Friday, October 4, 2013

Should Green Apply to the Brown Economy?

A new report suggests that brown industries should be encouraged to participate in the green economy. According to a TD Economics report titled "The Greening of the Canadian Economy," released on October 2, 2013, Canada's "green economy" is too narrowly defined and as a consequence it risks excluding of some of the sustainability efforts being made by many 'brown' companies, such as those in oil and mining.

The report calls for a new, holistic approach to better evaluate and measure environmental performance across all sectors and suggests Canadians should change the way they think about the relationship between the environment and the economy from a green-brown dichotomy to a more balanced and broad-based approach through "the greening of the economy."

The report correctly points out that the term "green" is nebulous and describes a wide range of activities, it lacks a standardized definition, making it difficult to measure and assess progress. Narrow approaches to defining the term often result in nominal descriptions of industries as either 'green' or 'brown.'

"Canadians should rethink the relationship between the environment and the economy. Rather than viewing environmental progress and economic growth as being conflicting objectives, acknowledging the progress being made on both fronts can be empowering and creates promise that even more can be achieved," said TD's Chief Economist, Craig Alexander.

The TD Report recommends an approach which measures "the greening of the economy," including efforts designed to increase operational efficiency and minimize environmental impact. The Report advocates a four-step approach that is applicable to all sectors of the economy:

1. Regulatory compliance
2. Managing operational efficiency
3. Environmental improvements through the supply chain
4. Creating new products and services.

Rather than make comparisons between industries, the report suggests that benchmarks should be found and made within industries.

"Canada needs to do more on conservation, emissions, sustainability," said Karen Clarke-Whistler, Chief Environment Officer, TD Bank Group. "But this report demonstrates that the environment is a key component of the economy. By measuring the 'greening' of the economy we have a means of measuring our progress."

While reducing environmental impacts are positive, there are serious problems with the approach advocated by this report.

1. Even if improvements are made, the approach suggested in this report ignores major sources of environmental harm. While measuring improvements in efficiency and supply chains may be laudable, it can also obscure the harm done by some industries by virtue of the impacts irrevocably embedded in their core activities.

2. Further by forgoing comparisons we ignore the relative merit of some industries over others (eg fossil fuels and renewable energy).

3. When an industry is located in a country with a lax or unenforced regulatory environment (such as Canada), compliance does not mean much.

4. Canadians are among the least environmentally concerned people on the planet, consequently it is environmentally disadvantageous to further dilute Canadian attitudes on corporate responsibilities by drawing attention to relatively insignificant initiatives.

5. If we were to follow the suggestions offered by the report, we would be making some of the companies appear much greener than they actually are. In effect we would end up legitimizing what amounts to greenwashing.

While it is imperative that we standardize definitions of terms like 'green' and 'sustainable' we can come to a better understanding through comparative assessments between different industries. In a capitalist system it this type of competition that allows the free market to do their work. Businesses compete on issues like price and they are starting to compete on efficiency, emissions and other environmental impacts. This will have maximum effect once we assign a price to carbon.

The TD Report advocates an approach that moves our thinking in the wrong direction. Destructive industries are looking for a way to identify with the green movement and the sustainable business revolution that is taking hold around the world. While most industries can be made cleaner, others are just too dirty to be redeemed. As the driving force behind climate change fossil fuels are a prime example. No matter what sustainability initiatives are introduced by oil companies, there is no way to stay within the upper temperature thresholds without ending our burning of hydrocarbons.

Simple put we need to embrace a science based understanding, not an approach that lends itself to more marketing subterfuge. The only way to combat the climate crisis is to ensure that the majority of remaining fossil fuels remain underground. To do this we need to muster political will, to generate the political will we need to expose environmental impacts.

Following the recommendations of the TD Report would lengthen the life span of our addiction to oil by making them seem more responsible than they could ever hope to be.

Canadians and people around the world need to come to a better understanding of the calamity that will follow the ongoing exploitation of hydrocarbons. The quicker we understand the facts the sooner we will be able to wean ourselves off petrochemicals and massively support emissions free renewable energy.

We cannot hope to win the war against climate change if we allow the brown economy to call itself green. 

To read the full detailed TD report and analysis of industries click here.

© 2013, Richard Matthews. All rights reserved.

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