Sustainability

What Is Sustainability?

In the broadest possible sense, sustainability refers to the ability of something to maintain or "sustain" itself over time.

In business and policy contexts, limits to sustainability are determined by physical and natural resources, environmental degradation, and social resources. Accordingly, sustainable policies place some emphasis on the future effect of any given policy or business practice on humans, the economy, and ecology. The concept often corresponds to the belief that without major changes to the way the planet is run, it will suffer irreparable degradation.

Key Takeaways

  • According to the Brundtland Commission's report, sustainable development, the processes used to pursue sustainability, means "meeting the needs of the present without compromising the ability of future generations to meet their needs."
  • The concept is often broken into three core concepts or "pillars": economic, environmental, and social.
  • Business and governmental commitments to sustainability are increasingly common, though these efforts encounter skepticism over corporate "greenwashing," which is the practice of providing a false impression to make a business seem more environmentally friendly than it is.
  • Some evidence is accruing that investors are actively embracing green investments.

As concerns about anthropogenic climate change, biodiversity loss, and pollution have become more widespread, the world has shifted to embrace sustainable practices and policies, primarily through the implementation of sustainable business practices and increased investments in green technology.

Understanding Sustainability

The idea is often broken down into three pillars: economic, environmental, and social—also known informally as profits, planet, and people.

In that breakdown, the concept of "economic sustainability" focuses on the portion of natural resources that provide physical inputs for economic production, including both renewable and exhaustible inputs. The concept of "environmental sustainability" adds greater emphasis on the "life support systems," such as the atmosphere or soil, that must be maintained for economic production or human life to even occur. In contrast, social sustainability focuses on the human effects of economic systems, and the category includes attempts to eradicate poverty and hunger, as well as to combat inequality.

In 1983, the United Nations created the World Commission on Environment and Development to study the connection between ecological health, economic development, and social equity. The commission, then run by former Norwegian prime minister Gro Harlem Brundtland, would publish a report in 1987, "Our Common Future," which has become the standard in defining sustainable development. That report describes sustainable development, or the blueprint for attaining sustainability, as "meeting the needs of the present without compromising the ability of future generations to meet their own needs."

Corporate Sustainability

Sustainability in business is not reducible to environmentalism. Harvard Business School lists two categories of sustainable business practices: the effect a business has on the environment, and the effect a business has on society, with the goal of sustainable practice being to have a positive impact on at least one of those areas.

"Corporate sustainability" emerged as a component of corporate ethics in response to public discontent over the long-term damage caused by a focus on short-term profits.

This view of responsibility encourages businesses to balance long-term benefits with immediate returns, with the goal of pursuing inclusive and environmentally sound objectives. This covers a broad array of possible practices. Cutting emissions, lowering energy usage, sourcing products from fair-trade organizations, and ensuring their physical waste is disposed of properly and with as small a carbon footprint as possible would qualify as moves toward sustainability.

Companies have also issued sustainability goals such as commitment to zero-waste packaging by a certain year, or to reduce overall emissions by a certain percentage.

A raft of corporations have made such sustainability promises in recent years. For example, Walmart Stores, Inc. (WMT) has pledged to reach zero emissions by 2040, Morgan Stanley has pledged net-zero "financed emissions" by 2050, and Google has pledged to operate carbon-free by 2030.

The push for sustainability is evident in areas such as energy generation as well, where the focus has been on finding new deposits to outpace the drawdown on existing reserves. Some electricity companies, for example, now publicly state goals for energy generation from sustainable sources such as wind, hydropower, and solar.

Because of the public goodwill created by these policies, they encounter skepticism over corporate "greenwashing," which is the practice of providing a false impression that makes a business seem more environmentally friendly than it is.

Challenges to Sustainability in Business

The switch to sustainability can be difficult. Materials from the Santa Fe Institute, for instance, outline three major impediments to getting firms to improve their environmental impacts: It is hard to actually understand the impact of any individual firm, it is difficult to rank the environmental impact of some activities, and it is difficult to predict how economic agents respond to changing incentives.

Moreover, many companies have received criticism for exploiting cost-cutting measures that can make evaluating sustainability more difficult by moving some business to less-regulated markets such as offshoring production to obtain cheaper labor, especially after offshoring began to affect white-collar jobs in developed economies, causing anxiety about globalization. Sustainability practices "significantly affect" the offshoring activities of multinational corporations, according to an examination of data from 1,080 multinational corporations.

The 'Investor Revolution'

Some evidence is accruing that investors are actively embracing green investments. A 2019 HEC Paris Research paper, for instance, showed that shareholders value the ethical dimensions of a firm so much that they are willing to pay $.7 more to purchase a share in a firm that gives a dollar or more per share to charities. The study also revealed a negative valuation of firms perceived as exercising a negative social impact.

Based on interviews with senior executives across 43 global investing firms, Harvard Business Review has argued that the perception among some business leaders that environmental, social, and governance issues are not mainstream in the investment community is outdated.

The "sea change" in investor attitudes described by Harvard Business Review draws on the increased commitments of investors. The Principles for Responsible Investment, a United Nations-supported effort to bring these issues into investing, had 63 investment companies with $6.5 trillion in assets under management that committed when it launched in 2006. In 2018, it had 1,715 companies with $81.7 trillion in assets.

Sustainable investing surveys over the past couple of years have suggested that half (or in some cases, more than half) of investors say that sustainability is "fundamental" to investing strategy.

Not everyone concerned with investments shares the enthusiasm. In July 2021, for instance, Securities and Exchange Commission (SEC) Commissioner Hester Peirce argued that not only would environmental, social, and governance (ESG) disclosure mandates violate the agency's authority, but it may also "undermine financial and economic stability." According to Peirce, the "inherently political" sustainability metrics were "unabashedly" created to direct capital toward certain businesses. In response to public comments and regulatory pressure to look into such mandates, Peirce said that it would be a violation of the SEC's "historically agnostic approach" to regulations.

Eiji Hirano, a former chairman of the board of visitors for Japan’s Government Pension Investment Fund, one of the biggest pension funds in the world, has said that there's a bubble in ESG investing and that the fund needs to rethink its ESG investments, according to interviews with Bloomberg News.

Sustainability vs. Sustainable Development

Though it reaches beyond them as a broad umbrella term, sustainability is connected to both the climate and "sustainable development."

The broader term "sustainability" refers to the long-term goal of building a more sustainable world, and "sustainable development" often refers to the specific processes and methods of achieving that goal.

Sustainable development refers to the process of improving economic well-being and quality of life while balancing the ability of future generations to do the same. The United Nations' Sustainable Development Goals are recognized as the international standard for sustainable development. Though the climate represents an aspect of those goals, it is not the only aspect. Among the 2021 goals, for example, are ones that aim to fight a list of things that include inequality, environmental degradation, and poverty.

The Paris Climate Accord, also called the Paris Agreement, is a legally binding international treaty, signed by 196 countries in 2015, that seeks to lower global warming "well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels." This agreement marks the current international standard for reducing climate change.

The United States rejoined the Paris Accord in January 2021. In April 2021, the Biden administration announced that the country will lower its greenhouse gas emissions 50% to 52% below 2005 levels by 2030 under its nationally determined contribution, or NDC, under the agreement. The U.S. had withdrawn from the agreement under the Trump administration.

An Example of Sustainability in International Affairs

In a speech at the Chesapeake Bay Foundation’s Philip Merrill Environmental Center in April of 2021, U.S. Secretary of State Anthony Blinken argued that the country would miss out on countless jobs and "the chance to shape the world’s climate future in a way that reflects our interests and values" if it failed to become a climate leader.

As is reflected in Secretary of State Blinken's comments, countries have begun to enter into a green infrastructure race as world leaders begin to look toward a shift away from fossil fuels on the global market. The Biden administration, for example, has argued for putting the climate crisis at the forefront of American foreign policy and national security.

“The geopolitics of industrial leadership, trade, and global supply chains will run throughout the next phase of climate action, as raised ambition for the deployment of decarbonization technologies and renewable energy resources at an ever-greater scale is accompanied by growing interest around the world in establishing a stake in their development,” a written comment from the Atlantic Council said in reaction to the U.S.'s comments on climate leadership.

Those in favor of strong green investments also argue that these investments are good for economic growth in general. The International Monetary Fund (IMF), for example, has argued that a world economic debt-financed investment plan for green infrastructure with carbon pricing could lead to a net gain in employment. A 2020 working paper from the World Resources Institute said that investments in low carbon result in more jobs than investments in fossil fuel. The study also reported that from 2005 to 2017, 41 U.S. states from all areas of the country and the District of Columbia were able to reduce their energy-related CO2 emissions while growing their GDP.

The 'New Climate Economy'

According to some developments, the sea change observed among investors may be part of a larger embrace of sustainable practices at the level of the global economy.

The COVID-19 crisis led to an unprecedented drop in emissions for 2020. But climate scientists warned that—without a global shift toward green infrastructure and away from fossil fuels—the reduction would be temporary and would only have a marginal effect, if any, on long-term climate change. Without a shift toward a green global economy, they warned, the drop would follow the pattern of the fall in emissions during the 2008 financial crisis, which was short-lived.

Recent IMF reports have also argued for countries to "green" their recovery efforts by emphasizing environmentally friendly measures in their broad-based fiscal stimulus spending. The IMF argued that a shift to green infrastructure would lead to net growth in employment and that it would avoid further exacerbating global inequality. IMF Managing Director Kristalina Georgieva, to take one example, has argued for establishing an international carbon price floor among large emitters such as the G20, standardized reporting on financial risks, and financial support for developing countries as necessary for the transition to the "new climate economy."

In the U.S., the Biden administration's infrastructure plan, the 2021 Infrastructure Investment and Jobs Act, includes provisions to build out the American infrastructure including "green" investments. The $1.2 trillion act passed Congress and was signed by President Biden on Nov. 15.

What Is Sustainability?

The most common definition of sustainability comes from the 1987 Brundtland Commission report for the United Nations. It defines the concept as "meeting the needs of the present without compromising the ability of future generations to meet their own needs."

What Are Sustainability Goals?

The Sustainable Development Goals (SDG) are a collection of objectives set by the United Nations, which it calls its "blueprint to achieve a better and more sustainable future for all." They seek to accomplish goals such as ending poverty and hunger, advancing inclusive and equitable educational opportunities, and promoting access to renewable energy.

Why Is Sustainability Important?

Inherent to sustainability is the idea that people shouldn't degrade the environment for short-term profits. It's necessary for life to exist. With the increasing intrusion of the effects of anthropogenic climate change on modern life—ranging from uncomfortable heat waves to expensive and lethal weather events—it has gained a great deal of attention. The notion also acknowledges that human systems ought to be fair if they hope to last and to reduce the total amount of human misery on the planet.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Sciencedirect.com. "Sustainable Development." Accessed Nov. 15, 2021.

  2. News.un.org. "Turning to sustainable global business: 5 things to know about the circular economy." Accessed Nov. 15, 2021.

  3. JSTOR. "The Concept of Environmental Sustainability." Accessed Nov. 15, 2021.

  4. sustainable development.un.org. "Report of the World Commission on Environment and Development: Our Common Future." Accessed Nov. 15, 2021.

  5. Sustain.UCLA.edu. "What is sustainability?." Accessed Nov. 15, 2021.

  6. Online.hbs.edu. "WHAT DOES 'SUSTAINABILITY' MEAN IN BUSINESS?." Accessed Nov. 15, 2021.

  7. Sustainability.google.com. "Carbon neutral since 2007. Carbon free by 2030." Accessed Nov. 15, 2021.

  8. Walmart.com. "Climate Change." Accessed Nov. 15, 2021.

  9. Morganstanley.com. "Morgan Stanley Announces Commitment to Reach Net-Zero Financed Emissions by 2050." Accessed Nov. 15, 2021.

  10. Santafe.edu. "The Complexity of Sustainability and Investing."Accessed Nov. 15, 2021.

  11. Epi.org. "Truth and consequences of offshoring." Accessed Nov. 15, 2021.

  12. Sciencedirect.com. "Environmental sustainability practices and offshoring activities of multinational corporations across emerging and developed markets." Accessed Nov. 15, 2021.

  13. papers.ssrn.com. "Do Investors Care About Corporate Externalities? Experimental Evidence." Accessed Nov. 15, 2021.

  14. Hbr.org. "The Investor Revolution." Accessed Nov. 15, 2021.

  15. Unpri.org. "Signatory directory." Accessed Nov. 15, 2021.

  16. Blackrock.com. "Sustainability goes mainstream." Accessed Nov. 15, 2021.

  17. Sec.gov. "Chocolate-Covered Cicadas." Accessed Nov. 15, 2021.

  18. Bloomberg.com. "Beware of ‘ESG Bubble,’ Says Ex-Chair of World’s Biggest Pension." Accessed Nov. 15, 2021.

  19. UNESCO. "Sustainable Development." Accessed Nov. 15, 2021.

  20. Online.Maryville.edu. "Sustainability vs. Sustainable Development: Examining Two Important Concepts." Accessed Nov. 15, 2021.

  21. Un.org. "Sustainable Development Goals." Accessed Nov. 15, 2021.

  22. unfccc.int. "The Paris Agreement." Accessed Nov. 15, 2021.

  23. Whitehouse.gov. "FACT SHEET: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies." Accessed Nov. 15, 2021.

  24. State.gov. "Tackling the Crisis and Seizing the Opportunity: America’s Global Climate Leadership." Accessed Nov. 15, 2021.

  25. Whitehouse.gov. "Executive Order on Tackling the Climate Crisis at Home and Abroad." Accessed Nov. 15, 2021.

  26. Atlanticcouncil.org. "Rapid response: Secretary Blinken’s April speech on climate." Accessed Nov. 15, 2021.

  27. Blogs.imf.org. "How Governments Can Create a Green, Job-rich Global Recovery." Accessed Nov. 15, 2021.

  28. Wri.org. "America’s New Climate Economy: A Comprehensive Guide to the Economic Benefits of Climate Policy in the United States." Accessed Nov. 15, 2021.

  29. Nature.com. "Fossil CO2 emissions in the post-COVID-19 era." Accessed Nov. 15, 2021.

  30. News.Stanford.edu. "Stanford researcher envisions energy and environment landscape after COVID-19." Accessed Nov. 15, 2021.

  31. imf.org. "IMF Managing Director’s intervention at the Leaders Summit on Climate, Session 2: Investing in Climate Solutions." Accessed Nov. 15, 2021.

  32. U.S. Senate. "H. R. 3684 - Infrastructure Investment and Jobs Act." Accessed Nov. 15, 2021.

  33. Whitehouse.gov. "FACT SHEET: The American Jobs Plan." Accessed Nov. 15, 2021.

  34. Sdgs.un.org. "The 17 Goals." Accessed Nov. 15, 2021.

  35. Unstats.un.org. "Overview-SDG Indicators." Accessed Nov. 15, 2021.