The economics of sustainability

Interesting times; we have a US market staring down the barrel of recession and Australian commentators debating the impact this will have on Australia, while, ironically, talking about inflation and interest rate increases... go figure.

So with all this going on, it is possible that businesses might start to look more at economics than sustainability. Likewise, the new Australian Government, with all its hopes to kick start an education and renewable energy revolution, will be forced (by the Opposition at the very least) to look more closely at their spending (something the Opposition, while in Government, never had to do...).

Seriously examining spending is a good thing, but to do so now - when things are looking pretty shaky to say the least - is too late. For a long time I have argued that sustainability should be more about economics than the environment; more specifically, sustainability is about opportunity cost and long-term decision making.

If we leave aside the new Australian Government (because, let's be fair, they have not really contributed to any of the current financial or economic issues the country is currently facing), and look only at businesses, the successful businesses in the next two years will be those that made long-term decisions to save (or invest) their good fortune over the past two years, so that it could begin to deliver returns when the cycle dipped. At the end of the day, I fundamentally believe, that is sustainability.

Investment in new technology, processes or training that reduce waste, on-going costs or dependence on something else (ie the electricity grid, water supplies, or - dare I say it - people) will be critical now. Not only will it reduce costs over the coming two years when things aren't as good, but it will also better position companies to deal with the new global expectations arising from concerns about climate change.

Likewise, those companies that invested in their people, spent the extra money to refine, extend and enhance the skills of their people will also be better off during the coming two years. Now more than ever companies need smart people to develop really smart ideas about everything from the business model, to marketing and technology. Without these people, many companies may find themselves losing the good people thus creating a double negative feedback loop: productivity decreases and costs increases. And when the cycle starts to dip, these are the last two feedback loops a company wants to feel.