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When
archaeologists recently announced that they had just discovered the ape-like remains of our
primitive ancestors in South Africa, it was hailed as homo sapiens’ ‘missing
link’ – the genetic bridge between modern humans and their older, less evolved
predecessors. Yet, perhaps it was not the only missing link to be found in
2011.

As
a panel speaker at the 11th International Conference on Corporate Governance
convened by the Institute of Directors India and
the World Council for Corporate Governance
in London during October, it was refreshing to hear how leading Eastern
business powerhouses like Tata are shaping new international best practices on
corporate responsibility. What was most striking was the recognition that this
shift in world GDP away from the West and toward the East and South brought
with it new obligations for them in terms of the wellbeing of the rest of the
planet – in particular, whether sustainable economic growth was possible and
what the implications of this for corporate governance could be.

Developing
a number of scenarios for over the next decade, my conference paper looked
beyond populist issues such as integrated sustainability reporting, to propose
that a major source of risk and conflict will be the interface between the
green economy and urban development. That is, like with eco-labelling in the
1980s and social audit in the 1990s, if things go badly with the transition to
a green economy, it is big business which”wrongly or rightly”will be blamed for
its failing. More specifically, big business could find itself in the
unenviable position of being accused of ‘asset stripping’ communities.

How
so? Well, let us start with a few facts about population shifts and trade
patterns. According to the McKinsey Global
Institute, cities account for 53 per
cent of global population and 80 per cent of global GDP, and so produce 75 per
cent of global CO2 emissions. Consequently, a new generation of public”private partnerships (PPPs) are
emerging to help deliver major low-carbon urban infrastructure to ensure
economic growth is as green as possible (e.g. rapid surface transport, district
renewable energy schemes, smart grids, etc). By 2025, ‘mega cities’ (a
population of more than 10 million inhabitants) like New York and Paris will be
yesterday’s news, as migration means the momentum switches to ‘mid-sized
cities’ (a population ranging between 150,000 and 10 million inhabitants) in
China (e.g. Guiyang), India (e.g. Surat), and Latin America (e.g. Cancun).
Naturally, companies will follow the trade, bringing with them much-needed new
skills and investment. So far, so good, and everyone wins? Or is corporate
governance lagging behind?

I
would argue that big business is repeating the errors of the past if it does
not consider more fully how this new wave of ‘low-carbon urbanization’ PPPs are
best governed. After all, these energy- and water- and transport-related
projects are huge, affecting the lives of millions. So, for instance, are costs
and profits shared fairly? Will this help alleviate poverty? Does this lead to
an upgrade in local skills and long-term, well-paid labour? Who owns the
intellectual property rights? How flexible are these multi-general contracts?

In
solving this conundrum, any green economy movement needs to bring together big
business (e.g. BT, Cisco, GE, IBM, Philips) and respected parties from the OECD
and UN, with elected city majors, trade unions, and NGOs in order to map out
how these new PPPs are to be designed and monitored. This way we can best
understand who the winners and losers really are, and how to smoothen the
transition to a green economy.

In
short, this is about being pro-business, but anti-weak governance. Business,
after all, is only a reflection of society, at its best and at its worst. The
smartest business leaders will intuitively understand this.

About Philip Monaghan

Philip Monaghan is a writer
and strategist in the fields of economic development and environmental
sustainability. He is founder and CEO of Infrangilis
and the acclaimed author of the books How Local
Resilience Creates Sustainable Societies (out February 2012) and Sustainability in Austerity
(2010).