Sustainable Global Economic Development 101: Challenges and Issues

Foreword

This series of articles provides a detailed explanation of sustainable global economic development, issues that arise, ways of addressing these complex problems, and benefits for nature, humanity, and the world economy. The series of articles aims to emphasize the essence of making global finance and the economy more sustainable and reveal the steps to achieve these goals. The importance of the series is that the aspects of the topic described in the articles concern everyone, and each reader can understand what factors, decisions, technologies, and ideas affect sustainable global economic development.

The Sustainable Global Economic Development 101 series consists of six articles:

1. Sustainable Global Economic Development 101: Definition and Principles

2. Sustainable Global Economic Development 101: Challenges and Issues

3. Sustainable Global Economic Development 101: The Indicators of Sustainable Economy Development

4. Sustainable Global Economic Development 101: Sustainable Global Finance Methods

5. Sustainable Global Economic Development 101: The Influence of Science and Technology

6. Sustainable Global Economic Development 101: Enhancement for Sustainable Globalism

The topic of sustainable development remains relevant over recent years, attracting attention, efforts, and resources towards international cooperation, in particular, to eradicate extreme poverty, promote fair trade, and build infrastructure in undeveloped countries. Although, business interests often conflict with the aims of sustainability. To deal with a variety of continuing changes the world is constantly undergoing, such factors as digitalization, globalization, urbanization, and others that have a significant influence on the sustainability of the world economy must be studied to disclose their effect. The article describes the theoretical background of a sustainable economy, the benefits and limitations of sustainable business, its issues and challenges. It also highlights sustainable global economic challenges and issues such as the incorporation of sustainability into the business, the circular economy, government action, social justice, holistic thinking and action, climate change monitoring, and business influencing policy.

The Theory of Sustainable Economy

According to the research, conducted by Grossman and Krueger (1991), who were American economists and professors at Princeton University, the wealthier a society becomes, the more its members are seeking a sustainable environment. In this case, the government is called upon to bring legislation in line with international standards. So the concepts of sustainable development and economic growth are closely collected (Grossman, Krueger, 1991). The main idea is to find a balance between supply and demand in the process of solving human problems. Economic growth or construction of a capital-intensive production structure is caused only by entrepreneurship and genuine savings. In a case where it is politically induced, there will be no sustainable economic development (Espinosa, 2021). Wealthy people usually increase the supply and demand for loanable funds. The range of alternatives is opening to people to promote further economic activity, accumulation, and consumption of resources, advancing technology of production methods, and consequently, so improving the efficiency of entrepreneurship. Which in turn raises the global economic prospects, gross domestic product (GDP) growth, and household consumption. The respect for property rights, efficiency, and predictability of legal systems are the main preconditions for the development of the economy (Acs, Estrin, 2018; Acemoğlu, Robinson, 2019).

Only then people can trust the state, have confidence, and will take risks to invest or accumulate money. The basic principle is that confiscation risk should become extremely low. Because this risk is limiting entrepreneurship in most areas of the economy. In this case, the market process is very restricted, since no one will voluntarily give up their private property rights. Also, along with ending legal inequality, a wide range of possibilities will be available to all people regardless of their social background and country of residence. Ending poverty depends on institutional arrangements which are essential determinants of economic and entrepreneurship development. Entrepreneurship expands new ways of addressing people's problems. Competition in business is a driving force behind innovations in all areas of the industry and the service sectors. Moreover, it contributes to establishing social cooperation and the creation of a just and inclusive society (McCloskey, 2006).

Figure 1: Green Economy's Great Opportunity (Pinterest, 2022).

The competition gives the possibility to propose to the customers better products and services at the possible lowest prices. Lastly, entrepreneurship produces social coordination. The process begins when private property rights are protected and communicated to society. Providing a basis for honest entrepreneurship is the most important condition under which it is possible to end poverty (Holcombe, 2003). The result means profit, depending on how well businessmen serve customers' needs. Besides, sustainable development toward civilization and wealth for all presupposes increasing in production and distribution of capital goods in line with changing demand arrangements (Bylund, 2011). As a consequence of economic progress, appears technological progress, automation, and digitalization of the state (Ridley, 2020). The prospective of a good income is the principal reason that moves individuals to satisfy other people’s needs as cheaply as anyone of their competitors. That is the only way to do good business, pay the consumer goods, and make investments. To this concept, a plan of getting more for a less amount of money is a key aspect of understanding the role of entrepreneurship in a philosophy of sustainability.

Challenges and Issues of Sustainable Economy

On the way to a Sustainable Economy, business faces many challenges and issues. For instance, the transition to a green economy and climate change monitoring will allow the accomplishment of such United Nations Goals for Sustainable Development as "responsible consumption and production", "climate action", "industry, innovation and infrastructure", "sustainable cities and communities". Resolving youth unemployment, social inequality, and accessibility to health and educational services will be the basis for achieving "no poverty", "zero hunger", "good health and well-being", "quality education", "decent work and economic growth". The rest of the challenges: business influencing policy, enacting necessary legislation, government regulation and holistic approach will permit to establish "justice and strong institutions", "partnership for the goals".

"The Green Economy is defined as low-carbon, resource-efficient, and socially inclusive. In a green economy, growth in employment and income is driven by public and private investment into such economic activities, infrastructure, and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss of biodiversity and ecosystem services" (United Nations, 2022).

Figure 2: An illustration of business and climate change (Spano, n.d.).

The Green Economy is a different vision for growth and progress, that can cause improvements in the economy and people's lives along with the protection of the environment and social well-being. The significant component of such an economy is the promotion of the adoption of sustainable technologies. The discussion of this matter centered on five main points: dealing with the problem of environmental risks, realization of radical sustainable technological changes, business-as-usual scenario, state regulation of the economy, distributional impacts and issues. According to the 2030 Agenda for Sustainable Development and Sustainable Development Goals, adopted worldwide in 2015, it is recognized that the goal of ending poverty should correspond with economic growth and social strategy with a range of various issues, including health, social protection, education, job creation, and others. The Sustainable Development Goals of the United Nations also build a link between ecology and the economy. In addition, these goals intensify the necessity for a transition to a green economy, that is the transformation towards more sustainable production and consumption. Economy and ecology always stand opposite each other due to the conflict of “profitability versus environment”. There is a strong tendency to believe that businessmen may either choose to prosper financially or take care of the planet, but they can not stand for both (Söderholm, 2020).

One of the biggest challenges faced by entrepreneurs is the incorporation of sustainability into the function of their business. The modern firm is forced to adopt a green economy, rethink and redesign all business practices and production processes. Besides, there is a need to integrate social responsibility. All these innovations allow for the finding of complex solutions to such problems as poverty, inequality, accessibility to health and educational services, and so on. The sense of all of the above-mentioned social changes leads the business and then the whole country to a sustainable economy. The necessity for the transition to a green economy determined new challenges for entrepreneurs and also for corporations. The representatives of business take part in co-regulatory and self-regulatory arrangements in cooperation with governments, and private and public institutions. This collaborative effort spans multiple scales, from the local to global. The results of such work include accounting and transparency standards, fair trade and energy consumption labels, forest certification, and emission trading (Nowodziński, 2022).

Aside from the transition to a Green Economy, several other issues arise namely: advancing the circular economy, dealing with youth unemployment, government action, climate change monitoring, social justice in climate transition, holistic thinking and action, and business influencing policy (Espinosa, 2021).

Figure 3: An illustration of the UK's getting greener policy (Kitch, 2021).

A circular economy is a model of production and consumption which involves sharing, reusing, and recycling as long as possible to extend the life cycle of products (European Parlament News, 2022). The problem of youth unemployment exists mostly in developing countries. And to solve it is necessary to integrate underserved businesses into the economy of a country. The establishment of the circular economy (where waste becomes a resource input and this will enable much less pollution) is the most important challenge of the sustainability concept. Especially, for multinational companies (Espinosa, 2021).

Without government regulation, it is very complicated for companies to conduct their business in a manner to support necessary amendments. Today all countries need significant changes in legislation to make their economy more sustainable. Political uncertainty may be a serious obstacle on a way to achieving Sustainable Development Goals. Government has a vital role in establishing a framework that requires action from businesses in that order to see system changes. Performing climate change monitoring is obligatory because to build a Green Economy it is necessary to possess information about the reduction of greenhouse gas emissions and other parameters to fight climate change. While presenting the reports in a standardized way, monthly and yearly, it is possible to see the situation clearly and have more insights for governments and companies.

The holistic approach to sustainable development is that it is not reasonable to focus only on one problem. All controversial issues should be viewed in a complex and close interaction with each other. For instance, a persistent focus on climate change is inappropriate. Because it is connected to many other issues to some extent. The best decision according to Nowodziński, a Polish scientist and economist, is to deal with sustainability issues in a complex manner. Social justice in climate transition means resolving the climate change problem is necessary for a human-centered way, strongly considering how to do it so that it is socially fair. Focusing in particular on the transition of workers, as an example, it is possible to avoid the risk of misalignment of labour skills. Failure to do so may affect the social fabric in such a way that even developed countries may not be able to deal with global social instability. Addressing sustainability issues is not about making the economy green. Making a real difference requires establishing a social movement to force politicians to carry out essential reforms. At present, in addition to loud statements from large corporations, there is a need for effective measures in terms of climate policy and education of customers and personnel. That is exactly the meaning of business influencing policy (Nowodziński, 2022).

Figure 4: Sustainability issues over the globe (The Guardian, n.d.).

Benefits and Limitations of the Sustainable Business

Not everyone knows that if the business is green it can be more successful in the long term. Sustainability will increase effectiveness, competence, boost brand value and reputation, provides a basis for implementing innovations, attract talented employees, and so on. Approximately 40 percent of millennials have taken up a new job for the reason that the company is sustainable, even knowing that they will get paid less. But it is known that not all companies have approved eco-strategies. This is due to the lack of awareness among corporations about the benefits of applying a sustainable strategy to the company’s production style. This suggestion deals with additional charges to companies in the case of investing in eco-friendly production processes, buying sustainable raw materials, and so on. All above-mentioned will inevitably lead to a rise in the price of company products. Part of the difficulty in sustainability is to control or measure the extent of engagement of every employee concerning the company’s sustainability. Moreover, some company leaders think they do not have sufficient resources to support a Green Economy. Despite this, the benefits of a more sustainable business are as follows: decreases business costs, improve company reputation, allows to establish a meaningful connection with the customers, setting out competitive advantage. To start a green business, first, it is necessary to invest a certain amount. But, the investment pays off well over time. By McKinsey, a sustainable business strategy can reduce expenses in perspective and rise operating profit up to 60 percent, and such companies are expected to have trusted reputations. As reported by Forbes, the most successful companies stand for corporate social and green values. This fact shows that a company cares about the planet and not only about making money. And that is a reason why customers appreciate and respect such corporations. Sustainability is widely discussed as a competitive advantage that helps to force advanced growth. Accenture’s research on sustainability states that 99 percent of chief executives from large corporations confirm sustainability is crucial to the future success of the company (Palombini, 2022).

Conclusion

Admitting taking responsibility for nature while managing a business, encouraging corporations to be more innovative in addressing the challenges, and governments to enact the necessary legislation means being concerned about sustainable development. Implementing the Green Economy signifies overcoming many challenges such as the realization of radical technological changes, incorporation of sustainability into the business, advancing the circular economy, government action, climate change monitoring, social justice, holistic thinking and action, and business influencing policy. To move towards sustainability goals it is essential to support the efforts of all sectors - government, society, entrepreneurs, academic community, and citizens who are working in this direction.

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