On a cool day last December, the eminent Swedish scientist Johan Rockström stood in front of a large audience at the European Parliament in Brussels and pleaded his case. “This is what we could call ‘the scientist’s nightmare,’” Rockström said. “We have disturbed the energy balance to the point where we are committed to three degrees warming. We have reached the sixth mass extinction of species on planet Earth—the first one to be caused by humans.” Rockström elaborated on his seminal 2009 Nature paper: “Suffice it to say that it’s not only climate change [we need to worry about], but we should be equally preoccupied with the interlinked issues of nitrogen, phosphorus, biodiversity, freshwater, land.”1

In the Nature paper, Rockström and coauthors argued that there exist nine, interlinked planetary boundaries, three of which we have already breached: climate change, nitrogen pollution, and biodiversity loss. While we can’t predict exactly what impacts will result from these excesses, or when they will occur, it is abundantly clear that the planetary boundaries are nonnegotiable.2,3

Twenty years prior to Rockström’s appeal to the European Parliament, President George H. W. Bush stood before an even larger audience—the 1992 Earth Summit in Rio de Janeiro—and declared that “the American way of life is not negotiable,” making a case for unfettered growth in the prevailing consumption-led economic model.4

The question that begs to be asked is, who will prevail in the looming clash of these “nonnegotiable” titans—Earth’s remaining ecosystems or the modern economic model? It has become increasingly apparent that the two will not be able to continue to walk side-by-side on their current path for much longer. It is out of this urgency that the Corporation 2020 campaign was born.

Corporation 2020

Launched at the Rio+20 conference in 2012 as a campaign to transform today’s model of business to make it fit for the future, Corporation 2020’s name points to the fact that a large-scale shift in human behavior must occur within the next decade or so—rather than in 2050 or 2100, as some multilateral negotiations discuss—if we are to maintain any hope of a sustainable world.

The campaign has looked at the wide variety of messages that have been proposed to solve the environmental crisis, and refined them into a more manageable set of changes that have the greatest potential to transform the outdated economic model into a truly green economy. These changes all center around the fact that no United Nations treaties or commitments by governments, no changes by consumers, and no effort by environmental nongovernmental organizations will ultimately be successful without looking closely at the largest actor in the economy: the corporation.

The corporation produces almost everything we use or consume. The private sector generates around 60 percent of global gross domestic product (GDP), and provides around 70 percent of global employment. But in addition to delivering livelihoods and the stuff of daily living, the corporation also risks its very existence and the stability of the economy as a whole by using natural resources too fast and polluting too much, without paying for these damages, or what economists call “externalities.” These unaccounted costs to society of “business as usual” for just 3,000 of the largest publicly listed corporations add up to an estimated $2.15 trillion per year. In other words, these top corporations collectively inflict costs and damages to the tune of 3.5 percent of global GDP every year and, until recently, we have been none the wiser.5-7

Corporation 2020 addresses this imbalance through four planks of change, which, when implemented, can snowball into significant structural changes in the economy. The first is a proper accounting and reporting system for these hidden externalities. Some companies have attempted to measure these on their own, but various groups (such as the TEEB for Business Coalition) are now coming together to collaborate on standardizing this measurement and disclosure. The second plank is a new system of taxation. Taxation can be used as an incentive to promote conservation and resource efficiency, but unfortunately our current system tends to rely mostly on taxes on income and profits. Third, Corporation 2020 takes a close look at corporate advertising, positing that advertising is a key factor in the expansion of an unsustainable consumer culture. Finally, recognizing that sustainability is not just an environmental issue, Corporation 2020 takes on the wildly risky levels of financial leverage that many companies now utilize, which contributed to the last four economic crises and which remain a threat to a sustainable economy.

Significant changes will be required to build a sustainable world, and these changes will require initiative and cooperation among many actors in society: businessmen, accountancy regulators, central bankers, finance ministry bureaucrats, advertising head-honchos, and concerned citizens around the world. We describe some of the changes that are happening in these four arenas, and illustrate some of the possibilities that the future holds in these fields to build a green economy.


Jo Christian Oterhals/Flickr
Stafjord A and Stafjord C oil platforms in the North Sea. Norway’s tax on oil revenue exemplifies the value of levies on natural resource extraction.

Bringing Externalities into the Daylight

Puma’s leap into the world of externalities. Jochen Zeitz, the German businessman, is something of a trailblazer in the business world. In 1993, at the age of 30, Zeitz was appointed chairman and CEO of the German sportswear company Puma, becoming the youngest person to chair a German public company in history. Not only is he a marathon runner, he is also a conservationist who flies his own plane to his estate in Kenya. With this background, it is perhaps no surprise that he again made headlines in 2011 with the release of the world’s first environmental profit-and-loss account (E P&L), the purpose of which was to publicize the company’s externalities along its entire supply chain, and to bring more attention to managing them.8

In other words, Puma actually began telling the world the monetary value of the environmental damages that the company causes but does not pay for. It’s not surprising to learn that Zeitz’s advisors had cautioned against such an action, fearing a public relations disaster. But Zeitz responded, “Well, everyone knows that business has a negative footprint, we know that human beings have a negative footprint, so why not be upfront about it?”9

Puma’s E P&L assigned large values to the damages caused by the company in five categories: water use, greenhouse gas emissions, land use conversion, waste, and air pollution. However, as it turns out, due to its honesty and sincere attempt at public disclosure and accountability, the company was in fact lauded in the press. Puma has since expanded its E P&L to the product level, and is beginning to advertise the differences in hidden costs between traditional and environmentally superior product lines. If consumers respond to this information in their buying decisions, such disclosure will become an even more powerful tool.

Standardizing disclosure. However, as admirable as Puma’s efforts are, the isolated efforts of individual companies will never be enough to shift the economy toward a more complete system of corporate disclosure of externalities. Leadership is necessary, but not sufficient; replication and scaling are also needed in considerable measure. These will require three interrelated efforts, which, thankfully, have all begun.

The first step is simply to gain an enhanced understanding and quantification of the materials and energy that companies use in their operations, as well as their dependencies and impacts on the natural world. There are many groups that have begun developing methodologies of such measurement, including the Global Reporting Initiative (GRI), World Resources Institute (WRI), World Business Council for Sustainable Development (WBCSD), and the Carbon Disclosure Project (CDP) and associated Water Disclosure program.

The second step is a standardization of the framework and techniques used to assign a value to the information collected by the first step. This is perhaps an even more difficult exercise; the reason that externalities have been hidden is that they are not traded in markets, they have no prices, and thus have not had an economic value assigned to them. The Singapore-based TEEB for Business Coalition, a global network of like-minded organizations including GRI, WBCSD, WRI, the World Bank, and several others, recently convened to fill this gap. The group is developing methodologies for companies to properly value their impacts on natural and social capital, taking on the controversial fact that most of these values represent losses to public goods, rather than private risks or dependencies.

The final step is the disclosure of externalities through a standardized method of reporting. Several groups are looking at how changes in financial, social, and natural capital can be reported in a single report. They include the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). This step is critical because it involves the translation of massive amounts of information into a useable mainstream format: a company’s annual report and accounts.

If the pieces of this puzzle are put together to form a robust system of disclosure of externalities in the statutory annual reports, the potential exists to usher in an enormous change in the way business works. Investors, consumers, and civil society could begin to understand what kinds of impacts are caused by companies. And they could start making changes in what they choose to invest in, what they buy, and what kinds of behaviors they allow.

However, information alone will not lead us to a green economy. Markets depend on price signals; when environmental costs are not incorporated into the prices of products, regulation must intercede to correct distortions. One of the best ways for governments to do this is through transforming taxation. As dreaded as the word has become recently, taxation is a very effective tool.


Bert Kaufmann/Flickr
An open pit mine in Germany. Higher taxes on resource extraction, while politically challenging, can provide tremendous social benefit.

Moving Towards a Smarter Tax

Norway’s oil windfall. The extent of oil and gas reserves in the North Sea along the northwest edge of Europe was not fully appreciated until the 1950s and 1960s, when significant reserves were discovered. Since that time, drilling has expanded greatly, with the UK, Norway, Denmark, Germany, and the Netherlands all issuing licenses. But perhaps no country in the world has put the revenues generated from oil drilling to better use than Norway.

The country’s Oil for Development program places tax revenues into a sovereign wealth fund to support the country’s aging population and to support development projects throughout the world. The fund is now worth over $700 billion.10

The reason Norway has been able to amass such a large fund is that it charges a steep 79 percent taxation rate for oil drilled in the North Sea. When asked whether oil companies tolerate such a high rate, Erik Solheim, former minister of Environment and International Development, said, “All of our companies at some point claim that they cannot do it, that they will withdraw from the North Sea. As far as I know, not a single one has withdrawn. They are all there!” Solheim sums up the benefits of the program by adding, “I mentioned this to President Lula of Brazil, and you could see his brain started counting how many schools and how many roads you could get from these taxes!”11

Australia’s noisy resource taxation fiasco and Ireland’s quiet success. However, imposing taxation rates can be politically perilous, as Australia found in 2010.

Few countries have won the geological lottery as richly as Australia. The country was blessed with extensive natural resources, including more than a third of the world’s nickel and lead, a fifth of the silver, a significant amount of diamonds and gold, and many other minerals, which comprise 12 of Australia’s top 25 exports. So it is understandable that discussions of royalties on natural resources take on a more fervent pitch in Australia than elsewhere. Nonetheless, as the prime minister, Kevin Rudd, was unveiling a new plan for resource taxation in May 2010, even he did not anticipate the events that would unfold.12

Kevin Rudd’s Labor Party overwhelmingly won the 2007 elections, and Rudd was ushered into office on a “Yes, we can” type of campaign message similar to what Barack Obama would use the next year. On his first day in office, he signed the Kyoto Protocol, having previously describing climate change as “the greatest moral, economic, and social challenge of our time.”13

The 2010 plan was called the Resource Super Profits Tax (RSPT), and the idea was fairly simple. The government had previously given mining concessions away too cheaply, and mining companies were reaping profits far in excess of what was economically reasonable. Under the RSPT, any profits greater than around 6 percent (the exact figure would depend on the government’s 10-year bond rate) would be taxed steeply at a 40 percent rate, and the government revenue would be distributed to the Australian populace by reducing taxes on small businesses, investing in infrastructure, and funding retirement savings.14-16

However, within weeks, subjected to extreme pressure from lobbyists and embroiled in a battle characterized by noisy advertising and aggressive lobbying by the mining industry, Rudd backed down and almost doubled the threshold of “super profits” to around 11–12 percent (the 10-year government bond rate plus five or six percentage points). Meanwhile, individuals within Rudd’s own political party rode this wave of unpopularity to try to eject Rudd from office. On June 23, his deputy, Julia Gillard, asked for a caucus vote on Rudd’s continued leadership of the government. By the next day, the coup de grâce was delivered for both the RSPT and Kevin Rudd himself.17


Jason Eppink/Flickr
A poster from Ji Lee’s Bubble Project, designed to give consumers a voice against advertising.

In an enlightening and very different example around the same time, Ireland quietly implemented its own resource taxes. Beginning three years ago, Ireland introduced various environmentally progressive taxes: carbon taxes on use of fossil fuels by homes, offices, vehicles, and farms; purchase taxes and yearly registration fees on automobiles, and per weight taxes on residential garbage.

This was a big change for the small country. “We are not saints like those Scandinavians—we were lapping up fossil fuels, buying bigger cars and homes, very American,” said Eamon Ryan, energy minister (2007–2011). One effect associated with the new taxes was 15 percent reduction in emissions since 2008. Ireland raised almost $1.3 billion in new revenues, very useful during the country’s recent period of credit stress. In fact, the International Monetary Fund recommended in August 2012 that the country expand these taxes further to increase their tax revenues.18

The Australian case shows the political dangers associated with tinkering with taxation structures, but it is by no means an indictment of resource taxes. Rather, Corporation 2020 has shown that the real benefit of resource taxes is that they provide a stable source of income for governments, while promoting resource efficiency and, importantly, they can be used to replace existing taxes on individual income and corporate profits. At a time of demand recession when corporate profit margins are under pressure, and when jobs are still being lost, the wisdom of not relying entirely on a declining tax base of profits and salaries for one’s future fiscal incomes cannot be overemphasized. A closer look at one resource in the United States—coal—demonstrates the potential of resource taxes.

Coal in the United States. Half of U.S. electricity depends upon coal-fired power plants. A typical price for power from these plants is around $0.08/kilowatt-hour (kWh). However, a Harvard Medical School study calculated that the actual costs, in terms of health problems and other damages, from using coal to generate power are about $0.17 higher than the price that consumers pay.19

A tax levied at the rate of just one tenth of those damages, $0.017/kWh, would produce $30 billion in tax revenues, which could be used to provide, for example, a tax refund of $3,400 to every “middle income” American ($75,000-$100,000). Of course, the income could be used in many other ways, including towards greater efficiency improvements and worker training in new, efficient technologies. But the tax would not be an unbearable burden on American families. The average American uses 12,000 kWh of electricity per year, which translates to $200 per year. This cost would likely be more than matched by the benefits in terms of greater efficiency and productivity of the economy as a whole, even if direct transfers were not made.20-22

What the experiences of resource taxation in different countries show is that new taxation structures can be extremely beneficial, but they must be presented in the right light for companies and citizens to understand their benefits and accept the taxes. As is often true, the packaging is as important as the product. This brings us to one of the most important drivers of today’s dominant business model: advertising.


The invisible handwriting. If you were walking the streets of New York City in the early 2000s, you would have noticed that something had changed in the advertisements on bus stops, buses, telephone booths, and the like. Virtually overnight, someone had placed white speech bubbles on tens of thousands of the ads. The speech bubbles were empty, and were clearly inviting passersby to write in their own captions.

On a Chanel ad featuring a woman rapturously embracing a perfume bottle, someone wrote in “Please save me from objectification.” In a bubble on a Lord of the Rings movie poster, someone scrawled “desperately seeking purpose.” And an Apple ad’s dancing silhouette was transformed with the message: “I steal music. And I’m not going away!”23

This was the Bubble Project, created by artist Ji Lee, and it represents but one of the methods that consumers have used to demand that their voices be heard. Some companies seem to recognize consumers’ growing frustration with the typical one-way communication model and have embraced social media outlets. It is a rare corporate marketing department that has not taken notice of the power of tools such as Twitter and Facebook to spread their messages and, in turn, encourage customers to offer feedback.


Fernando Stankuns
São Paulo, which banned almost all outdoor advertising in 2007.

The need for such transformations in the balance of power between producer and consumer cannot be overemphasized. Advertising today largely succeeds by preying on human insecurities, converting them into wants, wants into needs, and needs into product demand that fuels our dominant culture of consumerism. It delivers an economy where “take-make-waste” ad nauseam is the mantra of success, defined and measured in terms of higher profits for corporations and higher GDP for countries. This is the norm everywhere, and the freedom of advertising to impinge on our conscious and unconscious minds at all hours of night and day and at every place we care to visit is part of the delivery model of today’s economy. No matter its intrusion and social costs, the power and dominance of advertising is so complete that, in most countries, the right to advertise is equated with fundamental freedoms, such as the freedom of speech and expression.

São Paulo takes action. In other parts of the world, legislation has taken the lead in changing the shape of advertising. In 2007 the city of São Paulo in Brazil became the first major city outside the communist world to ban almost all outdoor advertising. Billboards were torn down, outdoor video screens removed, ads cleaned off the sides of buses, and the size of storefront signs regulated.

Though São Paulo may be known as the country’s epicenter of gang violence, residents now consider the Clean City Law an unexpected success. Even the head of Brazil’s largest advertising company admitted, “I think it’s a good law. It was a challenge for us because, of course, it’s easier to simply throw garbage advertising all over your city.”24,25

It is clear that the advertising industry needs to be more responsive, ethical, and accountable. Whether it is citizens, companies, or legislators that take the lead, the field of advertising is changing fast, but it must increase the pace if it is to stay relevant. We are facing environmental and social crises on many fronts, and advertising is one of the primary drivers of the cycle of consumption that lies beneath those crises.

However, advertising is not the only contributor to the unsustainable economic cycle that we find ourselves in now. To understand the other side of the story—unsustainable production—we must look to the world of finance. For it is financial leverage that has allowed today’s corporation to grow to such dizzying and unstable heights.

Limiting Leverage

The brief wondrous rise of Enron. Those who want to understand both the power and the danger of financial leverage need look no further than Enron. Formed in 1985 from a merger of several natural gas and marketing companies, Enron grew throughout the 1980s and 1990s to become an extremely successful energy-trading business. Driven by fierce internal competition, pressure from Wall Street, and an unvarying devotion to the bottom line, Enron’s executives pursued risky, highly leveraged investments. They used “special purpose entities” to obscure these deals, and disclosed very little to the public about these entities.

For a while, the strategy worked brilliantly. From 1998 to 2000, Enron’s revenues grew from $31 billion to $101 billion, and the company was ranked seventh on the Fortune 500.26,27

However, as every investor at the time will never forget, the game ended remarkably quickly in 2001, as analysts started to unpeel the layers of deception. In August, the company’s CEO abruptly resigned. In October, the company posted a significant quarterly loss. By December, it filed for bankruptcy, and it would not recover. The darling of Wall Street had fallen.28

“Too big to fail” is too big. As tragic as the loss of such a large amount of capital and 19,000 employees’ jobs are, leverage takes on a new level of danger in companies that are not allowed to go bankrupt; that is, companies that are “too big to fail.” Over the past several decades, the United States government has demonstrated its conviction that it is not just financial institutions that are too big to fail, but also nonfinancial corporations, and that these companies thus deserve bailout money to prevent disastrous feedback loops in the economy. A small sample of these companies includes AIG, General Motors, Citigroup, Lockheed Corporation, and most of the airline industry.

In the aftermath of the global recession of 2009, it is clearer than ever that corporate leverage must be contained. Leverage provides allegedly cheap capital, driving up asset prices initially, but at some point the market must adjust. This is what has triggered many of the economy-wide recessions in the past several decades. The good news is that there are many tools available to financial regulators to control the use of leverage by both financial and nonfinancial corporations.

The first step to controlling leverage is to understand that as strongly as corporate executives speak to the contrary, it is simply not true that financial markets can regulate themselves. While that may be true for certain markets, corporations have become too big and interconnected to allow them to fail. Indeed, some executives understand this, and either consciously or unconsciously exploit this reality. Moral hazard is not just a theory of political economy, it is a reality of business.


Brooke Novak
The rise and fall of Enron demonstrates the power, and danger, of corporate leverage, a concern amplified in the aftermath of the financial crisis.

India’s control of leverage. “In this country, regulatory intervention has always worked,” says Romesh Sobti, CEO of India’s IndusInd bank. In what Sobti describes as the “good old days,” 25 years ago, the amount of credit that a corporation received was based on a consortium of banks’ assessment of the corporation’s need. The banks shared information, and the amount of leverage that any corporation had was reported and limited by rules from the Reserve Bank of India.29

This is a far cry from today’s system, in which it is up to the corporation itself to decide how deeply to leverage, and the banks providing loans usually do not know how deeply in debt a corporation is with other banks, in private debt capital markets and in money markets.

India’s system was called consortium banking, and, says Sobti, “there’s a strong case for this to work around the world. This may be micromanagement, but if you do it over 20 years, it becomes part of your DNA.”29

Nonetheless, consortium banking is not the only option available to regulators. Reserve requirements and capital adequacy ratios are important tools for controlling leverage of financial institutions, and they can be equally applied to “too big to fail” corporations. Policies such as eliminating the tax deductibility of interest, strengthening disclosure requirements, and constraining leverage from mergers and acquisitions are also extremely effective at limiting how deep in debt non-financial corporations are allowed. Thus, the policy options are not in short supply; it is the courage that is lacking. Financial regulators must retake their rightful place as guardians of financial and economic stability, and stop being pliant facilitators of easy money in a corporate-cum-political chase for higher profits and GDP growth.

A New Corporate Model for a New Economy

What Corporation 2020—the campaign and the book—demonstrate is that the really inconvenient truth is not just that environmental problems exist, but that solving them will require politicians, bureaucrats, environmental scientists, economists, and business leaders alike to solemnly consider where our economy is heading, and where it might go if we work together to change its direction.

We already have many leaders among us—scientists like Rockström, business leaders like Zeitz and Sobti, and politicians like Kevin Rudd. Now we need followers.

We need consumers to understand that putting a green coat of paint on a product line does not make it sustainable. We need CEOs to understand that something much bigger than their stock value is at stake. We need regulators to dig in their heels and get to work.

And we need people all over the world to listen to the science, think critically about the solutions, and speak out. The world has not time for a hundred decisions or a century of revisions to negotiations. If we are ever to achieve a green economy, we must act fast, together, and deliver change in the few critical areas that can change the design of our corporations and the direction of our economies in short order—by 2020.


Pavan Sukhdev

Pavan Sukhdev is special advisor and head of UNEP's Green Economy Initiative and Study Leader for the G8+5 commissioned report on the Economics of Ecosystems and Biodiversity (TEEB), a project he was appointed...


Kevin Kromash

Kevin Kromash is the program manager of the Corporation 2020 program, based at the Yale University School of Forestry and Environmental Studies.

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