The views expressed in this report are those of the authors. Their statements are not necessarily endorsed by the affiliated organisations or the Global Challenges Foundation.

Are we currently heading towards a privatization of global governance? Private entities have emerged as key solution providers for the world’s greatest challenges, and exert control over technologies crucial to the future of humanity – in consequence, they now have a seat at the global negotiating table. Historical precedents encourage us to pay attention: this may well be the beginning of a new paradigm.

The engagement of non-state actors and more specifically for-profit entities in global governance is not a new practice, and has been the object of speculation and research for quite some time now. This phenomenon can be traced back to the pre-globalization era. However, since the globalization of trade and commerce has been promoted as a panacea for the prosperity of mankind in the 1970s, this phenomenon has visibly scaled up, and reached higher levels of formalization.

The private sector was brought on board for the Convention on Biological Diversity, the Millennium Development Goals, and various multilateral trade negotiations. Most recently a number of international agreements, including the Sustainable Development Goals and the Paris Agreement, have seen the private sector even more extensively involved in discussions, and sitting at the table as a potential solution provider. 

This marks a clear change from earlier periods, when the private sector tended to act as a lobby group, advocating on behalf of its own interests rather than the common good. In some cases, sections of the private sector have even built up activist-style pressures on heads of states to make progress on global agreements. Conventional activists and campaigners who frequently targeted the private sector are now finding themselves with strange bedfellows.

There might be genuine desire from the private sector to save the planet and humanity. However, this desire may also be triggered by the realization that sustainable development is the biggest business opportunity of our times and could be a propeller for economic growth in an otherwise gloomy global economic environment. In addition, the call for politicians to agree on a climate deal or phase out HFCs provides direction and predictability in a business environment that has become hugely volatile and uncertain.

It is hard to imagine the public sector and the third sector making progress on governance architectures, particularly those involving new technologies, without a substantial role for the private sector.

Three elements may help us make sense of this new phenomenon.
Recent events have led the private sector to realize that it needs to cure its own evils for the sake of its own sustainability. This was made clear in the aftermath of the Lehman Brothers bankruptcy that led to recession in the US and the EU. This might also be true of practices within the pharmaceutical industry, where protecting intellectual property at the cost of much larger benefits to humankind may no longer be a viable option for the future.

For a long time, the private sector has been part of the problem. Involving private sector entities in decision-making on global governance issues may therefore be necessary to stop further damage and develop new standards for voluntary action, as well as new regulations. This was one of the main reasons why the Convention on Biological Diversity engaged actively with the private sector. However, it must be noted that some criticize this approach, arguing that the private sector will not endorse any form of regulation that might reduce economic growth and business profitability. Many scholars call for vigilance to ensure that the process engages all key stakeholders and is not dominated by the private sector.

As global risks more evidently become potential business opportunities, the private sector is also becoming a potential source of solutions for the key challenges that the world faces. This change is supported by other actors. Legislators and policymakers have long given up on being solution providers, adopting the role of facilitator instead – whether they play this role without biases will be revealed in the future. Meanwhile, the third sector is looking to be more than a watchdog, and getting more comfortable helping the private sector improve its public image. In this new configuration, global risk reduction is no longer a zero-sum game for the various types of actors involved.

As the private sector reinvents itself, and its status shifts from “subject of regulation” to “catalyst of a future we want”, are we heading towards the privatisation of global governance? Perhaps the evolution of other governance systems could offer a point of reference.

States have been governed in various manners over history, by monarchs, by elected governments, or by dictators. Although changes from one form of governance to the other has not happened linearly, and for long periods of time, in various parts of the world, one or other system prevailed, we might see a pattern of successive evolution from one to the other. More importantly, a range of other sources of power have exerted influence.

A key point of comparison here could be the role of religious institutions. In many places, religious institutions have been a key player within established systems of governance. Their authority comes from the proclamation that they can act as a representative or avatar of God. Where religious institutions held a position of power, social rules regarding the best way to conduct one’s life were typically established in relation to the dominant religious framework, as articulated by these religious institutions. Often, religious institutions were a dominant social force, even when monarchs formally held power over the State. Over time, some of those monarchs became independent, whereas others acted largely under religion’s influence – in certain countries, such influence, or its consequences, is still visible today. In other cases, as monarchs gained partial independence from religion, they set up models that gave rise to secular state systems. Some of those monarchs still hold a measure of power within a constitutional system, while elected governments go about the daily business of governance. Although the level of progress towards such a constitutional arrangement varies from country to country, progress towards secularism seems to be a desirable evolution for politics and governance alike.

There is no exact parallel between the evolution of governance in nation states and global governance – one of the main reasons being that nations typically do have a government while there is currently no global government. Nevertheless, history holds many lessons about power plays and the influence of different actors on human society.

In all likelihood, the importance of the private sector and its influence on human lives is only going to grow. Private sector control over public goods is likely to keep increasing: beyond utilities, private sector entities exert increasing control over intellectual and financial assets, especially as private sector entities develop new technologies, and gain ownership over them. The level of private sector control could increase particularly over artificial intelligence, human genome mapping, and a range of other technological developments that are key to the future provision of comfort for humanity, and may even become critical to the sustenance of human life. Such technologies also condition any possibility to develop inter-planetary human colonies. It is therefore hard to imagine the public sector and the third sector making progress on governance architectures, particularly those involving new technologies, without a substantial role for the private sector.

As the private sector moves from a backdoor presence to the center stage of global governance, its relationship with governments and global governance institutions is undergoing profound change. These relations are changing from a situation where parties won’t even acknowledge each other’s presence to one of growing mutual comfort – from dubious connection to unabashed partnership. This might well be the beginning of a privatization of global governance.

Sachin Joshi

Sachin Joshi is Director of the Confederation of Indian Industry (CII-ITC) Centre of Excellence for Sustainable Development, where his work focuses on developing and supporting world-leading methods for sustainability labelling and CSR tracking. Previously, Sachin steered operations of the Centre for Social Markets (CSM) – a UK-based not-for-profit – and participated in the Deutsches Institut für Entwicklungspolitik’s (German Development Institute) Global Governance School. Sachin has authored a range of reports and articles on innovation, business models, CSR, climate change, and international relations.