Nowadays, the sustainability factor is something that firms and companies are not allowed to ignore anymore. Governments all over the world are implementing plans and policies in order to cooperate actions towards sustainable development, a development that takes into account Environmental, Social and Governance issues from different points of view. The ESG framework is becoming a necessary and fundamental component of the new policies both on a large governmental scale and a smaller business perspective.
However, balancing conflicting interests is not always an easy challenge for policy makers. In economic theory, the objective of a firm is to maximize profits over the long-term and, undoubtedly, complying with environmental regulations and investing to become a more sustainable firm has some short term cost. Even so, in a world of constrained resources, companies need to learn how to sustainably manage them to keep operations going in the long-run.
Sustainable Production is all about doing more and better with less, by increasing resource efficiency. The companies which choose sustainable practices will be able to create value by growing revenues through new products and services, reducing costs through eco-efficiency, managing regulatory risks more effectively and building intangible assets such as brand, reputation and collaborative networks with customers, competitors and suppliers.
Sustainable governance is a definitive new participatory governance model that aims to enhance a collaborative network to coordinate sustainable policies and practices across different functional and political levels of the world. Policies, indicators, consumption and production issues, and effective tools are combined to direct governance effectively.
The path towards sustainable development, therefore, creates scientific challenges for biogeochemists, hydrologists, ecologists, economists, political scientists, and other social scientists to understand how human actions affect ecosystems.Everyone is requested to play a role.
The principle of including everyone in the process, is one of the main components of the European Green Deal, the EU’s new growth strategy aimed to transform the Union into a fair and prosperous society. Europe was the first country to commit to becoming climate-neutral by 2050, an effective and flourishing economy with net-zero greenhouse gas emissions.
The EGD presents a collection of targets, intentions and objectives that will be implemented over the next years and have wellbeing at the center. However, the revision of the Green Deal is one of the main reasons that made farmers march on Rome. What the EGD promotes is perceived by them as “environmental extremism and unnecessarily strict rules that damage both producers and consumers”.
Indeed, in the past few weeks many of the biggest European cities have seen their streets choked up by longlines of tractors and rallying farmers setting up blockades, as a sign of protest against the policiesenacted in the wake of the pursuit of a sustainable European future. The reasons fueling the protests are multiple. For example, discontent rose against the intention of France and Germany of phasing out the tax break on diesel-fueled agricultural vehicles, as part of a wider energy transition policy.
From a broader perspective, though, the protests encapsulate many of the challenges that the EGD is faced with. Firstly, one of the core objectives declared by the EGD is to reduce the burden that marginalized economic groups have to shoulder because of the policies enacted, which are bound to cause disruption that have to be rectified with direct intervention. Their implementation now threatens to heavily affect the livelihood of farmers, whose sector has been plagued by labor shortages, rising input costs and general market volatility.
Another hurdle that the EGD is faced with are the possible exogenous shocks that can aggravate what are already delicate transitions. In the case of the farmers, the war in Ukraine and the decision of lifting all quotas and tariffs on the cheap imports coming from the besieged country have squeezed the agrarian incomes. On the other hand, the negotiations for a new trade deal with Mercosur, which is expected to flood the European market with beef and other agricultural products, have also raised alarm bells in the agricultural sector.
In general, the obstacle lies in balancing the different aims and interests of the EU, in this case the endeavor for open, free trade and the protection of the interests of its economic agents and citizens. In some cases, threading the line has even required some backtracking for the EU, which has for example given up on the aim of halving pesticide use by 2040.
The geopolitical situation hasn’t helped: the current breeze of the far-right risks undermining any economic decisions that prioritize ethical behavior, as it exploits public concerns amid growing inequality and global fragmentation. It’s a rhetoric that thrives on the frustrations of the farmers, for example, leveraging the difficulties of an export-oriented industry that is facing significant short-term exposure to the transition toward sustainability.
In the grand scheme, however, it will be Europe’s companies, economy, and citizens who ultimately bear the brunt of this rhetoric if the plans drawn by the EGD aren’t followed through. All the main economic global powers are exposed differently to climate change and supply shocks.
For the EU, the effects of the environmental damage and trade relations instability can already be seen. Public expenditure related to natural disasters is bound to increase vertiginously, as an example, and the energy insecurity experienced in 2022 has brought to life the RepowerEU. The project wants to both incentivize clean energy production, but also diversification of European energy sources along with a general decrease in demand. This highlights EU’s position in the global chain as one of resource scarcity, in many cases. It’s also a position that influences the measures implemented, which look at efficient use and conservation of resources, circular economy principles adoption, and investment prioritization in alternative resources that can improve autonomy and alleviate external pressure.
The short to medium term horizon thus appears heterogeneous: the EGD is an ambitious plan, and the pursuit for sustainability is one that necessitates careful balance between economic interests, environmental goals, and societal impacts – but at the end of the day, even if the path is hazardous, it is the one key for the EU’s long-term prosperity.
By Erica Laudicina and Lucrezia Manta.
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