Guest editorial

Citation

Midttun, A. (2010), "Guest editorial", Corporate Governance, Vol. 10 No. 1. https://doi.org/10.1108/cg.2010.26810aaa.001

Guest editorial

Article Type: Guest editorial From: Corporate Governance, Volume 10, Issue 1

In “The age of stupid”, a 2008 film with an intriguing title, the protagonist looks back at our world from the year 2055, human civilization in ruins after ecological disasters, and asks: what went wrong 50 years ago? Why was no action taken to save our planet and civilization from climate change? For one, they might say that we were not able to forge governance and collaborate to confront the tremendous challenge posed by the climate crisis to global human welfare.

The sustainability challenge is not new; however, the Brundtland report, outlining a vision of global sustainable development, was already published in May 1987. Like its chairwoman, it reflected a social democratic belief in political solutions, optimistic and enlightened concerted action, and global redistribution. The underlying governance model was implemented by national governments collaborating through international treaties under the leadership of the UN.

The ensuing 20 years, however, demonstrated the limits of this governance approach. Most countries have failed to sign major initiatives such as the Kyoto treaty. Almost all of those who have signed up have failed to live up to their commitments. Global summits and treaty negotiations continue to be held, but with limited expectations.

As illustrated in, “The age of stupid”, the failure to forge coherent strategies to meet the sustainability challenge places human civilization. We are facing an acute climate threat due to increasing western emissions and unrestrained eastern growth. The scale of the crisis depicted in business-as-usual scenarios by international expert forums such as the IPCC and the IEA/OECD is unprecedented.

While the sustainability challenge has become more dramatic in recent decades, the world has also changed economically and politically. Massive deregulation has opened borders and allowed globalized corporations to acquire resources on an unprecedented scale. Civil society organizations have emerged as moral voices, mobilizing around core humanist values and sustainability issues, while confronting capitalism and Western values around the world. The media and communication industry has grown into a major sector worldwide.

These developments create new complexities and interdependencies that undermine the traditional sovereignty of nation-states. Yet they also provide anchors for new modes of governance: the combination of civil society organizations and open media communication can provide new catalysts and channels for collective welfare concerns, and globalized corporations can provide instruments for implementation of policy agendas in addition to their main commercial concern. New international arenas are emerging for collaborative action and partnered governance across political, economic, and civic divides.

With the rather bleak scenario from “The age of stupid” in mind, this volume seeks to bring together scholars with interesting ideas and examples to rethink governance for the twenty-first century across disciplinary and institutional boundaries, drawing largely on work done under the research project CERES21: Sustainability Across Continents (Ceres21.org). The articles explore new governance opportunities in today’s institutional terrain, with a focus on the global sustainability challenge. They examine governance at global, regional, national, and local levels while exploring new institutional combinations. Innovative models of governance entrepreneurship are illustrated with examples from ecology, finance, corruption, and general politics. The scholars’ disciplinary backgrounds include political science, sociology, finance, and systems analysis.

The first article, “Globalization and governance for sustainability”, takes stock of core arguments in some of the most central governance traditions and discusses their capacity to deliver solutions. It starts with an appraisal of the strengths and weaknesses of the ideas of market-, state- and civil-society-led governance, then the effects of media and communication are considered as governance arenas in their own right. Finally, it reviews core arguments put forward in broader approaches to governance where different governance mechanisms are combined.

Out of the critical analysis this article distills an approach to governance that combines three basic elements: the need to secure creative tensions between the state, the market and civil society to reduce governance “lethargy” and to encourage governance entrepreneurship; an argument for polyarchic, multilevel governance, where flexible institutional frameworks at various levels of aggregation allow actors to jointly engage in developing governance; and the need to include open communication as an important governance element, to empower new actors, set new agendas and trigger institutional change.

The second and third articles address governance challenges in the financial system: Against the backdrop of the financial crisis, the second article asks “Why responsible investment falls short of its purpose and what to do about it?” Numerous analysts have seen the financial institutions practicing responsible investment as a major governance force to further sustainable development. However, following the financial crisis, these expectations must be reexamined. After a brief summary of the financial crisis and what is at stake, the article reviews the various forms of responsible investment and identifies the shortcomings of each. It also describes critical conflicts of interests between CSR and RI and suggests regulatory measures to correct certain systemic problems.

The third article, “The Icelandic Bank collapse: challenges to governance and risk management”, also addresses the financial crisis using the case of Iceland. The article documents a strong laissez-faire attitude to governance that led financial entrepreneurs to euphorically pursue profits, even as risk and balanced development were largely ignored. In the end, the bank sector collapsed with disastrous consequences for Icelandic economy and society. The article documents serious failures of governance due to lack of transparency and entangled ownership within the industry, following an extremely lax public regulation and a lack of public debate. Against this background, the article proposes new governance arrangements at the corporate, sectoral, and societal levels.

The fourth and the fifth articles argue for a systemic approach to globalized governance: “Managing sustainability through the value chain” takes a life-cycle approach to governance, and argues for optimization of entire value chains to account for factors such as environmental pollution and degradation. The article argues that environmental management still too frequently looks only at individual points of our (inefficient) production-consumption chain. As a result, pollution abatement merely displaces the problem to another section of the value chain. The article argues that sustainable development requires more widespread application of prevention-oriented life-cycle governance thinking, and more emphasis on optimizing the system as a whole.

“Sustainable palm oil: the promise and limitations of partnered governance” discusses The Roundtable for Sustainable Palm Oil (RSPO) as an example of an emerging new governance model that attempts to promote sustainable development. The article shows how the RSPO developed as consumer-oriented businesses partnered with civil society organizations and palm oil producers to address what was seen as a long-term threat to their financial interests. The paper concludes by suggesting ways in which partnered governance can be developed and optimized. One of the key findings was a major structural problem with such partnerships for sustainability: that their emergence and development typically depends on powerful players. In the case of deforestation caused by oil palm expansion, national government intervention was absent and international regulation could not be mobilized. While the RSPO’s system of partnered governance may have many shortcomings, the article points out that there are few real alternatives that have been as successful in addressing this type of sustainability issue.

Governance on global issues is traditionally discussed in the context of intergovernmental agreements and sometimes in the context of international organizations. While states and international institutions have central roles, they are often blocked by a lack of consensus and ambition. The sixth and seventh articles discuss governance potentials at other levels: cities and regional organizations.

The sixth article, “Governing from the middle: the C40 Cities Leadership Group”, explores a city network that emerged in direct opposition to the top-down policy process of international climate change negotiations. The article analyzes what it calls “governance from the middle” (below the national, but above the grass roots level), where city networks across continents come together to develop and implement technologies with industrial partners, to increase energy efficiency, retrofit buildings, handle waste, and make transportation more ecologically sound. Based on the C40 initiative, the article undertakes a critical examination of “Governance from the middle” and discusses the potential prospects and risks of such an arrangement.

Taking the European Union as a point of departure, “Governance arrangements for sustainability: a regional perspective” explores alternatives to inter-governmental conferences and treaties at the global level as a basis for promoting the Brundtland Commission’s vision of sustainable development. The article suggests an alternative strategy that focuses on governance arrangements (GAs) at the regional level rather than government agencies at the global level. The article also explores how such arrangements gain legitimacy from those affected by their decisions and argues that the success of GAs depends on their conformity to certain basic principles for the chartering, composition, and decision-making. If regional governance agreements succeed in Europe, it argues, their norms may diffuse to other parts of the world.

The final article, “Montesquieu for the twenty-first century: factoring civil society and business into global governance”, argues for rethinking governance through the prism of Montesquieu’s model of checks and balances within state powers. As globalization has eroded exclusive government control, governance must be revitalized as a dynamic interplay of government, civil society, and business.

The article further reveals interesting parallels between governance innovation and the product cycle in technological innovation theory.

The conceptual analysis is supported with the example of the Extractive Industries’ Transparency Initiative (EITI), a major new governance initiative aimed at lifting the “resource curse” from countries with an abundance of both natural resources and corruption.

While this volume cannot cover the whole array of governance issues surrounding sustainable development, it can still inspire a reassessment of governance given the challenges of our time. At a point where the financial and environmental crises demonstrate the extent of interconnection between economies and societies across the world, our cultural and institutional differences still limit our capability for collective action. Only when creative governance can transform our interconnectedness into an advantage will we be able to say that we did our part in avoiding “The age of stupid”.

Atle Midttun is Professor at the Norwegian School of Management, Institute of Innovation and Economic Organisation, Director of The Centre for Corporate Citizenship and Co-Director of The Centre for Energy and Environment. Before joining the Norwegian School of Management, he was a researcher at the Group for Resource Studies under the National Research Council, and a research assistant at the Institute for Social studies, Oslo following a job as research assistant, Institute of Sociology, University of Oslo. Atle Midttun has had visiting professorships at the Université Paris Sud, Faculté Jean Monet and the University of Michigan, Business School/School of Natural Resources. He has been a visiting Scholar at the Univeristy of California, Berkeley, Haas School of Business, the Max Planck Institut für Gesellschafts-forscung, Köln, and the University of Aalborg.

Atle Midttun