PUMA's EP&L

As you may have heard, apparel company PUMA has recently published the world's first EP&L (environmental profit and loss) statement. It is a modest first step in a very neat direction. For example, it's not surprising that

The analyses have shown that the biggest environmental impacts in the value chain occur, not through PUMA’s core operations but at the level of its Tier 4 suppliers, where raw materials are derived from natural resources, such as the cultivation and harvesting of cotton, cattle ranching for leather, and natural rubber production. [36% of GHG emissions and 52% of water]

... but nevertheless a meaningful step to have it quantified, agreed upon and audited. The report notes that there are real risk management benefits in terms of understanding exposures, quite aside from any sustainability benefits. Worth perusing, and hopefully we will see more of this from PUMA (stage 2 plans to include social impact, and stage 3 to include broader economic impact) and from other companies as well.

Duncan Green on resource curse

Oxfam’s Duncan Green reviews two new papers on natural resources and development, one by the World Bank and one by his own shop. He is harsh on the World Bank:

‘High oil and mineral prices mostly have a negative impact on long-run growth in exporting countries with bad governance. They have a significant positive impact on growth in exporters with good governance. This finding suggests that continued high commodity prices in the next few years could provide valuable resources to accelerate economic and social development in commodity exporting countries with good policies and governance.’

At this point alarm bells started to ring for me. Natural resources and governance are not independent variables – the interesting question is the impact of natural resources on governance itself. Countries are not born with either good or bad governance, they evolve, not least because of the influence of ‘money coming out of the ground’.

But that is nothing compared to this paper’s blind spot on environmental constraints. An entire paper on commodities, including agriculture, in which the only reference to climate is ‘investment climate’ is really quite an achievement... And nothing on natural resource exhaustion either... Other bits of the Bank are doing good work on climate change, but it doesn’t seem to have reached the authors.

His best point, responding to the Oxfam paper, is that the necessary domestic checks and balances and monitoring can become a much bigger tent than just the generic panacea of “civil society”:

At a national level, Lifting the Resource Curse argues, unsurprisingly, that the active involvement of civil society is essential both to increase the public pressure on governments to make the most of natural resource endowments and to act as watchdogs, tracking both the origins and uses of revenues from extractive exploitation. It is also of crucial importance to have public institutions that can support this process of participation and which are efficient in their control, monitoring, and enforcement of it.

But I think the paper could have gone a bit further with its power analysis on this – what other influential domestic groups have an interest in harnessing extractive industries for the national good? Answer, virtually all of them – business sectors (manufacturing, exporters, agriculture, finance), trade unions, media, national parliaments and local governments. Where and how have these kinds of coalitions formed and had an impact? There’s a lot more to life (and change) than CSOs.

This is particularly important for countries in which civil society, for whatever reason, struggles to punch at the same weight as powerful political and business interests.

P.S. Duncan is picky with his language, which is an excellent quality in a writer. Here’s him abolishing “human capital” and “political will”, respectively, from his vocabulary.

Aid vs. remittances

From Roving Bandit, who also gave us migration vs. microfinance, comes this equally striking chart:


That's right - private remittances outweigh the total of international development aid for a given year.

Is this related to resources? Well, it might be in the sense that the income-generating activities for migrants in developed countries might be less resource-intensive and environmentally unfriendly than in developing countries (I am thinking slash-and-burn agriculture, etc.). I’m not sure, though, and would be interested in any existing analysis of this.

More commentary on "The Phosphate Dilemma"

Over at U.S. Food Policy, Parke:

A reader asks by email how the train wreck can be avoided.

Some tentative thoughts: Best thing is to eat with lower environmental impact (especially less meat). Also, good environmental regulation of phosphate mining and remediation worldwide is wise, even if it then makes phosphate fertilizer more expensive. That higher price of fertilizer then feeds a response from farmers who can weigh the production advantages and cost disadvantages of increased application more wisely.

R:

Parke, is there any applicable thinking in academia on how to overcome the "race to the bottom"-type disincentives for country-level environmental regulation? (e.g., if everywhere else has strict environmental regulation, a given poor country has an incentive to avoid it if the lower costs mean they can produce more fertilizer and thus generate more revenue and employment)

Obviously this applies widely to extractive industries in general, not just phosphate fertilizer... maybe there are parallels from international labor standards?

Parke:

The most common U.S. center left answer to that question is to include labor and environmental standards as part of trade negotiations.

That's fine with me, but my attention is elsewhere.

The long-term solution to the "race to the bottom" is truly to lift the bottom. Good environmental regulation is a product of middle class democratic politics. There is an anti-trade and isolationist strand in progressive American politics, based on a deep pessimism that things will ever be any better in poor countries. That's not my strand. I hold out more hope for robust middle classes in India and China and Mexico, who can demand good environmental rules.

Recently, I loved reading about the modern Tata apartment design in Mumbia, India. Realistically or not, it generated a daydream about a million young people in Mumbia, wearing hip clothes, eating good (mostly vegetarian) food, living in tiny but fashionable apartments, flirting, watching cool shows and listening to cool music on small electronic devices, enjoying nightclubs, though being too poor to afford a car.

If that is the future we hope for Indian and Chinese youth, it would be just to try to envision something similar for our own children. I really am not sure our grandchildren will have a good world to live in, but if they do, it will probably look like that.

I like this vision in the long term. But that said, bringing about economic prosperity and vibrant democracy takes place on the timescale of decades, and it's possible to do a lot of environmental damage in a few decades. Indeed, some countries see some environmental degradation as central to developing their economies, and rich-country environmental regulations as a plot to stop them from doing just that. So there's still a need for innovative thinking and pragmatic solutions in the shorter term.