August 2017

Dirty Oil or Green Energy in the Faroe Islands?

By Árni Johan Petersen.

These are the stories from the two divided camps in the Faroe Islands – please give your take on this dilemma. Should the Faroese explore and produce oil in the Faroe Islands that will contribute to global energy safety and stability to an ever growing global energy demand? Or should the Faroese stop this process now, and rethink the current state of the world where the Faroe Islands could become the front-runner for green solutions to statuette an example, and stop the greenhouse gasses deriving from fossil fuel energy by saying no to oil?

Background
The 4^th license round for rights to oil exploration in the Faroe Islands was May 17^th 2017, and the search for oil in the offshore subsoil in the Faroe Islands might continue if there is an interest from international oil companies to invest in the exploration. Since the first license round in 2000 there have been conducted nine drillings in the Faroese offshore subsoil without any commercial fund but results have concluded the subsoil to have a hydro-carbon active system in place.

Today, the Faroese economy is strong, unemployment rate is close to 2 per cent, young Faroese are moving back home, population has surpassed 50.000 inhabitants for the first time, salmon industry is booming (has done so for seven years), tourism is booming (four years), and the fishery is booming. A society in prosperity where the incentives to create new jobs might be vanishing because there are no Faroese to fill in the positions and foreign workforce might become a necessary solution to keep the (capitalistic) wheels going.

Pro-oil exploration Camp
The Faroese Ben Arabo, CEO at Atlantic Petroleum, argues that the Faroe Islands should explore for oil in the Faroese subsoil. The world, he argues, demands oil and gas in large quantities because the world consumes 100 million barrels of oil every day, and the demand is increasing. Oil, as a percentage of the total world energy consumption, is decreasing but the growth of energy demand is so great that the demand for oil in quantity increases every year. Currently, he continues, approximately one third of the global energy demand derives from oil, one third from coal, and one fourth from gas. The rest derives from nuclear energy, water and other renewable energy currently supplying one-digit percentage of the global energy production.

We, who live in the privileged part of the world, Ben argues, take energy stability and security for granted while other parts of the world, e.g. India, China, Indonesia etc., do not have this luxury. Ben recommends people who think they could survive without oil should examine how long time passes before they use the first object that demands oil in its production process (e.g. tooth brush). Hydrocarbon is present in a large numbers of product ranging from mountain helmet, solar panels, aspirin, and tooth paste. The wishful thinking of “no-oil-tomorrow” is based on ideology rather than technology, Ben concludes.

Resistance Camp
For the first time since the Faroese started to dream about finding oil we are observing resistance in the Faroese community. These are mainly environmentalists who have joined forces in an attempt to stop the oil exploration in the Faroe Islands. One local NGO, Ringrás, is represented by Ingmar Valdemarsson á Løgmansbø who argues:

“The context of the opening of the fourth Faroese hydrocarbon licensing round is marked by increasing ecological turmoil and biosphere degradation stemming from anthropogenic climate change and widespread habitat destruction. Fundamentally, our global society is built upon a measure of success (unrelenting growth) which, when achieved, clashes with the integrity of the interconnected ecosystems that make life on earth viable, and thus, enable civilisation as we know it.

The challenges we face, as a country and a global community, are much greater and more fundamental than the question of energy supply alone. But nevertheless, it is evident that the energy systems of the future must, by necessity, be renewable, if they – and we – are to last. Reality is catching up with our complacency and the thwarted efforts to ditch fossil fuels and racing ahead of our expectations, but luckily on two fronts:

The forecast dangers of rapid climate change are showing themselves at an accelerated, unexpected and ominous pace.
Key renewable technologies have matured to take on and render fossil fuels largely obsolete.

Focusing on the latter in relation to the former, it is entirely untimely, unnecessary and unethical for the Faroe Islands to venture into a dirty industry that would threaten the mainstays of the Faroese economy, namely the fishing industry and tourism, whilst contributing to an uncertain future in favor of very dubious short-term financial gain, prone to suffer from stranded assets as disruptive technologies coupled with global weirding and climate policy expedite the transition to a low-carbon society. This is underlined by the recent developments in India, where 14 Gt of planned coal power stations have been cancelled in May alone on account of Solar PV directly outcompeting coal.

In this environment of change, we must embrace the shift away from fossil fuels and take on the potential leading role that our national goal of 100% renewable electricity generation by 2030 promises to imbue us with. This path is what we as a country need and what the world needs and, best of all, it won’t cost the world.”

According to Ingmar the Faroe Islands, the Faroese Government, has signed the Paris Agreement (COP21) which includes lowering the carbon emission to decrease the global warming. The Faroese Minister of Industry and Foreign Affairs, Poul Michelsen, has also publically stated his support to the agreement and the Faroe Islands should be the frontrunner in the battle against fossil fuel emission adding to the fire of global warming. The long term perspective, according to Ingmar, is that this will be the sustainable solution regarding environment, society, and economics because the Faroe Islands are heavily dependent on their fisheries, salmon farming, and tourism. Oil industry will add to the carbon quantity in the natural environment and changes in the ecology will alter the livelihood of the resources in the sea. This, in turn, will negatively affect the natural resources in the Faroe Islands harming the economy and society in the long run. Exploring for oil has to stop now!

The Broader Picture
The International Energy Agency (IEA) recommends exploring for more oil in the Scandinavian area because this will provide global energy stability and security. This argument is based on the fact that the political system is transparent, and the regulation for oil activities is progressive in terms of natural environment, work processes, and overall safety. The Middle East is, according to IEA, not the most reliable nor stable area, while Scandinavian countries are triple-A-democracies, market economies and predictable partners.

Producing more oil will lower the price of oil and this automatically decreases the incentives to invest in research and development of renewable energy solutions because the energy consumer demand will, in general, follow the least expensive solution. In contrast, if the oil production is stopped the oil price will go up and the demand for alternative solutions becomes pressing and the investors will predict return on investment. This will speed up the process to develop renewable energy solutions but we will probably experience political power changes on the global arena, e.g. a stronger Middle East. The question is, for how long? The sooner the world moves to alternative energy solution the global arena will change, again, and this might be the only sustainable solution because the emission and global warming is already at a critical stage.

So, should the Faroese provide for energy stability and security, or should they be the front-runners to say “no” to oil? Could the Faroe Islands become a role model for other societies in the Arctic and beyond? And if the Faroe Islands can do this, could other countries learn from this small country? Is the Faroese political (Governmental) agenda hypocritical because of its duplicity? Or is this hypocrisy a necessary aspiration to prosper as a small society in the Arctic that might spread to other small societies in the Arctic?

Árni Petersen is PhD-Fellow at the Department of Management, Society and Communication at Copenhagen Business School. His PhD project pursues the research question: “How does future expectation of wealth deriving from the oil affect the Faroese society and the potential outcomes in the future in the Faroe Islands?” His research features an in-depth case study of the Faroese Oil Industry, including interviews, observations, and local newspaper articles about the oil industry.

You can find Árni on LinkedIn.

Pics by BSEE & Christian Reimer, edited by BOS.

Universities – Front Runners or Falling Behind The Green Transition?

By Louise Kofod Thomsen.

Universities are knowledge generators, facilitators of innovation and play a key role in shaping the mindsets and developing the skills of our future leaders. Universities bear a tremendous responsibility for not just talking the talk, but also for walking the walk on social responsibility. However, when visiting a university campus, it is not always commonplace that we find universities in the forefront when it comes to acting sustainably and responsibly.

Universities proudly take on the role of advisors in setting universal guidelines for how others should act, but how good are they when it comes to implementing sustainability initiatives on their own campuses? The CBS campus is a wonderful place to take a stroll around, especially on a hot summer day, where you will be greeted by the sight of the students sitting on the grass and enjoying the green areas. You will quickly discover that CBS is a real Copenhagen campus with bikes as far as the eye can see. However, as with many universities, the CBS campus has a long journey ahead when it comes to implementing sustainability initiatives and decreasing CO2 emissions.

The pressure is on
Every third year, the Minister for Education and Science negotiates the new university development contracts, setting the goals for all Danish universities’ future development. The contracts contain self-defined targets by the individual institutions, reflecting their own strategic priorities as well as obligatory targets based on societal needs as defined by the Minister for Education and Science. However, until now, these contracts have mentioned no legal obligation for universities to implement sustainability initiatives on campus. Universities’ lack of focus on sustainability initiatives on campus is somewhat surprising. You would think that there should be considerable pressure on universities to show a higher degree of engagement on campus regarding sustainable development considering the growing concern and initiatives globally.

The dominating theme at Rio+20 was how to achieve environmental and social sustainable development globally. The green transition is also a leading theme for the Danish government with its ambition of having Denmark ranked as the top country worldwide for green initiatives. The green transition is reinforced not least by the recent adoption of the EU Action Plan for Circular Economy. In 2015, the world adopted the 17 Sustainable Development Goals aiming to engage governments, the public sector, civil society and universities to bring about global sustainable development and in November 2016, the Paris Agreement entered into force with 158 ratifying parties working towards the goal of staying below 2 degrees.

There is no doubt that there is a growing demand for better standards for sustainability and resource efficiency. Yet, if we are to achieve the highly ambitious global targets, we need drastic changes and stronger commitments by key actors. Considering universities’ crucial societal role in educating the generations, you might wonder what keeps universities from taking up this challenge?

CBS Goes Green – or did it?
In 2012, an initiative known as the “CBS Goes Green” was launched to, among other things, allow for waste sorting for the students at Solbjerg Plads. Today, 5 years on, waste sorting has still not been implemented at Solbjerg Plads or any other of CBS’ main buildings. This is generally explained to be due to “a lack of interest by the students”. Another explanation has been prior lack of waste sorting systems in the municipality of Frederiksberg. However, today Frederiksberg has a well-functioning system including clear guidelines as well as consultation services for correct waste sorting. With no clear strategy for handling waste (such as plastic, bio and metal) within the various CBS departments, it appears that sorting waste is difficult not only for students, but for staff and faculty as well. Despite often good intentions, the systems for sorting waste are generally lacking.

You might wonder why sorting your apple core from your paper trash is such a challenge when most do it at home. It seems as if the challenge lies within some rather old, out-of-date structures and a “this is how we have always done it” approach. Despite the fact that sustainability is a growing priority for universities all over the world placing a strong focus on teaching and research in this area, not many universities commit to integrate operational sustainability on campus.

Universities as test centers for sustainable initiatives
Universities are in many ways a powerful platform and a crucial component for achieving sustainable development across the globe, but also very importantly, locally, on campus. Universities have a responsibility as role models to lead the way and show students how to act responsibly. There are also long-term economic incentives for taking on the challenge.

In 2008, Copenhagen University adopted its first Green Campus targets and has since saved DKK 35 million on energy. The University of British Colombia is treating their campus as a living lab for students to work with behavior and innovation to develop sustainable solutions for the campus. They have launched The SEEDS Sustainability Program with the aim of advancing campus sustainability by creating partnerships between students, operational staff, and faculty on innovative and impactful research projects to be implemented on campus.

CBS has just launched a similar initiative, The Sustainable Living Lab, a project that opens up campus data for students, researchers etc. to use the campus to implement, test, research and teach sustainability with the CBS campus as the focal point (campus as a living lab). The Sustainable Living Lab project engages student organizations to create a better and greener campus, but we need CBS staff, faculty and management to contribute directly to projects like this if we want to transform CBS into a more sustainable university. However, we do see small steps towards a sustainable movement internally at CBS, with the recent establishment of the Sustainable Infrastructure Taskforce at the Department of Management, Society and Communication. Among others, the taskforce has set out to implement waste sorting using the department as a pilot project and in time use this knowledge for similar initiatives around campus.

Reflecting on CBS’ role as a business university with significant social science expertise, the unique focus of the CBS approach is its emphasis on business and societal dimensions that we can make use of for a sustainable campus redevelopment. There is a tremendous opportunity for universities to play a key role in this sustainable transition in terms of research, economical benefits and branding of universities as green contributors just to mention a few.

I believe, it is time we started redefining the role of universities in the sustainable transition and engaging students and staff alike in the journey towards creating a green campus.

Louise Thomsen is Project Manager for CBS PRME and the VELUX Chair in Corporate Sustainability at the Department of Management, Society and Communication, CBS. Her areas of interest are sustainable consumption, innovation, student engagement, education and partnerships for sustainable development. Follow her on LinkedIn and Twitter.

Pic by Bjarke MacCarthy.

CBS new Knowledge Partner of the OECD

By Karin Buhmann.

In early 2017 CBS accepted an invitation from the Organisation of Economic Collaboration and Development (OECD) to become an OECD Knowledge Partner. As an OECD Knowledge Partner, CBS joins a small group of prestigious universities – including the University of Geneva, the University of Sydney, London School of Economics and SciencesPo (Institut d’études politiques de Paris) – that are invited to share and discuss research based knowledge with the OECD, thus enhancing its ability to deliver on regional and global challenges related to economic collaboration and development. For 2017 CBS was invited to participate in two key ways: scholarly interaction at the annual political OECD Global Forum, and contributing an article to the OECD Yearbook. Both were connected to the topic at this year’s Global Forum: Bridging Divides, with particular focus on inclusive growth, digitalization, and trust.

Three CBS professors (Karin Buhmann (MSC), Kim Andersen (DIG), and Christian Asmussen (SMG) and the CBS Vice-President for International Affairs (Dorte Salskov-Iversen, who is also Head of Department of MSC) participated in the OECD Global Forum, which took place at the OECD Headquarters in Paris on 6-8 June 2017. Presenting and moderating at an ‘Idea Factory’, Professor Kim Andersen shared views on artificial intelligence. Professors Christian Geisler Rasmussen and Karin Buhmann interacted with OECD experts on issues of Inclusive Growth and the Location Choices of Multinational Firms (Geisler Rasmussen) and The role and challenges of OECD’s Guidelines for Multinational Enterprises for building trust through Responsible Business Conduct in a context of global competition (Buhmann).

With permission from the OECD, the CBS contribution to OECD’s 2017 Yearbook is reproduced in the following.

Responsible Business Conduct and Competition: OECD’s Guidelines for Multinational Enterprises and responsible supply chain management

By Karin Buhmann, Copenhagen Business School

Surprised looks with colleagues or students are commonplace when I observe that the OECD plays an important part for the promotion of responsible business conduct (RBC), not just in OECD countries but globally. RBC is OECD ‘speak’ for corporate social responsibility, corporate sustainability and other terms indicating an expectation that businesses take responsibility for their impact on society. The OECD’s key normative instrument for RBC, the Guidelines for Multinational Enterprises, and the remedy institution that adhering states commit to establishing, the National Contact Points (NCPs), are relevant to help offset some of the social cost that competition causes to employees and communities. The Guidelines provide norms of conduct for MNEs and for how they should act to avoid harmful impact caused by their supply chains. Revised several times since first adopted in 1976, the Guidelines provide normative standards in regard to human rights, labour/employment and industrial relations, environment, bribery, consumer concerns, science and technology, competition and technology. The Guidelines also apply to institutional investors, including minority shareholders.[1] Jurisprudence (‘case law’) emerging through complaints (‘specific instances’) handled by NCPs elaborates the practical implications of the Guidelines for companies and investors, within and beyond the sector and country concerned by each case. Like the Guidelines have extraterritorial reach beyond MNE home states, NCPs may also deal with business conduct arising in non-OECD states or other states having acceded to the Guidelines (provided a connection to that state).

A case[2] that was recently handled by the Danish NCP highlights the pertinence of OECD’s Guidelines at a time when SMEs too have transnational operations, as well as of the evolving guidance developed by NCPs. The case concerned a Danish textile company that sourced from a supplier in the Rana Plaza building at the time of its collapse in 2013.

The Guidelines are recommendations from governments to companies operating in or out of states (whether or not OECD-Members) adhering to the Guidelines. With the 2011 revision, the Guidelines adopted the risk-based due diligence approach.[3] This is a process for companies to identify, prevent, mitigate and account for their impact on society. Whereas corporate legal or financial liability due diligence aims at protecting the company against harm, risk-based due diligence is about protecting society against harm caused by the company or its business relations. Of course, if done well it also protects the company against liability or reputational harm.

The case on the Danish textile company concerned the adequacy of the company’s due diligence to prevent harm directly linked to its operations by a business relationship. The NCP found that the company did not apply processes for due diligence in compliance with OECD’s MNE Guidelines. In particular, the company failed to make demands that its supplier ensure employees’ human and labour rights, including through adequate steps to ensure occupational health and safety. As to whether the company had acted consistent with what it argued to be buyer practice in regard to building inspection, the NCP observed that practice by itself may be indicative, but not conclusive regarding the scope of risk-based due diligence. In other words, a company must think and act for itself in regard to demands on suppliers to take appropriate measures to ensure health and safety in the workplace. Thus, the NCP statement elaborates on the practical implications of the Guidelines and due diligence for companies in the textile and other sectors for the future, in regards to building safety and supply chain management.

The collapse of the Rana Plaza building was a wake-up call in many OECD countries concerning the human and social cost that can be the price for the quest for economic gain that drives much competition. Global companies have long taken advantage of wage differentials and weak regulation to keep costs low.[4] Concerns with labour and human rights have been strong if too often ineffective drivers for corporate change and the conditions for competition.[5] The textile sector is not unique in competition causing adverse social or environmental impacts. Agri-industry and mining are among sectors in which adverse social and environmental impacts of business activity are regularly reported. Enhanced knowledge of OECDs MNE Guidelines may contribute to promoting RBC in such transnational economic activities.

[1] OECD (2014) Scope and application of ‘Business Relationships’ in the financial sector under OECD’s Guidelines for Multinational Enterprises, Paris: OECD Global Forum on Responsible Business Conduct.

[2] Final Statement on Specific Instance notified by Clean Clothes Campaign Denmark and Active Consumers regarding the activities of PWT Group.

[3] The term was adopted from the United Nations Guiding Principles on Business and Human Rights (UNGPs), United Nations Human Rights Council (2011) UN Doc. A/HRC/17/31.

[4] Krugman P, Obstfeld M, and Melitz M (2014). International Economics: Theory and Policy, Global Edition. 10th ed. Online: Pearson.

[5] Ruggie J (2013) Just Business – Multinational Corporations and Human Rights. Boston: W.W. Norton.

Karin Buhmann is professor at Copenhagen Business School (CBS) where she is charged with special responsibilities for Business & Human Rights, and a part-time member of the Danish National Contact Point (NCP) under OECD’s Guidelines for Multinational Enterprises. Her academic background is in international human rights law.

Pic by Solidarity Center, edited by BOS.