Thursday, 27 March 2014

Business and Development – A Leap of Faith?

Photo of Jodie Thorpe, Globalisation research fellowHave you ever wondered what is really driving the many initiatives and investments that are taking place in the name of business and development? It was the first question I grappled with when I entered this field over 10 years ago. Yet despite the work of a great many organisations to better understand and quantify the ‘business case’, the answer seems to remain that business and development is largely a leap of faith.

This view emerged at a recent event convened, with Business Fights Poverty, to launch the new Business and Development Centre (BDC) at the Institute of Development Studies. Shankar Venkateswaran, Chief of Tata Sustainability Group, said it most explicitly during the keynote speech which opened the event. He noted that external factors play a relatively small part in driving sustainability at Tata compared to internal drivers like values, employee motivation and Board leadership, and highlighted that it is a “leap of faith” that most often takes a company from its current situation to its future sustainability vision.

Variations of this theme, however, recurred in different guises throughout the day right up to the closing panel debate during which Alistair Fernie, Head of Private Sector for the UK’s Department for International Development (DFID) put it another way. “The evidence base”, he said, “is weak”. He went onto explain that the evidence on business and development is in its infancy if you compare it to, say, the evidence to tackle malaria in Kenya.

John Humphrey, Director of the Business and Development Centre, struck a similar note based on recent BDC work, noting that there is little consensus on where the ground is most fertile for interventions. A deeper understanding of the impact of business activities on development outcomes is vital, he noted, if we are to make best use of the scarce resources available. We need to move beyond a drive to “do more”, and focus on identifying where business really has a unique role to play in removing blockages to development, and understand as well the limits of business and markets.

Refreshingly, the event was also the first time I heard someone question scale as the goal of business and development initiatives. This was Christian Spano, Global Lead for Enterprise Development at Anglo American, who asked whether our focus should really be on scale, and who would benefit as a result?  Large companies do have the means to achieve scale, but would this deliver development – or hollow out local markets? Several participants suggested that systemic change was a better goal.

While it clearly takes time to build up an evidence base – this is a pressing task, and should be a priority for those who have already invested a lot of energy to pilot and innovate in this area. The Business and Development Centre aims to contribute by focusing our own efforts, to deliver evidence and analysis on specific development problems in agriculture and nutrition, health and the green economy. We will do this by working with more and different partners from business, the development community and research institutes to generate high-quality, evidence-based research that reaches and influences decision-makers.

Much of what compels leading companies to engage in development will continue to be internal drivers. However, meaningful work on business and development should be supported by evidence and not have to rely only on a leap of faith. Perhaps more importantly, internal drivers do not and will not suffice for the vast majority of companies. Instead we must define much more clearly what the development sector needs from business, the limits of what business interventions can achieve, and the tools, including regulation, that will create better alignment between business activity and development goals.

By Jodie Thorpe, Research Fellow, Institute of Development Studies

The Business and Development Centre was launched, in partnership with Business Fights Poverty on 12 March 2014. Check our Storify stream which captures the event through tweets, photos, videos and web-links.

This post was originally published on Business Fights Poverty website, 21 March 2014.

Friday, 21 March 2014

Is 'going green' enough?

This week, as the RIO+ hosted an event in partnership with the Institute for Development Studies in the UK and the STEPS Centre on Green Transformations in the BRICS and what this may mean for developing Africa, it was hard to avoid the bigger question of 'is greening itself enough?”

There is no doubt that the green economy as a paradigm is picking up pace, as more and more countries undertake scoping assessments, declare green intentions through zero or low-carbon targets, pledge to make development greener or simply explore the opportunities for cleaner development and business opportunity through renewable energy.

According to all of the mainstream green thinking, which is largely economic, greening is the key for low-income countries, particularly for energy.

This is often seen as a necessary part of the revolution with mixed views on whether green is enough or inclusivity is also important. Most approaches recognise – at least in their rhetoric – the need to not only green the economy but also address poverty, however the latter seem to follow a trickle-down approach.

Current patterns of global resource use do not match our declarations for more sustainable development (see Box below) and bridging this gap will require radical reforms and a 'strong inclusivity approach' as Stephen Spratt calls it, i.e. the kind of approach that ensures that the poor do not just benefit but that they benefit more than other groups.



How much can greening facilitate changing the way we use resources and also who has access to them?


Last week, at an international workshop hosted by the German Development Institute (GDI) (PDF), similar debates arose. Some felt that extreme poverty had more political cachet while others insisted tackling inequality was not even a choice but a must.

At the country level this means, in part, moving from 70% reliance on coal and other forms of energy production to a significant change of renewables in the energy mix while reducing income and other forms of poverty at the same time. Amongst the BRICS, there are goals to make renewables more than 40% of energy generated.

Theoretically, this should be good for development. It is too soon to tell though if this will be true.

Rural and urban disparities on access to resources as well as differences between the poor and non-poor on access to basic services are still scandalous and new energy models still tend to use the same production and distribution models: concentrated, based on long value chains where limited overall benefits go to small farmers or small producers, and sometimes displacing many to meet the needs of others.

If we achieve green energy goals while failing to narrow the energy poverty gap or by creating new forms of inequality, is this still green transformation?


In a paper with RIO+ Deputy Director, Layla Saad, she and I basically say no, it should not be seen as such.

We found that a green agenda needs to do more than diversify the economic base and reduce emissions. By implication, green energy, whether in the form of bio-fuels or hydropower, would also need to 'ensure that the deep-rooted social, and to some degree environmental questions of our times are not left unanswered' and 'should not continue to be rooted in the lopsided motivations and unequal structures of traditional economic models that benefit the few and do little to quell the demands for equity and justice of those who have been consistently excluded'.

We also found that the green agenda in the BRICS and elsewhere is not yet providing enough big-sized answers to big fundamental problems, including how people who depend on nature for their subsistence are going to benefit from models that still prioritise money and growth, most of which is likely to be concentrated in the hands of big business, governments and the wealthy living in urban centres.

The BRICS themselves have taken varied approaches on green energy, particularly where the green and inclusion (social) agendas meet more clearly. 


India and Brazil have invested in biofuel and bio-energy options which have targeted or sought to engage small holder farmers (PDF), linking them to more secure income streams and to markets, with differing levels of success. In South Africa and China, the energy mix has been diversified differently through evolving combinations of hydro-electric, natural gas, nuclear, solar and wind. With China in the lead, reportedly, on clean energy finance and discussions on a BRICS Bank still active, there is significant opportunity for them, as first movers and the drivers of a global green agenda, to not only show how to go green but how to do it more equitably and how this can be done for both the short and the long-term.

A sustainability approach, I hope, would also promote:
  • energy (with water security and sanitation access) as foundational elements
  • education, health and jobs as pillars and stabilisers; and
  • sustainable consumption and production as well as governance as key conditions.
Leisa Perch is Policy Specialist at the Rio+20 World Centre for Sustainable Development.

Tuesday, 18 March 2014

Energy access a key priority for Africa in South-South cooperation

By Mao Amis

Most people who have lived in sub-Saharan Africa have a personal tale about access to electricity or lack thereof. Whether it is ‘blackouts’ that last several days or having to put up with noisy diesel powered generators in the neighbourhood, Africa’s struggle for reliable power supply is all too evident.

My own experience is no different.

For the 6 years of my secondary schooling in Uganda in the 1990s, each student carried 5 litres of kerosene and a lamp to boarding school at the beginning of every school term.

This was necessary because electricity supply lasted only a couple of hours, which was not enough to cover the time needed to study and pass tough A-level exams. As a result we used to go for evening studies in the school library carrying our books with one hand and a kerosene lamp with the other.

As soon as the main grid power supply went off, our kerosene lamps kicked in so we could continue our schoolwork. The danger of exposure to poisonous gases and the risk of storing large quantities of highly flammable liquids in the dormitories were all too apparent, but we had no other option.
 
Fast forward to 2014, the above scenario is still a daily reality in many schools, households, hospitals and other vital installations throughout sub-Saharan Africa. Many communities are still faced with the daily dread that they might not have the electricity needed to carry out their routine activities, which could cost a life, an education or a meal.

It is in this context that the green transformation and the realignment to promote South-South cooperation should be viewed.

Improving energy access and empowering those at the base of the pyramid should be the defining framework for any South-South cooperation


According to the World Energy Outlook (2011), in 2009 sub-Saharan Africa had an electrification rate of 30% compared to 68% in South Asia and 93% in Latin America. Two years later, the WEO 2013 notes that Africa is still home to a large share (nearly 50%) of the 1.3 billion people in the world without access to electricity (PDF) and 25% of the 2.6 billion who still rely on biomass for cooking .

It’s clear that Africa’s top priority should be to increase access to electricity supply as the basis of any South-South Cooperation in the energy sector.

Depending on the choices that African leaders make, the low rate of electrification accords Africa the opportunity to deploy cleaner technologies that could place the continent at the forefront of green transformation. Improving energy access can be achieved much more cost effectively through mini-grids or stand-alone off-grid installations at the local level, especially in rural areas. Interventions that focus on extending the main grid do not often result in improving energy access, because such schemes are costly and may require long-term commitments from large consumers to make them sustainable.

Are we doing enough to lift millions of Africans out of energy poverty?


Lifting millions of Africans out of energy poverty and achieving greater economic prosperity depends entirely on how much effort is placed on the green transformation.

Many countries in Africa have made significant progress in the transition to a green economy. For example, South Africa has recently completed its third major procurement process for independent power producers, and it is estimated that by the sixth bid, the potential investments in renewables would be worth more than US$10 billion. However, some analysts are worried that most of the preferred bidders are large international utilities, driven mostly by profit motives and less interested in socio-economic outcomes like narrowing the energy poverty gap.

This tension between the pursuit of profit and socio-economic and environmentally sustainable outcomes is at the core of the opportunities and challenges facing green transformations that are meant to serve broader development goals. A similar challenge faces South-South Cooperation for development.

To-date, most of the economic interactions have been driven by corporate interests, and it remains to be seen if rules of the game will change to ensure that investment patterns result in decent jobs and environmental sustainability. Some of the more powerful countries in the global South, have been accused of exploiting less developed but resource-rich countries to satisfy their needs for raw materials in fast-growing economies, in deals similar to those that have long defined the North-South economic relationships of African countries.

Will South-South cooperation  lead to an effective green transformation?


My personal observation is that unless things change radically this is very unlikely, partly because the focus of South-South cooperation is still biased towards the major economies, with the rest playing a marginal role.

There is a need to shake up this arrangement to bring more players on board to ensure that benefits of South-South cooperation trickle to those regions where change is needed the most. For example, the recent discovery of oil in the east Africa region is going to be a major economic boost for the region, but at what cost to the environment? The current flurry of oil-prospecting activities in the region, including in areas designed as National Parks and critical watersheds is quite worrying. Without strong green transformation goals, many African countries may well find themselves on the same paths the industrialised world has followed, to the detriment of all.

It is my hope that the mutual learning and knowledge sharing that has underpinned most South-South Cooperation interactions so far will be an opportunity for many African countries: an opportunity to embrace a green future, on their own terms.


Image: by Bige1977 at en.wikipedia (Own work) [Public domain], via Wikimedia Commons

Other blogs on green transformation and green growth:

Friday, 14 March 2014

More than just a "clean energy race"? BRICS investment and innovation could lead the way on green transformation

By Adrian Ely

On the sidelines of the World Cup in Brazil this year, another competition will be the subject of conversation amongst the delegations attending this year’s BRICS summit, also in Brazil.  Which of the ‘rising powers’ is winning the ‘clean energy race’?

The sixth summit meeting of the group known as the ‘BRICS’ (Brazil, Russia, India, China and South Africa)  was recently postponed from March to July, which will have seen the culmination of a month of football, with the world's eyes on Brazil. 

The host nation chose Fuleco (a portmanteau of the words "Futebol" – football - and "Ecologia") as the name of the tournament’s mascot.  And ecological harmony is one of the messages that Brazil wants to present to the world.  In line with its leadership at the Rio+20 conference last year, the country is now advocating more inclusive and environmentally-sustainable development.

And Brazil is not alone.  

The clean energy race - who is investing more and innovating faster?


Countries across the OECD and the other BRICS are also dedicating significant resources and policy effort to eco-innovation and the transition to a green economy.  This includes a move towards forms of energy generation that emit less carbon dioxide. In the green economy, countries theoretically compete on the basis of cheap, clean, low-carbon energy that drives low-impact industrial processes.

The Pew Charitable Trusts, a US-based non-profit research and public policy organisation, recently released an interesting factsheet advocating greater investment in this area (PDF) by the federal government.  It argues that in comparison to competitors such as South Korea, Japan, the UK and Germany, the USA is investing a lower proportion of GDP on clean energy R&D.

Previous Pew reports have issued similar warnings, looking more broadly to investment across the G20. In 2012, Pew pointed to rapidly increasing investment in India, and, in 2013, China was reported to have assumed the leading global position as ‘epicenter of clean energy finance’. 


BRICS leading the way on both global competitiveness and social experimentation


The focus is on the scale of expenditures on high-tech, capital-intensive approaches to low-carbon energy provision such as solar photovoltaic/ smart grid combinations and large-scale wind power, where intellectual property is a key driver of investment.

Chinese firms made up three of the top five solar photovoltaic (PV) manufacturers in a 2013 survey (PDF).  The top turbine manufacturers in India (Suzlon) and China (Goldwind) now compete as leaders in the emerging wind sector.  These are fast-becoming the dominant trajectories of energy innovation, creating new leaders in the field and challenging the USA as the incumbent energy power.  Innovation of this kind can be seen as an important contribution from the BRICS towards a ‘green economy’.

By Popolon (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

 
But beyond these dominant trajectories, BRICS countries are also experimenting with energy technologies that receive less attention by incumbent energy powers.  The scale of hydropower in China (now a global leader) is - with wind - reducing its otherwise overwhelming dependence on coal, and two of the world’s three 10GW+ hydroelectricity plants involve BRICS countries.  Likewise, Brazil’s focus on low ‘net carbon’ sugar cane bioethanol (notwithstanding social problems associated with its production) presents an alternative to petroleum, the dominant energy source in transport. 

Away from these high-tech solutions, other approaches to a green economy are also flourishing.  These may not entail the same levels of financial investment or bring similar opportunities for intellectual property licensing fees.  But they serve other goals such as social inclusion and poverty alleviation that are high on the political agenda across many of the BRICS. They include:

  • Social technologies (including small-scale, often community-led projects that serve both energy access and low carbon objectives), funded by – amongst others - Banco do Brasil.   
  • Solar thermal technologies in China, supplying affordable water heating without requiring the kinds of complex smart grid infrastructure needed for distributed solar PV generation.
  • Incorporation of local innovations around biomass energy into government-supported programmes (such as those supported under the National Innovation Foundation in India)
The BRICS are therefore home to many more contributions to the green economy than those measured in $ invested (as a proportion of GDP), or by sales or new patents.


Diversity in innovation can lead to a wider, more profound green transformation


It is this diversity of forms of innovation – often neglected in green economy debates - that moves the simplistic idea of a ‘clean energy race’ towards possibilities for a wider and more profound transformation.

Such green transformations will require widespread experimentation, learning and innovation beyond the dominant trajectories, often reinforced by incumbent interests. The STEPS Centre’s New Manifesto on innovation, sustainability and development governments and the international community argues that much more attention should be paid to diversity, not only in strategic investments but also through policies that protect creative experimentation in diverse niches.

The BRICS have a key role to play in the global search for green transformations.  They are already producing leading firms in some of the core green economy sectors that are emerging across the world.  But, they also provide a wider diversity of technologies, new forms of organisation and new ways of living that together offer opportunities for greener and fairer futures.

Beyond single-track races, the emergence of the BRICS offers the opportunity for a broadening out of potential pathways to sustainability, not only following the trajectories of the leading (Western) multinationals but also fostering wider transformations by enabling important alternatives to flourish.

*Who is Winning the Clean Energy Race is a series of annual reports published by The Pew Charitable Trrusts

Dr Adrian Ely is Head of Impact and Engagement at the STEPS Centre, and is a lecturer with the  Science and Technology Policy Research Unit (SPRU) at the University of Sussex

Tuesday, 11 March 2014

Governments and development agencies must work smarter with business

By John Humphrey

UK Secretary of State for International Development Justine Greening often refers to a ‘smarter approach to aid’ – a recent example can be found in her speech to the London Stock Exchange at the beginning of the year, about which I have previously blogged. Part of this development of a ‘smarter approach’ must focus on improving the way in which governments and development agencies work together with businesses to tackle global poverty. If this is not addressed the growing volume of business and development efforts aimed at improving peoples’ lives could fail to have a lasting impact.

Business can fight global poverty – but not on its own 


Political, private sector and development leaders broadly agree that business has a big role to play in driving economic growth and innovation, and contributing to the achievement of development objectives. Foreign Direct Investment (FDI) flows to developing economies now account for over half of all FDI flows worldwide and developing countries’ national investment policies are increasingly driven by their development strategies. In this environment, business and development interventions have boomed alongside the demands on business to provide solutions to challenges such as global poverty and climate change. At the Davos Forum at the beginning of this year, UN General Secretary Ban Ki-Moon cited the forthcoming UN Climate Summit in September as businesses opportunity to ‘show what they can do and to work with governments at the highest level to address climate change’.

But at IDS we are concerned that this surge in activity remains piecemeal and small scale, and that there is an urgent need to improve our understanding of what is effective and what will bring about long-term change in terms of business contributions, alongside the efforts of governments, civil society and donors. With the 2015 deadline to agree a new set of Sustainable Development Goals looming large on the horizon, establishing smarter ways of working with business is absolutely critical. Especially in a world where resources, natural and financial, are increasingly constrained and the demand to demonstrate value for money is ever present.

Time for greater leadership from the development sector? 


That’s why today we’re partnering with Business Fights Poverty to bring together leading development experts, senior members of the business community and international NGOs for the launch of the new Business and Development Centre to begin a discussion on how to establish a more systematic approach to business and development and to try and establish a better working relationship between the growing number of partners.

We want to come up with some solutions to how to work smarter together, and in the process answer these three critical questions:
  1. How can we better align business and societal interests? We need to improve our understanding of where and how business can make the greatest difference to development outcomes. Focusing on specific problems, issues and sectors i.e. nutrition, health pandemics, food security could help achieve greater alignment. 
  2. How can we ensure greater leadership and focus from the development sector? Business cannot tackle complex development challenges on their own. The development community has a crucial role to play in improving the way in which business and development objectives are constructed and incentivised by donors, governments and NGOs. 
  3. How can we improve our understanding of what works? Donors need to develop more consistent and rigorous empirical methods of assessing the impact of business and development interventions and to ensure that initiatives make best use of the scarce resources available.
Addressing these questions will be vital in defining in how we move forward in terms of improving both the quantity and quality of business and development efforts and our ability to scale up initiatives. In order to do this, the Business and Development Centre wants to work closely with representatives from across governments, donors, business and NGOs to ensure that our combined efforts have a transformational impact on people’s lives so please do get in touch and keep up to date with our progress.

Friday, 7 March 2014

The German energy transition: Fast forward or back to square one?

By Wilfried Lütkenhorst and Anna Pegels
 
The US baseball hero Yogi Berra once famously said in an interview “When you come to a fork in the road, take it!” No doubt, the German energy transition has come to a fork. It has reached a critical stage in its evolution. Where will it go?

The German energy transition is one of the most fascinating real world experiments of ‘green industrial policy’. Its unique aim is no less than seeking to ensure a sustainable future for a mature industrial society without using nuclear energy. Clear political objectives put a premium on climate change mitigation, a nuclear phase-out and the massive expansion of renewable energy. The strategy has received strong social backing to date. Innovative and competitive industries are exporting German energy technologies to expanding global markets, providing a prime example of the new industrial revolution towards climate-friendly economic development that many are calling for. We seem to be witnessing a success story unfolding, a story of a visionary national ‘project’ propelled by forward-looking policy interventions.

However, vested interests – above all the fossil empire with its huge ‘stranded assets’ - are striking back with a vengeance. A cool head is needed now more than ever unless we want to end up throwing out the baby with the bathwater.

A new study by GDI: costs and benefits

 
A new study funded by IISD and conducted by Anna Pegels and myself from the German Development Institute/Deutsches Institut für Entwicklungspolitik (GDI), analyses a key area of the energy transition – the costs and benefits of scaling up solar power and wind energy. Without doubt, the cost of promoting these technologies is significant. This should be no surprise, given that we are dealing with a political commitment to provide kick-off funding for new technological pathways. The results are impressive too. Renewable energies accounted for around 24% of the electricity produced in Germany in 2013, with well over half of this amount generated by wind energy and solar power alone.

At the same time, a total of 206,000 jobs were created (2012) in the wind energy and solar power sector, most of them highly skilled, and the industry prevented over 56 million tons of CO2 emissions that would otherwise have damaged the atmosphere. Furthermore, competitive global players have emerged – above all in the wind energy sector - and the environmental balance sheet is highly favourable: wind energy and solar power incur greenhouse-gas and pollution costs of between 0.3 and 1.2 €ct/kWh, while the figure for black and brown coal is between 9 and 11 €ct/kWh.

 

A distorted debate


Credit: Green Growth Knowledge platform
The debate is currently dominated by two phenomena generating a backlash. The first is the severe crisis in the German solar industry. The market, politically designed with guaranteed feed-in tariffs, is increasingly being conquered by overseas producers, primarily from China. German producers are hit by a wave of insolvencies, jobs are lost and technological leadership is fading. While the main reasons are still vigorously debated, the lack of innovation and the simple continuation of production processes that by now are mature, surely play an important role. At the same time, the healthy state of the wind energy industry is often completely overlooked.

The second phenomenon sees the assessment of the energy transition at risk of being reduced to an (increasingly distorted) analysis of electricity prices. As a transparent element of energy bills, the electricity surcharge is an easy political target – whereas the enormous subsidies that are still being pumped into fossil fuels remain largely opaque.

Germany cannot go it alone


Germany's pioneering role in bringing about climate-friendly growth in an industrial society is the subject of immense global interest. Depending on where observers stand in the political spectrum of climate interests, they want the energy transition to either become a resounding success or to fail miserably. There is much at stake for all concerned. The limitations of a go-it-alone approach by Germany are also becoming increasingly apparent. The close interlinkage with the European emissions trading scheme calls for greater coherence and alignment between regional and national policies. Scaling up renewable energy generation against a backdrop of falling prices for carbon certificates is bound to fail.

Calculated risks are unavoidable


Clearly, key challenges remain unresolved. These include grid expansion and integration, the development of large-scale energy storage capacities as well as the excessive incentives for solar power, which failed to anticipate the precipitation in the price of PV modules. At the same time, the fact that solar power capacity per capita in Germany is currently three times higher than the EU average should give cause for reflection.

However, an industrial and energy policy geared towards sustainability and societal transformation must accept a certain degree of calculated risk and even setback while not losing sight of its long-term objectives. The costs of the energy transition can be immediately accounted for. The same is not true for the long-term benefits of being in the vanguard of establishing a sustainable energy system.
 

This is a guest blog from our collaborators at the German Development Institute/Deutsches Institut für Entwicklungspolitik (GDI). A previous version appeared on the blog of the Green Growth Knowledge Platform on 26 February 2014. Wilfried Lütkenhorst is an Associate Fellow and Anna Pegels is a Senior Researcher at GDI.