What is sustainability?

I know what you're thinking... what is sustainability?

That's a good question. After all, the concept of sustainable development has become increasingly relevant in the past few years, which means its underpinnings have been affected by a wide variety of groups, interests, and policy decisions. As a result, sustainability has remained a relatively ill-defined concept. Indeed, this obtuseness makes it difficult for many to comprehend what it means to live a sustainable life. In order to proceed with my project, however, I must settle on a precise definition. Thus far I have chosen this one:

Sustainability: The potential for long-term maintenance of well-being, which depends on ensuring the welfare of the natural world and its inhabitants as well as using natural resources responsibly. It implies the integration of economic, social, and environmental spheres to meed the needs of the present without compromising the ability of future generations to meet their own needs.

Theory 101

This blog is designed to chronicle my progress as I work toward completing my senior thesis at Northwestern University. So, let's jump right in to the theory. ///

Research suggests that the demand for sustainable products is on the rise, and in response companies have increasingly taken to marketing their products as "green." For instance, you may have seen some of Royal Dutch Shell's advertising, where the company boasts of its commitment to sustainability and investments in alternative energy. The company, however, does not seem to be dedicated to these concepts and has sold off most of it's solar and wind energy investments. Shell CEO Jeroen van der Veer recently stated that "His company will continue to be primarily an oil and gas company."

When companies spend money to propagate faulty information about their sustainability efforts, they mislead and confuse consumers, which causes cynicism about all corporate sustainability claims regardless of their truth. Indeed, according to research by the National Consumer Council, although individuals seem to be concerned about sustainability and may want to buy responsibly made products, people are unsure of what sustainable consumption entails in practice. (Holdsworth, M. (2003). Green choice: What choice?).

Products created in a sustainable manner are exceptionally vulnerable to the harms of misleading information because they are credence goods, so the utility of these products is difficult to ascertain. Say, for example, you want to buy a pair of shoes that were produced without child labor and under fair working conditions, so you head to the store. Upon perusing the shelves, you notice that it is impossible for you to tell who produced those shoes and under what conditions they worked. The best you can do as a buyer is rely on third-party judgments or seller credentials.

When a company or regulating agency deludes consumers by providing misleading, incomplete, or confusing information, an information asymmetry exists between buyers and sellers. George Akerlof first identified the problems inherent to information asymmetry in a market when he argued that bad quality ultimately drives out good quality from the market when information asymmetry is present between buyers and sellers. The impact? As a result of insufficient information, consumers may not be aware of the low value of greenwashed products. This means competitive pressures will force down the price of high value goods, which will drive genuinely sustainable goods out of the market or at least prevent responsible companies from growing their businesses, regardless of increased consumer demand.

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Helpful definitions:

Sustainable product: A good or service that minimizes its impact on society as well as the environment at each stage of the product's life. These goods may be associated with environmental sustainability -- often called green products (CFC free aerosols, hydrogen powered cars), social justice issues (fair trade coffee, sweat free clothing), or both.

Credence good: A good whose utility impact is difficult or impossible to ascertain (as opposed to search goods or experience goods).

Greenwashing: The practice of companies disingenuously spinning their products and policies as environmentally friendly.

Utility: A measure of the relative satisfaction derived from various goods and services