Degrowth is a ludicrous idea to many business people. Yet, science and non governmental business influencers with strong mainstream credibility are now talking about it as an imperative. This mirrors early patterns of attention given to climate action decades ago, when mass industrial decarbonisation seemed absurd.
Degrowth – The New Conversation
What is Degrowth?
Degrowth is an equitable downscaling of material and energy throughput. It is a shift in industrial inputs and outputs to levels that do not exceed environmental and climatic tolerances, redistributing economic output to where it is needed most, and maintaining this overall level of economic activity in a steady state to provide and maintain quality of life for all.
Who Is Talking About It?
- WWF, an NGO that partners with corporates1, is calling on the UN Convention of Biological Diversity (UNCBD) to adopt the milestone of halving the footprint of production and consumption by 2030. ‘Habitat loss is mostly caused by agricultural expansion and new infrastructure. Overexploitation is in large part caused by unsustainable forestry and overfishing. Pollution has many causes, but is ultimately driven by manufacturing and extractive industries, as well as agricultural run-off. Overall, producers and consumers are rarely held accountable for negative impacts they have on nature. Often, they are also unaware of their biodiversity footprints due to the lack of transparency in global supply chains. At a systems level, the true social and ecological costs of production and consumption are generally not being factored into the cost of consumer products.’2
- A draft of the IPCC Sixth Assessment Report (part three), due in March 2022, was leaked in August 2021 by scientists who feared it would be watered down by governments. It affirms that emissions must halve in the next ten years to reach net zero by 2050 and stay within 1.5C of global warming this century and draws attention to lifestyle changes that will be necessary in rich countries and among richer people in order to reduce human influence on the climate, such as ‘refraining from over-heating or over-cooling homes, walking and cycling, cutting air travel and using energy-consuming appliances less’, as well as shifting to plant-based diets, which would ‘reduce emissions by up to 50% compared to the average emission intensive western diet’. The scientists also call out ‘existing and planned infrastructure and investments, institutional inertia and a social bias towards the status quo’ for locking in future emissions.3
- The New Zealand Ministry for the Environment commissioned a team led by Johan Rockström to translate the planetary boundaries framework for New Zealand. A case study on New Zealand’s food system found, in terms of production, that ‘many of the foods that New Zealand produces, such as milk, beef and lamb, are environmentally intensive’ and ‘initiatives often focus on improving production practices rather than, for example, exploring changes in land use’ and ‘it will be important to consider what other measures beyond production improvements might also be needed’. In terms of consumption, ‘by 2050, New Zealand food consumption is projected to twice exceed its fair share’, excluding food wasted, given the high consumption of red meat and its high environmental impact.4
- The Low Energy Demand (LED) scenario, published by the IPCC5, is the first to meet the Paris Agreement without relying on unproven carbon capture technologies. It includes significant SDG co-benefits, reducing global development inequalities, despite rises in population, income and activity. It assumes global energy consumption reduces by 40% by 2050 from 2020 levels, while material output decreases by 20% overall, 42% in the Global North and 12% in the Global South.6
What Does This Mean For Business?
To understand it as a business force, degrowth needs to be seen in the context of being a feasible alternative to the potentially failing rescue of the growth economy by the green growth movement.
Unlike green growth, which is an idea that has filtered into business top down from a UN-facilitated global sustainability agenda, degrowth changes are happening ground up in opposition to parts of that agenda that do not appear to be effective.
All businesses, even those that claim to be sustainable, need to assess the future risk to their social licence from levels of production and consumption that are environmentally and socially intolerable and test their long term strategy against scenarios with much lower business volumes.
Thinking about degrowth now as a potential future condition will create the knowledge base for an orderly change to the business model, the development of opportunities and a just transition for workers and communities, rather than having to absorb an imposed crisis and lament missed opportunities.
We take a look below, in terms of the economic paradigm, at where we are now (growth), where we seem to be heading (green growth) and where we may actually be heading (degrowth).
Growth Economy – We’re Here
How Does It Operate?
Our current growth-based economy operates by increasing the market value of produced goods and services (gross domestic product) over time. Every firm aims to increase the market value of its total outputs year-on-year to create wealth for its owners, better benefits for more customers, jobs for employees and suppliers, prosperity for communities and taxes for the government. This delivers an overall upward trend of human progress.
Six capitals are employed (provide inputs) to produce goods and services (outputs), increasing or decreasing the value of each capital (outcomes) in the process.
|Capitals Employed||Inputs to Production|
The economy grows in two ways:
- Extensive growth – more output from more capital input
- more people / hours
- more competence
- more land
- more resources
- Intensive growth – more output from the same capital input
- increased labour productivity
- increased resource efficiency
Intensive growth is driven by R&D, innovation and technology.
Problems With The Growth Economy
- Uneven wealth distribution. Industry has converted immense amounts of natural resources into manufactured goods, physical assets and financial capital, expanding the global middle class. But wealth is unevenly distributed, with many billions of people suffering poverty, hunger, inequality and limited opportunities.
- Nature loss. Relentless extraction of resources and wasteful use have depleted, scarred and polluted the environment, leading to an alarming rate of nature loss on land and in water.
- Climate change. The twin systems of fossil-fuelled industrial production and marketing-driven consumption of globally distributed goods have caused global warming, resulting in changes to Holocene climate patterns in every region of the planet. Some future changes are already locked in, irreversible for centuries or even multi millennia, such as sea level rise.
Two centuries of economic growth have created uneven human progress at too great an environmental cost. Business-as-usual must end, which means change must happen.
Economic Change – Where Do We Go?
There are two feasible alternatives:
- green growth economy
- post growth economy
Both rely on structural and systemic changes, affecting how public and private sectors operate and interact, as well as behavioural changes among people with higher footprints. Both have the same sort of end point in mind – human progress that is socially just and environmentally sustainable – but they are based on quite different views of what it will take to get there.
Green Growth Economy – We Seem to Be Heading in This Direction
Source of Concept
Green growth is a political and business policy outcome of the global Sustainable Development Agenda that has formed over the last 50 years, facilitated by the United Nations, culminating most recently in Agenda 2030 and the seventeen 2015-2030 Sustainable Development Goals (SDGs) for all nations.
The UN has undertaken decades of sustainable development effort. At the turn of the millennium, eight Millennium Development Goals (MDGs, precursors to the SDGs) were set for 2000-2015, focused on alleviating poverty in developing nations, combining human rights, a pro-market strategy and target-setting. The MDGs improved development cooperation, growing official development assistance funding by 75%. As a result, by 2015, compared with 1990 levels, the share of people experiencing extreme poverty and hunger had reduced by 50%, maternal mortality had reduced by 45%, the child mortality rate was 17,000 less per day and 2.3 billion more people had access to clean water. Yet, the MDGs were merely band-aids that did not address the causes of poverty, hunger and inequality – such as discrimination, social injustice, corruption and environmental degradation – much of which is driven by behaviours outside developing nations. Thus, the SDGs were co-designed and adopted by 193 governments to apply to all nations and to address the shortcomings of the MDGs: SDGs 1-6 reinforce the MDGs, SDGs 7-10 address root causes of poverty and inequality, SDGs 11-15 consider human impacts on nature and SDGs 16-17 enable the other goals.7
The SDGs align with other UN Sustainable Development programmes. SDG 13 for climate action is supported by the UNFCC COP21 2015 Paris Agreement to mitigate and adapt to climate change, as well as the 2015-2030 Sendai Framework on Disaster Risk Reduction. It is hoped that the UNFCC COP26 to be held in Glasgow in November 2021 will bring leaders together to accelerate climate action. Similarly, but in less advanced ways, the SDGs relating to nature are supported by the UNCBD. It is hoped that the UNCBD COP15, currently underway and to be concluded in Kunming in April 2022, will produce a new global accord on biodiversity, similar to the Paris Agreement on climate action, to halt and reverse nature loss.
The Sustainable Development Agenda is familiar to many people as the sweet space in the overlap between three co-equal pillars: the environment, society and the economy.
The agenda is founded on the premise that social progress, environmental protection and economic growth are axiomatic for human development, so a solution must be found that enables all three to be achieved simultaneously. A key theory is that economic growth and social progress can be decoupled from environmental impacts, ie green growth.
There are two types of decoupling:
- Relative decoupling (resource efficiency)
- production grows
- social outcomes increase
- negative environmental impacts slow
- Absolute decoupling (ecological regeneration)
- production grows
- social outcomes increase
- negative environmental impacts reverse
Relative decoupling is typically achievable with large scale production. Absolute decoupling has not yet occurred with large scale production, although regenerative farming has promise. Decoupling theory underpins several political ideas, such as the OECD Beyond Growth economic narrative8, the New Zealand wellbeing economy9, the US Green New Deal10 and the European Green Deal11.
The Sustainable Development Agenda is a powerful change driver for the business sector, guiding the maturation of business sustainability from non core CSR activities to strategic sustainability, delivered through the monitoring, managing and measuring of ESG metrics. The 2010-2019 Unilever Sustainable Living Plan was the first multinational business strategy expressly founded on decoupling theory.12
|Relative decoupling (resource efficiency) has really taken off as the key results area for environmental corporate sustainability. Resource efficiencies deliver cost savings, but also, the act of reporting them, along with social outcomes (such as increasing the number of women in senior management) can provide reputational gains. ESG disclosure has therefore ridden a wave of popularity among management and investors. Globally, 80% of large, listed companies report on ‘sustainability’ (up from 75% in 2017), with 68% connecting their reporting in some way with the UN SDGs (up from 39% in 2017).13 ESG data is a lucrative commodity for asset managers, feeding the formulation of ESG-related funds. By 2020, global ‘sustainable investment’ assets under management represented more than one third of total AUM, valued at US$35.3 trillion, a growth of 15% since 2018.14 |
Despite keen attention to ESG metrics, 2015-2019 progress on Agenda 2030 was very poor. Reducing poverty, improving maternal and child health, access to electricity and gender equality improved little. Reducing inequality, lowering carbon emissions and reducing hunger stalled or reversed. In 2020, the world was not on track to meet any of the SDGs by 2030. COVID-19 slowed progress even further with 120 million people pushed into extreme poverty, the first increase in twenty years on this core development issue; meanwhile, atmospheric concentrations of GHGs continued to rise.15
National governments are beginning to support high-emitting industry transitions, such as the Swedish government’s support of green steel16, the NSW Hydrogen Strategy17 and the New Zealand government’s support of agriculture, He Waka Eke Noa18; however, critics predict that economic growth and the electrification of industry and transport will drive energy demand at a rate that outpaces the rollout of renewable energy.
|The concept of net zero is, for many businesses, the vision of an absolute decoupling of their economic growth from climate effects, and is firmly part of their green growth agenda. A net zero goal means that by 2050 or sooner, a business aims to viably operate with a level of residual GHG emissions that can be appropriately and affordably offset or captured and stored. Process, product and technological changes to achieve net zero cannot yet be stipulated, so roadmaps to 2050 are, for the time being, unclear.|
All in all, despite the decades-long, UN-led drive for sustainable development supported by at least a decade of ESG business practices and recent tremendous growth in ESG financing, global sustainable development has stalled. A common refrain is the need for more and better data – asset managers want standardised, assured ESG business data that is machine-readable and centrally stored to inform the financial market and ‘shift the trillions’. Shift the trillions to what? Relative decoupling is intensive economic growth by another name and can, at best, only slow environmental damage, while the more appealing concept of absolute decoupling is elusive in practice.
Innovation, policy change, investment and better data may yet lead to the absolute decoupling of economic growth and environmental impact, but green growth certainly isn’t working yet. The question is, how long do we give it?
Post Growth Economy – We May Actually Be Heading in This Direction
The year 2030 will be a watershed as the SDGs and many firms’ current climate goals will simultaneously mature. Asset managers, industry and the business sustainability movement will have to answer to a global public running out of patience. If green growth doesn’t seem to be working, a critical mass of investors, consumers, voters, employees and activists may decide that growth really can’t be green, shun conventional consumption and demand urgent deceleration of production through a variety of means – the power of social networks, lobbying for regulatory change and legal action (all from the climate activism playbook).
Source of Concept
The aim of degrowth is to reach a post growth, lower metabolism, steady state economy. Degrowth is the transition pathway between the two economic paradigms: from growth to post growth. A reduction in economic output would cause GDP to fall, but degrowth (moving to a different economy) is not the same as recession (a shrinking economy).
Degrowth is a socioecological sustainability movement that began in France in 200120 around concerns over mounting environmental damage being caused by constant growth in industrial production and consumption. There is no single or clear degrowth vision, and there are some quite radical degrowth ideas, but adherents of all stripes tend to agree that in contrast to the inequality, nature loss and climate change that have resulted from two centuries of economic growth, degrowth will lead to abundances that will meet the needs of the many and leave us more time to enjoy life. (Note that the degrowth movement is not the same as the population control movement.)
A model of degrowth has not yet been devised because pulling together the various ideas presents many unresolved conundrums. For instance, capitalist societies use economic growth as a stabiliser, so are unlikely to be compatible with degrowth; rapid degrowth would be destabilising; planned degrowth is unlikely as it would require a change in power relations.19 A key imperative, therefore, for the degrowth movement is to elaborate on a stable degrowth pathway.
The pejorative view of degrowth is that it is a colonial, romantic regression toward time-consuming, labour-heavy, self-sufficient homesteading. Its connotations with austerity, frugality and domestic labour are highly off-putting to conservatives, feminists, social progressives and the labour movement alike. Many business people on both sides of the political spectrum are unwilling to see degrowth as anything other than an anarchic, niche notion.
Businesses need to ignore the hype and problematising around degrowth and move directly to understanding how it is manifesting, and may manifest in the near future, in mainstream life. Whereas green growth is positioned as reformist and existent and degrowth as revolutionary and normative, some degrowth ideas are, in fact, already being adopted inside the growth economy and may represent the beginning of a ground-up transition.
Ideas in practice, or at least in mainstream discourse, include planetary diets (plant-based meals, locavorism, veganism), low energy urban mobility (peak car, rail renaissance, 20-minute cities), the sharing economy (car share services, shared workspaces, fashion rentals) and flexible consumption (as-a-service business models). These new business models exist alongside regular forms of growth agnostic (non-capitalist) economic activity, such as not-for-profits, community trusts, social cooperatives and unpaid care work.
A degrowth transition toward a post growth economy could involve some of the following attributes.
|Steady state of production and consumption requires a circular economy for the continual re-use of valuable resources through cradle-to-cradle designs that include both technological and biological solutions, best described by the Ellen MacArthur Foundation.21|
|Working within environmental tolerances means, at a global level, respecting planetary boundaries22. At a business level, this means using science-based targets for climate action23, contextual water targets24 and science-based targets for nature25.|
|Changes to richer lifestyles|
|Richer people (by global standards) generally lead an environmentally-intensive lifestyle. They will become increasingly informed on their GHG and biodiversity footprint and will choose (or feel social pressure) to reduce such consumption. This would not mean deprivation, but switching to new ways of living well, valuing different things and transacting differently, such as through giving to and receiving from collectives.|
|Changes to poorer lifestyles|
|Kate Raworth’s Doughnut Economics is a simple visual model of a growth-agnostic economy operating within a social foundation and ecological ceiling.26 Poorly provisioned communities need to reach the social foundation, so there will be an ongoing requirement to deliver goods and services and create infrastructures within environmental tolerances to create impactful social change where needed, such as digital equality, access to healthcare and education and resilience to climate change.|
|Infrastructure has a long lead time and a long lifespan, it is expensive and resource/energy intensive. Existing infrastructure and architecture need to be retrofitted for new ways of living. Future infrastructure solutions may be very different to today’s – more local, more nature-based, less physical.|
|Business sustainability re-set from outcomes to impacts|
|Business-centric sustainability practices that focus on ESG outcomes will recede, to be replaced by public-centric practices that monitor, measure and manage new impact-conscious metrics of business value-creation, such as cultural stewardship, climate justice, human rights, anti-racism, multiplicity, the commons, sufficiency, ecological regeneration, shared knowledge, scientific advances, downtime and emotional wellbeing.|
|A central feature of degrowth is a more equal distribution of wealth through democratic means. Potential policy mechanisms could include universal basic income, job guarantee scheme, living wage, maximum income, bans on single use products, right to repair legislation, global carbon pricing, redistribution of subsidies, caps on material use and taxes on resource-intensive goods.|
|As some throughput limits are set and new metrics of success become established, public-private partnerships are a key opportunity for businesses to negotiate the reshape of their business model in ways that establish dimensions of risk and return that fit with their multiple stakeholders who provide capitals and who benefit from business outcomes. Some of these stakeholders aren’t born yet.|
|Fewer working hours|
|Working hours would be cut as throughput reduces, decreasing the environmental impacts of going to work and increasing the social benefits of increased downtime, including the redistribution of unpaid care work that currently more often burdens women.|
|Localism is a foundational concept in degrowth. In business, this could manifest in ‘design global, manufacture local’ approaches requiring the design of products and processes to consider local differences, such as resource availability, as well as downsized and decentralised technologies, such as 3D printing, and a rise in the value of craftsmanship.|
|Post growth technologies must avoid driving consumption and inequality, but meet new socioecological standards, such as data sovereignty and privacy, democratisation of knowledge, and lifecycle resource and energy minimisation.|
The climate crisis brought the radical idea of decarbonisation to the boardroom and decision makers who have grasped the nettle are displacing uncertainty with action. By and large, that action incrementally reduces carbon emissions and nature impacts while production and consumption grow.
In the near future, by 2030 at the latest, if that action is seen to be too ineffective or too slow to meet the challenges of both the climate and the biodiversity crises, as seems likely, the boardroom will have some hard questions to answer.
Degrowth to responsible levels and types of production and consumption is increasingly being seen, not only as a feasible idea, but the only feasible idea for a future economy that can operate within climate and ecological limits. Businesses need to prepare for the conversations that surely lie ahead.
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 He Waka Eke Noa – Primary Sector Climate Action Partnership 2021, Ministry for the Environment, viewed 14 October 2021, <https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/he-waka-eke-noa-primary-sector-climate-action-partnership/>.
 Kallis, G, Kostakis, V, Lange, S, Muraca, B, Paulson, S & Schmelzer, M 2018, ‘Research On Degrowth’, Annual Review of Environment and Resources, vol. 43, no. 1, pp. 291–316.
 Demaria, F, Schneider, F, Sekulova, F & Martinez-Alier, J 2013, ‘What is Degrowth? From an Activist Slogan to a Social Movement’, Environmental Values, vol. 22, no. 2, pp. 191–215.
 Let’s build a circular economy, ellenmacarthurfoundation.org.
 Planetary boundaries – Stockholm Resilience Centre 2012, Stockholmresilience.org.
 How it works, Science Based Targets.
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