Speech to Institute of Chartered Accountants Sustainability group

The Institute has a long history of leading businesses towards Triple Bottom Line Accounting, now evolved into sustainability accounting, and has pioneered the idea that the same level of rigour should be applied to measuring and reporting social and environmental outcomes, as to financial results. There is now much wider recognition that business is accountable not just to its shareholders but to the society within which it operates.

You have asked me to speak about "Greening NZ". Many would say that NZ does not need to be greened - that we are already clean and green and known for it world wide. We do have a superficial greenness, created largely by super phosphate, adequate rainfall, huge areas of pine forests, a low population and plenty of open space. However that is not the same as being sustainable. The super phosphate green is perhaps a good image — pleasing to the eye of tourists who don't know its contribution to eutrophication of waterways such as the Rotorua Lakes.

Another view was contributed by visiting environment commissioners from a number of countries at the time of the 20th anniversary celebration of the office of the Parliamentary Commissioner for the Environment. It was, I think, the Canadian commissioner who recounted his two day experience of trying to travel anywhere other than by car or aeroplane, and of our generally lax approach to pollution. He told the conference "you have no rules, you have no trains, you have no public transport, and I haven't seen cars with exhausts that dirty since I was a child".

Where have we come from? Well, we used to be a society of some 200,000 people with virtually no overseas trade. Fisheries were so abundant to feed 200,000 people we had no need of marine reserves or tradeable quotas; there was no need of recycling as everything was biodegradable; we could cut forest because there was plenty more; it was even sustainable for us to eat kereru because there was no threat to their population. Early New Zealanders made some mistakes, in particular burning rather too much forest, but we learned from them before it was too late.

Those practices are not sustainable for a population of 4 m people who are part of a market so open that there are 6 billion potential mouths to feed from the fish in our economic zone; we are feeding ten times our own population with dairy products; and importing large quantities of fossil fuel, minerals and non-degradable materials. We are fast using up spare environmental capacity, and in some areas it is already overused. Europe, with a much higher population density, realised the problem some time ago and is well ahead of us in sustainable practices; China has also realised it and faces a daunting task.

In looking at where we have come from, I want to take the mid-seventies as the comparator, partly because that was the time when a flowering of environmental literature — The Club of Rome's Limits to Growth, Commoner's the Closing Circle, the Erlich's work, and a little earlier Rachel Carson's Silent Spring, combined with the effects of thirty years of post war material growth, led to an era of unprecedented environmental awareness and concern. And partly because that was when I returned to NZ after 7 years in Europe, with two pre-schoolers, and became involved in environmental activism.

When I returned in 1974 NZ was in the middle of the decision about where to site its first nuclear power station and I became deeply involved in that campaign. There was no curb side recycling then, but milk, beer and soft drink bottles were returned for rewashing. Cowshed wastes were often poured directly into rivers and streams, much sewage had only primary treatment, landfills were called dumps and located preferentially in mangroves, thermal power stations operated at less than 30% efficiency, cars used a lot of fuel per km, there were no serious restrictions on fish catches, no dual flush toilets or low flow shower heads, no insulation standards for buildings, no energy performance standards for appliances (in fact no legislative power to set energy efficiency standards - this had to wait until I introduced the Energy Efficiency and Conservation Bill which passed in 2000). We also had the highest level of lead in petrol in the developed world.

We had no Ministry for the Environment, no Department of Conservation or Parliamentary Commissioner for the Environment and no RMA, though there was some quite recent legislation on land use planning and water and soil.

Haven't we come a long way?

But before we congratulate ourselves on the huge improvement in the quality of our environment over the last 30 years, let's look at what really matters: the actual quality of the environment.

Thermal power stations these days operate at more than 40% efficiency rather than less than 30%; yet greenhouse gas emissions from the electricity sector have skyrocketed over those 30 years from around 1 mt to well over 7 mt . That's because the effect of more efficient power stations has been totally eclipsed by the growth in electricity consumption — up 114% since 1975.

We have a quota management system to protect fisheries, yet a number of fish stocks have crashed — notably the Challenger Rise orange roughy stock which was closed a few years ago when it had declined to just 3% of its totally initial biomass. Our Hoki fishery was proclaimed just a few years ago as the first certified sustainable fishery. Since then the total allowable catch has been lowered by 60%. Total fishing catch has risen from 63 kt in 1975 to 517 kt — a seven fold increase which is clearly not sustainable.

Federated Farmers recently announced a target of 10 in 10 — a 10% reduction in effluent from each dairy farm going into rivers, over the next ten years. A worthy goal, except that over the last 30 years the number of diary cows is up 74% and is predicted to rise 3% a year in the future. A 1% a year step forwards, a 3% step each year backwards.

Tourism is often seen as a "green" industry and its true tourism operators have taken some exciting steps to reduce their environmental footprint. But tourism has a very high requirement for transport, tourist accommodation tends to have high water and power use, and waste production is high too. Tourist numbers have grown nearly six fold since the seventies and their environmental impacts will have grown with them.

NZ has the oldest, dirtiest and least fuel efficient car fleet in the OECD. Visitors gasp at what we are still driving in this country. We still have no emissions standards at warrant of fitness time, and no real standards for vehicles entering the country. New cars do tend to meet higher standards for fuel efficiency and emissions than in the seventies but there were 1.1m of them then and there are 2.7m of them now, so there are no prizes for guessing whether our environment is cleaner and greener now than then.

So despite major improvements in management practices, better institutions, laws and regulations, some economic instruments, and much better technology the overall state of the environment has gone seriously backwards in the last thirty years.

During those 30 years our population has grown by 35 % and our economy by 94 %. You will notice immediately that most of that economic growth is not per capita, but the result of increased consumption by all of us. It is therefore not strictly true to argue, as many do, that population growth is the main driver of environmental degradation. It is certainly a factor, but consumption is a larger one.

This means we have to run even faster just to stand still in the sustainability stakes.

Where are we headed, and what is the outlook for the future?

The Government is about to announce a carbon emissions trading scheme to control greenhouse emissions. We will have to wait a little longer to see how much it will achieve, but given the scientific advice that we have just ten years to turn our global emissions round and start to decrease them, there is no time to waste. The question we should be asking on Thursday, is how much will it reduce carbon emissions, and how soon?

Government also has a Sustainable Water Programme of Action, which is looking at some interesting ideas but has not yet led to any results. After over three years of waiting, I now call it the Sustainable Management Programme of Inaction.

Air quality emissions limits for cars entering the country are planned for around the end of this year. We must be just about the only developed country that doesn't have them. That will be a step forward but air quality will not improve at once — it will take time for cars entering the fleet to impact on its average emissions — and longer still if km driven continues to grow.

The Green Party's co-operation agreement with the Government in 2005 included an enhanced energy efficiency programme including an upgraded building code, fuel efficiency standards for vehicles, more investment in public transport capacity and a grants programme for solar water heaters. Those things are currently in train. The new Energy Efficiency and Conservation Strategy, mandated under the Greens legislation in 2000, will be released shortly and is substantially stronger than the 2001 version.

The Greens' Waste Minimisation Bill will be reported back soon from select committee and is being supported by government. That will make possible waste levies to support recycling, and introduce the concept of extended producer responsibility, or product stewardship as it is being called now, for disposal of products.

All these gains are likely to be overwhelmed by continued growth in throughput of materials and energy. Energy efficiency standards overwhelmed by more cars, more heated towel rails, and more plasma TVs. More riparian plantings and nutrient budgeting on farms overwhelmed by more cows. Less toxic material but far more of them. More waste recycling, but far more waste outweighing that.

This represents, in my view, the greatest sustainability challenge for business.

Business is going green by finding smart ways to use all their inputs more efficiently — less energy and materials per widget, less waste, less toxic materials. They will even change the nature of the widgets so they last longer, are repairable, reusable, recyclable. But in the end that can go only so far.

The APEC countries understood how hard it is when they agreed last week to set targets for greenhouse emissions based on energy intensity — energy per unit of GDP — rather than absolute reductions. Their target of a 25% reduction in energy intensity by 2030 looks great, but it means that if the economy doubles in that time, which it likely will, greenhouse emissions go up 50% from now.

It is the absolute level of emissions that the atmosphere will see, and react to. It doesn't care how big the economy is. The only environmentally effective target is to reduce emissions in absolute terms. That is what the US, Australia and China refused to commit to last week at APEC, and sadly NZ signed that communiqué too.

The ultimate challenge is to redesign an economy that stabilises and reduces its inputs of energy and materials yet still satisfies human needs. It's how to be more profitable without always getting bigger. There is no theoretical reason why the economy cannot continue to grow indefinitely, as long as the environmental impact of each unit of GDP reduces faster than the number of units grows. But that is proving very hard. It might be an economy of more books, art works, guided tramping and kayaking, local food production, higher value product made from smaller quantities of commodities like milk which impose such a high environmental cost on the environment. There is plenty of scope for the imagination.

APEC could have set an energy intensity target, saying the reduction in energy used per unit GDP had to be at least twice the rate of GDP growth. That would have done it. But no-one was game for that.

At the level of the individual firm, it means rethinking ways of prospering without growing inputs. That requires very clear sighted measurement — and that's where accountants come in. We measure what we value, and then we value what we have measured.

Can you help your clients, and the government, measure improvements in health, decent housing, literacy, art, sport, and time with the kids, total human wellbeing? Bhutan does — it sets "gross national happiness" it as its national goal. Can you help drive resource stock accounts for fish, soil, freshwater, forests?

We have on our side one big change since the 1970s. Repeated surveys show that most people have reached a level of material satisfaction that they now want quality of life and are prepared to sacrifice quantity of material things to get it. Public awareness of the environment is far higher than it was a decade ago. The TNS survey a week ago found 81% of people thought climate change is real and 55% thought Government wasn't doing enough about it. The Herald now has regular "Green pages"; the Listener has a regular green column. We have green buildings, green energy, green business, and of course inevitably, greenwash.

The task before us is to accomplish the biggest revolution in industrial times — to change the direction and goals of our economy to serve real needs, quality of life, human happiness, rather than just creating MORE, which in the end will mean less of what we really want.