The Sufficiency Solution?

There are many obstacles in the quest to achieve true sustainability in our industrialized society which has for centuries been accustomed to a take-make-waste model of consumption. Radical changes are needed in our economic paradigms in order to ensure that we, as a global society, can continue to increase global economic prosperity while at the same time conserve our ecosystems, and help to establish social justice and equity. The challenge of sustainability is to simultaneously create economic, social and environmental benefits, and has been famously defined as the ability to “meet the needs of the present without compromising the ability of future generations to meet their needs” (WCED, 1987).

Corporations are probably the largest, most powerful and influential player in terms of setting direction for society, and they must take the lead in adopting sustainable practices. In order to do this, many new ways of thinking will need to be employed and many new strategies and innovations will need to be developed. One of the biggest obstacles in this regard is that often managers fail to see either the necessity or the potential benefit—or simply see sustainability efforts as an impediment to growth. These assumptions remain despite much research that has shown strong business cases can be made for adopting sustainability as a corporate objective. Hart and Milstein (2003), for example, show how the multiple dimensions of sustainability can be connected to the multiple dimensions of shareholder value and thus demonstrate that sustainable strategies can be implemented that are not only good for society and the planet, but can represent increases in real shareholder value.

Generally, however, as the understanding of the necessity and opportunity associated with corporate sustainability permeates through the world of management, more and more businesses are taking their role as sustainability leaders seriously, and many are taking steps towards decreasing the negative impacts they have on the environment and society. While some more radical sustainability advocates insist (perhaps rightly) that these incremental changes are not enough, in reality economic systems cannot change overnight and it is important that corporations start somewhere. Many innovative business thinkers have developed strategies and programs that have at least set them on the path towards corporate sustainability, not only decreasing negative impacts but in some cases learning to exploit new markets and previously undiscovered opportunities.

One potential avenue for pursuing sustainability that is often overlooked by business—perhaps because it is not so clear how it can be turned into shareholder  value for a firm—is the idea of sufficiency, sometimes called eco-sufficiency. In plain language this term could be simply called frugality, modest living or sober living; it carries the implications of voluntarily choosing to live with fewer material possessions, consuming less, saving more, and thereby making less of an impact on the environment.  This lifestyle is becoming somewhat of a trend in some (primarily affluent) areas, and advocates often believe that living in such a way can increase personal happiness while helping to ensure the preservation of the earth for future generations. Other popular terms for this lifestyle choice include slow-living, simple living or minimalism. It is feasible that corporations can make use of this growing trend—even encourage it—to further their sustainability goals and even create new business opportunities.

Within corporate sustainability programs and initiatives there is much focus on the supply side of the firm, namely towards creating efficiency or decreasing the negative impact relative to the production of product or service provided. While this approach can help to save costs for the firm and reduce waste, it has also been shown that this approach can have a rebound effect (e.g. Dyllick & Hockerts, 2002). As production costs (and therefore prices) for products with negative impacts are reduced it can lead to an increase in overall production/consumption and therefore an increase in absolute negative impact. While each product may be less polluting (for example), the increase in total products sold due to lower costs has a net effect of increasing the total pollution. The problem here is that as production costs are reduced and prices go down, consumer demand tends to increase. While the company can boast a more efficient use of resources and a relative decrease in negative impact, the overall problem actually worsens.

Therefore, a logical alternative (or perhaps a supplement) to efficiency is to focus on the consumption side by reducing the demand for products or services that cause environmental or social harm.  In terms of the well-known equation I = PAT, while efficiency is geared towards reducing impact by lowering the technology factor, sufficiency takes another approach by effectively decreasing the affluence factor (Alcott, 2008). Corporations can only do so much in making their products sustainable when there remains a demand for unsustainable products. As long as a strong and stable demand for certain products exist, there will be companies striving to meet that demand by manufacturing the sought-after goods. And so it is important to realize that consumers have a role to play in corporate sustainability as well. By reducing demand for products which are unsustainable, consumers have the power to reduce negative impacts on the environment and on society. According to the Royal Society (2012), possibly the best way to decrease the negative human impact on the planet is to decrease the resource consumption of those sections of society which currently consume the most.

The idea of product stewardship postulates that corporations should take responsibility not only for the processes in their firms which are directly under their control, but all the effects of a product from resource extraction to disposal. One could argue that this then includes a responsibility to manage the demand side of business as well as the supply. By working to reduce the demand for unsustainable products, such products can be phased out and substituted for more sustainable ones. While some may argue that consumer demand is not within the scope of management’s control—after all, consumers want what they want and manufacturers respond to those wants—it is widely known that marketing plays a large role in directing consumer preference. If companies are willing to accept responsibility for the impacts of their products in the larger economic, social and ecological environment, ought they not also take responsibility by doing all they can in order to redirect consumer preference to products with a lower negative impact?

The difficulty is that many corporations have large investments and interests in consumer demand for unsustainable products. Many businesses thrive off continuing to sell products like SUV’s which are far less fuel-efficient than more compact cars. A shifting of consumer preference towards sufficiency would then been seen by such companies as a development detrimental to business. But companies producing SUV’s are not the only ones who might worry over such a trend.  A general decrease in consumer wants could mean less economic activity in general, and that is hard to stomach for an economy that is obsessed with constant growth. While environmental and social improvements might be realized from such a trend, is it possible for economic prosperity to continue to grow under such circumstances? Some research indicates that sufficiency-driven business models can indeed open the door for new and profitable opportunities.

Bocken & Short (2015) provide economic rationale for sufficiency by conceiving of it as “an effective core strategy for sustainable business model innovation, initiated and driven by companies themselves, rather than merely a reactive strategy to an external influencing factor on business.” They demonstrate through case studies that innovative business models can exist that work to curb consumption by moderating demand. If implemented carefully, things like avoiding built-in obsolescence, making products last longer, education and awareness, and conscious changes in marketing techniques in combination with new innovative revenue schemes can help promote sufficiency and ultimately lead to more sustainable business and value creation.

Other literature, however, shows some problems with the model of sufficiency. Alcott (2008) argues that just like resource-efficiency, sufficiency is subject to a negative rebound effect. He argues that as initial demand for products goes down, prices are reduced which, in turn, increases demand by others. It seems, therefore, that in order for sufficiency to be effective as a strategy for corporations to become more sustainable, a certain critical threshold would need to be reached so as to largely eliminate the rebound effect. If a large enough number of consumers in affluent nations would begin to show interest in such a lifestyle, business would adapt to cater towards these new trends; they would be forced to innovate to meet the changing patterns of demand.

In conclusion, while corporations remain the largest and most important leaders in setting the direction for society, controlling the means by which sustainability can be achieved, it is certainly important to consider the role of the consumer in the process. Corporations are responsive to their customers and as trends in consumption change corporations will strive to meet those changing needs. As it becomes clearer to the general public that sustainability is a matter of global and human concern, it may be that paradigm shifts which lead to attitudes of sufficiency continue to grow. The companies that manage to innovate now and find new ways of capturing value in such a new economic environment by capitalizing on sufficiency lifestyles will secure a competitive advantage in the future. In this way corporations and consumers together can contribute to a more sustainable world. 

Alcott, B. (2008). The sufficiency strategy: Would rich-world frugality lower environmental impact? Ecological Economics, 64, 770-786

Bocken, N., Short, S. (2015). Towards a sufficiency-driven business model: Experiences and opportunities. Environmental Innovation and Societal Transitions (2015).

Dyllick, T., Hockerts, K. (2002). Beyond the Business Case for Corporate Sustainability. Business Strategy and the Environment, 11, 130-141

Hart, S., Milstein, M.,  Caggiano, J. (2003). Creating Sustainable Value.  The Academy of Management Executive, 17(2), 56-69.

The Royal Society, (2012). People and the Planet, Available at: http://royalsociety.org/policy/projects/people-planet/report/ (accessed 16.09.15).

World Commission on Environment and Development. (1987). Our Common Future. Oxford: Oxford University Press, p. 8.

Social Capital & European Society

Social capital and its role in society have been defined by many different scholars and writers in different ways. Lyda Hanifan was one of the first to use the term in 1916. Her definition of social capital was, “Those tangible assets [that] count for most in the daily lives of people: namely goodwill, fellowship, sympathy, and social intercourse among the individuals and families who make up a social unit.” Other academics such as Jane Jacobs (1961), Pierre Bourdieu (1983) and James S. Coleman (1988) have done much to carry the concept further over the years. More recently, Robert Putnam has become an important writer on the topic, and is also much responsible for bringing the term into popular use after his 2000 book Bowling Alone: The Collapse and Revival of American Community. In one of his earlier publications he writes, “social capital refers to features of social organization, such as networks, norms, and trust, that facilitate coordination and cooperation for mutual benefit” (Putnam, 1993). The Organization for Economic Co-operation and Development (OECD) has written much about social capital as it relates to their work. In one of their publications, Brian Keeley (2007) writes, “We can think of social capital as the links, shared values and understandings in society that enable individuals and groups to trust each other and so work together (Keeley, 2007).” It is challenging to bring all these definitions together. For the purpose of this paper, social capital will simply refer to: the values and social norms embedded in a society that create social cohesion, encourages individuals to trust each other and facilitates cooperation.

Europe as a society has been shaped, in large part, by an abundance of social capital that has allowed it to grow and prosper economically. The shared norms and values held by Europeans throughout the centuries—values such as honesty, keeping of commitments, respect for people’s property, safety and security, goodwill, self-sacrifice and reliable performance of duties—which are largely a result of the widespread adoption of Christian tradition, have been an essential, underlying foundation upon which European peoples have cooperated. The networks of trust, or social cohesion, created by these shared norms have enabled Europeans to work together to build an advanced, civilized society that could not have been possible without this abundance. The World Bank Group writes, “social cohesion is critical for societies to prosper economically and for development to be sustainable… [it] is not just the sum of the institutions which underpin a society – it is the glue that holds them together (World Bank, 2011).” Indeed, it was this unique abundance of social capital that led this small peninsula at the tip of Asia to be called by many as simply “The Continent;” it is what has made Europe “Europe,” distinct from its eastern roots (Fountain, 2004).

A growing body of research has demonstrated how social capital contributes towards economic growth and prosperity (e.g. Whiteley, 2000; World Bank, 2011; Iyer, Kitson & Toh 2005). Central to understanding how this works is the idea that certain norms and values (such as the ones mentioned above) actually have economic value in that they foster economically beneficial relationships and cooperation—and in doing so they lower transaction costs (Fukuyama, 2001). It is no coincidence that countries where interpersonal trust is higher and social capital is stronger also have the most developed economies (Knack & Keefer, 1997; Knack, 2002).

A good way to demonstrate how trust and social capital has economic value is to use an illustration. Vishal Mangalwadi, an Indian author and philosopher, describes in one of his books (Mangalwadi, 2009) his first visit to the Netherlands during which time he realized that trust is a valuable economic asset. On this visit while staying in a rural part of the country, his host took him to buy fresh milk. They walked to a neighbouring farm and entered through an unlocked door into the facility where cows were milked. His host proceeded to fill his milk jugs from the vat, and then deposited money into a jar. They proceeded to leave with their milk, never encountering another person during the entire transaction. Mangalwadi was dumbfounded. He did not understand what prevented others from coming to steal the money in the jar, or to at least take the milk for free (not to mention the cows). This brief example shows how social capital can contribute to economic prosperity—but also how fragile it is. Because the milk farmer trusted his neighbours to pay for their milk without supervision, it lowered the transaction costs. Conversely, if the farmer at some point experienced theft, he may lose trust and take precautions by hiring someone to manage the transactions, ultimately leading to an increase in the price of milk. Taking the argument even further, if the hired worker were not himself trustworthy, and only made rational decisions based upon his own return on investment, he might begin pocketing some of the money. Continuing to lose, the milk farmer may be tempted to boost profits by watering down his milk. His customers would then be forced to create a regulatory institution that could ensure quality—further hiking up prices. This scenario shows, albeit on a very small scale, how social cohesion has economic benefit, and how the breakdown of trust in an economy can have detrimental and far-reaching effects. Mangalwadi realized what European communities had that was largely lacking in his own country, and what was responsible for the relative difference in economic prosperity: social capital.

The breakdown of the trust relationship between public transport companies and those using public transport in the Netherlands was one of the main reasons for the introduction of the OV chip card system, and serves an example of how social cohesion is deteriorating in Europe. The system, which cost a fortune to implement, was a rational response by the public transport companies in the face of profit losses due to fraud on the part of commuters who could no longer be trusted to “punch in” with their strippenkaart (Thales Group, 2011). By deviating from the social norms (namely honesty and trustworthiness), and cheating the system, the very consumers who tried to avoid costs to themselves in the short term, effectively caused the prices of public transport to increase for the entire society. Similar phenomenon can be observed throughout Europe in the corporate world and even politics. As people place less value on the social norms that have helped to shape Europe, social cohesion deteriorates and people trust each other less. As social cohesion breaks down, individuals tend to make decisions based solely on their personal rate of return rather than what is beneficial or “right” for the network in which they are embedded.

There are numerous reasons why social capital can be said to be on the decline in Europe. One of the main reasons is the diminishing role of the family in society. Increasingly more children are growing up with only one parent, or with parents that do not live together (Morgan & Zippel, 2003). Additionally it is increasingly more common that both parents work, and therefore invest less time with their children. Traditionally, the family has played the greatest role in passing on important social values and norms that constitute social capital (Putnam, 2000). Another possible reason for the decline may be decreased involvement with religious institutions. Increasingly fewer Europeans affiliate themselves with religious beliefs (Pollack, 2008). Religious institutions have been shown to play an important role in the development of social capital (Fukuyama, 2001).

The reasons why these values and social norms are disappearing are many and varied, but the results are clear: trust disappears, and transaction costs increase as problems like corruption, bribery, fraud and criminality take their place. Studies have shown that corruption raises the cost of capital and uncertainty in the economy (Gray & Kaufman, 1998), and some studies have shown that corruption is even spreading in Western Europe (Porta, 1997). On the other hand however, the same study shows that society is also becoming more concerned about problems like corruption and wants to do more to fight them. Also, while many of the traditional values that have contributed to social capital are on the decline, other values such as tolerance, environmentalism and social responsibility are on the rise in Europe. Additionally, the average economic and social well-being in much of Western Europe has been steady or on the rise.

How does one reconcile these seemingly inconsistent trends? Perhaps social capital is merely changing form. One other possibility is that Europe is not yet fully experiencing the effects of its steady decline in social capital, but is still reaping the benefits of the strong social cohesion created by prior generations. If this is the case, it is only a matter of time until Europe undergoes a painful transformation. As social capital continues to decline, it may be that Europe no longer finds itself positioned next to the United States at the forefront of the global economy.

Fountain, J. (2004). Living as people of hope (p. 53). Rotterdam: Initialmedia. 

Fukuyama, F. (2001). Social capital, civil society and development. Third world quarterly, 22(1), 7-20.

Gray, Cheryl W.; Kaufman, Daniel (1998). Corruption and Development. World Bank, Washington, DC. https://openknowledge.worldbank.org/handle/10986/11545

Hanifan, L. J. (1916). The Rural School Community Centre. Annals of the American Academy of Political and Social Sciences. 67, 130-38.

Iyer, S., Kitson, M., & Toh, B. (2005). Social capital, economic growth and regional development. Regional Studies, 39(8), 1015-1040.

Keeley, B. (2007). OECD Insights Human Capital How what you know shapes your life: How what you know shapes your life. OECD Publishing.

Knack, S. (2002). Social capital, growth and poverty: A survey of cross-country evidence. The role of social capital in development: An empirical assessment, 42-82.

Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A cross-country investigation. The Quarterly journal of economics, 1251-1288.

Mangalwadi, V. (2009). Truth and transformation: A manifesto for ailing nations. Seattle: YWAM Publishing.

Morgan, K. J., & Zippel, K. (2003). Paid to care: The origins and effects of care leave policies in Western Europe. Social Politics: International Studies in Gender, State & Society, 10(1), 49-85.

Pollack, D. (2008). Religious change in Europe: theoretical considerations and empirical findings. Social compass, 55(2), 168-186.

Porta, D. (1997). Democracy and corruption in Europe. London: Pinter.

Putnam, R. (1993). The prosperous community: social capital and public life. The American Prospect, 13(Spring), Vol. 4.

Putnam, R. (2000). Bowling alone: The collapse and revival of American community. New York: Simon & Schuster.

Thales Group (2011). The OV-chipkaart Story: A Nationwide Interoperable Fare Collection System in the Netherlands. ThalesGroup.com. Retrieved Dec. 13, 2014, from https://www.thalesgroup.com/sites/default/files/asset/document/thales_-_the_ovchipkaart_story_-_v2.pdf

The World Bank Group. (2011). What is Social Capital. Retrieved 12 11, 2014, from World Bank: http://go.worldbank.org/K4LUMW43B0

Whiteley, P. F. (2000). Economic growth and social capital. Political Studies,48(3), 443-466.