Sustainability: a shift of paradigm

For a very long time, “Sustainability” has been perceived as belonging exclusively to the realm of countries and businesses’ Corporate Social Responsibility programs mainly used as a tool to manage reputation. The long crisis countries and economies are still trying to recover from further strengthens the perception that economic growth and sustainability are different and divergent priorities.

However, a mounting number of governments and businesses are showing how “Sustainability” could also be a fundamental leverage to increase productivity, make a more efficient use of limited resources, boost profitability, create well-paid and knowledge intensive jobs, and ultimately contribute to the growth of businesses and countries in a cleaner and healthier environment.

As an example, jobs involving working with information, technologies or materials that help to make a more efficient use of resources and protect the environment are amongst the fastest growing in Europe. The potential is really promising, since even during the recession years (2007-2011), the number of jobs in these areas grew by 20%, with estimations saying that 20 million jobs could be created by the green economy between now and 2020.

Investments in the low carbon economy are bringing significant value added to most innovative Italian companies (€101 billion in 2013), consequently stimulating the national labor market. According to the Green Italy Report 2014, 61.2% of Italian job opportunities were linked to “green” skills last year, reaching 70% of hiring opportunities in the R&D sector. Innovation, globalization and increasing revenues do translate into higher employment rates, and since 2008 over 22% of total Italian companies have been investing in innovation, R&D, quality and green economy, creating 3 million green jobs so far (13.2% of total jobs in Italy).

Sustainability can play a crucial factor in stimulating new jobs in Italy, with companies investing in low carbon initiatives creating 26.6% of total hiring opportunities in 2014, compared to 12.1% of those not investing in the sector.

The role of Sustainable Technologies: stimulating growth and attracting investments

The deployment of new technologies stimulates growth and attract investments by raising living standards, creating new jobs and giving rise to centers of excellence all over the world. In particular, Sustainable Technologies play a crucial role in facing the challenges generated by the increasing prices and consumption of commodities and resources and the adverse effects of negative externalities. The main goal is helping governments and companies to improve the use of natural resources, and manage the rising costs of delivering products and services to citizens and customers.

In 2013, the US Government released the Climate Action Plan to prepare the United States for mitigating the effects of climate change and to lead international efforts to address global climate change. To confirm its commitment, the White House in February 2015 launched the Clean Energy Investment Initiative, aiming to catalyze $2 billion of expanded private sector investments in Sustainable technologies with breakthrough potential to reduce carbon pollution. In this context, former President Obama highlighted the importance of Sustainable Technologies to “unleash new jobs in industries of the future”, showing how employment in the only solar industry has grown more than 85% since 2010.

As for Europe, in January 2014 the EU Commission set the new 2030 objectives of -40% CO2 emissions against 1990 level, while in October 2014 all Member States agreed to achieve at least a 27% share of renewable energy in the final energy consumption by 2030, therefore confirming the strategic role of renewable energy for economic and industrial development.

According to Bloomberg News Energy Finance, investment in clean technology rose by 16% last year, reaching $310bn and almost doubling the clean electricity capacity than in 2011. The rise in investments is the first in three years, and a major role has been played by growing solar power markets in China (+32%, for a total investment of $90bn) and the US (+8%, $52bn), while in Europe investments only increased by 1%, reaching a total investment of $66bn.

Nevertheless, even with this significant volume of investments, we are still lagging behind the targets, since a 2012 IEA Report calls for $36 trillion investments by 2050 in Sustainable technology to limit the effects of climate change. The need of higher investments has been recalled in January 2014 by the UN climate chief Christiana Figueres, requesting again for tripling the current volume up to $1tn per year, to ensure the transformation needed to stay within 2 degree Celsius limit of global warming.

A second strong economic rationale behind the need of higher investments is that the costs of no-action are far higher than those associated to action and in fact a US Natural Resource Defense Council Study forecasts – for US only – $1.9 trillion (in today’s dollars) or 1.8% of U.S. GDP per year by 2100 in recovery costs (e.g. increased hurricane damages, residential real estate losses due to sea level rise, increased energy costs, and water supply costs).

On the one hand, governments’ initiatives and companies’ new business models can facilitate partnerships among innovators and collaborations with industries, ultimately creating an appropriate framework that supports the acceleration and broad deployment of innovative sustainable technologies. Therefore, educating and training the workforce, and creating new specific jobs and related responsibilities, will determine the widespread and effective deployment of Sustainable technologies accompanied by jobs’ creation, one of the most urgent and important challenges to be achieved now and in the coming years.

THE STATUS OF SUSTAINABILITY IN ITALY

In the last two decades the concept of sustainability – especially from an environmental perspective – has become a constant topic of discussion and it has increasingly gained consensus amongst citizens, countries and business as a fundamental aspect of their activities and lives.

In Italy, as well as other countries, this discussion has triggered the initiative of policymakers and companies; however, its performance is still below the average of European competitors. By using World Economic Forum’s Sustainable Competitiveness data, we compared Italy performances over three main aspects of sustainability - environmental policies, use of renewable resources and degradation of the environment - to those of the most important European economies, such as Germany, France, Spain and United Kingdom.

As shown in the Sustainability Scoreboard below, Italy lags behind in the European sustainability race with eight indicators registering results under the average level (4 “below average” and 4 “significantly under average”), compared to the 4 of Spain, 3 of Germany, 2 of France and 1 of the United Kingdom.

Italy shows substantial margins of improvement in the “policy” area. All four indicators register under average results: two significantly below (Enforcement of environmental regulation and Terrestrial biome protection) and two below average (Stringency of Environmental regulation and Number of ratified international treaties). Compared to other European economies, Italy seems to be less committed to sustainability with smaller size of “biome” protected, fewer international environmental treaties signed (22 vis-à-vis 23 of United Kingdom, and 24 of Germany, France and Spain) and with the current regulation which is not only less stringent but it is also not appropriately enforced. Furthermore, environmental management system has evolved in the context of a major devolution of legislative and administrative responsibilities to subnational levels of government. On the one hand, this fact catalyzed regional and local initiatives that helped to improve environmental performance in many locations. On the other hand, it also created ambiguities about the respective roles of national and regional levels of government, tended to increase gaps and inconsistencies in the transposition of EU environmental directives and undermined the efficiency and effectiveness of national policies.

This is also due to the fact that regarding the use of renewable resources, Italy is positioned in the lower part of the European ranking, with two out of three indicators performing “below average”: baseline water stress “significantly below average” (as in the case of Spain, this is partially explained by the lower level of water availability compared to Germany, France and Britain which makes a less efficient use of water even more impactful given the scarcer water availability) and “CO2 emissions” below average. This is the indicator on which countries struggle the most: with the exception of France, “significantly higher” than average, and Spain, “on average”, the other three countries taken into account perform “below average” with UK, significantly above emissions, and Germany “above”, stressing once again how reduction of CO2 emissions remains a difficult challenge for countries to cope with. A positive signal comes from water treatment on which Italy performs on average at the level of Germany and Spain.

Concerning the capability to preserve the environment, countries are very polarized and their outcomes vary according to the indicator considered. Italy struggles in terms of “quality of the environment”, registering “below average” levels and particulate, “significantly below average”, a measure of the quality of the air. Differently, it registers the best result in “Forest cover change”, the indicator gauging the change in forest area between 1990 and 2010. This is the assessment area where Germany struggles the most, registering “significantly below average” results on either forest cover change and particulate. The top positions are covered by Spain (“significantly above average” performance on both Forest change and particulate) and the United Kingdom (which registers “above average” performance on particulate and “significantly above average” on Forest change) while France holds an “on average” position with the exception of the Forest change indicator, where it performs significantly under average.

Overall, three areas of Italy’s performance appear less competitive compared to the other major
European economies:
• Regulation. The number of international treaties signed are fewer than competitors, and environmental regulation is not only poorly enforced but it is not enough stringent
• CO2 Intensity. Even though Italy performs pretty well on CO2 emissions, thanks to the considerable effort that the Government put in the mitigation policies, some sectors, such as transportation (particularly by road), show significant margins for improvement, being the main energy end-use and the second largest source of CO2 emissions
• Baseline water stress. The challenge of scarce level of water availability, mainly due to particular geographical conditions, is amplified by a not-efficient use of limited resources

Focusing on the energy sector, acquiring from abroad 76.9% of the energy it needs, Italy relies heavily on imports, much more than its European competitors (the average level of energy import of European Union countries is 54%). This exposes the country to the risks connected to the variation of costs and supply of resources, which negatively affects the ability of companies to operate and plan their investments, as well as citizens and their lives.

According to the World Energy Council, Italy lags significantly behind its European competitors on Energy Security (the effective management of primary energy supply from domestic and external sources, the reliability of energy infrastructure, and the ability of participating energy companies to meet current and future demand).

Hampered by an unfavorable total energy production to consumption ratio (the country produces only 17% of the energy it consumes) Italy is ranked 70 out of 129 economies analyzed by the World Energy Council, far behind United Kingdom (9), Germany (27), Spain (37), France (41).

However, as outlined in the National Energy Strategy implemented by the Ministry of Economic Development, Italy is committed on increasing both its energy production and the diversity of its electricity fuel mix to improve its long-term energy security. So far, it has reached important mitigation policy objectives by transforming its thermoelectric fleet into one of the most efficient in Europe and by changing the energy mix for power generation from oil to cleaner natural gas and renewable energy. Furthermore, several measures were adopted for improving energy efficiency in the residential, commercial and transport sectors. These policies have led to important achievements in the reduction of Green House Gas emissions and water pollution between 2005 and 2013. Despite these positive signals, a constant commitment and further resources should be ensured by the Government in order to reduce energy dependency and increase the level of efficiency in the use of resources.

Italy shows substantial margins from improvement in the “policy” area. All four indicators register under average results: two significantly below (Enforcement of environmental regulation and Terrestrial biome protection) and two below average (Stringency of Environmental regulation and Number of ratified international treaties). Compared to other European economies Italy looks less committed to sustainability with smaller size of “biome protected, fewer international environmental treaties signed (22 vis-à-vis 23 of United Kingdom, and 24 of Germany, France and Spain) and with the current regulation which is not only less stringent but it is also not appropriately enforced. Furthermore, environmental management system has evolved in the context of a major devolution of legislative and administrative responsibilities to subnational levels of government. On one hand this catalyzed regional and local initiatives that helped to improve environmental performance in many locations but on the other it also created ambiguities about the respective roles of national and regional levels of government, and tended to increase gaps and inconsistencies in the transposition of EU environmental directives and it undermined the efficiency and effectiveness of national policies.

Also for the “use of renewable resources Italy is positioned in the lower part of the European ranking with two indicators out of three performing “below average”: baseline water stress “significantly below average” (as in the case of Spain this is partially explained by the lower level of water availability compared to Germany, France and Britain which makes a less efficient use of water even more impactful given the scarcer water availability) and “CO2 emissions” below average. This is the indicator on which countries struggle the most: with the exception of France, “significantly higher” than average, and Spain, “on average”, the other three countries considered perform “below average” with UK, significantly above emissions, and Germany “above” stressing once again how reduction of CO2 emissions remains a difficult challenge for countries to cope with. A positive signal comes from water treatment on which Italy performs on average at the level of Germany and Spain.

Concerning the capability to preserve the environment countries are very polarized and their outcomes vary according to the indicator considered. Italy struggles with “quality of the environment” registering “below average” levels and particulate, “significantly below average”, a measure of the quality of the air. Differently, it registers the best result in “Forest cover change”, the indicator gauging the change in forest area between 1990 and 2010. This is the assessment area where Germany struggles the most registering “significantly below average” results on either forest cover change and particulate. The top positions are covered by Spain (“significantly above average” performance on both Forest change and particulate) and the United Kingdom (which register above average performance on particulate and significantly above average on Forest change) while France holds an “on average” position with the exception of the forest change indicator where it performs significantly under average.

Overall, three areas of Italy’s performance appear less competitive compared to the other major
European economies:

  • Regulation. The number of international treaties signed are fewer than competitors, environmental regulation is not only poorly enforced but it is not enough stringent
  • CO2 Intensity. Even though Italy performs pretty well on CO2 emissions thanks to the considerable effort the Government put in the mitigation policies, some sectors, as for example transportation (particularly by road) shows significant margin for improvement being the main energy end-use and the second largest source of CO2 emissions
  • Baseline water stress. The challenge of scarce level of water availability, mainly due to particular geographical conditions, is amplified by a not-efficient use of limited resources

Focusing on the energy sector, acquiring from abroad 76.9% of the energy it needs, Italy relies heavily on imports, much more than its European competitors (the average of energy import of European Union countries is 54%). This exposes the country to the risks connected to the variation of costs and supply of resources, which negatively affects the ability of companies to operate and plan their investment as well as citizens and their lives.

According to the World Energy Council Italy lags significantly behind its European competitors on Energy Security (the effective management of primary energy supply from domestic and external sources, the reliability of energy infrastructure, and the ability of participating energy companies to meet current and future demand).

Hampered by an unfavorable total energy production to consumption ratio (the country produces only 17% of the energy it consumes) Italy is ranked 70 out of 129 economies analyzed by the World Energy Council, well behind United Kingdom (9), Germany (27), Spain (37), France (41).

However, as outlined in the National Energy Strategy implemented by the Ministry of Economic Development, Italy is committed on increasing both its energy production and the diversity of its electricity fuel mix to improve its long-term energy security. So far, it has reached important mitigation policy objectives by transforming its thermoelectric fleet into one of the most efficient in Europe and by changing the energy mix for power generation from oil to cleaner natural gas and renewable energy. Furthermore, several measures were adopted for improving energy efficiency in the residential, commercial and transport sectors. These policies have led to important achievements in the reduction of Green House Gas emissions and water pollution between 2005 and 2013. Nonetheless these positive signals, constant commitment and further resources should be ensured by the Government in order to reduce energy dependency and increase efficiency in the use of resources.