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 3: climate science
earth’s climate history and human civilization
→ climate has always changed but not always at the same speed or for the same reasons
20 000 years ago: earth was in an glacial/ ice age (much lower temperatures)
9000 BCE (before Christ): holocene (stable warm period)
= key condition for human civilization
18th century: industrial revolution
→ humans started using fossil fuels (coal, oil, gas): naturally formed from marine
organisms
= increase in greenhouse gas emissions
⇒ rise global temperature
- more floods/droughts
- extreme weather events
- melting glaciers → rising sea levels
- wildfires
- …
impact of climate change
these impacts affect 3 major systems
1) physical systems: ice, snow, permafrost, glaciers, sea level
2) biological systems: ecosystems, forests, marine life, biodiversity
3) human systems: food production (agriculture), infrastructure, economy
2 major climate challenges
⇒ climate mitigation: limiting further climate change
- reducing the use of fossil fuels
- enhancing (=verbeteren) corban sinks (forest, soils, oceans)
⇒ climate adaption: adjusting societies to the unavoidable climate impacts
causes of climate change
➢ natural causes
: earth naturally shift between glacial (cold) and interglacial (warm) periods
main natural drivers:
I. changes in earth’s orbit: shape of earth’s orbit around the sun changes over time
- eccentricity: shape of earth’s orbit (circular ←→ elliptical)
- obliquity: tilt of earth’s axis (stronger tilt = stronger seasons)
- precession: wobble of earth’s axis
, II. tectonic plates
- large continents at pole (north/south) → easier ice formation = cooling
- plate movement → volcanic activity = heating
III. volcanic eruptions: particles reflect sunlight = after 1-2 years cooling
IV. solar activity: more or less radiation
! natural causes don't explain the rapid warming
➢ human causes
= burning fossil fuels ⇒ greenhouse gases that trap heat in the atmosphere
3 lines of evidence showing that humans are responsible for the rapid warming
1) carbon emissions data
: natural systems (land, ocean) absorb carbon from fossil fuels and industry
→ humans emit too much for the natural systems to absorb
2) isotopic evidence
: plants use more C-12 than C-13, fossil fuels are made from ancient plants
→ increase of C-12 and decrease of C-13 concludes more use of fossil fuels
3) physical mechanism (greenhouse effect)
: greenhouse gases absorb infrared radiation and trap the heat
radiative forcing: imbalance between the energy entering and leaving earth’s atmosphere
- more energy in = warming
- more energy out = cooling
balanced system: Incoming solar radiation ≈ outgoing infrared radiation
increase greenhouse gases, less infrared radiation escapes ⇒ more energy = warming
feedback mechanisms
: feedbacks amplify or counteract climate change
➔ positive feedback (strengthen/speed up)
➔ negative feedback (stabilising/ counteracting)
main positive (warming) forcings:
+ CO² : largest effect
+ Methane (CH₄)
+ others gases
main negative (cooling) forcings:
- aerosols: tiny pollution particles that reflect sunlight
- changes in land uses (deforestation): increases reflection
- volcanic eruptions: short-term cooling
⇒ effect of CO² can’t be compensated by the cooling effects
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 3: climate science
earth’s climate history and human civilization
→ climate has always changed but not always at the same speed or for the same reasons
20 000 years ago: earth was in an glacial/ ice age (much lower temperatures)
9000 BCE (before Christ): holocene (stable warm period)
= key condition for human civilization
18th century: industrial revolution
→ humans started using fossil fuels (coal, oil, gas): naturally formed from marine
organisms
= increase in greenhouse gas emissions
⇒ rise global temperature
- more floods/droughts
- extreme weather events
- melting glaciers → rising sea levels
- wildfires
- …
impact of climate change
these impacts affect 3 major systems
1) physical systems: ice, snow, permafrost, glaciers, sea level
2) biological systems: ecosystems, forests, marine life, biodiversity
3) human systems: food production (agriculture), infrastructure, economy
2 major climate challenges
⇒ climate mitigation: limiting further climate change
- reducing the use of fossil fuels
- enhancing (=verbeteren) corban sinks (forest, soils, oceans)
⇒ climate adaption: adjusting societies to the unavoidable climate impacts
causes of climate change
➢ natural causes
: earth naturally shift between glacial (cold) and interglacial (warm) periods
main natural drivers:
I. changes in earth’s orbit: shape of earth’s orbit around the sun changes over time
- eccentricity: shape of earth’s orbit (circular ←→ elliptical)
- obliquity: tilt of earth’s axis (stronger tilt = stronger seasons)
- precession: wobble of earth’s axis
, II. tectonic plates
- large continents at pole (north/south) → easier ice formation = cooling
- plate movement → volcanic activity = heating
III. volcanic eruptions: particles reflect sunlight = after 1-2 years cooling
IV. solar activity: more or less radiation
! natural causes don't explain the rapid warming
➢ human causes
= burning fossil fuels ⇒ greenhouse gases that trap heat in the atmosphere
3 lines of evidence showing that humans are responsible for the rapid warming
1) carbon emissions data
: natural systems (land, ocean) absorb carbon from fossil fuels and industry
→ humans emit too much for the natural systems to absorb
2) isotopic evidence
: plants use more C-12 than C-13, fossil fuels are made from ancient plants
→ increase of C-12 and decrease of C-13 concludes more use of fossil fuels
3) physical mechanism (greenhouse effect)
: greenhouse gases absorb infrared radiation and trap the heat
radiative forcing: imbalance between the energy entering and leaving earth’s atmosphere
- more energy in = warming
- more energy out = cooling
balanced system: Incoming solar radiation ≈ outgoing infrared radiation
increase greenhouse gases, less infrared radiation escapes ⇒ more energy = warming
feedback mechanisms
: feedbacks amplify or counteract climate change
➔ positive feedback (strengthen/speed up)
➔ negative feedback (stabilising/ counteracting)
main positive (warming) forcings:
+ CO² : largest effect
+ Methane (CH₄)
+ others gases
main negative (cooling) forcings:
- aerosols: tiny pollution particles that reflect sunlight
- changes in land uses (deforestation): increases reflection
- volcanic eruptions: short-term cooling
⇒ effect of CO² can’t be compensated by the cooling effects
