Are sustainable development and economic growth mutually exclusive?

by Augusto Cuginotti

The understanding of development in our society has broadened when the planet started to show that it is part of the economic system as much as the economic system and ourselves are part of the planet. Contrary to wide belief, economic growth and sustainable development are neither exclusive nor dependent among themselves, the first is a means that can lead to the second, but they do not have a direct relation of causality. To understand the role of economic growth to sustainable development, we must decouple the two and analyse the influence of each one in the new society about to emerge.

The economy of the past, where growth was the measure of development, has now evolved to an economy of richness creation for the current generation (where development is understood beyond old limits) together with the strategic planning of a type of development that also ensures that future generations will be able to meet their needs.

People and organizations of people are considering an expanding perspective of the system we live in and operate on. Business, as an example, has broadened the field of what they call stakeholders by incorporating customers, employers, civil society and finally the planet over the last four decades.

The concept of sustainable development itself is allowing organizations to structure their vision and their processes to effectively contribute to both richness creation to shareholders and towards a sustainable society. Understanding the new role of economics and being able to strategic plan for the future is the challenge of organizations that aim to become the organizations of the future.


Decoupling sustainable development and economic growth.

Society is facing the challenge of understanding sustainable development. Undoubtedly this new understanding changes the way society itself will work and brings us the question: what is the role of economics in this new era? What is the new connection between economy and development?

Not long ago economic growth was seen as a condition to foster development. In order to achieve the latter, efforts and studies were focused on improving the way a country or company allocated their scarce resources to generate the best return on investment possible.

History has shown that last century’s focus on economic growth brought materialistic development but also generated long-term debts through the eyes of sustainable development. Carbon emissions have been rising since the industrial boom on the 70’s, but this impact has started to be taken into account only recently.

Two were the mistakes: economic growth was seen as a means to a narrow view of development; or it simply ceased to be a means for development and was considered an objective itself. These mistakes created a mindset of operations in which the environment was an “externality” of the economic system.

This scenario does not imply that, to pursue sustainable development, society and business need to go in the opposite direction of economic growth, but also makes clear that economic growth is not – as understood from the past – a condition for sustainable development. They both obviously inter-relate, but should be decoupled from each other and seen as factors combined with many others. They are not mutually exclusive, but could be contradictory at some point. If development and growth are decoupled, one can decide what is the most important path to take if at a certain point they do not go together.

Growth on the new economy

New economics are recognizing what other sciences discovered some time ago. Things grow indefinitely only in theoretical math and an incessant growth has never been seen in natural phenomena. Our biosphere represents the system within which all forms of life are connected and has clear limits to growth: our planet is part of a closed system where carbon dioxide emissions we produce will accumulate in the atmosphere and buried nuclear waste will not disappear from the earth’s crust.

Neo-classical economics consider economic growth as a condition to development, but new economists see it differently: a means to development, not an end in itself. This changes the perspective from the extensively used “triple bottom line” to a bottom line of societal and ecological development in which economics play an active role of supporting these achievements.

Companies are capturing the changes in society and getting prepared to deal with those by being strategic. British Petroleum announced its shift to Beyond Petroleum like many of the “oil industry” now renamed themselves “energy industry”. The tobacco industry is purchasing other companies and diversifying its products as restrictions are growing throughout the world. The PVC industry, the main target of environmentalist years ago, phased out dangerous stabilizers from their production, improved their processes and some pioneer companies are planning the shift from producing tons of PVC to a service of recycling and re-selling the material.

These changes occur by not only pressure from society, but also the understanding of sustainability as a business case, a leverage point for competitive advantage. This is not a new process for organizations, it is rather the next step to incorporate a stakeholder that has a more relevant role in business than ever: the planet.

Product, process, people, planet

Some years ago the act of measuring results on the production line became the quality management revolution. Companies were looking at processes together with their products. This shift in perception brought the pioneer companies to the top of the ladder of successful production and theories have arisen acknowledging the broader system in which companies were operating.

This change evolved for considering people: initially the employees, with the health and security measures; and finally including Corporate Social Responsibility, shifting the basic Public Relations style to a two-way conversation with civil society.

This process of unfolding stakeholders is now bringing the planet as a relevant player to be considered on conversations of organizations and governments. Our biosphere is showing that it has boundaries and – when the boundaries are crossed – the impacts follow the scale of the player: it is not a defective product, an employee accident or a societal oppression anymore; it is a natural disaster, a planetary health issue and global climate change.

Sustainable development

The most known definition comes from the Brundtland Commission and can be interpreted as development within constrains, which are borders that, if surpassed, will compromise the capacity of future generations to meet their needs.

Scientists are addressing sustainable development with a more scientific-based theory to support that statement, but now bringing those boundaries clear so one can plan strategically towards sustainable development.

By no means does the existence of boundaries mean that our creativity towards a more sustainable and developed society is challenged. The art of being creative within boundaries of current reality is equivalent of understanding the laws of nature well enough to be able to put a machine heavier than air to fly.

Nowadays two groups are facing the challenge of growing towards a more sustainable society: the first, the organizations whose leaders are driven by the importance of their contribution towards this emerging society; the second, the organizations that want to continue operating on 2030. These two groups tend to become one in the next five years, and they will be the organizations of the future.

Organizations are exploring the business case of being strategic towards sustainable development by choosing products and processes that allow economic return while contributing to a more sustainable society. This integrates the right direction towards sustainability with an economic competitive advantage.