7 Business, Capital and Sustainable Economic Development Martin Purvis – Exploring Sustainable Development


Business, Capital and Sustainable
Economic Development

Martin Purvis


Historically, economic performance has been a crucial measure of a region’s success and state of development. Societies and individuals have sought to maximize economic growth, industrial production, employment and material living standards. Few have questioned this construction of progress and development. Yet there are, invariably, social and environmental costs to be set against the benefits of economic development. During the 1960s and 1970s, attention to these costs led environmentalists to argue for the necessity of setting limits to economic growth. The agenda of sustainable development, however, makes a rather different case, not for curbing growth, but for a fundamental change in its nature. Such ideas have been endorsed as the basis for future economic development by many national governments and the European Union (EU). The reframing of development has also inspired a revision of attitudes to business. Optimistic analysts now proclaim that business innovation can contribute positively to more sustainable development. Hence, Agenda 21 seeks to encourage business stewardship of the environment and resources, as well as an increasing commercial involvement in the design and implementation of sustainable development policies.

The chapter begins by reviewing the environmental impacts of modern industrial economies and the role of business in both the creation and solution of environmental challenges. It then explores arguments that it is in companies’ own commercial interests to adopt environmentally responsible behaviour and claims made that business efficiencies can deliver a change in the quality of economic growth that will make it environmentally sustainable. The win–win argument that simultaneous commercial and environmental gains are possible must, however, be subject to critical scrutiny. Thus, the chapter proceeds to question the claims made for business initiative and to consider how well the ideals of sustainable development accord with existing commercial priorities. The complexities of sustainable development are further revealed by the final section, which refocuses attention away from individual businesses to examine aspects of the broader character of economic growth under capitalism. The supposed incompatibility of global capitalism with sustainable development has led some to argue for alternative, localized geographies of economic activity. Such visions may appear impractical; but they help to identify the need for active political engagement in the process of making economic activity more sustainable.

Business and the Environment

Industrial modernity and the environment

Economic activity creates valued outputs of goods and services and, over the long term, has immeasurably increased the sum of human and man-made capital. Yet production is socially and environmentally disruptive, affecting both environmental quality and stocks of natural capital. Industry changes land use, eroding biodiversity and habitat. Manufacturing, in particular, consumes raw materials and energy, thus depleting the resource base. From these resources are produced not just the goods demanded by consumers, but also wastes and emissions to land, air and water. Bringing goods to market requires transport, again depleting resources and producing waste and emissions. Once in the hands of consumers, some goods and services require continuing inputs of energy and other resources to discharge their functions. Ultimately, nearly everything that we acquire is disposed of as waste (El-Fadel et al, 1997).

Concerns about environmental quality and resource depletion are not peculiar to the modern era; but they became more serious with the onset of large-scale industrialization (Brimblecombe, 1987; Sheail, 2002; Simmons, 1996). Since the late 18th century, the scale of industrial activity has increased markedly, not only through new growths, but also with the transformation of key sectors of the pre-modern economy, including agriculture (Bairoch, 1982; Grigg, 1992; Landes, 1969; see also Chapter 8 in this volume). Industrial development has spread internationally, but within this expansion the urbanization of production and population has concentrated the effects of environmental change in particular localities (Berry, 1990; Gugler, 1996; Knox and Agnew, 1998; see also Chapters 5 and 6 in this volume). The economy’s relationship with the resource base of natural capital has also been transformed. In the pre-modern era, industry drew chiefly upon renewable resources for its raw materials and energy. Over the past two centuries, however, its dependence upon non-renewable minerals and fossil fuels has increased strikingly (Humphrey and Stanislaw, 1979; Wrigley, 1988). Moreover, systems of production and consumption have become less localized (Chisholm, 1990). Cotton, a mainstay of industrial revolution during the 18th and 19th centuries, was the first major European industry to rely exclusively upon an imported raw material (Chapman, 1987). Subsequently, both materials and finished goods have become traded in greater quantities over longer distances. Thus, by 1991 the energy used globally in freight movement by shipping equated to the total consumption of the economies of Brazil and Turkey combined. Freight movement seems set to increase further in the 21st century, with air freight, its most energy-intensive form, growing particularly fast (Goldsmith, 1999; Menotti and Sobhani, 1999).

Current environmental concerns reflect mounting evidence that the damage caused by economic activity extends beyond localized pollution or resource depletion, to global problems of biodiversity decline and climate change (see Chapter 11). This is an aspect of a wider societal re-evaluation of modern industry’s engagement with science and technology. Once seen as the very foundation of progress, science and the businesses that employ it are argued to have forfeited public trust and become associated with threat and risk (Beck, 1992). Yet there has been no simple link between increasing environmental damage and the economic growth of the past two centuries. New industrial technologies have contributed to rising public perceptions of risk and environmental change. But at the same time, industry’s own commercially inspired search for cost savings has increased the efficiency of resource use by established sectors. In trades such as steel, making each unit of output currently demands only a fraction of the input of materials required a century ago and production creates less waste. Technological innovation has also extended the resource base, relieving economic and environmental concerns about over-exploitation and exhaustion of traditional raw materials. In the process, profitable new industries, such as petrochemicals, have been created, based on reserves with a previously unsuspected economic potential. Innovative products and technologies have also weakened the links between product value and the physical consumption of materials. The industrial achievement of the mid 20th century was embodied in the motor car, in which materials accounted for 40 per cent of product value. By contrast, the microchip, as the foundation of a new era of information technology, derives only 0.3 per cent of its worth from its material basis (Myers, 1997).

The challenge of future growth

Although some encouragement can be derived from the increasing efficiency of resource use and curbs on pollution in the developed world, both economists and environmentalists identify the next half century as a particularly challenging period. Their concerns about the potential environmental effects of economic activity reflect the prospect that any efficiency gains will be swamped by the growth of production and consumption. A five to tenfold increase in economic activity could be required by the mid 21st century to provide basic amenities for a global population twice the current total (Hart, 1995). As more of the world’s peoples aspire to the heights of material consumption now found in North America, Western Europe and Japan, demand will increase still more sharply (Stern et al, 1997). Yet substantial economic expansion using existing technologies and production methods will not be ecologically sustainable.

Change without growth is, of course, possible. Existing levels of economic output might be redistributed so that the needs of all the world’s people are met (see Myers, 1997). The message of sustainable development promoted in the Brundtland Report, however, is that such limits to growth are unnecessary and unhelpful (WCED, 1987). Economic growth is to be encouraged in both developed and developing countries as the best means of meeting basic and universal needs for food, clean water, fuel and shelter; to fund social investment in education, health and welfare; and to pay for initiatives to enhance environmental quality. However, the character of economic activity must be transformed. Existing efforts to promote resource efficiency and pollution prevention must be redoubled to decouple growth from increasing demands on the environment. In addition, the ideal of sustainable development requires greater equity in the social and geographical distribution of economic growth and wealth, giving priority to improving the life chances of the world’s poor.

Sustainable Economic Development as Eco-efficiency

A role for business

Environmentalists have traditionally been hostile towards business, an antipathy often reciprocated. Much environmental argument has been characterized as anti-growth, anti-business and anti-profit (Elkington, 1994). Responses to environmental concerns have often been portrayed as imposing a brake upon development and innovation: increasing business costs and undermining competitiveness, jobs and living standards. By comparison, the notion of sustainable development seems much more likely to resonate with business. Indeed, some commentators have allotted business a crucial leadership role in promoting sustainable development, arguing that major corporations are the only institutions with the financial resources, technical knowledge and institutional capacity to facilitate the necessary change (Hart, 1995; Holliday et al, 2002; Marcil, 1992; Shrivastava, 1995). These claims echo wider changes in the framing of the functions of business and its relationship with government. The past quarter century has seen a retreat from direct economic management by the state. Greater emphasis is now placed on innovative business behaviour in response to market stimuli as an important means of promoting environmental and social welfare, as well as economic progress.

Hence, definitions that characterize business as functioning primarily to generate profits for the owners of capital, are being challenged by formulations that highlight relationships with broader constituencies of stakeholders (Blair, 1998; T Clarke, 1998; Wheeler and Sillanpää, 1997; for an alternative perspective see Vallance, 1993). The links between a business and its stakeholders – including customers and suppliers, employees and their families, and the local community – need not be directly financial. But just as stakeholders are affected by a company’s operations, so they themselves influence business performance. Cooperation, rather than confrontation, between business and stakeholders may thus prove mutually beneficial. Environmental issues may forge business–stakeholder links; but the natural environment can be constructed as a stakeholder in its own right (Starik, 1995; for a counter-argument see Phillips and Reichart, 2000). Either way, a positive reading of this redefinition of business functions is that it should encourage the ‘greening’ of business, as companies pay greater attention to their own environmental impacts and construct more positive relationships with environmental campaigners (Enmarch-Williams, 1996).

Benefits to business

Advocates of business greening indicate that their reforms will protect the environment by mitigating resource scarcity, reducing energy consumption and curbing demand for waste disposal (Craighill and Powell, 1996; Howes et al, 1997). But equally important are claims of enhanced business profitability and growth (Elkington, 1999). Eco-efficiencies and improved resource management systems can reduce production costs, protect the supply of essential inputs and curb pollution damage to economically valuable assets. Environmentally irresponsible behaviour is thus presented as being against the self-interest of business. The risk that individual companies will evade this collective responsibility is reduced by legislation setting out common minimum standards of environmental practice and penalties for non-compliance. Prosecution for breaching legislative standards imposes direct costs upon business in the form of fines and liability for environmental restoration. Still more damaging to a company’s performance may be a loss of confidence by customers, investors and insurers if it becomes known as an environmental ‘criminal’.

At the very least, therefore, compliance with environmental legislation seems to make commercial sense. However, enthusiasts for business greening argue that companies benefit from voluntary efforts to raise standards still further (Elkington, 1994; Howes et al, 1997; Roome, 1992). In part, this reflects a tactical calculation that business initiative allows it to define progress in its own terms, reducing pressure for further environmental regulation (Beder, 2002). A more positive argument, however, is that companies which take environmental initiatives can reduce costs and increase their competitive advantage and market share (Azzone and Bertelè, 1994). New business opportunities may be created as consumers and investors increasingly favour Green products and companies (Elkington, 1999; Hill et al, 1994; see also Chapter 11 for a discussion of ‘climate-friendly’ business).

Champions of eco-efficiency assert that over 90 per cent of materials bought and consumed within modern economic systems do not become part of saleable products and 80 per cent of products are discarded after a single use. If we accept these figures, the calculation that the wealth extracted from each unit of natural resources could be quadrupled seems credible (von Weizsäcker et al, 1997). Such arguments relate to wider visions of ecological modernization (Murphy and Gouldson, 2000; Simonis, 1989; Spaargaren and Mol, 1991; for a critical perspective see Hajer, 1995; 1996). These proclaim that current deficiencies in the environmental performance of industrial systems will stimulate new economic development and technical innovation. Commercial success will be built upon the adoption of effective environmental management strategies. The search for Green technologies and products is thus presented as a key motor of economic growth. Moreover, in an era of globalization, the opportunities for capturing emerging Green markets may extend worldwide. Environmental policy and the innovation it is deemed to inspire are thus argued to be a key influence upon the competitiveness of national economies (Porter, 1990; 1991).

Case studies of manufacturing and service industries allegedly attest to the technical and commercial potential of eco-efficiency in reducing costs and legislative liability, improving employees’ health and safety and promoting a positive company image (Dowie et al, 1998; Petek and Glavić, 1996; WBCSD, 2003). Dow Chemicals, for example, reports a 60 per cent return on pollution prevention investments (Hart, 1995). Such claims also feature in a growing literature aimed at business itself, which uses studies of existing initiatives to encourage other companies to follow their example (see, for example, DoE, undated; DoE, 1996b). Moreover, clean systems and technologies are themselves marketable commodities (Rompel, 1996). Environmental business is a growing sector, including companies specializing in pollution control, waste management, land de-contamination, recycling and production of renewable energy and raw materials. The European Commission estimated that there were over 1 million jobs in eco-industries within the EU in 1994 and that future output and employment growth will outstrip the rest of the economy (European Commission, 1997a). Globally, markets for environmental technologies and services were valued at US$335 billion in 2000 and are forecast to reach US$640 billion by 2010 (DTI, 2000).

Creating the sustainable corporation

The literature on business greening stresses the importance of integrated management, looking beyond the specifics of particular production processes for ways to cut waste and costs at source. This may involve the extension of tools and systems developed to improve products themselves, through total quality management to a new engagement with the environment (Hillary, 1997). Audits can be used to identify and monitor the full range of a company’s environmental impacts. Armed with this information, businesses may be able to develop more effective management systems for environmentally sensitive processes. Moves by individual businesses to establish environmental management systems (EMS) are supported by external agencies. The British Standards Institution (BS7750), the International Standards Organization (ISO14000 series) and the EU (Eco-Management and Audit Scheme or EMAS) all sponsor EMS (Hillary, 2000; Welford, 1995). In theory, at least, this ensures their effectiveness and legitimates claims made for a firm’s environmental performance.

Improvement in environmental management, however, is rarely a once-and-for-all change. As a base level of performance, companies must comply with legislation covering pollution control and the treatment and safe disposal of waste. Often this involves investment in ‘end-of-pipe’ technologies that trap, treat and dispose of emissions. Increasingly, however, more positive strategies of pollution prevention and waste minimization are being implemented. These may be consistent with existing technologies and products, requiring little more than good housekeeping, improved staff training and attention to plant maintenance to reduce waste and pollution. However, audits can reveal potential efficiencies requiring significant investment and changes in industrial practice. These might include waste sorting to recover elements for reuse, material substitution favouring non-toxic, recycled or renewable inputs, and adoption of clean technologies that conserve energy, water and other inputs throughout the production process (Hillary, 1997; Petek and Glavić, 1996).

To be effective, EMS must cover all aspects of a company’s operations, not just the most obvious core functions. Hence, new information technologies may be adopted, not just as tools to enhance business efficiency, but also as a means of reducing waste and pollution. Computer-based systems of communication and data storage raise the prospect of a paperless office and, together with innovations such as video conferencing, may reduce transport demand (von Weizsäcker et al, 1997). Purchasing and accounting departments can play an important internal role in promoting efficiencies in resource use (McComas, 1995).

For the longer term, research and development capacity should be applied to enhancing the environmental, as well as economic, potential of industrial systems. Some products can be redesigned to increase their eco-efficiency; others must be replaced with environmentally sound alternatives. In both cases, environmental considerations should be integrated into the design process, alongside issues such as quality, safety and ease of manufacture and maintenance. Design for environment stresses not only resource efficiency and clean production technologies, but also increased durability of the product in use and enhanced potential for repair, reuse or recycling at the end of its lifespan (Charter and Tischner, 2001; Fiksel, 1996). Ultimately, the basis of a company’s operations may be transformed as old products and functions give way to greener alternatives. Thus, mining companies are using their own experience in land reclamation and restoration to market environmental services and oil companies are reinventing themselves as energy providers, with interests in renewable resources and clean technologies (see Chapter 11; Rompel, 1996; Shell, 2000).

The new demands placed on product development reflect moves to calculate the total environmental impact of industrial products and processes. Every stage of the product life cycle must be considered, from extraction and processing of raw materials, product manufacture, distribution to consumers, product use, potential for reuse and recycling, through to final disposal. Life-cycle analyses are applied to both conventional industrial products and other sectors, including housing and recycling schemes (Craighill and Powell, 1996; Smith et al, 1997). Their use raises significant methodological difficulties in identifying and evaluating all environmental impacts. In setting this challenge, however, life-cycle analysis helps to explore the spread of economic activity’s environmental impacts across time and space.

The web of business

In the context of the product life cycle, the importance of a single company as the creator of that product may appear to be diminished. Different and geographically dispersed businesses may be responsible for producing raw materials and components that make up a finished product, and for transport and distribution functions. Subsequently, it is often the consumer who makes decisions about reuse, recycling and disposal. The complexity of production and consumption systems should not, however, absolve business of environmental responsibility. Rather, it sets new challenges to reach out beyond the workplace.

A key objective of design for the environment is to encourage the consumer to behave responsibly – for example, by creating a product that is long lasting, easy to use efficiently and can be recycled on disposal. Customers themselves, both domestic and corporate, may be active partners, keen to buy Green products and efficient technologies. This relationship can be consolidated through product stewardship programmes, where a company retains a lifetime interest in its products. It may offer advice and support, ensuring that health or environmental problems associated with use and disposal are minimized, perhaps including final recovery and recycling facilities. This approach has been pioneered by the chemicals sector, chiefly to address concerns about toxic materials. But producers of other goods, including motor vehicles and consumer durables, could complement design for recycling and reuse with direct involvement in product recovery for disassembly.

Product stewardship schemes may increase business involvement in encouraging sustainable consumption (Flaherty, 1996; see also Stern et al, 1997). The advertising and promotional power of business is also being directed to the sale of environmentally sound products and energy efficiency. However, more substantial challenges to the ethos of mass consumerism could prove difficult to accommodate within the business agenda. Suggestions that consumers, particularly the more affluent, should use products more efficiently and, ultimately, consume less are both controversial and at odds with established business aims of market expansion (Myers, 1997; Shrivastava, 1995; Vincent and Panayotou, 1997).

Businesses not only contract external relations through product sales, most are also buyers of components and raw materials. The scale of commercial purchasing has led to its identification as an important mechanism to promote business innovation. By setting quality standards for inputs and production systems, purchasing organizations may encourage diffusion of environmentally informed business practices and technologies (Green et al, 1996; Hill, 1997; New et al, 2000). Initiatives include moves to reduce packaging and transportation, and to increase the use of materials derived from environmentally sustainable sources. However, more ambitious schemes involving a coordinated assessment of opportunities and problems throughout the entire purchasing chain could yield greater dividends. Novel partnerships might also be forged as companies find new uses for the waste generated by other businesses. Where this extends beyond recycling of materials to projects such as reuse of waste heat and water, it is likely that economic integration will require spatial proximity. Hence, an ecological, as well as a commercial, logic may underlie the geography of economic development.

Such principles are embodied in the creation of eco-industrial parks in Europe and North America, bringing together complementary activities on a single site (Potts Carr, 1998). At Kalundborg in Denmark, for example, an oil refinery has become the focus of an industrial community. The refinery shares its coolant water with other companies, reducing consumption by 25 per cent, and provides waste gas to fuel a power plant. By-products from the power plant are used in the production of cement, road fill and gypsum wallboard. The excess steam produced during power generation is harnessed to heat local homes and businesses, including a fish farm (Ehrenfeld and Gertler, 1997). Combined heat and power schemes, sometimes fuelled by domestic waste, are also a potential tool for improving environmental efficiency in existing urban developments.

Indeed, Welford (1995) advocates extension of EMS to develop integrated local or regional policies. Ecological integration and other means to minimize environmental damage would become key elements of regional economic development policy, complemented by a coordinated programme of environmental rehabilitation. In principle, such a regional EMS could become a new basis for the construction of comparative economic advantage, as inward investment would be attracted to an area by its reputation for innovative and efficient management and high environmental quality. In practice, however, the necessary cooperation between businesses, local government and the wider community may be hard to achieve. Even within individual local authorities there is still more evidence of tension than of synergy between departments prioritizing conventional economic development targets and those concerned to protect local environments (Gibbs et al, 1998). Other attempts to incorporate the principles of sustainable development within regional planning for south-east England confirm the importance, but also the practical difficulties, of securing meaningful participation from a wide range of stakeholders (Doak et al, 1998).

Forging international links

Any regional focus must not, however, become inward looking if it is to address the larger challenge of sustainable development. The search for the accommodation between economy and environment claimed for eco-efficiency has universal potential. Some of the greatest challenges are found in developing countries and the transitional economies of the former Soviet bloc. Transfer of management systems and technologies to these states is often difficult, not least because communities who would most benefit from environmental initiatives lack the means to pay for them. International agencies, national governments and the EU have funded technology transfers. However, business also has an important role. Some analysts see this as reinforcing arguments for free trade and capital mobility (Shaw and Hanson, 1996). Multinational corporations are portrayed as powerful agencies for the transfer of technology and EMS, thus promoting compliance with international environmental regulation. Pursuit of their own internal efficiency gains may also lead to the extension of practices on health, safety and the environment, derived from the developed world, as common standards for all of a company’s plants (Poduska et al, 1992; Susskind, 1992). Countervailing suspicions persist that inappropriate technologies may be transferred and mobile international capital is drawn to states least able to enforce effective social and environmental legislation. However, empirical evidence suggests that those developing and transitional economies most open to international investment and trade have seen the greatest recent improvement in environmental standards (French, 1997; 1998; Rompel, 1996).

Other partnerships claim to invest international capital in promoting economic and social development, while protecting environmental integrity. Initiatives include eco-tourism and bio-prospecting schemes that treat nature itself as a valued and marketable commodity. For example, a deal with Merck, a US supplier of healthcare products, has led to Costa Rica’s National Institute for Biodiversity assuming responsibility for one quarter of the country’s rainforests. Conservation and management is partly funded by Merck, in return for exclusive exploration rights to the territory’s bio-resources. If new commercial drugs are subsequently developed, the institute will receive royalty payments (Blum, 1993). Such schemes claim to make conservation profitable, and Shrivastava (1995) suggests that technology transfer could be supported in the same way. Major chemical producers, such as ICI and DuPont, might see commercial advantage in acquiring rights to genetic resources from tropical forests. In return, they would trade environmental technologies, such as the means to produce alternatives to the ozone-depleting chemicals demanded in rapidly growing applications such as refrigeration and electronics.

Changing the business context: pricing, tax and subsidies

Moves to price and sell nature conservation form part of wider changes that may be necessary if business is to champion the environment. Rather than attempt to change the commercial logic of business, it is argued that nature can be protected by incorporating it within the monetary sphere of value. Where financial advantage can be derived from environmentally sound behaviour, the established practices of the market may prove to be powerful agents of environmental protection. To harness this potential, companies and markets must adopt full-cost accounting.

Currently, prices of goods and services reflect only part of the true cost of production. Other costs, including damage to the physical environment and human health, have been externalized. Society at large pays, often through taxation, for environmental restoration, healthcare and other services. Some costs are not so much shared as exported. As the means of transferring capital, materials and goods across space have increased, it has become easier to distance those who profit from, or consume, particular industrial products from the social and environmental damage incurred as a result of production. Similarly, costs are transferred across time to subsequent generations, when they inherit degraded environments, depleted resource bases and distorted social structures. If the market is to promote more sustainable development, this evasion and transfer of cost must end. Product prices must reflect all environmental and social costs created throughout their entire life cycle from first design to final disposal.

Such moves cannot be implemented effectively by individual businesses. Change must be comprehensive, avoiding the market distortions that would arise if some goods carried a full cost price, while competing products established an apparent price advantage through continuing to externalize costs. Implementation of full-cost accounting thus requires a legislative foundation much as other elements of the market system are enshrined in law. Some limited moves have been made in this direction through the ‘polluter pays’ principle embodied in legislation that imposes liability for environmental damage and associated clean-up costs (OECD, 1975). But further action is necessary, not only to promote the full-cost principle, but also to remove existing market distortions.

Past efforts to secure traditional economic objectives of growth, full employment and protection of strategically important sectors such as agriculture and energy have created systems of subsidy and price support. These have had unwelcome consequences in sponsoring environmental damage and encouraging the misuse of resources (Anderson, 1995; Steenblik and Coroyannakis, 1995; see also Chapter 8 in this volume). Champions of the free market may take this as an argument for curbing state intervention. However, reform of subsidies and other financial instruments, including taxation, to promote environmental and social objectives will yield greater benefits. Increased taxation should be placed on pollution, waste, energy consumption and exploitation of virgin materials. By contrast, clean technologies, recycled materials and public transport might benefit from tax credits and subsidies (Fullerton and Wu, 1998). The UK has moved in this direction – for example, introducing differentials in excise duty for leaded and unleaded petrol. In 1996, this was followed by taxation of landfill disposal, which together with EU packaging regulations has increased attention to waste minimization. The policy also attempts to encourage employment, offsetting taxation on waste with a cut in the ‘jobs tax’ embodied in the employer’s National Insurance contribution (Turner et al, 1998). A similar switch in the target of taxation was made with the introduction of a climate change levy on business use of energy in 2001 (see Chapter 11). Together, such initiatives might promote an increasing substitution of labour for polluting processes and consumption of non-renewable resources (Bossier and Bréchet, 1995).

Too Good To Be True: Are Win–Win Arguments Sustainable?

The limitations of change in practice

So far the argument has not challenged the positive message on the environment promoted by Green business and its champions. But there are questionable aspects to eco-efficiency, ecological modernization and business endorsement of sustainable development. Nor are repeated arguments that business must become more environmentally responsible always properly supported by sophisticated accounts of how and why this will come about (Newton and Harte, 1997). It cannot simply be assumed that a realization of the supposed coincidence of commercial and environmental interests will engender change. Empirical studies reveal the complexity of business greening.

This is not to suggest that business managers are necessarily unsympathetic to environmental concerns. Surveys of business attitudes in Western Europe and North America regularly reveal majority support for environmental goals as a key element of corporate management strategy. Similarly, interviews in the UK, Germany and France, conducted for a study focusing on small- and medium-sized enterprises (SMEs), found echoes of wider public concerns about environmental damage, pollution and the state of the world to be inherited by interviewees’ children. The principle of reducing costs through efficiencies and waste minimization also resonated well with managers. But only a minority actively endorsed the Green message. Many found it difficult to reconcile attention to environmental concerns with their specific managerial responsibilities (Purvis et al, 1998; 2000).

In part, this reflected perceptions that environmental initiatives conflict with established commercial priorities on cost and competitiveness. Even the potential for cost savings as a result of environmentally beneficial initiatives is no guarantee of action by business. This sometimes reflects problems of time scale; investment that could generate long-term economic and environmental benefits is at odds with the perceived need to minimize immediate costs. Moreover, other means of saving, such as shedding labour, often appear quicker and easier (Purvis et al, 1998). Increasingly competitive UK energy markets have enabled businesses to lower their costs by switching suppliers or renegotiating tariffs, rather than by investing in energy efficiency. Overall, businesses are more likely to address specific pollution problems in a reactive manner than they are to embark upon strategic greening with the aim of improving competitiveness. Managers often see themselves as lacking the resources of capital, time and knowledge to invest in the larger goals of life-cycle analysis, or to make the significant changes to management systems, products and processes potentially required by design for the environment. Formal EMS remain rare amongst smaller European companies and many managers appear sceptical about official environmental management standards. The development of other motors for change, including supply-chain pressures and fiscal instruments, is partial and uneven. Individuals also perceive themselves as lacking the power necessary to effect significant change, either within their own company or impacting upon the wider world. Smaller businesses, in particular, often see their own actions as insignificant when set against the global scale of environmental damage (Hill, 1997; Merritt, 1998; Purvis et al, 1998; 2000).

Moreover, the empirical basis of the win–win argument is weak. Much rests upon highly selective case studies. There is no comprehensive evidence to substantiate arguments that superior environmental performance confers market advantage on either national economies or individual businesses. Industries characterized by high rates of investment may be able to take advantage of cost-reducing clean technologies; but Gray and Shadbegian’s (1995) study of US producers of pulp and paper, oil and steel concluded that the costs of improved environmental performance outweighed productivity benefits. Attempts to relate economic and environmental performance often prove inconclusive (Repetto, 1995), perhaps because many factors other than the environment influence patterns of international trade and investment, and the costs and profitability of individual companies.

Walley and Whitehead (1994) thus rightly argue that ‘It’s not easy being green’, and the potential for financial returns from environmental investment is limited. Consequently, the goal for business may be more realistically constructed as minimizing loss of shareholder value caused by environmental costs, rather than the creation of value through environmental initiatives. For all the rhetoric about business greening and efficiency, concern for the environment still conflicts, in practice, with immediate economic goals of maximization of growth and profitability.

Eco-efficiency or environmental quality: differing definitions of sustainable development

The need to temper win–win arguments with a dose of reality is not the only reason to conclude that the broad programme of sustainable development demands more than most businesses are willing or able to give. Gladwin et al (1995) distinguish between the business greening already evident and more substantial changes required for sustainable development. While the best elements of greening have extended business responsibilities throughout the product life cycle, the emphasis remains on instrumental or process objectives such as pollution reduction. There is little attention to sustainable development per se, involving deeper exploration of the effects of business practices on the health and integrity of ecological and social systems.

Business greening and eco-efficiency echo the more limited interpretations of sustainable development in devoting greater attention than hitherto to environmental concerns. But the focus remains on the performance of individual components of the economy and regulatory compliance, rather than upon the overall condition of the environment. No specific environmental quality targets are set and the impact of eco-efficiency initiatives upon the environment often remains untested and uncertain (Jacobs and Stott, 1992). Indeed, if output grows faster than eco-efficiency gains, the condition of the environment will deteriorate. Where this involves the erosion of Critical Natural Capital – such as the ozone layer and the global climate system – that underpins planetary life-support functions, the consequences could be particularly serious (see Chapter 11).

The case is thus made for a more rigorous interpretation of sustainable development that focuses upon the overall condition of the environment and sets specific performance goals for business, designed to ensure that environmental quality does not decline below a minimum level necessary to maintain social and economic well-being. The imposition of such targets and timetables for the achievement of specific environmental goals is already a feature of national and international regulatory frameworks. Examples include targets for the reduction of emissions of greenhouse gases and other pollutants, and legislation that prescribes performance in areas such as recycling and waste minimization. This approach builds upon the search for eco-efficiency; but in prioritizing the defence of the environment it creates new potential for contest.

The translation of the need to preserve environmental quality into specific performance targets and timetables is itself often difficult and disputed. Hence, for example, environmentalists have claimed from the outset that the measures enshrined in the Kyoto Protocol were inadequate to achieve the desired result of preventing significant climate change (Parry et al, 1998). Yet setting more stringent targets would have been politically impossible, not least because of opposition from influential business interests to any significant curbs on greenhouse gas emissions (see Chapter 11). In creating environmental targets, a stronger construction of sustainable development raises the prospect of constraints upon economic growth, business profitability and consumer behaviour.

Whether the defence of the environment necessarily imposes restrictions upon economic growth is a matter of debate. Jacobs and Stott (1992) are optimistic in arguing that preservation of environmental integrity is not incompatible with existing economic planning aims of fostering enterprise that is high skill, high wage and technologically innovative. Government and regulatory authorities that define environmental targets might also provide incentives to support this economic transformation through provision of information, grants, research support and direct investment. Ekins (1993), however, regards the scale of technological change required to enable improvement in environmental quality and continued economic growth as too great to be realistic. Moreover, as social and economic justice and the relief of global poverty require substantial economic growth in developing countries, the simultaneous task of meeting the environmental challenge could set particularly severe constraints upon business in the developed world.

Even if the overall effects of prioritizing environmental quality could be shown to be economically neutral or positive, individual companies and sectors would still contest the imposition of particular costs and constraints upon their operations. Environmental sustainability may allow overall growth of output, employment and profitability; but it does require economic change. Pollution- and energy-intensive industries, at a disadvantage in this process of transformation, will contest its necessity. Action against climate change as a specific instance of such contest is noted in Chapter 11. In this context, potential business losers from environmentally driven change include energy providers, motor vehicle producers and the freight transport industry. These are powerful vested interests, unwilling to sacrifice economic performance and profitability. Their ability to shape public debate and political process to meet their own sectional interests is strikingly at odds with the equitable ethos of sustainable development. Key sectors of American business, in particular, have formed the backbone of domestic political resistance to US ratification of the Kyoto Protocol. Without US participation, the effectiveness of the protocol will be severely diminished. Hence, American business has been allowed an effective veto over this important aspect of global environmental policy and vital foundation for sustainable development (see also Chapter 12).

The complexity of environmental challenges

If we argue that the agenda should be defined by the need to preserve environmental quality, rather than by the availability of opportunities for eco-efficiency, then we must also acknowledge that business does not always have the means to play a positive role. Advocates of ecological modernization assume that companies have the expert knowledge and technical capacity to transform an environmental challenge into a commercial opportunity. In practice, however, business may face confusions and uncertainties. In part, this reflects contradictory advice regarding, for example, the relative environmental merits of diesel- and petrol-fuelled vehicles, or the credentials of recycling schemes. But the complexity of environmental systems may create dilemmas that are impossible for science and society, as a whole – let alone individual businesses – to resolve unambiguously.

Damage to the stratospheric ozone layer, for example, prompted international regulatory initiatives to phase out production of ozone-depleting substances. But action was also required by business to develop alternative ways of delivering services, such as refrigeration, previously reliant upon the proscribed chemicals. This has been complicated by debate regarding the operational and environmental criteria defining a successful refrigeration technology. Different parties prioritize particular environmental considerations: not just ozone depletion, but concerns about the potential of refrigerants as greenhouse gases and the energy consumption of systems in operation. All are legitimate issues, as are cost, system performance, and the health and safety implications of using toxic or flammable refrigerants. Suppliers have actively promoted a diversity of refrigerants and systems, especially in relation to equipment for commercial and retail users. But no single currently available technology fully satisfies all of the performance criteria. In this context the managers of companies producing and servicing refrigeration equipment are ill equipped to make rational trade-offs between, for example, technologies claimed to eliminate damage to the ozone layer against those which supposedly minimize global warming impacts (Purvis et al, 2001). According priority to particular aspects of environmental change is a judgement beyond the capabilities of current science, while recourse to legislation or the market only gives the illusion of logical environmental decision-making in the absence of full understanding of costs and benefits.

What price equity?

Although notions of corporate social responsibility are increasingly urged upon companies (see, for example, European Commission, 2002), attention to the environment in the business discourse of sustainable development has tended to obscure the social dimensions of the concept. There is relatively little in the existing literature on business sustainability that engages directly with the aims articulated in the Brundtland Report of reducing poverty and social inequality, and improving quality of life for the world’s poor (WCED, 1987). In so far as they address wealth distribution and social equity, business champions often only repeat discredited assumptions about the trickle-down of wealth through the socio-economic hierarchy, within and between states. Thus groups such as the World Business Council for Sustainable Development relate their arguments about reconciling economic and environmental goals to support for international free trade (Schmidheiny, 1992). Global economic integration and free movement of capital and commodities are deemed to promote eco-efficiency, while fostering economic progress and wealth creation. Developing countries are claimed to derive particular benefit from access to global markets for the specific commodities in which they have a comparative advantage. Such trade is argued to generate income sufficient to pay for other goods, including environmental services, contributing to a virtuous circle of socio-economic and environmental gain.

Environmentalists and social campaigners, however, advance a very different view of free trade as reflecting the self-interest of international business. The influence of multinational capital within an increasingly global economy and the strengthening regulatory authority of the World Trade Organization (WTO) are claimed to have created freedom without responsibility for international business in pursuing market expansion and economic growth. Under regimes for trade, investment and intellectual property being established by the WTO, mobile capital is freer to search out short-term opportunities to benefit from the unsustainable exploitation of human and natural resources, especially in developing countries (Friends of the Earth, 1999; Shrybman, 1999).

Business, and particularly the largest international corporations, thus stands accused of hijacking the rhetoric of sustainable development, recasting it as a tool for business efficiency and gain, and evading difficult questions about the impacts of economic growth upon social welfare (Eden, 1994). It is, of course, unrealistic to expect that business will find a new purpose as the champion of social equity; but it is important to challenge the application of the label of sustainable development to initiatives that are manifestly inequitable, even neo-colonial (Middleton et al, 1993). The charge that the social and environmental welfare and economic potential of developing countries is being sacrificed to maintain Northern affluence can be applied even to the new wave of more imaginative partnerships between multinational corporations and Southern states.

Developing countries have long been resource reservoirs for the industrialized world, a trade in sustainability that has contributed to the social and environmental burdens facing many Southern states. Arguably, this inequality is perpetuated in a new guise – rather than being transformed – by initiatives such as eco-tourism and bio-prospecting. International investors claim to contribute to the economic and social development of the host area, while protecting its ecological integrity. However, these projects also represent a new manifestation of Northern claims to the greatest share of global resources and wealth, inspiring accusations of ‘bio-piracy’ and disregard for environmental justice (McAfee, 1999; Shiva, 1999). Through such schemes governments sell decision-making powers about the development of their own land and resources. There is no guarantee that the payments received are equitable, or that they are used to address the needs of communities inhabiting the designated land. Southern governments may themselves be active partners in schemes that ignore the aspirations of local people for development and deny their rights of access to land and natural resources. When governments, international capital and even international non-governmental organizations (NGOs) which sponsor conservation projects cannot be held accountable, local communities’ powers of resistance are limited (however, Neumann, 1995 sees some potential for positive change).

A Space for Sustainable Development?

Capitalism, crisis and sustainable development

Theoretical constructions of sustainable development deriving from economics present a goal of balance between resource creation and destruction in abstract and aspatial terms (Turner, 1993). Distributional effects over time, between the generations, often appear to be prioritized over attention to intra-generational equity. Acknowledgement of the need to create new opportunities for the world’s poorest people is not always accompanied by detailed discussion of the mechanisms through which this is to be achieved. Despite a tradition of geographical work that reveals injustice in the distribution of the environmental, as well as social, costs and benefits of economic growth (see, for example, Heiman, 1996; Mitchell et al, 1999), relatively little attention has been given to the spatial construction of sustainable development. If particular communities bear the costs of economic activity, or forego economic development to preserve natural capital, equity demands that they share in the consequent benefits. Communities are unlikely to accept arguments that they have contributed to a total national or global project of sustainable development if rewards accrue chiefly to other people and places. However often the injunction to think globally is repeated, it cannot displace the tendency to prioritize our own space and time.

Thinking in this way also requires that the ideal of sustainable development be related to the reality of socio-economic and environmental change in particular communities. Development under capitalism is inherently uneven over space and time (Smith, 1990). Hence, the experience of many individual communities has been the antithesis of sustainable development, even as global wealth and welfare have apparently increased. Periods of growth have been punctuated by dramatic collapse as capitalism restructures itself through crisis (Drummond and Marsden, 1999; Harvey, 1982). Some communities have been exploited for their resources, material and human, and have then been abandoned by mobile capital in search of better returns elsewhere. The ability of business to externalize costs has generated a legacy of pollution, scarred landscapes and abandoned factories and mines. The work force and the wider community dependent upon them may also be rejected as jobs are lost and skills become redundant. From this perspective residents of decaying industrial communities in Europe and North America may feel themselves just as much victims of ‘unsustainable’ development as are populations in developing countries. While financial capital has the potential for geographical mobility and redeployment in new ventures, the human capital embodied in particular individuals and communities is often relatively immobile and inflexible. Human skills are not necessarily transferable and social ties to particular locations cannot be easily broken to take up employment elsewhere.

There is not the space here to engage properly with arguments surrounding the reality, novelty and consequences of the apparently accelerating trend to globalization over recent decades (see Held and McGrew, 2000, for an excellent overview). But the expansion, integration and deregulation of global markets have widened differentials between the mobility of capital and labour, and arguably sapped the regulatory influence of individual states over multinational business. A shift in manufacturing to the developing world has been apparent for at least four decades as declining profitability forced businesses to adopt a dual strategy of enlarging markets and reducing production costs (Coffey, 1996; Dicken, 2003). Such changes have led to charges of the exploitation of low-cost labour and evasion of responsibility for social and environmental costs that are at odds with sustainable and equitable development (Beder, 2002; Klein, 2000). In recent years, however, the global economy has arguably entered a new phase of extreme capital mobility in which financial flows represent short-term speculative opportunities in currency and commodity trading, rather than investment in specific industrial ventures (Martin, 1994; Swyngedouw, 1996; Warf, 1999). This disengagement of financial and industrial geographies may redefine, rather than remove, the potential for social and environmental damage.

When episodes of economic growth built upon speculative investment break down, as happened throughout much of East Asia during the late 1990s, this can trigger a dramatic rise in unemployment rates (Wade, 1998). In the Asian context, this caused not just social dislocation, but also increased pressures on the environment (Dauvergne, 1999). In the absence of effective state welfare systems, many of the new urban unemployed in countries such as Thailand returned to their original rural communities. The sudden increase in the farming population prevented social collapse, but potentially at the cost of long-term damage to rural ecosystems (Crispin, 1998; Deen, 1998; Oxfam, 1998). At the national level, the immediate need to generate additional income through trade may also have created environmental damage that cannot easily be remedied. In particular, it is suggested that increased timber exports may pose a renewed threat to the sustainability of forestry in countries such as the Philippines (Howard, 1998).

Turning towards the local: an alternative economic geography

The spatial dynamic of capitalism is thus potentially at odds with the local experience of security and progressive continuity that is necessary if individuals and communities are to feel that sustainable development has achieved its ultimate objective of maintaining and improving their life chances. Such arguments have led some commentators to redouble their attacks against globalization and argue for ‘a turn toward the local’ (Mander and Goldsmith, 2001). In this they assert that economic security, social welfare and ecological integrity demand that capital be more strongly rooted within particular communities. Only a long-term commitment to a place and its people guarantees economic practices that are environmentally and socially sustainable. Otherwise there will always be the temptation for external capital to maximize short-term returns and move on.

Such arguments call for radical changes in the conduct and geography of economic enterprise so that local people determine their own social and economic circumstances, rather than being dictated to by national and transnational organizations. Greater emphasis would be placed upon production to meet consumer needs, rather than to maximize profit. Decentralization of economic activity would mean that more of these needs were met from local sources, giving employment to local people. This form of development from within would harness and enhance the resource of human capital represented by the individual’s skills, knowledge, motivation and creativity, and by the institutional organization of collective endeavour.

In theory, business and, by extension, Capital would develop a stronger sense of place. Localized systems of production and trade would curb the influence of impersonal market forces and bureaucracies, providing insulation from the disruptive boom and bust of capitalist economic cycles. Local purchasing also promotes the circulation and multiplication of local wealth, potentially an advantage for poorer communities. A reduced reliance upon mass transportation would yield environmental benefits, as well as cost savings. Moreover, if there were lesser recourse to trade as a means of importing sustainability, greater care would be required in the husbanding of a region’s own resources. Complementary economic activities would develop, feeding off each other’s by-products, encouraging recycling and other forms of waste minimization. The reintegration of production within a regionally bounded context might encourage all inhabitants to pay new attention to protecting their environment, reducing modern society’s dangerous alienation from nature (Dickens, 1996). Ultimately, this bio-regional ideal envisages development being shaped by the maintenance of balance between human aspirations and the health of ecological resources within a particular regional territory (Sale, 1985; 1996; Welford, 1995). This is not intended to set limits to growth, but to increase the likelihood of its sustainability.

Bio-regionalism has echoes of other calls, often informed by anarchist and socialist ideals, for greater local economic self-sufficiency, political democracy and harmony between humanity and nature (see, for example, Bookchin, 1980). Attempts at applying these ideas have a poor track record. However, Welford (1995) claims that, far from being impractical, bio-regionalism is ‘fully consistent with new modes of industrial organisation’ that are the hallmark of an emergent post-Fordist economy. Contemporary economic activity is argued to be already characterized by a shift from production based on the intensive use of materials and energy to a greater emphasis on creating value through the application of knowledge. Thus, adoption of clean technologies will be encouraged by a pervasive perception that, in a climate of economic uncertainty created by globalization and deregulation, constant innovation and the reinvention of products, processes and managerial culture are necessary to maintain competitive advantage (see the wider argument advanced in Cooke, 1996). Moreover, the adoption of information-based technologies, allowing increasing control over production processes, is argued to be changing the whole framework of economic activity as the rigidities of mass production are replaced by new flexibilities permitting diversified low-volume production (Dicken, 2003). Output is thus tailored to the needs of individual consumers and local markets and may be produced by smaller organizational units. Such changes are seen by many commentators to be creating a distinctive geography of economic activity (Cooke, 1996; Storper, 1997). Large firms are becoming disarticulated into separate divisions, international production is increasingly likely to be organized through the subcontracting of work to independent local suppliers rather than by direct foreign investment, and so-called ‘new industrial districts’ have been defined, with a potential for growth based on a localized network of small innovative firms (Piore and Sabel, 1984).

The extent, coherence and economic significance of trends towards post-Fordism are still disputed; but any claims that a new era of flexible specialization will necessarily create the potential for more sustainable development are questionable (Gibbs, 1996; 2002). The appearance of more dispersed and self-contained local and regional economies belies the reality of the continuing centralization of power within multinational companies and their networks of dependent suppliers and subcontractors. If local control is a key to better environmental management, it will not automatically be delivered by post-Fordist economic restructuring. This is not to argue that there is no potential for positive change; but localization is not a total nor an automatic solution to the challenge of sustainable development. Greater sustainability requires conscious planning and even the creation of economies in which production, trade and control were more localized would not obviate the need for other technical, managerial and attitudinal changes. It is important to recall the patchy environmental track record of the existing small business community.

Progress towards sustainable local economic development

If it is hard to envisage the total creation of a new bio-regional geography of decentralized economic activity, there are ways in which local people and institutions can cooperate to promote their own economic and social interests, while defending the health of their environment. Commentators such as Ekins and Newby (1998) have identified existing initiatives that exemplify aspects of their agenda for sustainable local economic development. Often the intention is not to overturn dominant tendencies to globalization, but to explore an alternative development path that may be especially relevant in restoring the economic, social and environmental fortunes of areas marginalized within global markets.

The purpose of existing systems of regional and local development planning could be redefined to give priority not simply to economic growth, but to the creation of employment that is environmentally sound, socially fulfilling and dedicated to creating goods and services that meet the needs of local consumers. To pursue such a development path, existing agencies providing advice and support for business would pay increasing attention to environmental concerns, the transfer of clean technologies and skills development within the workforce (Gibbs, 1998; 2002). Investment in education and training must assume a wider importance as a foundation of a contemporary economy in which knowledge is the most strategic resource (see the wider argument advanced in Morgan, 1997). New information technologies and the potential of e-commerce should also be harnessed to create newly extensive markets for small businesses and distinctive local produce, trading the promotion of employment and enterprise against strict adherence to minimization of transport and distribution.

Such innovations confirm that it is unrealistic to expect that all local needs be met from local resources. However, there is potential to revive localized exchange, especially in sectors such as timber, energy and food (Ekins and Newby, 1998). Food producers, in particular, could benefit from growing resistance on the part of consumers to mass production and associated concerns about product quality and safety, and the restriction of choice that results from the concentration of production and distribution in the hands of a few major companies (Imhoff, 1996; see Chapter 8 in this volume; for a wider discussion of economic and cultural change in relation to food see Ritzer, 1993). Locally distinctive produce, with claims to environmentally sound production, might thus increase its market share.

Other less conventional forms of economic initiative may have a role to play in increasing community enterprise and sustainable local development. At the local level, mutuality retains its potency as a critique of capitalism. Credit unions – which provide low-cost capital by pooling the resources of small savers – and Local Exchange Trading Systems (LETS) – which employ socially useful resources otherwise superfluous to the mainstream economy – can improve individual welfare and enliven local economies (Bowring, 1998; Lee, 1996; McCarthy et al, 2001; Meeker-Lowry, 1996; Williams, 1996). Neither guarantees development that is environmentally and economically sustainable. But LETS, in particular, promote increased local self-sufficiency and self-worth by harnessing labour rather than material resources and encourage the sharing, repair and recycling of industrially produced goods. Moreover, where capital is derived from a local source such as a credit union, it cannot be easily exported. The effective underwriting of an individual investment by the broader community makes it more likely that respect is accorded to common environmental resources.

Embedding mobile money

Local sustainable economic development cannot, however, rely totally upon internal resources of capital and entrepreneurship. External capital is a potentially beneficial catalyst for change within a regional economy, introducing environmentally innovative products and technologies and providing jobs for local workers and markets for local suppliers (Gibbs, 2002). Therefore, rather than attempting to exclude external investment and influence, development planners should explore ways of developing partnerships with exogenous capital that will bind it into a more lasting and positive relationship with a particular community. Conventional local sourcing schemes by major business purchasers could be refined in ways that echo the environmental logic of eco-industrial parks. Purchasing links could also form the basis of mutually beneficial initiatives to promote learning, skills development and capacity for innovation within the local economy (Gibbs, 1998). Individual multinational businesses, such as Bosch, with an established reputation for attention to the environmental and social dimensions of production have already embraced the partnership vision. The company’s Welsh branch plants have become a focus for networks of innovation that draw in training and educational institutions, as well as local SMEs (Morgan, 1997). Such initiatives are still relatively rare; but they form a model for the more active promotion of sustainable local development that could be replicated elsewhere.

The potential for withdrawal of external capital will always raise questions about the long-term health of a local economy. However, as Markusen (1996) points out, many of the most enduringly successful industrial districts have multinational investment, rather than localized networks of small companies, at their core. Through conscious long-term planning, communities can both maximize the benefits of inward investment and develop a degree of insurance against any adverse effects created by the departure of a major investor. The ideal of flexibility constitutes a key element of this blueprint. If, as described above, effort is consistently invested by business – both large and small – local government, educational and training institutions and other local partners in learning, skills development and industrial innovation, the foundation will be created for long-term economic success. If equal emphasis is placed on the maintenance of environmental quality, a community will be doubly attractive as a home for economic enterprise and inward investment. Such a vision has echoes of Welford’s (1995) ideal of the application of the principles of EMS at a regional level. But if such moves are to be effective in promoting more sustainable development, they may have to be reinforced by regulatory provisions. One potential way forward is to adapt and extend previous thinking about the reform of taxation.

Local sustainable development might be supported by a greater degree of local hypothecation of business taxation. Only a proportion of revenue would be allocated in this way, as funding generated by taxing business must continue to support the wider delivery of state services. Equally, local revenue cannot come exclusively from local sources without exacerbating existing differences between richer and poorer localities. However, those communities who live with a particular business have an especial claim to a share in the profit it generates, a principle once enshrined in the system of property rates used to fund local government, but now long since debased. The restoration of a direct fiscal link between business and the community would have only a marginal impact upon the total system of taxation and government finance; but it could ensure that a proportion of the wealth generated within a community is retained for investment in the collective creation of a more sustainable future. Such a system could be doubly advantageous if the basis of taxation were redefined.

The reform of company taxation to embrace Green principles could benefit many local communities in encouraging job creation at the expense of polluting and environmentally destructive activities. Particular transitional assistance would, of course, have to be given to communities currently dependent upon energy- and material-intensive industries to enable them to build an alternative, cleaner economy. But the situation of such communities in many ways simply reinforces the importance of specifying the use made of funding raised through Green taxation. Often it is simply absorbed into general government revenue. Some very limited attempts at hypothecation have been made – for example, directing a proportion of the funds raised by vehicle fuel duty towards transport investment. An alternative approach would be to target revenue in ways that are geographical, rather than sectoral, and defined more by communal need than government diktat.

Simply expressed, the aim would be to promote positive investment in the host community while a business remains in operation, and to provide environmental and social insurance against its removal or failure. Revenue from Green taxation would be identified for local expenditure on environmental improvement, including the reuse and rehabilitation of industrial sites on business closure. The social obligations that some businesses already express towards their host communities through sponsorship and other involvement in local projects would be extended. Taxation revenue would thus be locally directed for investment in infrastructure and educational provision to develop capabilities and flexibilities that would retain their value, even if mobile capital were withdrawn.

It is equally important that business be rewarded for investments that are locally beneficial, and socially and environmentally sound. Tax incentives and subsidies could, for example, be offered for the reuse of existing premises, or for recycling of equipment and building materials. Existing grants and incentives to incoming business should be redesigned to encourage initial attention to flexibility for reuse and recycling in the design of buildings, plant and production processes (compare with Cragg, 1998; Gibbs, 2002; Shrivastava, 1995). The overall aim would be to foster both a sense of local consciousness and a long-term commitment to enhancing environmental quality and human capital.

For such a framework for business operations to be viable, there would have to be a strong degree of public and political commitment. The proposal is quite different in spirit from the assumption of inevitable progress towards sustainable development under ecological modernization. Rather than sustainability being regarded as essentially a technical and managerial programme for business, it becomes a political project that must be supported by an effective and democratic infrastructure of governance (Gibbs, 1996). The proposal also places particular emphasis on local democracy and partnership to ensure that revenue is spent effectively and that financial, human and natural resources are employed in ways that genuinely reflect the full range of a community’s long-term needs. This would require the creation of more energetic and representative institutions of local governance – increasingly widely acknowledged as a foundation for, and facet of, more sustainable development (see Chapters 4 and 6). But, as is stressed by other contributors to this volume, local democracy must be embedded within an efficient and equitable national system of taxation and regulation, creating common conditions for business operations. In an era of global capital, the role of political authority constituted at still larger scales is increasing (Prakash and Hart, 2000; Schaberg, 1999). Strong political jurisdictions created through new institutional frameworks such as the EU, or embodied in specific multilateral agreements to defend common social and environmental standards, are thus an integral part of making business more sustainable. Only in this way can mobile capital be prevented from evading the full range of its economic, social and environmental responsibilities. And only in this way can the experience of sustainable development be made to seem more real to communities across the world. Hence, it may be necessary to act globally while thinking locally.


The central argument of this chapter rests on the need to look beyond conventional recipes for business sustainability. Eco-efficiency and management systems can reduce the environmental impacts of business; but to equate this with sustainable development is patently misleading. Nor is the greening of business an easy or inevitable process. If sustainable development requires a broadly based defence of environmental quality, rather than a partial reduction in the pace of environmental decay, it will demand more than most businesses are currently able or willing to give, whether in terms of technical innovation or sacrifice of economic gain. Thinking about the sustainability of economic activity also requires engagement with social and geographical issues of equity and an acknowledgement of the fundamental instability of economies under capitalism. It is this recognition that makes sustainable economic development necessarily a political project – a refinement of the state’s long-standing role in the regulation of the economy and the management of regimes of accumulation (see Drummond and Marsden, 1999, for an extended treatment of this theme). If sustainable development is genuinely to become the foundation for future economic development, it must be the focus of active planning, regulation and taxation reform. This requires a clearer vision of what constitutes sustainable development that places at its centre the coordinated defence of environmental and social integrity, rather than eco-efficiency for the individual business. Strong sustainable economic development may be unattainable; but it is nevertheless a potentially powerful critique of existing constructions of relationships between economy, society and environment. It is also absolutely necessary to retain this vision of strong sustainability against the complacency of the win–win arguments about the greening of business, which present a weak and debased version of sustainable development under which it is too easy to discount continuing environmental and social damage.