Guest Blog by Leida Rijnhout: Is The Private Sector Willing To Sign Up To The 2030 Sustainable Development Agenda?
This blog originally appeared here:
Within the 2030 Sustainable Development Agenda there are 17 Sustainable Development Goals, and 169 targets that should be achieved by all countries in the world. This is not a ‘North gives to the South’ or a ‘charity’ agenda, as the Millennium Development Goals were, but a framework that requires universal implementation.
In September 2015, world leaders agreed on the ambitious 2030 Sustainable Development Agenda that has the potential to change the global economic system. By making the most of this opportunity, the international community could break out of the ‘business as usual’ approach that left the Millennium Development Goals unmet. If governments really want to take this new framework seriously, it requires not only economic changes, but also most importantly political change because of the need to shift power relations and vested interests in the existing economic system.
The Sustainable Development Agenda is based on human rights, justice and with common but differentiated responsibilities. It is about putting sustainability at the heart of all national and international policies. This also implies policy coherence, a shift in investments, tax reforms and a redesign of finance mechanisms. The financial system also needs to be re-regulated after decades of deregulation.
At the Finance for Development Conference that was held in June 2015 in Addis Ababa, the main discussion was about how to finance the Sustainable Development Goals (SDGs). It was pretty clear that besides the traditional development cooperation for the Global South, the main solutions will need to come from increasing public funding by: better, more effective and fairer national tax systems; increasing sustainable public procurement; stopping subsidies to unsustainable practices (fossil fuel energy, intensive agriculture, polluting production) and stopping the global tax avoidance and illegal financial flows.
The 2030 Sustainable Development Agenda can be historical if implemented fully. The big challenge is to get a critical mass of governments with enough political power to challenge the vested interests of the private sector. We also need this political power to correct the many errors in the financial and monetary systems and to change the actual impunity for huge environmental damages. How do we get this sense of urgency at governmental level?
If we start to look at the role of the private sector: the world’s biggest firms cause $2.2 trillion of environmental damage per year, according to a study published a few years ago. This equates to 6-7% of the companies’ combined turnover, or around one-third of their profits. A different study comes to $7.3 trillion of un-priced natural capital costs, which equates to 13% of the global economic output in 2009. Many big corporations are also quite creative in finding ways to avoid paying their taxes and stashing their money in offshore accounts that are hidden from the eyes of regulatory authorities. Africa is losing $50 billion per year due to illicit financial flows, as companies refuse to pay taxes in the countries in which they operate. On top of this, the economies of the Global South are already confronted with the so called Ecologically Unequal Exchange (EUE), which calculated that international trade, as organised nowadays, leads to a net transfer of resources from those countries to the industrialised world. But this is not an exclusively ‘African problem’. In Belgium, big corporations received €700 million in tax reductions through special ‘on-demand’ tax rulings that were promoted by the government under the banner of ‘Only in Belgium’. Just recently, the European Commission decided that these deals are illegal and it ordered the Belgian government to demand back the money from the corporations.
It is legitimate to ask if the private sector is willing to fundamentally change the rules of the game and work to “transform our world”, as proposed by the 2030 Sustainable Development Agenda. Are shareholders, banks and investment funds willing to accept highly reduced profits by firstly avoiding or at least internalising the costs of the environmental damage they create? And are the UN and Member States politically able to change their policies and legal frameworks in such a way that they are obliged to do so?
It is widely known and regretted that the UN is becoming increasingly dependent on corporate funding, as shown by the recently published report “Fit for Purpose” Private funding and Corporate influence in the United Nations. This could influence the agenda and the activities of the UN and provoke a shift from multi-laterism to mini-laterism. It could result in public-private partnerships taking precedence over the designing of strong policy and legal frameworks. This, in turn, will make it more difficult to create a level playing field for a fair and green economic system, to close the inequality gap between countries, to stay within planetary boundaries, and to manage common goods based on human rights and justice for all. One of the best known public-private partnerships, the Global Compact, lacked a proper regulatory governmental and institutional framework, according to an evaluation by the UN Joint Inspection Unit. A blurred focus on mandate and lacking accountability mechanisms will weaken the democratic rights of citizens and the credibility of the UN system in general.
It is difficult to be aware of this increasing and untransparent role of the private sector without being worried about the implementation of the 2030 Sustainable Development Agenda. The Sustainable Development Goals (SDG) are, in contrast to the previous Millennium Development Goals, mostly a policy-based agenda. They should not only focus on channeling money into concrete development projects on, for example, poverty, education, water or sanitation in poorer countries, but they should also have the ambition “to transform the world” – and that means the whole world, meaning both rich and poor countries. This aim is obviously highly political as a fundamental shift has to be made with existing power relations and vested interests. Furthermore, most opinion- and policy makers are focused on seeing market-driven solutions and economic growth as the medicine for all problems. With this in mind, the ‘privatisation’ of the UN and the increasing influence of corporate lobbies at national levels could surely be an obstacle to implementing a policy agenda based on human rights and justice.
In the negotiations on climate change we see the same threat from the fossil fuel industry, which is unfortunately not at the forefront of the battle to make the shift to renewable energy. In this process it is a big challenge to prevent vested interests, particularly those from the fossil fuel sector, from having undue influence on the outcome, although hopes were low, as we can read in the report “Corporate Cook Book, how climate criminals have captured the COP21” from the Brussels-based NGO, Corporate Europe Observatory (CEO). As the report states: “the UN – particularly the UNFCCC – has rolled out the red carpet for even the dirtiest of corporations, allowing their false solutions and broken business models to be taken up as key part of the supposed solution to climate change.”
It is really urgent that Member States claim back the ownership of the UN and its political outcomes.
Corporate funding is compromising the independence of the UN, especially when it comes to its core mandate: designing policy and legal frameworks for a fair and just world. This means of course that Member States need to put more public funding into the UN work, as well as take responsibility at national levels. Since the very beginning of the SDG negotiations, civil society has stressed that this Agenda needs to be a state-led process, where the transformation of the economic system, closing the gap of inequalities and power relations, effective management of ecosystems and policy coherence are key.
An effective and just tax system in all countries would also provide finance for the implementation of the SDGs. Tax systems in developing countries tend to be some of the most regressive in the world. To bridge the inequality gap they need to be reformed into more progressive and effective systems. But it is not only in developing countries that reforms are needed. Fiscal policy in the European Union is also showing regressive trends. Taxing labour is still more common than taxing capital. This is increasing the inequality gap tremendously. In Brussels 40% of young people aged 15-24 now live below the poverty line.
According to Winnie Byanyima, Executive Director Oxfam International, it will be difficult to realise the needed changes in the existing tax systems, because of the vested interest lobbies: “One of the reasons for the inadequate response from EU governments to crack down on corporate tax dodging is the strong lobbying of powerful global companies in defense of a tax system that handsomely rewards them. It is a system that exacerbates the widening gap between the wealthiest and capital, and the poor as well as labour and consumption. Moreover, efforts by national governments to introduce fair tax systems will always be hampered by the inherently unfair international system, which serves to facilitate corporate tax avoidance. The governments of some EU countries such as the Netherlands and the UK claim to be ‘tax competitive’, effectively driving down standards to attract the business of multinational corporations. Unfair tax competition within the EU is leading to substantial tax losses for public administrations”.
Furthermore, the role of the financial institutions is also crucial for the implementation of the SDGs, as the right investments can help boost the shift towards sustainable business models and greener and fairer consumption and production patterns. UNEP has published an interesting study on how to establish a financial system that is aligned with sustainable development, called “The Financial System we need”. The bottom line of this UNEP inquiry is that it is both possible and necessary to improve key parts of the financial system. It writes: “Financing sustainable development will require capital flows to be redirected towards critical priorities and away from assets that deplete natural capital” and also puts a figure on it: “$6 trillion by 2030”, from high polluting energy development and power generation. The $5.3 trillion in annual energy subsidies identified by the International Monetary Fund is of course a good place to start looking.
In the same report it was mentioned that upgrading governance architectures, in other words giving more power to elected representatives, was identified as the least practiced but the most critical way of supporting the implementation of all other ways to get to a sustainable financial system. That is a politically correct way of saying that the best way forward is to take back the power that the private sector took away from governments.
As a civil society we have important roles to play: as watchdogs, innovators, implementers in the field, guardians and facilitators for participative democracy, defenders of human rights and advocacy work. But most of all to bring back the power to citizens and elected governments.
Leida Rijnhout
Director Global Policies and Sustainability
European Environmental Bureau
Within the 2030 Sustainable Development Agenda there are 17 Sustainable Development Goals, and 169 targets that should be achieved by all countries in the world. This is not a ‘North gives to the South’ or a ‘charity’ agenda, as the Millennium Development Goals were, but a framework that requires universal implementation.
In September 2015, world leaders agreed on the ambitious 2030 Sustainable Development Agenda that has the potential to change the global economic system. By making the most of this opportunity, the international community could break out of the ‘business as usual’ approach that left the Millennium Development Goals unmet. If governments really want to take this new framework seriously, it requires not only economic changes, but also most importantly political change because of the need to shift power relations and vested interests in the existing economic system.The Sustainable Development Agenda is based on human rights, justice and with common but differentiated responsibilities. It is about putting sustainability at the heart of all national and international policies. This also implies policy coherence, a shift in investments, tax reforms and a redesign of finance mechanisms. The financial system also needs to be re-regulated after decades of deregulation.
At the Finance for Development Conference that was held in June 2015 in Addis Ababa, the main discussion was about how to finance the Sustainable Development Goals (SDGs). It was pretty clear that besides the traditional development cooperation for the Global South, the main solutions will need to come from increasing public funding by: better, more effective and fairer national tax systems; increasing sustainable public procurement; stopping subsidies to unsustainable practices (fossil fuel energy, intensive agriculture, polluting production) and stopping the global tax avoidance and illegal financial flows.
The 2030 Sustainable Development Agenda can be historical if implemented fully. The big challenge is to get a critical mass of governments with enough political power to challenge the vested interests of the private sector. We also need this political power to correct the many errors in the financial and monetary systems and to change the actual impunity for huge environmental damages. How do we get this sense of urgency at governmental level?
If we start to look at the role of the private sector: the world’s biggest firms cause $2.2 trillion of environmental damage per year, according to a study published a few years ago. This equates to 6-7% of the companies’ combined turnover, or around one-third of their profits. A different study comes to $7.3 trillion of un-priced natural capital costs, which equates to 13% of the global economic output in 2009. Many big corporations are also quite creative in finding ways to avoid paying their taxes and stashing their money in offshore accounts that are hidden from the eyes of regulatory authorities. Africa is losing $50 billion per year due to illicit financial flows, as companies refuse to pay taxes in the countries in which they operate. On top of this, the economies of the Global South are already confronted with the so called Ecologically Unequal Exchange (EUE), which calculated that international trade, as organised nowadays, leads to a net transfer of resources from those countries to the industrialised world. But this is not an exclusively ‘African problem’. In Belgium, big corporations received €700 million in tax reductions through special ‘on-demand’ tax rulings that were promoted by the government under the banner of ‘Only in Belgium’. Just recently, the European Commission decided that these deals are illegal and it ordered the Belgian government to demand back the money from the corporations.It is legitimate to ask if the private sector is willing to fundamentally change the rules of the game and work to “transform our world”, as proposed by the 2030 Sustainable Development Agenda. Are shareholders, banks and investment funds willing to accept highly reduced profits by firstly avoiding or at least internalising the costs of the environmental damage they create? And are the UN and Member States politically able to change their policies and legal frameworks in such a way that they are obliged to do so?
It is widely known and regretted that the UN is becoming increasingly dependent on corporate funding, as shown by the recently published report “Fit for Purpose” Private funding and Corporate influence in the United Nations. This could influence the agenda and the activities of the UN and provoke a shift from multi-laterism to mini-laterism. It could result in public-private partnerships taking precedence over the designing of strong policy and legal frameworks. This, in turn, will make it more difficult to create a level playing field for a fair and green economic system, to close the inequality gap between countries, to stay within planetary boundaries, and to manage common goods based on human rights and justice for all. One of the best known public-private partnerships, the Global Compact, lacked a proper regulatory governmental and institutional framework, according to an evaluation by the UN Joint Inspection Unit. A blurred focus on mandate and lacking accountability mechanisms will weaken the democratic rights of citizens and the credibility of the UN system in general.
It is difficult to be aware of this increasing and untransparent role of the private sector without being worried about the implementation of the 2030 Sustainable Development Agenda. The Sustainable Development Goals (SDG) are, in contrast to the previous Millennium Development Goals, mostly a policy-based agenda. They should not only focus on channeling money into concrete development projects on, for example, poverty, education, water or sanitation in poorer countries, but they should also have the ambition “to transform the world” – and that means the whole world, meaning both rich and poor countries. This aim is obviously highly political as a fundamental shift has to be made with existing power relations and vested interests. Furthermore, most opinion- and policy makers are focused on seeing market-driven solutions and economic growth as the medicine for all problems. With this in mind, the ‘privatisation’ of the UN and the increasing influence of corporate lobbies at national levels could surely be an obstacle to implementing a policy agenda based on human rights and justice.
In the negotiations on climate change we see the same threat from the fossil fuel industry, which is unfortunately not at the forefront of the battle to make the shift to renewable energy. In this process it is a big challenge to prevent vested interests, particularly those from the fossil fuel sector, from having undue influence on the outcome, although hopes were low, as we can read in the report “Corporate Cook Book, how climate criminals have captured the COP21” from the Brussels-based NGO, Corporate Europe Observatory (CEO). As the report states: “the UN – particularly the UNFCCC – has rolled out the red carpet for even the dirtiest of corporations, allowing their false solutions and broken business models to be taken up as key part of the supposed solution to climate change.”
It is really urgent that Member States claim back the ownership of the UN and its political outcomes.
An effective and just tax system in all countries would also provide finance for the implementation of the SDGs. Tax systems in developing countries tend to be some of the most regressive in the world. To bridge the inequality gap they need to be reformed into more progressive and effective systems. But it is not only in developing countries that reforms are needed. Fiscal policy in the European Union is also showing regressive trends. Taxing labour is still more common than taxing capital. This is increasing the inequality gap tremendously. In Brussels 40% of young people aged 15-24 now live below the poverty line.
According to Winnie Byanyima, Executive Director Oxfam International, it will be difficult to realise the needed changes in the existing tax systems, because of the vested interest lobbies: “One of the reasons for the inadequate response from EU governments to crack down on corporate tax dodging is the strong lobbying of powerful global companies in defense of a tax system that handsomely rewards them. It is a system that exacerbates the widening gap between the wealthiest and capital, and the poor as well as labour and consumption. Moreover, efforts by national governments to introduce fair tax systems will always be hampered by the inherently unfair international system, which serves to facilitate corporate tax avoidance. The governments of some EU countries such as the Netherlands and the UK claim to be ‘tax competitive’, effectively driving down standards to attract the business of multinational corporations. Unfair tax competition within the EU is leading to substantial tax losses for public administrations”.
Furthermore, the role of the financial institutions is also crucial for the implementation of the SDGs, as the right investments can help boost the shift towards sustainable business models and greener and fairer consumption and production patterns. UNEP has published an interesting study on how to establish a financial system that is aligned with sustainable development, called “The Financial System we need”. The bottom line of this UNEP inquiry is that it is both possible and necessary to improve key parts of the financial system. It writes: “Financing sustainable development will require capital flows to be redirected towards critical priorities and away from assets that deplete natural capital” and also puts a figure on it: “$6 trillion by 2030”, from high polluting energy development and power generation. The $5.3 trillion in annual energy subsidies identified by the International Monetary Fund is of course a good place to start looking.
In the same report it was mentioned that upgrading governance architectures, in other words giving more power to elected representatives, was identified as the least practiced but the most critical way of supporting the implementation of all other ways to get to a sustainable financial system. That is a politically correct way of saying that the best way forward is to take back the power that the private sector took away from governments.
As a civil society we have important roles to play: as watchdogs, innovators, implementers in the field, guardians and facilitators for participative democracy, defenders of human rights and advocacy work. But most of all to bring back the power to citizens and elected governments.
Leida Rijnhout
Director Global Policies and Sustainability
European Environmental Bureau
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