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A Holistic approach to the management of human consumption towards an economics of well-being

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The goal of this conceptual paper is to draw attention to the problems caused by the rapid growth of the global economy, coupled with high population growth and excessive exploitation of natural resources. It is necessary to be aware that the global economy will not be able to grow at the actual speed in the long term. A paradigm shift in production and consumption is therefore necessary to avoid the collapse of ecosystems and the concurrent reduction of stocks of natural resources. This is the reason why capitalism has to take a new direction towards a sustainable and naturally harmonized development model.
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A Holistic approach to the management of human consumption towards
an economics of well-being.
GANDOLFO DOMINICI
Ph.D. Scientific Director Business Systems Laboratory
Chair of Marketing, Department SEAS, Polytechnic School, University of Palermo
ITALY
web: http://gandolfodominici.it/
e.mail: gandolfo.dominici@libero.it
VASJA ROBLEK
Ph.D. Student
University of Primorska, Faculty of Management Koper
SLOVENIA
vasja.roblek@gmail.com
Abstract: - The goal of this conceptual paper is to draw attention to the problems caused by the rapid
growth of the global economy, coupled with high population growth and excessive exploitation of
natural resources. It is necessary to be aware that the global economy will not be able to grow at the
actual speed in the long term. A paradigm shift in production and consumption is therefore necessary
to avoid the collapse of ecosystems and the concurrent reduction of stocks of natural resources. This is
the reason why capitalism has to take a new direction towards a sustainable and naturally harmonized
development model.
Key-Words: - Consumption; Economic development; Natural resources; Sustainable development;
Welfare
1 Introduction
The goal of this conceptual paper is to draw
attention to the problems of sustainable growth over
the capacity of natural ecosystems caused by the
rapid growth of the global production, coupled with
high population growth and excessive exploitation
of natural resources.
The increased use of natural resources is strongly
influenced by human activity and the economic
policies aiming to increase the actual economic
indicators (e.g. GDP, level of employability,
consumption per capita), which is resulting in a
higher demand for natural resources [6], [28].
Due to the rapid growth of production on a
global scale in the 21st century we arrived at the
turning point when earth's natural resources are
becoming no longer able to absorb the levels of
pollution and regeneration of natural resousrces
required by human economy [18].
World economic growth is based on quantitative
accelerated consumption of resource supply, while
the global ecosystem of which it is a material and
energy dependent decline. This leads the global
economy in less balanced condition [10]. In other
words, the global indicators of consumption of key
natural resources (land footprint, water footprint,
carbon footprint and overall material use) are
increasing and significantly exceeding the biological
capacity of the planet [14].
The reasons must be sought in the 1980s, when
the human pressures on the utilization of natural
resources for the first time exceeded their level of
global recovery [30].
A wider adoption of the sustainable operations
technicques by businesses would significantly
advance the holistic approach with connected
knowledge activities [34], [35]. Such holistic
models include the promotion of sustainable
development and are applying the sustainable
Recent Advances in Urban Planning, Sustainable Development and Green Energy
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73
paradigm beyond the environmental dimensions
[40]. Consequently, a valid sustainable strategy
should include not only an economic and
environmental perspective, but also the development
of the social-political and cultural aspects of
development [17].
2 Welfare and sustainable
development
The connection between the concept of consumption
and that of sustainable development can be traced in
the report of the Brundtland Commission [46].
The Commission defined sustainable
development as a form of: “development that meets
the needs of the present without compromising the
ability of future generations to meet their own
needs. This definition is based on two concepts
that explain the connection between sustainable
development, the growth of a country's welfare, and,
consequently the human consumption:
1. The concept of ‘‘needs’’: in particular the
essential needs of the world’s poor, to which
overriding priority should be given;
2. The idea of limitations imposed by the state of
technology and social organisation on the
environment’s ability to meet present and future
needs [46].
A more holistic country's welfare approach
should include not only the perspective of the social
and economic development, but also health and
environmental development indicators (Table 1).
According to the perspective of sustainable
development, the progress of welfare through
generations can be observed, studied and measured
in the same manner as country's social, economic
and environmental development [32].
Development indicators from the table 1 help us
to understand how human impacts on the condition
of his environment due to the need for economic
growth and consumption.
According to Hillman [23], in the past five
decades, global pressures on the environment of the
planet increased more than five times. Comparison
of the size of the ecological footprints and per capita
income indicates a high degree of interdependence.
Moreover indicators show that the growth of the
GDP is also in generally correlated with increasing
environmental pressures [29], [33].
The traditional development model is material
and energetical very complex and is based on fossil
fuels, mass consumption and disposal of various
wastes [15], [38]. The model is almost entirely
focused on quantitative economic growth. In
economically developed countries, indicators of
income and population growth in GDP are no longer
sufficient as a measure of overall progress, quality
of life and people satisfaction [1].
Table 1, Social, economic, health and environmental
indicators for determining countries welfare
Group of Indicators
Indicators
Economic Indicators
Per capita GDP
GDP of the
population
employed in
agriculture
Exports of
manufactured
goods
S
hare of
manufacturing
industries in the
GDP
Per capita
energy
consumption
Social Indicators
Rate of schools'
enrollment
Internet
connectedness
rate
IT literacy rate
Health Indicators
Number of
nurses per 1000
people
Number of
pharmacists per
1000 people
Number of
dentists per
1000 people
Number of
physicians per
1000 people
Life expectancy
at birth
Environmental Indicator
Ecological
carrying
capacity
Ecological
footprint
Carbon
footprint
Source: [9], [11], [47].
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New indicators such as the indicators of the
happiness (e.g. Life satisfaction approach,
Aggregate happiness indicators, Human
development index) are gradually being introduced
to measure the wealth of an economy or a nation.
Research [13], [12] shows that in 1957 the 35% of
the US population very happy while in the mid-
1990s the data was only 33%, although in that
period, their income had doubled.
Since the early 1990s, the emergence of the
Internet new economy influenced the rise of the
third wave of capitalism [37] as forecasted one
decade before by Alvin Toffler [43]. Rapid
technological developments, cheaper computer
equipment, as well as increased availability of
broadband internet, have been the factors that
influenced the change of life and work style [26].
Technology and economic growth have become
inseparable during the period of transition to new
innovation economy [2], [27]. Digital literacy has
become one of the key indicators of the
development in the field of the society
informatisation [44].
At the same time, the "malthusian" concept of
ecological carrying capacity has been gradually
introduced in organizations' management.
Ecological carrying capacity can be defined as the
maximum density of individuals of a species that an
ecosystem can withstand [24]. By using the
indicator of ecological carrying capacity we may
establish measures to protect certain habitat
depending on what kind and how many species live
there, taking into account the upper and lower limits
of the population (the minimum number of
specimens is necessary for the survival of the
species) [19]. This indicator has sometimes being
used to support decision-making on the protection
of endangered species, which is a test related to
biodiversity.
This malthusian approach can be dangerous if
used to evaluate the carrying capacity for the human
population, justifying policies that aim to forcely
suspend the human rights of reproduction. On the
other hand, the same indicator can also be
effectively used for the oversight of spending and
demand for resources and total human impact of
consumption and production on the environment.
Per capita ecological footprint (EF), or ecological
footprint analysis (EFA), are other means for
evaluating production policies and consumption
uses, and proving these against earth's capacity to
sustain them. This brings us to another important
indicator that is the "ecological footprint" as a
measure of human demand on the Earth's
ecosystems. This implies that the surface of land
and water (including natural resources) must be
considered in the measure of production outcomes
[20]. It is interesting to compare the information
about the ecological footprint of global production
and consumption. Wackernagel et al., [45]
highlighted that while, in 1961, we needed 0.7 of the
Earth for our production and consumption needs -
ecological footprint was therefore 0.7. hectares per
person - in 2007, this figure was already 2.7. This
means that we have already exceeded, the organic
load carrying capacity of our planet and our lifestyle
is no longer naturally harmonized [20].
Carbon footprints is a concept that is closely
linked to the ecological footprint. For each product
shall be determined how much of the GHG
emissions are created in its total production,
consumption and disposal [48].
The Kyoto Protocol defined carbon footprint as
an indicator or measure of the impact of human
activities on the environment. Therefore, can play
an important role in shaping individual actions of
different policies [21]. The carbon footprint
approach is gaining ground, especially with the
increasing environmental awareness is becoming a
benchmark for consumers.
Carbon footprint can also be used as a basis for
sustainable policies. Nevertheless this approach is
not without limitations. The first problem is the data
availability. Therefore, it is extremely difficult to
collect all the necessary information since it appears
that only 128 of the 4,609 largest companies listed
on the world’s stock exchanges disclose the most
basic information on how they meet their social and
ecological responsibilities. More than 60% of the
world’s largest listed companies currently fail to
disclose their GHGs, three quarters are not
transparent about their water consumption. The
slowing down of disclosure is illustrated by the fact
that while the number of large listed companies
disclosing their energy use increased by 88% from
2008 to 2012, there was only a 5% rise from 2011 to
2012. A similar reporting slowdown is occurring on
the other first-generation indicators [7].
The reason these figures are so important is
because there is a direct correlation between
transparency and companies taking substantive
action to improve their performance. This is also
referred to the time calculations, as here the values
must be discounted. All the evaluated monetary
assets include assumptions and limitations that are
specific to the method of valuation of the
environment and natural resources. In addition,
these calculations neglect to conisder the impact of
technology and development [15].
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3 Towards a sustainable and naturally
harmonized development model
The industrial model of capitalism, based on
continuous quantitative growth and global
population growth has led to the economic and
environmental crisis [23]. It is now necessary to be
aware that the global economy will not be able to
grow in the long term at such a speed of the collapse
of ecosystems and the simultaneous reduction of
stocks of natural resources [3]. When searching for
a solution for modelling the sustainable and
naturally harmonized development model it is
necessary to keep in mind that the global economy
today is made of two completely different worlds:
the developed and the developing countries.
If the world economy is now overgrown
compared to the natural base, the fast development
of developing countries represents a threat for the
ecosystem. In the application of basic commodities
such as wheat, red meat, fertilizers, steel and coal,
China quantitatively overtook the United States and
became the world's largest consumer [4], [3].
Consequently, it is evident that developing
countries as economically developed countries, need
a different development model.
We argue that actual capitalism should better
take a new direction towards sustainable and
naturally harmonized development model (Fig. 1) or
it will soon collapse.
In the book Capital in the 21st century, Piketty’s
[38] points out the flaws of the actual capitalist
model. According to Piketty, without a radical
transformation of the financial system, working
more and harder won’t ensure prosperity. The
neoliberal ideology that has imposed austerity
around the planet is punishing everyone who is not
an owner of capital. Policymakers and NGOs, at the
macro level, as well as companies and investors at
the micro level, need to concieve the value creation
in a holistic sense when formulating strategy and
allocating dwindling resources, particularly as they
seek to build long-term value [8].
Even after after the transition to the so called
information society, the world economy remains
dependent on natural resources. Nevertheless,
politicians (mis)understand economic development
as a statistical increase of the economic indicators,
and they are not effectively focusing on the
deteriorating health of the global ecosystem.
Alternative measurements of well-being can
contribute to the replacement of the present
indicators of the growth to which policymakers are
addicted [44].
Policymakers in developed countries should
question the assumption that human progress is
based on the number of cars, mobile phones and
other consumer items. It is necessary to focus also
on other factors of well-being that are not dependent
on mere consumption.
A real paradigm shift would imply the
considering that the progress of mankind entails a
different conception of social activities, through a
radical shift in the culture and in the hierarchy of
values.
Innovative companies have started to promote
services based on the sharing economy, creating a
shift in the culture of possession of goods. The first
applications of sharing economics have been on
durable goods such ast car and aprtment rental. The
latter is the case of the company Uber, established in
2009 and now operating in 45 countries. Uber is
based on a through a web application that allows
users to find a private car registered in the system,
for his/her transportation needs. In September 2014
this service was the target of tough protests by
existing taxi services in France, Germany and Great
Britain. the taxi drivers were protesting against
what, accroding to them is an unfair business
practice, which would also be dangerous for the life
of a passenger [10].
The former example is that of the web portal
Airbnb designed to promote trust economy. Airbnb
portal targets flat seekers and owners who wish to
rent their free space (flat or just a room). Thus,
individuals share their excess space with strangers
and earn money.
According to Brown [4 and 5], the markets must
recognize the environmental issues. The current the
prices of goods do not include environmental costs.
A new process of market creation is therefore
necessary to include ecological costs thus
considering the environmental constraints.
But is it actually possible to increase prosperity
while ensuring higher quality of life without
sustained economic (quantitative) growth?
One of the key challenges to the concept of
prosperity without growth is therefore the
development of a new macro-economics of
sustainable development, Daly [8] emphasized the
key role of environmental conditions in terms of
unchanged stock of natural capital and the
maintenance of low levels of material and energy
flows within the regeneration and the assimilation
capacity of the ecosystem.
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Macro-economics for sustainability, should not
be considered as just a model for maintaining
economic stability by increasing environmental
pressures. The required paradigm shift implies to
dismiss the assumption of growth of material
consumption.
To this aim the shift must be from quantitative to
qualitative economic development. In other words
an economic model that operates under the universal
spatial and environmental constraints taking into
account the regeneration and assimilation capacity
of the envoronment thus allowing e the survival and
increase well-being in the long term [8].
A sustainable economy is based on the
integration of social, human, physical and
environmental capital. Therefore the engine of
growth is not only greening the economy through
new technologies that produce fewer emissions and
consume less resources, but to focus on investments
in knowledge for a better use of human capital. A
sustainable society is not possible without a
complete transformation of the global energy
system, from centralized to decentralized, from non-
renewable to renewable energy sources [25].
The policymakers should be aware that for the
advanced economies prosperity without growth is
not utopian dreaming, but financial and
environmental necessity [25].
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Many proponents of disaster mitigation claim that it offers potential benefits in terms of saved lives and property far exceeding its costs. To provide evidence for this, and to justify the use of public funds, agencies involved in mitigation can use benefit-cost analysis (BCA). Such analysis, if well done, offers a testable, defensible means of evaluating and comparing projects, helps decision-makers choose between mitigation projects, and provides a means to assess the way we spend public funds. In this critical overview of the more contentious issues and latest developments in BCA, I emphasize the pragmatic choices that one can make in accordance with good practice in project evaluation.
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Risk management is too-often treated as a compliance issue that can be solved by drawing up lots of rules and making sure that all employees follow them. Many such rules, of course, are sensible and do reduce some risks that could severely damage a company. But rules-based risk management will not diminish either the likelihood or the impact of a disaster such as Deepwater Horizon, just as it did not prevent the failure of many financial institutions during the 2007-2008 credit crisis. In this article, Robert S. Kaplan and Anette Mikes present a categorization of risk that allows executives to understand the qualitative distinctions between the types of risks that organizations face. Preventable risks, arising from within the organization, are controllable and ought to be eliminated or avoided. Examples are the risks from employees' and managers' unauthorized, unethical, or inappropriate actions and the risks from breakdowns in routine operational processes. Strategy risks are those a company voluntarily assumes in order to generate superior returns from its strategy. External risks arise from events outside the company and are beyond its influence or control. Sources of these risks include natural and political disasters and major macroeconomic shifts. Risk events from any category can be fatal to a company's strategy and even to its survival. Companies should tailor their risk management processes to these different risk categories. A rules-based approach is effective for managing preventable risks, whereas strategy risks require a fundamentally different approach based on open and explicit risk discussions. To anticipate and mitigate the impact of major external risks, companies can call on tools such as war-gaming and scenario analysis. HBR Reprint R1206B
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Sustainability assessment is now emerging as a more transparent, comprehensive, integrated and far-sighted approach to decision making. Its basic demand is that all significant undertakings must make a positive contribution to sustainability. To apply this test, decision makers need criteria based on the core requirements of sustainability and the particularities of the context. As well, they need appropriately designed public processes; guidance on the weighing of alternatives, trade-offs and compromises; a supportive policy framework; suitable tools and inspiring examples. Drawing from transdisciplinary theory and practical case experience, the book addresses these matters and many of the surrounding controversies. While sustainability assessment must always be adjusted to particular circumstances, the generic approach set out in this book is applicable virtually anywhere.