THE BLOG

Can You Afford Not Being Sustainable? (Part I)

02/04/2015 02:40 pm ET | Updated Apr 06, 2015

The answer to this question is threefold, and should become evident through the examination of the definition of sustainability, the investigation of global trends (Part II) and through tangible examples (Part III). But, let's start from the beginning.

What, Exactly, Is Sustainability and Why Is It Important?

There is a misconception of sustainability as solely an ecological-related subject, which is not the case. On the contrary, there are a range of definitions and applications. Sustainability exists in the core of our current economic system, and of economics in general. Adam Smith, at the dawn of industrial revolution (1776), published his work An Inquiry Into the Nature and Causes of the Wealth of Nations. He was the first to identify, through the aforementioned work, that the pursuit of profits and self-interest will lead society to increasingly higher living standards through innovation and technological advances.

In other words, Adam Smith set the foundations of our economic system as we know it. However, in the mid-1800s, Thomas Malthus was the first to introduce the natural limitations regarding economic growth in his book An essay on the Principles of Population. He contradicted that such an economic system could be sustained, and that it would lead to social improvement. He argued that the population grows geometrically (e.g. 1,2,4,8,16) whereas the food supply increases only arithmetically (e.g. 1,2,3,4,5).

In addition, John Richard Hicks, in his work Value and Capital in 1939, became the first economist to introduce the concept of sustainability in economics. He defined the concept of "Hicksian income," (as it was named afterwards) which is considered the maximum amount that an individual, household or the economy, in general, could consume during a period, while still being able to consume the same amount in the future without compromising the productive capital.

Sustainability, however, is broadly associated with its environmental meaning, as it was introduced in the world commission on environment and development report in 1987:

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

There shouldn't be a misunderstanding, since both approaches and terms are correct, and both are referring to the same development model -- a model that promotes innovation and leads society to higher living standards, as Adam Smith suggested, in his development model.

However, at the same time, the sustainable model differentiates with current practices in two main parameters. First, it takes into account the limitations of our planet (i.e. scarcity of raw materials, climate change, food supplies) and, in addition, it is based on a more altruistic approach that fosters collaborations, rather than Smith's model, which is based on a "selfish" approach centered on achieving innovation and societal development.

I would like to thank Eleutheria Veneti for her contribution to this article.