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THE THREE DIMENSIONS OF SUSTAINABLE DEVELOPMENT: ENVIRONMENT,

ECONOMY AND SOCIETY

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 UDK: 502.131.1
Conference paper
www.znrfak.ni.ac.rs

IVANA ILIĆ KRSTIĆ1 THE THREE DIMENSIONS OF

ALEKSANDAR ILIĆ2
DANIJELA AVRAMOVIĆ3
1,3
University of Niš,
Faculty of Occupational Safety in Niš
2
University of Belgrade,
Military Academy in Belgrade
1
ivana.ilic@znrfak.ni.ac.rs
SUSTAINABLE DEVELOPMENT:
ENVIRONMENT, ECONOMY AND
SOCIETY
Abstract: This paper discusses the concept of sustainable
development, and specifically its three main dimensions. The aim of
the paper is to point out the multidimensional and multifunctional
aspect of the complex relationship between the environment, economy
and society. Nowadays, the concept of sustainable development is
adopted as the most recent form of social development paradigm both
globally and locally.

Key words: sustainable development, environment, economy, society.

INTRODUCTION systems to maintain their functions and processes over

In broadest terms, sustainability refers to the capacity
to continue activities or processes for an indefinite
period of time. It can be associated with any number of
economic, social or environmental activities and may
have different meanings within different disciplines.
There are many definitions of sustainability and
sustainable development. The most commonly listed
definition is the one by the United Nations
Environment and Development Council 1987 (the
Brundtland Commission). Sustainability means
different things to different people and in different (and
sometimes conflicting) ways; for example, it can be
used to suggest that something is financially
sustainable, “environmentally acceptable”, that it has a
long-term prospect or can continue indefinitely.
Regardless of the differences in interpretation, there is
a general consensus that sustainability is linked to the
goal of maintaining society’s well-being over time.
However, there are disagreements on how to integrate
the issues of sustainability in the field of environmental
protection, economics and society.
SUSTAINABILITY FROM AN ECONOMIC
PERSPECTIVE
There are various theoretical approaches in the
interpretation of sustainability. The commonly used
approach to sustainability is the one referring to the
three pillars – the environment, society and economy.
Essentially, this concept suggests that sustainable
development can only be achieved when each pillar is
promoted in agreement with the other two. Although
this approach provides a useful categorization of the
relevant dimensions of sustainability, it is difficult to
operationalize, mainly because it has no analytical basis
for making decisions on any compromises between the
three pillars. [1]
The application of the general concept of sustainability
can have different forms depending on the framework
used. For example, within ecological frameworks,
sustainability refers to the capacity of biological
time. This perspective focuses on natural capital and
often emphasizes the irreversibility of some natural
resources and the rights of non-human beings. Within
economic frameworks, sustainability is often
considered to be achieved if society’s well-being is
maintained over time. [2] There are different
formulations of this concept. Well-being is usually
broadly defined – in addition to the consumption of
marketed goods and services, enabled by economic
production (income), it includes household and
environmental services and other non-market outputs,
such as social cohesion.
Some economic interpretations of sustainability
Economists interpret sustainability in different ways.
Not all of these interpretations explicitly considered
sustainability, but the idea was the same - to achieve a
certain level of well-being. Over time, the term
"sustainability" is used more often. Dasgupta and Heal
(1974), Solow (1974) and Stiglitz (1974) gave three
basic contributions to the economic theory of
sustainability. Their models represent well-being over
time in terms of maximizing the benefits. They showed
the maximum level of usefulness that can be achieved
over time with the final level of natural resources. The
impact may be either constant or declining over time,
depending on what is assumed about core capital,
technological progress, and the rate at which future
benefit is reduced. [3]
Specifically, Solow (1974) showed that, under certain
conditions, sustained well-being over time can be
achieved by maintaining the total capital of capital.
That is, the exhaustion of natural capital can be
eliminated by investing in industrial capital or other
types of capital. By maintaining the level of productive
capital, the highest possible level of constant
consumption per person can be achieved over time.
As Pezzey and Toman noted, although Solow did not
explicitly talk about sustainability, “[his] was the first
readable paper proposed in the context of the theory of
formal economic growth as a sustainable society goal”,

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and this differs from the traditional economic approach
to maximizing the present value of well-being.
Solow’s maintenance of total capital is similar to the
“rule” proposed by Hartwick (1977). Hartwick’s rule is
that if all renters invest in reproducible capital from
exhausting resources, then non-decreasing consumption
over time is achieved. However, such “rules” require
that different forms of capital be close, if not perfect,
substitutions. [4]
In this context – where well-being is at least sustained
over time – sustainability can be achieved by
preserving the total capital. Capital is widely defined as
a “productive” base that provides opportunities to
obtain a variety of goods from it. It includes all the
capital assets of the society that are produced (roads,
buildings, machines), natural capital (ecosystems,
minerals, fossil fuels), human capital (education, skills,
knowledge) and social capital (institutions and
relationships that regulate interactions between people).
People value natural capital, while knowledge includes
basic and applied research and intellectual property,
which can also be interpreted as produced capital.
The implication of such an interpretation of
sustainability is the assumption that natural capital can
be exhausted, provided that the company invests in
other forms of capital (to compensate for this decrease),
so that total capital does not decrease over time. This
assumes that different forms of capital are substitutes.
For example, the level of total capital could be
increased by investing in manufactured capital to offset
the loss of natural capital. Similarly, the accumulation
of human capital through educational achievement and
acquisition of skills can be substituted for the produced
capital. Technological progress can also increase the
“effective” share of the capital, allowing production
with fewer physical inputs.
Another significant feature of sustainability is the level
of well-being that is considered sustainable. The
sustainability criterion of ‘well-being maintenance’
focuses on changes in well-being over time, and not on
whether the highest possible level of well-being is
achieved at any time. Therefore, in theory, the
attainment of constant well-being at an existential level
of consumption can satisfy this interpretation of
sustainability. A wider and more important view of
sustainability also requires that resources be used and
effectively deployed over time – whereby production is
carried out with minimum costs and resources are
directed to the areas that contribute most to the
benefits. Given economic efficiency at any time,
economic sustainability can be interpreted as the
allocation of resources over time (savings and
investments) in a way that ensures the highest level of
well-being for present and future generations. [5]
Well-being is difficult to define
The concept of well-being is central to the economic
interpretation of sustainability. Conventionally,
national statistical institutes and certain economic
models use income or consumption of goods and
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services that have visible economic value (market
goods and services) as a well-being indicator. This
generally excludes non-market outputs that contribute
to well-being, for example, usefulness derived from
entertainment activities, volunteer work or social
interactions supported by various forms of social
capital. This does not mean that economists do not
recognize the importance of these forms of well-being,
but many economic models do not take them into
account because of the difficulty of defining and
measuring their value more precisely.
How substitutable is natural capital and other forms
of capital?
The fundamental issue of the economic view of
sustainability is the degree to which different forms of
capital can be substituted for one another in order to
maintain well-being. This is debatable, as there are
wide-ranging views on whether it is ethically
obligatory and technically feasible to replace natural
capital with other forms of capital. The idea that natural
capital can be replaced by other forms of capital is
commonly referred to as “weak sustainability”. Weak
sustainability implies that, after natural capital has been
exhausted, other forms of capital can be increased in
order to restore total capital, and thus maintain
consumption (or well-being) per person. This suggests
that natural and other forms of capital can substitute
one another to a large extent, even if there is high
consumption of natural resources. This can be
acceptable to a society that wants, for example, to
spend a natural resource such as coal or biodiversity in
exchange for more road or healthcare infrastructure.
Based on this interpretation, the levels of different
forms of capital are irrelevant; it is the total capital that
is important for sustainability. By contrast, “strong
sustainability” rejects the idea of substitution, based on
the assumption that natural capital is not
complementary to other forms of capital, including
social capital, and is therefore largely “incompatible”.
This view is usually supported by environmental
economists (Daly 1990). [6] Despite this, there is a
wide range of opinions about what strong sustainability
is. Strictly interpreted, strong sustainability implies that
each component of the environment and each species
must be preserved for an indefinite period and that it is
ethically unacceptable and economically unsound for
future generations to be compensated for loss of natural
capital through the consumption of services from other
forms of capital. This implies that a very large,
potentially infinite, value is placed on these sources.
Other views suggest that non-renewable and renewable
forms of natural capital can be interchangeable as long
as the total amount of natural capital is retained.
However, there is some common ground between
advocates of weak and strong sustainability. Many
agree that some portion of natural capital is essential
for the production of other forms of capital
(manufactured, social and human) and that it is not
possible to maintain every natural capital for an
50 Years of Higher Education, Science and Research in Occupational Safety Engineering, 6-7 December, 2018, Niš, Serbia
indefinite period of time. [7] Indeed, natural systems
evolve and cannot be preserved in the original form.
Most advocates also accept that certain natural
resources are not interchangeable, at least below a
certain threshold, especially those resources that are
necessary for life. Therefore, different views
notwithstanding, two paradigms do not always have to
be in conflict. It is true that maintaining a minimum
level of natural capital (an aspect of strong
sustainability) may also be in line with weak
sustainability. This might happen because society could
be expected to place greater value on scarce natural
resources.
Thus, the debate concerning weak and strong
sustainability is characterized by the debate concerning
the degree of substitution and the mechanism for
determining the appropriate degree of substitution,
instead of discussing whether any substitution can
occur at all. From an economic perspective, the relative
prices (broadly defined, as they reflect the social value
of all forms of capital for the community) are the
primary mechanism through which decisions on the
substitution of types of capital can be made. However,
as discussed below, while prices are revealed in places
where markets are present, provided those markets
function effectively, this is not the case with certain
types of capital, especially natural capital. This means
that other approaches, such as taxes or regulations, may
be needed to protect the natural capital that is
considered vital. However, a strong approach to
sustainability does not provide an obvious analytical
framework or mechanism for determining when this
can be the case, or for establishing the community
value of different types of capital. Over time, it is
difficult for market efficiency or any other mechanism
to allocate resources in a sustainable manner due to a
high level of uncertainty regarding the degree to which
substitution is really possible. Substitution options
partially determine future technical advancements and
advantages of future generations, two factors that are
not completely unrelated. It is assumed that we cannot
know precisely what the needs of future generations
will be, so it is difficult to know what should be
preserved. Further complication in explaining
sustainability arises from the fact that technological
changes imply that we will be able to do more with
less, and we may be able to redirect the dependence on
some non-renewable sources on other non-renewable or
renewable resources.
APPLYING SUSTAINABILITY CONCEPTS
IN PRACTICE
As already mentioned, sustainability implies that all
resources are used efficiently – both within and
between generations – and that the productive base of
society (total capital) is more or less preserved over
time. Market and prices play an important role in this
context. When the markets are complete and well-
functioning, they provide a mechanism for determining
the cost of resources, depending on their value in use.
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Prices will also reflect the value that a company places
on individual resources. If prices are raised in response
to scarcity of resources, then prices provide incentives
for consumers and manufacturers to use resources more
efficiently or to look for a replacement. These
processes contribute to the improvement of well-being
and are therefore relevant to sustainability.
However, there are several reasons why market
processes cannot provide an optimal level of
sustainability. First, market mechanisms are not
perfect, thus affecting sustainability, which means that
basic capital is used inefficiently and, consequently,
well-being is at a lower level than it can be.
Specifically, incomplete information about the value
that the community places on non-traded capital
services reduces the efficiency of market allocation.
Second, even if the current generation is effectively
using resources, capital investment may be deficient.
This can leave future generations with inadequate
resources to maintain a level of well-being equal to that
of the current generation. Decisions of the current
generation can be insufficiently sustainable due to
incomplete information on the environmental processes
or the extent to which different forms of capital can be
replaced with one another. In addition, as mentioned
above, there is uncertainty regarding the preference of
future generations as to how their needs are to be met.
Despite these problems, previous generations have
shown increased willingness to provide a better life for
their descendants and have made numerous innovations
and capital investments to be used by the generations to
follow. This is reflected in the actions already taken to
incorporate the idea of sustainability into the
development policies of many countries. There are a
number of practical steps that have the potential to
improve decision making in this context. These include
improvement of:
 the efficiency of using resources (for example,
through adequate prices or regulations that provide
net benefits);
 our understanding of ecological systems;
 our ability to measure fixed capital.
These steps are interconnected because improvements
in one area will help our understanding of other areas.
Practical endeavours in the second and third area are
important for understanding the substitution rate
between different types of capital at present and in the
future, as well as the level of capital changes.
Improving the efficiency of resource use
If markets operate efficiently, scarce resources –
including environmental resources – are directed
toward use and the users who value them the most. In
principle, this can lead to the allocation of resources
that maximizes the well-being of a society. However,
when markets do not function properly (for example,
due to a lack of effective competition or a lack of
information) or are incomplete (for example, as a result
of externalities or good characteristics of specific goods
and services), the well-being cannot reach its full
50 Years of Higher Education, Science and Research in Occupational Safety Engineering, 6-7 December, 2018, Niš, Serbia

potential. Indeed, market values do not have to be in Improving our understanding of ecological systems
line with what the society values, or even with the
The existence of natural thresholds beyond which
interests of the economy as a whole in the long run.
environmental damage is irreversible means that there
Consequently, there may be a role for governments to
are restrictions on the substitution of natural capital. In
resolve externalities, facilitate the operation of efficient
many cases, these limits are not known. Improving our
markets and take into account the good aspects of the
understanding of the impact of using certain resources
environment and other resources. [8] Policies intended
(e.g. water) on the functioning of ecological systems
to tackle market failures can only be promoted based
would be useful, both from the perspective of
on economic efficiency. However, there may be many
governments that make decisions on environmental
circumstances when actions undertaken today can
protection and from the perspective of improving the
impose costs on future generations. In these cases, it
accounting of natural capital. Scientific agencies are
may be necessary to explicitly consider the impact on
already doing significant work in this regard. If it is
well-being among generations when formulating a
accepted that capital (produced, natural, human and
sustainable development policy. One example is
social) is the basis for consumption (broadly defined)
climate change, where the effects of greenhouse gas
and thus contributes to the well-being, then the
emissions will be tackled mainly by the future
approaches that measure changes in the total state of
generations. However, market failure in itself does not
the capital can provide an indication of sustainability
justify the intervention of the government. Government
and can inform policy analyses. Capital measures
action to tackle market failures is warranted only where
should include assessments of scope and interest, so
the benefits to society outweigh the costs of
that changes in capital can be assessed over time. There
intervention. Making this assessment can be
have been some attempts to extend the assessments of
complicated due to the long-term nature of the issue of
produced capital in traditional national accounts with
sustainability, inadequate information, priorities
assessments of natural, social and human capital. This
changing over time, uncertainty and confused
is sometimes called “extended wealth” or “adjusted net
management arising from the involvement of different
savings”. [10] There are various limitations and
levels of government. Given these conditions, policy
practical difficulties in evaluating extended wealth
options may or may not be able to improve the results
measures. One of the main challenges is to determine
for the community as a whole and they need to be
prices for natural capital. While some exhaustible
carefully evaluated to ensure that government
environmental resources, such as coal and oil, are
intervention does not exacerbate matters. Moreover, in
traded on markets and have monitored prices, these
the context of sustainability, they may often challenge
prices may not reflect the full value of resources due to
very indirect and poorly targeted policies.
market failures, such as underdeveloped externalities.
The most appropriate form of intervention will depend
In addition, in most cases environmental resources are
on the underlying source of market failure and the costs
not traded on the markets and therefore have no
and benefits of different policy options. The
observed market value. Therefore, it is necessary to
Commission has generally advocated the policy of
estimate economic prices for these resources. The
targeting the source of the problem, as this will usually
prices must take into account the various contributions
be more efficient - for example, using a broad
of natural capital to well-being - both direct (as natural
limitation of gas and greenhouse gas emissions
wealth items) and indirect (contributions of ecosystem
(directly internalising the sources of externalities
services, such as water purification). [11]
through pricing) can be a cheaper and more efficient
Specific natural capital is also very difficult to quantify.
option than setting up specific technologies to reduce
A similar issue can also be raised regarding the more
emissions. Market approaches will often be the most
intangible dimensions of social capital, such as cultural
efficient means of resolving market failure. This
diversity, social cohesion and self-respect. [12]
includes creating financial incentives to direct
Therefore, although extended capital measures may
resources toward the areas where they are valued the
involve investments in some forms of capital, such as
most by putting prices on ecological outputs – either by
human capital (through education and its impact on
creating a market (for example, emission and trade
labour income) and natural capital (through
licenses) or by using taxes or subsidies. It cannot
environmental conservation), many social values are
always be possible to use an explicit market-based
much more difficult to define, let alone quantify. In
approach to resolve the failure of a market when
addition, social capital is often not the product of a
property rights are difficult to define or enforce, or
deliberate investment strategy but rather a function of
where it is difficult to measure outputs. For example,
complex social and cultural interactions, so the same
some ecosystem services cannot be traded in markets
inputs of produced and human capital can yield
because ownership of the ecosystem service cannot be
substantially different outputs in terms of social capital.
defined or enforced. In such circumstances, direct
Given the inherent difficulties associated with the
regulatory approaches may be more convenient, by
development of comprehensive measures of capital
efficiently putting an “implicit” price on the relevant
actions and the uncertainty about future preferences
resource. [9]
(and hence the future values of different forms of
capital), Stiglitz and associates recommend a “control

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panel” of indicators for sustainability assessment. [13] REFERENCES

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prerequisites of the survival of not only the present but [8] Banks, G. 2009, Markets: How Free?, address to the
also the future generations of people. In this sense, Governing the Economy Symposium, Whitlam
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placing an emphasis on new economic and Creating Markets for Ecosystem Services, Productivity
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technological development strategies, which have to
meet the increasingly rigorous economic, as well as [10] Biddle, N., Davis, E., Myers, J., Dodhy, RS. 2009,
Exploring Measures of Low Social Capital, Australian
ecological, criteria. The state, education and culture, Bureau of Statistics Research Paper. Cat. no.
citizens’ associations, the media, and other numerous 1351.0.55.024, Canberra.
actors of social reproduction flows must each in their [11] Arrow, K., Dasgupta, P., Goulder, L., Daily, G.,
own way contribute to the intensification of Ehrlich, P., Heal, G., Levin., S., Maler, K., Schneider,
environmental awareness. This process must be S., Starrett, D., and Walker, B. 2004, ‘Are we
complementary to the process implemented through a consuming too much?’, Journal of Economic
market regulation mechanism, in which ecological Perspectives, vol. 18, no. 3, pp. 147-172.
criteria should also be incorporated. Therefore, [12] Barbier, E. 1987, ‘The concept of sustainable economic
sustainable development is one that permanently development’, Environmental Conservation, vol. 14,
maintains humans as a biological species and as no. 2, pp. 101-110.
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ACKNOWLEDGEMENTS
should not threaten the same right for the following Prepared as a part of the project Sustainability of the
generations. Another reason in support of sustainable Identity of Serbs and National Minorities in the Border
development is of an ecological nature. If nature is a Municipalities of Eastern and Southeastern Serbia
value in itself, then every aspect of economic activity (179013), conducted at the University of Niš - Faculty
that disturbs the wealth of resources is unacceptable. A of Mechanical Engineering, and supported by the
third potential reason to justify the concept of Ministry of Science and Technological Development of
sustainability might reside in the economic argument the Republic of Serbia.
that sustainable development is more efficient. In other
words, disrespecting the concept of sustainability leads
to inefficient economic development, in terms of ever-
increasing waste of global resources and energy.

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BIOGRAPHY of the first author

Ivana Ilić Krstić, PhD, is an
assistant professor at the Faculty
of Occupational Safety in Niš,
Serbia. She is the author or co-
author of over 50 scientific
papers published in scientific
journals and proceedings of
scientific conferences.
She is a member of the BENA organization. Her
academic interests include: social development,
occupational and natural environment, sustainable
development and social indicators of sustainable
development.

OSNOVNE DIMENZIJE ODRŽIVOG RAZVOJA: ŽIVOTNA SREDINA,

EKONOMIJA I DRUŠTVO
Ivana Ilić Krstić, Aleksandar Ilić, Danijela Avramović

Rezime: U radu se razmatra concept održivog razvoja i ukazuje na njegove bazične dimenzije koje ga čine. Ima
se za cilj da se sa multi dimenzionalnog i multi funkcionalnog aspekta ukaže na kompleksnu vezu između životne
sredine, ekonomije i društva. Uzimajući u obzir činjenicu, da se koncep održivog razvoja danas usvaja kao
najnoviji vid paradigme drušzvenog razvoja, kako na globalnom, tako i na lokalnom nivou.
Ključne reči: održivi razvoj, životna sredina, ekonomija i društvo.

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