Sustainability Economics
Course 2023 -2024
Professor Cathy Macharis
Made by: Margot De Munck
1
Professor: Cathy Macharis
Margot De Munck
, Sustainability Economics – 2023/2024
COURSES - SUSTAINABILITY ECONOMICS 11
General examination overview 11
1. What is expected + what to learn 11
1.1. What not to know: 11
1.2. What to know 11
Example exam question: 11
Introduction – H1 12
1. What is sustainability? 12
1.1 Sustainability 1.0 12
1.2 Sustainability 2.0 13
2. What is a sustainability system? 14
2.1 Sustainability requires change 14
2.2 Sustainability and equity allocation of resources 14
Definition of sustainability economics 14
2.3 Sustainability versus Profits 15
2.4 Value management: How to balance the needs and set priorities? 15
2.5 Planet boundaries linked to Donut Economy 15
2.6 System thinking - Transitions 17
2.6.1 the Iceberg Model (Edward Hall) 17
2.6.2 Anthropocentric vs Biocentric 17
2.6.3 Transitions 18
a) Transition 1.0 18
b) Transition 2.0 19
c) Transition History 20
2.7 Sustainable system – shift 20
2.7.1. Species survive? 21
2.7.2. Beyond the dualism of Self/World lies being in service to life 21
2.8 Final definition – sustainability economics 22
3. Course set up 22
3.1. Orientation 23
History of Sustainability – H2 25
1. Milestones 25
2. Concepts of sustainability: Tripple Bottom Line 28
2.1. Three nested development model 29
Economic schools and the Environment – H3 31
1. Economic schools of thought and the Environment 31
1.1 Reflection 31
1.2 Homo Economicus - John Stuart Mill (1836) 31
1.3 Behavioral economics - Bounded Rationality 31
2
Professor: Cathy Macharis
Margot De Munck
, 1.4 Thinking, Fast and Slow - Daniel Kahneman 32
1.5 The Power of the Unconscious Mind – Tale of Behavioral Change 33
1.6 Does more always makes you happier? – Tim Kasser 33
1.7 Macro-Economic Models 34
A. Aggregate Demand – Aggregate Supply 34
B. Solow Model 34
2. Historical perspective 35
2.1 Early History 35
2.2 Quesnay’s Tableau économique 35
2.3 Classical Economists (late 18th to mid-19th century) 36
Adam Smith 36
Thomas Malthus 36
David Ricardo 37
John Stuart Mill 37
2.4 Neo-Classical Economists (mid-19th century to 1930s) 37
1. W.S. Jevons - One of the main founders of the neo-classical school 38
2. Alfred Marshall - Key person in the field who developed firstly the model of demand and supply,
surplus,… and the presence of externalities. 39
3. Arthur Pigou - Student of Alfred Marshall – who developed theory of externalities further and he
used more examples related to the environment. 39
4. Harold Hotelling - continued on Malthus and Jevons on the course of resource scarcity. 39
2.5 Marxism 39
2.6 Conclusion 40
2.7 Paper study 40
2.8 1960s – 1970s: increased awareness – social changes 40
4. Environmental vs Ecological economics 43
4.1. Environmental economics – Sustainability 1.0 43
4.2. Ecological economics - Sustainability 2.0 44
4.3. Environmental vs Ecological economics 46
5. New paradigms 47
5.1. Old model 47
5.2. Human Needs Matrix 47
5.3. Choice Paradox – Barry Schwartz 48
5.4. New model 48
5.5. Conclusion 49
Implementing Sustainability at the firm level – H4 49
1. Stakeholders pressures 49
1.1. HOW = f(WHY) 50
2. Why is sustainability important – Ikea 50
2.1. How does Ikea try to change? 51
3. How firms approach sustainability 51
3.1. How firms bring purpose in their organization 51
3.1.1. Purpose-Led Strategic Aspirations - Purpose 53
3.1.2. Purpose-Led Strategic Aspiration – Needs 53
3.1.3. How firms bring purpose in their organizations? 54
3.1.4. Shared Purpose-washing 55
3
Professor: Cathy Macharis
Margot De Munck
, 3.1.5. Three types of Purposes within a business 55
3.2. How firms fit profit with sustainability 56
3.2.1. Free(d)man Paradox 56
3.2.2. Intrinsic Firm Value 57
3.2.3. Stakeholder capitalism – new urges to adapt businesses 58
3.3. How firms shape green markets 60
3.3.1. Understand the customer 60
A. Key questions (3) 60
B. Understanding versus Misleading the customer 62
3.3.2. Sustainable product & business model innovation 63
A. How can businesses respond to the Green Voice of the Customer? 63
B. Sustainable product innovation 63
C. Convert customers 64
3.4. How firms gain a green advantage 65
3.4.1. What’s your game: Défense or Offense? 65
3.5. Linking sustainability to firm value 67
3.5.1. Intrinsic Business Value = ? 67
3.5.2. Business Value from Sustainability 67
4. How to identify a sustainable company – Business model Canvas 71
Energy and Society, towards a green energy transition – H5 73
1. Energy 73
1.1. Energy as a critical resource 73
1.2. Energy as a sustainable development goal 73
1.3. Energy as a socio-technical system 74
1.4. Neoclassical Economics versus Sustainable Economics 74
1.5. Energy and the world economy – Unique sector 75
2. Sustainable energy transition 76
2.1. Five interacting transformations in global energy politics 76
2.2. Primary and Secondary energy sources 77
2.3. Energy Markets 77
2.3.4. Fossil fuels (skipped a bit) 78
Oil 78
Natural Gas 78
Coal 79
Nuclear 79
2.4. Electricity 80
2.5. Main renewable energy sources 80
3. Renewable energy transition 81
3.1. Opportunities and challenges 81
3.1.1. Global energy governance: 82
3.2. Sub Saharan Africa 82
3.3. Conclusion 83
If it doesn’t happen we have a huge issue → take seriously and do system thinking. However unfortunately
the world is becoming more complex where more and more aspects enter the system (environment, society,
geopolitical affect,…) by dropping one of them you can have distorted outcomes. Have a good policy towards
sustainable transition by incorporating everything.Existential Economics Economics– KEES KLOMP H6.1. 83
4
Professor: Cathy Macharis
Margot De Munck
Course 2023 -2024
Professor Cathy Macharis
Made by: Margot De Munck
1
Professor: Cathy Macharis
Margot De Munck
, Sustainability Economics – 2023/2024
COURSES - SUSTAINABILITY ECONOMICS 11
General examination overview 11
1. What is expected + what to learn 11
1.1. What not to know: 11
1.2. What to know 11
Example exam question: 11
Introduction – H1 12
1. What is sustainability? 12
1.1 Sustainability 1.0 12
1.2 Sustainability 2.0 13
2. What is a sustainability system? 14
2.1 Sustainability requires change 14
2.2 Sustainability and equity allocation of resources 14
Definition of sustainability economics 14
2.3 Sustainability versus Profits 15
2.4 Value management: How to balance the needs and set priorities? 15
2.5 Planet boundaries linked to Donut Economy 15
2.6 System thinking - Transitions 17
2.6.1 the Iceberg Model (Edward Hall) 17
2.6.2 Anthropocentric vs Biocentric 17
2.6.3 Transitions 18
a) Transition 1.0 18
b) Transition 2.0 19
c) Transition History 20
2.7 Sustainable system – shift 20
2.7.1. Species survive? 21
2.7.2. Beyond the dualism of Self/World lies being in service to life 21
2.8 Final definition – sustainability economics 22
3. Course set up 22
3.1. Orientation 23
History of Sustainability – H2 25
1. Milestones 25
2. Concepts of sustainability: Tripple Bottom Line 28
2.1. Three nested development model 29
Economic schools and the Environment – H3 31
1. Economic schools of thought and the Environment 31
1.1 Reflection 31
1.2 Homo Economicus - John Stuart Mill (1836) 31
1.3 Behavioral economics - Bounded Rationality 31
2
Professor: Cathy Macharis
Margot De Munck
, 1.4 Thinking, Fast and Slow - Daniel Kahneman 32
1.5 The Power of the Unconscious Mind – Tale of Behavioral Change 33
1.6 Does more always makes you happier? – Tim Kasser 33
1.7 Macro-Economic Models 34
A. Aggregate Demand – Aggregate Supply 34
B. Solow Model 34
2. Historical perspective 35
2.1 Early History 35
2.2 Quesnay’s Tableau économique 35
2.3 Classical Economists (late 18th to mid-19th century) 36
Adam Smith 36
Thomas Malthus 36
David Ricardo 37
John Stuart Mill 37
2.4 Neo-Classical Economists (mid-19th century to 1930s) 37
1. W.S. Jevons - One of the main founders of the neo-classical school 38
2. Alfred Marshall - Key person in the field who developed firstly the model of demand and supply,
surplus,… and the presence of externalities. 39
3. Arthur Pigou - Student of Alfred Marshall – who developed theory of externalities further and he
used more examples related to the environment. 39
4. Harold Hotelling - continued on Malthus and Jevons on the course of resource scarcity. 39
2.5 Marxism 39
2.6 Conclusion 40
2.7 Paper study 40
2.8 1960s – 1970s: increased awareness – social changes 40
4. Environmental vs Ecological economics 43
4.1. Environmental economics – Sustainability 1.0 43
4.2. Ecological economics - Sustainability 2.0 44
4.3. Environmental vs Ecological economics 46
5. New paradigms 47
5.1. Old model 47
5.2. Human Needs Matrix 47
5.3. Choice Paradox – Barry Schwartz 48
5.4. New model 48
5.5. Conclusion 49
Implementing Sustainability at the firm level – H4 49
1. Stakeholders pressures 49
1.1. HOW = f(WHY) 50
2. Why is sustainability important – Ikea 50
2.1. How does Ikea try to change? 51
3. How firms approach sustainability 51
3.1. How firms bring purpose in their organization 51
3.1.1. Purpose-Led Strategic Aspirations - Purpose 53
3.1.2. Purpose-Led Strategic Aspiration – Needs 53
3.1.3. How firms bring purpose in their organizations? 54
3.1.4. Shared Purpose-washing 55
3
Professor: Cathy Macharis
Margot De Munck
, 3.1.5. Three types of Purposes within a business 55
3.2. How firms fit profit with sustainability 56
3.2.1. Free(d)man Paradox 56
3.2.2. Intrinsic Firm Value 57
3.2.3. Stakeholder capitalism – new urges to adapt businesses 58
3.3. How firms shape green markets 60
3.3.1. Understand the customer 60
A. Key questions (3) 60
B. Understanding versus Misleading the customer 62
3.3.2. Sustainable product & business model innovation 63
A. How can businesses respond to the Green Voice of the Customer? 63
B. Sustainable product innovation 63
C. Convert customers 64
3.4. How firms gain a green advantage 65
3.4.1. What’s your game: Défense or Offense? 65
3.5. Linking sustainability to firm value 67
3.5.1. Intrinsic Business Value = ? 67
3.5.2. Business Value from Sustainability 67
4. How to identify a sustainable company – Business model Canvas 71
Energy and Society, towards a green energy transition – H5 73
1. Energy 73
1.1. Energy as a critical resource 73
1.2. Energy as a sustainable development goal 73
1.3. Energy as a socio-technical system 74
1.4. Neoclassical Economics versus Sustainable Economics 74
1.5. Energy and the world economy – Unique sector 75
2. Sustainable energy transition 76
2.1. Five interacting transformations in global energy politics 76
2.2. Primary and Secondary energy sources 77
2.3. Energy Markets 77
2.3.4. Fossil fuels (skipped a bit) 78
Oil 78
Natural Gas 78
Coal 79
Nuclear 79
2.4. Electricity 80
2.5. Main renewable energy sources 80
3. Renewable energy transition 81
3.1. Opportunities and challenges 81
3.1.1. Global energy governance: 82
3.2. Sub Saharan Africa 82
3.3. Conclusion 83
If it doesn’t happen we have a huge issue → take seriously and do system thinking. However unfortunately
the world is becoming more complex where more and more aspects enter the system (environment, society,
geopolitical affect,…) by dropping one of them you can have distorted outcomes. Have a good policy towards
sustainable transition by incorporating everything.Existential Economics Economics– KEES KLOMP H6.1. 83
4
Professor: Cathy Macharis
Margot De Munck
