Coronavirus (COVID-19) updates from the Australian Government

Sustainable development - to what end?


The recent World Summit on Sustainable Development once again has focused attention on the relationship between economic development and the state of the environment. Sustainable development remains a nebulous concept. Problems with its implementation and the trade-offs that arise often highlight differences in individual, national and international views of wellbeing.


Sustainable development remains a contentious issue ten years after the Rio Earth Summit in 1992. This arises partly because, beyond the basic idea, no common understanding exists of what sustainable development entails in practice, how it should be measured and how to develop policies consistent with the concept. Ideas differ about how best to promote human wellbeing as it applies to the current generation but also in terms of future generations' needs and preferences. In addition, no common understanding exists on how to balance economic, environmental and social considerations in a manner consistent with the concept.

The absence of a clear conceptual underpinning for sustainable development hampers implementation of the idea, as different stakeholders, at times, have formulated their own interpretations. From this point of view, policies that seek to balance competing uses of our resources may leave some unsatisfied.

This article discusses the evolution of the sustainable development debate, and the problems that arise when governments seek to operationalise the concept through policy. The latter issue was highlighted in September at the World Summit on Sustainable Development, in Johannesburg, South Africa. Negotiations during and leading up to the Summit were difficult and protracted, with significant disagreement on issues such as trade and finance, financing for development, renewable energy and climate change. The message that emerges is that in promoting sustainable development, we often are confronted with trade-offs between economic, environmental and social objectives, as well as the different preferences at the individual, national and international level.

The concept of sustainable development

Even though UN members at the Earth Summit in Rio in 1992 accepted the concept of sustainable development, in practice, we are still struggling to reach a common understanding of what it means. Whilst the basic premise that development should be sustainable is broadly accepted, the concept continues to evolve and its measurement remains difficult. Governments tend to adopt broad definitions that rely on general notions of wellbeing. Consequently, individuals, communities, interest groups and governments interpret the concept differently, in ways that accord with their framework of values.

Evolution of the concept

The Brundtland Report (World Commission on Environment and Development 1987) established a conceptual basis for sustainable development and produced what has become the most widely recognised definition of sustainable development as

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

This definition arose as a political construct during a time when there were increasing concerns that certain patterns of economic growth could adversely affect both ecosystems and the social fabric of society. Disquiet mounted, at least in the minds of some, over the sustainable extraction of what appeared to be a diminishing natural resource base. Nonetheless, economic growth can improve dramatically the wellbeing of those less well off. Hence, the concept aims to incorporate the need to simultaneously address poverty (through development) and environmental degradation, while ensuring equity within and between generations.

Contemporary definitions refer less to the needs of current and future generations, but rather, incorporate notions of wellbeing. Nobel Laureate Robert Solow (1992) defines a sustainable path as

    `one that allows every future generation the option of being as well off as its predecessors.'

This recognises that a minimalist notion of sustainable development, one that is based on needs, is inadequate, particularly for developed countries where society's basic human needs such as food and shelter largely have been met. Communities in these countries are looking beyond their basic needs to broader aspirations involving larger consumption opportunities, both in material consumption and services derived from ecosystems, such as eco-tourism. As countries continue to develop, their views will change on what development is sustainable. In other words, the target may move.

The notion of wellbeing

Grounding sustainable development on the notion of wellbeing may provide a more inclusive definition. However, wellbeing is ill defined. Firstly, whilst notions of wellbeing are readily applied to measures of individual welfare, methodological problems arise when we aggregate wellbeing across individuals, communities and countries. Wellbeing operates not just at the individual, but also at the regional and national level. For some, wellbeing may be reflected primarily through choice of consumption possibilities. For instance, consumption of material goods may comprise a significant component of what constitutes wellbeing. For others, wellbeing primarily may be affected by the scale and composition of wilderness areas. Across communities, the distribution of these consumption possibilities may matter. And, at the national level, the quantity of consumption possibilities may matter more.

Secondly, wellbeing also operates at the inter-generational level as the transfer of assets through inheritance reflects. For instance, much has been made of the potential transfer between generations as the baby-boomer generation approaches retirement. At the individual level, parents may be able to gauge, at least partly, their children's preferences in relation to their inheritance. Yet this is unlikely to be possible at both the national level and in terms of future generations.

The relative importance of economic, environmental and social objectives

The lack of common understanding of what sustainable development means also is due to the lack of guidance on what weighting should be attached to the economic, environmental, and social dimensions encompassed by the concept. Economic growth, a clean environment and sound social policy can be mutually supportive goals. They all contribute to improving the wellbeing of people, both now and in the future. However, these three dimensions, commonly referred to as the `three pillars', each correspond to a domain that has its own distinct driving force and objectives (Box 1). This allows stakeholders to pursue a particular objective (be it economic, environmental or social) that accords with their interpretation of what sustainable development should achieve.

Box 1: The three pillars of sustainable development

The economic dimension is geared towards improving the overall welfare of society by increasing the stock of human-made and knowledge capital. It does this primarily through attaining the highest achievable income and consumption possibilities. It is concerned with the optimal allocation of resources to meet the preferences of both current and future generations.

The environmental dimension focuses on protecting the integrity of ecological systems (natural capital stock) and ensuring that economic activity operates within ecological limits to prevent irreversible effects. This is achieved through satisfying the minimum conditions of ecosystem stability and resilience through time (Constanza et al. 1991; Common and Perrings 1992; Arrow et al. 1995).

The social dimension seeks to build the social capital necessary to improve equity within and across generations, through the development of transparent, democra
tic institutions built on good governance and participation.

If we accept that these different forms of capital (human-made, natural and social capital) contribute to wellbeing, then an individual's assessment of whether sustainable development is improving will depend, in part, on:

  • how they weight each of these forms of capital;
  • which components of the capital stock increase or decrease; and
  • what the direction and magnitude of that change is.

For instance, low-income households may weight improvements in their education, incomes and access to housing more heavily than do high-income households. Once households achieve a certain level of economic wellbeing, they may attach greater value to environmental resources such as wilderness areas.

These weights also, largely, reflect an ethical judgement on the need to preserve the natural capital stock in all its dimensions. In Australia, the community broadly supports a ban on whaling and the absence of nuclear power generation. On the other hand, it does not agree on the extent that land management should incorporate environmental objectives such as greenhouse abatement, salinity reduction and maintenance of biodiversity. Consequently, from a community perspective, landholders may undertake too little environmental conservation or too much environmental degradation.

Assessing the overall state of the environment

Difficulties in measuring the natural capital stock also contribute to a lack of common understanding on whether environmental goals are improving. Due to a number of conceptual difficulties, the Australian Bureau of Statistics only estimates environmental assets that fall within a particular asset boundary in the National Accounts. For an asset to fall within the boundary, it must have an identifiable owner, and that owner must be able to derive an economic benefit from the use of the asset, and data must be available. Environmental assets such as the atmosphere and terrestrial ecosystems are outside the boundary, as they do not have an identifiable owner who can derive an economic benefit from them. Water and fish stocks are not included due to lack of available data.

Furthermore, we must remember that the natural capital stock comprises a mix of environmental assets and attributes, such as biodiversity, air quality, vegetative cover, and areas of natural and cultural significance. As countries develop, some attributes may improve while others may be degraded further. The Australia State of the Environment reports provide the most comprehensive assessment of Australia's ecosystems. The most recent report notes improvements in vegetative cover and urban air quality, but key threats to biodiversity and our marine environment remain (Australian State of the Environment Committee 2001). Importantly, depictions that all aspects of the environment as a whole are being degraded are simplistic, because some environmental attributes, including important ones such as urban air quality, have improved.

Consequently, assessing the overall state of the environment is difficult, as, unlike human-man made capital, no numeraire exists that allows comparison of environmental assets. Consider, for example, the difficulty in aggregating individual environmental areas such as pristine wilderness areas, where some are improving and others are declining, as noted in the recent Australia State of the Environment 2001 report. Nor are there obvious weights to attach to different environmental assets. How do you compare a lake with a forest without a common measure of value?

Substitutability between different forms of capital

To assess whether things are getting better or worse overall, when some dimensions are improving and some are worsening, economists tend to think about how substitutable different dimensions are for each other. How legitimate this approach is for natural capital is quite controversial. Notably, communities, interest groups and governments will have different views about the extent to which different forms of capital are substitutable. This gives rise to two competing views characterised as the `weak' and `strong' forms of sustainability (Box 2).

Box 2: Weak and strong forms of sustainability

Weak sustainability holds that all forms of capital are complete substitutes in production and consumption. Trade-offs are allowed between the different forms of capital, so long as the total capital stock is not declining (Solow 1986; Hartwick 1977). This allows certain irreversible impacts that may improve wellbeing overall, but are not necessarily ecologically sustainable. An example is the extraction of mineral resources, such as iron ore, gas and oil. By their very nature, such resources are limited, so we cannot extract them from the Earth's mantle indefinitely. Nonetheless, we continue to extract such resources because they confer considerable benefits on individuals, communities and society.

The weak form of sustainable development is challenged on two fronts. Firstly, it may not always be technically possible to substitute between different forms of capital. At a practical level, some environmental assets, such as the biosphere, are irreplaceable and cannot be fully substituted by other forms of capital. Consequently, current and future generations will have lower levels of wellbeing. Secondly, for some, trade-offs between the different forms of capital are ethically indefensible (Sharp 2001).

Continued ...

Box 2: Weak and strong forms of sustainability (continued)

Strong sustainability imposes the constraint of a non-declining natural capital stock as a necessary condition for sustaining an economy's productive potential. This views natural capital and human-made capital as complements and only marginally substitutable in production and consumption processes. For instance, natural capital provides the raw materials into production processes and the assimilative capacity services that absorb the waste by-products of production. Strong sustainability acknowledges the limitations imposed by natural thresholds and irreversibility on the trade-offs that different forms of capital can achieve, without threatening the sustainability of individual ecosystems (Pezzey 1992). As we approach threshold decisions, trade-offs become less important whereas moral judgements become more important.

In a general policy context, policy makers need to judge the relative importance of various forms of natural and human-made resources, and aim for a socially optimal rate of use. Consequently, decision-making needs to recognise the complex inter-relationships between economic, environmental and social objectives.

Implementing sustainable development

One consequence of the lack of common understanding of what sustainable development actually means is that implementing the concept is much more difficult than envisioned. In particular, the concept has not been effective in preventing the loss of ecosystem services, such as biodiversity. For instance, the recent Australia State of the Environment 2001 report points out that `Australia is far from achieving sustainability, and major problems and impediments remain' (Australian State of the Environment Committee 2001, p. 112). This is partly because the concept polarises much of the debate between those who believe environmental protection is a precondition of social and economic progress, and those who feel economic growth should be given priority over environmental concerns. In turn, a polarised debate may lead to the pursuit of singular policies that may not be consistent with sustainable development. For example, policies to protect the environment that do not adequately consider econom
ic and social consequences would violate sustainable development principles, as would poorly managed economic development that leads to excessive environmental degradation.

A polarised debate

The absence of a clear conceptual underpinning of sustainable development has meant that different stakeholders either formulate their own interpretations of the concept, or establish a definition that more closely reflects their value judgements. This often has meant that sustainability has been taken to mean outcomes that are `environmentally desirable' (Pezzey and Toman 2002). For instance, criticism has been directed at the strong form of sustainability because it does not provide enough flexibility to allow for trade-offs between competing economic, environmental and social goals. It is also criticised because it allows certain groups to impose their sets of values on the rest of society, where their preference or value of an environmental amenity is relatively higher than the rest of society's. Pursuit of an environmental interpretation of sustainable development thus may be viewed as an enhanced form of environmental protection (Reid 1995).

The pursuit of singular policies

Narrowly promoting singular policies on the basis of their respective economic, environmental or social contribution to wellbeing may not be consistent with sustainable development. What is less appreciated is that policies pursued under the sustainable development banner may involve implicit trade-offs between different environmental pressures. The natural capital stock comprises a disparate mix of environmental assets and attributes that are not easily compared. The pursuit of environmental objectives may adversely affect the scale and composition of these assets. For instance, the pursuit of environmental objectives, such as lower greenhouse emissions, through policies that promote renewable energy may impact adversely on the availability and quality of wilderness areas (for example, windfarms on pristine coastlines). Whilst this is the subject of the accompanying article on renewable energy, two key insights are offered here. First, singular environmental policies that seek to address a particular environmental issue may result in the substitution of one form of environmental problem with another. Second, such policies also may mask implicit value judgements about the relative importance between competing environmental outcomes.

Recognising values and priorities

Few could, in principle, have anything against the sustainable use of our environment, and the need to look after it into the future. The problem of deciding which policy objectives to pursue remains at the heart of sustainable development. In choosing a particular sustainable development path, policy makers will need to consider the broader community interests, the human derived values from ecosystem services and prioritise which environmental problems they should deal with first. Ultimately this comes down to the question of which values we should uphold. In this regard, disentangling the various interpretations of the concept and clearly spelling out the trade-offs will be important in pursuing development that can be universally seen to maximise the wellbeing of both current and future generations.


Arrow, K., Bolin, B., Costanza, R., Dasgupta, P., Folke, C., Holling, C.S., Jansson, B-O., Levin, S., Maler, K-G., Perrings, C. and Pimentel, D. (1995), `Economic Growth, Carrying Capacity, and the Environment', Science, vol. 268, pp. 520 - 521.

Australian State of the Environment Committee (2001), Australia State of the Environment 2001, Independent Report to the Commonwealth Minister for the Environment and Heritage, CSIRO, Canberra.

Common, M. and Perrings, S. (1992), `Towards an Ecological Economics of Sustainability', Ecological Economics, vol. 6, no. 1, pp. 7 - 34.

Costanza, R., Daly, H.E. and Bartholomew, J.A. (1991), Goals, agenda and policy recommendations for ecological economics, in Costanza, R. (ed) Ecological Economics, Columbia University Press, New York.

Hartwick, J. (1977), 'Intergenerational Equity and the Investing of Rents from Exhaustible Resources', American Economic Review, vol. 67, pp. 972 - 974.

Pezzey (1992), Sustainable Development Concepts: An Economic Analysis, World Bank Environment paper number 2, The World Bank, Washington, DC.

Pezzey, J. and Toman, M. (2002), The Economics of Sustainability: A Review of Journal Articles, Discussion Paper 02-03, Resources for the Future, Washington DC.

Reid, D. (1995), Sustainable Development: An Introductory Guide, Earthscan Publications, London.

Sharp, B. (2001), Sustainable Development: Environment and Economic Framework Integration, Treasury Working Paper 01/27, New Zealand Treasury, Wellington.

Solow, R. (1986), `On the Intergenerational Allocation of Natural Resources', Scandinavian Journal of Economics, vol. 88, no. 1, pp. 141 - 149.

Solow, R. (1992), An Almost Practical Step Towards Sustainability, Invited Lecture, Resources for the Future, Washington DC (October 8).

World Commission on Environment and Development (1987), Our Common Future, Oxford University Press, Oxford.