A transformational shift is taking place towards sustainability across the economy. In public utilities this is driven by a need to prepare for net zero, address the biodiversity crisis and develop resilient systems. And, as utilities provide essential services, they are in the front line of the cost-of-living crisis.
Clearly choices must be made. How can decision makers in firms, regulators and government balance these different outcomes, identify common interest and deal with unavoidable trade-offs?
Deciding what an affordable and fair service looks like, whilst preparing for a greener future, is the subject of much debate.
Given the scale of the challenges faced, legal, regulatory and institutional change will be essential if we are to become more resilient. However, without a corresponding shift in mindsets and culture within utilities, it may be difficult to make the right choices to secure a sustainable future. This is because the current modus operandi in the energy, water and comms sectors is not designed to achieve sustainability. We believe that sustainability has to be environmentally, socially and economically fair to work.
Sustainability First argues that we need a set of consistent guidelines or principles to help companies, regulators and policy makers prioritise their work to achieve more sustainable outcomes. This does not mean ‘one size fits all’ when making choices. But instead, a clear framework that all actors can use and adapt to their circumstances when tackling difficult decisions and navigating change.
Expert insights on how to approach trade-offs
A recent workshop that we ran with the British Academy explored how best to approach the trade-offs that might be made by decision makers whilst promoting sustainability in sectors such as energy, water and communications.
The event was part of our major Sustainability Principles project. At the heart of this project is the idea that unless sustainability is embedded in all decision making, not just an afterthought, then firms, government and regulators will not make the necessary changes needed for the survival of people and planet.
Most organisations have now started considering sustainability but the urgency of the climate and biodiversity challenges we all face means it has to be integrated into all decision making. Sustainability needs to shape cultures within and, crucially, given the need for environmental, social and economic system change, between, organisations.
At our Chatham House workshop senior British Academy Fellows and academics explored how legal, ethical and cultural approaches can help deal with trade-offs and identify common interests on ‘wicked issues.’
From a legal regulatory perspective, we heard that it is critical to decide what the aim is in implementing sustainable principles and who is making the decision and deciding on trade-offs, or priorities. A five-stage approach was proposed as a framework for addressing trade-offs:
1. Map who makes the trade-offs – the context of trade-offs (or choices) is important as well as who enacts the trade-offs.
2. Clarify your theory of change – who is best placed to get change in this area? Who should lead and who plays which role (e.g., inspector, enforcer, mediator, translator etc)? What will motivate and incentivise leadership? This will clarify capacities (expertise, financial etc).
3. Co-ordinate across institutional regulatory boundaries – and work through possible scenarios for institutional and regulatory change.
4. Consider how to build trust and legitimacy – through a participatory approach (e.g. who are the best ‘translators’ between different groups?). Adopt a values-based approach or other means to build trust. Different cognitive frameworks and levels of knowledge will influence what trade-offs individuals will accept. Factors such as transparency, openness, accountability can all help build legitimacy.
5. Ask if the solution / approach can work in practice.
From an ethical perspective, we heard that without consistent frameworks, government policies and action risk being inconsistent. The UK is affected by a mix of ad hoc regulation instead of planned (overall) approaches, which can be incompatible with the government’s own legal requirements, such as around net zero.
The NHS being tasked with reaching net zero by 2045 was cited as an example. The costs for that must be taken out of the regular budget, thus reducing the NHS’s ability to fulfil its core health care remit. Taxpayer money is used for emission reduction efforts without the government providing the NHS with tools they need to make the decisions to achieve this. The conclusion? The NHS is asked to make trade-off decisions but is not given the necessary information to make them.
From a business ethics point of view, it was argued we need to challenge big narratives and avoidgeneralisations to make sustainable decisions. It was noted that it is also important to scrutinise language to question entrenched biases and that sustainability as a concept, is not fixed, but emerging.
Our workshop then explored these perspectives in two possible decision-making scenarios:
1) Who should pay the cost of welfare in essential services (taxpayer or bills); and
2) How future investments are made in essential services networks, - “investment ahead of need.”
The aim was not to solve the issues but to explore how to address trade-offs to further sustainability and whether a principles-based approach could help. A range of issues emerged. For example, who should pay for welfare raised issues around choice. Bills might not be that ethically different from a tax if you can’t choose not to use a particular service, like water.
Workshop attendees argued that principles could provide:
· A sense of purpose/mission for the staff in providers of essential services and their associated regulators;
· A stable reference in times of crisis when there is limited time for analysis;
· A lens that allows multiple possibilities to be explored;
· Opportunities that the law, which is static and precise, does not; and
· A broader assessment of risk.
It was argued that to establish useful sustainability principles requires a frank debate about the status quo, and which values (implicit or explicit) are driving decision-making already. Without this, there was thought to be a risk that new principles could be seen as contradictory or inconsistent.
Participants questioned how essential service providers see their role; was profit maximisation and avoidance of prosecution put before provision of an essential service to all? Some participants argued that in the past companies (and regulators) had prioritised competitive pricing at the expense of sustainability. It was argued that this was the trade-off that firms have often made in practice, if not in theory.
This raised the issue about the role of essential services in relation to government. If the overarching expectation of and by government is that all decisions are sustainable, then essential service providers would arguably not be forced to make such stark choices, or trade-offs. Participants also argued that regulation needed to reflect the need for sustainability.
Milky Way versus North Star?
Principles vary depending on what framework is used – it could be legal, rights and responsibilities, or financially based, for example. But a key aspect is who is making the decision and who is being impacted. In integrating social, environmental and economic aspects, we need to better understand who needs to be persuaded and engaged with and at what stage.
Overall, the issue of engagement for effective principles is critical. Whatever principles are adopted, they need to be inclusive and fair, especially in the transition to net zero.
Ultimately the aim of principles should be not to provide decision makers in government, regulation and companies with one single guidance “the North Star”, but with general guidance “the Milky Way.”
There is clearly no single answer. But for essential services or any other organisation to shift towards sustainability and a fair transition to net zero, a set of values and principles has to be embedded at the start of the decision-making process that is geared towards that aim.