The Resource Side

Worldwide there is increasing competition for oil, steel, copper, and alumina, cement, and other basic commodities, for industrial production and construction of urban infrastructure and industrial plants. In many countries the basic resources of land and water are also constrained resources at risk. At the same time supply constraints due to warfare and resource depletion are developing, which add significant increases in costs.

Demand for resources is driven not only by new development but also by the need to replace or restore decaying urban, rural, and industrial infrastructure as well as commercial and residential buildings. Industrial rust belts, for instance, exist in developed and developing countries alike.

Sustainable development in both developed and developing countries requires the setting of very high objectives for efficiency in the use of all resources, as one part of a broader strategy to avoid crisis. This calls for systemic planning and action to multiply efficiency, not just make incremental improvements. Gains in efficiency must be achieved across the whole product lifecycle, not just in production. Rapidly increasing consumption is already overwhelming many improvements in manufacturing productivity in a “rebound effect”. 

Some of the initial responses for achieving such high objectives include the Circular Economy (China) and the Recycling Economy (Germany and Japan), eco-industrial parks and networks, closed-loop and energy generating apartment and office complexes, and sustainable agriculture. All major economic sectors have a role to play in achieving the required gains in efficiency, not just heavy industry. These include land use planning and development; transportation, design and construction of the built environment; commerce; the design and operation of municipal infrastructure; agriculture, and households all have a share in the responsibility. Similarly, gains must be made at every stage of the lifecycle from resource extraction to final recovery or disposal.

There is a close relationship between resource issues and global changes, such as shifts in the chemical balance of the atmosphere, climate change, pollution of rivers and oceans, transboundary pollution, and loss of biodiversity. Even a Recycling or Circular Economy is only a partial economic solution. The deterioration of ecological systems -- locally, nationally, and globally -- demands economic solutions that will enable their restoration.

When looking at these systems in terms of human welfare, ecological economists call them “natural capital”. Natural capital is the source of all natural resources and the sinks that absorb the by-products of human activities. The accounts of natural capital must be recharged through major investments in restoration of forests, grasslands, deserts, farms, watersheds, oceans, and atmospheric balance. This “restoration economy” must also recover the sunk investment in human habitat and infrastructure so as to extend its life. Here too the investments will create massive opportunity for venture development and job creation.

For years economics was defined as the discipline that allocates scarce resources in a society. Mainstream neo-classical economists tended to see resources as substitutable through technological innovation and declined to calculate the limits. Their working assumption was that the stocks and sinks for an economy were virtually infinite. Resource depletion, pollution, degradation of ecosystems and global ecological systems were all counted as value-adding activities that add to gross domestic product.

The failures of neo-classical economics has led the emerging generation of economists to call it “autistic” for its inability to link its elaborate theories and models with the world in which we actually live. The discipline of Ecological Economics in the mid-90s separated its work from mainstream economics by insisting that our local, national, and global economies must be managed in their ecological context to avoid ever deepening crisis. This means ending the illusion that the critical functions of natural capital can be called “eternalities”, as though they had no place in economic analysis. This is true for companies, for cities, and for nations.

The Impact Side

There is a close relationship between resource issues and global changes, such as shifts in the chemical balance of the atmosphere, climate change, pollution of land, air, rivers and oceans, transboundary pollution, and loss of biodiversity. Even a Recycling or Circular Economy is only a partial economic solution. The deterioration of ecological systems -- locally, nationally, and globally -- demands economic solutions that will enable their restoration.

When looking at these systems in terms of human welfare, ecological economists call them “natural capital”. Natural capital is the source of all natural resources and the sinks that absorb the by-products of human activities. The accounts of natural capital must be recharged through major investments in restoration of forests, grasslands, deserts, farms, watersheds, oceans, and atmospheric balance. This “restoration economy” must also recover the sunk investment in human habitat and infrastructure so as to extend its life. Here too the investments will create massive opportunity for venture development and job creation.

Industrial ecology in one of the few systems frameworks that is committed to defining solutions for resolving the complex problems of resource constraints and environmental impacts within a sustainable economic context. Much of the literature has focused too narrowly, in order to build scientific credibility. However, the best researchers in the discipline are reaching to make it a major science of sustainable development.

At the practice level, eco-industrial development is working through the difficult challenges of place-based sustainable innovation. Local and regional teams are creating eco-industrial networks, eco-industrial parks, by-product exchanges, and integrated resource recovery systems and  there are three national initiatives in Korea, China, and Thailand.