The royal road to sustainability

Whoever destroys natural capital must also be responsible for its restoration. It is the only way to avoid human and economic drama. A guest post.

German agriculture alone causes 90 billion euros in environmental damage every year.  The photo, however, shows a cotton farmer in Texas.

“Everyone is talking about sustainability, but everyone understands something different by it. One of them wants to stop climate change, the other wants to fight hunger in the world, a third person is interested in oceans without plastic waste ”- this is how an article in the Frankfurter Allgemeine Sonntagszeitung on October 12, 2020 begins have we still achieved so little in terms of sustainability? This question preoccupied Ernst Friedrich Schumacher (1911 to 1977), the British economist of German descent. In his book “Small is Beautiful – A study of Economics as if People Mattered”, which appeared in 1973, 14 years before the Brundtland Commission officially defined “sustainable development”, Schumacher identified an age-old misunderstanding of the western world as the decisive one Cause: Nature is not an income, but a capital that needs to be preserved!

With this knowledge it becomes clear: All activities that destroy natural capital because they use more than its return are not sustainable and therefore not future-proof. The fact that so few companies and politicians campaigned for the preservation of natural capital in the past was due in turn to the fact that nature was long understood as a common good that is available to all people almost unlimitedly and free of charge.

Nature is being overexploited

Today the situation has changed fundamentally. In view of the rapidly growing world population (it has almost tripled in the last 60 years), natural capital has become the limiting factor for the further development of the prosperity and well-being of mankind. Climate change, the loss of biological diversity, soil degradation, and air and water pollution are the result of a single human error, namely the overexploitation of nature. It is still too often misused as a waste dump or as a resource supplier.

Globalization allows rich economic countries to consume more natural capital by importing goods than is available to them in their own country. You are destroying natural capital abroad. Global action is now required, but what exactly has to happen? The “royal road to sustainability” outlined below is not new, it is just celebrating its 100th birthday (Arthur Cecil Pigou 1920: The Economy of Welfare) and deserves special attention.

The basis for a transition to sustainability must be the will that we as individuals, as entrepreneurs, as a state and as a global society preserve the current stock of our natural capital. According to this, the polluter pays principle applies: whoever destroys natural capital is also responsible for its restoration.

This requires three measures. (1) We as individuals, as entrepreneurs, citizens or members of global society must disclose the external effects of our economic activity on natural capital and assess them in monetary terms as external costs. (2) These external costs must be internalized, i.e. allocated to the product prices. This already has an important control effect in the direction of sustainability, because this increases the prices for environmentally harmful products significantly more than for environmentally friendly products. (3) The additional income from the allocation of external costs to the product prices is then used to restore the damaged natural capital – the goal of sustainability is thus achieved.