Macro-economic Implications of Sustainability

This chapter demonstrates strong links between the sustainable use of non-renewable and renewable resources, and macro-economic performance. The chapter goes beyond earlier discussion of factors that contribute to climate change and the narrow focus on the fossil fuel industry to include consideration of a broader range of non-renewable and renewable resources that are an integral part of a sustainable environment. The chapter describes both physical and transition risks. And it highlights relevant linkages that exist between mitigation and/or adaptation strategies and macro-economic performance in terms of gross domestic product (GDP), national wealth, economic growth, inflation, stagnation, deflation, consumer spending, borrowing, employment, unemployment, monetary policy, and fiscal policy. The review indicates that well-planned and well-executed sustainability policies and action plans can confer significant macro-economic benefits. At the same time, it reveals that overzealous and poorly executed mitigation strategies as well as failure to pursue adaptation in the meantime can damage industrial performance and lead to significant negative macro-economic outcomes in terms of slowing growth, damaging supply chains, contributing to inflation, increasing unemployment, and reducing sectoral competitiveness. The chapter warns about the potentially damaging effect of expanding the environmental (E) sustainability agenda to the social (S) and governance (G) spheres. And it raises doubts about the use of industrial policy to achieve durable industrial transformation. The chapter presents cautionary remarks about several hidden threats to macro-economic performance from overambitious, poorly designed, and badly executed sustainability policies. These threats include pitfalls associated with lack of realism, mission creep in corporate governance, single-issue capture, hidden political agendas, greenwashing, whitewashing, and loss of competitiveness. The chapter concludes that if these threats are addressed effectively, “doing business” in this area could possibly provide an attractive commercial opportunity for businesses and investors, while at the same time it might advance the sustainability agenda and contribute to macro-economic performance.