Prevailing approaches of planning and strategy making, which traditionally deal with the states of systems in terms of fixed goals, fail to acknowledge the process nature of sustainable development. Using a system dynamics approach and relying on the concept of viability loops, the paper aims to illustrate a practical implementation of sustainable development with an urban water system as an example. It argues that planning for sustainable development should be ‘process-based’ – rather than ‘fixed-goal’ – oriented. Unlike the traditional approaches of strategy making to set fixed goals related to either supply-side and/or demand-side management, it is argued that triggering a social learning process with full involvement of all stakeholders and planners in the process would be the most suitable strategy for sustainable development. To this end, backcasting is recommended as a suitable tool and the process of model building is regarded as a means of learning rather than forecasting. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.