Sustainability and the Firm

Macroeconomic definitions of sustainability focus on the need to maintain aggregate stocks of natural and manufactured capital constant over time, so that future generations have consumption possibilities similar to those of the current generation. Similar tests can be applied at the firm level. To be sustainable, a company must maintain on its balance sheet an undiminished level of total net assets, measured at their social costs. It must also pass a similar test when assets are valued at prevailing private costs. To make realistic assessments of a country's or firm's sustainability, therefore, one needs to consider its overall economic performance as well as its environmental performance. By this definition, sustainability is intimately linked to the fundamental preoccupations of business managers: productivity, investment, and profit.