From: Lindseyrobinson@aol.com
Sent: Friday, January 16, 2004 4:21 AM
To: amadei@colorado.edu
Subject: Could I publish my clip on your website Prof. Amadei?


Lindsey Robinson
Engineers Without Borders
303-442-2460

Substantial Dividends For Sustainable Development-A Common Heritage Trust


While globalization has increased wealth for first world nations, and disproportionately for third world nations, "the market system has now reached an impasse that is unsustainable economically, socially and environmentally," said Koben Christianson, author of the World Business Council for Sustainable Development’s Report, Sustainability through the Market: Seven Keys to Success.

"Globalization without coherent and appropriate global governance mechanisms is not sensible. Markets depend on a stable and supportive framework of public policy, laws, regulations and market incentives put in place by governments on behalf of society that help determine proper market behavior," said Christianson.  The benefits of a free society and an open market system will collapse under its own weight if corporate governance, pricing the long-term basis for sustainable growth and enlightened self interest aren’t factored into the value of stock market listings, products and services, or civil society. Re-inventing price theory modeling, the future discount rate, price transfer or cross subsidizing principles, together with better informed consumer choice, innovation, efficiency and equitable wealth generation to incorporate sustainable development and expand globalization‘s benefits are principles redefining how wealth is created. Sustainable development and enlightened self interest need not be mutually exclusive.  

According to the World Summit on Sustainable Development Report, "sustainability is hindered by monopolies, corruption, perverse subsidies, and prices that do not reflect real economic, social and environmental costs. Legislation and regulations should promote competition, effective intellectual and physical property rights, reliable contractual terms, fair and transparent accounting standards, accountability for government intervention using tax incentives to fair subsidies, freedom and democracy, and full-cost pricing of goods and services." Indeed, the Summit even recommended that to attain a NYSE listing should require sustainable development integration regulations between government and business during the screening process, and sustainable taxation credits as incentives. Even innovative ideas like using the future cash discount rate and Black-Scholes price modeling for futures (to protect salmon fisheries, oil drilling, agriculture, carbon dioxide emissions and forestry) should be built in to shareholder and stakeholder value, where the market place spurs competition and innovation, while promoting sustainable development.

"Wealth creation should be synonymous with sustainable market behavior. Once the rules of the game are adapted to encourage sustainable development, the market will handle the rest," said the report. The Dow Jones’ innovative Sustainability Indexes reveals that corporations leading the environmental sustainability and ethics movement are already receiving the benefits in increased long-term shareholder value. Hopefully, by reducing income taxes for sustainable accounting practices by private pension funds,  while penalizing pension funds that don’t, institutional investors will follow suit as governments provide new carrots and sticks to change their behavior. Such recent UK Pension amendment regulations have changed the environmental/social strategies of  21 of the top 25 UK pension managers, who control funds worth approximately one-third of  all UK stock market investments, while increasing capital allocations to environmentally and socially ethic companies.

Likewise, ECAs or Export Credit Agencies of OECD countries (and potential  aggregate global ECA budgets), overseeing a $100 billion USD yearly budget, are the breeding ground for trade subsidy reform. ECAs combined budgets exceed that of the World Bank, the International Monetary Fund and all regional development banks. They must take the lead to establish environmentally sustainable investment standards, transparency and public accountability.

While Sustainable Development should become the "modeus operandi" for a global market system and intra-government exchange that insures equitable environmental protection and social equality for intellectual and physical property rights, as well as growth and economic advancement to all nations, "we presently have no way of legitimately balancing public goods and private interests at the international level," said Christianson. Enacting a future discount rate to protect the environment of fisheries, forests, farming and oil reserves, in its current state is adversarial to sustainability where future revenues are discounted disproportionately.  Since no resource grows exponentially indefinitely into the future, the Summit argues neither should such discounting of resources. The discount formula and the discounted resources rate should match real resource growth, as well as the cost of replenishing it or maintaining its sustainability reflex level.

It isn’t market failure per se, it’s the absence of effective markets, as well as the inequity that over 2.8 billion people in the world live on less than two dollars a day, and have no such access to the market system. We must create new markets where none previously existed, or reinvent existing markets. The Global Reporting Initiative aims to promote corporate transparency  standards on a global scale, dismantle unethical conduct like corruption, inequitable resource allocation and the current stakeholder mentality of corporate welfare and special interest. Through effective legislation and enforceable regulations, businesses and governments can simultaneously reward competition and the free enterprise market system, while promoting sustainable development, innovation, greater efficiency, informed consumer choice and increased shareholder value.  

To do so market regulations must encourage transparent operations and penalize collusion, discourage unhealthy subsidies (America’s $300 billion to farmers), and reprimand dumping, price transfer and cross subsidies the skirt  the fair and true value of goods and services, or further marginalize the poor.  Through market mechanisms and tax incentives, an alliance between multinationals and sovereign states can achieve desirable social outcomes and sustainable development. Examples like the Marine Stewardship Council who campaigned for sustainable international fishing created a Black-Scholes options theory formula that successfully reduced the cost of hedging salmon futures, rewarding environmentally conscious fishing communities that practice sustainable fishing. The same goes for forestry to carbon emissions, to the environmental degradation costs of setting up military bases abroad.  

The International Society for Ecological Economics valued 17 ecosystems services, estimated the world’s ecosystem services and natural capital value to be $16-54 trillion per year, averaging $33 trillion per year. Comparable to the world’s cumulative GDP value, the ecosystem still plays a role outside the market system. Under the UN Framework Convention on Climate Change, the fellowship established a market for carbon "sinks" that, "in addition to reducing atmospheric concentrations of carbon dioxide, making carbon sequestration economic would create a legitimate, quid pro quo, North-South wealth distribution mechanism. Carbon payments could, for example, make sustainable forest management a profitable endeavor for local communities living in and around the forests of the developing world. Furthermore, a market for carbon sequestration as an ecosystem service would also reduce the threats of unsustainable land clearing and biodiversity loss."

Another environmentally conscious coalition for corporate social governance, the Business for Social Responsibility, representing 1,400 companies introduced the Sky Trust that aims to regulate carbon emissions, by allowing the market to set prices on carbon emissions, generating revenue by emission rights bought and sold, and returning profits to "owners of the sky." Its founder, Peter Barnes exemplifies the principles of corporate governance focusing on "transparency, equitable treatment, responsibility, and accountability…. Ford  Motors announced that it will require all of its manufacturing suppliers, some 5,000 worldwide, to become certified. By the end of 2001 each and every supplier, if they want to retain Ford’s business, will have to have at least one of their manufacturing sites ISO 14000 certified. By July 2003, Ford will require all such suppliers to have certified all their sites," according to Barnes. General Motors followed suit affecting over 5,000 of their suppliers worldwide.

Likewise, Differential Pricing and Financing of Essential Drugs, organized by the Norwegian Ministry of Foreign Affairs, the World Health Organization and the World Trade Organization, represented another alliance between government and business to promote sustainability helping impoverished nations fight disease, while promoting self sufficiency and civil society.

Not too surprisingly, the free market system is already implementing such mechanisms for sustainable development through innovations that practice eco-efficiency,  for example, enhancing value with less impact used in precision farming that increases crop yields 2% a year through global satellite positioning, bio-engineering that grows stronger crops more resistant to pests, improved fertilizers that are less environmentally harmful, improved irrigation, and soil conservation. Favorable policies include partnerships between stakeholders, governments and  better informed consumers who believe in improving the quality of life, protecting the environment and paying fair value. These enlightened self- interests raise impoverished countries through fairer trade, and improve environmental and labor laws for imported products from third worlds who are often marginalized or excluded from the global market place altogether.

Sustainable-minded companies’ brand recognition thus achieve a "triple-win" improving the quality of life for the poor, while rewarding ethical behavior through increased shareholder and market share value, and a civil society that encourages change. "If structured properly, markets can be the most potent force for positive social transformation in the world," said Christianson.

Over the past few decades, corporations conducting international trade has risen from 7,000 to over 40,000. "Today, 90% of the world’s nations participate in a market-based economy where many restrictive barriers to trade and capital mobility have been dismantled. As a result, levels of trade among nations, currency exchange, and foreign direct investment have boomed." Even though there is much work to be done to bridge the gap in the quality of life between first and third world nations, increased  life expectancy and literacy,  reduced infant mortality rates, and access to safe drinking water among the poorest three billion people on earth has improved significantly," said Christianson.

In order for the market place to become sustainably conscious, it must rewrite it’s earth worth matrix where accurate and projected price signals fairly represent resources, future opportunities,  and "the true environmental and social costs of goods and services," said Christianson. "Proper valuation will help maintain the diversity of species, habitats and ecosystems, conserve natural resources, preserve the integrity of natural cycles, and prevent the build-up of toxic substances in the environment, requiring businesses to act on opportunities and responsibilities," he added. Unfortunately, "the integrated and interdependent nature of our new global challenges and issues contrasts sharply with the nature of institutions that exist today. These institutions tend to be independent, fragmented and working towards relatively narrow mandates with closed decision processes," said Gro Harlem Brundtland, World Summit speaker.

Together the Brundtland Commission and Koben Christianson’s World Business Council for Sustainable Development’s Report, Sustainability through the Market: Seven Keys to Success include a number of  recommendations: reform the use of the future discount rate, promote ethical competition by qualifying capital market access, earmark multilateral and bilateral  aid for non-OECD micro and medium enterprises, improve corporate governance and transparency by advancing independent third party audits and aligning corporate lobbying business practices through regulating their special drawing rights commitments that reward environmental performance, sanction product labeling for carbon intensity, advance third world intellectual and physical property rights and market participation, encourage technology transfer, introduce differential pricing schemes and tax reforms that reward sustainable conscious institutional investors, dismantle unfair subsidies and ensure export credit policies through regulatory accountability that are consistent with sustainable development, set milestones and performance targets that reward shareholder value with sustainable performance, invoke covenants and codify stakeholder conduct and standards throughout procurement that provide sustainable development incentives, and redefine macroeconomic indicators, stakeholder and shareholder value that both commit to environmental preservation, while spreading the wealth for all. "Now, more often than not, companies are also being pushed to demonstrate ethical quality and a basis for consumer trust that advances a well-functioning democracy, informed consumer activity, media attention, pluralist interest-group lobbying, and formal legislation  working together to promote transparency," said Brundtland.

We no longer have to live by the global rules of a zero-sum game that disenfranchises non-OECD countries for the disproportionate wealth of first world nations.  "That requires aligning the profit motive that guides market participants with the sustainability considerations that ought to guide the setting of market rules, where profit motives that drive global interdependence are allowed to bring about planetary sustainable development," said Christianson. "We need to take a global and integrated approach to achieving sustainability. A whole system understanding of the market can lead to the establishment of a transparent economic system that works for all," added Chad Holliday, Chairman and CEO, DuPont.
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