Revisiting Degrowth For Sustainability — It’s Necessary, But Challenges Traditional Economics

Can the planet sustain ever-increasing consumption? Logically, the answer is no. Across its life cycle, the average product results in carbon emissions of 6.3 times its own weight. It is not enough simply to green consumption by buying more sustainably produced goods — it is essential to reduce consumption through degrowth. That is because 45% of global greenhouse gas emissions comes solely from the production of the things we use and buy everyday.

Our love of things is a product of accepted wisdom that consumption is essential to economic growth, since our demand for things makes companies profitable and provides employment. But because environmental and social justice impacts are not figured into purchase costs, the impacts on the planet from our household consumption has a drastic effect on the environment.

Many of us were raised by family members who had experienced the austerity of World War II years. Every scrap was saved; luxuries were denied. Then came the rush of the post-war era, when people in the US moved into over 1,000,000 new homes annually. Spending on furniture and appliances increased by 240%. Each year, families bought millions of cars, refrigerators, stoves, and televisions.

It was a time of unbridled consumerism and what came to be accepted as prosperity.

Then came awareness of the connection between consumerism and anthropogenic climate change. By 2019, the Intergovernmental Panel on Climate Change (IPCC) concluded that deep cuts to consumer demand were needed to reduce carbon emissions. That perspective was antithetical to what had been a prevailing sentiment that whoever owns more toys wins.

Such cuts in consumer demand are an essential element of degrowth theory.

Degrowth & Investment — Interconnected Imperatives

First coined in 1972, degrowth theory received attention after a MIT computer simulation showed a world destabilized by growing material consumption. For several decades since then, the environmental movement has addressed humanity’s impact on the environment and identified economic growth as a key driver for unsustainability.

The notion has entered investment notes, acknowledging the time will come when environmental, social, and governance (ESG) concerns must take precedent alongside profit. It makes sense, as a precondition for sustaining long term value is to manage and address massive, paradigm-shifting externalities. Post-covid, we have supply chain disruptions, and consumers are taken aback by unaccustomed scarcity.

Can we learn to live without every commodity to which we’ve become accustomed?

It will require business models that work in harmony with society and the environment rather than hollow mitigation measures that do little more than continue the same financial growth trajectories and assumptions.

Lucy Findlay, managing director of Social Enterprise Mark, writes in a July blog post that “this requires a complete rethink of what business is.” Findlay explains that such reflection will need to occur even within the specialist social enterprise and investment community. “We need to think radically about how we design a different ecosystem led by those that have been marginalized by it rather than adapting the current system incrementally led by those that have ingrained.”

McKinsey & Company concur. An August, 2022 report describes how many companies today are making major ESG decisions, “such as discontinuing operations in Russia, protecting employees in at-risk countries, organizing relief to an unprecedented degree.” Moreover, they “continue to commit to science-based targets and to define and execute plans for realizing these commitments.”

ESG considerations are becoming more, not less, important in companies’ decision making even with recent swirling controversies. Externalities such as a company’s GHG emissions, effects on labor markets, and consequences for supplier health and safety are becoming “an urgent challenge,” and regulators are taking notice.

How Degrowth Could Become a Norm

Degrowth develops an alternative set of cultural practices in which we live within an economy of care and commons. It supports eco-communities and policies for sharing.

In a world where the US Capitol is attacked by citizen treasonists, it may be hard to envision a socio-ecological future motivated by social justice, democracy, respect for nature and its intrinsic value, meaning of life, and common well-being.

The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) last month included degrowth among a number of alternative economic models with insights that could help to arrest environmental degradation. The way nature is valued in political and economic decisions is both a key driver of the global biodiversity crisis and a vital opportunity to address it, according to a 4-year methodological assessment by 82 top scientists and experts from every region of the world.

Economic and political decisions have predominantly prioritized certain values of nature, particularly market-based instrumental values of nature. Although often privileged in policymaking, these market values do not adequately reflect how changes in nature affect people’s quality of life. Policymaking, the IPBES report states, overlooks the many non-market values associated with nature’s contributions to people, such as climate regulation and cultural identity.

What might this degrowth mindset look like in practice? It absolutely respects green business expansion and skill sets; it also requires those companies to report and moderate their carbon footprints.

It might mean that western diets would migrate away from eating meat. People could live in homes with smaller square footage or drive electric vehicles. Remote work and its corollary of less driving emissions would become a default rather than a temporary business measure. Visionaries like Elon Musk have been talking about making ride sharing a norm. Bike-sharing and fashion-sharing could be next.

Could the US and western Europe go so far as to measure economic outcomes differently, such as the Himalayan kingdom of Bhutan does with its gross national happiness index? Japan is investigating what a green GDP measurement would look like.

It would require forums on future needs satisfaction to establish dialogue between current and future generations to support the degrowth cultural shift. Those and other behavioral changes could inspire a degrowth-aligned investment portfolio which, in turn, inspires more sustainability.

Yes, it will be an ideological tsunami for investment houses to advise clients through oppositional pathways of increasing consumption and production while rewarding sustainability measures of all kinds, as Reuters notes in a recent article. But consumerism is a consequence of human interaction with nature. Adjusting to ways of claiming nature’s spaces and thoughtful deliberation prior to transforming them consciously is imperative.

Acknowledging spaces where social and physical realities meet within a degrowth mindset will require more harmonious co-existences, and such a reality could require focus on nurturing healthy relationships with nature, others, and the self — outside of the economic sphere but contributing to a new renaissance of prosperity.

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