Unit 1, GRE401

Sustainable Development and
Competitive Advantage

Unit 1: Part 1

Introduction to Sustainable
Development

© Jeremy B Williams 2012

2

Outline
1) Establishing the theoretical basis for
sustainable development
2) The limitations of environmental
economics
3) Weak sustainability vs strong
sustainability
4) Summary of differences


3

1) ESTABLISHING A THEORETICAL BASIS
FOR SUSTAINABLE DEVELOPMENT
• ‘Sustainable development’ (SD) is a term
that means many things to many people
• Murcott lists more than 50 academic
definitions (see Topic 1.2.1)
• Problematical because SD has been defined
by interest groups in ways that meet their
own agendas.


4

The Brundtland Report (1987)
• The most widely accepted
definition:
‘development that meets the
needs of the present without
Gro Harlem
compromising the ability of future Brundtland
generations to meet their
economic needs’.


5

Other definitions of SD
• ‘improving the quality of human life while
living within the carrying capacity of supporting
ecosystems’
IUCN/UNEP/WWF, 1991
• ‘to equitably meet developmental and
environmental needs of present and future
generations’
Principle 3, Rio Declaration, 1992


6

Points to observe …
• Notwithstanding the many definitions of SD,
it is fairly clear that it is a little more than
growth
• A key point to observe is that the word
‘development’ conveys a meaning
emphasising equity and increasing quality of
life
• There is also an emphasis on the future.


7

A concern for the future
“I conceive that land
belongs to a vast family of
which many are dead, few
are living, and countless
members are unborn”.
Kwame Nkrumah (1909-72)
Ghanaian leader


8

Failure of the GDP measure to
account for the environment
• Neglects depletion of natural capital
• Inadequate treatment of ‘defensive’
expenditures (e.g. pollution abatement and
health protection costs)
• Failure to account for the effects of
environmental degradation.


9

Uncertainty creates cynicism
• ‘moral convictions as a substitute for thought’ Redclift, M
(1987), Sustainable Development: Exploring the Contradictions
Methuen, London, p. 2.
• ‘how to destroy the environment with compassion’ Smith,
J.W (1991) The High Tech Fix: Sustainable Ecology or
Technocratic Megaprojects for the Twenty-first Century,
Aldershot, Academic Publishing Group, p. 135.
• ‘a good idea which cannot sensibly be put into practice’
O'Riordan, T (1988) ‘The politics of sustainability’, in R.K.Turner
(ed.) Sustainable Environmental Management: Principles and
Practice, London, Belhaven, p. 48.


10

This is where ecological
economics comes in …
• A body of literature has now emerged that is
providing the SD concept with some much
needed ballast
• At the time of Brundtland, the SD concept
emerged devoid of a theoretical core –
ecological economics can fill this void
• SD is the ecological economic problem


11

2) THE LIMITATIONS OF
ENVIRONMENTAL ECONOMICS
• Environmental economics (as a sub-discipline of
the neo-classical paradigm) views the
environment as a subset of the economy (the
factor ‘land’)
• Implicitly, mainstream economics looks upon land
as an inexhaustible resource, and it is not
affected by output
(Environmental economics at least acknowledges
the negative externalities associated with
production, and theorises about how they might
be ‘internalised’.)

12

GDP and the neo-classical
circular flow model
• What is ‘assumed away’ in the model?

Wages, profit, rent, interest
Resources

Households Firms

Goods and services
Payments for products

13

The neoclassical world view
The economy

The
environment


14

The ecological economics world
view
The environment

The
economy

Source: Ray Anderson (2002)


15

The economy and the
environment
Reduction in
natural
capital Economic
growth



16

The economy and the
environment



17

The economy and the
environment



18

The economy and the
environment

At some point,
the flows
between
environment
and economy
become
unsustainable



19

Cornucopia?
• The neo-classicalists argue that a properly
functioning market will ensure that as
resources/sinks become scarce:
 production methods will become more efficient
 consumption more environmentally friendly
 the extent of recycling and pollution control will increase
 humankind will become more inventive
• This would allow for continuing increase in quality
of life without environmental deterioration.


20

A flaw in the logic
• The major focus of mainstream environmental
economics is puzzling (see Unit 4) over the
conditions under which the market mechanism will
function ‘properly’
• The problem is, there are no properly functioning
markets – not for natural capital, at least
• These assets would need to be privately owned and
freely exchanged, which is rarely the case


21

Ayres (1993)
• The most important ‘scarcities’ (clean air,
clean water, climatic stability, biological
diversity, the absorption of waste by
natural systems, etc) lie outside the market
mechanism and outside the realm of
plausible technological substitution.
Ayres, R.U. (1993). Cowboys, Cornucopians and Long-Run
Sustainability. Ecological Economics, 8, 189-207.


22

3. WEAK SUSTAINABILITY vs
STRONG SUSTAINABILITY
• Weak sustainability acknowledges the concept
of Hicksian income* – limiting consumption to
the ‘interest’ or flow of services produced by
the capital stock
• But, it is assumes maintenance of total capital
John Hicks
stock (MMK + NK) without regard to
proportions
• Each kind of capital is treated as being
substitutable for another.
* Hicks, John R. (1939). Value and Capital: An Inquiry Into Some Fundamental Principles of
Economic Theory, Oxford: Clarendon Press.

23

The ‘everything-has-a-price’ view of
neoclassical economics
• Weak sustainability is achieved so long as
investment > the combined depreciation
of MMK and NK
• Robert Solow (1974)*: ‘If it is easy to
substitute other factors for natural
resources … then... the world can, in
effect, get along without natural
resources, so exhaustion is just an event,
not a catastrophe.’

*Solow, R. (1974). ‘The economics of resources or the resources of
economics?’ American Economics Review, 64 (2), pp.1-14.


24

Strong sustainability
• Strong sustainability rejects the idea that MMK
adequately compensates future generations for
ecological depreciation
• Regardless of price, MMK cannot replace the
unique services and amenities provided by nature
– most notably life-support services
• Strong sustainability advocates the precautionary
principle – where there are threats of serious or
irreversible damage, one should not wait for full
scientific consensus.


25

4. SUMMARY OF DIFFERENCES
• Environmental economics • Ecological economics
– The environment (‘land’) is a – People (and economies) are
‘factor of production’ integral to the environment
– There are man-made substitutes – There are no substitutes for
for environmental goods and many environmental goods
services and services
– Environmental problems can be – Addressing environmental
addressed by making problems requires a trans-
adjustments to the economic disciplinary enquiry
systems – Operates within a co-
– Operates within a comparative evolutionary paradigm
statics paradigm


26

Envisioning the future

Case Study 1


27

Think


28

The future
• If you don't know where you're going, you
end up somewhere else
• We have to decide where we want to go,
and balance that with where it is possible
to go


29

Envisioning
• The processes of envisioning and goal
setting are extremely important
• They are also very underdeveloped skills in
our society!
• In order to effectively envision, it is
necessary to focus on what one really
wants, not what one will settle for.


30

For example:
Really want Settle for
• Self-esteem • Fancy car
• Serenity • Drugs
• Health • Medicine
• Human happiness • Higher GDP
• Permanent prosperity • Unsustainable growth


31

Read


32

• Unit 1 courseware
• Especially Disposable Planet? (Activities,
Unit 1); Topic 1.1.1


33

Discuss


34

Two world views
Technological optimist Technological sceptic
• Technical progress can deal with • Technical progress is limited and ecological
any future challenge carrying capacity must be preserved
• Competition • Cooperation
• Linear systems with no • Complex, nonlinear systems with
discontinuities or discontinuities and irreversibilities
irreversibilities • Humans in partnership with nature
• Humans dominant over nature • Partnership with others
• Everybody for themselves • Market as servant of larger goals
• Market as guiding principle


35

Four visions of the future

Real state of world
Optimists right Sceptics right

Technological
optimist
? ?
World view

Technological
sceptic
? ?

36

Dystopian ‘Mad Max’ world?


37

Alternative ‘Star Trek’ world?


38

Controlled ‘Big Brother’ world?


39

Ecotopian world?


40

Four visions of the future

Real state of world
Optimists right Sceptics right

Technological Star Trek Mad Max
optimist
World view

Technological Big Brother Ecotopia
sceptic


41

Deliver


42

Watch archive footage in 2055


43

Trace the events back to 2011
from 2055 … what happened?
• Sketch out one of the four visions of the
future
• Reflect upon the various initiatives that
might, or might not have been taken, and
the prospective consequences
• Prepare a 10-12 minute presentation


Sustainable Development and
Competitive Advantage

Unit 1: Part 2

The Ecological Economic Problem:
Matching ultimate means with ultimate ends


45

Outline
1) From empty world to full world
2) Why some believe there is no need to
worry about climate change
3) Why we should worry about climate
change
4) Living within our means


46

1) FROM EMPTY WORLD TO
FULL WORLD


47

The Classical Economists

• Adam Smith (1723-90)
– Moral philosopher, Theory of Moral
Sentiments, (1759)
– Political economy – market part of the
social fabric
• Thomas Robert Malthus (1766-1834)
– One of the first to talk of the limits to
growth with his Essay on the Principle of
Population, (1798)
– Seen by some as the forefather of
ecological economics


48

• John Stuart Mill (1806-73)
– On the notion of the stationary state:

‘If the earth must lose that great
proportion of its pleasantness which it
owes to things that the unlimited increase
of wealth and population would extirpate
from it, for the mere purpose of enabling
it to support a larger, but not a happier or
better population…
…I sincerely hope, for the sake of
posterity, that they will be content to be
stationary long before necessity compels
them to.’
John Stuart Mill, Principles of Political Economy, book IV, chapter
VI, pp 756-57, (1848), as presented in J. E. Cohen, How Many
People Can the Earth Support?, WW Norton, pp. 397-98, 1995.


49

The rise of conspicuous
consumption

(1899)

50

Oil-fuelled economic growth:
‘The Golden Age’


2) WHY SOME BELIEVE THERE IS NO NEED
TO WORRY ABOUT CLIMATE CHANGE


52

1.Doubts about
the science


53


54

Image source: healthandenergy.com/global_warming_cartoons.htm


55

2.We will invent
our way out
of trouble


56

3.Think about
today not the
future


57

1.Doubts about Bordering on
the science the absurd

2.We will invent Ignores
our way out precautionary
of trouble
principle

3.Think about
today not the Unethical
future

3) WHY WE SHOULD WORRY
ABOUT CLIMATE CHANGE


59


60


61


62

The Stern Review, October 2006
• On climate
change:
“The greatest
market failure the
world has ever
seen”

Sir Nicholas Stern

63

IPCC Fourth Assessment Report

February, 2007:
Evidence of Human-
caused Global Warming
is ... “Unequivocal”


64


65

“Climate change will not be a major issue in
my life time.”
A. Strongly
disagree
B. Disagree
C. Note sure
D. Agree
E. Strongly agree


66

2005: CO2 = 379ppm


67

350.org


68

Source: http://www.21school.ox.ac.uk/news/archive/200702_inaugural_lecture.cfm

69

Source: http://www.21school.ox.ac.uk/news/archive/200702_inaugural_lecture.cfm

70
1928

2004

Upsala Glacier, Argentina

71

Blomstrandbreen Glacier, Norway

1922


72

Blomstrandbreen Glacier, Norway

2002


73

The Imja Glacier, Himalayas


74

The Imja Glacier, Himalayas


75

Floods in Southern China, July 2009,
400,000 left homeless

76

Southwestern China, March 2010

Anhui Province, China, August 2006


77

Forced migrations
• 2005: UN study reveals that there could be
as many as 50 million environmental
refugees around the world by 2010.
• Same study estimates that as many as 100
million people live in areas that are below
sea level or liable to storm surge


78


79

• 1 metre sea
level rise will
inundate
more than 15
percent of
Bangladesh,
displacing
more than 13
million people


80

Annual carbon dioxide emissions
• Bangladesh: 172kg per capita
• United States: 21 tonnes per capita


81


82

The ecological footprint concept

• How many planets would
we need if everyone lived
like you?

http://www.myfootprint.org


83

Calculating the ecological footprint
• Official statistics on
consumption are used to
calculate the amount of
biologically productive land
and water area required to
produce the resources
consumed and to absorb
the wastes generated using
prevailing technology
Image source: http://www.ew.govt.nz


84

Worldwide, there
exists about 1.9
biologically
productive global
hectares per person

Image source: www.adbusters.org © Jeremy B Williams 2012

85

At what stage do you think humankind will outstrip
its supply of biologically productive hectares?

A. 2010
B. 2020
C. 2050
D. 2100
E. No answer


87

Image source: http://www.footprintnetwork.org/


88


89

China


90

4) LIVING WITHIN OUR MEANS

• Ecological economics addresses the relationships
between ecosystems and economic systems in a
holistic way
• As the term suggests, it integrates economics
with ecology (which tends to concentrate on
‘natural’ systems rather than the human impact
upon them)
• But as we shall see, it also embraces moral
philosophy, ethics and political economy.


91

What does sustainable
development look like?
• How do we know when a nation has reached the
point of sustainability?
• Who determines the characteristics of a
sustainably developing economy?
• Lawn (2001): The moral issues of distributive
justice are unlikely to be realised if biophysical
limits to growth are ignored
• By the same token, disrespect for moral issues is
not conducive to biophysical constraint.


92

Inter-generational and
intra-generational equity
• Principle 3, Rio Declaration: ‘… to equitably meet
developmental and environmental needs of
present and future generations’.
• inter-generational equity
– a necessary condition for sustainability
• intra-generational equity
– a necessary condition for development


93

The ends-means spectrum


94

The ‘triple bottom line’
• Economic sustainability in the ‘Hicksian’ sense
• Preserving the capital (MMK, NK and HK)
• Social sustainability
• Participation, fellowship, social cohesion
• Environmental sustainability
• Maintaining the life-supporting function of ecosystems
– Emissions stay within assimilative capacity
– Utilisation of renewable resources is within
regeneration rates


95

Summary: The SD matrix
Inter-generational Intra-generational
justice: Sustainability justice: Development

Economic Accumulation of capital Reduction of poverty

Environmental Conservation and Environmental justice (in
environmental application of laws,
protection regulations)

Social Health, education, Democracy and
leisure participation


96


Unit 1, GRE401

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