Current government policy is failing to motivate organizations to achieve their sustainability goals. This is now mainly without obligation. Sofie Ploegmakers and Max de Jong from Capgemini explain what else the government can – and must – do to realize its sustainability ambitions.
The Dutch government has set ambitious goals in the field of sustainability. Action from both the business community and citizens is needed to achieve these goals. We seem to be in the starting blocks, but sustainability is still getting off to a slow start.
What’s holding us back? Companies: “I can produce something sustainable, but then I will not make enough turnover.” Politicians: “I cannot pursue a strict climate policy, because then companies will leave and I will not be re-elected.” Consumers: “I do want to become more sustainable, but only if it is made (very) easy for me!”
This means that all parties are waiting for each other. It is the government’s job to break this impasse. It must motivate the business community, and therefore also citizens, through policy. Current legislation is mainly based on subsidies, voluntary adjustments and reporting obligations without strict controls. Plans for stricter policy are met with resistance and small steps of progress are difficult to achieve.
How could it be otherwise? How do we ensure a government that can effectively create a future-proof, sustainable society?
The carrot and the stick
The government has two ways to motivate society: through reward or coercion. Remuneration (the carrot) provides more non-binding stimulation through things such as subsidies and tax reductions. Standardizing policy is based on an active ban (the stick). Both mechanisms have their advantages and disadvantages and are used by policymakers in the most effective way possible for each subject.
Normative policy means that the government draws up legislation and also actively punishes when it is violated. Consider, for example, the banning of CFCs to protect the ozone layer in the 1980s and 1990s. A harsh intervention whose positive effects are now clearly measurable.
In the case of sustainability, so far in the Netherlands we have mainly used stimulating, voluntary policy instruments. Companies (and citizens) can apply for subsidies for all kinds of sustainability initiatives such as solar panels, insulation and heat pumps.
A relevant disadvantage of the carrot, compared to the stick, is that it promotes an atmosphere of non-binding, which takes the speed out of policy implementation. We can no longer afford such a delay when it comes to sustainability.
“A basis of normative frameworks ensures that a level playing field is created.”
In recent years, the Dutch government and the European Union have committed to accelerating the sustainability transition and have initiated many regulations. However, alarms are still being raised from various quarters: things are really not happening fast enough. That is why, in line with academic research, we argue for a more effective policy mix: still the carrot, but with more stick.
More stick in the policy mix
The fact that the effectiveness of sustainability policy is increased by legislation of a more mandatory nature is primarily due to the complex nature of the task. It is a social issue in which the sum of individual behaviors and choices has major consequences.
Individuals do not immediately feel the impact of their choices. The government is now releasing citizens, because freedom and personal responsibility are (rightly) of paramount importance. However, we cannot assume that citizens will put sustainability first when making their choices. There are many factors that play a role, such as financial considerations, convenience, availability, etc.
The result is that companies, with profit as their primary objective and survival mechanism, run the risk that the cheap but polluting competitor is more attractive to consumers.
Even if organizations really want to realize their sustainability goals, it holds them back. A basis of normative frameworks ensures that every party must meet the same requirements, thus creating a fair playing field. In addition, recording sustainability requirements in legislation has a beneficial effect on the strategy of organizations. Although Dutch organizations say they are paying more and more attention to sustainability, the concrete figures have so far been lacking.
An addition to normative policy means that sustainability does not remain with PR and a formally assigned role here and there, but becomes a more integrated part of the organization. This offers peace and clarity.
This makes it less of an internal discussion point for companies, with some leaders working hard to get the rest of their team or department on board. Where non-binding adjustments and subsidies do not provide sufficient certainty to implement large-scale changes, normative legislation on crucial topics does. In this way, companies are extra motivated to actually embed sustainable business operations, production and behavior at the core of their processes and long-term strategies.
Borrow from the neighbors
We can find inspiration in Europe. The Netherlands scores below average in the field of sustainability. One of the leaders is Sweden. Of course, the country has geographical and demographic advantages for sustainability: a relatively small population, plenty of space for nature and opportunities for hydroelectric power stations.
But what kind of policy does Sweden have? The early start with climate measures is particularly striking. The country is considered a pioneer in this field and has one of the most eco-innovative technology sectors in the world. Like the Netherlands, Sweden implemented a range of subsidy measures for sustainable energy consumption, eco-innovative patents and financing for green startups.
“The crux is not only in more normative policy, but especially in its enforcement.”
But Swedish law has a stronger, more coercive framework. For example, Sweden not only has reporting obligations for larger companies, but this is also strictly monitored. At the beginning of 2023, Arla Foods received a hefty fine for misleading marketing. Sweden also introduced a CO2 tax in 1991, which proved to be extremely effective. This is not so much normative policy, but burdensome legislation that has more impact than voluntary agreements and subsidies.
A second European leader is Denmark. The country has been gradually introducing more and more measures since the 1980s, again with a combination of voluntary and coercive instruments. Like Sweden, Denmark implemented effective environmental taxes early on. In addition, it gives priority to its enforcement and verifiability in normative legislation.
Denmark does this through a combination of a central body, the Environmental Protection Agency, and concrete control by decentralized authorities.
Dutch resistance to the stick
Why then do we find so little normative legislation in the Netherlands? First of all, companies are very attached to their freedoms. In addition, they say they are already doing everything they can to reduce their emissions, map and monitor energy flows, invest in sustainable innovation, etc.
But is that really the case? Sustainability is a major transformation that demands a lot from organizations. What can we learn about adaptive capacity if we look at the past? Take the Covid-19 crisis for example. When the need (read: mandatory legislation) arises, highly innovative, digital (read: sustainable) solutions are possible.
Although damage was certainly suffered by (small) organizations, the global business community turned out to be more resilient and flexible than ever thought. This shows what it is capable of when given the right, urgent stimulus. What companies are showing today in terms of sustainability does not even come close to that.
Another well-known argument against mandatory legislation is the concern that many companies will move to a country where they are less tightly regulated. There has been debate for years about the attractiveness of the Dutch business climate.
Opinions vary: people are attracted by the allure of Amsterdam, its good infrastructure and progressive academic world. However, companies also complain about the tax burden. 20% indicate that they are considering leaving as a result.
If we hold the business community to more (sustainability) requirements, this would increase the risk of exodus. But how is it possible that all international studies place the Netherlands in the top 20 tax havens worldwide in 2022? Would companies really be deterred by additional sustainability measures in this case?
In addition, many people believe that there is already enough European legislation moving in this direction. So why should the Netherlands go the extra mile? And indeed, there will be pricing on companies’ CO2 emissions, petrol cars will soon no longer be allowed to be made and the construction sector will also face significant European measures in the coming years.
“If we find sustainability important, then we must be prepared to compromise on other things.”
The crux is not only in more normative policy, but especially in its enforcement. Because what is the point of strict (European) policy if there is no civil servant capacity to monitor it? At the moment, there is little actual enforcement of sustainability aspects. Authorities now only have the mandate to call companies to account about this, but cannot take further action. This must change. Only then will normative measures actually have the desired effect.
Also read: 4 in 5 large organizations not on track for 2050 net zero targets.
More standards and control
What kind of government do we need to achieve this? A modern, more data-driven government offers opportunities. In addition to setting a good example with a strong ‘internal’ sustainability plan, which requires providing insight, monitoring and actively reducing the negative environmental impact based on data, digitalization offers opportunities for more effective and efficient enforcement.
In this way, control processes can be made more labor intensive, so that the civil service and government budgets are less heavily burdened. Moreover, this responds to the call from society for more transparency in decision-making, also with regard to sustainability. Insight into and clear handling of actual performance data can help with this.
In addition, steering towards sustainability goals is also a matter of making trade-offs. If sustainability is important to us, we must be prepared to compromise on other things. Some companies may leave because of the stricter requirements, and funding will have to be provided to enforce and monitor policies. It is for a basic purpose: our survival.
In short, the Dutch government must deploy a broader spectrum of resources to achieve its sustainability goals. Sustainability is a social precondition that we can only guarantee through a healthy mix of both stick and carrot.
The Dutch government is currently staying too far away from normative policy, which is seriously endangering the effectiveness and feasibility of its goals. Finally, enforcement must be given a more prominent place in policy across the board. Only in this way will the Netherlands maintain a view of CO2 neutrality in 2055.
