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Sustainable development

Since the 1970s the question of sustainability, that is, the ability to maintain living standards in the future, has added an extra dimension to the discussion of progress. Influential reports such as the early reports of the Club of Rome (Meadows et al., 1972; Mihajlo & Pester, 1974) and the Brundtland report (WCED, 1987) have emphasised the idea that one should not only be mindful of current living standards but also those of future generations. Sustainable development has been defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (WCED, 1987), or the capacity to provide non-declining future welfare (Neumayer, 1999; see also Daly and Farley, 2003).

Sustainability is often considered in terms of three pillars - the economy, environment and society - and operationalised by defining different forms of capital. Two types of environmental sustainability are often distinguished, weak and strong:

  • Weak sustainability holds that stocks of natural capital are substitutable, meaning that their depreciation can be offset by increases in other types of capital.
  • Strong sustainability, in contrast, argues that some aspects of natural capital, such as the atmosphere, are 'critical' in that they are non-substitutable. From a strong sustainability perspective, sustainability can only be achieved when stocks of critical natural capital do not depreciate, or at least do not drop below a specific level (Kulig et al., 2010). Strong sustainability emphasises the biophysical limits to growth, the "'critical threshold' in the availability of ecosystem services ... beyond which non-linear patterns, irreversible changes and catastrophes may occur, with major environmental and economic consequences" (Farber, in Niccolucci et al., 2007, p. 668).

While there is some debate over non-substitutability and identifying critical thresholds, these ideas reinforce that the stocks of natural capital are the foundation for many other aspects of living standards now, and into the future, and that they need to be managed with care, both at the domestic and international level.

Consideration of sustainability has led to new approaches to measuring living standards. As discussed above, composite indicators have been developed to take sustainability into account, such as by adjusting GDP for the depletion of natural capital. More recently the capital approach has been proposed as a conceptual basis for living standards (World Bank, 2006; Statistics New Zealand, 2009a). This approach has some key advantages as a conceptual framework. Firstly, it broadens definitions of living standards by incorporating a range of values and factors beyond economic production. Secondly, it provides a way to think about stocks, flows and sustainability in a way which is readily understood, because it is based on well established economic frameworks.

The capital approach has gained significant support from academics, statisticians and institutions (Atkinson & Pearce, 1993; World Bank, 2006; UNECE, 2009), and has been described as "the most promising way forward" in measuring social welfare (Kulig et al., 2010, p.119). Statistics New Zealand has recently engaged in designing a framework for measuring indicators of sustainable development (Statistics New Zealand, 2009a) following the recommendation of the capital approach by the joint OECD/United Nations Economic Commission for Europe and Eurostat Working Group on Statistics for Sustainable Development (WGSSD, 2008).

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