The economic dimension of sustainability

This post is also available in: Spanish

There is a widespread tendency to connect sustainable development and sustainability with the impact of certain systems or activities on the environment in its respective sphere of influence.

When you make a search of images in Google under the term “sustainability”, the very first and overwhelming majority of results are green drawings, full of vegetation, renewable energy systems, logos related to recycling,…

Source: Google

If you ask somebody what does mean to be sustainable, he or she will address the answer to the use of clean energy, to separate waste materials or to buy green products. The same bias towards the environment may be clearly found in any report, news or documentary about sustainable development.

In this ecology-influenced context, it is logical that even the Brundtland Report´s definition of “sustainable development” seems to revolve mainly around the environmental aspect:

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” [1]

This conceptualisation may not be erroneous but, at least, incomplete. A basic search of information on the topic will lead you to the idea that sustainable development is based on three principles: society, economy and environment [1].

Despite the apparent prevalence of the environmental factor, the social and economic aspects of sustainable development are, in principle, equally important within the sustainability of an organisation. In practice, the relevance of each factor is defined by the results from the stakeholders analysis and the impacts analysis performed by every organisation. That is, the sustainable development of each organization is different, as well as the weighting of each aspect in its sustainability.

One of the most well-regarded standards in the field of the organization´s sustainable development are the Global Reporting Initiative´s (GRI) G4 Sustainability Reporting Guidelines,

The influence of the social aspect in the GRI sustainability reports was already treated in this post. Today, it is the turn of the economic category of the GRI G4 Guidelines. The environmental category will come in further articles.

“The economic dimension of sustainability concerns the organization’s impacts on the economic conditions of its stakeholders, and on economic systems at local, national, and global levels.

The Economic Category illustrates the flow of capital among different stakeholders, and the main economic impacts of the organization throughout society” [3.1]

So, the economic dimension of the Guidelines does not focus on the financial condition of the organization.

Within the economic category, there are four material aspects:

  1. Economic Performance;
  2. Market Presence;
  3. Indirect Economic Impacts;
  4. Procurement Practices.

Each of these four aspects, meets its own indicators that provide information on the development or economic effects of the organization with regard to each aspect. These are the indicators of each aspect:

  • Aspect: Economic Performance:
    • Direct economic value generated and distributed (G4-EC1);
    • Financial implications and other risks and opportunities for the organization´s activities due to climate change (G4-EC2);
    • Coverage of the organization´s defined benefit plan obligations (G4-EC3);
    • Financial assistance received from government (G4-EC4).
  • Aspect: Market Presence:
    • Ratios and standard entry level wage by gender compared to local minimum wage at significant locations of operation (G4-EC5);
    • Proportion of senior management hired from the local community at significant locations of operation (G4-EC6).
  • Aspect: Indirect Economic Impacts:
    • Development and impact of infrastructure investment and services supported (G4-EC7);
    • Significant indirect economic impacts, including the extend of impacts (G4-EC8);
  • Aspect: Procurement Practices:
    • Proportion of spending on local suppliers at significant locations of operation (G4-EC9).

Each of the indicators among each aspect in the economic dimension, include much more figures.

At first, it may be surprising this level of detail about the economic performance that brings a sustainability report. However, it is absolutely logical. After all, economy and sustainability deal with the same stuff: distribution of resources [2].

[1] WIKIPEDIA. 17 May 2015. Sustainable development. Consulted 19 May 2015.
[2] DRAE, 22ª ed. 2015. Economía. Consulted 19 May 2015.
[3] GLOBAL REPORTING INITIATIVE. GRI G4 part 2: implementation manual. Consulted 19 May 2015.
      [3.1] page 67
GLOBAL REPORTING INITIATIVE. GRI G4 part 1: reporting principles and standard disclosures. Consulted 19 May 2015. 
GLOBAL REPORTING INITIATIVE. GRI G4 part 2: implementation manual. Consulted 19 May 2015.