As analysed in the context of the sustainable market economy, policy innovation is needed to correctly incentivise all of the market towards sustainable development in order to move things at the speed and scale necessary to address the prevailing crisis – particularly concerning climate and biodiversity. 

Fundamentally, policy needs to innovate in order to reflect the latest science on the needed targets, and for assuring these targets can be met with the right regulatory measures. 

It is not just about introducing new regulation, but also about getting rid of old rules that set the wrong incentives, or to delete those rules that are no longer needed once new, better regulatory solutions are in place. An obvious example of wrong incentives are fossil fuel subsidies. There are many less obvious ones – e.g. if homeowners are encouraged to invest with a short-term horizon because of the tax system (the rules governing which renovation expenses are tax-deductible), making building efficiency measures a lot less effective. 

Advocacy is also about regulatory efficiency, i.e. about getting the right type of rules in place, those that do the job, but are also efficient to administer on the part of the public and the private sector. It does not mean promoting more, but rather better, more sustainable rules. For C21 the right approach is: ‘As many rules as needed, but as few rules as possible’. 

Because of the nature of politics and finance, advocacy is particularly key with respect to setting the right level of regulatory ambition and effectiveness – assuring that the right targets are set, and that these are actually reached through a policy framework that is rigorous enough. Often, policy innovation faces strong opposition by incumbents and tends to get watered down in the course of its implementation. Strong stakeholder voices can make a big difference in this respect. 

For us it seems particularly important to understand in this respect that the longer we wait with decisive action, the more ’harsh’ measures will need to be (Source). Such is the nature of exponential problems – true for climate or biodiversity as it is for a pandemic. Because we have waited with decisive action for far too long already, the measures we depend on today and going forward, unfortunately, are already quite ‘harsh’. They will have to include meaningful pricing for all GHG emissions, bans on new fossil investments, climate policy-adjustments at the border, etc. (Source). Advocacy is needed in order to nevertheless get these types of measures adopted swiftly.

For C21, science counts in this respect. Targets have to be science-based, and the rules simply have to assure that those targets can actually be met, whatever it takes. Of course, it would be great if we could avoid anything that is ‘harsh’, adhering to a maximum of personal- and market-freedom. But what about the ‘freedom’ of coming generations? In our view, it is our moral obligation to assure sustainable development, and that nothing is consciously more significant than to protect life and its diversity.

And indeed, surveys indicate that the general population wants science-based policy action (as was confirmed by this ‘biggest climate poll to date’).

Policy innovation is all the more critical as addressing sustainability today is largely a question of implementation. We have most of the technology to fight both the climate and biodiversity crisis. Missing are the policy frameworks that incentivise rapid and wide technology adoption. We need not primarily invent but execute – as was also pointed out by Mark Carney at WEF 2021.

In many countries, mainstream political parties begin to understand the need for urgent action. In most, however, the necessary extent of the required change is not yet fully understood (Source), and measures to achieve change in time are not drawn up yet. While long-term, ‘net-zero 20XX’ targets are being put into law, short-term measures are either still undefined or without consensus. In C21’s view, there is an acute danger that inefficient and insufficient regulatory steps are taken, and that extensive discussion on hundreds of different measures draw focus away from getting a few of the key needed ones implemented swiftly.

C21 also sees international agenda setting as still being ‘emergency-inappropriate’, largely profiling selected ‘feel good’ leadership examples, rather than focusing on the ‘hard-core’ policy themes that would lead to science-based measures beginning to take effect.

Firms have two main engagement options to foster sustainability. First, they can voluntarily act and go beyond regulatory compliance – internally, in their supply chains, and by way of their services and products. Second, they can advocate for the right framework conditions, and thereby assure compliance itself becomes more ambitious, thus requiring everyone to go beyond the status quo.

Even though the current focus is still on voluntary efforts, a growing number of firms understand that advocacy must be a key element of every Corporate Social Responsibility (CSR) strategy. Concretely, firms begin to realize that only with the right policy innovation will they be able to achieve Scope 3 sustainability targets (those they cannot significantly influence with direct measures). Corporate sustainability leaders also begin to understand that for them, who are ready, new policy can actually lead to competitive advantage.

With multinationals, a key challenge to address is the consistency of advocacy across their international network. Often, the level of ambition of the global head-office is not reflected in the local branch. With SMEs, a main driver for change is to demonstrate the relevance of advocacy and mobilise SMEs to advocate more actively.

With both multinationals and SMEs, a further challenge is their often only indirect political representation via industry- and trade-unions, where incumbents generally have most influence and the common sustainability denominator tends to be very low. C21’s CPX initiative directly addresses these types of corporate advocacy challenges and opportunities.

Key to understand in this respect is that advocacy by firms can often be decisive for policy adoption. This is because corporate opinion is very relevant for stakeholders in the political centre, which are in turn often decisive for winning majority support.

C21 expects workers and their unions to become an increasingly important climate and biodiversity stakeholder. This is mainly because currently, lower income households are less responsible for emissions and more exposed to their consequences. It is also because of a growing awareness that workers, lower income households, are subsidising the much larger environmental footprints of higher-income households as long as it is the general public and not the actual polluter who pays for the damages.

The gilets jaunes movement should be seen as a preview of the relevance of workers and unions as climate stakeholders – and not as proof that meaningful climate policy does not stand a chance in terms of broad public support.

Very relevant in this context is the term ‘just transition’, meaning that the path to sustainability must be fair and manageable to all members of society, in any country, no matter how affluent. While the differences among countries are very much a topic in climate negotiation, income differences within a nation are less so. However, with national inequalities growing in many countries, the call for just transition among income groups shall and will grow as well.

The so called ‘distributional effects’ of sustainability-relevant policies often are down to specific policy design. Important levers are thus experience sharing and capacity building among regulators.

Policy instruments such as Climate Income Systems (CIS) for emission pricing, as advocated by C21’s ICIA initiative, specifically cater to just transition, and thus the support of workers.

Youth (Fridays-For-Future, climate strike movements) and its specific demands tied to specific climate science, has become a powerful new stakeholder driving climate awareness (Source). Different from all other actors, youth has the undisputed right to demand climate justice – youth cannot be held responsible for causing it and is most exposed to it during that generation’s lifespan.

Youth is particularly relevant because of the specific ambition level of action it demands – a level which is being endorsed by a growing number of scientists as well (Source). Backed by hard data such as remaining emission budgets and path probabilities, these demands go substantially beyond the current targets of traditional decision makers. They are so ambitious that the current decision-making and implementation structures appear incapable of addressing them – one of the reasons why climate demands are sometimes coupled with calls for ‘systems change’.

As is covered in more detail as part of sustainable market economy, C21 is of the opinion that our best chance for addressing the climate and biodiversity crisis in particular, is not with an entirely new system, but by a better version of the current, market-based system. We highlight that the longer the inaction by established stakeholders, the more forcefully new actors will voice their demands. The less tangible progress is achieved within the current ‘system’, the more outspoken will be the demands for fundamental 'system change’ (Source).

While youth has indeed become a strong advocate for more ambitious action and has thereby already made a very significant sustainability contribution, the movement has not yet been effective in inducing real change by way of concrete policy action.

One fraction of its representatives withholds any specific policy recommendation, arguing that it is the role and duty of current decision makers to specifically bring forward the needed change. Another fraction convenes large numbers of stakeholders and draws up ‘masterplans’ with details on literally hundreds of different suggested policy measures, but hardly any strategy on actually getting these implemented.

In C21’s view, both approaches are sub-optimal. Youth is able and entitled to have an opinion on specific policies that affect their future. Not all policy instruments are created equal, and any fast-track political strategy must involve careful prioritisation and the staging of measures. 

In our view, advocacy efforts that grow youth participation in voting and the political decision-making process in general, are also an important lever for change. And we believe that a growing sense of urgency, coupled with today’s technological possibilities, will significantly help to about the level of change we need.

C21 specifically involves youth in several of its initiatives, including the Hack4Climate innovation program.