Sustaining The Economy and The Environment

Saumya Soni

July 12, 2021

What is the relationship between developing the human economy and increasing environmental quality? Does the accomplishment of environmental sustainability undoubtedly mean a reduction in rates of economic growth? If not, under what circumstances can the two objectives be met simultaneously?

Nobody these days dismisses the need for sustainable business practices. Even those concerned about only business and not the fate of the planet acknowledge that the feasibility of business itself depends on the resources of healthy ecosystems such as freshwater, clean air, robust biodiversity, and productive land.

And yet collectively we have not been making progress on diminishing the damage business does to the world. Admirable companies have launched commendable initiatives, but the negative impacts of business activity continue to shoot up. The problem is straightforward, It’s usually cheaper to shop a product that has a worse impact on its environment than the corresponding product that does less harm. Higher cost to the earth does not translate to a higher price to the customer.

A conflict of opinions arise concerning the possibility of sustaining the economy and environment. There are business leaders who remain unconcerned economic whether growth causes environmental damage and there are environmental advocates who do not believe you can have economic growth without causing environmental damage.

The evolution of the concept of sustainability can be divided across mainly three eras. In the beginning, it was seen as an operational affair, consisting of largely protective efforts to reduce companies’ environmental footprints and reducing waste. Later on, that changed into a more strategic stance. The focus was diverted from cost reduction to innovation, and firms began to consider whole picture. Now we’re in the midst of another overhaul of the concept, in which considerations of impact pervade all the decision making of firms. Rather than asking either “how can we make a profit?” or “how can we minimize our impact?” managers will seek those as two sides of the same coin. Sustainability will simply be how business is practiced.

The environmental sciences have documented large and daunting changes in earth systems, from climate change and loss of biodiversity, to alterations in nutrient cycles and depletion of natural resources in our day and age. The increased scale of economic activity and the soaring impacts on a finite Earth arises from both major demographic changes including population growth, urbanisation, and shifts in consumption patterns, for example; increases in meat consumption with rising income.

The branch of economics arguably should play a large role in meeting the sustainable development problem. The core question at the heart of sustainable development is how to allocate the finite resources of the planet to satisfy “the needs of the present, without compromising the ability of future generations to meet their own needs.”

Making progress on sustainable development requires the combining of research in development and environment. Since the beginning of the Industrial Revolution, innovation and technology have fuelled economic growth and rising material standards of living. However, because there is no price to pay for most ecosystem services and natural capital, innovation incentives skew against maintaining natural capital and the ecosystem services they provide.

Careless management, the hunger for easy money and short-term profits, lead some to believe the environment must be forgone for economic growth.

To stimulate pro-environment innovation, is it necessary to price environmental services and natural capital or, alternatively, is it better to supply direct incentives for innovation to enhance natural capital and ecosystem services? To answer the combined line of questioning, fortunately for the optimists, yes it is possible to conduct a sustainable economy with the environment and this can only happen under the active undertaking of sustainability as a term and implicating this via economic regulation.