THE BLOG
04/04/2016 08:19 am ET Updated Apr 05, 2017

Moving the Global Economy Toward Sustainability

Sylvain Sonnet via Getty Images

The technology of information, communication and transportation has made it possible for a global economy to emerge. Globalization has a logic of its own as companies seek to form or join networks that maximize their efficiency, market penetration and, ultimately, profit. When organizations expand the location of their partners and suppliers, they can increase their ability to produce and deliver to the entire world market. Inventions like inexpensive pocket-sized computing, bar codes, GPS, containerized shipping, air freight, satellite and cellular communication and the Internet have enabled organizations to operate globally. In fact, these technologies drive organizations to operate internationally or risk being beaten by their competition.

While some resist globalization and see it as a force for evil in the world, I see it as an inevitable outcome of the technologies of the 21st century. It is a force to be addressed and governed, rather than resisted. The benefits to the public of lower-priced and higher-quality goods and services are powerful and irresistible. Globalization can be disrupted, but it will not be stopped. In my view, it shouldn't be; it should be effectively managed and governed.

The problem with governing the global economy is that our system of political governance continues to be based on national sovereignty. I see no sign of that changing in the foreseeable future. In fact, as the economy globalizes and production becomes more homogenous and standardized, people seem to hunger more than ever for a sense of community and a distinct sense of place. The nation state continues to dominate politics, culture and society. One reaction to the force of globalization is an increased desire for community definition and community control of local decisions. People in democratic developed nations seek to influence public policies on a wide range of issues such as public safety, education, transportation, the food supply, the social safety net, land use and environmental protection. This desire for local control, and particularly the push to protect local air, water, and land resources, can be a powerful force capable of constraining the behavior of global corporations. Unfortunately, this local push is weak in the developing world and in places such as China and India that are on the path of rapid economic development.

But the desire for a clean and healthy environment is an inevitable stage of economic development. Once the basics of food, clothing and shelter are assured, issues of health and wellness become a higher priority. A predictable result of the success of globalization is the local and national regulation of economic production and consumption that threatens environmental quality and public health. This is especially true when environmental insults can be seen and smelled and when health impacts are direct and measurable. People start to worry about their health and particularly about the health of the people they love. While money can protect wealthy people from many threats to their wellbeing, it cannot always provide protection from air pollution and other toxic substances in the environment.

But what about a problem such as climate change that is long term, less visible and requires global actions to be addressed? What about corporations that move their headquarters, or at least their official headquarters, to the jurisdiction that taxes them the least? What of the control of dangerous and toxic materials like enriched uranium? While I see no prospect of a global government, and I wouldn't be in favor of one if it were feasible, we must develop better mechanisms of day-to-day cooperation and coordination among the world's sovereign nations to address global sustainability issues.

In some respects, the COP21 climate agreement reflects the reality of national sovereignty and the centrality of energy to national economies. With the exception of some cynical or ignorant people who continue to deny the reality of climate science, there is a wide consensus throughout the world about the grave threat posed by climate change. There is, however, no consensus about what we should do to mitigate that threat. That is one reason that the latest climate agreement allows nations to set their own greenhouse gas reduction targets and determine their own path to reaching those targets. Since there is no mechanism to enforce targets, we must count on nation states to do this on their own.

There are clear signs that this is happening. Here in the United States, national goals on emissions reduction have been set and, assuming the courts uphold EPA's decision, these targets will become established law. The Obama Administration's Clean Power Plan sets targets for states to reduce greenhouse gases, but leaves it up to states to figure out how to reach those targets. Both COP21 and the Clean Power Plan rule leave the decisions on how to make the transition to a renewable energy economy to those governments closer to the people who will actually implement the change.

A governance style that accommodates the global economy is one that acknowledges the reality of national sovereignty and the desire for community control, but that creates a shared awareness about global problems requiring coordinated action. That is the best we can do. We do not know if our best will be good enough.

The problems caused by globalization vary in their degree of difficulty. The transition to a renewable economy may be an easier problem to address than the problem of global terror. Developing national tax systems that acknowledge the reality of global corporations may be easier to implement than the transition to a renewable economy. But all of these issues require fresh thinking and a deeper understanding of life on a more crowded and interdependent planet.

The global economy and the sustainable economy could be mutually reinforcing. The drive toward efficiency and network management made possible by globalization could be enhanced by the closed system or circular production and consumption methods required by a sustainable, renewable economy. Synching globalization and sustainability requires low-cost, less-polluting, renewable energy. With cheap, clean energy we can establish a closed system of production and consumption, where fewer resources are wasted. This type of economy will be more efficient than a system built on the one-time use of finite resources. Using something finite and dumping it into a hole in the ground is less efficient and more costly than a system build on photosynthesis, renewable resources, and reuse of finite resources. In other words, an organization managed according to the principles of sustainability should be able to outcompete the organization sticking to the old, polluting 20th-century industrial model of management.

Globalization and sustainability can be synchronized and result in a clean, efficient and renewable resource-based economy. It remains true that some companies can always find short-term economic gain by taking shortcuts and making dangerous products or adopting production processes that pollute more than necessary. We will need national governments to regulate and constrain this behavior, just as we need local police to catch bank robbers. While robbing a bank may be a risky but effective short-term method for generating quick cash, it tends to create problems and jail time for those who pursue it. Companies that exploit and destroy the planet are starting to find that on a crowded, increasingly observed planet, polluting behavior is also getting harder to hide. A longer-term perspective can result in a more efficient, effective, global and sustainable operation. Competent management of a global corporation requires that CEOs practice sustainability management on a daily basis.