by Timothy Jack Nash – March 10, 2010
Imagine a world where everyone is healthy and wealthy. A world where governments set policies and regulations that promote triple-bottom line progress of economic, social, and ecological return on investment. Although idealistic, this vision of a sustainable economy is achievable. To realize it, we first need consensus on a compelling vision so we can start measuring our progress towards it.
Ever since Robert Kennedy’s declaration in 1968 that Gross National Product ”measures everything, in short, except that which makes life worthwhile”, statisticians and sustainability advocates have been dreaming up ways to measure and monitor a country’s genuine progress towards a better future. The Canadian Sustainability Indicator Network (CSIN) held a conference on March 2nd & 3rd in Toronto titled “Accountability Through Measurement” that hoped to facilitate dialogue and communicate best practices within this field. Attendees included a mix of statisticians, government agents, and corporate responsibility consultants, and workshops presented different models on how to measure the gap between our current reality and a sustainable future.
According to keynote speaker Hazel Henderson, modern economic indicators (GNP & GDP) provide a great measurement for the quantity of economic activity within a region, but they do not account for quality of growth or for impacts on the so-called “externalities” of human, social and ecological capital. GDP forecasts are used ubiquitously within traditional economics, so a flaw in GDP accounting means that our entire economic system could be based on bad math.
The simplest critique of GDP is that it puts things into the ‘goods & services’ category that might actually be bad. For example, if we look solely at GDP growth, the recent catastrophes in Haiti and Chile are good for their country’s respective economy. Obviously, this “growth” doesn’t consider the human and social costs involved as families got torn apart and infrastructure got leveled. If our national accounts are at least partially disconnected with reality, what does that say about our economic system? The recent financial meltdown showed us what can happen when a flawed theory catches everyone off guard. Governments and investors alike should be doing everything they can to prevent another systemic collapse.
Groups such as the International Institute for Sustainable Development and the Canadian Index of Well-being are busy working on solutions. They are developing composite indicators that measure improvements in areas such as Health, Democratic Engagement, and Environment. Although far from perfect, these indicators will spark a discussion among policy-makers, and provide a benchmark to start measuring trends. With better information regarding policy impacts on human, social, and ecological criteria, better decisions can be made.
Assuming that people will do what’s in their own selfish best interest and that markets will adjust quickly to reflect all available information, there are trillions of dollars to be made by investing ahead of the curve. The Green Transition Scoreboard has already counted $1.248 trillion invested in the green economy, and this number is slated to grow as investment opportunities in new buildings, energy infrastructure, transportation, and technologies start considering social and environmental benefits, and as these new investments start paying dividends. According to the Climate Solutions 2 model, society needs investments totaling $10 trillion by the year 2020 to avoid the worst consequences of climate change. Would a set of national sustainability indicators help achieve this goal?
Investments thrive in stable conditions with no surprises. Uncertainty surrounding the financial impacts of sustainability issues adds to portfolio risk, and decreases the flow of capital to vital areas. Until governments develop sustainable development strategies that are comprehensible and enforceable, companies and investors will continue to develop short-term tactics instead of long-term strategies.