Sustainability in the private sector is closely allied to green growth. But is the notion that growth can go green just another chapter in Greta Thunberg’s fairy tales of eternal economic growth? Or is it the manual we must follow to build a livable planet and functioning economy? 

The Organization for Economic Cooperation and Development positions green growth as "fostering economic growth, while ensuring that natural assets continue to provide the resources and services on which our well-being relies." Public perceptions aside, science deals not with proof but with evidence. As such, the Intergovernmental Panel on Climate Change has been as unequivocal as it can be about the targets we have to hit to stay within the planetary boundaries that house our intertwined relationship with those "assets and services."

Unfortunately, we’re crossing the thresholds within which humanity can continue to develop, thrive and survive considerably faster than we’re decoupling economic growth from ecological damage. It’s a hard case to make that we’ve delivered on matching green with growth.

My Economist subscription is no stand-in for an economics degree, but I’d like to take a quick look at green growth — what it’s built on, what it has, or has not, afforded us and whether we should shift the window of discourse to get a better view on where growth meets green.  

Beyond GDP

Economic life is currently guided by one major question: Are we in a recession? The answer rests, like so much does, on the almighty acronym GDP. 

Gross Domestic Product is the world's most powerful and widely used indicator of economic progress. It’s also a very narrow measurement and, born of the manufacturing age, best measures "things you can drop on your foot" but not much in the way of well-being. If I dropped a thing and that thing broke my foot, it would be a boost to GDP via the services rendered during my hospital visit.  

Some frameworks to measure economic development that would replace the almighty focus on GDP have gained popularity, such as Oxford economist Kate Raworth’s Doughnut Economics, but the G20 doesn’t appear poised to ditch GDP any time soon. Can we really deliver on green growth with GDP as a foundation? 

There is no reason theoretically that we can’t achieve "absolute decoupling," i.e. the adoption of clean energy enabling emissions to decline while sustaining economic growth. As Senior Fellow at the Breakthrough Institute Zeke Hausfather wrote, "There is no physical law requiring economic growth — and broader increases in human well-being — to necessarily be linked to CO2 emissions." 

There is no physical law requiring economic growth — and broader increases in human well-being — to necessarily be linked to CO2 emissions.

But, as with all things sustainability, the usefulness of theoretical exercises at this point is limited. The key metric for success in the green growth paradigm is the decoupling of GDP growth from carbon emissions. But even the cases where decoupling has occurred — for example, the reordering of European nations’ economies this century to foster the simultaneous rise in GDP and decline in emissions — aren’t very solid. A purported green growth win like this is promising on paper, but carbon is not bound by national boundaries, and the bulk of those emissions have been offshored.  

And, although the circular economy aims to ameliorate the deleterious environmental effects of consumer capitalism, green growth has to reckon with a related phenomenon explained by the "Jevons paradox." That is: technological progress increases the efficiency with which a resource is used; the subsequent drop in cost increases its demand; and the efficiency gain as it relates to resource depletion is outstripped. 

Assuming the core tenet of consumer capitalism (more) remains, then clean energy is not necessarily spared. Growing GDP in a clean energy economy means we need more stuff to make said energy, such as more wind turbines, solar equipment and bioenergy operations. 

On degrowth

Non-human species with whom we co-exist in planetary boundaries would likely be in favor of us adopting degrowth as a solution to rising emissions, but selling the idea of "less" to a world guided by GDP feels like a pretty moot case. 

Degrowth is an economic theory built on ideas from fields such as political ecology, ecological economics and environmental justice, focused on the social and ecological harm caused by the pursuit of infinite growth. Degrowth emphasizes the need to reduce consumption and production, and promotes replacing GDP as the indicator of prosperity. 

So I was surprised, and super intrigued, to hear the CFA Institute’s "The Sustainability Story" podcast host a conversation on why green growth is not the answer to the climate and biodiversity challenges we face, and what a world that embraced degrowth would look like. 

Degrowth advocates don’t posit that we’d be "living in caves with candles" but instead that people in rich countries would do things such as alter their diets, live in smaller homes and maybe even consume less stuff. If this reads like a radical and naive sentence, it feels the same writing it. But is it? And is there a "business case" to make for degrowth? 

That’s a hard question to answer, as it depends on why you think businesses exist, why they’re financed and what an economy is for. The Gap’s CEO-to-employee pay ratio was 3,113:1 last year, while the average CEO was paid about 20:1 in the 1950s. Laws or regulations weren’t changed to allow this; norms and expectations did. And there is no framework, policy or regulation responsible for or capable of changing social norms. 

Given that we’re in "all of the above" mode in search of systemic climate solutions, degrowth, or at least the ditching of GDP, should be on the table for real consideration. 

As Kenneth Boulding, former head of the American Economic Association, said: "Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist."