Critical Approach to Economics Quiz

Critical Approach & Business Ethics - Sustainability

• Sustainability is derived from the Latin word sustinere, meaning to maintain, support, or endure.
• Sustainability refers to the capacity of something to be maintained at a certain rate or level.
• Sustainability is value-neutral and depends on the moral values maintained.
• Through its association with environmental concerns, sustainability has developed into a normative concept.

Environmental Sustainability

• One way of understanding sustainability is through the concept of the tragedy of the commons.
• The tragedy of the commons describes the conflict between short-term and long-term interests when dealing with finite resources.
• Free access to finite resources can lead to over-exploitation.
• The benefits of resource exploitation accrue to individuals or groups, while the costs are borne by all those affected.
• Externalities often arise from poorly defined property rights, leading to overuse of resources.

Environmental Sustainability: Externalities

• Overuse of a resource can be considered a negative externality.
• Externalities occur when the negative effects of resource overuse impact unrelated third parties and are not reflected in the market price.
• Externalities often stem from poorly defined property rights.
• Economists propose taxation as a solution to externality problems, such as carbon taxes on pollution.
• Cap-and-trade systems can also be used to address externalities.

Sustainability: Examples

• CO2 emissions
• Deforestation
• Groundwater over-exploitation
• Antimicrobial resistance

Sustainability: Why Bother?

• Environmental ethics focuses on the relationship between humans and the environment.
• Anthropocentrism: Preservation of nature for human use, only if it brings benefit to humans.
• Ecocentrism: Preservation of nature for its own sake, regardless of human needs, emphasizing interdependence.
• Different interpretations of humanity's relationship to nature lead to variations in valuations of the natural world and interpretations of responsibility.

Sustainability: Different Views

• Anthropocentric view: Focuses on human well-being and the provision of resources, with nature as a precondition for a good human life.
• Ecocentric view: Focuses on the intrinsic value of non-human life along with humans.
• The Earth is a subject of rights rather than a collection of objects, consumption is justified only to the extent it is needed for survival.

Sustainability: Three Interconnected Dimensions

• Environmental, economic, and social factors must be considered to ensure environmental sustainability.
• Economic sustainability involves preserving and promoting long-term economic well-being.
• Economic activities should balance economic growth, resource efficiency, social equity, and financial stability.
• Social sustainability involves the well-being of people and communities.
• This includes equality, human rights, access to education and health care, and decent work.

Case Studies

• Patagonia: The company promotes reduced consumption, prioritizing the lifetime and environmental impact of its products.
• Tesla: Has pushed for electric vehicle technology but has faced criticism for labor practices.
• Unilever: An outspoken company committed to sustainability but has been criticized for prioritizing public display of sustainability over internal improvements in some practices.
• BlackRock: One of the world's largest asset managers has committed to sustainability in its investment decisions; however, some question the sincerity of their approach.

Sustainability: Frameworks & Performance Metrics

• Sustainability focuses on environmental, economic and social issues.
• It's encompassed by frameworks, such as the Triple Bottom Line or UN Sustainable Development Goals.
• Businesses, using performance metrics like ESG (Environmental, Social, Governance) scores, are increasingly using sustainability to make investment decisions.
• Such approaches have been criticized due to excluding social inequality and promoting greenwashing.
• Current frameworks also assume sustainability can be achieved within the ongoing economic paradigm of growth.

Greenwashing

• Misleading consumers or authorities into thinking that goods or services are more environmentally friendly than they truly are.
• Regulators and watchdogs are implemented to enforce standardization and disclosure.
• Corporate strategies are adjusting to face stricter regulations.

Growth and sustainability

• Economic growth and environmental sustainability are not inherently incompatible, but may depend on continuous technological progress.
• Environmental limitations, like limited natural resources, can hinder continued growth.
• Environmental degradation from economic growth can slow down productivity and negatively impact human well-being.
• Continuous economic growth against limited natural resources can lead to systemic collapse.
• Degrowth (reduced economic growth) can be a possibility to allow for ecological sustainability.

Doughnut Economics

• Understands sustainability by incorporating social and environmental limitations.
• Introduces the concept of an ecological ceiling and a social foundation.
• The ecological ceiling refers to the limits of the environment's ability to maintain environmental quality, while the social foundation describes basic needs for society's well-being.

A New Business Model

• The current business model needs to be redesigned.
• The new model should be regenerative and distributive (rather than degenerative and divisive).
• Strategies should include, but are not limited to, purpose, networks, governance, ownership and finance.
• The current focus on profit is insufficient to address the challenges posed by sustainability.

Explore the fundamental concepts of the critical approach to economics through this quiz. Delve into topics such as human behavior, economic growth, and social foundations based on the UN’s Sustainable Development Goals (SDGs). Test your understanding of regenerative finance and its implications on business practices.