Sustainable Consumption and Production, Volume I: Challenges and Development 3030563707, 9783030563707

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Sustainable Consumption and Production, Volume I Challenges and Development Edited by Ranjula Bali Swain Susanne Sweet

Sustainable Consumption and Production, Volume I

Ranjula Bali Swain · Susanne Sweet Editors

Sustainable Consumption and Production, Volume I Challenges and Development

Editors Ranjula Bali Swain Center for Sustainability Research Stockholm School of Economics Stockholm, Sweden

Susanne Sweet Center for Sustainability Research Stockholm School of Economics Stockholm, Sweden

Department of Economics Södertörn University Stockholm, Sweden

ISBN 978-3-030-56370-7 ISBN 978-3-030-56371-4 (eBook) https://doi.org/10.1007/978-3-030-56371-4 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 Chapters 14 and 15 are licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/). For further details see licence information in the chapters. This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

During the finalization of this book, COVID-19 emerged and developed into a serious pandemic resulting in an aggregate shock to all countries— that has exposed the vulnerabilities of vital supply chains and fragilities of public services, deepened inequality and is testing solidarity across geographic levels and scales. While it is too early to address the impact of the pandemic on sustainable consumption and production, our ambition with this volume is to generate a broad account of research on sustainable consumption and production, both in terms of theoretical and analytical diversity, supported by perspectives and studies from multiple regions and sectors. It is our hope that the contributions in this volume will inspire to engage in discussions of how to address global and systemic issues in relation to consumption and production and how this relates to sustainable development and societal challenges. This volume is part of a two volumes work on Sustainable Consumption and Production. The initial process of work on these volumes began when Bali Swain was Visiting Professor to University of California, Berkeley and Sweet was the Research Manager of an eight years long cross-disciplinary research program, Mistra Future Fashion, aiming for a systemic transformation towards sustainability in the fashion industry. Reaching out to colleagues around the globe for contributions has resulted in a multi-dimensional, rich and dynamic representation of the research on sustainable consumption and production. We therefore first and foremost would like to gratefully acknowledge the contributing v

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authors, for their contributions and for the participation in the digital twodays International Sustainable Consumption and Production book workshop at Stockholm School of Economics in October 2019. In addition, we would like to thank two anonymous reviewers and our publishing team at Palgrave Macmillan led by Wyndham Hacket Pain and Rachel Sangster, supported by Lavanya Devgun, Anette Lindqvist, Arun Kumar Anbalagan, Ashwini Elango. We thank Mimi Choudhury for excellent copyediting support and Suneethi Raja for subject indexing. We express our gratitude to the Swedish Research Council for Sustainability (Formas), the Swedish Energy Agency, and to the Swedish Foundation for Strategic Environmental Research (Mistra) for research funding to the editors of this volume. We acknowledge Mistra Center for Sustainable Markets, Misum, for the financial and administrational support for copyediting of this work. Stockholm, Sweden June 2020

Ranjula Bali Swain Susanne Sweet

Contents

1

2

Introduction to Sustainable Consumption and Production Challenges and Development Ranjula Bali Swain and Susanne Sweet Sustainable Consumption and Production: Mapping the Conceptual Terrain Jayati Srivastava

3

An Analysis of a Sustainability Index Stig Blomskog and Magnus Hjelmblom

4

Completing the Cycle: An Inclusive Capitalism Approach Linking Sustainable Consumption and Production Ralph P. Hall and Shyam Ranganathan

5

Interaction Between Government and Business to Shape Sustainable Markets Sven-Olof Junker and Lars-Gunnar Mattsson

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39

65

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Achieving Sustainable Production Through Creative Destruction: Reflections on a Multidisciplinary Project Max Jerneck

107

Motivations for Investment in Sustainable Consumption and Production Joakim Sandberg and Emma Sjöström

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8

Climate-Friendly Default Rules Cass R. Sunstein and Lucia A. Reisch

9

Producing and Consuming Sustainability in Business Education Tatiana Egorova and Marijane Luistro Jonsson

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11

12

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14

The Trans-Formative with Trans-Parency: Untapping Ground-up Environmental Information and New Technologies for Sustainability Per M. Stromberg and Claudia Ituarte-Lima Sustainable Production of Forest-Risk Commodities: Governance and Disarticulations Izabela Delabre, Callum Nolan, Kristjan Jespersen, Caleb Gallemore, and Anthony Alexander

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Farm and Feed: Heterogeneous Effects of Integrating Farm Innovations on Child Nutrition in Uganda Aimable Nsabimana and Angélique Umutesi

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Increasing Pace of Urbanization and Implications for Food Security and Sustainable Agriculture Raghbendra Jha

249

Urban Advantage? Sustainable Consumption and Ontological Cityism Across the Urban Hierarchy Lin Lerpold and Örjan Sjöberg

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Urban Advantage? Sustainability Trade-Offs Across and Within the Intra-Urban Space Lin Lerpold, Örjan Sjöberg, and Wing-Shing Tang Energy Consumption Patterns in Africa: The Role of Biomass Fuels for Cooking and Fuel Use in the Transportation Sector Amin Karimu and John Bosco Dramani Towards Sustainable Consumption Practices: Evidence from India Sangeeta Bansal, Charu Grover, and Adan L. Martinez-Cruz Feminist Ecological Economics: A Care-Centred Approach to Sustainability Nicholas Reksten and Maria S. Floro Asymmetric Information in Menstrual Health and Implications for Sustainability: Insights from India Supriya Garikipati We Know We Are Hypocrites, But Do We Believe It? The Limits and Possibilities of Hypocrisy Discourse for Sustainable Consumption Darren Fleet, Shane Gunster, and Matthew Paterson

Index

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Notes on Contributors

Dr. Anthony Alexander works in sustainable supply chain management and decision analysis, with a particular focus on linking environmental science and social foundations with organisational strategies. He was the 2015 recipient of the Prof. Roger Mansfield Prize for Research Excellence from the University of Cardiff Business School, Wales. Ranjula Bali Swain is Visiting Professor and Research Director at Center for Sustainability Research (CSR) & Misum, Stockholm School of Economics and Professor of Economics, Södertörn University, Stockholm, Sweden. Her research focusses on sustainable development, environmental economics and development. Sangeeta Bansal is a Professor at the Centre for International Trade and Development, Jawaharlal Nehru University, India. Her main research interests are in environmental economics, new agricultural technologies, corporate strategies for environmental protection, nutrition and game theory. She works in economic theory, empirical economics and experimental economics. She has published her research in the areas of environmental economics, agricultural economics and food policy. She is a co-editor of the journal Resource and Energy Economics and has served as an editorial board member of the Journal Environmental and Development Economics. She was recipient of the Fulbright Research Fellowship in 2013–2014 to visit University of California, Berkeley. She has provided consultancy to IFPRI, Washington, D.C., on several research projects, to

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Vi UNCTAD and South Asian Network for Development and Environment and Economics (SANDEE). She is a member of a scientific panel of Food Safety and Standards Authority of India. She holds a Ph.D. in economics from the Indian Statistical Institute, Delhi Centre. Stig Blomskog has a Ph.D. in Economics, and is currently Senior Lecturer at Södertörn University, Stockholm, Sweden. His research interests are various applications of decision support systems founded on Multi-Attribute Decision Theory. Dr. Izabela Delabre is a Sussex Sustainability Research Research Fellow, examining the intersection of sustainable deforestation and supply chains. Her research interests are of sustainability, sustainable production and consumption environmental governance.

Programme livelihoods, the politics and private

John Bosco Dramani is an economist and a lecturer at Kwame Nkrumah University of Science and Technology, Kumasi, Ghana. He is also a Research Fellow of The Brew Hammond Energy Centre, Kwame Nkrumah University of Science and Technology, Kumasi. Tatiana Egorova is a doctoral student at the House of Innovation, Stockholm School of Economics, Sweden. Darren Fleet is a Ph.D. candidate in the School of Communication at Simon Fraser University. His research focuses on faith-based social movements, environmental discourse and the cultural politics of fossil fuels in Canada. Maria S. Floro is Professor of Economics at American University in Washington DC and served as co-director of the Graduate Program on Gender Analysis in Economics (PGAE) between 2009–2018. Her publications include co-authored books on Informal Credit Markets and the New Institutional Economics, Women’s Work in the World Economy, and Gender, Development, and Globalization: Economics as if All People Mattered and articles on gender and work intensity, time use, unpaid work and well-being, environmental degradation, care work, vulnerability, and informal employment, urban food security, poverty, household savings, credit and debt service burden. Professor Floro currently leads the Hewlett Foundation and Open Society Foundations-funded Care Work and the Economy Project ( https://www.careworkeconomy.org).

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Caleb Gallemore, Ph.D. undertakes research into interorganizational collaboration on land use and climate change policy, frequently using geospatial, network, and statistical analysis in his work. He holds a Ph.D. in Geography and a Master’s degree in Political Science with a concentration in International Relations. Supriya Garikipati has a Ph.D. in development economics from the University of Cambridge, UK. Her main research interest is in evaluating the impact of public policy interventions on household behavioural with a focus on gender and poverty. Within this she is particularly interested in interventions that enhance women’s livelihoods and reproductive health. She has worked extensively on microfinance and menstrual health in India’s microfinance. She is also interested in studying influences of institutional factors on women’s agency, particularly the influence of patriarchy and social networks. She has been combining the use of quantitative and qualitative methods of analysis for over ten years and is experienced in the use of a variety of techniques, extending this to the use of focus-group-discussions which have proven meaningful in her recent works. She was PI for a recently completed randomised trial that examines the role of informed choice in menstrual health. Her work is highly engaged with policy and she has been part of several policy teams, her most recent contributions are to NABARD’s E-Shakti programme and in the redrafting of India’s national menstrual hygiene guidelines. The impact of her research has been recognised as ‘world leading’ by UK’s research excellence framework. Her previous research has been funded by UKRI, KRCC, ESRC, British Academy, Newton Trust and DFID. She is currently an associate professor in development economics at the University of Liverpool where she teaches this subject to graduate and post-graduates. Dr. Charu Grover is working as Assistant Professor in the department of economics at Shaheed Bhagat Singh College, University of Delhi since 2012. Prior to this, she has worked as Assistant Professor at SGND Khalsa College, Delhi, and business analyst at Genpact, India. She has been awarded her Ph.D. from Jawaharlal Nehru University in 2020. Her research area is environment economics, discrete choice experiment, and labeling. She has published papers and participated in various international conferences organized by the European Association of Environment and Resource Economics, Finland; Indian Statistical Institute, New Delhi, and South Asian University, New Delhi.

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Shane Gunster teaches in the School of Communication at Simon Fraser University, Canada. His research focuses upon news media coverage and advocacy in the area of climate and energy politics, and his latest coauthored book is Journalism and Climate Crisis: Public Engagement, Media Alternatives (Routledge, 2017). Dr. Ralph P. Hall is an Associate Professor in the Urban Affairs and Planning (UAP) program at Virginia Tech, the Associate Director of the School of Public and International Affairs (SPIA), and the Director of SPIA’s Undergraduate Programs. Dr. Hall has over two decades of academic and professional experience in applying the concept of sustainable development to infrastructure systems with a specific emphasis on transportation systems in developed regions, and rural water supply and sanitation systems in developing regions. He has published two significant co-authored works on Sustainable Transportation: Indicators, Frameworks, and Performance Management (2015) and Technology, Globalization, and Sustainable Development: Transforming the Industrial State (2018). Dr. Hall holds a Ph.D. in Technology, Management, and Policy and two S.M. degrees in Technology and Policy and Civil and Environmental Engineering from Massachusetts Institute of Technology. He also holds an M.Eng. in Civil Engineering from the University of Southampton. Magnus Hjelmblom has a Ph.D. in Computer and Systems Sciences, and is currently Senior Lecturer at the Decision, Risk and Policy Analysis (DRP) group, Faculty of Engineering and Sustainable Development, University of Gävle, Sweden. His research interests include normregulation of agent systems, an area which borders both DRP and Computer Science, and the analysis, application and development of decision support systems. Claudia Ituarte-Lima (Ph.D. University College London and M.Phil. University of Cambridge). For twenty years, she has specialized in human rights and environment (biodiversity and climate law) in theory and practice. As an international public lawyer and scholar, her focus is on environmental justice and the transformation of international law into new governance forms at the national scale that support healthy ecosystems and people’s wellbeing. Her methodology ranges from case studies in Latin America, Southeast Asia and Eastern Africa, to research examining the interactions of international regimes. Claudia is affiliated to Stockholm

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University as well as to University of British Columbia and the Raoul Wallenberg Institute of Human Rights and Humanitarian Law. Max Jerneck is a sociologist and a researcher at the Center for Sustainability Research, Stockholm School of Economics, who studies the emergence of low carbon industries. His dissertation from Lund University (2015) was a historical comparative study of the different trajectories of the solar industry in the US and Japan, 1973–2005, where Japan’s relative success, in sum, was explained by the absence of financialization. Max Jerneck has since continued researching the development of the solar industry in China, and issues of industrial policy and innovation in general. He is also researching the nature of “hybrid” organizations, as well as migration, integration and labor markets. Kristjan Jespersen As a primary area of focus, Dr. Kristjan Jespersen, studies the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance. He has a background in International Relations and Economics. Raghbendra Jha, Ph.D. (Columbia), FWIF is Professor of Economics and Executive Director Australia South Asia Research Centre, ArndtCorden Department of Economics, Australian National University. He specialises in public economics, macroeconomic and development economics. He has published 32 books/monographs and more than 150 papers in journals and other refereed outlets. His recent books include: Handbook on Food: Demand, Supply, Sustainability and Security, Economics of Food Security, and Facets of India’s Economy and Her Society (in two volumes). Marijane Luistro Jonsson is a post-doctoral researcher at Center for Sustainability Research, Stockholm School of Economics (SSE), where she teaches and conducts inter-disciplinary research on the behavioral dimension of sustainability. Among her research foci are cooperation, nudges, and knowledge resistance. She is affiliated with SSE’s House of Innovation (HOI), Center of Sustainable Markets (Misum), and Stockholm China Economic Research Institute (SCERI). She has also been teaching sustainability-related courses in the school such as Global Challenges and Tackling world Challenges.

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Dr. Sven-Olof Junker is a scholar of organization and decision theory affiliated with Center for Sustainability Research and Score (Stockholm centre for organisation theory) at Stockholm School of Economics. During 2020–2022 he is active in the research project “Governing towards a low-carbon economy: linking policy practices with market practices” financed by Handelsbanken’s research foundations. His recent publications cover topics of transnational governance of Responsible Business Conduct (RBC), hybrid organization for promoting sustainability and Europeanization of public administration. He also works for the Swedish Financial Management Authority (ESV), and previously he has worked within both private and civic sectors with policy work. Amin Karimu is an economist and a lecturer at the University of Ghana Business School, Legon. He is also associated with the Centre for Environmental and Resource Economics (CERE), Umeå University, Sweden. Lin Lerpold is an Associate Professor at the Stockholm School of Economics in the Department of Marketing and Strategy and the Executive and Research Director at the Center for Sustainability Research. She is also a member of the board of the Stockholm School of Economics Institute for Research, Vice Chair in the board of directors of AP2, and a senior advisor for Global Utmaning. Lin was the founding director of SSE’s sustainability center, Mistra Center for Sustainable Markets. Before that, she served as the Associate Dean for SSE MBA programs and has been a Visiting Fellow at the LSE, Center for the Studies of Human Rights and Visiting Professor at INSEAD, Strategy Department. Adan L. Martinez-Cruz is an empirical economist whose focus is on applications and innovations of non-market valuation techniques. He has been trained as an agricultural and resource economist by the University of Maryland, College Park. After completing his Ph.D., he spent three years as a postdoc in ETH-Zurich’s Department of Management, Technology, and Economics. And before joining SLU’s Department of Forest Economics, he was assistant professor in the Department of Economics at Centro de Investigacion y Docencia Economicas (CIDE), Mexico. He has carried out consultancy for Environment Canada (Government of Canada), the National Institute of Ecology and Climate Change (Government of Mexico), the World Bank, the Inter-American Development Bank, and the United Nations Development Programme.

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Lars-Gunnar Mattsson is professor emeritus at the Stockholm School of Economics and a researcher at the Center for Sustainability Research. He has held faculty positions as professor at Linköping University, Uppsala University, University of California at Berkeley (visitor) and since 1980 at the Stockholm School of Economics. He is a founding member and Fellow of European International Business Academy and the European Marketing Academy as well as a Fellow of the Royal Swedish Academy of Engineering Sciences. His research has covered inter organizational aspects of distribution, industrial marketing and purchasing and internationalization. Recently his research has focused on digital transformation, sustainable development and interaction between policy practices and market practices for climate mitigation. Callum Nolan is a doctoral researcher at the University of Reading in the School of Archaeology, Geography and Environmental Science. His research explores the political ecologies of small-scale marine fisheries in the Western Region of Ghana. Dr. Aimable Nsabimana is currently a researcher and Lecturer at the University of Rwanda (UR), in the department of Economics. He holds Ph.D. in economics from Swedish University of Agricultural Sciences (SLU), Uppsala, Sweden. His research interests cut across Development and Applied Economics & Spatial Econometrics. Specifically, Aimable is an expert in using microdata. In addition, Aimable has acquired advanced skills in Stata, R, ArcGIS and QGIS among other statistical, spatial and econometric software packages. Aimable has also undertaken good number of consultancy services with reputable different organizations, including: UNU-WIDER, FAO, CARE International Rwanda, Trop-Caire Rwanda, among others. Matthew Paterson is Research Director at the Sustainable Consumption Institute and professor in the Department of Politics at the University of Manchester. His most recent book is Thinking Ecologically About the Global Political Economy with Ryan Katz-Rosene. Dr. Shyam Ranganathan is an Assistant Professor in the Department of Statistics at Virginia Tech. Dr. Ranganathan has worked on developing statistical methodology to handle high-dimensional timeseries data, text analytics, network analysis for socio-economic applications including sustainable development, public health, online threat detection in social networks etc. Dr. Ranganathan holds a Ph.D. in Applied Mathematics

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and Statistics from Uppsala University, Sweden, and an M.S. in Electrical Engineering from the University of Notre Dame, USA. He has worked as a correspondent reporting on social and development issues for “The Hindu”, an Indian newspaper and holds a postgraduate diploma in Journalism from the Asian College of Journalism, India. Lucia A. Reisch is a behavioral economist and full professor for intercultural consumer research and European consumer policy at the Copenhagen Business School in Denmark where she founded the Consumer and Behavioural Insights Group CBIG. Her main research focus is on sustainable lifestyles and policy. She is one of Europe’s leading academic experts in behaviorally insights based regulation and “nudging”, consulting international organizations and governments worldwide. Nicholas Reksten is Associate Professor of Economics at the University of Redlands in Southern California. His research primarily focuses on the political economy of the environment. He is especially interested in the role that social norms play in shaping economic responses to the ecological crisis. Additionally, he is the coauthor of an introductory economics textbook, Principles of Economics in a Nutshell, which incorporates feminist and ecological elements for students new to economics. Joakim Sandberg is Professor of Practical Philosophy and Director of the Financial Ethics Research Group at University of Gothenburg, Sweden. He is also Professor of Economics and Finance from a Humanist Perspective at University of Groningen, the Netherlands. Joakim does research in the intersections between moral and political philosophy and studies in business and economics. Much of his recent work has focused on how to get financial institutions such as banks and pension funds to take a stronger responsibility for the societal and environmental effects of their activities. Joakim has led research projects on sustainable investment, institutional investment and fiduciary duty, consumers’ attitudes towards responsible finance, microfinance, and the philosophy of sustainable finance. Joakim was selected as Wallenberg Academy Fellow by the Royal Swedish Academy of Sciences in 2014. Örjan Sjöberg is Professor of Economic Geography at the Stockholm School of Economics (SSE), a position held since 2001. He is also Research Director at the Center for Sustainability Research, SSE. Upon receiving his Ph.D. in human geography (Uppsala University 1991), he

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joined SSE where over the years he has taught courses on economic geography, international economics, globalisation, institutions and economic development, Asian and transition economies, urban studies as well as business and climate change. In addition to being the author of a monograph on rural change under central planning and the editor of several collections of articles, his research has appeared in e.g. Annals of the Association of American Geographers, Economic Geography, Environment and Planning A, Geoforum, International Journal of Urban and Regional Research, Urban Studies and in several area studies journals. Dr. Emma Sjöström is a Research Fellow at the Department of Marketing and Strategy, Stockholm School of Economics (SSE) and Director of the Sustainable Finance Initiative at the Mistra Center for Sustainable Markets (Misum) at SSE. She is also Deputy director of the Stockholm Sustainable Finance Center (SSFC), a joint project between SSE and the Stockholm Environment Institute, funded by the Swedish Government. Her research, mainly founded in organizational science, centres on how the financial market can serve as an arena for corporate influence, e.g. via active ownership. She also pursues research on the theme of long-termism, and on integrating ESG in the capital market conversation. Additionally, she continuously writes teaching cases about sustainable business and sustainable finance. Emma has advised several political committees on sustainable finance. She received her Ph.D. from SSE in 2009. Jayati Srivastava is Professor of International Politics at the Centre for International Politics, Organization and Disarmament (CIPOD), School of International Studies (SIS), Jawaharlal Nehru University (JNU), New Delhi, India. Her area of research includes international environmental politics; global civil society; legitimacy of global governance; global justice; and, southern perspectives on IR. Per M. Stromberg for the past 20 years he has specialized in shedding light on drivers of environmental degradation, and aligning incentives to more welfare-enhancing paths, in the ‘green, blue and grey’ environmental fields. Catalyzing a background in government, the UN, OECD, EU, academia, business consulting and think-tanks, Per sources answers at the intersection of economics and other fields, and by coupling seemingly unrelated methods and initiatives. Thanks to 10 years of living and

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working in Africa, Asia and Latin America, he has gained a deep understanding of key challenges for livelihoods and the environment at different scales (Ph.D. University of Cambridge, MSc University College London, both in environmental economics). Cass R. Sunstein is currently the Robert Walmsley University Professor at Harvard. He is the founder and director of the Program on Behavioral Economics and Public Policy at Harvard Law School. In 2018, he received the Holberg Prize from the government of Norway, sometimes described as the equivalent of the Nobel Prize for law and the humanities. From 2009 to 2012, he was Administrator of the White House Office of Information and Regulatory Affairs, and after that, he served on the President’s Review Board on Intelligence and Communications Technologies and on the Pentagon’s Defense Innovation Board. Susanne Sweet is Associate Professor and Research Director at Center for Sustainability Research, Stockholm School of Economics. Sweet’s research covers a broad range of topics on corporate sustainability and responsibility and she has for the past eight years been the research manager for a large cross disciplinary research program on circular fashion. Wing-Shing Tang is currently Adjunct Professor in Department of Geography and part-time Research Fellow in Advanced Institute for Contemporary China Studies in Hong Kong Baptist University. He graduated with a B.A. (Hons) in Geography at McGill University, a MSc(Pl.) at University of Toronto and a Ph.D. at Cambridge. He is currently Associate Editor of City, Culture and Society, Asia Editor and Editorial Board Member of Human Geography: A Radical Journal, Editorial Board Member of Urban Geography, Corresponding Editor of International Journal of Urban and Regional Research, Member of the Steering Group of International Critical Geography Group and East Asian Regional Conference in Alternative Geography. His research interest is to comprehend the nature of cities and urban development, especially Chinese cities (including Hong Kong). This is achieved by interrogating Foucault, Lefebvre, Harvey and others by subjecting western discourses on space to urban experiences in other parts of the world. Research outcomes include a modest attempt to challenge Lefebvre’s thesis of complete urbanisation and his argument of urbanising Gramsci by the experience of Hong Kong and China. The other is a critique of urban China research by coining the double concepts of random conceptual indigenisation and random

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conceptual appropriation. Recently, he is interested in exploring the applicability of Chinese philosophies to unentangle the ever-lasting debate in Urban Studies about town-country contradictions. In doing so, he has initiated urban comparative projects between urban China and south Asia. Angélique Umutesi is a Research Analyst with the Macroeconomics, Trade and Investment (MTI) Global Practice at the World Bank, where she contributes to policy analysis and work on growth prospects for Kenya. Prior to joining MTI, Angélique served as a Research Officer at the Rwanda Development Board in Kigali, Rwanda. She holds a M.A. in Economics from the University of Nairobi and B.A. in Education (majoring in Economics and Business) from the University of Rwanda.

List of Figures

Fig. 2.1 Fig. 2.2

Fig. 3.1

Fig. 3.2

Fig. 4.1

Fig. 10.1

Fig. 10.2 Fig. 12.1

Sustainable consumption and production (Source Adapted from UNEP, 2015: 11) Per capita material footprint of countries based on income (Source Adapted from UN, 2019, The Sustainable Development Goals Report 2019, p. 15) An example of an aggregation tree (see for example Odelstad, 2019, Figure 5) with three strata (Source Authors) A value conflict. The difference between F and P in S 1 outweighs the difference between P and F in S 2 (Source Authors) Different operating postures that might be adopted by government, corporations, workers, and consumers in the context of citizen, NGO, and shareholder scrutiny (Source Adapted from Ashford and Hall 2018) The IPBES framework adapted to show the nexus between mining, ecosystems and human rights (Source Authors’ adaptation [in Ituarte-Lima and Stromberg 2018a] of IPBES and Díaz et al. [2018]) Scales of concern for sustainability (Source Authors modified from Ituarte-Lima and Stromberg [2018a]) Distribution of various farm innovations (Source Authors’ computations based on LSMS-ISA data of [2010/2011] and [2011/2012])

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185 190

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Fig. 12.2

Fig. 13.1

Fig. 16.1

Fig. 16.2 Fig. 16.3 Fig. 16.4

Fig. 16.5 Fig. 16.6 Fig. 16.7 Fig. 18.1

Distribution of HAZ & WAZ for under-five children in 2010/2011 and 2011/2012 in UNPS (Source Authors’ computations based on LSMS-ISA data of [2010/2011] and [2011/2012]. Increasing pace of urbanization and implications for food security and sustainable agriculture) Share of urban population (Source Author calculations based on date from World Development Indicators 2019, http://datatopics.worldbank.org/world-development-ind icators/. Legend: SUW = share of urban population, SRW = share of rural population) Size of primary energy demand in Africa (Note The size of the bubble indicates the relative size of total primary energy demand. Source IEA, 2014b) Primary energy mix in the regions of SSA in 2012 (Source IEA, 2014b) Primary energy demand in Africa by fuels projected to 2040 (Source IEA, 2014b) Biomass, other renewable energy and waste as ratio of total energy consumption for developing regions (Note Combustible renewables and waste refers to solid biomass, liquid biomass, biogas, industrial waste and municipal waste. Source Authors computation based on World Development Indicators [WDI], 2019) Technology used by households for cooking in Sub-Saharan Africa (Source IEA [2014b]) Global energy usage by source, 1990–2010 (Btu) (Source EIA [2017]) Oil consumption and vehicles in use in Africa (2007–2015) (Source OICA [2016] and BP [2018]) An integrated framework of ecosystems and social and economic systems (Source Own depiction)

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318 319 320

322 323 328 333 380

List of Tables

Table 2.1 Table 2.2 Table 4.1 Table 5.1 Table 5.2 Table 9.1 Table 9.2 Table 12.1 Table 12.2 Table 12.3 Table 12.4 Table 12.5 Table 12.6 Table 12.7

Landmark global initiatives towards SCP Targets and indicators for sustainable consumption and production (Goal 12 of SDGs) Summary of strategies to address income inequality Expressed policy requests in the construction roadmap 13 roadmaps for fossil-free markets of Fossil Free Sweden (FFS) Overview of four conceptual approaches to teaching sustainability Level of competencies development by four conceptual approaches Household and demographic attributes Descriptive of the under-five child health outcomes in Uganda (2010–2012) Single farm innovation adoption and child nutrition (stunting) Single farm innovation adoption and child nutrition (underweight) Adopting double farm innovations and child nutrition (stunting) Adopting double farm innovations and child nutrition (underweight) Two/three possible combinations of innovations and under-five child nutrition

24 27 72 97 102 174 175 236 237 238 239 240 241 242

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LIST OF TABLES

Table 12.8 Table Table Table Table

13.1 13.2 13.3 16.1

Table 16.2 Table 16.3 Table 16.4 Table 17.1 Table 17.2 Table 17.3

Integrating farm inputs use and household consumption and poverty level Urban population (million) Cereal yield (kg per hectare) Agricultural land as percentage of total land Typical conversion efficiency range of household cookstoves by energy sources Total energy supply and total final energy usage by region and source, 2015 (Exajoules) Trends of number of vehicles in use in Africa countries Percentage share of different transport modes used in 14 African cities Summary statistics of the households in the sample Results using conditional logit model Willingness to pay estimates

243 252 255 256 325 327 330 334 356 359 361

CHAPTER 1

Introduction to Sustainable Consumption and Production Challenges and Development Ranjula Bali Swain and Susanne Sweet

Introduction The sustainable consumption and production (SCP) agenda has been a hypernym for various efforts and approaches to address the growing concerns on bio-diversity loss, resource availability, climate change, and mounting waste problems on land and in seas. In spite of efforts of the global community to support a transition towards more sustainable development through, for example, the Sustainable Development Goals (often referred to as SDGs or Agenda 2030), it seems hard to achieve progress. The most recent scientific report on the SDG achievements raises strong concerns that many of the goals are not even moving in the right directions, such as climate change and biodiversity loss (UN, 2019). In addition, recent crises events such as the Covid-19 pandemic have underlined the vulnerabilities of our globally interconnected social

R. Bali Swain · S. Sweet (B) Center for Sustainability Research, Stockholm School of Economics, Stockholm, Sweden e-mail: [email protected] R. Bali Swain e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_1

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and economic systems, and concerns have been expressed that Covid-19 has not only challenged global health systems but has hit the poorest and most vulnerable communities the hardest. The authors of the latest Global Sustainable Development Report point out that all countries are distant, to varying degrees, from balancing human well-being with a healthy environment (UN, 2019). The complexity in addressing these social and environmental challenges have been highlighted in recent studies of the SDGs that show that they are conflicting, interlinked with trade-offs and synergies, and sometimes contradictory (Bali Swain, 2018; Bali Swain & Ranganathan, 2020; Ranganathan & Bali Swain, 2018; Spaiser, Ranganathan, Bali Swain, & Sumpter, 2016; UNSD, 2020). This implies that a number of environmental, social, and economic interrelationships have to be addressed and suggestions of transformative changes and innovations need to be understood in the context of impact on multiple systems and levels of consumption and production. Technological innovations might not only change production methods but can alter ways of consumption that can be both positive and negative for the well-being of people and the planet. Ten years ago, policy voices in the EU made statements on the urgency of a collective decision and system-wide sustainability transformation (Federigo & Hontelez, 2010). They identified the challenges of moving from a consumption society and a growth paradigm, and saw it as necessary to challenge current economic thinking: “sustainable production needs to identify priority areas and objectives, beyond climate change and energy. Sustainable consumption also needs to be a priority area for development” (ibid.: 11). Studies in various academic disciplines relating to sustainable consumption and production have over the years gathered data and assessed the factors responsible for the environmental and social costs generated by a worldwide growing consumer society. The tension between the ability and freedom to consume and a resilient and sustainable Earth system that can provide has visibly increased. Pathways have been suggested in policy, research, and practice to realize change towards more sustainable systems of consumption and production, and a number of international treaties and agreements, such as the Paris Agreement on Climate Change and the Sustainable Development Goals, have been realized in the last decade. However, the complexities, interrelatedness of issues, and the necessary

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processes and collective efforts to achieve systemic societal change globally, that can truly move us to adopt more sustainable consumption and production systems, remains to be seen. This volume will capture and address some of the challenges towards the development of sustainable consumption and production. First, we provide an introduction to the field and discuss some of the findings in earlier research on sustainable consumption and production and, second, we introduce the content and themes of the chapters in this volume.

Sustainable Consumption and Production Sustainable Consumption and Production (SCP) has been an important topic of policy and research agendas since early 2000. For example, the EU-funded research agenda SCORE! (Sustainable Consumption Research Exchanges), was set up in 2005 as a four-year network project to act as one of the EU’s central support structures for the UN’s 10 Year Framework of Programs for Sustainable Consumption and Production. The UN’s SCP framework was established after the 2002 World Summit on Sustainable Development in Johannesburg and was adopted at the United Nations Conference on Sustainable Development in 2012. SCORE! had a series of workshops and conferences to identify and analyse the state of the art in SCP research, and published a book series to promote cases of change in the areas of mobility, food, and energy use (Tukker, Charter, Vezzoli, Sto, & Munch Andersen, 2008). They identified that the challenge to move towards SCP could be vastly different depending on the type of economy a country or part of a country were a part of. Building on the classification made by Hart and Millstein (1999) on consumer economies, emerging economies, and base-of-the-pyramid economies, they argue that all are facing sustainability challenges but that the goal and type of SCP change as well as type of governance needed will differ tremendously (Tukker et al., 2008: 6). In addition, they highlight the importance of understanding the specific context and the socio-technical system including necessary expertise from several sectors while attempting to changing sustainable consumption and production patterns (ibid.). SCP has also been the focus of several special issues in academic journals such as the Journal of Industrial Ecology (2005, 2010, 2017) and Journal of Cleaner Production (2008). As will be discussed by Srivastava in Chapter 2 in this volume, the concept is elusive and not

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clearly defined, which makes it difficult to identify policy measures that can promote certain outcomes. In particular, connections between environmental sustainability and development pose a specific challenge that mirrors the argument made by Tukker et al. (2008). In a recent literature review, comparing developing and developed economies with regard to sustainable consumption and production, Wang, Ghedimi, Lim, and Tseng (2019) find that the focus of the SCP practices varies depending on the level of development. Not surprisingly, economic development is found to be the priority and focus in many of the developing countries although many bottom-up approaches such as corporate initiatives to clean production in the supply chain can be observed (Corral, 2003; Mungkung et al., 2012; Wang et al., 2019). The developing economies are challenged by the tradeoff on the one hand, between promoting production to gain economic development that in the long run can support the consumption needs of their population, and on the other, to implement policies to protect the environment from the impact of a rapid industrial expansion. These priorities have been referred to as a backward attitude tending to “grow first, clean up later” (Rock & Angel, 2007: 10). In developed economies both bottom-up approaches integrated in business activities, and top-down governmental policies are implemented and enforced. Based on Wang et al.’s review (2019), Western European countries are identified as having the most active SCP approaches, encompassing both industry and governmental approaches linking to both consumption and production. Early approaches to sustainable consumption and production were focused on the intention to limit the environmental burden from production (Moors, Mulder, & Vergragt, 2005), and research on consumption was mainly focused on consumer behaviour, and more specifically on the so- called consumer behaviour gap, that posits the gap between consumers’ intentions to buy green and their actual buying behaviour. Research has found that efforts to guide consumers into more sustainable consumption patterns have not been successful (Solér, 2012). In today’s consumer society with products relating to individual taste and identity, consumers have been found to strategically avoid information about environmental benefits in their purchase decisions (Dobers & Strannegård, 2005; Nordström & Thunström, 2015). Another stream of research on consumption focuses on mitigating negative consumption and waste patterns (Jonkute & Staniskis, 2016; Staniskis, 2012). Recent literature

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on sustainable consumption covers a range of approaches and use of theoretical lenses. One stream emphasizes consumer policy measures as a way to move towards sustainable consumption patterns, for example nudging, (Sunstein & Reisch, 2019). Moreover, some sociological studies focus on the practices of consumption (Warde, 2005, 2017), and raise concerns if individual consumers are able to change to more sustainable behaviours, being trapped in unsustainable societal and market systems (Holt, 2012). A third approach is to address the concept of mindfulness for sustainable consumption. Fischer, Stanszus, Geiger, Grossman, and Schrader (2017) identify in their review the mechanisms of mindfulness that can potentially promote sustainable consumption: to disrupt routines, promote more congruence with regard to the attitude-behaviour gap, nurture nonmaterialistic values, enhance well-being, and foster pro-social behaviour. They argue that these mechanisms could partly be supported by research, but that the field still suffers from methodological challenges and shortcomings in existing empirical approaches, which are not clearly defined and operationalized (Fischer et al., 2017). As mentioned, the dominant focus in the early literature, on the production and industrial side, on central themes such as pollution control, production efficiency, and green products have later been complemented with widening the attention to consumption and consumption patterns that underpin the resource-intensity of our economies. Several authors stress the importance of jointly considering production and consumption activities and systems. We will argue that the social systems and processes are as important to recognize and address as the technological ones, to achieve change towards sustainable consumption and production. In the context of reaching the Agenda 2030 goals, mitigating climate change, stopping the biodiversity decline and supporting processes of social and economic development, adopting sustainable consumption and production alone is not sufficient, but can support wider societal and cultural changes. In an attempt to find a more holistic theoretical approach to sustainable consumption and production, Geels, McMeekin, Mylan, and Southerton (2015) review different schools of thought in the field. They argue that the SCP research suffers from two related problems that hinder theoretical progress. First, the SCP term is acting as an umbrella concept for a wide and heterogeneous set of concepts and approaches and, second, the SCP debates are dominated by two intellectual positions they call “reformist” and “revolutionary”. The reformist position proposes changes within

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current market systems and structures, while the revolutionary condemns the market-based and consumer society model and proposes downsizing and moving towards alternative lifestyles such as well-being (Geels et al., 2015). Geels et al. argue that the reformist position is limited in its potential to foster environmental sustainability with its focus on technological and consumer behaviour change, and slow with respect to the urgency demanded by problems such as climate change. The authors also deem the revolutionary position politically unpalatable (ibid.). Instead, they suggest a third position called “the reconfiguration position” that argues that system failure is the core problem, and the focus instead should be on transitions towards new systems. The reconfiguration will conceptualize consumption and production as “mutually constitutive and overlapping domains arising from alignments between multiple elements (infrastructures, technical artefacts, modes of production and provision, policies, cultural meanings, consumer practices)” (Geels et al., 2015: 8). The authors argue that changes of systems such as transport, energy, and food, will have greater sustainability potential compared to changes in technologies or behaviour, and will constitute more socially and politically feasible attempts to change deep societal structures. Another approach to address the complexities of sustainable consumption and production is the Ecology of Business Models Experimentation map (Bocken, Boons, & Baldassarre, 2019). The model aims at identifying potential redesign paths towards sustainable business model innovations by including the wider system, identifying unsustainable business models and ways of lessening the dependencies on them, as well as finding supporting infrastructures towards sustainable consumption and production systems. The circular economy approach is emerging as an influential paradigm in sustainable consumption and production research and practice. It is an approach to reduce material and resource use, prolong life and product reuse, repair, refurbish, or remanufacture and, at the end of a product’s life, recycle the material and put it into productive use again. For an in-depth discussion on circular economy, refer to our introductory chapter in volume II of this edited series (Bali Swain & Sweet, 2021).

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Sustainable Consumption and Production: Challenges and Development In this volume, several authors have taken a wider perspective while studying sustainable consumption and production, and recognized the different contexts in which the research is done when addressing specific environmental or societal problems. Without saying as much, we agree that working with a specific theoretical lens will help frame and analyse the appropriate analytical level. But seeing the study in a larger context without losing sight of its focus will help future inroads into changing SCP. It will enable an understanding of what broader issue-linkages can be influencing the processes and outcomes of efforts, to find answers to challenges such as creating food security, access to clean energy, or controlling the spread of viral disease. We hope that this volume will contribute to new insights and stimulate further thinking on Sustainable Consumption and Production research. Our contributors come from many countries and the research spans multiple continents. We intend to move the SCP field of research forward by including and addressing several social issues in addition to environmental problems that have dominated the field of SCP, as well as include many regions that have not found a place in most SCP research and studies. In Chapter 2, Srivastava deliberates on the meaning of the concept of sustainable consumption and production. She argues that SCP reconciles the goal of environmental protection with that of development and condenses it into the “norm” of sustainable development. The chapter investigates SCP’s definitional complexity, measurability, targets and indicators, and the gap between intent and outcomes. It further suggests that the ethical and moral motivations can bring about behavioural changes towards responsible consumption and production practices. This involves highlighting ethics of sustainability in addition to employing the harm principle which addresses both the concerns of environment and development, and contributes to building pathways for achieving SCP. Blomskog and Hjelmblom (Chapter 3) continue with the conceptual analysis of Sustainability Index. Analysing the concept of OECD-based household sustainable consumption index, they conclude that the index mistakenly treats the concept “sustainable consumption” as a descriptive concept. This results in treating the construction of this sustainability index as a statistical and empirical problem. Blomskog and Hjelmblom

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argue that sustainable consumption is thus an intermediate concept, that is, the construction of a sustainable consumption index should be regarded as a normative multi-attribute decision process. The analysis benefits policymakers and other stakeholders, contributing to a deeper understanding of sustainability as a concept and avoiding the risk of low validity of its measurement. Macro-level frameworks like planetary boundaries and Sustainable Development Index (SDI), can help governments identify areas where strategic action is needed. In Chapter 4, Hall and Ranganathan argue that there is a need for new approaches at the micro level that incentivize actors to transition to sustainable forms of development. This necessitates addressing sustainable consumption and production, and inequality. They suggest an approach that closes the gap between the environmental-production-income and distribution-consumption cycles by coupling environmental sustainability with economic and social sustainability. Their approach to inclusive capitalism bridges the income earned from capital ownership and from wages; and between the human production of goods and services, and the impact of these activities on the environment. Hall and Ranganathan analyse different mechanisms to bridge these divides and suggest broadening the distribution of capital ownership using future earnings of capital and directing this income towards sustainable consumption and production. They argue that this is a holistic solution to the growing environmental problems and income inequality. In market economies production and consumption are dependent on exchanges between market actors providing and using resources. Junker and Mattsson (Chapter 5) argue for the “whole-of-government” perspective, that interaction between market actors and policy actors are crucial to achieve sustainable development goals and climate mitigation. Technical, economic, and policy innovations are needed for the market to be able to perform fossil-free market exchanges. They use “roadmaps” originating from a non-traditional Swedish government committee named “Fossilfree Sweden” (FFS) and the government’s climate action plan as empirical focus. The roadmaps for specific industries/sectors are developed by market actors and submitted by FFS to the government. With the aim of furthering the knowledge of how interaction between government and business promotes sustainable market exchange, they adopt a conceptual model that identifies three categories of market practices—representational, normalizing, and exchange practices—that are interlinked by

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translation. Junker and Mattsson’s policy practice approach refers to a “whole-of-government” perspective. They analyse one of the roadmaps, “Construction”, in terms of how policy innovations, as identified in the climate action plan, can promote technical and economic innovations and help in the development of fossil-free market exchanges. Making a transition to a sustainable production system involves what Joseph Schumpeter termed creative destruction. Clean technologies need to develop to the stage where they may dislodge fossil fuels and other unsustainable industries. Several of the energy technologies to create a low-carbon economy exist but require significant innovation to overcome intermittency and to reduce material intensity. At the same time, in industrial processes such as steel, aluminium, cement, etc., sustainable production processes are still in their infancy. In Chapter 6, Jerneck reflects on how this transformation to a sustainable production economy may be achieved. The process involves the “creative destruction” of fossil fuels and other unsustainable industries, as alternatives are brought to the point of competitiveness. Jerneck argues that this involves several processes from innovation, finance and knowledge of organizations, supply chains, and markets. This chapter suggests that above all it is a political project, involving political economy, industrial policy, and macroeconomic management; with social policy to ease the transition from sunset to sunrise industries. Although the task is unprecedented, there are lessons to be learnt from previous episodes of politically driven economic structural change, making an understanding of economic history relevant as well. In short, the creative destruction of fossil fuels is an interdisciplinary project with many opportunities for interdisciplinary research and cooperation among social scientists, policymakers, and practitioners. The financial system has a critical role in promoting sustainable consumption and production. Sandberg and Sjöström (Chapter 7) focus on sustainable investment—that seeks to integrate sustainable development interest and various aspects of the SDGs into its financial decision-making. They examine financial versus moral motivations—of the key actors in this field—to explore the motivations of sustainabilityoriented investors for directing capital towards sustainable consumption and production practices. In public communication, sustainable investment is often framed in financial terms, that is, that a focus on sustainability is a way to generate long-term shareholder value; however, some

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investors may be motivated by “doing good” to contribute to a sustainable future. These two rationales build on different logics and may produce different strategies on the part of investors, leading to different outcomes. Sandberg and Sjöström argue that the financial logic has a theoretical or mind-to-world direction of fit, and it requires investors to adopt a reactive and hypothetical stance towards sustainability issues. The moral logic, on the other hand, has a practical or world-to-mind direction of fit, and it requires investors to adopt a proactive and categorical stance to sustainability issues. This chapter reflects on what this might entail for sustainable consumption and production. Citizens and policymakers are increasingly depending on demand-side policies, both behavioural and conventional, to help mitigate climate change. In Chapter 8, Sunstein and Reisch argue that choice architecture may be used as a new policy to reduce greenhouse gas emissions and may supplement or complement the standard tools of economic incentives, mandates, and bans. Several consumers choose the less expensive option between the climate-friendly products or services and alternatives. Sunstein and Reisch suggest that climate-friendly default rules may be applied as an effective tool for altering outcomes instead of large economic incentives. The underlying motivation for doing this includes the power of suggestion, inertia and procrastination, and loss aversion. If chosen well, climate-friendly defaults are likely to have large effects in reducing the economic and environmental harms associated with various products and activities. They further suggest that in deciding whether to establish climate-friendly defaults, choice architects (subject to legal constraints) should consider both consumer welfare and a wide range of other costs and benefits. Sometimes that assessment will argue strongly in favour of climate-friendly defaults, particularly when both economic and environmental considerations point in their direction. The chapter concludes that surveys in 17 countries worldwide show that a majority in many nations are in favour of climate-friendly defaults. Sustainable consumption and production are often associated with systems and products surrounding firms and industries, often neglecting the sustainability mindsets. Egorova and Luistro Jonsson (Chapter 9) focus on the production and consumption of sustainability literacy, particularly in business education. Recent trends have shown that business schools across the globe are transforming their strategy by widening their societal engagement and integrating sustainability into their curriculum. This chapter analyses the potential and pitfalls of the production and

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consumption of sustainability courses by reviewing existing literature and analysing four specific approaches undertaken by business schools—an elective course, an integrated course, a degree programme, and leading sustainability transformation by example. Egorova and Luistro Jonsson provide useful insights into the design and development of sustainability literacy in business schools. In Chapter 10, Stromberg and Ituarte-Lima address two research questions: (1) Does top-down transparency/information disclosure contribute or not to addressing the social-ecological challenges emerging from supply chains? (2) Do distinct types of transparency, top-down versus ground-up, differ in the way they can contribute to address these challenges and thereby to the enjoyment of the right to a healthy environment? To assess these questions, they use the mining industry as a case study, which faces increasing social-ecological challenges. First, they build on Ituarte-Lima and Stromberg (2018), identifying the sustainability challenges of the sector. The chapter then unpacks information: from the common focus on accuracy and precision, which they argue is necessary but insufficient for reaching positive socio-ecological outcomes, into seven sub-characteristics that they argue are sufficient for contributing to what qualifies as effective transparency. Thereafter, Stromberg and Ituarte-Lima apply these characteristics to contrast how current topdown approaches versus emerging ground-up approaches contribute to effective transparency. This highlights ways in which recent technological advances make ground-up approaches necessary for delivering effective transparency that is conducive to circular and, above all, sustainable commodity chains. In 2017, about 15.8 million hectares of tropical tree cover loss was recorded due to deforestation. Tropical deforestation has numerous socioecological and economic consequences, releasing more greenhouse gas emissions, in carbon dioxide equivalents, than the entire European Union. Understanding how the global commodity system connects production and consumption across distance is essential to explaining and countering the drivers of uneven global environmental change and its societal effects. New forms of information exchange have made it simpler to identify “telecouplings” between these distant producer and consumer systems. In Chapter 11, Delabre, Nolan, Jespersen, Gallemore, and Alexander examine the complexities of implementing private-sector-led “zero-deforestation” commitments, which promise to eliminate deforestation from the supply chains of the commodities that companies

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produce, trade, and/or source. Employing the concept of “disarticulations”, Delabre et al. bring an analysis of global production networks into conversation with critical political economy’s emphasis on discourse and knowledge production. They discuss dominant, mainstream discourses prevalent in zero-deforestation governance, including notions that: (1) Implementing zero deforestation is highly technical and thus requires the expertise of consultants and third parties; (2) All supply chain actors have responsibility for zero deforestation; (3) The need for data and technologies for governing deforestation; (4) Jurisdictional approaches provide joined-up governance for zero deforestation. Examining these discourses helps us to understand some of the complexities in the implementation of “zero-deforestation” commitments, how socio-economic processes in global production are linked or delinked, and how people can be connected to or excluded from these chains. Finally, they reflect on opportunities for research and practice in shifting towards sustainable consumption and production of deforestation-risk commodities, and the importance of considering how power relations and knowledge politics shape production networks. Nsabimana and Umutesi (Chapter 12) examine issues related to increasing farm productivity to ensure food security and reduction in hunger to achieve the SDGs. They argue that a systematic use of agricultural innovations like fertilizers, hybrid seeds, and pesticides together with new technology is the best way to raise farm productivity. This chapter employs an empirical cross-country analysis to investigate the associations between the adoption of agricultural innovations and child nutrition in rural Uganda. Nsabimana and Umutesi find that the reduction in child malnutrition is strongly associated with combined innovations rather than single-use technology. They argue that efforts aimed at reducing child malnutrition and ensuring sustainable food security should focus on adoption of agricultural innovations by farm households through affordable, accessible inputs markets and adequate extension services. The world’s population is expected to rise to 9.8 billion by 2050 with two-thirds of the people living in urban areas. This population growth is expected to be largely concentrated in Africa and Asia. The urbanization in emerging market economies poses a challenge for agricultural production. At the same time, agricultural productivity is unable to keep up with the speed of urbanization and growth in food demand. This demand for food is highly skewed towards non-human consumption and

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wastage. In Chapter 13, Jha reviews the trends in urbanization and agricultural productivity to conclude that the world may be facing a somewhat neo-Malthusian future. Jha suggests that public policy should subsidize agricultural research. Taxation is suggested to reduce the demand for certain types of food (particularly meat) and use of agricultural crops for biofuels. Implications for international trade and domestic agricultural policies are also considered. The chapter further discusses other institutional and demographic measures to reduce food wastage, arguing that for sustainable food security, measures on both the supply and the demand side, need to be urgently undertaken. Modern cities have been conceived to be inherently unsustainable. While the agglomeration economies due to effective use of land, better opportunities for the provision of public transport, and a lower per capita investment in physical infrastructure are economical on natural resources, urban areas have higher levels of per capita consumption. High density often results in higher costs of space, consequently encouraging high productivity activities in major cities. Education and income differences result in spatial sorting, with corresponding differences in consumption patterns. In Chapter 14, Lerpold, Sjöberg, and Tang suggest that size, density, and the position in the urban hierarchy may need to be taken into account in assessing sustainability outcomes. This intra-urban differentiation needs to be considered with the inter-urban issues of boundary drawing for measurement. Lerpold, Sjöberg, and Tang refer to this as “ontological cityism”. Lerpold, Sjöberg, and Tang (Chapter 15) review the literature on urban sustainability emphasizing the complexities and trade-offs between and within the 3 Es—ecology, economy, and equality. They focus on the intra-urban dimensions of density, mobility, the built environment and housing, lifestyle trends and gentrification along with social sustainability issues of crime, homelessness, and community. In addition to the gains from increased size and density, outcomes also depend on the urban morphology and the consequences of spatial sorting. Lerpold et al. discuss that positive outcomes generated by density and efficiency may be offset by rebound effects, like less sustainable construction materials or increased income inequality. Thus, sustainability gains often become an empirical issue. Furthermore, social sustainability is as critical as environmental sustainability, and a trade-off between these two types of sustainability may be difficult to resolve.

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Energy is central to any economic activity and also to the goals of sustainable growth and development. Its efficient production and use are key to the green growth agenda and in achieving most of the SDGs. For African countries to move from being consumer-based economies to investment-driven economies, infrastructure in the form of energy would be very essential. In Chapter 16, Karimu and Dramani investigate the energy consumption patterns in Africa, particularly in the area of biomass fuels and fuel use in the transportation sector. They find that fuelwood is the most consumed cooking fuel in Africa, especially Sub-Saharan Africa (SSA), where more than 80 per cent depend on this fuel for cooking, revealing an unsustainable consumption pattern. Evidence on transportation suggests that Africa is still a major consumer of fossil fuel even though motorization rates in Africa are below the world average. This may be caused by factors that include poor infrastructure such as limited paved roads (this creates traffic congestion), poor maintenance and servicing culture, and high dependence on used cars. India has made commitments at the global level towards supporting Sustainable Development Goals and is making considerable progress towards achieving them. Energy consumption in India grew at an average rate of 5.3 per cent between 2013 and 2017. India’s share in the global energy consumption reached 5.6 per cent in 2017. With economic growth, energy consumption is also expected to rise. This has severe consequences for air quality. Vehicular emissions and industrial pollution have resulted in a situation where nine out of the 10 most polluted cities in the world are in India. The Government of India has undertaken various policy measures towards energy conservation and efficient use of energy. Some of the policy measures target industries, while others aim at sustainable consumption via demand-side policies. In Chapter 17, Bansal, Grover, and Martinez-Cruz document and assess policy measures adopted by the Government of India towards sustainable consumption, with a special focus on policies towards energy efficiency. Energy consumption labels inform consumers of the relative efficiency of different products, and are going to be effective if consumers are willing to pay a higher price for the energy efficient products once information is provided. Bansal et al. conduct an experiment in two districts of Delhi, with different socio-economic characteristics such as affluence, education, occupational structure, etc. They find that respondents from the more affluent South Delhi district have a stronger preference for an energy efficient labelled

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car and on average, are willing to pay US $ 5050 as compared to US $ 1186 by East Delhi respondents for the same car. The Covid crisis has underlined the importance of the traditionally ignored and undervalued: nature and care, and household production. Simultaneously, an emerging crisis of care and social reproduction continues to accompany economic growth throughout the world, with the potential to reverse the sustainable development gains. Demographic changes imply that an increasing number of children and elderly need care, which women disproportionately provide. At the same time female labour force participation has increased rapidly since the 1960s with expansion of trade, capital flows, and economic restructuring. Women have thus ended up with the triple responsibility of being income earners, household managers, and care givers. In Chapter 18, Reksten and Floro introduce a comparative assessment of neoclassical, ecological, and feminist economics of consumption and production from the perspectives of sustainability, their conceptions of well-being, and their treatments of institutions and questions of political economy. The chapter seeks to integrate the ecological model of the economy, which explicitly considers the relationship between the economic and environmental systems, and the feminist analysis of the relationship between social provisioning and the economic system. The resulting framework builds on the work of feminist ecological economics. An underexplored research area connected to women’s health and well-being and the environment is the issue of managing menstrual waste. Disposable pads generate an estimated global waste of around 480 billion soiled pads annually. Most of these used pads end up either in landfills or in the oceans where the plastic and other non-compostable material in these products take hundreds of years to decompose. Garikipati (Chapter 19) explores how markets for menstrual products have evolved and their implications for sustainability of menstrual hygiene management. Garikipati finds that a tangled web of traditional taboos, markets, and government policies have merged to create and endorse asymmetric information in menstrual health that has promoted the single product category of disposable pads. Deep-rooted beliefs and behavioural practices of menstruating women have adverse implications for environmental ecosystems, while seriously limiting women’s agency in the choice of menstrual products as awareness of alternatives is negligible. The chapter argues that “informed choice” has the potential to steer the menstrual health market in a more sustainable direction.

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Climate change is often presented as a super wicked problem with the four characteristics: “time is running out; those seeking to end the problem are also causing it; lack of central authority; and policies discount the future irrationality”. In a thought-provoking Chapter (20), Fleet, Gunster, and Paterson draw attention to the most salient aspect of such a dilemma: we’re all part of the problem but in ways that often render suspect the claim that individual lifestyle actions are the solution. In the context of the need for urgent climate change action, this chapter poses accusations and admissions of hypocrisy as a type of super wicked provocation, equally displaced over time and space, necessitating ongoing self and institutional re-examination without offering clear or salient choices for sustainable consumption, but nevertheless inviting important conversations. Drawing on existing quantitative and qualitative research showing that the hypocrisy discourse is not simply a sensationalist PR strategy of conservatives but is rather a broad, significant, and multifaceted form of climate change discourse, the authors engage with the varied modes of language hypocrisy in contemporary English language legacy media. Fleet et al. offer both practical and theoretical tools to consider if, and how, hypocrisy can act as fertile ground for pro-climate action.

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Mungkung, R., Gheewala, S. H., Kanyarushoki, C., Hospido, A., Werf, H. V. D., Poovarodom, N., … Feijoo, G. (2012). Product-carbon footprinting in Thailand: A step towards sustainable consumption and production. Environmental Development, 3, 100–108. Nordström, J., & Thunström, L. (2015). Styrning av konsumenter mot miljövänligare och hälsosammare produkter. Information och ekonomiska incitament. Forskningsrapport, Handelns utvecklingsråd. http://www.handelsradet.nu/ wp-content/uploads/2010/05/2015-3-Styrning-av-konsumenter-mot-mil jovanligare-och-halsosammare-produkter.pdf. Ranganathan, S., & Bali Swain, R. (2018). Sustainable development and global targets: A dynamical systems approach to aid evidence-based policy making. Sustainable Development, 26(6), 812–821. Rock, M. T., & Angel, D. P. (2007). Grow first, clean up later? Industrial transformation in East Asia. Environment, 49(4), 8–19. Solér, C. (2012). Conceptualizing sustainably produced food for promotional purposes: A sustainable marketing approach. Sustainability, 4(3), 294–340. Spaiser, V., Ranganathan, S., Bali Swain, R., & Sumpter, D. (2016). The sustainable development oxymoron: Quantifying and modelling the incompatibility of sustainable development goals. International Journal of Sustainable Development & World Ecology, 24(6), 457–470. Staniskis, J. K. (2012). Sustainable consumption and production: How to make it possible. Clean Technologies and Environmental Policy, 14, 1015–1022. Sunstein, C. R., & Reisch, L. A. (2019). Trusting nudges: Toward a bill of rights for nudging. London: Routledge. Tukker, A., Charter, M., Vezzoli, C., Sto, E., & Munch Andersen, M. (Eds). (2008). System innovation for sustainability 1: Perspectives on radical changes to sustainable consumption and production. Sheffield, UK: Greeenleaf Publishing. UN. (2019). Independent group of scientists appointed by the secretary-general, global sustainable Development Report 2019: The future is now—Science for achieving sustainable development. New York: United Nations. https://sustai nabledevelopment.un.org/content/documents/24797GSDR_report_2019. pdf. UNSD. (2020). Second report of sustainable development goals interlinkages. UN: IAEG Interlinkages Working Group. Wang, C., Ghedimi, P., Lim, M. K., & Tseng, M.-L. (2019). A literature review of sustainable consumption and production: A comparative analysis in developed and developing economies. Journal of Cleaner Production, 206, 741–754. Warde, A. (2005). Consumption and theories of practice. Journal of Consumer Culture, 5(2), 131–153. Warde, A. (2017). Consumption and public life. London: Palgrave Macmillan.

CHAPTER 2

Sustainable Consumption and Production: Mapping the Conceptual Terrain Jayati Srivastava

The existential crisis faced by planet Earth has invigorated many efforts on the part of the international community to protect the environment for the present and future generations while not compromising on the objective of economic development. Many national governments, intergovernmental organizations, particularly the UN and civil society actors, have been at the fulcrum of many landmark environmental initiatives that have largely converged around the ‘norm’ of sustainable development.1 This chapter maps the genealogy and meaning of the concept of sustainable consumption and production (SCP). It also deals with the complexity related to its definitional exactitude, policy measurability, targets and outcomes, and the gap between intent and implementation. It analyses the development–environment conundrum and the important steps taken by the international community to reconcile the two, leading to the adoption of the framework of sustainable development. The chapter argues that ethical and moral motivations can bring about behavioural changes towards responsible consumption and production

J. Srivastava (B) Jawaharlal Nehru University, New Delhi, India e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_2

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practices. This, most importantly, calls for mainstreaming the ethics of sustainability, in addition to invoking the harm principle to build robust pathways for achieving SCP. The chapter is divided into four sections. Section “SCP: Definition and Scope” deals with the definition and scope of SCP and traces its evolution through major historical initiatives taken by the international community. It also looks at the framework of sustainable development that forms the pivot for SCP and discusses the development–environment conundrum that it seeks to resolve. Section “Targets, Indicators and Implementation of SCP: Mind the Gap” discusses the targets and indicators of SCP and the gaps between intent and implementation. Section “Mainstreaming Ethics of Sustainability” looks at the ethics of sustainability to propound solutions for achieving SCP by appealing to the moral core and universal obligations, and the harm principle. Section “Conclusions” sums up the main arguments and findings.

SCP: Definition and Scope The idea of SCP seeks to reduce the material footprint of economic development and aims at blending it with environmental objectives. According to the United Nations Environment Programme, SCP … is a holistic approach to minimising the negative environmental impacts from consumption and production systems while promoting quality of life for all…. SCP aims at doing more and better with less, by reducing resource use, environmental degradation, waste and pollution along the whole life cycle of goods and services, while at the same time increasing quality of life for all (emphasis in original) (UNEP, 2011: 10).

Such efforts at decoupling rest on four key principles aimed at “(1) [i]mproving quality of life without increasing environmental degradation, and without compromising the resource needs of future generations; (2) [d]ecoupling economic growth from environmental degradation….2 ; (3) [a]pplying life-cycle thinking, which considers the impacts from all lifecycle stages of production and consumption process; and, (4) [g]uarding against the re-bound effect, where efficiency gains are cancelled out by resulting increases in consumption” (UNEP, 2011: 11). In general terms, it translates into resource efficiency and minimizes the negative environmental impact of economic growth (UNEP, 2015: 14).

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An important milestone in the journey of SCP was the resolution adopted by the UN Sustainable Development Summit titled Transforming Our World: The 2030 Agenda for Sustainable Development on 25 September 2015. It stipulated 17 interlocking Sustainable Development Goals (SDGs) and 169 targets tracked by 232 unique indicators for a prosperous and peaceful world (Ritchie, Roser, Mispy, & Ortiz-Ospina, 2018). Within the rubric of SDGs, Goal 12 aims at ensuring sustainable consumption and production (SCP). SDG 12 expands on the idea of decoupling to define it as a set of measures aimed at … promoting resource and energy efficiency, sustainable infrastructure, and providing access to basic services, green and decent jobs and a better quality of life for all. Its implementation helps to achieve overall development plans, reduce future economic, environmental and social costs, strengthen economic competitiveness and reduce poverty. (Ritchie, Roser, Mispy, & Ortiz-Ospina, 2018).

SCP is therefore geared towards responding to basic needs and ensuring development “while minimizing the use of natural resources and toxic materials as well as the emission of waste and pollutants over the life cycle of the service or product so as not to jeopardize the needs of future generations” (UN, n.d.). In the context of climate change, for instance, it would entail that all production and consumption of goods and services to be based on a close examination of the carbon footprint generated during the entire life cycle of production and consumption; and also, either mitigating the environmental costs or offsetting them by adopting numerous practices of sustainability (see Fig. 2.1). The SCP and Development–Environment Conundrum The SCP is a culmination of a long-drawn-out process to reconcile the goal of environmental protection with that of development, which has since been encapsulated in the “norm” of sustainable development. Way back in 1987, the Brundtland Commission Report (World Commission on Environment and Development) articulated sustainable development which it defined as:

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Fig. 2.1 Sustainable consumption and production (Source Adapted from UNEP, 2015: 11)

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…development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts: the concept of ‘needs’, in particular the essential needs of the world’s poor, to which overriding priority should be given; and the idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs …. A world in which poverty and inequality are endemic will always be prone to ecological and other crises. Sustainable development requires meeting the basic needs of all and extending opportunity to satisfy their aspirations for a better life.” (WCED, 1987: 54, emphasis added)

Within the inter-generational timeline, it underlined both the limits of the carrying capacity of Earth and also the need for reducing poverty and equitable development. Since then, development and environment have become the two pivots of the definition of sustainability. The vexed issue is rooted in differential levels of development that countries find themselves in, and therefore, historically differential levels of contributions to the environmental damage. Developing countries see accelerated development as the only way to lift millions out of poverty and improve the quality of life. As the Indian Prime Minister, Indira Gandhi, underlined at the first United Nations Conference on the Human Environment (UNCHE, 1972a) at Stockholm in 1972: “We do not wish to impoverish the environment any further and yet we cannot for a moment forget the grim poverty of large numbers of people. Are not poverty and need the greatest polluters?”3 Less developing countries thus want developed countries to be mindful of their responsibility towards environmental damage in the past while also removing the structural obstructions to the economic development. As a result, the notion of common but differentiated responsibility, and the polluter-pays principle gained ground as part of the sustainable development framework. Many successive initiatives have since been made to fulfil these objectives within the framework of sustainable development, the most recent being a set of SDGs adopted in 2015 (see Table 2.1).

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Table 2.1 Landmark global initiatives towards SCP 1972, United Nations Conference on Human Environment (UNCHE), Stockholm Conference 1987, Report of the World Commission on Environment and Development (WCED)

1992, Agenda 21, United Nations Conference on Environment and Development (UNCED), Rio Conference

1994, Oslo Symposium

2000, Millennium Development Summit, New York

2002, World Summit on Sustainable Development, Johannesburg

First UN Conference on environment. Started the debate on ways to reconcile environment and development The WCED Report: Our Common Future eloquently defined the concept of sustainable development as “development that meets the need of the present without compromising on the needs of future generations to meet their own needs.” It continues to be the mainframe of international environmental initiatives Ch 4.3 of Agenda 21 underlined that “unsustainable pattern of consumption and production, particularly in industrialised countries is the root cause of environmental problems and developmental imbalances.” Drafted a working definition of SCP as “the use of goods and services that respond to basic needs and bring a better quality of life, while minimising the use of natural resources, toxic materials and emissions of waste and pollutants over the life cycle, so as not to jeopardise the needs of future generations.” Adopted Millennium Declaration that enumerated eight Millennium Development Goals (MDGs) with an ambitious aim of reducing extreme poverty by 2015 Adopted the Johannesburg Declaration on Sustainable Development and the Plan of Implementation. Stipulated that SCP is integral to achieving sustainable development and committed to work towards encouraging and promoting the development of a 10-year framework of programmes (10YFP), in addition to promoting social and economic development within the limits of carrying capacity of the earth

(continued)

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Table 2.1 (continued) 2003, Marrakesh Process

2012, United Nations Conference on Sustainable Development, Rio+20

2015, United Nations Sustainable Development Summit, New York

2017, UNGA Resolution

A multi-stakeholder’s forum set up to encourage cooperation on implementation of SCP and provided important significant inputs on the development of a 10-year framework of programmes (10YFP) Outcome document The Future We Want, reiterated that “… Poverty eradication, changing unsustainable and promoting sustainable patterns of consumption and production and protecting and managing the natural resource base of economic and social development are the overarching objectives of and essential requirements for sustainable development.” Building on the work of the Millennium Development Goals, it launched work towards developing SDGs. It also mandated the United Nations High-level Political Forum on Sustainable Development (HLPF). The first meeting of HLPF took place on 24 September 2013 Adopted Transforming Our World: The 2030 UN Agenda for Sustainable Development enumerating 17 Sustainable Development Goals. Goal 12 was specifically aimed at ensuring sustainable consumption and production patterns Adoption of the global indicator framework for Sustainable Development Goal7 pertaining to the 2030 Agenda for Sustainable Development

Source Adapted from UN, Sustainable Development Goals Knowledge Platform https://sustainabled evelopment.un.org/topics/sustainableconsumptionandproduction, accessed on 26 February 2020

SDG Goal 12 in particular reiterated that environment and development are the two sides of the same coin; they are complementary, and in the long run, there are synergies between the two. Such reconciliation of the twin goals of development and environment postulates demographic and developmental transitions to ensure that there is equitable distribution of gains to level the huge income gaps between countries (per capita income in developed countries is $40,000 in contrast to $2000 in developing countries) (UNEP, 2015: 14). To address this concern, many of

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the 17 SDGs underlined developmental thrusters under the broad rubric of holistic approach to transform our world. These include SDG 1: No Poverty; SDG 2: Zero Hunger; SDG 3: Good Health and Well-being; SDG 8: Decent Work and Economic Growth; SDG 9: Industry, Innovation, and Infrastructure, SDG 10: Reduced Inequality. On the other hand, the environmental issues specifically find a foothold in SDG 7: Affordable and Clean Energy; SDG 11: Sustainable Cities and Communities; SDG 13: Climate Action; SDG 14: Life Below Water; SDG 15: Life on Land; SDG 12: Responsible Consumption and Production. Some SDGs straddle the worlds of both development and environment. These include SDG 4: Quality Education; SDG 5: Gender Equality; SDG 6: Clean Water and Sanitation; while SDG 16: Peace and Justice and Strong Institutions, and SDG 17: Partnership to Achieve the Goals are about creating pathways for a better world by recognizing the laudable objectives of peace and justice, and collective action. The fact that consumption and production both feature in SCP makes it a multi-layered process involving stakeholders at every level from the production cycle to consumption. It thus makes states, market, and civil society actors important stakeholders and active participants in the process. The state also performs a dual role of being the facilitator and regulator, apart from being a producer and consumer in some cases. It is believed that such a decentralized approach would help in better achieving the goal of sustainable development. Although the goal of SCP is a laudable one along with other SDGs, the problem is the huge empirical gap between the intent and outcome, which is discussed in the next section.

Targets, Indicators, and Implementation of SCP: Mind the Gap The goal of SCP under SDGs has eight targets in addition to three aligned means to ensure their implementation (12.a, 12.b & 12.c & 12.a.1, 12.b.1 & 12.c.1). Each of the goals has a corresponding indicator in order to facilitate monitoring and ease of measurability (see Table 2.2). Adherence and compliance is purely voluntary, and places ownership of responsible behaviour at all levels including state, market, and civil society. Yet, it does not lay down a comprehensive framework for ensuring compliance, making outcomes far from satisfactory. About the progress made so far, by 2018 nearly 108 countries had adopted policies towards achieving the targets of SCP. Nearly 303 related

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Table 2.2 Targets and indicators for sustainable consumption and production (Goal 12 of SDGs) Targets

Indicators

12.1 Implement the 10-Year Framework of Programmes on Sustainable Consumption and Production Patterns, all countries taking action, with developed countries taking the lead, taking into account the development and capabilities of developing countries 12.2 By 2030, achieve the sustainable management and efficient use of natural resources

12.1.1 Number of countries with sustainable consumption and production (SCP) national action plans or SCP mainstreamed as a priority or a target into national policies

12.3 By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses 12.4 By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water, and soil in order to minimize their adverse impacts on human health and the environment

12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling, and reuse 12.6 Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle 12.7 Promote public procurement practices that are sustainable, in accordance with national policies and priorities

12.2.1 Material footprint, material footprint per capita, and material footprint per GDP 12.2.2 Domestic material consumption, domestic material consumption per capita, and domestic material consumption per GDP 12.3.1 Global food loss index

12.4.1 Number of parties to international multilateral environmental agreements on hazardous waste, and other chemicals that meet their commitments and obligations in transmitting information as required by each relevant agreement 12.4.2 Hazardous waste generated per capita and proportion of hazardous waste treated, by type of treatment 12.5.1 National recycling rate, tons of material recycled 12.6.1 Number of companies publishing sustainability reports

12.7.1 Number of countries implementing sustainable public procurement policies and action plans

(continued)

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Table 2.2 (continued) Targets

Indicators

12.8 By 2030, ensure that people everywhere have the relevant information and awareness for sustainable development and lifestyles in harmony with nature

12.8.1 Extent to which (i) global citizenship education and (ii) education for sustainable development (including climate change education) are mainstreamed in (a) national education policies; (b) curricula; (c) teacher education; and (d) student assessment 12.a.1 Amount of support to developing countries on research and development for sustainable consumption and production and environmentally sound technologies 12.b.1 Number of sustainable tourism strategies or policies and implemented action plans with agreed monitoring and evaluation tools 12.c.1 Amount of fossil-fuel subsidies per unit of GDP (production and consumption) and as a proportion of total national expenditure on fossil fuels

12.a Support developing countries to strengthen their scientific and technological capacity to move towards more sustainable patterns of consumption and production 12.b Develop and implement tools to monitor sustainable development impacts for sustainable tourism that creates jobs and promotes local culture and products 12.c Rationalize inefficient fossil-fuel subsidies that encourage wasteful consumption by removing market distortions, in accordance with national circumstances, including by restructuring taxation and phasing out those harmful subsidies, where they exist, to reflect their environmental impacts, taking fully into account the specific needs and conditions of developing countries and minimizing the possible adverse impacts on their development in a manner that protects the poor and the affected communities

Source UNGA, 2018, Global Indicator Framework for the Sustainable Development Goals and Targets of the 2030 Agenda for Sustainable Development, A/RES/71/313, E/CN.3/2018/2. Accessed on 20 February 2020: 12–13

policy instruments were reported to have been adopted by 71 countries and the European Union. The response from the market also seems to be constructive, with 93 per cent of the world’s 250 largest companies (based on revenue) reporting on sustainability, along with three quarters of the top 100 companies in 49 countries (UN ECOSOC, 2019). However, the road to achieving SCP seems like a long one. There appears to be a lag in prioritizing environment in the short term even though the long-term consequences of environmental damage do impact

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economic growth. For instance, there are huge health costs of air pollution, pesticides, chemicals, hazardous waste, etc. which then lead to a large economic burden. Similarly, the cost of global warming results in food scarcity, which will in turn impede overall well-being of the population. Despite that, not much heed is paid to the cost of environmental damage caused at various levels of production and consumption. It is established by the fact that there is an increase in material consumption from 87 billion metric tonnes in 2015 to 92.1 billion tonnes in 2017. If we project back, in 1970, material consumption was 27 billion tonnes, making it an exponential increase of 254 per cent. This also corresponds with the increase in per capita material footprint from 8.1 metric tonnes of natural resources in 1990 to 12.2 tonnes in 2017. If this trend continues, material consumption is likely to rise to 190 billion metric tonnes in 2060 (UN, 2019: 15). Added to that is the huge disparity in per capita material footprint of rich and poor countries (see Fig. 2.2), even though the per capita material footprint of developing countries is also growing—from 5 metric tonnes in the year 2000, it rose to 9 tonnes in 2017. Developing countries going through rapid economic development show a growing material footprint on account of construction and infrastructure projects. Overall, however the high-income countries account for 27 metric tonnes per capita material footprint as compared to 2 metric tonnes in low-income countries and 17 metric tonnes in upper-middle-income countries (UN, 2019: 15). At the same time, poverty and underdevelopment continue to pollute the lives of millions of people. According to the Global Multidimensional Poverty Index, out of 101 countries, 23.1 per cent of people are multidimensionally poor, making it a total of 1.3 billion people. Half of the 1.3 billion multidimensionally poor people are children below the age of 18, and a third of them are below 10 years of age. Two-thirds of multidimensionally poor people are found in the middle-income countries (UNDP-OPHI, 2019: 1). It is paradoxical that SDG Goal 1 aims at ending poverty in all its forms, and we seem no closer to achieving it by the year 2030, making development and poverty alleviation only a cherished goal. This brings us to the fundamental framework of ethics of sustainability which offers us some guidance on achieving SCP which is discussed in the next section.

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Fig. 2.2 Per capita material footprint of countries based on income (Source Adapted from UN, 2019, The Sustainable Development Goals Report 2019, p. 15)

Mainstreaming Ethics of Sustainability The ethics of sustainability theoretically creates the possibility of an alternative vision of political action that can reconcile the environment– development paradox and create a better future for humanity as a whole. The idea of a shared ecological space has acquired pre-eminence in the sustainability discourse which underlines the unity of biosphere and the concept of one Earth (Hayward, 2006: 359), not different territorially bound political communities. The ethics of sustainability thus moves from individual nation states to a shared notion of international community. The arch extends further to include not just the present but the future generations as well. The conventional notion of temporality and spatiality are thus unsettled as one begins to use the language of inter-generation (temporal), and the concept of one Earth and the unity of biosphere (spatial). This builds on an ethical argument that “a civilization based on

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human solidarity cannot exist without also being a civilization in solidarity with nature” (Lowy & Betto, 2015: 336). Sustainable development is thus seen as the most appropriate transnational concern, something that Nancy Fraser would classify as metapolitical justice4 which intersects with other dimensions of justice in different domestic contexts (Fraser, 2010: 25). For instance, displacement of people on account of large infrastructural projects would be harmful for their livelihoods, which at the same time would be detrimental to the environment. Similarly, the absence of economic, social, and political rights would aggravate environmental problems by denying access to natural resources. The distribution of natural resources is integral to this debate, which uses the language of rights and entitlements. It calls for “true respect for life, through equitable sharing of earth’s resources among all those who live on the planet” (Shiva, 2015: 123). In this context, equitable utilization of natural resources is seen as crucial for the realization of sustainable development as embedded inequalities affect poorer sections more than others. This again reiterates the argument about equitable development and burden-sharing in the spirit of common but differentiated responsibility and the polluter-pays principle. It is important to underline that from a developmental point of view, rapid economic growth is the panacea whereas sustainability is about comprehensive development, which is integrally connected to lifting millions out of poverty, and bringing about an improvement in the quality of their lives. From the environmental point of view, sustainability is linked to limitations to the carrying capacity of Earth and resource scarcity, which if left unheeded would lead to a global ecological disaster (Costanza, 1989). Sustainability, therefore, views natural capital5 as fundamentally different from other forms of capital because of its complex interlinkages with nature, including living and non-living resources, and also its non-substitutability (Pelenc, Ballet, & Dedeurwaerder, 2015: 1). Accordingly, natural capital is a prerequisite for survival and well-being and is, therefore, in a positive feedback loop with general welfare. Some of the natural capital must be categorized as critical capital, which is integral to human survival such as ozone layer, carbon cycle, biodiversity, etc. and hence must be maintained at a constant level. Hence, natural capital cannot be replaced as the damage caused to it is irreversible (Ekins, Simon, Deutsch, Folke, & De Groot, 2003: 168–169), which again underlines the ethics of sustainability.

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Here, a differentiation is made between growth and development in which the latter is seen as progressive improvement in human conditions. “Growth implies quantitative physical or material increase; development implies qualitative improvement or at least change” (Goodland, 1995: 9) in a positive manner. Hence “sustainability will be achieved only when development supplants growth; when the scale of the human economy is kept within the capacity of the overall ecosystem on which it depends. If we acknowledge the finite nature of our planet, ‘sustainable growth’ is an oxymoron” (Goodland, 1995: 4). Therefore, economic growth may not be a panacea for addressing either environmental or developmental problems but requires “embracing ethical norms pertaining to the survival of living matter, to the rights of future generations and to institutions responsible for ensuring that such rights are fully taken into account in policies and actions” (O’Riordan, 1988: 30). Many scholars also underline that we must pay attention to the structural reasons for inequitable development and maldistribution and hence, make participation and representation an essential component of distribution. Demands for the recognition of cultural identity and for full participatory democratic rights are seen as integral to distributional issues since “the distribution of environmental risks mirrors the inequity in socio-economic and cultural status” (Schlosberg, 2004: 518, 522). Besides, “more attention must be placed on greater “participation of people who are object of development…we cannot discuss environment or development without discussing political development. And you cannot eradicate poverty, at least not only by redistributing wealth or income but there must be more redistribution of power” (WCED, 1987: 41).6 It thus means greater democratization at all levels, and a commitment to ensure that no harm is engendered which brings us to the harm principle as essential to the ethics of sustainability. The Harm Principle and Ethics of Sustainability The harm principle plays an important role in forging the ethics of sustainability as it talks about preventing risks born out of environmental ills and the negative fallout of inequitable development. It is integral to the concept of sustainable development as it includes future generations as a part of the moral community which deems protection against harm caused by the present generation’s use of natural resources to meet the needs of future generations. Sustainable development would “create

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the greatest good or least harm” and help in bringing synergy between economic growth, social development, and environment (Salamat, 2016: 3–4, emphasis added), both in the present and the future. In 1972, the first UN conference on environment, UNCHE, adopted a no-harm principle under principle 21 of the Stockholm Declaration on Human Environment while asserting full and total sovereignty over natural resources. It said, “States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction” (UNCHE, 1972a). Significantly enough, the harm principle applies to both axes of sustainability—development (reduction of poverty, inequality, and ensuring better quality of life) and environment (minimizing environmental risks and working within the threshold limits of the biosphere). This hinges a lot on appealing to the universal moral universe which invokes moral obligation of the human agency towards “... impartiality, universalizability, [and] equality” to argue that “if it is in our power to prevent something bad from happening, without thereby sacrificing anything of comparable moral importance, we ought, morally, do it” (Singer, 1972: 231–232). The harm principle emanates from the Latin phase sic utere tuo ut alienum non laedas, which roughly translates as “use your own so as not to harm others,” as the philosophical basis of the use of power to prevent harm. John Stuart Mill is most prominently associated with this principle, but he underlined that “the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others… The only part of the conduct of any one, for which he is amenable to society, is that which concerns others” (Mill, 1909/2009: 18–19). Mill makes it explicit that the use of coercive power by the state is only to prevent harm from happening to others because for him individual freedom and liberty were paramount. However, over a period of time, the harm principle was used by the welfare state proactively to prevent harms like domestic violence, sexual abuse, drug abuse, and societal harms such as disposal of hazardous waste, and actions such as murder, theft, etc. The state action is therefore justified to take adequate regulatory steps to reduce the risk or prevent harm. The harm principle was further developed eloquently by Feinberg who argued that it requires moral judgements and is, therefore, value laden

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(Feinberg, 1984a: 32). He introduced something quite profound to the harm principle by making an argument that “harms are a state of setback vital interests which is the product of the wrongful (right violating) conduct of another party” (Feinberg, 1984a: 186). So, if the rights are violated by others, then it is seen to be causing harm. He also makes a distinction between causing harm intentionally or allowing harm to happen which means not preventing the harm from happening (Feinberg, 1984a: 166) which entails different kinds of liability. Fienberg calls environmental pollution a public harm, which becomes accumulative harm, as it is “produced by generally dangerous activity that threatens no specific persons nameable in advance, but almost anyone who happens to be in a position to be affected. These activities produce some common danger to all the members of the community.” Thus, when such an act cross a particular threshold, it becomes a public harm as it impacts vital interests shared by everyone (Fienberg, 1984b: 27). It is thus imperative to prevent environmental harm and also assign costs for generating environmental bads—whether pollution, global warming, or disposal of hazardous waste through a robust compliance and penal mechanisms such as taxation, labelling, fines, etc. at every level from production to consumption. This is anchored on the already established principles of polluter pays, and common but differentiated responsibility in the spirit of equitable burden-sharing and responsible behaviour and, most importantly, a commitment to causing no harm. On the issue of development too, the harm principle establishes an expansive notion of rights and entitlements. This would mean putting the obligations on the rich not because they are rich but because of their responsibility in causing and perpetuating structural poverty—thus causing harm (Shapcott, 2010: 193). In other words, “the better-off— we—are harming the worse-off insofar as the radical inequality we uphold excludes the global poor from a proportional share of the world’s natural resources and any equivalent” (Pogge, 2005: 40). More importantly, by allowing perpetuation of monumental suffering borne out of global poverty “we are harming the global poor—or, to put it more descriptively, we are active participants in the largest, though not the gravest, crime against humanity ever committed” (Pogge, 2005: 33). Alleviating poverty by means of accelerated development is therefore akin to harm prevention, and should be seen as a negative duty of the richer countries and their people towards the poorer countries and their people.

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The harm principle is thus used to assert the causal connection between the actions of the richer actors—individuals, states, and market—and the harm perpetrated by them due to structural inequality to make it a matter of rights for the world’s poor and the disadvantaged. According to Michael Walzer, “it’s not the fact that there are rich and poor that generate egalitarian politics but the fact that the rich ‘grind the face of the poor’, impose their policies upon them, command their deferential behaviour…the experience of subordination—of personal subordination, above all—lies behind the vision of equality” (Walzer, 1983: xiii). Hence, poverty and environmental degradation are impermissible harms, and to circumvent them is a collective moral responsibility. Also, universal moral obligation rests on the claim that poverty and environmental damage are no longer emanating from within national borders, but have transnational origins. Thus, one needs to look at structural reasons for global inequalities and environmental bads, and attendant domestic and international institutional architecture, political processes and practices that perpetuates poverty, inequitable development, and causes environmental damage.

Conclusions The ambitious project of Sustainable Consumption and Production is a part of the long-drawn-out effort by the international community to protect the environment along with rapid social and economic development. While it marks a landmark step, there still exist large gaps in meeting its core objectives because of the perceived tensions between environment and developmental goals. The concept of sustainable development underlines the synergy between the twin goal of environment and development. We can no longer talk about the silos of environment and development but of the complementarity between the two. The world requires a multipronged approach to redistribution of resources in order to meet the twin goals of development and environment, which would also go a long way in also meeting the targets of SCP. The ethics of sustainability by invoking the unity of biosphere or only one Earth creates a common moral universe of shared identity which is transnational in nature and thus allows us to escape the territorial trap (Agnew, 1994) and foreground an alternative vision for both the present and the future generations. The principle of harm applied equally to meet the objectives of environment and development within the overall

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framework of ethics of sustainability can be a useful guiding light to operationalize SCP.

Notes 1. See Srivastava, J. (2011). 2. By “reducing material/energy intensity of current economic activities and reducing emissions and waste from extraction, production, consumption, and disposal; and promoting a shift of consumption patterns towards groups of goods and services with lower energy and material intensity without compromising quality of life” (UNEP, 2011: 11). 3. The Indian PM’s (Mrs. Indira Gandhi) speech at the plenary session of the UNCHE (1972b). 4. Her arch of justice include redistribution, recognition, and representation (the three Rs of justice). 5. According to UNEP 2015 guidance framework on SCP, other capitals are: manufactured capital, financial capital, social capital, human capital. 6. The representation was made by Aristides Katoppo as a part of public hearing organized by the WCED, Jakarta, 26 March 1985. 7. It was prepared by the Inter-Agency and Expert Group on SDG Indicators (IAEG-SDGs).

References Agnew, J. (1994). The territorial trap: The geographical assumptions of international relations theory. Review of International Political Economy, 1(1), 53–80. Costanza, R. (1989). What is ecological economics? Ecological Economics, 1(1), 1–7. Ekins, P., Simon, S., Deutsch, L., Folke, C., & De Groot, R. (2003). A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecological Economics, 44, 165–185. Feinberg, J. (1984a). Harm to others: The moral limits of the criminal law. Oxford: Oxford University Press. Feinberg, J. (1984b). Environmental pollution & the threshold of harm. The Hastings Center Report, 14(3), 27–31. Fraser, N. (2010). Scales of justice: Reimagining political space in a globalizing world. New York: Columbia University Press. Goodland, R. (1995). The concept of environmental sustainability. Annual Review of Ecology and Systematics, 26, 1–24. Hayward, T. (2006). Global justice and the distribution of natural resources. Political Studies, 54, 349–369.

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Lowy, M., & Betto, F. (2015). Values of a new civilization. In W. F. Fisher & T. Ponniah (Eds.), Another world is possible: World social forum proposals for an alternative globalisation (pp. 329–337). London: Zed Books. Mill, J. S. (1909/2009). On liberty. Auckland: Floating Press. O’Riordan, T. (1988). The politics of sustainability. In R. K. Turner (Ed.), Sustainable environmental management: Principles and practices (pp. 29–50). London: Bellhaven Press. Pelenc, J., Ballet, J., & Dedeurwaerder, T. (2015). Weak sustainability versus strong sustainability. Brief for GSDR. https://sustainabledevelopment.un. org/content/documents/6569122-Pelenc-Weak%20Sustainability%20versus% 20Strong%20Sustainability.pdf. Accessed 5 Apr 2020. Pogge, T. (2005). Real world justice. The Journal of Ethics, 9(1/2), 29–53. Ritchie, H., Roser, M., Mispy, J., & Ortiz-Ospina, E. (2018). Measuring progress towards the Sustainable Development Goals. SDG-Tracker.org. Accessed 5 Apr 2020. Salamat, M. R. (2016). Ethics of sustainable development: The moral imperative for the effective implementation of the 2030 agenda for sustainable development. Natural Resources Forum, 40, 3–5. Schlosberg, D. (2004). Reconceiving environmental justice: Global movements and political theories. Environmental Politics, 13(3), 517–540. https://doi. org/10.1080/0964401042000229025. Shapcott, R. (2010). International ethics: A critical introduction. Cambridge: Polity. Shiva, V. (2015). Living democracy movement: Alternatives to the bankruptcy of globalization. In W. F. Fisher & T. Ponniah (Eds.), Another world is possible: World social forum proposals for an alternative globalisation (pp. 115–124). London: Zed Books. Singer, P. (1972). Famine, affluence, and morality. Philosophy & Public Affairs, 1(3), 229–243. Srivastava, J. (2011). Norm’ of sustainable development: Predicament and the problematique. India Quarterly, 67 (2), 93–110. UN. (2019). The Sustainable Development Goals Report 2019. New York: United Nations. UN. (n.d.). Sustainable consumption and production. Sustainable development goals knowledge platform. https://sustainabledevelopment.un.org/topics/sus tainableconsumptionandproduction. Accessed on 22 Oct 2020. UN ECOSOC. (2019, May 8). Progress towards the Sustainable Development Goals: Report of the Secretary-General. E/2019/68. UNCHE. (1972a). Stockholm Declaration on Human Environment. https:// www.un.org/ga/search/view_doc.asp?symbol=A/CONF.48/14/REV.1. Accessed 15 Apr 2020.

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UNCHE. (1972b, June 14). Indira Gandhi’s address to the United Nations Conference on the Human Environment Stockholm. https://www.inc.in/en/ media/speech/the-human-environment. Accessed 4 May 2020. UNDP-OPHI. (2019). Global Multidimensional Poverty Index (2019): Illuminating Poverty. United Nations Development Programme and Oxford Poverty and Human Development Initiative. http://hdr.undp.org/sites/def ault/files/mpi_2019_publication.pdf. Accessed 5 May 2020. UNEP. (2011). Paving the way for sustainable consumption and production: The Marrakesh Process Progress Report, Towards a 10 Year Framework of Programmes on Sustainable Consumption and Production. https://sustainab ledevelopment.un.org/content/documents/947Paving_the_way_final.pdf. UNEP. (2015, June). Sustainable consumption and production: A handbook for policymakers, UNEP. https://sustainabledevelopment.un.org/content/ documents/1951Sustainable%20Consumption.pdf. Accessed 6 May 2020. Walzer, M. (1983). Spheres of justice: A defense of pluralism and equality. New York: Basic Books. WCED. (1987, August 4). Our common future: The World Commission on Environment and Development. Official Record of the UNGA, A/42/427.

CHAPTER 3

An Analysis of a Sustainability Index Stig Blomskog and Magnus Hjelmblom

Introduction Sustainable consumption is today an important policy goal, which is supposed to contribute to an overall sustainable development. It is therefore important that policymakers and other stakeholders have access to valid measurement or evaluation models regarding sustainable consumption. Today, there is also extensive research and development of measurement models regarding sustainable consumption. The main purpose of this chapter, which is primarily directed towards researchers and practitioners (e.g. policymakers) within the field of sustainability, is a critical analysis of the common usage of the concept sustainability and how it is measured. We focus on sustainability with respect to (household) consumption, and use a recently developed household sustainable consumption index for 28 EU countries as an example. The index determines a ranking of the countries regarding sustainable consumption, i.e.

S. Blomskog (B) Södertörn University, Huddinge, Sweden e-mail: [email protected] M. Hjelmblom University of Gävle, Gävle, Sweden e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_3

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the index is a kind of ordinal measure regarding sustainable consumption of these countries. It should be noted that the construction of the index is supported by guidelines stated in the handbook about how to construct composite indicators issued by OECD (2008). The putative purpose of the handbook is to serve as a guideline for the construction of valid measures or indices regarding various aspects of sustainability. We argue that the construction of the previously mentioned index and many others seems to be grounded on a misinterpretation of the meaning or functioning of the concept sustainability. The designers of the index seem to interpret sustainability as a descriptive concept, a mistake that we (following Odelstad, 2017a: 31) refer to as the descriptive or realistic mistake. Instead, we argue that sustainability functions as an intermediate concept . Briefly, an intermediate concept functions as a link between different sorts of concepts, such as descriptive concepts and normative concepts. Intermediate concepts are common in legal, ethical and evaluative contexts. We are not aware of any previous studies where the concepts sustainable consumption and sustainability are explicitly treated as intermediate concepts. We therefore stress that our analysis should be regarded as a preliminary treatment of a very complex conceptual problem. To make the analysis tractable, it is performed as far as possible by means of an informal non-algebraic language. Finally, to avoid misinterpretation of our analysis, we stress that the purpose of our conceptual analysis is not to propose and/or elaborate any specific methods for the construction of a sustainable consumption index. As we argue in the chapter, the construction of a sustainable consumption index is a normative decision process. As such, it requires both (1) specific domain knowledge about the evaluation context and situation, and (2) adequate knowledge of the semantic function of the concept sustainability. Furthermore, since sustainability is a multidimensional concept, the process also benefits from (3) knowledge of multi-criteria decision analysis. As we point out in the chapter, the designer of a sustainability index should understand, for example, that the choice of a specific statistical method is a kind of normative decision, which should ultimately be grounded on normative reasoning. Since we do not possess the required domain knowledge, we make no attempt to prescribe a certain design of a sustainability index. Instead, our contribution focuses on (2) and (3). The chapter is organized as follows: In the next section, we present evidence for our hypothesis about the descriptive mistake in the context of sustainable consumption. In the third section, we introduce the

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theory of intermediate concepts. In the fourth section, based on the theory of intermediate concepts we analyse the construction of a sustainable consumption index for 28 EU countries. In the fifth section, we summarize the conclusions of the analysis.

Common Usage of the Concept Sustainable Consumption Introduction In this section, we examine how the concepts sustainable consumption and sustainability are commonly used. The examination functions as a background to the interpretation that we suggest in the following sections. It is both practical and very common to talk about a living environment, or society, or some aspect of society such as household consumption, being sustainable. The notion of sustainable development could then be understood as a development that leads from a ‘less sustainable’ society to a ‘more sustainable’ society. Sustainable consumption is then used (i) as a comparative concept, meaning that we can talk about different degrees of sustainability and compare different objects with respect to their sustainability. In such a context, the term ‘sustainability with respect to consumption’ is perhaps more natural than ‘sustainable consumption’. Another common application of sustainable consumption is (ii) to label objects sustainable or not sustainable (i.e. unsustainable). Sustainable consumption is then treated as a two-valued categorical concept . We will in the following, despite a slight risk of confusion, refer to both applications (i) and (ii) of sustainability as sustainable consumption, and assume that the domain is a set of countries. When it is absolutely necessary to distinguish between the two applications, the term sustainability with respect to aggregated household consumption will be used for sustainable consumption as a comparative concept. Construction of a Sustainable Household Consumption Index: A Case Study Today there is vast literature on constructions of measurement and evaluation models regarding sustainable consumption. We take Bartolj, Murovec, and Slabe-Erker (2018) as a case study and examine how the concept sustainable consumption is understood and used in this

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research field. The examination starts from our hypothesis that sustainable consumption is often misinterpreted as a descriptive concept. Bartolj et al. (2018) develop an index named Household Sustainable Consumption Index (HSCI). The domain of the index is the aggregate household consumption in 28 EU countries in 2005, 2010 and 2015. The authors’ starting point of the construction is as follows: The multidimensional phenomenon of sustainable consumption, which is measured in our research, is understood in line with the definition given by the Oslo Roundtable (1994) and is divided in three major areas: (1) the use of goods and services that respond to basic needs and bring better quality of life, (2) minimizing the use of natural resources, toxic materials and emissions of waste and pollutants over the life cycle and (3) not jeopardizing the needs of future generations. (Bartolj et al., 2018: 36, italics ours)

Based on the three major areas (1–3), stipulated at the Oslo Roundtable Conference, and a method, named Social Progress Index methodology (OECD, 2008), the authors design a formal decision process for selection of relevant variables for the construction of the HSC-index. They select 17 variables related to education, people’s habits, material situation of households, health outcome, food and beverage consumption and the environment. These measures are inputs into a statistical algorithm named factor analysis , the outcome of which is that the variables are reduced into two dimensions. The index is then constructed by aggregating these two dimensions by means of a so-called geometric aggregation rule. A central term in the quotation above is ‘multidimensional’, which means ‘having or relating to multiple dimensions or aspects’ (MerriamWebster, n.d.). In the following, the terms dimension, variable, and aspect will be used more or less interchangeably, usually preferring the latter. Examples of aspects include area, temperature, age, loudness, archaeological value (cf. Odelstad, 2019: 105) and carbon dioxide emissions. Note the important distinction between aspects that are descriptive (empirical or factual; e.g. temperature or CO2 levels in the atmosphere) and nondescriptive, i.e. normative or evaluative concepts or intermediaries that function as links between descriptive and normative conceptual systems. Odelstad (2019: 106) gives a number of examples of so-called ‘policy relevant concepts’, i.e. concepts of importance for planning as well as decision and policymaking, that are multidimensional intermediate concepts:

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measurements of national income, inequality, poverty, gross domestic product, inflation, unemployment, gender equality and ‘other “indicators” defined with normative motivation incorporating interpersonal weighting in some easily tractable way’ (Sen, 1977: 53). Understanding the nature of an aspect is crucial for understanding what it means to measure it and how to interpret the result of the measurement. An Interpretation of the Constructed HSC-Index The HSC-index determines a ranking over the 28 EU countries regarding sustainable household consumption. The index implies, for example, that regarding sustainable household consumption, the Netherlands is in 2015 ranked above Latvia, i.e. that household consumption in the Netherlands is more sustainable than household consumption in Latvia (Bartolj et al., 2018, Figure 3: 43). A crucial question is: How do Bartolj et al. interpret such a statement implied by the index? Is it interpreted as a descriptive or as a kind of normative statement ? On the one hand, (i) it seems that the authors interpret the concept ‘sustainable household consumption’ as a kind of descriptive concept. It is unclear how the authors interpret the term ‘phenomenon’, which occurs in the quotation above, but a common view in the scientific context is that this term has a descriptive connotation, i.e. that it refers to some empirical magnitude (Merriam-Webster, n.d.). This suggests that the authors assume that the sentence, ‘The household consumption in the Netherlands is much more sustainable than the household consumption in Latvia’, corresponds to a factual statement regarding some kind of empirical relationship. On the other hand, (ii) Bartolj et al. (2018) seem to assume that the index implies guidelines and action-guiding norms for policymakers and other stakeholders: The results should be at the disposal of policymakers as well as the general public in order to give everybody a rough idea about whether a country is on the right, sustainable path to well-being. (Bartolj et al., 2018: 45, italics ours)

According to the index, the household sustainable consumption in the Netherlands is on the right path, or at least closer to it compared to

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Latvia. But the claim that the household consumption in Latvia is ‘not on the right path’, and should be adjusted such that the consumption patterns is approaching the right path, is obviously a normative statement (in the form of an action-guiding norm). A reasonable interpretation is that the index implies that the household consumption in Latvia should be adjusted such that the consumption pattern becomes more consistent with a sustainable consumption pattern. The problem that arises for Bartolj et al. is how to justify these actionguiding norms if the authors believe that sustainable consumption is a descriptive concept. According to the view (often referred to as Hume’s law1 ) that no ought-judgement may be correctly inferred from a set of premises expressed only in terms of ‘is’, either their reasoning relies on a set of hidden normative premises, or sustainability is not a descriptive concept. Measuring Descriptive and Non-descriptive Concepts Another central concept in the quotation by Bartolj et al. (2018: 36) is ‘measure’. What does it mean to measure sustainable consumption? As Odelstad (2017a: 31) remarks, the notion of measurement is not unproblematic. The common, classical view is that to measure how much some object x has of some aspect α, involves applying a method for determining if x has more or less of α than some other object. That is, measurement in this narrow sense presupposes the existence of an ‘objective’ decision method that is tied to the meaning of the concept, and that produces the same result if performed by different competent users. The term measurement, however, may also be used in the broader sense of representing an aspect (either descriptive, i.e. some empirical phenomenon, or normative, e.g. a valuation) with a numerical structure. Inspired by Odelstad (2017b: 26), we will refer to the former (narrower) kind of measurement, which is relevant only for descriptive aspects, as measurement-M (M for decision Method). The measure that is the result of measurement-M will be called an M -measure. Examples include measures of length, area, temperature, age, velocity and the level of CO2 in the atmosphere. Measuring these concepts means applying a well-specified measurement method that is part of the meaning of the concept, like placing unit-length sticks on a straight line, edge-to-edge, alongside the object whose length is to be measured, and counting the sticks.

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Furthermore, we will use the term measurement-R (R for numerical Representation) for measurement in the broader sense of representing an aspect (either descriptive or normative) with a numerical structure. A measure constructed by means of measurement-R will be called an R-measure. Measures of the previously mentioned multidimensional concepts—national income, inequality, poverty, gross domestic product, inflation, unemployment and gender equality—are examples of R-measures, i.e. measures that represent valuations and not descriptive phenomena. We will later return to the issue of what it means to measure multidimensional concepts, and argue that such concepts can be measured in the sense of measurement-R but not in the sense of measurement-M . Note that, since measurement-M is a subset of measurement-R, it is a fallacy to conclude that an aspect is measurable in the sense measurement-M , and hence is descriptive, from the fact that an aspect is measurable in the sense measurement-R (Odelstad, 2017b: 27). However, measurement-R of multidimensional concepts usually presupposes measurement-M of various underlying descriptive dimensions. Returning to the notion of sustainability with respect to household consumption and the HSC-index, it is not unreasonable to believe that at least some of the 17 variables that constitute the basis for the HSCI are descriptive phenomena, and thus can be measured in the sense of applying a decision method, i.e. in the sense of measurement-M . But even if all variables represent descriptive phenomena (and thus are measured by M -measures), it does not mean that the subsequent application of factor analysis and geometric aggregation to the measures of these variables, constitutes a decision method that is tied to the meaning of some phenomenon called ‘sustainability with respect to household consumption’. While we certainly agree with Bartolj et al. (2018) that this concept depends on many dimensions or aspects, we believe that by treating this phenomenon as an empirical phenomenon that can be measured in the sense of measurement-M , one commits what we previously referred to as the descriptive mistake. One may of course, like Bartolj et al. (2018), propose a particular well-specified procedure for measuring sustainability, but since the procedure itself is the result of normative decisions regarding how to valuate and aggregate several dimensions, it represents a valuation and is not tied to the meaning of the concept. Thus, it is an R-measure and not an M -measure, and sustainability is not a descriptive concept. Furthermore, the decision to adopt this measurement procedure means

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taking a normative stance, and accepting its normative consequences (e.g. that a lower ranked country is to a lesser degree ‘on the right, sustainable path to well-being’). Conclusions of the Analysis of the Index Construction We conclude that the quotation of Bartolj et al. (2018) above supports the hypothesis that the concept ‘sustainable consumption’ is often misinterpreted, in that it is assumed to refer to some kind of a multidimensional yet descriptive phenomenon. This mistake gives rise to the conceptual problem of how this descriptive concept can imply action-guiding norms. So, if sustainable consumption is neither a purely descriptive concept, nor a purely normative concept, what kind of concept is it and how should a measure of it be understood? In the following sections we will discuss these questions. The conceptual framework that is required may be unfamiliar to some readers, but we will use it informally and as far as possible avoid the technical and mathematical notions necessary for a more detailed formal analysis.

A Brief Introduction to the Theory of Intermediate Concepts In this section, we explain in an informal way the functioning of intermediate concepts and argue that ‘sustainable consumption’ should be understood as an intermediate concept, more precisely an intermediate aspect (Odelstad, 2019: 105). We will start by a reinterpretation of a fictitious example by Odelstad (2019: 107f). Let us suppose that some traffic policy stipulates that the air pollution caused by traffic should decrease by 5 per cent each year. To evaluate the effects of this policy, it is necessary to examine whether this objective (which is expressed in quantitative terms) is met. This means that ‘air pollution caused by traffic’ must be measured. It is, of course, possible to separately measure (in the sense measurementM ) traffic-related emission of different kinds of gases (e.g. nitrous gases) and harmful particles of different sizes. But it is less obvious how to trade different kinds of emissions off against each other. One can argue that the stipulated objective is met if the emissions within each individual category decreases by 5 per cent, but what if, for example the emission of nitrous gases is reduced by 20 per cent while the emission of a particular kind

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of harmful particles is not reduced at all? Furthermore, if we also include fossil fuel CO2 emissions as part of air pollution, how do we trade off such emissions against emission of nitrous gases and harmful particles, respectively? Apparently, air pollution is a multidimensional concept, and there is no straightforward way to measure it. In the original example, it is some bus traffic policy that stipulates that the punctuality of buses should increase. As Odelstad (2019: 108) remarks, one could, for example, select an easily measurable aspect of punctuality and regard it as an operationalization of punctuality, or one could select some important aspects of punctuality and aggregate them, or one could aggregate as many aspects of punctuality as possible. Whichever may be the case, the choice involves taking a normative stance. Thus, bus punctuality is not a purely descriptive concept, and therefore not measurable in the sense of measurement-M . On the other hand, it is not a purely normative concept either. Instead, it is an intermediate concept with descriptive grounds and normative consequences, and to measure it means to evaluate its grounds with regard to the normative consequences. Due to the structural similarity with bus punctuality, the same argument can be applied to the concept of air pollution. Both concepts depend on measurable facts, but how they depend on those facts is a normative issue, i.e. involves valuations. The notion of intermediate concepts is also known under names such as intermediaries, ground-consequence-terms, middle terms or coupling terms, and is related (cf. Odelstad, 2019: 105) to the notion of thick concepts discussed in as diverse areas as ethics (e.g. concepts like cruelty, courageousness, kindness; see for example Kirchin, 2013; Väyrynen, 2016) and risk analysis (e.g. risk and safety; see for example Möller, 2009). A thorough overview of the discourse on intermediate concepts is given in, for example, Lindahl and Odelstad (2013, section 1.7). A classic example of an intermediate concept is ownership, whose meaning is tied to its function as a syntactic tool for formulating legal rules and a ‘vehicle of inference’ for legal reasoning. Its role is to link factual grounds for ownership with legal consequences of ownership. In this view, ownership is attached to certain facts, and different legal or normative positions are attached to ownership. The term being the owner of functions as a bridge between different conceptual systems, one containing facts (e.g. events, actions, or circumstances) and one containing normative positions like obligations, claims, legal powers, etc. In other words, the term ownership connects legal information of

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two different sorts, factual (descriptive) and normative, and ownership is in itself neither a purely descriptive nor a purely normative concept. A schematic view of ownership as an intermediate concept is given in Fig. 3.2 in Hjelmblom, Paasch, Paulsson, Edlund, and Bökman (2019), referring to Lindahl and Odelstad (2013: 553). Other examples of intermediaries in a legal context are citizenship, relationship similar to be married (see Lindahl & Odelstad, 2013: 557), work of equal value (see Odelstad, 2017a), and enduringly suited to its purpose (see Hjelmblom et al., 2019). Deciding on how to measure a multidimensional aspect such as air pollution or bus punctuality means taking a normative stand, and is part of clarifying the meaning of the concept (Odelstad, 2019: 105–107).

Fig. 3.1 An example of an aggregation tree (see for example Odelstad, 2019, Figure 5) with three strata (Source Authors)

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Figure 3.1 shows a simple aggregation tree that visualises the structure of the aggregation problem in Bartolj et al. (2018). The bottom factors b1 − b17 could represent a number of basic aspects, the aggregate aspect S 0 at the top could represent ‘sustainability with respect to household consumption’, while S 1 and S 2 in the middle stratum are intermediate concepts. Note that, in some sense, higher up in the tree means ‘more normative’, while lower down means ‘more descriptive’. As will be further discussed later, intermediate concepts often form networks (like chains or trees; see for example Lindahl & Odelstad, 2013; Odelstad, 2019), so that what constitutes a consequence of a certain concept in turn constitutes a ground for another concept. In Fig. 3.1, S 1 and S 2 are intermediate concepts (more precisely, intermediate aspects) whose grounds are the basic aspects b 1 , b 2 , … , b 10 and b 11 , b 12 , … , b 17 . These intermediate concepts constitute in turn the grounds for S 0 , sustainability with respect to household consumption. This concept may in turn be one of the grounds for a broader notion of sustainability, taking also other factors (like sustainability with respect to production) into account.

An Analysis of the Construction of the HSC-Index Introduction In this section we perform a critical analysis of the construction of the HSC-index based on our claim that sustainable consumption has a similar function as the intermediate concepts, ‘bus punctuality’ and ‘air pollution’, discussed in the previous section, i.e. that it functions neither as a purely descriptive nor a purely normative concept. Thus, we believe that under the design of the HSC-index lies an insufficient understanding of the nature of the concept ‘sustainable consumption’, that negatively affects the validity of the index. To measure this concept, i.e. to construct an index such as the HSC-index, means to evaluate the grounds for sustainability with respect to household consumption with regard to its normative consequences. This evaluation is a paradigmatic example of a normative multi-attribute decision process. Such a process cannot reasonably be founded on objective decision rules. This means that the HSC-index cannot be interpreted as an M -measure, but must be interpreted as an R-measure that is a numerical representation of the outcome of a multidimensional normative decision process.

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We start the reconstruction of the HSC-index by introducing a simple formal conceptual framework. The domain of sustainable consumption consists of 28 EU countries c i , and is denoted as: C = {c1 , c2 , . . . . . . , c28 }. The HSC-index is apparently intended only to be used for ranking the objects in C, which means that ‘distances between the countries measured on the horizontal axis do not represent the differences in the absolute level of sustainability household consumption’ (see Bartolj et al., 2018: 42). We thus treat the HSC-index as an ordinal measure, denoted HSC, that determines a ranking of the countries regarding sustainable consumption. That is, ci is more sustainable (with respect to household consumption) than c j if and only if   HSC(ci ) > HSC c j , and ci and c j are equally sustainable (w.r.t household consumption) if and only if   HSC(ci ) = HSC c j . Our claim that ‘sustainable consumption’ functions as an intermediate concept means that statements such as HSC(ci ) > HSC(c j ) are neither purely descriptive (empirical) statements nor purely normative statements. Thus, such statements do not refer to a kind of multidimensional empirical phenomenon. Briefly stated, we claim that an adequate interpretation is that a statement such as HSC(ci ) > HSC(c j ) functions as a link or bridge between grounds in terms of facts about the two countries and possible normative consequences in terms of various action guiding norms. A conceptual and logical analysis of such links requires the introduction of a formal framework, but here we simply perform an informal analysis focusing on two questions: What are the possible normative consequences of a statement such as HSC(ci ) > HSC(c j )? What are the grounds for a statement such as HSC(ci ) > HSC(c j )? These questions will be discussed in the following two subsections.

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For example, according to Bartolj et al. (2018, Figure 3: 43) it holds that HSC(F) > HSC(P), where F and P denote France and Poland, respectively. What are the possible normative consequences of this statement for (e.g.) Poland’s government? What are the grounds for this statement? A reasonable claim is that a policymaker should be able to understand the kinds of index design decisions that have been taken that lead to this particular ranking, otherwise the policymaker might take irrational policy decisions. That is, it should be possible for Poland’s government to figure out why France is ranked above Poland, in order to take action. Furthermore, suppose that Poland’s government is to decide between two suggested policy changes, one which leads to an improvement in aspect b 1 (i.e. the leftmost arrow in Fig. 3.1) but a deterioration in aspect b 3 , and one which leads to an improvement in aspect b 2 but a deterioration in aspect b 4 , and status quo with respect to the other aspects. It should then be possible to reason about which of these two actions leads to the highest degree of sustainability with respect to household consumption. Thus, a reasonable requirement is that the decision process, including the trade-offs made, should be transparent for the user of the index. The Consequence-Side of Household Sustainable Consumption Although the intention of the HSC-index designers is that the index should be used as an ordinal measure of sustainability as a comparative concept, it could in principle also serve as the basis of a corresponding two-valued categorical concept. One way is the following: Imagine a (real or fictitious) reference object in domain C that is considered to be ‘just barely’ sustainable. For example, let us assume that this applies to France. Then for each c in C it holds that, c is sustainable if and only if HSC(c) ≥ HSC(F), otherwise it is not sustainable. Note that ‘at least as sustainable as’ is a binary relation (a predicate) on C, while ‘is sustainable’ is a unary relation (a property). On the consequence-side of sustainable consumption we might find various action-guiding norms that prescribe or put restrictions on certain actions. The basic idea behind the comparison of two countries (e.g. the Netherlands, NL, and Latvia, L) with respect to sustainability

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seems to be the following: If HSC(N L) > HSC(L) on one measurement occasion, but HSC(N L) < HSC(L) on a later occasion, then this can be seen as a signal to the policymakers of the Netherlands to increase   their efforts towards higher sustainability. Or if HSC N L  < HSC(N L), where NL represents the Netherlands at some later occasion, then this suggests that the Netherlands is ‘not on the right sustainable path to well-being’ and should take action. Sustainable consumption as a two-valued categorical aspect may imply, in its turn, various action-guiding norms. For example, if some country c is found to be ‘not sustainable’ with respect to household consumption, then a possible normative consequence is that c’s government should (for example by legislation, by creation of economic incentives or by other means) try to affect the household consumption patterns of c towards higher sustainability with respect to household consumption: If c is not sustainable, then the government of c should try to change the consumption patterns of c. Furthermore, Bartolj et al. argue that “the sustainable path to wellbeing should be built upon sustainable consumption” (2018: 34). A plausible interpretation in terms of the theory of intermediate concepts is that sustainable consumption is one of the grounds for a broader notion of sustainability that also takes other aspects (e.g. sustainability with respect to production) into account. This broader notion of sustainability (e.g. ‘overall sustainability’ or ‘sustainability all things considered’) is then an aggregate of several intermediate concepts that constitute its grounds, and it may in turn imply various action-guiding norms that regulate decision-making on various levels. That is, the concept ‘overall sustainability’ is found on the consequence-side of sustainable consumption. In the aggregation tree in Fig. 3.1, this aggregate aspect would represent a fourth stratum at the top of the tree, above S 0 . Naturally, the aggregation of these different sustainability dimensions into a higher level notion of sustainability requires more weighing decisions, where different aspects of sustainability must be traded off against each other. A theoretical (algebraic) tool for the rational reconstruction of complicated conceptual systems containing intermediaries is the so-called Theory of Joining Systems, developed by Lindahl and Odelstad (see for example Lindahl & Odelstad, 2013; Odelstad, 2019). However, an account of the formal treatment of complex networks or strata of intermediate concepts of various kinds, and the logical form of action-guiding norms, is beyond the scope of this investigation.

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The Ground-Side of Household Sustainable Consumption In this subsection we examine what kind of design decisions that give rise to statements such as HSC(F) > HSC(P). Since we treat sustainable consumption as a multidimensional intermediary, we understand the construction of the index as a normative multi-criteria decision process consisting of a number of stages. A good starting point, to get an overview of the decision process, is an aggregation tree (see Fig. 3.1) that visualises the structure of the aggregate aspects involved. The tree displays three ‘decision points’, one regarding the aggregation of basic aspects b1 , b2 , . . . , b10 into S 1 , one regarding the aggregation of b11 , b12 , . . . , b17 into S 2 , and one regarding the aggregation of S 1 and S 2 into S 0 (i.e. sustainable consumption). The design decisions express valuations (i.e. normative standpoints) that should be linked to the intended normative consequences implied by the index. A problem here is the ‘open’ nature of the HSC-index, that is, that its consequences are not entirely specified (regarding so-called open intermediaries, see for example Lindahl & Odelstad, 2013). Again, we stress that we do not possess the kind of extensive domain knowledge of empirical facts, cultural values, formal legal rules as well as informal normative rules etc. that is required to make substantial comments on the normative process to construct a sustainability index. Thus, our analysis is intended as a formal analysis of the normative decision process, not as a material analysis of the ‘best’ or ‘correct’ trade-offs between different dimensions or what kind of evaluation model that would be appropriate. As previously described, the construction of the index takes place mainly in two stages: (1) Selection of basic aspects, and (2) Aggregation of basic aspects. Selection of basic aspects. In the first stage, the designers select seventeen variables, which we name basic aspects and denote as: b1 , b2 , . . . , b17 . These basic aspects describe various facts about the countries, which are or should be relevant for the construction of the HSC-index. The starting point for the selection of these basic aspects is the so-called working definitions stipulated at the Oslo Roundtable conference (1994). The working definitions are stated in three areas, which function as broad guidelines for the selection of the basic aspects. But it would be misleading to regard the working definitions as a set of objective rules for

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the selection of relevant basic aspects. The selection of the basic aspect must reasonably be context sensitive. This is also noted by the designers claiming that: It is therefore possible that the developed index is not suitable for other countries due to its bias towards the European lifestyle. (see Bartolj et al., 2018: 45)

The notion ‘European lifestyle’ might be interpreted as referring to a broad normative background knowledge, which is relevant for constructing the HSC-index in a European context. In another context a different set of basic aspects might be relevant. We denote the measures of the basic aspects as: m 1 , m 2 , . . . , m 17 . It is not unreasonable to believe that some of these measures may be of the kind M -measures, that is, measures of descriptive phenomena, but it is likely that others are representations of some valuations and normative decision processes, that is, R-measures but not M -measures. In the next stage we comment on the aggregation process. Aggregation of the basic aspects. The construction of the HSCindex is based on an aggregation of the measures regarding the basic aspects. Formally stated, the measure HSC is a function of the measures m 1 , m 2 , . . . . . . . , m 17 : HSC = f (m 1 , m 2 , . . . , m 17 ). The construction of f corresponds to an aggregation process, which is obviously an intricate and complicated normative decision process. The function f can be interpreted as an aggregation rule that determines relationships between the aggregated aspect ‘sustainable consumption’, measured by HSC, and the basic aspects measured by m 1 , m 2 , . . . , m 17 . The relationship between the aggregated concept sustainable consumption and its basic aspects is in the general case very complicated. We summarize some of these relationships in the Appendix, but a thorough specification of these relationships requires a more elaborated conceptual framework (see for example Bouyssou, Marchant, Pirlot, Tsoukias, & Vincke, 2006; Odelstad, 2002) than can be introduced in this chapter.

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As illustrated in Fig. 3.1, the aggregation of the basic aspects takes place in two stages. In the first stage, two measures (representing ‘dimensions’ or ‘factors’ in Bartolj et al., here denoted HSC1 and HSC2 ) are constructed. HSC1 is a measure of an intermediate aspect S 1 which is an aggregation of ten of the seventeen selected basic aspects. Formally, HSC1 is a function of the measures m 1 , m 2 , … , m 10 , i.e. HSC1 = f 1 (m 1 , m 2 , . . . , m 10 ). HSC2 is a measure of an intermediate aspect S 2 which is an aggregation of the remaining seven of the seventeen selected basic aspects. Formally, HSC2 is a function of the measures m 11 , m 12 , … , m 17 , i.e. HSC2 = f 2 (m 11 , m 12 , . . . , m 17 ). How should the measures be interpreted? It should be noted that the two measures represent partial evaluations of the countries regarding sustainable consumption. This means that the measures represent at least two partial rankings of the 28 EU countries, as follows: c i is (as regards b 1 , b 2 , … , b 10 ) at least as sustainable with respect to consumption as c j if and only if   HSC1 (ci ) ≥ HSC1 c j and c i is (as regards b 11 , b 12 , … , b 17 ) at least as sustainable with respect to consumption as c j if and only if   HSC2 (ci ) ≥ HSC2 c j . In Fig. 3.1, the two partial evaluations represented by HSC1 and HSC2 correspond to the arrows denoted S 1 and S 2 , respectively (i.e. the two ‘dimensions’ in Bartolj et al.). S 0 represents the aggregated evaluation, that is, the aspect ‘sustainability with respect to household consumption’. We have previously pointed out that the measures are determined by applying a statistical algorithm named factor analysis. It is essential to understand in this context that the application of a certain statistical method has normative consequences since sustainable consumption is an intermediate concept. The choice of using factor analysis should not only be grounded on various kinds of statistical principles and criteria, but also on normative reasoning regarding (for example) how an improvement

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in one basic aspect relates to a deterioration in another basic aspect, in terms of overall sustainability. We argue that rational normative reasoning presupposes both a correct interpretation of the function of ‘sustainable consumption’ as well as adequate domain knowledge. It is clear that the designers of the HSC-index have extensive domain knowledge, but we believe that they make a conceptual mistake that erodes the validity of the index. In the next stage, these two measures are aggregated by means of a geometric aggregation rule defined as:  HSC(x) = HSC1 (x) · HSC2 (x) The overall rank-order of 28 EU countries is finally determined as follows: c i is at least as sustainable with respect to consumption as c j if and only if   HSC(ci ) ≥ HSC c j . In Fig. 3.1, the rank-order is denoted as the arrow S 0 . It should be noted that there are many different aggregation rules that could be applied in this context. The question is—at least from a normative point of view— why the designers prefer this aggregation rule. For example, another popular aggregation rule is the additive aggregation rule, which in this case would be defined as: HSC(x) = w1 · HSC1 (x) + w2 · HSC2 (x), where w 1 and w 2 are scaling constants coordinating the two aggregated measures. The ranking determined by this additive aggregation rule might of course not be consistent with the ranking determined by the geometric aggregation rule. The choice of the aggregation rule is obviously an intricate normative decision problem. But it should be noted that while additive aggregation requires that the measures to be aggregated are interval scales, geometric aggregation requires ratio scales, which is a higher demand. For example, the choice between the two aggregation rules might imply inconsistent solutions of so-called value conflicts, illustrated in Fig. 3.2. Let us assume that the construction of the two measures HSC1 and HSC2 give rise to the following outcome (where, for example, F and P denote France and Poland, respectively):

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Fig. 3.2 A value conflict. The difference between F and P in S 1 outweighs the difference between P and F in S 2 (Source Authors)

HSC1 (F) > HSC1 (P), i.e. HSC1 (F) − HSC1 (P) > 0, and HSC2 (P) > HSC2 (F), i.e. HSC2 (P) − HSC2 (F) > 0. This gives rise to a value conflict, illustrated in Fig. 3.2, since in this example France is more sustainable than Poland with respect to the basic aspects b 1 , b 2 , … , b 10 , while Poland is more sustainable than France with respect to b 11 , b 12 , … , b 17 . Obviously, there are three possible outcomes of this value conflict: 1. HSC(F) > HSC(P), 2. HSC(F) = HSC(P), 3. HSC(P) > HSC(F). Now, let us assume that the additive aggregation implies that HSC(F) > HSC(P), which is the outcome illustrated in Fig. 3.2, whereas a

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geometric aggregation implies that HSC(P) >HSC(F). The inconsistent solutions of the value conflict might in turn give rise to different policy recommendation regarding measures about the consumption patterns in the two countries. Policymakers that intend to use the index should be able to understand such crucial weighing or trade-off decisions. As we claimed earlier, a policymaker   that takes decisions based on statements such as HSC(ci ) > HSC c j , but does not understand what decisions (e.g. which trade-offs) the statement is grounded on, might take irrational policy measures not consistent with the policymaker’s own values. To sum up: By means of the reconstruction of the HSC-index, we have identified and commented on three kinds of normative decisions taken by the designers. 1. Selection of seventeen basic aspects and assignment of measures to the basic aspects. 2. Construction of two partial measures grounded on the basic aspects by means of factor analysis. 3. Aggregation of the two partial measures by means of a geometric aggregation rule. The construction of the index is based on an extensive number of decisions taken by the designers. A problem with the decision process is the lack of transparency. This means that an external judger as a policymaker (that intends to use the index as guidelines for policy measures) is not able to understand and assess the decisions that have been taken by the designers. The designers might have taken decisions that would not be consistent with the policymaker’s values. For example, various trade-offs or weighing decisions taken more or less implicitly in the construction process might not be consistent with the policymaker’s views of reasonable trade-offs. If that would be the case, the index has a low external validity, that is, a low validity from the policymaker’s point of view. However, as the index is constructed it seems difficult or maybe impossible to assess the external validity of the HSC-index. It should be noted that the index might have a low external validity even if the index has a high degree of internal validity, that is, the decisions taken in the construction process are from the designers’ point of view well-argued. We end the chapter by emphasizing that to determine a ranking of objects as the 28 EU countries regarding sustainable consumption is

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a normative multi-attribute decision problem and not a statistical and empirical problem. We do not, however, argue that the use of statistical methods and geometric aggregation is necessarily a bad design choice, but the choice needs to be grounded on normative reasoning. Such reasoning could include the kind of trade-offs illustrated in Fig. 3.2, for example supported by decision support tools based on a conceptual framework elaborated within multi-attribute decision theory. For an extensive overview and treatment, see for example, Belton and Stewart (2002), the Handbook by Figueira, Greco, and Ehrgott (2005), and classical works like Keeney and Raiffa (1976) and Keeney (1993).

Conclusion This chapter is directed towards researchers and practitioners within the field of sustainability, particularly those interested in the design of measures or indices of sustainability and those interested in the application and/or interpretation of such measures. Its relevance to, for example, policymakers lies in that it contributes to a deeper understanding of what kind of concept sustainability is and what it means to measure such concepts. Without a proper understanding of the nature of this concept, there is an obvious risk of low validity of its measurement. In the chapter, we perform a case study where we point out potential misinterpretations of the notion of sustainability in general and sustainable consumption in particular. The case study consists of a critical analysis of the construction of the HSC-index, a household sustainable consumption index for 28 EU countries. A starting point for the analysis is our claim that it is a conceptual mistake (which we refer to as the descriptive or realistic mistake) to treat sustainable consumption as a descriptive concept. A consequence of this mistake is that the construction of the index is treated as a kind of statistical and empirical problem only. Instead, we argue that sustainable consumption is a specific kind of value concept named intermediate concept, whose function is to link descriptive grounds with normative consequences, and thus that the construction of the index is a normative problem. That is, the construction of a sustainable consumption index should be regarded as a normative multi-attribute decision process. We discuss what it means to measure multidimensional intermediate concepts, in light of the distinction between measurement-R (the wider

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notion of measurement as numerical representation) and measurementM (the narrower notion of measurement as application of a decision method), and argue that measurement of sustainability is measurement in the former sense but not in the latter. That is, a measure of sustainable consumption is a numerical representation of a valuation arising from normative decisions taken in the index design process. Obviously, the conceptual mistake made by the designers hollows the validity of the constructed sustainable consumption index. Naturally, this also applies to similar sustainability measures or indices, and to some extent even to the guidelines in the OECD (2008) handbook ‘Constructing Composite Indicators’ that the HSC-index designers refer to. The other main contribution of the chapter is the presentation of an alternative approach that aims to avoid this conceptual mistake, employing key concepts from multi-attribute decision theory (e.g. aggregation, component relations, utility difference comparisons) and the theory of intermediate concepts. We suggest a deeper and more formal conceptual analysis of the concept sustainable consumption, together with more general analyses of sustainability indices constructed by means of the guidelines in the OECD handbook. Further, we suggest that decision support tools should be developed and tested in the context of sustainable consumption as well as in other kinds of sustainability contexts. Such decision support tools can be constructed by means of the conceptual framework elaborated within multi-attribute decision theory. Using decision support tools, it is possible to explicitly treat the construction of sustainability indices as normative multi-attribute decision process. Acknowledgements We wish to thank our discussants at the book workshop at Stockholm School of Economics (October, 2019) for their fruitful comments on our initial draft. We also wish to thank the editors of the book, Ranjula Bali Swain and Susanne Sweet, for the invitation, and Ulla Ahonen-Jonnarth and the editors for their insightful comments and valuable suggestions.

Appendix: Definitions of Selected Component Relations Odelstad (2017a, referring to Sen, 1970) discusses a number of conditions that may apply to the relationship between an aggregated aspect (like sustainable consumption) and its basic aspects, and that can be of

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relevance for normative reasoning and argumentation. These ‘component relations’ include equality preservation,2 positive response,3 non-negative response, global non-negative response and in accordance with, ceteris paribus (see for example, Odelstad, 2002, section 9; 2017a: 26f) and similar principles. Below we describe some of the component relations by means of a simple two-dimensional example, where m 1 and m 2 are measures of the underlying aspects b 1 and b 2 and m 0 is a measure of an aggregated aspect α 0 . Stated in terms of m 1 , m 2 and m 0 : α 0 is equality-preserving in C in relation to b 1 and b 2 if, for all c i and c j in C:     If m n (ci ) = m n c j , for all n, 1 ≤ n≤ 2, then m 0 (ci ) = m 0 c j α 0 exhibits positive response (type 1) in relation to the aspects b 1 and b 2 if, for all c i and c j inC:   If m n (ci ) > m n c j and  m p (ci ) = m p c j for all p, 1 ≤ p≤ 2 and p = n, then m 0 (ci ) > m 0 c j α 0 exhibits global non-negative response in relation to the aspects b 1 and b 2 if, for all c i and c j in C:   If m n (ci ) ≥ m n c j for all n, 1 ≤ n≤ 2, then m 0 (ci ) ≥ m 0 c j To generalize these component relations to the case of an arbitrary number of basic aspects is in some sense straightforward but requires nevertheless a stronger algebraic language, which cannot be introduced in this chapter.

Notes 1. The Oxford Dictionary of Philosophy: Hume’s law. A name for the contested view that it is impossible to derive an ‘ought’ from an ‘is’. In other words: There is no logical bridge over the gap between fact and value (Blackburn, 1994: 180). 2. “Pareto-wise indifference” in the terminology of Sen (1970) (see Odelstad, 2017a: 26). 3. “Pareto-wise better” (Odelstad, 2017a: 26).

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References Bartolj, T., Morovec, N., & Slabe-Erker, R. (2018). Development of a household sustainability consumption index and its application to EU-28. Sustainable Development, 26, 34–50. Belton, V., & Stewart, Th. (2002). Multiple criteria decision analysis: An integrated approach. Dordrecht: Kluwer Academic Publishers. Blackburn, S. (1994). The Oxford dictionary of philosophy. Oxford: Oxford University Press. Bouyssou, D., Marchant, Th, Pirlot, M., Tsoukias, A., & Vincke, Ph. (2006). Evaluation and decision models with multiple criteria. Dordrecht: Kluwer Academic Publishers. Figueira, J., Greco, S., & Ehrgott, M. (2005). Multiple criteria decision analysis: State of the Art surveys. New York: Springer. Hjelmblom, M., Paasch, J. M., Paulsson, J., Edlund, M., & Bökman, F. (2019). Towards automation of the Swedish property formation process: A structural and logical analysis of property subdivision. Nordic Journal of Surveying and Real Estate Research, 14(1), 29–63. https://doi.org/10.30672/njsr.78170. Keeney, R. L. (1993). Value focused thinking: A path to creative decision making. Cambridge, MA: Harvard University Press. Keeney, R. L., & Raiffa, H. (1976). Decisions with multiple objectives: Preferences and value tradeoffs. New York: Wiley. Kirchin, S. (2013). Thick concepts. Oxford: Oxford University Press. Lindahl, L., & Odelstad, J. (2013). The theory of joining-systems. In D. Gabbay, J. Horthy, X. Parent, R. van der Meyden, & L. van der Torre (Eds.), Handbook of deontic logic and normative systems (Vol. 1, pp. 545–634). London: College Publications. Merriam-Webster. (n.d.). Multidimensional. In Merriam-Webster.com dictionary. https://www.merriam-webster.com/dictionary/multidimensional. Accessed 3 Mar 2020. Merriam-Webster. (n.d.). Phenomenon. In Merriam-Webster.com dictionary. https://www.merriam-webster.com/dictionary/phenomenon. Accessed 3 Mar 2020. Möller, N. (2009). Thick concepts in practice: Normative aspects of risk and safety. Unpublished PhD Thesis, Royal Institute of Technology, Stockholm. OECD. (2008). Handbook on constructing composite indicators: Methodology and user guide. Paris: OECD Publications. Odelstad, J. (2002). Intresseavvägning: En beslutsfilosofisk studie med tillämpning på planering [Weighing of interests: A study in the philosophy of decision making with applications to planning]. Stockholm: Thales. Odelstad, J. (2017a). Likvärdigt arbete och teorin om mellanbegrepp (Jobs of equal value and the theory of intermediate concepts. Research report No. 46). Sweden: Gävle University Press.

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Odelstad, J. (2017b). Om beslutsteoretiska verktyg vid tillståndsprövning av vindkraft (Decision Support Tools and Permission Processes for Wind Power. Research Report No. 47). Sweden: Gävle University Press. Odelstad, J. (2019). Joining conceptual systems: Three remarks on TJS. Filosofiska Notiser (Philosophical Notes), 1, 77–131. Oslo Ministerial Roundtable. (1994). Oslo roundtable on sustainable production and consumption. http://www.iisd.ca/consume/oslo000.html. Sen, A. (1970). Collective choice and social welfare. San Francisco: Holden-Day. Sen, A. (1977). Social choice theory: A re-examination. Econometrica, 45(1), 53–88. Väyrynen, P. (2016). Thick ethical concepts. Stanford: Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/. Accessed 2 Mar 2020.

CHAPTER 4

Completing the Cycle: An Inclusive Capitalism Approach Linking Sustainable Consumption and Production Ralph P. Hall and Shyam Ranganathan

Introduction Sustainability as a paradigm has continued to evolve since its emergence from the environmental movements of the 1960s and 1970s, to its international articulation through international summits, conferences, and declarations. While many desire a clear definition and framework to support sustainable decision-making, the multidimensional and dynamic nature of development makes such a framework elusive. However, two recent frameworks designed to identify a safe operating space for humanity on the planet deserve some attention, especially given their links to consumption.

R. P. Hall School of Public and International Affairs, Virginia Tech, Blacksburg, VA, USA e-mail: [email protected] S. Ranganathan (B) Department of Statistics, Virginia Tech, Blacksburg, VA, USA e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_4

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The first framework, called the planetary boundaries framework, developed by Rockström et al. (2009) and Steffen et al. (2015), attempts to quantify nine biophysical processes that regulate the stability of the earth system. Of the nine earth-system processes—climate change, change in biosphere integrity, stratospheric ozone depletion, ocean acidification, biogeochemical flows, land-system change, freshwater use, atmospheric aerosol loading, and the introduction of novel entities (e.g., persistent toxic chemicals)—climate change and change in biosphere integrity are considered as core planetary boundaries given their fundamentally important role in the earth system. While the planetary boundaries framework is a work in progress, the quantification of safe boundaries provides macro measures (limits) that can be used to keep human activity in check. The challenge, though, is identifying who is driving the negative trends and pushing the earth closer to or beyond critical thresholds. The second framework attempts to identify the nation states that are advancing human development while respecting planetary boundaries in the context of per capita CO2 emissions and material footprint. Hickel’s (2020) Sustainable Development Index (SDI) revises the Human Development Index (HDI) by reformulating its income measure to account for sufficiency and divides this revised HDI by a new Ecological Impact Index. The result is a measure that reveals no nations are sustainably developed, and a focus on economic growth/development (in line with the original HDI) will no longer be sufficient to achieve a high SDI score. Both economic development and ecological impacts must be addressed simultaneously. While these macro-level frameworks that link human activity to planetary boundaries, such as the SDI, will be critical in helping governments identify where strategic action is needed, there is still a need for radically new approaches at the micro level that incentivize actors to transition to sustainable forms of development. This needs to simultaneously address both sustainable production and consumption, as well as political needs such as inequality that disincentivize individual-actor participation in sustainability initiatives. In particular, we need an approach that closes the environmentalproduction-income and distribution-consumption cycles by treating sustainable consumption and production as two sides of the same coin. Such an approach requires that environmental sustainability is coupled with economic and social sustainability. The financing of production needs to be considered carefully as a driver in this cycle to ensure any proposed

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solution is not derailed by powerful vested interests. Particular attention needs to be given to inequality and social well-being to ensure that the entire population is invested in sustainability efforts, especially when the same technologies that help promote sustainability (e.g., automation) are perceived as undermining employment and causing significant income gaps for workers in traditional labour-intensive sectors relative to “white collar” workers and capital owners. For instance, since the 1970s, median family wealth in the U.S. has been flat, whereas family wealth in the 90th percentile has seen steady growth (The Urban Institute, 2017). These trends reveal that the American middle class, and especially minority/disadvantaged populations, failed to financially benefit as previous generations did from gains in labour productivity and economic growth (ibid.). Further, since 2000, wages as a percentage of GDP has fallen (dropping below 60 per cent for the first time around 2005), while the share of GDP going to corporate profits has increased (Bernstein & Raman, 2015). Prior to the early 2000s, the inability of workers to maintain their share of GDP was linked to earlier forms of automation, the decline of labour unions, changes in corporate taxation, the financialization and globalization of the economy, deindustrialization in the U.S. and many OECD countries, and trade (Arnone, Barnes, & Landers, 2019; Ashford & Hall, 2018). Over the last decade, however, increasing attention has been given to the role of modern automation and digital technologies/artificial intelligence (AI) in hollowing out the middle class (Autor, 2015) and undermining the ability of workers to earn a living wage (Ashford & Hall, 2018; Brynjolfsson & McAfee, 2014; Yang, 2018). The growing role of automation/AI in economic growth means that labour may no longer be able to claim the share it once did of the wealth being created. Put differently, as human knowledge and skills are continually being embedded in new technology, the balance of the actual work being undertaken continually shifts from labour to capital. Thus, efforts to re-shore manufacturing in the U.S., for example, may result in the economic value returning without the jobs. In the age of automation/AI, as production becomes more capital intensive, the distribution of earnings will also need to become more capital intensive if families are to have sufficient income to purchase essential goods and services. Thus, in this chapter we advance a form of inclusive capitalism that recognizes the role of labour and broadly distributed capital ownership as essential to providing individuals with

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a livable income from their labour and the work done by the productive capital they may own. In addition, we also link the mechanism for broadly distributing capital ownership to the creation of inherently sustainable goods and services. The latter connection is essential if we are to avoid a surge in consumption that is likely to result from increasing the income/wealth of families with unmet needs. Figure 4.1 presents different postures that might be taken by government, corporations, workers, and consumers in the context of citizen, NGO, and shareholder scrutiny (Ashford & Hall, 2018). The willingness of each actor to support a transition towards sustainable development is likely to be heavily influenced by their location on the relevant continuum as shown in the figure. For example, a government could act as a trustee for stakeholder interests and advocate—through policy and regulation—a more sustainable approach to development, or could focus on creating incentives that try to realize similar outcomes through market interactions. In the latter case, the willingness and capability of corporations to respond to market incentives is likely to depend on how they view their Workers ConƟnuum Independent and conƟngent workforce; LiƩle job security or tenure; Needed skills and wages defined by the employer

CollecƟve/union representaƟon; Shared decision-making; Technological literacy; Skills development; Wages supplemented by capital ownership

Roles of CorporaƟons

Roles of Government

ConƟnuum

ConƟnuum Minimal State/ UƟlitarianism Capitalist (laissez faire) approach to policy and markets

Rawlsian Government Government acts as trustee for stakeholders; IntervenƟonist approach to policy and markets

CiƟzen & NGO Concerns

Profit MaximizaƟon Capitalist (laissez faire) approach

Corporate Social and Environmental Responsibility (CSER) Sustainable IndustrializaƟon

Roles of Consumers ConƟnuum ‘Value’ Consumers Purchasing based upon the price and perceived value of products and services

Green Consumers Purchasing based upon the environmental and social impacts of products and services

Shareholders’ Concerns

Fig. 4.1 Different operating postures that might be adopted by government, corporations, workers, and consumers in the context of citizen, NGO, and shareholder scrutiny (Source Adapted from Ashford and Hall 2018)

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mission in terms of maximizing shareholder value (through market capitalism) or promoting corporate social and environmental responsibility (CSER). In the former case, if a government adopts an interventionist (trustee) approach to protecting the environment and disadvantaged groups, corporations focusing on maximizing shareholder value may have no choice but to comply, whereas those advancing CSER may already be in compliance and could have a distinct market advantage. Alternatively, corporations might take the lead if the government is unwilling or unable to act. What should be clear from this example is that the posture of each actor matters with regard to how likely it is for a specific strategy to succeed. The burden of realizing progress towards sustainability could also rest on consumers, whose “green” purchasing habits could shape demand for highly sustainable products and services. The classic slogan of “reduce, reuse and recycle” was primarily aimed at consumers, but it fails to highlight the need for producers to rethink their role in the productionconsumption cycle. In addition, the classic notion of the consumer ignored the possibility of the consumer shaping the sustainability conversation as is increasingly happening in a world of social media influencers and citizen/consumer activists. Thus, the value consumer at one end of the continuum is the classic consumer optimizing only based on value, whereas the green consumer at the other end of the continuum includes sustainability values in their calculations. The worker continuum reflects the nature and security of jobs rather than whether a job advances sustainable development. The growing number of independent and contingent workers (in the service sector) have little job security and in many cases simply respond to the needs of the employer. These individuals typically do not qualify for healthcare or retirement benefits, are vulnerable to unexpected life changes, and have limited disposable income. They are also unlikely to be green consumers, assuming that more sustainable goods and services come with a cost premium. The more traditional jobs lie at the other end of the worker continuum, where employees, in theory, receive a living wage based on their skills and ability, and have the security that comes with healthcare or retirement benefits. These individuals are more likely to be in a position to help create sustainable goods and services, but their market influence (via consumer demand) will depend on their numbers relative to those unable to effectively use their purchasing power.

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Figure 4.1 reveals that the role of governments, corporations, and consumers in advancing sustainability is likely to change based on socioeconomic realities and dominant political beliefs in a region. Thus, it is helpful to focus on a country, in the case of this chapter the U.S., to see how a new approach to inclusive capitalism that addresses sustainability and social concerns might take hold. The following three sections take a closer look at how the inclusive capitalism approach can be considered by disaggregating the discussion above into three cycles, namely the social cycle, the environmental cycle, and the financial cycle. The social cycle is an important consideration for the sustainable consumption end of the paradigm—without some form of income equality, or at least income equity, it is unlikely that sustainable consumption will be widely accepted. The financial cycle, on the other hand, is important to understand if we are to implement sustainable production—producers look to financing to enable enhanced production and are heavily influenced by this driver in capitalism. The environmental cycle lies at the heart of sustainability, and its impact on the other cycles, and the impact the other cycles have on it, are the fundamental subject of sustainability studies. These cycles correspond to each of the issues discussed above, and we emphasize the feedbacks inherent in the processes by visualizing them as cycles.

The Social Cycle In the context of inclusive capitalism, the social cycle considers the role of humans and, more specifically, work, in economic development, and how these roles relate to the distribution of wealth. In principle, there are five general ways by which to increase the income of poor and middle-class people (Hall, Ashford, Ashford, & Arango-Quiroga, 2019): (1) labour (wages); (2) capital (dividends, interest, and rent); (3) government redistribution of income and capital; (4) private charity; and (5) consumer debt. The two most common approaches to reducing inequality and increasing income tend to centre on increasing wages and/or government redistribution of income or capital. The idea of growing consumer debt is unsustainable, private charity is systematically inadequate, and capital ownership based on current market principles has concentrated rather than broadened income/wealth (ibid.). Given the potential displacement or undermining of well-paid employment opportunities by AI/automation and other market forces, the idea of using

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a universal basic income (UBI) to provide a minimum level of financial security is gaining traction. What is interesting about the provision of a UBI is that it raises fundamental questions about where a nation stands on a capitalism-socialism continuum. Further, the mechanism through which the UBI is provided can also challenge the capitalism vs. socialism dichotomy, revealing new configurations of how human systems, the economic systems they create, and environmental systems can symbiotically coexist. Table 4.1 provides a summary of several economy-wide approaches to providing a UBI and highlights their financing mechanism, whether the approach has an employment requirement, the income received (if known) and by whom, and whether a connection exists between the approach and sustainable development. The table reveals the significant differences between the programmes, especially with regard to the levels of income received and by whom, and whether an approach could work within existing economic and political systems or require a fundamental change. The Alaska Permanent Fund (2019) already exists, but is limited to between $1000 and $2000 per year for Alaskan residents. Providing a basic income via a Negative Income Tax (Friedman, 2002) or Cost of Living Refund (through a revised Earned Income Tax Credit, EITC, 2019) could occur within the existing U.S. tax system. However, the income received would only be available to workers and there would be no connection between the approach and the environment. Lansley and Reed’s (2019) Partial Basic Income (PBI) Proposal for the UK and Stern’s (2016) and Yang’s (2018) Universal Basic Income proposals for the U.S. include a more extensive array of components—such as the elimination of benefit/welfare programmes, the creation of a VAT, etc., to fund the basic income—but they could still be implemented with modest changes to existing economic and welfare programmes. However, none of these proposals considers how the provision of a basic income could impact the environment. At the other end of the continuum lies Barnes’ (2015) Common Wealth Trust (CWT) and Ashford’s (2006, 2016) notion of Inclusive Capitalism. The CWT proposal is based on the long-term (intergenerational) protection of national ecosystems, with rents from the carefully managed use of the ecosystems financing a UBI. In contrast, Ashford’s

Inclusive Ownership Fund (IOF)

UK Labour—Inclusive Ownership Fund (IOF) (Syal, 2018) Lansley and Reed’s (2019) Partial Basic Income (PBI) Proposal in the UK

Lansley and Reed’s (2019) Fuller Basic Income (FBI) Proposal in the UK

Taxation combined with the removal of welfare assistance programmes Modernization of the Earned Income Tax Credit (EITC) (also known as the Working Families Tax Credit)

A Negative Income Tax (NIT) (inspired by Milton Friedman 2002) Cost of Living Refund (2019)

Same as PBI (above) with No the addition of a Citizen’s Wealth Fund

None

None

None

None

All workers age 18+, including “childless” workers

Workers in a firm with an IOF

None

Environmental/sustainability aspects?

Citizens/residents who file a tax return

Varies based on Every British citizen age and marital status; ranges from £2080 to £10,400 annually Varies based on Every British citizen age and marital status; ranges from £2600 to £13,520 annually

Single people earning less than $50,000 a year would receive $4000 annually; married couples earning less than $90,000 a year would receive $8000 annually Up to £500 per month

Yes

Yes

Varies based on income

Amount received? By whom?

Yes

Work req.?

The elimination of child No benefit payments and state pensions, and reductions in means-tested benefits

Principal financing mechanism(s)

Summary of strategies to address income inequality

Scheme/programme

Table 4.1

72 R. P. HALL AND S. RANGANATHAN

Principal financing mechanism(s)

Work req.?

Andy Stern’s (2016) Elimination of 126 welfare No Universal Basic Income programmes; reduction in (UBI) Proposal government tax expenditures/spending; a 5–10 per cent value-added tax (VAT) on goods and services; a financial transaction tax (FTT); a “common wealth” fund; a 1.5 per cent wealth (or net worth) tax on personal assets over $1 million Andrew Yang’s (2018) A 10 per cent value-added No Universal Basic Income tax (VAT) on the (UBI) Proposal production of goods or services a business produces; certain welfare programmes (unspecified) would be consolidated

Scheme/programme Every U.S. citizen between 18 and 64

Every U.S. citizen over the age of 18

$1000 a month

$1000 a month

Amount received? By whom?

None

(continued)

Potentially—if a common wealth fund is created based on the principles underlying Common Wealth Trusts (CWTs) (see below)

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No

The Alaska Permanent Fund (APF) (2019)

The Alaska Permanent Fund (APF)

Yes

Chris Hughes’ (2018) A tax on annual incomes Guaranteed Income for of $250,000 or more Working People

A trust fund managed by No the Social Security Administration (SSA), with revenue from a range of potential options including a value-added tax (VAT), taxes on unearned income, a carbon dioxide tax, and small transaction fees on the trading of securities and derivatives

Assured Income (Arnone et al., 2019)

Work req.?

Principal financing mechanism(s)

(continued)

Scheme/programme

Table 4.1

Annual dividend payments typically range between $1000–$2000

Children (0–17) would receive $100–$200 per month; working age adults (18–64) would receive $200–$400 per month; older individuals (64+) would receive $100–$200 per month $500 a month Every working adult in a household with an annual income of less than $50,000 Alaska residents

Every U.S. citizen

Amount received? By whom?

None

None

If designed well, the carbon dioxide tax could incentivize low-carbon investments

Environmental/sustainability aspects?

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Principal financing mechanism(s)

The American Solidarity Fund (ASF)

Common Wealth Trusts (CWTs)

Scheme/programme

American Solidarity Fund (ASF) (Bruenig 2019)

Peter Barnes’ (2015) Common Wealth Trusts

No

No

Work req.? Not specified; The Universal Basic Dividend (UBD) payment would depend on the size of the ASF and its five-year performance Not specified Citizens

U.S. citizens

Amount received? By whom?

(continued)

The CWTs would be legally accountable to future generations and would have the authority to limit the use of threatened ecosystems and charge for the use of public resources

ASF’s assets could exclude companies if they violate human rights or cause environmental destruction

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Inclusive capitalism based on the principle of “binary growth”

Robert Ashford’s (2006, 2016) Inclusive Capitalism (based on binary economics)

Source Adapted from Hall et al. (2019)

Principal financing mechanism(s)

(continued)

Scheme/programme

Table 4.1

No

Work req.? Unlike income enhancement via a UBI, no absolute amount of income is prescribed; the amounts paid in dividends to beneficiaries according to this approach depends on the earning capacity of the capital acquired

Citizens, employees, consumers, and/or welfare recipients

Amount received? By whom?

Ownership-broadening trusts could invest in common stock voluntarily issued by companies that are advancing inherently sustainable forms of growth

Environmental/sustainability aspects?

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notion of inclusive capitalism focuses on financing a transition to inherently sustainable production systems that are subsequently owned by citizens. The capital income from this ownership is the source of the UBI. If modern automation/AI continues to displace or undermine wellpaid and meaningful employment opportunities, any UBI scheme that is linked with employment is unlikely to benefit those who are unable to find work. Such proposals also fail to account for unpaid reproductive and social roles. Other schemes that address this limitation by providing a basic income to eligible citizens, fail to link the programme to its potential environmental impacts (discussed below). In addition, limiting any programme to citizens alone fails to account for non-resident and transient workers who may be financially vulnerable. However, recent political trends and “nation first” agendas make it unlikely that UBI programmes will expand to serve non-citizens. While Barnes’ (2015) proposal for CWTs explicitly links a UBI to environmental protection, it would require a fundamental change to current political and economic systems to be implemented. This leaves Ashford’s (2006, 2016) inclusive capitalism proposal as a promising alternative that connects social, environmental, and financial systems, and could be implemented using existing financial institutions.

The Environment Cycle The relationship between the environment and the economy has been studied formally at least beginning with the work of Knut Wicksell and Arthur Pigou in the late nineteenth century. Environmental economists have pointed out that over-exploitation of resources, while lifting people out of social misery and poverty in the short-run, will result in externalities causing, among other things, health issues, irreversible loss of habitats and resources, etc. While the societal impact of economic development has been wellunderstood, it is also increasingly clear that the burden of the climate crisis will fall on the most vulnerable, the socially and economically underdeveloped populations. A recognition of this tradeoff between satisfying immediate unmet needs of the vulnerable population and the generational impact on future vulnerable populations has resulted in the development of new economic models that incorporate the environment as a factor in the economy. The study of the environment cycle using the so-called Green Solow model or variants (Brock & Taylor, 2010) is a useful step

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in that it accounts for over-exploitation of resources while encouraging economic growth that is essential to solve economic problems, especially for the people most vulnerable to the climate crisis. However, this does not directly resolve social inequalities and hence a more comprehensive solution is required. As we step further into the dangerous territory demarcating an almost irreversible warming of the earth and consequent catastrophic upheavals that may be visited upon the poorer sections of society, we need to determine a means to link these ideas holistically. In this chapter, we focus not on the promising theory being developed, but on a potential solution that is practicable within the ambit of the inclusive capitalism framework discussed in the following section. In terms of the paradigm of Fig. 4.1, the aim is to nudge “value consumers” who are at one end of the consumer continuum towards being “green consumers” at the other end of the continuum, while encouraging a similar movement for producers. A major challenge is that any effort to reduce inequality and poverty without fundamentally transforming production and consumption cycles, is likely to worsen the environmental impacts associated with these cycles. For example, Brown (2016) finds that household income is a strong predictor of a household’s carbon footprint. The more we earn, the larger our greenhouse gas (GHG) footprint becomes. If the solution to inequality/poverty is to increase the income of those in the lowest income bracket without reducing the wealth/income of households in the highest bracket, total GHG emissions would increase. Similarly, Wiedmann, Lenzen, Keyßer, and Steinberger (2020) argue that it is the overconsumption of the affluent that is driving the exploitation of nature and humans, and new sustainable consumption and production systems and lifestyles need to be envisioned that operate within planetary limits. Hence, an interesting idea explored in this chapter is how to increase income in a way that directly connects the spending of this income to inherently sustainable goods and services. We propose that, within the ambit of the inclusive capitalism framework, consumers are provided with an incentive to purchase “green products.” The capital earnings that were proposed to be distributed to consumers, workers, and other participants in the inclusive economy may be used with a suitable “green discount” in the purchase of selected products. This is similar in principle to subsidies for solar panels and electric cars for instance, that encourage consumers to buy into the development of such sustainable technology by purchasing these products in preference

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to polluting products. The crucial difference in this case, however, would be that the capital earnings of each consumer would itself be used in the inclusive capitalism framework as opposed to taxpayer-funded subsidies, which tend to be limited in time and scope and subject to political approval.

The Finance Cycle A central thesis of this chapter is the concern that increasingly productive real capital (principally AI/automation) is driving productivity and simultaneously hollowing out middle-class employment opportunities and worsening inequality. When the concern is framed in this manner, the potential set of solutions to ensuring people are able to obtain a living income and benefit from economic development fall into two broad groups. The first set of “employment” solutions focus on initiatives such as enhancing work prospects via retraining programmes, raising the minimum wage, and guaranteeing employment via government-run programmes. These solutions typically align with mainstream economic and political systems that view work as the principal mechanism for distributing wealth. This set of solutions also includes the provision of welfare/benefits that are funded by taxation of labour and capital. The second set of solutions focuses on initiatives that distribute wealth through mechanisms that broaden capital ownership. These “capital” solutions include Barnes’ (2015) CWT, UK Labour’s proposal where corporations (with more than 250 employees) would transfer up to 10 per cent of their ownership into an Inclusive Ownership Fund (IOF) that would pay their employees up to £500 per month (Syal, 2018), and Ashford’s (2006, 2016) notion of Inclusive Capitalism that focuses on broadening the acquisition of capital with the earnings of capital based on the principles of binary economics. Since the IOF proposal does not have any specific environmental considerations, it is not discussed further. Barnes’ (2015) CWT proposal is built around the sustainable management of critical ecosystems, where asset preservation would be the paramount mission. The CWTs could be set up as not-for-profit corporations and have fiduciary responsibility to future generations (i.e., the managers of these not-for-profit corporations would be required to protect their assets for future generations and to share current income equally). Any entity wishing to use an ecosystem would need to pay for this right, which would provide the primary source of revenue for a

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basic income. The potential scale of the CWT proposal is interesting. For example, if they were established globally, they could become an essential mechanism for keeping human activity with planetary boundaries. Since the CWT proposal would require a seismic shift in how a nation’s ecological systems are managed and owned and the IOF proposal only benefits workers and does consider the environmental implications of increasing effective demand, Ashford’s (2006, 2016) concept of Inclusive Capitalism presents a unique approach to linking the financial cycle (i.e., capital investment) to the social and environmental cycles. Further, if real capital is driving productivity as discussed previously, broadening its ownership is an efficient way to ensure that citizens are able to receive a living income from (1) their labour and (2) the capital they own through the programme. Ashford’s (2006, 2016) notion of Inclusive Capitalism is based on the principle of “binary growth.” According to this principle, “a broader distribution of capital acquisition with the earnings of capital distributes capital income more broadly in future years (thereby producing more effective future consumer demand) and therefore more demand for investment in capital and labour in earlier years” (Hall et al., 2019). Put differently, if a capital investment to grow a company paid for itself over a specific period from its future earnings, and the ownership of this investment was broadly distributed, its owners (e.g., citizens) would receive an income from this capital ownership once the investment loan is repaid. In anticipation of this increase in future consumer demand, firms may invest earlier in expanding their production to supply this future demand, further expanding economic activity. A critical component of this proposal is the Binary Trust, which would borrow money from banks and other lenders to acquire dividend-paying common shares issued to the trust fiduciaries by participating companies that are planning to grow. The share acquisition loans would be collateralized by private and/or public capital credit insurance—that is, members of the Binary Trust would not make any investment in the trust. Rather than investing in any form of corporate growth, the inclusive capitalism trusts (Binary Trusts) would invest in inherently sustainable goods and services. The investment decision makers working for Binary Trusts would need to be able to integrate knowledge relating to corporate finance, green/sustainable engineering, environmental/ecosystem

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science, etc., and be highly competent with a broad array of environmental assessment techniques, such as life cycle analysis (LCA) and environmental/sustainability certification schemes. This targeted investment approach would create a new financial cycle that specifically promotes sustainable production. Once the investments have paid for themselves out of their future earnings, the Binary Trust would divert all future income streams (dividend payments) to citizens (who would now have an ownership stake in the corporation). If these citizens are then able to use these funds to purchase the sustainable goods and services created via this ownership-broadening binary financing mechanism, the environmental-production-income and distribution-consumption loop would be closed. To achieve this, in the short-run, incentivizing sustainable consumption would be a mechanism that nudges consumers to shift from the “value consumer” end of the continuum to the “green consumer” end of the continuum. This new circular economy would coexist alongside the current economy, providing an opportunity for corporations to experiment with the approach and citizens to see how the economy can be shaped in a way that works for everyone, not just those who are well-capitalized.

Conclusion In this chapter, we take a holistic view of the sustainability paradigm that is informed by the roles of different stakeholders along value continuums for government, corporations, consumers, and workers. We propose to close the environmental-production-income and distribution-consumption loop by encouraging different stakeholders to move towards the sustainable end of each continuum. We propose that sustainable consumption and production is feasible as a paradigm only if two other factors are also accounted for: the financing of production and inequality among consumers. We address this by considering a social cycle and a financial cycle that are tightly linked to the environment cycle, which is the main focus of sustainability studies. By recognizing these processes as interacting cycles, we emphasize the complex feedbacks involved in implementing sustainability efforts in society. We consider different mechanisms proposed in the literature (tabulated in Table 4.1) and suggest how Robert Ashford’s Inclusive Capitalism framework provides an approach that seems practicable without being too disruptive to ensure that these

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cycles are sustainable in the global economy. This is an especially important consideration at this juncture when serious questions are being asked about participatory processes in politics, economics, science, etc. Global anti-intellectual movements that dismiss concerns related to democracy, inequality, and the climate have grown strong and captured power in many countries across the world, while strong grassroots movements in support of these processes have also sprouted all over the world. In this climate, we propose a solution that emphasizes the importance of these participatory processes without disrupting existing systems significantly. We acknowledge that there are likely to be “prime mover” problems and hence that there is a need for short-run stop-gaps such as incentivizing or subsidizing the consumption of green products, but we believe that well-managed Binary Trusts can take over this role in the long run. The concept of Inclusive Capitalism holds great potential to initiate a sustainability transition, but it is likely that simple nudges in a sustainable direction to well-meaning citizens intent on their own well-being as well as that of others will have a far-reaching effect. Acknowledgement The authors wish to thank the editors of the handbook Prof. Ranjula Bali Swain and Dr. Susanne Sweet, and also all the participants of the Sustainable Consumption and Production Book Workshop, held in Stockholm, 15–16 October 2019, for useful comments and feedback on an earlier version of the chapter.

References Alaska Permanent Fund Corporation. (2019). Alaska Permanent Fund. https:// apfc.org/. Accessed 18 June 2019. Arnone, W. J., Barnes, P., & Landers, R. M. (2019). Assured income. Washington, DC, USA: National Academy of Social Insurance. Ashford, N. A., & Hall, R. P. (2018). Technology, globalization, and sustainable development: Transforming the industrial state. New York: Routledge. Ashford, R. (2006). Binary economics and the case for broader ownership. https:// ssrn.com/abstract=877925. Accessed 19 June 2019. Ashford, R. (2016). Why working but poor? The need of inclusive capitalism. Akron Law Review, 45, 507–537. Autor, D. (2015). Why are there still so many jobs? The history and future of workplace automation. Journal of Economic Perspectives, 29, 3–30. Barnes, P. (2015). Common wealth trusts: Structures of transition. Cambridge, MA: Tellus Institute.

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Bernstein, A., & Raman, A. (2015). The great decoupling: An interview with Erik Brynjolfsson and Andrew Mcafee. Harvard Business Review, 93, 66–74. Brock, W. A., & Taylor, M. S. (2010). The green Solow model. Journal of Economic Growth, 15(2), 127–153. Brown, H. (2016). Is sustainable consumption compatible with increasing the income among the poor and middle class? Wordpress. https://wordpress. clarku.edu/hbrown/2016/07/09/is-sustainable-consumption-compatiblewith-increasing-the-income-among-the-poor-and-the-middle-class/. Accessed 6 Oct 2019. Bruenig, M. (2019). Social wealth fund for America. https://www.peoplespolic yproject.org/projects/social-wealth-fund/. Accessed 18 June 2019. Brynjolfsson, E., & McAfee, A. (2014). The second machine age. New York: W. W. Norton. Cost of Living Refund. (2019). A federal cost-of-living refund. https://costofliv ingrefund.org/federal Accessed 15 Aug 2019. Friedman, M. (2002). Capitalism and freedom: Fortieth (anniversary ed.). Chicago, IL: University of Chicago Press. Hall, R. P., Ashford, R., Ashford, N. A., & Arango-Quiroga, J. (2019). Universal basic income and inclusive capitalism: Consequences for sustainability. Sustainability, 11, 4481. Hickel, J. (2020). The sustainable development index: Measuring the ecological efficiency of human development in the Anthropocene. Ecological Economics, 167, 1–10. Hughes, C. (2018). Fair shot: Rethinking inequality and how we earn. London: Bloomsburg Publishing. Lansley, S., & Reed, H. (2019). Basic income for all: From desirability to feasibility. London: Compass. Rockström, J., Steffen, W., Noone, K., Persson, Å., Chapin, F. S., Eric, L., & Lenton, T. M. (2009). Planetary boundaries: Exploring the safe operating space for humanity. Ecology and Society, 14(2), 32. Steffen, W., Richardson, K., Rockström, J., Cornell, S. E., Fetzer, I., Bennett, E. M., & Biggs, R. (2015). Planetary boundaries: Guiding human development on a changing planet. Science, 347 (6223), 1259855. Stern, A. (2016). Raising the floor: How a universal basic income can renew our economy and rebuild the American dream. New York: PublicAffairs. Syal, R. (2018). Employees to be handed stake in firms under labour plan: Companies with 250 or more employees will be expected to create ownership fund, John Mcdonnell to say. https://www.theguardian.com/politics/2018/sep/ 23/labour-private-sector-employee-ownership-plan-john-mcdonnell. Accessed 18 June 2019.

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The Urban Institute. (2017). Nine charts about wealth inequality in America (Updated). http://apps.urban.org/features/wealth-inequality-cha rts/. Accessed 19 June 2019. Wiedmann, T., Lenzen, M., Keyßer, L. T., & Steinberger, J. K. (2020). Scientists’ warning on affluence. Nature Communications, 11, 3107. https://doi.org/ 10.1038/s41467-020-16941-y. Yang, A. (2018). The war on normal people: The truth about America’s disappearing jobs and why universal basic income is our future. New York: Hachette Books.

CHAPTER 5

Interaction Between Government and Business to Shape Sustainable Markets Sven-Olof Junker and Lars-Gunnar Mattsson

Introduction The theme of this book is sustainable consumption and production as aspects of sustainable development (SDG 12, UN, 2015). Sustainable development will not be achieved without interlinked technical, economic and government policy innovations. In a market economy, consumption and production are dependent on market exchange between sellers and buyers. Our contribution to this Handbook is to analyse how interaction between government actors and market actors may shape sustainable markets and thus promote development of sustainable production and consumption. We focus on government/business interaction for climate mitigation, a major sustainable development goal (SDG 13, UN, 2015) to achieve the SDG 12 objective: sustainable production and consumption.

S.-O. Junker (B) · L.-G. Mattsson Center for Sustainability Research, Stockholm School of Economics, Stockholm, Sweden e-mail: [email protected] L.-G. Mattsson e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_5

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The role of government to shape well performing markets is a contested issue. Supporters of “free markets” believe government interventions to be harmful, unless primarily intended to protect property rights, competition and consumer protection. On the other side, there are supporters among academics and practitioners for state interventions to make markets more effective by various types of rules and norms, economic sanctions and subsidies as well as public–private partnerships and business ventures (e.g. Acemoglu & Robinson, 2012; Evans & Rauch, 1999; Geiger, Harrison, Kjellberg, & Mallard, 2014; Premfors, 1998) There exists in academic literature very little, if any, conceptual conversation of what constitutes a sustainable market, how it can be created and shaped. We argue that a market is sustainable if, over time, it substantially promotes sustainable development, and that interaction between government and business might aid in shaping sustainable markets. The question addressed in this chapter is: How can government policy innovations, based on interaction between government and business, promote sustainable market exchange between actors involved in production and consumption? Our analysis refers to a Swedish government committee, “Fossil Free Sweden”, that mobilizes business actors to develop and adopt “roadmaps” for fossil-free production and consumption, in line with the Paris agreement. We thus deal with a major societal challenge, climate change, that needs to be approached by joint efforts within and across societies. We focus on interaction between government policy practices and market practices to promote sustainable production and consumption. Our analytical reasoning particularly notes that policy actors and market actors interact, negotiate and redesign different aspects of market processes in efforts to achieve sustainable development. We first present our conceptual framework on markets and on interaction between market actors and policy actors. Second, we present features in one of the roadmaps for fossil-free production and consumption that has been submitted to government by market actors. Our analysis focuses on technical and economic innovations presented by the market actors and the governmental policy innovations they feel are necessary to remove because they hinder, or do not sufficiently promote the innovations described in the roadmaps. Third, we apply the empirical analysis to discuss the problems and opportunities for policy/market interaction to

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reach the fossil-free Sweden objective and reflect on practical as well as research implementation of our analysis.

The Conceptual Framework Market The market concept refers to conditions and contexts for voluntary exchange of goods and services between sellers and buyers. Coase (1988: 8) states that the market is a “social institution that facilitates exchange”. From this viewpoint, markets and sustainable development interrelate in many ways (Finch, Geiger, & Harkness, 2017; Mattsson, 2016; Roepstorff & Morsing, 2011). Market studies have further identified specific market practices concerned with sustainable development (Geiger, Harrison, Kjellberg, & Mallard, 2014; Peattie & Crane, 2005). There are numerous analytical, theorizing approaches, with different scientific backgrounds that affect how a market is conceptualized. We stress the embeddedness in social institutions of market actors, exchanges and relationships (e.g. Ahrne, Aspers, & Brunsson, 2015; Callon, 1998; Granovetter, 1985; Håkansson, 1982). A wide array of empirical research confirms that most markets are characterized by high amounts of complexity, multiplicity and dynamics when it comes to how they are structured, organized and performed (Brunsson & Jutterström, 2018). There is considerable empirical and conceptual research about businessto-business and industrial markets as well as distribution systems. These studies have found markets characterized by interaction, exchange relationships and network interdependencies. Such an interaction/network perspective understands technologies, innovation and structural change as predominantly endogenous in markets. (e.g. Håkansson, Ford, Gadde, Snehota, & Waluszewski, 2009; Håkansson & Snehota, 1995; Mattsson & Johanson, 2006). Based on these observations from organization and marketing research, we draw upon the concept of market practices. Market practices are defined as all activities including material arrangement that contribute to performing markets (Kjellberg & Helgesson, 2007). Market practices are in some streams of research viewed as being largely shaped by institutional arrangements in which rules, norms, standards, theories, representations, customs and legitimate practices are collaboratively developed and disseminated (Czarniawska & Sevón, 2011). In other

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streams of research emanating from the academic sub-discipline of marketing, practices are seen as being largely shaped by market actors themselves (Araujo, 2007; Cornelissen & Lock, 2005; Håkansson et al., 2009; Kjellberg & Helgesson, 2007). Such constructivist but somewhat different perspectives on markets tend to steer scholars’ attention towards analysing how general ideas of the market are fitted into various modes of action, and more specifically, how images and representations of markets are constructed and how these representations shape market exchange (Callon, 1998; Latour, 1986). Markets, in this respect, are ongoing results of market practices. Markets are performed and shaped by activities committed in continuous recursive processes (Mason, Kjellberg, & Hagberg, 2015). Overall, the focus is hereby on the evolving nature of markets including efforts to stabilize markets. However, addressing major challenges such as climate change require technical and economic innovations, as well as government policy innovations. Thus, we argue that sustainable markets are shaped in interaction between market practice and policy practice, recognizing the problematic nature of the process especially since technical and economic innovations, and government policies are involved. To develop this argument, we apply the conceptual model developed in Kjellberg and Helgesson (2007), to understand markets as shaped by three bi-directionally interlinked categories of market practices. First, exchange practices are activities that realize individual exchanges. The activities include negotiations, contractual agreements, prices, qualities and quantities of resources exchanged and more. In the context of sustainable development, more specifically climate mitigation, we define sustainable market exchange as consisting of products/services that have been produced and distributed without CO2 emissions, and will be used without causing such emissions. This definition implies that attributes of sustainable production and sustainable consumption are included in the exchange practice. Exchange practices result in connections between actors that are involved in earlier, later and concurrent exchanges for production and consumption. Second, normalizing practices are activities to establish and apply rules and norms for business conduct relating to market exchange, e.g. norms based on voluntary agreements between market actors and/or procedures that comply with international or national rules established and overseen by public actors. Normalizing also includes models and methods for

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market representation and market exchange, in the present and/or the future. Third, representational practices are activities that serve to describe and analyse markets and market processes. Since market practices are situated in multiple realities, representations of markets might differ among actors, also due to theorizing and methods applied. Different versions of market representations coexist and compete to gain influence (Kjellberg & Helgesson, 2006). Links between the different practices are conceived as translations (Callon, 2007; Czarniawska, 2000; Czarniawska & Sevón, 2011; Kjellberg & Helgesson, 2006, 2007). Translations are not a priori based on causality but on traceable association between practices. Markets are accordingly seen as dynamic systems of practical translations between exchange, normalizing and representational practices. Consequently, we argue that translations among the three categories of market practices are important for the development of sustainable market exchanges. For example, normalizing practice that introduces a ban on the use of a specific chemical ingredient in a product causing harmful emissions during its production or use, translates to changes in exchange practices and will also affect how products, sellers and buyers are categorized in market representation (cf. Sweet, 2000 that studies the effect of banning the use of chlorofluorocarbons). The general market concept allows for practices that differ in many respects: for example, as regards representation with reference to framing; as regards normalizing with reference to calculative devices and conceptual frameworks; and as regards exchange with reference to nature and content of exchange. Theorizing about markets based on different scientific disciplines reflects these varying interpretations that play a role in both policy practice and market practice. With that in mind, we claim that sustainability in society can be realized primarily through a focus on mechanisms and processes by which the adopted sustainability policies are translated into all the three categories of market practices. In the next section, we develop this argument. Interaction Between Market and Policy Practices How policy practices interact with market practices is a focal point in different streams of study. Studies show that policy practices in welfare states have gradually changed since the Brundtland Commission Report

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in 1987 (Jessop, 2004; Rhodes, 1994). In general, governments have moved from exercising hierarchical control towards adopting long-term and across-the-board societal goals, enrolling not only public but more regularly, private actors for implementing policies and setting of working methods including deliberation and negotiation among multiple actors and organizations both inside and outside government (Christensen & Lægreid, 2007; Héritier & Lehmkuhl, 2011; Jordan, 2008; Peters & Pierre, 1998). Public–private policy arrangements have appeared on both domestic and international scenes (Stone, 2008). Borders between public agencies, companies and non-governmental associations are increasingly blurred in these processes of linking modes of organization and practice (Bromley & Meyer, 2017; Brunsson & Sahlin-Andersson, 2000). Furthermore, firms are increasingly assuming social and political responsibilities that go beyond legal requirements (Scherer & Palazzo, 2011), challenging a traditional distinction between market and policy actors. When public actors and market actors interact with the aim to promote sustainable development, theorizing about markets in policy practice meets theorizing about markets in market practice. We have stated above that the potential for reaching sustainability in society must primarily focus on mechanisms and processes through which the adopted sustainability policies are translated into market practices. With that in mind, policy practices need to include, explicitly or implicitly, markets as objects of policies. Innovation policy and public procurement policy provide examples of how market representation differs depending on theorizing about markets, provoking a conflict between micro-economic and interaction/network-based market representations (Waluszewski, 2011). How governments are able to adopt and implement policies in the handling of complex and “wicked”, and in the case of climate mitigation “super wicked”, problems has recently become established as a key topic in the literature on governance for sustainability (Head, 2008; Termeer, Dewulf, Breeman, & Stiller, 2015; Voss, Bauknecht, & Kemp, 2006). A common assumption in this literature is that policies are made in assemblages which include participating actors across societal sectors, enacting incompatible goals and means for achieving public policies (Cohen, March, & Olsen, 1972; Czarniawska-Joerges & Jacobsson, 1989; Kingdon, 1984) Policy outcomes, therefore, have a high degree of uncertainty. As a consequence, participants engaged in influencing the processes of agenda-setting, policy development as well as resource distribution potentially can have a large impact on the choices that are

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made (Ferlie, Fitzgerald, McGivern, Dopson, & Bennett, 2011). Hence, the algorithm for public policy-making regarding climate mitigation is in many cases undoubtedly complex, messy, characterized by great uncertainty and conflicts. In this view, a study of policy practice is not only a matter of examining procedures within the public administration per se, but additionally zooming in on both formal and informal linkages between policy and market practices. How does policy cause changes in market practices? A recent contribution in the field of organization theory argues that market studies generally reflect the need for significant policy based organizational efforts in shaping markets and elements of markets such as competition and exchanges (Brunsson & Jutterström, 2018). Research has also shown that various forms of horizontal and “soft” governance have become important ingredients for implementing sustainability policies (Mörth, 2004; Russel & Jordan, 2009). What is commonly denoted as “whole-of-government” (Christensen & Lægreid, 2007) refers to a set of organizing principles when the government plays a facilitating role with a mission of assuring that governing processes are consistent with democratic norms of justice, fairness and accountability (Christensen & Lægreid, 2007; Denhardt & Denhardt, 2000). The term triggers diverse connotations depending partly on setting and context. While “whole-of-government” is sometimes used to describe a policy practice with formal aims of improving policy coherence and achieving horizontal and vertical integration within government (OECD, 2011), scholars also view it as attempts of government to interact with market actors in order to achieve policy alignment across numerous fields (Morrison & Lane, 2005). In the latter form, governments enact the role of orchestrators rather than executors, with the aim of accomplishing “synergies by bringing together different stakeholders in a particular policy area”, as stated by Christensen and Lægreid (2007: 1060). This view underlines that market actors regularly play influential roles in policy practice. Many welfare states have a long tradition of such corporatist arrangements for developing policy and settling conflicts in society. During the last two decades, research has continuously reported on the expansion of “whole-of-government”, including market actors across various policy fields; e.g. environment, research, energy, healthcare and transport (Borrás, 2003; Christensen & Lægreid, 2007; Rhodes, 1997; Sørensen & Torfing, 2007). Specifically, in policy areas like climate

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change, which impact numerous stakeholder and societal sectors, the practice of “whole-of-government” can be motivated for reaching sound and achievable policies. This form of hybridized policy practices is claimed to contribute to increased plurality and flexibility as features of policy processes (Alexius & Furusten, 2019). It helps in bridging polarized interests among market and policy actors, as well as increasing commitment and trust across these camps. In conquering policy inertia with regard to say, “super wicked” sustainability problems, attempts to apply “whole-of-government” have proven to further entail path generation towards sustainable development (Bothello & Salles-Djelic, 2018; Djelic & Quack, 2007). Research suggests that processes of policy innovation play a vital role in “whole-of-government”. Policy entrepreneurship is a concept used to analyse initiatives that “draw attention to policy problems, present innovative policy solutions, build coalitions of supporters, and secure legislative action” (Mintrom & Norman, 2009). Such practices are enacted by both policy actors and market actors, and imply the “softening up” and changing of conditions for discussing and deciding upon certain alternatives (Cairney, 2018; Kingdon, 1984; Mintrom & Norman, 2009). “Whole-of-government” implies, in this sense, organizing in pluralistic contexts involving multiple interests and identities (Jarzabkowski & Fenton, 2006). Our adopted constructivist view of markets as performed by market practices in interaction with policy practices provokes attention to how the market practice model can be adapted to also include policy practice influence, thereby helping to bridge the gap between policy and market according to arguments in Mattsson (2016). The overriding issue for a government is to enable and stimulate fossil-free production and consumption and thereby fossil-free market exchange practices. A government can do that by efforts to change normalizing practice, for example, by formal and informal rules and norms, becoming directly involved in exchange practice as say, a supplier or buyer of products and services, and by affecting market representation with regard to temporal and spatial framing. This analytical reasoning underscores that policy actors and market actors interact, negotiate and redesign each market practice category in an effort to change market practices towards fossil-free market exchanges.

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In the introduction, we defined sustainable markets as markets that substantially promote sustainable development. Adopting a market practice framework, we suggest that attributes of market exchange practice provide measures of the extent to which a market is sustainable. Since individual SDGs are compatible/incompatible to different degrees, whether or not a market is sustainable cannot be generally determined. In this chapter however, the translation from the Paris agreement to reduction of emission of greenhouse gases to increase of fossil-free production and consumption, as revealed in attributes of market exchange, is rather straightforward. Furthermore, and importantly, interlinkages between the practice categories provide opportunities to understand market dynamics related to sustainability. The Empirical Illustration “Fossil Free Sweden” (henceforth FFS) was initiated by the Government in conjunction with the 2015 Paris agreement. FFS is an example of a non-traditional organization of a government committee. Its task is to promote, support and be a driving force for change. FFS is led by a “National Coordinator”. The committee shall support and make visible actors and activities for a fossil-free Sweden, and stimulate market actors in specific industries to develop roadmaps for innovations in line with the nationally determined contribution to the Paris agreement as well as the adopted national climate goals. Until October 2019 market actors has composed and submitted to government 13 roadmaps (Appendix 1). During 2020 an additional 8 roadmaps will be submitted. As stated in the introduction this chapter focuses on how interaction between government and business can promote sustainable market exchange between actors involved in production and consumption. Based on this we pose three related questions to the “Construction” sector roadmap. Which are the technical, economic and policy innovations described? How do the roadmaps refer to the three categories of market practice activities? What are the suggestions for policy practice innovations?

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Innovations in the Construction Sector Roadmap Carbon emissions arise primarily from the manufacture of construction materials and buildings’ energy usage. Innovations listed cover the extended value chain from extraction of raw material to use and reuse. A life cycle perspective is required in terms of planning, design, construction and utilization. A strategic innovation agenda developed with cooperation among stakeholders is needed. Increased resource efficiency, increased use of fossil-free material are technical dimensions of innovations that need to be supported by economic/organizational innovations: transition from linear to circular business models aided by availability and use of data on climate effects for all transactions in the extended value chain. There is a plea for increased cooperation between actors across the entire value chain. The roadmap argues that if currently available techniques could be made more effective, including digital transformation of processes, reduction of waste and reusage of material, the climate effects of production and use could be reduced by 40 per cent until 2045. To reach climate neutrality however, major “technical shifts” are required, especially the development of carbon capture and storage technologies (CCS). It is obvious that the described construction innovations are interdependent with innovations described in several other roadmaps. Of the 13 roadmaps listed in Appendix 1, innovations in the Construction roadmap are specifically interdependent with those in Aggregates, Cement, Concrete, Digitization Consulting, Forestry, Haulage, Heating, Mining and Mineral and Steel roadmaps. For instance, Forestry innovations include delivery and use of biomass for bioenergy (for heating, electricity production and fuel) and increased use of wood for construction of apartment buildings, also proposed by Construction. Steel innovations related to Construction include recycling of steel. Haulage innovations include logistic efficiency and substitution of diesel with fossil-free fuel. Cement innovations refer to technologies to use and store carbon dioxide (CCU and CCS) and recycling of material. How Roadmaps Refer to Market Practices Representation. In the analysis of all 13 roadmaps, employing the Nvivo software, we classified four partly overlapping categories of market attributes. First, the term market attributes fundamental prerequisites

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for market exchange, here labelled as Market Conditions —specifically, conditions such as property and contracting rights, general principles of evaluation, mechanisms of information flow between market actors and conforming incentives. Accordingly, the term market is used to create images of fundamental settings that need to be put in place for spurring both supply and demand of fossil-free products and processes. The Construction roadmap connects the market to government, stressing the need for new principles and rules, which should improve the conditions for market exchange without causing emissions of greenhouse gases. Second, roadmaps attribute the capability to specific entities (organizations, individuals) to determine the value, nature or quality of market products/processes. We label this attribution category Market Evaluation. It denotes occasions when the roadmaps are conceptualizing markets as pricing mechanisms based on for example, specific preferences of market actors, or situations in which values are seen as co-created by market actors. Some roadmaps stress the need to construct new methods to calculate and price emissions of greenhouse gases connected to the current production system—methods which should be integrated into standard evaluation methods used by businesses and the financial industry. For instance, Construction emphasizes the need to increase the price of waste as part of improving reuse and recycling in new construction. The market term sometimes also attributes mechanisms of evaluation as elementary for understanding and influencing market exchanges. Third, the term market is also attributed to Market Performance, that is, the ability to achieve something in society, for instance, effectiveness, acceptance of requests and solutions, adjustments, and market-driven initiatives, as well as not achieving expected outcomes, for instance distortions of competition. Many of the roadmaps discuss public procurement as a market mechanism with high potential to influence performance. The Construction roadmap refers to public procurement as “the engine” of climate mitigation. Furthermore, technical change and digitization are seen as global trends that impact markets substantially. Fourth, the roadmaps attribute the term market with Market Framing. This represents markets as something composed of specific parts fitted together. Framing markets implies admitting, enclosing or supporting objects such as products, actors and organizations into a cohesive setting with both spatial and temporal borders. For instance, many of the roadmaps make a distinction between the national market and the global market, identify a product category and somewhat implicitly make

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connections between product markets related to the term value chain. Framing is important to understand the dynamic market context for market exchange—what actors are involved, what products and services are exchanged, and under what temporal conditions. The Construction roadmap, for instance, lists all actors in the value chain that do business with each other (i.e. are involved in market exchange). Exchange. The framing in market representation shows that exchange practices involve a variety of products and services that need to be coordinated among a variety of actors in new ways. To an important degree, innovation processes require market exchange with actors in markets represented by other roadmaps. Thus, the Construction roadmap describes how market representation for innovation translates to market exchange between new constellations of actors. These exchanges that need to be coordinated with reference to a common market performance requirement are inspired by what is called the Strategic Innovation Agenda suggested by the Construction roadmap. Normalizing. Market representation in the Construction roadmap concerns conditions for climate-mitigating innovation. It is predominantly based on interaction and cooperative relationships among all actors for effectiveness and innovation. Temporal framing relates to value-chains, life cycles and innovation. Spatial framing has a focus on cross-industry interdependencies, national boundaries, policy-market interaction, as well as value-chains. The normalizing practices supporting this development can be deduced from what the roadmap asks the market actors and the policy actors to do. Some of those changes are addressed to market actors, some to political actors, to be realized by them more or less in interaction with the market actors. The Construction roadmap requires business actors in the construction sector to develop and implement innovations for climate mitigation with a focus on life cycle-based norms in planning, in interaction with suppliers, customers and other counterparts in early stages of construction projects. Requirements for Government Policy Innovations Affecting Market Normalization In the Construction roadmap, the government is asked to develop and implement norms to support climate-mitigating innovations by market actors. The 11 requests in the Construction roadmap are presented and divided into analytical categories in Table 5.1. Those marked by an asterix

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are also included to varying degree in the Climate Action Plan (CAP) submitted by the government to the national parliament in the end of December 2019. The analysis above shows that business actors expect a highly active and decisive government to support development of a sustainable market. In contrast to the idea that governmental regulations are harmful for achieving cost-effective and well-performing market practices, the Construction roadmap refers to market actors in need of a strong regulatory state/government. Policy actors should not take their hands off market affairs, but rather intervene to an important extent. Table 5.1 Expressed policy requests in the construction roadmap General policy requirements • Establish ambitious, long-term and predictable laws and regulations for the sector. (1) • Use public procurement as an instrument for climate mitigation. Develop procurement competence and control outcomes of procurement processes. (2)* Innovation support • Create conditions for technic shifts in steel and cement industries by policies for financing, risk sharing, innovation support and control instruments. (3)* • Support financial incentives for climate mitigation investments. (4)* • Stimulate renovation of old buildings to save energy in a life cycle perspective. (5)* Market shaping support • Develop in cooperation with market actors a strategy and action plan for supply and distribution of fossil-free fuel. (6)* Information support and standard changes • Introduce compulsory declaration of how, in a life cycle perspective, buildings and construction products affect CO2 emissions. (7)* • Ask an appropriate actor to develop and manage an open database for generic, life cycle-based climate effects of representative buildings and infrastructure objects. (8)* • Ask an appropriate actor to develop methods to visualize climate effects emanating from transactions in the value chain, from raw material to consumer. (9) • Ask an appropriate actor to develop, in dialogue with market actors, procurement criteria and definitions of climate neutral and climate positive buildings and infrastructure. (10) • Change the rules for classification of waste to enable and promote recycling. (11)* Source Authors

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Opportunities and Problems to Shape Sustainable Markets in Interaction Between Policy and Market Practices How Might the Requests for Policy Innovation Affect Market Exchange? Returning to the market practice model, keeping in mind that the three market practice categories are interlinked by numerous translations and that we are searching for conditions for sustainable market exchange, how might the policy innovations affect market exchange? Policy actors are directly involved in market exchange when they are involved in public procurement (2) but for the other “points” it is a matter of normalizing practice to be translated to exchange and representation practices. The outcome of the translation processes within and between categories of policy activities such as between “visualizing climate effects (10)”, change the “rules for classification of waste (12)”, “stimulate renovation of old buildings (5)”, “introduce compulsory declaration (8)” and their effects on changing market practice towards more fossil-free market exchanges is not given by causal analysis but a matter for judgement based on experience, knowledge, beliefs, routines and political considerations. Applying more detailed analysis of potential inclusion of the suggested policy innovations in practice will likely refer to representation practices in terms of conditions, evaluation, performance and framing. How policy practices and market practices are aligned, contested and negotiated when market and policy innovations are confronted is of importance to understand climate mitigation. A clear application of the direct involvement of market representation practice is to “develop in cooperation with market actors a strategy and action plan for supply and distribution of fossil fuel (6)”. How Will These Requests Be Met by Government? In this chapter we consider climate mitigation as dependent on interlinked technical, economic and policy innovations influenced by market and government policy actors. Innovations have important temporal dimensions, entail uncertainties, require financing, disrupt established practices and resource constellations, and are dependent on spatially distributed actors. Given the nature of innovation processes, how will the requests be met by the government?

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A main feature of policy practices is the handling of conflicting interests. Inspired by neo-institutional theory, we suggest three potential modes of response to the requests that are expressed in the roadmaps, or a combination of these modes (Junker, 2014; Oliver, 1991). First, the mode of acceptance by initiating policy processes in line with roadmap policy requirements. Such response could indicate a successful brokerage between government and business. However, it does not necessarily imply an effective reaction with respect of climate mitigation, but rather a reaching of consensus among the involved actors. Second, avoidance is another potential mode of governmental response. One example could be the setting up of new public committees for investigating the requests further and thereby also enabling a decoupling of policy talk from actual reform action for a short or extended time. Third, proactive manipulation, a mode by which government tries to actively change the content and significance of the requests or integrate market actors’ requests into already ongoing policy processes, without changing the policy content. Manipulation can consequently be an attempt of either increasing/decreasing policy impacts or diluting the requests with other conflicting policy interests. Acceptance, avoidance and manipulation can be viewed as both competing and collaborating strategies of governmental response. The roadmaps request the government to participate in risk-taking and financing, in developing tools for disruptive market practices, and in coordination between spatially distributed market actors. How do requests become included in government practices that in themselves are characterized by risk-taking, financing, spatially and hierarchically distributed policy actors, tool-making, as well as the development of new resource constellations for public infrastructure? A first evaluation of how the government handles the roadmap requirements is reflected in the national Climate Action Plan (CAP) that was submitted to parliament in December 2019. The CAP lists 132 policy activities based in part on roadmap requests and to a large extent on other previous, on-going or planned governmental policy processes. As presented in Table 5.1, eight requests from the Construction roadmap are to a varying degree among the 132 policy activities. However, a closer examination indicates that the government adopts different policy responses to the roadmap requests. We see the application of all suggested modes of response. The introduction of a compulsory climate declaration indicating how buildings and construction affect CO2 emissions in a life cycle perspective

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can be viewed as acceptance. The issue was nevertheless not completely novel. It was already on the public agenda for some time and public research institutes were commissioned to develop a generic calculative model. Government could thus rapidly delegate to a public agency the mission of preparing an effective implementation of a new legislation. The act of compulsory climate declaration is currently planned to come info force in the beginning of 2022. Avoidance is another governmental response strategy that at least partly has been adopted. Some of the roadmap requests are at best temporarily ignored, for instance the suggestion to develop an application for visualizing climate effects emanating from transactions in the entire value chain. Other issues have been re-packed as new public investigations, e.g. the issue of developing an open database for life cycle-based climate effects of buildings. The CAP recognizes the need to investigate the specific requirement without the government taking a positive position on the issue. We also see some initial evidence of governmental manipulation of roadmap requirements. For instance, the planned major green tax reform and the issuing of new public green bonds are both presented as policy innovations which will increase the financial incentives for climate mitigation investments. Both policies were nevertheless the results of negotiations in the forming of a coalition government in January 2019. The handling of adopted policies as responses to new demands can successfully be used in situations with several conflicting interests (Pache & Santos, 2013). Questions for Further Inquiries Market practices are linked through complex structures of translations. Market actors and policy actors, situated in partly separate contexts and with disparate and sometimes conflicting interests, are interlinked to partake in these processes of translation. How market exchange practices spread is also dependent on numerous steps of translation between representation, normalization and exchange, each potentially consisting of local deliberations and negotiations, which generate traceable paths of translation towards sustainable production and consumption practices (Bothello & Salles-Djelic, 2018). The FFS study highlights the need to take temporality into account when analysing the link between policy and market regarding climate mitigation.

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As with all innovations, the duration from ideas/invention to general use is considerable. During this process, new alternatives or complementary solutions to climate mitigation will likely be found. Upscaling a new technique, first applied in an experimental setting, will be necessary to make an impact. In an aggregated sense fossil-free market exchanges need to substantially increase. The “whole-of-government” approach needs to cope with conditions for interaction between government and business. For instance, how is market representation in the roadmaps related to market representation by policy actors as they develop responses to market actors’ requirements? Normally within the core executive of government, there are highly institutionalized procedures for calculating the effects of proposed policies on exchange behaviour and tax revenue. How these market representations interfere with and merge with representations in the roadmaps is of course difficult, if not impossible to determine at this stage. One can expect negotiations about requirements among policy actors, including how the roadmaps conform with or contest market representation in policy practice. Other potential issues are variances in how markets are represented in different government agencies and the allocation of response to requirements between government agencies (Koppenjan & Klijn, 2015). Climate mitigation arguably needs effectively coordinated efforts in society. Finally, the roadmaps, provide a Swedish perspective on a global challenge. The idea is that the innovations, with Swedish origins, will increase the competitive power of Swedish industry. However, it is a fact that Swedish market actors are highly dependent on cooperation and competition with actors outside Sweden, both in Sweden and abroad. Therefore, since fossil-free market exchanges might entail higher costs and prices, markets point to the risk of “distortion of competition”. How the Swedish government is dependent on international and global policy practices that may conflict or be in line with the Swedish practice is also not fully discussed in the roadmaps (cf. Djelic & Sahlin-Andersson, 2006). For instance, EU rules might be problematic as concerns state contribution to innovation.

Conclusion Conventionally, when conferring on policy practices of shaping and reforming markets, attention is drawn to formal instruments like guidelines, rules, procedures and lawmaking—hence, mainly covering activities

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that categorize as normalizing practices, engaging both governmental bodies for regulation and standardizing organizations and industry associations. In contrast, we address the significance of how policy practices affect translations between three categories of market practices. The question raised in the introduction is: How can government policy innovations, based on interaction between government and business, promote sustainable market exchange between actors involved in production and consumption? To answer this questions we suggest that the analytical framework presented and applied in the chapter can help to bridge the gap between policies aimed at climate mitigation and shaping of sustainable markets. By installing a public initiative that helps in motivating market actors to negotiate and congregate upon perceived market conditions and “policy barriers”, governmental efforts on say, interim targets of emissions reduction become aligned with business innovation efforts, compatible with a seemingly required form of “whole-of-government”. During this climate mitigation process towards increasing share of fossil-free market exchanges, by definition, innovation for sustainable production and consumption are required.

Appendix 1 See Table 5.2.

Table 5.2 13 roadmaps for fossil-free markets of Fossil Free Sweden (FFS) Production field

Process owner

Aggregates industry Airline industry Cement industry Concrete industry Construction industry Digitization consulting industry Forestry industry Haulage industry Heating industry Mining and mineral industry Retail industry Shipping industry Steel industry

Swedish Aggregates Industry association Swedish Air Transport Society Cementa (cement company) Swedish Concrete Association Skanska (construction company) Cybercom Group (company) Swedish Forest Industries Federation Sweden’s Road Transport Organization Profu (research company) Svemin Industry Association Swedish Food Retailers Federation Swedish Shipowners’ association Jernkontoret Steel Producers’ Association

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CHAPTER 6

Achieving Sustainable Production Through Creative Destruction: Reflections on a Multidisciplinary Project Max Jerneck

Introduction Moving to a sustainable production system would involve what Joseph Schumpeter called creative destruction. Clean technologies would have to be brought to the stage where they can dislodge fossil fuels and other unsustainable industries. Many of the energy technologies needed to create a low-carbon economy exist, but require significant innovation to overcome intermittency and to reduce material intensity. And for many industrial processes, such as steel, aluminum, cement, etc., sustainable production processes are still in their infancy. Sustained innovation is needed for a transition to occur. In this chapter, I reflect on how that might be achieved. The creative destruction of fossil fuels is a multidisciplinary project that requires insights from many social sciences, not to mention natural sciences and engineering (which I will not focus on here).

M. Jerneck (B) Stockholm School of Economics, Center for Sustainability Research, Stockholm, Sweden e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_6

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I explore some of the themes that it would involve. My point of departure is the framework developed by Grubb, Hourcade and Neuhoff in their book Planetary Economics: Energy, Climate Change and the Three Domains of Sustainable Development (2014). It deals with energy but is applicable to sustainable production more widely. Michael Grubb and his co-authors separate the task of moving to a sustainable economy into three domains. The first is concerned with the inefficient use of resources. Even when saving energy would be economically beneficial, consumers do not do it. They are content to hold their energy use at a level that they consider adequate, without spending too much time thinking about it. This problem can be addressed by introducing regulations and standards, and by nudging consumers towards behavioural change, as explored in other parts of this book. The second domain of sustainable development is concerned with pollution as an externality that is not priced in the market. The task of policy is to set such a price. Curbing climate change would involve a tax on carbon, or a cap and trade system where permits to pollute can be bought and sold. Such a policy has the advantage of simplicity: in one stroke, policy makers can induce the multitude of actors that make up the economy to reorient their behaviour as they see fit, without the need for political micromanagement. Economists have tried to calculate a price that would reflect “the social cost of carbon” although in practice the price is limited by political constraints. Changes in the first two domains can indirectly help reorient the economy towards sustainable production. Stricter regulations and a price on carbon could give an edge to low-carbon alternatives that are not yet commercially viable. Still, they would mainly induce consumers to switch within a range of options that already exist, rather than induce producers to develop entirely new technologies. Pricing carbon does not confront the inherent uncertainty of innovation. To bring technologies that are far from commercialization into the mainstream would require more than guarantees that fossil fuels will become more expensive; it would require guarantees that investments in specific unproven technologies will be rewarded. This is all the more important given the extraordinary capital intensity and long lifespans of the economy’s energy and industrial infrastructure. To fundamentally change the production system would require a third domain of sustainable development, the domain of evolutionary technological change.

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The second and third domains complement each other, attacking fossil fuels from two sides: one makes fossil fuels more expensive and the other makes alternatives cheaper. All three domains are needed, and must work in tandem for a transition to occur (although it is possible that there may be tradeoffs between them in some cases; a relentless focus on optimizing resource efficiency may preclude potentially valuable innovation opportunities, for example). Unlike the first two domains, the third domain of systemic change goes far beyond economics into other social sciences. That is what this chapter is about.

Aspects of Creative Destruction I will now turn to the different themes and disciplines that can help us understand the creative destruction of fossil fuels. My reflections represent a general overview of the topic, informed by my own research on innovation and the emergence of low-carbon industries (e.g., Jerneck, 2015). The chapter is divided along thematic and disciplinary lines. The divisions are somewhat arbitrary, with different topics blending into each other. (Whether this reflects the messiness of the topic or of my own thinking is for the reader to decide.) Each section represents vast literatures, of course. They are only meant to represent a tiny tip of the iceberg, to encourage further exploration and discussion. Evolutionary Economics The core of the third domain of sustainable development is evolutionary economics. More specifically, it is Schumpeter’s theory of creative destruction (Schumpeter, 1942; see also 1934 [1912], 1939). Its central tenet is that economic development is not a smooth process but a disruptive one, where dominant producers are suddenly destroyed by new and more innovative entrants. Incumbents can use their financial and political power to resist change for long periods of time, discouraging new entrants from challenging them; but once one entrepreneur manages to break through, it inspires a wave of imitators who together can quickly force the collapse of incumbents, destroying their capital. Whether entrepreneurs can break the status quo depends on whether they have access to credit to finance the initially unprofitable phase of innovation. The financial system thereby plays a crucial role, as elaborated in a section below. Incumbent firms can also try to remain innovative, if they have the right governance structures

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and competition forces them to—yet another topic that will be developed in another section. Innovation proceeds by combining existing capabilities in new ways. Understanding how industries are related, and how change happens through diversification into new fields is therefore an important topic (see for e.g., Hausmann et al., 2014). Evolutionary economics is the study of how economies develop over time, through the emergence and adaptation of new forms, much like the evolutionary development of species. The focus is on change, rather than a tendency towards equilibrium; the model is biology rather than physics. It is a social science, however, concerned with strategic action and reflexivity. Economic actors can anticipate their competitors’ moves and plan accordingly. The main actors in Schumpeter’s theory are entrepreneurs, firms and financiers. The state stays mainly in the background, to guarantee a basic legal and financial system. Later Schumpeterian scholars (e.g., Janeway, 2018; Mazzucato, 2013) have emphasized the role of the state as an entrepreneur. This role will be prominent when studying decarbonization, which is a politically determined goal. Finance The financial system plays a decisive role in creative destruction, as the place where investment decisions are made. To know how to steer finance towards green ends takes knowledge of how banks and other financial entities operate, and how they relate to both incumbent and challenger firms. It takes knowledge of financial regulations, and the various roles played by institutions such as venture capital and private equity, asset managers and investment banks. It also includes shadow banking, operating outside of what is traditionally understood as the financial system. Venture capital is often held up as a catalyst of radical innovation and disruption. At times venture capital has been enamoured with clean technology, such as before 2008; but after the crash, the mood shifted to pessimism (Gaddy, Sivaram, Jones, & Wayman, 2017). Capital intensity and competition from powerful incumbents, along with a lack of exit opportunities, deter investment. The problem may not lie within the venture capital sector itself, but in the wider financial ecosystem. There is a lack of patient capital—or adventurous capital is perhaps a better term— because financial regulations do not prohibit rent-seeking and short-term

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speculation on existing assets, which are much easier routes to making money than industrial development, let alone with unproven clean technologies. The process of financialization, when finance decouples from industry, is an impediment to the creative destruction of fossil fuels (e.g., Jerneck, 2017). Finance is mobilized on the basis of expectations about the future. These are particularly important for unknowable ventures such as innovation. Expectations form through social processes, making them potentially contagious and self-fulfiling. If investors expect coal to become unprofitable in the near future, investment in the coal industry will collapse suddenly, leaving coal assets “stranded,” without value. Similarly, if optimistic expectations are formed about a clean technology, a rush of investment may make it sustainable. (To read more about how expectations form and shape economic outcomes, see Beckert, 2016). The most important financial actor is the central bank, which sits at the top of the national financial system (or continental financial system in the case of the ECB). Central banks have historically been called upon to address what is considered the pressing problems of each age, whether it is unemployment, industrial development, war financing, or inflation (Bezemer, Ryan-Collins, van Lerven, & Zhang, 2018). They could serve the transition to a sustainable economy by engaging in credit guidance to steer credit away from dirty and towards clean industries. They also influence production indirectly through their purchase of financial assets, and the frameworks that determine eligible collateral for loans. Running industrial policy through the central bank is currently controversial, and would inevitably involve considerations of political economy. Political Economy Any analysis of how to replace fossil fuels would have to start in political economy. The transition to a sustainable economy is above all a political project, resisted by some of the most powerful interests on Earth. If left to itself, the direction of innovation will likely continue down the path of fossil fuel-intensive technology, and would certainly not produce a transition in the short time-frame climate scientists say is available. There are many difficult innovation and engineering challenges involved in moving to a different industrial system but the main constraints are political. Fossil fuel interests will obstruct the process, translating their vast economic power into political and ideological power, by financing political and

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public relations campaigns, university programmes, think tanks and so on. The mere fact that they create a lot of wealth and employ a lot of people gives them political attention and leverage. Much of society’s physical and legal infrastructure is designed to favour fossil fuels, contributing to the state of “carbon lock-in” (Unruh, 2000). Hypothetically, fossil fuels could be attacked directly, much like nuclear power has been in some countries. They could also be hit with a sky-high carbon price. But given how entrenched fossil fuels are in every sphere of the economy and the political system, a more plausible line of attack is through creative destruction, where alternatives are brought to a stage where switching becomes irresistible on economic grounds. Doing so will require political mobilization and alliance-building among actors who have more to gain than lose from a sustainability transition. It goes beyond social movements and political parties, to private enterprises, including those on the fence such as electric utilities. Institutional Analysis After gauging the strength of the various actors that may block or advance low-carbon development, it is useful to analyse the many formal and informal arrangements that shape relations between them. Institutional economics, economic sociology and various strands of political science are all concerned with this type of analysis (for one example, see Whitley, 2007). They focus on how arrangements between actors constrain and enable action, determining the direction industrial change may take. Institutional arrangements have an effect independently of the actors involved. They evolve path-dependently, and can therefore be difficult to change in the short run. Policies to advance low-carbon production would have to take them into consideration. Institutional arrangements include relations between industry and finance, and between producers in a supply chain. They can be arm’s length or long-term relational. They include corporate governance, shaping the type of investments corporations make and their time horizons. They also include relations between employers and employees, and whether or not they have a cooperative relationship in which workers may introduce incremental innovations on the shop floor. Radical innovation displaces workers, so may be difficult to implement where union power over the workplace is strong. On the other hand, unions may have job-training programmes and guaranteed employment making them less

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hostile to innovation. Union density may also be correlated with universal welfare states, making displacement less disruptive (see more under social policy). It all depends on the circumstances. A useful example of how institutions can shape innovation can be found in Murray and Schwartz’s (2019) book about how relations with unions shaped the different trajectories of the American and the Japanese auto industry, or Saxenian’s (1996) comparison of Silicon Valley and Route 128 in Massachusetts. Industrial Policy Policy-wise, the third domain of sustainable development is located at the opposite end of the spectrum from the second domain. Pricing externalities is about using a general tool; when promoting clean industries directly, tools need to be more specific. The main obstacle to creative destruction, beyond the political power of incumbents, is uncertainty. It can be alleviated only by guarantees that specific technologies are worth developing. This is especially true in capital intensive technologies that are in direct competition with incumbents, such as clean energy technologies (Bonvillian & Van Atta, 2011). The task of transitioning to a sustainable economy is often likened to a “moonshot.” To continue the comparison, putting a man on the moon was not achieved by setting a price on terrestrial travel, but by promoting the specific technologies needed for space travel. Industrial policy is the practice of choosing which industries should be promoted and which should be phased out. In the context of sustainability, the sectors to be promoted are alternatives to fossil fuels, such as renewable energy, energy storage, electric vehicles, new industrial processes and materials, etc. Strategic industrial policy has been employed with varying degrees of success throughout the world. The key to success is state capacity, and the state’s relations with the private sector. The state needs to be autonomous enough to avoid being captured by special interests, while having ties that are close enough to know what the private sector is doing and thinking (Evans, 1995). To develop clean industries, it is important to know where tradeoffs and complementarities lie. In some cases it might be necessary to make synchronized investments in different industries for any of them to get off the ground. For example, to boost production of electric vehicles it might be necessary to simultaneously invest in infrastructure to charge vehicles; advances in new battery technology; and mining for rare earth

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minerals. No single investment may make sense on its own, but together they can create the momentum for electric vehicles to replace the internal combustion engine. Sometimes a “big push” strategy may be needed, similar to an airplane needing a certain speed to take off (RosensteinRodan, 1943). This may require coordination across borders, for example within the EU. An important part of industrial policy is structuring incentives. Some sectors may be able to absorb large amounts of spending from a macroeconomic perspective (see below), but it is important to consider how the design of spending affects behaviour. Public spending can create principal–agent type problems of moral hazard, where the receiver can get away with wasting money. “Soft budget constraints” can dull the drive to innovate or reduce costs. On the other hand, some form of softness may be necessary for actors to take the plunge into uncertain innovative investments (Jerneck, 2020). Should spending be designed as tax credits, subsidies, loans or guaranteed procurement? And what sort of performance should be exacted in return? These are all important questions. Often, the most effective way to enforce discipline is by enforcing competition, as the section on market structure will emphasize. Macroeconomics Maximizing the speed of transition means fully using all the resources of the economy. It also means using them in ways that maximize the creation of new resources through innovation. This requires a bird’s eye view of the national economy, with all its available sources of human labour and skills, equipment and machinery, natural endowments, infrastructure, and intangible assets such as knowledge. Having a grasp of these is necessary for decarbonization, to know where competing resources are tied up and how they could be released to create fiscal space for spending on clean new industries. Switching to a sustainable economy will take an extraordinary amount of spending. It is needed both to advance new clean sectors and to decommission old dirty ones, and help their workers become productive in new sectors. The task of macroeconomic analysis is to find the right amount of spending that will maximize the speed of transition without causing intolerable inflation. Macroeconomic analysis can be used to calculate the output gap, that is, the space left until the economy runs at full capacity. It indicates how much spending the economy can absorb, although the

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amount, of course, depends on where it is aimed. A relevant estimate of the output gap would include not only unused resources such as idle plant and unemployed workers, but unfulfilled potential for innovation and economies of scale that normally materialize in response to increased demand. This is a difficult task, yet necessary, requiring detailed knowledge of the economy’s labour supply, factories, supply chains and so on. A rapid transition will create a “high-pressure economy,” where demand is stoked to the point of pushing against supply constraints. This is an unusual situation in capitalist economies, which are normally demand constrained. High-pressure economies normally arise only in wartime, or during certain “growth miracle” episodes (see the section on economic history below). Macroeconomic analysis will be needed to ascertain just how much steam can be added before the economy overheats, and how to apply the necessary breaks to stabilize and cool down the parts of the economy that are at risk. Running the economy hot to maximize creative destruction would create a highly volatile situation. It would be prone to “unbalanced growth,” where some sectors outgrow their upstream providers of inputs, causing bottlenecks (Hirschman, 1959). Trying to anticipate them in advance and figuring out ways to overcome them will be necessary. A macroeconomic perspective can be used to conduct a cost–benefit analysis of climate policy. For policies to promote innovation, however, the costs are difficult to calculate and the benefits are unknown. It is still a useful approach for the short run, where uncertainty is manageable. It is worth noting that the calculation of costs looks different on the macro level than it does for the individual actor on the micro level (hence the need for a distinctive discipline to avoid fallacies of composition). For the individual actor, cost–benefit analysis is done by calculating how far a certain amount of money can go towards reducing emissions. Finding projects that achieve the largest possible emissions reductions at the lowest cost—the most “bang for the buck”—is then the aim. At the macro level, costs are calculated differently. Picking and choosing which resources to activate through spending is not a relevant exercise because all resources in the economy are available for use, and if they are not used, or used ineffectively, they inflict an opportunity cost on society. A macro perspective must take into account all the economy’s diverse resources, and determine how they could be combined for greatest effect. It must

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consider their unique capabilities and whether or not they have alternative uses. Due to the division of labour, equipment and skills are often firm-specific, and cannot easily be switched to other ends (see the section on organization theory below). Sometimes there are tradeoffs between resources that could be used for various different purposes, and sometimes resources are designed for a specific purpose and would lie fallow if not activated through spending. Instead of “bang for the buck,” a more fitting slogan would be “use it or lose it.” Sometimes several resources must be activated at once to have any effect at all, and then create synergies and virtuous cycles of improvement. Another reason why the “bang for the buck” approach does not apply at the macro level is that there is no fixed budget constraint for the state (unless it uses a currency it doesn’t control, as in the Eurozone). The binding constraint is not a fixed sum of money but inflation. A micro-level cost–benefit analysis does not have to take into account the spending’s effect on inflation, but at the macro level it becomes imperative. Aiming spending at the most effective, least inflationary, targets will be important. The greater the capacity to check inflation, the faster the transition can occur. This means that a transition policy needs to be informed by an understanding of inflation, an elusive phenomenon with many causes that can be difficult to predict. It can be described as too much money chasing too few goods, resulting either from overspending or underproduction. The policy response can therefore be to reduce spending or to increase production, depending on the underlying cause. Spending can be reduced directly, by raising taxes, or by restricting credit to dirty or unproductive sectors, for example. One difficulty in predicting and controlling inflation is that the same amount of spending can have widely different effects on inflation depending on where it is aimed. If new purchasing power is created for scarce resources with inelastic supply, such as land, it is likely to cause prices to increase. If it is spent on increasing the production of some input that is in short supply and acts as a constraint on production, it can cause prices to decrease. When two economic activities depend on the same input, spending involves tradeoffs. In other areas, inputs are designed for specific activities and tradeoffs do not exist. In areas where the production of one input may allow increased production of another, there are synergies. This needs to be considered when comparing costs across different uses. Needless to say, any estimates of

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the inflation effect of spending will necessarily be rough, and will need to be updated continuously. There are also forms of “administrative inflation” caused by firms with market power (Means, 1959). In those cases the appropriate policy response could be legal sanctions or policies to promote competition. A high-pressure economy is also prone to wage inflation because it increases workers’ bargaining power. This can be ameliorated by corporatist arrangements to negotiate wage restraint and avoid wage-price spirals. Other sources of inflation include commodity shocks from world markets, which can be hard to avoid in the short run. Developing the domestic food and energy supply builds resilience against such shocks, and should be part of any transition plan anyway. To know where the inflation pressure points are, the macroeconomist must be informed by technical expertise, by engineers and industrial analysts. Knowing how much slack there is in the economy as a whole means knowing how much slack there is within firms, and their potential to achieve innovation and economies of scale. This brings us to organization theory. Organization Theory Edith Penrose (1959), in her analysis of the growth of the firm, argues that firms expand because they have unused resources (knowledge, equipment or personnel) that they want to put to use. The expansion process, in turn, creates new knowledge and unused resources, perpetuating the process. Through learning-by-doing, each firm generates a unique set of capabilities, forming the basis of their competitive advantage. Firms seek to expand from this base into adjacent areas, where their unused capabilities might be of use. Sometimes it succeeds and sometimes it fails, in the latter case forcing the firm to retreat into its own base of unique capabilities. That is what provides openings for entrepreneurs. Knowledge of this dynamic is needed to gauge where slack is available, and how spending could be directed to maximize innovation and entrepreneurship. Penrose’s theory fits with the economic sociology of Harrison White (e.g., 2002), whose conception of competition indicates that firms do everything to avoid price competition, seeking out unique niches to occupy instead. This reinforces the notion that cost–benefit analyses need to consider that resources with firm-specific uses cannot easily (or at all)

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be put to use elsewhere if they are not activated through spending. Capabilities that lie fallow may also leave suppliers upstream and downstream idle, with spare capacity, or innovation potential unfulfilled as a result. William Lazonick (e.g., 2010) builds on Penrose’s theory to construct his own “theory of the innovative enterprise.” It focuses on three social conditions for innovation in organizations: integration of workers and managers in the production process, to encourage them to introduce new ideas; long-term financial commitment; and strategic control over the enterprise by managers who are familiar with the innovation process. These conditions are determined by corporate governance, as well as wider institutional arrangements. Arthur Stinchcombe’s (1990) theory of how organizations are structured to seek out information and reduce uncertainty is also useful to understand the social learning process that enables incremental cost reductions and improvements in production. It highlights why achieving “routinized innovation” is so difficult (and indeed paradoxical) (cf. Schumpeter, 1942). Supply Chains Forging industrial change takes knowledge of how industries fit together. It is important to know how producers are connected to their inputs upstream as well as their markets downstream. One reason carbon lock-in is so strong is that the industries of the fossil fuel economy are tightly bound together. Internal combustion engines are produced through multiple suppliers of parts that would not be needed in an electric vehicle world. They are also reliant on the oil industry, and the infrastructure for provisioning petroleum. Clean technologies are often hindered from expanding because of gaps in both suppliers and downstream markets. It is important to consider the backward and forward linkages of industries. Electric vehicles, for example, are dependent on backward linkages to battery production, which in turn, is dependent on the supply of certain minerals, often of the rare earth variety. Studying how networks between suppliers emerge, reproduce, and why they sometimes fail is instructive (Schrank & Whitford, 2011). Supply chains cross national borders and often span the globe. This makes trade policy an unavoidable issue to advance low-carbon industries. Trade agreements may limit the policy space to promote certain industries, but there are usually exceptions for environmental protection,

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so in theory it should not be hard to argue the case for climate policy. As usual, it comes down to an issue of power and political economy.

Market Structure Competition is a powerful driver of innovation and industrial development. Having a suitably competitive market structure might compensate for the drawbacks of soft budget constraints, creating incentives to keep innovating to keep from falling behind competitors. It is important to find the right balance of competition for each industry. For industries considered natural monopolies, a single provider is the most optimal. This is arguably the case in industries such as nuclear power or railroads, where the scale and capital intensity is so large that it can be hard for more than one company to bear, and where duplication would be too wasteful. It is also the case when there are network effects: when profitability is dependent on a certain threshold of users. For industries where capital intensity is not a problem, a large number of competitors may be preferable. Having many actors involved would maximize experimentation, and increase the likelihood of producing innovative designs. Sometimes oligopoly may be the right balance between promoting dynamism and reducing risk and duplication (e.g., Yamawaki, 1988). The optimal level of competition depends on the type of industry. The task of social scientists and policy makers is to identify it, and work towards reaching it by either breaking companies apart or consolidating them. These matters require counterfactual reasoning; differences in opinion will of course be large. The “natural” form of competition for firms according to Harrison White (2002) is to avoid price competition and establish a separate niche, although in some cases, competition policy has forced firms to compete for market share in the same industries for unusually long periods of time, elevating dynamism (Miyazaki, 1967). For this market structure to last, it must be combined with other arrangements, assuring that firms do not go bankrupt too quickly. Economic History Although the task of causing the creative destruction of fossil fuels is unprecedented, there are lessons to draw from other episodes of rapid structural economic change. In particular, it is informative to study

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episodes when economic transformation has been a political goal, as is needed now. Many comparisons have been made with wartime mobilization, when the task has been to mobilize the full capacity of the economy towards a political goal (e.g., Wilson, 2016). Postwar reconstruction, and the economic development of “developmental states,” for example, in East Asia, is also a useful comparison. Some of the most prominent examples are Japan’s income and investment doubling plan of the 1960s, and South Korea’s mid-1970s heavy and chemical industrialization plan. The Japanese case is instructive about market structure. As the previous section hinted at, firms were made to compete fiercely in the same industries, while enjoying protections from bankruptcy; this made ever increasing industrial investment both attractive and necessary to stay in the game (Miyazaki, 1967). Postwar France is also an interesting case of how policy makers conducted strategic industrial policy while controlling inflation (Monnet, 2019). As always with history, it is important to contextualize the past, and know how it differs from our time. History can be a guide that shows what has worked in the past, but policy tools are not necessarily transferable to the present. Social Policy As the term implies, creative destruction will wreak havoc on sunset industries and the jobs associated with them. That is one reason why it is often vehemently resisted. To soften the blow, it is necessary to provide a safety net to those who are made unemployed. Job retraining programmes can help workers transition from dirty to clean industries. Some might be too old to retrain and might be better served by early retirement. In some cases, welfare benefits and healthcare may be tied to a specific employer, making it important to have universal welfare programmes to ease the transition. The social dimension of creative destruction means that social policy considerations must be taken into account, not only to cushion the blow of creative destruction but to make it politically palatable in the first place. That is why proposals for a Green New Deal in the United States include social provisions that at first seem far removed from climate policy—such as universal healthcare, for example.

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Conclusion As I have outlined in this chapter, the creative destruction of fossil fuels is a rich and wide-ranging topic. Its complexity means that no researcher can hope to have more than a passing knowledge of all the themes involved. One the other hand, this makes it an opportunity for interesting interdisciplinary cooperation among social scientists, as well as policy makers and practitioners.

References Beckert, J. (2016). Imagined futures: Fictional expectations and capitalist dynamics. Cambridge, MA: Harvard University Press. Bezemer, D., Ryan-Collins, J., van Lerven, F., & Zhang, L. (2018). Credit where it’s due: A historical, theoretical and empirical review (Working Paper Series (IIPP WP 2018–11)). London: UCL Institute for Innovation and Public Purpose. Bonvillian, W. B., & Van Atta, R. (2011). ARPA-E and DARPA: Applying the DARPA model to energy innovation. The Journal of Technology Transfer, 36(5), 469. Evans, P. B. (1995). Embedded autonomy: States and industrial transformation. Princeton, NJ: Princeton University Press. Gaddy, B. E., Sivaram, V., Jones, T. B., & Wayman, L. (2017). Venture capital and cleantech: The wrong model for energy innovation. Energy Policy, 102, 385395. Grubb, M., Hourcade, J. C., & Neuhoff, K. (2014). Planetary economics: Energy, climate and the three domains of sustainable development. Oxford: Routledge. Hausmann, R., Hidalgo, C. A., Bustos, S., Coscia, M., Simoes, A., & Yildirim, M. A. (2014). The atlas of economic complexity: Mapping paths to prosperity. Boston, MA: MIT Press. Hirschman, A. O. (1959). The strategy of economic development. New Haven, CT: Yale University Press. Janeway, W. H. (2018). Doing capitalism in the innovation economy: Reconfiguring the three-player game between markets, speculators and the state. Cambridge: Cambridge University Press. Jerneck, M. (2015). Sunrise of an industry: Solar energy under financial and industrial capitalism in the U.S. and Japan, 1973–2005. Lund: Lund University Press. Jerneck, M. (2017). Financialization impedes climate change mitigation: Evidence from the early American solar industry. Science Advances, 3(3), e1601861. Jerneck, M. (2020). When soft budget constraints promote innovation: Kornai meets Schumpeter in Japan. Industrial and Corporate Change.

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Lazonick, W. (2010). The Chandlerian corporation and the theory of innovative enterprise. Industrial and Corporate Change, 19(2), 317–349. Mazzucato, M. (2013). The entrepreneurial state: Debunking public vs. private sector myths. London: Anthem Press. Means, G. C. (1959). Administrative inflation and public policy. Washington, DC: Anderson Kramer Associates. Miyazaki, Y. (1967). Rapid economic growth in post-war Japan—with special references to “excessive competition” and the formation of “keiretsu”. The Developing Economies, 5(2), 329–350. Monnet, E. (2019). Controlling credit: Central banking and the planned economy in postwar France, 1948–1973. Cambridge: Cambridge University Press. Murray, J., & Schwartz, M. (2019). Wrecked: How the American automobile industry destroyed its capacity to compete. New York, NY: Russell Sage Foundation. Rosenstein-Rodan, P. N. (1943). Problems of industrialisation of eastern and south-eastern Europe. The Economic Journal, 53(210/211), 202–211. Penrose, E. (1959). The theory of the growth of the firm. Oxford: Oxford University Press. Saxenian, A. (1996). Regional advantage: Culture and competition in the Silicon Valley and route 128. Cambridge, MA: Harvard University Press. Schumpeter, J. A. (1934 [1912]). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Cambridge, MA: Harvard University Press. Schumpeter, J. A. (1939). Business cycles. New York, NY: McGraw-Hill. Schumpeter, J. A. (1942). Socialism, capitalism and democracy. New York, NY: Harper and Brothers. Schrank, A., & Whitford, J. (2011). The anatomy of network failure. Sociological Theory, 29(3), 151–177. Stinchcombe, A. L. (1990). Information and organizations. Berkeley, CA: University of California Press. Unruh, G. C. (2000). Understanding carbon lock-in. Energy Policy, 28(12), 817– 830. Van Lerven, F., & Ryan-Collins, J. (2017). Central banks, climate change and the transition to a low carbon economy: A guide. New Economics Foundation Report. White, H. C. (2002). Markets from networks: Socioeconomic models of production. Princeton, NJ: Princeton University Press. Whitley, R. (2007). Business systems and organizational capabilities: The institutional structuring of competitive competences. Oxford: Oxford University Press. Wilson, M. R. (2016). Destructive creation: American business and the winning of World War II . Philadelphia, PA: University of Pennsylvania Press.

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Yamawaki, H. (1988). The Steel Industry. In R. Komiya, M. Okuno, & K. Suzumura (Eds.), Industrial policy of Japan (pp. 281–302). London: Academic Press.

CHAPTER 7

Motivations for Investment in Sustainable Consumption and Production Joakim Sandberg and Emma Sjöström

The Role of the Financial System in Production and Consumption The financial system plays a vital role in enabling production and consumption. It could also have a big role to play in promoting sustainable activities in this regard, as per SDG 12. In broad terms, the financial system serves at least three purposes: First, it enables the transfer of payments in an efficient and secure manner. This is essential for all economic activity, including production and consumption. In fact, one could say that finance provides the infrastructure that allows producers and consumers to meet and make deals in an efficient and secure manner. Second, by transforming savings into lending, the financial system can support corporate efforts to invest in new solutions and to grow their production; and it can help citizens to finance a new home or other major

J. Sandberg (B) University of Gothenburg, Gothenburg, Sweden e-mail: [email protected] E. Sjöström Misum, Stockholm School of Economics, Stockholm, Sweden © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_7

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purchases. Debt instruments such as bonds and mortgages are developed for this purpose. The debt market is where interest rates are determined, which performs an important function for economic activity in that it impacts consumer spending and corporate investment, both on a macro and micro level. Third, the financial system fills an important function in redistributing financial risk, for example, between actors and between different time horizons. Insurance companies play a key role here, as do a range of insurance-like securities. While citizens can insure themselves against theft or fire, corporations can insure themselves against price fluctuations, for example in commodities such as wheat or rice or metals, in exchange rates, or against property losses due to unexpected events. As we were alerted to during the financial crisis of 2007–2008 and several times before that, the malfunctioning of the financial system can have dire consequences for production and consumption, as well as for people’s lives and livelihoods. In the financial crisis, many people lost their homes and their jobs. Strong manufacturing declines were reported, particularly in export-oriented economies (The Economist, 2009). Shipping volumes decreased dramatically in the wake of the crisis, as exporters had difficulty obtaining letters of credit (Financial Times, 2008). So, how can we make sure that the financial system plays a more constructive and sustainable role in the future? This chapter analyzes an interesting subset of the financial market—so-called sustainable investment—that seeks to integrate concerns about sustainable development and various aspects of the SDGs into its financial decision making. Our main concern is with understanding the motivations—financial versus moral—of key actors in this field. While sustainable investment is already changing the landscape of financial markets, we will show that it is markedly heterogeneous and builds on at least two “institutional logics” that point in rather different directions. In order to become a stronger force for sustainability, then, we will argue that the field needs to address the background issue of motivation.

Increased Focus on Sustainability in the Financial Sector The financial sector is, for at least a few decades now, increasingly incorporating “non-financial” issues such as the natural environment and social justice into financial analysis and decision making, as well as

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in the product offerings to institutional and retail clients. According to surveys, 48.8 per cent of total European assets under management are now invested with a sustainability orientation, and in Australia and New Zealand the proportion is even higher: 63.2 per cent (Global Sustainable Investment Alliance, 2019). Sustainable investment may, for example, be conducted by equity or bond investors who choose to avoid certain sectors and companies based on substandard sustainability performance. Investors may also actively choose to invest in companies that meet certain sustainability criteria that are deemed important for generating future cash flows. Many investors are also spending considerable resources in engaging with corporations on sustainability issues. It could be incidentbased, where investors are asking corporations to mitigate the effects of an accident or similar. Or it may be proactive, where investors are for example asking companies to advance their work on mitigating climate change or positioning themselves better for helping to achieve the SDGs. The number of signatories to the UN-backed initiative “Principles for Responsible Investment” has grown rapidly and continuously since its inception in 2006. By signing the six principles, investors commit themselves to integrating social and environmental aspects into their financial decision making. As of early 2020, it has nearly 3000 signatories, including some of the world’s largest pensions funds, and asset managers with trillions of dollars under management such as BlackRock, UBS, and Vanguard. Another sign of growing interest for sustainability in the financial markets is the emergence of new types of sustainability-oriented products that are geared towards supplying municipalities, corporations, and others with “green” funding. Most notably, the market for green bonds has grown rapidly since the first such bond was issued in 2007. Green bonds are earmarking the use of proceeds to environmental projects, for example related to transportation, energy, or waste management. Other types of labelled bonds are social bonds, blue bonds that are focused on water, and transitions bonds. New venture capitalists have emerged who focus solely on funding sustainability-driven innovation and private equity firms that specialize in business models that support sustainable production and consumption (see for example Serafeim & Freiberg, 2017).

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Investor Motivations As we have outlined here, it is key to understand the role of investors when discussing sustainable production and consumption. In this chapter we will explore one specific aspect, namely, the motivation of investors to engage in sustainability. Whereas the public message about sustainability from institutional investors is often framed in financial terms, where it is primarily a way for equity investors to generate long-term shareholder value, some investors may also be motivated by “doing good”, and by an urge to contribute to a sustainable future. These two rationales build on different logics and may produce different strategies and outcomes. Most importantly, the two rationales may have different implications on the financing of sustainable production and consumption, as well as on whether the investor is a proactive rather than reactive agent in the sustainability ecosystem. In order to further analyze the two rationales, we draw on the institutional theory of sociology and especially the concept of institutional logics. Institutional theory emphasizes how behaviour in both business and civil society tends to be regulated and given meaning by certain social institutions, or patterns of thought and behaviour. Scott (2001: 48) defines institutions as “social structures that have attained a high degree of resilience […] composed of cultural-cognitive, normative, and regulative elements that, together with associated activities and resources, provide stability and meaning to social life”. Similarly, Thornton and Ocasio (2008: 101) define institutional logics as “the socially constructed, historical patterns of material practices, assumptions, values, beliefs, and rules by which individuals produce and reproduce their material subsistence, organize time and space, and provide meaning to their social reality”. The rise and relevance of institutional logics in our lives is really quite intuitive. It may start with an entirely rational process, namely that we organize our thoughts and behaviour around certain central goals. For example, if we want to be moral beings that cater to the well-being of others, we choose attitudes and behaviour that we believe will help us in this endeavour. This may include the attitudes of generosity, beneficence, and self-sacrifice. The second step is that our thoughts and behaviour give rise to, or become attached to or embedded in, various social practices and expectations. For example, our sense of morality comes to influence or adjust to the practices and expectations of our friends and community. This is of course a central idea in all social science, namely, that a key

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to understanding ourselves is to study the development of various social patterns of thought and behaviour. The present chapter follows a more distinct strand of sociological research. Inspired by the work of Pierre Bourdieu (1990), recent empirical research has sought to analyze situations with multiple or competing institutional logics. Such situations are characterized by more diverse or dynamic social practices, or they can be examples of outright conflict or upheaval, and people have complementary or competing views on which thoughts and behaviour are appropriate. By analyzing such situations, institutional researchers can provide new insight into the variation and dynamics of social practices (Sjöström, 2009). We will now dive deeper into what we perceive as the two institutional logics of sustainable investment, namely those of doing well (in the financial sense) and doing good (in the moral sense).

The Financial Logic of Sustainable Investment Most investment activity is of course motivated by some form of financial concern; that is, an interest in economic returns or profits. With regard to sustainable investment, an important motivation of many investors is the idea that integrating sustainability factors could be a tool for enhancing returns. This idea is sometimes formulated in terms of the “materiality” of sustainability: Material issues are those that “can have the greatest impact on the firm’s ability to create shareholder value” (Eccles & Serafeim, 2013). The goal of sustainable investors is then to identify and pursue those corporate sustainability efforts that are material or financially relevant. For example, the initiative named Sustainability Accounting Standards Board (SASB) is developed to help investors do this: “SASB connects businesses and investors on the financial impacts of sustainability” (SASB, n.d.). Investors but also policy makers are quite concerned with understanding the financial consequences of sustainability. The concept of stranded assets is a good example (Ansar, Caldecott, & Tilbury, 2013): Unanticipated or premature write-downs or devaluations could be necessitated, for example, if future climate regulation makes it impossible to use oil reserves that have already been priced in, or if extreme weather events force cotton-dependent companies without access to large enough volumes of alternative fibres out of business. Such scenarios are taken into

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account by investors, not for moral reasons, but for financial reasons, and can guide their investment decisions. We can gain further understanding of the financial logic by consulting treatments of sustainable investment in the economic and financial literature. The primary focus here has been on understanding and evaluating the ‘business case’ for, or financial viability of, such investments. Is there indeed a connection between the sustainability performance and the profitability of various companies or the performance of investment portfolios, and, if so, what could explain that connection? It seems safe to say that the main hypothesis in this literature concerns the topicality of issues concerning sustainable development. For example, in his book The SRI Advantage, Camejo (2002: 4–5) writes: “To put it simply, [socially responsible investment] SRI reveals a link between existing mass social trends and the financial performance of corporations”. More specifically, sustainable investment is thought to avoid the risks associated with being unpopular among consumers and regulators. But it is added that the strength of the link may depend on several factors, such as whether public opinion is settled or divided on a certain issue (51), whether there are appropriate “avenues for popular pressure to exert itself” (49), and whether corporate managers have enough skills to understand the trend (47–48). More generally, “the different issues affecting alpha [will] most likely change depending on events” (50). Sustainable investment is thus thought to bring alpha, that is, returns that exceed market returns. Calvello (2010: 169) defines environmental alpha as “the return derived from the deliberate application of manager skill to assets whose values are determined primarily by climate changerelated factors”. He argues that such alpha is likely to be potent “for decades” as the world continues to struggle with the great challenges of sustainability. However, just like other forms of alpha, the financial opportunities in question are likely to be “scarce, transitory, and capacity constrained” (ibid.). The accounting firm KPMG analyzed a large number of strategic reports on climate change issues from the financial sector in order to get a better understanding of how the industry works with such issues on a daily basis (KPMG, 2008). The resulting review highlights four main risks that are associated with climate change: regulatory risk (from future regulation or taxation), physical risk (from the physical effects of climate change), risk to reputation (from consumers’ and employees’ attitudes) and risk of litigation (from a combination of the above).

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But is there actual empirical evidence that confirms any of the hypotheses above? A large number of scholars have been interested in the connection between sustainability and financial performance over the years. In what is probably the most ambitious meta-study to date, Friede, Busch, and Bassen (2015) seek to aggregate the results from more than 2000 empirical studies. The review indicates that almost half of the studies (48.2%) have found a positive correlation between corporate social and financial performance respectively, and only a tenth (10.7%) a negative one. However, a good deal of studies also come out neutral (23.0%) or with mixed findings (18.0%). Studies on the portfolio level tend to give less impressive results, with nearly three quarters coming out as neutral or mixed, and only 15 per cent with positive correlation. This indicates that even when sustainability factors are material to the underlying companies, investors may not be successful in exploiting their financial potential. In order to compare the financial logic of sustainable investment with the moral logic that we will describe later, we wish to highlight three important analytical dimensions. First, it should be noted that the financial logic has a theoretical or mind-to-world direction of fit. The concept of “direction of fit” comes from philosophy and is paradigmatically taken to explain the difference between beliefs and desires (Anscombe, 1963; Humberstone, 1992). Beliefs are satisfied when they fit the world, that is, when they are true, and so they have a mind-to-world fit; whereas desires are satisfied when the world fits them, that is, when they are met, and so they have a world-to-mind fit. The first direction of fit is also called theoretical, whereas the latter is called practical. The financial logic has a theoretical or mind-to-world direction of fit, which means that investors should seek to mimic how the business world actually works rather than try to change it according to their own morals. This is so since, after all, what determines the financial success of a sustainable investment strategy is how well it forecasts the future behaviour of the market. We realize that the practice of betting on a specific future outcome may seem like it involves some degree of desire; that is, of wanting that the future pans out in a certain way. However, given that the investor cannot control or influence the future behaviour of the market, a prudent investor should not engage in wishful thinking in this regard. That is, he or she should base their bets on beliefs rather than desires— more specifically, on beliefs based on the best available evidence on the future trajectory of the market. In this sense, then, the financial logic has a mind-to-world rather than a world-to-mind direction of fit.

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Second, we would characterize the financial logic of sustainable investment as promoting a reactive rather than proactive stance on the part of the investor, for similar reasons. What we mean by reactive is that the investor’s decisions are preceded by—or are a reaction to—other people’s activities, as opposed to proactive decisions that are not preceded by such concerns. As we have seen, sustainable investment will only be a good bet if it seems likely that either consumers, employees, regulators or companies themselves will put a high value on sustainability in the future. But what this means is that, in one sense, one could view sustainable investors as trying to piggyback on the moral behaviour of other actors. While their investment decisions may be accompanied by desires and values, the financial logic requires a mind-to-world fit with some appropriate trend in society—that is that either consumers or regulators put a value on sustainability—in order for the investor to reap the relevant rewards. Third, the financial logic requires a case-by-case or hypothetical stance with regards to particular sustainability issues. What we mean by hypothetical is that one’s engagement on a certain issue depends on the specific features of the issue, as opposed to categorical which is more universal. As we have seen, the financial logic challenges investors to identify and pursue the corporate sustainability efforts that are material or financially relevant. In order to find the best opportunities for positive returns, investors will need to evaluate and make decisions based on their best knowledge and estimates of each individual firm and case. This is further corroborated by the empirical evidence, which suggests a mildly positive but highly contingent correlation between the sustainability and financial performance of firms.

The Moral Logic of Sustainable Investment While financial concerns often take centre stage, many sustainable investors are at least partly motivated by “doing good”, or by an urge to contribute to a sustainable future, as well. This motivation may be stronger among individual investors than among professional financiers. There are several studies indicating that individual investors often are ready to sacrifice financial returns for some form of ethical pay-off, although there is considerable variation in the strength and size of this financial sacrifice (Barreda-Tarrazona, Matallin-Sáez, & Balaguer-Franch, 2011; Mackenzie & Lewis, 1999; Nilsson, 2009). Moreover, a strong

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moral motivation can also be found among churches and other faithbased organizations that have played a prominent part in the development of sustainable investment (Kreander, McPhail, & Molyneaux, 2004). So how should we understand the moral logic of sustainable investment? Judging from recent philosophical and psychological literature on the topic, there are actually two logics or ‘perspectives’ at play here, which we can call the integrity perspective and the impact perspective (Cowton & Sandberg, 2012; Sandberg & Nilsson, 2015; Sandberg & Rönnegard, 2020). We will briefly describe these two perspectives in what follows, before noting features that they have in common. The integrity perspective, as the name suggests, is primarily concerned with the moral integrity (or perhaps purity) of the investing individual or organization. At the heart of this perspective is the seemingly simple idea that it seems immoral or unsustainable to invest in or profit from companies which are engaged in immoral or unsustainable activities. That is, the immorality of the underlying companies can be said to also ‘taint’ their investors. This is so since, to many observers, investing in a company seems to indicate some form of support for or acceptance of its activities (Larmer, 1997). The preferred remedy is to use negative screening or divestment in an attempt to cleanse an investment portfolio of companies with undesirable features. The integrity perspective is highlighted by some sustainable investment funds, that use slogans such as “Investing with an easy mind” or “Invest for success with a clear conscience” (Sandberg, 2007). More importantly, it is popular in the media coverage of sustainable investment. For example, the British Medical Association was criticized a number of years ago because it held shares in tobacco corporations, despite its anti-smoking advocacy. It seems that the black-and-white nature of the integrity perspective is suitable to media logic. Another example is students who have engaged in fossil fuel divestment campaigns based on the argument that their university should not profit from activity that harms the planet. The impact perspective, on the other hand, is primarily concerned with the consequences of investment decisions on the underlying companies and their stakeholders. A more popular formulation of this is that investors should “make a difference” or have an “impact” on some relevant aspect of sustainable development. This impact will tend to be indirect; that is, investors are mainly expected to persuade companies to

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perform better on social and environmental dimensions. Their tools for change could be the same strategies as above, such as negative screening and divestment, but then rather founded on the premise that divestment can decrease access to capital or that it can generate stigma or a norm shift that in the end will pressure companies to cease their unsustainable business (cf. Green, 2018; Shiefeling & Hoffman, 2019). Many commentators however believe that positive screening or corporate engagement are likely to be more effective strategies for influencing corporate conduct (RBC, 2019). Corporate engagement is by and large designed to be a tool for influence: investors meet with companies to ask for change (they may even develop key performance indicators for such processes) or file shareholder resolutions at annual meetings asking for specific measures to be taken by corporate management or boards. The impact perspective is also highlighted by sustainable investment funds. Slogans such as “Investing with a purpose” and “Making money and making a difference” are used to signal that the investor can also be an agent of change. Our interest here is not so much in the specifics of these two perspectives, but rather in the moral logic that they have in common. In order to compare the moral logic of sustainable investment with the financial logic noted above, let us return to our three analytical dimensions. First, the moral logic of sustainable investment has a practical or world-to-mind direction of fit, as opposed to the theoretical or mind-to-world direction of the financial logic. This means that the moral logic is satisfied when the world is made to fit the investor’s morality, and not the other way around. This is perhaps easiest to see with the impact perspective, where the whole point is to change the world according to a moral vision of sustainability, rather than to embrace the contemporary world as a moral vision. But it is also true for the integrity perspective. To see this, consider someone who is opposed to war but holds shares in an armaments company. The right thing for this person to do is to sell the shares for the sake of his or her values, not to change his or her values for the sake of the shares and their profit (Sandberg, 2007). Second, an upshot of the feature above is that the moral logic requires a proactive stance on the part of sustainable investors, as opposed to the reactive stance of the financial logic. This means that sustainable investors are expected to take action irrespective of other people’s activities, such as the activities of consumers or regulators. In practice, sustainable investors

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will likely need to screen and monitor all of their current and potential investments for possible ethical problems or improvements. This is especially true on the impact perspective, where there is a broad range of possible actions on the part of the investor that, depending on the situation, can be used to influence companies to become more sustainable. Third, the moral logic seems to require investors to take a categorical stance on moral issues in the business sector, as opposed to the hypothetical stance of the financial logic. This means that they cannot judge investments or companies on a case-by-case basis, but instead need to adopt a more general or principled attitude. This is especially true on the integrity perspective, which we said above is often associated with a blackand-white view of good and bad companies. But it may also be true for the impact perspective, since the effectiveness of impact activities is likely to depend on the perceived strength and consistency of the investor’s moral motivation.

Discussion: The Relevance of Investor Motivations for Sustainable Production and Consumption Our research in this chapter has indicated that sustainable investment rests on two main motivations, namely those of doing well (in the financial sense) and doing good (in the moral sense). However, when investigating these institutional logics, we have found that they actually point in two quite different directions. On the one hand, the financial logic has a theoretical or mind-to-world direction of fit, and it requires investors to adopt a reactive and hypothetical stance towards sustainability issues. On the other hand, the moral logic has a practical or world-to-mind direction of fit, and it requires investors to adopt a proactive and categorical stance to sustainability issues. As we noted above, whichever logic comes to dominate the field will have implications for the role that investors can and will play in the sustainability ecosystem, and more specifically for the transition to sustainable production and consumption. We do not take a normative stand here, but simply wish to raise awareness about the issues. For instance, while the financial logic seems to dominate in the current market, some might argue that there is a need for a stronger emphasis on the moral logic in the future (Sandberg, 2018). An agenda for increasing the share of sustainable production and consumption in the economy might require

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investors who have a proactive rather than a reactive approach in order to supply large sums of capital in the direction of the SDGs. On the other hand, critics may argue that such a proactive stance goes beyond the mandate of investment firms, especially their so-called fiduciary duty to cater to the interests of their clients (Hawley, Hoepner, Johnson, Sandberg, & Waitzer, 2014). Unfortunately, the link between investor logics and their relation to sustainability is largely missing in contemporary research on sustainable investment. We will therefore close by posing a few broad questions as suggestions for future research, which we hope can help us understand how financial markets can provide better support for sustainable production and consumption in the future. First, there is considerable empirical work to be done in the field, to establish what the main motivations of investors are and which logics they build on. Interestingly enough, research has shown that a considerable amount of investor resources is spent on advancing immaterial environmental and social issues through shareholder activism (Schopohl, 2017). This would suggest either that shareholder engagement in this domain is largely driven by motives other than a quest for shareholder value maximization, or that even financially motivated investors are not carrying out adequate analysis of what best serves their purposes. When researching motivations, it would be relevant to understand whether a classification of different investors can be made on these grounds, and which factors determine those motivations—for example, national culture, corporate values, individual values, social trends, peer pressure, or something else. Second, there are also normative questions to explore: For example, which institutional logic would best serve the achievement of the SDGs, or SDG 12 in particular? Do investors have an obligation to their clients to follow a strictly financial logic of investment, or can they also follow a moral logic as described above? Could it perhaps be the case that investors have an obligation to society to follow a moral logic—and, if so, of what form? These questions are of course linked to the more general discussion about the purpose of the firm. If the only purpose of commercial companies is to maximize shareholder value, then it may seem at odds that shareholders have an obligation to engage with them on sustainability issues (unless of course shareholders are convinced that this will help them maximize shareholder value). However, if companies also have broader

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non-financial obligations of a social or environmental kind, which sometimes are formulated as obligations to a broader group of stakeholders, then similar obligations on the part of investors seem less strange. Finally, there are also political or legal questions that are highly relevant here: Which is the best way for regulators to improve the concern for sustainability issues in the financial sector, and which sort of institutional logic should it build on? More specifically, should regulators provide financial incentives for sustainable investment practices, or should they instead strengthen the possibility for moral decision making among financial executives?

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Hawley, J., Hoepner, A., Johnson, K., Sandberg, J., & Waitzer, E. (Eds.). (2014). Cambridge handbook of institutional investment and fiduciary duty. New York: Cambridge University Press. Humberstone, I. L. (1992). Direction of fit. Mind, 101(401), 59–83. KPMG International. (2008). Climate changes your business: KPMG’s review of the business risks and economic impacts at sector level. Available online at: http://www.climatebiz.com/sites/default/files/document/Climat echang_riskreport.pdf. Kreander, N., McPhail, K., & Molyneaux, D. (2004). God’s fund managers: A critical study of stock market investment practices of the Church of England and UK Methodists. Accounting, Auditing & Accountability Journal, 17 (3): 408–441. Larmer, R. (1997). The ethics of investing: A reply to William Irvine. Journal of Business Ethics, 16, 397–400. Mackenzie, C., & Lewis, A. (1999). Morals and markets: The case of ethical investing. Business Ethics Quarterly, 9(3), 439–452. Nilsson, J. (2009). Segmenting socially responsible mutual fund investors: The influence of financial return and social responsibility. International Journal of Bank Marketing, 27 (1), 5–31. RBC. (2019). Evolving landscape: 2019 responsible investment survey: Executive summary. Retrieved from https://global.rbcgam.com/sitefiles/live/docume nts/pdf/rbc-gam-responsible-investing-survey-executive-summary-2019.pdf. Sandberg, J. (2007). Should I invest with my conscience? Business Ethics: A European Review, 16(1), 71–86. Sandberg, J. (2018). Toward a theory of sustainable finance. In T. Walker, S. Kibsey, & R. Crichton (Eds.), Designing a sustainable financial system: Development goals and socio-ecological responsibility (pp. 329–346). Basingstoke: Palgrave Macmillan. Sandberg, J., & Nilsson, J. (2015). Do ethical investors want purity or effectiveness? An exploratory study on the ethical preferences of mutual fund investors. Journal of Financial Services Marketing, 20(1), 34–45. Sandberg, J., & Rönnegard, D. (2020). Sustainable investment. In W. Leal Filho (Ed.), Encyclopedia of the UN sustainable development goals: Decent work and economic growth. Cham: Springer. SASB. (n.d.). Retrieved from https://www.sasb.org/. Schopohl, L. (2017, August 24). The materiality of environmental and social shareholder activism—Who cares? Available at SSRN: https://ssrn.com/abs tract=2991544 or http://dx.doi.org/10.2139/ssrn.2991544. Scott, W. R. (2001). Institutions and organizations. Thousand Oaks, CA: Sage. Serafeim, G., & Freiberg, D. (2017). Summa equity: Building purpose-driven organizations. Case study. Harvard Business School.

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Shiefeling, T., & Hoffman, A. J. (2019). Bill McKibben’s influence on US climate change discourse: Shifting field-level debates through radical flank effects. Organization & Environment, 32(3), 213–233. Sjöström, E. (2009). Shareholder influence on corporate social responsibility. Ph.D. thesis, Economic Research Institute (EFI), Stockholm School of Economics, Stockholm. The Economist. (2009, February 19). The collapse of manufacturing. Retrieved from https://www.economist.com/leaders/2009/02/19/the-col lapse-of-manufacturing. Thornton, P. H., & Ocasio, W. (2008). Institutional logics. In R. Greenwood, C. Oliver, K. Sahlin, & R. Suddaby (Eds.), Handbook of organizational institutionalism (pp. 99–129). Thousand Oaks, CA: Sage.

CHAPTER 8

Climate-Friendly Default Rules Cass R. Sunstein and Lucia A. Reisch

Beyond Mandates and Incentives Increasingly, both citizens and policymakers are placing high hopes on demand-side policies, both behavioral and conventional, to help mitigate climate change (Creutzig et al., 2018, forthcoming). Greenhouse gas emissions are driven, in large part, by individual behavior, produced by some mixture of perceived benefits, perceived costs, and perceived social norms (Ross et al., 2016). Changes in such behavior, produced by new norms and different kinds of choice architecture, could produce substantial emissions reductions. To be sure, those changes are most unlikely to do everything that must be done. But if a ton of carbon emissions is valued at an appropriate level—say, around $35, as the United States now believes or around e30, as Germany is now discussing—then even seemingly modest steps could easily produce monetized benefits in the

C. R. Sunstein Harvard University, Cambridge, MA, USA e-mail: [email protected] C. R. Sunstein · L. A. Reisch (B) Department of Management, Society and Communication, Copenhagen Business School, Frederiksberg, Denmark e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_8

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hundreds of millions, or even billions, of dollars (or euros). And if any nation is adopting some kind of “Clean Power Plan,” designed to reduce greenhouse gas emissions, a serious question remains: How will such a plan achieve its goals? At least part of the answer lies in uses of behavioral science, including behavioral economics—our main topic here. For orientation, suppose that in a relevant community, there are two sources of energy, denominated “green” and “gray.” Suppose that consistent with its name, “green” is better than “gray” on climate change grounds. Those who use green energy emit lower levels of greenhouse gases and of conventional pollutants. Suppose that those who use gray energy save money. Which will consumers choose? The obvious response is that the answer will depend on the magnitude of the relevant differences. Suppose that green energy is far better than gray in terms of climate change and that gray energy costs only very slightly less. If so, consumers will be more likely to choose green energy than if it is only slightly better on environmental grounds and if it costs far more. Individual preferences certainly matter. Across a reasonable range of imaginable differences in magnitudes, we would expect to see a great deal of heterogeneity across people, nations, and cultures. Some people do not much care about greenhouse gas emissions, and the monetary figures will drive their choices. For other people, reducing such emission is important, and such people may be willing to pay a great deal to make the environmentally preferred choice. On standard assumptions, people’s decisions will depend on the relationship between economic incentives and underlying preferences. The standard assumptions are not exactly wrong, but as behavioral economists have shown, they disregard important variables that do not involve strictly economic incentives (Shafir, 2013). Some kind of choice architecture lies behind people’s decisions, and that architecture may have large effects on what people choose (Thaler & Sunstein, 2008). One question involves prevailing social norms (Allcott, 2011; Allcott & Rogers, 2014). What choices are other people making, and why? If choosers know that most other choosers are selecting green energy, there will be an increase in the likelihood that they will themselves choose green energy (Allcott, 2011: 1082). If, by contrast, environmentalists lament the fact that few people are choosing green energy, the result might well be to aggravate the very problem that environmentalists are seeking to solve, by drawing attention to, and thus reinforcing, a social norm that they hope to change (Cialdini et al., 2006). And if there is a widespread belief that

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reasonable and good people select climate-friendly products, that norm will exert pressure in favor of green energy (Cialdini et al., 2006: 12; Horne & Kennedy, 2017). Social norms may well lead behavior in a green or gray direction even in the face of significant economic incentives.1 Another question involves expressive considerations. Some consumers select green energy not because of a careful calculation that the environmental benefits justify the private costs, but because of a desire to express certain values (Posner, 2009) or to act in accordance with their idealized self-perception (Reisch, 2003). Many of those who purchase climate-friendly vehicles seem to be responding largely to expressive considerations. They want to “make a statement.” They may want to do so because of their conception of their identity2 or because they want their statement to be seen in public (Griskevicius, Tybur, & Van den Bergh, 2010). Expressive considerations can of course point in different directions in accordance with prevailing norms. In some communities, purchase of green energy (and green products in general) is strongly favored on expressive grounds; in other communities, it is not favored or is even disfavored.3 While expressive considerations may involve people’s selfunderstandings, they may also involve signaling (Griskevicius et al., 2010; Sexton & Sexton, 2014). Consumers may wish to signal their preferences to others and that desire may influence their choices, as in cases of conspicuous conservation (Sexton & Sexton, 2014). Socially visible products, such as electric sports cars, are naturally more useful for status display than switching to green electricity, installing a high-efficiency heat pump in the basement, or opting for car sharing. “Buying green” is often done for status reasons, while “behaving green” is usually less visible and status-laden (Starr, 2009). As we shall see, expressive considerations may also interact with law and policy. In particular, the law may affect the nature and even the sign of the signal. People may also make a rapid, automatic judgment in favor of or against green energy, and that automatic judgment may motivate their behavior whatever the nature of a careful calculation of its own consequences (Kahneman, 2011). Denominating a product as a climatefriendly choice may be sufficient to create a kind of brand that sparks a “warm glow” for brand aficionados (Hartmann & Apaolaza Ibáñe, 2006). That form of green branding and the associated emotional benefits may well have a large effect on intuitive judgments. In fact, the power of green branding is such that it has been found to lead to a significant increase

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in the purchase of candy bars with green labels, especially among healthconscious purchasers, even when those candy bars are not healthier in any way (Schuldt, 2013). Of course, social norms are likely to play a large part in producing such judgments. Our principal topic here is the role of climate-friendly default rules. Defaults are settings that apply, or outcomes that stick, when individuals do not take active steps to change them (Brown & Krishna, 2004; Johnson & Goldstein, 2013). Default rules establish what happens if people do nothing at all. In the example with which we began, people are asked to make an active choice between green and gray energy. But it is easy to imagine a different approach, one in which choice architects set a default rule in one direction or another, while allowing people to depart from it. In short, social outcomes might be automatically green. Apart from creating a default rule, choice architects may or may not seek to influence people’s choices. In fact, there is a continuum of possible approaches, whose poles are active choosing (with neutral presentation) and firm mandates (with no ability to opt-out), and whose multiple intermediate points include the following: • active choosing accompanied by self-conscious framing or related influences (meant to encourage either climate-friendly or gray choices), • a climate-friendly default with costly opt-out, • a climate-friendly default with costless opt-out, • a gray default with costless opt-out, • a gray default with costly opt-out. Our goal is to explore the uses of climate-friendly default rules. A great deal remains to be learnt; on the empirical side, new studies continue to be highly informative. For instance, we have recently found that in Germany, green defaults, i.e., automatically enrolling customers in cleaner energy sources, tend to stick, especially but not only among those who are concerned about the problem of climate change (Kaiser, Bernauer, Sunstein, & Reisch, 2020). On the basis of existing evidence, it is reasonable to think that climate-friendly defaults may well have major effects on environmental outcomes—in some contexts comparable to the effects of mandates and bans, and potentially far larger than the effects of information, education, moral exhortation, and even significant economic

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incentives (Chetty & Friedman, 2014; Nisa, Bélanger, Schumpe, & Faller, 2019). If the goal is to reduce greenhouse gas emissions, and to save money in the process, default rules are an important tool in the regulatory repertoire, and they may be able to achieve a great deal more than other tools, including those that would cost taxpayers a great deal of money. Especially in a period in which the standard tools—mandates, bans, and economic incentives—sometimes face serious economic and political obstacles, and because it is unclear that consumer information is effective in changing household action toward more sustainable choices (e.g., Nisa et al., 2019), climate-friendly default rules deserve careful attention. Such default rules might play a supplementary role in any nation’s effort to reduce greenhouse gas emissions, or indeed by any such effort by private institutions or even households. It is true, of course, that public officials must have the legal authority to promote (or require) climatefriendly default rules and such officials may lack that authority. Without engaging the legal issues, which vary across states and nations, we urge that private providers should give serious consideration to climate-friendly defaults, and that officials should do so as well to the extent that they are authorized to do so. One of the primary advantages of climate-friendly defaults is that they can have beneficial effects while maintaining freedom of choice and hence respect for heterogeneity. Suppose, for example, a relevant population contains a number of people who are facing serious economic difficulty. If so, and if green energy is more expensive than the alternative, it may well be important to allow consumers to opt-out (at least if energy subsidies are unavailable). But a series of complexities arise by virtue of the fact that default rules are typically selected because they benefit choosers, not third parties; in the environmental context, externalities are frequently involved. This point suggests that the choice of default rules should turn on an assessment not only of consumer welfare but also of a set of other costs and benefits. If, for example, a green default would have modest costs for consumers, but produce significant social benefits from emissions reduction, it would (by hypothesis) be justified on cost-benefit grounds (Sunstein, 2018). It follows that our own criteria are welfarist: We suggest that default rules should be evaluated by asking about their consequences, that social welfare is what matters, and that cost-benefit analysis is a useful (because administrable) method for testing whether one or another approach would increase social welfare. We acknowledge that this approach can

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be contested and also that it leaves gaps; we also acknowledge the existence of questions about public acceptability (Reisch & Sunstein, 2016; Sunstein & Reisch, 2019). The largest point is that default rules with environmental consequences are pervasive, and they might be green, gray, or somewhere between. When existing defaults are relatively gray, it is not because nature so decreed, but because of emphatic human choices, and these might be otherwise. If public and private institutions seek to make progress on the climate change problem, they might well be able to do so by becoming far more self-conscious about selection of the appropriate defaults. One of our principal points is that default rules of multiple kinds are already in place, alongside other forms of choice architecture, and they have large effects on outcomes, both economic and environmental, even if they have not been subject to careful scrutiny.4 The remainder of this chapter is organized as follows. In the following, we first offer a few examples of climate-friendly defaults, designed to establish their generality, their potential, and their impact. The next part explores why default rules matter, with an emphasis on the power of suggestion, the role of inertia, and loss aversion. We then examine non-sticky defaults, and show that in some cases, people will reject climate-friendly defaults. The paper then explores whether choice architects should select a climate-friendly default, first on the admittedly artificial assumption that consumers’ interests are the only issue at stake, and second by introducing externalities. Building on the foregoing discussion, we conclude with a general framework, welfarist in character, for choice architects to consider in selecting among the various options.

Climate-Friendly Defaults: Examples Daily life is increasingly accompanied by the equivalent of climate-friendly defaults. Consider motion detectors that turn out the lights when people do not appear to be in the relevant room. In this way, motion detectors create the equivalent of an “off” default. Or consider appliance and computer settings that turn the relevant equipment off when it is not in use. If the default setting on office thermometers is turned down in winter, and up in summer, we should expect significant economic and environmental savings, at least if the default setting is not so uncomfortable that people will take steps to change it (Brown, Johnstone, Hašˇciˇc,

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Vong, & Barascrud, 2013). Both policy and technology are making climate-friendly defaults of this kind readily available.5 Green Energy We began with a choice between utility suppliers. It is far too simple, of course, to suggest that the available possibilities fall in two dichotomous categories of “green” and “gray.” There are multiple options, and the environmental and economic consequences of diverse sources of energy require careful investigation; disputes are easy to find (see, e.g., Boyle, 2012; Everett, Boyle, Peake, & Ramage, 2012). For present purposes, it is sufficient to stipulate that from the standpoint of reducing greenhouse gas emissions as well as final disposal risks of nuclear waste, some renewable sources are far preferable to others, and consumers might want to consider that point when choosing energy, especially if they can save (or do not lose) money at the same time. Many jurisdictions do offer some kind of choice. In some nations (including the United States and Germany), people are generally defaulted into a particular source, with the option to opt-out. Typically, the default is relatively gray (perhaps because some of the green options continue to be expensive, or perhaps because most national energy authorities have promoted and subsidized grey energy for decades). To use green energy, people have to seek out relevant information and choose it affirmatively.6 The deterrent effects of that requirement are large, even in circumstances in which people would give serious consideration to climate friendlier options if presented with the choice unaccompanied by a default. What would be the effects of switching to a green default? The question has been examined through randomized controlled trials, natural, and laboratory experiments (e.g., Ebeling & Lotz, 2015; Hedlin & Sunstein, 2015; Kaiser et al., 2020; Pichert & Katsikopoulos, 2008). While lab experiments should be taken with many grains of salt, because they may not predict actual behavior (Loewenstein, Sunstein, & Goldman, 2014), overall, the results of these studies testify to the extraordinary power of green defaults.7 It is important to note that existing energy defaults may persist even if they do not reflect the preferences of the consumers (Ghesla, 2017; Kaenzig, Heinzle, & Wüstenhagen, 2013), which attests to the power of

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defaults. But do citizens approve of them? We asked for citizens’ view on green energy defaults in 17 countries worldwide (Sunstein & Reisch, 2019). Our questions were admittedly stylized; we did not probe how citizens would react if green energy cost significantly more. Nonetheless, the responses do suggest a high degree of receptivity to automatic enrollment—irrespective of whether these defaults are encouraged or required by the government. Energy Efficiency Many consumers use products that are significantly less energy-efficient than available alternatives (Frederiks, Stenner, & Hobman, 2015). For purposes of reducing greenhouse gas emissions, a central question is whether and when they will switch to products that are more efficient and less expensive (at least in the long-run). And in some cases, people do have energy-efficient products, and it is possible that they will switch to less energy-efficient products that are less expensive (at least in the shortrun). Independent of the expense of the switch itself, does the default matter? A series of experiments attempted to answer this question (Dinner, Johnson, Goldstein, & Liu, 2011). People were asked to choose between two kinds of light bulbs. One is the efficient but costly Compact Fluorescent Light Bulb (CFLB); the other is the inefficient but inexpensive Incandescent Light Bulb (ILB). The choice between the two greatly matters. If every home in the United States changed merely one ILB to a CFLB, the result would be to save over $600 million in annual energy costs, to eliminate greenhouse gas emissions equal to those of more than 800,000 cars, and to save energy that would light over three million homes annually. In the relevant studies, subjects were told that they were undergoing a significant amount of remodeling of their home and that the contractor had outfitted the light fixtures with either the ILB or the CFLB. Subjects were asked whether they wanted to switch, at no cost, to the alternative. They were also given a great deal of information about the costs and benefits of the two options. For example, the CFLB would cost $11 in electricity per 10,000 hours, whereas the ILB would cost $49 per 10,000 hours. The CFLB would cost $3 per bulb whereas the ICB would cost $0.50 per bulb (Dinner et al., 2011).

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The central finding is that the default greatly mattered. When energyinefficient ICBs were the default, they were chosen nearly 44 per cent of the time. When the CFLB was the default, the ICB was chosen only 20.2 per cent of the time (Dinner et al., 2011). The disparity is especially noteworthy in view of the fact that in the relevant experiments, people were not in the standard real-world situation of having to overcome inertia and to make a change. They were asked, more simply, whether they would do so, and in the sense they were forced to choose. If they had the option of postponing the decision and simply sticking with the status quo, the disparity would undoubtedly be larger. Smart Grids Smart grid technology is of considerable interest in many nations. Such technology has the potential to provide a better balance of the supply and demand of electricity and to make the grid more flexible, efficient, and reliable. In particular, smart meters have increasingly been seen, by the public and private sectors alike, to be useful tools to develop smart energy use patterns through the provision of immediate feedback (FoxPenner, 2014). However, consumers have been reluctant to accept this new technology, partly due to privacy concerns, partly due to perceived risks of reduced comfort. If the goal is to get close to the target, what might be done? An experimental study based on a nationwide panel in Denmark shows that the implied default greatly affects consumer behavior. More specifically, the acceptance rate to install a smart meter is significantly higher if offered as an “opt-out” frame (“No, I would not like to have a smart meter with remote control installed in my home”) than as an opt-in frame (Ölander & Thøgersen, 2014). The study confirms that the framing of the question, and the implied default, have a substantial impact on the share of a population that accepts Smart Grid installation; with this finding in mind, the authors urge “that campaigners therefore should choose a framing only after careful consideration” (Ölander & Thøgersen, 2014: 151).

Why Default Rules Matter Why do climate-friendly defaults have such a large effect on outcomes (see, e.g., Dinner et al., 2011)? There appear to be at least three principal contributing factors; each of them has distinctive characteristics in the

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context of greenhouse gas emissions (e.g., Brown, Farrell, & Weisbenner, 2011; Jachimowicz et al., 2019; Johnson & Goldstein, 2013). Suggestion and Endorsement The first factor involves an implicit suggestion or endorsement on the part of those who have devised the default rule (Madrian & Shea, 2001; McKenzie, Liersch, & Finkelstein, 2006).8 Suppose that choice architects, whether private or public, have explicitly chosen a climate-friendly default. If so, choosers may believe that they have been given an implicit recommendation (perhaps from a private institution, perhaps from public officials), and that they should not reject it unless they have reliable private information that would justify a change. If the default choice is green energy, it is tempting to think that experts, or sensible people, believe that this is the right course of action. Those who are deciding whether to opt-out might trust the choice architects well enough to follow their lead. Many people appear to think that the default was chosen by someone sensible and for a good reason. Especially if they lack experience or expertise and/or if the product is highly complex and rarely purchased, they might simply defer to what has been chosen for them.9 The point suggests that default rules are less likely to have an effect when people consider themselves to be experienced or experts, and indeed, there are findings to this effect among environmental economists, who reject selected defaults (Löfgren, Martinsson, Hennlock, & Sterner, 2012). Outside of the climate change context, there is strong evidence that a lack of information on the part of choosers, including a lack of information about alternatives, helps to account for the power of defaults. In one study (involving savings behavior), over half of those who stuck with the default specifically mentioned an absence of private information as one of their reasons for doing so (Brown et al., 2011). An implication of this explanation is that if choosers do not trust the choice architect, in general or in the particular instance, they will be far more likely to opt-out. And indeed, there is evidence for this proposition as well (Tannenbaum & Ditto, 2011). If choice architects select a climate-friendly default for reasons that are perceived as self-serving, elitist, preachy, or foolish, we would expect to see an increase in the rate of opt-out. Climate-friendly defaults are more likely to stick if choosers trust those who have selected them, or at least perceive no reason to distrust them.

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Inertia The second explanation involves inertia and procrastination (sometimes described as “effort” or an “effort tax”; see Johnson & Goldstein, 2013). To change the default rule to either green or gray, people must make an active choice to reject that rule. They have to focus on the relevant question, which is whether how they should trade off environmental, economic, and perhaps other goods. Especially but not only if the question is difficult or technical, and if the tradeoff is complex or morally charged, it may be tempting to defer the decision or not to make it at all. In view of the power of inertia and the tendency to procrastinate, people may simply continue with the status quo and avoid choosing (Iyengar, Huberman, & Jiang, 2004). In many cases involving climate change, the decision whether to select green energy involves some thinking, some risk, and a potentially complex (and morally charged) assessment of economic and environmental considerations. The choice of an electricity provider is not exactly intuitive; it may well be cognitively demanding. The default rule might stick simply because people do not want to engage in that thinking, take that risk, or make that tradeoff. Studies of brain activity find that when decisions are complex and difficult, people are more likely to stick with the default (Fleming, Thomas, & Dolan, 2010). Even if people in some sense want to investigate the issue and possibly to make a change, they might decide that they will do so tomorrow—and tomorrow never comes. Consider in this regard the finding that a default thermostat setting has a significant effect on OECD employees (Brown et al., 2013). A 1 C degree decrease in the default caused a significant reduction in the average chosen setting, apparently because most employees did not much care about the new default, and hence did not take the time to change it. Small as it was, the cost of that effort did not justify the bother. This interpretation is supported by the remarkable finding that when the default setting was reduced by 2 C degrees, the reduction in the average chosen setting was actually smaller, apparently because sufficient numbers of employees thought that it was too cold, and returned the setting to the one that they preferred (Brown et al., 2013). In this case, the reason for the effect was probably inertia, not suggestion. The 1 C degree decrease was a bit colder that the preferences of OECD employees, but not enough to justify a change. But with a 2 C degree decrease, the underlying preference manifested itself in restoration

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of the original status quo. The general lesson, to which we will return, is that in the face of strong preferences, the default is less likely to stick, which gives choice architects greater room to manoeuver when they make small changes rather than large ones.

Reference Point and Loss Aversion A third and especially interesting explanation stresses the fact that the default rule establishes the reference point for people’s decisions. Recall in this regard the behavioral finding of loss aversion. People dislike losses far more than they like corresponding gains (McGraw, Larsen, Kahneman, & Schkade, 2010) and whether a loss or a gain is involved does not come from nature or from the sky. The default rule determines what counts as a loss and what counts as a gain. To appreciate the power of loss aversion and its relationship to default rules, consider an illuminating study of teacher incentives (Fryer, Levitt, List, & Sadoff, 2012). Many people have been interested in encouraging teachers to do better to improve their students’ achievements. The results of providing economic incentives are decidedly mixed; many of these efforts have failed (Fryer et al., 2012). But the relevant study enlists loss aversion by resetting the default. The authors gave teachers money in advance and told them that if students did not show real improvements, the teachers would have to give the money back. The result was a significant increase in math scores—indeed, an increase equivalent to a substantial improvement in teacher quality. The underlying idea here is that losses from the status quo are especially unwelcome, and people will work hard to avoid those losses. Return in this light to default rules and the question of energy efficiency. Suppose that as compared to the gray (energy-inefficient) choice, the green option costs $200 more upfront but saves $210 over a period of five years. If the gray option is the default, people are likely to focus on the immediate loss of $200, and they will be highly reluctant to incur that loss. Perhaps the $210 savings will overcome their reluctance, but the immediate $200 loss will likely loom large. If, by contrast, the green option is the default, people are more likely to focus on the eventual loss of $210, and they will be highly reluctant to incur that loss. In the environmental context, loss aversion may have an especially significant effect, certainly in the case of climate-friendly defaults: People may well feel

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a pang of conscience, or anticipatory regret, if they are contemplating rejection of a green default (Hedlin & Sunstein, 2015). In this respect, the default may well interact with, and help to establish or reinforce, prevailing social norms. Recall that some people make climate-friendly choices because they want to “make a statement.” If opting out produces environmental as well as economic harm, it may entail a statement that consumers do not want to make, and this is so even if they would not have opted in.

When Default Rules Do Not Stick In some cases, people are willing to switch the default at the expense of the climate-friendly outcome. Recall that in the face of a 2 C degree decrease in the default setting, many OECD employees took action to turn up the temperature (Brown et al., 2013). Note as well that when experienced people—environmental economists attending a conference— were presented with a default number for carbon dioxide offsets for flying, they were unaffected by that number (Löfgren et al., 2012). And in the study of energy-efficient light bulbs, the default rule was sticky, but not remarkably so. Even when it was the default, the energy-inefficient light bulb was rejected by about 56 per cent of choosers.10 We could easily imagine populations that would likely reject the energy-efficient choice in equal or higher numbers, especially if the less efficient option cost a great deal less, and if in that population, environmental considerations did not loom large. When default rules do not stick, the usual reason is usually straightforward: People have clear preferences that run counter to them. If preferences are clear, people are less likely to be influenced by the endorsement in the default rule. Inertia may well be overcome. Loss aversion will be far less relevant, in part, because the clear preference helps define the reference point from which losses are measured. Suppose that consumers are defaulted into a climate-friendly energy source that costs 50 per cent more than the alternative. Unless social norms or inertia are particularly strong, some consumers will reject that default. For supportive evidence, consider both the evidence presented above and a study in the United Kingdom, which found that most people opted out of a savings plan with an unusually high (and therefore unattractive) default contribution rate (12 per cent of before-tax income). Only about 25 per cent of the employees remained at that rate after a year,

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whereas about 60 per cent of the employees shifted to a lower default contribution rate. Notably, people with lower incomes were more likely to stay at the unusually high contribution rate (Beshears, Choi, Laibson, & Madrian, 2010). Similar findings have been made elsewhere, with growing evidence that those who are less educated, and less sophisticated, are more likely to stick with the default (Brown et al., 2011). The clear implication is that extreme or highly unwelcome defaults are less likely to stick. It follows that climate-friendly defaults that are perceived as foolish, wrong, harmful, expensive, or the imposition of some high-minded environmentalist elite, may well be rejected by many consumers. A more puzzling and somewhat troubling implication, based on the lower incomes of those who stayed with the default in the savings study described above, is that default rules may be more sticky for lowincome workers than for their higher-earning counterparts. One reason may be that low-income workers have a great deal to worry about (Banerjee & Duflo, 2012; Shah, Mullainathan, & Shafir, 2012), and so are less likely to take the trouble to think through and to alter the default rule. An “effort tax” may seem especially high for, and have an especially large adverse effect on, people who are already facing a large number of decisions and costs. This point suggests that a costly climate-friendly default may have a regressive impact, both because poor people have less money and because they may well be especially likely to stick with it. And indeed, there is general evidence that when people are highly informed and experienced, and hence know what they want, they are far less likely to be affected by the default rule (Löfgren et al., 2012). One reason is that the effort tax is worth incurring. Another reason is that highly involved and competent “market mavens” actually enjoy searching extensively and making their choice independently of defaults. Since “the consumer” does not exist in the abstract, there have been calls for a more group-specific policy design that takes the relative level of consumer competence into consideration, and in particular, that distinguishes among confident, vulnerable, and responsible consumers (Micklitz, 2013). Such distinctions may have a bearing on the selection of personalized default rules, taken up below.

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Should Private or Public Institutions Choose Climate-Friendly Defaults? We now turn to the normative question. Which default rule should choice architects select? Are climate-friendly defaults a good idea? As we had suggested, our criteria are insistently and unabashedly welfarist. The question is whether one or another approach would improve people’s lives, which requires a focus on the actual consequences. We acknowledge the existence of questions about public acceptability (Reisch & Sunstein, 2016; Sunstein & Reisch, 2019); we also note that welfarist considerations can be understood in diverse ways (Adler, 2012; Sunstein, 2018). Our hope is that in this context, considerable progress can be made without requiring resolution of the most difficult normative questions. Consumers (Without Externalities) For purposes of simplification, begin with the case in which the only concern is the welfare of the chooser and there are no (or only modest) externalities. Under this admittedly unrealistic assumption, the preferred approach is to select the default rule that reflects what most people would choose if they were adequately informed (Smith, Goldstein, & Johnston, 2009). If we know that a particular default rule would place people in the situation that informed people would select, we have good reason to select that default rule (with the understanding that those who differ from the majority may opt-out). In the easiest cases, the answer is entirely clear once we specify the likely effects of the options in question. If climate-friendly energy both costs less and reduces environmental harm, it is safe to say that most informed people would choose it. It should certainly be the default. Under the specified circumstances, those who want consumers to make different choices will not find it easy to explain their views. Indeed, some options should be ruled out of bounds because they are obviously in no one’s interest. Now suppose that the tradeoff is not so self-evident, but that we have reason to believe that 80 per cent of people, given a great deal of information, would choose green energy. This might be the case if either (1) climate-friendly energy is far better on environmental grounds but only very slightly more expensive or (2) the relevant population is known to have strong environmental commitments. In either case, there is a strong reason to favor automatic enrollment in climate-friendly energy. But if

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gray energy would cost significantly less, and if it would be only slightly worse on environmental grounds, a gray energy default would seem best. To be sure, it might well be necessary to do a great deal of empirical work in order to identify the approach that informed people would choose. (As we shall see, this is a point in favor of active choosing.) The idea of “informed” choice might also raise hard conceptual questions. For reasons that behavioral economists have emphasized (Sunstein, 2012), people may err even if they have a great deal of information. They may, for example, display unrealistic optimism or discount the longterm (Sunstein, 2012); the latter point bears especially on choices in the areas of energy and environmental protection. If informed choosers show systematic biases, it may not make a great deal of sense to base default rules on what appear to be informed choices. On the other hand, any effort to build correction of such biases into the very idea of the informed chooser creates a risk, which is that the enterprise will involve identification of what the choice architect believes to be the right choice on the merits—in which case the chooser, as an agent, tends to drop out of the analytic picture. The best solution is probably to rely on what informed choosers actually do, while also allowing correction if their choices can clearly be shown to be against their interest, perhaps because of some kind of behavioral bias. On this count, actual evidence—about what informed choosers do—is extremely important. It would be useful to assemble information about the level of opt-out under various alternatives (Thaler & Sunstein, 2008). Perhaps experiments or pilot programs would provide such information.11 If only 2 per cent of people opt-out if climate-friendly energy is the default, and 50 per cent opt-out if gray energy is the default, we have reason to believe that climate-friendly energy is better. Of course, it is possible that majority rule is too crude. Suppose that there are two default rules, green and gray. Suppose that 55 per cent of informed people would be relatively indifferent between green and gray, but would slightly prefer green. Suppose too that because of their unusual situation (perhaps they are poor), 45 per cent of people would strongly prefer gray. It is probably best to select gray, because almost half of the population would like it very much, and the (narrow) majority only cares a little bit. This example shows that it is important to ask not only about which approach would be preferred by informed people, but also about the intensity of their preferences.

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Consumers and Third Parties In the climate change context, externalities are pervasive; they are the principal motivation for a climate-friendly default rule. Choosers may also face a collective action problem. Asked individually, they might rationally select gray energy, but they might prefer climate-friendly energy if everyone else were doing so as well (a possibility that argues for a firm mandate rather than a mere default rule). If choice architects are deciding among defaults in the presence of externalities and collective action problems, they must investigate the full set of costs and benefits, not only the welfare of choosers (see, e.g., Johnson & Goldstein, 2013). If a default rule turned out to stick, what would be the costs and what would be the benefits? Even if most choosers would select gray because it is less expensive, green might be the better default if it would avoid significant costs. Suppose that we focus specifically on greenhouse gas emissions. We could easily imagine cases in which the avoidance of greenhouse gases would produce significant gains, so that a green default would be simple to justify even if it turned out to be more expensive for users. Ideally, choice architects would monetize all of the relevant costs associated with relevant energy users and set a default rule accordingly.12 Of course, it is true that the assessment could create serious empirical challenges both in monetizing the relevant benefits and in projecting the level of opt-out. As we have suggested, distributional issues may be relevant and important as well (Adler & Treich, 2015). Suppose, for example, that the cost-benefit analysis argues in favor of a climate-friendly default, but that the selection of that default imposes net costs on consumers, including poor people. Suppose too that poor people are unlikely to opt-out, perhaps because they are busy and occupied with other matters, perhaps because they are not confident that opting out makes best sense or because they fear—unnecessarily—that they will lose supply. If poor people would in fact be net losers, but would not opt-out, the argument for a climate-friendly default may remain plausible, but it is weakened. If it is chosen, it may be important to explore the possible financial subsidies for those who pay for it or to make the possibility of opt-out both salient and clear, at least if the latter can be achieved without endangering the goals that led to the default rule in the first instance.

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Conclusion With respect to climate change, consumer choices are greatly affected by a wide range of influences, including choice architecture in the form of social norms and applicable default rules. In fact, the climate change problem is created, in large part, by choice architecture that promotes extraordinarily high levels of greenhouse gas emissions. Mandates, bans, and incentives have legitimate roles, but climate-friendly defaults should be an important part of the mix. They are easiest to justify when they will simultaneously save money and reduce greenhouse gas emissions; consider motion detectors, automatic “off” defaults, and (in important cases) green energy. In some cases, of course, climate-friendly defaults will be costly to consumers. For example, green energy may turn out to be more expensive. Smart grids and smart meters have potentially large benefits, but they may also impose costs as a result of traceability and reduced data privacy. No one should favor a situation in which choice architects select defaults that cost consumers a great deal (perhaps in terms of money, perhaps in terms of privacy) and deliver only modest environmental benefits. Some of the hardest cases arise when the climate-friendly default would cost consumers a nontrivial amount but also appear to produce significant environmental benefits. In such cases, choice architects have two reasonable options. The first is to call for active choosing (and to inform consumers in the process). The second is to assess costs and benefits, and to select the default rule on the basis of the assessment. The choice between the reasonable options depends on whether choice architects have justified confidence in their assessment of costs and benefits. If they do, and if the assessment demonstrates that the climate-friendly default is unambiguously superior, they should choose it. Much of the time, the best approach is automatically green. Climatefriendly default rules, attentive to the full set of costs and benefits, are likely to emerge as a significant contributor to efforts to reduce greenhouse gas emissions—complementary to and on imaginable assumptions better than education, economic incentives, and mandates or bans. Acknowledgment We are grateful for support from the Program on Behavioral Economics and Public Policy at Harvard Law School. This essay draws heavily

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on Sunstein and Reisch (2014, 2018). The treatment is, however, substantially revised, redirected, and updated.

Notes 1. It is possible, of course, that an emphasis on social norms will trigger adverse reactions and potentially resistance, perhaps especially among younger people. See the discussion of “deviant subcommunities” in Kagan and Skolnick (1993). 2. For relevant discussion, but not focused on environmental protection in particular, see Akerlof and Kranton (2010). 3. On the diversity of social meanings, and their changes over time, see Lessig (1995). 4. Note that choice architecture may result from deliberate design or instead from invisible-hand mechanisms; there may be no architect (UllmannMargalit, 1978). 5. For the available palette of default policies, see Johnson et al. (2012) as well as Jachimowicz, Duncan, Weber, and Johnson (2019). 6. For one example, see http://www.massenergy.org/renewable-ene rgy/FAQ (last visited 20 November 2019). 7. For a critical evaluation of (the effectiveness of) “green nudges” in a broad sense see Andor and Fels (2018) and Schubert (2017). 8. Of course, it is not true that all defaults are chosen because they produce the best outcomes for people. 9. People might also have experienced for themselves the positive outcomes of controversial regulatory decisions that they might not have endorsed ex ante. Examples include smoking bans for bars and restaurants that have been imposed in the US and in Europe in the 2000s—in the face of industry opposition. Yet polls today show a high ex post agreement with these bans. Citing such examples, Weber (2012: 380, 393) concludes that “query theory and such examples suggest that policy makers may sometimes be well advised to shape and lead public opinion rather than follow it.” 10. Recall, however, that the study was a laboratory experiment, not a randomized trial. If people actually had to take steps to change the default—rather than merely answering questions about whether they would do so—the switch rate would likely have been smaller. 11. The Behavioral Insights Team in the United Kingdom is actively engaged in such projects, including in the domain of energy. See BIT (2011). Available at https://www.gov.uk/government/uploads/system/uploads/

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attachment_data/file/60536/behaviour-change-and-energy-use.pdf (last visited 21 November 2019). 12. As we have noted, externalities might justify a mandate rather than a default rule.

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CHAPTER 9

Producing and Consuming Sustainability in Business Education Tatiana Egorova and Marijane Luistro Jonsson

Introduction Business schools are often seen as breeders of greed and advocates of the profits-centred approach to management. More and more critical voices are questioning business education and blaming business schools for teaching “winner-takes-all managerialism” (Parker, 2018). Business schools are also seen as having failed to deliver on the “promise to create greater public value by developing the management profession” (Khurana, 2010), and as offering “anti-intellectual” degrees (Neem, 2019). The goal of business and management education is to essentially create good managers who are able to provide value for society (Samuelson, 2006). Given the existing pressures on the environment and rising

T. Egorova Stockholm School of Economics, Stockholm, Sweden e-mail: [email protected] M. L. Jonsson (B) Center for Sustainability Research, Stockholm School of Economics, Stockholm, Sweden e-mail: [email protected] © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_9

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awareness of the environmental impact of business, several stakeholders started to demand that companies integrate sustainability considerations into their activities (Koerber, 2009). Thus, a good manager is no longer seen as the one able to maximize profits to the greatest benefit of shareholders. A modern-day good manager is the one who can balance the demands of various stakeholders while simultaneously making profits. Therefore, as the understanding of what a good manager entails changes, business schools are bound to adapt and alter their curricula (Losada, Martell, & Lozano, 2011). An interesting question that arises is whether the teaching efforts of business schools are in line with the demands of society towards sustainability-related competencies developed by the graduates in their studies. To dig into these questions and to provide insights into the current ecosystem of the production and consumption of sustainability in business education, this chapter reviews relevant studies, and then analyses four conceptual approaches towards teaching sustainability that are commonly adopted in business schools: elective courses, integrated courses, degree programmes, and leading sustainability transformation by example. In particular, we review the potential advantages and disadvantages of the different approaches in terms of the development of particular competencies related to sustainability. We find that there is an overall lack of evidence regarding the sustainability-related competencies demanded by different types of potential employers, while the teaching is informed largely by theoretical research focused on the competencies for sustainability. Therefore, it remains unclear whether the competencies that graduates acquired in their studies are relevant for their future careers. Moreover, different approaches naturally lead to variations in the level of development of particular competencies. Together with the variations in coverage in terms of the number of students who are exposed to sustainability education, and given the potential self-selection of students, these variations likely result in different levels of sustainability literacy of graduates that make them more or less suitable to work for particular types of employers and with specific matters. This should be taken into account when designing sustainability courses, and the proposed framework is a simple and useful tool for comparing different options that may be considered by business schools.

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Production of Sustainability Literacy in Business Schools Business schools are changing and sustainability is gradually becoming an important part of their curriculum (Christensen, Peirce, Hartman, Hoffman, & Carrier, 2007). However, the complex and multifaceted nature of sustainability makes it virtually impossible to offer a single definition of the term (Bateh, Heaton, Arbogast, & Broadbent, 2013). Christensen, Kang and Willoughby (2008) define sustainability training as “business education that integrates awareness of social and environmental information and trends into business decision making”. In our view, this definition focuses on a more mechanical aspect of sustainability education and does not account for the long-term nature of sustainability problems and the necessary transformation of the way people understand and interact with the world (Mulà & Tilbury, 2011). In its multitude of interpretations, we define sustainability in this context as instilling a long-term awareness and mindset among the students that takes into account the common good and the future generations. It is an essential component of implementing change. Educational institutions, including business schools, are of crucial importance for sustainable development as they educate future leaders, decision makers, and policy makers (Cortese, 2003). Sustainability can be addressed in the teaching strategies at three different levels, namely, teaching about sustainability, teaching for sustainability, and capacitybuilding; the last is the most substantial and transformative approach since it entails that students adopt sustainability-related skills (Sterling, 2004). Research also points out that the successful integration of sustainability courses in the curriculum requires that these courses are connected to real business activities and society (Painter-Morland, Sabet, Molthan-Hill, Goworek, & de Leeuw, 2016). Another stream of literature focuses on assessing sustainability-related efforts of business schools. Content analysis of the Sharing Information on Progress (SIP) reports within the project “Integrating Sustainability into Business Schools” (ISIBS) showed that the majority of business schools develop new courses or programmes on sustainability rather than attempt to embed sustainability considerations across the curriculum (Godemann, Herzig, Moon, & Powell, 2011). Another important facet of the matter is what competencies are being developed in the process of sustainability education. While the term competencies is infused with

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ambiguity and often confused with skills, abilities, knowledge, qualification, and other related matters (Baartman, Bastiaens, Kirschner, & Van der Vleuten, 2007), we define competencies in line with the definition proposed by Wiek, Withycombe, and Redman (2011: 204) as “a functionally linked complex of knowledge, skills, and attitudes that enable successful task performance and problem solving”. The literature on competencies related to sustainability that should be integrated with the teaching process has made significant progress, which was summarized by Wiek and colleagues (2011), who proposed five core competencies that should be taught: systems thinking, strategic, interpersonal, anticipatory, and normative. There is evidence suggesting that competencies related to responsibility and emotional intelligence are more integrated into the curricula rather than those related to interdisciplinarity, future orientation, participatory skills and personal involvement (Lambrechts, Mulà, Ceulemans, Molderez, & Gaeremynck, 2013). Besides, the analysis of reading lists for undergraduate sustainability courses in the US suggests that 55 per cent of the top assigned materials are related to the weak sustainability paradigm and only 29 per cent are focused on the strong sustainability paradigm (Landrum & Ohsowski, 2017). Prior research has criticized the business society for aligning with the weak sustainability paradigm (Davies, 2013), which may possibly be rooted in the approach towards teaching sustainability chosen by business schools. However, the weak sustainability paradigm assumes the possibility of substitution between natural and human capital, which was shown to be unfeasible (Hartwick, 1978). Taken together, these results indicate that most business schools opt for teaching about sustainability rather than adopting a more transformative approach and, in doing so, they instil an unrealistic view of the problem that does not adequately reflect its scale and required solutions. The overall statistics on sustainability courses and their content is unavailable, which constitutes a challenge in itself, as the actual scale of these efforts is not clear. However, in 2012, there were 759 sustainability academic programmes in the US, less than 20 per cent of which led to a degree in sustainability (Vincent, Bunn, & Stevens, 2012). The actual number of courses across the world and their types are hard to assess; however, the efforts in teaching sustainability can be classified in the following way: offering single sustainability courses (most often electives), offering integrated mandatory sustainability courses, offering majors and degrees in sustainability, and leading sustainability transformation by example. We will discuss these efforts in greater detail further.

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•Offering Single Sustainability Courses While this approach is probably the easiest to implement, the transformative capacity of a single course is usually limited. Besides, single courses are most often electives and therefore, students who have already developed an interest in sustainability tend to self-select. •Integrated Mandatory Sustainability Courses Some business schools offer mandatory integrated courses to all students, usually at the Bachelor level. These efforts vary greatly in terms of duration and requirements towards successful completion of a course; however, they have potential for great transformative capacity and are less likely to be subject to self-selection by students. •Sustainability Majors and Degrees A greater commitment of business schools to teaching sustainability can be expressed as sustainability majors and degrees. While these efforts are more likely to produce lasting change, students also tend to self-select to these programmes leaving the vast majority of graduates not equipped with sustainability-related knowledge and skills. •Leading Sustainability Transformation by Example While obviously the most difficult and costly approach, leading by example involves a transformation of the campus, research commitment to sustainability, and teaching on sustainability across the whole curriculum. Such a complex approach is likely to have the highest transformative potential and lead to lasting change in thinking and decision-making of the graduates. One can conclude that the production side is characterized by a great variety of teaching strategies ranging from offering single courses to leading sustainability transformation by example. However, the vast majority of these efforts are likely to suffer from self-selection of the students and be directed towards those who have already developed some interest in sustainability. Moreover, it remains unclear which strategies are better suited for developing particular competencies related to sustainability. Thus, we can conclude that the production side lacks a long-term approach. At the same time, the needed but not so obvious task of building capacity and integration appears to be lacking. It is argued that educational institutions, in general, do not have sufficient conditions

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for moving towards a more holistic approach to teaching sustainability (Velazquez, Munguia, Platt, & Taddei, 2006). Lack of incentives and accreditation towards this direction could be one of the factors behind the status quo. Consequently, business educators may form their curricula based on the scarce information about consumption trends, which will be discussed in the next subsection.

Consumption and Demand for Sustainability Literacy Current challenges such as climate change, artificial intelligence, antimicrobial resistance, and the like represent risks as well as potential opportunities for the private sector in the future. As a result, employers would like future graduates to be cognizant of the complexities of these issues and would like them to have sustainability literacy and competence to address them. However, studies suggest that the awareness of employers about the changing priorities of employees have not yet been translated into recruitment practices (Christensen, Kang, & Willoughby, 2008). Moreover, there is a great variation in terms of integrating sustainability-related efforts with core business activities among companies in different industries and geographies (Kiron et al., 2017). While 90 per cent of the executives realize the importance of sustainability, only 25 per cent of the companies have managed to build a business case for their sustainability efforts (Kiron et al., 2017), which may be an indication of the lack of practical skills and an understanding of how awareness can be translated into practice. Furthermore, it is widely accepted that the business case for sustainability is a narrow view of sustainability, related to the weak sustainability paradigm that does not realistically reflect the scope of the problem (Landrum & Ohsowski, 2018). Nevertheless, there is a qualified optimism regarding the possible future improvements of these statistics as expressed in a recent PRME (Principles for Responsible Management Education) survey, which suggests that around 90 per cent of the students feel relatively confident to apply the sustainability-related knowledge and skills in real life (Haski-Leventhal & Concato, 2016). Another PRME survey of business students’ attitudes revealed that more than half the students find it very, and even absolutely, important to work for a socially and environmentally responsible employer, while only around 1 per cent consider this to be an unimportant factor (Haski-Leventhal & Concato, 2016). A

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survey by Bain and Company in 2012 showed that about 60 per cent of employees in different industries claim to care more about sustainability than they did three years previously. More than half of the respondents attributed this change of attitude to greater awareness (Davis-Peccoud & Allen, 2013). Despite growing awareness about sustainability issues among students and employers, research indicates that they are not sure about who will take action, and are also not fully ready to assume personal responsibility (Rosentrater & Burke, 2017). Although employers are aware of sustainability-related issues and the pressure from the society, as well as the demands of the talent pool, they are not sure what exactly they should do in this respect and how to approach the problem. Extant research provides limited insight into the specific sustainability-related competencies that are demanded by employers (Drayson, 2015). Thomas, Barth, and Day (2013) surveyed employers and identified that among the sustainability-related capabilities the following were the most relevant: communication, critical thinking, decision-making, reflecting on experiences, and holistic and systems thinking. Another study compared the results of a systematic literature review on CSR-related competencies with the data obtained by interviewing CSR professionals and proposed eight sustainability-related competencies: (1) anticipating competence (forensic thinking); (2) systems thinking; (3) instrumental understanding of CSR standards and regulations; (4) CSR management that includes leadership, identification, and realization of CSR-related opportunities, and implementation; (5) interpersonal competencies; (6) personal valuedriven competencies comprising ethical normative competence, ability to balance and business objectives; (7) ability to regulate CSR-behaviour and active involvement, and (8) ability to self-reflect on CSR views and experiences, personal attributes and attitudes (Osagie, Wesselink, Blok, Lans, & Mulder, 2016). While the former set includes a rather general list of management-related competencies, aside from the systems thinking competencies, the second includes a variety of technical skills that may be an indicator of sustainability efforts still being considered as foreign to the core of the business by practitioners. Despite this notable progress, little is known about the actual requirements of employers in terms of sustainability-related competencies. This may be an indicator of a requirement for sustainability-literate employers who may wish to rely on the skills of their employees. This in turn requires that business schools should be able to equip students with such competencies.

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While we observe an increasing demand for sustainability knowledge and related competencies, it has not yet been well defined. Neither the employers nor the students seem to require any particular set of competencies, which, on the one hand, charges the educators with greater responsibility and, on the other hand, offers them more opportunities to address these issues creatively. This can probably be one of the reasons for such a great variety of sustainability courses and programmes being offered by business schools that we discussed in the previous section. While educators may seem to rely on the research findings in designing curricula, it is important to reflect on how the competencies being taught are aligned with the needs and requirements of the business society.

Other Stakeholders in the Ecosystem Being Formed The market of sustainability education as it is presented above does not represent the whole picture as there are other important players that affect supply and demand, and are a part of the ecosystem being formed. There are intergovernmental organizations such as the United Nations, governments and NGOs who are affected by both the supply and the demand sides directly as well as indirectly. For example, the UN sets the agenda by establishing Sustainable Development Goals (SDGs) among other initiatives. SDGs inform teaching on sustainability, thus affecting the supply side; at the same time they inform the broader society thereby affecting the perceptions of what is considered to be important and, consequently, affect demand for and consumption of education about sustainability. Besides, the UN is one of the potential employers of sustainability-literate graduates and therefore, has an influence on the market equilibrium. National governments play a role similar to the UN. However, in some countries they have the power to set educational standards and finance education directly by managing state universities, or indirectly in the form of grants and scholarships. This way the governments and their agencies also impact both the demand and supply sides of sustainability education. Therefore, it is crucially important for the state to be aware and recognize the importance of the challenges faced by the world. Sustainable NGOs too affect the supply and demand for sustainability education in a variety of ways. They can engage in agenda-setting activities, finance education through grants and scholarships, and employ

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graduates. They can also assume educational functions, which makes them co-producers of sustainability education. Given the number of important players, viewing sustainability education as a market, where the supply side is represented by educational institutions and the demand side is composed of students and their future employers, would be a simplification. On the other hand, the ecosystem seems to be still in the formation stage, which complicates the identification and definition of the impact of each stakeholder and its relative strength. This also complicates the analysis of various educational arrangements and the comparison of their relative efficiency, as it is unclear how efficiency can be defined and for which stakeholders. Moreover, there is a great degree of ambiguity regarding the competencies actually demanded by various stakeholders, and how suited educational arrangements are to meet them.

Approaches to Teaching Sustainability In this section, we present and analyse four conceptual approaches to teaching sustainability—a single elective course, a mandatory integrated course, a specialized degree programme, and leading sustainability transformation by example. We analyse these four approaches to teaching sustainability across several dimensions: transformative capacity, proxied by the duration of the course, coverage in terms of the number of students, the advantages and disadvantages of each approach, as well as the level of competencies developed, following the classification of competencies proposed by Wiek et al. (2011). Table 9.1 presents the key features of the different approaches to teaching, analysed along the first four dimensions, namely, the level of transformative capacity, coverage, and the advantages and disadvantages specific to each approach. According to Wiek et al. (2011), there are five key sustainabilityrelated competencies that should be developed within the sustainability training, namely, systems-thinking, strategic, anticipatory, normative and interpersonal competencies. Systems thinking refers to the ability to analytically think across different domains and scales, identifying systematic relationships and possible interactions, and to see the problem as an integrated whole. Strategic competence, in turn, is the ability to design and implement strategies leading to more sustainable outcomes. Anticipatory competence relates to the ability to systematically analyse and

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Table 9.1 Overview of four conceptual approaches to teaching sustainability Course

Transformative capacity

Coverage

Advantages

Disadvantages

Elective course

Moderate

Low

Self-selection of students

Mandatory integrated course

High

High

Easy to set up and integrate into the curriculum Changes the status of sustainability education

Degree programme Leading sustainability transformation by example

High

Moderate

Moderate

High

Costly to implement The outcomes depend on the actual design High level of Risk of specialization overqualification Demonstrates the Costly to potential change implement and how it can be May not be duly implemented acknowledged by the students

Source Authors

assess potential future developments in relation to sustainability matters. Normative competence refers to the grounding principles and values of sustainability and the ability to comprehend, apply, reconcile, and negotiate those. Finally, interpersonal competence is defined as the ability to motivate, facilitate, communicate sustainability-related activities. All skills are important and the research suggests no prioritization of one over another. The level of competencies development by each approach is presented in detail in Table 9.2. Elective courses are very common as they are easy to set up and integrate virtually in any business school. However, these are usually short-term endeavours that are highly subject to self-selection of students as only those with prior interest towards sustainability tend to enroll. Oftentimes these courses are practice-oriented and involve project-based learning methods and/or participation of industry partners. In terms of competencies development, such courses are generally more suitable in developing more applied competencies such as an interpersonal one. They also help to shape normative thinking. However, usually the short duration of the courses does not allow systems thinking, anticipatory and strategic competencies to develop. Examples of these courses could be “World in the Making: Tackling World Challenges” offered to Master’s

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Table 9.2 Level of competencies development by four conceptual approaches Course

Elective for Master’s Mandatory course for Bachelor’s Degree programme Leading sustainability transformation by example

Level of competencies development Systems thinking

Strategic

Anticipatory

Normative

Interpersonal

Low

Low

Moderate

Moderate

High

High

High

Moderate

High

Low

High

High

High

High

High

Low

Low

Low

Moderate

Low

Source Authors

students at Stockholm School of Economics, or “Business Sustainability” offered to MBA students by INSEAD. Mandatory integrated courses can be offered at any stage of education but are becoming more common for Bachelor’s students. There is a huge range in the ways that courses can be designed and integrated, from very formal options that are usually short term and not taken with the same level of commitment as other core courses either by the students or by the faculty, to long-term integrated solutions equal in status to other mandatory subjects. We will focus our analysis assuming that the courses tend, or at least aim to fall in the latter category. Here an important transformative and mindset-building feature is that it grants sustainability education the same status as the traditional professional courses. This means that future graduates are more likely to take sustainability issues seriously, many more will think in sustainable terms and will be more equipped to drive change. In terms of competencies development, such courses are oftentimes characterized by strong theoretical focus and therefore tend to develop normative, systems thinking, and strategic competencies. Mandatory courses do not suffer from self-selection of students and have a strong advantage of large coverage in terms of the number of students. However, such endeavours are usually costly to implement and hard to align with existing courses and subjects. Different approaches to such integration are found in business schools. For example, the Stockholm School of

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Economics offers a “Global Challenges” mandatory course to Bachelor’s students that spans over two years, while Alliance Manchester Business School has chosen to integrate sustainability and wider societal issues into all core courses taught to MBA students. Degrees and majors in sustainability are also becoming more popular across business schools. While they undoubtedly offer the highest level of development of all competencies, they are even more subject to selfselection of students as they require an even greater commitment to sustainability and willingness to make it a career path than the elective courses. Therefore, they pose a risk of overspecialization, which may constitute a problem given the uncertain demand for sustainability professionals. On the other hand, these graduates can be potentially employed by international organizations, governments or NGOs that may need highly specialized experts. While little is known about the demand for these professionals expressed by other ecosystem participants, it is hard to assess whether such a high level of specialization is desirable. Examples of such programmes are “International Strategy and Sustainability” offered by the Hanken School of Economics, and Master’s in “Environment and Resources” offered at the Stanford Graduate School of Business. Finally, many business schools opt for leading sustainable transformation by example—by greening campuses, changing their operations and routines to more sustainable ones, engaging in sustainability research to a greater extent, hosting sustainability and environmental labs that engage students, and oftentimes paying particular attention to teaching. While these efforts greatly vary in their scope and depth, Columbia Business School can be a good example of exemplary campus efforts—it achieved zero emission renewable electricity in 2018, while a whole range of business schools offer unique and exciting opportunities for student projects, such as the Sustainable Laboratory at MIT Sloan School of Management and or a Social Impact Award at INSEAD, to name a few. While these efforts have very high potential for capacity-building, their ultimate success greatly depends on the school’s ability to communicate to its students the need to be aware of not only what is being done but also why it is done, and why it is important. While the classification and analysis presented in this chapter cover a wide range of possible educational efforts, this list is neither complete nor restrictive. Some other brilliant endeavours may not fall precisely into any of the categories, and may eventually open up a new category. Our aim with this framework is, however, not to paint an exhaustive and

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comprehensive picture, but to offer a tool that can be helpful in analysing different educational arrangements related to sustainability education. Moreover, the framework can be easily tailored based on the particular syllabus of a specific course to assess the potential benefits and pitfalls associated with that course.

Concluding Remarks An important issue that remains unclear is the extent to which these dimensions are aligned with the requirements of the future employers of the students. Clarifying the requirements of the business community towards the competencies of future graduates would be helpful in assessing the relevance of the curriculum. However, the scarce evidence suggests that among the competencies addressed by the courses, employers are particularly interested in systems thinking, normative, interpersonal and anticipatory competencies. Thus, a potential graduate who took integrative and elective courses is likely to possess the necessary competencies developed to an acceptable level. In this light, the courses should be viewed as complementary to each other rather than different approaches to teaching sustainability. Specialized degrees, although very useful in terms of capacity-building and the development of sustainability competencies, raise some concern regarding the potential future employment of the graduates. While they may be overqualified for the industry players, it is not clear whether their competencies are in line with the requirements of other potential employers such as government agencies and NGOs, and how strong the demand expressed by them is. Employers are also interested in more technical skills related to sustainability, such as the knowledge of the relevant regulation and the ability to “balance business and sustainable goals”. While the former could be addressed in the process of education to a greater extent, the latter may be problematic. In different contexts, the interpretation of the balancing skill may range from “building a business case for sustainability” to “greenwashing”. While the former may not be enough to address the scope of the sustainability challenge, the latter may be an indication of sustainability taken as contradictory to the core of the business. Such a view bears the risk of leaving the issues of sustainability to the communications department with minimum to no transformation taking place. Another point that could greatly benefit the analysis presented above is the assessment of the impact produced by the courses. However, it can

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be potentially assessed only by studying the careers of the graduates. As most sustainability-teaching endeavours are a relatively new phenomenon and the impact can be assessed only after several generations of graduates get jobs, it is hard to arrive at any conclusions regarding the impact of sustainability teaching at the moment. To conclude, we can see that the growing demand for sustainabilityliterate graduates has not yet been translated into particular competencies required by potential employers, be it the industry or other participants in the ecosystem that is being formed. However, business schools aim at teaching a particular set of competencies, informed by mostly theoretical research. In addition, there is evidence that most universities rely on and prioritize the weak sustainability paradigm over the strong one, which we argue may be a response to the demand expressed by the employers of future graduates. In turn, while the businesses express their awareness and understanding of the sustainability needs, they don’t seem to have the knowledge and skills required to implement sustainability strategy and policy. In this light, it is surprising that the overall awareness about sustainability has not yet been translated into recruitment practices. Therefore, it remains unclear whether the competencies being developed are the ones demanded by the employers. Very scarce evidence suggests that there is a match between what is being taught and what is being demanded, although it is not a perfect match. Moreover, the level to which these competencies should be developed remains ambiguous. The proposed framework is a useful analytical tool that can help in sustainably assessing the production side and aligning it with the evidence from the consumption side.

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top 50 global business schools: Baseline data and future research directions. Journal of Business Ethics, 73(4), 347–368. Cortese, A. D. (2003). The critical role of higher education in creating a sustainable future. Planning for Higher Education, 31(3), 15–22. Davies, G. R. (2013). Appraising weak and strong sustainability: Searching for a middle ground. Consilience: The Journal of Sustainable Development, 10, 111–124. Davis-Peccoud, J., & Allen, J. (2013). The big green talent machine. [online] Bain. Available at: https://www.bain.com/insights/the-big-green-talent-mac hine. Accessed 13 November, 2019. Drayson, R. (2015). Employer attitudes towards, and skills for, sustainable development. York: Higher Education Academy. Godemann, J., Herzig, C., Moon, J., & Powell, A. (2011). Integrating sustainability into business schools–analysis of 100 UN PRME sharing information on progress (SIP) reports: 58–2011. Nottingham: International Centre for Corporate Social Responsibility. Hartwick, J. M. (1978). Substitution among exhaustible resources and intergenerational equity. The Review of Economic Studies, 45(2), 347–354. Haski-Leventhal, D., & Concato, J. (2016). The state of CSR and RME in business schools and the attitudes of their students. Third bi-annual study, PRME initiative. Khurana, R. (2010). From higher aims to hired hands. Princeton, NJ: Princeton University Press. Kiron, D., Unruh, G., Reeves, M., Kruschwitz, N., Rubel, H., & ZumFelde, A. M. (2017). Corporate sustainability at a crossroads. MIT Sloan Management Review, 58(4), 2. Koerber, C. P. (2009). Corporate responsibility standards: Current implications and future possibilities for peace through commerce. Journal of Business Ethics, 89(4), 461–480. Lambrechts, W., Mulà, I., Ceulemans, K., Molderez, I., & Gaeremynck, V. (2013). The integration of competences for sustainable development in higher education: An analysis of bachelor programs in management. Journal of Cleaner Production, 48, 65–73. Landrum, N. E., & Ohsowski, B. (2017). Content trends in sustainable business education: An analysis of introductory courses in the USA. International Journal of Sustainability in Higher Education, 18(3), 385–414. Landrum, N. E., & Ohsowski, B. (2018). Identifying worldviews on corporate sustainability: A content analysis of corporate sustainability reports. Business Strategy and the Environment, 27 (1), 128–151. Losada, C., Martell, J., & Lozano, J. M. (2011). Responsible business education: Not a question of curriculum but a raison d’être for business schools. In M.

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Morsing. & A. S. Rovira (Ed.), Business schools and their contribution to society (pp. 163–174). London: Sage. Mulà, I., & Tilbury, D. (2011). United Nations Decade of Education for Sustainable Development 2005–2014. In National journeys towards education for sustainable development, 2011: reviewing national experiences from Chile, Indonesia, Kenya, the Netherlands, & Oman. Paris: United Nations Educational, Scientific and Cultural Organization (UNESCO). Neem, J. (2019). Abolish the business major! The Chronicle of Higher Education, [online]. Available at: https://www.chronicle.com/interactives/2019-08-13abolish-the-business-major. Accessed 5 April, 2020. Osagie, E. R., Wesselink, R., Blok, V., Lans, T., & Mulder, M. (2016). Individual competencies for corporate social responsibility: A literature and practice perspective. Journal of Business Ethics, 135(2), 233–252. Painter-Morland, M., Sabet, E., Molthan-Hill, P., Goworek, H., & de Leeuw, S. (2016). Beyond the curriculum: Integrating sustainability into business schools. Journal of Business Ethics, 139(4), 737–754. Parker, M. (2018). Shut down the business school. London: Pluto Press. Rosentrater, K. A., & Burke, B. R. (2017). University students and sustainability. Part 1: Attitudes, perceptions, and habits. Journal of Sustainability Education, 16, 2151–7452. Samuelson, J. (2006). The new rigor: Beyond the right answer. Academy of Management Learning & Education, 5(3), 356–365. Sterling, S. (2004). Higher education, sustainability, and the role of systemic learning. In P. Corcoran (Ed.), Higher education and the challenge of sustainability (pp. 49–70). Dordrecht: Springer. Thomas, I., Barth, M., & Day, T. (2013). Education for sustainability, graduate capabilities, professional employment: How they all connect. Australian Journal of Environmental Education, 29(1), 33–51. Velazquez, L., Munguia, N., Platt, A., & Taddei, J. (2006). Sustainable university: What can be the matter? Journal of Cleaner Production, 14(9–11), 810–819. Vincent, S., Bunn, S., & Stevens, S. (2012). Sustainability education: Results from the 2012 census of US four year colleges and universities. Washington, DC: National Council for Science and Education. Wiek, A., Withycombe, L., & Redman, C. L. (2011). Key competencies in sustainability: A reference framework for academic program development. Sustainability Science, 6(2), 203–218.

CHAPTER 10

The Trans-Formative with Trans-Parency: Untapping Ground-up Environmental Information and New Technologies for Sustainability Per M. Stromberg and Claudia Ituarte-Lima

Introduction “In 2017, worldwide material consumption reached 92.1 billion tons, up from 87 billion in 2015 and a 254 per cent increase from 27 billion in 1970, with the rate of extraction accelerating every year since 2000” (UN, 2019). Current production and consumption trends seriously jeopardize the

P. M. Stromberg (B) Environmental Economics Unit, Swedish Environmental Protection Agency, Stockholm, Sweden e-mail: [email protected] C. Ituarte-Lima Stockholm University, Stockholm, Sweden e-mail: [email protected] Institute for Resources, Environment and Sustainability, University of British Columbia, Vancouver, BC, Canada © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_10

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UN Sustainable Development Goal 12, to ensure sustainable consumption and production patterns, and thereby the goals more broadly (UN, 2019). While internationalization of supply chains may, for example, serve to diffuse clean technology, it also poses new challenges to sustainability because first, sourcing from countries with weaker environmental standards in practice means a regression in understanding what is needed for sustainability of industry practices, specifically to a false assumption that markets are sufficient to manage and distribute environmental goods and services in a way that best benefits society; second, even in the highincome Western countries, public institutions and policies are sometimes hampered because of the fear of losing either opportunities for export, or for attracting foreign direct investment.1 International e-commerce is an increasingly related policy challenge, which is difficult to regulate across borders. The challenge is further accentuated by the joint pressures from increasing and shifting demand for natural resources (through a growing population with increasing per capita consumption), and climate change when it reduces supply of background quantity and quality of environmental goods and services. Moreover, there are complaints that the often highly internationalized firms frequently use a portfolio approach to manage regulatory risk, using low-tax planning and making subsidiaries autonomous to shield the mother company from environmental liability claims. Alternatives such as voluntary schemes tend to be only as strong as the real threat of stringent binding regulatory policy (e.g., Blackman, 2010), which requires both sufficiently resourced and well-functioning government institutions. Digitization and other emerging technologies are open for new ways of setting the scene for more sustainable industry practice for sustainable production and consumption. Here, we focus on two developments of transparency: enhanced monitoring of environmental effects of production in even faraway locations, and sharing of such information beyond where monitoring occurs, regardless of jurisdictional boundaries and countries.2 Thereby the often ignored precondition for functioning markets, that is, information, is added to the flow of commodities. Because what is profitable can be negative for parts of society (so-called externalities),3 the so-called invisible hand of markets is not a one-handed affair: invisible and blindfolded to societal gains, another hand, that of transparency, is needed to conduce to socio-ecological sustainability.4

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Governments have a necessary role to set the scene for more sustainable practices, for example, by regulation and by holding accountable those individuals and business enterprises that do not comply with environmental and human rights law. Legislation typically obliges industry to self-report their emissions to the government inspection agency. Increasingly, such data is made public through the so-called Information Disclosure (ID), often in so-called Pollutant Release and Transfer Registers (PRTR), aiming to enhance accountability and environmental performance of industries. Conventional approaches to transparency in environmental issues focus on how duty-bearers disclose information about environmental harm. In human rights legal language, the term duty-bearers refers to governments, as well as business enterprises causing social-ecological loss or damage that interferes with the enjoyment of human rights. The affected individuals or collectives are called rights-holders, such as people in cities, towns, and rural areas, including indigenous peoples and local communities. Under human rights law, the business enterprises are categorized as duty-bearers, not rights-holders, with human rights responsibilities to protect, respect and remedy. For example, according to principle 11 of the UN Guiding Principles on Business and Human Rights which synthesizes existing human rights obligations, the business enterprises’ responsibility to respect human rights “means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved” (Principle 11).5 A bottom-up approach, as used here, is similar to citizen science. Such ground-up approaches to gathering information are developing rapidly and are already changing how governments work. Either independently or together with national and local governments, individuals monitor the quality of the environment in which they live or move, for example, radon levels in their homes (in Canada, Ireland and Sweden); radioactivity in the urban landscape (Japan); schools measuring nitrogen dioxide (Ireland); thousands of homes monitoring outdoor air quality in entire cities (Belgium); biodiversity6 ; and the drinking water quality downstream of polluting economic activity. Apart from generating data, such a ground-up approach serves to conscientize the population on nature’s contribution to people, helping to create a sense of community, and as developed in this chapter, the right to information as well as holding dutybearers accountable for degradation of natural life-supporting systems.

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In this chapter, we address two research questions: (1) Does top-down transparency/information disclosure contribute or not to addressing the social-ecological challenges emerging from supply chains? (2) Do distinct types of transparency, top-down versus ground-up, differ in the way they can contribute to address these challenges and thereby to the enjoyment of the right to a healthy environment?7 The rest of the chapter is organized as follows: First, the case study of mining is introduced by describing some of the key sustainability challenges of this sector. Thereafter, the conceptual framework is introduced, which will be used to assess transparency in the context of contemporary social-ecological challenges. Subsequently, the framework’s tool to diagnose common challenges to effective transparency assesses the sector (the case study, which is mining) along spatial, temporal, and power scales. In the subsequent section, information is unpacked into sub-characteristics that we argue are necessary for understanding what makes transparency effective. The analysis is then discussed, and is followed by the concluding section with policy considerations.

Theoretical Framework and Methodology To address our research questions, we build and further develop the Ecosystem Well-being—Human Rights framework (Ituarte-Lima & Stromberg, 2018a), which synergizes the IPBES framework and human rights law to enable contrasting the transparency effectiveness of topdown versus ground-up approaches to managing information about the potentially harmful effects of industry on social-ecological outcomes. Under human rights law, States have substantive and procedural obligations as well as heightened obligations concerning people in vulnerable situations (Ituarte-Lima, 2017; Knox, 2017). While in this chapter we will discuss mainly procedural rights, a key human rights principle is that human rights are interdependent and indivisible: substantive rights such as right to water and right to health often depend on procedural rights. The procedural human rights obligations of States in relation to the environment include access to information, public participation and access to justice including remedy. For example, States have specific procedural obligations before granting a mining concession, authorizing a dam or an infrastructure project, which would cause degradation or loss of biodiversity. These obligations include assessing the environmental and social impacts of the proposal, including environmental and social impact

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assessments. It also facilitates the exercise of people’s right to freedom of expression and association, and public participation in decision-making processes, which in turn can contribute to better informed decisionmaking about ecosystem services. Procedural rights also include the right to access effective legal remedies for those who claim that their rights have been violated. Complementary to the characterization of duty-bearers’ obligations based on human rights law, key dimensions of the EW-HR framework include examining the following (Fig. 10.1): • Time horizons (short-term, medium-term and long-term). • Spatial dynamics/scales (local, regional, global); for example, a global market may lead to regional loss of forest that increases flood magnitude along a local stretch of a river. • Factors that indirectly affect ecosystems, such as population, technology, and lifestyle that can lead to changes in factors directly affecting ecosystems, such as unsustainable catches by fisheries or the application of unsustainable use of agrochemicals in the production of food, fodder, fiber, and fuel.

Fig. 10.1 The IPBES framework adapted to show the nexus between mining, ecosystems and human rights (Source Authors’ adaptation [in Ituarte-Lima and Stromberg 2018a] of IPBES and Díaz et al. [2018])

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The resulting changes in the ecosystem cause the ecosystem services to change, thereby affecting nature’s contribution to people and human well-being. Methodology To address our research questions, we adopt a case study approach to understand the untapping of transparency as applied to the socialecological sustainability challenges arising from mining. Mining is chosen for the case study because that sector contributes to welfare but also compromises it, especially with regard to local, social and environmental impacts. This is a challenge from the point of view of social as well as environmental policy. The effects can be particularly severe at the local level. However, as shown by recent conflicts, it is also a problem at the national and international levels when mining industries pollute or make scarce/unavailable essential ecosystem services such as fresh water on which both urban and rural populations and economic activity, and nature, depend (Ituarte-Lima & Stromberg, 2018a; Stromberg & ItuarteLima, 2018). The business sector sometimes argues that their focus is for-profit, having to report to their share-holders only, and without recognizing their human rights-related responsibilities. But even from a totally for-profit perspective that does not consider being in line with human rights standards, businesses are increasingly becoming aware that such an approach can have consequences that stem from conflicts with local populations, even causing the banning of open-pit mining at subnational or national levels, such as in El Salvador, Colombia, and Costa Rica. Meanwhile, recent initiatives with substantial institutional weight have recently made public announcements about the important role that transparency has in environmental matters in mining.8,9 However, they are yet to propose how such a vision of transparency for better governance will materialize. We used a composite of methods to address our research questions including literature review, analysis of policy documents, legal interpretation and participant observation in multi-actor events/initiatives. The focus of these events was environmental governance with participation of people, particularly from governments, human rights national institutions, civil society and academia, including the workshop SEPA-UNDP

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Mejorando la Gobernanza Ambiental en el Sector Extractivo Colombiano in Bogota, Colombia (November 2017), the webinars “Environmental governance of the mining sector/Gobernanza ambiental del sector minero” of the NBSAP Forum Webinar Series and GOXI Learning Series (October 2017). Insights on issues relevant to transparency were also obtained from participant observation in multilateral environmental agreements, specifically the Convention on Biological Diversity including events on mainstreaming biodiversity in the mining sector at the CBD Subsidiary body on scientific, technical and technological advice in Montreal, Canada (December 2017), and at the CBD-COP14 in Egypt (November 2018). On transparency and mining, participation in the 2019 annual meeting of Extractive Industries Transparency Initiative (EITI) provided relevant insights.

Effective Transparency from a Systemic Perspective Why Top-Down Transparency Is Not Enough Transparency is part of governance and indirect drivers, located in the center box of the theoretical framework in Fig. 10.1 in the above section. Transparency is often seen as not only a right to information per se, but as a policy instrument conducive to responsible business practices by incentivizing polluters to enhance their environmental performance. As such, transparency has even been described as a precondition for sustainable production and consumption, by greening commodity chains (e.g. Wognum et al., 2011). However, misused transparency initiatives can indeed be counterproductive, such as greenwashing (Silberman, 2011).10 Transparency could then give an illusion of environmental compliance, thereby deviating the regulator’s or public’s attention from the need for alternative, more stringent, regulation (e.g., Kim & Lyon, 2011; Lyon & Maxwell, 2011). While ID is appealing in principle, the self-reported data in PRTR has repeatedly been found to be incorrect (e.g., Hoffman et al., 2015; Johnston Edwards & Walker, 2019; Kim & Lyon, 2011; Walker, 2018). Some studies of ID schemes do report positive effects (e.g., García et al., 2009), but it is generally held that ID requires strong institutions to work well (e.g., Blackman, 2010). One methodological problem when assessing ID schemes is the difficulty in isolating the effect of ID from the effect from other, parallel, regulation, or technological change. For

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example, the Canadian PRTR scheme was introduced simultaneously with stringent standards (Harrison & Antweiler, 2003), which may confound the cause-and-effect link. The question is not whether ID and PRTR are relevant policy instruments. Probably under the appropriate circumstances, they are. Rather, a key question is if they are sufficient for effective transparency. Governments have in general very limited means to verify the emissions reported to PRTR registers, due to resource constraints of inspection agencies (e.g., EPA, 2011). This means that the incentive for firms to disclose their emissions accurately may be weak (Lyon & Maxwell, 2011). For example, for the European reporting of dioxins and furans, EEA (2011) informs that “Reporting of PCDD/PCFD under E-PRTR 2009 is extremely inconsistent between countries.” Some firms disclose only selectively (Kim & Lyon, 2011), or aggregate pollution across time or space which may hide hazardous peak levels of pollutants. One way could be to aggregate in “spatial” terms, by disclosing emissions data that are aggregated across several plants, thereby failing to disclose peak levels at individual plants. In fact, conventional registers are required to report only annual averages of pollution (consistent with the OECD Recommendation of the Council on Establishing and Implementing Pollutant Release and Transfer Registers, OECD, 2018). Examples are the Swedish and Canadian pollution registers, which present annual averages of pollution and therefore, do not reveal information about temporal peak levels of pollutants. The dose-response functions for how pollutants affect nature and human health is non-linear, containing thresholds and tipping points. Because averages mask temporal peak loads, the PRTR data underestimates the impact that pollution has on society and how it affects people’s right to a healthy environment in distinct ways. Moreover, ID initiatives are not easily adopted by low- and middle-income countries due to their high cost, high requirements in terms of government competence, resources as well as institutional integrity. This may explain why there are no such scheme in Africa, and only three in Latin America (Chile, Mexico and Nicaragua).11 The Mining Sector as a Case Study Conflicts related to mining have increased rapidly during the past decade due to competition for resources (CIRDI, 2017) such as water and land. Meanwhile, the demand for minerals is expected to double in volume over

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the coming 30 years (OECD, 2019), and supply of mining inputs such as water and land will be further constrained, due to climate change and requirements from agriculture to feed a growing population (Deloitte, 2018). IPBES global assessment (2019) highlights pollutants, mining and toxic dumping as activities with strong negative effects on soil, freshwater, and marine water quality. The environmental footprint in turn affects nature’s contributions to people, some which are not fully replaceable, and some are irreplaceable. Renewable energy technologies put additional pressure on socialecological systems because they rely on minerals available at only a few sites in the world. This limited substitutability across potential extraction locations has already disrupted supply chains and production of end goods. Geopolitical factors have disrupted supply chains of rare minerals—such as in the China-Japan conflict in 2011, and conflicts in the Democratic Republic of Congo (De Koning, 2011). Environmentally motivated conflicts have disrupted supply from the Andean region, where rare resources of lithium exist, which are used in IT products such as mobile phones.12 Sweden holds rare earth minerals, for example, bastnäsite, monazite, and xenotime, but villages have already objected to their extraction. To address these challenges, transparency has been proposed as part of good governance. Satellite data is increasingly used in environmental monitoring, including in mining. For example, new initiatives by World Resources Institute as well as UN Environment enables one to access online data on natural resources status adjacent to mining areas, and the X-Map initiative led by UN Environment is dedicated to socioenvironmental impacts from mining. So far, their ability to monitor detailed impacts on terrestrial and aquatic environment is limited, and requires visibility of the environmental impact (which excludes for e.g., industrial processes under one roof, or impacts occurring sub-surface of soil or water). Scales of Social-Ecological Challenges Arising from Mining We adopt below a tool from the EW-HR framework (Fig. 10.2) that helps to structure some social-ecological challenges that arise from the activities of the mining sector.

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Fig. 10.2 Scales of concern for sustainability (Source Authors modified from Ituarte-Lima and Stromberg [2018a])

Figure 10.2 is applied to our case study, mining. Following ItuarteLima and Stromberg (2018a), typically only those environmental impacts occurring within the project site are reported, and only within the commercially active time of the activity (i.e., the small box indicated by the white arrow). This may include clearing of land, change in water table levels, water and soil pollution, generation of particulate matter in the air, blasting, and sedimentation (Ituarte-Lima & Stromberg, 2018a). Impacts beyond the project site may include pollution of agricultural soil or water, effects on drinking water supplies or on the productivity of downstream fishing (fish nursery mangroves, river banks, or actual fishing waters). Induced impacts (i.e., not directly attributable to the project) include impacts on associated industries, social services, and commercial services such as stores, and the population growth due to establishment of residential settlements with increased pressure on sanitation, water supply, and biodiversity. Lastly, a particular challenge is to measure cumulative impacts (i.e., combined with other activities). A river may be shared by

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a mine, a city, and a downstream factory, each of which alone does not have a substantial impact on ecosystem services. However, taken together their impacts breach an environmental threshold, for example, impacting the same local fishing nursery waters, persistent bio-accumulative toxic substances, further habitat fragmentation, reduction, or extinction of certain vulnerable species. Time scale. Mining has relatively longer-term effects on the environment than many other economic sectors (horizontal axis, Fig. 10.2). Despite that, regulation of mining social-ecological impacts tends to be static, insufficiently addressing the effects of sudden, unexpected events as well as events occurring in a long-term horizon. While environmental impact assessments are often compulsory, they are done before the extraction starts. Therefore, at best they are based on a qualified prognostic about how much ore is going to be extracted and managed, where, and with which technique. This ex-ante focus contrasts to the reality that production from a given mine often continues for several decades, and after mine closure, tailing dams imply substantial environmental risk in perpetuity. As production continues, ever more ore is discovered and extracted. This gives both a scale effect and a composition effect. First, the volume of tailings and the size of tailings dams increase. With more tailings and larger dams comes increased pollution and risk for dam brakes with wide socio-environmental impact. Second, as the easily extractable ores are finished, the extraction continues into sometimes less pure ore containing more toxic impurities such as arsenic.13 Apart from such deviations from the environmental impact assessments, which are due to the mining operations themselves, the context of the mine too, changes over time: Regional competition for water often increases due to demographic and climate factors, with effect on for example, both water volume and quality downstream and upstream (see for e.g., Ituarte-Lima & Stromberg, 2018a). Additionally, challenges arise by crossing mandate periods. Even 50 years, a relatively short time horizon for many mines, equate to twelve presidential mandate periods in many places. These factors place the mining industry further out on the time axis (Fig. 10.2) than most other economic sectors with potential impacts on the right to a healthy environment not only of present generations, but also of generations yet to be born. Spatial scale. As mentioned under “Time scale,” extractive industries have vast spatial impact on nature’s contribution to people, including

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water volume and quality down-stream (e.g., pollution and alteration of water tables) as well as upstream (e.g., dams providing mines with electricity) (Ituarte-Lima & Stromberg, 2018a), and air particles hazardous for respiratory diseases, soil and biodiversity entering neighboring municipalities, territories, and countries. This places the mining industry further out on the spatial axis (Fig. 10.2) than most other economic sectors, affecting not only the people neighboring the mining site but also beyond. State obligations and business responsibilities concerning a healthy environment, which include breathing clean air, accessing clean water, and living, working, studying, and playing in non-toxic environments are affected. Current law and policy have mismatches with social-ecological systems (Ebbesson & Folke 2014; Libert Amico, Ituarte-Lima, & Elmqvist, 2019); e.g., ID including PRTR consider end-of pipe emissions, failing to place the emissions in their spatial context. Furthermore, focus on spatial scale of emissions rather than spatial scale of exposure experienced by people and non-human beings misrepresents the relevant spatial scale to match with social-ecological systems and the impacts on people and other non-human living beings. Power scale. This axis is additional to Fig. 10.2. The mining industry has substantial power because it is a lucrative industry; the 50 largest mining firms in the world were worth $896 billion (2018).14 Moreover, the mining industry supply of metals and minerals is of strategic economic and often geopolitical importance. The advent of renewable technologies has created a new dependence from producers of such technologies, on supply from mining operators (UNDP, 2018). The power of the mining industry sets the State—from the legislature to the executive and the judiciary—at a relative disadvantage. The challenge is accentuated in lowand middle-income countries, sometimes due to corruption, where State officials are relatively weak due to smaller budgets, and due to lack of specific environmental expertise, not least in off-shore mining. Immediate financial revenues generated through mining (Temporal scale) are often controlled by a small number of hands (Power scale). This small number of powerful people can act as “gate keepers” to the financial revenues generated by mining, and use as well as gain further power by their control over the allocation of economic resources, and job promises to other stakeholders (e.g., Bebbington, Abdulai, Bebbington, Hinfelaar, & Sanborn, 2018).

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In contrast, the negative impacts on people’s right to a healthy environment from environmental and health damage are spread out over time (Temporal scale), and across potentially hard to monitor large areas upstream and downstream of the mine or remote areas (Spatial scale). Additionally, mining industries are often multinational in character, with international firms based in territories with very different regulatory approaches to sustainability and human rights.15 Likewise, mining industries operate in localities and countries with a wide range of political realities (including armed conflict), and through sub-entities in locations that respond to other regulatory regimes (including fiscal paradises). Global Witness (2016) identified conflicts over the control of land and natural resources as underlying factors in almost every killing of environmental defenders in 2016 (Power scale). Mining and extractives were assessed by Global Witness (2019) as the most dangerous sector to be an environmental defender with more murders—43 cases in 2018—than any other sector. The mismatches between law and social-ecological systems raise severe challenges for sustainability governance and the enjoyment of the right to a healthy environment. On the one hand, duty-bearers can instead become power-holders, taking advantage of here-and-now benefits controlled by a few powerful actors (mining operators, key governmental staff); and on the other, rights-holders experience the impacts “there-and-in-the-future.” Those rights-holders include downstream populations conducting agriculture or fisheries as a livelihood, the downstream general public in cities, towns, and villages affected by hazardous pollution, the host country’s tax-payers who ultimately finance the public debt used for investments in infrastructure including hydropower plants for the mines, social service to its workers during operation of the mine and, after its closure, environmental rehabilitation of abandoned mines, etc. Assumptions underlying ID do not match with what ID currently delivers. Namely, that publicly available data about pollution levels will be of high quality, and presented in a way that will make it highly used, thereby motivating mining ventures to comply with international sustainability and human rights standards.

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Untapped Potential of Ground-up Transparency Data can be characterized in several ways. Ultimately, the context and purpose of the data will determine which characteristics are most important; that is, the data needs to be fit for purpose (e.g., Chen, Hailey, Wang, & Yu, 2014; Fadahunsi et al., 2019; Redman, 2013). It follows that the choice of data characteristics greatly affects the usefulness of the data, such as how effectively it contributes to the enjoyment of the right to information and corresponding transparency obligations of duty-bearers. Based on the EW-HR framework, and keeping in mind the three axes of time, space, and power, we proceed to assessing information characteristics. We contrast how top-down versus ground-up approaches may differ in the ways in which they contribute to what we conceptualize as “effective transparency.” By effective transparency we refer to a type of transparency which does not only aspire to, but actually does enhance social-ecological status. To this end, we take stock of a selection of initiatives: information disclosure as an environmental policy instrument; citizen sensing; governments and others using citizen sensing data; technology development including sensors and emerging IT for open data; and access to easily understandable data. Furthermore, UN international bodies as well as regional bodies such as the Organization of American States, the Council of Europe, and the African Union have provided authoritative interpretations of the content of procedural rights, as well as the need for effective measures for the enjoyment of this right in practice. For example, the right to freedom of information is interpreted to be of fundamental importance not only to democracy and freedom, but also to the right to participate and to the realization of the right to development.16 Complementary parameters are also set for substantive rights such as the right to water. For example, the UN Committee on Economic, Social and Cultural rights also sets out the different aspects of the right to water, specifically availability, accessibility, acceptability, and quality.17 Because effective transparency concerns not only information disclosure by duty-bearers but also substantive elements of the right to a healthy environment such as clean water, nontoxic environments, healthy biodiversity and ecosystems, and authoritative interpretations of both procedural and substantive obligations that are relevant in interpreting the content of the information.

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Recent advances of low-cost sensors to measure environmental quality, new information and communication technology, data mining and processing have significantly leveraged the potential for ground-up approaches of data provision. Even seemingly low accuracy and low precision data becomes more useful, for example, by drawing statistical inference from more than one measurement point of water quality. New technology for monitoring environmental quality and sharing this information has changed the balance between top-down and ground-up (e.g., Dupuy & Aarvik, 2017; Pareja, Xavier, & Daitch, 201918 ). The advent of better and cheaper technology for measuring environmental quality enables local communities to monitor water intake. This is an important enhancement, because recalling Fig. 10.2, it addresses the shortcoming of monitoring only end-of-pipe, by detecting indirect, induced as well as cumulative impacts of mining. Data accuracy. Ground-up transparency, in which rights-holders contribute to unveiling the social-ecological mining impacts on nature and nature’s contribution to people through generating, accessing and sharing information as well as participating in environmental matters, which can contribute to higher transparency effectiveness. The reasons are that ground-up approaches are well placed to monitor not with a focus on environmental quality per se, but with a focus on human exposure to pollution—e.g., water that people drink and the air that people breathe (indirect, induced and cumulative effects, see Fig. 10.2). The advent of new technologies has changed the enabling environment for ground-up transparency. Better and low-cost monitoring equipment with increased precision and accuracy is already being used, for example, in a large number of participatory community monitoring schemes in Latin America (Pareja et al., 2019). The cost of monitoring and IT equipment is quickly falling. While monitoring equipment is still costly, at about USD 5000 for one measurement device capable of monitoring several substances with high-enough precision and accuracy, financing is often provided by civil society organizations and foreign aid, or by the government. In Peru, the law recommends mines to finance implementation of community environmental monitoring committees. The community may then send a water sample for external analysis, such as to academia willing to support with an assessment of the water quality. Such networking between academia and ground-up initiatives are very common in other applications of citizen science. The authority responsible for environmental inspection can be notified. If the sensing is shared or open data,

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it can be autonomously monitored by the regional or national agency responsible for environmental inspections, prompting a government field visit. Open sharing may also serve as early warning to communities further downstream, as well as upstream mining operators, or civil society watchdogs and even mass media. If several sensors along the same watershed indicate high pollution levels, the usefulness of the data goes from early warning to proof of pattern. Tagging the censoring results by time and location enable applying simple programming codes, and increasingly feasible artificial intelligence, to reveal relevant information for effective transparency. For example, these sensors and analysis of information can capture when pollution burdens are cumulatively produced by more than one mine or other pollution sources. Enhanced measurement, and analysis of large datasets, leverage the usefulness of ground-up approaches. The new technology allows the sharing of such data beyond just the direct duty-bearers and rights-holders; making the data public enables any individual or organization to assess it, including by emerging artificial intelligence technology. Importantly, open data propels diffusion via mass media to make tax-payers and investors aware of forthcoming environmental liabilities and political risks, thereby incentivizing them to pressure toward more sustainable production. Ground-up transparency can contribute to collaboration between State officials and rights-holders to hold accountable duty-bearers violating environmental and human rights law. State officials and/or academia networks can collaborate with rural and fisherfolk communities, urban citizen science initiatives, and combine such data with simplified hydrological data to detect the source of the pollutant. The information may serve as evidence of the extent to which standards, regulations, norms and principles are being complied with in a judicial, quasi-judicial (e.g., presenting the case to a human rights commission) or a non-judicial case. Having baseline information and evidence of impact can serve to prevent damage to people and nature (e.g., provide arguments to deny a mining project license or to request improvements to project license conditions to safeguard ecosystems functions and services), and access remedy (e.g., environmental restoration orders when harm has already occurred, and access to compensation when restoration is deemed not possible).

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Data precision. Technological advances described under the previous section enhance both data precision and timeliness (next section). The terms accuracy and precision need to be qualified, for example, in accordance with the associated purpose. If the community-sensed data is indicating sudden high pollution levels, the precision of the data may suffice as a trigger for precaution against using the water until further analysis is done. Precision in detecting hazardous pollution levels may be valuable even when its accuracy is relatively low compared with the measurements made by more sophisticated equipment. (People with potential exposure to polluted air or water are likely to prefer some false alarms to not being aware of a serious hazardous or life-threatening pollution peak.) Data timeliness. In contrast to the current ID schemes, providing annual averages of pollution levels by the end of the year, new technology enables real-time sharing of pollution data between rights-holders. This is important for three reasons. First, to sound an alert about hazardous peak levels of pollution. Second, to provide information about pollution levels within narrow time periods, which is important. The health impact of pollution is non-linear, and above certain thresholds the effect can be certainly severe (e.g., during pregnancy, or for children or older people). A coalition of stakeholders, for example, provides real-time open data on water quality for the McKenzie river in Canada, and the data is secured through blockchain technology. Clearly that is a high-cost example, but low-cost options abound.19 Third, early warning systems to prevent the damage may be especially important in mining due to the potential magnitude, and low reparability or irreparability of the damage to the environment. Data trustworthiness. Citizen sensing through participatory community monitoring enables the rights-holders to conduct their own monitoring, for example by fellow community members they may trust more than duty-bearers. By gathering data from several points in time, along different upstream and downstream locations, data becomes less vulnerable to both intended and unintended distortions. The next section addresses another aspect of data trustworthiness. Data accessibility. Monitoring at the water intake enables access to data both through direct reading from measurement devices and, by sharing it digitally. However, people measuring the environmental quality (e.g., water) can also become gatekeepers of that information, potentially restricting others from access to the data, including people of the

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same community (Transparency International, 2017). While some groups such as women, youth and the poor may have relatively less power within their respective communities, not least to access environmental information, new technologies can be an entry point to tackle this inequality. Compare with recent examples of how smartphones and social media enable women in repressive environments to file their claims (without even going to government offices, which may be against social norms in some contexts) and/or connect with like-minded people. Several local and citizen-sensing initiatives involve youth, building on their technical savvy and concern for their own future. IT solutions for sharing data can provide universal access to fellow community members, downstream communities, governments, industry and mass media. (Accessibility is linked to communication. The ability to communicate the data to those other than the direct stakeholders in mining is described in the first point, Data accuracy). Data interpretability. Data must be used to be of any value. Usability of data hinges on its being adapted to specific users. Language, format, and cultural sensitivity are key ingredients for effective communication. While ID often does not match the needs of data interpretability, more so in multicultural settings with illiteracy, local monitoring offers the possibility of rights-holders to generate interpretable data suited to their needs and, also with the support of academia or civil society organizations, contrast it with the information provided by duty-bearers and identify convergences and divergences in interpretations on the actual situation, damage and risks. Data low-costliness. Not only the latest technology but also the basic versions of PRTR are costly infrastructure to set up (here we use costliness to mean all requirements, including financial but also knowledge, skills, accountable institutions). Low- and even middle-income countries with other pressing needs may find it difficult to be motivated to set aside enough resources to build such solid systems of data gathering, in contrast to opting for other more low-cost solutions such as ground-up approaches.

Discussion and Policy Implications The chapter uses the EW-HR framework to move the policy focus: from data provision about end-of-pipe pollution within the concession site to the actual exposure of this pollution, and thereby the ability of

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measuring impacts on the ecosystems and a good quality of life. Rather than only measuring heavy metals’ concentration in end-of-pipe pollution, one needs to account for the actual impact that those heavy metals have on the stream in which fish live and lay their eggs, and the water that women, men, girls, and boys drink. Pollution release at the end-pipe in contrast to exposure and impacts is very different, because the latter captures other interacting dynamics that affect nature’s contributions to people as well as nature’s intrinsic values; for instance, impacts on fragile ecosystems, reproductive cycles of plants and animals, and key intellectual and physical developmental stages in babies, girls, and boys. Through our analysis using the EW-HR framework, we show how the substantive elements of the right to a healthy environment, for example, safe water and sanitation, is often dependent on procedural rights such as access to information and participation in decision-making. In this context, “information” can be nuanced into seven sub-categories for effective transparency. The characteristics of information under the right to access information will determine, under certain circumstances, whether people are able to meaningfully participate and enjoy their right to a healthy environment. In line with the interdependency human rights principle, effective transparency means understanding that the enjoyment of one human right may be dependent on another right, and no right is hierarchically above another right as all rest on the human dignity of all human beings. Several features of our case study, the mining sector, accentuate the challenges of only relying on top-down transparency. Mining is situated far out along spatial, temporal, and power scales, and the mismatch of these scales and social-ecological systems raises special challenges for ID to be a means for effective transparency. The reason is the mismatch between the conditions needed for the enjoyment of the right to a healthy environment, especially in the case of low- and some middle-income countries, and what top-down transparency is assumed to provide. Subsequently, combining insights from information science and jurisprudence/authoritative legal interpretation qualifying the right to access to information in environmental matters, we highlight seven aspects of information characteristics to tackle key challenges faced by top-down transparency that can help in achieving effective transparency. We have argued that policies currently misconceive/ignore several information characteristics, with impacts on the usefulness of the data. We have used tools from the EW-HR framework to scrutinize current approaches to

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transparency and have found that effective transparency requires a shift from only top-down transparency to a policy mix of both top-down transparency and ground-up transparency. We do not argue that effective transparency would be achieved only by ground-up transparency because this would imply too heavy a burden for rights-holders and dilute human rights obligations of duty-bearers to respect, protect, and fulfill human rights. When unpacking the information characteristics, we assess whether and to what extent the emergence of new technologies is relevant. We find that they are, and that they can flip around the way information is managed and by whom, from top-down to a combination of top-down and ground-up approaches. While the mining industry and governments will continue to have their sources for identifying pollution, they will not be (and in many cases they are not, already) the only ones generating relevant information on the social-ecological impacts of mining. Like emerging citizen science applications in other sectors, such as measurement of urban air pollution, there is significant potential to increase public participation in generating key data of the social-ecological impacts caused by mining. If made open data, such ground-up transparency can help stakeholders and decision makers to assess environmental impact in a more effective way all along the minerals value-chain. We find that current notions of transparency tend to build on an outdated view of the scope of technology. New technology has enhanced the possibilities for local communities in rural and urban settings to both monitor environmental quality, and to share such information digitally at relatively low cost. Notably, technological advances have enhanced the scope for higher accuracy, precision, timeliness, trust, interpretability, and shareability at accessible cost. We find significant scope for enhanced collaboration between governments and rights-holders to increase effective transparency as a tool for social-ecological sustainability. In our case study of mining, participatory community monitoring committees have the scope of going beyond being only a mechanism to reduce conflict between communities, mining firms and the government. Such groundup initiatives can also bolster the effectiveness of government in regulating and monitoring the mining sector, as well as holding accountable mining businesses that violate environmental and human rights law. Notably, ground-up transparency is not only placed at a potential level playing field with top-down transparency, but has several advantages over top-down transparency. Rights-holders are often closer to the impacts of

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mining (for example in remote rural areas) in comparison to duty-bearers such as government inspection agencies, who are often based in cities far from the mining sites. Being close to the site and being able to detect exposure and impacts timely is particularly important in terms of early warning systems. Combined top-down and ground-up approaches seem to have untapped potential as important policy instruments to align scales of law and policy with social-ecological sustainability. The two approaches complement each other across the seven data characteristics, such as by the location where top-down and bottom-up measure pollution. Additionally, they mutually reinforce each other: ground-up verification provides incentives for industry to enhance their reporting, thereby enhancing comparability of data, which in turn enhances the interpretation of the measurements conducted downstream.

Conclusions First, on the question on whether transparency contributes to positive or negative social-ecological outcomes: Using the case study of mining, this chapter reveals that top-down transparency risks being blind to key characteristics of information that are necessary for transparency. In the worst of cases, it is not about being blind to other necessary characteristics for effective transparency but using the discourse of accuracy and precision possibly intentionally to make the information de facto inaccessible to those rights-holders and/or duty-bearers who may use the information to hold accountable mining companies for their social-ecological impacts. We propose the term “effective transparency” to characterize transparency that is necessary for not only de jure compliance with information disclosure regulation but transparency that de facto contributes to positive social-ecological outcomes. As a monitoring tool for environmental and health authorities, the system is only as good as its input: First, by design, top-down transparency builds on data being self-reported, which opens the door for industry to report pollution only selectively; the data is reported in aggregate form across time and (often) across multiple factories; and it is reported end-ofpipe in contrast to where exposure and impacts to biodiversity, ecosystems and people takes place. Second, as a tool for transparency and right to information for the public, the literature shows that the public and mass media access the ID data only very sparsely. Because data is valuable only

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if used, we are concerned about ID data’s contribution to effective transparency. We conclude that effective transparency and openness cannot be a one-way process. Such a one-way approach may deviate attention from the need to adopt alternative, more stringent, law and policy instruments. On our second research question on whether top-down versus groundup transparency contributes to the enjoyment of the human right to a healthy environment, we find that the data needs to flow to other communities, mass media, investors and other trigger points with the greatest scope for aligning industry’s incentives toward a healthy environment for all. Our findings reveal the need to go beyond the current paradigm of top-down transparency. New technologies are changing the playing field for transparency. These new technologies help to significantly increase the scope of ground-up approaches, and allow them to partly but not entirely substitute the contribution of top-down transparency, which was previously unique to duty-bearers. New technologies have the potential to criss-cross the examined information characteristics, infusing them with the capacity to synergize and, in some cases even challenge the information disclosed by top-down transparency. As for any policy instrument, scrutinizing and challenging top-down transparency is vital for achieving effective transparency. Hence, groundup transparency can be a carrot for duty-bearers (e.g., complementing unavailable resources, accessibility to the site) and a stick (e.g., when duty-bearers, both governments and mining ventures, provide misleading information). These findings can be used in law and policy conducive to more sustainable production and consumption practices both nationally and internationally. For example, the findings can inform which policy framework needs to be in place for mining, and as such, could add to suggested assessment criteria for when mining concessions should be granted (see for e.g., Ituarte-Lima & Stromberg, 2018b). Acknowledgements We are grateful for useful comments received from the participants at the Sustainable Consumption and Production workshop, Stockholm School of Economics, 15–16 October 2019, particularly Professor Ranjula Bali Swain, Dr. Susanne Sweet, Dr. Örjan Sjöberg and Dr. Izabela Delabre. This chapter has greatly benefitted from participatory processes at the Swedish Environmental Protection Agency and United Nations Development Programme during the joint Environmental Governance Program, including

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feedback received in the SEPA-UNDP webinars “Environmental governance of the mining sector/ Gobernanza ambiental del sector minero” of the NBSAP Forum Webinar Series & GOXI Learning Series (October 2017); as well as presentations including the workshop SEPA-UNDP Mejorando la Gobernanza Ambiental en el Sector Extractivo Colombiano (in Bogota Colombia (November 2017) and at the Third Annual Meeting of the Policy and Technical Experts Committee (PTEC) of the World Bank (2014). We also acknowledge the thoughtful comments provided by Pekka Rinne and Ellef Hersoug. However, the authors remain fully responsible for the views expressed in it, and for any limitations of the final text. Claudia Ituarte-Lima’s research for this paper was funded by the Swedish Research Council (FORMAS) through the research projects, “Effective and Equitable Institutional Arrangements for Financing and Safeguarding Biodiversity” (no. 254-2013-13) and “Institutional Analysis of Ecological Compensation” (no. 2016-01556). She developed this chapter while conducting a visiting research stay at the Institute of Resources, Environment and Sustainability at the University of British Columbia.

Notes 1. Ituarte-Lima and Stromberg (2018b) suggests minimum criteria to inform when governments may grant mining concessions. The criteria may be useful also for other sectors. 2. Among the many definitions of a circular economy, they tend to converge in aspiring to a reduced through flow of resources in society, with the effect (although seldom stated as a primary aim) of releasing the pressure on earth’s life supporting natural systems (see e.g., EC, 2015, https://ec.europa.eu/transparency/regdoc/rep/1/2015/EN/12015-614-EN-F1-1.PDF). 3. An externality exists if a negative (or positive) impact is generated by an economic activity and affects third parties, without compensation being made. 4. Increasingly, firms include social values in their business models, either in response to policy or consumer preferences, but this is possible only as long as it is profitable. In contrast, the financial sustainability of mining industries is under increasing stress from the short-sightedness of investors (Deloitte, 2018). 5. UN “Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework” were developed by the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie. The Special Representative annexed the Guiding Principles to his final report to the Human Rights Council

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6.

7.

8.

9. 10.

11. 12. 13.

14. 15.

16.

17.

(A/HRC/17/31). The Human Rights Council endorsed the Guiding Principles in its resolution 17/4 of 16 June 2011. With over 50 million submissions, Artportalen is one of the world’s largest citizen science initiatives. Its website (https://www.artportalen. se/Home/About) contains data from the public’s observations of plants, animals and fungi. Top-down refers to the activity causing the environmental impact, and the government that is responsible for environmental inspections. Ground-up refers to those affected by the environmental impacts, such as downstream economic activity, or populations in downstream cities, towns and villages. Investors with $10 trillion in assets pressure miners over tailings safety, Accessed on 24 Sep. 2019 at https://www.mining.com/miners-challe nged-urgently-reveal-tailings-safety-records/. Extractive Industries Transparency Initiative (EITI), https://eiti.org/ homepage. (There) “…has to be a clear link between ID and government reputation (and potential fall from power), for accountability to be possible. This has major implications for the strategies of ID supporters.” https://www.ids.ac.uk/publications/beyond-inform ation-disclosure-to-achieve-accountability-in-the-extractive-sector/. As reported by the UNECE PRTR initiative, https://prtr.unece.org/prtrglobal-map. See e.g., https://newrepublic.com/article/155753/climate-changesgreat-lithium-problem. “The supply of easily exploitable ores has become exhausted. New orebodies are more complex, difficult to process and contain more toxic impurities like arsenic. Standard industrial processing methods, which include smelting and associated sulphur-dioxide emissions, are unsuitable for these complex ores.” Canada Research Chair in Aqueous Processing of Metals http://www.chairs-chaires.gc.ca/chairholders-titulaires/profileeng.aspx?profileId=3089. https://www.mining.com/value-top-50-mining-companies-surge-140-bil lion-2017/. States are sometimes parties to distinct multilateral environmental agreements and human rights treaties and the Constitutions and legal frameworks also differ from country to country. Report of the Special Rapporteur, Promotion and protection of the right to freedom of opinion and expression, UN Doc. E/CN.4/2000/63, 18 January 2000, para. 42. See also Holst Jensen, M., Villumsen, M., Døcker Petersen, The AAAQ Framework and the Right to Water (2014), https://www.humanrights. dk/publications/aaaq-framework-right-water-international-indicators.

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18. Source International business plan. Source International. Accessed 30 September 2019 at https://uploads-ssl.webflow.com/5d9954966e7b48d c0509576b/5daf95d51116387bbf0b0a8b_Source%202019%20Annual% 20Report.pdf. 19. http://gordonfoundation.ca/initiatives/datastream/.

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CHAPTER 11

Sustainable Production of Forest-Risk Commodities: Governance and Disarticulations Izabela Delabre, Callum Nolan, Kristjan Jespersen, Caleb Gallemore, and Anthony Alexander

Introduction Tropical deforestation has numerous socio-ecological and economic consequences, releasing more greenhouse gas emissions, in carbon dioxide equivalents, than the entire European Union (WRI, 2018a).

I. Delabre (B) · A. Alexander University of Sussex Business School, University of Sussex, Brighton, UK e-mail: [email protected] A. Alexander e-mail: [email protected] C. Nolan School of Archaeology, Geography and Environmental Science, University of Reading, Reading, UK e-mail: [email protected] K. Jespersen Department of Management, Society and Communication, Copenhagen © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_11

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The Paris Agreement and the United Nations Sustainable Development Goals (SDGs) seek to strengthen forest governance. SDG 15.2 ambitiously aims to ‘promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests and substantially increase afforestation and reforestation globally’ (UN General Assembly, 2015), and the SDGs as a whole explicitly address transnational production-consumption connections driving land-cover change (Gallemore, 2016). Despite this growing attention, deforestation continues, with 15.8 million hectares of tropical tree cover loss recorded in 2017 (WRI, 2018b). As Peet, Robbins, and Watts (2010) argue, understanding how the global commodity system connects production and consumption across distance is essential to explaining and countering the drivers of uneven global environmental change and its societal effects. As new forms of information exchange have made it simpler to identify ‘telecouplings’ between distant producer and consumer systems (Lenzen et al., 2012; Liu et al., 2013), supply chain members in several sectors, particularly cattle meat, forestry, oil palm, cereals and soybeans, have been forced to pay attention to ‘deforestation-risk’ commodities (Pendrill et al., 2019; Weber & Partzsch, 2018). Despite these concerns, international trade in high forest-risk commodity trade continues to grow to meet rising demand (Grassini, Eskridge, & Cassman, 2013), continuing to raise pressure on forestlands. This chapter draws upon the concept of ‘disarticulations’ (Bair & Werner, 2011; Havice & Campling, 2013; McGrath, 2018) to examine how (sustainable) commodity production is governed through ‘zerodeforestation commitments.’ Put simply, the disarticulations perspective studies how socio-economic processes in global production are linked or delinked, and how people can be connected to or excluded from these chains. This brings an analysis of global production networks into

Business School, Frederiksberg, Denmark e-mail: [email protected] C. Gallemore International Affairs Program, International Affairs Program, Easton, PA, USA e-mail: [email protected]

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conversation with critical political economy’s emphasis on discourse and knowledge production. The chapter describes some of the current complexities of implementing zero-deforestation commitments, as they are enacted in heterogeneous contexts, and enroll diverse actors and alliances. Finally, we explore opportunities for research and practice in shifting toward sustainable production and consumption of deforestation-risk commodities.

Disarticulations and ‘Sustainable’ Commodity Supply Chains Next, we describe the disarticulations approach in relation to Global Commodity Chain (GCC), Global Value Chain (GVC), and Global Production Networks (GPN) perspectives. We then consider how the disarticulations approach can support analysis of the zero-deforestation agenda, its uneven effects on different actors, and how socio-economic processes in global ‘sustainable’ commodity production come to be discursively and/or physically linked or delinked in commodity circuits. Shifting from the macro-historical perspective from which worldsystems theory’s ‘commodity chain’ concept derives (Hopkins & Wallerstein, 1977), Global Commodity Chain (GCC) and Global Value Chain (GVC) analyses focus primarily on relations between different firms— particularly between buyers and suppliers (Gereffi, Humphrey, & Sturgeon, 2005; McGrath, 2018). The GVC perspective adopts a ‘problemsolving’ approach intended to support ‘upgrading’ toward higher valueadded activities (Selwyn, 2019). The Global Production Networks (GPN) approach moves away from the chain metaphor, to examine networks for firm and non-firm stakeholders within which the governance of production is embedded (Havice & Campling, 2013; McGrath, 2018), and the complexity and variety of non-firm actors in shaping economic activity (Coe & Yeung, 2015). In contrast to organization-centric accounts common to commodity chain approaches, the disarticulations perspective studies how discourses shape economic exchange (McGrath, 2018). This perspective is not so different from work in institutional economics. North (2005), for example, argues that normative and empirical beliefs are central to explaining economic change and that agents can manipulate belief systems to maintain inefficient economic institutions from which they benefit.

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Greif (2006), similarly, argues institutions can be analyzed as interconnected processes driven by organizations, rules, norms, and beliefs. Supporters of the disarticulations approach contend that, as Wheatley (2011: 69) puts it, ‘Nothing exists independent of its relationships,’ and study the ‘many forms of power relations that characterize multiple and intertwined relations of networks’ (McGrath, 2018: 514) that allow certain actors to shape the beliefs and norms that form and reform transnational commodity circuits (Bair, Berndt, Boeckler, & Werner, 2013). This perspective encourages us to study the messy politics through which actors implement zero-deforestation commitments, the discourses that legitimate their use, and the complexities in their implementation. As we consider how ‘zero-deforestation’ efforts emerge and are implemented, we explore the range of relationships that interrupt or fragment the current organization of commodity chains (Faier, 2011). High-level zero-deforestation commitments requires ‘screening out’ ‘unsustainable’ commodity suppliers. The goal here is to understand how diverse actors can use the zero-deforestation agenda to shape the terms of other actors’ roles in commodity supply chains. In this case, we examine how actors physically and discursively differentiate sustainable ‘deforestation-free’ and unsustainable commodities, creating a complex of beliefs, norms, rules, and organizations (Greif, 2006) that affect who can access which commodity circuits. analyzing zero-deforestation commitments through this lens highlights how new forms of sustainability governance interact with extant commodity circuits to shape where value is added, who can sell what, to whom, and who benefits therefrom.

Deforestation in Telecoupled Commodity Supply Chains and Zero-Deforestation Commitments Global annual deforestation has increased dramatically since the latter half of the twentieth century, driven by the aggressive and rapid economic expansion that has accompanied an increasingly globalized world. Much of this deforestation is linked to large-scale agricultural development. Pendrill et al. (2019), for example, attribute 62 per cent of forest loss between 2005 and 2013 to expanding commercial cropland, pastures, and tree plantations. Globally, the commodity groups most commonly associated with deforestation are cattle meat, forestry products, oil palm, cereals and soybean. Contemporary deforestation’s multi-scalar impacts

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are becoming increasingly well understood as civil society organizations, international institutions and academics continue to identify socioeconomic and ecological devastation on numerous commodity frontiers, often alongside dispossession and violence (Butt, Lambrick, Menton, & Renwick, 2019; Moore, 2010; Tsing, 2003). Indigenous and local communities may rely directly on tropical forests’ ecosystem services, including the provision of food, medicine, and livelihood, as well as on the biodiversity that inhabits these regions (Laurance, 1999; Sunderlin et al., 2005). State and corporate actors, capitalizing on weak tenure systems in forest and rural communities, often usurp local communities’ control over, and access to, these benefits frequently through direct use of force (Li, 2018). Land described as ‘marginal’ or ‘unproductive’ (often in contrast to communities’ claims) can then be opened up as a resource for global investment, with significant implications for local livelihoods and social relations (Li, 2014; McGrath, 2018). Telecoupling, which refers to socio-economic and environmental interactions over distance, results from agents’ strategies that facilitate or impede flows of material, energy and/or information among coupled human-natural systems (Liu et al., 2013). Telecoupling through global commodity chains results in asymmetrical power relations, the dynamics and effects of which require more scholarly attention. While most research on global commodity chains (broadly conceived) studies how commodities are ‘incorporated’ into global supply chains and is subject to an ‘inclusionary bias’ (Bair & Werner, 2011), a disarticulations approach helps us to better characterize the actual terms of incorporation and how they evolve over time. This perspective also supports our understanding of the processes of devaluation and exclusion (whether physical or discursive) that (re)produce global production networks and value chains. Supply chains have become globalized, extended and diffuse, so knowing exactly where commodities are sourced, and the environmental and social conditions of their production, presents an unprecedented challenge. Such opacity has often been of benefit to multinational corporations who have facilitated, or turned a blind eye to, harmful telecouplings while decoupling themselves from negative externalities through a lack of transparency. Buyers may work to bridge distances when communicating demands around quality, timing and quantity to suppliers, but maintain distance when activists point out their supply chains’ negative environmental and social impacts (Tsing, 2009).

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Armed with more inexpensive telecommunications and monitoring technology, alongside social media savvy, civil society organizations and some governments recently began linking telecoupled deforestation with specific globally recognizable corporate actors, accountable for their supply chains’ deforestation (Gallemore & Jespersen, 2019; Weber & Partzsch, 2018). Facing these risks, some businesses partnered with NGOs to establish initiatives for sustainable commodity production and ease sourcing. Unilever, for example, was a founding member of the Roundtable on Sustainable Palm Oil in 2004 (Schouten & Glasbergen, 2011) and several large downstream supply chain members are critical sources of pressure for increasing the standard’s stringency (Gallemore, Guisinger, Kruuse, Ruysschaert, & Jespersen, 2018). In these novel forms of private rule-setting (Scherer & Palazzo, 2007, 2011), non-state actors, including businesses and NGOs, gain functions ‘that have historically been the task of governments, most notably that of regulating the negative externalities of economic activity’ (Mayer & Gereffi, 2010: 1), such that both firm and non-firm actors play active roles in shaping telecoupled production and consumption (McGrath, 2018). Recently, several corporate actors have issued ‘zero-deforestation commitments’ (ZDCs), voluntary pledges to eliminate deforestation from their entire supply chains, or at least for specific commodities or sourcing locations. Such commitments have proliferated in the past decade, driven by ‘name and shame’ NGO campaigns and recognition of a ‘business case’ for Corporate Social Responsibility (Newton & Benzeev, 2018). By March 2017, over 760 public ZDCs had been made by 447 commodity producers, processors, traders, manufacturers, and retailers (Donofrio, Rothrock, & Leonard, 2017). However, more understanding is needed of the complex politics of ZDC implementation (Lambin et al., 2018; Lyons-White & Knight, 2018). Commitments vary wildly on issues as critical as the definition of ‘forests’ and ‘deforestation,’ implementation mechanisms, and success metrics (Garrett et al., 2019). Diversity and ambiguity make it difficult to evaluate ZDCs’ contribution to reduced deforestation. There is also warranted cynicism about corporate-led sustainability initiatives in general, often considered to be largely symbolic attempts to disguise a general continuation of business as usual (Dauvergne & Lister, 2012).

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Discourses in Zero-Deforestation Governance Although ZDC are made at the ‘global’ level and imply a standardized and stringent rollout, zero-deforestation remains an institutional void at the transnational scale. ZDCs face diverse contexts, intersecting with existing inequalities and political structures. Next, we discuss dominant, mainstream discourses prevalent in zero-deforestation governance, the complexities of implementation of ZDCs, and consider who may benefit, or be harmed in the implementation of such commitments. Discourses shaping deforestation governance include the following notions: (i) Implementing zero-deforestation is highly technical and requires the expertise of consultants and third parties; (ii) All supply chain actors have responsibility for zero-deforestation; (iii) The need for data and technologies for governing deforestation; (iv) Jurisdictional approaches provide joined up governance for zero-deforestation. Implementing Zero-Deforestation Is Highly Technical and Requires the Expertise of Consultants and Third Parties Complex negotiations between industry stakeholders are required to establish these initiatives’ requirements and make ZDCs ‘practical’ to implement. In these sites of knowledge production, definitions and technical requirements act as the rules and norms that affect who can access commodity trade, and how they can benefit. ZDC implementation requires experts, consultants, third parties, and review panels to deal with technical requirements and ensure independence and objectivity. In the palm oil sector, for example, Greenpeace, Golden Agri Resources (GAR) and a consultancy firm developed a methodology for forest classification called the High Carbon Stock (HCS) Approach, which defines what counts as a forest and, thus, what land can be developed. A significant challenge in deliberations for integrating the HCS Approach into the Roundtable on Sustainable Palm Oil (RSPO) requirements was how to apply the methodology in the context of High Forest Cover Countries. Negotiations had to balance achieving standardized requirements that could allow buyers to meet their ZDCs with the need to allow expert groups to develop national interpretations (which might not meet buyers’ deforestation commitments). National interpretations require diverse actors to define the terms of incorporation into or exclusion from supply chains, creating boundaries between ‘sustainable’ and

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‘unsustainable’ production practices while also making special cases for certain countries that are counter to the ideal standardization processes (Busch, 2014). They need to be adapted to align with countries’ existing growth-oriented development pathways. Given the often-complex technical requirements of deliberation, consultants and service providers are central promoters of particular methodologies (e.g. High Carbon Stock Approach and High Conservation Values). These methodologies are in turn verified by other actors, particularly auditors and assessors. Specialist auditors and consultants that have an increasingly important role in implementing the zerodeforestation agenda are responsible for helping differentiate sustainable and unsustainable suppliers, excluding non-compliant sources. These experts act as new sites of power and knowledge production in sustainability governance. Support for companies’ and NGOs’ stakeholder engagement strategies by consultants and intermediaries assembles dispersed supply chain actors as part of governance arrangements, but also, paradoxically, establishes relations of authority and influence that hold them apart (Allen, 2011). All Supply Chain Actors Have Responsibility for Zero-Deforestation An important stated principle in implementing ZDCs is the promise of commensurate effort for all supply chain actors, meaning that, not just producers are responsible for sustainable production, but downstream actors share responsibility by purchasing certified sustainable, deforestation-free commodities. For example, downstream manufacturers have been previously criticized for their low uptake of certified sustainable palm oil (CSPO) and their unwillingness to pay a premium price for CSPO, which has disproportionately placed the burden of ensuring palm oil sector sustainability predominantly on oil palm growers (Nesadurai, 2013). Oil palm producers have been faced with implementing sustainability requirements that were not required by other RSPO members. For supply chain actors implementing ZDCs, it could be argued that buyer firms can demand more information from suppliers and extract new value from addressing environmental concerns through a ‘sustainabilitydiven supplier squeeze’ (Ponte, 2019). The revised RSPO requirements in 2018 included emphasis on shared responsibility and accountability for all RSPO members (rather than being limited to producers) in an attempt to address this imbalance (RSPO, 2018).

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The RSPO, while certainly among the most successful of existing sustainability certification programs, is severely limited by an internal tension between its membership numbers and required rigor (Gallemore et al., 2018). Reliant on brand reputation concerns to drive participation, the RSPO’s membership has expended considerable effort strengthening the verifiability and traceability of certified supply chains. In the process, it has generated a set of more or less separate supply chains, whose costs reflect the transaction costs of monitoring palm oil flows as much as the price of sustainable and equitable production (Gallemore & Jespersen, 2019). This system results directly from the power relations between different RSPO member sectors, particularly reflecting the growing dominance of downstream economic actors, who have come to primarily set the agenda at RSPO, leading to increases in rigor that threaten to lock out small producers (Gallemore et al., 2018). The Need for Data and Technologies for Governing Deforestation ‘[T]raceability leverages transparency to operationalize organizational goals related to material origins, and provides context to a final product or service’ (Francisco & Swanson, 2018: 2). A response to reputational risk, traceability also creates hierarchies of supply chains—companies which achieve traceability can use it to influence customer purchase behavior and avoid reputational risk, critical concerns for companies with high visibility brands (Francisco & Swanson, 2018; Gallemore & Jespersen, 2019). This capacity also affects power relations: a company that can trace its products can also pressure upstream actors regarding their production processes (Ford, 2003). Supply chain actors, NGOs, and financial institutions can avail themselves of a growing number of tools to monitor companies’ ZDC. Deforestation-free supply chain monitoring tools led by NGOs and non-profits include: Transparency for Sustainable Economies (Trase), the Accountability Framework (AFi), World Resource Institute’s Global Forest Watch (GFW) Pro, and the Zoological Society of London’s Sustainability Policy Transparency Toolkit (SPOTT). However, while civil society organizations frequently mention the need to ‘hold companies to account,’ there is a gap between documenting non-compliant behavior and the capacity to take action to change practices. As Wilmar International’s conservation advisor recently noted, ‘knowledge of land or

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concession ownership and management oversight, as well as the accuracy of these boundary maps, are crucial when addressing information received related to deforestation and fires, among others’ (qtd. In Ng, 2019). According to Mighty Earth, an NGO that runs a ‘Rapid Response’ monitoring system to identify cases of companies linked to deforestation and peat development for palm oil, soy, or cattle production: ‘We’re now awash with data about where deforestation is happening…just because the data exists does not mean that it is acted upon’ (Mighty Earth, 2019). Transparency and traceability, on their own, are insufficient to achieve sustainability (Gupta, 2008). Technologies for monitoring deforestation both reflect and shape particular political visions and ideologies. For example, governments and corporations increasingly use geospatial technologies to determine which land is attractive for development and conservation investment (Goldstein, 2014; Goldstein & Yates, 2017). These capabilities, however, come with the risk that digital governance can side-step political questions and deliberative processes. They may, therefore, tilt power relations in favor of those who own, program and control such technologies and datasets. Technology’s effectiveness depends on who uses what data, and how, to support governance and decision-making. Nor can the promises of objectivity and accountability offered by digital datasets go unquestioned. Gebara and Agrawal (2017), for example, note that in Brazil local land users in the Amazon have learned how to clear forestland without being detected by satellite monitoring, refusing to respond to a carrot-andstick approach to anti-deforestation, their knowledge and subjectivities prompting resisting coercion. Jurisdictional Approaches Provide Joined up Governance for Zero-Deforestation In the past few years, actors interested in supply chain sustainability initiatives have begun to advocate ‘jurisdictional’ and ‘landscape’ approaches, which combine private or multi-stakeholder supply chain programs with public sector resources and regulatory support (Lambin & Thorlakson, 2018; Nepstad et al., 2014). Jurisdictional and landscape initiatives are examples of a growing number of integrated landscape approaches (ILAs) which attempt to sustainably balance conservation and development of one or more agricultural sectors at the scale of an entire jurisdiction (Ros-Tonen, Reed, & Sunderland, 2018; Sayer et al., 2013). Because

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landscapes are subject to numerous development pathways, decisions about which path to take implicate diverse and often-competing interests (Sayer et al., 2013). For example, tropical forests are vital carbon sinks and biodiversity-rich ecosystems, but from a socio-economic perspective, there are strong incentives for deforestation and subsequent intensive agricultural production (Engel, Pagiola, & Wunder, 2008). While these efforts may help address some existing ZDCs’ deficiencies, they do not necessarily overcome the complex challenges they pose. An example can be seen in how an NGO in Brazil, Instituto Centro de Vida (ICV), is working to develop a jurisdictional approach for nodeforestation in the state of Mato Grosso. At the jurisdictional level, multiple stakeholder groups work to develop measurable criteria for addressing complex technical and political-economic sustainability problems, including land tenure rights, increasing agricultural productivity, forest conservation. Such challenges have also been documented in relation to the institutional work involved in developing Reducing Emissions from Deforestation and Forest Degradation (REDD +) at the jurisdictional level in Central Kalimantan, Indonesia (Jespersen & Gallemore, 2018). In its jurisdictional-level setting, ICV is involved in negotiating difficult criteria with large commodity buyers and soy producers, and is also tasked with successfully making the ‘business case’ for deforestationfree commodity production at local level. Making the ‘business case’ is particularly challenging when there is no market signal that buyers will pay a premium for deforestation-free commodities (Delabre, Alexander, & Rodrigues, 2019). The interactions between different actors in jurisdictional initiatives are power-laden, and can privilege some interests over others. For example, new crop varieties and agricultural intensification may support increasing yields for commodity producers and thus meet targets for productivity, but leave the complex political-economic conflicts over equitable land tenure and resource access rights unaddressed. NGOs such as ICV, and other actors working at the jurisdictional level, play an important role in implementing this zero-deforestation agenda, making difficult decisions and undertaking significant tasks for rolling-out implementation. Their work contributes to (re)shaping the terms of incorporation and exclusion in agricultural commodity production networks.

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Exclusions and Unintended Consequences The enactment of the zero-deforestation agenda presents moments of both discursive and physical inclusion and exclusion of particular actors in forest-risk commodity chains. Lambin et al. (2018) argue that zero-deforestation commitments may increase market consolidation, and further marginalize poor farmers, as it is more likely that producers with access to capital and technology are able to comply with sustainability requirements. Market-driven supply chain sustainability initiatives have entrenched positions of powerful actors and have led to exclusions of less powerful actors (Bush et al., 2013; Delabre & Okereke, 2019; Marin-Burgos, Clancy, & Lovett, 2015). It is therefore critical that the effects of ZDCs—as they intersect with existing contextual conditions and heterogeneity in production practices—are further studied in order to meaningfully address deforestation and support sustainable and equitable commodity production. Although ZDCs may involve processes of divestment and supplier deselection, such screening decisions are complex and may lead to detrimental consequences. For example, cutting off suppliers may reduce buyers’ influence or ability to incentivize deforestation-free practices. If suppliers are excluded from certain ‘deforestation-free’ supply chains, and market demand for the commodity still continues unchanged, commodities can still be sold to other buyers or markets. Exclusionary processes can also cause effects of displacement into other landscapes or biomes, such as the unintended negative consequences observed in the Cerrado landscape after the Soy Moratorium was implemented in the Amazon in 2006 (Dou, da Silva, Yang, & Liu, 2018). If production is pushed to areas with higher conservation value, there is the possibility that more extensive damage will be caused than business as usual in the original location (Carrasco, Larrosa, Milner-Gulland, & Edwards, 2014).

Conclusions The success of emerging institutions for supporting the zero-deforestation agenda requires not only that the formal rules that form the coercive apparatus of deforestation commitments are in place but also that they are consistent with—and ideally supported by—the norms, beliefs, and organizations relevant to the commodity in question. These different institutional elements can be created and mobilized by different types of

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power in ways that can support or undermine the formal institutions that form the tip of the anti-deforestation iceberg (Jespersen & Gallemore, 2018). It is clear that there is a need to better understand the nuances and complexities of the zero-deforestation agenda, and the extent to which it can have marked sustainability benefits. A disarticulations approach offers a perspective that examines the relations of the governance of commodity supply chains, and how the deforestation-free agenda transforms linkages that determine who can, and who cannot, participate in global commodity circuits. Public, private, and hybrid governance interventions that aim to stop deforestation must appreciate the importance of diverse contexts shaping the implementation of initiatives, and be vigilant of processes that may privilege or exclude particular interests. Examining the dominant discourses in governing zero-deforestation highlights more subterranean modes of power. Actors and institutions have emerged to support the zero-deforestation agenda, but researchers should consider how power relations and knowledge politics shape production networks. Practitioners should be careful not only to carefully craft deforestation models in light of the identities and interests of the people these institutions govern but also, ideally, to create institutions that encourage mutual reflection and identity co-production (Agrawal, 2005). Acknowledgements The authors would like to thank the editors of this volume, Ranjula Bali Swain and Susanne Sweet, for their insightful comments on an earlier draft. We are also very grateful to Per Strömberg and Örjan Sjöberg for their valuable reflections and constructive comments at the International Sustainable Consumption and Production Workshop 15–16 October 2019.

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CHAPTER 12

Farm and Feed: Heterogeneous Effects of Integrating Farm Innovations on Child Nutrition in Uganda Aimable Nsabimana and Angélique Umutesi

Introduction Child malnutrition remains a key challenge to Africa’s economic development. The prevalence of undernourishment has risen in recent years and remains the highest compared to other regions. As a result, Africa lags behind in achieving the first two Sustainable Development Goals (SDGs) of ending poverty and hunger (FAO & ECA, 2018). More specifically, like in other African countries, a large share of the Ugandan population is undernourished (41.7 per cent), and the prevalence of childhood stunting in Uganda remains stubbornly high, with almost one-third of children under five stunted. Child malnutrition in Uganda is associated with poverty and household incomes (Kirk, Kilic, & Carletto, 2018), lack of access to (quality) food (Tiwari, Skoufias, & Sherpa, 2013), poor healthcare, and hygiene, as well as

A. Nsabimana (B) Department of Economics, University of Rwanda, Kigali, Rwanda A. Umutesi World Bank, Nairobi, Kenya © The Author(s) 2021 R. Bali Swain and S. Sweet (eds.), Sustainable Consumption and Production, Volume I, https://doi.org/10.1007/978-3-030-56371-4_12

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inadequate childcare (Vella et al., 1992), therefore calling for a sustainable multisectoral approach to eradicate all forms of child malnutrition. Empirical evidence has linked food security and child nutrition to intellectual development and academic achievement (Alderman, Hoddinott, & Kinsey, 2006; Glewwe, Jacoby, & King, 2001; Poppe, Frölich, & Haile, 2019), health and social outcomes, and economic development (Strauss & Thomas, 1998; WHO, 2000). This calls for fast and efficient measures to improve child nutrition outcomes in Africa if the target of ending all forms of malnutrition by 2030 is to be achieved. Efforts to improve child nutrition in Africa has so far focused on ensuring food security among other measures, with emphasis on raising agricultural production and productivity through adoption of technologies (AU, 2003; Harou, 2018). Further, development theory suggests that using improved agricultural technologies, including hybrid seeds, fertilizers, agro-chemicals machinery, and irrigation is a primary pathway for agricultural productivity (Abay, Berhane, Taffesse, Abay, & Koru, 2018; Bold, Kaizzi, Svensson, & Yanagizawa-Drott, 2017; Evenson & Gollin, 2003; Khonje, Manda, Mkandawire, Tufa, & Alene, 2018; Sheahan & Barrett, 2014). While reducing food insecurity and malnutrition requires raising agricultural productivity, in more than a half century, the SSA has failed to experience any significant farm productivity improvements, and this has been broadly linked to low and slow adoption of modern farm technologies in agriculture (Bold et al., 2017). Low agricultural productivity also limits the capacity to achieve the second Sustainable Development Goal of increasing the capacity for agricultural productivity and sustainable food production systems and protecting ecosystems and biodiversity (FAO & ECA, 2018). Despite substantial literature dedicated to identify the effects of agricultural technologies on farm households in Africa (Abdulai & Huffman, 2014; Bold et al., 2017; Conley & Udry, 2010; Kabunga, Dubois, & Qaim, 2012), the linkages between farm technology adoption and food security remain an empirical puzzle in many SSA countries. More specifically, there have not been any empirical studies that examine the linkages between integrated agricultural technologies and child nutrition via consumption. We use two waves of farm household survey data from Uganda National Panel Surveys (UNPS) in an attempt to fill the knowledge gap within country analyzes that examine the relationship between integrated agricultural technologies and household child nutrition.

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The overall objective of this study, therefore, is to explore the links between integrated farm technology adoption and household child nutrition.1 We investigate the heterogeneity effects by type of farm technologies (improved seed, fertilizer, agro-chemicals, and extension services) and child nutrition within farm households. We further examine the effects of integrating various possible farm inputs on children from farm households, by using stunting and underweight outcome variables as proxies for child nutrition and health development. The results from this study show that adopting integrated agricultural innovations (IAI) reduces the probability of having stunting and underweight among children in rural households in Uganda. By first showing that the adoption of single farm innovation (hybrid seeds, inorganic fertilizers, organic fertilizers, pesticides, or extension services) does not yield robust effects on child nutrition, in this study, we find that various possible input integrations may reduce the probability of having stunted and underweight children within farm households by 2.2–8.2 percentage points.2 We further show combination of two farm innovations, with hybrid seeds coupled with other innovations (organic and inorganic fertilizers, pesticides, and extension services) lead to improved child nutrition outcomes. Furthermore, multiple combinations of farm innovations (any two or three) reduced the probability of a household having a stunted or underweight child, stressing the importance of combined innovation in improving child nutrition. The study finally provides the channels through which the use of integrated farm innovations can influence child nutrition. First, we estimate the effect of IAI on equivalized household consumption levels. The use of those technologies allow farm households to increase farm productivity (Bold et al., 2017; Jaleta et al., 2016; Kabunga et al., 2012; Khonje et al., 2018) that would subsequently induce an increase in farm household consumption levels. We also examine the effect of IAI on the poverty level in farm households, and the results show that complementarities of farm inputs increase the likelihood of not having poor farm households by around 11 percentage points. The results are in line with existing literature (Kassie, Shiferaw, & Muricho, 2011; Khonje et al., 2018) on how the integrated farm may reduce poverty among farm households. Intuitively, we can say that when the farmer integrates the inputs, he/she is able to increase farm productivity, which in return allows them to boost household consumption, providing food security and balanced diets.

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The rest of the chapter is structured as follows: section “Empirical Model, Child Nutrition, and Measurement” provides the empirical model, child nutrition, and measurement. The data and descriptive statistics are provided in section “Data Sources and Description Statistics”, while the results and discussions are presented in section “Results and Discussion”. The mechanism and transmission channels are discussed in section “Transmission Mechanisms” and section “Conclusion” concludes.

Empirical Model, Child Nutrition, and Measurement As explained in the previous sections, the available data allows us to first use the subset of household data from UNPS with children under five years mentioned above. We are able to test the hypotheses set previously, taking advantage o child-level panel data. In this respect, we aim to derive basic results on single agricultural technology (fertilizer, hybrid seeds, or extension services) and child fixed effects, and then proceed with various other combinations of agricultural innovations together with child fixed effects. Second, they allow us to look for plausible evidence on whether short-term changes in agricultural technology adoptions result in observable changes in child nutritional outcomes via consumption. Estimation Strategy To achieve the study objective, we first estimate the following equation: To achieve our objectives and derive linkages between agricultural innovations and child nutrition, we start with the following expression: Yhct = α1hc + η1t + γ1 Dhct + φ1 Z hct + β1 Whct + ε1hct

(12.1)

where Yhct is our outcome variables of interest (stunting, underweight, and wasted) of children under five years from the household h, living in the community c, surveyed in wave year t. The term α1hc is a household (village) fixed effects while η1t denotes survey year fixed effects.3 In this research work, the term village and community are used interchangeably. The village fixed effects absorb all time-invariant unobservable and observable community attributes that could affect nutrition in the community. These characteristics may include, for instance, socio-cultural norms and latent skills of the farmers in the community. On the other

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hand, the year fixed effects is used to account for time varying characteristics that could influence child nutrition. The variable of interest, Dhct , dummy, indicates whether household adopted farm innovations during the farming process. The model also contains some time varying household and village characteristics, denoted by Z hct and Whct , respectively. The household attributes include age of household head, size of household, distance (km) between household and main road and market. In addition, we include village controls such as average annual temperature and rainfall in the village in a given year. These later controls are highly relevant to isolate possible effects of changes in weather patterns from confounding results, since the majority of farm activities in Uganda, including the use of agricultural innovations, are rainfed agriculture. The term ε1hct is a mean zero residual that is assumed to be uncorrelated with all the right-hand side terms of Eq. (12.1). Given the binary nature of our outcome variables, each equation to be estimated in this research will be linear probability model (LPM). While using LPM can bias estimates relative to nonlinear techniques such as probit and logit models (Horrace & Oaxaca, 2006), we prefer it for two reasons. First, remember that we use region-community and household fixed effects in our estimation procedure, and there is bias related to using fixed effects in the context of nonlinear approaches stemming from the incidental parameter issue (Greene, 2002). Second, even though we can use alternative specifications like probit or logit models without fixed effects, this would certainly induce other severe biases resulting from unobserved heterogeneity than would be when estimating LPM (Bellemare, Novak, & Steinmetz, 2015). There are many advantages of estimating LPM rather than logit or probit models, and some of them include the following: First, the LPM is better suited to deal with fixed effects given that the probit models are mostly associated with incidental parameters (Greene, 2002). Further, another important advantage of using LPM is that LPM parameter estimates are directly interpreted as marginal effects. This implies that as changes in probability that Pr(Y hct = 1 ), whole the parameters from probit or logit have to be transformed before interpreted in similar way (Bellemare et al., 2015). Estimating Eq. (12.1), however, may lead to biased and inconsistent estimates, given that the model does not account for the characteristics of unobserved households. It is obvious that many of the households’ attributes may be unobserved, and hence fall in the error term s. More

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oddly, those unobserved attributes might be correlated with agricultural innovation adoption decisions, thus leading to our estimate of γ 1 (the coefficient of the plausible association between adopting agricultural innovations by farm households and child nutrition) being biased. To deal with such issues and to ensure accurate estimates, we include a set of different fixed effects such as household, ethnicity, village, year of survey, child and region fixed effects, to account for the unobserved factors that are common across those groups, and express our final expression of interest as: Yhct = α2hc + η2t + γ2 Dhct + φ2 Z hct + β2 Whct + δ2 khcr + ε2hct

(12.2)

where khcr represents vector of household, village, year of survey, community, ethnic groups, and regions fixed effects to account for the unobserved factors that are common in villages, households, ethnic groups, and regions (Fig. 12.1).

Fig. 12.1 Distribution of various farm innovations (Source Authors’ computations based on LSMS-ISA data of [2010/2011] and [2011/2012])

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Child Nutrition and Measurement A balanced food diet and nutrition are the cornerstones of human health and development. Good nutrition plays a substantial role in ensuring health and well-being, while poor nutrition can lead to anemia, reduced immunity, and impaired physical and mental development (WHO, 2014). Due to lack of adequate diversity and meal frequency, young children are vulnerable to undernutrition, especially stunting and micronutrient deficiencies, and to increased morbidity and mortality. Deficiencies of micronutrients (including vitamins and minerals) or macronutrients (such as carbohydrates, protein and fat) for children and pregnant women can have severe consequences for child survival and long-term well-being. It also has far-reaching consequences for human capital, economic productivity, and overall national development (Namugumya et al., 2014). This study uses the reported anthropometric variables—age, sex, length, height, and weight—for children under five years to construct height-forage, weight-for-age, and weight-for-height z-scores based on the WHO’s growth standards (Leroy, 2011). The computed z-scores explain the difference between the value for an individual and the median value of the reference population for the same age or height, divided by the standard deviation of the reference population. For instance, the z-scores for weight-for-height describe how far a child’s weight is from the median weight of a child at the same height in the reference value (World Food Program, 2005). Therefore, the child nutrition indicators are computed using the following expression, Z scor e =

Ti − X X sd

(12.3)

where Z score stands for standard deviations, representing the child health/nutritional outcome indicators (height-for-age, weight-for-age and weight-for height scores), the T i stands for the observed measured value for an individual i; X represents the median value of the reference population for the same age or height and, finally, X sd denotes the standard deviations of the reference population. The three indices are used to provide outcome measures of nutritional status. The weightfor-height z-scores (WHZ) shows the body weight relative to height and is an indicator of current nutritional status. It is particularly useful for measuring short-term changes in nutritional status resulting from starvation. Similarly, height-for-age z-scores (HAZ) describe the cumulative

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linear growth, representing past or chronic inadequacies of nutrition and chronic or frequent illness, implying longer-term changes in malnutrition. Finally, the weight-for-age z-scores (WAZ) combine both HAZ and WHZ, making the interpretation more difficult, but are commonly used to assess the growth and changes in the level of malnutrition over time (Harou, 2018). In Uganda, around 84 per cent of the population still lives in rural areas, and agriculture remains the main source of livelihood and the main pathway out of poverty for a majority of Ugandans. As far as child nutrition in Uganda is concerned, there are still substantial nutritional deficiencies among infants and children under age five. For instance, according to the most recent Uganda Demographic and Health Survey (DHS) of 2018, there are more than 2.2 million children under 5 years (29 per cent) who suffer from stunting (low height-forage) (UBOS, 2018). Stunting increases with age, peaking at 37 per cent among children of ages 18–35 months. Stunting is greater among children in rural areas (30 per cent) than in urban areas (24 per cent), with some regional variations. Stunting ranges from a high of 41 per cent in the Tooro sub-region to a low of 14 per cent in Teso sub-region (USAID, 2018). Figure 12.2 provides the HAZ and WAZ distributions of under five children in the 2010/2011 and 2011/2012 datasets from the Uganda National Panel Survey (UNPS).

Data Sources and Description Statistics To examine the links between agricultural innovation and child nutrition, we draw data from two waves of UNPS collected in 2010/2011 and 2011/2012. The UNPS is implemented by the Uganda Bureau of Statistics (UBS) with support from the World Bank Living Standard Measurement Study—Integrated Surveys on Agriculture (LSMS-ISA) program. The sampling design was representative at the national level, as well as for rural farm households. The study population is drawn from all regions of Uganda. The sample under this research proposal consists of 4237 households between 2010 and 2012, after keeping small holders with relevant information on variables of interests. Table 12.1 provides more details of descriptive statistics of farm households and other demographic attributes that are considered in this study.

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Fig. 12.2 Distribution of HAZ & WAZ for under-five children in 2010/2011 and 2011/2012 in UNPS (Source Authors’ computations based on LSMS-ISA data of [2010/2011] and [2011/2012]. Increasing pace of urbanization and implications for food security and sustainable agriculture)

In every wave, the survey collects anthropometric measures (height and weight) for children under five years, and detailed information on agricultural activities. The data on individual-level anthropometric measures and farm households’ agricultural information, including details on the use of extension services, fertilizers, and hybrid seeds, offer the opportunity to investigate potential pass through from agricultural innovation adoption to child nutrition via farm production and consumption. As can be identified from Fig. 12.1, a significant number (more than 30 per cent) of farm households in Uganda do not apply any technology during farming, rather, they only use traditional methods (like traditional seeds). Figure 12.1 also reveals that around 24 per cent of farm households use single technology when farming, while less than 15 per cent use two combinations. In addition, using UNPS of panel nature (at the household and individual levels) and a shorter period between the survey waves,

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Table 12.1 Household and demographic attributes Variable

Mean

Std. dev.

Min.

Max.

N

Improved (hybrid) seeds (0/1) Pesticides use (0/1) Chemical fertilizer use (0/1) Organic fertilizer use (0/1) Received extension services (0/1) Age of the household head Household size Household head is male (0/1) Share of dependents in hh Mother with no education Mother with primary education Mother with secondary education Mother with higher education Father with no education Father with primary education Father with secondary education Father with higher education Distance in (KMs) to nearest major road Distance in (KMs) to nearest market Annual precipitation (mm) Mean precipitation of wettest quarter Annual mean temperature (degrees C) Mean temperature of wettest quarter (degrees C) Number of plots per hh Total household farm land size HH allocates large land size on beans (0/1) HH allocates large land size on maize (0/1) HH allocates large land size on cassava (0/1) HH allocates large land size on Irish potatoes (0/1) Central region Eastern region Northern region Western region

0.261 0.159 0.054 0.137 0.288 41.811 9.162 0.919 0.587 0.473 0.485 0.04 0.002 0.439 0.445 0.112 0.004 9.089

0.44 0.366 0.227 0.344 0.453 12.45 3.902 0.274 0.138 0.5 0.5 0.196 0.044 0.497 0.497 0.316 0.061 7.756

0 0 0 0 0 18 3 0 0.125 0 0 0 0 0 0 0 0 0.03

1 1 1 1 1 86 33 1 0.929 1 1 1 1 1 1 1 1 32.636

1286 1580 1580 1580 1580 1578 1580 1449 1580 528 528 528 528 544 544 544 544 1580

35.803 1218 455.675 22.329 21.933

17.93 184 76.43 1.53 1.368

0.498 687 284 15.7 15.9

116.177 1709 657 26.5 25.2

1580 1580 1580 1580 1580

3.332 2.22 0.608

2.743 3.22 0.488

1 0.024 0

9 42 1

1463 1580 1580

0.623

0.485

0

1

1580

0.696

0.46

0

1

1580

0.435

0.496

0

1

1580

0.242 0.266 0.362 0.129

0.429 0.442 0.481 0.335

0 0 0 0

1 1 1 1

1580 1580 1580 1580

Source Authors’ computations based on LSMS-ISA data of (2010/2011) and (2011/2012)

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allow us to conduct within-household analyzes over time, and be able to control the estimations for unobserved time-invariant child attributes that are not the case in cross-sectional or pooled analyzes. Therefore, these attributes make this study more relevant. The main outcome variables of interest are the children’s anthropometric measures—height (expressed in centimeters) and weight (measured in kilograms) as they are reported in Table 12.2. Based on the World Health Organization (WHO) standard references, we computed the standardized z-scores of height-forage, weight-for-age, and weight-for-height, from which we determined stunting, underweight, and wasting status by taking children’s age and sex into account.

Table 12.2 Descriptive of the under-five child health outcomes in Uganda (2010–2012) Wave 1 (2010/2011) wave 1&2

Wave 2 (2011/2012)

Average

Variable

Mean

Std. dev.

Mean

Std. dev.

Mean

Std. dev.

Child sex Age Height Weight Z -scores Length/height-for-age Z -score Weight-for-age Z -score Weight-for-length/height Z -score Incidence Stunting Underweight Wasted Number of households

0.528 32.651 91.267 12.818

0.5 14.331 11.177 7.139

0.516 33.199 91.434 12.844

0.5 14.975 11.442 6.41

0.522 32.923 91.351 12.831

0.5 14.652 11.306 6.783

−1.19

10.172

−1.475

4.833

−1.333

7.961

−0.364 2.229

4.76 13.796

−0.369 1.619

4.736 11.735

−0.367 1.922

4.746 12.797

0.366 0.106 0.014 509

0.482 0.308 0.119

0.325 0.117 0.016 509

0.469 0.321 0.125

0.345 0.111 0.015

0.476 0.314 0.122

Source Authors’ computations based on LSMS-ISA data of (2010/2011) and (2011/2012)

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Results and Discussion The results for Eq. 12.2 of the effect of farm innovations on child nutrition are presented in Tables 12.3, 12.4, 12.5, and 12.6. We find a strong relationship between agricultural innovation adoption and child nutrition. The results are similar in terms of expected signs of both stunting and underweight regressions. However, overall, the significance and magnitude of the effect is amplified when these innovations are combined rather than single farm technology adoption. With single farm innovation adoption, the coefficient is negative and statistically significant for improved (hybrid) seed in both stunting and underweight regressions (Tables 12.3 and 12.4). Households that have adopted improved (hybrid) seeds have a 30.0 percentage point lower probability of having a stunted Table 12.3 Single farm innovation adoption and child nutrition (stunting) (1) Improved (hybrid) seeds

(2)

(3)

(4)

−0.300 (0.158)* −0.005 (0.412)

Inorganic fertilizer

−0.304 (0.301)

Organic fertilizer Pesticide use

0.111 (0.248)

Extension services Household controls Farm controls Enumeration area FE Child FE Region by year FE Ethnic FE Mean value of outcome Number of households R-squared

(5)

Yes Yes Yes Yes Yes Yes 0.365 233 0.652

Yes Yes Yes Yes Yes Yes 0.365 233 0.678

Yes Yes Yes Yes Yes Yes 0.365 233 0.682

Yes Yes Yes Yes Yes Yes 0.365 233 0.681

0.012 (0.446) Yes Yes Yes Yes Yes Yes 0.365 233 0.680

Source Authors’ computations based on LSMS-ISA data of (2010/2011) and (2011/2012) Standard errors in parentheses Notes Robust standard errors in parenthesis * p