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The Role of Environmental Accounting in Preventing Global Catastrophe
Graeme Taylor
Coordinator, BEST Futures
www.bestfutures.org
1 Do We Value Our Children’s Future?
“The real power of accounting perhaps lies in the way in which, as a structure of
meaning, it comes to define what shall and shall not count as significant.” (Roberts,
1991)
It is easy to describe the problem facing humanity—because our global system is
environmentally unsustainable, it is heading towards economic and social collapse. The
solution is equally straightforward—in order to avoid catastrophic collapse, our
unsustainable system must be transformed into a sustainable system.
However, many people do not have a clear understanding of either the problem or
the solution because the term sustainable development has been corrupted to mean
sustaining material growth, rather than developing ecological sustainability. So if we
wish to avoid disaster we need to start by clearly defining sustainable and unsustainable.
Put simply, something is sustainable if it can persist over time and unsustainable if it
can’t. We know that the present industrial system is unsustainable because it is
progressively degrading major ecosystems, and history and science tell us that any human
society that destroys its environment cannot survive. The air we breathe, the water we
drink and the food we eat all come from our environments. Because the energy and raw
materials used by our economies come from our environments, the long-term viability of
human societies depends on the long-term viability of the biophysical systems that
support them.
Although there is a growing awareness of environmental issues, most of the
world’s policy-makers do not yet understand the disastrous consequences of continuous
environmental degradation, or that biophysical systems can rapidly change when they
reach tipping points. They talk and act as if sustainability is a negotiable political option,
rather than a nonnegotiable ecological requirement.
As a result most political responses to the interrelated issues of climate change,
biodiversity loss and growing resource shortages are reactive, piecemeal and inadequate.
This situation is causing concern among an increasing number of politicians, business
leaders, scientists and communities who believe that global institutions currently lack the
capacity to manage these massive systemic problems (Rediff, 2008).
At present most politicians are still proposing ways to increase rather than reduce
resource consumption, and most international conferences are still debating how much
temperatures can be allowed to rise rather than what needs to be done to reverse global
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warming. These discussions perpetuate dangerous myths—that constant expansion of
resource consumption is possible on a finite planet and that adaptation to climate change
is possible. The reality is that the collapse of major ecosystems is imminent and that
natural and social systems cannot adapt to catastrophic changes.
As a consequence, the most important task of environmental accounting is to
explain that the real bottom line is not financial profits but survival, and the survival of
most species and our advanced civilizations is now at risk.
2 The Global Emergency
“We have reached a point of planetary emergency… Elements of a perfect storm, a
global cataclysm, are assembled… the oft-stated goal to keep global warming less than
+2°C (+3.6° F) is a recipe for global disaster, not salvation.” James Hansen (quoted in
MacIntosh, 2008)
Most people know that there is a global financial crisis, but they do not yet realize that
this is only part of a much larger and graver problem: the global environmental
emergency. The following diagrams may help to explain this issue:
Figure 1 represents a firm’s estimated financial position over the foreseeable
future:
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The blue line shows the firm’s forecasts for net assets. In this chart, because
expenditures are exceeding revenues, the company’s financial position is steadily
worsening.
This situation is clearly unsustainable. Unless this trend is reversed, the company
will go bankrupt and cease to exist. Let’s compare the estimates (the blue line) with the
actual finances (the red line). Clearly the estimates are completely inaccurate and
bankruptcy is right around the corner. Now the firm’s managers have three problems: the
first is that their company is going bankrupt; the second is that the situation is much
worse than they thought; and the third is that their accounting system doesn’t know why.
This chart is fictitious. Figure 2 is the real chart.
This shows the Intergovernmental Panel on Climate Change (IPCC) 2007
forecasts for how quickly sea-ice in the Arctic is melting. The blue line is the mean
estimate for the minimum summer sea-ice remaining. The lines above and below the blue
line represent the estimated best and worst case scenarios.
In the IPCC’s forecasts—which have been the statistical basis for international
negotiations on preventing climate change—the summer sea-ice is not likely to
completely disappear until sometime after 2100. However, the red line shows the actual
situation (based on 1979-2007 satellite observations). In reality, the sea-ice is melting
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much faster than predicted; most Arctic sea-ice may disappear in the summer as early as
2013, more than 80 years earlier than forecast (Public Interest Research Centre, 2008).
Like the previous chart, this diagram shows the existence of three critical
problems: our planet’s ability to regulate global temperatures is failing; this problem is
worse and more urgent than was forecast; and the scientific models used to make the
forecasts were badly flawed. This means that most experts and policy-makers have been
basing their judgements on inaccurate scientific data. As a result they do not understand
that we are only a few decades away from the catastrophic collapse of the global
environment and economy. Because they do not understand the implications and urgency
of the crisis, they cannot see the need to take emergency action to reverse global
warming.
How could 10,000 climate experts make such inaccurate predictions? Many
factors are involved: for example the time it takes to prepare and approve reports means
that data is often five years out of date, and many scientists are under intense pressure to
produce conclusions that closely match their home governments existing political and
economic policies. However, it is likely that a major cause of the poor modeling has been
the failure to use a whole-systems approach and explore how non-linear dynamics are
likely to produce system state changes. This is indicated by the reluctance of the IPCC (to
date) to include feedback processes in their reports that have not been extensively studied
(e.g. the release of methane from melting permafrost).
Fortunately many leading climate scientists are now making extraordinary efforts
to change this situation. They are calling emergency conferences and organizing media
events to ensure that the public is not only aware of the latest scientific data, but also
aware that interacting positive feedback processes have the potential to cause runaway
global warming.
In the real world not everything can be quantified and not everything should be
quantified. Whole systems are more than the sum of their parts and qualitative factors
cannot be ignored. We cannot wait to find out exactly where environmental tipping points
are and when they will occur, because the consequences of passing them will be both
irreversible and catastrophic. Instead we need to determine the general quantitative and
qualitative dynamics of biophysical and social systems, and then take a precautionary
approach to ensure that we act within safe operating parameters (e.g. by building
adequate safety margins into our systems to guarantee safe climate conditions).
3 What Does It Mean to Adapt to Catastrophe?
“Climate policy is characterized by the habituation of low expectations and a culture of
failure. There is an urgent need to understand global warming and the tipping points for
dangerous impacts that we have already crossed as a sustainability emergency that takes
us beyond the politics of failure-inducing compromise. We are now in a race between
climate tipping points and political tipping points.” (Spratt & Sutton, 2008)
An example of our collective failure to understand non-linear system dynamics is the
assumption that ecosystems and economies can adapt to rising temperatures. Most
politicians and economists are proposing that international negotiations try to limit
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average global temperature increases to 2°C, while admitting that achieving these targets
is unlikely. In August 2008, Bob Watson, the former chair of the IPCC, warned that the
world should work on mitigation and adaptation strategies to "prepare for 4°C of
warming" (Vince, 2009).
This approach is simply not feasible. Temperatures above 2°C will not only
destroy most coral reefs and tropical rainforests, but also trigger runaway global warming
through melting Arctic permafrost and releasing billions of tons of methane (Johnson &
Simms 2008). The result will be the extinction of most life on Earth and the end of
advanced human civilizations (Lynas, 2008; Spratt & Sutton, 2008).
Even if we manage to restore a safe climate, another environmental disaster is
looming. Our global footprint now exceeds the world’s capacity to regenerate by about
30%. If humanity’s consumption of biological resources and production of waste
continues to increase at current rates, by the mid-2030s we will be consuming twice as
much each year as our planet can sustainably produce and recycle (World Wildlife Fund,
2008). Computer modeling indicates that this trend will cause environmental and
economic collapse by 2050 (Turner, 2008).
With the exception of weeds (which have short life cycles and spread easily),
plants cannot adapt to rapid climate change (Smith, 2009). Human economies also cannot
adapt to large-scale destructive changes. For example, the United Nations is warning that
the world’s food production may decline by 25% by 2050 due to the combined impact of
climate change, land degradation, water scarcity and species infestation (Wallis, 2009).
Given that one billion people are already malnourished and that the global population is
forecast to increase to 9 billion by mid-century, this sharp reduction in the availability of
food and water is likely to lead to mass starvation.
A catastrophic outcome occurs when there is a total system failure from which
recovery is impossible. The loss of irrigation water as aquifers are pumped dry and
glaciers disappear, the spreading of the world’s deserts, the die-off of most marine life as
increasing levels of CO2 acidify the oceans—all these events will occur in the coming
decades unless emergency action is taken now. And each of these will be catastrophes
with destructive consequences that may last thousands or millions of years.
For this reason we need to ask: what does it mean to adapt to climate change, if
climate change will be catastrophic? If adaptation to catastrophic outcomes is not
possible, then we had better focus our efforts on preventing disaster and ensuring a safe
future. This will require a completely different strategy: instead of making international
agreements that increase pollution and raise global temperatures, we need to make
agreements to reverse global warming, refreeze the Arctic and restore a safe climate.
But no matter how quickly we act to restore a safe climate, we will have to adapt
to climate change. Already average global temperatures are increasing and extreme
weather events becoming more frequent. Because our ability to adapt is limited, we need
to integrate adaptation into a wider strategy of mitigation. This can be done through
concentrating our efforts on an emergency effort to rapidly reverse global warming—for
example through redesigning the economy to capture carbon from the atmosphere for use
in agriculture and manufacturing rather than releasing it as a pollutant (Taylor, 2008).
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4 The Need to Make the Politically Impossible Possible
“While the benefits of controlling greenhouse gas emissions remain uncertain, diffuse,
international in scope, and cast in the future, the costs of such control are easier to
calculate, threaten our lifestyles, and are cast in the present, which makes it politically
difficult to enact meaningful greenhouse gas control policy.” (Hackett, 2005)
Policy-makers have good reasons for resisting mitigation proposals that require large-
scale technological, economic and cultural changes: rapid changes of this magnitude are
usually politically unacceptable and therefore practically unachievable. Successful
policy-making normally involves "balancing" competing interests, including conflicting
ecological, economic and social interests (Foran et al., 2005; Schoer, 2005).
The obstacles to making structural changes are not only vested interests, but also
entrenched beliefs and behaviours. Some subjects are even taboo: although it will be
impossible to create a sustainable economy without putting limits on individual and
collective consumption, many politicians and business leaders are reluctant to discuss this
issue in public for fear of provoking a backlash that could destroy their careers.
As a result most experts and policy-makers focus on what they believe are
achievable goals. However, making incremental adjustments to an unsustainable system
is not a viable strategy for preventing disaster. Climate change mitigation and adaptation
strategies will only be effective if they are based on accurate science (i.e. on biophysical
realities), not on what is currently politically achievable. Because sustainability is a
requirement for survival, we must do whatever is necessary to restore a safe climate and
healthy ecosystems.
Since the environment, economy and culture are holarchically nested systems (the
economy is a subsidiary of culture and culture a wholly owned subsidiary of the
environment), we will not be able to transform our unsustainable consumer society into a
sustainable conserver society without changing current views, values, and institutions.
We have no choice: we must find ways to make an economic and cultural paradigm
shift—to make what is currently politically impossible possible.
The challenges we face are enormous, but not insurmountable. Although time is
not on our side, the accelerating pace of change works both ways. Not only is there
increasing destruction, but also growing awareness and more and more constructive
innovation. New system-based views, values, social structures and technologies are
emerging all over the planet. The process of transformation has already begun.
The major forces driving constructive change are rising educational levels, the
growing exchange of information and the development of more sustainable and
distributed information, energy and productive technologies. Although television and the
Internet are spreading unsustainable consumer values, they are also developing a global
awareness of democracy, the environment, peace and human rights.
The major force driving destructive change is the continual expansion of the
industrial system with its environmentally unsustainable patterns of production and
consumption. We can expect climate change and increasing resource shortages to
intensify international competition and conflict (Dyer, 2008). Major social conflicts are
also likely to occur within countries as the result of global economic crises, growing
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inequality and an increasing gap between rising expectations and declining standards of
living (National Intelligence Council, 2004).
At this time most people are too busy with their lives to pay much attention to
national or global issues. However, we have already begun to enter the phase of growing
global crises. As regional and global crises grow it will become increasingly clear to
people all over the world that the current global system is failing. More and more people
will question the destructive values and institutions of our industrial system and begin to
look for constructive alternatives—pathways to survival. At this point, if positive
solutions and good leaders exist, rapid transformation is possible (Taylor D & Taylor G,
2007). It will not be easy to make the transition from economic growth based on
increasing resource consumption to economic growth based on increasing efficiencies.
This enormous technological and cultural transformation will require the mobilization of
entire nations and the reorganization of the global economic system. But this type of
effort has succeeded before. If visionary leaders emerge it is quite possible for rapid
transformative change to take place in most of the world’s major economies.
The mobilization for war that took place in the United States after it was attacked
by Japan is an example of how rapid change is possible when people unite behind a
common cause. Priorities changed overnight. The entire economy was changed over from
consumer to military production within a few months. Men went to war, women went
into the factories and the country went from high unemployment to a labour shortage.
Although the United States was only at war for three and a half years, during this time
enormous quantities of military goods were produced and scientific breakthroughs were
made in many areas including radar, jet aircraft and nuclear energy.
Sceptics argue that attempts to create a sustainable economy will result in
economic ruin. In contrast, studies by the Organization for Economic Co-operation and
Development (OECD) suggest that greenhouse gas emissions could be cut by a third by
2030 at a cost of just 0.03% of the annual growth of the world GDP (OECD 2008). The
complete transformation of the global economy will be much more expensive. However,
it is not likely to cost more than the Second World War, when American military
expenditures rose from 1% of the national income in 1939 to 42% in 1944 - an enormous
effort that did not destroy the American economy (Spratt & Sutton, 2008).
Most people and most governments will not become convinced of the need for
structural change until the global economy has begun to collapse. This process will cause
immense misery and damage. The danger is that the downward spiral of poverty, hunger,
wars and environmental destruction will become unmanageable and humanity will cross
one ecological and social tipping point after another.
The hope is that as the global environment and economy begin to collapse, the
majority of the world’s population will wake up to the need for constructive change. But
for this to happen a clear vision of a sustainable alternative must already exist and be
supported by a critical mass of well-organized people.
Our role is to accelerate structural transformation through helping the emerging
elements of the new sustainable system come together in a process of collaboration,
convergence and confluence. This can be done if we both clarify the consequences of not
taking action to prevent environmental collapse, and put forward a clear vision of a
sustainable system and a practical path for creating it. The development of a constructive
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holistic alternative to our destructive global system (i.e. the existence of a positive system
attractor) will support the rapid evolution of a new type of sustainable system (Taylor,
2008).
5 The Dangers of Virtual Economics
“Clearly, there are numerous benefits in better attaching value to externalities so that the
market signals better reflect the real environmental load of services and goods. In a
market economy, prices are determined largely by supply and demand. But ‘What price
does one put on a stable climate?’ What price do you put on things essential for life but
for which we have no price because they are not traded in the market place? It is
questionable whether we will ever find a method for measuring the value of natural
capital upon which all agree. But we all agree that nature is valuable. In fact, arguably,
the ecosystems of the world are priceless and it is clearly wrong to continue to assume
they have no value.” (Hargroves & Smith, 2005)
People will not be willing to change their behaviours, institutions and technologies as long as
they believe that the current economic system can deliver economic security and prosperity.
The biggest obstacle to the creation of a sustainable societal system is the myth that the
global economy will soon recover from a cyclical recessionary phase and then continue
to expand. In reality any economic recovery will be fragile and short lived.
In the coming decades a combination of failing ecosystems and resource
shortages will destabilize and eventually collapse the global economy. This will happen
because the continuous expansion of the global economy is impossible on a planet with
finite resources (Daly & Cobb, 1989).
The World Bank has estimated that global consumption will increase by 400%
between 2000 and 2050. This assumes that enormous new quantities of fresh water,
wood, minerals, oil and gas, grains, fish and other essential inputs will be found to
produce four times as many products. The problem is that these raw materials do not
exist. Nicholas Stern, the bank’s Chief Economist and Senior Vice-President, said in the
same report, “The $140 trillion world of five decades time simply cannot be sustained on
current production and consumption patterns” (World Bank, 2003).
In fact the global economy cannot continue to produce and consume even at
current levels with current technologies: the planet does not have the resources and
cannot recycle the waste. The global economy has been running an environmental deficit
for more than two decades (World Wildlife Fund, 2006). It is only a matter of time before
environmental destruction causes the devastating collapse of major ecosystems (forests,
fisheries, river systems, etc.).
Shortages are developing because many resources are approaching peak
production levels. These environmental constraints were major factors in the sharp rise in
food, energy and commodity prices in the period leading up to the 2008 financial crisis.
With the global recession demand has been reduced and the prices of many resources
have fallen. However, if the global economy starts to recover and demand increases,
resource shortages will again force prices back up to pre-recession levels (International
Energy Agency, 2008).
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In reality the global economy is a virtual economy since values are largely
unrelated to real wealth. The current financial crisis is the result of the sudden contraction
of imaginary wealth in the form of credit, shares and overvalued assets. Underlying the
American credit and mortgage bubble is what the investor George Soros calls the
“Superbubble”—an overvalued US currency, which has been printed in enormous
quantities to cover annual trade deficits and a growing national debt (Soros, 2008).
The United States has been running large trade deficits for decades because it
imports more than it exports. Americans have been able to get away with this because the
US dollar is the world’s reserve currency and foreign investors have been willing to buy
US treasury bills. In effect, the Chinese, Saudis and others have loaned Americans the
money needed to buy their goods.
Not only is this financial arrangement unsustainable, but its foundations are
starting to collapse. Foreign investors are becoming increasingly nervous that there will
be a massive sell off of US dollars (which would lower its value). As well, Americans
consume five times their share of global resources and China, India and other countries
are increasingly competing for a limited supply of global resources. At some point in the
near future these countries will refuse to keep propping up American overconsumption,
and both the US dollar and the American economy will go into free fall.
These problems are not unique to the US economy. The whole global system is
based on unsustainable resource consumption. The following diagram illustrates why the
American economy—the largest in the world—will have difficulty recovering from this
recession:
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While market forces are good at producing and distributing goods at the cheapest
possible price (where there is open competition), they are not designed to take into
account social and environmental goals.
Because companies will go out of business if they fail to make profits, they are
under constant pressure to do whatever is the most financially rewarding. Unless it is
going to improve the bottom line, it is unlikely that a company will invest in conserving
energy and resources or in reducing pollution. They are even less likely to contribute to
social goals such as sharing resources, preserving ecosystems or feeding the hungry. The
problem with the marketplace is that Adam Smith’s invisible hand is unprincipled: capital
goes wherever it is the most profitable, and businesses tend to support government
policies that will increase profits.
As well, because profits can only be made where there are scarcities (since price
reflects the relationship between supply and demand), corporations are constantly trying
to control or monopolize productive resources and intellectual knowledge, and constantly
centralizing wealth in heirarchical, undemocratic institutions.
However, it would be wrong to blame everything on business. We live in a
consumer society where advertising drives demand, and increasing demand drives
increasing production. Nowhere in the economic or cultural system is there anything to
keep resource consumption within environmentally sustainable limits. Markets encourage
efficiency but not sufficiency; consumption but not conservation.
A further problem with markets is what is known as Jevons paradox. When a
good is produced more efficiently, its price tends to go down. As the price goes down,
more people can afford to buy it, so sales and production go up. We can see this with
electronics: as they become cheaper, more and more are sold. While market forces may
encourage businesses to reduce the resources used to produce each unit of goods and
services, they do not encourage either businesses or consumers to reduce their total
resource consumption.
Richard Sanders, an ecological economist, commented that “economic efficiency
is about people getting whatever they want (so long as they have the money) at the
cheapest possible price. However, while it may be rational for individuals to want a
particular thing, the impact of millions of people wanting that thing may be socially
and/or ecologically irrational. For example, the private car is an individually rational
form of transport while public transport is socially rational... [Because] the essence of the
sustainability problem is that in the aggregate, humanity is able to demand natural capital
via the market at volumes far beyond the carrying capacity of the planet…there is no way
within a market context to stay within the carrying capacity of the planet.” (Sanders,
2006)
Although new technologies will delay the collapse of industrial civilization, they
will not be able to prevent it. While technological advances will reduce waste and
improve efficiencies, they will not change the values and social structures that promote
unsustainable economic expansion, environmental destruction, inequality, greed and war.
Technological solutions cannot fix social problems.
Driving our unsustainable global economy is the unsustainable culture of the
consumer society. It creates false greeds for power, status and wealth instead of meeting
real needs for meaning, community and survival. Advertising creates the illusion of
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scarcity in the rich world, where people try to satisfy their emotional and spiritual needs
through consuming things they don’t need. Many of these goods are produced in the
economically poorer regions of the world where real scarcity exists and people do not
have access to the resources they need to meet basic subsistence human needs for food,
shelter, health and education.
Because the consumer culture produces both insatiable wants (greed) and poverty,
people will never feel that they have enough and there will never be an end to increasing
consumption and constant environmental degradation. A culture that values shopping
over survival is ultimately unsustainable.
6 The Requirements and Parameters of a Sustainable Global System
“Genuine wealth is built with every action and choice we make, no matter how small or
large. Genuine wealth is achieved when our decisions and actions are grounded in core
values that are rooted in love and respect for each other, respect for nature and creation,
and a genuine desire to work together towards improving the well-being of both current
and future generations.” (Anielski, 2007)
The sustainability of every living biological and social system is determined by its ability
to have its essential needs met on an ongoing basis. These enable it to maintain itself over
a relative time period with sufficient resilience to withstand normal environmental
stresses and to reorganize in healthy ways in response to changing conditions.
A common mistake is to describe essential needs as only minimal physical inputs,
since all living systems are members of wider communities and ecosystems. For example,
human needs are more than simply material needs for food, shelter and safety: they are
also emotional, intellectual and spiritual needs—for meaning and belonging, for
relationship to both community and nature. Since living systems can only survive if they
are simultaneously individually healthy and members of healthy communities and
ecosystems (i.e. healthy parts of healthy wholes), it is more accurate to say that the
essential needs of all biological and social systems are for health and wholeness.
In the world today the dominant view is that reality is a hierarchy of separate
objects, rather than a holarchy of interrelated systems. In this alienated reality,
competition for power and resources is the natural state of existence, as is the exploitation
of the weak by the strong. The popular media accept that it is normal for billionaires to
hoard wealth in a world full of hungry children, and for weapons of mass destruction to
be developed in tandem with the mass extinction of species.
Since societal systems are organized by world-views, the core requirement of a
sustainable system is an ecologically relevant world-view that recognizes the
interdependence of all life on earth, and the need of all life for health and wholeness. The
implication of this is that the development and spread of a systems-based paradigm is a
prerequisite for the constructive transformation of the global system.
Although it is impossible to predict the exact structure of a sustainable system, we
can define its essential needs, and from these its basic social and economic design
requirements. Ecological bankruptcy is inevitable unless the process of continual
environmental degradation is reversed. This means that the first law of a sustainable
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economy is that all human economic activities must take place within sustainable
biophysical limits (Daly, 1996).
The key principles of sustainable development have also been defined by many
governments and organizations. For example, the United Kingdom Sustainable
Development Commission proposed:
Sustainable development should be the organizing principle of all democratic
societies, underpinning all other goals, policies and processes ….
All economic activity must be constrained within [ecological] limits.
We have an inescapable moral responsibility to pass on to future generations a
healthy and diverse environment, and critical natural capital unimpaired by economic
development ….
Sustainable economic development means “fair shares for all”, ensuring that people’s
basic needs are properly met across the world, while securing constant improvements
in the quality of people’s lives through efficient, inclusive economies …. Once basic
needs are met, the goal is to achieve the highest quality of life for individuals and
communities, within the Earth’s carrying capacity, through transparent, properly
regulated markets which promote both social equity and personal prosperity.
Sustainable development requires that we make explicit the cost of pollution and
inefficient resource use, and reflect those in the prices we pay for all products and
services ….
There is no one blueprint for delivering sustainable development. It requires different
strategies in different societies. But all strategies will depend upon effective,
participative systems of governance and institutions, engaging the interest, creativity
and energy of all citizens ….
Society needs to ensure that there is full evaluation of potentially damaging activities
so as to avoid or minimize risks. Where there are threats of serious or irreversible
damage to the environment or human health, the lack of full scientific certainty
should not be used as a reason to delay taking cost-effective action to prevent or
minimize such damage (Porritt, 2005).
Sustainability requires individual, corporate and governmental accountability and
responsibility. Part of redesigning the economy is shifting financial costs from individual
and corporate activities that benefit society, to activities that do environmental, economic
and social harm. In Capitalism as if the World Matters Jonathan Porritt proposed that
governments not tax the value that people add and instead tax the value that they subtract.
This would mean eliminating personal income taxes, company taxes and value-added
taxes and instead taxing pollution, speculative currency transactions and unearned wealth.
We will only be able to prevent global collapse if global resource consumption is
kept within sustainable limits. Businesses and consumers are not able to determine these
limits because markets are mechanisms for determining economic prices, not ecological
sustainability. It will only be possible to reduce total resource consumption through both
providing clear regulatory and financial guidance to markets, and changing consumer
values and behaviors.
Regulating economic activities is neither a new nor a radical idea. Because our
societies recognize that not everything can be efficiently managed by market forces,
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governments already build and operate roads, schools and emergency services and
regulate every type of business from railways to restaurants. Every society considers that
wars and natural disasters are too important to be left to private interests and markets.
With the future of humanity at stake, we now need to ensure that markets serve the
interests of society and not the other way around.
7 Whole-systems Accounting and Modeling
“A successfully assessed economic process may have negative social, demographic and
environmental impacts and vice versa. Statistics are still not sufficiently able to evaluate
the complex costs of economic development in terms of impacts on various fields of
social conditions of people’s lives and impacts on the quality of various environmental
aspects. What is often missing is assessment of effects in dependence on time. Societies
sometimes pay for a short-lived economic success by negative social and environmental
impacts that come usually with a delay.” (Drápal, 2005)
If our species is to survive, we need a better understanding of the problems we face and
their solutions. Our current economic and accounting models are incapable of even
grasping the existence of many critical environmental problems. Although global
computer modeling (Turner 2008) and footprint analysis have been warning for years that
the global economy is environmentally unsustainable, only a handful of government
research institutes are seriously addressing this issue. (An excellent example of research
on national sustainability is Weaver et al., 2000).
Our economic and accounting systems are a part of the problem rather than the
solution. Accounting systems that value existing material wealth but not the future of our
children are not only flawed, but dangerous. Their failure to value other life forms puts
the survival of our own species at risk. Valuing private profit over community promotes
social inequality and conflict. Their failure to place any value on love, trust, justice, faith,
and sacrifice robs us of the vision to avert disaster and preserve life on Earth.
The role of environmental accounting is not to make minor adjustments to this
dysfunctional economic model, but to help create an entirely different type of holistic,
sustainable economy. Jane Andrew points out that the purpose of accounting is to
establish accountability (Andrew, 2001). To do this we will need to ask the really
important questions:
- What contributes to ecological and human health and wholeness?
- What factors are making our natural and social systems unsustainable?
- When ecological, economic and social collapses are likely to occur?
- What changes must be made within what timeframes to prevent disaster and
ensure sustainable outcomes?
Our starting point must be to ensure that accounting methods reflect the reality
that the economy is a subset of the environment (and that the economy is in this sense is a
cultural invention). They need to ensure that all economic activities must take place
within environmentally sustainable limits and support ecological and social health and
wholeness. For example, since the unique intellectual property contained in each species
is irreplaceable, the existence of every life form should be protected with the same care
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given to priceless historical artefacts. We also need to take a whole-systems approach and
do cost-benefit and risk management analyses of environmental and social issues. For
example, we need to know whether it would it be better to invest in peacebuilding rather
than warmaking; and what are the risks and costs of runaway climate change.
We will only be able to explain global environmental problems and convince
policy makers and the public of the need for urgent action if we are able to accurately
value existing natural and social assets, and then estimate how different policies will
affect these assets in the future. Our challenge is to develop a full set of environmental
accounting tools, including a dynamic, systems-based global model capable of
forecasting probable future outcomes and their timelines, costs and benefits.
Environmental accounting has a vital role to play in preventing global disaster and
creating a sustainable future. But we must act quickly. Rajendra Pachauri, the Chair of
the Intergovernmental Panel on Climate Change, believes that “If there’s no action before
2012, that’s too late. What we do in the next two to three years will determine our future.
This is the defining moment” (MacIntosh, 2008)
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