Section 3.1: Business, the economy and sustainability

Since the 20th century, humankind has witnessed unprecedented economic growth and prosperity globally. Economic growth has improved the quality of life for many. However, this also comes at the expense of treating the natural environment as an endless source of resources and a limitless sink for wastes.

The Limits to Growth

“The Limits to Growth”, a book published in 1972, showed that exponential population and economic growth rates could not be sustained indefinitely on a planet that has a finite amount of resources and limited capacity to deal with the environmental consequences of human activity. It emphasized the complexity of the conflicting issues of economic growth and environmental protection and highlighted the urgent need to develop ways to bridge these competing goals.

For our economy to be sustainable, we must therefore seek a win-win scenario between economic development and environmental protection. I use the word “development” very deliberately here, to distinguish it from “growth”. The notion of unlimited economic growth is somewhat outdated and not necessarily part of improving quality of life.

We must always keep in mind that our economic and human activities are nested within a finite environment, because human activity is linked to society and depends on and impacts the natural environment. Our economic system of exchanging goods and services are therefore a subset of human activity, with firms (companies) at the epicenter of the economy.

 The diagram below shows this embedded system, and highlights that the firm and the economy operate as a subset to nature – not the other way around.

Source: Adapted from Senge et. al. (2008)

Supplementary Resources

Meadows et. al. (1972) “Limits to Growth”

AFP (2016) “Reconciling growth and the environment”

Harris and Goodwin (2013) “Reconciling Growth and the Environment”

Beder (2002) “Economy and the Environment, Competitors? Or Partners?”

Hoffman and Gorg (2013) “An introduction to business and the natural environment”

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