The Green Growth Paradox: combining private sector development and environmental protection
Balancing economic growth and environmental protection has long been a major policy dilemma and subject of public debate. While this issue is relevant for all countries, it is particularly so for developing countries. These countries have an urgent and major need for private sector development (PSD), but also possess some of the world’s most important natural capital stocks and are especially vulnerable to environmental damage. Well-known images of deforestation for palm oil production in Indonesia or oil spills in the Niger delta vividly illustrate the environment-economy dilemma.
International and bilateral development agencies focus increasingly on supporting developing countries in addressing these challenges. In particular, the quest for a framework that provides ‘win-win’ solutions gathered speed in the 2000s through the OECD’s Green Growth Strategy. This strategy focuses on exploiting the significant economic potential of new ‘green’ sectors such as renewable energy, thereby creating new green jobs.
Strengthened by the policy objectives for sustainable private sector development (PSD) in the new Sustainable Development Goals, donors have recently begun focusing on a more holistic ‘green PSD’ approach. This approach seeks to go beyond simply avoiding potential negative spillovers and addressing trade-offs between environmental and economic objectives, instead, it aims to build mutual synergies based on integrated approaches. Key questions that are raised include:
- How can PSD initiatives strengthen the environment and increase natural capital (beyond protection)?
- How can environmental protection measures generate positive spill-overs for PSD and innovation?
- What kind of business environment reform (BER) measures can support green PSD?
Turning ambition into action
Technopolis Group is supporting donor agencies and policymakers in translating these ambitions into policies and action, by facilitating learning through analysis, monitoring and evaluation. It is currently working with the Donor Committee on Enterprise Development (DCED), a multi-donor forum focused on PSD, identifying how to support policymakers in scoping synergies and trade-offs between environmental sustainability and business environment reform.
Working with Globelics, a global research network on the role of innovation in development, Technopolis Group produced a policy brief on how innovation linkages between natural resource-intensive industries and the rest of the economy can help countries to achieve sustainable PSD and escape the ‘resource curse’. Through an evaluation of the Compete Caribbean Program funded by the Inter-American Development Bank, Global Affairs Canada and the Department for International Development of the UK, we investigated the capacity challenges faced by policymakers in integrating the environmental perspectives in BER initiatives.
A few initial lessons emerge from this work. First of all, specific policy instruments seem very well placed to contribute to ‘green PSD’, including the introduction of environmental standards, business license reform, research and innovation capacity building, integral landscape (ecosystem services) management schemes and subsidy reform. However, the ability to mix environment and PSD is not limited to the choice of policy instruments and policy mixes. In addition, it includes involving the private sector and environmental stakeholders in the design and implementation of these initiatives, strengthening environmental safeguards in capital investments, and capacity building for programme management and staff on environmental sustainability or BER. New insights are expected to emerge as the work advances, as recent programmes enter operational or evaluation stages, and as pilot initiatives are gradually scaled up. Technopolis Group will continue to provide sound advice to policymakers and practitioners based on its pioneering work in this field.
