Common sense tells us that air, water, food, and shelter are fundamental to the survival of humans and businesses. However, the pathway to healthily integrating the two remains a challenge. Read this chapter to explore the important interrelationships between the environment, society, and economics and their importance to sustainable business. What are the merits of both views of economics with limits versus no limits to growth? How do businesses and individuals threaten ecosystems and the environment? What roles can businesses play in addressing environmental challenges as well as the limitations?
2.1 Sustainability Economics
Tragedy of the Commons
An important concept relevant for sustainability is the "tragedy of the commons". This phrase was coined by the ecologist Garrett Hardin in a 1968 article in Science. The tragedy of the commons describes a situation where different parties share a common good (such as open public land), and acting independently in their own self-interest, they will ultimately overexploit and deplete or destroy the shared resource. The tragedy is that the individuals acting in a way that they believe is in their own best interest end up acting in a way that is detrimental to their collective and individual long-term best interests.
There are numerous examples of tragedy of the commons in modern life and the environment, including polluting the atmosphere, overharvesting fish stocks (see "What Happened to All the Fish" as follows), and polluting waterways. Related to our cattle example in the limits to growth discussion mentioned previously, tragedy of the commons can be illustrated in a simplified example involving cattle. If several cattle herders share a common (publicly shared) area of land and all herders are entitled to let their cattle graze on that land without restriction, there is the potential for tragedy of the commons to occur.
For each individual herder, it is in their self-interest to maximize their profitability by placing as many cattle as possible on the land. There is no direct incremental resource cost to the herder for each cow they add to the shared land, and the herder has increased revenue through greater cattle sales. If each herder acted in this manner, the quality of the common resource can be either temporarily or permanently damaged as a result of overgrazing if the total cattle population exceeds the carrying capacity of the shared land. Once carrying capacity is exceeded, all are negatively impacted, including, ironically, the herders who added to their cattle stock.
In this system, each herder receives all the benefits from adding additional cattle, while the resource damage to the common land is shared by all herders. What should also be noted is there is no economic incentive in this example for a herder to withhold cattle from the land because even if one herder chose not to add additional cattle over concern about damaging the shared land, there is nothing to prevent another herder from adding more cattle resulting in the same end result of a depleted resource.