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A social contract approach to sustainability

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Abstract

This paper asks whether it is possible to derive a concern for future generations (“sustainability”) from an account of the firm as a social contract (SC) among its stakeholders. Two aspects of a leading SC model of the firm limit its usefulness for an analysis of sustainability. First, the stakeholders provide investments to the firm over time. Second, the relationship between contemporaries and future generations is marked by asymmetries of power and knowledge that need to be considered while reconstructing the SC today. I discuss three reformulations of the SC that are all, in principle, capable of introducing within the SC a concern for future generations. The first describes the contractors as heads of families. The second envisages a grand meeting of stakeholders of all generations. The third, which I find most defensible, views the SC as an ahistorical agreement reached behind a thick veil of ignorance. This agreement is based on John Rawls’s norm of reciprocity, whereby the stakeholders adopt today the decision they wish all previous (and future) generations had made regarding the rate of consumption of natural resources and emission of pollutants.

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Notes

  1. A stakeholder is any “identifiable group or individual who can affect the achievement of an organization’s objectives or who is affected by the achievement of an organization’s objective” (Freeman and Reed 1983, p. 91).

  2. I use in the paper the term “social contract” instead of “contractarianism” and “contractualism” (Barry 1989), often found in the literature. Contractarianism is the brand of social contract ethics associated with the idea of a mutually advantageous agreement. Contractualism is the brand stressing instead the impartiality of the agreement. I return to this distinction in Sect. 4.

  3. An alternative approach would be to consider a grand bargaining game including representatives of all generations. I discuss this problematic possibility in the next section.

  4. An operational definition of ecological footprint is “the aggregate area of land and water [...] that is claimed by participants in the economy to produce all the resources they consume, and to absorb all the wastes they generate on a continuing basis, using prevailing technology” (Wackernagel and Rees 1997, p. 7). Hart (1995) discusses the notion of “management of the organizational ecological footprint,” instances of which are pollution prevention (“minimize emissions, effluents and waste,” p. 992), product stewardship (guidance as to the “selection of raw materials and [...] product design with the objective of minimizing the environmental impact of product systems,” p. 996) and “sustainable development,” defined here as “minimizing the environmental burden of firm growth and development” (p. 992).

  5. Rawls himself recognized this in Political Liberalism (Rawls 2005, p. 20–21).

  6. It remains unclear whether the assembly should include all the actual generations, or both the actual and the hypothetical generations (cf. Pontara 1995, pp. 81–89). The inclusion of hypothetical generations seems, however, to make the simulation exercise even more complex.

  7. Cf. also Doorn (2010) considering the challenge of “inclusiveness,” i.e., including all relevant actors, for the application of Rawls’s theory. And Arenas and Rodrigo (2016), discussing how indirect reciprocity can ease the problems posed by the impossibility of posterity to reciprocate.

  8. This is essentially the “Lockean proviso” discussed by Gauthier (1986, p. 205), applied to the bargaining problem among the stakeholders.

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Authors and Affiliations

  1. Católica Porto Business School and CEGE, Universidade Católica Portuguesa, Rua Diogo Botelho 1327, 4169-005, Porto, Portugal

    Giuseppe Danese

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  1. Giuseppe Danese
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Correspondence to Giuseppe Danese.

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The author declares that he has no conflict of interest.

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I would like to thank seminar participants at Simon Fraser University, Universidade Católica Portuguesa (Porto), Workshop on the Social Contract at the University of Granada (2015) for helpful comments. I would also like to thank Candace Martinez for her insightful comments. The usual disclaimer applies.

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Danese, G. A social contract approach to sustainability. Int Rev Econ 64, 327–339 (2017). https://doi.org/10.1007/s12232-017-0275-6

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