Real economic global results from decoupling economic growth from unsustainable natural resource management and inefficient industrial processes are the central themes of Cents and Sustainability. Implementing wealth creation strategies at the local, national, and international level is the primary economic theme, or modus operandi, of the 21st Century, as opposed to 20th Century wealth appropriation strategies. This begets the question do concrete auditable examples of wealth creation while sustainably managing natural resources at the national level exist? Resoundingly the answer is yes, as is demonstrated by Drs. Smith, Hargroves, and Desha in their book. Furthermore, their book, by focusing on actionable results regarding decoupling negative environmental externalities from economic growth allowing for sustainable development, provides a much-needed approach to implement at speed and scale so as to prevent wide-spread economic and ecological collapse.
While Limits to Growth, published in 1972, provided the context surrounding pending mid-term global economic and ecological collapse, and Our Common Future, published in 1987, described action that needed to occur so as to develop in the short-term a sustainable economic and just future for our global citizens, Cents and Sustainability completes the sequence by describing some of the results possible from the desired decoupling activities described in the first two books.
While this context-action-result framework provides us with some prescriptive options for decoupling methodologies, on the other hand, the results described in the book also provide clear options for the process-oriented business community from which we can act. The authors delineate concise economic examples of how industry has made processes “re-sustainable” by eliminating negative environmental externalities by explaining four organizing principles:
- Regeneration, which implies using renewable resources only at their rate of regeneration. For example, from a financial accounting perspective depletion rates need to equal rates of regeneration, so as to accurately price an asset vis a vis its economic and environmental value.
- Substitutability, which means using non-renewable resources as a means to, at speed and scale, substitute and implement a renewable resource. For example, if organizations, municipalities, and national governments required a tax on non-renewable hydrocarbons exploitation to specifically fund renewable energy, substitutability could be achieved.
- Assimilation, which refers to the natural carrying capacity or assimilative capacity of exogenous substances to absorbed and then assimilated back into a natural ecosystem should be maintained at zero. For example, this would require that the quantity of carbon dioxide released into the atmosphere through either anthropogenic or natural causes would not exceed an assimilation capacity of zero so as to not impact the ecological and resulting economic system negatively.
- Avoiding irreversibility, which explains that all anthropogenic ecological and resulting economic inputs should not approach irreversibility. For example, this would require the global fish catch would not overfish a fish stock to such an extent that the fish stock collapses, as has happened in the Atlantic Canada cod fishery.
The context-action-results framework along with the four organizing principles desire further business strategy attention as we rapidly decouple our global economy defined by wealth appropriation from negative environmental externalities into a global economy defined by wealth creation. [see: Dr. Allan Afuah, Strategic Innovation: New Game Strategies for Competitive Advantage]
Gabriel Thoumi frequently contributes to Mongabay.com.
Environmental sustainability—the new economic bottom line
(03/28/2011) That’s the message in Accounting for Sustainability: Practical Insights. The book represents the compilation of a five-year project—nicknamed “A4S”—sponsored by Prince Charles, Prince of Wales, that examined the feasibility of factoring industries’ impact on the environment into their economic spread sheets. Using case studies and interviews with leaders at major accounting firms, Accounting For Sustainability documents the bond between capitalism and environmental capital.
Where do forest carbon markets go from here?
(04/20/2010) For thousands of years, we have been planting and growing trees without difficulty. It’s simple, and forest carbon business strategy can be, too. In fact, it’s core to what I’m trying to teach the MBA/MS students in my course at the Erb Institute this semester: If the world’s best available technology for removing carbon dioxide from the atmosphere is employing the natural photosynthetic capacity of natural forest management, we can too.
Financial Accounting for Forest Carbon Offsets and Assets
(11/16/2009) Poised to wreak havoc on the climate of Earth, our only home, is a phenomenon we’ve been observing for 150 years: an increase in Earth’s mean temperature. To mitigate the global climatic disruption that humans put into motion long ago, the actors in the forest carbon offset market encourage landowners to sequester atmospheric carbon dioxide (the culprit in global temperature increases) in return for a payment for ecosystem service based on financial unit called a metric ton carbon dioxide equivalent (mtCO2e). The regulatory and institutional frameworks of the forest carbon market are developing rapidly, yet one of the most urgent regulatory issues for a viable quality market is forest carbon financial accounting under International Accounting Standards (IAS) and U.S. generally accepted accounting principles (GAAP). We predict forest carbon offset assets will become a thriving investment asset class with significant equitable distribution of revenues based in a transparent financial accounting mechanism. This article introduces forest carbon assets as an alternative asset class under IAS and U.S. GAAP.