Climate Change

It’s the economy, stupid

Pooran Desai
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Here at Davos we participated in a fantastic scenario planning workshop with Schwab Social Entrepreneurs and business partners including Boston Consulting Group, Credit Suisse and Siemens. One of the scenarios we examined was that of a ‘Positive Economy’ when, by 2030, true environmental and social costs and benefits are included in national and company accounts. This is the big prize for sustainable development – when we can harness market forces and align them for everyone’s benefit to tackle the major challenges we face such as climate change and political insecurity caused by poverty and social exclusion.

It is time now to recognise that sustainable development is not about environmental, social and economic factors. Sustainable development is simply about the economy. Let me explain.

Going back to Rio+20 in June last year, I attended an event at which the Prime Minister of Bhutan, His Excellency Mr Jigmi Y Thinley, talked about Bhutan’s now well-known commitment to promote Gross National Happiness (GNH) rather than Gross National Product. This policy was first articulated back in 1972 to make sure economic development accorded with the country’s Buddhist values. This is not just rhetoric – the Government of Bhutan has refused a World Bank backed project to build a new big dam and hydro-electric plant which stacked up well financially, but which would have diminished natural and social capital. Bhutan wants to strengthen this position and so the values of GNH are being taught in Bhutanese schools with other countries such as Finland thinking of doing the same. Indeed, the New Economics Foundation’s Happy Planet Index 2012 makes interesting reading. It compares well-being with ecological footprint and show clearly the disconnect between between this index of sustainability and GDP.

The limitations of GDP as an indicator are not new – even its inventor Simon Kuznets in 1934 expressly stated not to use it as a measure for welfare. Yet GDP has gained demonic power in national policy making. Serious attempts are being made to GDP back in its box. Examples being talked about include GDP-plus, supported by the UK government, and the World Bank’s Natural Capital Accounting initiative, an approach supported by leading UK companies such as Kingfisher (a partner in BioRegional’s One Planet Living initiative).

In support of these initiatives to free ourselves from the grip of GDP, we should be more careful with our language. We are all now familiar with the mantra that ‘sustainable development is the coming together of environmental, social and economic factors’. This mantra is not quite correct. Technically the economy includes social and environmental factors even when we don’t place a financial value on them. We know this. We know that good parenting improves the economy. We know that looking after farmland preserves productivity and income. What we really mean is that sustainable development has social, environmental and financial factors. Economy and finance are not the same thing. They have come to mean the same thing but we now need to reclaim the word ‘economy’ and re-instate its true meaning.

So what is sustainable development? To borrow Clinton’s presidential election strapline from 1992 – it’s the economy, stupid.

The World Economic Forum is a great place to build on the momentum to go beyond GDP. For companies that means moving beyond the acronyms of CSR (Corporate Social Responsibility) and ESG (Environment, Social and Governance) to full economic accounting. Let us keep our eye on the big prize and make real the scenario of a Positive Economy by 2030.


Author: Pooran Desai, Co-founder, BioRegional and International Director, One Planet Communities, United Kingdom; Social Entrepreneur of the Year, Europe, 2011

BioRegional Development Group designs and delivers real life sustainable communities and businesses, including the award-winning BedZED eco-village in London, where BioRegional has its main base.  The BedZED village also houses seven BioRegional companies, such green property developer BioRegional Quintain, a kerbside recycling company for SMEs, and a clean tech company for the paper industry. BioRegional has sister organisations or representative offices in North America, China, Greece, Mexico and South Africa.

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Climate ChangeGeo-economicsFuture of the EnvironmentEconomic Progress
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