BCOM 1201 Exploring Sustainability - Fall 2024 Lecture Notes PDF

BCOM 1201 Exploring Sustainability Economic Sustainability Challenges Dr. Hao Lu Assistant Professor Department of Management Today’s Topics Defining Economic Sustainability. UN SDGs: Linking economic sustainability with the other bottom lines. Econo...

BCOM 1201 Exploring Sustainability Economic Sustainability Challenges Dr. Hao Lu Assistant Professor Department of Management Today’s Topics Defining Economic Sustainability. UN SDGs: Linking economic sustainability with the other bottom lines. Economic Feasibility. 2 Complexity of Sustainability 3  Irresponsible 4 Human Nature Tragedy of the commons: a situation in which individuals and organizations, who are self- interest driven and have access to public resources, tend to deplete the resources for personal gain. Increase of insurance premium. Toilet paper crisis during COVID Overfishing in most costal areas. An important cause is the scarcity of resources. Some believe that it explains most of the environmental issues. Government intervention is required.  Market failure in sustainability When free markets do not maximise society’s welfare, they are said to ‘fail’ and policy intervention may be needed to correct them (Bowen et al., 2024) As environmental [and social] problems are external to the market, they cannot be solved by market forces alone. In this sense, environmental problems are an example of a “market failure”. (Arimura, 2024) Emissions and nature destructions are not in financial balance sheets Pursuing self-interest (as it is supported in the free market) can cause tragedy of common, e.g., overfishing in NS In the governance section we will learn how governments can play a role in avoiding this failures Sources: Arimura, T. H. (2024). Environmental Problems: A Market Failure. In Introduction to Environmental Economics and Policy in Japan (pp. 3-18). Singapore: Springer Nature Singapore. https://www.lse.ac.uk/granthaminstitute/explainers/why-do-economists-describe-climate-change-as-a-market-failure/ 5  Marx’s Ideological Superstructure 6 Source: https://simple.wikipedia.org/wiki/Base_and_superstructure#/media/File:Ba se-superstructure.svg  The Circle of Sustainability Economi c Resilien Environmental ce Sustainability Wealth Social Distribut Cohesio ion n Culture Wealth and Creation Value 7  Ideology and Sustainability Environmental Sustainability Culture and Social Cohesio Value Social n Value System Economi Economic c Resilien Value Wealth ce Creation System Wealth Distributi on 8  Economy “An economy is a system of production and consumption activities that determine how resources are allocated among all of its participants” (Investopedia). Traditional economic system Command system (more government, socialism) Free market (less government, capitalism) Mixed (all countries have a mixed system) Source: https://transportgeography.org/contents/chapter7/freight-transportation-value-chains/economic- system/ 9 From Trading Economy to Business Economy​ The role of businesses in an economy​ Specialization role: Best at something vs. OK with everything​ Scale-economy role: More for less​ Knowledge creation role: Facilitate R&D & innovation​ Wealth distribution role: Who gets what​ Social responsibility role: be a good citizen​ 10  Corporate Citizenship Definition: A corporation, just as a citizen of a society, have legal and social rights and responsibilities to buy, own, and sell properties, and to sue and be sued in court as a legal entity. It was meant to regulate the behaviour of corporations by outlining their rights and responsibilities. The ultimate goal of corporate social responsibility is to cultivate good corporate citizens. Legal citizenship: explicit rights and responsibilities outlined by law, violation leads to legal sanctions. Social citizenship: implicit rights and responsibilities set out by the society, violation leads to social sanctions. 11  Issues with Corporate Citizenship Often, rights are emphasized, and responsibilities are ignored. Citizenship are used as shields for consequences of business wrongdoings. Coercive power on society due to size and wealth. 1 2  Economic Sustainability: The UN Perspective Economic sustainability refers to practices that support long-term economic growth without negatively impacting social, environmental, and cultural aspects of the community SDG 7: Affordable and clean energy SDG 8: Decent work and economic growth SDG 9: Industry innovation, and infrastructures SDG 12: Responsible consumption and production https://sustainability.umw.edu/areas-of-sustainability/economic-sustainability/#:~:text=Economic%20sustainability%20refers%20to%20practices,cultural%20aspects%20of %20the%20community. 13 SDG 7: Affordable and Clean Energy Energy is the fuel of business and Electricity generation in Canada, by source (2022, in gigawatt hours) economic growth We need energies that do not harm people and planet (renewable energies) In Canada: 60% from renewable sources In Nova Scotia: 51% from coal and 18% from Natural gas Why? Are all renewable energies harmless? Source: https://natural-resources.canada.ca/our-natural-resources/energy-sources- distribution/renewable-energy/about-renewable-energy-canada/7295 14 SDG8: Decent Work and Economic Growth How is economic growth measured? Definition: An increase in the amount of goods and services produced per head of the population over a period of time. (Google Dictionary) It is usually measured by GDP (Gross Domestic Product) GDP measures the monetary value of final goods and services (International Monetary Fund) It creates job and convenience GDP is growing all around the world, should we be happy? Source:International Monetary Fund https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD 15  What’s the problem with economic growth? GDP growth is not the problem. The problem is how GDP growth is fueled. GDP growth is highly correlated with material extractions and GHG emissions GDP cannot grow forever on the finite planet GDP growth destroy nature in developing countries as the production sites The growth is not fairly distributed among countries and social classes Rich people and developed countries benefit more Some of us are producing and consuming more than capacity of the earth MF= Rae Material Extraction Source: Wiedmann, Thomas, et al. "Scientists’ warning on affluence." Nature communications 11.1 (2020): 3107. 16 SDG 12: Responsible consumption and production “From 2000 to 2022, domestic material consumption grew by 69 per cent, from 56.6 billion metric tons to 96.0 billion metric tons” (UN.org). Now we are using 1.75 earth, and “If the global population reaches 9.8 billion by 2050, the equivalent of almost three planets will be required to provide the natural resources needed to sustain current lifestyles” (UN.org). Many products are unethically produced and many are not needed (e.g., junk foods) Many product are based on planed obsolesce logic 17  Sustainability Inequality Induced By Garbage Shipping garbage to the developing countries has been a common practice for all developed countries, including Canada. This creates tremendous environmental concerns in the recipient countries. In the meantime, developed countries has been criticizing the worsening environment in the developing countries such as India, China, Malaysia, and Vietnam, all are dumping yards for the western world. Source: https://www.theguardian.com/us-news/2019/jun/17/recycled-plastic-america-global-crisis 18 What happens if we reduce consumption? Reduction in consumption would: Reduce production Reduce GDP growth and Job creation (contradiction with goal 7) Reduce materialistic lifestyle conveniency However, it can Help saving environment So, SDG 12 cannot be achieved by current way of living and we need innovation 19  SDG 9: Industries, innovation, and infrastructures Innovations… create new products and jobs can reduce our dependence to fossil fuels can make production process more efficient At the same time Can have unknown side effects for human health and nature Can make products so complex, which can reproduce inequality and centralize power Can create new pollutions and environmental issues https://unstats.un.org/sdgs/report/2024/goal-12/ 20  Economic Feasibility Definition: The degree to which the economic advantages of something to be made, done, or achieve are greater than the economic costs. Differentiate economic feasibility to a business vs to society. To a business, economic feasibility simply means that the producing of a product/providing of a service brings non-negative profitability to the firm. To society, economic feasibility means that the social benefit of an activity out weights the social cost. The two may contradict each other. damage the environment to increase efficiency – benefit the firm but generates negative social benefit. Innovation spill over – benefit to the society but not necessarily feasible to businesses. 2 1  Government Intervention to Address Economic Feasibility When a project is socially beneficial but not economically feasible to businesses, government intervention is usually necessary. Takeover: Education, healthcare, utility, insurance, Infrastructure Tax incentives: Innovation, NPOs, eco-products Direct subsidies: R&D, transportation, renewable energy Legal protections: Patent, copyrights, license The goal is to transfer at least partial costs and risk to the public and to inspire the desired types of innovation. 22  Before Next Class Social Assignment due on October 25. Read The second chapter of economic sustainability in the textbook. Attend Lab #7. 23 Questions? 24