Basic principles of sustainable and responsible business and economics
Ch 1: introduction
ethics, responsibility and sustainability (ERS)
~ethics: multidisciplinary field (philosophy, psychology, economics, organizational theory)
2 approaches:
- normative ethics: what is right or wrong?
- descriptive ethics: why do people actually make certain decisions?
~responsibility: integrating and balancing, economic/financial, ecological/environmental
and social while pursuing organizational goals and contributing positively to society
⇒ what organizations do and how they act responsibly
~sustainability: Brundtland “Meeting the needs of the present without compromising the
ability of future generations to meet their own needs”
⇒ future orientations regarding complex and wicked social, environmental, and economic
challenges, meeting the needs of the present without compromising the ability of future
generations to meet their own needs,
- economic → financial, profit
- social → people, society
- environmental → planet, ecological
history of sustainability thinking
→ concerns about sustainability are not new
1. Malthus (1798): population growth vs limited resources
: population grows exponentially but food production grows linearly
⇒ gap between population size and available resources
2. Jevons (1865): the coal question
: technological efficiency doesn’t automatically reduce resource use
→ increased efficiency can lead to higher total consumption
= Jevons paradox
3. Carson (1962): silent spring
: pollution harms ecosystems ⇒ human actions have unintended side effects
→ economic activity can cause serious and lasting environmental harm
4. Boulding (1968): spaceship earth
: earth = closed systems ⇒ limited resources, no unlimited waste disposal
→ the economy is constrained by the physical limits of the planet
5. the limits of growth (1972)
: exponential growth in population & economy combined with finite resources
→ leads to overshoot and collapse if no changes occur
,⇒ finite planet and exponential growth = unsustainable system
Brundtland report: core of sustainable development
: brundland definition had 2 key ideas
➢ needs (beyond income or consumption)
- physiological: water, air, food, sleep
- safety: stability, security
- social: relations, beloning
- esteem: dignity, self-respect
- self-actualization: growth, meaning
➢ limitations → imposed by technology, social organisation, environmental capacity
sustainability = also about equity (not only environmental)
⇒ includes fairness and distribution
2 dimensions of equity
1. intragenerational equity: fairness within current generation, rich vs. poor today
2. intergenerational equity: fairness between present and future generations
trade-offs in sustainability
: tensions between present needs and future needs
→ non-renewable resources: extraction today reduces future availability
→ renewable resources: can be irreversible (overfishing, deforestation)
ability (=vermogen)
⇒ ability of future generations depends on what we leave behind
total capital = natural + physical + human + institutional
~natural capital: ecosystems, biodiversity, atmosphere
~physical capital: infrastructure, technology
~human: education, skills, health
~institutional: governance, rule of law
operational models
➔ triple bottom line/ 3P’s
people - planet - profit
➔ 5P’s
people - planet - profit - prosperity (=welvaart) - partnership - peace
sustainable development goals (SDG’s)
: 17 goals set by the UN used for strategy development, policy evaluation, sustainability
idea of embeddedness
→ economy and society are embedded in the biosphere, not separate from it
, Ch 2: views on sustainability and their assumptions
different worldviews on the relationship between economy, society, environment
⇒ ERS framework (ethics, responsibility, sustainability)
economic system: production, consumption, trade, wealth creation
social system: people, culture, equity, institutions
environmental system: ecosystems, natural resources, planetary limits
disparate - - → subsuming - - → intertwined - - → embedded
(economy-centered) (ecology-centered)
1) disparate view, “the economy is separate”
→ traditional, neoclassical economic view
→ markets (left-alone) will regulate themselves efficiently
ex. ExxonMobil
➔ systems are independent: companies shouldn’t engage in non-economic systems
(society, environment ⇒ economy dominates)
➔ invisible hand will regulate everything (problems will be regulated by the price)
➔ company’s main focus = profit maximization (reducing costs, impact on people =
income)
sustainability is optional → not part of core business
+ environmental problems = externalities (costs for society, not the firm)
criticisms
- ignores the social and environmental needs (financial performance only)
- leads to pollution, inequality and depletion of resources
2) subsuming view, “sustainability for business advantage”
→ strategic and instrumental approach
→ still prioritizes profit but acknowledges that long-term profitability depends on
social stability and ecological balance
ex. Nestlé, coca-cola
➔ systems are nested: economy is the center, society and environment support
➔ social and environmental actions are valuable if they generate business benefits
➔ shared value model: firms can create economic value by creating societal value
sustainability becomes part of strategy, innovation and competitiveness
, criticisms
- the profit motive still dominates
- Instrumental approach: social and environmental needs are only addressed for
market opportunities
3) intertwined view, “triple bottom line” → people, planet, profit
→ economy, society and environment are interconnected
→ equal importance, firms must balance their responsibilities
ex. interface (carpet manufacturer)
➔ no hierarchy: all 3 are interdependent (dependent on each other)
: balance, not dominance of one system over another
➔ 3P’s or triple bottom line (TBL) model measures beyond only profit
: balance between people, planet, profit
companies produce integrated sustainability reports (financial + non-financial performance)
⇒ encourages long-term thinking and innovation
criticisms:
- difficult to measure the non-financial results (trade-offs) consistently
- profit may still dominate
- can degenerate into box-thinking exercises
➢ checklist thinking
➢ greenwashing
➢ social washing
4) embedded view, “economy within ecology”
→ most transformative (causes a change) worldview
→ environment is the foundation of all life (including society and economy)
ex. patagonia, doughnut economics,, planetary boundaries framework
➔ the systems are nested in reverse than subsuming view
➔ environment sets boundaries (planetary limits) for human and economic activity
promotion of strong sustainability: natural capital cannot be replaced by human-made capital
!! profit as a means to purpose, not the final goal
criticisms:
- seen as utopian or unrealistic
- requires deep systemic changes: governance, finance, consumption patterns
embedded view
⇒ weak sustainability: capital types are substitutable (natural capital = human-made capital)
⇒ strong sustainability: natural capital is non-substitutable
Ch 1: introduction
ethics, responsibility and sustainability (ERS)
~ethics: multidisciplinary field (philosophy, psychology, economics, organizational theory)
2 approaches:
- normative ethics: what is right or wrong?
- descriptive ethics: why do people actually make certain decisions?
~responsibility: integrating and balancing, economic/financial, ecological/environmental
and social while pursuing organizational goals and contributing positively to society
⇒ what organizations do and how they act responsibly
~sustainability: Brundtland “Meeting the needs of the present without compromising the
ability of future generations to meet their own needs”
⇒ future orientations regarding complex and wicked social, environmental, and economic
challenges, meeting the needs of the present without compromising the ability of future
generations to meet their own needs,
- economic → financial, profit
- social → people, society
- environmental → planet, ecological
history of sustainability thinking
→ concerns about sustainability are not new
1. Malthus (1798): population growth vs limited resources
: population grows exponentially but food production grows linearly
⇒ gap between population size and available resources
2. Jevons (1865): the coal question
: technological efficiency doesn’t automatically reduce resource use
→ increased efficiency can lead to higher total consumption
= Jevons paradox
3. Carson (1962): silent spring
: pollution harms ecosystems ⇒ human actions have unintended side effects
→ economic activity can cause serious and lasting environmental harm
4. Boulding (1968): spaceship earth
: earth = closed systems ⇒ limited resources, no unlimited waste disposal
→ the economy is constrained by the physical limits of the planet
5. the limits of growth (1972)
: exponential growth in population & economy combined with finite resources
→ leads to overshoot and collapse if no changes occur
,⇒ finite planet and exponential growth = unsustainable system
Brundtland report: core of sustainable development
: brundland definition had 2 key ideas
➢ needs (beyond income or consumption)
- physiological: water, air, food, sleep
- safety: stability, security
- social: relations, beloning
- esteem: dignity, self-respect
- self-actualization: growth, meaning
➢ limitations → imposed by technology, social organisation, environmental capacity
sustainability = also about equity (not only environmental)
⇒ includes fairness and distribution
2 dimensions of equity
1. intragenerational equity: fairness within current generation, rich vs. poor today
2. intergenerational equity: fairness between present and future generations
trade-offs in sustainability
: tensions between present needs and future needs
→ non-renewable resources: extraction today reduces future availability
→ renewable resources: can be irreversible (overfishing, deforestation)
ability (=vermogen)
⇒ ability of future generations depends on what we leave behind
total capital = natural + physical + human + institutional
~natural capital: ecosystems, biodiversity, atmosphere
~physical capital: infrastructure, technology
~human: education, skills, health
~institutional: governance, rule of law
operational models
➔ triple bottom line/ 3P’s
people - planet - profit
➔ 5P’s
people - planet - profit - prosperity (=welvaart) - partnership - peace
sustainable development goals (SDG’s)
: 17 goals set by the UN used for strategy development, policy evaluation, sustainability
idea of embeddedness
→ economy and society are embedded in the biosphere, not separate from it
, Ch 2: views on sustainability and their assumptions
different worldviews on the relationship between economy, society, environment
⇒ ERS framework (ethics, responsibility, sustainability)
economic system: production, consumption, trade, wealth creation
social system: people, culture, equity, institutions
environmental system: ecosystems, natural resources, planetary limits
disparate - - → subsuming - - → intertwined - - → embedded
(economy-centered) (ecology-centered)
1) disparate view, “the economy is separate”
→ traditional, neoclassical economic view
→ markets (left-alone) will regulate themselves efficiently
ex. ExxonMobil
➔ systems are independent: companies shouldn’t engage in non-economic systems
(society, environment ⇒ economy dominates)
➔ invisible hand will regulate everything (problems will be regulated by the price)
➔ company’s main focus = profit maximization (reducing costs, impact on people =
income)
sustainability is optional → not part of core business
+ environmental problems = externalities (costs for society, not the firm)
criticisms
- ignores the social and environmental needs (financial performance only)
- leads to pollution, inequality and depletion of resources
2) subsuming view, “sustainability for business advantage”
→ strategic and instrumental approach
→ still prioritizes profit but acknowledges that long-term profitability depends on
social stability and ecological balance
ex. Nestlé, coca-cola
➔ systems are nested: economy is the center, society and environment support
➔ social and environmental actions are valuable if they generate business benefits
➔ shared value model: firms can create economic value by creating societal value
sustainability becomes part of strategy, innovation and competitiveness
, criticisms
- the profit motive still dominates
- Instrumental approach: social and environmental needs are only addressed for
market opportunities
3) intertwined view, “triple bottom line” → people, planet, profit
→ economy, society and environment are interconnected
→ equal importance, firms must balance their responsibilities
ex. interface (carpet manufacturer)
➔ no hierarchy: all 3 are interdependent (dependent on each other)
: balance, not dominance of one system over another
➔ 3P’s or triple bottom line (TBL) model measures beyond only profit
: balance between people, planet, profit
companies produce integrated sustainability reports (financial + non-financial performance)
⇒ encourages long-term thinking and innovation
criticisms:
- difficult to measure the non-financial results (trade-offs) consistently
- profit may still dominate
- can degenerate into box-thinking exercises
➢ checklist thinking
➢ greenwashing
➢ social washing
4) embedded view, “economy within ecology”
→ most transformative (causes a change) worldview
→ environment is the foundation of all life (including society and economy)
ex. patagonia, doughnut economics,, planetary boundaries framework
➔ the systems are nested in reverse than subsuming view
➔ environment sets boundaries (planetary limits) for human and economic activity
promotion of strong sustainability: natural capital cannot be replaced by human-made capital
!! profit as a means to purpose, not the final goal
criticisms:
- seen as utopian or unrealistic
- requires deep systemic changes: governance, finance, consumption patterns
embedded view
⇒ weak sustainability: capital types are substitutable (natural capital = human-made capital)
⇒ strong sustainability: natural capital is non-substitutable
