Sustainability in Business and Economics (EBM209A05)
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Rijksuniversiteit Groningen (RuG)
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The Age of Sustainable Development
Summary of the book "The Age of Sustainable Development" by J. Sachs (2015). This book is used for the course 'Sustainability of Business and Economics'. The document is a summary of all the mandatory chapters for the course. It is a summary of chapter 1-14 (excl ch. 11). Very comprehensive summary...
The role of the accountant in implementing the Sustainable Development Goals
Book Summary Sachs (2015) "The Age of Sustainable Development"
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Sustainability in Business and Economics (EBM209A05)
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Sachs - The Age of Sustainable Development Sustainability in Economics and Business
Chapter 1 – Introduction to Sustainable Development
Sustainable development tries to make sense of the interactions of three complex systems; the world
economy, the global society and the Earths physical environment.
Sustainable development is also a normative outlook on the world, meaning that it recommends a set
of goals to which the world should aspire.
Sustainable development recommends a holistic framework in which society aims for economic
prosperity, social inclusion and environmental sustainability goals. SDGs call for socially inclusive and
environmentally sustainable economic growth. The fourth objective should also be; good governance
of governments (healthcare, education, infrastructure). But also of MNEs. In the book the three-way
normative framework will be used as sustainable development.
In addition to this normative concept, it is one of complex systems. A system is a group of interacting
components that together with the rules for their interaction constitute an interconnected whole. E.g.
the economy is a system of millions of individuals and businesses, bound together in markets,
contracts, laws and regulations. Their interactions give rise to behaviours and patterns which are
complex. Emerging properties are the characteristics that emerge from the interactions and are more
than the sum of the parts. Responding to shocks and changes (Lehman brothers).
Technological Change
How new technology can help achieve sustainable development. Three aspects of technology;
⁃ Technology advances are the main driver of long term global economic growth (combust engine,
electricity, ICT).
⁃ Technological advances often have negative side effects (burning coal and CO2)
⁃ Technological advance us under human guidance. Governments can steer technology and
innovations and should do that in the targeted direction.
As a normative approach
It is also a normative or ethical way to view the world. One that delivers wellbeing for citizens today
and in the future. There are five concerns in the distribution of wellbeing or social cohesion:
1. Extreme poverty
2. Inequality
3. Social mobility
4. Discrimination
5. Social cohesion
Trade-offs and Synergies in Economic/Social/Environmental
Efficiency and equity (fair distribution). The common view is a trade-off between both. But
development can offer synergies rather than trade-offs.
II. An introduction to Economic Growth
GDP measures (1) the production inside the boundaries of the country (2) output at market prices.
PPP is used to measure differences in countries not at market prices but at relative prices. GDP only
measures that what takes place in the market.
Economic Growth
Economic growth simplifies growth in GDP per capita. We
are interested in the growth in production. It does not
measure wellbeing. For most of human existence, output
per person was at a very low level but from 1750 onwards
there was positive economic growth (UK and US)
eventually it spread around the world but unevenly. After
the industrial revolution, population curves turned op
steeply (ability to grow more food as of technology;
fertilizers, machines). The relationship between
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population and economic growth is complicated.
The recent growth of China
Since 1978 China has been the fastest growing economy in history. In places with urbanization it led
to low fertility rates, increasing life expectancy, education and public health. But not all is well; mass
migration, inequality, massive pollution.
Improvements in Global Health
Higher incomes led to more food security, health technologies, medical advances, vaccinations etc.
Life expectancy has increased worldwide, child mortality lowered but still high and diseases still kills
many people around the world.
Increase in GDP has certainly increased wellbeing worldwide but is not sufficient to ensure wellbeing.
Inclusion and environmental sustainability needed.
III. Continuing Poverty in the Midst of Plenty
Even though we have seen economic growth, parts of the world remain stuck in poverty. Extreme
poverty is when you cannot meet your basic needs, survival. This appears both in rural and urban
areas and mostly in Sub-Saharan African countries. Also India, Pakistan, Nepal and Bangladesh
score low. Globally, the number of people in extreme poverty have been falling but are still high.
Landlocked countries more often have high poverty numbers as economic growth is harder in
landlocked countries. Infant mortality rates are also an indication of poverty.
IV. Global Environmental Threats Caused by Economic
Development
Humanity has become a serious threat to its own future wellbeing
of both rich and poor. Floods, droughts, deadly famines, crop
failures, forest fires etc. are rising in number and severity.
The Anthropocene is our new age in which humanity, through the
massive impacts of the world economy, is creating major
disruptions of Earth’s physical and biological systems.
In the last 150 years the
concentration of CO2 has shot up and is a human cause. It is
urgent to identify the safe operating limits for the planet or, define
the planetary boundaries. The red shaded areas of each slice are
increasing rapidly.
V. Pathways to Sustainable Development
The first part of sustainable development—the analytical part—is
to understand the interlinkages of the economy, society,
environment, and politics. The second part of sustainable
development—the normative part—is to do something about the
dangers we face, to set SDGs, and to achieve them!
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Chapter 2 – An Unequal World
I. Incomes Around the World
GDP per capita is a what institutions use as a first
measure for level of development. There are high-,
middle- and low income countries. The UN has also
identified ‘least-developed countries’, there are fifty.
II. Urban-Rural Inequality
Countries have great variations in standard of living
between but also within them. The starkest in-
country is rural-urban gaps. Differences:
- Agriculture vs. industry and services
- Low vs. high income
- Food-growing vs. coastal/river areas
- Low vs. high population density
- Low vs. high levels of public services
- High vs. lower fertility rates (in cities, children seen as expensive, rural seen as labour)
Global Trends in Urbanisation
Richer parts of the world tend to be more urban, poorer more rural. Urbanisation rates, on the other
hand, are higher in poorer parts of the world (especially Africa). High levels of urbanisation worldwide
are expected in the (near) future.
III. Income Inequality Within Countries
The variation in incomes across households and individuals within a country can also be very large.
The Gini coefficient measures income (in)equality within a country. Northern Europe has chosen a
pathway of becoming wealthier with considerable social equality, the US also has rising inequality.
What are the reasons for inequality?
- History
- Geography
- Government policies; corruption vs. government spending on public services
- Variation in education level are also a source of inequality. If everybody has the same
opportunities, education can be an equaliser but can on the other hand also be a source of
inequality.
- Rural-urban divide
- Discrimination; women or minorities not having the same changes
IV. Measuring Wellbeing
Life satisfaction, wellbeing or happiness is determined by the ability to meet our material needs and
aspirations. Part depends on income as well as social services. Raising wellbeing and not just income
is what is important. The human development index (HDI) uses
- Income per capita
- Educational attainment (mean expected years of schooling)
- Indicators of health (life expectancy)
The GDP and HDI are related but not the same. GDP can be influenced by e.g. oil and gas reserves
that increase GDP but HDI shows that actually the country is not as wealthy as expected. On the
other hand, South Korea has attained economic growth by health and educational improvements so
has higher HDI than GDP.
Subjective Wellbeing
Why not ask people directly about the quality of their lives? The Gallup survey included ladder type
questions. There is a distinction between emotional/affective happiness and evaluative happiness.
The outcome is that income per person indeed matters but social capital/quality of social environment
and community is also important. The happiness of people depends fundamentally on our relations
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with others. In the end, the overriding goal is not income but life satisfaction and wellbeing and asks
for a holistic perspective.
V. Convergence or Divergence
Before the Industrial Revolution most of the world was poor. After inequality started to take off with
UK, US and other western Europe countries. Increased political control and military power of Western
European countries created a setback to the potential convergence. After decolonisation the
independent countries could start economic growth. Technology enhanced this process. Convergence
is possible (e.g. China), but some countries are trapped in poverty.
Chapter 14 – Sustainable Development Goals
I. The SDGs
The issue of sustainable development has been on the global agenda since 1972. But back then the
world population was half the size of the current world population and CO2 emissions were not as
high and recognised. Also, environmental treaties from 1992 did not succeed. In 2000 the Millennium
Development Goals came, the fight against extreme poverty. The MDGs had been successful in
poverty reduction but in 2012 world leaders realised the world needed a new and dramatic approach:
the SDGs. Engaging the world community and universally applicable.
It took three years to agree on the seventeen SDGs. They embrace the three pillars of sustainable
development (economic development, social inclusion and environmental sustainability). Each nation
chooses its own national targets base on its national circumstances and priorities.
It is
now up to the world’s governments, in partnership with businesses and civil society, to implement the
seventeen SDGs. Completing the SDGs end-2030.
II. Goal-Based Development
The MDGs had market acceleration of poverty reduction, disease control and increase in schooling
access and infrastructure in the poorest countries in the world. How did they do this and how do goals
matter? Goals are critical for:
- Social mobilisation. A direction is needed, consistency of effort to achieve any common purposes.
- Peer pressure. Progress was going to be reported and countries compared.
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