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Green Economy: meaning and principles

In this article, we will explore what the green economy is, its principles and significance, and why it's becoming a key focus for sustainable development globally.
Business
2024-01-15T00:00:00.000Z
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As we increasingly look to balance economic growth with environmental sustainability the concept of a green economy is becoming essential. It’s an economic system that prioritises reducing environmental risks and ecological degradation while promoting sustainable development. This concept is especially relevant in today’s society as we face global challenges like climate change and resource depletion.

👉 In this article, we will explore what the green economy is, its principles and significance, and why it's becoming a key focus for sustainable development globally.

What is the green economy?

Defining the green economy

The green economy is an economic framework that integrates considerations for the environment and sustainability into economic growth. It aims to generate economic development and job creation while ensuring that we don’t deplete the planet’s natural resources - which are essential for our survival. This approach focuses on reducing environmental risks and ecological scarcities.

The UN defines the green economy as “low carbon, resource efficient and socially inclusive. In a green economy, growth in employment and income are driven by public and private investment into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss of biodiversity and ecosystem services.”

Difference from traditional economic models

Unlike traditional economic models, which often prioritise immediate economic growth at the expense of the environment, the green economy emphasises the sustainable use of resources. Traditional models tend to disregard the long-term consequences of resource depletion and environmental degradation. In contrast, the green economy seeks to find a balance between economic development and ecological sustainability, recognising the finite nature of our planet's resources.

Relevance in tackling global environmental challenges

The concept of the green economy is increasingly relevant in addressing global challenges such as climate change, resource scarcity, and environmental degradation. It offers an approach that includes reducing carbon emissions, improving energy and resource efficiency, and safeguarding biodiversity and ecosystem services. The transition to a green economy is seen as a key strategy for achieving sustainable development, balancing economic growth with the need for environmental conservation.

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How did the concept develop?

Origins of the concept

The term green economy was first introduced by environmental economists in the 1989 report for the UK Government, ‘Blueprint for a Green Economy’. This report, which focused on defining sustainable development and its implications for economic progress and policy, used the term green economy in its title but didn’t delve into detail in the report itself.

Following this, the authors expanded on the concept in two subsequent reports, ‘Blueprint 2: Greening the World Economy’ (1991) and ‘Blueprint 3: Measuring Sustainable Development’ (1994). These reports broadened the scope from environmental policy to incorporate global economic challenges like climate change and resource loss, building on decades of research in environmental economics.

However, it wasn’t until 2008 that the term gained global significance. With the backdrop of the global financial crisis, the United Nations Environment Programme (UNEP) promoted green stimulus packages, inspiring governments to incorporate green initiatives in their economic recovery plans. In October 2008, UNEP's Green Economy Initiative was launched, further cementing the concept's relevance. As part of this initiative one of the original ‘Blueprint’ authors was asked to prepare a report outlining policies for economic recovery while enhancing global sustainability, this report is known as the ‘Global Green New Deal’ (2009). 

The concept of the green economy gained further international attention in 2010 when the UNEP Global Ministerial Environment Forum recognised its potential to address global challenges. In the same year, the UN General Assembly designated the green economy as a central theme for the 2012 Rio+20 Conference, leading to significant discussion on the topic and renewed interest in this area of research.

This renewed research interest resulted in the publication of UNEP's 2011 Green Economy Report, which provided a working definition of the green economy and was supported by various think tanks and commercial bodies. This period also saw numerous UN agencies, non-governmental organisations, and partnerships further exploring and promoting the green economy concept, establishing guiding principles, and assessing its benefits and risks.

What are the key principles of the green economy?

Originating from the paper ‘Principles, Priorities, and Pathways for Inclusive Green Economies’ presented at the UN High-Level Forum on Sustainable Development in 2019, there are five core principles that best encapsulate the green economy. They offer a comprehensive framework for understanding how economic growth can be aligned with environmental sustainability and social inclusion.

The wellbeing principle

The green economy focuses on enhancing the well-being of all individuals. It's not just about financial wealth - it extends to human, social, physical, and natural capital. This principle highlights the importance of broad access to essential resources and education, fostering environments where sustainable businesses and livelihoods can thrive. 

The justice principle

This principle emphasises equity, both within the current generation and between present and future generations. The green economy promotes inclusivity and fairness, aiming to reduce disparities and focusing on empowering traditionally marginalised groups, including women. It values social justice and aims to ensure an even distribution of resources and opportunities. 

The planetary boundaries principle

Respecting and maintaining ecological limits is central to the green economy. This principle recognises the diverse values of nature - ecological, social, and economic. Taking a precautionary approach, it commits to preserving natural capital and avoiding ecological overreach. Investments are directed towards conserving, expanding, and restoring natural systems, in harmony with the needs of local communities reliant on biodiversity.

 👉 Discover the nine planetary boundaries in our article

The efficiency and sufficiency principle

The green economy advocates for sustainable production and consumption. It embraces low-carbon, resource-efficient, diverse, and circular economic models. This principle acknowledges the necessity of a global shift to maintain the consumption of natural resources at sustainable levels. It supports aligning economic incentives with societal costs, encouraging responsible consumption, and addressing both over-consumption and basic needs.

The good governance principle

Effective and accountable governance is important to the success of the green economy. This principle requires institutions to make decisions based on a mix of scientific research, economic analysis, and local knowledge. Good governance in this context means institutions work together across various sectors, remain impartial, and are responsive to the needs and aspirations of the community. Moreover, it involves shaping a financial system that prioritises long-term sustainability and the overall well-being of society, ensuring that economic growth does not come at the expense of environmental and social health.

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What's the difference between a circular economy and a green economy?

The terms green economy and circular economy are often mentioned in the same breath. And while both concepts aim to align economic growth with social and environmental objectives, they actually have distinct focuses and approaches.

The green economy is primarily concerned with fostering economic growth that respects and maintains ecological balance and sustainable use of current natural resources. This approach integrates environmental sustainability into all aspects of economic planning and decision-making, ensuring that natural assets can continue to support human well-being and economic activities.

In contrast, the circular economy concentrates on establishing a closed-loop system for resources. Its primary goal is to transform the traditional linear model of production and consumption - characterised by a 'use and discard' approach - into a circular or sustainable one. The circular economy emphasises minimising waste and maximising the reuse and recycling of materials, helping to create a more sustainable and efficient use of resources.

👉 Learn more about the circular economy in our blog

Both the green and circular economies share the common objective of balancing social, economic, and environmental goals. However, their strategies are different: while the green economy looks at the wider picture of sustainable economic development, the circular economy hones in on resource efficiency and waste reduction.
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What are the benefits of a green economy?

Environmental benefits

The transition to a green economy has significant environmental benefits - especially through the reduction of carbon emissions and pollution. This shift leads to cleaner air and water, helping to preserve biodiversity and ecosystems. For example, in Germany, aggressive policies promoting renewable energy have resulted in a substantial decrease in greenhouse gas emissions - they’ve now reached their lowest point in over 70 years! This not only benefits the country directly but also contributes to global efforts in combating climate change.

Economic benefits

Economically, the green economy stimulates growth by creating new markets and job opportunities in renewable energy, sustainable agriculture, and green technology sectors. This economic stimulation is evident in many countries around the world. Take China for example; the country is fast becoming a global leader in renewable energy, creating millions of jobs in the solar and wind energy sectors. Additionally, investing in green technologies often leads to cost savings over time through improved efficiency and lower energy costs.

Social benefits

On the social front, the green economy promotes health and well-being by reducing environmental hazards and pollution, which have direct positive impacts on public health. Moreover, green economy strategies often include efforts to reduce inequality by providing job opportunities and skills training in disadvantaged communities. An example of this can be found in Kenya, where investment in geothermal energy has not only created jobs but also helped in improving local infrastructure and community development.

Challenges and criticisms of the green economy

Financial challenges

One of the primary challenges in implementing a green economy is the financial aspect. Transitioning from traditional to green industries often requires significant investment in new technologies and infrastructure. For developing countries, this can be a major hurdle due to limited financial resources. What’s more is that the shift can also lead to short-term job losses in traditional industries, creating economic strain.

Political and policy barriers

Politically, the transition to a green economy can be challenging due to resistance from established industries that are heavily reliant on fossil fuels. These industries often have significant political influence, which can slow down the adoption of green policies. 

Additionally, a lack of consistent policies across regions can hinder global progress towards a green economy. For example, differing environmental regulations and standards can create complications for multinational companies and international trade.

Technological hurdles

On the technological front, while advancements are being made, there is still a need for significant development in areas like energy storage and efficiency. The high cost and early stage of some green technologies can limit their adoption, especially in sectors where fossil fuels continue to be more economically viable.

Criticisms and limitations

The concept of a green economy also faces criticisms and limitations. Some argue that it doesn't address the underlying issue of overconsumption and that it simply 'greenwashes' economic growth without making substantial changes to consumption patterns. Others point out that the focus on market-based solutions might not be sufficient to address environmental crises, and more radical changes in our economic and social systems might be required.

👉 Learn what the term ‘greenwashing’ means in our article.

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The future of the green economy

As the green economy evolves, several key trends are emerging that are set to define its future. These trends include technological innovations, policy reforms, consumer behaviour, and business strategies - each one will play a critical role in the transition toward a more sustainable economic model.

Advancements in renewable energy technology

Renewable energy technologies, particularly solar and wind power, are undergoing rapid advancements. These improvements are not only making these technologies more efficient but also more cost-effective, broadening their accessibility and appeal. In addition, strides in battery technology and energy storage are addressing long-standing challenges, such as energy consistency and reliability, further bolstering the potential of renewable energy sources.

Policy shifts toward environmental sustainability

Governments worldwide are increasingly recognising the need for stricter environmental regulations. Policies such as carbon pricing, financial incentives for green technologies, and enhanced standards for energy efficiency are becoming more common. These policies aim to reduce carbon emissions and encourage sustainable industry practices, playing a crucial role in steering the global economy towards greener alternatives. Such regulatory changes are not only essential for environmental protection but also stimulate innovation and investment in sustainable technologies.

Consumer demand for sustainable products

Consumer behaviour is a powerful driver of change in the green economy. There's a growing preference for eco-friendly products and services. This shift in consumer demand is leading to increased investment in sustainable product development, eco-friendly packaging, and green marketing strategies. As consumers become more environmentally conscious, businesses that prioritise sustainability are likely to see better customer loyalty and market growth.

The rise of green business leadership

Evolving market dynamics mean that businesses that prioritise sustainability are more likely to succeed and emerge as sector leaders. Companies investing in green technologies and sustainable practices are not only contributing to environmental conservation but are also gaining a competitive edge. This trend is likely to continue as more businesses recognise the long-term benefits of aligning with green principles, from increased efficiency and cost savings to positive brand perception and customer trust.

These emerging trends represent a transformative shift in the global economic landscape, pushing us towards a more sustainable and resilient future.

What about Greenly?

At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. Why not request a free demo with one of our experts - no obligation or commitment required. 

If reading this article has inspired you to consider your company’s own carbon footprint, Greenly can help. Learn more about Greenly’s carbon management platform here.

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