Integrating the economy with the ecology

Integrating the economy with the ecology

‘It’s too costly to repair environmental damage’ we are told time and time again.  In fact the only way to pay for any spending on ecological issues is to raise money by growing the economy which inevitably equals impacting further on nature.  This is, in our view, a race to the bottom.  It is pitting one against the other, which we believe is completely unnecessary.  Every economic transaction has ecological consequences since it requires natural capital inputs as part of the goods and services produced.  This can easily be observed by its ongoing loss. 

Carl Obst in: Australia must make the environment integral to economic decision-making (The Conversation, January 16, 2017)  sets out three essential factors that we must adopt as part of any economic decision-making ….

The way traditional economics measures the environment, or in many instances doesn’t, is a long standing problem. For decades, our primary measure of economic activity, gross domestic product (GDP) has measured “progress” without accounting for the cost borne by the environment, nor the substantial benefits we receive from it.

In politics and economics we regularly use the word “capital” to mean assets like buildings or cash. This should extend to the environment too. Nature is an asset.

The need to recognise our natural capital is highlighted by its ongoing loss – the reductions in forests, the depletion of fish stocks, the degradation of soil, the loss of biodiversity, more severe flooding and similar trends. The human and environmental cost of these losses are invisible if you only look at GDP, and so there is little political incentive to do anything.

We must change this, and make nature integral in our calculations and decision making. Our economic system functions within, not alongside, an environmental reality. The tools have been created over the past twenty years to factor the environment into our decision making. We just need to take the next step.

Measuring natural capital is essential if we are to have any idea of what has been lost, what we have left and what we need to do to restore any semblance of balance.i

Integrating economic measures is also essential. 

Although accounting for environmental stocks and flows is useful and should be encouraged, none of the accounts on their own drive home the link between economic activity and the environment. Without a broader, more systemic framing, it remains easy to see the environment as a set of separable components, which are external to the economy.

This siloed view is reinforced in our approaches to environmental measurement. Experts in soil, water, biodiversity and the climate all establish their particular approaches, without consideration for how their data can be used and applied in an integrated way.

Closing the circle is the third essential if the measuring and integrating are to have any tangible effect.

While recent advances in environmental-economic accounting have opened new possibilities, much work still remains. Measuring and accounting for our natural capital is only part of the story. We must integrate the information into the analytical tools and models that decision makers use. We must report natural capital measures in budget statements and annual reports. And, most importantly, we must use the information to build the conversation about the inherent connection between natural capital and economic activity.

The standard set of financial and economic data in the national accounts and corporate reports cannot be regarded as best practice any longer. Australia is a mature and wealthy society, the next step must be investment by governments and corporations in systems to account for natural capital and hence give themselves a complete set of information for economic decision making.

This is not new thinking.  Proponents of the circular economy (Ellen McFarlane) or the steady state economy (Herman Daly) have prepared extensive models that are not unfamiliar to some innovative business leaders such as Ray Anderson, Interface Inc.  And Paul Hawkin, in The Ecology of Commerce sets out a framework based on natures circular principles.

For the full story click on the link: Make environment integral with economic decision-making

For an audio visual presentation on Natural Capital Accounting with Carl Obst, click on this link: Natural Capital Accounting