This chapter discusses in more detail our conceptual definition of sustainable development, introduced in part A, and describes alternative ways of measuring the concept of sustainable development.
Defining sustainable development
The definition of sustainable development used in this report is an interpretation of the Brundtland definition (WCED, 1987), which states:
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Sustainable development means ensuring that well-being is at least maintained over time. The principle of fairness within and between present and future generations should be taken into account in the use of environmental, economic, and social resources.
Putting these needs into practice requires living within the limits of the natural environment.
There are essentially two starting points for viewing sustainable development: the anthropocentric view and the physiocentric view.
The anthropocentric view places human needs as the starting point and environmental protection as necessary in that it contributes to human well-being. This aligns with the first principle of the Rio Declaration, which states that “human beings are at the centre of concerns for sustainable development” (UNCED, 1992).
In contrast, the physiocentric view focuses on the protection and conservation of the environment for its own sake, irrespective of its utility to humans.
The Brundtland definition is anthropocentric – it places humans as the focus of attention. The definition also incorporates a principle of fairness that requires the needs of the present generation to be balanced with the needs of future generations. Therefore, maintaining options for current and future generations to meet their needs is an important element of sustainable development.
Sustainable means ‘durable’, ‘can be continued’, or ‘lasting’. This implies that sustainable development is development that can be continued into the future. The challenge laid down by the concept lies less with the word ‘sustainable’ and more with the word ‘development’ (Pearce & Warford, 1993 in WGSSD, 2008). Development is usually seen as a positive change.
Whether a change is thought to be positive or negative involves value judgements, and can change over time and according to differences in perspectives. Accordingly, development is not the same as growth. Growth entails an increase in physical variables, whereas development includes both qualitative and quantitative features.
Meeting needs and maintaining options
Individuals and society derive well-being from the total wealth of a country, where total wealth encompasses a range of capital assets and is broader than just financial wealth. These capital assets can be categorised as natural, human, produced, and social capital. They generate a stream of benefits over time, which contribute to the well-being of individuals and society.
While there are many definitions of well-being, and debate around its determinants, this report follows the Ministry of Social Development’s Social Report 2008 definition of social well-being, which is those aspects of life that society collectively agrees are important for a person’s happiness, quality of life, and welfare.
Capital assets are therefore integral to meeting people’s needs. Maintaining and managing them in a way that preserves options over time, to ensure a non-declining level of well-being, is a necessary condition of sustainable development.
The capital approach allows us to examine maintaining options for meeting needs in two ways.
Weak sustainability is where one type of capital stock can be replaced or substituted by another. An often cited example is when produced and human capital is substituted for natural capital, such as when a technological advancement makes it possible to substitute abundant resources for scarce resources.
Weak sustainability implies that the sum of all capital assets must be maintained, rather than the individual stocks of capital assets (WGSSD, 2008). However, this also assumes a level of certainty about each capital asset that does not really exist.
Strong sustainability is where produced, natural, social, and human capital are not regarded as freely interchangeable and each type of capital stock should be maintained. It is assumed that substitution possibilities among capital stocks are limited, because some of the forms are considered critical and cannot be substituted for (WGSSD, 2008).
The debate over weak and strong sustainability relates to the degree to which capital stocks can be substituted for each other. A key point in this debate is that some forms of capital are considered ‘critical’ – they are not substitutable as they provide a stream of benefits that are essential and for which no known substitute exists. This relates to the fact that Earth has a finite carrying capacity, and we must live within these limits.
An example of a critical natural asset is a reasonably stable climate. If the climate is destabilised, the basis for our civilisation in the long term may be threatened in a fundamental sense, almost irrespective of our material wealth (WGSSD, 2008).
Critical capital is generally associated with forms of natural capital. However, it can be argued that there is a critical level of social capital that is essential in order to maintain development in the long term.
Meeting needs and maintaining options can be characterised as managing a portfolio of assets. In managing these assets, we must take into account that there may be limits to the amount of substitutability, which has implications for the options available to future generations.
The requirement to maintain or increase well-being over time is included in the conceptual definition of sustainable development. Well-being is a term that is familiar in the New Zealand context, and the link between well-being and sustainable development is explicit in the Local Government Act 2002, which refers to the role of local authorities in “promoting the social, economic, environmental, and cultural well-being of communities, taking a sustainable development approach”.
Fairness between generations
The Brundtland definition (WCED, 1987) refers to balancing the entitlement of the present generation to meet their needs with the ability of future generations to meet their needs. ‘Present generation’ refers to those who are alive today; ‘future generations’ are those not yet born.
The goal of sustainable development is to ensure the availability of options for both those currently living and for future generations to meet their needs. One is not to be achieved to the detriment of the other. Therefore, the principle of fairness, both between and within current and future generations, is included in the definition. Future generations should have the same options as the present generation, and should not be limited by the consequences of actions of the present generation.
Limits of the environment
There is a strong relationship between meeting human needs now and into the future, and living within the limits of the environment. Figure C1 represents society and economic activity, which are constructs of people, at the centre of concern for sustainable development. Both are constrained by the natural systems of the Earth.
Relationship between the environment, society, and the economy
The functions provided by the natural environment can be divided into three groups: resource functions, sink functions, and ecosystem services. Resource functions are the natural resources used by humans. Sink functions are the ability of the natural environment to absorb waste and pollution caused by human activities (United Nations, European Commission, International Monetary Fund, OECD, & World Bank, 2003).
Ecosystem services refer to resources and processes that are provided by ecosystems. Ecosystem services encompass:
supporting services, such as soil formation and nutrient cycling
provisioning services, such as production of food and clean water
regulating services, such as regulation of climate and disease
cultural services, such as spiritual and recreational benefits obtained from ecosystems (Millennium Ecosystem Assessment, 2003).
Biodiversity (see part B, topic 2) and ecosystems are closely related concepts. Products of biodiversity include many of the services produced by ecosystems, and changes in biodiversity can influence all the other services they provide (Millennium Ecosystem Assessment, 2003). Ecosystems and the biological diversity contained within them provide a stream of goods and services, the continued delivery of which remains essential to our well-being.
Measuring sustainable development
There is no internationally agreed way to measure sustainable development. Therefore, to put the approach we have used into context, this section describes various ways of measuring sustainable development:
- the capital approach
- composite indicator systems
- systems approach
- theme-based approach.
The capital approach
The capital approach to measuring sustainable development underpins the Statistics NZ measurement framework (Statistics NZ, 2009). The measurement framework provides the basis for selecting and interpreting the results of the indicators. Stock and flow indicators are derived from the capital approach. However, our measurement framework goes beyond the capital approach to include other types of indicators (see ‘Types of indicators’ in part C).
This approach to measuring sustainable development borrows the concept of capital from economics, and broadens it to include other elements that are relevant to human well-being.
The term ‘capital’ was first used in economics to describe assets that enable future economic production, such as buildings and machinery. Capital assets are capable of generating income and have themselves been produced. All goods and services can be viewed as being produced through the use of capital, normally in conjunction with human labour. The capital approach, therefore, analyses assets or capital goods as means of production that will produce a flow of services into the future.
In sustainable development literature, this notion of capital has been broadened to include four types of capital – financial and produced capital, natural capital, human capital, and social capital. These capital assets make up the national wealth of a country, which is the total resource base of a nation. Capital assets in this broader sense can be defined as resources that generate a flow of goods and services that enhance well-being over time.
As streams of benefits flow from capital assets, maintaining or enhancing stocks of capital is a necessary condition for sustainable development. The stock of capital that is currently used to meet the needs of the present generation should be passed on to the next generation intact or enhanced.
The concept of leaving capital intact relates to the Hicksian definition, in which income is the maximum amount an individual can consume during a period and remain as well off at the end of the period as at the beginning (Hicks, 1946). This definition can be applied to the total resource base of a nation. The income of a nation is the amount that it can collectively spend during a period without depleting the capital base upon which it relies to generate this income (United Nations, European Commission, International Monetary Fund, OECD & World Bank, 2003).
Descriptions of types of capital
Produced and financial capital
Produced capital includes fixed assets that are used repeatedly or continuously in production processes for more than one year. Fixed assets can be tangible (ie machinery, buildings, roads, harbours, and airports) or intangible (ie computer software, original works of artistic value, intellectual property, and other specialised knowledge used in production).
Financial capital includes assets and liabilities that have a degree of ‘liquidity’ and tradability as a discrete store of value. They come in many forms and include currency, deposits, debt, company shares, government bonds, and other financial instruments. Financial capital may further be defined as an asset for which a counterpart liability exists.
Natural capital refers to Earth’s natural resources, land, and the ecological systems that provide life-support and other services to society and all living things. This broad category covers both non-renewable natural resources (such as land, coal, oil and gas, minerals, and gravel) and conditionally-renewable resources (such as forests, fish, and water flows used for hydro power production).
In addition, natural capital covers ecosystems and other natural systems that provide essential services to humans. For example, nature’s capacity for absorbing waste products that would otherwise cause pollution damage, and recreational services provided by the environment (WGSSD, 2008). Ecosystems have the ability to renew and maintain themselves, depending on conditions, both in terms of their components (ie species) and functions (such as the interaction between species and the physical environment, eg the conversion of sunlight into energy stored in food).
Human capital is “the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social, and economic wellbeing” (OECD, 2001a). The economic importance of knowledge and skills is widely recognised within labour economics (for individuals’ income), growth theory, and business. At the same time, the personal well-being effects and social effects of learning are considered by many to be as important as the economic effects (WGSSD, 2008).
The most commonly adopted definition of social capital is the OECD (2001b) definition: “networks, together with shared norms, values and understandings which facilitate co-operation within or among groups”. As with other forms of capital, social capital generates benefits that improve well-being. This includes benefits associated with institutions such as the rule of law and transparency of political processes, as well as cultural benefits such as language, religion, and sports.
The assets of social capital are the networks and associated norms, such as shared understandings and informal rules that influence behaviour. Networks link individuals, groups, and institutions, and occur in a variety of different modes and forums, including face-to-face meetings, legislation, and technology-assisted transmission of information.
Improved social capital produces positive outcomes, such as identity and a sense of belonging, increased knowledge and understanding, community resilience, and lowering of transaction costs. A lack of social capital results in negative outcomes, such as social exclusion or intolerance of difference, reduced family functioning, and corruption (WGSSD, 2008).
Two other forms of capital that are sometimes discussed are institutional capital and cultural capital. In this framework, they are treated as a subset of social capital for the reasons given below.
Institutional capital is “the range of formal and informal civic, political and legal arrangements that underpin market activity and civic life” (adapted from OECD, 2001b). Institutional capital relates to both formal networks and processes, such as the legal system and democratic participation, as well as informal elements.
Cultural capital is a community’s embodied cultural skills and values, in all their community-defined forms, inherited from the community’s previous generation, undergoing adaptation and extension by current members of the community, and desired by the community to be passed on to its next generation (Dalziel & Saunders, 2009).
Like most national attempts to measure sustainable development, our framework relies on a set of indicators. This allows changes across several dimensions of sustainable development to be analysed separately. However, it becomes difficult to make simple statements on the direction of the changes when the various indicators move in different directions.
One way to get around this is to use indicators that combine a range of individual measures for environmental, economic, and social aspects.
Such indicators, referred to as composite indicators, include:
- ecological footprint
- ‘green’ GDP
- genuine progress indicators.
The ecological footprint is the total amount of land required to directly or indirectly sustain human activity. This includes not only the land utilised in the supply of goods and services, but also the land required to absorb CO2 emissions and other wastes. An ecological footprint identifies the maximum population a given land area can support, so making visible the hidden ecological cost of an activity or population.
Green GDP uses conventional gross domestic product (GDP) as its basis, and typically takes account of two extra factors: resource depletion and degradation (source function), and pollution and waste (sink function). This is done by subtracting from GDP both the value of resources lost through depletion or degradation, and the cost of mitigating and managing waste and pollution. Green GDP combines measurement of the source and sink functions into one indicator.
Genuine progress indicators
Genuine progress indicators (GPIs) describe a range of measurement tools that share a general principle of measuring the progress of society in a way that accounts for economic externalities, and changes across environmental, economic, and social domains. Some GPIs are aggregated to a single value and can be compared with changes in GDP. The proposition is that GPIs tell us more than our current reliance on GDP, which has a focus on economic growth. GPIs distinguish between ‘goods’ and ‘bads’ and acknowledge that society’s views on these can change over time, leading to appropriate changes in the indicators used.
The systems approach aims to measure sustainable development by measuring the whole system (environmental, economic, and social) completely. The systems approach emphasises that nature, society, and the economy are interdependent parts of a complex system. Advocates of this approach argue that many approaches to measuring sustainable development fall short of representing all the variables and relationships inherent in a complex system (Sustainable Aotearoa New Zealand, 2006).
A theme-based approach groups indicators into various issues or themes that are typically determined on the basis of policy relevance. The United Nations (2007) sustainable development indicators are formed from a theme-based approach.
Sustainable development and local government
The indicators used in this report provide a national-level overview of sustainable development. Sustainable development principles are equally applicable at a local level and sustainable development is one of the key philosophical underpinnings of the Local Government Act 2002.
To ensure that local authorities take a sustainable development approach, the Local Government Act 2002 requires them to publish long-term plans that take into account all dimensions of well-being – environmental, economic, social, and cultural, as well as allowing for the reasonably foreseeable needs of future generations.
The Act also promotes engagement with local communities. The resulting responses are described through community outcomes, and the long-term council community plan. Local authorities are responsible for monitoring the progress towards community outcomes. They must report back to the community on progress made towards achieving sustainable development at the local level. This complements the reporting at the national level.
Some of the information and indicators used to monitor local-level community outcomes can inform national monitoring and reporting on sustainable development. The reverse is also true; national information can be used to inform local monitoring and reporting.
Māori and sustainable development
The natural environment and resources of particular parts of New Zealand have special meaning and value for the iwi and hapū (tribes and sub-tribes) who are the tāngata whenua (people of the land) of each particular place. The practice of kaitiakitanga (Māori environmental guardianship) is recognised and acknowledged in New Zealand’s environmental management system and included in legislation such as the Resource Management Act 1991.
In this report we intended to include information relevant to Māori and sustainable development where possible. However, this has not been possible as the report focuses on national data and analysis, not on local data that would be of most use to iwi, hapū, runanga, and marae (groups and communities) planning for maintaining and protecting local resources.
Many iwi and hapū are undertaking environmental monitoring in different parts of the country and, as with local government indicators, this monitoring could eventually inform national monitoring.