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IISD Speech: President and CEO Scott Vaughan at Winnipeg Chamber of Commerce Fun, Profit and Saving the Earth event

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IISD Speech: President and CEO Scott Vaughan at Winnipeg Chamber of Commerce Fun, Profit and Saving the Earth event

May 18, 2018 – Thanks to Loren Remillard of the Winnipeg Chamber for his continued leadership, and to all of the generous sponsors of today’s event, including Manitoba Hydro, the Manitoba Trucking Association, Veolia and others.

IISD President Scott Vaughan addressing Winnipeg business leaders on transitioning to a green economy.
Photo: Winnipeg Chamber of Commerce.

The business community and trucking are on the front lines of a complex, unstable and changing world. The Manitoba and Canadian economies are highly dependent on trade. Sustainability standards are advancing quickly, with the Sustainable Development Goals creating a new momentum.

Continuous advances are underway in efficiency and broader innovation. And regulatory approaches linked to low-carbon pathways are debated not only here in Canada but with every country moving to implement the Paris climate agreement.

Winnipeg is the model for replicating community-based sustainability indicators across Canada and around the world.

So those are the four areas I’ll explore with you today – trade, sustainability, innovation and climate.

Let’s start with trade. I’m on the federal government’s advisory group on NAFTA and environmental issues together with two former premiers and others. Since its founding, IISD has worked on trade policy as a means to magnify environmental protection, good jobs and social inclusion.

Quality of life is a key competitive advantage for business and people investment, and we want Winnipeg to score as high as it can.

Yesterday, another NAFTA deadline was missed. Time is running out. While these are deadline and can always shift, the pattern of missed deadlines is worrying. The Mexican election of July 1st is approaching. While the left-wing presidential candidate is leading, it’s worth noting that Mexican business groups have seriously examined the competitive implications of post-NAFTA for months.

More pressing is the U.S. Congressional window to get a NAFTA deal through during the lame-duck session. That window closes in two weeks.

IISD has had plenty to say about NAFTA’s flaws. At the very least, trade policy should follow a do-no-harm approach. That is the broad basis of the notion of "competitive neutrality."

NAFTA missed that low-bar through its investor-state dispute settlement provisions. They were poorly conceived and badly executed, leading to hundreds of millions of dollars in capricious settlements. Perhaps more costly, it gave anti-NAFTA advocates an easy target that in turn  eroded public confidence in the value of trade.

Not surprisingly, the language used by advocates of a more progressive policy—think fair trade—has been hijacked by a powerful anti-trade constituency.

For 20 years, IISD colleagues have worked to fix policy problems like the NAFTA investment clause. They have helped reshape the debate, and solutions are being embedded in new agreements like the Canada-Europe CETA or Trans-Pacific Partnership Agreement. We are working with others to help support the World Trade Organization system, itself under siege.

But to be clear, IISD has worked towards better trade policy. Protectionism and isolationism are bad policy choices—bad for business, bad for environmental cooperation, bad for innovation, bad for economic certainty and ultimately, bad for peace. Remember, our current system came out of the 1945 post-war period.

While the Bank of Canada and other economists forecast only a marginal economic dip if NAFTA ends and Canada reverts to bound tariff rates in the World Trade Organization, I’m not buying it. Imagine the administrative confusion at hundreds of border crossings in a post-NAFTA setting? This means higher costs to shippers and higher costs to consumers all the way down the supply chain.[1]

Last fall, IISD economists ran an economic model and study of the impacts of a 20 per cent tariff hike on steel, aluminum and automobiles. Briefly, we found that nobody wins, measured by losses in GDP, losses in jobs and increases in greenhouse gas emissions. The biggest loser is the United States.

And we don’t need a model to know that a no-NAFTA scenario will increase environmental and public health costs, at least in the short term, from higher air pollution rates from idling trucks at congested borders.

So, with that thought, let me shift gears from the doom and gloom to my second point around sustainability. If trade policy is narrowing, the sustainability agenda is moving in the opposite direction, and quickly.

The global market for green goods and services is estimated today at just under USD 900 billion and tracking to exceed USD 1.7 trillion by 2025.

Recently, Bloomberg estimated that the global investment in renewable energy last year increased marginally, to USD 279.8 billion. The cumulative investment in renewable energy in this decade is USD 2.2 trillion.

Winnipeg is the model for replicating community-based sustainability indicators across Canada and around the world.

While the rate of growth in renewable energy markets is tepid—last year it was 2 per cent growth—it has again outpaced global investments in conventional energy sources. In many countries, it makes more sense to invest in renewable energy than fossil fuels. And that’s counting the USD 450 billion that the fossil fuel sector receives annually by way of subsidies, roughly four times higher than the subsidy rate for renewable energy.

While cleaner energy is a big part of green markets, it is hardly the only story. More goods and services in global supply chains are embedding green sustainability standards. Today, 40 per cent of all coffee has some kind of sustainability standard. More than 20 percent of palm oil—a USD 9 billion annual market – has similar sustainability standards.

As these markets expand, they are creating new opportunities in new markets. But these markets need to be open in a predictable, rules-based manner. I find it interesting that the biggest demand for renewable energy has now shifted from mature markets like Germany and the United States to emerging markets like Uruguay and Argentina, part of MERCOSUR. Recently, Canada announced it is considering negotiating a MERCOSUR–Canada free trade agreement. If there were ever a time for Canadian business to diversify their markets, it is today.

We are working with the World Economic Forum and some leading global companies to examine how green and sustainability standards are being integrated within global supply chains today, and how trade policy can help expand. We are also part of a smaller group of companies, led by Unilever, Ikea and others, working on advancing a circular economy in Canada.

An important driver that is shaping this momentum is the Sustainable Development Goals, or SDGs.

The SDGs comprise a big agenda—17 ambitious goals, like ending extreme poverty, ending hunger, advancing the rights of women and girls, protecting fresh water and tackling climate change. They mark the first time ever that all nations of the world have agreed on a shared, comprehensive vision of the future.

When the goals were launched in 2015, a global PWC survey found that 70 per cent of businesses had plans to embed the SDGs within their operations in five years, while 90 per cent of citizens thought it important that business signs up to the SDGs. A follow-up survey last year found that 62 per cent of companies globally were already mentioning the goals in their reporting.

Compared to many other countries, the SDGs still have a low profile in Canada. But this is changing fast. CPA Canada reported last year that several leading corporations used the SDGs as a framework for evaluating their progress, including Barrick, BMO, Goldcorp, Sherritt and Teck, and some companies aligned their targets with those of individual SDGs, such as TELUS, for example.

My colleague Darren Swanson is one of the world’s experts on the SDGs. He is planning to provide ongoing information to business groups in Winnipeg on the SDGs; this might be something we could explore jointly with the Chamber.

We’re also seeing momentum at the municipal level. In two months, New York City will be the first city to report on what it is doing on the SDGs.

Winnipeg also has a lot of bragging rights in measuring sustainability. With the amazing leadership of Connie Walker and her super smart colleagues at the United Way of Winnipeg, the PEG urban sustainability platform won an international award as the best in its class globally in community-based reporting. Winnipeg is the model for replicating community-based sustainability indicators across Canada and around the world.

We are working with five communities in Canada now to replicate the Winnipeg PEG model. IISD will move beyond Canada to communities in the Caribbean, Central America and Southeast Asia in 2018, again using the Winnipeg PEG model as the starting point.

If trade policy is narrowing, the sustainability agenda is moving in the opposite direction, and quickly.

With our partners at United Way, we are looking at how a PEG 2.0 can include the SDGs in a new platform. Indeed, United Way Global recently decided that the SDGs will be their central "brand" to engage a new generation of young people in volunteerism.

Why does community measurement matter?

For us, it matters because it is not just about where we live, but how we live. That is what PEG has helped us understand together. Attracting investment is one thing; attracting people is another. People want to live, work, and raise a family in a city and community that is clean and friendly!

Quality of life is a key competitive advantage for business and people investment, and we want Winnipeg to score as high as it can.

Which brings me to my last two points briefly—data and climate.

I was at the Davos meeting in January, and every second meeting—regardless of topic—had some reference to big data, open data, blockchain and AI. While I was lost on some blockchain references, like you, IISD is linking innovation with data delivery pathways, like exploring how a new PEG can use smart phones to reach younger people.

We’re working now with the RBC Foundation to explore how big data and lessons from fintech could improve Lake Winnipeg stewardship. We are doing similar work around big data and climate resilience. My colleague Jane McDonald—IISD’s Managing Director—is leading a new project on a Lake Winnipeg Hackathon.

I wanted to come back to the innovation and data agenda in relation to road transport. We have followed the work of the Geneva-based World Transport Organization in finding solutions to low-emission and sustainability solutions for over a decade. What’s interesting is their focus on how to align different parts of innovation, like digital logistics, pre-shipment clearance, smart regulations and other measures. I spoke with the head of their North American work this week and think linking up their experts with the impressive work of the Manitoba Trucking Association could bring strategic advantages.

Let me wrap up with climate change.

IISD works with a number of countries on low-carbon options that are emerging after the Paris agreement. Financial markets are increasingly looking at climate as a key area of risk; the Task Force created by Mark Carney—the Canadian head of the Bank of England—has recommended enhanced climate disclosure, and many companies—like Blackrock, Goldman’s, Vanguard, Walmart and others—are moving ahead.

I’m excited that David McLaughlin, who helped shape Manitoba’s own climate plan, joined IISD this week as director of a new national climate program for Canada we are undertaking called the Carbon Transitions Canada Initiative.

The SDGs mark the first time ever that all nations of the world have agreed on a shared, comprehensive vision of the future.

For me, the made-in-Manitoba plan is a smart approach in a number of ways: it gets that the environment and the economy go together, and that climate change is not just an environmental issue but a fundamental economic issue for us all.

It framed a wider question about shifting to a green economy, and thus the economic conditions, new jobs, new investments and trade opportunities associated with this transition. By underlining the pillars of climate, jobs, water and nature, the Manitoba plan sees the integrated aspects of how these all affect each other.

The details of this and other plans are evolving.

I’ve mentioned two big issues that are moving in different directions: a narrowing and uncertain trade agenda and an expanding sustainability agenda. The other risk is of course colliding agendas, and we are seeing some indications of that here in Canada, with the BC–Alberta debates on pipelines spilling over into trade issues.

At the international level, there is growing interest in using border carbon tax adjustment, basically to condition the entry of goods based on their carbon footprint.

These linkages underscore how these four big issues—trade, sustainability, innovation and climate—are so interlinked and moving fast.

This increases the importance of business working together on big public policy.  For almost 30 years, that has been the approach of IISD.  And we look forward to working with you moving ahead.

Thank you again.

 

[1] While these scenarios frankly may have seemed ludicrous two years ago, we are seeing measures now. The reprieve to Canadian and other steel and aluminum producers with regards the 20 per cent import tariff to the U.S. will sunset in two weeks; the U.S. has said it won’t be extended.

Last month, Canada was placed on a Priority Watch List, with China and others, for breaking intellectual property rights laws. In January, the U.S. announced a 30 per cent tariff hike on photovoltaic components used in solar panels, focusing mainly on China.