Tuesday, April 10, 2012

Global warming and economic sustainability


The logo for this series

(Disclaimer: I am not an economist, a sociologist, or an expert of any kind, other than perhaps in philosophy and theology. But I am very concerned about the environment -- hence this series on global warming.)

What is economic sustainability?  Why is it important? And how is it connected with global warming? These are all important questions that I want to address in this post. Global warning is so crucial that the fate of the Earth may depend on the answers that we collectively give to them.

The new report that the Secretary-General's Global Sustainability Panel (GSP) issued in March outlines a framework for sustainable development. The GSP calls for world leaders to adopt a new set of Sustainable Development Goals (SDGs) that will help to shape global policies and actions after the 2015 target date for achieving the Millennium Development Goals (MDGs). The MDGs focus on reducing extreme poverty, while the SDGs will focus on all three pillars of sustainable development.As mentioned in the previous post, sustainable development has three pillars: economic, social and environmental.
In this post I want to concentrate on the economic pillar. Since the focus of this series is on global warming, my concern will go beyond the problem of ending extreme poverty, which is always immediately cited when this pillar is discussed. The economic pillar includes everything from how the very poor manage to survive using the meager resources at their disposal to how corporations ought to use all their available resources in an efficient and responsible manner, while at the same time being profitable. Each of us, without exception, is responsible for taking care of our own oikos or household in a way that encourages sustainability.
  
Economic sustainability requires the responsible use of resources. Sustainability involves making sure that every person  whether individual or corporate, seek to conserve the resources they use and limit the damage they cause. This is difficult for poor people, who may have used slash-and-burn methods for centuries, just to give one example. Poor people can also help in the battle for economic sustainability, but they may need education and financial assistance to make such changes possible.

I want to emphasize the role of corporations, however, since they too have an important role to play. Only lately, it seems, has this role been discussed so openly. That is a refreshing development.

Businesses come in all sizes. Very few are multi-national corporations. The man who collects garbage with a donkey cart in my neighborhood in the Gambia runs a business. So do the ladies who sell fruit and peanuts while sitting on a stone beside the road, or those who operate small stands with a pitiful offering of onions and a few other vegetables.

All businesses want to make a profit, of course, otherwise they would not survive for long. But at the same time every business should see to it that its operations do not produce environmental concerns that could cause lasting harm to the environment. By being mindful of the impact of the operation on a community a business is able to choose raw materials that are more environmentally friendly, and to design waste disposal methods that do not damage the environment. Economic sustainability can be seen as a tool to make sure the business has a future and continues to contribute to the financial welfare of the owners, the employees, as well as the community where the business is located.

I would suggest that, if a choice needs to be made, economic sustainability ought to take priority over profit. Managers and shareholders must be prepared to sacrifice, if necessary, for the sake of saving the Earth. Unfortunately, short term goals such a maximizing profit often take precedence today. Even during the recent recession, which is still not over, senior executives continued to benefit enormously while the economy as a whole stagnated and profits plummeted. In this case, it is clear where their priorities lay.

Big corporations can afford the luxury of making such choices, which the people on my street do not, since they are barely eking out an existence. But comparing the scale of their operations, large corporations can do much more damage to the environment than what is caused by small businesses in the developing world.

True economic sustainability demands that all businesses, no matter what their scale, minimize their use of resources so that these resources can be replenished or replaced. Forestry companies that plant new trees are an example of the first. Replacement is more difficult, however. Oil companies cannot replace the oil they pump out of the ground, but they can help to provide substitutes. That way the remaining oil can be used for other purposes that are less damaging to the environment.



The World Business Council for Sustainable Development (WBCSD), in its 1992 publication "Changing Course," coined the term eco-efficiency. It is based on the concept of creating more goods and services while using fewer resources and creating less waste and pollution. That same year the Earth Summit endorsed eco-efficiency in the private sector. This term has now become synonymous with a management philosophy geared towards sustainability.

According to the WBSCSB, eco-efficiency is achieved through the delivery of  "competitively priced goods and services that satisfy human needs and bring quality of life while progressively reducing environmental impacts of goods and resource intensity throughout the entire life-cycle to a level at least in line with the Earth's estimated carrying capacity."

Simply put, eco-efficiency means producing more with less. The WBCSD demands businesses strive toward
  • A reduction in the material intensity of goods or services;
  • A reduction in the energy intensity of goods or services;
  • Reduced dispersion of toxic materials;
  • Improved recyclability;
  • Maximum use of renewable resources;
  • Greater durability of products.

Business strategies that are linked to the concept of eco-efficiency call for specific reductions in resource use, “natural capitalism,” which incorporates eco-efficiency as part of a broader strategy, and the “cradle-to-cradle” movement, which claims to go beyond eco-efficiency in abolishing the very idea of waste. These are all good ideas, but very few businesses have moved very far yet in this direction.

There are many impediments to economic sustainability. I will mention only a few:
  • A firm belief that technology can provide the solution to all the problems of economic unsustainability. While technology may be helpful, it cannot solve every problem.
  • A great reliance on business as the principal actor of transformation. New products, production processes, or further research and development will not necessarily solve these problems. Who will decide what products are needed? The retailer or the consumer? What resources will be devoted to these products? And what will happen if the product is harmful to the environment?
  • An implicit trust in the market system. The market does not always work the way it should as the current economic crisis proves.
  • A blind faith in growth. This is one of the basic failings of the Western individualistic world view. This belief has contributed much to the ecological mess today.
These beliefs make economic sustainability more difficult. Instead, what is needed is a profound change of heart. Unless there is a massive change of heart at both the individual and corporate levels, the Earth will never attain sustainability again.

Yet, unless it does, catastrophe stands waiting around the corner, and thus we lurch from crisis to crisis, whether economic, social, or environmental. The current recession, the political crises of our age, and the massive environmental mess that we have created already, are all related. The anomalies in weather patterns are the result of global warming that was caused in turn by our inability to achieve economic sustainability.

The World Economic Forum has produced a report, entitled “Redefining the Future of Growth: The New Sustainability Champions,” that analyzed more than 1,000 companies from around the world and in a wide variety of industries on the basis of criteria that gauge sustainability, innovation, and scalability. The report singles out 16 companies that shine in terms of their sustainability initiatives (see chart below):


All of these fast-growth sustainable organizations have revenues under $5 billion, and share a mindset and a set of practices. Based in nations as diverse as Costa Rica, Egypt, and South Africa, the companies all aim to proactively turn constraints, such as location or economic situation, into opportunities through innovation. They have embed sustainability in their company culture and work to shape their own business environments.

Economic sustainability is possible, but it will require sacrifices and commitments that many companies are probably not willing to make. Indeed, ir will require sacrifices from everyone involved in the process. Even poor street vendors may have to make adjustments in order to limit their environmental impact. Plastic bags can be found littering every African street. There are no laws yet restricting the use of such bags.

In Toronto, shoppers have to pay five cents per bag, unless they bring their own bags, which is what we do. Similar laws exist in many cities in North America and Europe. While this poses an inconvenience to many consumers, businesses love it, since it represents a small saving to them. The environment, of course, is the biggest winner. But this is only a small victory for the environment. Economics, unfortunately, tends to trump the environment.

Canada promotes economic sustainability, but it encourages the major oil companies that are developing the tar sands. This is hypocrisy and needs to be condemned. I will raise this issue of the tar sands in a future post in this series. This lack of concern, which is confirmed by in the recent federal budget when the government proposed easing the requirements for environmental assessments. It is clear where its priorities lie: money. It makes me ashamed to call myself a Canadian. Stephen Harper and his government do not speak for me.

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