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Only What Counts, Counts
Sustainability Accounting Innovations as Tools to Open New Fields of EnquiryTaking sustainability into account
By Kenneth Hermele, Peace and Development Studies, Växjö university, and
Ernst Hollander, Dr of Technology, University of Gävle, Sweden
Paper presented to the VHU (Vetenskap för hållbar utvecking) Conference, Linköping, September 2007
Paper presented to the conference Developing Economies: Multiple Trajectories, Multiple Developments, European Association for Evolutionary Political Economy (EAEPE), November 2- 4, 2006, Galatasaray University, Istanbul, Turkey[1]
“There is a limit to what one can do with numbers – just as there is a limit to what one can do without them. Finding the right balance is not easy.”
Herman Daly (1996)
“'I was happy Ammu said', and realised that she had been.
'If you're happy in a dream, Ammu, does that count?' Estha asked.
'Does what count?'
'The happiness – does it count?'
She knew exactly what he meant, her son with his spoiled puff.
Because the truth is that only what counts counts."
Arundhati Roy (1997)In an earlier paper we have argued that accounting for ecological and social sustainability can be made into a tool for innovation as long as the drastic reductions in complexity are clearly recognized and stopped well before arriving at uni-dimensional measures such as monetary values.[2]
After the seminal contributions by Polanyi, reciprocity relations were, for a long time, neglected in economics – even in evolutionary political economics.[3] Since the 1990’s heretic economists such as Easterly et. al, Bowles & Gintis, and Ostrom have, however, started to change the discourse by stressing concepts such as social cohesion, community governance and self-organized resource governance respectively.[4] This entails or leads to interests in reciprocity relations and the strengthening and weakening of those over time. The reasons for the neglect of reciprocity relations for a long time are many and often superficially reasonable as we discussed in our earlier paper.
In this paper we want to enlarge our argumentation in favour of transparent accounting for social sustainability. Such an accounting for social sustainability could – just as its ecological counterpart –serve as a warning against economism. This it might do if it highlights the costs of socially “brutal” economic growth. Socially brutal economic growth can be exemplified with growth accompanied by growing inequalities and dissolution of trust, reciprocity etc.
The measures of sustainability that concern us here are those that attempt to drastically reduce complexity without hiding that this is what is done. We are both genuinely ambivalent as to the merits of reducing the many dimensions of sustainability or economic progress to very few dimensions. Drastic reduction is for instance done when human development is measured in 3 dimensions (as in the Human Development Index by life expectancy, knowledge and GNP/cap) or even more far-reaching – when economic progress is measured in just one, (GNP/cap).
Our focus in this paper will, however, not be on the pros and cons of the many serious attempts to create indicators that combine communicative power and respect for complexity. To discuss those pros and cons seriously we would need to enter into a lot of technical details that would lead us astray. For a well-balanced account that include the technical details we refer to Stephen Morse who makes a committed presentation of indicators of development, poverty, sustainability etc. with the distance demonstrated by a subtitle admitting "... - an unhealthy obsession with numbers"[5]
The Our aim here is more limited. We are both outsiders to the Indicator's Business but hope that more academics of our type – who are critical against genuine obsession with numbers – will get a sense of the New Fields of Enquiry that could result from some real and some suggested Sustainability Accounting Innovations. We also want to warn against some exercises where reductionism is combined with obscurity.
Those Sustainability Accounting Innovations that we do find meaningful can, however, not onlywill discuss can serve the creative purpose of supplying new perspectives. They can, however, also serve a “destructive” purpose of loosening the grip that GNP accounting has over our minds.[6]
This destructive purpose is one of the reasons that we choose to start our reflection overscattered examples of Sustainability AccountingInnovations by briefly mentioning some of the many qualities of two attempts to use monetary terms to argue the case for drastically stepped up efforts to conserve wild nature.
Measuring Ecological Sustainability
A monetary value for the world's ecosystem services[7]
A number of environmental systems analysts have suggested that it is reasonable to compare their estimate of the economic value of 17 ecosystem services across 16 biomes – an estimate that amounted to 33 Terra-USD –with the global GNP – 18 Terra-USD. We think they were both bold and innovative.[8]
Among their own five stated motives for their exercise are "... 1) make the range of potential values of the services of ecosystems more apparent and ... 5) stimulate additional research and debate." We think that their agenda is in fact taller than this and anyhow our motives for focusing on their work are only partly captured by their own stated motives. Among further possible motives are
- pointing to the question of substitutability and non- substitutability
- reaching out for a debate with the "Economics Profession" in the narrow sense
- the destructive one mentioned above of loosening the grip that GNP accounting has over our minds
- starting to form an epistemic community that can seriously influence political decisionmaking when projects that threaten ecoservices are considered (i.a. projects that "develop" wetlands, coral reefs or mangroves).[9]
The question of substitutability
The calculations of Costanza, et al (1997) are based on the premise that "the curve intersection" for the 17 aggregated services occur on parts of the "willingness to pay/ marginal benefit"-curves where there is substitutability. Otherwise those curves would be almost vertical and the value of the services approach infinity. That's another way of saying that the global economic value of the 17 ecosystem services are probably equal to or larger than the global GNP even if we by definition exclude those instances where we have already or will soon pass points of no return from global disasters. We'll get back to the question of substitutability below.
Reaching out to the "Economics Profession"
To try to use the classical economic toolbox in dealing with such multidimensional phenomena as sustainable development can be viewed as giving the benefit of the doubt to the "Economics Profession" in the narrow sense. It is justly argued in wide environmentalist circles that the classical economic toolbox can be useful when dealing with part solutions to ecological problems. The movement for ecological tax reform has been growing for a long time and here the classical economic toolbox comes in handy.[10] Where the brutal reductionism of one-dimensionality/monetarisation is justly contested and where it is thus more questionable to give the benefit of the doubt is in analysing the problem rather than finding part solutions. Because if we seriously want decisionmakers to take ecological risks into account it is a real question if we should succumb to their desire not to understand the complicated laws of nature that i.e. preclude substitution of the globe's atmosphere. Costanza et.al. do take that risk but they do it in such elegant manner that they might open not only for misuse but also for the opposite. By "the opposite" we refer to the possibility that people from the "Economics Profession" in the narrow sense start to give the benefit of the doubt to Environmental Systems Analysts and even to Ecologists.
The destructive one
Those of us who have interacted with the business community – even that part which is in the enviro-progressive World Business Council for Sustainable Development – know that the longing for monetary terms in the enviro-debate is very strong.[11] Many enviro-advocates within the business community are frustrated when they realise that factors that don't "reach the bottom line" reasonably fast don't count even when the scientific facts are well documented and the reasoning strong. The "Economics Profession" in the narrow sense is oftentimes even more resistant to non-monetarised factors than top managements of large corporations. Creating a well-founded estimate of the global economic value of 17 ecosystem services across 16 biomes that is equal to[12] or surpasses world GNP means that the team around Costanza "accepts" to play the game of the elite within the resistance to taking enviro-threats seriously. If the team around Costanza can go on playing that game skilfully they might make an important contribution to intellectually disarm this elite among the resisters.
An epistemic community for conservation
Parts of the "Economics Profession" seem to have reacted constructively to the arguments put forward by Costanza et.al. Some of those reactions are briefly mentioned in an article by a partly overlapping group "headed by" Balmford five years later.[13] We'll make a few comments to the Balmford et.al. article – again without giving a fair presentation of the arguments.[14]
In order to avoid a problem in the earlier article – extrapolation from the margin to a global total – the team around Costanza and Balmford focus on some cases where it is reasonable to compare two NPV's (Net present Values). The NPV's, that is, of services delivered by a biome when relatively intact and when converted to typical human use. Projects that develop Wetlands, Coral Reefs or Mangroves are cases in point. "Despite the limited data, our review also suggests a second broad finding: in every case examined the loss of non-marketed services outweighs the marketed marginal benefits of conversion, often by a considerable amount". But rapid conversion continues. The authors estimate the present rate of losses of biomes due to conversion and conclude that the mean rate of losses of biomes is over 10% per decade. And "... a single year's habitat conversion costs the human enterprise, in net terms, of the order of 250 GigaUSD that year and every year into the future". The article concludes by comparing the cost of an effective, global reserve program – 45 GigaUSD – with the value of the ecological services and goods ensured by the reserve network. The latter estimate is close to 5 TerraUSD. "The benefit:cost ratio of a reserve system meeting minimum safe standards is therefore around 100:1".[15]
This Balmford et al article successfully defends the broad conclusions from the first article and also makes the policy implications clearer. This – and the fact that the exercises start from very concrete cases where the actual human decisions can be seen and followed – make us get some hope that an epistemic community, that could get an impact on vital decisions for ecological sustainability, is in the making.
Sustainability accounting in Sweden
From an innovative attempt to meet the longing for a uni-dimensional ecological sustainability measure we now move on to some Swedish attempts where the bridging between Environmental science and Economics either haven't even been tried or where the methodological problems are blurred.
Substitutability versus complementarity
When defining Sustainable Development, SD, a distinction is often made between weak and strong SD. The dividing line is whether we assume substitutability or complementarity and at what levels the discussion is pursued. In some contexts the level of aggregation is absurdly high. At this level one discusses as if it was meaningful to substitute one kind of resource for another: economical and social resources for ecological, ecological for cultural, economical for social, etc. To suppose such a substitutability at this absurdly high level of aggregation, ecologists call weak sustainability since it is easier to achieve than sustainable development in a more meaningful sense. In other words: weak sustainability would allow us to reach the conclusion that SD exists although its ecological component may be growing weaker.
Strong sustainability demands that each component – ecological, economical, social, etc – at least is kept intact separately; a weakening of one component cannot be made up for by the strengthening of another.
In order to make this discussion concrete, we will now look at three attempts to measure sustainable development, using two contradicting methods, one that shuns the need to reduce complexity and two that blur the methodological problems.
16 dimensions of ecological sustainability in Sweden
The Swedish parliament has established a range of 16 environmental goals; all of them defined in physical terms. No attempt is made to summarise this aspect of sustainability, which makes the measures an example of the complexity of using a very strong definition (see Table 1).
Table 1. Sweden's environmental quality objectives
Objective / Will it be achieved?1. Reduced climate impact / Probably not
2. Clean air / Probably not
3. Natural acidification only / Probably not
4. A non-toxic environment / Probably not
5. A protective ozone layer / Perhaps, but only with stronger measures than at present
6. A safe radiation environment / Perhaps, but only with stronger measures than at present
7. Zero eutrophication / Probably not
8. Flourishing lakes and streams / Perhaps, but only with stronger measures than at present
9. Good-quality ground water / Perhaps, but only with stronger measures than at present
10. A balanced marine environment, flourishing coastal areas and archipelagos / Perhaps, but only with stronger measures than at present
11. Thriving wetlands / Perhaps, but only with stronger measures than at present
12. Sustainable forests / Probably not
13. A varied agricultural landscape / Perhaps, but only with stronger measures than at present
14. A magnificent mountain landscape / Perhaps, but only with stronger measures than at present
15. A good built environment / Perhaps, but only with stronger measures than at present
16. A rich diversity of plant and animal life / Probably not
Source: Sweden's environmental objectives 2006