JAKARTA, Indonesia— A sustainable green business model with long-term profitability: how to marry these two concerns was the subject of a wide-ranging discussion during day two of the Tropical Landscapes Summit 2015.
The conference heard how commitment towards sustainable approaches must involve investment from the private sector. As panelist Mark Burrows, Managing Director & Vice Chairman of the financial corporation, Credit Suisse said, “The money is plentiful; it’s a matter of understanding that climate is not risk, that sustainability is not risk – it’s opportunity.”
Despite Burrows’ belief, investment in green businesses – whether agriculture, technology, or tourism – is often regarded with hesitancy and concern about risk and revenue.
Felipe Calderon, Chair of the Global Commission of the Economy and the Climate, and former President of Mexico said he has little patience for this viewpoint.
“We need to stop having this blinding debate that we have been having for the past 20 years,” he told the capacity audience in Jakarta.
As Energy Secretary of Mexico between 2003 and 2004, Calderon said he thought that renewable energy was too expensive, even though he knew that the “energy model was reaching its limits”.
The recipe for good resource management is transparency
Calderon is now a major proponent of a low carbon economic model based on renewable fuels and private investment in wind, solar and other clean energies. He believes that governments must create incentives for the private sector to promote the transition to a low-carbon economy so that it becomes as cost effective – or even more cost effective – than fossil energy.
This is a predicament that Indonesia considers as it faces “the dilemma of short term versus long term spends,” according to Bambang Brodjonegoro, Indonesia’s Minister of Finance.
While he agrees with Calderon’s view and said that Indonesia “would like to invite more investment in the green economy,” he also said that Indonesia faces growth and development challenges as well as policy reform. He cited water supply as an area where green investment could be welcomed, except for the level of local government regulations that would hinder any investors making a profit.
Reform must also include transparency, as accountability is essential to people committing to long-term investment, said Dr. Kuntoro Mangkusubroto from the ITB School of Business and Management in Jakarta. He gave the example of the Leuser National Park, which, he said, had been “20 percent destroyed due to illegal mining, illegal logging, palm oil, and other issues” with no one being held accountable or prosecuted.
“This lack of law enforcement is a real threat to Indonesia,” he said. “The recipe for good resource management is transparency. A government can provide accountability and make it verifiable to the public. Incentives have to be provided.”
Kuntoro said along with this accountability, reforming the “mind set” of the bureaucracy was an important issue when discussing green entrepreneurship.
If we don’t solve the investment questions this year, we won’t have another opportunity for years to come
Figuring out how the public sector can support private enterprise is part of that process, according to Peter Holmgren, Director General of the Center for International Forestry (CIFOR).
“We have to understand how to pick up risk and also support small people,” he said. “There lies a great opportunity for return in public service investment.”
The inclusion of indigenous people as well as smallholders and medium enterprises is vital in any reform, agreed all members of the panel.
“There are big players, but also medium and small players,” said Shinta Kamdani the Vice Chair of the Indonesia Chamber of Commerce and Industry (KADIN) and President Indonesian Business Council for Sustainable Development referring specifically to palm oil. “We need to embrace them all, and any other players in the game.”
While the major companies last year made a pledge about sustainable palm oil, around 40 percent of palm oil producers are smallholders. Holmgren said that those small farmers are at a disadvantage when it comes to long-term capital and investment in sustainability.
“We need to make sure that the infrastructure exists, and that financial transactions aren’t complex and cost too much,” he told the summit audience. “We have to think big in order to help the small.”
When Rachel Kyte, Vice President and Special Envoy for Climate Change at the World Bank, came to the podium, she made the dramatic gesture of tearing up her speech.
“I agree with everything that has been said,” she declared. “There is no time like the present. If we don’t solve the investment questions this year, we won’t have another opportunity for years to come. It has to be this year, it has to be now.”