Sustainable Resource Management Delivers Quality of Life

Climate change is a global problem that requires a global solution. At the same time, there is a pressing imperative to meet global quality of life ambitions. That’s why the United Nations have defined the ‘Sustainable Development Goals’ of the 2030 Agenda for Sustainable Development as including both climate change and basic concerns such as clean water, health, and poverty. Our work on energy in the United Nations Economic Commission for Europe is designed to improve access to affordable and clean energy for all and help reduce greenhouse gas emissions and the carbon footprint of the energy sector in the region. It promotes international policy dialogue and cooperation among governments, energy industries and other stakeholders. That’s the theory – let’s talk a bit about practice.

The world is headed towards between 4 to 6 degrees temperature rise and those levels are a species-existential threat – there’s no doubt about it. On the other hand, there are many places and countries where people are worried as first priorities about how to get food on their table or a roof over their head or to educate their children. For them, if you think about the famous Maslow’s hierarchy of needs, climate change might be on their list of priorities – it’s just not number one. The challenge we face in the ‘Sustainable Energy’ division of UNECE is finding an integrated solution for climate and development.

Energy as a Service

An important lever to achieve our goals is rethinking the way we see ‘energy’ overall. We don’t consume coal or gas or electricity, we’re not consuming kilowatt-hours – instead we consume ‘lighting’, for example, or – depending on where you are – you may consume ‘heating’ or ‘cooling’. These are services that energy offers.

We could reinvent energy: Instead of selling a product like more kilowatt-hours of electricity or more units of gas, providers should be selling ‘quality of life’ to people. It’s about comfort in your home, the warmth, the lighting, the mobility solutions that you require and all the rest of it.

Take the housing market for example: Thermal insulation can be expensive – and not everyone can afford the cost. When we change the business model to a service model then the service provider bears the costs and has an interest in reducing those costs. It’s their cost of capital, their knowledge of the technology, and their relationship with the contractors that would actually enable the retrofit market to take off. They would be depending on the revenue stream of a subscription service they have with their clients. So suddenly energy efficiency becomes the heart of their business model because that is how they will improve their margins. That’s the basic argument. A key challenge then, is transforming energy from the commodity business it has always been to the service industry it should be. The same can be said for resources – if we focus on the end-use services that consumers require rather than the volumes of resource commodities that must be produced, we can immediately shift the resource industry from a volume and logistics play to a zero-harm, zero-waste, value-add play.

From guidelines to guidance

How to make change possible is a very relevant question from a governmental point of view. It ranges from market design issues down to specific measures. At the UNECE we have a ‘High performance buildings initiative’, that we’re pursuing. We’ve put in place guidelines for energy efficiency standards in buildings and products and we have international conferences with experts to share knowledge and experience. A much more effective way to make an impact would be working at city and local levels. That’s why we are establishing International Centres of Excellence that deliver hands-on training and policy reform, from developing local standards and guidelines to enabling case studies to from public-private partnerships. That’s a very good method of technology transfer and capacity building. It is also a fantastic mechanism for scaling up to global impact. We are identifying local actors and inviting people to embrace change with an exchange of knowledge and information. There is a need to modernize education in all of the professional communities involved in buildings and to have collaboration with universities. They need to re-write their textbooks and train the next generation architects and engineers – and so on. We can support countries and people from many different layers.

We are relying on ‘principles-based’ guidelines: We don’t dictate how to run a business, but we try to demonstrate what is possible to achieve. The architect, the engineer, the contractor, and so forth can design and build something that meets the UN’s standard without having to meet prescriptive requirements. Our guidelines can apply in Moscow and they can apply in Rio de Janeiro or in Washington, D.C. Humidity, temperature and all these factors of influence can vary a lot all over the world – so it’s not ‘one-size-fits-all’. And we do it on a very practical level, for the ‘people with hammers in their hands’. We’re mobilizing local level structures to be able to train and bring the professional skill set up to a level to deliver that kind of an outcome that has an impact. And that really makes a change.

Mineral resources and sustainability

Let’s have a look at the beginning of the value chain: conservation of resources starts with raw materials. A well-known and very current example is electromobility. We have a project under way, in partnership with the European Commission, focused explicitly on batteries and critical raw materials. The global average ‘material footprint’ today is 11.9 tonnes per capita – over the whole spectrum from developing countries to the more advanced countries (more consuming countries is the better expression here). That single number masks a huge range from 2 to 27 tonnes per capita. The average is expected to rise to about 18 tonnes! If all countries and everybody consumed the way the average American consumer does today, we would need seven Planet Earth’s. Last time I looked we don’t have seven Planet Earth’s, and that’s the issue. Raw material use cannot continue to use the same linear models that have delivered today’s patterns.

The current patterns of resource production and use are unsustainable. There is a need for a global, principles-based sustainable resource management system and a comprehensive financial reporting framework for extractive industries if the world is to meet its climate objectives and deliver quality of life at the community level. Such an architecture for responsible extractive industry management would benefit communities worldwide and provide assurance to a market and investment community that is calling for tightened environmental, social, and corporate governance aligned with the 2030 Agenda. Embedding requirements to manage resources in line with the 2030 Agenda in financing packages would ensure sustainable outcomes. UNECE proposes action for securing sustainable resources for the future including a comprehensive Socio-Environmental-Economic Contract to Operate that integrates quality of life, just transition, climate change mitigation and adaptation, and environmental stewardship, common sustainable finance taxonomy and principles to support ESG-focused funding, a shared Principles-based, Integrated, Sustainable Resource Management Framework as per the existing UNFC and the UNRMS under development, a comprehensive framework for traceability, transparency, and sustainability in supply chains, and strategic environmental assessments of government plans and programmes.

Regarding critical raw materials used for e-mobility or windmills or renewables and photovoltaics – it’s not just batteries, it’s a broad spectrum – we got to find a way to develop the resources. We need to have recycling, tracking and recovering, we need the concept of circular economy. And we need the digitalization of keeping track of where things have gone in order to be able to recover them. We have developed the United Nations Framework Classification, which is a way of how companies can keep track of the resources they have under management. That’s now being evolved into a holistic and dynamic Resource Management System: that enables companies and countries to keep track of and optimize the production of and the investment in resources.

There are three dimensions to that: The first is an understanding of what the resource amounts are, the second is what are the technologies and technical approaches to the development of these resources, and the third traditionally has been ‘economics’: What’s the price, what’s the cost? But, with the 2030 agenda that third axis suddenly becomes a ‘peacock tail’ of 17 sustainable development goals. You can optimize your development of the resources in line with what you’re trying to achieve with the development agenda. That actually gives you several things: 1. You can identify barriers and obstacles. 2. You can filter out if there are conflict issues, which areas to develop and how to prioritise. 3. You get a ‘social license’ to operate: Companies can invest in these resources and have confidence they’ve been developed in accordance with UN guidelines and globally acceptable standards.

Technical innovation will play a vital part in this process. When thinking about the idea of circular economy and the need to recover materials, we really need to know where the inventories are and where they move. Fingerprinting and block chain technology can be very helpful with that. Maybe the next best source for one critical raw material isn’t a new mine but rather a city where you could recover enough of this material by recycling to re-use it. That’s why you really need to know where the stuff is. We got a long way to go, but I think it’s absolutely essential to get those technologies in place: the high-tech angle on materials, on operations, on investments. Only good information enables good decisions.

That’s why we are pleased about the commitment of companies such as DMT – who as initiator and partner have developed a systematic global certification scheme: Project CERA 4in1. With the support of EIT RawMaterials, a body of the European Union, they are working closely together in a huge network of expert partners, including universities, companies and non-profit organisations.

Already running since spring 2017, DMT is advancing this project to ensure CERA will become the first universal and comprehensive certification scheme that includes all minerals and all regions. This requires – and encourages – international cooperation in order to jointly benefit from such a complete and transparent system for the production, processing and traceable transport of all mineral resources. In principle, such a global system is the technical implementation of the idea of the ‘United Nations’ in the very literal sense. Find out more about this high-end-approach to sustainability on their CERA website.

Changing incentives for a change

And there is something else we have to change if we want to reach our goals faster: the attitudes of decision makers. For decades in economics, we have talked about the concept of ‘shareholder value’. Most incentive structures that were put in place were very linked to share prices. That approach doesn’t work anymore, even for shareholders (as this Forbes article from 2017 explains). As the world is committed to the 2030 agenda to development sustainably, the incentives for senior management, for boards of directors, even for shareholders need to be better aligned to that goal. The incentive cannot be just the share price – we need more key performance indicators that are really helpful. We want governments to be rational economically, environmentally and socially. A very effective way of making that happen is to put executive incentives in line with those outcomes. That would be a useful step.

Additionally, we’ll need a change of attitude in business: From opposition to cooperation. Often lawmakers or regulators are very focused on keeping the private sector out of the room. There’s some sense of a corrupt influence of private money in decision making. Obviously, there can be such a harmful influence – but it is not the norm. When I was in California, we were doing work following an accident: A landslide provoked by lots of rain took out a substation and dumped it into one of the reservoirs. We went through a whole process of dredging out the reservoir because what has been in the substation was now in the reservoir and it contained hazardous materials. We asked the regulator: ‘What degree of clean-up are we trying to achieve?’ And they said: ‘We want to have one-half of detectable limits.’ How do you distinguish between one-half of detectable limits and three quarters of detectable limits when you can’t detect it? The point is: You need to have a collaboration among regulators, the private sector, and society. The work that I do at the United Nations is both competent and capable and is delivering results because we HAVE the private sector at the table, alongside governments. The way we avoid any undue influence is just complete, brutal transparency. And that way you can have a pragmatic, reasonable and effective approach – that kind of cooperation and collaboration is essential if we want to attain our objectives.

From isolationism to collaboration

Every country has got its own endowment of natural resources, and it’s got its own regulatory, cultural and legislative heritage. There’s not one pathway that applies to everybody. But we do need a common vocabulary. And we need a collective outcome that delivers two degrees or one-and-a-half degrees while allowing development to occur in a sustainable way. In the last years, ‘globalization’ has got a bad name for some people for a variety of reasons. But globalization has also brought growth and prosperity to areas of the world that previously had benefited little. We should also consider that certain complex products cannot be manufactured 100% in individual, isolated countries. Just imagine what resources are packed in this smartphone: when you are really concerned about this product and you want to ensure that you’ve got your own resources for everything that goes in here – that becomes an extremely expensive insurance policy that you’re paying for security of supply.

I would think you’re better off with a diversity of sources, a diversity of technologies and a choice of different ways to ensure the desired outcomes. Encourage countries and regions to align with societies and norms, rather than dictate: ‘You must do it my way.’ Because everybody has their own way, every individual, every city, and every country is going to act in self-interest. The real challenge we face is, how can we get self-interests aligned with societies’ needs. And that’s where proper pricing signals and proper market structures become really important. You’re getting into the psychology of what drives and motivates people’s behaviour. And a change in behaviour is what we need to mitigate climate change. We are facing a species existential threat; we should not deny that reality and we need to make faster progress. Global collaboration is our only chance. We will need much more of it – not less.

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