Governance, and how to improve it, is a vital issue that affects every citizen because it gets to the heart of how we organize ourselves as communities, companies and as a society to achieve our most basic objectives. The issue of governance, the process by which decisions are made and implemented, is as old as civilization itself.
As corporate sustainability has transitioned from a focus on compliance, risk management and cost reduction to a strategy aimed at growth and brand differentiation through product and service innovations and optimization of resource consumption and efficiencies, there is a corresponding need for a transition in governance. Ironically, there is only a modest focus on governance at a time when current approaches increasingly are outdated.
Governance is practiced today in one of three principal ways: through top-down hierarchies (command and control) characteristic of governmental bodies and many corporations; through networks such as markets where buyers and sellers agree on price levels and other conditions for transactions of specific products and services; and through collaborative partnerships where individuals, groups or institutions find common cause to achieve specific goals that none can separately attain. Within specific organizations, such as government agencies or corporations that must reconcile many kinds of economic and social objectives, all three types of governance can operate simultaneously. These objectives can range from complying with corporate financial disclosure requirements, improving air quality, participating in local land use decisions, or managing the diverse participants in a global supply chain.
Much of the current focus on governance deals with the management of individual issues or processes within large established institutions. This approach to governance is being fundamentally disrupted and transformed. Three major factors explain this disruption: 1) the growing scale and complexity of governance challenges where impacts can be global, regional and local simultaneously (think turbulence in the financial markets); 2) the emergence of system-level challenges that defy the jurisdictions or capabilities of institutions (consider the interrelationships involving climate change, the exacerbation of drought or flood conditions and the availability of water supplies for drinking or food production); and 3) the near-instantaneous availability of information to citizens (see the immediate reaction of customers who do not wish to pay higher access fees for banking services).
All three factors are now in play in the evaluation of how to make the New York metropolitan region, and other major population centers around the world, more resilient to future storm surges or sea level rise. Should residents of flood damaged or destroyed properties rebuild on the same sites that may again be vulnerable, and receive flood insurance backed by taxpayers? Should a sea wall be constructed to protect against future storm surges or should wetlands be enhanced to create natural barriers to rising water levels? Should power generation and distribution systems be relocated and building codes modified? How can local, state and federal officials, as well as the private sector, non-governmental organizations and individual citizens, have a voice in answering these and other questions?
Next page: Working top-down and bottom-up
An analogous example involves the multitude of organizations responsible for the management of the seven-state Colorado River basin. Through a coalition catalyzed by the U.S. Bureau of Reclamation and Water Resources, a process has evolved to acquire system level knowledge to respond to the myriad challenges facing western water use. By working in both a top-down and bottom-up fashion, government agencies, local and regional water authorities, Native Americans, the business community, recreational interests, non-governmental organizations, climate scientists and consumers have better information to make decisions that harmonizes the best interests of future users of the Colorado River with current needs.
Similar system-level challenges exist concerning the protection of the food supply, investments in public infrastructure, entitlement spending, the prevention of obesity and global environmental conditions.
What connects all of these challenges is their transformation from single issues to systems of issues. What’s needed is a system level understanding of the interconnectivity of the economic, environmental and societal changes taking place. Currently, government policymakers, corporate executives and individual citizens generally do not think of solving problems in this fashion; rather our approach is similar to pothole management: as one is patched, another is identified after the fact. Other organizations, such as multilateral development institutions, non-governmental organizations or private foundations, are attempting to patch potholes at a faster rate even as the pothole population keeps accelerating.
A major step forward would be to improve governance so that it matches the system-level scale of the problems that we confront. One example of system level governance recently was announced by the U.S. Food and Drug Administration that proposes to regulate food safety and quality across the entire value chain of agricultural enterprises responsible for providing fresh fruits and vegetables on America’s tables rather than responding, in ambulance-like fashion, to health incidents that already have occurred. As a result, growers, packagers, retailers and other enterprises involved in the agricultural chain of custody will, in the future, have a series of individual responsibilities (such as ensuring that irrigation water met certain standards, preventing bacterial contamination of fresh food, providing toilet and washroom facilities for agricultural workers and maintaining records and plans for managing contamination incidents) as part of a comprehensive system of information and management that will be more transparent to all, including consumers. Under this system, targeted regulation can co-exist with and support a market-based system.
This example of system level governance embodies three critical attributes: 1) investing in data collection and information technologies that makes for a “smarter” decision making process by obtaining a system-level view of the problems rather than focusing on one issue or constituency at a time; 2) modifying governance processes to enable participants to respond to big picture needs as well individual issues of immediate concern; and 3) providing greater power to consumers to alter their own behaviors and choices by making available more relevant and timely information.
Far from creating new layers of decision making, system-level governance can enable networks of citizens, agencies and companies to better understand the expectations, needs and capabilities of the other participants. It also avoids the shortcomings of proposals to establish governmental bodies that possess global regulatory authority; such proposals have been demonstrated to lack credibility and legitimacy across a range of political systems and cultures. Rethinking governance means both the redistribution of authority and responsibility through networked systems where the accountability for bad decisions becomes as evident as the benefits from well made choices.
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