Almost every day we hear news items about the gap in the ozone layer, the increased emission of CO 2 gases and consequent global warming. Soil erosion is taking place at an alarming rate and, just as populations increase, so does our ability to produce food to feed them decline.
Clearly this is unsustainable and if the world continues at this pace then Homo Sapiens will one day join those species facing extinction.
"Think globally, act locally" is a good environmental slogan. So what about Scotland? Why should Scotland have cause to worry when its population is not increasing and when we are seeking to plant more trees, not less? The effects of this global time bomb appear remote when compared with our own burning political and economic issues. These issues include the Scottish Parliament and its new devolved responsibilities; the threats to Scottish exports and inward investment from the strength of sterling, a decline in growth rates and thus the ability for the Scottish economy to provide an improving standard of living for the people of Scotland.
The words "sustainable development" first penetrated my consciousness when I was Chairman of the Countryside Commission in the early 80’s some 15 years ago following the Brundtland Report. Since then, the Earth Summit in Rio de Janeiro in 1992, the publication of the United Kingdom’s Sustainable Development Strategy in 1994 and subsequent conferences leading up to the Kyoto Conference on climate change last year, have all brought those two vital words onto our television screens and into our minds.
What is sustainable development? The Government’s Consultation Paper tells us it is about ensuring a better quality of life for everyone, now and for generations to come. It is not difficult to think of areas in the Scottish economy where we are behaving in ways that are clearly unsustainable. In agriculture, for example, at a time of huge and increasing financial difficulty for Scottish farming, most farmers are heavily dependent upon subsidy under the European Common Agricultural Policy. Clearly there has to be a major shift away from subsidising food production towards policies that encourage healthy land use and yet sustain rural economies and rural populations.
The fishing industry is another case in point where man is exploiting the bountiful resources of the sea much faster than they can be renewed by nature. The silver harvest of herring on which so many coastal populations around the Highlands thrived is a memory of the past. Can fish farming round our coasts help to provide a substitute? It, too, is going through a very hard economic climate with its very survival in question, but if better economic times return can it or should it survive unless it can prove that it is sustainable in our fragile marine environment?
Transport, too, is a huge industry and also a major pollutant. On present trends the overall growth from CO 2 emissions by the year 2010 is estimated to be around 8% while the growth in emissions from transport will be nearer 40%. It is clear enough that without significant changes in the levels and priorities of investments in systems and means of transport, and without changes in 17 political and legal decisions relating to transport, increasing delays, pollution and danger will lead to paralysis and if transport systems crawl and choke so do economies and societies.
So how should the financial sector react to the challenge of sustainable development in these and other areas? At first sight it is easy enough to say that financial companies are not prime producers. They do not to any great extent pollute. Cash transmission, the provision of credit, the credit card revolution, telebanking, direct insurance, funds management, pension provision - these, surely, are the essential, sustainable services necessary for developed economies and hugely important, in particular, for the Scottish economy. It is easy enough perhaps for financial sector companies to pay lip service to the concept of sustainable development and to make the token gestures that demonstrate a "green" awareness. The use, for example, of recyclable materials in reports and accounts, the publication of general statements on environmental principles, the conservation of energy in buildings and branches. All these are essential steps.
But it would be wise to go further and for Scottish financial companies to demonstrate their awareness of the principles of sustainable development and to contribute towards the Scottish debate ahead of the arrival of a Scottish Parliament, in order to demonstrate to Government and public opinion alike an awareness and sensitivity to the issues involved.
Of course there are two sides to the balance sheet; there are the environmental costs of complying with environmental legislation but equally there are great environmental opportunities in inventing, researching, developing and financing the sort of systems and technology which will allow us to live and work in a more environmentally-friendly way.
Banks, as the providers of credit, come into contact with the whole spectrum of Scottish industry and enterprise.
"Banks have a unique, dual role to play in a society which is working towards sustainable development, both by encouraging social and economic development and, therefore, social progress but also by influencing the environmental policies of business."
Banks have a unique, dual role to play in a society which is working towards sustainable development, both by encouraging social and economic development and, therefore, social progress but also by influencing the environmental policies of business.
Social and financial exclusion are topics high on the agenda and the Government and some financial institutions are looking at issues surrounding the fact that high numbers of people do not have bank accounts. Clydesdale Bank has been working with Credit Unions in and around Scotland. The Bank has established a special unit, located in its Head Office, which handles business from Credit Unions and offer a number of services free of charge. The dedicated unit is able to relieve the huge administrative burden from the Credit Union Managers but, in addition, is able to offer professional advice on future financial management to the community. This type of partnership between Credit Union and Bank can only accelerate social and economic progress in the community.
In offering financial support and advice to small, medium and large businesses, banks help the economy to flourish and this, in turn, creates wealth and employment. However, banks do have a corporate responsibility to the wider community and Business Banking Managers must ensure that their clients are conducting their business in a sound, environmentally aware fashion. It is important that businesses are sensitive to the direct or indirect impact they may have on their local environment, especially if they are part of a supplier chain.
Insurance companies, too, need to be very conscious of sustainable development - and of course most of them are. The effects of global climate change, the El Niņo factor, water shortage, drought, flood are of vital importance for the general insurance industry. In a different context, the life assurance industry has already played and will continue to play a vital role in pointing out to Government the unsustainability of our previous methods of funding state pensions and the potentially disastrous legacy that hangs over many of our EU partners in this regard.
"But it would be wise to go further and for Scottish financial companies to demonstrate their awareness of the principles of sustainable development and to contribute towards the Scottish debate ahead of the arrival of a Scottish Parliament, in order to demonstrate to Government and public opinion alike an awareness and sensitivity to the issues involved."
Fund Managers, under an intense spotlight on short-term performance, have to have regard for the long-term sustainability in environmental terms of the companies in which they invest. Bad decisions will surely come home to roost at some stage and share prices may drop if there is a market perception well ahead of actual results.
So in all these ways companies in the Scottish financial sector need to be increasingly aware of the environmental issues of sustainable development. But they need to do more. They need to demonstrate that they are in support of Government in particularly Scottish issues. Many of them are of course already doing this. For example, the Institute of Chartered Accountants of Scotland recently published a report calling for Accountants to re-think their public interest duties in order to consider "how accounting might best help the development of a sustainable future as opposed to the unsustainable future which current accounting practice envisages". The report is entitled "The Valuation of Assets and Liabilities: Environmental Law and the Impact of the Environmental Agenda for Business". It is well worth reading.
General Accident, for example, is committed to playing its part in safeguarding the environment. As a founder member of the United Nations working group, which developed the statement of environment principles for the insurance industry, it works at the highest level with other like-minded insurers across the world to promote environmental initiatives relevant to its industry. However, it also seeks to involve its employees by giving them an opportunity to contribute at a very practical level. Through its support for the Scottish Conservation Projects Trust it provides places for its employees to participate in a range of action breaks all over Scotland and England, undertaking practical environmental projects such as drystane dyking, mortar walling, erosion prevention, tree planting and path building. It is interesting to note that Commercial Union, with whom General Accident is about to merge, provides support for the British Trust for Conservation Volunteers.
The World Wildlife Fund for Nature recently launched its Scotland Wild Rivers Campaign and is seeking the endorsement of a wide range of fishery management and conservation bodies concerned with the health and fish population of Scotland’s rivers. The Clydesdale Bank has also supported this project.
Financial institutions must continue their sponsorship of and support for organisations and projects which embrace a Sustainable Development philosophy and bring us that bit closer to putting our own house in order here in Scotland.
Lord Nickson is Chairman of the Clydesdale Bank.
