Human development is about becoming more resilient

An extract from an interview on rearticulating human development, with Maria Mendiluce, CEO, We Mean Business Coalition.

Dr. María Mendiluce has over 20 years’ experience in sustainable development, energy and climate action. She sits in the Senior Management Team of WBCSD, guiding over 200 member companies on transformative climate policy and energy transition. In addition to her role at WBCSD, María is also CEO of the We Mean Business coalition. Prior to working at WBCSD, María held roles at the Economic Bureau of the Spanish Prime Minister, the CEO office of Iberdrola and the International Energy Agency (Paris). María has a PhD in energy economics and regularly teaches at different universities and publishes in academic journals and media

This is an abridged interview by Asun Lera St Clair @AsunStClair

For the full interview, click here.

Resilience and wellbeing

The novel coronavirus pandemic is a once-in-a-century challenge that confronts humanity itself, leaving no nation unaffected. At the same time, there is no denying its disproportionate impact on those most vulnerable. The relationship between continued human development and becoming resilient – being able to bounce back after a shock and adapt to new circumstances – has rarely been demonstrated so vividly. Becoming resilient to not only low-frequency, high-magnitude events but also to the looming threat of climate change.

Ensuring wellbeing, in addition to education, is a key contributor to building resilience and helping people lead better lives. The social and economic dimensions of wellbeing are certainly important: a good life hinges on a functional health system and financial security, for example. But the environmental dimension of wellbeing is just as important. The blossoming of human potential relies on a safe and healthy natural environment, an element that was often been taken for granted in the past. Now, however, it is hard to escape the reduced life-expectancy because of air pollution or to deny the potentially adverse impacts of climate change on livelihoods.

Sustainable yet profitable development

Although the social, economic and environmental dimensions of wellbeing are inseparable in principle, they can conflict with each other in practice. This leads to apparently inevitable trade-offs among, say, boosting the economy, protecting the environment and addressing inequality. Today, when national economies have been brought to their knees, it is only natural to focus on reviving them. But there is no reason why this revival could not be directed in a way that is less damaging to the environment, less exploitative of people. The key is to find a business model that makes the making of profits contingent on social and environmental improvements.

As a first and most important step towards such a model, the prices of goods and services must reflect social and environmental costs, the so-called externalities. Once this happens across the board, when such costs become internalized, it will become difficult for a given company to sell things cheaper by ignoring the costs. If governments could insist that prices reflect the cost of externalities, it could generate a snowball effect by transforming the financial system.

Then, companies must also internalize social and environmental risks, be it the boiling over of social tensions as riots or coastal flooding triggered by climate change. Typically, companies pay attention to such risks only when they are manifested in events such as the pandemic. Instead, they should integrate social and environmental aspects into their overall risk-management processes, into their financial reports. Once they do so, they will quickly realize that this is good for their bottom line too. A company that reduces emissions by using clean technologies can access cheaper capital and sell its products cheaper because they have fewer or no externalities. It is thus competitive, and its operations are profitable.

Lastly, companies need to demonstrate a purpose that consumers, employees and even many providers can identify with. Such companies are undoubtedly better performers, more profitable, because they can rely on a highly motivated and committed workforce.  

A business case for human development

Companies rely on people, not just their immediate employees but people throughout the supply chains. In their success lies the success of companies. The business sector understands the importance of skills, talent and the potential of people very well, so companies could be led to realize the importance of human development as a concept that encapsulates these aspects. Besides, companies are increasingly aware that the more diverse they are, in terms of geography, culture or gender, the more likely they are to succeed. Conversely, a company whose policies reduce the resilience of the people they rely on will eventually go bankrupt.

Nevertheless, although companies are increasingly accounting for environmental risks, they have not quite grasped the case for accounting for social risk. What is needed a strong and compelling narrative that could help justify the business case for measuring, tracking and reporting progress towards the UNDP-validated metrics of human development. A narrative that would convince companies that their resilience is reliant on the resilience of people and societies.

Image by Marco Verch on Flickr