The Business Times

Bottom-up greenness powered by top-down incentives

This approach will spur businesses to switch to green practices in an autopilot mode.

Published Wed, Mar 31, 2021 · 05:50 AM

DISAPPEARING forests, melting glaciers, and frequent extreme weather all signal to us that the planet Earth is stressed. Today, many primary school students can recite the looming environmental crisis in one form or another. In the business world and policy circle, the term ESG (Environmental, Social, and Corporate Governance) has also become a new cliche.

Massive educational efforts and political movements have helped achieve a remarkable level of green awareness. Those who haven't been persuaded thus far are unlikely to budge though, and political forces resisting changes are still expected to mount opposition. From this observer's vantage point, the efforts to go green have reached the stage of diminishing marginal returns, using an economist's jargon; simply put, continuing the current path won't be cost-effective.

Cost-effective solutions rest in figuring out implementable ways to internalise the negative externalities (ie, environmental degradation) generated in our current systems of producing goods and services. I see bottom-up greenness (BuG) as a promising way of addressing the issue. Let me use palm oil supply chains and a pilot project soon to be undertaken by the Asian Institute of Digital Finance and its partners (a bank, a non-governmental organisation, and two fintech companies) to explain this new pathway.

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