"One of the most pressing and complex challenges
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The Polluter Pays Principle
Poverty and its Impact on the Environment
Industry and Economics
The Growth in International Trade
The Environmental Impacts of Tourism
T here are few sets of interactions as intrinsic to human society as those involved in business and the economy. Since the first person traded five chickens for a goat, we have been engaged in business as a means of makings ends meet.
All animate beings on Earth consume as an inherent aspect of life. Historically however, this consumption was usually limited to meeting the immediate needs of basic survival, such as food, housing and the protection against enemies and predators. Since then, economics, and consumption, have become much more complex. After the industrial revolution-which began in the North and then spread to the South-human desires multiplied, and industrialized humanity began to want new things as fast as they could be invented. In the years following, many new "conveniences" such as refrigerators and televisions improved our quality of life, and we started to depend on them. No matter how isolated, most people today ride in automobiles or buses, wear eyeglasses with metal frames, make telephone calls or listen to the radio. All these are products of the industrial revolution.
As there is an intrinsic interconnection between human activity and economic activity, so too is there is an interconnection between economics and the environment. The word "economy" in most European languages is derived from the Greek words "oikos," which means "home," and "nomos," which means "law." Economics-at least in the European languages-could be considered a sort of law of the home, or household management. In the larger sense of the word "home," extending beyond our dwellings to the entire planetary home, the Earth, this word implies that successful economics involves the responsible and efficient care of the Earth's resources.
While there are many uncertainties in both economics and the environment, what is clear is that there is an intricate relationship between the two. It is also evident that there is a need for their integration in order to achieve environmental sustainability. The incorporation of social, environmental and equity issues into economic development is a necessary step to ensure that all people everywhere are able to enjoy a comfortable standard of living and improved quality of life without causing irreversible damage to the environment.
A modern economy consists of a system through which goods are produced from resources, transported, marketed and then consumed. The production, consumption and distribution of these goods are all dependent upon the ecology, or the biosphere, for materials such as timber, minerals, soil and fossil fuels. Likewise, the environment is needed for the disposal or elimination of waste. From an ecological point of view, the modern human economy is a set of interactions of energy and materials that exists alongside and is dependent upon natural biospheric processes.
In the past, this interdependence of economic and ecological processes was often overlooked or unrecognized. The environment was regarded as an unlimited source of resources to be exploited for production, or as a bottomless pit into which wastes could be disposed. When the scale of human activity was small in comparison to ecological processes, it is easy to see how humankind adopted this assumption. Today, however, people are realizing that the interdependence of the environment and the economy cannot be ignored.
Many economists believe that much of the current environmental crisis can be attributed to an undervaluing of the Earth's resources in the global marketplace. On a personal level, we of course value the air, the water, the trees and wildlife. Markets, however, with their emphasis on supply and demand, do not incorporate this value into the prices of goods.
What these prices do reflect is the extracting or growing raw materials, the cost of production, packaging, advertising and transport. What they do not reflect is the environmental costs associated with the production and distribution of the goods. These costs are called "external costs" because they are not borne by the manufacturer. External costs, however, often cause an uncompensated loss of health, finance or welfare on the part of other people or communities not involved in the manufacturing. For example, the costs of air pollution, such as increased rates of lung diseases, are experienced by the community and not borne by the actual polluter. Since these costs (cleaning up the air or paying hospital bills for people with sensitive lungs) are not borne by the polluting producer, they are not reflected in the prices of products. Hence, the producer has no economic incentive not to pollute.
Another example can be seen in a chemical company that discharges
its waste into a river or lake. Since much of this waste is highly
toxic, it causes numerous environmental consequences such as killing
the aquatic life of the region and polluting the community's drinking
water supply. The potential costs of properly disposing of the
toxic waste were saved by the company. Unless the company has
to pay the cost of cleaning up the water, the prices of its chemicals
will not reflect the true cost of producing them. If the company
were forced to pay these costs, its prices would increase, encouraging
consumers to look for other chemicals or substitutes. It also
would encourage the company to find ways of reducing the amount
of toxic waste it produces.
A new concept to deal with the problem of external costs is evolving in international circles but does not yet have enough support to be properly implemented. The "polluter pays principle" states that whoever is responsible for damage to the environment should bear the costs associated with it. Although the theory may seem straightforward, in practice it is difficult to enforce because it is not always obvious who is responsible for environmental degradation.
In any market transaction, there is a buyer and a seller, both of whom benefit in some way from the transaction. If there were any pollution or other form of environmental degradation caused by the production of the product, then both are in some way responsible for it. In other words, the degradation would not have occurred had either of them refused to take part in the transaction. It then stands to reason that both parties should in some way pay the cost of either avoiding the problem or solving it, given that producing products without harm to the environment often incurs higher costs.
Some organizations think it quite reasonable to demand that environmental
degradation be paid for in direct proportion to the amount of
benefit obtained from the activity that caused the degradation.
The costs of environmental degradation can thus be included in
market prices through realistic resource pricing as well as through
the use of economic instruments such as taxes and permits. These
measures would "internalize" the external environmental
costs by distributing the costs of environmentally harmful methods
of production and consumption to those that are engaged in the
activity. Once this full cost pricing is implemented, and the
complete costs are internalized, market forces should make heavily
polluting or wasteful industries obsolete and should encourage
environmentally-sound ones.
 | The Growth in World Trade Exports (in $US billion) Source: International Monetary Fund (IMF), International Financial Statistics Yearbook, (Washington, D.C.: various years); current dollars were allocated using the IMF's export value index; 1993 estimate based on IMF, World Economic Outlook, October 1993. Dollar values are 1990. |
Poverty and Its Impact on the Environment
Just as inefficient economies and industry can have a negative impact on the environment, so too can lack of economic activity or industry impact negatively on the environment. At the Stockholm United Nations Conference on the Human Environment in 1972, former Indian Prime Minister Indira Gandhi spoke of the link between poverty and environmental degradation when she attributed pollution primarily to poverty and underdevelopment. On hearing this, many developing countries attending the Conference expressed concern that environmental goals could detract from their development objectives.
At the time of the Stockholm conference, an estimated 944 million of the world's people lived in poverty. Scientists and policy makers were beginning to witness the environmental degradation scarring the planet, a result of years of irresponsible industrial development. The connections between poverty and environmental concerns had not yet been clearly drawn.
Today we know the connections all too well. About 40 per cent of the world's population lives in poverty. More than one billion people are considered absolute poor, and every day an estimated 40,000 children die of disease and malnutrition.
Those who live in poverty are often too preoccupied with immediate survival to be concerned with environmental issues. They do not have the luxury of using what resources they have access to in a sustainable manner. Often, the poor are forced to exploit the environment due to limited choices of food and fuel. Deforestation, soil erosion and desertification are environmental problems that are often associated with extreme poverty.
Environmental degradation and poverty are strongly intertwined, resulting in a vicious cycle in which poverty causes environmental stress that, in turn, perpetuates poverty. The only way out of this vicious circle is along the path of sustainable economic development and the efficient use of modern technologies.
The traditional economic instruments that measure success in the market place frequently encourage us to take natural resources-for food, fuel, shelter and more-without requiring us to replenish the environment. The present system used to calculate the gross national product (GNP) takes no account of the depletion and degradation of natural resources and, therefore, overstates progress and generates environmentally destructive policies.
In the long term, however, environmental losses creep onto profit-and-loss balance sheets. They impose heavy burdens on societies as well as the global and state economies of both developing and developed countries. Local and national economies from Australia to Zimbabwe feel the economic stress of degradation when agricultural yields decline, fish catches fall, and the costs of cleaning up toxic wastes, providing health care and alleviating hunger begin to eat away at any profits. The economic system warns us that we are over-harvesting only when it is too late. In the developing world, this falling productivity is reducing living standards, thereby creating more poverty.
As well, the unequal distribution of land, rather than a shortage of land, forces the poor to exploit marginal environments. Most agricultural land is concentrated in a small percentage of holdings usually owned by a privileged minority who use it for export crops, forcing the poor to unsuitable lands. This pressure on the land by growing populations leads to a host of environmental problems such as soil erosion and loss of water sources.
The world has the ability to end absolute poverty, and with its
end a major threat to the well-being of a large and growing number
of people. When the poor are given the means and opportunity to
break out of the vicious circle in which poverty holds them, real
sustainable development will become a possibility.
The world's dominant
economic systems are based on what we have begun to realize are
two potentially self-destructive and environmentally-damaging
principles: consumption and growth. Most human economic activity
is centred on consuming resources. In addition, this activity
depends on maintaining a growth in consumer activity. Each year,
industry must produce more manufactured goods and extract more
minerals than it did in the previous year in order for the economy
to be considered "healthy."
Though necessary for development and economic growth, industry also is the cause of many environmental problems. It consumes 37 per cent of the world's energy, and emits 50 per cent of the carbon dioxide, 90 per cent of the sulphur oxides and many of the chemicals now threatening the ozone layer with depletion. Every year industry produces more than two billion tons of solid waste and 338 million tons of hazardous waste.
Though most industrial activity is in the developed world, the developing world is doing just that-developing, and often unsustainably. Recent studies from the World Bank and the General Agreement on Tariffs and Trade (GATT) conclude that the amount of "dirty" industrial output in developing countries has grown steadily over the past two decades. They also suggest that this has more to do with the stage of industrialization of those countries than any other factor-including the desire of some industries to migrate to them primarily because of their lower environmental standards.
The good news is that industries are beginning to recognize the need to prevent wastes from being generated in the first place before treatment and storage are necessary. Some companies have demonstrated economic and environmental benefits from introducing cleaner production as an integral part of their environmental management system.
Limited financial resources and lower profit margins, however, sometimes make it difficult for business and industry to make the protection of the environment a priority. When looking at profit and loss statements, sales growth is often a matter of survival. Capital investment alternatives are usually decided upon by calculating the immediate return on investment. Because there is a need for measurable evaluation criteria, traditional business models emphasize short-term results instead of long-term opportunities that are afforded by incorporating environmental principles into the plan. To counter this tendency, the shareholders in many corporations are pressuring management to produce short-term profits while at the same time accounting for social or environmental costs.
In countries with a choice of consumer products, communities often advocate supporting those companies with good environmental policies or boycotting those with hazardous environmental principles. When companies experience dramatic drops in their sales because the public disapproves of their environmental policies, they often reconsider their practices.
This strategy, however, is most practical in developed countries
where consumers have a choice of products. In developing countries
the scenario often is much different, and there are not so many
options for consumers. Some of the problems that do exist are
a lack of awareness, inappropriate labelling of products and inadequate
environmental legislation. Where environmental legislation does
exist, its enforcement is often weak. Because of light fines or
minimal punishment, it is often cheaper for companies to continue
to break the law than it is to protect and clean up the environment.
Crossing Borders: The Growth in International
Trade
The formerly separate economies of the world are increasingly merging into one gigantic and interdependent economy. The implementation of the Uruguay Round of GATT and the establishment of the World Trade Organization (WTO) is expected to generate billions of dollars each year for the global economy and will bring profound changes to the contours of international trade and markets. The WTO intends to weave national economies into the expanding global economy. This fundamental change in the way the world conducts its business will mean that environmentalists, and those with environmental concerns, should both monitor and search for ways in which the environment could suffer from irresponsible business and industrial practices.
An integral component of the new global economic order is the concept of mutual interdependence and the idea of "comparative advantage." The idea is that a country or region that produces certain commodities well, and at the lowest price, should concentrate its activity on those items and rely on trade for the balance of its needs. According to this concept, for example, Costa Rica should produce coffee and trade it for sugar, which Brazil might be better at producing.
While this concept holds certain advantages, it also causes problems, some serious enough to threaten open trade within and between nations. Among these are the problems of security of supply of goods or services between nations. Global trade increases the need for transportation and distribution, thereby creating more pollution as goods are transported over greater distances. As well, a global economic system of trade could undermine the ability of communities at the local level to be self-sustaining. Farmers and other primary producers, unable to compete in the global marketplace, could be pushed into poverty.
All nations have strengths, or potential strengths, that could be developed through cooperation across borders. To ensure equitable benefits and global equilibrium, some economists say that all contributions to increase open world trade should be seen as positive, even if they are not uniform and fair in providing direct benefits to all countries.
One practice that could effectively contribute to the objective of sustainable development would be to evaluate the activities of transnational corporations (TNCs). Through providing opportunities for employment, investing in the community and purchasing local inputs for their production processes, TNCs often contribute positively to the economic development of their host countries. Typically they also export a high percentage of their outputs, thereby earning foreign currency for their host country and positively contributing to its balance of trade.
While in general, TNCs positively influence the economic and social development in the host country, there are examples where this is not the case. If they are able to get away with it, some TNCs overexploit resources, both human and natural. Moreover, many developing countries let TNCs operate in ways that would never be tolerated in developed countries. In the worst cases, the desire of developing countries for economic growth and foreign direct investment by TNCs can even override their strongest concerns for environmental protection and human safety.
Fortunately, an increasing number of companies are endorsing voluntary
codes of conduct, such as the International Chamber of Commerce's
Business Charter for Sustainable Development, which strongly recommends
improved environmental performance through sound environmental
management. National codes like Japan's "Charter for Good
Corporate Behaviour" and its "Global Environmental Charter"
have also encouraged TNCs to conduct their operations in a responsible
and conscientious manner, both at home and abroad. Still, much
remains to be done to ensure that TNCs contribute to the establishment
of fairer economic systems which do not threaten our global environment.
The Environmental Impacts of Tourism
A case study
After the oil industry, tourism is the second biggest business in the world. It also is one of the world's fastest growing businesses, and is the largest source of employment in the world. The number of tourists worldwide has tripled over the past 20 years. Every year, nearly 600 million tourists check in at hotels, villas, apartments and camps. According to the World Tourism Organization (WTO), tourists spent US $3.2 trillion in 1994, providing work for 10 per cent of the global work force.
However, tourism, travel and recreation are an increasing source of environmental stress on the Earth. Tourism can carry a heavy price tag for the environment because of the hotels, fast food restaurants, access roads and vehicles that come with it. Indeed, when the needs of tourists supersede the needs of the local community, the latter are sometimes compromised.
The 'sunandsand' tourists are usually responsible for the worst environmental damage, straining water, energy and sewage disposal resources in their tourist havens, from the islands of the South Pacific to East Africa. In one area of Tunisia, for example, tourists' needs for fresh water have lowered the groundwater level and left many homes dry for several hours a day. Many beaches in the Caribbean are now unsuitable for bathing because of sewage pollution.
Hungry for foreign currency to pay for imports and to finance debts, many developing countries are turning to tourism. This strategy could be smart economics: some 20 per cent of all international tourists now go to developing countries. By the year 2020, the WTO estimates that 937 million tourists will travel every year, an increasing percentage of whom will visit developing countries.
Though development of tourism is a choice for some countries, for others it is almost a necessity. Nepal, for example, is too poor to take care of its vast cultural treasures, and so must rely on the many travellers who have romanticized the Himalayan kingdom.
Tourism, if handled properly, can help to preserve both a country's natural and cultural heritage. To attract visitors, a country must preserve not only its natural resources, but its architectural and cultural monuments, which are often threatened by vandalism, theft, pollution, wars and overdevelopment. Ironically, however, some of the damage can be caused by tourism itself.
One alternative to environmental abuse by tourism is the ecotourism movement. Some advocates of ecologically-responsible tourism see it as a solution to chronic underfunding of national parks and other protected areas, and as having the potential to become one of the central elements in sustainable economic development. As well, when communities learn that they can make more money by inviting visitors to experience the natural beauty of their forests than they can by cutting them down, they cannot fail to be inspired to preserve the environment.
The WTO stresses that extreme caution be exercised in developing ecotourism, because when large numbers of visitors descend upon biologically and culturally sensitive areas, the effects can be devastating. The Mount Everest area of Nepal, for example, supports a major trekking and climbing industry that consumes more fuelwood and produces more waste than the area can handle. The trails of K2 in Pakistan and the Camino Inca of Peru are littered with the refuse of hikers. Thus, though ecotourism is an attractive alternative to mass tourism, there is still a need to make mass tourism sustainable because it will always dominate the industry.
Jacqueline Aloisi de Larderel, director of the Industry and Environment
office of the UN Environment Programme, says that only careful
planning and management will stop tourism's current negative environmental
impacts. The tourism industry, all levels of government and community
organizations should cooperate to ensure that tourism is sustainable.
Otherwise, she adds, tourism could lead to destruction and pollution
in some of the world's most ecologically fragile areas.
Contact:
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