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Framing the market

We've just had a discussion about the role of the market. In this video, Jonathon Porritt explains how the market can be framed
You really have to look at the role of business over a 25 year time span. Go back to 1992 and the Earth Summit, the birth of the World Business Council for sustainable development. At that point, late ’80s, early ’90s, honestly, businesses were either pretty useless or they were positively problematic as in doing really bad things without any concern for people, communities, or the planet. Move forward 25 years, and it’s a much more nuanced picture. We now have a cohort of companies that are absolutely out there doing their bit to build more sustainable business models, more sustainable notions of wealth creation, on environmental, social, governance issues.
Behind them, of course, you’ve got tonnes of companies who still need to be regulated to do the right thing. They’re not going to do it unless they’re made to do it because otherwise they’ll go and do what their shareholders want them to do, which is to make more money. So the role of government is still critical, it has to frame the markets, to compel those who haven’t seen the reality for what it really is in business today, to do what they should be doing anyway. So it’s a combination of both. But the leadership in business now is very significant.
The market can work really well when the market is framed in such a way as to promote more sustainable outcomes for people, communities, and the planet. That’s what creates jobs. I mean, right now we have a classic example going on in the USA where Donald Trump is saying, we’re going to lift the regulations on the fossil fuel industry, we’re going to stop the war on coal to create jobs. But of course, Donald Trump doesn’t mention the fact that there are already 3/4 of a million jobs in the solar industry in the USA, far more than in coal and even in coal and gas combined.
And he doesn’t mention the very uncomfortable reality that for every $1 billion invested in renewables, you create 2 and 1/2 thousand more jobs, for a $1 billion invested in hydrocarbons, in oil, coal, and gas. That’s too inconvenient for people like Trump to recognise. This agenda of sustainable wealth creation is job generating. It’s not job destroying. It’s job generating. And it’s only their attachment to really completely moribund, very dangerous ideological positions that stops them seeing that. There’s a really interesting situation here in the UK because to be honest, our government is next to useless when it comes to sustainability. They don’t understand it.
They are driven by a whole set of very short-term perspectives, and now they’ve got Brexit to deal with a kind of self-imposed disaster of mega proportions. But out of the last five years from this government, two very interesting things emerged, one is the Modern Slavery Act. A statute on parliamentary books here which compels anybody above a certain size, a business above a certain size, that wants to do business in the UK, it has to produce a statement demonstrating that it is not aware of any impacts in its supply chain that would be supportive of, or directly involved in, the equivalent to modern slavery, so indentured labour, whatever it might be.
And that is having a huge impact, and that’s a government measure. And secondly, here in the UK, we’ve got something called the Social Value Act, which again, it probably emerged from the coalition government, which compels all public bodies whether that’s a local authority, a health body education, that when they’re letting a contract for a major contractor– so a new capital project to build a building or bit of infrastructure whatever it might be– those contractors in their tender documents, have to demonstrate the additional social value which will be created as well as the value for money. And more and more public bodies are now taking that notion of social value extremely seriously.
So two tiny little measures, both having a really interesting multiplier effect. The Modern Slavery Act at the moment is what I would call a slow burn story. It’s already feeding into another initiative called the Corporate Human Rights Benchmark which is looking at the activities of different companies in critical sectors to expose their supply chains to much greater scrutiny. Now when the campaigners get to work on some of these supply chains, so electrical and electronic goods, for example, and they can identify proven cases where very large household names are unable to demonstrate that the raw material they’re using to put together their devices has been sourced in completely ethical and responsible ways.
If they can’t demonstrate that, then they’re in breach of their conditions under the Modern Slavery Act. So at that point, there isn’t any reason why a campaigning group shouldn’t go after that company and say, you can’t demonstrate this, that means you are in breach of your obligations. That means you shouldn’t be trading here. It probably won’t be as easy as that, but at least there’s now a mechanism for trying that.

In this video, Jonathon Porritt explains how the market can be “framed” to make it more responsive to social and economic value. He gives two recent examples from the UK – The Modern Slavery Act and the Social Value act. Both these Acts compel businesses to take responsibility for the impacts of their operations, and create social value.

Can you think of other examples of the market being framed well?

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