Appunti sulla terza parte del corso European company law (sustainability)

Sustainability

History of the concept

The inspiration for the term sustainability came from the Brundtland Report of 1987, which argued the contradiction between long-term sustainability and short-term welfare.

The concept of sustainability was born in forestry, where it means never harvesting more than what the forest yields in the growth.

There have always been two opposing views on the relation between humankind and nature: one about adaptation and harmony and another which sees nature as something to be conquered.

Sustainability is also a study matter for economists: Thomas Malthus (mass starvation), Harold Hotelling (optimal rate of exploitation of non-renewable resource).

The Report of the Club of Rome was important because it predicted the extinction of many natural resources crucial to our survival within one or two generations.

Therefore, the report of UN World Commission on Environment and Development (the Brundtland) showed the way out by adopting the concept of sustainability.

The main question that Brundtland posed himself was: how can the aspirations of the world’s nations for a better life be reconciled with limited natural resources and the dangers of environmental degradation? The answer of the Commission’s work is sustainable development: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

There have been two major developments in the concept of sustainability:

• Harmony between 3 dimensions: social, economic and environmental.
• Distinction between strong and weak sustainability.

People, planet, profit

The Brundtland report speaks of two concerns that should be reconciled: development and environment. Today, however, sustainability is seen in terms of three dimensions: social, economic and environmental.

• United Nations’ Agenda for Development: “Development is a multidimensional undertaking to achieve a higher quality of life for all people. Economic development, social development and environmental protection are interdependent and mutually reinforcing components of sustainable development”.

Why are economic and social development different? Robert Gibson said “material gains are not sufficient measures or preservers of human well-being”.

The idea of sustainability having 3 dimensions originates from the Triple Bottom Line concept coined by Elkington: to the conventional bottom line (profit) should be added care for the environment (planet) as well as being good to people (to the social dimension).

The weight that each part should have is argued, because, since the social and economic aspects are more related to the well-being of the present generations while the environmental one is projected to the future, there could be a situation where the former become twice as important as the latter.

It is even more complex thinking that the only solution to our desire for a better life and our concern to what this may do to the environment is a situation in which these 3 dimensions are in harmony.

The focus of the Brundtland report was the attempt to reconcile the two goals of development and sustainability.

Happiness, well-being and welfare

Happiness is the broadest concept out of all three because a policy that would make everybody happy would be considered a good one. However, being happiness extremely subjective, it is impossible to design a policy based on it. A hypothetical gross national happiness could be calculated by asking people how they feel or objectively measuring the well-being.

If happiness can be called a subjective well-being, the latter refers to objective conditions to make people happy. It is the equivalent of “livability of the environment”. In a policy perspective, it should incorporate freedom, security, education, democracy and justice.

Welfare is a more limited concept referring to material needs such as food, health and shelter. It includes mostly objective factors but also other social indicators, harder to quantify, such as participation and cultural values.

We could replace the socio-economic aspects with the term well-being.

Sustainability, resources and the future

Sustainability may be defined as a long-term well-being.

The heritage we leave to future generations consists of resources needed for production and for survival. Some resources are easily preserved, others are easily lost. It makes more sense to distinguish resources between non-renewable, renewable, natural, soil, biodiversity, water, forest, clean air, man-made, paintings, landscapes and capital.

In Robert Solow’s view, natural resources can always be substituted by capital.

1. How much of our natural resources can we sacrifice?
2. Which resources should we preserve at all cost? For those to be substituted, how much capital should be created to compensate for the loss of how much in terms of natural resources?

The first question can only be answered by society.

The second question was first analyzed by Hotelling in 1931, who stated that the depletion of