Environmental sustainability

Environmental sustainability is the process of making sure current processes of interaction with the environment are pursued with the idea of keeping the environment as pristine as naturally possible based on ideal-seeking behavior. An "unsustainable situation" occurs when natural capital (the sum total of nature's resources) is used up faster than it can be replenished. Sustainability requires that human activity only uses nature's resources at a rate at which they can be replenished naturally. Inherently the concept of sustainable development is intertwined with the concept of carrying capacity. Theoretically, the long-term result of environmental degradation is the inability to sustain human life. Such degradation on a global scale could imply extinction for humanity.

The Notion of Capital in Sustainable Development

The sustainable development debate is based on the assumption that societies need to manage three types of capital (economic, social, and natural), which may be non-substitutable and whose consumption might be irreversible.  Daly (1991), for example, points to the fact that natural capital can not necessarily be substituted by economic capital. While it is possible that we can find ways to replace some natural resources, it is much more unlikely that they will ever be able to replace eco-system services, such as the protection provided by the ozone layer, or the climate stabilizing function of the Amazonian forest. In fact natural capital, social capital and economic capital are often complementarities. A further obstacle to substitutability lies also in the multi-functionality of many natural resources. Forests, for example, do not only provide the raw material for paper (which can be substituted quite easily), but they also maintain biodiversity, regulate water flow, and absorb CO2. Another problem of natural and social capital deterioration lies in their partial irreversibility. The loss in biodiversity, for example, is often definite. The same can be true for cultural diversity. For example with globalisation advancing quickly the number of indigenous languages is dropping at alarming rates. Moreover, the depletion of natural and social capital may have non-linear consequences. Consumption of natural and social capital may have no observable impact until a certain threshold is reached. A lake can, for example, absorb nutrients for a long time while actually increasing its productivity. However, once a certain level of algae is reached lack of oxygen causes the lake’s ecosystem to break down all of a sudden.


Market Failure as a Reason

If the degradation of natural and social capital has such important consequence the question arises why action is not taken more systematically to alleviate it. Cohen and Winn point to four types of market failure as possible explanations: Firstly, while the benefits of natural or social capital depletion can usually be privatized the costs are often externalized (i.e. they are born not by the party responsible but by society in general). They add that many times natural capital is also undervalued by society since we are not fully aware of the real cost caused by the depletion of natural capital. Information asymmetry is a third reason identified to cause natural and social capital depletion. Often the link between cause and effect is obscured, thus making it difficult for actors to make informed choices. Cohen and Winn close with the realization that contrary to economic theory many firms are not perfect optimizers. They postulate that firms often to do not optimize resource allocation because they are caught in a business as usual mentality.
 

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