameter (e) implies that we don’t care
that much about inequality (though we do care somewhat). The low growth
rate parameter (g) assumes much lower levels of world GDP growth than in
the recent past. The overall implication is that we are happier than previ-
ously assumed to transfer consumption to future generations and we care
less than previously about dealing with current inequality.
The underlying ethical assumptions implicit in the 1.4% discount rate
have been severely criticized on a number of fronts. Nordhaus (2007)
points out the inconsistency between this discount rate and the discount
rates used in earlier economic analyses of climate change for which a higher
discount rate (in the region of 6%) has been typical. Dasgupta (2007) high-
lights a fundamental problem with a low inequality parameter, which is
that it implies much more saving for the future than we actually observe.
Dasgupta suggests that setting e = 1 might suggest we should be saving up
to 97.5% of our GDP to invest in social projects with positive returns in
the future. Dasgupta’s ethical point is that doing something about climate
change at the same time as not doing much about global poverty implies
ethically questionable value judgments. Rich Westerners are prepared to
reduce their consumption now to save their own children’s children but
are not prepared to reduce their consumption now to save poor nations’
children now. This echoes the arguments of Lomborg (2001) who suggests
that there are more pressing threats to global development (such as tackling
HIV in Africa) than climate change.
Weitzman (2007) makes a rather different point about the use of dis-
count rates. He suggests that the Stern Review may have arrived at the
right answer by the wrong method. For him the key problem is uncer-
tainty. The introduction of uncertainty about future growth rates, includ-
ing the introduction of the possibility of negative growth rates leads to
much lower values of the discount rate than 6% even if e = 2 and r = 2%.
It is also the case that with “fat tails” in the distribution of climate impacts
such that the probability of extremely negative GDP outcomes remains
significant (rather than tending to zero as in a normal distribution), then
70 Michael Pollitt
the discounted damages may be extremely large even at higher discount
rates. The appropriate way of handling such uncertainty is via purchasing
catastrophe insurance which argues for early action on decarbonization to
reduce the probability of extremely negative outcomes (arising from very
high temperature rises).
Other criticisms have been leveled at the calculations of the costs of cli-
mate change by Carter et al. (2006). They argue that the Stern Review was
systematically biased in its use of scientific evidence on climate change and
made use of the most pessimistic scenarios of the temperature impacts of
anthropomorphic carbon emissions. Byatt et al. (2006) upon examining
the cost and benefit calculations in the Review suggest that it combines
pessimistic scenarios as to the climate impact and economic cost of cli-
mate change with optimistic scenarios for the cost of mitigation (i.e., low
costs). They also suggest that it ignores an earlier more skeptical report by
the House of Lords Select Committee on Economic Affairs (2005). Neu-
mayer (2007) makes a rather different criticism pointing out that the Stern
Review assumes the substitutability of fi nancial and natural capital. Neu-
mayer argues that assuming non-substitutability of the two types of capital
would be a better assumption (and would also support early action to stop
natural capital loss).
Indeed, to suggest the cost of mitigation could be as low as 1% of world
GDP rather obscures the likely true cost. As Dasgupta (2007) points out,
this becomes 1.8% of the GDP of developed countries, if they have to bear
all of the cost (which seems likely initially). If one assumes optimism bias
in the costing of mitigation projects, this could double the cost (given that
many involve large capital cost programs or high transaction costs). If one
further assumes that many of the least-cost responses, while technically
possible, are not implemented and adjustment is required by second best
means, then costs could easily be doubled again. Given that the difference
in the cost of their budget programs between the two main political parties
seeking election in advanced democracies is usually of the order less than
0.5–1% of GDP, a policy which could ultimately cost of the order 5% of
GDP is one which will require a significant individual engagement with and
belief in it. This is especially true given the fact that keeping the overall cost
down requires high actual or implicit transfers from rich to poor countries
which are likely to be significant as a percentage of rich countries GDP.
The development aid budgets of rich countries are currently a small frac-
tion of 1% of GDP. Therefore, it is clearly a leap of faith to assume that all
developed countries will necessarily be willing to spend large sums solving
global climate problems rather than adapting their own economies to the
reality of climate change as it emerges.
Stern (2008a) robustly responds to his critics. He recognizes the need
to include uncertainty in calculating the discount rate, but argues that this
lowers it. He acknowledges and defends the role of his low assumptions of
r and e. He suggests that it is easy to justify a discount rate in the range
of 1.5–5%. In a further paper (Dietz et al., 2008) he (and his co-authors)
recognize that standard market economics as embodied in the social dis-
count rate is not enough to handle the values of society with respect to cli-
mate change. Stern (2009) goes further suggesting that discounting cannot
adequately handle the climate problem and that taxes are only part of the
solution. He suggests that changed individual attitudes have a role to play
in reducing the cost of public policy (p. 33): “The more that people take on
board damages to others, through discussion and information, and worry
about them directly, the less need for other public policy actions.”
Stern (2008a) contains a summary of his suggestions for the key elements
of a Global Deal on Climate Change (which are expanded in Stern, 2008b) to
put the size of the flows of payments from developed to developing countries
to pay for carbon reduction activity. The size of total aid flows from devel-
oped to developing countries is currently of the order of $100 billion.
Targets and Trade:
• 50 percent cuts in world emissions by 2050 with rich country cuts

at least 75 percent.
• Rich country reductions and trading schemes designed to be open
to trade with other countries, including developing countries.
• Supply side from developing countries simplified to allow much
bigger markets for emissions reductions: “carbon flows” to rise to
$50–$100 billion per annum by 2030. Role of sectoral or techno-
logical benchmarking in “one-sided” trading to give reformed and
much bigger CDM (Clear Development Mechanism) market.
Funding Issues:
• Strong initiatives, with public funding, on deforestation to prepare

for inclusion in trading. For $10–15 billion per annum could have a
programme which might halve deforestation. Importance of global
action and involvement of IFIs (International Financial Institutions).
• Demonstration and sharing of technologies: e.g., $5 billion per annum
commitment to feed-in tariffs for CCS (Carbon Capture and Storage)
coal could lead to 30 new commercial size plants in the next 7–8 years.
• Rich countries to deliver on Monterrey and Gleneagles commitments
on ODA (Official Development Assistance) in context of extra costs
of development arising from climate change: potential extra cost of
development with climate change upward of $80 billion per annum.
(Stern, 2008, p.31)
Box 6.1 The Suggestions for a Global Deal on Climate Change

72 Michael Pollitt
The size of the program envisaged under the Global Deal is clearly
substantial. However, while the Stern Review focuses on global ethical
assumptions, there are important additional distributional issues between
nations when it comes to how the burden should be shared between them.
While developed countries might accept the principle of converging on the
same level of emissions per head across all countries (taking trading into
account) by 2050, this neglects the fact that this implies inequality in the
cumulative emissions per head taking into account emissions history since
the industrial revolution (see Johansen, 2007). Even to achieve equity in the
fi nal per head emissions target the United States might need a 90% cut in
GHG emissions by 2050 (which is a much more severe relative cut than any
other major country). Developing countries might fi nd it difficult to neglect
the issue of taking cumulative emissions into account, especially as it is
cumulative emissions that cause global warming.
The policy challenge posed by the need to decarbonize the world econ-
omy is huge. The costs to individuals within advanced economies are likely
to be noticeable and significant. They will require rises in the price of
energy, transport and energy-intensive goods to fi nance supply-side changes
to production methods (or to purchase offsetting emissions reductions
abroad). They will also imply significant demand-side response in terms of
shifting consumption to less-energy-intensive goods and associated behav-
ioral change (e.g., using public transport more often). They will also require
individuals to support investments which have significantly higher global
benefits than national benefits, and may often be located abroad. This will
require society within developed countries, such as the UK, to actively sup-
port the policies that are required to achieve the goal of decarbonization
over a long period.
The recent failure of the UN climate conference in Copenhagen to reach
a Global Deal has only illustrated the difficulties that many countries will
have in implementing the drastic cuts in emissions required. Given that
the probability of a self-enforcing international agreement to promote radi-
cal action is currently low, this further emphasizes the need for increased
“grassroots” pressure for climate policy to create sufficient political moti-
vation for action.
INDIVIDUAL VALUES, BEHAVIORAL CHANGE

AND EFFECTIVE CLIMATE CHANGE POLICY
In this section we argue that individual values are important in achieving

decarbonization of the economy and that it is important to understand how
these values are formed can be influenced.
Von Storch and Stehr (1997, p. 90) provide a helpful framework for
thinking about the way that climate policy comes about. They suggest that
while it is true that climate policy is notionally based on the optimization
of welfare (as in the Stern Review), there are two important fi lters through
which the calculation of welfare maximization has to go. First, there are
the “interpreters of climate“—who are the “experts” who evaluate the
information that we have on the climate. In our age we might see these as
mainly being scientists, such as those represented by the UN International
Panel on Climate Change (IPCC). Von Storch and Stehr (1997) have a nice
illustration from the Middle Ages of the role of Church in interpreting the
meaning of series of bad-weather-induced poor harvests in Europe in the
years 1315 to 1319. The Church interpreted the lack of agricultural produc-
tivity caused by unfavorable weather as a judgment from God and called
on the people to repent. Second, there are the “interpretative systems of
society” which determines what the “costs” of adaption and abatement
are and also defi nes the welfare function that is being optimized. Thus, the
interpretative system might hear what the scientists have to say and actu-
ally think that the lifestyle changes required to abate carbon are too high
and the benefits too uncertain. What is clear from this framework is that
“climate science” and indeed “economic science” do not determine climate
policy, they merely inform it. Societal values are the ultimate determinant
of climate policy. Different societies and different individuals receiving
the same scientific information will come to different conclusions on the
actions (if any) to be taken. Recent controversies about the reliability of cli-
mate science following the revelations about the alleged manipulation and
withholding of climate data by a prominent university research department
only highlights the political sensitivity of climate policy to the fi ltering pro-
cess through which it passes.1
Tjernstrom and Tietenberg (2008) look at how individual values relate
to national climate policy. They used International Social Survey Program
data on 8000+ respondents from 26 countries for the year 2000. They found
that national emissions reductions targets were higher in countries where
a higher percentage of individuals think that climate change is important
and where there is higher press freedom and higher trust in government.
Individuals were more likely to think that climate change was important
if they were better educated, lived in an urban area and had more affi nity
with other countries. The authors conclude (p. 323) that “what citizens
believe does matter” for policy.
Vandenburgh, Barkenbus, and Gilligan (2008) discuss the role of the
individual in taking action on carbon emissions in the United States. They
outline seven actions which would have a significant overall impact on
U.S. emissions. These include reducing idling of cars, reducing the use of
standby power and maintaining the proper tire pressure. Even assuming
limited uptake, the total expected emissions reduction from these individ-
ual actions could be 7% of U.S. residential and domestic emissions. Van-
denburgh et al. (2008) discuss the process by which we get individuals
to change their behavior. They argue that regulation alone is unlikely to
work (or even to get enacted). Raising prices (e.g., of gasoline) would be an
74 Michael Pollitt
obvious economic policy, but this has serious distributional consequences,
especially in the short term. In the absence of effective regulation or high
enough prices it is necessary to appeal to a moral imperative to get indi-
viduals to change their behaviour. What is needed is “personal norm acti-
vation” (i.e., a spontaneous change of behavior created by a sense of duty
in the absence of explicit sanctions) (Vandenburgh, 2005). The sorts of
norms that will be important in encouraging individuals to take actions to
curb carbon emissions are those of “environmental protection,” “personal
responsibility” (for the climate problem), and “reciprocity” toward individ-
uals in developing countries (and other places) who will bear the brunt of
the costs of a changing climate. Personal norm activation is closely related
to the need to “inspire,” to “win hearts and minds” and to “instil strong
personal and moral values” in the area of environmental responsibility.
The need for personal norm activation suggests that we need to turn to
‘norm’ specialists (see Johnson, 2008). The most obvious places to turn
for help (globally) in this area are religious institutions (such as Christian
churches). Religious institutions activate norms regularly in their role of
interpreting what God may be saying in this generation. They have had
an honorable role in many of the most momentous norm changes in soci-
ety: the civil rights movement, the environmental justice movement, third
world debt relief and the collapse of the Iron Curtain. Recently in the
United States for instance almost all major Christian denominations have
expressed strong support for sustainable development and for decarboniza-
tion, and indeed changing public attitudes in the United States to taking
action on climate change reflect the clear stances of the churches on this
issue.
Of course, there is a debate about whether religion is good for the envi-
ronment. Lynn White (1967) drew attention to the “creation ordinance”
in Genesis 1:28 as the Judaeo-Christian justification for exploitation of the
natural world and the religious support for industrialization and the mas-
sive growth of economically motivated exploitation of national resources,
of which carbon emissions are merely one consequence. However, in reality
religion has played a more mixed role (see Berry, 2006). The sustainable
development movement traces its intellectual origins back to a Christian
philosopher—Rev. Thomas Malthus—who fi rst warned about the likely
limits to human exploitation of natural resources (see Mebratu, 1998). The
econometric evidence on the impact of Christianity on attitudes to environ-
ment is weakly positive (for 1993) in the United States (see Boyd, 1999).
However, for the UK evidence (for 1993) suggests that overall affi liation to
a Christian denomination makes no difference to attitudes regarding the
environment, although educational attainment and scientific knowledge
about the natural environment are significant and there are some differ-
ences between denominations (see Hayes and Marangudakis, 1999). Simi-
lar results are found for a 1993 sample covering the United States, Canada,
Great Britain and New Zealand (Hayes and Marangudakis, 2000). Pepper,
Jackson, and Uzzell (2010) fi nd that adherence to Christianity has a posi-
tively significant, if small, impact on socially conscious and frugal con-
sumer behavior for a sample of UK consumers.
Examination of the key religious texts of the three great monotheistic
religions—Judaism, Christianity and Islam—shows that they all provide
strong support for care of the environment.2
Judaism: “The heavens declare the glory of God; the skies proclaim the
work of his hands. Day after day they pour forth speech or language where
their voice is not heard. Their voice goes out into all the earth, their words
to the ends of the earth.” (Psalm 19: 1–4)
Christianity: “The creation waits in eager expectation for the sons of
God to be revealed. For the creation was subjected to frustration, not by
its own choice, but by the will of the one who subjected it, in hope that the
creation itself will be liberated from its bondage to decay and brought into
the glorious freedom of the children of God.” (Romans 8: 19–21)
Islam: “The sun and the moon to a reckoning, and the stars and trees
bow themselves; and heaven—He raised it up and set the balance. Trans-
gress not in the balance, and weigh with justice, and skimp not in the bal-
ance.” (Sura 55: 5–9)
As with previous religious inspirations for behavioral change, con-
nections between taking action and the central tenets of religious faith
need to be highlighted and recognized as being important for now. It
seems to be that science is telling us that the time is coming for action
on climate change. It is increasingly clear that only if connections are
made with personal norms of behavior that the required (radical) action
will be forthcoming. For many people (even if they are not religious) a
religiously inspired movement may be the only way to bring about the
scale of behavioral change that is required via both individual action and
individual example. The challenge is that climate change is clearly an
international development problem involving actions by and in develop-
ing countries. Helping developing countries develop poses conventional
challenges which remain diffi cult or impossible to solve. For example
changing incentives within developing countries with rain forests to
incentivize their continuation is not just a matter of climate policy but of
conventional economic development. However, as all the great religions
emphasize, rather than worrying about the action/inaction of others we
should start by changing our own actions.
Sandelands and Hoffman (2008) lay out the key role for religion in
tackling climate change very clearly. They note that encouraging people
to take action on climate change will only work if environmental sustain-
ability is seen as part of a true sustainability. Individuals are not motivated
by economic social cost-benefit analyses, what they need is an appeal to
their “hunger for meaning.” As Fromm (1977, p. 137) puts it: “Only a
fundamental change in human character from a preponderance of the hav-
ing mode to the predominantly being mode of existence can save us.” The
76 Michael Pollitt
Global Deal will founder if it is ultimately merely based on an economic
analysis of the climate problem. What is needed is an engagement of the
mass of individuals in advanced countries (and eventually in developing
countries) in a movement toward a more sustainable world. As Sandelands
and Hoffman (2008, p. 13) suggest, this will require a desire to help others
across borders and be based on a politics which is based on hope rather
than fear. This is because if people lose hope that meaningful decarbon-
ization can be achieved (because of a lack of trust in their own and other
countries’ governments), then it will never be achievable, as a lack of belief
will give rise to a self-fulfilling prophecy.
It is important to point out that the suggestion that religiously inspired
changes in personal behavior and attitudes are likely to be important in
tackling climate change only highlights of difficulty of bringing about radi-
cal action on climate. Indeed in Pepper, Jackson, and Uzzell’s (2009) survey
of consumer attitudes in Woking, England, highlighted that a reduction in
consumerism (or an increase in frugality) was only significantly impacted
by a personal motivation to frugality or a reduction in income. Adherence
to organized religion is on the decline in many Western countries (though
not in many rapidly developing ones), and religious institutions are inher-
ently conservative and subject to the same sorts of obstacles to behavioral
change as the individuals who support them (Douglas & Pepper, 2009).
Douglas and Pepper suggest that what is needed is a “green” religion that
combines the personal environmental commitment of non-institutional
eco-spirituality (in some New Age movements) with the significant trans-
formative social and community movements born out of organized reli-
gion. In this way positive personal attitudes to the environment might be
translated into support for effective action. The issue is how to harness
both the considerable power of organized religion to bring about social
change (by engaging committed adherents and other people of goodwill) in
order to win hearts and minds to the considerable behavioral changes and
economic costs required in tackling climate change.
This view is supported by Pope Benedict in his 2009 letter Caritas
in Veritate or “Charity in Truth.”3 This thoughtful document highlights
the difficulty of global economic development in the absence of a truly
integral humanism. It addresses, among other things, the need to address
global environmental problems and recognize the “covenant between
human beings and the environment” (para. 51). The Pope concludes:
“Openness to God makes us open towards our brothers and sisters and
towards an understanding of life as a joyful task to be accomplished in a
spirit of solidarity. On the other hand, ideological rejection of God and
an atheism of indifference, oblivious to the Creator and at risk of becom-
ing oblivious to human values, constitute some of the chief obstacles to
development today” (para. 78). In other words, religion can help us to
overcome our indifference to the plight of others and to tackle global
development problems, such as climate change, rather than to focus on
our own personal and local self-interest.
IMPLICATIONS FOR COMPANIES
Companies can help or hinder the accumulation of institutional, relational,

moral and spiritual capital in society as constituent parts of their total impact
on social capital (Heslam, Jones, & Pollitt, 2009). Firms build institutional
capital by adhering to the laws of the country and supporting legitimate
authority. Firms build relational capital by having strong stakeholder rela-
tionships internally and externally. Firms build moral capital when ethics are
embedded in core business operations and when accountability structures are
put in place that will keep the moral dimensions of the company’s core opera-
tions under review and in development as new ethical challenges emerge.
Firms exhibit spiritual capital when they pay attention to their “soul,” articu-
late and develop their—and by implication their employees—sense of ulti-
mate purpose, and have strategies to ensure that this is shared throughout the
company. All of these types of social capital building by fi rms will be needed
to address issues of environmental sustainability.
These four capitals will each be shaped by the sort of world which is
engaged with climate change policy. Responsible large, and particularly mul-
tinational, companies will be increasingly impacted and required to respond
in its attitude to how it builds social capital. Thus, institutional capital build-
ing by firms will involve participation in emissions trading schemes, stan-
dards and adherence to environmental laws as facts of life. Firms should
comply with these schemes and be responsible in their lobbying toward
(against?) them. Relational capital building will bring firms increasingly into
contact with a post-materialist (see Inglehart, 1990) and personal environ-
mental norm activated world. Both customers and employees will expect
firms to take decarbonization seriously. Moral capital building will require
companies to have values and set examples which actively promote environ-
mental sustainability. All companies, but particularly multinationals, should
demonstrate integrity, consistency and transparency of actions toward the
environment. Spiritual capital building will require companies to have an
inspiring vision about why the company exists and what drives it, other than
the quest for profit. This will be because society will/should increasingly rec-
ognize that participation in this sort of vision is central to its survival.
Companies will need to support and respond to the personal norm acti-
vation of employees and customers, and to some extent participate in it. A
good example of this is the UK High Street retailer, Marks and Spencer’s
Plan A4. This is a comprehensive set of commitments to a whole range of
environmental targets, including carbon reduction, aimed at responding to
and anticipating rising consumer sensitivities.
CONCLUSIONS
The economic case for early decarbonization is highly debatable, with a

fi nancial social cost-benefit analysis capable of being subjected to a wide
78 Michael Pollitt
range of criticisms which make the use value of such analysis for policy
questionable. However, the moral case for early action on the grounds of
environmental sustainability and economic and environmental justice is
overwhelming.
It is undeniable that the costs of decarbonization will be substantial and
involve a significant political cost. Even if the cost were only 1% of world
GDP per annum, this would involve much higher costs in advanced coun-
tries, historically large international transfers to developing countries and
significant redistributional consequences between sectors and individuals
within advanced countries.
The current vision for action is narrowly focussed on the scientific case
for convergence in emissions per head by 2050. This raises major ethical
issues to do with historical emissions and the confl icts between the envi-
ronment and development within developing countries. The slow progress
toward a Global Deal on climate change only highlights the difficulty and
vulnerability of effective climate policy and the requirement to gain and
maintain active public support for decarbonization.
We have argued that we need to seriously engage with ethics, morality
and religion in tackling environmental issues. Individual behavior will need
to change, and there will need to be significant individual engagement with
the climate change issue in order to ensure support for the expensive inter-
national policies that are required. If we do not engage in this sort of per-
sonal norm activation there is no chance we will meet the targets suggested
by climate scientists. In parallel, companies will increasingly be called on to
support the building the sort of institutional, relational, moral and spiritual
capital that supports climate change action.
NOTES
1. See, for example, Ben Webster and Jonathan Leake (2010, January 28), Sci-
entists in stolen e-mail scandal hid climate data, The Times, Retrieved from
http://www.timesonline.co.uk/tol/news/environment/article7004936.ece.
Accessed February 2, 2010.
2. For some good resources on religion and the environment, see http://daphne.
palomar.edu/calenvironment/religion.htm. Accessed February 2, 2010.
3. Available at www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_
ben-xvi_enc_20090629_caritas-in-veritate_en.html. Accessed February 2, 2010.
4. See http://plana.marksandspencer.com/. Accessed February 2, 2010.
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7 Green Business and Green Values
A Perspective from Government
Elizabeth Anastasi
KEY MESSAGES
• Perceptions and expectations of what constitutes green economic

activity and employment vary widely.
• All businesses across all sectors of the economy will increasingly have
to measure and modify their carbon footprints.
• Demand for low-carbon and environmentally aware business solu-
tions is expected to grow strongly over time. These solutions will
become increasingly important in day-to-day business operations.
• Increased requirements for carbon and wider environmental monitor-
ing and reporting necessitate the embedding of climate change risks
and future carbon emissions profiles in business investment decisions.
• There is evidence of increased demand-side and supply-side pressures
for businesses to accurately signal the green credentials of their prod-
ucts and processes to the market.
• Credible markets are fundamental to addressing many of these issues
but may not be sufficient to deliver social optimal outcomes in the
long-term public interest due to the presence of market failures and
barriers to change.
• The government’s primary response to the challenge of removing
carbon from economic activity and addressing other environmental
impacts has been to create a policy and regulatory framework to pro-
vide clear and long-term signals to industry to help shape operational
and investment decisions, principally through participation in the EU
Emissions Trading Scheme and the Climate Change Bill which com-
mits the UK to statutory targets for emission reductions.
• Given the need to improve environmental performance, the Low Car-
bon Industrial Strategy aims to ensure that the UK is well-positioned
to benefit from the business opportunities with making the transition
to a low-carbon economy.
The growing challenges of climate change, both in terms of the need to

adapt to the unavoidable impacts of existing environmental damage and
82 Elizabeth Anastasi
to mitigate against further change, mean that “business-as-usual” is no
longer an option. Low-carbon, environmental and green concerns more
generally should not be addressed in isolation to other economic objectives.
These challenges present the need for a fundamental transition to a more
sustainable future in the way we live and work. This chapter discusses the
potential role for government in facilitating this transition by identifying
barriers which may prevent the market from working effectively and where
government intervention can help limit these.
PROBLEMS OF DEFINITION:
WHAT DOES GREEN ACTUALLY MEAN?
Perceptions and expectations of what it is to be green vary widely across

consumers, businesses and countries. In addition, views of what it means
to be a green consumer or a green company have changed over time. Defi-
nitions have expanded from the use of relatively mature “environmental”
technologies associated with pollution clean-up, waste management and
recycling, to encompass the development and use of renewable energy
technologies, such as electricity generation from wind, wave and tide. In
particular, the use of nuclear power has gained greater prominence as a
low-carbon technology.
With the increasing urgency attached to tackling climate change, the
defi nition appears to have broadened much further over recent years, cov-
ering a wide variety of activities, technologies and sectors, ranging from
the creation of more energy-efficient building and low- or zero-emission
methods of transportation to the increasing scale and scope of carbon and
environmental management and monitoring services, and carbon finance.
There has also been a growing focus of the wider environmental and social
impacts of businesses’ activities through the rise in prominence of corpo-
rate (social) responsibility.
The legal commitment by the UK to reduce carbon emissions by 80% by
2050 in the Climate Change Act 2008 demonstrates that the government
is committed over the longer term to actions that reduce carbon emissions.
The scale of the target will, as outlined earlier, require a fundamental shift
in the way all activities are carried out in the UK—leading to a transforma-
tion of the industrial landscape and adjustments across the whole supply
chain. Businesses across all sectors of the economy will have to increasingly
account for their carbon footprint and therefore will, to some extent, have
to green their operations. “A green economy will be one in which lower
carbon and resource efficiency will permeate all products and services
throughout the entire economy” (Ernst & Young, 2008).
Legal requirements to account for environmental impacts, including for-
ward-looking legislation such as the Climate Change Act and the establish-
ment of market frameworks such as the European Union Emissions Trading
Green Business and Green Values 83
Scheme, imply that the labels “green” and “not green” will become less
meaningful. Instead, products and processes will increasingly become dif-
ferentiated by “shades of green” as businesses modify the scale and scope
of their activities to improve their environmental and social performance
alongside their economic objectives.
The United Nations Environment Program (UNEP) recently discussed
this spectrum of green activity in the context of distinguishing a number
of trends of how employment could change over the wider economy in a
“green” transition (UNEP, 2008):
• Additional jobs will be created—for example the manufacture of pol-

lution-control devices and new cleaner technologies;
• Some employment will be substituted—for example shifting from
fossil fuels to renewables or from land fi lling and waste incineration
to recycling (i.e., a shift between sectors or between subsectors);
• Certain jobs may be eliminated without direct replacement—for
example if packaging materials are discouraged and their production
is discontinued; and
• Many existing jobs will simply be transformed and redefined as day
to day skill sets, work methods and job profiles and greened—in
particular, plumbers, electricians, metal workers and construction
workers.
This breakdown and the example definition from Ernst & Young quoted
earlier help to establish the breadth and depth of what will be required to
establish a green economy, spanning a wide spectrum of skills and occu-
pational profiles. The challenge for government is to identify, within this
wide range of activities, the barriers that are preventing the market from
delivering optimal decisions with respect to the full impacts of their activi-
ties and, more importantly, to distinguish where government intervention
may be required.
THE DEVELOPMENT OF A LOW-CARBON

AND RESOURCE-EFFICIENT ECONOMY
At present, much of the focus of the “green business” discussion focuses on

climate change and, within that, the need to significantly reduce the carbon
intensity of the way that economic activity is undertaken.
Recent analysis commissioned for the former Department for Business,
Enterprise and Regulatory Reform (BERR, now Department for Busi-
ness, Innovation and Skills, BIS) from independent consultants Innovas
and Kmatrix adopted a wide defi nition of a Low Carbon and Environ-
mental Goods and Services (LCEGS) sector—this defi nition includes tra-
ditional environmental goods and services, renewable energy activities and
“emerging low-carbon.” Using this definition, the analysis estimates that
the global LCEGS sector was worth around £3 trillion in 2007/2008. Of
this the UK’s LCEGS sector accounted for over £106 billion (roughly 3.5%
of the global market and placing the UK sixth in terms of market size) and
was estimated to employ around 880,000 people (Innovas, 2008a). The
estimates are higher than earlier figures given the broader range of activities
captured by the analysis and also because they capture wider supply chain
activities in this sector.
The UK emerging low-carbon subsector contributed around half of the
estimated market value and employment in the LCEGS sector. In addition,
around half of the total market value of the sector was attributed to activ-
ity in the supply chain, highlighting the far-reaching implications of the
growth in this sector. Demand for low-carbon and environmentally aware
business solutions is expected to continue to grow strongly over the coming
years as these solutions become increasingly important in the day-to-day
business operations across the economy. It is estimated that the UK LCEGS
sector grew by approximately 4% in 2007/2008, and, despite the economic
downturn, forecasts for future growth of this sector continue to be reason-
ably buoyant, at over 4% per annum to 2014/2015 (Innovas, 2008b).
Business opportunities in the green economy will not necessarily just
accrue to growth of new sectors. Ernst & Young (2008) identified a number
of key sectors and subsectors that could develop green business opportuni-
ties where the UK already holds a comparative advantage: software, elec-
tronic equipment, machinery equipment, fi nancial services1 and business
services2 . In some cases, the importance of these areas is in terms of the
fi nal good or service offered; for others, the importance lies in facilitat-
ing the “greening” of operations along the supply chain and as “enabler”
technologies, such as information and communication technology (ICT)
facilitating the uptake of greener business solutions.
Ensuring that the necessary investment is delivered in a timely way to
support the development of such sectors and technologies is clearly impor-
tant if the UK and other countries are to make a cost-effective transition
to a low-carbon economic base, while providing businesses with maximum
opportunity to capitalise on future low-carbon business opportunities.
The fi nancial services sector has already taken advantage of the move
to more comprehensive pricing of some environmental impacts of eco-
nomic activity—the pricing and trading of carbon in particular has grown
substantially over recent years as governments have sought to establish
a credible long-term market framework to allow companies to internal-
ize the environmental costs of their economic activity in the most cost-
effective way.
Despite the economic crisis, the global carbon market continued to grow
in 2008, with total value of transactions at the end of the year reaching
approximately €86 billion—double its 2007 value. Transactions and deriv-
atives under the EU Emissions Trading Scheme (ETS) contributed about
€63 billion to this total, with London benefiting considerably from the
development and growth of this market and establishing itself as a world
center for carbon trading (World Bank, 2009).
Between 2004 and 2007, global investment in sustainable energy
increased substantially year on year, with an average annual growth rate
of over 65%. Total sustainable energy fi nancial transactions were valued
at $205 billion, with new investment into the sector accounting for around
$148 billion of that total (UNEP/SEFI, 2008). In spite of the economic cri-
sis, new investment into the sector rose to $155 billion in 2008, although
investment in the second half of 2008 was 17% lower than the fi rst half
(UNEP/SEFI, 2009).
To ensure that the UK moves to a more sustainable growth path, it is
important to ensure that the economy builds on existing strengths and that
businesses take advantage of the economy-wide opportunities arising from
the transition. However, despite the progress already made, and the poten-
tial for future progress, there appear to be some barriers in the market that
are holding back the development of the green economy.
THE RISE IN IMPORTANCE OF CORPORATE

RESPONSIBILITY AND ACCOUNTING FOR
THE RISKS OF CLIMATE CHANGE
Increased requirements for carbon and wider environmental monitoring

necessitate the embedding of climate change risk and future carbon emis-
sions profiles of technologies and business into all investment decisions.
Recent analysis from the Carbon Trust (2008) suggests that the implications
of climate change for company value would be widely varied across sectors.
Some sectors could be expected to gain value (for example, consumer elec-
tronics or building insulation), while others would need to transform their
activities to maintain or improve company value (for example, aluminium
and automotive sectors). Essentially the headline findings suggested that
better incorporation of the risks and opportunities for climate change by a
well-positioned, proactive company had the potential to increase company
value by up to 80%. In contrast, if a company is poorly positioned, or lack-
ing in action in this area, the report suggested that up to 65% of its value
could be threatened.
The Government’s recent Corporate Responsibility Report (HMG,
2009) outlines a clear business case suggesting that although businesses
are legally obliged to make profits, there is scope for improving company
performance and shareholder value, improving a fi rm’s profits and work-
ing toward competing successful in global markets by going beyond what
the law requires. The report demonstrates that corporate responsibility
can achieve this impact through both direct links (such as improved effi-
ciency through the reduction or better management of waste, and better
risk management) and indirect routes (primarily through building trust and
confidence and a increased value from improved reputation).
Despite growing interest in the risks and opportunities of climate
change to investors, a recent report for Ceres and the Environmental
Defence Fund, suggested that many of the world’s leading corporations
are failing to provide a full account of the risks and potential costs of
climate change (Corporate Library for Ceres and the Environmental
Defence Fund, 2009). However, some companies are undertaking activity
to monitor and report on environmental impacts and carbon footprints.
For example, the Carbon Disclosure Project (CDP) provides information
for over 530 institutional investors with assets of over $64 trillion on the
carbon performance of some of the largest companies around the world,
with a view to improving information flow in the marketplace for inves-
tors who are becoming increasingly interested in carbon footprints and
the implications of climate change. Their recent report Global 500 pub-
lication suggested that reporting companies accounted for close to 6%
of total global emissions, when considering direct emissions from their
activities. The report suggests improved response rates to the CDP survey
and better quality responses reflect the greater corporate engagement and
interest by shareholders in climate change. Of respondents to the sur-
vey, 74% stated that they had carbon emission reduction targets in place
(PWC, 2008, for CDP).
In addition to specific initiatives such as the CDP, increasing interest
in greener values is reflected in the rise in the number of market indices,
investment funds and individual companies offering investment oppor-
tunities that take account of, for example, clean technology and climate
change, sustainable development and corporate social responsibility. For
example, HSBC’s Climate Change Benchmark Index tracks the stock
market performance of key companies that are best placed to profit from
challenge of climate change. At its launch in 2007 this index had out-
performed the MSCI World Index by around 70% when tracked back
to 2004 (HSBC, September 2007). Similarly, RBS/ABN Amro’s Climate
Change and Environmental Index looks at businesses involved in tackling
adverse effects of climate change and mitigating environmental degrada-
tion. The FTSE Group have also launched an Environmental Markets
Index as one of their responsible investment tools.
A growing number of indices also measure the performance of compa-
nies in that meet particular corporate responsibility standards. Examples
include the FTSE4Good Index (launched in 2001) and the Dow Jones
Sustainability Index (launched in 1999), which focus on companies that
meet globally recognized corporate responsibility standards and those
that are driven more by sustainability issues. Similarly, Business in the
Community (BiTC)’s Corporate Responsibility (CR) Index, launched
in 2002, attempts to capture the extent to which CR is integrated into
day-to-day operations and corporate strategy. Research looking at the
link between good performance on CR and fi nancial performance indi-
cators (such as shareholder return and dividend yield) suggested that in
addition to demonstrating a correlation with reduced volatility, com-
panies that consistently participated in the CR Index outperformed the
FTSE 350 on total shareholder return by between 3.2 and 7.7% per year
between 2002 and 2007 (Business in the Community, 2008).
In some cases fi rms can signal their green credentials to potential cus-
tomers through participating in initiatives such as the Carbon Disclo-
sure Project or striving for inclusion on one of the market indices as
mentioned earlier. However, outside the requirements of the legislative
and regulatory framework that businesses operate under, there has been
growth in the adoption of voluntary standards and labeling to which
fi rms can aim to get accreditation, and hence signal more easily the cre-
dentials of their products.
Aside from a number of products for which minimum standards are
enforced, many of the labels currently in use in the marketplace are not
formally regulated, as there is no formal requirement at present to meet
such criteria. However, some fi rms strive to adhere to particular British
(BSs) or International Standards (ISOs) on, for example, energy manage-
ment, social responsibility, carbon footprinting and environmental protec-
tion. Accreditation to these formal standards and other green or eco-labels
requires a fi rm to meet particular criteria before the standard can be used
as part of their marketing and hence signaling to the market. One impor-
tant aspect of this behaviour is that it not always targeted at fi nal consum-
ers—for companies in the supply or value chain, accreditation to particular
standards are useful for signaling environmental or green credentials to
potential industrial consumers that are perhaps more sustainably minded.
Consumer decision making has a key role in the development and suc-
cess (or not) of new goods or services, with well-informed consumers help-
ing to promote competition between fi rms through switching expenditure
to products that more accurately reflect their needs. Increasing consumer
awareness of social and environmental issues is creating an incentive in the
market for fi rms to signal directly the carbon content and potential envi-
ronmental benefits of their products and organizations.
Alongside forecast estimates for the size of the potential markets for
greener goods and services, such as those mentioned earlier, survey evi-
dence suggests that customers are showing increasing awareness of the
wider impacts of the products that are available to them, and believe there
will be increasing pressure on companies to address issues relating to cli-
mate change and sustainable development (Ipsos MORI, 2007; PriceWater-
houseCoopers, 2008). One recent survey suggests that consumers were on
average willing to pay a premium of around 20% for environmentally and
ethically friendly everyday items (PriceWaterhouseCoopers, 2008).
IDENTIFYING BARRIERS TO THE
DEVELOPMENT OF THE GREEN ECONOMY
The government’s primary response to the challenge of reducing carbon

from economic activity and addressing other environmental impacts is to
create a regulatory framework that facilitates open and competitive markets,
providing longer-term regulatory certainty for economic agents. However,
it is recognized that while credible markets are a necessary fundamental
base for addressing many of these issues, they may not be sufficient to auto-
matically deliver outcomes that promote long-term public interest.
Key market failures may affect the ability of the market to deliver opti-
mal solutions, through distorting price signals and incentives or estab-
lishing barriers to the creation of a low-carbon, more resource-efficient,
greener economy. Externalities (both positive and negative), information
asymmetries and significant uncertainty can prevent markets from identi-
fying and taking up the most cost-effective means of addressing and pre-
venting environmental damage.
In his Review of the Economics of Climate Change (2006) Lord Stern
stated that climate change was “the biggest market failure that the world
has seen.” He concluded that the costs of inaction far outweighed the costs
of early coordinated international action.
The full social costs of greenhouse gas emissions from economic activity
are not automatically internalized by individual economic actors. Private
individuals do not take account of the additional costs to society from the
actions that they take. Without the internalization of these external costs,
private actors will not face the right incentives from the marketplace to
properly account for their wider impacts and, where necessary, amend their
behavior.
Similarly, the full benefits to society may not be taken properly into
account if private actors make investments to address environmental dam-
age already undertaken or to prevent future harm. Failure to take account
of these positive spillovers could lead to underinvestment by the market
in, for example, supporting infrastructure, R&D and the skills base of the
workforce.
At an extreme some goods may not be provided at all—so-called “pub-
lic goods” which are non-rival and non-excludable3, such as clean air, in
particular suffer from the free-rider problem whereby each individual actor
will wait for others to make the decision and then take advantage of any
investment made without contributing to the cost.
In addition to the market failure of externalities, information asymme-
try and uncertainty can mean that markets may deliver inefficient solutions,
since market participants may lack the information they require to make
the “right” production or consumption decisions. Similarly, uncertainty,
particularly when looking over the longer term, can result in commitment
problems—firms may be reluctant to invest in new technologies (in either
their development or purchase) if future levels of demand and prices are
uncertain. Again, this can lead to underinvestment in innovative activity
that could prevent the development of more efficient markets. Commitment
problems and uncertainty over the longer term are of particular importance
of the context of moving to a greener economy given concerns over losing
competitive edge, the difficulties in gaining global commitments on action
and the uncertainty over the extent of change that companies will have to
adapt to.
Consumer behavior is unlikely to change sufficiently to drive demand
for more sustainable and environmentally friendly products if the relevant
information that allows them to make informed decisions between products
is not easily available. This applies to both fi nal consumers and industrial
consumers who may be part of wider supply chains. Industrial consumers
that cannot easily access information that will enable them to take up more
environmentally sound business solutions may fi nd that there are negative
knock-on effects for their own competitiveness. For example, measures to
improve the energy efficiency of production processes and buildings can
have direct cost savings that mean that companies are able to compete more
effectively on the market.
Small and medium enterprises (SMEs) in particular appear to face
challenges associated with obtaining adequate information, for example
through the lack of capability (time or human resources) to identify bet-
ter options for carbon reduction actions. In addition to helping companies
make better decisions in the short term, better information provision about
abatement potentials also reduces some of the uncertainty over the longer
term, allowing fi rms to take a longer-term view when considering invest-
ment decisions. This has implications for investment in skills, innovation
and infrastructure.
Significant investment in innovation and the necessary skills will be vital
for the UK and other countries to make the necessary cuts in carbon emis-
sions in the most cost-effective way and in a timely manner. As such, market
failures which lead to underinvestment in these areas (whether from lack
of internalization of the true costs and benefits, or problems with informa-
tion in the market) could severely hamper efforts to reduce environmental
impacts and adapt to damage already incurred.
Given the potential for market failures, without government interven-
tion, it is unlikely that private market forces alone will deliver a socially
optimum market equilibrium.
GOVERNMENT ACTIVITY IN PROMOTING

GREEN BUSINESS AND GREEN VALUES
Government’s approach to helping to make the transition to a more sus-

tainable economic growth path needs to take account of relevant drivers
of change, such as consumer behavior, the cost of carbon, innovation and
regulations to ensure that a credible and consistent regulatory and policy
framework is developed over the longer term. Alongside commitments to
maintaining macroeconomic stability and a competitive market framework,
the government’s principal methods of signaling a long-term commitment to
reducing carbon is the statutory target to cut greenhouse gas emissions by
80% from their 1990 baseline by 2050 (as outlined in the Climate Change
Act 2008) and commitment to the EU ETS. Providing more certainty to mar-
kets over the longer term and establishing a market price for carbon help give
increased certainty of demand for low-carbon goods and services.
In addition to specific legislation on addressing environmental impacts
and carbon emissions reductions, other regulations also have implica-
tions for improving wider company performance in areas such as corpo-
rate responsibility. For example, the Companies Act 2006 is expected to
deliver benefits to business of around £250 million a year (DTI, March
2005). The act contains key provisions relating to directors’ general duties
and the Business Review that will make a significant contribution to Cor-
porate Responsibility. Part of the statutory statement of directors’ general
duties establishes the concept of “Enlightened Shareholder Value,” which
recognizes that, by paying appropriate attention to wider matters, directors
will be more likely to achieve sustainable success over the longer term, for
the benefit of their shareholders. Similarly, requirements under the Busi-
ness Review were expanded4 so that quoted companies must now report
on environmental, employee, social and community matters, to the extent
necessary to understand the business.
The establishment of regulatory frameworks, such as those which estab-
lish carbon pricing and markets for trading of carbon, may go some way to
ensuring that the right incentives are in place for companies to take better
account of the wider impacts of their economic activities. They are supported
by government initiatives that seek to ensure that the necessary supporting
infrastructure is in place—this includes direct and indirect investment and
support for innovative activity, skills and physical infrastructure.
However, such market mechanisms alone may still not be sufficient to
deliver necessary outcomes of improved environmental performance.
In the context of reducing carbon emissions, standard marginal abate-
ment cost (MAC) curve analysis by organizations such as the Climate
Change Committee suggest that there are a wide range of carbon abate-
ment options available for take-up. The analysis suggests that although
many of these options require a positive carbon price in order to incentiv-
ize their development and take-up by the market, others do not. These
“negative-cost” measures should not require a positive carbon price, or
even necessarily the establishment of a carbon market for their take-up
to be cost-effective. Many energy efficiency measures, such as those for
improving the building stock or the fuel efficiency of cars, fall into this cat-
egory. Poor uptake of some of these options suggests that there are perhaps
additional failures or barriers in the market, such as those outlined earlier.
For example, poor information about the benefits of uptake, poorly aligned
incentives or problems with accessing finance to undertaking options that
are perhaps more capital intensive.
Government therefore needs to be able to identify what these potential
barriers are and, where possible, limit their impact so that the transition
to a more sustainable and greener economy can be achieved in the most
cost-effective way. There is a wide range of policies targeted at minimiz-
ing failures and barriers in the market—actions to improve environmental
performance of markets can, to some extent, be considered as a subset of
wider policies addressing similar market failures in other areas.
The UK government launched the UK Low Carbon Industrial Strategy
in July 2009, alongside the publication of the UK Low Carbon Transition
Plan, the Renewable Energy Strategy, and the Low Carbon Transport Strat-
egy. These documents set out a clear vision for a low-carbon future for
the UK and seek to provide more certainty about government commitment
over the longer term to reduce carbon emissions. The aim of the Low Car-
bon Industrial Strategy is to ensure, within the context of the requirements
to dramatically reduce carbon emissions, that the UK economy is well posi-
tioned to take advantage of the potential economic opportunities of a tran-
sition to a low-carbon economy. Building on the commitments of earlier
policies, these strategies seek to address some of the continuing barriers to
a cost-effective transition, and include announcements on the support the
research, development and deployment of low-carbon technologies, access
to fi nance for companies such as SMEs that may not be able to fi nd the nec-
essary capital to support viable business proposals and the need to improve
information about the opportunities available reducing carbon footprints.
Government has a key role in facilitating the provision of relevant informa-
tion that may help individual and industrial consumers properly embed the
environmental consequences of their choices into their decision-making pro-
cesses. There are currently a number of demand-side initiatives designed to
encourage consumers to think more about implications of their choices. For
example, the cross-government Act On CO2 campaign (launched in 2007)
aimed to help businesses and individuals reduce their carbon emissions.
This may include helping to address information failures through help-
ing the supply-side improve the measurement and labeling of the environ-
mental impacts of their products. Government advisory services, such as
BusinessLink and the Manufacturing Advisory Service, have a vital role
in providing information to business on issues such as energy and resource
efficiency, waste, pollution control, and requirements to meet criteria for
accreditation to relevant standards.
The UK Low Carbon Industrial Strategy announced a package of ini-
tiatives as part of the drive to help SMEs understand the implications of
the necessary transition to a low-carbon economy. This included efforts to
improve awareness of the opportunities and risks relating to a move to a
low-carbon economy, helping SMEs to reduce their carbon footprint and
develop low-carbon products.
Binding or voluntary product standards can help address two funda-
mental market failures through reducing the negative externalities of prod-
ucts and process by driving down the environmental impacts of goods
and services and, as highlighted earlier, improve market transparency by
increasing the provision of relevant information. British or international
standards help improve market transparency across international borders.
Further, minimum standards can ensure that demand is focused on a set
of goods and services that better take account of the social implications
of consumption of these products. However, despite their useful role, it is
important to not overstate the impact that standards can play in creating
more sustainable products and processes—there is the potential for nega-
tive feedback effects on the level of innovative activity undertaken as firms
could potentially focus their efforts on developing a reduced number of
technologies and products, reducing consumer choice (BERR, 2008).
Government also has an important role to play in driving markets for-
ward through public procurement. The public sector can exert significant
buying power in a number of markets on both capital expenditure and cur-
rent consumption and, hence, by acting as an intelligent customer, play an
important role in facilitating the development of new products and processes,
for example in markets for clean technology and green products and services.
For example, the government’s Sustainable Development Strategy commits
departments to reduce carbon and waste from their supply chains and public
services and to increase water efficiency. These commitments will necessarily
affect the way that departments undertake public procurement and ensure
that wider sustainability concerns are better accounted for.
In terms of delivering wider objectives on corporate responsibility both in
domestic and international markets, the government is responsible for deliv-
ering a variety of policies that have an impact on this area. This includes,
for example, policies aimed at reducing poverty and disadvantage, as well as
promoting human rights both internationally and at home, and involvement
in programs such as the Ethical Trading Initiative (ETI) and the International
Fairtrade Labeling Organization (FLO). In addition, government supports
a wide range of individual sectoral initiatives that provide support to busi-
nesses operating in different sectors which are designed to provide businesses
with a framework for responsible operations internationally.
NOTES
1. Financial services include investments in carbon trading, carbon offsets,

green or clean tech indices and socially responsible investment funds, provid-
ing capital for investment in clean technology and environmental products/
projects.
2. Business services include environmental consultancy services and environ-
mental marketing.
3. This means that consumption by one does not reduce availability of that
good for others, and that it is not possible to effectively exclude particular
agents from using the good.
4. All businesses, other than small businesses, were already required to produce
a business review prior to the introduction of the Companies Act 2006. The
review is prepared by companies for the benefit of their shareholders to help
with their assessment of how the performance of the directors.
REFERENCES
BERR (2008). Regulation and innovation: Evidence and policy implications (Eco-
nomics Paper No. 4).
BIS (2009a), UK Low Carbon Industrial Strategy.
BIS (2009b), BIS Economics Paper 1: Towards a Low Carbon Economy – economic
analysis and evidence for a low carbon industrial strategy.
Business in the Community (2008), The Value of Corporate Governance: The
positive return of responsible business.
Carbon Trust (2008). Climate change: A business revolution.
Corporate Library for Ceres and the Environmental Defence Fund (2009). Climate
risk disclosure in SEC fi lings.
DTI (March 2005), Company Law Reform.
Ernst & Young (2008). Comparative advantage and green business.
HMG (2009). Corporate responsibility report.
HMT (2006), Stern Review: The Economics of Climate Change.
HSBC (25th September 2007), Press Notice: HSBC launches climate change bench-
mark index
Innovas (2009a). Low carbon and environmental goods and services: An industry
analysis.
(2009b). Update of growth forecasts.
Ipsos MORI (2007). Tipping point or turning point?
PricewaterhouseCoopers (2008) for Carbon Disclosure Project 2008, Global 500
Report.
PriceWaterhouseCoopers (2008). Sustainability: Are consumers buying it?
UNEP (2008). Green jobs.
UNEP/SEFI (2008). Global trends in sustainable energy investment 2008.
(2009). Global trends in sustainable energy investment 2009.
World Bank (2009), State and trends of the Carbon Market 2009.
8 Sustainability of Corporate Profit
Jack Keenan
BACKGROUND
The Centre for International Business & Management (CIBAM) and Judge
Business School presented a February symposium on Green Business and
Green Values in February 2009.
CORPORATE GOVERNANCE
Whilst many speakers focused on sustainability, I was asked to look at sus-

tainability of a different sort—the sustainability of a corporation’s profit.
And, because of a prior CIBAM paper published in Corporate Governance
(Keenan, 2004), I decided to look at the current or potential role of the
UK’s Combined Code of Governance in providing profit sustainability for
UK-based companies.
I reviewed the UK Combined Code and recalled my own time as an
executive board member and later as an independent non-executive. The
UK Combined Code today is the sum of several reports and reviews under-
taken by leading businessmen beginning with the Cadbury Report in 1992
and fi nishing with the Higgs Review and Smith Report in 2003.1
Today, in light of large-scale value destruction in the UK banking sys-
tem, there are many calls for another look at the UK Combined Code. My
point of view is that the Code today sets out principles and requirements
that if properly complied with would have averted levels of profit loss wit-
nessed over the past two years.
The Code tells companies that they must comply with its requirements
or explain why they have not. Too many executives and boards claimed
compliance without proper procedures and execution. In other words, true
compliance had not been achieved, but no explanation was forthcoming.
CORPORATE RISK ASSESSMENT
The key to profit sustainability in the Code lies in the area of internal control
and risk management. Specifically in the Principle (D.2) and Provision (D.2.1):
Sustainability of Corporate Profit 95
Principle D.2 of the Code states that “the board should maintain a
sound system of internal control to safeguard shareholders’ investment and
the company’s assets.”
Provision D.2.1 states that “The directors should, at least annually, con-
duct a review of the effectiveness of the group’s system of internal con-
trol and should report to shareholders that they have done so. The review
should cover all controls, including fi nancial, operational and compliance
controls and risk management.”
The Higgs Review in January 2003 added to the Combined Code “Sug-
gestions for Good Practice.” Importantly, Higgs asked, “What has been the
board’s contribution to ensuring robust and effective risk management?”
AN EFFECTIVE RISK MANAGEMENT MODEL
The Higgs Review does not actually spell out a model for robust and effec-
tive risk management, so at the Cambridge Symposium I spelled out a
process that has proven to be effective for several companies to achieve a
measure of profit sustainability. There are three pieces to any effective risk
management model:
1. Identify key risks

2. Quantify the risks and their probability
3. Mitigate the risks
I believe that the risk management process should be overseen by a compa-

ny’s internal audit function, which can also supply training, but that the oper-
ating units and functions must own the process. It also helps if risk assessment
is an integral part of the strategic planning process. The three-year Strategic
Plan can then be presented to the board by the CEO with the corporate risk
assessment. This fulfills the board’s annual review requirement. I would also
suggest that the corporate risk assessment be updated as part of the develop-
ment of the annual operating plan which will also be reviewed by the board.
The corporate risk assessment is built from the bottom-up by each oper-
ating unit and function with the most critical risks captured as the assess-
ments move up through the corporate levels. So each country would have
its risk assessment in its strategic plan even though that country’s risks
might not have been critical enough to be captured in the region’s or cor-
porate risk assessment.
A RISK MATRIX
A risk matrix is a simple tool for facilitating the construction of a risk

assessment at each step. The matrix is designed to capture the fi nancial
impact and probability for each key risk.
96 Jack Keenan
Figure 8.1 A risk matrix.
Arrows within the matrix can also be used to demonstrate how risk
items have changed in cost impact or probability since the previous strate-
gic or operating plan. For example, in the illustration, risk #3 has become
more probable and costlier since the previous plan.
MITIGATION IS KEY
Risk identification and quantification begin the process, but without proper
mitigation, Higgs’s call for “robust and effective risk management” will not
be achieved. For each risk identified and quantified at each level of a cor-
poration, there must be a mitigation action or series of actions, a timetable
for achievement of each mitigation step and identification of the executive
responsible. At the corporate level, the person responsible would be one of
the CEO’s executive team or, in some cases, the CEO. Mitigation actions
that merely call for study or review should be discouraged. Study should
move on to implementation of true mitigation measures.
WILL THIS RISK MODEL HELP TO SUSTAIN PROFITABILITY?
It might if the board encourages an open and an honest risk assessment

process. The CEO of one UK bank fi red the risk assessment officer who
Sustainability of Corporate Profit 97
raised serious red flags. The officer was found to be “quirky” and not a
“team player.” When risks are running rampant because of the operational
team, the last thing one should want is for the risk assessment officer to
join the team.
Higgs had another key suggestion for “good practice”: “Is the composi-
tion of the Board and its committees appropriate, with the right mix of
knowledge and skills to maximize performance in the light of future strat-
egy? Are inside and outside the board relationships working effectively?”
Sadly, the answer in too many cases should have been NO!
The UK Combined Code is a compendium of excellent principles, sound
requirements and suggestions for good practice. It takes strong and inde-
pendent boards to ensure authentic compliance to the requirements of the
Code. Without such boards, profit sustainability will be illusory.
REFERENCE
Keenan, J. (2004), Corporate governance in UK/USA boardrooms. Corporate

Governance International Review, 12, 172–6.
NOTE
1. The Cadbury Report (1992), The Greenbury Report (1995), The Hampel
Report (1998), The Higgs Review (2003), The Smith Report (2003).
9 Doing Good Is Good Business
David Roth
SUSTAINABILITY IS THE NEW DISPOSABILITY
For almost 65 years, since the end of World War II, disposability and its
twin, planned obsolescence, drove an optimistic consumerism best symbol-
ized by the aggrandizing automobile fins of the American gas guzzlers of
the 1950s.
Today, perhaps as another symbol of our times, the auto companies are
running on empty. And the ad agencies that encouraged our love affair with
the car, self-defrosting refrigerators, and every other modern convenience
with a limited warranty are the subject of ironic ridicule in the hit TV
drama Mad Men.
Marketers world over are sill in the business of divining our motivations
for profit but their probes of the human psyche reveal a significant shift in
attitude about the amount of money we expect to spend and on what we
are prepared to spend it.
The rules of commercial engagement have changed. We humans still
are acquisitive animals, desire nice things, and remain fundamentally self-
interested. However, we feel that our personal resources are limited. And
we have begun to recognize that the Earth’s resources are limited as well.
While self-interest remains our primal motivator, we understand that, on
this crowded planet, our self-interest often is best served by working in a
cooperative rather than adversarial manner.
The old metaphors no longer work. The seller is not a hunter attempt-
ing to ensnare the buyer. Increasingly, buyer and seller form a paired unit
seeking products that will serve the former and provide profit to the latter
without harming the Earth’s climate or any of its peoples.
All marketers, suppliers and retailers will feel the impact of this change,
which is more than a transient response to the difficult economy. Rather,
we are witnessing a permanent shift in purchasing behavior and the nature
of consumption. Market leaders are embracing this change by embedding
social and communal values into their business propositions.
For these companies, Corporate Social Responsibility (CSR) is not an
add-on. It is not a palliative to absolve the corporation for the sins against
the environment, nor is it simply a tactic for ingratiating the corporation to
Doing Good Is Good Business 99
its customers. It is fundamental criterion that will be important for defi ning
business success.
While it remains axiomatic that a successful business needs to be profit-
able and reward all of its stakeholders, the public will not regard a busi-
ness as successful unless it achieves its results ethically and with scrupulous
regard for the Earth and its inhabitants. The new metric of success asks not
only if you made a profit but also how you made a profit.
The consequences are real. All things being equal, shoppers will spend
their money with businesses that share their values and punish those that
do not.
NOT JUST PHILANTHROPY
Both corporate social responsibility and corporate philanthropy impact

positively on the health and welfare of society. Both serve important but
different functions.
Corporate philanthropy is about how a corporation spends a small pro-
portion of its profits. A corporate philanthropic gift is a limited transaction
between the giver and the recipient. Both recipient and giver receive a divi-
dend. The recipient increases resources for curing disease, providing edu-
cational opportunities or broadening the audience for cultural events. For
the giver, philanthropy pays a dividend in the form of enhanced prestige.
CSR is about how a business earns all of its profits. It is more than trans-
actional; it is cultural. Because CSR is a way of doing business that is infused
throughout an organization, it broadly impacts the many constituencies
within, affiliated with and touched by the organization. CSR can motivate
and inspire the loyalty of staff, customers, suppliers and shareholders.
In this sense, CSR can produce positive long-term results, perhaps far
greater than those achieved by philanthropy alone. But CSR can be more
complicated to implement especially when it relates to sustainability and
requires cooperation at every link in the supply chain.
DOING GOOD IS GOOD BUSINESS
Supply chains are complicated. Being responsible about the products we

offer and offering them at a good price is not always easy. Purchasing deci-
sions can have unforeseen and unintended consequences. But, as the follow-
ing examples illustrate, it is possible to be both responsible and profitable.
B&Q
In the mid-1990s, home improvement centers in Europe were doing big
business in garden furniture sourced from Southeast Asia. The suppliers
100 David Roth
and retailers made money. Consumers got a good price. Everyone was
obliviously happy until an enterprising journalist asked B&Q, the largest
home center in the UK, where it sourced its wood.
When the then marketing director, Bill Whiting, answered that he did
not know, the journalist responded: Don’t know means don’t care. Whiting
could not get the exchange out of his head. And he soon discovered two
troubling facts. First, that some garden furniture wood was harvested from
endangered forests. Second, no mechanism existed for verifying the prov-
enance of wood from these remote forests.
With a group of partners, B&Q engaged the entire supply chain, from
forest to retail, and supported tracking and traceability systems to ensure
that the wood for garden furniture was responsibly harvested. Within a few
years, most of the wood was certified as sustainable by the Forest Steward-
ship Council (FSC).
At the same time, B&Q cultivated consumer awareness of how products
bought for backyard comfort in Europe impact tropical forests in develop-
ing regions of the world. B&Q’s leadership proved good for the endangered
forests, for the climate that forests help stabilize and for sales.
Walmart
Walmart provides an important example of CSR and concern for sustain-
ability because its environmental commitment is a core business strategy
and, as the world’s largest retailer, its impact is enormous.
Walmart established an Environmental Advisory Board in 1989. In
1993, the company opened an experimental “green” store, in Lawrence,
Kansas, which emphasized energy-efficient technologies and materials in
the store’s construction and operations.
The company slowly expanded its environmental program during the
1990s and through the early years of this century. Meanwhile, the chain
came under intense scrutiny for its impact on the environment and its
labour practices.
Initially defensive, Walmart ultimately collaborated with some of its crit-
ics, including NGOs. The company’s conciliatory and proactive approach
helped repair its reputation for corporate good citizenship, which it deemed
important for maintaining relationships with long-time customers and for
expanding its base of more urban and affluent customers. The company’s
initiatives include:
• Product Range: In 2007, Walmart pledged to sell 100 million energy-

efficient compact fluorescent light bulbs within one year—and it met
that goal.
• Sustainability Index: In July 2009, Walmart announced that it would
create a sustainability index that it will apply to all of its products, an
effort that is likely to affect is roughly 100,000 vendors.
• Project Impact: In another far-reaching initiative, Walmart has
launched a remodeling program aimed at reducing the size of its
stores and the amount of merchandise and packaging they contain.
Equally important, Walmart’s environmental initiatives are linked to the

“virtuous circle” that has been at heart of the corporate strategy since Sam
Walton opened his fi rst store. Environmentally related efficiencies—such as
recycling, eliminating packaging, and improving fleet management—pro-
duce cost reductions that enable the lower prices that drive sales volume.
As H. Lee Scott, Jr., told an audience at the National Retail Federation
convention, in New York, in January 2009, in one of his last speeches as
Walmart CEO:
There is no conflict between delivering value to shareholders and help-

ing to solve bigger societal problems. In fact, they can build on each
other when developed executed and aligned properly.
At Walmart we do not see it as philanthropy or CSR or the triple
bottom line. We believe you can bring together the bottom line and the
balance sheet with the societal and environmental bottom lines.
Proctor & Gamble

Proctor & Gamble claims that about three billion people, or half of the
Earth’s inhabitants, are consumers of its household and personal care prod-
ucts.
To understand the needs of such a broad consumer base, the company
has made diversity a business strategy that, when linked with collabora-
tion, becomes a competitive advantage.
“We may be messier getting started, may need to work harder to figure
out how to work across cultures and languages,” said P&G chairman A. G.
Lafley. “But we’re going to come up with more ideas and create something
that will make a difference.”
Because P&G views itself as a company that creates products, from laun-
dry detergent to skin care, that primarily are bought and consumed by
women, the company is especially engaged with women’s health issues.
“I’ve become a huge believer in that the health of an economy relies on
the health of women in an economy,” said Lafley. “Do they get an educa-
tion? Do they have birth control information? Do they have access to medi-
cal practitioners? What’s the health of their babies at birth?”
The company conducts educational programs for girls’ hygiene and
operates mobile and in-school dental facilities for children in various parts
of the world. It runs a safe drinking water program and has built schools
in China.
B&Q, Walmart, and P&G, two retailers and a supplier, are examples of
companies that operate successful internationally businesses, which impact
102 David Roth
the Earth and its inhabitants. The companies share another important
characteristic: each is informed by an ethic which asserts that doing good
is good business.
BEST PRACTICES
The key point is not that these companies operate perfectly, but that they
are earnest in their commitment to corporate social responsibility. And
they are not alone.
Among enlightened businesses, this concern with corporate social
responsibility touches a broad range of issues including responsible sourc-
ing, employee welfare and poverty in the developing world. Concern with
CSR was perhaps jolted and accelerated by the urgent need to slow the
negative impact that business has had on the Earth’s climate.
Since the advent of industrialization, in the mid-1700s, the concentra-
tion of carbon dioxide in the Earth’s atmosphere has increased by about
30%. Without remediation, climate change could become irreversible in
only two decades.
Governments have a role in this remediation as they did during the early
years of industrialization, in the 19th century, by enacting laws to prohibit
child labour and regulate other abuses. Today, however, the agents of reme-
diation include NGOs and businesses as well as governments.
The many reasons why entities other than government are engaged in
these problems include globalization—the sense that we are all intercon-
nected citizens of the planet and communication—the ability to immediately
and constantly exchange information that reinforces our connectedness.
The engagement of business involves other reasons:
• Customers prefer to do businesses with organizations that they trust,

a trust that was sorely tested by the global financial crisis.
• Employees prefer to work with organizations that they can feel proud
of, that do not harm others or damage the Earth.
• Shareholders prefer to invest in companies that produce strong returns
while acting as good corporate citizens.
Here are some suggested best practices for CSR, particularly as it relates
to product sourcing and sustainability:
Transparency: Provide consumers with all the information necessary to

make purchasing decisions. Along with the normal descriptions of a prod-
uct’s performance and efficacy, customers increasingly want to understand
the social and environmental impact of the products they use. Be honest.
Consumers forgive imperfection but punish deceit.
Responsible Innovation: It may be innovative to create MP3 players and
other products with just enough style and color change to prompt annual
disposal and repurchase. But it is also irresponsibly wasteful. Many con-
sumers now reject excess; even more can no longer afford it. Most will
welcome real innovation but lose patience and respect for changes simply
calculated to rip notes from their wallets. Purchases will be more consid-
ered and practical. Products, like the most enduring examples of civiliza-
tion, will be valued for their timelessness.
Differentiation: A sincere commitment to sustainability will win customer

respect and purchases. And it will differentiate a company from its com-
petition. The key word is “sincere.” “Greenwashing,” a veneer of concern
coating business as usual, is easy to see through and dismiss. The resulting
brand damage can be fatal.
Integrity: People do not feel comfortable compartmentalizing their lives.

They expect the same standards of decency and ethical behavior to apply
whether they are working, shopping or spending time with family and
friends. Businesses that depart from this consistency create dissonance and
risk losing customers.
Talking Points: If you’re not sure whether your products measure up to

CSR and sustainability standards, ask them. Imagine your products can
talk. What would they say about how their raw materials were provided?
How would they describe the conditions in the factories where they were
fabricated? Could the products freely share their stories with your custom-
ers or, to avoid embarrassment, would you fi rst need to coach them?
All businesses can benefit from integrating a commitment to corporate
social responsibility and sustainability into the life of the organization. The
marketing community, having been complicit in fostering overconsump-
tion, perhaps has a special responsibility for adopting and advancing CSR
and the notion of sustainable consumption.
The marketing community made a lot of money convincing people that
they needed to purchase a new car every couple of years or that last fall’s
fashion was just too last fall. Having contributed to the problem, marketers
can help solve it by redirecting their creative power to encourage a more
realistic and responsible attitude toward consumption and stewardship of
the Earth.
This initiative would be good, and it would be good business.
10 Demonstrating Goodness
Michael Littlechild
There has been a fairly broad consensus in the corporate world for some
time that it makes sound business sense to behave oneself. Some businesses
bought in sooner than others to the notion that high ethical conduct is part
of the process of making money, rather than a mere adjunct or even a com-
plete distraction. Today there are few corporate websites which spare their
readers a lecture on the company’s ethical credentials. The terminology
can vary—ethics, sustainability, corporate responsibility (social or other-
wise)—but they are all essentially variations on the same theme.
At the same time most companies are only too aware that they are facing
a skeptical audience. Our trust that companies do what they say has not
significantly shifted since the days when businesses were silent about their
ethics and hoped we would either not fi nd out or care. Edelman still fi nds
that only 38% of British citizens (‘informed public’) trust companies to
do what is right, a little behind their trust in governments (44%), but well
ahead of faith in media (28%), ironically the source of most of our informa-
tion on the misdemeanors of business (July 2009 survey). These results are
roughly the same for many Continental European countries, although these
tend to be less cynical about the media. Americans on the other hand have
a history of trusting companies much more than Europeans. The crisis of
capitalism of the past two years, and the role of banks especially, caused
their faith in companies to nosedive in 2009, with a 20% drop in trust to
the same levels we are used to in Europe, only to bounce back to long-run
levels in 2010.
So what have businesses been doing to convince a doubting public? A
whole bundle of activities have been tried, abandoned, rehashed and retried,
and still we seem to remain unconvinced. I have divided these efforts to
impress into four main categories.
RE-BRANDING
A number of sectors have been at the forefront of using corporate image

and communications to persuade us of their ethics. This is not just regular
Demonstrating Goodness 105
public relations but an attempt to redefi ne the very identity of the company.
Oil and gas and retail are sectors where this has been very evident. BP
discarded the British Petroleum identity long ago, somewhat later redefi n-
ing itself as Beyond Petroleum. This came complete with a green flower
logo and matching prime-time advertising, in which the focus was more on
harmony with the natural environment than the more muscular imagery
of drilling holes and flaring gas. Sainsbury’s reassured us that they were
the fi rst supermarket to stop selling caged eggs, that they source ethically
from farmers and that their carrier bags are reusable. These companies
are quite typical of their sectors nowadays, the main differentiator being
which caught on to it sooner rather than later. Essentially, however, this
re-branding exercise has been, at best, an attempt to persuade us through
positioning rather than to provide us with any real evidence that there is
reality behind the message.
CLUBBING
An approach which goes back to the dawn of time for Corporate Social
Responsibility (CSR)—some 20 odd years ago—is to associate with other
like-minded companies to proclaim the importance of good corporate con-
duct and to strive together for improvement. Business in the Community in
the UK was a pioneer in this field, born of an era when serious social disor-
der in deprived inner cities led companies to reflect upon the role they could
have in bringing long-term solutions to such problems. Since then, fraternal
bodies have set up in most Western economies as well as further afield.
These clubs are mostly open to all comers. There are no entry qualifica-
tions or minimum ethical tests to pass before you can rub shoulders with
the leading exponents of CSR. The spirit is that anyone can join, ethical
warts and all, and learn from others how things can be done better. Mem-
bership is therefore no great measure of good conduct, though some associ-
ations do create league tables of their members. There is no doubt however
that many companies join in the hope of benefiting from “innocence by
association.” Certainly most are quick to tell us of their membership and,
where they can, their high rankings in the performance tables.
CERTIFYING AND INDEXING
An obvious further step is to obtain third-party endorsement through cer-

tification or by qualifying for ethical stock exchange indexes which set and
evaluate entry criteria.
Certification for ethical purposes is an extension of certification for
quality, which has been a success in setting standards for a whole variety
of products and services. The closest standard of relevance to ethics is ISO
106 Michael Littlechild
14001 on environmental management. This is universally regarded as a
model for good environmental practice, though some of the faith put in it
is based on a misunderstanding of what it stands for. ISO 14001 focuses on
environmental management systems, with formalized processes for mea-
suring impacts and defi ning and following up remedial actions. It does not
insist on any particular limits for emissions or rate of improvement for their
reduction. Attempts to reproduce a similar approach to certifying CSR, a
behavioural concept which cannot be easily and universally defi ned, have
had to change course and ISO has provided guidelines for social responsi-
bility (ISO 26000) rather than a certified standard.
Ethical stock exchange indexes are subsets of listed companies which
qualify as good or sustainable, the leaders being FTSE4Good and the Dow
Jones Sustainability Index. They are directed toward the market for socially
responsible investment, though this represents such a small proportion of
investment funds that they are unlikely to have any material effect on the
flow of funds to good companies’ stocks. For most companies the impor-
tance of membership is at least as much as a badge of respectability, again
shown by the prominent position that membership is given in company
communications.
The ethical indexes have developed over time, and their selection criteria
have become more sophisticated and demanding. There is no doubt that
they have been part of the forces of change persuading companies to take
ethics seriously. However, the selection criteria still need to be based on
fairly simple, document-based evidence of ethics, which is traceable and
visibly impartial. Inevitably they cannot go very deeply into testing how
far policies are followed in reality. They also have not shown that ethics
as judged by them have a strong performance advantage. The FTSE4Good
index has historically fluctuated very closely in line with the All World
index, though disappointingly at a lower level.
PUBLIC REPORTING
The most direct attempt to demonstrate the sincerity of corporate ethi-

cal claims is the practice of public reporting. Serving as a companion to
the Annual Report and Accounts, this report (variously named “social,”
“sustainability” or some combination) sets out to present objectively the
non-fi nancial performance of the company and is targeted at the company’s
stakeholders rather than shareholders. Such reports have become very com-
mon coinage. According to a survey by KPMG in 2008, some 85 of the
UK’s top 100 companies produced stand-alone reports. This was second
only to Japan with 88, while in the United States, late arrivals on the ethical
reporting stage, it was 72, over double the number in 2005.
The reports have a broadly common coverage, typically consisting of
stakeholder sections, but they vary enormously in length, style and the
extent to which they serve to promote a positive image rather than genu-
inely report on the company’s strengths and weaknesses. They all contain
significant amounts of data, with many following the Global Reporting
Initiative (GRI), a UN-sponsored framework which harmonizes the data
to be included in such reports and how it should be defi ned and expressed.
Many of the reporters also have aspects of the reports verified by inde-
pendent companies to ensure the reader that the content is well founded.
For the serious reporters the whole exercise involves a significant com-
mitment of internal resource as well as expenditure on verification and
communications. Because of the need for verifiers to validate a defi ned
text, most reports are still produced annually in hard copy, though all are
available online and many companies also have web-based, continuously
updated reporting.
Given all these sterling efforts, what can have gone wrong to cause us to
persist in distrusting corporate sincerity? I would underline two main prob-
lems. The first relates to business behavior itself, namely the slow progress
made toward embedding corporate responsibility into the everyday activi-
ties of the business, beyond specific CSR activities. The second relates to
the reporting of ethical performance, with inherent flaws in the approach
both to coverage and verification.
GAPS BETWEEN THEORY AND PRACTICE
The most important factor undermining confidence is the public demon-

stration that businesses have fallen short of their ethical pledges. Many
illustrations appear in our newspapers on a daily basis.
In 2005 the Group Chief Executive of Barclays was saddened to discover
that the Daily Telegraph believed that banking was behind as a sector in
CSR. “It was clear to me,” he said in his corporate responsibility statement,
“that, despite our efforts in the past, we still had a lot to do to convince our
stakeholders that we are absolutely serious about corporate responsibility.
The best way I can do this is to say that everything we do under the ‘cor-
porate responsibility’ banner is directly relevant to our business goals.” In
2007, however, by which time one might have expected corporate responsi-
bility to have reached even higher levels, an undercover BBC reporter pro-
duced a powerful television report showing Barclays staff being trained
to be anything but responsible, indeed to sell products inappropriately to
customers. We watched as a call-center trainer explained to trainees how he
loved getting customers complaining about bank charges. “I was thinking
‘you are not getting it back’. I was a right git.”
Balfour Beatty in 2006 was a leading light in CSR in the UK construction
sector, a member of the Dow Jones Sustainability Index and the outright
winner of Construction News’ Corporate Responsibility Award. At the same
time, as was discovered two years later by the Office of Fair Trading, the
company was one of 40 businesses in the industry colluding over bidding
for public contracts, resulting in clients such as local authorities overpaying.
BP’s Sustainability Report of 2004 highlighted pipeline integrity as a key
element in its management of environmental risk. However, in 2006 in two
separate incidents some 5000 barrels of oil were leaked onto the Alaskan
tundra, which led to investigations by a Federal Grand Jury as well as both
the Houses of Congress. They all criticized BP in the United States not just
for technical failure but for management neglect, resulting in BP having to
commit to a series of major management and operational changes. Included
in the solution was the appointment of a U.S. District Court judge to act as an
independent ombudsperson for BP’s U.S. employees to ensure that their con-
cerns about these or any other operational issues would be investigated and
resolved. The conclusion that the company had to accept was that manage-
ment had ignored employees’ concerns. Similar conclusions had been reached
by investigators of two fires the year before at BP’s Texas City Refinery, which
resulted in fatalities. The damage to BP’s reputation in North America con-
tinued right up to April 2010, when the Gulf of Mexico catastrophe caused
reputational damage to the company on an uprecendented scale.
How could these things happen in such large, sophisticated companies?
Why would leading businessmen risk such public embarrassment, not to say
exposure in the courts? Were the CSR claims they made always intended to be
a big bluff? Did those chief executives think we were all naïve, or maybe just a
bit thick? Or did they perhaps not know what was going on in their own com-
panies? None of these explanations makes pleasant reading for their employ-
ees and customers, or their shareholders for that matter. I am inclined to favor
a different explanation, relating to their limited vision of CSR. I strongly sus-
pect that they had such things as customer mis-selling, collusion with com-
petitors, and poor safety and engineering integrity in a completely different
box. Despite the all-embracing statement of the bank, I think these compa-
nies’ senior executives still had CSR pigeon-holed with community projects,
employee diversity and tree planting. Odd though it may seem to the layman,
they simply did not have honest selling, fair competition and environmental
risk management in their dictionary definition of corporate responsibility.
FLAWS IN REPORTING
If there are gaps between codes of conduct and actual practice, the pro-
cess of reporting on practice also has some significant fl aws. The content
of many CSR reports still has a strong promotional feel. It is true that
some companies have gone further in baring their souls and admitting
their own mistakes, though in many cases this is because the story is
already out and it would not be credible to do much else. The reports
also contain a lot of data, which one would hope could not lie. However,
at close inspection much of the data given constitutes long rambling lists
of numbers that reveal little or nothing without corresponding context
or benchmarks. Rarely are we given ready-made time series which could
at least help identify trends. The GRI has gone a long way to standard-
ize defi nitions of data and increase the demand for statistics but that has
often exacerbated rather than reduced the problem of numbers for num-
bers’ sake. So by following its requirements, a multinational can inform
the public that the number of cases of alleged competition infringements
under judicial review is six, the number of supplier audits performed is 23
and the number of community initiatives is 46. When one reads these long
lists of data, one is continuously struck that a crucial test has not been
passed, or more likely not even been applied, namely: are these numbers
interesting or meaningful for any stakeholder?
Even if some of this data is relevant to stakeholders’ interest, it is often
not clear how to interpret good results from bad. If customer complaints
have fallen, this is presumably good news. Unless of course the company
has made it harder in some way to complain or its poor response to earlier
complaints has discouraged customers from bothering to do so (which, as
all of us know, happens too often). Similar question marks are attached to
health and safety statistics, which tend to worsen as companies improve
their reporting mechanisms.
Further flaws in current reporting approaches lie in the limitations of the
external verification process. It is a common misconception that a verified
report has somehow been completely validated for its content, whereas in
fact the extent of independent verification is generally very limited. A typical
assurance statement, contained at the back of a report of a major interna-
tional company with a long-standing reporting history, illustrates the point:
Level of assurance: Our evidence gathering procedures have been de-

signed to obtain a limited level of assurance (as set out in ISAE 3000)
on which to base our conclusions. The extent of evidence gathering
procedures performed is less than that of a reasonable assurance en-
gagement (such as a fi nancial audit) and therefore a lower level of as-
surance is provided.
The limitations of our review: The scope of our work was limited to group
level activities. We did not visit any of the company’s businesses. Our
stakeholder engagement activities were limited to attendance at one event.
Therefore, our conclusions on Materiality and Responsiveness are based
on our discussions with the company’s management, our review of se-
lected media and the review of documents provided to us by the company.
On the face of it, it is hardly a testimony to exhaustive rigor. Other

statements in a lengthy text use language abounding in double negatives.
“Nothing has come to our attention that causes us to believe that HSE,
community investment and ethics dismissals data has not been properly
collated.” Auditors are naturally keen to ensure that they primarily check
data which can be practically validated, to protect their own reputations
and manage their risk. As a result, even within the constraints of these
strong caveats, the validation is focused essentially on whether statistical
data is accurate rather than whether it means much, let alone how well
company policies are adhered to in reality.
DO BETTER OR GIVE UP
Is this a hopeless situation? Are companies doomed to be disbelieved about

their ethical sincerity because everyone believes that they are just out to
make money, come what may? I think there are some straightforward but
significant ways in which things can be done a lot better and they will save,
not cost money.
1. Don’t do Annual Social Reports

Annual reports, hard copy or web only, are old hat and not worth the
yearly crescendo of internal activity. Needing a fi xed text on which auditors
can pin their verification is no good reason to annualize the report, given
the limitations of the validation exercise. A flow of updated information
does better.
2. Report on how Business is Done, not just the Trimmings

Corporate responsibility and ethics are empty concepts if they are not about
how a company does business—how it treats the people who work for it,
the customers who buy from it, the suppliers that sell to it, the other organi-
zations and people that surround it and are affected by it, as well as the rest
of the planet. This may seem a huge truism, but it still seems lost on many
of those who run businesses. The largesse handed out to worthy causes in
money and kind is interesting but, as it accounts for less than 1% of profits
in even the most generous companies, it is worth a few paragraphs. Besides,
being generous is not the same as being ethical.
3. Get Independent Verification of how You do

Business, not of what You Write About it
A code of ethics needs to be clear about what real business practices a com-
pany uses, not just what generic values it expounds. There is no point in
claiming it supports the local supply chain if it pays its suppliers late, or that
it believes in customer transparency if it plays tricks with pricing extras on
its website, or that it is striving to reduce its environmental footprint when
it is really just ensuring it does not exceed legal limits and is not fi ned. It is
worth verifying these things and telling stakeholders the results.
4. Report Stakeholder Feedback Openly

Some businesses are leading the way in not just listening to stakeholders
but publishing the dialogue. This fits well with continuously updated web
reporting and shows a serious intent in dealing with comments and chal-
lenges to integrity and ethics. It does though require a different mindset
from the orthodox one of “managed” external communications. But then
we have seen how little attention people pay to that.
5. End the Avalanche of Meaningless Numbers

Reporting standards and initiatives have created a mystique about CSR
data which is undeserved. Data needs to be of interest and meaningful to
one stakeholder or another to justify the sweat of collection and publica-
tion. Applying this test will cut down the volume we get but should ensure
that it is information rather than numbers.
6. Be Modest
It is better to be realistic about ethical claims than to confuse long-term
aspiration for current reality. If the company has started on something
which is work in progress, it is a mistake to present it as a tried and tested
value. Many a company is still hurting from getting this wrong in the dis-
tant past. Every company should make a point of asking itself the question
posed earlier regarding whether their sincerity is credible. If it concludes
that disbelief really is a given, then it is an important conclusion to reach,
so that the whole CSR and communications charabanc can pack up its kit
and move off.
11 Sustainable Special Economic Zones
A Call to Action
Richard Broyd, Jeff Grogan, Alexandra
Mandelbaum, Alejandro Gutierrez and
Debra Lam
Broyd, Grogan, Mandelbaum, Gutierrez and Lam
EXECUTIVE SUMMARY
The World Bank has defi ned 2301 special economic zones (SEZs) in 119
countries, which account for approximately US $200 billion in gross
exports per year. The current economic and environmental crises present
a unique window of opportunity to highlight a new development model
which focuses on efforts to simultaneously achieve economic and envi-
ronmental sustainability. Such a strategy can be highly differentiating and
enhance the SEZs’ chance for longer-term success.
To achieve economic sustainability an SEZ should, through specializa-
tion and cluster-based economic strategy, support regional efforts to boost
entrepreneurialism, innovation and productivity. To achieve environmental
sustainability, an SEZ must work to reduce its own ecological footprint and
that of its supply chains.
There are a number of steps that an SEZ can take to pursue the transfor-
mation toward economic and environmental sustainability. These include:
• Conduct an economic and environmental strategic audit. An SEZ

should assess its assets, capabilities, and challenges across four key
impact areas: governance and policy, economic competitiveness,
carbon footprint, and infrastructure and spatial planning. The SEZ
should assess the governance framework, economic performance and
the business environment of the region in which it operates, iden-
tify the key stakeholders and the composition of industry clusters,
and assess the climate for entrepreneurship and regulatory policy.
The SEZ should understand its unique role in contributing to the
competitiveness of the region. In turn, the SEZ should also identify
ways to reduce its carbon footprint by co-locating elements clustering
manufacturers and emphasizing clean, green manufacturing practices
and strong spatial planning, built around industrial ecology, circular
economy, and cyclical industry cluster concepts.
• Develop economic and environmental goals and a corresponding stra-
tegic plan. Informed by the results of the economic and environmental
Sustainable Special Economic Zones 113
strategic audit, the SEZ should develop a strategy defi ning the actions
required to create economic and environmental sustainability.
• Identify and ensure alignment among key stakeholders. To success-
fully enact change, an SEZ should leverage existing institutions and
formalize new processes as necessary to ensure cross-collaboration
among key stakeholders in an effort to create consensus and align-
ment behind the strategy.
• Monitor and report progress. Finally, SEZ leadership should identify
and monitor a set of relevant metrics, identify areas of success and
shortcomings relative to the strategic plan, and provide the appropri-
ate actions to address those shortcomings. The metrics should sup-
port and complement the governance and policy framework.
INTRODUCTION
Since the 1950s, special economic zones (SEZs) have proliferated as a way
to attract businesses and investors by promising investment incentives, and
liberal rules and regulations.
Unfortunately, the rules and regulations have rarely addressed curtailing
waste production or included incentives for companies and individuals to
consider their ecological impact. The more rules and regulations an SEZ
applies, the argument goes, the more likely it will lose business to other
less-stringent competitors. As such, a “race to the bottom” takes shape
whereby SEZs compete to have the leanest environmental standards or the
most lax enforcement and monitoring measures in place in order to attract
business and investment.
A consensus has emerged that the “old” model of “industrialize, get
dirty, get rich, clean up later” is both unwise and unnecessary. The current
economic and environmental crises present a unique window of opportu-
nity to highlight a new development model. Such a “new” model focuses
instead on efforts to simultaneously achieve economic and environmental
sustainability.2
Believing that environmental and economic goals are not mutually exclu-
sive, Arup and Monitor Group have collaborated to contribute our ideas on
how emerging economies including China, Korea and India might continue
to build their economic competitiveness while working to meet their carbon
reduction targets. There have already been some positive developments in
this direction.3
In the pages that follow, we describe how sustainable special economic
zones (SSEZs) can serve as a vehicle to do this. We define SSEZs as spe-
cial economic zones which, through their composition and operational
practices, not only build the competitiveness of the region in which they
reside but also test and demonstrate environmentally sustainable infra-
structure and practices which can then be rolled out to other SEZs, and
other regions. For example, in China, we see SEEZs as one opportunity
114 Broyd, Grogan, Mandelbaum, Gutierrez and Lam
Figure 11.1 Distribution of private sector and public sector zones in developing
and transition economies.
Note: zones exclude single factory programs; Countries on the map are indicative
and not exhaustive.
Source: Special Economic Zones Performance, Lessons Learned, and implications
for Zone Development, Foreign Investment Advisory Services, April 20081
to provide leadership on addressing the post-Kyoto carbon arrangements

and to continue their Circular Economy policies against growing economic
pressures. But there are more opportunities applicable to other places all
over the world, as the principles of economic and environmental sustain-
ability are universal.
While the ideas presented here can apply to SEZs currently being devel-
oped, our focus is on the thousands of SEZs already in place; SEZs which
now struggle to grow economically and produce substantial amounts of
carbon dioxide, air and water pollutants, and waste.
The ideas that follow are directed at SEZ administrators, government
officials, and business leaders alike. The current economic and environ-
mental challenges present important opportunities for these individuals
to explore new paths toward progress. Our intention is for these ideas to
meaningfully contribute to current thinking on economic and environmen-
tal sustainability, and we hope that the described way forward guides these
leaders and decision makers to successfully implement the ideas.
THE CASE FOR ECONOMIC AND

ENVIRONMENTAL SUSTAINABILITY
An economic goal of any nation or region is a high and rising standard

of living. This depends upon creating a business environment that fosters
entrepreneurialism, innovation and rising productivity. Strong, compet-
itive clusters of industry are an important component of this business
environment.4,5
Being economically sustainable means that a region has created a busi-
ness environment which not only supports a number of competitive clusters
in the region but also provides the opportunity for new clusters to emerge,
grow and flourish.
Environmental sustainability refers to taking steps to: lower the region’s
carbon footprint; efficiently produce and consume energy; adequately man-
age waste; install energy-efficient infrastructure; improve spatial planning
and design to emphasize mixed land use patterns, residential and employ-
ment density; and provide accessible and efficient public transport, quality
open spaces that enhance biodiversity and a circular economy for material
resource flows.
Regretfully, the history of economic growth parallels the history of
environmental decline. Economic growth has typically occurred in dev-
astatingly direct proportion to increased energy consumption, production
waste, carbon emissions, and other actions harmful to the environment.
Many who focus on environmental sustainability believe that it cannot
be coupled with any type of fast-paced economic growth. In some of the
world’s fastest growing economies such as China, India, Brazil and Rus-
sia, economic expansion has come largely with the price of environmental
degradation.
Other nations seen as at the forefront of environmental sustainability
such as Finland, Norway, and Sweden have well-developed economies and
are now seen as able to “afford” environmentally sustainable development
efforts, though environmental damage was incurred at an earlier stage of
their industrialization history.
As climate change becomes a defi ning issue of the 21st century, cap-
turing the public and media’s attention, prompting wide-ranging political
discussion on an improved international climate action plan, and driving
new business strategies, the concept of environment and economic mutual
exclusivity is being challenged. Such plans and strategies recognize that the
growing inefficiencies and waste generation results not only in environmen-
tal degradation, but also diminished economic competitiveness. By moving
to more environmentally sustainable economic growth, a virtuous cycle
forms where people, even in developing economies, begin to demand envi-
ronmental sustainability. Environmental sustainability becomes an integral
part of economic sustainability.
SEZS AS DEMONSTRATION ZONES

FOR SUSTAINABLE DEVELOPMENT
Special economic zones afford a unique opportunity to demonstrate how

economic and environmental sustainability can work in tandem. Today,
most SEZs have had difficulty differentiating themselves from one another.
However, a strategy built on both economic and environmental sustain-
ability can be highly differentiating and can enhance the SEZs chance for
longer-term success. There are examples of SEZs that have set targets for
environmental sustainability, in China, India and the Middle East.
As the region enhances its economic competitiveness, it will have a grow-
ing cadre of people focused on environmental sustainability. SEZ stake-
holders can lead the way and collaborate to improve the environmental
impact of SEZs, while enhancing and marketing their economic success.6
SEZs have formed for a variety of reasons. Some have been formed as
“pressure valves” to avoid more difficult structural reform in the immedi-
ate term or, as a catalyst for reform, allowing the nation to pilot and test
new programs and approaches before implementing them nationally. In
other regions SEZs have been created to attract investment and stimulate
economic growth.
Many SEZs have traditionally competed on price and tax rebates in
order to attract businesses and workers. Many have failed to focus on the
local strengths of a region and have failed to create the conditions upon
which they can successfully compete. Their economic strategies have been
neither differentiated nor value-driven. Focused on manufacturing and
industrial sectors, many have failed to attract knowledge-based industries,
the technological know-how and the talent necessary to become a center
of innovation. Many SEZs have failed to attract foreign investors, pro-
vide meaningful levels of employment, or support cross-border trade and
knowledge transfer efforts. These failures have led these SEZs to consider
ways to be “de-notified” from SEZ status so that developers might pursue
other uses of the real estate.7, 8
Environmentally, SEZs conditions have typically been dismal. Compa-
nies and industries within SEZs have been frequently governed by liberal
environmental regulations that neither curtail waste production nor incen-
tivize companies and individuals to consider their ecological impact. SEZs
believe that if they regulate too much, they will lose investment to other
less stringently regulated competitors. For industrial companies requir-
ing large physical footprints and producing substantial amounts of waste,
strict environmental regulations can, at least in the short term, be the dif-
ference between profits and losses. SEZs have competed to have the lowest
environmental standards or most lax enforcement and monitoring in order
to attract the most business and investment.9, 10
Today, the World Bank has defi ned 2301 SEZs in 119 countries, which
account for approximately US $200 billion in gross exports per year. China
specifically accounts for around 19% of these zones.
While there have been some success stories as well, varied levels of suc-
cess among SEZs point to the need for a new model for thinking about
long-term economic and environmental sustainability. SEZs particular
governance and policy status, distinct from the rest of the region or nation,
allows them to serve as laboratories for new legal structures which can be
carved out of national legislation for experimental and demonstration pur-
poses. The SEZ, therefore, is an ideal focal point for proving the advantages
of a new model at a time when the traditional economic competitiveness
metrics or environmental merits alone are insufficient, and the pressure to
form a post-Kyoto climate change agreement is strong.
SUSTAINABLE SPECIAL ECONOMIC ZONES
The past failings of SEZs do not have to be their future reality. Gov-
ernments and industry participants are interested in sensible solutions.
Operators realize that effective management of the environment is a key
attraction for potential investors. As such, SEZs that focus on developing
their economies and nurturing their environments can position themselves
for long-term growth.
To achieve economic sustainability, SEZs must create a business envi-
ronment which supports cluster-based economic strategy and facilitates
entrepreneurialism, innovation and increasing levels of productivity. While
there may be up-front costs integrating environmental and economic strat-
egy, failing to couple an economically competitive strategy with environ-
mental consciousness will ultimately be far costlier.11 In fact, lowering an
SEZs environmental impact can also have real economic benefits such as
reduced energy costs, lower waste, lower healthcare costs, an improved
quality of life, increased innovation and higher productivity.
ACTIONS TO BECOME A SUSTAINABLE

SPECIAL ECONOMIC ZONE
There are a number of steps that an SEZ can take to pursue the transforma-
tion towards economic and environmental sustainability. These include:
• Conduct an economic and environmental strategic audit. An SEZ

should assess its assets, capabilities, and challenges across four key
impact areas: governance and policy, economic competitiveness, car-
bon footprint, and infrastructure and spatial planning.
• Develop economic and environmental goals and a corresponding
strategic plan. Informed by the results of the economic and environ-
mental strategic audit, the SEZ should prepare a focused mission state-
ment and defi ne the actions required for economic and environmental
sustainability. This strategic plan should be binding and linked to
economic competitiveness metrics and carbon reduction targets, and
it should connect to new Clean Development Mechanisms (CDMs)
and other carbon policies.
• Ensure alignment among key stakeholders. To successfully enact
change, it is important to leverage existing institutions and formalize
new processes and institutions as necessary to ensure cross-collabora-
tion among stakeholders and to create consensus behind the strategy
and alignment in economic competitiveness and environmental sus-
tainability efforts in support of the strategy.
• Monitor and report progress. Finally, SEZ leadership should identify
and monitor a set of relevant metrics, identify areas of success and
shortcomings relative to the strategic plan, and provide the appropri-
ate actions to address those shortcomings. The metrics should sup-
port and complement the governance and policy framework.
A description of each of these steps is provided below:
Conduct an Economic and Environmental Strategic Audit

The strategic audit enables an SEZ to “take stock” of where it stands today
relative to four impact areas: governance and policy, economic competitive-
ness, carbon footprint, and infrastructure and spatial planning.
Governance and Policy

Governance, as defi ned by the United Nations, refers to “the process by
which decisions are implemented (or not implemented).” This defi nition
remains purposefully broad to illustrate that governments are one of many
actors that can be involved in the process of governance. Other actors may
include fi nancial institutions, businesses, investors, and community lead-
ers, among others.12
Good governance frequently shares a set of core values13:
• Accountability—government must be explicit about what it is incen-

tivizing (via subsidies) and discouraging (via taxes and fi nes) and
remain accountable to those who will be affected by its decisions or
actions;
• Responsiveness—institutions and processes try to serve all stakehold-
ers within a reasonable timeframe; and
• Effectiveness and efficiency—government produces results that meet
the needs of society while making sustainable use of resources.
Good governance can drive foreign direct investment, encourage effi-

ciencies in economic activity, support and extend rule of law, and estab-
lish the foundation for an equitable and inclusive society that seeks to
avoid confl icts peacefully, among other things. Policies, in turn, support
and implement governance doctrines. In today’s SEZs, policies frequently
focus on short-term economic drivers to attract businesses, including tax
breaks and incentives. Instead, policies should produce long-term gains and
encourage high levels of stakeholder engagement.
The governance and policy audit should make explicit the tax and other
business incentives and regulatory policies in place to recruit and retain
business investment in the SEZ. It should also map the businesses and
fi nancial institutions, which comprise the SEZs stakeholder group and the
degree to which the SEZ is effectively and efficiently meeting stakeholder
needs.
Economic Sustainability
The productivity and innovative capacity of a regional economy benefit
from macroeconomic conditions such as sound fi scal policy and effective
political decision-making processes. However, these are increasingly pre-
conditions, not sources of competitive advantage. Prosperity in a region
is actually created by the microeconomic foundations of competitive-
ness rooted in the sophistication with which individuals, fi rms, indus-
tries and industry clusters based there compete. This is what gives rise to
productivity. The sophistication with which fi rms compete rests heavily
on the quality of the regional business environment in which they oper-
ate.14 Achieving economic sustainability begins with an assessment of a
region’s economic performance and competitive prospects. Analytical
steps include the following:
• Benchmark the economic performance and innovation output of the

region. An audit of an SEZ’s economic sustainability begins with a
benchmarking of the region’s economic performance and innovation
output. Key indicators include statistics related to employment (job
creation and unemployment rates), population, wages (wage level and
wage growth), establishment formation, and innovation output (pat-
ents, fast growth fi rms), among others. These statistics are then com-
pared against national and regional averages as well as against the
region’s key competitors. This typically includes regions with similar
geographic or demographic composition, as well as high-performing
regions whose success can be further studied and, perhaps, replicated.
• Understand the economic composition of the region. A second step in
assessing economic sustainability is understanding the composition of
industry in the region in which the SEZ resides, and the role the SEZ
plays in contributing, or not, to the region’s competitiveness. In our
experience, the most successful regions are specialized. For example,
in the United States, New Jersey is very strong in pharmaceuticals,
and in Europe, London is strong in fi nancial services.
Economic composition describes the unique set of companies and clus-

ters in a region. The objective of this analysis is to assess the relative size,
growth, and economic impact of various clusters of an economy. In addi-
tion, the economic composition analysis helps identify relative strengths
and regional assets within the SEZ and the region that may provide oppor-
tunities to drive economic growth.
Figure 11.2 shows the composition of a selected region. The size of
employment in a given cluster is represented by the size of the bubble. The
share each cluster contributes to the region’s employment is represented by
the bubble’s position on the vertical axis. The change in share of employ-
ment is represented by position on the horizontal axis.
Clusters above the horizontal dotted line have more employment than
expected for the region. Clusters to the right of the vertical line are gaining
employment share in the region relative to the nation. The clusters in or
close to the upper right quadrant are generally the most competitive clusters
in the region.
• Assess the business environment. The third step in our economic

sustainability audit is an analysis of the quality of the business envi-
ronment in which the SEZ resides and how the SEZ contributes or
detracts from this business environment.
To understand the specific strengths and challenges of a given busi-

ness environment, in-depth interviews with local executives should be
conducted. In addition to interviews, a cross-regional survey can be very
helpful for benchmarking a region’s assets. Monitor uses our Executive
Insight Survey, which asks a standard set of questions about the business
Figure 11.2 The composition of a region’s traded industry clusters.

environment, and identifies opportunities to upgrade the business environ-
ment by promoting regional strengths and addressing the most pressing
issues for local businesses. Topics such as the extent to which there are
specialized pools of human resources, technology and infrastructure and
capital to support the needs of particular industries; the level of sophisti-
cation of customers in a region; the rules, incentives and pressures which
govern competition and their influence on productivity; and the presence
and strength of related and supporting industries in a region are addressed
in this assessment. We follow this survey with in-depth interviews with
local executives and government leaders to identify the specific strengths
and challenges of the business environment and to identify the most press-
ing issues and opportunities.
• Benchmark the competitiveness of key clusters. In addition to under-

standing the region as a whole, it is important to examine a select
number of the region’s industry clusters in more depth. Such an analy-
sis provides a nuanced understanding of how strengths and challenges
play-out in different parts of the regional economy. Output from the
analysis will not only help the specific cluster in question, but will also
inform the overarching regional strategy and how the SEZ might best
contribute.
Monitor’s approach to cluster prioritization follows a screening process

designed to select important regional clusters for further analysis. Filters
are used to help identify clusters that offer the optimal mix of economic
attractiveness and strategic feasibility. This screening process may include
economic performance, innovation and composition metrics as well as
other measures of economic impact such as size of addressable market,
sociopolitical environment, and competitive position.
We next benchmark the performance of the selected clusters. Through
targeted interviews, qualitative research and a focused survey of cluster
participants, we map the composition of the cluster and assess the local
inputs, competitors, customers and other clusters that impact the cluster’s
ability to develop, grow and sustain businesses in the given region.
Every cluster is made up of several subclusters, which consist of closely
related industries. Subclusters serve to support the overall cluster at vari-
ous points in its value chain. Figure 11.3 analyzes the flow of products,
services, information and ideas through the plastics cluster and provides a
broader perspective of the cluster’s particular strengths and strengths and
weaknesses.
Often, a region that is strong in a cluster is really strong in just a few of its
component subclusters. Data-driven cluster maps allow for the identifica-
tion of relatively stronger and relatively weaker subclusters within clusters
in most parts of the world. The stronger the subcluster, the darker the blue
is shaded. In general, regions and companies should strive to build broad
Plastics subcluster.
Figure 11.3
and deep clusters and strength across the numerous subclusters within the
cluster. Relatively weaker subclusters indicate areas that a region’s market-
ing and recruiting efforts ought to target.
• Assess the environment for entrepreneurship. Few factors have as great

an impact in producing innovation, creating jobs, or generally con-
tributing to a dynamic and competitive economy than entrepreneur-
ship. Successful entrepreneurship arises from many factors, including
financing, innovative ideas, management skills, and the right set of
social, economic, and personal motivations. In any given environment,
some of these factors will be available, while others will be lacking. The
key challenge for policymakers wishing to promote entrepreneurship
is to find which ones are unavailable and how they can be supplied.
This, of course, is in itself a complex, entrepreneurial endeavor requir-
ing imagination, will, and negotiation among competing interests. It
requires, above all, the ability to identify the binding constraints in the
environment so as to develop a feasible plan of action.
Any effective strategy for the promotion of entrepreneurship must begin

with an assessment of the strengths and weaknesses in the environment. Per-
haps there is a financing gap for start-ups or approval and registration pro-
cesses are onerous and opaque. Perhaps entrepreneurial skills and values are
not being fostered, or entrepreneurs are deprived of advice due to the absence
of networks, business associations, and professional service firms willing to
work with new companies. There is no way to know in the abstract which
measures are most likely to work for a particular environment.15
• Economic performance and sustainability of the SEZ itself. With

the analysis of the region’s economic performance, assessment of the
business environment and cluster-specific analysis of the composition
of industry clusters complete, we can then turn to a similar analysis
of the SEZ. Such an analysis would include an audit of the SEZ’s
assets and resources, the composition of industry and industry clus-
ters within the SEZ, and the relative competitiveness of cluster sub-
components. This analysis would enable us to identify how the SEZ
might best contribute to the economic sustainability of the region.
Carbon Footprint
Carbon footprint is an accurate indicator of an area’s environmental sus-
tainability. Undertaking a carbon footprint analysis of modern SEZs is
likely to highlight the consequences of continual economic growth with
little regard to biophysical limits.16 To prove our theories, the team took an
example SEZ in China, and estimated the carbon footprint to be 9.3 tonnes
per person. A breakdown of the results can be seen in Figure 11.4.
Figure 11.4 Carbon footprint of example Chinese SEZ.
While this is an example SEZ, it is a close reflection of other SEZs around

the world, especially in China, and serves our exercise aim of accessing and
improving SEZs’ economic and environmental sustainability. The footprint
is dominated by the energy use in homes. Electricity production makes up
60% of the total carbon footprint of houses, again relating to carbon inef-
ficient electricity production. As a comparison of carbon footprint, Figure
11.5 gives an indication of the footprint of countries across the world, and
how an example SEZ compares.
Figure 11.5 Comparative analysis of countries (per capita)

Certainly the comparison does not wholly reflect the different uses and
economic activity, and therefore does not defi ne carbon within an SEZ ver-
sus the country at large, but it does indicate a baseline scale. The footprint
of the residents from the sample SEZ is three times higher than the average
person in China, though three times lower than the U.S. resident’s footprint.
While there is some disagreement on the sustainable carbon footprint, most
believe it to be 2.5 tonnes per person.17 We examined the changing impact
over time, to assess whether the SEZ is getting closer or further away from
this goal. The trajectory is not encouraging. Since 2003, the carbon foot-
print of our sample SEZ has grown by 35%, with an average growth rate of
7%/year. To achieve a sustainable carbon footprint by 2050, there needs to
be a reduction of 2%/year, mainly through a supply mix of likely renewable
and decarbonized energy, accurate estimates of increased grid demands,
and supporting infrastructure.
Infrastructure and Spatial Planning

The fi nal impact area that needs to be audited is the infrastructure and spa-
tial planning. This begins with a comprehensive mapping of the building
stock, resource flows—transportation, land use and open space, and infra-
structure—of the existing site. Using biomimicry principles, the design
looks at nature as a model of inspiration; measure for ecological standards
to serve as the lasting criteria; and mentor to learn and adapt from.18 With
sufficient understanding and interpretation of the local conditions—eco-
nomic, social and ecological—and the needs and aspirations of current and
future residents, the retrofit master plan for the SSEZ can be grounded on
the existing site context.
For transport and access, the current and future transport modes will
be detailed, including the carbon shares of each type, fuel options, and
transport networks. Transport maps should detail the connections within
the SEZs, but also to its regional areas and major cities and waterways.
Communications and educational information will be analyzed to see how
the public is informed, opined and engaged in their daily and leisure com-
mutes. Goods and service routes and deliveries will also be incorporated
into the analysis.
Land use and open space focuses on reducing the demand for motor-
ized travel by enhancing the degree of mix of uses compared to the current
mix. Land uses evolve over time, making flexible and temporary land uses
important. Land use will incorporate transport, energy, waste and water
plans. Studies will be done on the orientation of the prevailing winds, soil
conditions, biodiversity, included protected habitats, food production and
pollution levels of the different areas. The overall emphasis for the land
use and open space will be for a mixed use, high density, biodiverse and
integrated community.
Infrastructure addresses resource and waste management and energy
and building fabric standards, as well as providing for sustainable energy,
water, transport, waste and environmental systems that underpin the sus-
tainable future of the SSEZ and their integration into the wider area. This
involves understanding the current consumption levels of waste, water, and
energy and the corresponding strategies in dealing with or supplying them
to the community. As it is an existing site, the operation, rather than the
construction period will be studied.
Equally important will be understanding the existing and future policies
and governance operations of the site’s infrastructure. Who operates and
pays for the waste management? How much does energy cost? What are
the government’s plans and targets in renewable energy, and does the area
have a natural advantage toward a particular type? How do enterprises
and consumers use and monitor their water and what kind of education
and communications strategy is in place? As each site is different, having
this type of information will be critical in producing the specific strategies
for the area. Overall though, the principles of minimizing the consumption
(or in waste, the production), and supplying it with alternative sources or
expanding further uses will be emphasized.
In understanding the infrastructure and spatial planning, it is important
to realize the impact on each of the areas—building stock, transport and
access; land use and open space; and infrastructure—have on each other,
and how their strategies can be leveraged. The waste management can
include waste to energy generation, while creating more sustainable trans-
port modes in the land use plans, could lessen the overall infrastructure
needs. Analyzing the SEZ’s existing infrastructure and spatial features and
plans can produce the specialized strategies to transform it into it an SSEZ.
Develop Economic and Environmental Goals

and a Corresponding Strategic Plan
Informed by the results of the economic and environmental strategic audit,
the SEZ should prepare a set of goals and a strategic plan. The goals and
strategic plan detail the specifics of how the SEZ will address the gaps identi-
fied in the audit. The process of defining the goals and strategic plan should
be viewed as an opportunity to inject into the SEZ’s policies new aspirations
that will set the stage for long-term sustainability and competitiveness.
An SEZ’s goal should be stated simply and at a high level. The goal of
an SEZ seeking to become an SSEZ must include the two key components
of sustainability: economic competitiveness and environmental impact. By
focusing the goal on the end-result, rather than the process, it can serve as a
mission statement to galvanize public support for the SEZ’s new direction.
The goal must then be supported with a detailed and action-oriented
strategic plan. The strategic plan focuses on the gaps identified from the
economic and environmental strategic audit, as well as any additional aspi-
rations that the SEZ wishes to incorporate.
To develop a strategic plan, an SEZ should follow several key steps.
These include:
• Prioritizing assets and capabilities it needs to grow or acquire as
revealed in the strategic audit. Establishing priorities creates a
sequencing of resource investment activity.
• Engaging expert government, economic and environmental leaders
who can bring prior experience to bear.
• Considering relevant best practices from other zones, businesses or
states in related circumstances.
• Defi ning specific action items that will address prioritized areas for
investment.
Additionally, it is imperative that each of the strategic audit’s four impact

areas has its own action plans developed during the course of the strategic
audit.
An SSEZ will adopt environmentally sustainable practices, and it is
likely that there will be opportunities to develop clean technology activities
(particularly services) that fi ll gaps in existing clusters as the SEZ moves
toward environmental sustainability. The high environmental standards in
SSEZs will also stimulate development of these activities which may, over
time, lead to competitive clean technology businesses. However, an SSEZ
does not mean an SEZ focused on “clean tech” activities, and is even more
unlikely that a clean tech cluster per se will emerge purely on the basis of an
SEZ transforming itself into an SSEZ. The team remains skeptical that all
the announced stand-alone clean tech clusters are based on differentiated
and economically sustainable competitive strategies.
Governance and Policy

Having mapped existing policies, subsequent policies should be primarily
focused on longer-term economic and environmental sustainability. This
requires developing new policies, refi ning existing policies—or both—to
focus on these goals. Policies are likely to encourage certain actions that
may drive long-term investments in the development of human assets, con-
centration on innovation and idea or technology transfer, and promotion
of a higher quality of life, all while recognizing the need to balance a wide
portfolio of policy tools and directives.
Each SEZ must identify its own set of appropriate policies that allow
it to drive toward the goal of becoming more economically competitive
and environmentally sustainable. These policies—supported, enforced and
refi ned through governance—create the foundation on which an SEZ can
begin the process of becoming an SSEZ.
Economic Sustainability
A competitive differentiation strategy is necessary for sustainable growth;
an SEZ is merely a mechanism. SEZs must be designed as mechanisms to
address issues in the business environment that can support and foster the
development of clusters which have been identified as part of competitive
strategy. Indeed, an SEZ will only address certain aspects of the broader
business environment that will be identified as necessary to support the
clusters. Where SEZs have been applied as a panacea in and of themselves,
it will be luck if they “work.” Other important dimensions of the business
environment that are beyond the scope of this paper, but critical, include
availability of capital and trade policy.
One of the most important ways in which an SEZ can enhance its sustain-
ability is by targeting subcluster growth. No cluster is ever fully complete.
Even a very strong regional cluster will have some areas of weakness; it will
have some subclusters of buyers, suppliers or other related industries that do
not have much of a presence in the region. It is important to find these gaps
because they offer very good opportunities for business recruitment.
There are a number of reasons for this:
• Highly attractive business environment—outside companies that

could come into a region and fill in these weaker subclusters will tend
to view the business environment as highly attractive. The well-devel-
oped cluster indicates that within the region there are unique attri-
butes that support that cluster’s business (these attributes can only be
identified through follow-on analysis). The fact that many fi rms suc-
ceed in the region over time creates an inherently attractive business
environment for companies in the targeted subcluster;
• Few head-to-head competitors—were the company to come to the
region, it would face few head-to-head local competitors. Because the
subcluster is weak in the region, there would not be many other simi-
lar fi rms in the area;
• Likelihood of success—because the company would be coming into a
well-established cluster, while at the same time facing few local com-
petitors, it would be more likely to succeed. Unlike a company lured
in by incentives, this company would come due to existing assets and
sales opportunities; and
• Strengthening cluster overall—-because the company would be fi lling
in a gap in the cluster, it would help other companies in the region be
more competitive, improving efficiency in goods and services access
with the gap fi lled.
In short, a region can offer companies in these weak subclusters a com-

pelling, highly differentiated value proposition—everything they need to
compete, with little direct competition in the area. Using this type of analy-
sis, SEZ administrators will be better prepared planning which industries
and clusters will need workers; whether high-end activities will remain via-
ble; whether manufacturing will remain competitive in the region; which
potential and emerging clusters in the region can be successfully developed;
and what factors will differentiate the region. Such a fact-based strategy
also helps administrators and regional investors create broad-based consen-
sus and action among the relevant leaders and institutions in the business,
government, civic and education spheres.
In addition to enhancing the economic competitiveness of a region, by
carrying out a meticulous subcluster analysis and working to fi ll gaps, the
SEZ will be able to reduce its ecological footprint, reducing overall resource
consumption. By co-locating elements within a supply chain, the SEZ will
be able to improve product production efficiency while lowering the carbon
emissions associated with transport and shipping.
Carbon Footprint
If changes are not made in terms of consumption patterns, energy provision
and industrial efficiency, then the city is on a trajectory to have a carbon
footprint of 20 tonnes per person by 2030, similar to the current U.S. aver-
age footprint. The “Low Carbon Trajectory” would mean the footprint
would be 2.5 tonnes by 2030. Every year that the footprint rises, it becomes
the more difficult to achieve significant reduction and change.
As an initial assessment of strategies below demonstrates, the effectiveness
of a range of policies to reduce the carbon footprint can vary substantially.
With the suggested changes, the footprint could be reduced from 9 to 5 tonnes.
The key intervention with the greatest reduction is renewable energy,
achieving a reduction of 1.9 tonnes per capita.19 While efficiency changes
are continually occurring within industry, the “Efficient Industry” inter-
vention represents an improvement beyond the standard change of effi-
ciency that is currently about 1% a year. It is an immediate 20% shift in
Figure 11.6 CO2 emissions reduction from 2007 baseline (cumulative).

the average footprint per unit of economic output generated by industries
within the city. 20
A mobility reduction could result in a smaller impact. Finally, greener
products include a shift in the consumer basket toward lower impact prod-
ucts. This includes all areas of consumption such as food, clothing, and
electrical equipment. Consumers could be incentivized, perhaps through a
VAT discount to purchase low-carbon and energy goods—so that manu-
facturers of goods are motivated to redesign their products to be more com-
petitive. Consumption will also be reflected through a true, non-subsidized
energy price that progressively has a carbon-impact price included. A simi-
lar 20% change is anticipated.
While the recommended 2.5 tonnes/capita may be difficult to reach and
different for each situation, there are strategies, especially in the spatial
and infrastructure sectors, to reduce carbon footprint. However, it should
also include government and household behavior, and subsequent rebound
effects of reduced energy use. In the current institutional setting, a low-
carbon lifestyle is not sufficiently rewarded. If the pursuit of a SEZ is to
ensure unlimited economic growth without any acknowledgment of bio-
physical limits, then it simply cannot be called “sustainable.” To become an
SSEZ, SEZs will need to promote sustained growth with a low ecological
footprint, with reduction strategies and the carbon footprint analysis.
Infrastructure and Spatial Planning

Based on the initial audit, the plan for infrastructure and spatial planning
would include several interrelated strategies.
Figure 11.7 Potential reduction of individual interventions.

Generally, in most developing countries, walking, bicycling, and public
transport take up the majority share, but as they become more prosperous, car
ownership and usage rises. In understanding the transport plans, as income
improves, the key is to maintain high levels of sustainable, low-emissions
transport, considering increased vehicle movements and future developments,
and prohibiting high-polluting vehicles. A carbon footprint reduction can best
be achieved through the formation of a Low Emission Strategy (LES).21 LES
provides a package of measures to help mitigate the transport impacts of a
development. Sample LES recommendations for SEZs include:
• Create an efficient, integrated external transport system to coordinate

the development of railway, highway and canal transport.
• Establish a connecting transport system that includes light rail, bus,
bicycle, etc., emphasizing car use as the last option.
• Coordinate the transport system in the industrial park and related
urban areas, resulting in the SEZ becoming an organic part of the
integrated transport system.
• Fuel the public transport system and private vehicles with renewables,
including electric cars and motorcycles.
• Combine short- and long-term programs to help the transport system
face challenges from development.
• Develop a strong education and communications platform to cham-
pion LES so that residents and visitors alike are knowledgable and
supportive of the transport system 22.
Equally important is the question of land use and open space. In looking
to enhance their sustainability, SEZs should cluster manufacturers using
industrial symbiosis principles together with integrated supply chain man-
agement, emphasizing clean, green manufacturing practices. The resource
cycle will direct location choices. Green infrastructure should integrate
with the physical development of the whole zone. A large percentage of the
total SSEZ area should be left as multifunctional countryside, for the pur-
pose of improving health and well-being. The neighborhood design should
link homes to business, commercial and community functions, connecting
people to the places they want to go to.
Additionally, hard paved areas can be made porous to help refi ll aquifers
and to slow down run-off. Improved water capture and gray water man-
agement in urban areas could provide reliable water supplies for irrigating
farmland during drought conditions and help to maintain food productiv-
ity in climate change induced swings in climate. Water could be stored in
lakes in urban parks as has been done in Curitiba, or could be cleaned using
natural reed bed systems as has been done in Freiburg. Fitting water cap-
ture and grey water recycling systems into industries and homes can save
household potable water consumption, reduce storm run-off, and curtail
energy consumption.
As a fi nal component to land use and open space, food security and
CO2 contribution issues can also be addressed within the built environ-
ment. A sustainable food distribution system based on national networks
of regional, local and urban farms can lessen transport costs, the need for
chemical fertilizers, all while strengthening rural-urban ties. Buildings can
also produce food with artificial light, hydroponics and nutrient recycling
from city waste. Access to local, healthy, seasonal produce can increase
within the SSEZ. Finally, the improving building thermal and visualisation
standards should also be taken advocated to maximize thermal comfort
using natural conditions and lessen energy intensity.
An improvement to resource and waste management is also achievable
by considering each stage of the development life cycle (see Figure 11.8),
from the design to the end-of-life of buildings. The life cycle is split into five
distinct phases (design, construction, operation, maintenance, and decon-
struction) each occurring sequentially. By considering waste generation at
Figure 11.8 The development life cycle and resource and waste management.
each stage, SEZs will be better prepared to incorporate technical solutions
such as better logistics for materials supply, designing out waste and better
site practice to minimise wastage.
A site waste management plan can manage waste segregation, con-
tain SMART23 objectives (e.g., recycled content, % recover of waste), and
include a material procurement, education and communications compo-
nents. Additionally, a construction logistics plan should include material
sourcing and waste removal.
With a high percentage of organic waste, a sustainable strategy would
source separate organic waste from recyclables and residuals (three
streams). The organic waste would then be combined with sewage sludge
from the wastewater treatment plant and treated in an anaerobic digestion
(AD) facility to produce biogas to generate electricity and heat. The dry
recyclables would be sent off site for recycling, while the residual waste
would be sent for thermal treatment at a gasification facility to produce a
synthetic gas to generate electricity and heat. An example SEZ’s domestic
organic waste found that an anaerobic digestion facility could generate the
following:
• 9,000,000 m³ of biogas
• 11.5 million kWh/year of electricity
• 18million kWh/year of heat
• 1.4 MW/year of power
• 26,000 tonnes of digestate for fertilizer
• 190,000 m²/yr of power (heat and electricity)24
With strong spatial planning, built around industrial ecology, circular

economy, and cyclical industry cluster concepts, the waste produced in one
industry can be used as inputs for another industry. This exchange network
is facilitated by the proximity of the different stakeholders. The integration of
the residential community should also be encouraged. The opportunities for
synergies within the zone can cover a large range of resources from byproduct
material exchange to shared water or waste treatment infrastructure. These
synergies are implemented because they enable costs savings for the partici-
pants in addition to reducing their environmental impact. Figure 11.9 illus-
trates different strategies that could be used to develop a circular economy.
Finally, energy and building fabric standards must be taken into account.
SEZs can be ahead of the curve by enacting decarbonizing strategies. They
should identify the scale of energy reductions achievable and seek to match
the resulting energy needs to locally available renewable energy sources.
Priority should be given to early investment to reducing energy needs,
sourcing from renewable sources and reducing overall costs. New decar-
bonized communities will have less car usage, energy-efficient buildings,
and local renewable energy generation.
Together, the strategies for the four impact areas will help transform
the SEZ into an SSEZ. Current SEZs address each other separately, but by
Figure 11.9 Illustration of resource exchange network.
integrating them around economic and environmental sustainability, the

chances of reaching the environmental and economic goals, and success-
fully following the strategic plan greatly increases.
3. Ensure Alignment among Key Stakeholders

Once the plan is in place, the real transformation begins. Transforming an
SEZ into an SSEZ will require a shift in policies and actions that extend
across all sectors of the economy. To carry this out successfully, it is impor-
tant that the institutions and individuals in charge of defi ning and imple-
menting new policy and changed behaviors act under a shared consensus
or agreement. Existing institutions can be leveraged, with relevant stake-
holders coming together as a result of a shared sense of urgency to drive to
decisive action.
Through its extant governing structure, an SEZ already has institutions
and processes in place to support the necessary discussions that will lead
to alignment among stakeholders. This may include processes that ensure
alignment between local, regional, and national governments. Even with
certain alignment processes in place, an SEZ may fi nd it necessary to estab-
lish new institutions or processes in order to address components of the
strategic plan that may never have been considered in the past.
4. Monitor and Report Progress

Mechanisms to monitor and report progress are necessary to measure
success and identify areas that require new or reformed policies. By high-
lighting areas of success, progress reports provide SEZ administrators an
opportunity to learn best practices that may be applicable to other elements
of the strategic plan. Areas of lagging development provide data that equip
an administrator to draft new policies or defi ne necessary adjustments to
resource investments.
An SEZ must monitor its progress by defining metrics for each of the ele-
ments of its strategic plan. These metrics should consist of both qualitative
and quantitative measurements; a shift toward solely one or the other risks
the loss of relevant details that can inform future policies.
By following the four steps outlined against each of the four impact
areas, an SEZ can begin taking the tangible measures toward sustain-
ability and becoming an SSEZ. The SEZ customizes defi nitions of the
impact areas and then moves from aspirations to action items through
the four steps. This shift from theoretical to actionable sets the stage for
long-term growth prospects that can improve the well-being of the SSEZ
population.
CONCLUSION
This chapter has outlined the importance of sustainable development within

an economic zone, from both an economic and environmental standpoint.
It certainly has not and does not aim to address the fi ner details. But it is a
start of a much needed and critical discussion in an unexplored area that
has many possibilities to further economic and environmental sustainabil-
ity. Much more needs and will be done, but the process has to begin, and a
path is shown fi rst through this strategy chapter on the transformation to
become SSEZs. 25
An SEZ that seeks to attract investment, create jobs and improve its built
environment must recognize the way in which smart and efficient envi-
ronmental policies should be incorporated with an aspiration for a high
quality of life and economic competitiveness. Achieving environmental sus-
tainability cannot be seen as half-heartedly implementing policies that are
measured in onerous costs and taxes. Likewise, driving economic competi-
tiveness must be seen as linked to—rather than at odds with—environmen-
tal sustainability.
Becoming an SSEZ is truly about defi ning competitive advantages. This
can be done in the context of improving the existing legal, regulatory and
governance frameworks of current SEZs, which would mean a minimal
disruption, low additional implementation costs and swift change. Eco-
nomically, an SEZ that takes a cluster-based approach to innovate and dif-
ferentiate itself will continuously be poised to develop—thereby ensuring
continued investment and growth. Environmentally, an SEZ that seeks to
develop energy-efficient infrastructure, improve waste management tech-
niques and create a sustainable way of living will have a unique and com-
pelling story to attract investors, workers and residents alike.
Further, the potential to lower one’s carbon footprint is enormous;
imagine if this process were to take place in all of China’s SEZs—19% of
the world’s SEZs, with more than 50 million employees total26 —or the rest
of the world’s SEZs. The transformation for the world’s SEZs to become
SSEZs presents an unprecedented opportunity to economically and envi-
ronmentally improve our way of life now and for generations to come.
The world is experiencing crisis on both an economic and environmental
front. But this is also an opportunity to re-think how to best develop our
economies and nurture our environment, and SEZs are uniquely positioned
to serve as leading examples for ways that economic competitiveness can be
coupled with, rather than in opposition to, environmental consciousness. A
crisis presents many perils, but it also opens the door for opportunity. SEZ
administrators can decide to drive economic development, improve the liv-
ing standards of those within the zone and proportionally lower the impact
on the environment. SEZs have the opportunity to once again serve as dem-
onstration areas for astounding, historic success—this time by showcasing
the ability to link economic growth with environmental sustainability. It
is at this moment that SEZs can position themselves for long-term success,
and become SSEZs.
NOTES
1. Sustainable development of special economic zones in emerging markets,

Grail Research, Monitor Group, 2009.
2. This can’t last: Study ranks countries by environmental sustainability,
LiveScience, 2005.
3. Renewable energy use to be made mandatory for SEZ’s, The Financial Express,
June 2009; New-age tech to power Faridabad’s green ‘SEZ’, The Times of
India, November 2008; Regulations of the Shenzhen special economic zone
on the environmental protection of construction projects, Shanzen Munici-
pal Office of Legislative Affairs, July 2006; Special economic zones and com-
petitiveness, Asian Development Bank, November 2007; Green building to
the United Arab Emirates, the Australian Government website, March 2009;
Dubai International Academic City Phase-III becomes Middle East’s first
and largest LEED certified academic facility, Zawya, June 2009; ITT signs
MoU with GreenSpaces, Merinews, March 2008.
4. Clusters are geographically proximate groups of interconnected companies
and associated institutions in a particular field, linked by commonalities and
complementarities. Clusters are normally contained within a geographic area
where ease of communication and interaction is possible. Clusters cut across
traditional industry classifications. Clusters take various forms depending on
their sophistication, the field of activity, location and historical roots. Devel-
oped clusters, however, normally include end-product or service companies;
suppliers of specialized inputs, components, machinery and services; financial
institutions; and fi rms in related industries. Clusters also often include firms
in downstream industries; producers of complementary products; specialized
infrastructure providers; government and other institutions providing special-
ized training, education, information, research, and technical support; and
standard setting agencies. Finally, many clusters include trade associations and
other collective private sector bodies that support cluster members.
5. Clusters of innovation, regional foundations of U.S. competitiveness, Moni-
tor Group and Professor Michael E. Porter, Harvard University, 2001.
6. Special economic zones, FIAS, April 2008 SEZs are an umbrella term for
many other types of free zones, which have certain characteristics in com-
mon. These include geographically delineated area that is legally defi ned and
often physically enclosed; a single management/administration for that geo-
graphic area; eligibility for benefits among consumers and businesses physi-
cally located within the area; and separate customs area for import/export that
includes streamlined procedures and limited documentation requirements.
7. “SEZs: engine derailed?”, www.indiatogether.org, January 2009.
8. “India’s tryst with special economic zones”, www.opinionasia.org, August
2006.
9. Does trade lead to a race to the bottom in environmental standards? Another
look at the issues, Philippine Institute for Development Studies, October
2005.
10. Special economic zones, FIAS, April 2008.
11. Greening growth: How local government can build the green economy.
12. What is good governance? United Nations Economic and Social Commis-
sion for Asia and the Pacific, 2009.
13. Ibid.
14. Clusters of innovation, regional foundations of U.S. competitiveness, Moni-
tor Group, and Professor Michael E. Porter, Harvard University, 2001.
15. For further information on how to assess a region’s climate for entrepreneur-
ship, see Pathways to prosperity, Monitor Group, 2009. An electronic copy
can be obtained through www.compete.monitor.com.
16. Carbon footprint was chosen as the main indicator for environmental sus-
tainability because it is easier to quantify, compare and defi ne. It is also inter-
nationally recognized and accepted; it is the main indicator for governmental
climate change and environmental discussions; however, there are other indi-
cators that can be used.
17. Barrett, J., Paul, A., Scott, K., & Dawkins, E. (2009). Counting consump-
tion. WWF-UK.
18. Benyus, J. (1997). Biomimicry. New York: HarperCollins.
19. This intervention assumes a 100% renewable electricity supply for the city
and does not cover heat, only power.
20. Both renewable and energy-efficiency strategies are discussed in more detail
in the previous spatial and infrastructure section and need to be considered
for both costs and carbon concerns, specific to the local context.
21. The primary aim of LES is to accelerate the uptake of low emission fuels and
technologies in and around a development site. This usually takes the form
of an area where some kind of enforcement is carried out to ensure particu-
lar types of vehicles are restricted. Some UK authorities are already making
effective use of LES. LES are secured through a combination of planning
conditions and legal obligations. They may incorporate policy measures and/
or require fi nancial investments in and contributions to the delivery of low
emission transport projects and plans, including strategic monitoring and
assessment activities. LES differs from a LEZ (Low Emission Zone) which
refers to a geographic area where emissions from road transport are miti-
gated. A LEZ may be one aspect of an LES in an area.
22. Optimized real-time journey planning can transform safety and ease of
public transport use and improve service interchange. Information would
be available over hand-held devices and at kiosks within all service loca-
tions. Operators would have the advantage of having passengers guided
around breakdown points, and feedback would enable service interchange
to be improved. This service would make public transport as, if not more,
desirable as private car transport. The whole system could be powered by
solar energy including the handsets of the users.
23. Specific, Measurable, Achievable, Realistic and Time-related.
24. This assumes that most internal areas match the Chinese National Code
GB50189 energy use standard of 160 kWh/m²/yr.
25. This chapter acknowledges that there are certain topics that may need
to be further addressed before an SEZ administrator can begin to suc-
cessfully outline a customized plan to become an SSEZ. These include
SEZ-specifi c areas not discussed or analyzed in the chapter, such as pro-
duction- and consumption-based accounts, supply chain flows, product
life cycle, behavioral/cultural issues (e.g., entrenched attitudes of resi-
dents and workers) that may prevent barriers to change, unique political
situations, and specifi c subcluster analyses that reveal the drivers behind
a region’s strong clusters.
26. World Bank, April 2008, p. 27.
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12 Considering Green Business
and Green Values
J. C. Spender
WHAT DO WE KNOW?
Our conference program’s segmentation into issues, challenges and solu-

tions implies some agreement about how to engage “green issues” and
proceed toward a “Green New Deal.” Whether we consider energy man-
agement, oceanic acidity, the fall in the water table or the end of the age of
oil, our target is to fi nd politically viable, socially acceptable and ecologi-
cally sustainable agricultural, industrial and social policies that cohere into
an integrated way of being. Prince Charles’s 2009 Dimbleby Lecture reaf-
fi rms this. Hard though this project might be, it seems one around which
we should surely all gather.
Nonetheless I shall take a different position and argue it would be wiser
to begin by admitting we have no idea what we are doing. This is not
to insult the many now working passionately on green issues; rather, it is
about clarifying the distinction between knowing and acting that lies at the
core of our eco age’s challenge. With no policy position or revenue stream
to protect, I am institutionally free to suggest our present “crisis” has less to
do with the presence or absence of appropriate policies about energy, public
health or fish stocks than with how we think about matters green. Beneath
the debates about what “the science” does or does not show, or how we
might resolve the North-South or Rich-Poor differentials, I shall argue that
we are in the grip of an epistemological crisis that runs deeper than any
crisis of technology, politics or ecology.
Green problems have a special sharpness because they force us to look
into the state of our knowledge about who we are and how we interact
through what we do to our world. We are reminded of how much we do
not know about this—such as global warming or the ecology of the deep
oceans. My starting-out assertion is that we are confronting a historical
break in how we understand the world and here I agree with the Prince,
an authority one might not normally cite. Strained circumstances make for
strange bedfellows. So I shall divert from our conference’s title—“Green
Business and Green Values”—to reflect on “green” itself, its meaning and
how it challenges our ways of understanding.
142 J. C. Spender
At one level, of course, the suggestion that we have lost our way might
strike some as a reason to turn toward religion, as evident in the Pope
Benedict’s third encyclical. Many of those grappling with corporate social
responsibility, capitalism’s contradictions, medical ethics, sweated labor,
the prospect of water and pollution wars and so on are moving in this direc-
tion, lamenting our age’s loss of religion’s moral compass. Engaging this
calls for more knowledge, study and reflection than I can possibly bring to
the task so I shall look at a narrower issue and suggest a new constructive
role for philosophers and social science academics.
These quiet laborers, merely thinking about thinking, often fi nd them-
selves positioned against activists, energetic business people and policy-
makers whose primary focus is action—stop talking and do something!
But thinking is full of pitfalls, and we need thoughtful action, not knee-jerk
responses or action for the sake of appearing active. No doubt the wide-
spread urge to act, to establish carbon trading or tighten fleet mileage or
gas emission standards will prove irresistible; it certainly salves our anxiet-
ies even as we wonder about the intended and unintended outcomes. That
is the politicians’ problem. Ecology has appeared on their menu and they
must take a position if they are to earn their constituents’ support. Academ-
ics are not in this situation and must wonder what, if anything, they might
bring to the table from their ivory aeries. They might, for instance, wonder
at the disappearance of the religious and philosophical frameworks within
which green issues would have been discussed 150 or more years ago. I
shall argue time is crucial and in losing our way we have also lost track of
our time.
BACK TO THE FUTURE
We live in the shadow of the Victorian Age. Inter alia it gave us the modern
university’s agenda and science as the privileged mode of knowing, stand-
ing against previous times’ less objective modes—religion, politics, feudal
relations, and so on. Science’s promise was that it would provide each of
us the freedom to discover the truth for ourselves, free of intervention or
interference by others. But most thinkers appreciated that science’s victory
was far from complete, even as we hesitated to admit it; it seemed to over-
look much about human knowing. The developments of pragmatism, exis-
tentialism and various forms of post-positive modernism reinforced and
articulated these doubts. In the UK the popular appeal of CP Snow’s 1959
Rede lecture about “the two cultures” made it academically acceptable to
say we had two legitimate modes of thinking and knowing. The point being
that while the confl ict or relationship between science and the humanities
remains unresolved—in a philosophical or methodological sense—at least
their differences were no longer hidden under a carpet of Victorian dogma.
Nor did the humanities need to be grovelingly apologetic as they were in
Considering Green Business and Green Values 143
the late 1800s. Nor was pluralism to be considered mere methodological
weakness, though justifying and handling it remains a challenge.
Notwithstanding these advances, many academic disciplines seem
unwilling to respond to their message, especially those focused on social
policy and collective human action. Shying at the methodological chasm,
they typically pursue one or other way of knowing, rather than working
to bridge between and embrace both—as we see from the ongoing debates
about quantitative and qualitative research methods. Likewise some phi-
losophers—perhaps spurred by Snow’s agenda—continue to seek an
overarching mode of human knowing that, if found, would surely have
a significant part to play in how we might deal with green issues. But we
now suspect this methodological Nirvana is forever out of reach and the
Victorian dream of total objectivity and universal laws no more than a
fogged reflection of Plato’s hunches. In the meantime we must confront our
situation and make haste to cut away anything that stands in the way of
our grasping Gaia more securely. We have nothing but our knowledge to
bring to this task. Although our capacity for action is profoundly human, it
is only acceptable when shaped by our knowledge. This is my point—do we
really know enough about our situation to think the green project is about
choosing between identifiable actions?
THE PLACE OF DOUBT
I mentioned religion because some of the deepest disagreements among

Europeans during the Age of Enlightenment were around the limits to
human knowing, specifically about whether we were imprisoned by “radi-
cal doubt” or could ever achieve certainty or “God’s Eye View.” The ancient
religious, humbler than we, presumed not, that it was not given to us to
know the way the gods knew. Acceptance of radical doubt—what we might
now call “bounded rationality”—was central for Descartes and Kant, and
yet, in some mysterious way, Victorian science forgot it. We became per-
suaded the scientific method of Bacon and Newton could be developed suf-
ficiently to let us achieve “objective truth.” So my chapter’s main message is
that we might leverage pre-modern doubt into our thinking about today’s
situation and see more clearly how, in many ways, we are the product and
prisoners of Victorian ways of thinking. As long as we continue to deny
doubt and thus the shortcomings in how we know, we shall remain trapped
in the Victorians’ ultimately ineffective ways of thinking. Green means
challenging such naïve thinking.
Bounded rationality is a way of defi ning who we are. It reminds us we
can never fi nd out everything that must be understood if we are to achieve
even the tiniest degree of certainty. We are also limited in our abilities
to grasp the implications of the knowledge we have already developed.
Following Popper’s popularization, natural science articulated bounded
144 J. C. Spender
rationality as the method of falsifiable hypotheses about our future expe-
rience (Popper, 1969). Scientific statements should not aspire to be fully
certain knowledge of the world, simply close enough to be practical and
useful as we act within it. The approved methods of science would produce
knowledge that would be reasonably coherent without being in any sense
complete. While our knowledge must be shaped by how we humans know,
Kant’s point, the deeper question of how the result might relate to the world
remains unconsidered. Thus, thinking about global warming is not at all
the same thing as acting by, say, reducing carbon dioxide emissions in the
expectation of changing it. Acting engages the world in ways quite different
from thinking through the way we have modeled it. The passive and active
modes of knowing—as in Ryle’s distinction between knowing-that and
knowing-how (Ryle, 1954)—can only converge when we have a complete
model of reality, when we have reached beyond our bounded rationality to
the place of total knowing. The Victorian dream was that science could be
an apparatus like Jacob’s ladder that would help us escape our condition of
radical doubt and reach this place. Yet, if we care to look, we can see the
futility of thinking this way, of looking to science to fi x a situation we are
creating through our application of science.
The humanities are in a different position; they lack a coherent method
or even agreement about how one can know. On the one hand, we have
various “historical methods” that range from truth as revealed by the
accumulation of historical facts, such as a royal lineage or the sequence of
events in a revolution, to the adoption of explanatory paradigms such as
the inevitability of a people rising against a feudal power or the impact of
acquiring a new military technology. Beneath these different notions of
explanation are un-resolvable questions about how to justify the analyst’s
interpretation and selection, for science’s ceteris paribus is not available.
We cannot put history in the laboratory, extracting it from life and the
unknown multitude of alternative explanations of every human event.
Thus, the humanities suggest forms of knowing forever contingent on
arbitrary selections of the facts and causal attributions, and, unlike sci-
ence, they lack the methodological apparatus necessary to prove things
could not have been otherwise.
So I shall take Snow at his word and contrast our two current ways of
knowing—for it is in such ambiguity that we must act mindfully. Note
that science and the humanities only seem to be different ways of knowing
because we are denied full knowledge. Were certainty available, we would
not need even one research methodology. Consciousness itself would be
enough, for the Truth would expose itself to us without interference or
delay. Our research methods are our various strategies for dealing with
our particular modes of not knowing and the resulting inaccessibility of
the Truth. It follows, as social studies of science have shown as they redis-
cover Kant’s critiques and erode the Victorian dream, that our knowledge
is never “of the world” or of the things we seek to know. Knowledge is
always about our own project—making a life and living in the world as
we fi nd it. We see that science is one of the humanities after all—inevi-
tably humanist and imprisoned in how we think, forever tied up with
subjective interpretations that can never be grounded in an out-of-life
“objectivity.” While philosophers and epistemologists may be excited by
exploring how one way of knowing or discovering relates to another or
might be better justified and so preferred, the immediate practical issue is
to handle the doubt that is the most pressing characteristic of our present
situation.
Most understand bounded rationality in psychological terms, the conse-
quence of our limited neural capabilities. But it is also about our relation-
ship to the things beyond the mind that we seek to know. A different way
of addressing the same apparent disjunction between our outer and inner
worlds is to restate the fundamental difficulties that arise when we dis-
cover ourselves located within the system we are trying to know, making it
impossible to put it at arm’s length and view it objectively. Just as we cannot
achieve certainty so we have no access to that Archimedean fulcrum from
which we might survey reality.
Here is the fundamental challenge of dealing with matters green—we
are embedded within them, part of the problem and its imagined solu-
tions, in a Wonderland of our own time and making. The epistemological
consequence is that until we abandon the pursuit of certainty and objec-
tivity, and the curious dream of being able to stand outside this world,
we shall never fi nd our way to the lived heart of our situation and explore
possibilities that are not mere masks covering its interactions—such as
“climate-gate” and the debates about the problematic “science” of global
warming illustrate.
Gore continues to do a fi ne job proposing recent changes in tempera-
ture, ice cover, and vegetation are proof positive of our messing up the
biosphere (Gore, 1993). But how can we ever know whether this is cor-
rect or not? We cannot conduct a “natural experiment” on the human
condition. So the question is Does it matter? To settle it, we would need a
complete validated model of the universe and/or access to that Archime-
dean fulcrum. Gore is neither a fool nor naïve and knows he is a perish-
able influence around the world, so what is he really doing? I suspect he
is deliberately challenging our belief that we have to get the science right
before we can act responsibly, knowing that traps us into inaction as we
wait for complete knowledge. But what are the alternatives? Is “the sci-
ence” all we have to go on?
The problem here is not relativism, the bogeyman positivists deploy to
de-legitimate the humanities’ ways of knowing. Rather, the deeper chal-
lenge it is to grasp that fact that the discussion is about our condition, about
how we know and act. There is irony here for Popper’s motivations were
146 J. C. Spender
as much political as philosophical, as his Open Society project revealed
(Popper, 1945). While the knowledge that interested him—as a philosopher
of science - was of the non-human, of what lay beyond the humanities,
he actually envisaged a science-based democracy. As we wait for that to
emerge, we wonder how to justify choices of human action under the condi-
tions of rampant uncertainty and knowledge-absence that are so evident on
matters green. We know we do not have the time or opportunity to act only
on the basis of adequately established science, even though there are times
it can be informative. Rather we face immediate choices about whether
to intervene or not in a world we do not understand. Under these circum-
stances, if we choose to act, we are morally obliged to surface the interests
involved. In other words, while we cannot know the consequences of our
action, we can for sure try to find out who is likely to be impacted, who and
where are those others who make up the human network. Cotton subsidies
in the United States affect others in nations far away. Green means uncov-
ering the ways in which such interactions work, it means building workable
models of human society rather than of the natural world. It means adopt-
ing a humanist kind of pragmatism rather than a de-humanized positivism
of “the real.”
In the absence of certain knowledge and the rigorous plans that can be
built on it, we have a Snow’s pluralism, two immiscible ways of know-
ing—a scientific way and a humanities way. What happens here? As we
admit this, we draw our choosing and acting out of the imagined imper-
sonal world of facts and into the community of those acting and those
affected, the very opposite of appealing to “scientific experts” who tell
us they have some privileged access to a neutral objectivity beyond the
lived world. Gore’s strategy becomes clearer. He is not playing the sci-
entist who thinks he knows reality; on the contrary, he is a canny pol-
itician working to re-shape the global warming discourse and thereby
engage interest groups all too often excluded by the discourse of science.
He recasts global warming as a political/social problem, reaffi rming the
ancient Greek belief that in the absence of certain knowledge all we have
is democratic conversation. It alone must synthesize the pluralism within
the situational contingencies the discussants are experiencing, allowing
them to search for and fi nd a consensus that reaffi rms their membership
of a single community. Conversation is the crucial process of construct-
ing our experience and sense of self. Given bounded rationality, we have
nothing else, weak as it might seem.
WHAT HAPPENED TO OUR CONVERSATION?
Around 150 years ago the European public conversation changed. The
Newtonian model of natural science as the paradigmatic mode of knowing
fi nally delegitimized an older tradition, the ancient art of rhetoric and
persuasion that hinged on the philosophical modesty mentioned earlier.
Rhetoric differs from logic alone precisely because it is fashioned around
shared human situations in which proof and complete knowledge are not
available. Reasonable agreement or pisteis was the objective—what lives
on today as “beyond reasonable doubt.” The Greeks were sharply aware
their city-states could not function without such agreement and the col-
laborative action that could result. Their leaders could not claim or dem-
onstrate certainty about the outcome of the action called for, even more
important when it involved giving up a measure of self-interest in favor
of the group. Note that rhetoric is about collaborative human action, not
merely about propaganda and shaping opinion, reasoned action’s pre-
cursors. We realize Greek communal activity, the Olympics, the drama,
and so on, were laboratories for their rhetoric, and thereby the creation
of the state. From several hundred years BCE through to the 18th cen-
tury, rhetoric was one of three parts of the trivium, the central plank in
European university education and academic scholarship (Conley, 1990).
Adam Smith, for instance, was a professor of rhetoric long before there
was economics. Green is about our need for a new rhetoric with which to
create a new state of our world.
As soon as we emerge from the Victorian dream encapsulated in Lord
Kelvin’s dictum that “if you cannot measure it, you cannot improve it,”
we see science itself is no more than a family of rhetorical devices, a trope,
a mode of persuasion that has achieved remarkable weight in spite of
being, like every other discourse, ultimately founded on mere assumption.
At this point Snow’s two cultures collapse into one, that of the human
conversation among the engaged. Green matters must be grasped from
the subjective humanist point of view, from within our form of life, not as
matters of science considered from an imagined objectivist point of view,
beyond our life-world. Nature is not something to be understood as a
“thing-in-itself” but as the inanimate that mediates the ways in which we
(and the animate) impact each other. The epistemological re-positioning
makes green rhetoric very different from the objective discourse of a sci-
ence far removed from our experience and day-to-day life—the nature
of black holes, say, or what were the causes of the Second World War?
Green matters are about us, inherently indexical, constrained within the
here and now and how we occupy and make our world. The key choice is
always that between our action and inaction, between agency and accep-
tance or irresponsibility.
We cannot bring this constructive immediacy into our discourse until
we have a sense of what is to be acted on. Mere abstractions will not do.
Nor can we swallow the whole world in a single gulp. From medieval times
through to Talcott Parsons we have been tempted to disaggregate human
society into functional layers (Figure 12.1). While we experience ourselves
148 J. C. Spender
as individuals, we sense levels of analysis and possible action “above” and
“below” us. Simon, who deserves more attention, saw society as “par-
tially” decomposable (Simon, 1981). There is policy at the level of the
family, China’s “one child policy,” or at the level of the industry, carbon
trading. There is the level of sovereign nations and international agencies to
demand they control their industries’ emissions through their own national
legislative processes. In general, we need a model functionally relevant to
the action modes of the socio-political situation. Again, this asserts no cer-
tain knowledge of how human society functions, it is simply a reflection of
social action heuristics we have generated over time.
Figure 12.1 suggests it makes sense to disaggregate any green action
to a specific layer. Then we can evaluate it against criteria such as: (a) is
there enough understanding for us to consider the decision reasoned, (b)
is there the political will to carry the action through, and (c) can we antic-
ipate the consequences sufficiently to reinforce (a) and (b) and can we see
where the chips will fall, who will be impacted and how? We live within
democratic capitalism, national and increasingly global, and business
organizations are some of the most powerful and complex engines pro-
ducing the goods and services we value. But business is bounded within a
context of social, political and legal constraints. Clearly if business is to
really engage green, rather than merely highjack its language to benefit its
shareholders, its efforts to maximize shareholder wealth must be curbed
by the public and the institutions created to implement their conclusions.
But it is even more sharply bounded by its rhetoric, what can and cannot
be said.
Figure 12.1 Field of green.

CONSIDERING RHETORIC AND POLITICAL ACTION
While rhetoric is more art than science, it benefits from several thousand
years of thought about how we humans influence each other. First, there
is the matter of identifying one’s audience and what they are prepared to
hear versus what seems incomprehensible or immediately unacceptable.
This shapes the specifics of what might be said, its “tropes,” the particular
language, metaphors, metonyms, and parts of speech and the specific argu-
ments to be brought to the persuasive task. Gore’s process is rhetorically
rich fully appreciating how his choice of media shapes the audience and
what can be said. His deft use of scientific language distances him from
pronouncing on “values,” clothing his discourse in a contemporary author-
ity a religious vocabulary, for instance, might lack. Yet his allusion to our
responsibilities to future generations raises such issues, especially for so
religiously inclined an audience as the United States. Likewise PowerPoint
and projected graphics were not available to Cicero or Winston Churchill,
but are available and acceptable in our age.
The overall project then is to reframe green matters as the most impor-
tant and pressing for our collective consideration and to frame them with a
language that enables us all to take part in a democratic discussion about
our future. Implicit is the caution that such matters should not be left to
elected representatives, for their political situation and compromises reduce
their inclination and ability to properly engage the issues. Nor should they
be captured by science. Can the public reclaim the green discourse as femi-
nists have shown women must claim the discourse of their bodies? What
are we really trying to do? Green is about action under uncertain circum-
stances not about developing better knowledge—the ultimately fatal temp-
tation to inaction. To reclaim the discourse we must bring it to the same
level of immediate engagement that we have with the rest of our everyday
lives—fetching the children from school, calling on friends when they are
sick, deciding to take up a new fitness project, and so on. Gore, as one
person trying to show us how to proceed, is encouraging us to realize the
contextualized nature of our lives and to embrace its implications responsi-
bly and with moral commitment.
Rhetoric is about language applied to persuasion, not just verbal lan-
guage, of course, but symbolic communication of all types. The language of
science has proved extraordinarily compelling for two centuries, but it can-
not be sufficient under our present circumstances of bounded rationality.
Much of the science that deals with everyday matters, such as genetic engi-
neering or ending life-support, has severed itself from the public discourse,
creating a deep practical form of communal not-knowing that calls for the
development of a new discourse around medical ethics—a new language
with which we can engage the medics whose discipline-driven choices have
little attachment to our individual existences yet affect them greatly. In
150 J. C. Spender
the past, families and tribes addressed these questions as matters of social
tradition; there were no disengaged specialists standing outside the group.
Green issues likewise demand a language of the engaged. How should
we speak with the North-Western Pacific tribes about whale hunting, part
of their culture but not of ours? Or with Chinese industrialists about acid
rain as they struggle to put that country’s impoverished past behind it, a
past we do not share? Or with Western states’ cattlemen about gaseous
emissions as we dine on vegetables flown in from Israel? Without a mutual
functioning language, we can have no reasonable persuasion and no collec-
tively arrived-at action. The alternative is some form of science-based anti-
democracy that, aside from anything else, implies a significant narrowing
of the interests engaged and a temptation to totalitarian sub-optimality.
The argument here is that green issues are, by defi nition, those of the
collectively and subjectively lived world and therefore inherently political—
not scientific. Attempts to present them as about the objective world—espe-
cially that presumed in positivistic science—are no more than the charged
rhetoric of disdain for those whose interests are being silenced. Green mat-
ters and how we think about them must be put into in a global political
context in which all are entitled to be engaged, whatever their life-world.
That is obviously a political statement, reminding us of the impossibility of
addressing these issues in a non-political way and that attempts to present
them as objectively science-driven are simply political moves to control the
conversation.
POSSIBLE LANGUAGES
But before closing this chapter on “it’s all politics, isn’t it”—clearly
true—we might return to the question of possible languages. The West-
ern modes of thought evident in Snow’s contrast of cultures are not widely
shared around the world. Huntington’s book (2003), whatever its mer-
its, reminds us of Islamic culture and thought and its marked differences
from Western thought. Any global conversation about green issues must
take alternative ways of thinking into account, just as it must take Indian,
Chinese and Filipino thinking and culture into account—and a lot more
peoples’ cultures besides. Perhaps academe’s most significant challenge is
to do this language work and thereby help enlarge the discourse, rather
than leave it to the politicians of the moment. In short, green issues chal-
lenge us to globalize academe and so marshal the human race’s knowledge
resources in ways that have not been imagined since the Abbasid transla-
tion project and its attempts to codify the Book of Human Knowledge
(Gutas, 1998).
Nor is the Western situation as simple as Snow suggests. Since Victorian
times and the noted contrast between scientific objectivity and subjective
interpretation, the public discourse has been augmented by two additional
modes of human knowing, giving us four main modes to contrast with
the Newtonian one that was dominant for so long. The most influential
is evolution, propelled into our discourse by Darwin and Spencer. Before
dealing with this I note a fourth, now being reshaped by brain research, the
science of consciousness, the exploration of the physiological, biochemical,
or neurological core of the human condition. For many this promises to
be an underpinning to all forms of human knowing, a fi nal reconciliation
between the purity of logic and the nature of Mind. For others this raises
the paradox of expecting the human mind, as the apparatus that produces
all knowledge, to stand outside itself and understand itself—matters that
need not delay us here.
For clarity these four alternative modes of human knowing can be
arranged along two dimensions—time and agency, or more specifically,
given the essential subjectivity of human knowledge, human time and
human agency. We can distinguish between epistemologies that presume
what is to be known about is fundamentally static or universal, such as the
positivistic laws of nature; time-less and true at all places. Some presume
the soon-to-be-revealed laws of brain function will be of this type. Against
this time-free view, we can place a dynamic view, and here evolution is the
archetype. So long as we presume evolution is not toward a knowable end,
mere teleology, be that perfection or equilibrium, it is a way of thinking
about our engagement with the eternally dynamic as species evolve to cre-
ate a new situation, so demanding further evolutionary adaptation by other
species.
The evolutionary metaphor has been very productive for the social sci-
ences and the humanities, as it has been for the life sciences, but its impact
is often misunderstood. Ultimately it is about the difference between our
lived time and Nature’s, between the time we make and the time that is
beyond our influence. The distinction above is also that between passive
fatalism and engaged agency, between accepting the world as we fi nd it
and acting to change it. This distinction has been influential in European
thought at least since the time of Vico, who argued for two universes of
human knowledge: Nature, that which we could observe but not know
fully because it was created by God, and that which we could know in quite
different ways and even fully because the things known were created by us,
such as our legal systems (Berlin, 2000).
Time is reinserting itself into our discourse and becoming an issue
for contemporary philosophers, in the work of Bergson and Heidegger
universal dynamic
natural positivist science evolutionary thought
man-made science of consciousness? humanities’ lived-time
Figure 12.2 Principal modes of human knowing.

152 J. C. Spender
especially. The latter distinguished between logical time, which positivist
science might use, and the lived time of Dasein, subjective time. As we shift
from the left side of the matrix to the right side, evolutionary thought is
attractive because it clamps down on the inherent relativism that might oth-
erwise render the analysis viciously circular. The selecting agent is Nature
not man. But, as a result, evolutionary time must be measured in terms of
species change, not in logical or lived times. Green means abandoning all
notions of time that are detached from the human lived experience—such
as logical or evolutionary time—and adopting a time subjectively contex-
tualized in our life-world in terms of our life choices.
If green matters were merely about politics, there would be fewer con-
straints over our actions. We could discuss and agree, and modern com-
munications means this can be amazingly rapid. Likewise we are mistaken
if we think people are inherently conservative and take a long time to
change their views. Even the most casual reading of the happenings dur-
ing the French Revolution reminds us that people and their actions can
change with terrifying speed. Green matters are especially demanding of
our modes of knowing precisely because they are not only about politics
and the common will; they often engage the natural world which has its
own clock(s). A species’ reproductive cycle constrains to our agency and
the changes we might wish to make in a species’ population. Breeders know
this and work with it as an unchangeable time-ness that limits their agency
just as the Second Law of Thermodynamics does; it sets limits to how time
can be experienced in that milieu.
If the life-world-centered green discourse is indeed constrained by what
man did not create (Nature), the challenge is to see how science’s tremen-
dous achievements can be brought in without pushing all other discourses
aside. The power of radical doubt is that it denies science its victory. Sci-
ence becomes a handmaiden to human persuasion, not its master. Logos is
powerful but can never be determining or leave ethos and pathos behind for
their interplay mirrors the human condition. Rhetoric is about persuading
thinking, feeling and socialized human beings not logic engines.
It is useful to look at how Von Clausewitz argued that strategy—what
we might call leadership or effective rhetorical practice—it begins when
the general confronts the limits to the various actors’ knowledge. But he
also argued that this meant little separated from the context and practice
of battle. In military terms, strategy (a) is about choosing the time and
place of engagement and (b) must accompany the army into the field and
reconstruct its context continuously as the battle unfolds (von Ghyczy et
al., 2001). Military leadership is about the interplay of determining and
adapting to the changing context of action. While this pushes the general’s
agency to the fore, denying any scientific model or theory priority, science
can provide some powerful and rigorous language for defi ning the con-
text and communicating the leader’s intentions. We can plot the enemy
positions and tell our troops to advance out of their line of fi re. We can use
the Second Law to calculate the heat losses and energy demands of vari-
ous action options. Science, along with the relevant social, legal and psy-
chological constraints that lie beyond the rhetor’s influence, helps describe
the context of action without determining the general’s choices. It helps
outline the socio-political context into which human agency is projected—
what we might call the solution space. That space is the lived-world and
cannot ever be defi ned by science alone. Clearly science is essential to the
green discourse, helping defi ne some options, but its hegemonic impulses
must be restrained and held subservient to the life-world and its own lived
time. As leaders make green proposals, they engage human audiences with
deep intuitions about how time works in their lives. Lived time is remark-
ably fluid and changeable while logical and evolutionary times are not.
Thus, rhetoric is often regarded as the activity of making others aware of
possibilities they had not previously refracted into their everyday living. A
rhetor’s ability to frame green issues is constrained by these experience-
based time and space intuitions for they are, by defi nition, in the audience’s
lived world, one far from the laboratory or the library.
Overall this chapter argues green issues cannot to be considered objec-
tively in the ways normally implied by the scientific committees and experts
as they pontificate or as natural experiments to be conducted by govern-
ments or corporations. Those affected lie outside these constellations of
power and must seize the conversation. Green matters’ difficulty lies pre-
cisely in the fact they are lived and are inherently political. Stakeholder
theory, workable or not, is likewise inherently green because it is about
negotiating the distribution of burdens and benefits among the people
involved. Corporations have no capability to be green beyond their stake-
holders’ actions, and are seldom open to what all of them have to say either.
The bottom line is that green is not merely intellectual, academically inter-
esting and demanding as it might seem. Thinking productively about it
cannot be disengaged from the political, social and economic realities of
our life-world. Green demands, on the one hand, a new appreciation of the
limits of scientific thinking and, on the other, an appreciation of the limits
to political and economic possibility. To pretend otherwise is to put off the
post-modern realization that we are being challenged to think beyond tech-
nological fi xes to the problems that our technologies have created, beyond
transferring green problems to those claiming scientific analysis is power,
and conclude that green presupposes making our species’ collective experi-
ence and expectation central to the discourse. This might move us onward
from the academic elitism of Enlightenment thinking to a green humanist
conversation before it is too late, before our lived time runs out. Doing so
might open up a new universe of life-world-centered ethics and morality
that could take us back to the animism of previous pre-scientific or pre-
modern civilizations.
154 J. C. Spender
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Ryle, G. (1954). Dilemmas: The Tarner lectures, 1953. Cambridge: Cambridge
University Press.
Simon, H. A. (1981). The sciences of the artificial (2nd ed.). Cambridge, MA: MIT
Press.
Snow, C. P. (1959). The two cultures and the scientific revolution: The Rede lecture
1959. Cambridge: Cambridge University Press.
von Ghyczy, T., von Oetinger, B., & Bassford, C. (Eds.) (2001). Clausewitz on
strategy: Inspiration and insight from a master strategist. New York: John
Wiley & Sons.
Contributors
Elizabeth Anastasi is Economic Adviser, Low-Carbon and Sustainable

Development at the Department for Business, Innovation and Skills.
Anastasi graduated from the London School of Economics in 2004 after
studying for a B.Sc. in economics and joined the former Department of
Trade and Industry as part of the economist Faststream. After complet-
ing a Masters in Economics at the Sorbonne in Paris, she rejoined the
former Department for Business, Enterprise and Regulatory Reform in
September 2008 as an economic adviser working on low-carbon busi-
ness opportunities and sustainable development. In particular, she
worked on the economic evidence supporting the recently published
Low-Carbon Industrial Strategy. Liz continues to work as an Economic
Advisor within the low-carbon and sustainable area for the Department
for Business, Innovation and Skills. She also recently completed a part-
time secondment to the Committee on Climate Change as part of the
team working on a review of low-carbon innovation in the UK.
Richard Broyd is a Partner of the Monitor Group based in London. Prior

to this, Broyd was chief executive of a substantial family office; held a
number of positions at Montedison, including managing director of a
specialty chemical company and director of strategy and control; was
regional manager for an international economic consultancy advising
governments and major corporations as well as publishing extensive
reports on economic prospects for many countries and industries. In
1980 he was awarded a Ph.D. in regional economic development by Cor-
nell University and was at the United Nations Center for Regional Devel-
opment, Nagoya, Japan. Richard has served as chairman and board
member of several private and public companies and is currently a direc-
tor of Sollers in Moscow, a major European family office and chairman
of Reach to Teach, a charity.
Jeff Grogan is a senior partner at Monitor Group and a leader in the firm’s
national economic development and security practice. He advises busi-
ness and government leaders on issues concerning national, regional and
156 Contributors
cluster competitiveness. While directing competitiveness projects and pro-
viding advice to Monitor clients and colleagues worldwide, he oversees the
development and commercialization of new competitiveness applications
and tools. Grogan has led numerous national, regional and cluster com-
petitiveness studies in the United States. He directed a multi-region, multi-
cluster competitiveness project, the United States Clusters of Innovation
Initiative, as well as regional and cluster competitiveness projects across
the United States. He led a study to profile the economic performance and
competitiveness of the United States for the nation’s governors and briefed
them on the study results. He has served on presidential and gubernatorial
transition teams addressing topics of national and regional competitive-
ness. Jeff is also actively engaged with Monitor colleagues and clients in
economic competitiveness projects in Europe, Asia and the Middle East.
He directed a multinational initiative to benchmark and recommend
policies to advance entrepreneurship. He directed an effort to develop a
proprietary database of advanced critical infrastructure security-related
technologies for use by both public and private sector clients. Grogan has
also developed corporate and business unit strategies for clients in indus-
tries including defense electronics, automotive products, steel, shipbuild-
ing, telecommunications and professional services.
Prior to joining Monitor Group, Grogan served as an officer in the
United States Navy. He was the navigator and gunnery officer of a guided
missile destroyer. He served as combat systems officer on the battle staff
of a destroyer squadron commander and as a tactical action officer for
warfare commanders in aircraft carrier battle group contingency opera-
tions in the Pacific and Indian Oceans and the Arabian Sea.
Grogan is a director of the Massachusetts Technology Collaborative,
MassInc and the Fitzie Foundation. He is a member of the board of
governors of the John Adams Innovation Institute. He is a trustee of
Noble and Greenough School, and Tenacre Country Day School. Gro-
gan received his Master of Business Administration degree in 1987 from
the University of Virginia’s Darden Graduate School of Business Admin-
istration, and a Bachelor of Science degree in International Security
Affairs in 1978 from the United States Naval Academy.
Alejandro Gutierrez is an architect and Associate Director at Arup Urban

Design leading a range of urban development projects globally such
as Dongtan Eco City–Shanghai, Wanzhuang Eco City–Beijing, Dubai
Waterfront Masterplan Sustainability Review and the competition brief
for Copenhagen Port Regeneration Strategy. He joined Arup in 2002.
In addition, he is an invited lecturer to UCL Bartlett School of Archi-
tecture, London School of Economics, Universidad Iberoamericana in
Mexico and Universidad Catolica in Chile.
Prior to joining Arup he was director for Cities Consultancy Unit
at Catholic University in Santiago, Chile, and also director for Cities
Contributors 157
and Environment area at the Architecture School in the same university
where he was advisor to the minister of housing and urbanism on spe-
cific urban projects.
Noreena Hertz is Duisenberg Professor of Globalization, Sustainability

and Finance based at both the Rotterdam School of Management, Eras-
mus University and the University of Cambridge. Hertz’s work offers a
much needed blueprint for rethinking economics. Her unique, integrated
approach weaves traditional economic analysis into foreign policy trends,
psychology and sociology. Hertz’s career began in St. Petersburg where
she completed her MBA at Wharton and helped establish the city’s stock
exchange. Hertz then became a consultant at the World Bank, advising
the Russian government on economic reforms, specifically the shift from
a communist model to a capitalist system. After gaining her Ph.D. at
Cambridge, Hertz moved to the Middle East, where she headed a team
of 40 researchers exploring potential roles for the private sector in the
peace process.
In her number one best-selling book The Silent Takeover, Hertz pre-
dicted that unregulated markets and massive fi nancial institutions would
have serious global consequences. This prescience has lead to many
describing Professor Hertz as a visionary. Her 2005 best seller, The Debt
Threat: How Debt Is Destroying the Developing World . . . and Threat-
ening Us All, exposed the dangers of irrational lending. Hertz played
a leading role in the development of (RED) an innovative commercial
model to raise money for AIDS victims in Africa having inspired Bono
(co-founder of the project) with her writings. Hertz’s op-ed pieces have
been published in several key publications including The Washington
Post and The Financial Times. Alongside a heavy broadcasting and writ-
ing schedule, Hertz regularly participates in debates and panel discus-
sions with leading politicians and public figures. She also advises major
multinational corporations, CEOs, NGOs and start-up companies and
sits on various corporate and charitable Boards.
Edward Hyams is a Partner in Englefield Capital having fi rst met their

investment partners to work on the Zephyr renewables transaction in
2003 and works mainly on energy, environmental and infrastructure
investments at Englefield. Hyams is non-executive chairman of the UK
Energy Saving Trust (www.est.org.uk), taking up this role in April 2005
as a result of a long-standing interest and experience in energy efficiency
and sustainability. He also chairs a UK energy and infrastructure “think
tank“—the Utility Strategy Group.
While managing director at Eastern Group (Eastern Electricity) in the
late 1990, he was founder chairman of the East of England Round Table
for Sustainable Development and has participated in numerous national
policy groups on energy, the environment and sustainability. He was
158 Contributors
named UK Best Business Leader in the 2002 Sage Daily Telegraph Busi-
ness awards as CEO of a new UK Energy Business. Hyams is a chartered
engineer with a degree in electrical engineering from Imperial College
and has a post-graduate qualification in accounting and finance.
Jack Keenan is the founder and CEO of Grand Cru Consulting Ltd. He
has been chairman and CEO of Kraft Foods International, and CEO of
the business which is now Diageo plc. Keenan has served as an execu-
tive director on the Diageo and Moet Hennessey boards, and as a non-
executive on the boards of Marks & Spencer plc, Tomkins plc, The Body
Shop International and General Mills, Inc. He is a director of National
Angels Ltd.—a theatre production company that has produced History
Boys and War Horse in the West End together with the National The-
atre. Keenan has been patron of the Centre for International Business
& Management at Judge Business School for eight years. The principal
clients of Grand Cru Consulting are today Oaktree Capital Manage-
ment, the Stock Spirits Group SARL (which he chairs) and Revolymer
Ltd. He graduated from Tufts University with honors and has an MBA
from Harvard. He is a resident of the United Kingdom.
Debra Lam is a Senior Policy Consultant at Arup with experience in gov-

ernance, sustainable development, socially responsible investments and
project management. Lam works across a broad span of sectors, from
non-profit organizations to federal and local governments. Her ongoing
research and analysis includes low-carbon strategies for new builds and
retrofits, climate change adaptation and mitigation and the resilience of
cities to combat climate change and transition to a low-carbon economy.
Lam received her undergraduate degree in Foreign Service at George-
town University and her graduate degree in public policy at the Univer-
sity of California, Berkeley. She is an LEED Accredited Professional.
Michael Littlechild is a Founder-Director of GoodCorporation and leads

the delivery of its ethical assessment services. He is a former partner of
KPMG Consulting in the Strategic Business Management group which
served KPMG’s leading clients. At GoodCorporation he has led teams
to undertake ethical assessments which review policies and working
processes to analyze how businesses comply with their declared ethical
policies. He has extensive experience in Europe, the Middle East, Africa,
the United States, China and Southeast Asia. He also leads GoodCor-
poration’s anti-bribery and corruption services. Michael was formerly a
research fellow at the European Policy Research Center at the University
of Strathclyde and is on the Advisory Board of the International Center
for Corporate Social Responsibility at Nottingham Business School. He
is a trustee of Awards for Young Musicians.
Contributors 159
Alexandra Mandelbaum is a Consultant based in Monitor’s New York
office. She has worked on developing corporate strategies for clients in
various industries, including pharmaceuticals, pulp and paper indus-
tries, governments and educational institutions. She has worked for cli-
ents in Brazil, most of Latin America, Russia and the United States.
Recent client engagements have included the development of a compre-
hensive five-year strategic plan for a pharmaceutical company for the
Latin American Region; the development of the positioning and strategy
for a Russian university; the facilitation of a series of workshops for
seven U.S. state governments to develop statewide economic strategies
and mechanisms for implementation; the creation of several non-profit
entities’ five-year growth strategy plans; scenario analysis on the future
of Cuba; extensive content development for a series of training sessions
and executive off-sites for Monitor’s Regional Competitiveness practice;
and the management of a year-long project focused on mapping and
expanding the reach of market-based solutions to poverty in Africa.
Prior to joining Monitor, she worked as an emerging markets equity
research analyst for JP Morgan Chase, with a specialization in the steel
sector. Prior to that, she was the assistant to Spanish High Court Judge
Baltasar Garzón on a project of counterterrorism cooperation between
Europe and the United States, as well as a university instructor. Man-
delbaum has a Ph.D. from New York University, an M.Phil. from Cam-
bridge University, and a B.A. from Harvard University. She grew up in
Spain and is fluent in five languages.
Christos Pitelis is Director of the Center for International Business and

Management (CIBAM) and reader in International Business and Com-
petitiveness at the Judge Business School, as well as a Fellow in Econom-
ics at Queens’ College, University of Cambridge. Christos has published
extensively in scholarly journals such as Organization Science, Journal
of International Business Studies, Organization Studies, International
Journal of Industrial Organization, Management International Review
and Industrial and Corporate Change. He is the editor of the Collected
Papers of Edith Penrose, on the editorial boards of Organization Sci-
ence, Organization Studies and Management International Review
and a guest editor for Organization Studies, Corporate Governance,
International Business Review, Management International Review and
Industrial and Corporate Change (on the theory of the fi rm, globaliza-
tion, international business, regulation, global governance and global
fi nance). Christos has researched, consulted and co-ordinated projects
for many governments, the European Commission, the United Nations,
USAID, the Commonwealth Secretariat, and the private sector. He has
been visiting professor in Europe, Russia, China, Latin America and
the United States (for example, Berkeley, Copenhagen Business School,
160 Contributors
MIT, China-Europe Management Institute, University of St. Petersburg).
Since 1999 he is included in the Marquis Who’s Who in the World.
Michael Pollitt is a University Reader in business economics at the Judge

Business School, University of Cambridge and director of studies in eco-
nomics and management at Sidney Sussex College, Cambridge. He is
an assistant director of the ESRC Electricity Policy Research Group. In
2007 he was appointed as external economic advisor to Ofgem, the UK’s
energy regulator. Since early 2008 he has been a member of the New
Zealand Commerce Commission’s expert panel on input methodologies
for the regulation of electricity, gas and airports. He has been convenor
of the Association of Christian Economists UK since 2000.
Pollitt holds a BA in economics from Cambridge and an M.Phil. and a
D.Phil. in economics from Oxford. He has been a fellow of Sidney Sus-
sex since 1994. On business ethics, he works with Ian Jones (Center for
Business Research, Cambridge) and is the co-author (with Ian) of Mul-
tinationals in Their Communities: A Social Capital Approach to Cor-
porate Citizenship Projects (Palgrave, 2007) and co-editor of The Role
of Business Ethics in Economic Performance (Macmillan, 1998) and
Understanding How Ethical Issues Develop (Palgrave, 2002).
Vicky Pryce is a Senior Managing Director in FTI’s Economic Consulting

practice, and is based in the London office. Vicky joined FTI in Sep-
tember 2010 and leads on business economics, working with leading
companies on issues from corporate strategy to public policy. Prior to
this, she was Director General, Economics & Chief Economic Adviser,
Department for Business, Innovation and Skills (BIS), 2002-2010 and
Joint Head, UK Government Economic Service, 2007-2010. Vicky is a
member of the Secretary of State for Business Panel on monitoring the
economy and also a member of Vince Cable’s Business Advisory Group.
Before joining the civil service Vicky was Partner at London Eco-
nomics, Partner and Chief Economist at KPMG, Corporate Economist
at Esso Europe and Chief Economist at Williams & Glyn’s Bank (later
RBS). She was also instrumental in the creation of GoodCorporation, a
company formed to promote Corporate Social Responsibility.
Vicky is a visiting Professor at the CASS Business School, a fellow of
the Society of Business Economists, Adjunct Professor at Imperial Col-
lege Business School and a visiting Fellow at Nuffield College, Oxford.
She is on the Council at the University of Kent and on the Advisory
Board for the Centre for International Business and Management
(CIBAM) at the Judge Institute at Cambridge University. She is also a
member of the Standing Advisory Group of the Financial Reporting
Review Panel (FRRP), and of the International Advisory Board of Brit-
ish American Business Inc (BABI). She serves as a Fellow at the RSA and
a Freeman and Liveryman at the City of London and has just become the
Contributors 161
fi rst female Master of the Worshipful Company of Management Consul-
tants. She is also on the Board of Trustees at the Centre for Economic
Policy Research (CEPR) and Patron of “Pro-Bono” Economics.
David Roth is CEO of The Store–WPP (Europe, Middle East, Africa and
Asia). Roth started his career at the House of Commons working for a
Member of Parliament. He swapped the cut and thrust of politics for
the cut and thrust of advertising. He joined Bates Dorland as a strategic
planner becoming main board director for strategy and the managing
director of the consulting and digital divisions. Roth led the worldwide
retail and technology center of excellence for the international agency
group. After working as a management consultant, Roth joined King-
fisher’s B&Q plc one of Europe’s largest retailers sitting on the main
board of directors as UK and international marketing director. In 2008
he joined WPP as the CEO of The Store–WPP Global Retail Practice for
EMEA and Asia. A frequent keynote speaker, international lecturer and
author, he is also the host of The Store TV an on-line retailing maga-
zine program. Roth is a non-executive director of TFT the Geneva-based
NGO which specializes in supply chain best practices that are socially
responsible and protect the environment.
Jochen Runde is Director of the MBA program at Judge Business School.

He is co-editor of the Cambridge Journal of Economics and a member
of the Cambridge Social Ontology Group (CSOG) and the Centre for
Process Excellence and Innovation. He is a former Fellow of the Cam-
bridge-MIT Institute (CMI), where he served as associate director of the
Professional Practice Program (2001–2003) and director of Graduate
Programs (2003–2005). He has also served as director of Programs at
Judge Business School (2007–2008), on the Cambridge University Board
of Graduate Studies (2003–2008), and as an author and consultant to
Interactyx, a company that produces interactive electronic books, digital
media players and course management systems. Jochen has taught at
Judge Business School since 1999, prior to which he was a fellow and
lecturer in economics (1992–1999) and Doris Woodall Research Fel-
low (1991–1992) at Girton College, Cambridge. Before moving to Cam-
bridge, Jochen taught at the Department of Economics, University of
the Witwatersrand, in Johannesburg (1984–1990). His research interests
include the development and commercialization of digital technologies;
the philosophy of economics and the social sciences more widely; social
ontology; probability, uncertainty and rational choice theory; Austrian
economics and the economics of institutions.
J. C. Spender is currently Svenska Handelsbanken Visiting Professor at the

School of Economics and Management, Lund University (Sweden) and
Visiting Professor ESADE/Universitat Ramon Llull (Spain). He is also
162 Contributors
visiting at Open University Business School, Cranfield School of Man-
agement, Leeds University Business School and the International School
of Management (Paris). He retired from full-time employment in 2003.
Spender obtained a B.A. and M.A. in Engineering from Oxford Uni-
versity, followed by a Ph.D. in Corporate Strategy from Manchester Busi-
ness School. Prior to Oxford, he served in RN experimental submarines.
On graduation he joined Rolls Royce & Associates to do reactor design
and development work on the UK nuclear submarine program. He then
moved to IBM as large account salesman and team leader, followed by
strategy consulting. He then pursued a career in investment banking,
but left to enter the Manchester Ph.D. program. His thesis was awarded
the U.S. Academy of Management AT Kearney Prize in 1980, published
as Industry Recipes (Blackwell, 1989). Spender has served on the fac-
ulties of City University (London), York University (Toronto), UCLA,
University of Glasgow, and occupied the Chair of Entrepreneurship and
Small Business at Rutgers (State University of New Jersey). After a year’s
sabbatical with the Advanced Technology Program (U.S. Department of
Commerce), he was appointed dean of the School of Management, New
York Institute of Technology and later dean of the School of Business
and Technology, Fashion Institute of Technology (SUNY), New York.
Sir Crispin Tickell is Director of the Policy Foresight Programme, James

Martin 21st Century School at Oxford University. Most of his career
was in the Diplomatic Service. He was Chef de Cabinet to the Presi-
dent of the European Commission (1977–1980), Ambassador to Mex-
ico (1981–1983), Permanent Secretary of the Overseas Development
Administration (1984–1987), British Permanent Representative to the
United Nations (1987–1990), and Warden of Green College, Oxford
(1990–1997). He is an author and contributor to many publications on
environmental, climate and related issues.
Index
A CEO, role of, responsibility 96

Advanced countries, democracies, Ceres and the Environmental Defence
economies 70, 72, 76, 78 Fund 86
Advanced Management Program Inter- Certification 105–106
national (AMPI) 7 China 3, 13, 15, 17, 23, 36, 42, 101,
Allocation of scarce resources 57–60 113, 115–116, 123–125, 136,
Anaerobic digestion (AD) 133 140, 148
Audit 21–22, 95, 109–110, 112–113, Christianity, Christian 24, 74–75
117–120, 123, 125–126–127, Circular Economy 112, 114–115, 133
130 Clausewitz 152
Clean Development Mechanisms
B (CDMs) 117
B&Q 99–101 Clean energy 13, 46
Best practices 102–103, 127, 135 Clean technology (“clean tech”) 83, 86,
Board 1, 5, 8–11, 21, 26, 94–97 92, 127
Brand, branding 5, 14, 21, 40, 43, Climate change 12, 16, 20, 24–25,
103–105 32–34, 45, 49–50, 67–78,
Business in the Community (BiTC) 22, 81–83, 85–87, 90, 115, 117, 131
86 Climate Change Act (2008) 49–50, 68,
Business services 84, 93 82, 90
Clusters 112, 115, 119–121, 123, 127,
C 128, 136, 138, 156
Capital 62, 70, 77–78, 91, 121, 128 Co-evolution 63–64
Capital, financial and natural 70 Collaboration 7, 23, 40, 101, 113, 118,
Capital, human 62 Combined Code of Governance (UK)
Capital (building), types: institutional, 20–21, 94–95, 97
relational, moral, spiritual 77–78 Competitive advantage 101, 119, 135
Capitalism, capitalist 23, 39–44, 61, Competitiveness, economic 2–3, 89,
104, 142, 148 112–113, 115–121, 123, 126,
Carbon emissions 13, 17, 32, 45, 129, 135–136, 156
48–51, 68, 70–73, 78, 81–91, Consumers, consumption, consumerism
106, 115, 129, 144, 148 17, 26, 34, 44, 47, 48, 55, 57,
Carbon footprint 16, 18, 81, 82, 86, 75–77, 82, 85, 87, 89–92, 98,
87, 91, 92, 110, 112, 115–117, 100–103, 126, 130, 137
123–125, 129–131, 136 Conversation, democratic, global
Carbon Disclosure Project (CDP) 86–87 146–147, 150, 153
Centre for International Business and Coop capitalism 42–44
Management (CIBAM) 1–12, Cooperative movement, enterprises
26–29 43–44
164 Index
Corporate governance 7–9, 12, 94 Executive 94, 96, 107–108, 120
Corporate Social Responsibility (CSR) Expert, scientific 73, 146
4, 20, 22, 82, 85–86, 90, 92,
98–99, 102–108, 110, 142 F
Crisis, financial, economic 5, 13, 16, Financial services 92
22, 34, 39, 42–44, 84–85, 102, Foreign direct investment (FDI) 2, 3,
136, 141 118
FTSE4Good Index 86, 106
D
Decarbonization 67–68, 70, 72, 74, G
76–78 Global greenhouse gas (GHG), emis-
Department for Business, Enterprise sions 13, 68, 72, 88, 90
and Regulatory Reform (BERR, Global Reporting Initiative (GRI) 107
now Department for Business, Globalisation 9, 23, 35, 39, 102
Innovation and Skills, BIS) 10, God 73–76
83 Governments 9–10, 15, 19, 23, 35,
Development, sustainable, economic 40–42, 76, 84, 102, 104,
14, 18, 20, 22, 24, 71, 171–118, 134
74, 76, 86, 92, 112, 115, 132, 135–136 Governance (see Corporate governance)
Differentiation 103, 127 Growth 13–15, 17–18, 34, 44, 50, 59,
Dow Jones Sustainability Index 86, 61–63, 68–69, 74, 84–85, 87,
106, 107, 89, 115–120, 123, 125, 128,
Dynamic capabilities (view) 63 130, 135–136
Gucci capitalism 23, 39–44
E
Eco design (EU Directive) 48 H
Ecology 18, 25, 112–116, 125, Heat pumps 46
129–130, 133, 141–142 Higgs Review 94–97
Economizing 52–64 HSBC Climate Change Benchmark
Edelman 104 Index 86
Education 15, 17, 19, 54, 101, 125– Human (beings), agency, bahavior,
126, 129, 131, 133, 147 condition, nature, psyche 15, 16,
Efficiency 16, 48, 83, 90–91, 100, 115 25, 32–38, 40–41, 43, 53, 56,
Energy, renewable, wind, solar 15, 17, 75–76, 98, 142–153
19, 33, 45–46, 82, 85, 91, 125, Human development index (HDI) 18
129, 133, 136–138 Humanity (see Capital, human)
Energy consumption, usage, deple-
tion, cost, challenge 19, 24, 33, I
45–51, 72, 115, 117, 124, 126, Industrialization (see also Industrial
129–131 revolution) 35, 74, 102, 113,
Energy Performance Certificate 46 115–116
Enlightened Shareholder Value 90 Industrial organisation (IO) 62, 64
Entrepreneurship, Entrepreneurialism Industrial revolution 31, 32, 72
112, 115, 117, 123, 156 Infrastructure 16, 88–90, 112–113,
Ethical Trading Initiative (ETI) 92 115,117, 125–126, 130–131, 133,
Ethics (morality), ethical behaviour, 135–136
moral values, norms, capital 4, Innovation 16, 18, 52–53, 58, 60–64,
7, 9, 14, 21, 24, 38, 41, 67–69, 89–90, 103, 112, 115–117, 119,
72, 74, 77, 78, 92, 99, 102–111, 121, 123, 127
142, 146, 149, 153 Institutions 37, 39, 43–44, 52–53,
EU Emissions Trading Scheme (ETS) 59–64, 74, 76, 113, 118–119,
50, 77, 81, 84 129, 134, 136, 148
Evolution, co-evolution 31–32, 36–38, Integrity 14, 77, 103, 108, 111
63–64, 151 Internalization 84, 88–89
Index 165
International Fairtrade Labeling Orga- New Electricity Trading Arrangements
nization (FLO) 92 (NETA) 19
Islam 9, 15, 36, 75, 150 New models (of economics, develop-
Islamic banking (see Islam) ment) 41, 43, 113, 116, 117
NGOs 8, 14, 15, 24, 100, 102
J North Sea oil and gas 45
Judaism 74–75
Judge Business School 1,6–8, 11–12, 29 O
Office of Fair Trading 107
K Oil 13, 21, 45, 50, 105, 108, 141
Knowledge 2, 4, 7–10, 37, 59, 61–64,
74, 97, 116, 142–153 P
KPMG 26, 106 Pareto efficiency 57, 63
Kyoto Protocol 12, 16, 114, 117 Perfect competition 57–58, 61
Philanthropy 14, 22, 99, 101
L Price signals 19, 48–50, 88
LED lighting 45 Proctor & Gamble 101
Legal commitments, requirements, Profitability 96–97, 99
structures 15, 60, 68, 82, 85,
111, 117, 137, 148, 151, 153 R
Low-carbon technologies, economy, Radical doubt 143–144, 152
industrial strategy, future 13, 15, Rationality (bounded) 143–149
16, 19, 25, 45, 47–50, 81–84, Re-branding 21, 104–105
88, 90, 91, 92, 129, 130, 155 Recession 12, 24, 39, 42, 44–45
Low Carbon Industrial Strategy 2009 Rees, Lord 33
(UK) 91 Religion (See also Christianity, Islam,
Low Carbon and Environmental Goods Judaism) 5, 9, 24, 33, 67, 74–76,
and Services (LCEGS) 83 78, 142–143
Low Carbon Trajectory 129 Renewable energy (see Energy)
Low Carbon Transition Plan 91 Resource-based view 63
Low Carbon Transport Strategy 91 Responsibility (See also Corporate
Low Emission Strategy (LES) 131 Social Responsibility) 14–15,
Low Emission Zone (LEZ) 137 20–23, 35, 40, 74, 77, 82,
85–87, 90, 92, 96, 98, 99,
M 102–108, 110, 142, 147, 158,
Marginal abatement cost (MAC), curve 160–161
analysis 13, 16, 89–90 Review of the Economics of Climate
Market structures 50, 52–53, 56–59, Change (see Stern Review)
62–64 Risk assessment, management, matrix
Marketing 14, 25, 87, 93, 100, 103, 12, 17, 21, 68–69, 85, 94–97,
116, 123, 161 108, 110, 135
Material welfare (see Wealth) Rhetoric 147–153
Microgeneration 46, 51 Robbins, Lionel 52–64
Mitigation 21, 70, 96, 158
Morality (see Ethics) S
Multinational enterprises (MNEs) 2–3, Scarce means, resources, commodities
9, 21, 77, 109, 156 53, 55, 57–60
Small and medium sized enterprises
N (SMEs) 19, 89, 91–92
National Retail Federation 101 Smart grid, meters 46, 49, 51
The Nature and Significance of Eco- Social Discount Rate 24, 68, 71
nomic Science (NSES) 52–54 Spatial planning (see Infrastructure)
Neoclassical economics, theory 52, 55, Special Economic Zones (SEZs) 112-
56, 61–64 136
166 Index
Stern Review 17, 24–25, 67–73, 88 U
Strategizing 62–64 United Nations Environment Program
Supply chain 14, 45, 50–51, 82, 84, (UNEP) 83
89, 92, 99, 100, 110, 112, 129, University of Cambridge 1, 6, 7, 8, 28
131, 161
Sustainability, environmental and V
economic 9, 12, 14–15, 18–20, Vico, Giovanni Battista 151
44, 49, 52, 75, 77, 78, 86, 92,
94–108, 113–128, 134–136 W
Sustainable development 14, 18, 20, 22, Walmart 100–101
24, 74, 86, 87, 92, 115, 135. See Wealth 9–10, 12, 18, 26, 35, 42, 43,
also Development 52–54, 64, 69, 148
World Bank 112, 116, 140
T
Transparency 14, 77, 92, 102, 110 Z
Trust, distrust 73, 76, 86, 102, 104, 107 Zero-carbon 45, 49, 51

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Green Business, Green

Values, and Sustainability

1. Corporate Governance Around

2. Behaviour and Rationality in

3. The Value Creating Board

4. Corporate Governance and

5. Internal and External Aspects of

6. Green Business, Green Values,

Edited by Christos N. Pitelis, Jack

New York London

Simultaneously published in the UK

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2011 Taylor & Francis

Trademark Notice: Product or corporate names may be trademarks or registered trade-

Library of Congress Cataloging in Publication Data

ISBN 0-203-82808-9 Master e-book ISBN

ISBN13: 978-0-415-88382-5 (hbk)

List of Illustrations vii

1 CIBAM and the Symposium on

2 Humans: Then, Now, and Looking Ahead 31

3 The End of Gucci Capitalism 39

4 The Energy Challenge 45

5 Economizing, Innovating and Sustainable Economic

6 Green Values in Communities: How and Why to Engage

7 Green Business and Green Values:

9 Doing Good Is Good Business 98

10 Demonstrating Goodness 104

11 Sustainable Special Economic Zones: A Call to Action 112

12 Considering Green Business and Green Values 141

List of Contributors 155

6.1 The Suggestions for a Global Deal on Climate Change 71

8.1 A risk matrix. 96

11.1 Distribution of private sector and public sector zones

11.2 The composition of a region’s traded industry clusters. 120

11.3 Plastics subcluster. 122

11.4 Carbon footprint of example Chinese SEZ. 124

11.5 Comparative analysis of countries (per capita). 124

11.6 CO2 emissions reduction from 2007 baseline (cumulative). 129

11.7 Potential reduction of individual interventions. 130

11.8 The development life cycle and resource and waste

11.9 Illustration of resource exchange network. 134

12.1 Field of green 148

12.2 Principal modes of human knowing. 151

CIBAM AND THE CIBAM GLOBAL BUSINESS SYMPOSIA

CIBAM’s Identity and History

• The nature, growth, boundaries and strategies of MNEs, to include

Identifying the focus, joint interests and complementarities, and aim-

THE SYMPOSIUM ON “GREEN BUSINESS

This section provides a summary of the Symposium’s proceedings; it has

First Day—Thursday, 19 February 2009

Opening Panel: “Green Business and Green Values: Issues”

Myth 1: We can wait.

Myth 2: We should fi x the economy fi rst.

Myth 3: Reducing emissions will cost too much.

Myth 4: Reducing emissions will reduce growth and cost jobs.

Myth 6. Markets and regulations are in opposition.

“Doing Good Is Good Business”

“Islamic Banking and Sustainability”

“A Role for Government”

Second Day—Friday, 20 February 2009