Diversifying approaches to governance (GMT 11)

Drivers

The socio-economic progress of recent centuries has been accompanied by a steady evolution in systems of governance, i.e. the mechanisms used to steer society away from collectively undesirable outcomes and towards socially desirable ones.^[1] In particular, the creation of complex state hierarchies and systems of commerce has played a key role in incentivising and enabling economic development, and in managing associated social and environmental harm. In more recent times, however, challenges and opportunities are driving the emergence of new approaches to complement hierarchical and market-based governance.

New challenges for established governance approaches

One factor creating demand for new governance approaches is the mismatch of scale between the increasingly long-term, systemic challenges facing society and the more limited focus and powers of governments.^[2] For example, integration of global markets means that many effects of resource use are felt far from where products are consumed (GMT6). As a result, governments may have little awareness of the impacts of domestic consumption, and little ability to influence them because of the territorial limits on state authority. Additionally, global trade agreements constrain states from differentiating between imports based on production methods.^[3]

Other challenges relate to the management of global natural capital. Greenhouse gas emissions, for example, affect the atmosphere as a whole, with related impacts likely to fall most heavily on future generations. Since mitigating climate change requires coordinated action worldwide, individual governments may have little motivation to take unilateral steps to reduce emissions.

Similarly, individual countries may lack incentives to protect global public goods such as rainforests because the benefits that they provide, such as storing carbon and hosting biodiversity, are very widely distributed and long term compared to the short-term financial gains that other land uses could generate. In each of these instances, the failure of market prices to internalise all the costs of resource use and pollution mean that market forces are unlikely, in themselves, to produce sustainable and socially beneficial outcomes.

Political cycles can also reinforce the human tendency to disregard the long term when making choices.^[4] Electorates often prioritise immediate concerns such as jobs and crime, while politicians tend to focus on the next election.^[5] The result is short-termism in policymaking, deterring action that delivers benefits in the future and encouraging ones that result in delayed costs.

Governance failures can also undermine national policy responses. For example, government institutions can be inflexible and slow-moving when confronting such complex challenges as climate change.^[6] The content of policy is also susceptible to bias resulting from collective action by well-resourced interest groups ^[7] or corruption.

Changing technologies and values

Social and technological changes (GMT4) are also facilitating innovations in governance. Information and communication technologies have created new ways to establish international communities and networks, encouraging collaboration and information sharing. Such advances are key to the increased involvement of non-state actors in global environmental governance.

Enormous increases in data accessibility and storage are also closely linked to changing expectations and values. Citizens increasingly demand transparency and accountability from governments and business. Media coverage of the social and environmental harm associated with globalised supply chains has grown. And recent decades have witnessed a shift in attitudes towards humanity’s relationship with nature, and the responsibility owed to vulnerable populations and future generations.^[8]

Trends

While governments are likely to remain the primary mechanism for coordinating human activity, more diverse governance approaches are emerging. Some can be seen as extensions of state authority, while others involve non-state and local actors in 'network governance', based on informal institutions and instruments.^[9]

Intergovernmental collaboration

International environmental agreements have proliferated in recent decades, with activity peaking during the 1990s when more than 350 environmental agreements were adopted or amended.^[10] The subsequent decline in new agreements reflects both the increasingly dense network of regimes in place and growing awareness of their limitations. Negotiations are often extremely complex and slow, and the policymakers involved may have strong incentives to defer costly actions that promise only distant benefits. A lack of enforcement mechanisms further undermines their effectiveness and many international agreements are yet to be implemented.^[11]

One approach that has emerged to facilitate intergovernmental collaboration is the establishment of long-term targets. For example, many countries have adopted greenhouse gas emissions-reduction targets stretching to 2050.^[12] By signalling long-term ambitions, such targets potentially provide a way to secure reciprocal commitments from other states, as well as helping to deter government short-termism by locking domestic policy into a long-term framework.

International policymaking is also taking place in supranational blocs, with the EU providing by far the most advanced example. Partial pooling of state sovereignty and the establishment of effective enforcement mechanisms has enabled the EU to agree and implement some of the world’s highest environmental standards. Despite the failings of global climate change negotiations, the EU and Member State governments have delivered significant reductions in greenhouse gas emissions,^[13] in the knowledge that their major trading partners are making similar commitments.

In contrast, the emergence of global supranational hierarchies is much less advanced. As a result, ‘Intergovernmental organisations are inadequately resourced, are not vested with the requisite authority, lack competence and coordination, and display incoherence in their policies and philosophies‘.^[14] 

Non-state actors and hybrid approaches

The limitations of state and intergovernmental mechanisms in addressing global governance challenges have enabled non-state actors to assume an increasing role. Civil society and business complement the state’s rule-making and enforcement powers in their ability to operate informally across borders, and their substantial local knowledge and contacts.^[15] The growing importance of network governance can be partially explained by changes in the scale and focus of non-governmental organisations (NGOs). The number of international NGOs has increased from less than 5 000 in 1985 to more than 50 000 today.^[16] At the same time, their goals have shifted from primarily aiming to steer government and intergovernmental processes, to creating norms and standards, and monitoring and enforcement processes.^[17]

Business becomes involved in governance processes in response to pressure from customers, investors and the public, as well as to manage environmental impacts on their operations and pre-empt or influence governmental action.^[18] Crucially, business often has a commercial interest in adopting production standards. Network governance approaches can thereby operate by aligning the interests of different stakeholders — with NGOs proposing standards and business promoting them.^[19]

Certification and labelling schemes, for example, enable firms to signal good practice to consumers and differentiate their products from those of competitors. Such approaches today address some key environmental problems, such as forest degradation, ecosystem fragmentation and pollution.^[20]

In other situations, companies may favour the harmonisation of standards to reduce production costs or achieve level playing fields with competitors. In such cases, business may have a strong incentive to lobby governments to formalise and enforce standards. The adoption of EU emissions standards for road vehicles across Asia (Figure 1) illustrates both the desire for standardisation in global production, and the interplay of state and non-state actors in environmental governance.

Figure 1: Adoption of the EU's Euro emissions standards for cars and vans in Asian countries, 1995–2025 ^[21]

Source: Clean Air Initiative for Asian Cities (2011)
Note: Please read reference [22] for additional information.

The rise of networks is also providing opportunities for state actors at the local level. Cities and networks of cities, for example, are expected to play an increasingly important role in environmental governance.^[23] Cities concentrate populations, economic activity and innovation of all sorts. This not only creates opportunities for resource-efficient ways of living but also means that changes at local scales can have far-reaching effects. Better networking of cities, as illustrated by the Covenant of Mayors,^[24] therefore has a crucial role to play in the diffusion and up-scaling of local innovations.

Implications

The growing scale and complexity of humanity’s interactions and environmental impacts suggest that the new governance models outlined are both necessary and desirable. It is clear, however, that they bring a variety of uncertainties and risks.

First, the dispersion of authority to numerous actors pursuing varied interests is already producing a profound shortage of coordination in governance. The work of many non-state actors is sector specific, which increases the risk that links between different policy areas will be missed.^[25] Worse than a lack of coordination is direct competition between actors, which can result in inaction, wasteful use of funding and complications in national and international policymaking. For the EU, as for other stakeholders, progress in environmental governance will therefore mean striking the right balance between inclusiveness and effectiveness.^[25] The increasing number and diversity of actors involved in global governance could also mean that stakeholders are confronted with an ever increasing array of legislation, standards, norms and labels. The Ecolabel Index currently tracks 459 schemes covering 197 countries.^[20] While these have an important role to play in environmental governance, a plethora leads to confusion and loss of trust.^[26]

Second, the rise of business and civil society in governance can have a mixed impact on democratic processes. At one level, it enables a larger number of stakeholders to shape governance approaches, affording a greater voice to grassroots organisations with a keen appreciation of local realities. At the same time, however, the growing role of non-state actors could well undermine the authority of elected governments, potentially threatening democratic processes. While changing technologies and rules on access to information mean that government choices are increasingly subject to the scrutiny of empowered and interconnected citizens, a shift to non-state governance may reduce the democratic legitimacy, transparency and accountability of decision-making.

In elected parliamentary systems, decision-making processes and debates take place in the public domain, and the representatives involved are accountable to voters. In contrast, non-state actors are unelected and unaccountable, with their workings not always transparent. The funding and expenditure of non-state actors, for example, cannot necessarily be traced by members of the public and debates on policy and strategy tend to occur behind closed doors. This is a particular challenge where civil society engagement takes the form of short-term coalitions directed at specific issues – a process termed ‘bazaar governance’.^[27] As non-state actors become more important in global governance, they will need to improve their transparency and accountability.

The extent to which the environment is already regulated means that the focus of governance has increasingly turned to how to make existing standards and norms work better. Experience suggests a need for flexibility and the right mix of hierarchical, market-based and network approaches. Risk assessment that addresses the state of the environment, pressures and conduct is likely to point to the need for a range of responses. Openness to different and evolving governance approaches is therefore highly desirable.