Sustainability means circularity
We have been led to believe that development is a straight line – upwards and onwards. And so, it’s not hard to understand why the notion of sustainable development quickly translated into a call for green growth.
However, a sustainable economy needs to break with the workings of the linear economic model, in which we take resources from nature, and use them to make products that are only used for a short period of time – perhaps just once – before we throw them away as waste.
From where we are today – development needs to be a circular movement. The idea of a circular economy is to circulate resources, making them stay longer in the loop, so that we can get more from less.
Today, we know a lot about our planet – although there is still a lot that we don’t understand. But we do know that we will have to reduce the material throughput of the economy. Either we do so by choice, or by necessity.
The climate is changing, and average surface temperature is already 1.1 degrees Celsius higher than the reference period around the industrial revolution. According to the International Panel on Climate Change, we might transgress 2-degrees of warming already in the 2030s. As a result, the climate crisis could displace 1.2 billion people by 2050.
These are conservative estimates. There is a lot that we don’t know about the changing climate – but we now know that it is unlikely that we will be positively surprised. The 21st century will present us with major challenges – and as economists this is our greatest test.
A glance at the past
Sustainability means taking into account the wellbeing of future generations. That is, wellbeing, not GDP or economic growth, but our ability to satisfy human needs and wants.
In the past, increases in human wellbeing was greatly linked to a growing GDP – but not by causation. In the previous centuries, nature was the abundant factor, and so, the availability of produced capital was the main determinant of economic output.
However, produced capital has become relatively abundant, while nature is becoming the scarce factor. Therefore, we can no longer increase economic production merely by investing in technology, infrastructure and machinery – we need to invest in nature.
In today’s world, we have uneconomic growth – which means that, the growth in production of goods and services no longer contributes net-positively to human utility. Because the gain from increased consumption does not outweigh the loss of welfare that follows from the depletion of ecological systems. The development strategy of the past – growth – has become uneconomic.
Planetary Boundaries
Nature is the foundation of human existence – and therefore, it is the basis of all economic activity. Natural capital are the stocks of resources that make up our natural wealth. And from this stock flows a stream of natural amenities – or services – that make up our natural income.
We depend on nature for basic life-sustaining services such as cleaning the air that we breathe, and the water that we drink, and all economic acitivity is based on the use of natural goods and services – in one way or the other. There is no sector in the economy that is independent of the quality of nature. Some would even say that dependent is not sufficient to cover our relation to nature; we are nature – without nature, we are not.
Sustainability then means respecting the planetary boundaries.
The planetary boundaries framework tells us that it will not suffice to focus on climate change alone – and that we cannot solve anything by simply putting windmills and solar panels everywhere. Then that will affect “land system change” which is the yellow field you see shooting out to the left there, which is an important driver of biodiversity loss.
Still, economic activity is depleting natural systems at a global scale. This is the planetary boundaries framework, first published in 2009 by a group of scientists affiliated with the Stockholm Resilience Center. They have defined nine critical limits that we need to stay within – that’s the red circle around the earth there – beyond which we believe there are important tipping points. We need to stay in the safe, green area, in order to ensure that the planet remains a stable system, where humans can thrive – in the decades, and centuries, to come.
Climate change, for example, has transgressed the safe level – that’s the blue circle further in towards the middle – while the loss of biodiversity is far beyond the red, critical boundary. The biochemical flows of nitrogen and phosphorous are also in the critical area, threatening to destabilise important ecosystems, which again drives climate change.
The planetary boundaries framework tells us that it will not suffice to focus on climate change alone – and that we cannot solve anything by simply putting windmills and solar panels everywhere. Then that will affect “land system change” which is the yellow field you see shooting out to the left there, which is an important driver of biodiversity loss.
In short: Everything is connected, and we need to reduce the stress on ecological systems quickly.
Doughnut Economics
Sustainability is not about saving the planet. If our goal was to save the earth, we could easily jump to the conclusion that there are too many people on this planet. But then, should climate refugees be left on the border to starve because we’re too many? No.
Sustainability is about ensuring the economic possibilities of future generations. And we cannot do that by taking from people that are already alive today. Neither can we let the green transition contribute to further marginalisation of already vulnerable communities. The sustainable transition needs to be just.
This model was published in Kate Raworths book from 2015, with the title Doughnut Economics, where she suggests a new paradigm for thinking about economic development. She builds on the planetary boundaries’ framework, and combines it with the UN sustainable development goals.
This is where the Doughnut enters the picture. The model was published in Kate Raworths book from 2015, with the title Doughnut Economics, where she suggests a new paradigm for thinking about economic development. She builds on the planetary boundaries’ framework, and combines it with the UN sustainable development goals.
The green doughnut shaped circle marks the safe and just operating space for the economy in the 21st century. On the inside of the green circle, you now find things that we all can agree are necessary in order to live a good life today, such as the access to food and water, housing and decent employment, safety and peace, and so on. The challenge for the 21st century economist is to create economies that adjust so that we do not overshoot the planetary boundaries, whilst making sure that no one falls short of the social foundation.
How do we do all that? In fact, no one has achieved this yet. No country inhabits the safe and just space – we’re all developing countries now. But, there are some key lessons in Doughnut Economics. First, we need to change the goal and target the things that actually matter. For a long time, we have used GDP as a target for economic policy, believing that this would enhance human wellbeing. But growth was never supposed to be an end in itself – it’s a means to an end. Then, we need to see the full picture and understand that the economy is embedded in the natural world. That all economic activity affects natural systems, and that the changes in the quantity or quality of natural capital, influences the production possibility frontier. What we can choose the degree and sign of this effect. We can affect nature for good – or for bad – to create a positive – or vicious – cycle.
A glimpse at the future
The future will present us with both challenges and opportunities.
Today, we take nature for granted – and now we see where that has led us. But what if we placed nature at the very centre of economic analysis and policy? Because if economics is a science studying the allocation of scarce resources, then sustainable management of natural systems should be placed centre-stage in the economic universe. And if we did that, we would quickly see the need to invest in natural capital to improve the wellbeing of human beings today, and the economic possibilities of future generations.
This might sound very hard and difficult – how do we invest in nature? But listen: natural capital is fundamentally different to other forms of human-made capital. Why? Investments in physical capital, financial capital, and human capital, always entails devoting time and resources. That means that investments in human-made capital always comes at a cost, because it relies on resources that could otherwise have been consumed. BUT natural capital is qualitatively different. While other forms of capital depreciate, nature is resilient and it’s the only form of capital that reproduces itself.
Hence, we need to work with nature to make this work. We need to learn from nature, to adapt to the new economic realities of the 21st century.
The future is circular
And one thing nature would never do, is to waste resources! Circular economy is an umbrella term for a wide variety of different actions and strategies that aim at reducing our dependency on extracting new resources from nature – whilst at the same time, reducing the amount of that is wasted. We must learn to see waste as a resource, and to create goods in a way that allows for both maintenance and repair, and makes sure that the product can easily be deconstructed so that we can pick out the different materials and use them over again. And we must relearn not just taking from nature – but also giving something back in return. We must move from monoculture to permaculture, and find strategies in which we enrich natural systems at the same time as they contribute to our production and wellbeing.
Thank you – and good luck!
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