Beyond GDP Conference Proceedings

Beyond GDP Measuring progress, true wealth, and the well-being of nations

19-20 November 2007 Conference Proceedings Europe Direct is a service to help you find answers to your questions about the European Union

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Luxembourg : Office for Official Publications of the European Communities, 2009

ISBN 978-92-79-09531-3 DOI 10.2779/54600

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(HTTP://EC.EUROPA.EU/ECOLABEL) Conference Proceedings

Beyond GDP Measuring progress, true wealth, and the well-being of nations

19-20 November 2007

European Parliament, Brussels organised by European Commission, European Parliament, Club of Rome, WWF and OECD

www.beyond-gdp.eu

TABLE OF CONTENTS

Foreword 7

Summary notes from the Beyond GDP conference

Highlights from the presentations and the discussion 10

CONFERENCE

Conference Programme 19 Opening Speech: The challenges of modern societies

José Manuel Barroso, President of the European Commission 24

Session 1: Measuring progress, true wealth and well-being 27

Joaquín Almunia, Member of the European Commission, Commissioner for Economic and Monetary Affairs 28 Rui Baleiras, Secretary of State for Regional Development, Portugal, and EU Presidency 31 Bruno S. Frey, Professor for Economic Policy and Non-market Economics, University of Zurich 34 Hans Rosling, Professor in Public Health Science, Karolinska Institute, Sweden 37 H.E. Chief Emeka Anyaoku, International President of WWF 41 Pervenche Berès, Chairwoman of the Committee on Economic and Monetary Affairs of the European Parliament 44 Pier Carlo Padoan, Deputy Secretary-General of OECD 46 Giulio Santagata, Minister for the Implementation of the Government Programme, Italy 49 Opening and discussion of Session 1 52

Opening Speech of Day 2

Hans-Gert Pöttering, President of the European Parliament 56

Session 2: Insights from practice 61

Carole M. Laible, President and Chief Operating Ofﬁ cer, Domini Social Investments 62 Nicole Notat, President Vigeo Group 64 Lothar Meinzer, Director Sustainability Centre BASF 66 Stephen Pursey, Head of the ILO Integration Department, International Labour Organization 72 Opening and discussion of Session 2 74

Session 3: New measures of progress – Obstacles and opportunities 83

Pier Paolo Cento, State Secretary for Economic Affairs and Finance, Italy 84 Patrick Viveret, Cour des Comptes, France 86 Kristalina Georgieva, Director Strategy and Operations Sustainable Development, World Bank 88 Opening and discussion of Session 3 92

Session 4: The way forward 101

Walter Radermacher, President of Federal Statistical Ofﬁ ce, Germany 102 Ashok Khosla, Co-President Club of Rome 106

2 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

Miloslav Ransdorf, Vice-Chair of the Committee on Industry, Research and Energy of the European Parliament 109 Jérôme Vignon, Director, European Commission, DG Employment,

Social Affairs and Equal Opportunities 111 Conference Opening and discussion of Session 4 114

Session 5: Next steps & conclusions Table of contents of Table Stavros Dimas, Member of the European Commission, Commissioner for Environment 128

WORKSHOP

Workshop Programme 133

Session 1: Introduction: The challenge of going beyond GDP

Anders Wijkman, Member of the European Parliament 138

Session 2: Technical and policy challenges 141

Marco Mira d’Ercole, OECD, Social Policy Division 142 Oliver Zwirner, European Commission, DG Environment 146 Jacqueline McGlade, Executive Director, European Environment Agency 149 Branislav Mikulic, European Foundation for the Improvement of Living and Working Conditions, Dublin 151 Laurs Norlund, Director, European Commission, Eurostat, National and European Accounts 158 Opening and discussion of Workshop Session 2 160

Session 3: Breakout session: Key needs and ways forward 165

Workshop - Panel 1 166 Carlos Figueiredo, Environment Ministry, Portugal 166 Thais Corral, REDEH, Brazil 169 Peter van de Ven, Statistics Netherlands 170 Opening and discussion of Workshop Session 3 – Panel 1 172 Workshop - Panel 2 180 Isabelle Cassiers, Professor of Economics, University of Louvain and National Fund for Scientiﬁ c Research, Belgium 180 Jean Gadrey, Professor of Economics, University of Lille 182 Paul Hofheinz, Lisbon Council 183 Opening and discussion of Workshop Session 3 – Panel 2 186 Workshop - Panel 3 194 Stuart Bond, WWF, UK 194 Teresa Fogelberg, Deputy Chief Executive, Global Reporting Initiative 196 Andrea Saltelli, Jochen Jesinghaus and Giuseppe Munda, European Commission, Joint Research Centre, Italy 201 Opening and discussion of Workshop Session 3 – Panel 3 204

19 & 20 November 2007 3 Table of contents

Session 4: Collaboration opportunities 213

Bedˇrich Moldan, Professor at the Charles University, Czech Republic 214 Willy de Backer, 3E Intelligence 215 Johannes Blokland, Member of the European Parliament 217 Opening and discussion of Workshop 4 218

Session 5: Workshop conclusions 223

Anders Wijkman, Member of the European Parliament 224

VIRTUAL INDICATOR EXHIBITION

Adjusted Net Saving by Alexandra Sears and Giovanni Ruta, The World Bank 228 Canadian Index of Wellbeing (CIW) by Lynne Slotek, CIW National Project Director 231 Capability Index by Ingrid Robeyns, Radboud University Nijmegen, The Netherlands and Robert van der Veen, University of Amsterdam, The Netherlands 233 Comparing welfare of nations by Hans-Olof Hagén, Statistics Sweden 236 Corruption Perception Index by Transparency International 239 Bribe Payers Index by Transparency International 241 Global Corruption Barometer by Transparency International 243 National Integrity Systems (NIS) Scoring System by Transparency International 244 Promoting Revenue Transparency Project by Sophie Buxton, Transparency International 246 Core Set of indicators by Ove Caspersen, European Environment Agency 248 European Benchmark Indicators (EBI) by Edward Vixseboxse, Netherlands Environmental Assessment Agency (MNP) 251 Ecological Footprint by Mathis Wackernagel, Global Footprint Network 255 (environmentally) Sustainable National Income (eSNI) by Roefi e Hueting, Foundation SNI 258 EU set of Sustainable Development Indicators (SDIs) by Laure Ledoux, European Commission, Eurostat 261 The Human Development Index (HDI) by Amie Gaye, UNDP Human Development Report Offi ce 264 Index of Individual Living Conditions by Heinz Herbert Noll, GESIS, Social Indicators Department 267 Genuine Progress Indicator (GPI) by John Talberth, Redefi ning Progress 270 Happy Life Years (HLY) by Ruut Veenhoven, Erasmus University Rotterdam, The Netherlands 273 The Happy Planet Index prepared by Sam Thompson, Nic Marks, Saamah Abdallah, nef (the new economics foundation) and Ed Matthews, Friends of the Earth UK 275 JFS Sustainability Vision and Indicators by Kazu Kobayashi, Japan for Sustainability 278 MDG Dashboard of Sustainability by Jochen Jesinghaus, European Commission 280 The Natural Capital Index framework (NCI) by Ben ten Brink, Netherlands Environmental Assessment Agency (MNP) 284 (Regional) Index of Sustainable Economic Welfare (ISEW) by Prof. Tim Jackson, RESOLVE, University of Surrey, UK, Nat McBride, Independent Consultant, Saamah Abdallah, nef (the new economics foundation) 288 System of Environmental-Economic Accounting (SEEA) by London Group on Environmental Accounting 291

4 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

Sustainable Society Index (SSI): a new comprehensive index for world-wide use by Geurt van de Kerk, Sustainable Society Foundation, Arthur Manuel, Sustainable Society Foundation 294 Time Distance Method for Analysing and Presenting Indicators

by Pavle Sicherl, SICENTER 297 Conference World Happiness Index by Pierre le Roy 301 Table of contents of Table OVERVIEW CONFERENCE BACKGROUND PAPERS

Measurement Beyond GDP by Bart Wesselink, Jan Bakkes, Aaron Best, Friedrich Hinterberger and Patrick ten Brink 304 Beyond GDP: Overview paper for the Beyond GDP conference by Marcel Canoy, and Frédéric Lerais, European Commission, Bureau of European Policy Advisers (BEPA) 304 Alternative progress indicators to Gross Domestic Product (GDP) as a means towards sustainable development by Yanne Goossens, European Parliament 305 Measuring Well-being and Societal Progress by Enrico Giovannini, Jon Hall and Marco Mira d'Ercole, OECD 306 Accounting for the Environment - The European Development by Elisabeth Møllgaard, European Commission, Eurostat 307 Accounting fully for ecosystem services and human well-being by European Environment Agency 308 Well Being Stories by Andrea Saltelli, Jochen Jesinghaus and Giuseppe Munda, European Commission, Joint Research Centre 309 The use of indicators in the European Commission by Stephen White and Oliver Zwirner, European Commission, DG Environment 309

ANNEXES

Annex 1 – Welcome letter to the participants 312 Annex 2 – Press Pack 313 Annex 3 – Indicator Exhibition 330 Annex 4 – Registered participants 331 Annex 5 – Istanbul declaration 344 Annex 6 – Conference organisation 346

www.beyond-GDP.eu provides complete video archive, background papers, slides, speeches, press coverage, contact details and recent developments Acknowledgements The Beyond GDP partners would like to thank Ecologic, the Institute for European Environmental Policy (IEEP), MNP, and SERI for their inputs into organisation and content, as well as GlobeScan, Ogilvy and the media partners: Reuters, Ethical Markets Media, IPS, Other-News, and The Parliament Magazine. Note to the reader Many of the presentations and discussions have been transcribed from recordings of speakers or interpreters. Occasionally technical limitations made recordings incomplete or difﬁ cult to understand. This means that the texts might not always be entirely complete or accurate. In particular, we apologise if names and afﬁ liations have not been perfectly transcribed. In some cases, the texts have been edited slightly for the sake of clarity. For published presentations please check against delivery.

19 & 20 November 2007 5

Foreword

The Beyond GDP conference revealed a high examples that occurred since last year's con- degree of consensus on the need for change. ference. Firstly, hurricanes caused death and The participants from industry, trade unions, destruction in the Caribbean and the United NGOs, academia and government questioned States, but such natural disasters can actually not whether action is needed but on 'how' we lead to increases in GDP. Secondly, the price of complement or improve on GDP, and develop oil and food skyrocketed, but again GDP failed new indicators for the 21st Century. I am pleased to highlight the impact on the poorest and the that the conference led to concrete commit- resulting unrest in many parts of the world. ments for further action from all the partners involved. A move beyond GDP means several things for us at the European Commission. It means ﬁ nding In his opening speech President Barroso indicators that are more inclusive, timely and reminded us that GDP is an indicator of eco- understandable to European citizens. It also nomic market activity and was not intended to means using these indicators to guide European be an accurate measure of well-being. It was and national policies towards sustainability, for developed for the world of the 1930s which is example, by highlighting good practices. Doing signiﬁ cantly different from today. Today, the link this will require us to make better use of existing between economic growth and elements of well- statistics but also to speed up the development being such as the sustainability of our society and use of integrated economic, environmental is much less clear and straightforward. This is and social accounting. I am glad to announce why President Barroso stressed how important that the European Commission will present its it was to go beyond GDP. I share that view. roadmap for action in 2009.

The pressure to go beyond GDP is also mount- But going beyond GDP requires action from all ing because we are increasingly faced with those involved. This is why we are publishing complex challenges such as climate change, the proceedings of the Beyond GDP conference, competition for resources, social inclusion and to keep the debate alive and support the com- security. These are issues where GDP performs mitments made. poorly as an indicator. Let me just pick just two

Stavros Dimas Member of the European Commission Commissioner for the Environment

19 & 20 November 2007 7

Summary notes from the Beyond GDP conference Summary notes from the Beyond GDP conference

Highlights from the presentations and the discussion

The Beyond GDP conference, organised by the European Commission, European Parliament, Club of Rome, OECD, and WWF, brought together over 650 delegates from more than 50 countries to explore how to improve the measurement of progress, true wealth and the well-being of nations. It fully supported the momentum to go beyond GDP.

European Commission President José Manuel Barroso, in his speech opening the conference, highlighted how GDP, since its birth in the 1930s, was rapidly adopted as the best-recognised measure of economic performance in the world. He added that “GDP is an indicator of economic market activity. It was not intended to be an accurate measure of well-being. Even Simon Kuznets, ... one of the main originators of GDP, said: ‘the welfare of a nation can scarcely be inferred from a measure of national income’”.

President Barroso also noted that despite being an invaluable tool for economic policy, GDP is unﬁ t to reﬂ ect many of today’s challenges, such as climate change, public health and the environment. “We cannot face the challenges of the future with the tools of the past”, he said.

According to President Barroso, we should aim for “the sort of breakthrough that we saw in the 1930s, a breakthrough that adapts GDP, or complements it with indicators that are better suited to our needs today, and the challenges we face today”.

President Barroso concluded, “It’s time to go beyond GDP”.

©Photo European Parliament President Barroso opening the Beyond GDP conference

10 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

SESSION 1 Giulio Santagata, Minister for the Imple- mentation of the Government Programme,

Measuring progress, Italy, focused on the role and responsibility of Summary true wealth, and well-being governments. He underlined the importance of government analysis of the impacts of its decisions and noted that additional analysis, Chaired by such as on the impacts of decisions on social David Grant Lawrence, Director, capital, can clarify new areas of public action European Commission, DG Environment and innovation in governance. He noted that governments should increasingly monitor the Joaquin Almunia, Commissioner for ‘quality’ of development including environmen- Economic and Monetary Affairs, also stressed tal sustainability and citizens’ satisfaction. He the inadequacy of GDP to take into account also noted that indicators provide the ‘memory’ sustainable consumption and production pat- of a government’s actions. He underlined that terns – “it cannot distinguish between activi- understanding and communicating the state ties that have a negative or a positive impact of the nation is vital, and that the quality of on well-being. In fact, war and even natural democracy can profi t from better information. disasters may register as an increase in GDP.” He noted that “we need to fi nd measures that Hans Rosling, Professor of International will complement GDP and build a more nuanced Health, Karolinska Institute, Sweden, dem- and accurate understanding of economic and onstrated innovative graphical software that societal progress” and suggested that in the reveals the links among various trends in the short term key sets of indicators will be impor- fi elds of economy, social issues and environ- tant to take into account social and environment. He addressed the issues of communica- mental challenges, and composite indicators tion tools and the potential for engaging a wider such as the Human Development Index (HDI) public. Public access to data, in the right and and Ecological Footprint (EF) are useful, nota- attractive forms, can help build on the innovative bly to raise awareness. In the long term, he capacities of citizens and engage civil society. saw integrated environmental and economic Effectively communicating data can help create accounting as likely to be the “strongest tool” an important public good. for supporting the promotion of well-being and progress. He concluded by stating that the “time is ripe to take the measure of well-being one step further.” Decision making beyond GDP: needs and a vision Rui Baleiras, Secretary of State for Regional Development, Portugal, EU Presidency, noted the relevance of the Beyond GDP dis- Chaired by cussions for post 2013 EU Cohesion policy and Timo Mäkelä, Director, the EU budget review. He observed that other European Commission, DG Environment dimensions need to be monitored in guiding these policies. He called for a set of a few high- HE Chief Emeka Anyaoku, President of level indicators to be used to capture different WWF, added a note of urgency and a call for development issues, pointing out that “it is more responsibility. He noted “if all lived as Europeans important to have a picture of the forest than we would need 2.6 planets. The global overshoot of all the individual trees”. is a liquidation of the assets on which human well-being depends. It is creating social ten- Bruno S. Frey, Professor of Economic Policy sions and confl ict, and it is making our existence and Non-Market Economics, University of ever more fragile. It is also taking away the Zurich, argued that ‘life satisfaction’ and ‘hap- development rights of future generations.” He piness’ are acceptable and indeed appropriate noted that since 1970, there has been a 30% objectives for government policy. However, he decline in (vertebrate) species, and that “quite put a caveat, indicating that rather than aiming simply, species suffer when ecosystems cannot to maximise happiness, governments should keep up with human consumption.” He called for focus on policies that enable people to pursue societies to stop the continued ecological defi cit happiness. spending, commit to living within the planets resources, and improve our understanding of

19 & 20 November 2007 11 Summary notes from the Beyond GDP conference

how ecosystems and their services support our SIDE EVENT economies and well-being. Expert Workshop Pervenche Berès, Chair, European Parliament Economic Committee, added to the call for a Chaired by more nuanced understanding of what GDP does Anders Wijkman, and where it is relevant, noting that GDP does Member of the European Parliament not adequately deal with issues such as natural resources, the free-rider problem and distribu- In the expert workshop preceding the confer- tional issues. She noted that fi xing the market by ence, participants discussed ways of address- integrating social and environmental externalities ing key challenges in improving our measures into prices, and hence into GDP, could contribute of progress. It brought together more than to the solution. She noted that we need a new 100 individuals from over 30 countries. measurement of public goods and the EU should lead the way on this. In the various workshop sessions, speakers and panelists discussed both policy and technical Pier Carlo Padoan, Deputy Secretary General aspects, including: the evolving needs of decision of the OECD, stated that “we need to measure makers and the general public and how to best welfare not just production” and that “the needs meet them; the specifi c methodologies that go to measure progress is part of the trend towards beyond GDP; and how we can improve the differ- greater governmental accountability – It cannot be ent approaches that complement GDP. done without social participation as progress refl ects different things for different people, depending on In group discussion, participants addressed three their cultural background, history and personal main questions: beliefs and also on the health of society, the environment and the economy.” He argued that different – What are the key opportunities for going beyond indicators of progress are valuable and appropriate GDP? and to be encouraged. He noted that indicators – What is feasible in the short to medium term and capturing social cohesion, good governance and how can implementation be improved? subjective well-being should be included among sets – How can policymakers, key institutions, business, of key indicators. He also underlined the OECD’s media and the broader public be engaged on commitment in this area, with the ongoing ‘Global these issues? Project’ that builds on the Istanbul Conference in June 2007. “By measuring progress we can achieve A common criticism was that even though we live progress for all” he said. in an era of unprecedented data quality and quantity, in some key areas the issue of data quality and timeliness is not yet adequately addressed. One speaker raised the point that we need to improve our understanding of how people actually spend their time (including their involvement in non-market activities) and how these activities contribute to overall welfare.

The subjective nature of progress and well-being was also posed as a challenge to developing effective indicators and statistics; the discussion made clear that aspirations and needs have unique national and local circumstances.

Some speakers pointed to the current work on ecosystem accounting as an important contribution to improving policymaking vis-à-vis the environment.

©Photo European Parliament It also became apparent through the discussion that Pervenche Berès at Session 1: Decision making the different stakeholders involved have differing beyond GDP – needs and a vision capacities and strengths; for example, subjective

12 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

indicators such as happiness are not typically DAY 2 collected and reported as ofﬁ cial government 20 November 2007 statistics by statistical agencies. Summary

In his dinner speech to all conference partici- Hans-Gert Pöttering, the President of the pants, Anders Wijkman summarised key out- European Parliament, opened the second day comes of the expert workshop: asking “what is it that we wish for our societies?” and noted that “well-being is not just growth; Access to quality, timely data is important. GDP it is also health, environment, spirit, and cul- is presented every quarter, stock markets daily. ture.” He noted “the debate today affects us all. For environmental and some social issues, data It is more than just statistics. It is also a way is often 2 years old. There are some exceptions, of thinking and the goals we set.” He argued such as live online data for ground-level ozone that quick action is important and that we have concentrations. There is need for timelier data to have a vision that goes beyond a simple to help people in decisions (like ozone con- production vision. He noted that “we need an centration levels in cities, useful in decisions understanding of the social developments of our such as whether to take the car or go jogging). times, of the changing environment. We need to Spatial differentiation of data (a point made by be able to assess whether the European Union Jacqueline McGlade, Director of the EEA) can is in fact heading towards a long-term sustain- help make dry statistics accessible, relevant able economy”. He also noted that “we crucially and engaging. need new indicators to measure welfare - this is a basis for shaping our future.” Continued commitment and more support are needed to develop integrated economic-environmental accounts to measure natural assets and help clarify the ecosystem services they provide.

Complementary indicators are needed. There was widespread agreement at the expert workshop that GDP is not sufﬁ cient as an indicator of well-being. The majority of the experts attending the workshop supported the idea of complementary indicators (as opposed to ‘correcting’ GDP).

Action should be undertaken at multiple lev- ©Photo European Parliament els. He noted several areas where information is lacking, frequently at multiple levels (local, President Pöttering from the European Parliament national and global). Both statistical rigour and opening Day 2 public participation are important: “We need to have accounting at different levels; . . . we need a top-down approach and a bottom-up approach, we cannot do one without the other.” SESSION 2 Insights from practice Overcoming barriers is required. The barriers to going beyond GDP include attitudes and per- Insights from recent practice ceptions, ﬁ nance, business models, education. These barriers must be addressed. in policy and business

Hazel Henderson, of the Club of Rome introduced and chaired the session. She noted that ‘triple-bottom-line accounting’, that deals with ‘people, planet and proﬁ t’, advanced the analysis of risks and helped businesses to integrate environmental and social issues into the balance sheet.

19 & 20 November 2007 13 Summary notes from the Beyond GDP conference ©Photo European Parliament

Leading ﬁ gures from social, economic and environmental spheres participated in the panel discussion

Carole M. Laible, President Domini Social forward to measure and encourage progress is to Investments, underlined that the pressure to meet use the existing vehicles of ‘country profi les’. He short-term targets leads in some cases to failure also noted that the ILO aspiration to decent work to see the long-term impacts. She noted that “the is now a global phenomenon and that statistical wealth of a corporation is more than the stock price” effort is needed to better capture reality, especially and that to assess the true value of companies one in developing countries. needs to measure the externalities. She also stated her belief that companies will prosper if they enrich the ecosystems on which they rely, invest in staff CONTRIBUTIONS FROM THE FLOOR and contribute to local communities. Nic Marks of the New Economics Nicole Notat, President of the Vigeo Group, Foundation (NEF) asked whether “products underlined the “need to look beyond output indica- really refl ect what we need and what matters tors,” and also look at “management, coherence to us” and stated that we need a “refl ection and results.” The measurement and integration of on whether or not consumption enriches social and environmental factors lead to innovation people's life”. He noted that this would and reduce risks to reputation and costs. She also amount to “externalising the internality” called for international standards and noted the – expressing the real value of things. current discussions as to whether to create an ISO norm on social sustainability. Vittorio Prodi, Member of the European Parliament, underlined the importance of Lothar Meinzer, Director of BASF, argued that the ‘intangible goods and assets’ and the business is already integrating environmental and importance of dematerialising society. social concerns into its management systems as As regards indicators of progress, he noted part of its value-based management approach, that looking at energy intensity is not which analyses future products and processes enough, as the shifting of industry to other using not just fi nancial costs and revenues, but countries is not refl ected. also environmental and social indicators. Caroline Lucas, MEP, said that the way Stephen Pursey, Head of the Integration forward is not only about more and better Department, ILO – on the work place dimen- indicators and data; it is about action. sion – noted that “the work place is where the value She said that only gathering data means of the market meets the value of society,” and that we risk “going down in history as the fi rst an important objective needs to be the pursuit of species [to monitor] its own extinction rather ‘decent work’. He suggested that a useful ways than taking active steps to avoid it”.

The call for action comes not just from policy makers and experts, but also from the public. A survey (by GlobeScan) conducted in the context of the conference clearly showed that people want measures of progress that go beyond GDP: three-quarters of the people surveyed (in 10 countries including Australia, Brazil, Canada, France, Germany and Russia) wanted governments to “look beyond economics and include health, social and environmental statistics in measuring national progress.”

14 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

SESSION 3 New measures of progress - Obstacles and opportunities Summary

Tony Long, Director of WWF’s European Policy Ofﬁ ce, introduced and chaired the session, which focussed primarily on measures already in use and government initiatives currently underway.

Pier Paolo Cento, State Secretary for Economic Affairs and Finance, Italy, noted that Italy is passing legislation that would require the use of environmental accounting at national, regional and local levels. This is part of a broader refl ection on the necessary rationalisation of public expenditure and would make the environment also a responsibility of the Ministry of ©Photo European Parliament the Economy and Finance. Over 650 participants from more than 50 countries attended Kristalina Georgieva, Director at the World Bank, highlighted how focus on short term income generation can lead to collapse of whole were chosen to valorise this choice of direction. economies, as testifi ed by the Mauritanian Changing the GDP implies a more fundamental fi sheries collapse in 1987. She underlined the refl ection on the unit value (money). Increasing importance of natural capital and ‘intangible attention needs to be given to the ‘gift economy’, capital’ (human and social capital) in the wealth the part of the economy made of informal non- of nations, noting that investments in human priced exchanges. capital and stronger institutions have the highest return. She also stressed the importance of strengthening resource management, especially CONTRIBUTIONS FROM THE FLOOR in developing countries. According to World Bank estimates, environmental degradation Rita Trattnigg, Sustainable represents a cost up to 6% of China’s GDP – Development Coordinator, Austria underlining an example of one of several factors pointed to the notion of social capital as that need to be taken into account when trying being an important emerging concept to understand the true wealth of nations. in understanding factors contributing to human well-being. Patrick Viveret of the Cour des Comptes, France, noted the French government is looking Isabelle Cassiers, Professor at the into new indicators and approaches for ‘wealth’. Université Catholique de Louvain The current system of valuing wealth (e.g. com- pointed to the ecological dangers that pany accounts) can provide the wrong incen- export-led growth puts on developing tives. The refl ection on the veracity of accounts nations, citing the example of the severe may be easy for fi rms but less so for the state overfi shing in Mauritania. (e.g. the share of GDP for the education and health systems hardly equate to their value to A number of participants underlined the society). He underlined that the ecological chal- close relationship that exists between the lenge – the question of ecological limits – cannot choice of indicators and prevailing social be addressed by proposing limits without a posi- values and aspirations. tive perspective. The opportunity for well-being constitutes that positive perspective. Making Others noted that a common value for a historical observation, he stated that GDP’s all people is time and that an indicator success after the Second World War refl ected on time spent could add to the useful the political and societal decision to modernise information available. the industrial fabric. Indicators such as GDP

19 & 20 November 2007 15 Summary notes from the Beyond GDP conference

SESSION 4 Jérôme Vignon, Director, European Commission, The way forward DG for Employment, Social Affairs and Equal Opportunities, talked of the risk and intensity of poverty, and underlined the importance of social Enrico Giovannini, Chief Statistician, OECD, cohesion. He presented benchmarks of national chaired this session and underlined the challenge performance, including employment, unemploy- and context for the use of indicators. Governments, ment and poverty, noting the available data and statisticians, business, citizens all use statistics the value of the country benchmarking approach and we have to fi nd away of addressing each. He to encourage progress. He also highlighted the noted that “we cannot reduce the complexity of importance of health indicators. the world to a single number”. To him, extending economic national accounts is a very promising though costly way forward that offers good promise for the long term and needs to be accelerated. It is important to invest in the public good, which CONTRIBUTIONS FROM THE FLOOR is ‘common knowledge’. He also noted that we should measure the resilience of the ecology (e.g. Giulietto Chiesa, representing the World biodiversity and life-support functions) as well as Political Forum (WPF), noted that “the the resilience of the economy (to what degree it mindset of GDP is celebrated every day”. is ‘future proof’). He noted that mass media needs to make changes, as it is still working within this GDP Walter Radermacher, President, Federal mindset. He also argued that we need a new Statistical Offi ce, Germany, raised a tone of institutional world architecture. realism from the national statistics perspective, saying that in 1989 his predecessor promised A participant noted that we need more to come up with an enhanced GDP in two years, information on the state of health and integrating calculations of natural and social capi- education in countries. Others argued that tal. This challenge is still not met 17 years later, intangible assets such as human rights, underlining the complexity of the task. He under- dignity, respect, and tolerance are important lined that now we have too many indicators and aspects of well-being, and that social capital the challenge is to make something simple that needs greater integration in policies. is theoretically consistent, politically relevant and empirically measurable. He noted that the UN 2011 Mike Salvaris of RMIT University, milestone of standard environmental accounts is Australia noted that the concept of progress a key one to focus on. has not been defi ned democratically in society and that this needs to be addressed. Ashok Khosla, Co-President of the Club of He mentioned that civil society and Rome, noted that “we are living in a world that has governments in Australia are increasingly completely lost its bearings,” and “that we have building indicators to address this, and that an economic system that does not work for many a recent law has led to local governments people” that is “not able to handle the depreciation including social and environmental of natural capital”. He observed that “we talk of indicators into their 5-year plans, with public ‘decoupling’ but unfortunately what is decoupled consultation part of the indicator selection is livelihood, well-being and jobs”. As regards the process. way forward, he suggested that indicators should be defi ned by the last and the poorest and not John Hontelez of the EEB, argued that those that dominate the decision-making system. a new Commission will come in 2010 and that this is an opportunity for a new Lisbon Miloslav Ransdorf, Vice-Chair European agenda – one that can usefully be a new Parliament Industry Committee, noted that Sustainable Development Strategy. Within more effort is needed to test the assumptions this, GDP can be “just one indicator”. underlying economics; models have proven unable to forecast major events correctly, missing critical WWF, UK raised the question of how to breakdowns in economies over the past (Mexico, frame the whole debate and argued that a Russia). Environmental and social issues need “fair, one-planet vision” would be helpful. greater consideration and aiming at higher GDP is not necessarily the solution.

16 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

SESSION 5 Next steps & conclusions Summary

Stavros Dimas, Commissioner for Environ- ment, who initiated the Beyond GDP conference, closed the conference noting that “the main achievement of this conference has been to clearly demonstrate the political consensus on the need to go beyond GDP”. He summarised the main points from the Beyond GDP conference:

There is a need for action to go beyond GDP to measure progress, true wealth and well-being of nations.

There is an urgency for action. We are liv- ©Photo European Parliament ing beyond the resources of our one planet Commissioner Dimas delivering the closing address and destroying the resources upon which we depend. Critical social challenges include social cohesion, employment, education, happiness, migration and poverty issues. There is political consensus on the need to go beyond GDP. Europe is committed to We need to have a better understanding of the taking a leading role and working in part- value of stocks of natural resources and of nership. Commissioner Dimas emphasised that the vital services provided by ecosystem “It is essential that the momentum is not lost services. and I look to Europe taking a lead role – working together with other organisations including the Access to quality, timely data is important. UN, the OECD and the World Bank. It is also Commission Dimas noted, “We have stock mar- essential to work closely with business, NGOs ket information every minute of the day. We and other stakeholders who in many ways are have quarterly reports of GDP. But information the real leaders in this ﬁ eld”. on environmental and social trends is often years old by the time it reaches policy makers.” Road map for action. Commissioner Dimas said their must be an acceleration in the devel- The way forward requires progress on vari- opment of integrated accounting in the social ous measurement tools at the same time. and environmental spheres and called for the There is a role for composite indicators such as further development of headline and composite the Ecological Footprint and Human Development indicators. He pointed to the promise of improv- Index that are easily understandable, easy to ing the communication of Europe’s progress on communicate and raise awareness in the public. sustainable development through the creation There is a role for headline indicators. And there of a sustainability scorecard. He also announced is an important role for accounting frameworks that in 2008, the Commission will present a road for both environmental and social topics. map for action on these issues.

19 & 20 November 2007 17

Conference Programme Conference Programme

Day 1: November 19

14:00 Registration and welcome coffee at the Indicator Exhibition

OPENING Chair: David Grant Lawrence (Director, European Commission, DG Environment).

15:00 Opening Speech: The challenges of modern societies Environmental sustainability, new social risks, migration and security are key concerns for the 21st century and raise new challenges for societies and policy makers. The challenges increase the need for consensus on indicators that measure progress towards well-being and can complement economic indicators such as GDP. Speaker: José Manuel Barroso (President of the European Commission).

SESSION 1: Measuring progress, true wealth and well-being

15:15 Measuring progress, true wealth and well-being While GDP is well recognised as the headline measure of economic performance, it is less obvious how to measure the other dimensions of societal progress. Indicators to capture those dimensions would greatly contribute to better policy making, to guide regional development and help address the new challenges. Speakers: Joaquín Almunia (Commissioner for Economic and Monetary Affairs); Rui Baleiras (Secretary of State for Regional Development, Portugal, EU Presidency); Bruno S. Frey (University of Zurich).

16:10 Communicating content: New communication tools for new measures Solid indicators and statistics can play a key role in policy making, press coverage and public debate, but often fail to get the attention they deserve. The public see only some of the facts and often fail to be engaged by the facts they see. There is a need for better communication – new tools can play an important role in informing and engaging the public. Speaker: Hans Rosling (Karolinska Institute, Sweden). 16:30 Coffee break

17:00 Decision making beyond GDP: needs and a vision Although GDP growth is a key policy target, its relationship to well-being and quality of life is neither straightforward nor sufﬁ cient for decision making. Policy decisions need to better integrate economic, social and environmental dimensions. There is a need for a vision and practice that includes a more comprehensive measuring of progress that moves beyond GDP. Chair: Timo Mäkelä (Director, European Commission, DG Environment). Speakers: HE Chief Emeka Anyaoku (President, WWF); Pervenche Berès (Chair of the EP Economic and Monetary Affairs Committee); Pier Carlo Padoan (Deputy Secretary-General, OECD); Giulio Santagata (Minister for the Implementation of the Government Programme, Italy). 18:30 Cocktail reception

Conference dinner for all conference participants

19:30 The conference dinner is hosted by the European Parliament. Speaker: Anders Wijkman (MEP, Environment, Public Health and Food Safety Committee). Welcome and highlights from the experts workshop.

20 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

Day 2: November 20

08:30 Welcome coffee at the Indicator Exhibition

ADDRESS Conference

09:00 Speaker: Hans-Gert Pöttering (President of the European Parliament) Major negative effects of globalisation such as climate change pose new risks not only to our eco-system but to our entire economies and eventually our societies as a whole. This is why new indicators of wealth are needed and the European Parliament can play a key role in helping to shape the required broad democratic consensus.

SESSION 2: Insights from practice Conference Programme Conference 09:15 Insights from recent practice in policy and business Concrete examples suggest that there are opportunities and tools to improve our capacity of making decisions based on more reﬁ ned measurement of progress, wealth and well-being. For example, policies for sustainable development are increasingly common and popular, while many leading companies and investors are incorporating social responsibility and environmental considerations into their business models and information tools. Chair: Hazel Henderson (Club of Rome) Panelists: Carole M. Laible (President, Domini Social Investments); Nicole Notat (President, Vigeo Group); Lothar Meinzer (Director, Sustainability Centre, BASF); Stephen Pursey (Head of the ILO Integration Department, International Labour Organization). 10:45 Coffee break

SESSION 3: New measures of progress – Obstacles and opportunities

11:15 What do the measures say and where can they be useful? A range of measures (sets of sustainable development indicators, integrated accounting, human development index, ecological footprint, genuine savings, genuine progress indicator) is already produced and in use at local, national and international levels. The full potential of these decision-support tools needs to be further explored in a dialog among the indicators’ producers and users, including policy makers, civil society representatives and the media. Chair: Tony Long (Director European Policy Ofﬁ ce, WWF) Panelists: Kristalina Georgieva (World Bank); Patrick Viveret (Cour des Comptes, France); Pier Paolo Cento (State Secretary for Economic Affairs and Finance, Italy). 12:30 Lunch

SESSION 4: The way forward

14:30 To move to a more balanced set of metrics, we need clearer policy commitments, improved measurement methods, changed decision making, and improved communication. This change requires the use of integrated economic, social and environmental statistical and analytical tools, a clearer communication to the public about key fi gures, the use of quantifi able policy commitments and the development of a culture of ex-ante and ex-post policy evaluation. Chair: Enrico Giovannini (Chief Statistician, OECD). Panelists: Walter Radermacher (President, Federal Statistical Offi ce, Germany); Ashok Khosla (Co-President, Club of Rome); Miloslav Ransdorf (Vice-Chair of the EP Industry, Research and Energy Committee), Jérôme Vignon (Director, European Commission, DG for Employment, Social Affairs and Equal Opportunities). 16:00 Coffee break

SESSION 5: Next steps & conclusions

16:30 The European contribution to a global effort: next steps in measuring progress What are the concrete steps that Europe can undertake to improve the measurement of progress, co-ordinate with similar initiatives worldwide, and integrate these improved measures into decision-making? Speaker: Stavros Dimas (Commissioner for Environment). 17:00 Closure of the day

19 & 20 November 2007 21

Opening Speech The challenges of modern societies Conference

José Manuel Barroso President of the European Commission

Opening speech: The challenges of modern societies

Ladies and gentlemen,

It gives me great pleasure to welcome you today policy is a great success. The forest is preserved to this high level conference. I would like to thank for future generations. The ecosystem, and all the the co-organisers, the European Parliament, the life it supports, is protected. Tourism too is safe- OECD, the Club of Rome and the WWF for all the guarded. In other words, well-being goes up. efforts and contributions made for this conference to take place. But what will be the evaluation of this decision if only measured by GDP? For many years now, there has been a growing consensus that Gross Domestic Product is not, on It is diffi cult, and I’m sure that everyone will agree, its own, suffi cient to guide high quality, policy and to make tough decisions that promote long-term business decisions. well-being if the short-term consequence is a drop in GDP. The European Union is facing today a whole series of global and new challenges, in order to safeguard So in this rapidly changing, globalising world of the our prosperity and well-being. And Europe is mak- 21st century, we fi nd ourselves with a sea of data, ing today a valuable contribution to meet these but, in some cases, lacking the tools we need to challenges; we are leaders on many of these: take swift, well-informed and effective decisions climate change, energy security, health develop- that promote the well-being of individuals, of soci- ment, to mention but a few. These are the great eties, of the planet itself. challenges of our time – often new, always shared challenges that transcend national borders and That is not to say GDP is a poor indicator. Quite demand a common response. the opposite. Since its birth in the 1930s, it was rapidly adopted as the best-recognised measure This is also refl ected in the political issues that I of economic performance in the world. It can be discuss with my peers around the world: energy, used in economic forecasting. It allows compari- climate change, fair trade, migration, development, sons of countries and of developments over time. terrorism; in the context of EU bilateral discus- It is also – very important this! – objective and sions, in the context of the G-8, in the context of not subject to interpretations. the United Nations. Without it, in the words of Nobel Laureate Paul The conference today should help us to consider Samuelson, policymakers would be adrift in a sea how to pick up these issues; to consider if GDP of unorganised data. per capita is the appropriate indicator. But GDP is an indicator of economic market activ- Because when we are assessing policy options ity. It was not intended to be an accurate meas- to tackle these challenges, what GDP sometimes ure of well-being. Even Simon Kuznets, another tells us is sometimes not adequate – or, at least, Nobel Laureate and one of the main originators of not suffi cient. GDP, said: ‘the welfare of a nation can scarcely be inferred from a measure of national income’. Let me give you an example. A decision is made to ban all trade in certain types of precious hardwood Nevertheless, as long as there was at least a cor- to preserve an ecologically important forest. The relation between GDP and well-being, this didn’t

24 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Opening The challenges of modern societies

really matter. After all, there has always been indicators for the last six years, and statistics an implicit link between economic growth and on some sub-categories for even longer. aspects of well-being – like having a job, and levels of consumption. But while all this is positive, there has been no progress yet in reaching a consensus on Conference That is why I consider that this conference well-being indicators. Today is when we start should not be a dry, academic discussion of to fi x that. the merits of various indicators. It should lead us to the sort of breakthrough that we saw in It is not enough for us to talk about the different the 1930s, a breakthrough that adapts GDP, or global challenges, as energy, climate change, complements it with indicators that are better health, security and the environment. We need suited to our needs today, and the challenges widely accepted communication tools that show we face today. progress in these fi elds. And that progress can only be measured with suitable indicators. You are building on strong foundations. Many international organisations have already started So it’s time to go beyond the tools developed for looking at ways of going beyond GDP. More the very different world of the 1930s. It’s time recent generations of economists like Nobel to go beyond today’s situation with important Laureate Amartya Sen have been grappling amount of not well structured data. with the challenge of measuring the somewhat abstract, and multi-dimensional, concept of well- It’s time to go beyond GDP. being. The EU’s own statistical offi ce, Eurostat, has already published sustainable development Thank you. ©Photo European Parliament

19 & 20 November 2007 25

Session 1 Measuring progress, true wealth and well-being Conference

Joaquín Almunia Member of the European Commission, Commissioner for Economic and Monetary Affairs

Ladies and Gentlemen,

Let me start by expressing my gratitude for the In Europe, GDP underpins the instruments and opportunity to speak this morning. The range of criteria we use to make vital economic policy deci- partners involved in today's conference and the sions. For example, whether or not a country meets participants that have joined us from all over the the Maastricht Criteria to adopt the euro or whether world are proof of the importance we now place on it has met the agreed targets for infl ation and fi nding accurate measurements of societal progress interest rates and budgetary debt and defi cit are and well-being. all judged using a reference value based on GDP.

Having the right indicators is essential at every GDP was never intended to be anything but an indi- stage of policy making. Statistics describe a phe- cator of economic performance. It cannot distinguish nomenon at hand, analyse the related issues and between activities that have a negative or a positive help select policy proposals. They facilitate the impact on well-being. In fact, war and even natural implementation and then the monitoring of those disasters may register as an increase in GDP. policies and they communicate the outcome to the general public. Adequate statistics are therefore Also, GDP does not take into account the non- indispensable. economic factors that add to well-being. And many policies that contribute to well-being may not be In my comments this morning I will consider adequately refl ected in GDP growth. For example, the importance and the limitations of the Gross GDP does not take into account the sustainabil- Domestic Product as a statistical measure and I will ity of production and consumption patterns. For explore what other indices would be appropriate instance, while investing in low carbon energy to measure progress. solutions may be essential for the environment and long term sustainability, it may not be the policy *** option preferred for short term economic growth, as measured by GDP. Let me start by clarifying what GDP does and does not do. These limitations do not undermine the intrinsic value of GDP per se. But it should not be considered As President Barroso has indicated, GDP was intro- as a benchmark of the overall progress of a society duced following the Great Depression, in order to as is sometimes the case. Of course, economic help politicians steer the economy towards key growth can bring about an improvement in quality economic objectives and provide a solid basis for of life, but only up to a point. Indeed, many studies sound economic policy decisions. Based on a whole of affl uent countries do not register an increase in set of data – the National Accounts – GDP is the happiness in line with wealth. Even Adam Smith sum of the value added of all goods and services in the 18th Century recognised that well-being sold on the market in a given period. Today it comprised many aspects of human life. has become the foremost measure of economic activity. Thus there is a clear need to fi nd measures that go beyond GDP. Today more than ever before, As a universally recognised and accepted system, faced as we are with major environmental and it allows us to compare the economic perform- demographic challenges and rapid changes in our ance of different countries worldwide and to track societies. economic developments over an extended period of time. To address these challenges, we need to gain a better understanding of what is happening in

28 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

society at large and the impact these trans- developed in the early 90s and is now widely formations are having on citizens and on the used around the globe as an indicator of envi- broader environment. ronmental sustainability.

We need to ﬁ nd measures that will comple- But composite indicators are also controver- Conference ment GDP and build a more nuanced and accu- sial. This is largely because the compilation of rate understanding of economic and societal these indices implies making a judgement on progress. the weight of each individual variable. Thus, composite indicators are criticised for lacking This is not an easy task as there is no univer- neutrality and transparency. In the worst case sally accepted measure of well-being, not least scenario, they could send misleading messages because there are many deﬁ nitions of what this and thus invite politicians to draw overly sim- model actually entails. plistic conclusions.

*** Despite this there are useful examples of effective composite indicators such as the Human However, consensus has been building on the Development Index or the Ecological Footprint need for a more comprehensive measure of well- and improved techniques in the construction being for some time and a certain amount of of composite indicators could go a long way to progress has already been made on this front. overcome their limitations.

On its side, the EU has been working on extending *** its use of statistics beyond GDP. That is why I believe that composite indicators A striking example of this has been the develop- have a valuable role to play, especially rais- ment of a set of indicators to monitor, assess ing awareness of specifi c developments and and review the EU's Sustainable Development challenges. Strategy, our approach to reconciling economic development, social cohesion and protection of But I also consider it necessary to build a more the environment. overarching framework where environmental and social issues are integrated altogether with In this context, we have developed approxi- economic ones. Today the abundance of offi cial mately 150 indicators organised along 10 themes statistics comprises a wealth of information. that look at economic development in parallel However, the lack of integration of these sta- with issues such as climate change, management tistics means that developments that are inter- of natural resources, public health, social inclu- related can only be studied in isolation. sion, demographic change and global poverty. This is why we promote setting-up satel- *** lite accounts like the System of Integrated Environmental and Economic Accounting aim- Despite the progress up to now, time is ripe to ing to overcome this very problem in the fi eld of take the measurement of well-being one step environmental issues. It builds on the European further. [Indicator sets such as those used in System of National Accounts – which has evolved the Sustainable Development Strategy are very to become a robust and highly credible statis- focused in their approach and provide informa- tical system – and links the economic data in tion on specifi c issues.] the national accounts to non-economic environmental data. With this in mind, some argue that a better approach would be via so called aggregate or Integrated Economic and Environmental Accounts composite indicators. This involves combining are a very effective tool to analyse the con- indicators to produce a bottom line – a sum- nections between the environment and the mary statistic that can encapsulate complex or economy. As a complement to environment sta- multi-dimensional issues, giving a sense of the tistics, environmental accounts allow for a more bigger picture. The advantage of this type of in depth examination of environmental concerns measure is that it is very effective at attract- as the different modules are broken down by ing public interest and focusing debate. An other, non environmental variables, such as example is the ecological footprint, which was industry. Because of its integrated nature, this

19 & 20 November 2007 29 Conference

system allows a wide range of relevant indicators expenditure. A second set of priorities will be to to be extracted. achieve good coverage for the accounts on waste, water and environmental taxes. These environmental accounts will allow us to answer urgent political questions. For example, they will help ascertain whether economic growth is having less impact on the environment. They Conclusion will also help establish whether we are respecting the Kyoto targets in terms of greenhouse gas Ladies and gentlemen, let me conclude. emissions or are simply exporting the emissions following delocalisation of production. Gross Domestic Product is an indispensable measure of economic activity that has successfully Eurostat is leading efforts both at EU and interna- steered our economies through the post-war period, tional level to develop environmental accounts and underpinning the prosperity we enjoy today. progress thus far has been encouraging. Already, 24 EU Member States have developed Air emission However, new challenges of the 21st century require accounts, while two more are planning to do so in new statistical instruments. Only this way can we the near future. A total of 23 countries are involved both build our understanding of the shifts in our in compiling economy wide material fl ow accounts societies and develop our capacity to respond or are planning to do so while 21 countries are effectively. collecting data on environmental expenditures. In the short term, key sets of indicators and com- However, we need to further intensify our efforts. posite indicators can play a valuable role both Gaps remain in terms of data availability among informing and raising public debate on social Member States and in different areas of environ- and environmental challenges. However, in the mental accounts. For the forthcoming years, a key long term, Integrated Accounting proves to be priority will be to identify where data is missing the strongest tool for developing policy relevant and assist member states in their efforts to fi ll statistics and for supporting a comprehensive these gaps. approach to the promotion of well-being and progress. In the environmental sphere, our best Eurostat will also work alongside Member States option for accomplishing this goal is through the to develop comparable accounts for air emissions, System of Integrated Economic and Environmental economy wide material fl ows and environmental Accounts. ©Photo European Parliament

30 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

Rui Baleiras Secretary of State for Regional Development, Portugal,

and EU Presidency Conference

This conference, Ladies and Gentlemen, deals with paradigm of the European Union – it states clearly one of the major challenges of our age – how to that for the Union, progress means economic per- measure progress, true wealth and well-being more formance in a global world, together with social broadly and more reliably than GDP allows for. We cohesion and environmental sustainability. have reached a point where we need to think of our goals as a society and to refl ect on the traditional For Europe the crucial question of the moment is not concepts of economic growth and welfare. what progress means, but rather whether we have the best ways of measuring progress throughout The European Union pioneered the consideration of the entire policy cycle – from diagnosis and policy sustainable development and is strongly committed formulation to monitoring and assessment. to the environment and social welfare. Therefore, rather than reassessing the priorities, we need to If we focus on what is probably the broadest reach a consensus on what the concepts of sus- European policy – cohesion policy – the previous tainable development and well-being mean for the question becomes clearer. This European policy, EU and for the international community. This is a anchored on the principle of solidarity, was fully crucial step in order to defi ne the new tools that are aligned on the European Union’s development needed to support and guide the decision-making paradigm – the renewed Lisbon Strategy. But is that best fi ts the priorities. our system of indicators totally coherent with the goals of cohesion policy? Or are we too focused I would much like to highlight the work done in on measuring GDP? this fi eld by the United Nations, the EU, the OECD, the World Wildlife Fund and the Club of Rome, not So we need the strongest and broadest commit- only for placing the measurement problem on the ment from policy-makers, researchers and statisti- international agenda, but also for working on the cians, to improve our system of indicators so as development of concrete tools that go beyond GDP. to measure progress on several territorial levels In fact, new tools have a double role. On the one in a totally comparable way. hand, they help the decision-making process but, on the other hand – at an earlier stage – they The ‘beyond GDP’ debate is even more relevant, help policy-makers and society at large to become given the current European political timetable. aware of the new economic, environmental and We have just started the debate on post-2013 social challenges. Cohesion Policy and I recall the Cohesion Forum we had in Brussels, in late September, and the Let me remind you as well of the importance Informal Ministerial Meeting that will take place in of the Istanbul Declaration to this debate. Last the Azores, at the end of this week. And we are June in Istanbul several hundred people from all also approaching the budgetary review debate over the world – representatives of the European which is scheduled for next year. Commission, the OECD, the Organisation of the Islamic Conference, the United Nations, UNICEF What does GDP include and what does it exclude? and the World Bank – debated ways of measuring progress and came up with some interesting points GDP, as we all know, gives us the Total Market to feed into this international debate. Value of all fi nal goods and services produced within a defi ned territory over a given time period. What is the European political framework for This outcome indicator is very appealing because this debate? it gives us a simple and clear message about the current economic activity of a country or a region I think this is a good starting point. The adoption and about the relative performance of several of the renewed Lisbon Strategy is the development economic spaces. But, if nowadays we do get this

19 & 20 November 2007 31 Conference

clear message, it is only because the methodol- probably not desirable to do so since these are such ogy of measurement is well-defi ned, allowing for diverse issues. For example, economic activity and inter-territorial comparisons. This great advantage well-being are problems of a very different nature. of GDP makes it one of the main decision-making The former can be measured in a quite objective support indicators in many areas. As such, inter- and monetised way and allows for aggregation, national comparability and multi-territorial scales while the latter is essentially subjective and poses are desirable characteristics for alternative or com- diffi cult problems of aggregation and territorial plementary indicators of progress. comparability. Therefore we need a limited set of indicators that can complement information However, GDP tells us very little about how market reported by GDP. We need them to enable us to transactions help to increase or decrease well- have a quick and yet reliable picture of the various being, and virtually nothing about non-market development issues that I mentioned. activities. GDP does not encompas a wide set of crucial items that are relevant for society’s well- Even if it were theoretically possible to devise a being. Just to give you a few examples, I could single indicator that could give a message as clear mention environmental issues, such as resource as the one given by GDP, the construction of such depletion, emissions of carbon and other pol- an indicator would be almost impossible in practice, lutants, water quality and biodiversity; on the since to aggregate so many diverse items would social front I could mention poverty, inequality be completely meaningless. of income distribution, educational attainment and health-care access; for non-market goods Yet, there is a very important point to make. For and services I could mention ecosystem services, the purposes of making policy, especially inter- volunteer work and the value of leisure. These national policy like the EU does, we must restrict are all activities that certainly infl uence the level the quantity of high level indicators. It is more of well-being, but are not covered by mainstream important to see the wood than all the individual economic indicators. trees. Otherwise we cannot have a clear picture of how countries and regions are performing in This does not mean that GDP is a wrong indicator. either absolute or relative terms. This is because Not at all. The key point is that we should not be too much information becomes diffi cult to interpret; tempted to use it to assess achievement in areas decision-making becomes more diffi cult the more about which GDP cannot tell us much. GDP is a indicators we have, especially if they are moving measure of current economic activity. It does not in opposite directions. If we do not focus on a very measure well-being or happiness. Although there restricted number of high-level indicators, we risk may have been a positive correlation over time, having to keep going back to GDP because highly they are not the same and they do not necessarily dispersed information is very diffi cult to deal with tell us the same story. and very diffi cult to interpret.

We have to recognise that, for decades, there have Before and after actual policy decisions are made, been misleading interpretations of GDP, an indicator during diagnosis and evaluation, the high level indi- that cannot in fact be used to infer directly anything cators must be complemented by comprehensive about sustainability or well-being. As Mr Barroso and detailed measurements, in order to zoom in said, Simon Kuznets, one of the fathers of the on certain questions. National Accounting System, was in fact the fi rst to recognise that GDP is not a measure of well-being Ladies and Gentlemen, to sum up, measurement of and that GDP does not take into account the costs progress is, and must be, the outcome of a virtuous or benefi ts – short-term or long-term – of current cycle. First of all, policy-makers must defi ne what economic activity. progress means based on diagnosis and research – a job mainly for the scientists. Secondly, the So how can we move forward? researchers and statisticians need to develop ways of measuring this progress. Thirdly, statisticians There are huge differences between concepts such will needs to produce and present indicators of as current economic activity, economic sustain- this progress. Finally – and this brings us back ability, sustainable development, well-being and to the starting point – policy-makers must then quality of life or happiness. evaluate the progress made and then refi ne the concept of progress based on the indicators, thus Clearly it is not possible to measure all these rel- triggering a new round in the progress measure- evant dimensions using just one indicator. And it is ment cycle.

32 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

And as a society we need to keep feeding the Ladies and Gentlemen, there is an urgent need progress measurement cycle with our thoughts for the world to adopt effective sustainable and reﬂ ections. In Europe and in the world, we development policies. I hope this conference need to continuously reﬁ ne our ideas about what will send an important and clear message to progress means and how to measure it. Unless underline urgency on the international agenda. Conference there is wide participation in order to build a It is our responsibility to secure the well-being sound consensus, the new indicators, and even of future generations. And it is our responsibil- some of the current ones, will not allow for ity to ask institutions all over the world to work international and inter-regional comparisons, together and to combine their efforts to get the which could jeopardize their usefulness. right answers to meet today’s requirements. ©Photo European Parliament

19 & 20 November 2007 33 Conference

Bruno S. Frey Professor for Economic Policy and Non-market Economics University of Zurich

Happiness - Possibilities and Pitfalls

We are in the midst of a revolution. We are turn- I asked President Barroso where he would put him- ing away from material things towards well-being. self – and he agreed to let me pass on his answer. And I will be arguing that the way to measure He said “8.5”. Isn’t that encouraging? well-being is happiness. Happiness is the factor we need to consider. I can assure you that the life satisfaction indicators we have today are quite valid. When we ask people, I would like to make two propositions. “How satisfi ed are you with your life?” they don’t just tell you some nonsense; they tell you what they – Firstly, although National Income and Social really think. It’s surprising, but it’s true. They tend to Indicators (including the Human Development tell you how satisfi ed with their life they really are, Index) are good indicators, happiness, or life and this is confi rmed by the fact that people who satisfaction, are much better; are satisfi ed with their life laugh more than other people. They smile, and are more sociable. Very – Secondly, we must be very careful not to do the importantly they sleep well and they are healthier wrong thing. Although government should make than others. Happiness leads to better health, and it possible for people to be happy they should of course the happier people are, the fewer suicides not try to maximise happiness. For example, there are. So these indicators of happiness or life the European Commission should not proclaim satisfaction are really quite good. “We are now maximising happiness.” This would be disastrous. And I can confi rm that happiness can be measured. If you had asked me seven or eight years ago “Is So my fi rst proposition is that we should move it possible to measure happiness?” I would have towards happiness indicators – and here I have said, “Of course not! You cannot measure such a some good news. Most people are happy. It’s simply personal thing as happiness.” Today I think totally not true – as some philosophers tell us – that we differently. I think that we can measure happiness. live in a terrible world and should lament all the I would claim that it is easier to measure happiness time. It is exactly the opposite. Statistically, based than Gross National Product. We have a lot of ways on very sound data, we know that most people of measuring happiness – although of course we are very happy. must apply them appropriately.

Consider the following question: “All things consid- The most important are certainly surveys, the ques- ered, how satisfi ed are you with the life you lead?” tion I just asked you. Here the Eurobarometer, and Let me repeat the question. “All things considered, perhaps more importantly, the World Value Survey how satisfi ed are you with the life you lead?” Just are very prominent. Then there is Experience think a moment of what you would answer, on a Sampling. This is when you are asked randomly scale from 1 – totally unhappy – to 10 – totally how happy you feel just at this moment, and then happy. this is aggregated up. Then even more scientifi cally one can do brain scanning. All these methods of I am quite convinced that almost nobody would say measurement are quite reliable. ‘1: very, very unhappy.’ or even 2, 3, or 4. There may be some 5s, but most of you would say, ‘I I won’t go into a critique of National Income because am something like 6, 7 or 8, and even 9 out of Commissioner Almunia and State Secretary Baleiras 10.’ And I think that’s a wonderful thing, so let’s have already talked about that. I just want to men- be content with the nice world we live in. tion one thing which was not pointed out by these

34 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

two gentlemen, namely that today, roughly – the second one is the red line – which indi- 50 percent of National Income – and even cates satisfaction with life – and you see that 60 percent in many countries – is attributed to it isn’t going up, it remains constant. government activity. How is government activity measured? By input, in the form of materials So to take National Income per capita as an Conference and work. You can immediately see that has indicator of well-being is wrong, because you nothing to do with welfare. So GNP is great as can see that they don’t go together. a business cycle indicator; it measures productive capacity but not for well-being. I would now like to consider a second point. “Assuming that we can measure happiness in But I would argue that Human Development a satisfactory way, what do we do with this Indices and other social indicators are not very information at the political level?” good either. Take for instance life-expectancy. Of course it is great to live a long time, but what if Let me fi rst say what I think should absolutely your last ten or fi fteen years are unhappy? Then NOT be done. Governments should not now it doesn’t help to get older and older. School jump to the conclusion that “We have to max- enrolment is often used as a Social Indicator, but imise happiness”. The EU Commission should of course it is not an output. We know from PISA1 not say, “Now we need to maximise the happi- and other studies that there are many countries ness of all European member countries.” This where a lot of input is made into schools, a lot is wrong because once the happiness indicator of children go to school, but they don’t learn is seen as important it will be manipulated by much and they are not very satisfi ed. governments. We have to accept this – we should not be naive. We saw that when the euro Per capita income is also sometimes used as a was introduced. We know that some countries Social Indicator. This is even worse, as I would like manipulated their defi cits considerably, and to show in the case of Germany. By the way, this everybody knew it! This would be the case if can be done for every country I know of. I have happiness were a government goal; govern- the statistics for the United States, for Japan, for ments would manipulate it and respondents France and for many other countries. would no longer tell the truth.

On this graph, you see two lines: Another reason why governments should not try to maximise happiness is that happiness is – the green line is going up – that is the not the only thing which should matter for poli- Development of Real GNP; ‘real’ means that tics. There are other things. Things like justice, you can buy more and more material goods, responsibility and solidarity are important too. such as cars, houses, good food or whatever. Happiness should not be the only goal – we So the material component is increasing; must remember that.

Income and Life Satisfaction in Germany, 1973 – 1999, Stutzer and Frey (2004) based on a survey on Eurobarometer

1 Programme for International Student Assessment (PISA)

19 & 20 November 2007 35 Conference

What governments need to do, and this includes What the government can also do is to create the the EU Commission, is to make it possible for right political conditions. One which I think is very people, for individuals, to develop a life which important in the twenty-fi rst century is to increase makes them happy. I have not yet mentioned the citizens’ rights in terms of political participation. ‘environment’, not because I forgot, but because I There is now strong econometric evidence that think it is perfectly obvious that the environment citizens who get involved in politics at various is so important and that a good environment levels are more satisfi ed with their lives. I think enables people to be happy. I have mentioned that the European Union could move a little bit ‘education’. We know from economic happiness more in this direction. Everybody speaks about research that better educated people are hap- the “democratic defi cit” of the EU and a lot of pier, because they have more opportunities and European politicians have understood that. We can relate to more things. That is the great thing now have evidence from happiness research that about education. It not only increases our human this really is important for people’s well-being. production capital but makes people more satis- Another thing that improves public satisfaction is fi ed with their lives. political decentralisation. People are more at ease with political decisions taken at the local level with It may seem somewhat trivial, but economic condi- which they are familiar. tions are terribly important for happiness, not so much income, but employment. Unemployment So my conclusion is: Happiness is a wonderful is the worst thing for happiness. People who are concept and can be used to make better policies, employed and are then thrown out of their job lose but it should be used by governments to enable contact with society and feel useless. This is a ter- people to achieve their own personal happiness rible situation and makes them really unhappy. in their own way. ©Photo European Parliament

36 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

Hans Rosling Professor in Public Health Science,

Karolinska Institute, Sweden Conference

Communicating content: New communication tools for new measures Editor’s note: Professor Rosling’s presentation used extensive visual aids in the form of statistical software and slides. To see archived video of the presentation, visit the Beyond GDP website at http://www.beyond-gdp.eu.

I am going to talk about how we can put ambition American countries – and the Arab countries in high – really high – when using data. Let’s unveil green now move ahead with family planning into the beauty of statistics! Those who like to analyse a completely new world which we are not really a lot manage to understand statistics, but it is prepared for. And here we are today! diffi cult to communicate this understanding. Look at this – how beautiful it is! It is Chopin’s Nocturne – These animations are aimed at two major tar- but very few of you can see the beauty of the get groups: children below twelve and Heads music just by looking at the notes. There may be of State! Analysts and economists devised this one or two who can see it. Yes, there is someone animation. It is not designed to replace any over there who can see the beauty, … you are other econometrics or statistical software; it is like the composer who can see the beauty, but just intended to add something to it. most of us need an instrument and someone to play it. Only then can we see the beauty of I could show you another thing, which you may the notes. But here is some good news. There fi nd surprising. It is an important message for are small electronic instruments that your kids Europe. Europe is not so special any longer! can use at home, quite cheaply, and they will A large part of Asia and a large part of the play the notes. Let’s take this allegory a little Middle East have the same family size and the further and see if we can apply it to statistics. same life expectancy. But there is something Let me play some statistics for you. where Europe is special. We see fertility rates on this axis, but I now have population aged Let’s start with this one. Here every ‘bubble’ is sixty-fi ve years and above on this other axis. a country and the size of the bubble is the size In 1961 you had Europe up there – old people, of the population. Up here we have the United small families – and the developing countries Kingdom, and Germany; in fact those brown ones were down there. They had large families and are European countries, not just the European not very many old people. Now let’s look again. Union but the Europe we learned at school. Those See how Europe is now getting older and older are the Americas and what have I shown on the and in America and Japan see the ‘green’ and axes? I have shown the size of the family on one ‘red’ bubbles. The rest of the world is chang- axis and life expectancy on the other axis. This is ing to small families, but they are not following 1950 when the world was as my students said “us Europe in terms of old age. This is what makes and them”. These were the industrialized countries Europe special: our life expectancy! The size and these were the developing countries. of the family is no longer special but we have double the proportion of the population around What has happened since then? To show how sixty-fi ve. This is not the same in the United much of the world has changed we can use States but it is the same in Japan. I used to animation. See how as the years pass by the say that these are the countries suffering from former developing countries improve their life immigration defi ciency. They have developed expectancy. And now look at the red bubble very rapidly but they don’t have immigration, showing Chinese family planning: they move to so they have a very old population. Interestingly smaller families very fast! Now off come all the enough, if you track Germany for instance and

19 & 20 November 2007 37 Conference

you go backwards in time, and then compare it with China for instance, you will see that China moves towards a very small family with a very low proportion of old people. So very rapidly you can see a lot of the statistics.

Let me show you GDP down here. On this axis you have the child survival rate, the number of children dying. The low numbers are up here, so at the top you have the healthy ones and at the bottom those with high numbers of children die at an early age. This is the world today; high infant mortality in Africa (the blue countries down here) and the very favourable situation in Europe.

GDP – I would agree with the President – is a very good measuring stick. As a Public Health Professor, I like it because it explains 80 percent of health in the world. I agree that happiness in high-income countries is not correlated with GDP, but in the rest of world it is, because unemployment and economic hardship is an everyday concern, as it used to be in Europe back in the 1800s. Then Europe developed and got healthier and wealthier. Let’s freeze the world where it is today and I’ll pick out Portugal. Now we can explore this one country very easily, going backwards like this. This is where Portugal was in 1945, exactly where we have Chad or Angola today… This is Portugal’s development. It is interesting to see that something appears to have happened in Portugal in 1974. Isn’t it nice how very fast you can see it? You can see that the democratization which came about abruptly brought a social dimension to development in Portugal and it then became the country we know today. It is not the best economy in Europe, but its child survival rate is much better than in the United States of America. That is where Portugal is today.

Let me show you a PowerPoint presentation too. Let me give you a conceptual model. What are we doing when we are collecting data? We have the world and we have the statisticians who are very good at collecting and generating data. So we have all the data up there. How do we get it down here? Well, normally we have microdata in the form of individual information, or individual environmental measurement. And then we have indicators, which are more useful. The normal procedure is to send data to the government and the government manages the world. Now Enrico Giovannini of the OECD has suggested that the very word ‘statistic’ is wrong because statistic doesn’t mean ‘static’ it means ‘the state’ and we need ‘societal-tistics’. I don’t know the pronunciation and I know Enrico is struggling with this. It means data for society. Who

©Photo European Parliament else uses this data? Well researchers use it and

38 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

they produce results for government and for the down. That was the case with sulphur oxide. But commercial sector, and they feed it down and it is an easy one, because it was linked to one we get functioning markets. They request the specifi c pollutant. And it is simpler than the one data. We have data that goes to the media, and we are facing today – carbon dioxide. I could research goes to the media, and then it feeds for instance go to the GDP measurements. I Conference down into the civil society. That’s how things could de-select here and change this variable were fi fteen years ago. Then the Worldwide up here. Instead of categories I could take Web came and the statistical agencies started indicators. Now I am looking at Eric Swanson’s their web pages and made information available “World Development Indicators”, the best com- directly to civil society. Unfortunately, we lost piled data set of Development Indicators. I can ten years with the old concept of selling data. now easily look at the environment and see But we now have free data in the European emissions, and I have fi ve hundred variables Union and we are moving in that direction. Civil immediately available here. I can choose carbon society is doing something new and that, I think, dioxide emissions per capita. There is no data is part of why we are here today. It is not only from the countries in the North here but when because of the new environmental statistics; it I go backwards here we have a carbon dioxide is also because civil society is asking for data emission. The red ones emit a lot. China and today. People want data about global develop- India are still low … and here we can see child ment, about their own nation, and about their health. local community – so we really need to have a very broad arrow that goes down like this. This The sad thing is that all improvements in the is what it is all about. Can we devise tools, or economy and in child health have been con- new ways of allowing all that valuable data to nected to higher emissions of carbon dioxide. fl ow around the world and be used in so many It is really the big challenge we have. That’s different ways ways – not to replace any of the why GDP doesn’t work because it is absolutely other uses, but to reinforce them? We can add contradictory to the main environmental con- to the use of data which is already being pro- cern we have. duced with such a lot of professional skill and such a lot of investments. If I then put carbon dioxide on this axis instead and put GDP here, we can see that in 1975 the Let me show what you could do with environ- United States was there. China was not much mental data for instance. I will tell you a nice of a concern. No one was thinking about carbon story that will make you feel good about how we dioxide, we were all concerned about sulphur. can handle the environment. Sulphur emissions This is what has been happening. Can you see? per person: how much sulphur have we emitted Really what appeared there was the data from into the environment in relation to GDP? We start the Russian Federation after the split of the Soviet back in 1851 when the United Kingdom was in Union when started getting emissions statistics the midst of the industrial revolution and was from there too. None of them are falling… they the most terrible polluter the world had ever just stop increasing. This is a real challenge to be known – but worse was to come. Look what hap- able to follow this year by year. And what I have pens when we move forward here, I can move noticed when I lecture about this is how the big forward and other countries follow the United investors, and governments, are being infl uenced Kingdom. First the United Kingdom is leading by their children. Make environmental statistics and then – see the large mass of green – the freely available on the internet for children to United States overtakes as the main polluter. see and they will talk with their parents. This is We move on into the new century and see pol- a very important message. lutions sky-rocketing up. We reach the highest level here and start to realise that something So, how can we achieve that big arrow on the has to be done about it. The United Kingdom right? Let me move it over like this and I will show by then is up there and they are overtaken and you what we can do. Of course, the WebPages of then this happens. So isn’t this an effective the statistical agencies must continue to improve measuring tool? and a lot of good work is being done on that, but if we really want innovation, and let’s take What you see is this transaction where the that as our message, why is a fi fty-nine year old United Kingdom went up like this and then came Professor of Public Health standing here talking down again and eventually in the year 2000, about IT technology? This is a job for a child. when we are over there, we come all the way It is my son and his wife who dropped out of

19 & 20 November 2007 39 Conference

University seven years ago who shut themselves but to get the whole dataset. But licences cannot away and wrote this code! This is how it happens. just be given out willy nilly. This is a legal issue, It is the same story for all inventions: someone gets not a technological issue. an idea and they see that they can get IT technology from there, and statistics from somewhere else, When we started discussions with Google (and and then put it together in a new form. But what Google actually acquired our software half a year we also need is a unifi ed format. ago and intend to scale it up for free use in the public sector) the fi rst question was, “How many The single most common request we get is that we statistics are there?” “There is a lot of microdata” I should put measurements of happiness together said. “No, no, not microdata but the indicators, all with other data. We want environmental data – the indicators in the world. How much is that?” both the statistics collected publicly and those from research and civil society – and we want to I didn’t know, so I made an estimate and it was see them in the same format. A unifi ed format is about fi ve terabytes; that’s all the historical statis- the number one requirement. It was only when we tics, everything from local communities to nations. started to write music with the same notes that And their reaction was: “Five terabytes, that’s no it could be widely played. It is very important to problem whatsoever, it’s less than ‘the Lord of the have a unifi ed format. We need a search function; Rings’!” In one night a kid can download the entire it took us half a year to make a prototype where database of public statistics! ‘here are no techno- you can search databases. It was given to the logical limitations but there is a legal one, and a United Nations statistics department and is now credibility issue. “If you use our data you need to being quietly launched as UN data: free access to give the source, you need to show our logo, you search a lot of databases. It has only been acces- need to make a link to our Webpage. You can- sible in the last few months. not revise the data which we have published and claim that it is still ours. You have free access but When we came up with these designs – and what I if you make an income we share it with statistical showed you in the bubble is just one of them - we agencies.” We have to settle this, if it can be done made several types. We need interactivity and we by proper governance, because today these good need story-telling. But in the end it is not WebPages innovative statistical units don’t have clear gov- that spread information. It is how it is used by the ernance from above. That’s why they cannot link people who tell stories and initiate innovation. We out of the corporate sector and into the innovative know how we get innovation; I have studied docu- sector in the best way. ments from the World Bank, the European Union and the OECD. We need lots of ideas, we need We need to combat this disease. It is the worst new technology, we need investment and in this disease we are facing today in terms of data access. particular case we need access to data. For our We could call it Database Hugging Disorder!!! But study over the last seven years, the single most it is not a congenital disease; it’s a disease trans- diffi cult thing was not ideas, technology nor even mitted by poor management, haphazard budgeting money; it was being allowed access to data. That and unclear legal relations. If we can eradicate it is why we are not getting. I must emphasise that. we can get data out, and not only in the bubbles I see the problems in making databases available. that I have just show you. You have a lot of inno- I have become aware of them, because innovation vative young people and innovation out there. We is now taking place only within agencies or groups must let the corporate sector and small start-up where this is happening. We need an access licence, enterprises contribute without losing the credibility not only in order to pick one little series of data, of the good professional statistical agencies.

40 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

H.E. Chief Emeka Anyaoku International President of WWF Conference

Beyond GDP: Measurement tools for a Living Planet

Dear Commissioners, Members of the challenge. Our way of living is not only threat- European Parliament, distinguished guests, ening the health and diversity of our planet’s species, but has become a huge threat to human I am delighted to be here representing my organi- survival as well. zation, WWF, as one of the joint originators and sponsors of this conference. Twelve years ago we WWF has been publishing the Living Planet co-hosted a similar gathering, also held here in Report biennially over the last decade. In these the European Parliament and also co-sponsored reports we have been calling attention to the with the European Commission and Club of Rome. fact that we are now in what we call ecologi- It was called “Taking Nature into Account.” cal overshoot. In plain terms, this means we are using more resources and emitting more We argued then for a whole new range of meas- waste than our planet can handle. Reversing urement tools to help our policy-makers and these trends is WWF’s goal. political leaders to chart a path to sustainability. We likened it to a dashboard in a car. We argued To better understand the distance to our goal, that society needs a vast new array of dials and we are using two measures. instruments next to the steering wheel to be able to measure how fast the planet is travelling. We The fi rst is the Living Planet Index, now being need to know how much fuel we have in our tanks, further refi ned jointly with The Zoological Society the engine work rate and temperature, the oil of London. The Living Planet Index is a kind of pressure, the water levels, tyre pressures and so “Dow Jones” index of nature. It measures the on. The call is the same now as it was 12 years health of our planet’s biological diversity. It sum- ago – only more urgent. We need to move beyond marizes population trends of more than 1300 our reliance on limited, though well-known, dash- vertebrate species around the world: in the sea, board indicators like Gross Domestic Product. We on the land and in freshwater ecosystems. It need in other words to move beyond conventional documents a 30 per cent decline in the average economic accounting. We are calling for new ways population size of vertebrates since 1970. Quite to measure and record progress so that we can simply, biodiversity suffers when our planet’s take the necessary corrective measures to set a ecosystems cannot keep up with human rates more wise development path. of consumption and waste generation. This is now happening at a rate unprecedented in Societies cannot continue to operate as if the human history. planet was a business in liquidation. We cannot continue to turn our backs on pollution and call The second, complementary measure tracks it someone else’s problem. We cannot continue human demands on the planet. For this we use the to call income what in reality is resource deple- Global Footprint Network’s Ecological Footprint, a tion. We cannot claim economic success for resource accounting system that measures how development patterns that leave hundreds of much nature we have and how much nature we millions of people marginalised and which stoke use. This allows us to compare human demand the fears of resentment and confl ict. against nature’s available supply.

The WWF mission is to build a future in which Nature’s supply is comparatively easy to quantify humans live in harmony with nature. Obviously – we have one planet Earth. Human demand has we have a great deal of work to do to meet that grown rapidly. In 1961 humanity used half of our

19 & 20 November 2007 41 Conference

planet’s ecological capacity. According to the most ecological defi cit, our global overshoot, is entirely recent data, just over 40 years later, humanity’s dependent on depleting our planet’s resource stocks demand now equals 1.3 planet Earths. and accumulating yet more waste. Technological breakthroughs may slow the trend but are nothing These calculations apply to nations and regions like enough currently to reverse them. as well. For example, Europeans use 2.6 times more than Europe’s ecosystems can provide. If This global overshoot is liquidating the assets on everybody in the world consumes resources and which human well-being depends. It is creating expends wastes at the same rate as Europeans, we social tensions and confl ict, and it is making our would need close to three planet Earths to sustain existence ever more fragile. It is also taking away these lifestyles. If everybody lived like the average the development rights of future generations. American, we would need more than fi ve Earths. WWF, UNEP, and the World Conservation Union Such ecological defi cits are possible because nations defi ne Sustainable Development as a commitment import resources from other countries and deplete to “improving the quality of human life while liv- ecological assets. Without any other planets – (at ing within the carrying capacity of the supporting least for the moment) – to trade with, Planet Earth’s ecosystems”. As this defi nition implies, ecological ©Photo European Parliament

42 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

indicators alone do not determine sustainable sustainability tools so they can become robust development. We must also be able to measure measures for public policy formulation, evalua- the quality of life. tion and eventually better decision-making.

Most recently, WWF has been working with oth- It is enormously important and gratifying that the Conference ers to see if it might be possible to combine statistical experts from Eurostat, the Organisation the Ecological Footprint with the United Nation’s for Economic Cooperation and Development Human Development Index. The challenge with (OECD), United Nations institutions and numer- this combination approach is to see if it is pos- ous national statistical agencies are here to help sible to live well, which the UN defi nes as a mini- us to chart this path. It is important too that the mum Human Development Index of 0.8, and live European Union institutions and Member State within the means of one planet, which means an governments represented so strongly here are Ecological Footprint of 1.8 hectares or less per putting their progressive environmental policy person. This would mean we could fi t within one positions to the test. We simply will not know planet and have a satisfactory quality of life. if carbon dioxide reductions, energy effi ciency gains, renewable energy targets, the opera- Living and thinking within the box defi ned by tion of a carbon market and halting biodiversity these two indicators is the single greatest chal- goals will be reached or not if we don’t measure lenge of the 21st century. But nearly all countries them – and place the results fi rmly in front of in the world are missing this target. In fact, the leaders setting these ambitions. moderate United Nations projections, with slow, steady growth of economies and populations, In conclusion, it is almost certainly the case indicate that humanity will be living as if we had that those countries and regions with surplus two planets to support us by 2050. At this level of ecological reserves, – and not the ones relying on ecological overshoot, exhaustion of resources and continued ecological defi cit spending, – which will large-scale ecosystem collapse become increas- emerge as the robust and sustainable economies ingly likely. and societies of the future. If this is the case, then it is also true that the GDP indicator does In our new Global Programme Framework, WWF not capture this vital information. Of course, has committed to stop biodiversity loss and help measuring the performance of our economies is humanity reduce its Footprint to the size of one important. But economies are a means, not an planet Earth by 2050. The scale of this challenge end. The decision leaders in governments and is absolutely enormous – nothing short of a industries of today, never mind tomorrow, need revolution in our economies, societies, energy to know how our ecological and social assets choices and lifestyles. We need to move not are performing just as much as our economic only beyond GDP, but also far beyond WWF. The ones. I trust that this conference will give us reason is obvious: we cannot do this alone. this guidance.

We see this conference as an important step in building support for a broader range of scientiﬁ c Thank you.

19 & 20 November 2007 43 Conference

Pervenche Berès Chairwoman of the Committee on Economic and Monetary Affairs of the European Parliament

Economic policy making – beyond maximising GDP

1. Introduction an oil tanker was shipwrecked. Economic growth is also necessary to meet the challenges of the Thank you for the invitation to speak at this very ageing society we are facing. timely conference in the European Parliament. Economic policy should therefore focus on an This discussion at the international level has been indicator measuring economic growth. GDP as a going on for some time. But now, we can have the measure still has future in giving an indication of dream that with this Conference the Commission the realised economic output and also in giving is completely committed to the idea that time has an indication of the potential economic growth. As come for action. We need it for us if we want to be with all economic data, it is not the precise level as coherent with the Lisbon Strategy but I also have such that is most important, but the trend and the the conviction that the EU could take the lead in relative position, in this case to other regions. moving ahead at the global level. I can only observe, that GDP as a measurement has I think it is important to underline that the purpose proven to be a reliable proxy for economic activity of Gross Domestic Product – GDP – is normally in that sense. However, using GDP as a measure simply to measure economic output and economic has limitations. For instance: GDP does not take growth. GDP is also used to project a country’s into consideration depletion of non-renewable potential economic growth. Moreover, GDP can resources. GDP also does not take into account be compared across countries with a minimum of the free-rider-problem. Seen from a modern pol- methodological diffi culties. icy maker’s point of view this limitation must be overcome if we are to address the problems we GDP was not created to be a measure for societal are facing with climate change and other environ- well-being, but I recognise that it is often used as mental issues. an indicator for that. I suppose that GDP has been used and is being used as an indicator for well- Another limitation of GDP is that is does not give being because it is up to now the best available any indication of the income distribution. From measure. It has served well for a good number of a policy makers point of view a huge defi ciency years, but I think that all policy makers realise that that must be overcome in our fi ght for a more fair GDP cannot be the only basis when deciding and distribution of wealth in today’s society. devising an economic policy in today’s society. Not does GDP measure a population’s well-being or “quality of life”. Understanding what defi nes “well- 2. Limitations in using GDP as a measure being” and “quality of life” is crucial, but subjective at the same time. It is not least crucial for policy Let me underline that economic growth is neces- makers from very rich parts of the world, where sary to ensure poverty can be fought and social most material needs of the population have been inclusion guaranteed. This all implies: a need for or at least can be met. more jobs. We have to realise that even activities that are not strictly speaking really adding Moreover, GDP measures are normally limited to something to society in an economic sense, still countries. This is not always practical in a world provide people with a job and therefore with an where not only fi nancial markets but all markets income. You may think of activities like repairing are becoming global. a lock after a burglary, or cleaning a beach after

44 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

One can conclude from this that modern pol- “quality-of-life”. Moreover, there are also many icy makers cannot rely on GDP solely when political issues to be considered. First of all what designing policies. Policy must take into account index is the best! And can any index be used in what could be called social progress. Therefore any country of the world? GDP must be supplemented, not replaced, by Conference other measures and perhaps more qualitative Second, even if a country scores high on a information. “well-being” or “quality-of-life” index, can policy makers be sure that it is the result of a given policy-mix. And can policy makers in other 3. Beyond GDP countries simply copy the policy mix and be sure that their population will become happier? Our Western societies have developed so much Or can a high “well-being” or “quality-of-life” that the ordinary citizen nowadays expects politi- score be explained simpler e.g. that some peo- cians not only to just deliver long term economic ple are just more positive than others? As you growth; growth should also be sustainable, can understand this involves quite a lot of very including state of the art health services, social subjective elements in what used to be a fairly security, environmental protection et cetera. objective and straightforward measure. This is a just and big challenge in an ever more globalised world. Many other issues such as globalisation of markets and the time-lag in policy effects could also be For some issues like environmental resources addressed. we could simply set a price. This would mean integrating some externalities into GDP. It sounds easy and it is necessary, but in reality 4. Conclusion it is extremely diffi cult – both politically and methodologically. I have made clear that moving beyond GDP is not as easy as it sounds. I have also made it Think about the current discussion about emis- clear that it might be diffi cult for a politician sion trading. All of a sudden there is no more to get reliable answers from any type of index free-riding. It costs to pollute and of course or GDP. Nonetheless, GDP, with all its inherent industry reacts. This is in many ways a classi- diffi culties, might remain a useful measurement cal political fi ght between industry interest and of economic output for some time but time has “green” concerns. come for us to refl ect on better measurement that would better take into account issues of Let me allay all doubts: I recognise that intel- public goods. lectual challenges and methodological issues need to be considered such as: What is the To me – whether relying on GDP or measures right price? How should the price be fi xed? Will beyond – politics is about conviction. One can be pricing of free goods benefi t rich companies and inspired by all kinds of indexes and experiences rich societies? Even for what intuitively seems but any politician will have to make up his or her to be the simplest way of improving GDP as a own mind on how he or she considers society measure there are many issues to consider. to develop and then fi ght for it to become a reality. The methodological issues do not get fewer when considering various indexes on “well-being” or

19 & 20 November 2007 45 Conference

Pier Carlo Padoan Deputy Secretary-General of OECD

Ladies and Gentlemen,

It is a great pleasure to be at this important event. makes governments more accountable and trust- worthy, and on the other, it encourages people The OECD is well known worldwide for the quality to participate more actively in the defi nition of of its statistics and has, since its inception, worked policy goals. to provide the fi gures needed to explain and understand our social economic processes and improve We are already witnessing an explosion of initiatives our public policies. We have a wealth of expertise to measure progress around the world. Statisticians, based on the experiences of our 30 members and policy makers and civil society are discussing what nearly 70 other countries. We are also a well rec- progress really means and how it can be measured. ognised source of publications and information The second OECD World Forum held in Istanbul in delivery. June 2007 and the preparatory meetings organised in all continents made clear that there is a “world Based on this statistical supply and know-how, movement” engaged in this effort. But the magni- measuring whether and how life is getting better is tude and implications of this movement have not one of the most important roles this Organisation been fully recognised. What is remarkable that it is can take on. And to do this properly we need to happening across the world and it isn’t just being look beyond GDP. As Angel Gurría, the OECD’ s led by the public sector. Civil society is increasingly Secretary General said this year “ We have to move taking a lead in several countries. towards measuring welfare not just output ”. Why are all these people and institutions spend- Some call it well-being, and some the wealth of ing so much time and resources on this? Why has nations. We call it progress of societies. But what- this captured the general interest? Have societies ever words you use, many now agree that it is time seen this as a way to tackle a common challenge? to call for a global effort to fi nd measurements The OECD recognises the importance of this work that go beyond GDP. on several fronts.

“ Progress ” is a complex concept, because it means One of the main ingredients of a successful democ- different things to different people, depending on racy is access to quality information. Reliable facts their cultural background, history and personal and ﬁ gures help governments improve their policies beliefs; but also depending on the health of society, by comparing them and measuring their impact. the environment and the economy. But if we agree When societies can trust social and economic indi- that progress encompasses many elements, we cators, they can better assess a government’s therefore also have to agree that its measurement performance and put forward better proposals. In cannot be reduced to “growth in GDP per capita”. turn, governments can enjoy stronger consensus And this is true both for developed countries, as for their policies. well as for emerging countries, who do not want to simply follow the development path followed in Globalisation has made our national realities more the past by OECD countries. complex, as well as more sensitive to external actors and factors. The Information Age has made Developing measures of progress is not a purely our daily lives more dynamic, more plural and more statistical/technical exercise: it touches on two complicated. The amount of available information very sensitive areas for all societies: governmental makes it much more difﬁ cult to understand public accountability and social participation. Measuring affairs and develop a participative democratic cul- progress with reliable information is a key ingredi- ture. We must provide our societies with new, clear ent of the democratic process. On the one hand, it and reliable tools to form their opinions, to make

46 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

their assessment of the effectiveness of their Second, we will assist those who want to meas- democracies in fostering social progress. ure progress by sharing and developing best practice and providing support (recognising that In many countries, we see distrust in public different societies have different views about ﬁ gures, in political parties, political communica- what progress means); Conference tion and, ultimately elections. This scepticism affects the whole democratic process because And third, we will achieve results by promoting it undermines accountability. the use of these measures: by working with the media and the ICT industry. We want to produce So, to reiterate the point, the OECD believes a set of statistics that are trusted, understood better information is an essential support to and used by as many people as possible. democratic governance. What steps are we taking? So, yes, the OECD thinks it is time to look beyond GDP to provide better and more useful I believe that we should encourage each nation information. And that is why we have launched or region to design its own sets of progress a Global Project on “Measuring the Progress measures, taking into account good practices of Societies” and I would like to tell you about developed around the world. We do not believe our work. in the idea of replacing GDP with another single indicator. We have to take into accounts the In June 2007, three years after our ﬁ rst World complexity of our societies. Therefore we think Forum on “Statistics, Knowledge and Policy” that the development of a set of “key” indica- held in Italy, the OECD, in collaboration with the tors, is the most promising avenue. United Nations, the World Bank, the European Commission and the Organisation of the Islamic At the same time we should work to achieve Conference, organised the second World Forum the highest degree of comparability of indica- in Istanbul on “Measuring and Fostering the tors between societies through internationally Progress of Societies”. Some 1200 people, from agreed statistical standards. Of course, this is over 130 countries attended. Presidents and not easy, but the balance needs to be struck. ministers rubbed shoulders with the leaders New initiatives are being launched and we are of civil society. Captains of industry met the working with countries and experts to advise heads of charitable foundations and leading and assist their work. We will promote research academics. on some of the new and complex areas that are clearly relevant for progress, like social cohe- They shared a common interest in wanting to sion, subjective well-being, good governance develop better measures of how the world is and others. progressing. They shared the view that the world needs leadership in this area and that Early next year we will publish a handbook on the Global Project on Measuring the Progress Measuring Progress in Practice. It will bring of Societies can provide it. together the world’ s best practices and provide a tool-kit for those wishing to embark on The conference led to the Istanbul Declaration a project. A training course to accompany the which the OECD, the European Commission and book will be developed. our other partners signed. It calls for action to identify what “progress” means in the 21st century We also need to be more effective in bring- and to stimulate international debate, based ing indicators to the public. We have started on solid statistical data and indicators, on both projects with leading ICT companies to develop global issues of societal progress and how socie- the tools that will engage citizens. Indicators ties compare. The World Forum gave the OECD of progress can tell some fascinating stories; a clear mandate to begin a Global Project in they increase accountability; build knowledge, collaboration with others. Our aims are many change behaviour and underpin democratic but in short we will follow three main streams governance. To achieve this they need to be of work: known and, above all understood.

First, we will advocate globally encouraging And we are working with others to build a website – societies to develop their own measures of using the interactive philosophy of Web 2.0 – that progress; will allow people to undertake and share their own

19 & 20 November 2007 47 Conference

analyses of progress with the rest of the world. A In the 19th century, our societies established a new “ Wikipedia ’’ for progress, where people interested institution – the national central bank – to better in knowing whether their country, region, city is manage our economies and help protect society progressing or not can fi nd appropriate data and from crises. In the 20th century, we introduced metadata and interact with fi gures. antitrust and audit institutions to improve the effi ciency of markets and protect consumers and We are fostering the creation of regional groups so investors. In the 21st century, it is time to build new that those working on this issue can interact with schemes and institutions to empower our citizens others in their region: groups in Latin America, to assess the quality of their governments and Africa, and Middle East are being created, as well policies, but also to measure their own progress as for OECD member countries. Such exchanges in a modern society. will not only enrich the knowledge of the respective region but will also fl ow – via the Global Project – What if we could build, in each and every country, to benefi t the whole world. Inclusiveness is the an institution for assessing progress? An institu- name of the game. tion where different parts of society (government, opposition, trade unions, business associations, We have already established a group for Africa, NGOs, academia, media, statisticians and others) where the African Development Bank and other could discuss what progress means to them and the agencies will run a biennial forum on the Progress key indicators to measure it. An institution whose of Africa. The Inter American Development Bank progress indicators are seen as having authority have agreed to run a group for Latin America. And and legitimacy. Would this signifi cantly improve the United Nations will take the lead in running the quality of our political and social debates – the a group for the Arab Region. While the OECD will quality of our democracy? run a group for the OECD members. Other groups will follow and we hope that a similar intitiave for I believe so. As I said before, better indicators of Europe will be taken after this conference. progress alone are not enough. They need to be trusted – to be seen as accurate and impartial. Let me reiterate that we are not trying to enforce They need to be used and understood and become one single view of progress. We should celebrate shared knowledge among citizens. It was Socrates the differences in history and culture that give who said “ The only good is knowledge and the only rise to our different notions of progress. But after evil is ignorance ”. listening to the debate here and hearing about the discussions at Istanbul, I am struck by the It is vitally important for all our societies to develop overwhelming similarity in what we all consider as a broader understanding of progress so that we can progress, from Bhutan to the United States, from measure it. It is a unique opportunity to improve Nigeria to New Zealand. Indeed this process could the ways in which our policies are made and it can turn out to be an invaluable point of reference in the breathe new life into democratic processes. These run up to 2015, when the existing set of Millennium are worthy, ambitious goals but they are achiev- Development Goals will be reviewed. able, so long as all of you – each and everyone one of you – participate. Ladies and Gentlemen, So, I am delighted that so many people are here If we want to improve the quality of public debate, to discuss this exciting, far reaching endeavour to the contribution of civil society to public policy, move Beyond GDP and to assess the well-being, true the transparency of governments and therefore wealth and progress of nations. Because by measur- the level of trust in democracy, we need to pro- ing progress we can achieve progress for all. vide credible points of reference and reliable solid data. A set of progress indicators, supported by the joint expertise of international organisations, can provide this new reference. Thank you.

48 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

Giulio Santagata Minister for the Implementation

of the Government Programme, Italy Conference

First of all I would like to thank the President of programme proposed to the voters before the the European Commission, José Manuel Barroso, election, which was accepted by the parties and all the organisers for the invitation sent to belonging to the Governmental coalition. me to participate in this conference today. 2. The transmission of these goals to the compe- I would like to thank them for having put on tent authorities, who are responsible for updat- the agenda of an in-depth debate on a topic ing and specifying the goals, and for designing which is extremely relevant for our democra- specifi c implementation measures. cies: the quality of statistical information, its signifi cance, spatial and time comparability and 3. The defi nition of a closer link between the transparency, and its accountability to citizens objectives of the programme and the defi ni- and public opinion. tion of the public budget. This will also make it possible to make budget management more What is important is that the path we set out active, reducing inertia and getting closer to a in 2004 in Palermo and this year in Istanbul is zero-base budget. This is very important for a followed in greater depth, looking at important country which is strongly committed to budget- aspects and bringing the individual governments ary readjustment. to participate more thoroughly. 4. The establishment of a system to monitor The questions that this conference is addressing how government policies are achieving their to the policymakers involved in implementing objectives. This aspect is particularly important governmental programmes are diverse and com- for an institutional universe as complex as the plex: What is the universe of information, data Italian one; it is complex in terms of decision- and indicators which are important for defi ning making procedures, complex when it comes to and implementing governmental programmes? the division of tasks between various institutional What innovations are needed for the statistical levels, and complex as regards the use of a new and information system to make the management type of accountability that is still recent and not and control of public policies more effective? What fully implemented by every single authority. balance should be struck between the continuous increase in the data available and the optimal 5. The ongoing monitoring of measures approved use of this data by the public authorities? by the Government and by Parliament thus concerns the phases of administrative imple- Here I can bear witness as the Minister respon- mentation, fi nancial measures, effective imple- sible for the implementation of the government mentation through concrete acts and, lastly, programme in Italy. On the basis of my experi- monitoring the impact of such measures on ence, albeit brief, I would suggest to you vari- specifi c subjects, with comparative evaluation ous points with respect to our new information of the objectives set. needs and with the need for more linear and transparent links between government action 6. The greater emphasis on, and sometimes total and communication to the public. renewal of, assessment systems which will allow us progressively to set up a sort of “memory” During a year and a half of the Prodi govern- of governmental actions and of their impact on ment, the monitoring and assessment of public citizens, on fi rms and on the environment. policies was tackled on various fronts: Institutional renewal of this type means by its 1. The defi nition of government goals, hierar- very nature that we need solid information that chically defi ned, on the basis of the political is more detailed than we currently have.

19 & 20 November 2007 49 Conference

The actions to be undertaken are of at least three quite true that our choices, basically in any area types: of public activity, should be based on information enriched with other elements of knowledge on - First, the individual authorities responsible for environmental sustainability, and on the satisfac- management of the programme should be able tion and well-being of our citizens. to generate the data and the information which are necessary for monitoring their own actions; My second point concerns, at the other end of the for such task there is a need for continuous scale, the level of detail of indicators related to the advice and supervision from the offi cial statisti- implementation of public policies. These indicators cal offi ces. I would like to stress the agreement should include the elements which are recognis- between governmental structures involved in the able when it comes to measuring environmental implementation of Governmental programme impact, population impact, and generally the way and our National Statistical Institute, in order the nation’s capital is used. to associate new measurement criteria to the single policy actions. On this last point I would like to recall that some of the most innovative analysis of the causes of ter- - Secondly, authorities have to be able to supply ritorial differences in my country are based on the prime factors which go beyond mere perform- concept of “social capital”; I refer in particular to ance indicators, for more complex assessments the contributions by Robert Putnam. The possibility of the impact of these provisions. of having a better assessment of social capital is something which allows you not only to improve - And thirdly, thanks to what’s going on here and existing information but to open up new roads of what a lot of international and national institu- analysis, and new possibilities of interpretation tions are doing as well, we can progressively and fi nally to look at innovative and more effective enrich the list of available knowledge sources and areas of public action. indicators in order to monitor the implementation of the programme. Before concluding I would like to underline a problem which is relevant, namely the selection and As you can see a whole series of actions have to choice of the indicators we use. I’m not really say- go “beyond GDP”. ing anything new if I remind you in this audience that while looking at the trends in our economies We’ve got to go beyond the horizons which for and at the impact of government action we are decades have been established and anchored in the supported by an ever-increasing volume of data traditional national accounting systems. I think this and indicators – and more and more information is signifi cant from at least two points of view. just keeps coming in. We are increasingly enriched by this and open to it, but sometimes our decision The fi rst point relates to the indicators and aggre- making process can be swamped by too many dif- gate measurements of what the government is ferent indicators and statistics. doing. Here the monitoring and implementation of the Government programme are obviously obliged, What I would say here is that we need to be selec- if you like, to use a whole series of measurements tive – but rigorous – in using indicators. In fact we and assessments based on the state of our environ- need to be very strict and fair when choosing the ment, which could prompt more general reactions indicators we use and keep monitoring, in relation closer to the concepts of satisfaction and happiness. to the task we have to carry out. And in fact it is becoming more and more essential that measurements and evaluations relate more This is particularly important when you look at to the quality of development and the quality of how you report to the public on the state of our choices made by policymakers. nations. I believe that our citizens need to be informed simply, directly, regularly and under- I don’t think that it is worth looking just at a simple standably, using indicators which should perhaps substitution of GDP with other criteria to assess be commonly agreed by the people involved in the progress of our democracies. Nevertheless, we governance, including the government majority will always need sectorally and territorially accu- and the political opposition who expect to be the rate measurements of the intensity of economic Government of the future. development. I believe, for instance, that changes in the interest rate obviously have to be linked This is why I very much believe in events like the one to the economic cycle. But at the same time it is today and in the role of international cooperation.

50 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

Cooperation on a daily basis, even if only techni- and shared institutional infrastructure – including cal, can help choose the most signifi cant set of high quality statistical information – which needs indicators to communicate to our citizens. to be reinforced. If that happened, the quality of policy making would improve, since it would Italy would like to continue the journey started benefi t from more effective internationally com- Conference in Palermo and Istanbul, which continues here in parable measurement of what each government Brussels today. I am convinced of this, both as is doing. That would also improve communica- a matter of principle and also because the two- tion between the government, parliament and coalition system that we are trying with diffi culty public opinion. And I think the quality of our to build in my country should be based on solid democracies cannot but profi t from that. ©Photo European Parliament

19 & 20 November 2007 51 OPENING AND DISCUSSION

• Timo Mäkelä • Marcello Palazzi Director, European Commission, Progressio Foundation, Netherlands DG Environment, Chairman of Session 1 and Tällberg Foundation in Sweden

Your Excellencies, Ladies and Gentlemen, I would like to put a question. Many cities, businesses and fi nancial institutions have acquired My name is Timo Mäkelä and I work in the European experience by pioneering some of these new ways Commission on issues related to sustainable of measuring their progress over the last 20 years. development. Just this Friday I was in Paris, where there were 450 fi nancial institutions all working on triple bot- After some stimulating opening addresses and tom line reporting, and they had all pioneered new keynote speeches including the impressive pres- ways of measuring their progress. So my question is entation by Professor Rosling, we will now open this: GDP is fi rst and foremost an aggregate meas- our fi rst panel of this conference. We have been ure. How do we start (at enterprise or city level) hearing a lot about hardcore economics and how and bring it up to the aggregate dimension? to measure happiness as part of the sustainable development process. All kinds of issues have been And in a way why don’t we have one of the govern- raised so I hope that our panellists are not confused ments that are represented here create an alliance by what they have heard so far. We have here a platform of businesses and cities, and just experi- very impressive group of panellists who are at the ment and see what happens? Because I think the heart of attempts to use indicator statistics and time is right to do that. So I call on you to look at develop them into a decision-making tool. what enterprises and cities are doing and think how a government could pioneer some kind of alliance The theme of the panel is “Decision-making beyond in their own country to do that together? GDP: needs and a vision”.

Our panellists are: • N.N.

- HE Chief Emeka Anyaoku, President of the WWF, My question is: Don’t you think that in the context - Madame Pervenche Berès who comes from the of the knowledge economy or information age, centre of the European economic decision-mak- and the Lisbon Strategy of the EU, there is good ing body, and is currently Chair of the Economic news? Progress is becoming qualitative because and Monetary Affairs Committee of the European there is too much information. Quantity of infor- Parliament, mation is not the issue; the issue is about quality - Dr Pier Carlo Padoan, the present Deputy of knowledge. And so are we not shifting the very Secretary-General of the OECD – organisation notion of progress and going in the right sustain- with headquarters in Paris, able direction? - Mr Santagata, who is a member of the Italian Government; in his present position as Minister for the Implementation of the Government • Pervenche Berès Programme, he needs to see how to make prac- Member of the European Parliament tical use of statistics indicators. There should be no doubt that we need to take For speech by HE Chief Emeka Anyaoku see page 41. account of all the good experiences that are going For speech by Pervenche Berès see page 44. on around Europe. Obviously we must. But your For speech by Pier Carlo Padoan see page 46. proposal was to try going from the local to the For speech by Giulio Santagata see page 49. global and here I think we need to have a two- way strategy, because we need to see both views. I’m quite clear about this because one plus one doesn’t always make two; sometimes it makes three, sometimes just one. So let’s make sure we take account of all degrees of experience.

Thank you to the other speaker who mentioned the Lisbon Strategy because I forgot to say something about that in my speech. For me, one good reason for Europe to move on this subject is the

52 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Measuring progress, true wealth and well-being

Lisbon Strategy, because if we’re only going to • Pier Carlo Padoan use GDP as it’s designed today to evaluate the OECD outcome of the Lisbon Strategy, it will turn out all wrong because it will not serve as a good These are two very important points. I certainly measurement of the sustainability of our growth. share the view that there are several very impor- Conference It will not take into account the added value of tant places where information is produced: from the knowledge society and so on. And I would the business sector and from society. So from even say this need has been increased by the that point of view we have to go from local to decision rightly taken by the head of states global and vice versa, but we also have to go and governments last March under Chancellor from macro to micro and vice versa. After all it’s Angela Merkel, when it was decided that the not just beyond GDP but also below GDP that EU would take an initiative in terms of energy we need to look. And that is an enormous task and environment. If we want to be coherent for the reasons I gave earlier. We need to trust with this strategy, then it is certain that we that data just as we need to fi nd comparable cannot measure the results of this strategy if ways of producing new data. This is a daunting we have a GDP that does not completely take task, but it is necessary. I hope international into account the externalities of some spend- organisations can help with their expertise. ing. And we need a good tool that refl ects the results and progress we make in terms of the From the Lisbon Strategy we have fi nally under- environment, but also how we deal with public stood that knowledge is a powerful driver of goods – and here fair distribution of wealth and growth – even GDP growth, let’s admit it. The the social aspects are very important. point is how we use this wealth of information. We need to adjust that information, and we need ways of scrutinising it and translating it • HE Chief Emeka Anyaoku into policy action. From that point of view I fully WWF share the sentiment of your remarks. In all the discussions we’ve been holding today it’s clear that we are talking about Europe and the developed world. Because some of the the- ses put forward here can be easily challenged in the context of the developing world. However, I do not want to go into all that; I just want to say that we should be aware of the fact that the focus for our discussion is Europe and the developed world. But be that as it may, may I comment briefl y on what the gentleman there said about the quality of information, the quality of the knowledge that we get. I think that in trying to measure progress and well-being, there should be careful selection of the information and knowledge on which such measurements are based, because we do now have a surfeit of information and knowledge – some of it relevant and some of it irrelevant. I’d just like to underscore that point.

19 & 20 November 2007 53

Opening Speech of Day 2 Conference

Hans-Gert Pöttering President of the European Parliament

Opening of Day 2

Ladies and gentlemen,

I am delighted to be able to welcome you here Economic growth alone is not synonymous with at the European Parliament today as one of the prosperity and citizens’ well-being. Prosperity can- organisers of this “Beyond GDP” Conference. not be measured only on the basis of purely economic indicators, other factors must also be taken For this conference – which has been organised into account. Prosperity and how we defi ne it is a jointly with the European Commission, the OECD, a truly multidisciplinary matter, and that is why it number of civil-society partners, the Club of Rome is so important that today so many representa- and the WWF – there could, in my view, hardly tives of civil society, and of economic, social and be a more appropriate venue than the European environment-policy interests are taking part in Parliament, where the citizens’ directly elected this discussion. representatives take responsibility for our common future. The current debate is crucial for the long term and concerns us all. Much more than just statistics is Although this conference will focus mainly on at stake, because the indicators which we select technical and scientifi c questions, as President and apply to accomplish our daily work also refl ect of the European Parliament I would nevertheless our way of thinking and our objectives. like to look at what the theme of the conference means for the lives of all of us. After all, how we We therefore need more than just growth indi- are to measure progress and prosperity is much cators; we need indicators and bases for meas- more than just an issue for economic experts to urement which fully refl ect economic reality, the examine. situation of our environment and the social reality of our society, and which can therefore be taken I agree that we must leave the actual defi nition of into account in shaping policy. the measurement instruments to the experts – but the questions about the effects of, and the need The English philosopher Jeremy Bentham (1748- for, new indicators go quite a lot further. 1832) once said something which seems particularly apt today: “The greatest happiness of the Let us take a current example: just last Saturday greatest number is the foundation of morals and in Valencia the United Nations Intergovernmental legislation”. Panel on Climate Change (IPCC) presented the last part of its climate change report. The report In the same vein, does seeking a consensus on is a severe warning about the worldwide effects the correct prosperity indicators not at the same of global warming. More clearly than ever before, time also mean establishing a consensus on our the report identifi es human beings as the cause political and social goals? of global warming. The key issue must be what we wish to achieve for This incontestable fact shows us that economic our society, what we would like to attain for our growth is after all in part also linked to irrevocable future and for that of our grandchildren. negative effects on our environment. Production, which has been rising for decades and which we In common with the whole world, the European have always sought to increase, is not a sign of Union faces major challenges: globalisation, a equally continuous progress. lack of social cohesion, the impact of immigration

56 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Address Measuring progress, true wealth and well-being

on social balance, environmental pollution and and fl oods, we are now already beginning to climate change. All of these signifi cantly affect pay a high price for polluting and damaging our our citizens’ well-being in demographic, social, environment. And the longer we wait, the higher migration-policy and environmental respects. that price will be and the more our health and safety will be at risk. Conference I am convinced that it is globalisation that offers major opportunities for the European Union, And so we really must think beyond GDP, and if we shape it actively and sustainably. But it fi nd new and additional guidelines for our policy clearly also has side effects which we cannot work. just ignore. It is not a question of production itself, but of As politicians and those bearing responsibility how we produce and what effects that has on in society, it is our duty to face up to this chal- the human race and the environment. lenge and to systematically incorporate it into our legislative work. The title of your conference also reminds us that in the European Union we must shape policy on From the outset it is therefore important to be the basis of our common values – with human aware of the underlying assumptions of the beings at the centre. current debate – i.e. beyond GDP. I am unshakably of the opinion that the European We must start by realising that for too long Union is far more than an economic joint ven- we have equated merely increasing GDP with ture. We bear extensive responsibility for the prosperity. Concentrating for decades on this balance and well-being of European society. one economic indicator has to a certain extent been misleading. A central component of this idea is that the European Union is a community of shared values. Prosperity is after all not just growth. Rather, it Those values include the right to a clean and is an overall sense of well-being which encom- healthy environment, protection of creation passes mental and physical health as well as as handed down to us and people’s overall environmental and economic factors. well-being.

And prosperity is also brought about by reconciling Over recent years the public has indeed become human beings with their natural heritage, with a noticeably more aware of the consequences clean environment which is managed sustainably of irresponsible and ruthless growth. Almost and socially, and with their cultural wealth. 90% of European citizens are worried about the effects of climate change. We are not alone in having to change our entire way of thinking: the group of the world’s leading But by undertaking reforms to create an industrial nations, G8, originally met to discuss eco-social market economy based on environ- purely economic matters but now deals with mental protection, social cohesion and market issues such as climate change and the effects economics as the cornerstones of a strategic of migration. triangle, the European Union has embarked on a course with a future in terms of ensuring While noting that worldwide growth has been sustainable development. continually increasing since the 1950s, we must also note that we have not been taking into This future survival model requires support for account pollution and hence the destruction of sustainable production and consumption pat- our own living and working environment. terns in order to effectively separate economic growth from environmental damage. It is in With more people than ever before suffering every respect a strategy through which everyone from asthma or allergies as a result of urban involved can win and which also corresponds pollution, can we seriously say that our pros- closely to the European model of society which, perity has increased just because the economy in addition to the free market, is mindful of is growing? the social and ecological dimension. The EU Reform Treaty has also made prosperity in the With climate change accelerating and millions comprehensive sense an explicit objective of of people facing the threat of violent storms the European Union:

19 & 20 November 2007 57 Conference

Above all, the EU strategy for sustainable devel- health, education and culture as well as integration opment aims to continually improve the quality and environmental quality as basic prerequisites of life and well-being of the present and future for sustainable development. generations on this earth. We also have a moral obligation vis-à-vis future The European Union has made a good start to imple- generations to carry out an honest and compre- menting the principles of sustainable development; for hensive assessment of the effects of our human example, the new orientation of the Lisbon Strategy actions. And let me repeat the key principle: we for growth and development marks a speciﬁ c policy must look beyond pure production. We must not implementation of the above-mentioned strategic close our eyes to the long-term effects of our triangle of the eco-social market economy. actions and thereby commit subsequent generations to paying the price for them. Under the renewed Lisbon process, important initiatives have also been taken in the social sphere and I therefore welcome and fully support this confer- on environmental protection; thus the European ence’s initiative of working out a consensus on what Union is endeavouring to support all three com- prosperity means and how it can be measured. As ponents equally. legislators we need these guidelines, this set of indicators, in order to be able to base our policy In the resolution which it adopted in 2006 on the work on appropriate information. strategy for sustainable development, the European Parliament also took the view that when measuring If we succeed in adapting our deﬁ nition of progress progress in society the importance attributed to and prosperity to the altered framework conditions, GDP should be balanced by taking equal account of it will then be easier for us to take the next step and qualitative aspects of progress – i.e. quality of life, make our production methods more sustainable. ©Photo European Parliament

58 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Address Measuring progress, true wealth and well-being

But to undertake this work by fumbling around growth and prosperity. We must prove to our in the dark would not be in keeping with the partners around the world that it is possible to responsibility which we bear as politicians for sever the link between economic growth and our society and above all for its future. higher CO2 emissions. Conference

Now we at the European Parliament are not all The forthcoming UN conference now provides scientists, although fortunately we do have in an opportunity for the global community of our midst a number of engineers and excellent states to formulate a comprehensive and binding specialists from a wide variety of scientifi c fi elds. response to the challenges of climate change. But as politicians we have to take decisions which affect all areas of society. The European Union must show strength of leadership in Bali. Above all, we must succeed A consensus on future indicators therefore has in bringing the United States, China and India to be reached quickly. Precise and reliable data to the negotiating table. In this connection I are essential, and in order to be able to fully was struck and encouraged by the fact that meet their purpose they should cover all aspects the United States also welcomed the last part of human life. We need as accurate as possible of the IPCC climate change report. an overview of the social developments of our time and of rapidly changing environmental For its part, the European Parliament last week phenomena. We must be able specifi cally to presented a comprehensive proposal for the UN ascertain whether the European Union really is conference in Bali, based on the report by its moving towards an economy which is sustain- non-standing climate committee. The report able in the long term. indicates practical ways of limiting the global temperature increase to 2° Celsius. At the beginning of my speech I referred to the huge challenge of climate change for the whole But the report also calls for a negotiating man- of humanity and mentioned the fourth and fi nal date with a precise timetable. In Bali we must part of the United Nations Intergovernmental not miss the opportunity of taking a decisive step Panel on Climate Change (IPCC) report, which towards a successor to the Kyoto Protocol. has just been adopted in Valencia. You are assembled here to devise something The report provides us with confi rmation that which we all urgently need: new indicators for global warming is clearly taking place and that measuring and assessing how we live, our pros- human action could result in abrupt and irre- perity and well-being. This is about much more versible changes on earth. than numbers and dry statistics. It is about the foundations for shaping our future correctly. We need to act quickly. Our next and best oppor- Policy can shape things in the right way for the tunity for doing so is the forthcoming UN climate future only if the foundations are present in the conference in Bali. On behalf of the European form of meaningful and comprehensive data. Parliament I call upon all Member States of the United Nations to do everything they can to Climate change is only one example – albeit one prevent the Bali climate conference from failing. of the most compelling – of how we need more data than just measurement of pure economic We must face up to the challenge of climate growth. New indicators are indispensable if we change and resolutely combat this problem. want to think about and shape the future.

As the European Union, we must point out ways Accordingly, I wish you all and this conference of moving away from the production methods much success and fruitful further work. which up to now have damaged the environment. But that does not mean having to forgo Thank you for your attention.

19 & 20 November 2007 59 60 Session 2 Insights from practice Conference

Carole M. Laible President and Chief Operating Ofﬁ cer, Domini Social Investments

The Power of Money

Thank you for the opportunity to speak with you At Domini, we have created a process to evalu- today. I would like to take a few moment of your ate potential investments using information not time to discuss the impact of corporations on well- currently considered by the fi nancial markets. being. In order to provide transparency in this process, we have created and published our global invest- Let me begin with a story from the early 1980s. ment standards. We believe that companies will A pharmaceutical company knowingly distributes succeed and prosper in the long run when they HIV-tainted blood to hemophiliac patients. The do the following, among other things: short-term benefi t is that they do not have to destroy inventory they have already paid for. The • Produce high-quality, safe and useful products long-term effect is that they sicken thousands of • Enrich the ecosystems on which they depend patients, creates huge medical expenses and to • Invest in the health and development of their date, costs hundreds of these patients their lives. employees The resulting litigation drains the corporation of • Treat their investors and lenders openly and time, money and focus for years on end. transparently • Strengthen the capabilities of their suppliers How did this happen? What drove this company • Contribute to the local communities in which to knowingly distribute tainted blood? The pres- they are located sure to meet short-term numbers induced senior managers to externalize the cost of the bad blood, To complete our evaluation, we begin with third-party selling it to unknowing patients, rather than bite social and environmental research; we then begin into their bottom line. This action helped them our proprietary research process which includes meet the short-term “success” demanded by the continuous in-depth media searches, review of fi nancial markets, but failed to recognize the long- publicly available company documents includ- term impact on the company and society. ing regulatory fi lings and sustainability reports, communication and dialogue with the companies For many decades, those of us in the socially respon- and their key stakeholders, such as labor unions, sible and sustainable investing communities have community groups, and non-governmental organi- recognized that the wealth corporations create is zations. This process helps to build the demand more than stock price. We have known that it is for data on corporate social and environmental not enough to simply accept the stock price that is performance and to communicate our expectations provided every minute of every day, so easily and to corporations and other investors. conveniently. If we are to understand the true value of these corporations we must hold them accountable We then create partnership and join powerful coali- to the negative externalities they produce and reward tions, such as the Carbon Disclosure Project, which them for the intangible wealth they create. But, is a group of investors with cumulative assets of analysis depends on data. What is disclosed is meas- $41 trillion, to collect and distribute information ured and what is measured is monitored. Gathering on the business risks and opportunities presented the data necessary to measure and evaluate these by climate change and greenhouse gas emissions positives and negatives is no easy task and has data from the world’s largest companies. This required tremendous efforts. It is my hope that the year, to complement the effort of this organization, insights we’ve gained from our years of looking at and my fi rm wrote to nearly 200 companies around understanding companies and their businesses will the world that failed to respond to the Project’s be useful as you go about your important work. annual survey. We received 19 responses, with

62 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

six respondents committing to completing to years and decades, rather than months and the survey next year. We consider it a success quarters. In a world where institutional money that six very large companies are willing to managers and investors are forced to rely on provide this valuable data understanding that stock price, a shift to long-term thinking is dif- Conference it is important to us as investors. fi cult. And since it seems that the world follows the investing style of institutions that manage On labor issues, our fi rm approached Gap to money on a full-time basis, systemic change request a public report that would quantify becomes impossible. Incorporation of different the progress they are making to improve labor measurements on a macro-level, will force insti- conditions in their global supply chain; they told tutional managers away from stock price, and by us it was impossible. We were able to convince default, reduce the short-term, shallow analysis them otherwise. The resulting report not only set which is commonplace today. Then, companies a new standard of transparency for the apparel will begin to seek ways to add value rather than sector, it has served as a model for companies in detract value recognizing that these practices other industries. This report was then followed will be rewarded by the fi nancial markets. by work at the Global Reporting Initiative to include a sector supplement on global supply Without macro-economic measures of long- chain labor standards. term value creation, ESG-based evaluations will remain boutique. To be truly mainstreamed, Responsible investors have achieved what others macro-economic criteria need to be adjusted to have not. We have measured the intangibles of 1. measure the impact of positive intangibles and the corporations in which we invest, created port- negative externalities to society, 2. incorporate folios of companies which create wealth beyond these into current GDP, and 3. ensure that the stock price, and enjoyed competitive returns. public understands these new metrics

We’ve made real progress. But, let’s not exag- ESG-based evaluations have started the proc- gerate our accomplishments. Change at a macro ess. Let us follow the path to building a ﬁ nancial level is critical because ESG factors are gener- services system that supports the creation of ally long-term. They frequently focus on issues universal human dignity, ecological sustainability where risk and reward are best measured in and ﬁ nancial wealth. ©Photo European Parliament

19 & 20 November 2007 63 Conference

Nicole Notat President Vigeo Group

I’m going to talk to you about my company’s busi- But we know today that there are still not enough ness, namely the exercise of measuring tangibility standards guiding and illuminating companies as and effectiveness in the action programmes and to the nature of the objectives that they are to strategies of companies with the aim of incorpo- pursue and as to the nature of the indicators and rating social, environmental and societal factors the reporting that they must carry out. into their activities and their traditional business relations. We therefore made the choice of gathering together what exists today at international level that is more Before speaking to you more precisely about this comparable, and more accepted by everyone, such activity, I should clarify the philosophy which pre- as the principles of action, the recommendations, sided over the construction of the objectives bench- the standards laid down by the International Labour mark and also the method of analysis. Organisation, the UN and the OECD in its recommendations to companies. From that, we have a Our analysis is exactly the same as what I have set of principles of action at social and environ- just heard, namely that companies today are being mental level on market relations with suppliers called upon more and more to think about their and subcontractors, on territories, which make it creation of wealth and values in the long term. They possible to identify objectives on the basis of which are also increasingly being forced to internalise to analyse and position the company. objectives that in the past they perhaps exter- nalised more to other companies and territories, Once this analysis and objectives benchmark has to those parties concerned by their activities and been established, it must of course be sectored. decisions. All criteria and principles of action are of value only in terms of their relevance and their sensitivity to We therefore consider that it is defi nitely a chal- the professional sector in which the company oper- lenge to provide investors and asset managers with ates. And for us the method of analysis – it is a information and useful analysis for their invest- choice – aims to measure effectiveness beyond the ment choices, but also behind this analysis is indicators of results, which are indicators that we the idea that, by incorporating these social and produce, and also to measure the effi ciency of the environmental factors in their own performance company’s managerial system, i.e. to have indica- factors, companies will open up new opportunities tors of the relevance of the objectives pursued by for themselves in innovation, creation, growth and the company at social, environmental and societal potential new activities, and that, conversely, in level, to have indicators of the coherence of their neglecting these factors they are taking risks for deployment within the whole managerial chain and themselves: risks of reputation and attractiveness, on the company’s entire range of activities and, and legal risks. Consequently companies too have fi nally, to have indicators of the quantitative or every interest in joining this movement. qualitative results of all these objectives.

Whoever says measuring a company’s perform- You will understand that in order to carry out this ance in social, environmental or societal terms work our fuel, our raw material, is information. means clariﬁ cation of the objectives benchmark And with the challenge of the reporting which used to analyse companies and the choice of a companies are more or less capable of performing method of analysis that is as robust and indisput- on all these objectives today, the question arises able as possible. It is important for the objectives in time, I think, of a standard or a benchmark to benchmark, for companies currently carrying out facilitate the objectives on the basis of which to most of their activities at world level, to be based perform this reporting. on objectives that are universal in scope and valid wherever the company is operating in the world.

64 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

As things stand, we collect information from You will be aware that, through a forum organ- companies themselves, from what they have ised by ISO and the international standardisation available, on which we can also question the bodies, there is discussion at international level company. But we also collect the information about whether a standard should be constructed produced by all the parties involved in the com- for the social responsibility and sustainability of Conference pany, either directly or indirectly, which allows companies. This work now exists and has been us to compare different kinds of information going on for three years already, although it is and thus fi ne-tune analyses for the investors still far from being fi nalised. As you can imag- and managers interested. ine, this objective is very diffi cult to fi nalise. Incidentally, I mention this because it refl ects In conclusion, I would say that today these data, the feeling today that it is necessary to move and this information, contribute to the construc- towards normative benchmarks in this fi eld and tion of indicators which report the relevance, towards indicators that are both relevant and effectiveness and tangibility of the company’s comparable and can therefore guide the com- action and its results on these social, environ- panies that are reporting on these points. mental and societal factors. Thank you. ©Photo European Parliament

19 & 20 November 2007 65 Conference

Lothar Meinzer Director Sustainability Centre BASF

Good morning, Ladies and Gentlemen,

From a company’s perspective if we think of envi- performance. The objective is to identify core areas ronmental responsibility, social cohesion, what of non-fi nancial performance that are important to comes to mind is the term CSR (Corporate Social both companies and investors. They want to identify Responsibility), which explicitly means mainstream- broad metrics for each of these core areas that are ing environmental and social concerns into business applicable to companies across markets and sec- activities to create added value. tors. They want to establish the linkages between the measurement of non-fi nancial performance and If you look at companies, and you will see hun- fi nancial performance. They will explore strategies dreds and thousands of them, they have integrated for managing and communicating this performance these environmental and social concerns via their in the core areas as well as include the linkages to Corporate Social Responsibility policies into their widely used management models. So the European decision-making processes, into their management CSR movement and the European CSR Alliance is systems and into their reporting systems. So basi- the key actor to bring forward these issues that cally every company has integrated this concept are being discussed here today. into risk management in order not only to ensure that laws are respected but also to minimise mate- Let me, in the second part of my presentation look rial risk and to reduce ‘reputational’ risk. at a few examples in a single company, namely BASF, and look at how we integrate non-fi nancial We have integrated CSR to enhance our business, to considerations into measuring, into decision-mak- strengthen our brand image, to optimally leverage ing and into reporting. our resources and to generate benefi cial business environments. And we also see that we can create Let me fi rst tell you that we are really not short new businesses by CSR, by accessing new target of indicators. This applies at company level, com- groups and markets, by new business models, by munity level, and national level; the indicators increasing our market differentiation by CSR and are there. also by increasing our customer retention rates. For companies for example we look at global report- So there are hundreds and thousands of single ing initiative indicators, the so-called G3 guidelines and company specifi c experiences integrating non- at the moment, which give a balanced picture of fi nancial performance indicators. Therefore we wel- economic, environmental and social indicators. We come the initiative of the Commission to initiate a report on these indicators, and we measure these so-called European CSR-Alliance which aims to draw indicators, as you see on the left side of this chart. on these individual experiences and try to bring We give an extract of these indicators in our annual them to a higher more comprehensive level. We are report on a very prominent fi rst page as BASF key doing this by entering so-called laboratories where data. So there’s no problem about indicators. companies that have specifi c experiences in specifi c fi elds like demographic change, innovation, supply The question is how you use these indicators, and I chain, etc. meet together with their stakeholders want to give you two or three examples of that. to move these issues onto a higher level. The fi rst example is what we at BASF call ‘value- I’m happy that there is one specifi c CSR laboratory based management’ or abbreviated VBM! It is which is run under the leadership of Lloyds TSB our company’s steering principle and our tool to and Telecom Italia together with other companies implement the strategic guideline “We earn a pre- and stakeholders. It deals with the issue of market mium on our cost of capital”. VBM is focused on valuation of fi nancial performance and non-fi nancial our key fi nancial indicator, the EBIT after Capital

66 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

Cost. It is derived from the cost of capital concept. To implement this focus on value into the organization, we use the value drive concept, which provides a methodology to Conference create awareness for key drivers of value for BASF. It recognises the fact that there are other indicators, that there are various value drivers that in the end drive the value of the whole company. And by integrating these so-called value drivers into our value-based management, we try to integrate fi nancial, non- fi nancial, environmental and social indicators into that chain. These two concepts, the value-driver concept and the cost of capital concept, are supplemented by a third key VBM element, the link between the stra- tegically aligned value drivers and the target agreement process. The last element makes sure that VBM is anchored concretely in the organization So this is a management system that relies upon fi nancial and non- fi nancial indicators and the measurement of these indicators.

The second example is a tool. Based on indicators you have to develop tools to measure things. BASF for example has developed what we call the ‘eco-effi ciency analysis tool’. This tool is a key tool for our internal decision-making processes when it’s about decisions on the future products and processes we use. And with this eco-effi ciency analysis tool we are able over the whole lifecycle to assess both the total cost and the total environmental burden of a product or a chemical process in this case. And we are able to compare different solutions in order to be able to decide upon which is the most ‘eco-effi cient’ solution for a specifi c challenge. This is on the left side of the chart where you see the classical eco-effi ciency analysis based on cost and environmental burden. We have developed this instrument further into what we now call SEEbalance tool. This tool also includes social indicators to give us a complete picture based on the environmental effects, on the fi nan-

19 & 20 November 2007 67 Conference

cial effects and on the social effects of a product or a process and therefore it is our key decision-making tool in strategic planning.

And the third and last example is what we depict in our annual report as BASF’s ‘value-added statement’. And this value- added statement is based on a classical ﬁ nancial balance sheet but it looks at how we spend the value we have created. Who are the stakeholders that beneﬁ t from this value we have created? You see it’s about value created for employees, for the state in the form of taxes, for the shareholders, and for the creditors.

So let me conclude by saying: the indicators, the measuring tools, and the management systems are there. Now it’s all about integrating. This goes at company level and I am happy and proud to say that from next year BASF will integrate its ﬁ nancial, environmental and social reporting into one company report. This demand for integration should also apply at the level of states. If I look at the European Lisbon Growth Strategy, if I look at the European Sustainable Development Strategy, if I look at the European CSR Strategy, I see that there too the missing link is integration.

68 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice Conference

19 & 20 November 2007 69 Conference

70 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice Conference ©Photo European Parliament

19 & 20 November 2007 71 Conference

Stephen Pursey Head of the ILO Integration Department, International Labour Organization

Thank you to the organisers of this very stimulating by the UN Summit in 2005 as a global goal, conference for the chance to discuss the challenge central to the shaping of a fair globalisation, and of measuring decent work. by numerous other regional meetings including the European Union and last summer the G8. It’s Employment fi gures prominently in the classical also part of the millennium development goals as measurement of GDP – and as Professor Frey say a key driver of poverty reduction. yesterday, it is also a major determinant in people’s assessment of their overall happiness. It’s a Measuring decent work thus requires indicators vital input to production and central to our sense that capture both the more easily quantifi ed dimen- of identity, self-esteem and social relations. sions and for example the quality of governance systems. I’d like to draw your attention to fi ve Workplaces are – if you like – where the values of major challenges: the market meet those of society. Furthermore, progress in making work less physically demanding The fi rst is that unlike Europe and most members and more materially rewarding has been closely of the OECD countries, many developing countries linked to the replacement of human effort by have much weaker data, particularly on the more machines, and thus the use of natural resources. qualitative dimensions of decent work. Support So the quantity of work available and its quality for the collection and analysis of labour statistics is thus very high on political barometers of what has not been part of the development assistance people expect from their leaders. And these are portfolio of European countries, but I hope that global phenomena; the aspiration for decent work some of the ground-breaking work we’re doing with is universal. the support of the European Commission means that it will be in the future. Now progress towards decent work fi rst depends on the freedom of women and men to express their Second, some of the classical labour market indi- concerns, to organise, to defend their rights and to cators were developed mainly by already indus- participate in the decisions that affect their lives. trialised countries and have less value to many developing countries. For example, in countries Second, it requires opportunities for work that with no unemployment benefi t system, women is productive and delivers a fair income, and and men have to fi nd some sort of work. The over- that in turn must be built upon entrepreneurship supply of labour leads to a large number of people and enterprise, and an enabling environment for working unproductively for very low earnings. investment. However, the strict defi nition of unemployment includes the stipulation that a person worked for Third, it calls for action to promote security in the more than one hour in the previous week. So we workplace, decent conditions of work and social need a broader measure of labour underutilisation protection for families. that includes not only being completely without work, but also the situation of casual labourers who And fourth, social dialogue – or labour manage- may wait for days at the crossroads before picking ment relations as they say in the United States – up a few hours work, or street traders who may between representatives of governments, trade sit with their wares all day and make only a couple unions and employers’ organisations is both an of sales. We do not have an adequate picture of aim in its own right and a means to achieve the the size of decent work defi cits, either globally overall goal. or nationally. And this means that inadequate attention is given in poverty reduction strategies Now this approach to decent work, as well as being to improving the quality of employment. the mission of the ILO, has also been endorsed

72 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

My third point is that more and more developed tion and consumption needed to adapt to and countries are supplementing their quantitative mitigate climate change, there will also be a data on employment with surveys of percep- need for a major transformation in the world of tions. In Europe we have data on the percentage work: job losses as well as job gains. Intelligence of employed people who think it is very likely strategies will need much more information Conference or quite likely that they will lose their job in the about what constitutes sustainable employment next six months. This perception of insecurity in the environmental sense and economically is an important determinant of well-being and and socially. Now the ILO Governing Body last likely affects behaviour. Incidentally in 2003, week endorsed proposals for a green jobs ini- nine percent of respondents answered ‘yes’ tiative to support workers and employers, and to that question in the EU25. Few developing governments through this transformation. Again, countries have such types of vital information. industrial countries will need to support the ILO could help to disseminate best EU practice developing world in this approach and Europe on such opinion surveys. is well placed to take the lead.

My fourth point is that a strategy for improved To sum up, decent work embraces the multi- global information on progress towards decent ple dimensions of what makes work valuable work must focus on equipping national policy- to individuals, communities, companies and makers with the information they need to deter- countries. The ILO has the responsibility within mine and assess policies. These considerations the UN system for labour statistics and we need suggest that the way forward is to develop a your support in addressing the challenges of methodology for country profi les on progress fi nding new ways to measure decent work and using a comprehensive global template of the expanding collection of the basic necessary dimensions of decent work. Not all countries statistics. The decent work concept bridges the will have data for all dimensions but they may economic, social and environmental pillars of be able to gradually build up these information sustainable development. Partnerships are thus sources. Furthermore, numerical data will usu- vital in broadening the measures we have to ally need an accompanying narrative to provide assess progress and ensure that we can con- a context for assessing progress. nect them in ways that enable policymakers not only to balance the trade-offs but perhaps more My fi fth and fi nal point is that if we are to under- importantly to spot and exploit the trade-ins. take the considerable restructuring of produc- Thank you very much. ©Photo European Parliament

19 & 20 November 2007 73 OPENING AND DISCUSSION

• Hazel Henderson Club of Rome, Chairwoman of Session 2

Good morning. The panel this morning will pick up from a question that came up at the end of the session last night, namely about what is business doing and about ﬁ nance. I have been involved in this area for many years and so what we want to talk about is just to give you an idea of all the businesses and the ﬁ nancial institutions, as well as organisations like the ILO, that are already incorporating social and environmental indicators into the way they manage assets.

So we have a wonderful panel this morn- Ms Hazel Henderson ing and we’ll get into it in one moment. There was one gentleman from Ghana who was unable to join us and we are sorry about that. But what we are going to do is basically look at some of the examples from the ﬁ nancial sector and the business sector where these companies already do what we call ‘triple bottom line’ investing. These are just examples of some of these companies. Now many of them have come together in organisations, and pension funds representing many trillions of dollars and now using what we call enhanced analytics for risk management. So since the micro- economists and the accountants have been doing this already at the level of the ﬁ rm for nearly 20 years, is there really any reason why we cannot accelerate the process of incorporating this triple bottom line analytics into GDP?

So basically, why do we do this kind of analytics? Because they avoid risk, and whenever you internalise social and environmental costs into your balance sheet you are protected from unavoidable risks. The new book ‘The Black Swan’ is really about this so that’s why we do it in management.

Personally I have been concerned about this issue for 30 years so I am very delighted to be here. I think that what we are talking about here is that the information age has now become the age of truth and all NGOs now can see when companies don’t perform for the environment and for social purposes, and so we have a lot of new ways of keeping companies accountable. Now we are moving on to changing GDP at government level.

74 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

• Hazel Henderson Chairwoman

I would like to start by introducing my friend, Carole Laible, who is Conference the President of the Domini Social Investment Group in Boston, and you will probably all have heard about the Domini Social 400 Index. So Carole, the ﬂ oor is yours.

For speech by Carole M. Laible, see page 62. For speech by Nicole Notat, see page 64. For speech by Lothar Meinzer, see page 66.

• Hazel Henderson Chairwoman I’m very happy to introduce our friend from the ILO, which has been a leader in all of this kind of reporting initiatives. Mr Stephen Pursey the ﬂ oor is yours.

• Stephen Pursey International Labour Organization Thank you Hazel and thank you also for all the support you’ve given to the ILO’s goal of decent work and also for your own pioneering efforts in including employment in your quality of life indicators. I know that you’re frustrated that public authorities are lagging somewhat behind the leaders in the business world.

For speech by Stephen Pursey, see page 72.

• Hazel Henderson Chairwoman So we would like to have a lot of discussion. I hope that we get lots of questions. And this green jobs initiative is I believe extremely important. In the United States most of the socially responsible companies that I work with and many of the pen-

19 & 20 November 2007 75 OPENING AND DISCUSSION

sion funds have joined in the green jobs initiative. • Anders Wijkman My passion is growing the green economy and I Member of the European Parliament think that it really comes out of this kind of new analysis. Once we internalise all those social and One question is directed primarily at the fi nan- environmental costs at both the micro level of cial community. The point was made by Carole companies and at the macro level, then we have that change at macro level is important otherwise a way of steering our economies toward building responsible investment behaviour will not be the this entire new sector. rule but the exception. And then I also think that Nicole Notat said that we lack global standards and frameworks. Now of course the private sector is not • Nick Marks homogeneous, but heterogeneous. We have quite a New Economics Foundation number of voices from industry who are not really interested in reforms like this, and the whole debate I really applaud the panel for talking about how we on social responsibility has been very much at the internalise the externalities but I think the challenge European level – something of a voluntary nature, of well-being is to externalise the internalities. no mandatory rules, no mandatory frameworks, Products are often actually dependent on a cycle etc. Now apparently in this particular area when of dissatisfaction in that marketing tends to cre- we talk about indicators and internalisation etc., ate needs and wants in people so that they don’t we need things to happen at the macro level. Can actually have to try and sell more products. And if you explain how you are dialoguing with ministers we’re going to move towards a sustainable green of fi nance, ministers of industry etc. because there economy then we need to actually think about the you very often fi nd resistance, because they know products that companies sell and whether those what they do and they don’t know what new would products are actually enriching people’s experience be, so that’s the question. of life. If they’re not enriching people’s experience of life and actually creating a sense of well-being The other questions is: the architecture of business in the way they live their lives, then however eco- models today is by and large such that you earn effi cient they are they’re still not delivering public revenue only by selling more volume; there are good for people. exceptions but most companies are rewarded that way. Walter R. Stahel has written a fascinating book I’m wondering whether in your investment deci- called ‘The Performance Economy’ where he turns sions you look at the product and you look at the whole thing around and says, if industries and what that product actually is. Do you look at the companies offer services more than products you marketing of that product and whether it’s creat- could move away from only looking at volume and ing false desires particularly in children? Are they look at quality, performance, etc. To what extent being products that they don’t need, that are not is that being factored into your deliberations? healthy for them?

• Nicole Notat • Carole M. Laible Vigeo Group Domini Social Investments At this stage it’s clear that, in terms of standards The short answer is ‘yes we do’. We look at con- for sustainable development and corporate social sumerism, marketing and advertisers and within responsibility for companies, as things stand there industries we identify key concerns in terms of aren’t really any standards for companies to judge companies and marketing to children, and any their performance by and the same goes for inves- issues of that sort. We do, and at industry level tors. And maybe that’s the responsibility of the we determine what the key issues are. market authorities; they could react to that – or alternatively the public authorities. At European level and internationally this is a whole area where I think more could be done. And I was involved in the environmental panel in France and there it was a pressing issue trying to establish standards and, trying to establish indicators. But it’s true that as things stand we haven’t yet managed to ﬁ nd a solution to this problem.

76 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

• Vittorio Prodi I think that my question is really about what are Member of the European Parliament the obstacles to actually putting these debates about indicators into operation? What stops us I’m very interested in this conference because actually implementing these ideas? Because in it is of vital importance for our future. So I have spite of all the very nice words I’ve heard from Conference to say that I appreciate the idea of underlin- the businesses on the platform as a member ing the importance of intangible assets within of this political house, I have never ever once companies. This is just the fi rst step though; if been bothered by a business who was asking we want to have really sustainable development me to improve standards, to be more ambitious we have to have a different kind of development in legislation. The message of a policymaker is that values intangible goods, rather than just always about diluting timetables, diluting tar- intangible assets so that companies keep selling gets, diminishing ambition. hard and material goods. So the Lisbon Agenda, the Lisbon Strategy, is important because we can And if I might offer an answer to my own ques- create a different society that is more appreciation I think it is because in spite of the fact tive of immaterial goods. This is the change we that we are still taking about supplements and have to make. That is, acknowledge that this complements to GDP, we are not really taking kind of development, which is to some extent the bull by the horns. We are not saying: Is GDP represented by GDP, is unsustainable. And so in any case, in its own terms, actually telling us we have to fi nd a consensus on a different anything useful about people’s increased well- way, on a different kind of development. That being? Because there’s so much evidence out is why we need a change in culture because it there now that once a certain level of needs are has to be consensual. This is where we should met increasing GDP doesn’t actually improve be moving and this is what we need indica- our life experience. And in fact beyond a cer- tors for. But indicators mostly on immaterial tain level more and more GDP actually leads to development; to dematerialise our society and more breakdown, more problems and so forth. somehow a corporation is not enough. We need And so in a sense I think that if we could fi nally something much more profound, and I feel that understand that GDP isn’t actually telling us in this sense Europe has the culture, and the anything very useful and that people’s well- spirit within this Parliament to lead this move- being is far more dependent on relative income ment, this change. But I would say we need than absolute income, we could start putting indicators of dematerialisation in our societies. an important element of equity back into this Energy intensity is not enough. It could even be debate and we could start making the policy misleading because, by delocalisation, we might space we really need to talk about, namely have pushed away energy intensive industries, what companies really need to do to ensure perhaps toward less advanced countries causing that sustainability and equity are at the heart much more environmental damage. We have of the policymaking process. to have indicators that incorporate this system of values and to measure the way toward this different development that would bring a higher • Hazel Henderson civilisation than the present one. Chairwoman One of the new indicators for investors now is • Caroline Lucas looking at whether companies lobby for higher Member of the European Parliament standards or whether they lobby for lower standards. And so this is becoming an important I thank the previous speakers, and I have to investment criterion. Do companies really walk say that I’ve been enjoying the conference. the talk, or do the lobbyists say something differ- However, I must confess to a certain degree of ent about lowering the standards where publicly mounting frustration. We keep talking about they talk about the good standards. I feel I ought evermore important bits of data, like this very to ask how do you see this at BASF? last most important bit of information about indicators. But it does strike me that we really do risk going down in history as the species that spent all its time monitoring its extinction rather than taking active steps to avoid it.

19 & 20 November 2007 77 OPENING AND DISCUSSION

• Lothar Meinzer environmental sustainability, is to start talking BASF about it preferably with the trade unions and get some agreement as to how to change things. You Just a brief addition or a comment to the previ- might either have to change to a different business ous speaker over here who said that most of the model that can survive or to work for an appropriate business models of today are based on selling solution. That will be at the level of the company, more volume, which is not the experience that I but I would suggest that the sort of things that have at least. we’re aiming for would also enable you to have that sort of discussion at the level of a country about a I just want to give you one example. BASF is in development strategy. For example there seems to the B2B business and the aim is not selling more be quite a lot of evidence that insulating buildings volume but creating more value for us and our is one of the most effective ways to reduce fuel customers. For example we are a big supplier of use, by improving the conservation of energy. It the automotive industry, e.g. plastics or coatings. also happens to be reasonably labour intensive, But instead of selling a ton of coating, we are paid and most likely will require an upgrading of skills. for the amount of coated cars, and within that busi- So there’s a clear win/win situation to be achieved ness model, we are striving to use the minimum by putting out these indicators and talking about volume with the highest efﬁ ciency. what to do with them.

Regarding another aspect which has been raised before on a national level, I just want to point you • Marcello Palazzi to the German Sustainable Development National Progressio Foundation Strategy, which was released fi ve years ago. It is based on measurable indicators of targets in four In a way the transition we are going through also areas. I think this is a great example of going touches upon what we used to call the digital beyond GDP and these four categories are: inter- economy in industries like the software indus- generational equity, quality of life, social cohesion tries. This is an area where Europe has tried with and global responsibility, and these are determined the Lisbon Council, and the Lisbon Agenda, to be by 21 measurable indicators. This is a good way more competitive. I think they should pay some to have another point of view on the wealth of attention to how we can become much better in the nation. Europe by developing the real digital economy. AS you know, in the US after all a lot of the success in the last few years has been through Google and • Francois Schneider other such digital companies. That, I think, would Research and De-growth also fi t very well with the Lisbon Strategy and the Lisbon Agenda. What would be the decision if it turned out that an increase in ecological or social indicators, or The second point which I made briefl y yester- societal indicators implied a reduction in economic day is that this question of indicators has also a activity? We were going to have a conference on local dimension. Again in Europe for ten years or this in April in Paris. more there have been campaigns to make cities more sustainable, since cities and regions are very important in determining how corporations • Stephen Pursey and other economic actors actually work. So how International Labour Organization do we link up with the local framework? Cities like Freiburg and Basel have done enormous work in I think it’s important to realise that statistical making their economies more sustainable, so that measures and indicators are tools for people to is important too. discuss and change things. So from an ILO perspective, the value of indicators is not necessarily that we get nearer to some higher truth; it’s that people can actually use them to talk about ways to change what’s going on.

I would say that the number one thing to do, if you have indicators which mean a company calls into question its economic sustainability or its

78 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

• Mike Salvaris • Catarina Roseta-Palma RMIT University Melbourne Lisbon University Institute – ISCTE

My question is directed to Stephen Pursey. It I would like to make a comment, in the form of is about the ‘mismeasurement’ of employment. a question specifi cally for BASF. Conference The most common international measurement of unemployment used in most countries is The concept of the triple bottom line – although effectively working for one hour a week. It is it is very user-friendly because what it means an extremely crude measure, and very mislead- is very clear for everyone – is in a way slightly ing. In my own country patterns of work have misleading, or even very much misleading, changed dramatically over the last ten years, because it is misleading to think you can have so that long-term unemployment is growing, a bottom line for people or for the planet, in the there is involuntary unemployment of differ- same way as you have a bottom line for profi t, ent kinds, there is much more part-time work, which is monetary (you sum it up and you know much longer hours, and quite a lot of work how much it is, there is a number). stress. In my view, the continued use of this measurement of unemployment by politicians I was wondering how BASF calculates the envi- especially is almost as gross a mismanagement ronmental burden, and how you proposed to as GDP might be considered of well-being. What calculate the social composite indicator, because we need, I think, is some sort of decent work you showed the graphical view of one specifi c index, which takes into account not only the point. The costs are the costs. You sum them true measurement of actual work but also the up and you know how much they are. I was conditions of work, to answer your question wondering what weightings you use for the about where we might be heading with new environmental burden indicator and also for employment measures. the social burden indicator, because I think it is really important, if companies are going to start using and reporting information, that they • Stephen Pursey do not all use different weightings and different International Labour Organization aggregation methods, which they sort of choose for themselves. We can assume that they choose Very quickly, I agree. One of the problems with them for the best reasons, because they really changing statistical systems on this is that a think they are the most important weightings, very large number of countries are geared up but they may also manipulate them to have to doing it that way. Changing it is really like the best indicators with the basic company turning an oil tanker around. I think the logical information. way forward is to actually have more varied defi nitions of what constitutes work. A second comment: if we do not even have an agreement on what the macroeconomic indicator I think we are always going to fi nd it very diffi cult weightings should be, and if we do not even have to capture it in one indicator, and that would an agreement on where we want to aggregate be my caveat about the idea of an index, i.e. macroeconomic indicators, I do not think it is that for the moment I cannot quite see how to really useful for legislators to think that they weight for example fundamental principles of should oblige companies to report information rights at work, which I think have to be part in a specifi c way, the composite indicator way. of your concept of decent work, with the total I think we should not be talking only about numbers in employment in proportion to work- macroeconomic indicators, I think people have ing age population. different opinions; it is not clear that weighing everything and putting everything as a simple I think they are two quite different things, and indicator is useful, so maybe for companies it trying to work out the weighting of the one might not be that useful either. or the other is beyond me and I think beyond most people. So I would suggest we need a range of indicators so that people can actually see the various dimensions of decent work and use the appropriate one for the issue that they are addressing.

19 & 20 November 2007 79 OPENING AND DISCUSSION

• Jan Juffermans • Hazel Henderson De Kleine Aarde Chairwoman

My name is Jan Juffermans from ‘De Kleine Aarde’ in I do not know whether any of the members of this Holland, an NGO working with global footprints for panel would like to address the point made by our 9 years already. I think what is lacking is a discus- friend from the Netherlands concerning subsidies sion about a level playing fi eld. I would expect this to unsustainable activities. This is such a big issue; from the [business] sector, because in agriculture we are dealing with this in the United States right for example we see that for 20-30 years already now, with the energy bill. There are enormous organic farmers have been suffering because the subsidies to coal, oil, nuclear, and then they expect playing fi eld is not level. So there is no fair compe- solar and renewables to try to compete. tition. Although we have all the indicators for this, and there is a 1989 report in Holland that shows Does anyone have a comment on how we deal with that if polluters paid in Europe, organic produce these perverse subsidies from governments? would be cheaper on the market. But there is no sign of politicians reviving the “polluter pays” principle and bringing it back to life again. • Andreas Siegel Council of Europe • Hazel Henderson I have two questions. Chairwoman First: Can we really say today that companies are Good point. Yes. This is what we are all talking interested in the long term rather than the short about: how do we internalise all those costs in the term? Because if you listen to what speakers said price of the product? at the beginning and if you look at the way the fi nancial system works through the stock exchanges where the short-term profi t is the most important • Laszlo Pinter, thing, I am sure there are some companies that International Institute are interested in the long term but aren’t they just a drop in the ocean? Shouldn’t we be looking for Sustainable Development into overhauling the fi nancing mechanisms which My name is Laszlo Pinter. I am with the International encourage people to think in the short term? Institute for Sustainable Development in Canada. My question is: How do you calibrate the indica- Second: On indicators in companies, because we tors that companies are using? I think it could have been talking about progress and well-being be a general question. Basically, the question is: indicators, if we want well-being indicators, don’t How much progress is enough? And this question we have to ask people who work for those com- is related to what a previous speaker brought up: panies as well as their customers, the different How do we link measuring corporate level perform- stakeholders, what they consider well-being to ance and benchmarking it to a public at a higher be? We surely we have to take that into account level, whether at either community or regional in order to have better indicators. level or up to the global outcomes that we know we have to achieve. • Hazel Henderson Chairwoman • Carole M. Laible Domini Social Investments Yes, on this issue of fi nancial reform – reforming what I call the global casino – we are beginning to I think that some of it depends on the activity. see the necessity of doing this and the issue that There are certain industries and practices which you point out is so crucial. How do we go from we consider unsustainable and won’t invest in at the short term to the long term, when we have all, and then there are other issues and concerns all the Wall Street analysts forcing companies to where we weigh performance relative to perform- raise their earnings every quarter? Does anyone ance in a peer group. So we really take both a top on the panel want to address this issue, short term down and bottom up approach. versus long term?

80 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Insights from practice

• Lothar Meinzer • Hazel Henderson BASF Chairwoman

Just a quick remark. First on the question regard- This is a very important issue for all of us. This ing the eco-effi ciency analysis. I am very happy is the reason why we are here talking about the Conference to pass on the details to you. This method is need to go beyond GDP. Because until govern- not a secret method. It is published, there have ments internalise their own external environ- been critical reviews by independent institutions mental and social cost into their score card, and the indicators we use are also published. whether we call it enhanced GDP or whatever, So for example in the environmental fi eld, there then companies like ours are always going to are the classical indicators like land use, toxic- be swimming upstream against government ity potential, ozone depleting potential, global performance. So it is very important. warming potential, etc. All these indicators, as I said, are published. • N.N. Short term versus long term. Of course that is the discussion. We as a company have to combine Just one comment or question. Wouldn’t it be the two. Our investment cycles are 20, 30 or easy to convert the short-term measurement 40 years, so for example if we are building a steam into longer-term measurement that includes cracker – that is the heart of a chemical plant – it social and ecological issues by demanding that will be running for more than 30 or 40 years. At corporate boards convert the bonus structure for the same time, we have to publish our quarterly CEOs, etc. so they receive a bonus at the end of reports, and what they refl ect is the outcome of their two-year, three-year contract, rather than our long-term strategy and our sustainable suc- each quarter. Wouldn’t that be easy? cess. We are not interested in trying to achieve improvements for just a few quarters.

• Patrick ten Brink Institute Of European Environmental Policy I am Patrick ten Brink from the Institute of European Environmental Policy. I just want to ask business about your recommendations for government. Because GDP does not measure liabilities, its assets or risks, and you were talking about the importance of measuring one’s risks and liabilities, and the asset base, what sort of recommendations would you have for governments in terms of them dealing with climate risk or biodiversity loss risk? What sort of assessments are needed and what sort of additional evaluations are needed? ©BI-TC

19 & 20 November 2007 81

Session 3 New measures of progress – Obstacles and opportunities Conference

Pier Paolo Cento State Secretary for Economic Affairs and Finance, Italy

I am very pleased to be here this morning so introduce into the debates the question of eco- that I can tell you about the contribution that the nomic “ungrowth.” Not as a return to the past but Italian parliament and the Italian government are instead as a way of actually facing up to the limits attempting to provide in terms of ensuring that not of development that burns up more resources than only do we have theoretical thinking but actually are actually available to humanity. This becomes tangible progress so that we do in fact manage to even clearer when you look at the phases for imple- move beyond GDP. Because GDP should not be the menting the Kyoto protocol and the agreements only economic, social and environmental indicator on the European Directive on Emissions Trading. It that we have and that we use. has ended up by becoming clearly necessary, even in the national fi eld, to measure the effectiveness We are convinced that the moment has come for of policies and to reconcile economic growth with us to move on from theoretical rhetoric, from aca- the limited nature of natural resources and the demic refl ection – no matter how important that vital need to ensure sustainability. may be – to actually trying to identify instruments, standards and rules which will ensure that we have In Rio, the Earth Summit adopted Agenda 21, which binding national legislation on scientifi c research recommended that all of the signatory nations into indicators that can be used alongside GDP. should reconcile the environment and develop- Increasing international attention is being paid to ment, both into their national policies and into issues linked to environmental sustainability, which their planning and implementation. It also recom- shows that we do need an integrated reform of mended that countries should try and ensure that our approach to the major economic indicators and they had integrated economic and environmental public fi nance instruments. We can then measure accounting schemes. Research has subsequently the effectiveness of national and regional policies been done along these lines by the UN, by the in a timely fashion, and actually assess the cost European Union, by the World Bank, by the OECD, and effectiveness of implementing international and by many other international bodies across the agreements on sustainable development and mov- planet. But experimental models have also been ing towards more sustainable development. run on a more limited basis in provinces and com- munes and have proved that we do need to have We do need a legislative framework which will new instruments developed, and that we need ensure that environmental indicators are effective to develop instruments and indicators that can and which will ensure that environmental indica- measure environmental variables which are often tors stand side by side with economic and fi nancial decisive for economic growth. But until recently indicators so that we are no longer as partial as they have not been counted and have not been we have been in the past. included in the normal models for assessing policy effectiveness. This shortcoming is going to exac- And the approach from the past has done nothing erbate the margin for error in policy assessment good for the environment or indeed the economies and will reduce the effectiveness of fi nancial and of nation states. There is now a wide ranging debate economic policies as we have seen up until now. amongst the scientifi c community too, which puts If we manage to overcome this situation, then the subject of the limited use of resources, the that would make it possible for us to protect the limited existence of resources, and the limited environment more rationally and we would also availability of resources right at the centre of the be able to carry out more complete cost/benefi t agenda. And that is another reason why economic analysis of sustainable development. growth, and economic development cannot continue to be a dogma, taking no account of the It is in this context that the Ministry of Finance fact that natural resources are limited. Part of the and Economics in Italy has decided on the encour- scientifi c and economic community has started to agement of Minister Tommaso Padoa-Schioppa

84 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 Newmeasuresof progress–Obstaclesandopportunities Session 3 such wearealsogoingtobeidentifying objec- prehensive environmental informationandas that citizens have afundamentalrighttocom- In thatsystemwearealsorecognisingthefact environ State andoflocallevel authoritieswiththefull and of asystemthatcanintegrate theeconomic approach, thepresentationandintroduction mental accounting.Firstofallthereisthegeneral cover themainelementsforapplyingenviron- The contentofthelawisvery simple,butitdoes of Januarynextyear. the budgethasbeenadopted,sothatwillbeas be transmitted totheEuropeanParliament once environmental accountingbeingapplied ground theconcreteresultsofprinciples have madeitpossibleforustoassessonthe European Union sible partlythankstocontributionsfromthe sations inourcountry. Thesehave beenpos- been carriedoutbylocalbodiesandorgani- law hasbeenalloftheexperimentsthathave this committeeindrawing upthisdraft decree the workandstudiesbeingcarriedoutby accounting. Andofparticularimportancefor for correctimplementationofenvironmental tion measuresintermsofpublicexpenditure accounting, andalsotoidentifyrationalisa- draft legislationforintroducingenvironmental has alsobeencalledupontocomeupwith munity andinternationallythatcommittee been carriedoutatnationallevel inthecom- be monitoringsimilarexperiencesthathave into localbodies.Thatcommitteewillalso tem intotheState,regionsandthen introducing anenvironmental accountingsys- upon tolookatthemainproblemslinked to to setupacommittee,whichhasbeencalled by theCouncilofMinistersandthereforewill This draft decreelawwas approved last week fi nancial planningandbudgetingofthe mental assessmentofthesemeasures. fi nancing LIFEprojects,which . the principlesofsustainabledevelopment and tives forpoliticalactivity, takingintoaccount concentrating, andwehave toensurethatat part ofthedecreelawthatwewillhave tobe to gothroughparliament.Itisonthesecond model. Thissecondpartofthelaw used tode to statisticalandmathematicalindicatorsbe Then, alsointhedecreelaw, wehave areference Italy’s economicpolicies. drawing uptheStatebudgetandin planning and environmental issueswillbeoneoftheeconomic to publicadministration, butitwillmean that bureaucratic changewhichwillbeimportant of FinanceandEconomics.Thisisnotjusta henceforth betheresponsibilityofMinistry this draft lawandtheenvironment willalso Ministry hasbeenfullyinvolved indrawing up at thecentreofagenda.TheEnvironment whole questionoftheenvironment willbe put time, oncethispositionhasbeenadopted,the ecological andsocialrepercussions.For the I hopeyour conferenceisa success. future are the actualenvironmental footprintofwhatwe cal debt,bygivingusaproperassessmentof make itpossibleforustoreduceourecologi- infrastructure policyandsocialpolicy, whichwill assessment ofeconomicand on alldeveloped countriesconstraints regarding in suchaway astoplacenotjustonItalybut for environmental accounting.Theymustdothis nomic and statistical systemwhichcanprovide uswitheco- is tosetupananalyticalandmathematical Let meconcludebysaying thatwhatweneed the samelines. of thevarious bodiesthatareworkingalong European level wealsohave thecooperation doing nowandwhatwewillbeinour fi nancial indicatorstaken intoaccountin policies. Thankyouforyourattentionand fi fi nancial indicatorsthatcan beused ne theenvironmental accounting fi nancial policy, or fi rst needs rst fi rst 85

Conference Conference

Patrick Viveret Cour des Comptes, France

When, a few years ago, I came to carry out an One, which I discovered when I was carrying out assignment at the request of the French govern- this assignment on wealth, is the work that has ment not only on new indicators of wealth but also been done in Canada, and particularly Quebec, on a new approach to wealth, including the mon- by the Collective to fi ght poverty. They proposed etary question, we were directly concerned by the to the government of Québec to organise what issues raised in the presentation by Kristalina, i.e. they called a ‘knowledge crossroads’ so that there the relationship between, on the one hand, indica- could be an exchange of knowledge between the tors, including the new indicators to be promoted, Ministry of Finances and this Collective for a pov- and, on the other hand, the choices made by society erty-free Québec, on the one hand, on economic and the issues in public decision-making. Because and fi nancial matters and, on the other hand, on we can have all the alternative indicators we want the problems of exclusion and poverty. And on the but if they are not connected to decision-making occasion of this ‘knowledge crossroads”, to which and deliberate democratic choices they will simply the then Minister of Finances Bernard Landry had remain in the toolbox. agreed, a debate began on national accounts, and on Gross Domestic Product, because members of When I was carrying out this assignment, the the Collective to fi ght poverty, having heard pre- President of the French Republic at the time, sentations on the national accounting system, said Jacques Chirac, said in Johannesburg: “The house one day to the Minister: “If we understand you is on fi re but we are looking elsewhere”. And I had correctly, in your Gross Domestic Product a lot of taken, as an example of the problem of indicators, resources and wealth, which we ourselves carry, do the fact that not only is the house on fi re and we not appear.” And at the same time they proposed are looking elsewhere but also we are deliberately an alternative indicator which, with their proverbial adding fuel to the fl ames of the house that is on humour, they called the ‘Sweet Domestic Product’ fi re. A good many of the reasons why we have this (doux) as an alternative to the Gross Domestic counterproductive attitude lie in the fact that our Product (brut). And referring to another indicator, systems for evaluating wealth – be it a question which they called ‘Hard domestic expenditure’ for of company balance sheets or national accounts the same reasons, they said: “In your accounting for nations – encourage us to adopt these coun- systems, destruction, social suffering and health terproductive attitudes. Kristalina has just evoked problems are not mentioned but we experience the image of the Queen Mary. Well, in a way we them in our own lives.” They proposed to call this are in the position of a sailor who has decided ‘Hard domestic expenditure’. to change course, whether we call it lasting or sustainable development or even decline: today That is a good example of where a procedure of there is a major agreement developing within the positive democratic confl ict, through this ‘knowl- international community about the fact that our edge crossroads’ logic, creates at the same time type of growth is ecologically, socially, ‘civilisa- a situation in which the debate on indicators is tionally’ unsustainable, but at the same time as placed within a new cycle of democratic debates we are asserting the need to change course, we and public decisions. continue to have onboard instruments which are set to the old course, that of productivist growth. In France, we have just learnt of a very interest- Consequently, as long as there is no link with the ing experiment, the ‘Grenelle de l’environnement’. issues, and particularly public decision-making This initiative, which was born in civil society, issues, all our efforts as regards new indicators, was proposed by a coalition of associations call- even if they are alternative indicators, are insuf- ing themselves the ‘Alliance pour la Planète’, and fi cient. And when we look at this link with issues, when the present President of the Republic agreed there are some useful experiences that I should to take it up, for four months the different players like to mention. in French society asked themselves about new

86 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 New measures of progress – Obstacles and opportunities

types of growth, consumption, development, in terms of natural capital – must at the same production and even life, and the necessary time be accompanied by indicators enabling us reorientation so that the debate on indicators to work on greater well-being. could be included within the framework of a general reorientation. When I started my assignment on wealth, we Conference worked a lot with the United Nations Development And we can see today that one of the important Programme. It had just produced a major report consequences of this ‘Grenelle’ is that the scope highlighting the fact that it would take only 10% of this work will be much wider than when this of the amounts being invested in arms, drugs and exploratory assignment was entrusted to me, advertising to implement the world programmes not only on the new indicators of wealth but needed to eradicate hunger and provide access also on the link with public decision-making to drinking water and basic health care. procedures. And this is a very important issue from the point of view of the democratic proc- So it is absolutely essential when we ask our- ess itself, because most of the time all these selves about indicators also to pose the political indicators leave a situation of opacity in which and societal question about the choices made by the implicit choices of society do not appear. This society and by civilisation. And at the same time, was the case with the Gross Domestic Product and this will be my fi nal word on the subject, and the national accounts. Before the statistical we must not content ourselves with focusing formalisation of the national accounts, you had our interest only on indicators; we must also choices by society and these choices by society take an interest in the graduation units behind were directly linked to the way in which societies, these indicators. And in these graduation units following the drama of the Second World War, we obviously have a link to money. Yet what tried to recreate a blueprint for life which was we are living today is extreme immoderation in that of reconstruction, and in which industrial terms of the fi nancial economy. The relation- modernisation was seen as a choice by society. ship between the realities of the real economy First of all, reconstruction and industrial mod- of goods and services actually traded and the ernisation were chosen and then they defi ned immoderation of the fi nancial economy which the costing methods and statistical instruments is one of irrational exuberance – to use the which were going to value reconstruction and words of Alan Greenspan, former Chairman of industrial modernisation, to the detriment of the United States Federal Reserve Board, in his other activities. book “The Age of Turbulence’. The result is that of the 4,000 billion dollars spent everyday in Today, we are at a similar crossroads. The human the marketplace, less than 5% corresponds to race fi nds that it is now obliged to take account real goods and services. of the ecological defi cit – and Pierre Paolo talked forcibly about this in his presentation. However, If we want to work on calling the present indi- the more we take the ecological defi cit into cators into question, we must also accept that account and thus the question of limits on non- in years to come we shall have to work again renewable resources, which Kristalina has just on the question of monetary policies on a con- been talking about, the more we need at the tinental scale and even at world level. same time to have better indicators of well-being. The reason is that if you propose that people And I dare hope that this European meeting limit their consumption patterns and there is no in this Parliament, which is itself an outstand- prospect of greater well-being if they do, they ing indicator of the advances made in public are in the same situation as a drug addict who awareness of these questions as regards the is offered a withdrawal cure but without any representation of wealth, will be another step alternative positive prospects. And therefore the forward. Perhaps next year or in two years’ time double indicator of real resources – the indicator we shall fi nd ourselves here discussing the issue which allows us to frame the question of limits of new approaches to money.

19 & 20 November 2007 87 Conference

Kristalina Georgieva Director Strategy and Operations Sustainable Development, World Bank

Measuring the Wealth of Nations

Good morning everybody. I want to start with to increase this wealth, including by transforming a story from the old days of the Soviet Union. one type of asset into another, but with an eye Mr Brezhnev went to Europe and at the end of his on making sure that the whole becomes bigger visit he was interviewed and the journalist asked than the sum of the parts. him: Mr Brezhnev, can you tell us in one word what is the state of the Soviet economy? And Brezhnev - Fourth, and this is very important for us in the said: Good. And then the journalist said: Now if Bank, the change in real wealth, which we call you were to add a little bit more, say in two words? ‘genuine’ or ‘adjusted net’ savings, is a measure Brezhnev said: Not good. of sustainable development.

In a sense, what we are struggling with here is to Let me give you an example of how understanding make sure that we have a reﬂ ection of the state this asset base and especially the natural capital of our economies that is accurate, that tells us part of it can alter our view of how well we are the foundation for our own well-being and that of doing. This is an asset sustainability example from our children. Mauritania.

I want to share with you research we have done in In the fi rst half of the 1980s, and this is a real exam- the World Bank led by my colleague Kirk Hamilton ple, the fi sh catch in Mauritania grew very sub- over a long period of time that in a sense gives us stantially – basically more than quadrupled – from a measurement of the wealth of the nations. I will 20,000 to nearly 90,000 tonnes. Based on con- describe about how we measure that wealth, what ventional indicators everything was great. GDP we have learnt from this measurement, how we up, foreign exchange up, budget revenues up, in go about measuring changing wealth, and what fact as Mr Brezhnev said: Good. Except that the the policy implications are. fi sheries collapsed. It only took seven years. Just seven years later, exports that were growing at The fi rst question I would start with is: Why meas- 7.5% between 1980 and 1987 shrank to -2.3% in ure wealth? What does that give us? There are four the next three years. The well-being of Mauritanians good reasons to measure wealth - understood as benefi ting from the export of fi sh could not be sus- the net present value of future consumption: tained. If we were to measure fi sh stock as an asset as part of our overall equation, then we could have - First, it tells us the potential for future well- warned policy-makers that there was an impend- being. What is the foundation we have built for ing collapse and that measures had to be taken to our children? change the way Mauritania manages fi sh.

- Second, it shows the composition of wealth: how Last year, 2006, we published a book called ‘Where much of it is physical, man-made or natural, is the Wealth of Nations?’. The book does the fol- how much is human asset, how much is social lowing. It measures three types of wealth: (1) pro- assets or institutional assets. This composition duced capital – buildings, machines and infrastruc- of wealth is very important to understand the ture, (2) natural capital – croplands, pasturelands, ‘initial conditions’ for development. forests, minerals and energy; and (3) what we call “intangible capital”, namely the human capital and - Third, it is such a very useful model. If we look the quality of the institutions that are so critical at everything that forms the wealth of nations, for the well-being of our societies. Do they pro- on the same footing, then we can think of ways vide accountability? Is the judiciary strong? Do we

88 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 New measures of progress – Obstacles and opportunities

have a high or a low level of corruption? We did human capital – educational expenditure in calculations for nearly 120 countries and came this case – and that boosts the savings rate, up with very interesting fi ndings. Not only did but then we would subtract natural resource we recognise that the wealth per capita is very depletion, which in the case of Bolivia is quite different across the world. I am sure you will substantial. That brings us down to -2%, and Conference be asking: Which is the richest, the wealthiest then we would add to this the negative impact country? In 2000 it was Switzerland: around of pollution damage, which in the case of Bolivia 650,000 dollars per capita. And the lowest? brings it to about -4%. So because of resource Ethiopia, with only around 2,000 dollars per depletion and pollution, what we see here is that capita. And everything in between. This allows Bolivia is on a non-sustainable path. us to see different groups of countries (low income, middle income, high income) and how As a Bulgarian national, I naturally looked at they compare. I chose to show you how they how my own country is doing. It is doing better compare in terms of what these three types of than Bolivia, that is the good news, but still the capital provide to societies. true level of saving in my country is lower than our minister of fi nance thinks it is. He thinks Well, three very interesting fi ndings. it is 6%, it is actually around 4%, in fact just over 4%. - First, built-in capital, the physical, produced capital, actually accounts for the same share, If we follow up over a long period of time what whether you are a rich country or a poor has happened in Sub-Saharan Africa, the poorest country, 16% in low income countries, 17% of the continents, what we have to conclude, in high income countries. sadly, is that if you apply this measure of true wealth, Sub-Saharan Africa actually has created - Second, in all countries intangible capital wealth that is about zero over 30 years, because matters tremendously. It is the largest share of the depletion of natural capital and not using of wealth: 59% in the poor countries, 80% it to invest in its institutions and its people. in the rich countries. Which brings me to my last point. What is it that - Three, and this is very important for how we do with this analysis? We in the World Bank we think of development in the developing have been tracking wealth for quite some time; world, the share of natural capital is very since 1999 we have been publishing ‘adjusted high in poor countries: 26% of their capital net saving’ as part of our development indicators. is their natural base, the land, the forest, the Unfortunately each year we observe that 20-30 fi sh stock, versus only 2% in the developed countries have negative wealth accumulation. world, e.g. in Japan where it is almost 0%. These are primarily the poorer countries.

What this means is that developing countries Every year we publish what we call the “Green have to pay very close attention to how they Data Book”. This summarises environmental utilise this part of their capital base, and actu- natural resource impact for countries, and our ally to remember that the most important part country teams are using it more and more as of it is actually land, not what is under the soil, they think of operational programmes. but the soil itself. There are other countries that are moving Let me move on to a second point that results toward wealth indicators, like Canada, with from this analysis: what do we know? What have its ‘capital approach’ to sustainable develop- we learnt about measuring the change in real ment; Norway has its ‘petroleum-adjusted net wealth, the indicator we call ‘genuine savings’? savings’; Botswana has a ‘sustainable budget And just to make it more real, let’s look at Bolivia index’: we cannot spend more of our diamond in 2003. If we are to use the traditional concept wealth than we can do sustainably; and it’s too of savings, we would have gross savings and net bad the minister of Ghana was not here – he savings, and the difference between gross and would have told you how they think of natural net would be depreciation of ﬁ xed capital and we resource management. would basically stop right there. It would look as though Bolivia is not doing too well but it does Let me conclude: what are the main lessons we have positive net savings. If we take genuine can draw for development? First, that because of savings, then we see how much is invested in the high share of natural capital, strengthening

19 & 20 November 2007 89 Conference

natural resource management is actually much more important for developing countries than it is for the rich world. They have to pay much more attention to soil degradation because of the high share of land in their natural capital. There has to be a very strong focus on reducing incentives to overexploit resources, especially living resources, the gift of nature that countries can rely on hypothetically forever. When we do that, we need to reinvest resources in other assets, so we expand the non-tangible, the intangible, the human dimension of development. It is precisely that investment in human capital – and in stronger institutions – that has the highest pay off. Roads are a good thing, but it is the people and the institutions they rely on that matter most.

90 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 New measures of progress – Obstacles and opportunities Conference

19 & 20 November 2007 91 OPENING AND DISCUSSION

• Kristalina Georgieva World Bank

Actually, this is a great question! I would like to make two points.

Firstly, it has taken more than 10 years for this research to bring results in terms of impact on operational work. The fi rst lesson I would draw is that, in terms of changing mindsets and how we think of our economies and societies in development, one • Tony Long has to persevere. We have to be very persistent in Director European Policy Offi ce, WWF, doing this day in day out for a long period of time Chairman of session 3 for the results to become acceptable. During the session that we have now we are going Secondly, the way it gets operationalised in the to begin to answer the question which is the title World Bank is by these data becoming part of of the conference: How do we measure progress, our country operational programmes. What this how do we measure true wealth and how do we means is that more and more – and I would not measure the well-being of nations? say in every country but more and more – when we think of what is the best we can do together I have three distinguished panellists to help me with a particular country in development, we now with these questions. take into account the assessment of wealth, the different assets that we have talked about here, By way of introduction let me just say that he has but more importantly the genuine savings. Then got a distinguished political career in Italy, he has we look at the different dimensions of environmen- been in the Green Party in Italian politics since tal assets. We look at pollution and then we say: 1985. He has served in very distinguished positions what are the specifi c policy implications? Just one as Secretary to the Special Commission on the example: China: pollution as share of GDP. We Prevention and Repression of Corruption. He is also struggled a lot with the Chinese authorities, we a Vice-President of the Commission on Justice and came up with a number, and the number is around a member of the Council of Elections and he now 6% of GDP lost due to environmental degradation. holds the position of State Secretary for Economics Then from there, once policy-makers accept that and Finance in the Italian government. It’s with this is a serious problem, good things can, and pleasure that I introduce Pier Paolo Cento. do, happen.

For speech of Pier Paolo Cento, see page 84. The notion is: break it down, to make it operation- For speech of Kristalina Georgieva, ally relevant, rather than have a theoretical concept. see page 88. Make it relevant for individual countries by taking individual issues that countries are struggling with and then integrate it into the programmes. • Tony Long Chairman • Anders Wijkman Before passing on to the next speaker, I wonder Member of the European Parliament whether I could just ask for a point of clariﬁ cation from you. I can see the analysis, and I can see Thank you very much, Kristalina, as always a very some of the conclusions you are drawing from clear message. I commend you for this. But I do the analysis but what I can’t see quite is how this not think the theoretical aspect is so unimportant. becomes ‘operationalised’ in the Bank. I would ask you how does the Bank translate this into its overall message, when you have World Bank conferences, etc? Because it is all very well that you factor it in at the individual country level, but if the Bank as a bank could draw the right conclusions, it could start bombarding governments and say: Look guys, you have to change this notion of GDP, you have to factor in other indicators. But

92 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 is anothercomment. Still beforeIpassontothenextspeaker, there • unless wedoso. fundamentally wecannotsucceedinourmission the directiontowards sustainability, because can say: wearemovingbeing ontheship, in I ally follows.You donotseeitright away. Me, captain turnsthewheel,andshipeventu- Commission. Itislike theQueenMary. The a biginstitution,littlebitlike theEuropean of everybody, thattheWorld Bank iskindof of ourengagement.Letmeadmithereinfront we pay upfrontattentiontothesustainability poverty andsupportsustainablegrowthunless was therecognitionthatwecannolonger ment network.Part ofthereasonwedidthat Presidency, intoonebigsustainabledevelop- and Agriculture),withourInfrastructure Vice used tobe:Environment, SocialDevelopment Presidency (which Sustainable Development Vice We mergedourEnvironmentally andSocially Bank made avery importantdecision. the World becomes mainstreamedintheBank.Recently, it translates intoabroaderprogramme andit China, orasweseehappeninginIndia–then in thecaseofGhana,orasweseehappening as ithappened be convinced itisgoodforthem– and wegetthegovernments ontheothersideto countries andthen,ifthisworkproducesresults with acoupleofpilots,weworkinnumber implications. Sowhatweusuallydoisstart is accurate, thatitiseffective andthatithas coming upwithaspolicyrecommendations time. Ittakes timetobesurethatwhatwe are that forresearchtobecomeoperational takes Mr Zoellick, butthepointIwanted tomake is We certainlyhopethatyou willhearitfrom • Newmeasuresof progress–Obstaclesandopportunities know. we shallhearitnowfromMrZoellick, Idonot we have nothearditfromhissuccessor. Maybe we have notheardthatfromMr Wolfensohn, Session 3 Chairman Tony Long World Bank Kristalina Georgieva ﬁ ght a promiseforallofus. then thisindicatorofwealthnationsreallyis out. Ihopethattheycanbeworked out,and very importantissueswhichshouldbeworked the substitutabilityofcapital.Ithinktheseare the notionofweakandstrongsustainability think thatnatural capitalisthestrugglebetween the measuresarestillnotwelldeveloped. Ialso on theintangiblepartofcapital,because think thatmoreworkshouldbedoneespecially I to stressthatagainthedevilisindetail. and notjustshort-term gains.ButIwouldlike sustainability, whichisaboutlong-termvision, This isextremelyimportantinourstrugglefor tor couldbetaken asanearlywarning signal. example ofMoroccowherethestockindica- was mostlystruckbythe important approach.I very longresearch.I think itisanextremely revolutionary one.Itisde for many years, andinfactthispublicationisa Bank onthisissue follow theworkofWorld report fromKristalina.I have beentryingto Thanks, Tony. Iwas extremelydelightedbythis • (“ Patrick isamemberof theCourdesComptes going toaskPatrick Viveret toaddressus. chance toasksomemore questions.NowIam I amgoingtopasson, because theywillgeta There aresomepeoplewiththeirhandsupbut • collectively, thebetter offwewillbe. intangible element,sothemorewecanverify you canquiteaccurately measure,especiallythe Of courseittakes very littletoseeddoubt,but together becausethesearenoteasyassessments. lar work.Obviously, weneedtobindourefforts partners hereinthisroomwhoaredoingsimi- continue andthisisakindofpleatopotential environmental side.Thisworkcertainlyhasto affect development prospects,aswellonthe ability, institutions,andcorruptionhowthey doing quitealotofworkonissueslike account- need todomorework.Actuallywehave been A quickreaction.Icompletelyagreethatwe • Court ofAuditors”) inFrance. Heisadistin- Charles University Bedrich Moldan Chairman Tony Long World Bank Kristalina Georgieva ﬁ nitely theresultof 93

Conference OPENING AND DISCUSSION

guished author and commentator, especially on • Nick Marks the subject we have before us, on alternative New Economics Foundation measures of wealth. He is currently part of a working party with the UN Development Programme, Nick Marks, New Economics Foundation, and author reporting to the French government on alternative of the ‘Happy Planet Index’ actually, but I’m not measures of wealth. I am pleased to introduce going to talk about that. As a statistician who has Patrick Viveret. worked on indicators for fi fteen years, we always have an issue around stocks and fl ows. How do For speech of Patrick Viveret, see page 86. we combine these things? And obviously the World Bank has a stock approach, but you have some assumptions in there: • N.N. - One is that the future fl ow of well-being is to do Eight years ago in Berlin there was a Congress. with assets and wealth, and well-being research The title was “Beyond Growth”. Herman Daly at would challenge that assumption. Indeed people that Congress put together his experience at the experience diminishing returns from extra levels World Bank telling the story of trying to publish of wealth. in a World Bank document a diagram with the economy as a subsystem of nature. He said it was - The second thing is that we have a slight prob- impossible for him at the World Bank to do that. lem with another stock, which is the stock of Now we learn that in Japan natural capital should carbon dioxide in the atmosphere. Future costs have zero value. I would like to ask Mr Viveret of climate change are not going to fl ow from what he thinks about this appreciation of natural marginal additions to the stock, they are going capital in Japan? to fl ow from the quantity of that stock. And so your accounting process must take account of the net current liability for future costs, that there • Enrico Giovannini must be some set aside: a fund that basically OECD says that we need to be saving now to pay for the future costs of climate change, and I would Enrico Giovannini, Chief Statistician of the OECD. like to see that added into it. Two weeks ago the International Association of Auditor Generals had its biennial meeting in Mexico City, and one of the two topics discussed by these • Patrick Viveret Auditor Generals from the whole world was key Cour des Comptes, France indicators. This was I think a very important signal that this community of people are looking into Firstly, particularly in Kristalina’s presentation it this as one of the key topics to try to make whole became clear that we don’t just have the example countries accountable, not just governments but of Japan; in economic capital in the classical sense whole countries. And at the end of the conference of the term, natural capital and intangible capital there was a discussion about the possibility that are decisive. What does that show us? Well it shows INTOSAI could create a working group to work with us that what one could call the environmental other international organisations on this issue of fundamentals and anthropological and human key indicators. fundamentals are the decisive factors of economic fundamentals. If the planet becomes unliveable, But one of the important points that were made if there are no more human beings left, obviously was the problem of the independence of Auditor it won’t be possible to have an economy. And if Generals, because they want to keep their inde- you look at the OECD’s work of a few years ago pendence. They do not want to be seen as a sup- that was clear. So the share of natural capital and porting a particular measure, or general policies human capital represent 86% of total capital. And or specifi c policies. that means that the institutions which put forward very few alternatives over the last fi fteen years So my question is: How do you see this tension have recognised that environment and human between the need to engage the Auditor Generals stakes are absolutely decisive. in this effort and to allow them the independence to be able to assess governments, using indicators The second point is that natural and human capi- but also in an independent way? Thanks. tal for the most part are based on gifts without a counterpart. The question of the economics of

94 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 In France, intheDeclaration ofHumanRights supposed toworkforcitizens anddemocracy. help, becausetheseareorganisations thatare pendent, thenthatindependence canactually and assessmentorganisations thatareinde- If you have accountingorganisations, audit that want topreserve theexistingstatusquo. with vested intereststhatthey want topreserve, are somany lobbies,therearesomany people asset inmoving downthatpath.Becausethere ence oftheCourtAuditorsisvery muchan natural heritage,andthereforetheindepend- the qualityofhealth,education,andpreserving you needadifferentfaithfulness; faithfulnessto look atitintermsofcitizens oftheState, then of thecompany, butifyou transform thatand to theeconomicperformanceandassets point, you’re generally talkingaboutfaithful you lookatthisfromanassetholder’s view- image. Butfaithfulofwhat,towhat?If are thecitizens. Soyou have tohave afaithful holders, inpublic that werethoughtupasaprioritybyasset image. Whenyou have accountancystandards Then thesecondquestionwas thequestionof should alsocertifythat. Auditors, whenitcerti AndthereforetheCourtof apply thattoitself? environment theState budgets,why doesn’t regulation callsoncompaniestodraw upsocietal the Statethroughlawonneweconomic question thatwas asked was, considering that the budgetand French Stateaspartofaneworganisation of Auditorshadtocertifytheaccounts straint? Recently forthe independence intoanassetrather thanacon- then take onboardtheseissuesandturntheir ent, suchastheCourtofAuditors,canthey when you have institutionsthatareindepend- human economiesistaken intoaccount.Now reality oftherelationshipbetweennatural and and inmonetarysupport,toensurethatthe we needinourindicatorsandprices, – said, forexample,onproblemslinked tocoal linked thisintomonetaryissuesandwhatwe I way inwhichwecanadvance –andthat’s why very importantpointbecauseifyou lookatthe without adoubtthemostcommon.Sothat’s a teristics, itwouldbecomeclearthatgiftsare well asthenatureoftrade, andtheircharac- Newmeasuresof progress–Obstaclesandopportunities if you hadthenatureofgoodsandservicesas accounted forallnatural andhumanresources, If you hadgeneral accountingthatactually model fornatureandhumansthatisdecisive. gifts isacentral issuebecauseitisclearlythe Session 3 fi nances ofthecountry. Andthe fi nances your assetholders fi estheState’s fi rst time,theCourt fi nances, and toassesshowthatmoneyhasbeenused. to verify thenecessityofpubliccontributions right directlyorthroughtheirrepresentatives statement thatsays thatallcitizens have the and Citizens’ Rights,there’s avery important lion. Butbecausetheinstitutionalandsocial 120 million Japanesegives usabout$180 bil- in Japanfromnature.Thatmultipliedbyabout $1,500 percapitaishowmuchwealthwehave Japan ismuchsmaller. Ihave theexactnumber: poor countries,theshareofnatural assetsin point was thatinrelative terms,relative tomany natural wealth.Ofcoursethisisnot true.My My apologiesifIsuggestedthatJapanhaszero Just aquickfollowuponthequestionJapan. • service ofcitizenship. independence isactuallyaguarantee ofthat So thatisarightofcitizens, andtherefore First,wedoalotofworkonunderstanding - but letmemake fourpoints: probably asubjectforseparate conference, CO sible. Andofcourseworkwillcontinue. reality andasusefultopolicy-makers aspos- actually comeupwithassessmentascloseto point welltaken, weneedto domuchmoreto and whatthesubstitutionamongassetsis.But understand whathappensover timewithwealth Well wedotrytothinkdynamically, wetryto A questionwas putonstocksversus valuewe don’t nature. think thatwearebackintheStoneAgewhen natural capital.Somy apologiesifIledyou to capita. Ofthis500,000,1,500isthevalue ofthe total wealthofthe capital ofJapanissomuchbigger, Imean,the to underpinthisshift; the policyandinvestment decisionsthatneed higher tolowcarbonintensity andwhatare to understandwhatcan bedonetoshiftfrom would like toexpandthisothercountries South Africa,IndonesiaandBrazil), andwe the biggestcountries(India,China,Mexico, at themomentsix‘lowcarbonstudies’for uses indeveloping countries. We arerunning from individualcountrieswithsectorsand carbon intensity, wheretheemissionscome World Bank Kristalina Georgieva 2 emissions andwhatweshoulddo–thisis

Japanese is$500,000 ﬂ ows.

per 95

Conference OPENING AND DISCUSSION

- Secondly, we are very concerned that still most • Bruno Contigiani of the attention on carbon emissions reduction is L'Arte del Vivere con Lentezza focused on energy and in particular on the power sector, whereas in the majority of the developing It’s a cultural association, we organise global days

countries the biggest potential for CO2 emissions of slow-down around the world. So we would like to reduction is in avoiding deforestation and land introduce something like a GDWP instead of GDP, use change. Say in Indonesia 80% of emissions that W could mean “well-being.” But well-being come from deforestation. So can we generating does not mean the same in Europe, the United more attention to what actually matters may not States, China, Russia, India, Bangladesh or Egypt. be globally so signifi cant, but it will defi nitely be Poor people or rich people are different in the world, very signifi cant for countries, and is also good and many people in Western countries acknowledge for mitigation, good for climate resilience, and that we can’t continue to grow in the same way good for development, for poverty reduction and we did in the last fi fty years. Young people decide development; So how can we get more attention to choose a job that is more interesting, low paid, in this direction? and shifting down or slowing down becomes interesting for manager who are too stressed. But it’s - Third, we are very keen to gear the World Bank different if we think of countries like India or poor toward getting carbon intensity to be just part of countries because well-being could mean a house, the decision-making process, and not long ago a job, food, family or a car. So what we see now we made a commitment to measure the carbon is that the common value we have in the world is intensity of our own lending activities starting time, how people spend their time. So we could with energy, transport and forest. Obviously that think of an indicator to understand how people still doesn’t answer the question, how would spend their time, because it is the common value countries cope, those that have contributed the we have in the world. But is different to think of least and are most impacted? Basically Sub- time in Italy or in Russia. And we try to include Sahara Africa is least at fault for climate change among the other indicators an indicator that shows but most impacted. And there what we do in the how people spend their time. Thank you. World Bank is raise attention to their vulnerability and to the need for adaptation. We then call on our donors, those that support our soft lending • Walter Radermacher arm, and we say, just to sustain the benefi ts we Federal Statistical Offi ce, Germany have promised to developing countries over the next three years, we have to add something like I’m Walter Radermacher, UN Committee on 600 million to 2 billion dollars to make sure that Environmental Economic Accounting. I’ve a ques- the risk imposed by climate change is not falling tion to Kristalina. With respect to her approach to on the shoulders of people and communities in the wealth of nations, it’s very important additional the developing world. information you presented but it certainly has also some limitations as we have heard. There is the problem of valuation; we have the problem • Rita Trattnigg of applicability to global environmental goods like Sustainable Development Coordinator, climate, as you mentioned already and the problem of degradation in the future which is not account- Austria able in the period today. I would like to turn the spotlight on to a relatively new notion and that’s the notion of social capital. So my question to you is whether and how far the This describes the social ties between human beings World Bank is willing to cooperate with a system of or citizens within a nation or within a society, and statistical offi ces, the UN Statistical Commission, that would also be a very important factor for which follows more or less a multidimensional the well-being of a nation. I would like to ask the approach, green accounting so to say, and whether World Bank especially … I’ve seen human capital this could be an option for you to join that boat? but I’ve not seen social capital on your slides, so I would like to ask you if this will be of importance in your future work?

96 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 to dowiththeprogress ofsocieties. community who’s private interestshave nothing a globalworldincreasingly ledbya indicators, wehave toaddresstheproblemof you want togofurtheronthequestionof the subjectofconference.Ibelieve thatif power ofmoney, thatisingreatcontrast with power ofthe this conferencetopointouttheproblemof situation. Hewas perhapstheonlyspeaker in ing outtheschizophrenic signalsfromthe present I wouldlike tothankProfessorViveret forpoint- they arevery muchrewarded fordoingso. panies toabuseAfricannatural resourcesbecause Africa andthepressureformmultinationalcom- between thenegative orzero genuinesaving of World Bankexaminedthelinkthattherecouldbe In thesamelightIwouldlike toknowifthe it isdecoupledfromsocialcommunitylife. rapid growthexerts oneconomicactivitywhen stocks andthatthisexampleshowsthepressure tion togeneration hownottoexhausttheir social capital,Mauritanianknewfromgenera- believe thatthankstowhatcouldbecalledtheir Kristalina gave abouttheMauritanian I wouldlike tocomebacktheexamplethat • education foreconomists? of actiontheWorld Bankistakingtoreform about this.Socouldyou pleasetelluswhatkind learnanything the timeandmostofthemdon’t Bank? You recruitalotofyoung economists all capital etc,howdoyou copeintheWorld distinguishing between experience andbasedontheimportanceof My questiontoyou Kristalinais:basedonyour economist many years ago. Now IshouldperhapsaddthatItrained asan of various talksincompaniesthatwas required. competences neededtodothekindofscreening have thequalities, them becausetheydidn’t recruiting young economistshehadtore-teach ple ofmonthsagoandhetoldmethatwhen Newmeasuresof progress–Obstaclesandopportunities ethical investment fundsinScandinavia acou- I metwithamanagerofonethebiggest • Session 3 University Professor attheLouvain-la-Neuve Isabelle Cassiers Member oftheEuropeanParliament Anders Wijkman fi nancial sector, theincreasing fi nancial andnatural fi fi sheries. I nancial fi sh the powerof globe -howwouldyou seethatchanging?Now it’s somethingthatweseere part ofthatisgoodsandservices- imbalance betweenwhattheygenerate andthe My speci do thatisprobablyalongcomplicatedissue. one economicparadigm toanewone. Howto aspects ofchangethatarenecessarytogofrom Viveret. Youquestion directlytoMr mentioned Patrick Viveret have said,I’dlike toputa Following onfromwhatIsabelle Cassiers and • so astoenhancethepowerofpeople? phrenic worldandtolimitthepowerofmoney conference toaddressthisquestionofaschizo- What shouldbethenextstepforthiskindof So my questionwouldbetoPatrick Viveret: and that’s why wehave thismeetingand we society andtotrygo beyond and above … is importanttounderstand thewholefabricof the statementthatwe were reallypoor. Soit very day makes mesoviolentlyopposedto with ourfamiliesand friendswhichtothis we alsohadthestrengthofsocialrelations talking aboutsocialcapital,humancapitalbut shocked usbecausewewerehighlyeducated, poor you are”. Andthatactuallyreallykindof said, “You’re very lucky, knowhow you don’t one oftheJapaneseprofessorsturnedtousand and atthattimeinamomentof that byeleven o’clockeverybody was drunk traditional Bulgarianhospitalitywhichmeans pened tobefromJapan.We treatedthemwith from theWest cometomy university. Theyhap- for the was stillinBulgariaand in theearlyseventies I tal. Justaquickfootnote.Asyoung professor ally trytomeasure-morepreciselysocialcapi- issues’ willbecomingupwithanindextoactu- 2008 ourgroup‘Working onsocialdevelopment social capitalandsometimebythesummerof Actually wedotrytoinclude-intheintangible, I’ll startwiththequestiononsocialcapital. • and howweuseit. it’s scarce,wehave noway ofmeasuringtime what aboutthequestionoftime?Timeisrare, Planète Vie Jean-Luc Roux World Bank Kristalina Georgieva fi rst timeinmy life,wehadadelegation fi c questiontoyou isasfollows:Given fi nancial markets today andthe fl ectedacrossthe in vinoveritas , 97

Conference OPENING AND DISCUSSION

will have many more about what we measure in • Patrick Viveret the traditional economic sense. Cour des Comptes, France

I was asked whether we would be interested to Now the question of well-being is of course of cen- venture into green accounting. I think some of tral importance in this debate, but all too often in my colleagues, to my understanding, have been discussing well-being, ‘being’ seems to be some- working with your team. Here is our limitation; it what forgotten. We need to move from ‘having’ and is that we need to come up with a measurement consumption to ‘being’. For the reasons outlined by that is actually applicable, we can bring it into Ghandi prior to his demise – and which are clearly our country dialogues – which is to say that there highlighted by the UN fi gures I quoted – he said: are some levels where we leave the good so as “Earth provides enough for every man’s need but not to be an enemy of the perfect. And obviously not for every man’s greed.” So there’s enough to this commitment will continue and hopefully the go round he said. limitations within which we operate will diminish over time as we have seen them diminish in the According to UN fi gures, two hundred and twenty last ten years. But I just want, for the benefi t of fi ve individuals have the same income as two and a everybody, to remind you that the World Bank is half billion human beings. You are seeing untram- owned by governments. We are a cooperative of a melled covetousness and greed which is going to hundred and eighty-fi ve governments and they in lead to poverty and shortages elsewhere. But we a sense give direction to what we should be doing. can tackle the fundamental problems of human Sometimes we jump a little further, or move a little beings: food, housing, water, basic healthcare. We faster than the instructions we get. But collectively can afford that, so what we’re paying for is the we need to take a political view to make decisions cost of ill-being: advertising, drugs and armaments around changes that are absolutely necessary for generate ten times more than you need to sort us to actually perform our functions to leave the out these basic problems of hunger. We are pay- world a better place for our kids. Hopefully this is ing that cost, the cost of ‘anti-well-being’. So it’s still possible. very important to develop this notion and it’s got to be at the heart of the new economic paradigm And I was asked what we are doing to change that has been talked about today. mindsets, especially in the profession of economics. Today is my day quotations from the past. Max Weber said something very telling: We’ve Lenin happens to be the person who said that the gone from an economy of salvation to salvation most diffi cult revolution is the one that happens via the economy. So what we’re experiencing now in peoples’ heads and what we’re talking about is the end of this salvation through the economy here is a mindset revolution. What we launched because this is something that is coming back to in the World Bank very recently is a programme haunt humanity. Not just because of environmental on leadership for sustainable development. We issues but because mankind is facing such crucial actually do want to bring to challenge conventional challenges that we are in danger. We might not wisdom and a little bit more ‘nuance’ into the way continue to exist, so we’re moving onto a new cycle we think of societies. We will make this programme which has implications for civilisation as a whole; to be one that links to business schools and we it’s not just about economics. And here the two do hope that over time in the next two or three fundamental issues are: years, it will produce not only more comprehensive thinking for us in the World Bank, but it would be - What are we going to do with our planet? helpful in how business schools or the profession - How are we going to do that? of economics operate. But obviously we won’t do this alone, we will do it hopefully collectively with What are we going to do to preserve our species? many of you in this room. And here the question of accounting time is of critical importance. It ties in with the last problem I raised and that’s the question of currencies.

In all the experience of so-called complementary currencies, and there have been about ﬁ ve thousand odd of those throughout the world, it’s clear that lifetime, life cycle is an accounting unit. And that’s no coincidence because the time you spend on the planet is a fundamental resource.

98 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 the lifetime.Howlongyou live isthekey there. fundamentals andthere,theaccountingunitis carbon aswellhumanandanthropological logical fundamentals,non-renewable resources, to have aglobalcurrencythatisbasedoneco- get worse,soitwillbeallthemoreimportant beginnings ofa Bank ofBelgium,andheidenti Lietaer,Bernard formerDirectorattheCentral Newmeasuresof progress–Obstaclesandopportunities project tocreateaglobalcurrency. Itisledby characteristics. There’s anextremelyambitious currency, we France whereyou have gotthiscomplementary In anexperimentthatisbeingcarriedoutin Session 3 tal needsataplanetarylevel. We’ve seenthe fi nd preciselythesefundamental fi nancial crisis,thatwillprobably fi ed fundamen- ed requires suchanapproach. ship tolife,theuniverse andeverything that it isthequalityofourbeing,relation- are qualitative aswellquantitative because and withourselves andtheindicatorsweneed relationship withnature,otherindividuals, to development isre-establishinga‘peaceful’ a warlike relationshipwithoneself. Sothekey competitors. Thelackofaninnerlifeisdueto seeing otherindividualsaspermanentrivals and Equally economicproblemsaretheresultof kind ofwar relationshipwiththeenvironment. at war. Ecologicalproblemsaretheresultofa our societiesisthattheyare However theproblemsweareexperiencingin 99 ©Photo European Parliament

Conference

Session 4 The way forward Conference

Walter Radermacher President of Federal Statistical Ofﬁ ce, Germany

I start with a little story of the past. We talked space. We of course have to make corrections to about Lenin, we talked about Brezhnev, and I fi gures, but into this rather fl at structure we are would like to tell you one of my own stories. It is trying to introduce new information. That in fact fairly straightforward. In 1989, my predecessor is what is giving rise to some of the problems to in the Offi ce for Statistics in Germany, spoke to be tackled. the German Parliament and promised them that within two years he would be able to bring about a Traditionally, the strength of the statistical system correction of the overall accounting system of the has been based on fl ows and fl ow calculations. national economy, by including the use of natural When I came to stock accounts, the fact is we do capital, the consumption of natural capital and also not have comparable quality of data around the work done in private households. “Egon Hölder, world. What is also very important, in terms of what President of the statistical offi ce, is now announc- Enrico Giovannini said, is the need to update our ing feminist eco-social product”, that was what view and look at what sort of processes underpin the newspaper headlines said the next day. I was the production of statistics. The most important only a simple statistician at that time when I was process is design. There are patterns which can given the job of undertaking this whole process, be infl uenced especially if new problems come to seventeen years ago. And you can imagine that we the fore. have a lot of experience in going “beyond GDP” in the meantime and some of those experiences have First of all we have to take a decision as to what been included in the following statements. sort of measurement has to be carried out, what sort of indicators have to be woven into the bigger picture. So the question is who decides on what information should be gathered, what sort of indicator is relevant and which ones are not relevant. That is the whole basis of a design process. Then it comes to the statistical production process and fi nally communication is vital. I will come back to these aspects later.

I have been an offi cial statistician for 30 years by now, and I have seen a whole explosion of different proposals coming forward. It began in the eighties with the ‘social indicators’, and then there were a number of different waves of further information, ‘sustainable development indicators’, ‘progress indicators’ came to the fore, ‘millennium development goal indicators’. Today there is certainly no lack of proposals or suggestions. In fact, we have a plethora of proposals and our problem in offi cial statistics is to make sense of all of this, to make something consistent out of it all. As Enrico Giovannini just said: the world is rather complex and we cannot understand everything just by looking at it from one angle. Even our system of accounts for the national economy is a fl at, two-dimensional view of a complex reality, which has to integrate stocks and fl ows, time and

102 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward Conference

This is essentially a question of data quality. Next point which is decisive as far as I am Good information must be politically relevant, concerned is: where do we stand in the politi- has to be theoretically consistent, and it has cal cycle? The fi rst thing we have to do is to to be empirically measurable. Clearly there describe the problem – agenda setting as is is something of a confl ict here. The types of known – in order to put an issue on the politi- approaches that Enrico Giovannini mentioned cal agenda in the fi rst place. But then we have can be fi tted into this triangle in different ways. to take more and more specifi c decisions, the Indicators normally come out of the relevance goals are set and fi nally we have performance corner, while the accounting methods tend to control and depending where you are on this come from the consistency corner of the trian- scale, the indicators used are very different. We gle. Basic statistics have the obvious advantage should not lose sight of this fact. that they are measurable. So again there are certain problems in trying to accommodate all The last point is that if you want to draw up these diverse things under one single roof. a portfolio of statistical information, on the Y axis there is a distinction between high and low aggregated data, and on the X axis the question of accuracy and cohesion. On one hand you have lowly aggregated short-term data. On the other hand there is the world of accounting to be taken into consideration, the economic, social and environmental accounting. Then we have multidimensional indicator systems. Here I would like to draw your attention to the little ‘green book’. This is a bit of a ploy to get you to look at it. It shows the German approach of sustainable development indicators and its application. It is available in the world wide web (www.destatis.de/publications).

Finally we have composite indicators, i.e. highly aggregated indices and indicators as proposed There is some interaction then between the offi - for example with HDI (Human Development cial statistics here on the red, and these three Index) or EDP (Eco Domestic Product) and oth- customer groups which I have outlined: politics, ers. They always include a number of assump- public opinion and science. They all interact with tions and underlying background that often are the national statistical offi ces, and they infl uence not or can not be made explicit. They have a kind statistics in their turn. Statistics then of course of “invisible load” of methodology that usually has an impact on public opinion; that has an can not be communicated in an adequate way impact on the way voters behave and so on. So when using these indices. That is why for offi cial there is a lot of feedback and interrelationship statistics with their claim to offer data of high between these different aspects. That must be quality (see for example the European Code of borne in mind at all time. Practice) it is a diffi cult process to provide this

19 & 20 November 2007 103 Conference

abroad caused by the transport of German import and export goods, have increased

considerably faster than CO2 emssions from goods transport within Germany itself. And of course these aspects play a major role

when it comes to pursuing a CO2 reduction policy. But that is just one example out of many possible ones.

Now, what do we need to take account of when it comes to offi cial statistics and if we want to fi ll in the wish list we have been looking at for the past couple of days? In offi cial statistics, it is expected that we per- manently reduce our functioning resources while continuously new data requirements are brought forward. Many of our colleagues kind of data. Perhaps rather provocatively, you suffer from this fact occurring to them; we see have this fi gure of 42. Many of you have probably budget cuts, we have had these cuts for more than followed ‘The Hitchhikers Guide to the Galaxy.’ In 10 years by now in our offi ce. At the same time that, the number 42 is the response to everything. there are extreme requirements placed on qual- We are only not quite sure what the questions were ity. And having spoken to a lot of people working in the fi rst place. But this is what Enrico Giovanni in this fi eld in Europe, they want to take steps meant, when talking about this one fi gure, which to reduce the response burden. So these are the we do not want to see applied to everything. conditions under which offi cial statistics work. And with these conditions I would add that in Europe, So there is a kind of hierarchy in the background the historical political system is very complicated of offi cial statistics: highly aggregated, more and and heterogeneous. more synthetic, and as it goes down, you see an increase in detail. Just a few recommendations now: I think it is very important that from today’s discussion we can In Germany – and I think this is true for Europe draw some conclusions. We heard the President too – our opinion is that the indicators we use to of the European Parliament this morning. New unify the different elements are collated from data requirements are only acceptable if offi cial basic data via the accounting system. This is the statistics are equipped with adequate resources. adequate way to gain consistent data in order to We also need to make sure that the necessary supplement for example the headline indicators basic data are available, otherwise we won’t be for sustainable development. able to score any degree of quality or relevance

What can we do in terms of analysis using ac counting? Here is an example from the German press conference in November 2007. The press conference was entitled to show “environmental- economic aspects of globalisation”. By way of methods of environmental economic accounting using basic data from various surveys (foreign trade statistics, transport statistics

etc.) we calculated the CO2 emissions incorporated in the products imported and exported to or from Germany. In

addition we assessed CO2 emissions abroad stemming from the transport of imported and exported goods on their way to or from Germany (see slide 13).

Here, we see that the CO2 emissions

104 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

So much more than in the past, these days we have to take account of civil society and we have to let them participate in our work. So once again: We need to improve communication and Conference make much more effort in the course of designing statistics, especially when it comes to the selection of indicators. What I am saying is that we need to involve civil society to a much greater extent.

And a last recommendation here: cooperation. Let us intensify the working relationship between national statistical institutes, international organisations and the scientiﬁ c community. Only by for the information. We need to broaden the cooperating we will be able to ﬁ nd better solu- accounting systems. I would refer to the UN tions to our problems. Let’s go ahead in a com- approach which until 2011 will have a standard mon effort. for an integrated environmental and economic accounting system (SEEA). We need to agree on indicator sets based on available information. That is working in Germany but also throughout Europe, I think.

And ﬁ nally, just a last point: What is very important for the process of improving our measures, is that we follow Hans Rosling’s pattern and improve communication. It seems decisive to me, when he pointed out to Web 2.0. The blue sun in the middle, Web 2.0, affects everything, not just communication at the end of the production process (see Slide 17), but also the design process of ofﬁ cial statistics. ©Photo European Parliament

19 & 20 November 2007 105 Conference

Ashok Khosla Co-President Club of Rome

Thank you, Mr Chairman. not my story. The fact of the matter is that we are living in a world that has completely lost its I want to convey greetings from one of the sponsor- bearings. Here is a country in which one man a ing organisations that I represent, Club of Rome. I month ago, when the stock market index went will be talking this afternoon a little bit about the from 15,000 to 18,000, made 5 billion dollars in perspectives that the Club of Rome has established one day of trading. In 6.5 hours of trading, this over the last nearly 50 years. But I would also like gentleman made more than 4.8 billion dollars, to tell you that a good part of my perspective is maybe much more because we do not know all from working at the grass roots in a third world his shareholdings. On that same day, on page 5 country. The two are, to some extent, combined of the same newspaper, it said that several dozen in my presentation. farmers had committed suicide because they could not pay their debts. It is a topsy-turvy economy. Let me start with a few what we might call factoids, Frankly, we have a real problem when you have the bane of statisticians. We have today virtually stock markets hitting record highs in a country no way of escaping the idea that the climate is of 1.1 billion where 800 million according to the changing. In fact, one of the senior economists of government, which is not prone to exaggerate the UK, Sir Nicolas Stern, has said that it is the these statistics, are below the poverty line of greatest market failure in history. Then I have to 2 dollars, where 300 million people earn less ask him: What about the fact that half the world’s than 20 rupees a day. You know what 20 rupees population lives below the poverty line? Is that not is: 40 eurocents? Even in India it is hard to live a market failure? Then I have to ask him: What on 40 eurocents. about the fact that hundreds of species become extinct every year? Is that not a market failure? So while the world’s economy has made huge And then what about the fact that 150,000 square progress and some people live with unprecedented kilometres of land becomes desert every year? Has opportunities for fulﬁ lment, we have an economic that nothing to do with market failure? I also, as system that does not work for many people. I said, know one country better than others, so Unfortunately, the concept of GDP symbolises much of my discussion draws on my experience many of the issues that underlie these problems in my own country, which is India. that face the world today.

In 1991, 16 years ago, in the wisdom of the gov- The value of GDP as an indicator has been proven. ernment of that time, we introduced neo-classical It is not a problem, we have heard many of the liberal policies. Today, 16 years later, all we talk good things about it over the last two days, and about in our newspapers, our headlines, our front I subscribe to them. It is a necessary indicator. pages, is: “Is GDP this year going to be 9% or If it is made more sophisticated, all the better. 10%?”. In those 16 years, we have generated Much has been said by people all through the last more billionaires than any other country in Asia, few sessions. The classical commitments we have possibly in the world. The Club of Rome was heard include the fact that it is not comprehensive, invited last week by the President of Germany, it does not cover things like women’s contributions Horst Köhler, who told us a very interesting story. and domestic work, and subsistence activities, He said that one of the-prize giving ceremonies informal sector, free unpaid work, many things: that he had to give a prize at, his dinner companion non-monetised transactions, nature’s contribution. was an Indian industrialist. The Indian industrial- It ignores non-quantiﬁ able monetised and non- ist leaned over to the President of Germany and monetised variables like health and well-being, he said in a very condescending kind of way: “I happiness and fulﬁ lment. It tends to aggregate only buy German companies.” Well, the world is things and to hide the variations like income and changing. This is a story from Horst Köhler, it is wealth disparities, sectoral differences, risks and

106 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

vulnerabilities. I won’t summarise all the things we have heard, but I will say that there are a few additional things that we have not heard much about. Conference

It encourages very short-term thinking for example. The time horizon never exceeds a year. It is not capable of handling the depreciation of natural assets. It manages well manmade or mechanical or physical resources, but not too well natural capital, or indeed social capital. It has a tendency to double count on the income, even the bads and the goods are all added up. And sometimes underestimates on the cost side.

The methodologies are vague and many of the things like inﬂ ation and purchasing power parity and so on are now beginning to be made better and better, but we’ve got a long way to go. Many of these things have already been said, but there is a lot more to be said. The new criticisms, or the future criticisms of GDP, really, I think, will have to relate to the psychology of human beings, of civilisations, of societies.

Subscribing to GDP as a predominant way of characterising the wealth and welfare of a society, I think, refl ects a mindset, an attitude, which is very inimical to the future of our planet, and certainly of civilisation. It refl ects what is important in society and economy. We chose indicators that refl ect what is important to us. It refl ects the relationships and our attitudes towards the relationships between people and nature, between people and people, and indeed between people and machines. It distracts us from the real issues of resource depletion and of the possibilities for overshoot and collapse that these have a tendency to have. I worry, for example, about the counterincentives that GDP numbers give our societies in terms of changing the lifestyles and consumption patterns and production systems that we have to change if the world is going to survive.

We have talked so much here about decoupling: energy and water use and resources from GDP. Unfortunately, what is decoupled is livelihood, unemployment and jobs. Because of the way we have chosen to push our GDP. I have not opened a newspaper in India over the last 3 or 4 years without some reference to the GDP getting up to 9%, 9.5%, 10%, it is like a kind of horse race. Our whole attitude is determined by how well we are doing in this race to get the

GDP up. ©Photo European Parliament

19 & 20 November 2007 107 Conference

It encourages non-sustainable patterns of resource governments, both as users and founders of work use. It encourages obsolescence; it encourages on indicators, and that we promote the idea that waste, because all of these add up to more GDP. variation among the indicators is as important as It encourages hit-and-run-economics, accelerated understanding the aggregates. resource use, and depletion, and it encourages the undervaluing of potentially shared and under- My proposition as a person who is a follower of utilised assets. We basically have to reﬂ ect how the Gandhian tradition is that indicators ought to mindsets are going to be looked at. The psychologi- be deﬁ ned from the viewpoint, the perspective, of cal impact is on low emphasis on the distributional the lowest, of the poorest, of the people who got issues rather than on the aggregates. And it tends left behind, and not by those who dominate the to encourage homogenisation, standardisation and decision structures of our society. uniformity of solutions.

I am being asked to wrap up so let me just come to a few of the things that I think we need to do in terms of the future. I think personally that GDP has to look at the possibilities of how technology and how institutions are going to be designed in the future. Technology choice under the current system has to do with making GDP bigger by making things bigger and centralised and capital-intensive, by using very highly material-based progress and discouraging dematerialisation, and has too much focus on zero sum outcomes: whatever it is that one society gets, somebody else has to lose or pay for. We need to go into positive sum thinking.

The Club of Rome over the last 30-odd years has been basically concerned with systems, and linkages between systems. It has looked at stocks, ﬂ ows and the links, and the delays between them. It has found that systems have very strange behaviour patterns. They are often counterintuitive. They do things very differently from what you might expect from so-called common sense. And one of those things is, because of the delays in systems and delays in the knowledge that we have about systems, the possibility of overshoot and collapse. We have world systems in which very suddenly the climate changes or the oil ﬁ nishes, or something happens, and we say: well, we did not think about it beforehand. It is also concerned very much by the limits: limits set by nature, by social processes, and by human potential.

These problematics we espouse to look into solutions for: ‘resolutics’. How to bring economic, social and environmental issues together, to perform, to lead to sustainable development? So our proposition is that GDP has become a surrogate for a way of thinking, and what we have to now look at is deﬁ n- ing what is a good life not just by what we have, but by what we are. And that needs very different kinds of indicators. The low-hanging fruits among these indicators are that we need, as my previous speaker just said, much better collaboration

between civil society, universities, business and ©Photo European Parliament

108 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

Miloslav Ransdorf Vice-Chair of the Committee on Industry,

Research and Energy of the European Parliament Conference

I have some interesting experience from when fi nancial fl uxes. No economic crisis of the last I worked for the Institute for Forecasting in two decades has been the subject of a warning the Czechoslovak Academy of Sciences. We from economists beforehand. When in recent prepared some projects and recommendations years, some Nobelists were put on the board of for the government in this interesting period in one fi nancial fund in North America, the result the eighties. One of our colleagues, Mr Klaus, was an enormous loss and a further 70 billion now the President of our country, said that dollars had to be put into economic structures economics is completely different from other to avoid even more bitter consequences. social sciences because it is a hard science. Other social sciences are only soft sciences, So the mainstream of economic science func- including sociology, psychology, history, etc. tions more as political ideology than as a sci- But my thesis is completely different. After entifi c analysis. The problem is that modern this experience, when our state was governed advanced society is the society of universal by economists, I have to say that economics mediation, as was said for the fi rst time in functions more as an ideology, as a political Hegel’s ‘The Phenomenology of the Spirit’. This ideology in our own days, and this ambition to universal mediation is something very diffi cult be universal or to be a hard science cannot be for us, because more and more, these essen- fulfi lled. The recent situation of economic science tial processes in human society are mediated is described by Paul Ormerod in his famous book by phenomenal structures and phenomenal published in 1994 ‘The Death of Economics’. processes. From this analysis, it is evident that all social sciences try – at least – to analyse their own It is also the problem of GDP. GDP does not basic assumptions. Economics takes these basic refl ect the development of human society in assumptions as given. This lack of capacity to all its complexity, as has been pointed out by refl ect on the real basis of the analyses is maybe my predecessors. For example, if you expand the problem of economic science today. Ormerod the clearing of rainforests in Brazil, that would pointed out that no forecast of economists has obviously contribute to economic boom and been fulfi lled in the last 20 years, including expansion of GDP in Brazil. But the social cost fi nancial breakdowns as in Mexico, Brazil and for the future would be imminent. The same can Russia. We can fi nd examples of this thesis now be seen with the growth of China. China in a recent book published by Mr Greenspan, is praised as the “recipe” for many countries the head of the Fed. In Mexico, just one week in the third world. The growth rate of China before the crash, the International Monetary is astonishing, it’s true. But Foreign Affairs Fund published a very positive evaluation of the published an interesting article dealing with development of the Mexican economy. And one the problem of the environmental cost of this week later, everybody was panicking, because growth. This growth is extremely expensive as it was necessary to put some 50 billion dollars regards energy input. The Chinese use more into the Mexican economy to avoid spreading energy per unit of GDP than the advanced this crash to other countries. European countries or Japan: fi ve times more than the US, and even three times more than The second problem which is evident in the India. We can see the degradation of the envi- recent situation of economic science is that most ronment. We can see the terrible impact on economic analyses concentrate on phenomena. nature, water and air pollution, and even the They omit to analyse the essential processes in expansion of desert. Desertifi cation proceeds human society. The majority of economists who at 1960 square miles per year, despite the fact have been awarded a Nobel prize worked in the that the Chinese have started very ambitious fi eld of the analysis of fi nancial derivatives and projects of reforestation.

19 & 20 November 2007 109 Conference

So with these examples we can demonstrate that this push towards a higher rate of GDP and economic progress is not the remedy for social problems. In China, even the Communist Party of China refused to introduce the very principle of minimum wage, arguing that all labour should be governed by market conditions. Respecting the recommendations of mainstream economists cannot resolve environmental and social problems.

I have to say, as was mentioned by Mr Radermacher, that there are also other indicators which can be of assistance in evaluating the situation of recent societies, like the index of social progress devised by Richard J. Estes in the nineties. It would show that a very important factor for citizens in our societies is disposable time. Disposable time can be measured. So it is something which is very important for the quality of life.

To conclude, I have to say that the recent crisis in economic science is a challenge for everybody working in this ﬁ eld. Social sciences need to give us new and fresh ideas, to eliminate the dominance of mainstream economics. We need economic heretics, as one Russian writer, Zamyatin, said in one of his essays: “Heretics are the only remedy against the entropy of the human spirit.” ©Photo European Parliament

110 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

Jérôme Vignon Director, European Commission, DG Employment,

Social Affairs and Equal Opportunities Conference

I am going to outline to you the way in which of them. Those that you see here have come the indicators, and by these I mean essentially from the contributions of statisticians, but there social and economic indicators, are used for is also political input in accordance with the the development of a European strategy to three criteria indicated by Mr Radermacher: combat poverty and exclusion. So if you look consistency, likelihood and veracity. These come at the triangle – economics, social affairs and together to help the 27 Member States. You the environment – I shall take just two points of need a passage between statistics and politics the triangle. But I shall be going to the heart of if you are to have indicators that enable us to this conference as I consider how better to use guide ourselves. quantitative indicators, to inform and motivate politics and policies. These 14 indicators are intended to illustrate two main objectives in the European strategy You have a list of 13 plus 1 indicators, 14 then, to combat poverty and exclusion: which have been chosen from among the 42 structural indicators and these are for the use - Our ﬁ rst objective is to increase social cohe- of 27 members of the European Union (see slide sion, to reduce poverty; above). These are benchmarks to enable them - And the second is to measure interaction to measure their commitment to and progress in between growth, employment and social combating poverty and exclusion. Here we have cohesion; to create a bridge between the the illustration of what Mr Giovannini touched classic macroeconomic objectives of growth on in his opening remarks. We are in a complex and employment and the objective of social environment with complex objectives and if we cohesion. are to reduce poverty and social exclusion, we must have not just one single indicator at our So we are looking at the complex issues that we disposal but a whole plethora, a whole family are studying in this conference. Now in my brief introduction, I shall use just four of these indicators, as I answer the question: is it true that growth in employment does contribute to diminishing poverty and exclusion? Or, under what conditions can growth diminish poverty and exclusion? I shall use indicator 1, the red one, measuring the risk and intensity of poverty; and I shall use the 11th one, i.e. poverty of those who are working, the in-work poverty risk. I shall use indicator 5: looking at households where nobody works, jobless households; and then indicator 12, which is macroeconomic par excellence, participation in employment, in other words activity rates.

19 & 20 November 2007 111 Conference

The development of the poverty risk over 5 years is something that I will not show you on a slide, because we do not have ﬁ gures for all the members of the European Union. But this shows the importance and delays in statistical investment. I am not able to show developments in poverty over 5 years for all EU members, but only for a few. But with regard to those for which I do have the statistics, I have to note that for those from 5 to 10 years of age, the poverty rate is not drop- ping; it is starting to increase and this despite an increase in growth and employment.

This brings us to the next question. Why is it that despite important progress in growth and employment – this is the so-called Lisbon This graph above shows you the scope of the strategy, and we are talking about the last fi ve political problem just in the European Union today, ears, in particular since 2003 – why is there no with its wealth. I am not talking about developing apparent change in the risk of poverty? First, let`s countries. On the left hand column, you see that use our indicators to try to fi nd an explanation. We about 16% (1 European in 6) risks poverty, the 60% may have work, we may be amongst those who threshold; and one child in 19 (in other words, 1 in benefi ted from the recently created jobs, and yet 5). Looking at the graph, you see how an increase we can still be poor. This explains why growth in in adult poverty leads to more poor children. And employment does not affect radically the poverty we come to a political conundrum here: the risk of rate. Looking at the columns (see graph above) poverty for children and the poverty rate among you see the poverty rate of those in work (it is in children is higher than that for adults. This is one the order of 8% for the EU); the arrow shows the of the reasons why the European Union is looking variation in employment over the last fi ve years. At at this as part of its sustainable strategy. It wants fi rst sight, if you look at the left side of the graph, to cut poverty among children. you might think that those countries where there has been only a slight variation in the numbers in work would also show a very low proportion of those in work who are poor. However, if you look at the right hand side, an increase in the activity rate – you see the arrows, where these are very high – this is to the detriment of the quality of the jobs that we are considering and therefore the pay levels. But this is a judgement with two very weak, simplistic criteria. If you look more closely at the right hand side of the graph, you can see that some countries have, despite growth in activity, managed to keep a relatively low proportion of poor workers, whereas if you look at those on the extreme right of the graph, although there is greater activity, the proportion

112 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

of poor people in work is very high. So this means that with just two indicators, it is not possible to make any meaningful social analysis. We need more. This is one of the points Conference I need to stress.

I wish to stress that it is all well and good to have indicators, but there are certain contradictions between the relevance of an analysis and its ability to provide an explanation for us, and then the simplicity of communication. If I add two or three further indicators to this graph, it becomes illegible and impossible to transmit or communicate. We have to live our daily life and our problem is to produce a message that is read- able, that is comprehensible.

We need more indicators and at the same time, we need to be able to provide an I just want to say one more thing. Using a group accurate method that will put us on the right of indicators which are not very numerous but course. This is extremely important if we are to are signifi cant, it is possible to provide pointers understand these diffi culties, and if we are to for decision-makers if these are social and can reduce poverty even when there is a growth situ- be linked to the major indicators of employment ation of employment. When we look at families and growth. (see graph below) or households where no adult is at work, and we have very important infor- And there is a second point I wish to refer to mation from the vertical column in this mauve here, namely the importance of health indica- colour, we can say that since 2001 the proportion tors. I do not have enough time to present of adults living in families where nobody is in this to you, but by adding them to what I have work has not changed. Consequently the poverty just described, we have very good additional rate of the children in these families remains explanations to enable us to understand the very high. There we have the strongest message diffi culties there are in ensuring that employ- in social analysis to help decision-makers. ment policies reach those families and people who are furthest away from work today. Looking If we do not look at the way in which progress at the future, if in those areas with which I am on the labour market affects those families, concerned we are to make additional progress, where there is nobody at work, no adult at work, we need to look at citizens’ health and the link if we do not worry about the way in which the there with the environment. One of the best development of employment affects only those windows for social and economic policy to open where there is already one adult at work, then up to sustainable development involves knowing we are not going to be able to deal with the more about health, because if we work on that issue of poverty at its very root. we quickly get to the environment.

19 & 20 November 2007 113 OPENING AND DISCUSSION

cies with a very similar view, not just to go beyond GDP, but to develop measures that can be used not only by policy-makers, but also by other decision- makers including citizens, including ourselves as individuals. We heard about civil society’s initiatives, like local communities and associations who have developed measures of progress, of well-being and so on. We have heard about the commitment of some governments to take this forward. We have heard representatives of parliaments, not just the • Enrico Giovannini European Parliament, associate themselves with this effort. We have heard international organisa- Chief Statistician OECD, tions, statisticians, and also representatives of the Chairman of Session 4 business world, media and citizens.

This session is on “The way forward”. I think that How to bring all these different constituencies over the last two days we have heard a lot of together? This is a big challenge and is one of the important, interesting speeches and statements. points I would like to suggest for our discussion I think that the challenge ahead of us and espe- this afternoon. But it is clear that we have a lot of cially ahead of the panellists in this last session actors involved and committed to take this agenda is to try to homogenise them, to fi gure out how forward. The risk is that we will increase confusion we can progress, and where to go from here. Let instead of improving collaboration. We have to fi nd me say just a few words from my perspective. a way to work together and give a sense to the As you have noticed, the panellists represent the fi nal stakeholders that we are working together different institutions that have co-organised this and not fi ghting each other – as somebody said conference. today, our world is too accustomed to competing and in some cases, to fi ghting. The president of WWF had to leave, but all the co- organisers of the conference are represented, plus The second point is about measures. We have the world of offi cial statisticians. So let me, fi rst of heard about different approaches, and my personal all, introduce the membersof this panel: conclusion and summary, again for discussion this afternoon, is the following. A single number? - We have Mr Walter Radermacher, No, that is not a solution. We cannot reduce the President of the Federal Statistical Offi ce from complexity of our world to a single number. GDP is Germany; not the right single number, but there is no other single number that can really represent the com- - We have Mr Ashok Khosla, plexity of our world. We have heard some positive co-president of the Club of Rome; words about composite indicators, and I think we should share this view. Composite indicators can - We have Mr Miloslav Ransdorf, be helpful, but they do not answer all the ques- Vice-Chair of the E.P. Committee on Industry, tions. In the short run, key indicators were quoted External Trade, Research and Energy; as a possible solution with the possibility of giving good answers with some weaknesses, but I have - We have Mr Jérôme Vignon, heard from many speakers that key indicators are Director, European Commission, used in practice and are seen as the possible way Directorate-General for Employment, forward. The long-term solution, and we have to Social Affairs and Equal Opportunities. accelerate this transition as much as possible, is to extend the economic national accounts frame- I will take just a few minutes for the introduction. work to other domains and extract meaningful and I also ask the speakers to be brief in order to allow coherent indicators from this extended framework. you to take the fl oor and provide your comments We have done a lot on the environmental side, at and proposals on the way forward. least in theory, but now we need to implement what has been developed on paper. On the social I draw three main conclusions from this conference. side, human capital and social capital, we are still lagging behind. But it is clear that in the medium- The fi rst one is about the actors. We have seen long term, the extension of national accounts seems a lot of people representing different constituen- very promising, although costly.

114 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

My third point is about communication and Now I turn to the next speaker who repre- empowerment. It is not enough to engage sents one of the most important institutions in people. It is not enough to develop good meas- Europe, the European Parliament; one of the ures. We need to invest in communication and most important not just because they hosted this empowerment. These two key words have been conference, but because the Parliament needs Conference mentioned several times. We need to engage to be fully engaged in this effort. Mr Ransdorf people; we need to help people to understand is Vice-Chairman of the Committee on Industry, the world they are living in and their society. Research and Energy. We need to increase the accountability of governments. We need to invest in tools like those For speech of Miloslav Ransdorf, that Hans Rosling showed us, to allow people to see page 109. transform information into knowledge. Again, this is a big effort. It is not just about statistics, it is an investment in public good, which • Enrico Giovannini is common knowledge. Chairman I will stop here. Indeed, the challenges that you mentioned are very well perceived by those, who, like me, I will come back a little bit later with some are economists by training and statisticians by proposals for the way forward, but I want to practice. give the ﬂ oor now to the ﬁ rst speaker of this afternoon. Walter Radermacher is a very well- As somebody said in the Istanbul forum: “You known chief statistician but he has also been statisticians and economists have a big respon- working for many years on green accounts, so sibility.” So I feel on my shoulders a special his heart is very close to what we have been responsibility to try to answer these questions. debating. Fortunately I am not alone. We are working with several institutions, and one of them For speech of Walter Radermacher, is the European Commission. The European see page 102. Commission was one of the subscribers to For speech of Ashok Khosla, see page 106. the Istanbul Declaration. Of course, we have long-standing collaboration and, I would say, strategic cooperation with Eurostat. • Enrico Giovannini Chairman I am very glad that Mr Vignon will give the perspective of the European Commission, particu- Thank you very much. I would just like to under- larly because we have heard some very strong score two points that I found extremely impor- words from the President of the Commission and tant in your speech. from the Commissioner for Economic Affairs, and then the Commissioner for the Environment will One is the importance of variation. Statisticians close our meeting. So indeed, the Commission are a little bit worried about variance because is a very important player in this endeavour. they do not feel safe in dealing with distribu- tions. They prefer to talk about averages. But For speech of Jérôme Vignon, see page 111. we have a lot of data that can be used to show differences. I think that your call to pay more attention to differences, and to variance of phenomena, is very important.

The second point that I like very much is your point on systems. This is not something that we can solve as individuals or that just one group or one country can solve. We need, as we said yesterday, to develop new institutions that can help to draw attention to such phenomena using reliable ﬁ gures.

19 & 20 November 2007 115 OPENING AND DISCUSSION

• Enrico Giovannini public to underpin public debate on global issues.” Chairman We are suggesting creating national roundtables. But again, we cannot solve these problems without Perhaps you cannot see it from where you are, but also thinking about the institutional setup. I am glad to say that a lot of people are visiting the European Parliament these days and so we have Finally, I very much like what one of the speakers people in the gallery who are following our work. I this morning said when he talked about this “car- would guess that they will never forget the ﬁ gures refour du savoir (knowledge crossroads)”. In other they have just seen. This is one way to underline words, the possibility of putting people together the need for us to reach the people who at the end to learn more, to increase their knowledge about of the day make decisions. It is very nice that this what the world is doing. We need to have stronger conference has had some external audience over alliances with the media, because as Mr Ransdorf these two days. mentioned today, we live in a world where the media are very powerful. And we need to engage Before opening the ﬂ oor for discussion, let me be them in this effort. a little provocative, taking one of the ideas that came out of the workshop yesterday morning. I will stop here. We have 45 minutes for our discussions. We were reminded that a similar conference took place some years ago and that not very much happened afterwards. Somebody said: “We need • Georges Menahem an action plan!” This time, we do need an action CNRS, France plan! We need to try to identify after this conference what we will be able to present at the next I want to draw your attention to the link between conference, perhaps in 5 or 10 years. Here I would what Mr Vignon said in his very enlightening pres- like to call your attention to some deadlines that entation about employment and labour, and what have been mentioned throughout these days. Dr Khosla said about poverty.

First of all, the OECD, together with other organisa- Now, Jérôme Vignon’s statistics were concerned tions, is planning to hold the Third World Forum on with the safety that is supposed to be provided by “Statistics, Knowledge and Policy” in October 2009 the social protection system, the social security sys- in Korea. This is a possibility to show progress. tem – safety for workers, especially poor workers or But then, as we heard yesterday, the EU needs to unemployed workers. These were supposed to be be discussing the post-2013 strategy. So 2013 is covered by social security but this does not apply another deadline that is important. in all countries. In a sense, there is a challenge now to social security systems. They work in some Then we heard about another deadline which is countries, but in other countries they don’t. 2015, when the Millennium Development Goals will be rediscussed. So we have ahead of us, almost So this leaves me with my question: why in this every two years, an opportunity to do a check of conference are we not talking about indicators what we are doing. I think that this timetable did which would enable us to compare social security not exist 12 years ago, and it is important that we systems? keep it in mind. One of the speakers this morning, Patrick Viveret, We also have something else. We have seen how clearly challenged the responsibility of fi nancial many taxonomies are being developed around the and monetary movements which can direct the world. We heard, for example, that in Latin America, economy. This is directly linked. There is just one Bogotá, Sao Paolo, Rio de Janeiro and many other indicator, the modifi ed security index, which makes cities are trying to do exactly what has been said it possible to compare the different social security here. So we have an incredible wealth of experience systems and the outcome shows us something around the world and we need to try to fi nd a way very clear. On the one hand, we have the demo- to bring them together. We have to start talking cratic social systems. There is the Swedish social about this institutional setup. Mr Figueiredo yes- democratic system for example in which we have terday during the workshop said for example: “We 28% level of protection. Then in the US there is a need to build institutions”, and he added “at global negative level of protection. Poverty is not covered level, that have the authority and the legitimacy to in the US. In the middle we have France with about provide key high-quality statistics to the general 15%, and the UK at about 8%. That is a liberal

116 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

system where the weight of the fi nancial sys- are stuck with the commonplace interpreta- tems is greater. The question is why don’t we tion of economic theory. Consumer preference ask ourselves about the value of social security measures everything all at once, preferences systems? and results. We suppose that the consumer is omnipotent and covers all of that. It is not true, Conference so it is not worthwhile imputing those to the poor • André Vanoli people who are sweating to calculate GDP. the French Institute of the Environment If we want to measure the results more effec- I really must say a few words, not as a defence tively, and if we look at the indicators which are or illustration of GDP, but to qualify part of the proposed here and there, we need to develop discussion in this conference, in particular this a new branch of statistics looking at states of afternoon. On occasions, I have had the impres- health, education, and security. Many features sion that GDP could be translated as “Group of of this sort need to be developed, and apart Devious Partners,” “Devil’s Partners,” or “Group from some spheres such as education, it does of those who plot against the welfare of man- not get very far. Health takes us a bit further, kind.” The problem with this sort of criticism is but not that much further; we have not done an twofold in nature. awful lot there. But since the beginning of the 1970s when the movement for social indicators On the one hand, it seems to me that it does developed, the distinction between the means not do justice to the wonderful development and the end is caught in this. in statistical information systems, particularly over the last 50 years. But even more so, par- One last point. It seems to me that during ticularly when we consider social statistics since this conference we have underestimated the the 1970s and the Club of Rome challenging state of the necessary information. It was very certain characteristics of growth. Social statistics clear in yesterday morning’s workshop when have been much developed in many countries. on several occasions the impression was given There have been reports on social situations that basically the statistics available, the data and much criticism over the last couple of days are not all that bad. I think that this assess- has been levelled at the so-called GDP fi nding ment came from those who look at many very answers where they should be found. On social detailed lists of indicators and have to pull them statistics, we could en passant pay tribute to together. But apart from that, and particularly Richard Stone who did a lot to develop things for all of those looking at the deterioration of nationally, providing a social and a demographic national assets, consumption, by society, we statistics system that has not entirely seen know far too little to answer the questions that the light of the day, but he at least sowed the are being asked. I do not want to discourage seeds. statisticians in their efforts. Fortunately Walter has experience here. He has shared it with us Then secondly, there are no doubts about meas- on several occasions. He has laid stress on the uring production. But if you ever do challenge contradictory requirements made of statistics, this, then it is just fruitless to concentrate on but in these new areas where we need far more a thermometer. GDP is nothing other than an information and analysis, we won’t shine with overall measure of production. And for the last nothing or virtually nothing to hand. 40 or 50 years, we could have had a general production index, as we have for industrial production, but as there are many factors miss- • Andreas Siegel ing – we did not know much about statistics Council of Europe on services for example – what we have is the national accounts, GDP, looking at the market Having been able to follow the Istanbul and various other factors. Conference as well as this conference, I think there are three dimensions where we have to It seems to me that a major mistake is being move forward: made by mixing up those goods and services which are covered by GDP as a means, and then - Firstly, we need to explore further the sig- the outcomes of using the goods and services nifi cance and the scope of what was called in question. We need to understand that if we earlier “intangible capital.” I think we have are to make progress, because otherwise we explored much of the fi nancial and natural

19 & 20 November 2007 117 OPENING AND DISCUSSION

aspect, but this intangible capital needs to be whereas the problem is really more of a policy and valorised, valued even more; political problem about how citizens themselves are involved in determining the measurements of - Secondly, we have to explore what kind of progress. And I think Patrick Viveret put it very well mechanisms we have to achieve a consensus when he said that the core problem democratically on indicators. As was said, the data is there, we is that the concept of progress that operates in the have a lot of choice, but we have to make that world is one that is not democratically decided, and choice, so how can we do it; that essentially it’s visited upon us increasingly in a global world and by fi nancial institutions. So that - Thirdly, and most importantly, we have to look is a core democratic problem. into managing process, how to regulate the institutional aspects and the follow-up of knowledge. Other problems are that indicators then become How do we translate knowledge into policy- exceedingly important in infl uencing government making? I think there is a general agreement policy and therefore outcomes. that there is still a big gap in this area. Thirdly, the quality of democracy and human rights As far as I can say, we should defi nitely adopt a itself is an issue in progress, which, as Andreas complementary approach with different options, was saying, needs to be part of the measures that different ways We do not have to reinvent the we use. So I’d like to suggest that we give more wheel, because we already have some models. attention to this and I’d like also to make the point And of course, I’d like to mention that the Council that there are good models. It is not simply a mat- of Europe is actually a regional and sectoral option ter of researching indicators. There are many good which we should take into account. It does indeed models. I would say, there is a global movement have a proposal to manage specifi c aspects of now of developing well-being measurements as a well-being, and a whole cycle of progress, in what community engagement strategy, in thousands of we would call the aggregated notions of human small communities and local governments, through- rights, democracy, rule of law, social cohesion, out the world. In my own country, in Australia, we and cultural diversity. This can of course develop have a law that now requires that local govern- into indicators such as dignity, respect, tolerance, ments of about 60,000 have to develop long-term participation, security, good governance, predict- plans of 5 years involving their citizens and setting ability, solidarity, etc. All of these are actually put clear economic, social and environmental goals, together in 200 different conventions elaborated with indicators determined by the citizens. There by civil society, and experts, and agreed upon by are many other practices that could be adopted. governments. They are verifi ed by monitoring Canada 5 years ago tried to introduce a National mechanisms. There are even support mechanisms Progress and Well-being Measurement Act to make to help governments come up to the level of expec- it compulsory for a report to the parliament each tation, and then there is of course evaluation to year on the progress and well-being of Canada, start the process again. across a series of dimensions. That is something that all EU countries should be working toward. I am proposing that we do not disregard existing Canada did not proceed with that, sadly, but the models where we have a process to manage the Canadian index of well-being is important. whole problem already available. The measurement of democracy itself needs to be part of the way forward as one of the measures. I • Mike Salvaris want to commend the OECD project on measuring RMIT University, Australia the progress of societies, because I think it is an exercise in global leadership which has recognised I want to suggest that in moving forward we need that it is not simply about measuring progress. It to consider more seriously the issues that have is about defi ning what progress means and mak- been raised in many ways by different people ing that a democratic debate that is participated throughout the last two days, concerning democ- in by communities. It is about good governance racy, civil society, and communication and building and democracy and not just technocratic issues in indicators. or better measures.

I think to some extent we are still on the quest for a kind of Holy Grail here. We are still looking for a set of indicators that are going to solve the problem,

118 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

• Raoul Weiler rally around. From a historical point of view, Club of Rome, Brussels I would just mention that about ten years ago, a small group of thinkers at that time sat I want to make some suggestions about the down, spent some time, and developed what appeal for action plans for the way forward. became known as the Bellagio Principles for Conference I refer to the presentation of the President of measuring progress and sustainable develop- WWF yesterday, in which he mentioned some ment. It was not a common set of indicators, numbers about the footprints we are dealing but a set of common principles that took us with today and which look likely to increase in ahead a little bit. Maybe it is time to take the near future. This also relates to what the another look at this question. This could be President of the Club of Rome said about over- something practical. shoot and collapse. 2. It might also be useful to run some scenarios The overshoot or the footprint is created in from a sectoral point of view. If we indeed go the ﬁ rst place by the industrial world. As the ahead, and complement or change – I mean President of WWF said yesterday, some of our that broadly – the way we measure progress, countries have a footprint of 2.6, and these at both the micro and macro level, what are countries correspond to about a billion people the implications in practical terms for a par- on our planet. So I would recommend that the ticular sector? I am thinking about running indicators to enlarge, or develop, the overshoot the sort of scenarios we do when we make situation be taken into account for let us say decisions from the perspectives of consum- a period of 20 years, till 2025. That is the ﬁ rst ers, producers, regulators, and so on. point.

When we look at the evolution of the emerg- • John Hontelez ing countries, which is today roughly between European Environmental Bureau two and three billion people, they are facing an overshoot in the very near future, if that trend Mr Chairman, you mentioned a few deadlines for continues. Then, last but not least, there are further discussion. I would like to suggest one 2.5 billion people who have an ‘undershoot’. more, which is 2010. I think the new Commission So I think that our industrial societies, and should present a new Lisbon agenda. The ﬁ rst the European Union especially, should focus agenda was set in 2000 for a decade. It was especially on how to reduce and even achieve a characterised by dominance of GDP indicators, negative development in terms of footprint and including attention on employment. But, as overshoot. So it seems to me essential for the Mr Vignon has shown, it is rather poor on social way forward, that this recommendation should inclusion, and, as far as we are concerned, be explicitly taken into account. also rather poor on the environment. In 2010, Europe will know what its supposed Kyoto obligations will be. We will also know whether we • Laszlo Pinter have achieved the target of halting the decline International Institute for Sustainable of biodiversity. We can also see whether the current approach can indeed promote social Development, Canada inclusion. The new Commission should launch I will try to be quick and practical. I have two a real sustainable development strategy for the suggestions. EU, with GDP as just one of the main indicators for progress. It should bring the EU back into 1. It is quite clear from the discussions we have line with its carrying capacity, and pay more had today and yesterday that although there attention to social inclusion and a responsible are different perspectives, there is a lot of world at global level. So I would suggest for convergence, not necessarily on indicators, discussion about the follow up to clearly target but on certain principles for how we should a new Lisbon agenda. proceed. I think the practitioner community on all levels that is interested in measurement, might beneﬁ t from having some of these principles synthesised at a very high level. This can then be something that the global community interested in these strategic issues can

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• Stephen Hall be very sensitive as to how we frame this whole Department for the Environment, UK debate. There was some discussion on the role of China and the emerging economies in this, and I am not sure whether I will go home today feel- it is very crucial that we recognise some of the ing very positive about all this discussion about research that WWF has thrown up, namely that going beyond GDP, or very depressed. I come from a lot of the emissions and environmental impacts developing the UK sustainable development indica- that are happening in countries like China, India tors, and I feel that myself and many colleagues and Brazil, are actually largely connected with in other countries have been working hard for a consumption in the Western world. So it is prob- number of years to develop indicators that cover ably not useful to point fi ngers at this stage but something more than GDP. The main problem is actually to recognise where our responsibilities lie that we have been doing this, but we have not in the industrialised world and focus on how we quite got the message across yet. work towards a fair one-planet vision, rather than setting various economies against each other. As The key question is: How do we get the mes- regards contribution to environmental degradation sage across? It may be that we just have to have in particular countries, a lot of responsibility lies the policy perspectives changed. Perhaps we are with the industrialised world. It is a very important putting too much weight on our own shoulders, as part of our communication message that needs statisticians who feel responsible for this. Because to be taken into account if we want to have more people from the Club of Rome have been talking economies on board for this agenda. about this kind of issues for 30 years, and ‘Limits to Growth’ was written 30 years ago. The message still has not been taken up by policy-makers. • Pavle Sicherl University of Ljubljana, Slovenia I am not sure that as statisticians we alone can provide the solution. There has got to be some Marcel Proust said that the road of discovery is not kind of political change as well. We can go with in seeking new land but in seeing with new eyes. that political change and provide the answers to What we are trying to do now, is look with new eyes some of the questions, but the political change at different new aspects, different dimensions. But has got to happen. Maybe this might just happen I would like to go one step further, and say that as a result of pressure from the public, and one we also need to use better existing indicators and of the ways through which we can do that is be the new ones we are going to develop. more innovative about our communication products. Particularly we should be focusing efforts to I very much like what the panel was saying today, provide educational resources so that the children about communication and empowerment, and who will be the adults of the future will have a bet- investing in tools to allow people to acquire knowl- ter awareness of environmental and social issues edge. But perhaps more important than talking than the current generation. I think that is one about statistical methods is to see how, if you look way forward. The diffi culty is to try and deal with at the same data from different perspectives, you the current generation. There is a lot of research can reach new conclusions. that suggests that you can raise awareness, you can raise knowledge, but you still won’t get peo- Let us look at, for instance, at male and female life ple to change their behaviour – and that is where expectancy in the European Union. If you look at the political side comes in. There has to be some it in the usual way, which is the vertical way, at a bravery on the political side to just leap and make given point in time, in 2000 it was 8% higher for some changes. females. If you look at it the other way around, which is the time distance that you go for a given level of the indicator, you might ask: When was • Liz Craeynest the life expectancy for males in 2000 achieved by WWF, UK females? In 1971, a time distance of 29 years. What does this mean? Simply that from the same I just wanted to make a comment as well on the data you can say: We have a small difference if communication side of things for the action plan you look at it percentage-wise. But if you look at on how to take this forward. One of the things it from the point of view of time it is a large one. that we defi nitely need to do that needs to be at the heart of this agenda, if we want to take it So what I am trying to say is: We should use indi- out of this room and out of Europe as well, is to cators more widely, because otherwise interest

120 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

groups pick the one they like for their argu- developing countries. It is progressing but a lot ments, and do not look at the whole situation. of work needs to be done. So we should be saying: yes, as Ms McGlade was suggesting in the workshop, we should have indicators which are understandable to people • Frank Corcoran Conference in the street. I would simply add, indicators European Environmental Bureau and statistical measures should be understood by people in the street. Now we do not have GDP is a one-dimensional indicator but it never users, only governments and decision-makers. pretended to be otherwise. It has just been You remember what Hans Rosling was showing abused by people, that is all. us. Now the information goes straight into civil society, and we also need tools which will help The Lisbon process is a two-dimensional process them to get perceptions about situations in a dealing with competitiveness and employment. democratic way. The European sustainable development strategy on the other hand is a three-dimensional process. The problem has been that people are • Stephen Pursey trying to use a two-dimensional process to solve ILO a three-dimensional problem, and that does not make any sense at all. So as for the solution, we I am a little worried that we are running away do not have to invent a strategy. The strategy with the idea that we have enough basic data is there. It is called the European Sustainable to come up with a plethora of indicators. That Development Strategy. All you have got to do may be true for the EU and most industrial- now is implement that, and demand of the ised countries but I am not at all sure that it Council of Ministers that they use this plethora is true for the majority of the world, and the of indicators, the sustainable development indi- world’s population, certainly the least developed cators, to input into the Council deliberations, countries. so that they can implement the sustainable development strategy and tell them to stop try- I think the statistical services of many least ing to solve a three-dimensional problem with developed and quite a few middle income a two-dimensional strategy. developing countries are sometimes very badly underresourced. So, as a very specifi c recommendation for a way forward, could we agree • Anders Wijkman that perhaps all countries should have done a Member of the European Parliament least one reasonably comprehensive national household survey, with a labour force module I did refer to some of the conclusions from the by say 2012, with the results tabulated online expert group yesterday, and I think we had some by 2014, in time for the 2015 review of inter- forward-looking proposals, in particular pertain- national development strategies? Of course, ing to areas where we need more information to make that happen, that means that those and knowledge. One was related to ecosystems parts of the public authorities, national and and ecosystem services. Another to sectoral international that deal with statistics, will have policies leading to unintended consequences. to talk to development ministries. Because many A third really focused more on the trade-off countries will need support for their national between full-time work and time with your fam- statistical services and that typically has not ily and your children, etc. So we had a number been part of aid budgets. In fact it has usually of very concrete suggestions. But, and I think been one of the bits that drops off the end of you are right, even if we have more informa- the national budget. tion, more data, how do we oblige the leading policy-makers to use them, and to incorporate them, and to pay as much attention to them as • Enrico Giovannini to this almost magical GDP fi gure? Ashok told Chairman us about attitudes, and I think he goes really to the core of the problems. I do recall that Perhaps you or others are not aware that sev- when I worked at the United Nations, I think it eral organisations created “PARIS 21”, which was in 1994 or 1995, the theme of one of the is a partnership to try to engage governments fi rst human development reports was “Jobless and aid agencies to invest more in statistics in Growth.” And how ridiculed we were, because

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we dared to question whether conventional growth This conference has been very important, starting would result in the generation of as many jobs as in with the title. I was astonished when I saw the title the future because of automation, etc! So whenever of this conference, because I work here, and this you try to question some of those postulates, you conference is taking place in a place where the fi nd that those postulates are very strongly held, mindset – to use an expression of Mr Khosla – of not only by most economists, but, I would say, GDP is celebrated every day. The Lisbon Strategy by most of my colleagues. There is this theory of was intended here exclusively in the domain of the inverted Kuznets curve, which tells us that the competitiveness. The rest has been simply done richer a country becomes in material terms, the less away with. We need a new European strategy. pollution there is. It is a very strongly held notion, although we can show that for carbon emissions, Second point. The main actors of the economic for waste, for ecosystems etc, that wisdom is very and social system we live in are absent. The big questionable, to put it mildly. corporations, the big dealers in the gigantic fi nancial world, the big oil companies are not here. And they So we have to look very carefully and maybe that do not agree with our discussions today. They are could be a theme for the follow up: What are the absent ideologically, and de facto, which is a very barriers right now that stop us moving to real serious indicator of the situation because they are action? And one is attitudes, perceptions. Another enemies of this discourse. one is of course resistance within the fi nancial institutions. They have been criticised today, but Third point. We need a radical change in the behav- they have certain rules. If someone tells them to iour of the mass media system, which works to serve do it differently, they will of course resist, until the GDP mindset. Every day in every country. How they understand what the transition would look to achieve this is a central question, to provoke a like and how the future would look like. The same change in the behaviour of millions of people. goes with business models. Although our friend from BASF told me today that I was wrong, that Fourth and last point. We need a new institutional there were indeed a lot of examples of companies world architecture to face a very critical situation selling performance and quality, etc. I insist that where we do not have much time. The question most companies earn revenue by selling more vol- of time is decisive. We have ten years to take ume. So if business models have to be rethought, decisions. According to the Club of Rome`s pre- how is it being done, and what does the transition diction, the political elite in the world is reacting period look like? very slowly. 15 years, they need. I believe we do not have time. That means it is time to put the Last but not least, we have touched upon education. question of a new institutional world architecture If we strongly feel that economists are wrongly at the centre of discussions because we have no trained, and they are one of the categories that place where decisions can be taken. We have no do not understand much of this, well, then we idea where these decisions can be taken. We do have to do something about education. And I fully not need any more conferences and gathering data. agree with you. The Commission could two things We need places where questions can be put and in terms of follow up tomorrow: decisions taken. These, I believe, are the tasks we have to face very soon. - Merge the Lisbon strategy and the Sustainable Development Strategy. That would be very easy to do, and a welcome step forward; • Joachim Spangenberg Helmholtz Centre for Environmental - And you could also reconsider your thematic Research, Germany strategy on natural resources and increase your goal for resource effi ciency from 3% to 6%, I want to point to something which has not played a because 3% will lead us nowhere. big role in the discussion so far, which is the fact that progress has something to do with the future.

• Giulietto Chiesa We are usually working with indicators of a state, Member of the European Parliament and not about our preparedness for the future. For the environment, for instance, if you want to I speak in the name of the World Political Forum. I have a correction for GDP, you must be sure to have some suggestions, political suggestions. check that the system is ultimately future-proof. That has to do with things like the resilience of

122 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

the system, so the resilience of the ecological So there are good possibilities, many more system to elements like biodiversity and things than 10 years ago, for taking the present set of like that is a good indicator for the contribution indicators and projections alongside GDP. That to future progress. But that also applies to the does not give you corrected GDP, but it does economy. We cannot measure the economy at give you a set of information that has a high Conference the moment based only on one quantitative attention value and is highly relevant. That will fi gure without having any kind of idea whether not come from statistical offi cers. It will come the economy as such is future-proof. That also from one of the pieces of Walter Radermacher’s relates to what Anders Wijkman just said about jigsaw puzzle. But the community that has now the integration of the Lisbon strategy and the developed has its models and review systems sustainability strategy. You must have a per- available, and will be very happy to work with spective for the development of the economy. it. And in that connection, another deadline And that means for example asking: What is the comes to mind, in addition to the ones men- economic sustainability of the economy? How tioned by the chair. Very early in 2010 there resilient is the economy in case of disturbances? will be another round of reporting to the spring Is the economy sensitive to change, and can its Council on the state of a number of indicators. I early warning system pick up challenges? Are think we have just enough time to add a future there redundancies to deal with collapses? Is perspective to that set. the diversity of the economy suffi cient? Things like that are obviously important questions to address the issue of whether the economy is • Ivo Havinga future-proof. We must address these questions United Nations Statistics Division, as well, in addition to just quantitative meas- Department of Economic and urement, simply because otherwise we cannot talk about progress, we are just talking about Social Affairs state. So for the future perspective, I think these things must be addressed, and they only I have really enjoyed the whole conference and underline that these new questions need a new I want to bring forward my ideas, in a personal kind of economist. You cannot recycle the old capacity, with regard to the way forward. I have ones, you need to talk about education and formulated them for eight different topics, some breed new ones. of them reinforcing what has been mentioned earlier.

• Jan Bakkes One. I fully embrace the concept that it should MNP be a multipurpose system of perspectives. That means that we should not have a single com- I was one of the people who were involved posite indicator, but more. The human develop- in drafting the issue note for this conference. ment indicator of the UN has been mentioned. On this very issue of future perspective, I see We have talked about sustainable development practical possibilities. A number of people, indicators and we should move forward on them. among them Ashok Khosla, have emphasised That is the “Beyond GDP” and here we are talk- the short-sightedness that comes with the focus ing beyond GDP in terms of systems of national on conventional indicators, that keeps your accounts. Of course, the system of national vision limited to the next quarterly fi gures, accounts is already broader than GDP, but here while not noticing that your fi sh stocks are we are also talking in terms of the system of going to collapse. What has changed over the environmental economic accounting, and social past 10 years, is the way we are accustomed accounting matrixes; and of course in terms to forecast. A lot of things have happened, not of indicators we are talking about millennium only in climate, but also in biodiversity; quite development goals, which we are all very proud broad based assessments have been produced, of monitoring internationally. looking into the future and it is now almost a routine phenomenon that worldwide environ- Having said that, I come to my second point, of ment-focused assessments are being produced. course all these different sorts of indicators and The public and decision-makers are becoming composite structures, and integrated account- more accustomed to that. And one of the things ing systems, have to be updated from time they reveal is the enormous delays that add to to time. It has not been properly refl ected in the drama. the discussions about what is actually already

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happening on the ground at this moment, in terms And due to the fact that we very much stimulate of inclusion of medium-term and long-term views the system of national accounts by broadening its in economic statistics. By 2008 we will submit a assets base, by including also the natural environ- new system of national accounts and one of the ment in terms of environmental economic account- major contributions that has been made is the ing, we will have a basis for providing the offi cial inclusion of research and development and other statistics. So in that sense, I would like to echo intangible assets, as well as natural resources, with the position taken by Laurs Norlund, who said “I the perspective of getting a better understanding am rather optimistic, we have already gone so far, of growth analysis, in terms of understanding what and we are going forward.” So it is not that we are explains growth. Apparently the assets that we had developing a whole new paradigm shift today. We in the system of national accounts of 1993 were have to get increasingly more vocal about what insuffi cient, so we extended them to the areas that we are doing and bring that closer to those who I have indicated. So we hope to come to a better have to make policy. understanding of growth, but not only of GDP but also of other areas, like consumption, exports and If we have ambition, we need budget. So in terms imports and the like. of offi cial statistics, if you want to have greater ambition, you defi nitely need to provide the budget In terms of the SEEA (System of Integrated for it, and we are looking to the politicians to make Environmental and Economic Accounting) we have that available. I think it is not so much bringing already made headway in terms of discussion and GDP to the street. I do not ask for my little town revision, which will be brought to the Statistical to understand GDP. What I want politicians to do, Commission in 2012. We are incorporating deple- is when I provide them data, that they understand tion and degradation, as well as measurement of it and translate it into policy on the street, so that the ecosystem. There has been a whole team mobi- we really embrace issues, like poverty, distribution lised internationally that brings that together and and the environment. And that is where politicians, brings countries to debate these very issues. statisticians, accountants the government have to work together. In terms of the action plan, I think you defi nitely have to set deadlines. Some deadlines will have a Finally, I think the European Union has to lead by bearing; the system of national accounts with its example, and it does, and this conference is testi- already extended asset base is going to be moved mony to that, that it leads by example., You should forward in 2008. We have extended inclusion of be congratulated for doing that, both the Parliament natural resources by 2012 through the SEEA and and the Commission, as well as Eurostat in that we have the NDG discussion in 2015. particular context, and the public at large.

In terms of the engagement of the accounting And I really salute you all on that. What I do ask is community, we have to make headway. Already that if you lead by example, I would like that this in the United Nations, being very close to Wall followed through by Eurostat by developing a pro- Street and the investors, we do engage them on gramme for environmental accounting. It is much the intangibles in terms of understanding share- more detailed, that this kind of data will be made holders values, and we should go beyond that in available to the public. And ﬁ nally, if you lead by non-ﬁ nancial reporting systems, as has already example, you should also lead the implementation been mentioned, like the global reporting initiatives, in developing countries. And I am looking forward to and we embrace that. We have to engage more the support of the European Union in implementing fully in that sort of process, and they have to move a broader database in developing countries too. forward, not only in Europe, but also beyond.

Another point which I would like to stress: there is an enormous contribution by NGOs, private sector, ﬁ nancial sectors, in terms of developing indicators and productivity indicators and the like, bringing into account the limitations of growth. But I think there is a critical role to be played by ofﬁ cial statistics in terms of providing data in an authoritative and integrated manner. It is important to bring these data out with independence and integrity, which of course should be relevant.

124 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 The way forward

• Enrico Giovannini conference has been broadcast, and the images Chairman and all the speeches will remain, in future, as archived video. So people will be able to look We have had a very rich debate, not just in this at what we have said and I would encourage session, but over these last two days. Let me you to inform your constituencies about this Conference take this opportunity on behalf of the OECD to opportunity and encourage others to look at thank the host and the co-organisers and all what we have done. Presentations will also be the speakers and the participants in this very made available online and we hope to publish important event. the proceedings of this very important conference. So I think we can now close this session. This event is not just an event that is going to I am very glad that Commissioner Dimas has disappear. In the world of new technologies, joined us, and I would like to give him the ﬂ oor we are very glad to say that, as you know, this for the closing remarks. ©Photo European Parliament

19 & 20 November 2007 125

Session 5 Next steps & conclusions Conference

Stavros Dimas Member of the European Commission, Commissioner for Environment

The European contribution to a global effort: next steps in measuring progress

Distinguished Guests, Ladies and Gentlemen, that was held 12 years ago – also in the European It is a very great pleasure to be delivering the Parliament. And when you compare the two events, concluding address to what has been a very suc- there are good reasons to believe that this confer- cessful conference. ence can mark a turning point in how we measure and understand the world we live in. One of the measures of success is the quality of the audience and the speakers. Each of the part- A ﬁ rst change is that this debate has moved out- ners – the Commission, the European Parliament, side of the environmental community and into the OECD, WWF and the Club of Rome – have been the mainstream. We are now looking at progress, represented by their highest representatives. We wealth and well-being and not just “nature”. With have had 620 participants from 53 different coun- initiatives, such as triple bottom line accounting, tries attending the event. Industry, trade unions, businesses are embracing the search for new ways NGOs, academics and policy makers have all made of measuring progress. And with the support of their voice heard … and from all sides there is a the Presidents of Parliament and the Commission consensus that there is a need to move “Beyond this is an initiative that has political support at the GDP”. highest level.

Politics is about changing the world we live in. We A second change is the active support from eco- want to end poverty. We want better jobs. We want nomic and statistical experts as we look for ways to reduce pollution. In order to develop intelligent to move beyond GDP. I am very encouraged that policies we need to understand the world and organisations such as the OECD, the World Bank understand the impact that our policies make – or and Eurostat have all been involved in the organi- are likely to make. Politics without good indicators sation of the conference because it will be their is like trying to make a jigsaw in the dark. And expertise that takes forward the conclusions we just as the overarching priority of the European have reached. Union is sustainable development – which balances social, environmental and economic progress – our The ﬁ nal change is that a lot of excellent work has indicators need to be able to measure progress in been carried out over the last 12 years. We are each of these areas. not starting from a clean slate and concepts like the “ecological footprint” have caught the public I would like to conclude this conference by looking imagination. The World Bank has been taking back at some of at themes that were raised by thinking forward on concepts such as “natural other speakers. But before I do this I would like capital” representing the real wealth of nations. to extend my particular thanks to the European And tools such as integrated accounting and sus- Parliament for agreeing to host the event. The tainable development indicators have been steadily home of European democracy is an ideal setting for developed. discussions that are ultimately about changing the way that we make politics. There is also a sense For these three reasons – being in the political of continuity because this conference follows on mainstream, having the active support of econo- from the conference “Taking Nature into Account” mists and statisticians, and being able to build upon

128 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 5 Next steps & conclusions

a solid body of existing work – I believe that is one of the most vivid. The hurricane killed this can be, to return to the words of President almost 2000 people. It fl ooded 80% of New Barroso in his introduction, “… a truly ground- Orleans and caused widespread destruction to breaking conference that will lead to the sort property. It caused damage worth more than 80 of breakthrough that we saw in the 1930s, billion US dollars. And yet American GDP actu- Conference a breakthrough that adapts GDP, or comple- ally increased after the start of reconstruction ments it with indicators that are better suited work. It is quite possible for something that is to our needs today, and the challenges we face good for GDP to be bad for society. And it fol- today.” lows that, if boosting GDP is the only measure of success, we could easily end up doing more Looking back to the discussions that have taken harm than good. place, an important fi rst conclusion is that GDP is the most successful and best known indica- There were many new ideas raised in previous tor that we have. It is simple, it is clear, and presentations and I would like to come back to it has stood the test of time. I think there has some of these in order to draw some conclusions been general agreement that GDP is a rigor- that could help guide us as we look to develop ous indicator for economic purposes and that better indicators. it should continue to play a role in economic decision making. A fi rst conclusion is that there is no single alternative to GDP – and that to look for one would But I think all speakers have agreed GDP is be a mistake because it would miss the point not suffi cient to guide modern policy making that GDP has multiple uses. GDP is used for that covers social, environmental and economic communication purposes as a simple to grasp objectives. It is not a good indicator of well- proxy of progress. It is used for policy assess- being and this becomes a problem when GDP ment and design. It is used to decide the alloca- is understood by public, press and politicians tion of budget resources. One of the messages as the unique yardstick for progress. from the conference is that we need a set of indicators – but a very limited one – that can We have heard many examples of the limita- complement GDP in all of these areas. There are tions of GDP. The case of Hurricane Katrina a number of potential routes: from integrated ©Photo European Parliament

19 & 20 November 2007 129 Conference

accounting to new composite indicators. I hope Perhaps the main achievement of this conference that I correctly summarise the consensus of the has been to clearly demonstrate the political con- conference as being that we should advance on sensus on the need to go beyond GDP. President all fronts at the same time, and not try to pick a Poettering noted that “for too long we have focussed winner in advance. on economic growth as an alternative to welfare”. President Barroso concluded “that we cannot meet A very important point was made by Chief Anyaoku the challenges of the future with the tools of the from WWF who underlined the urgency of action. past. Commissioner Almunia felt that “the time is Current consumptions patterns are unsustainable ripe to take the measure of well-being one step and Europeans are living as if they had 2.6 planet further”. Earths at their disposal. This global overshoot is liquidating the assets on which life on earth depends The challenge now will be to pick up from the and is limiting the development rights of future conclusions of this conference and actually start generations. Perfection can be the enemy of the to improve our indicators and the way we use good and striving for the perfect indicator at the them. It is essential that the momentum is not lost ﬁ rst go is unrealistic. We need to be prepared to and I look to Europe taking a lead role – working experiment with tools that are perhaps less than together with other organisations including the perfect and then work improve them over time. UN, the OECD and the World Bank.

State Secretary Baleiras from the Portugeuse It is also essential to work closely with business, Presidency put forward very interesting ideas on NGOs and other stakeholders who in many ways how better indicators could be used in practice to are the real leaders in this ﬁ eld. On the part of the guide EU policies – and in particular the review of European Commission I can announce that we will the EU budget and the revision of our cohesion present a policy Communication next year that will policies. develop these ideas into a roadmap for action.

President Barroso noted that we should strive for We will certainly need to work on headline, compos- consensus to develop indicators that are globally ite indicators that can measure social and environ- recognised and comparable – which are two of mental progress. We will also have to speed up and the strengths of GDP. But at the same time, we improve the development of integrated accounting should not use this as an excuse for inaction. The in the social and environmental spheres. And to EU and its member states should be prepared to improve our governance of the European sustain- take the lead in looking for better ways of meas- able development strategy, we should also develop uring progress. and publicise a “sustainability scoreboard” based on existing Sustainable Development indicators. A number of speakers noted the need to have This tool is already well developed in other policy a better understanding of the value of stocks of areas such as innovation and would help Member natural resources and of the vital services pro- States to judge if real progress is being made and vided by eco-system services. This is an area to better identify good practices. where work – supported by the Commission – is ongoing and which I am sure will be a theme of next year’s ministerial meeting of the Convention of Biodiversity.

Anders Wijkman drew attention to the importance of timely data. We have stock market information every minute of the day. We have quarterly reports of GDP. But information on environmental trends is often years old by the time it reaches policy makers. On a similar theme the European Environment Agency drew attention to the possibilities that new technologies are creating for collecting and processing data in almost real time. This is something that we should be aiming for. The more up to date indicators are the more useful they are.

130 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 5 Next steps & conclusions

Ladies and Gentlemen, My ﬁ nal words are words of thanks. Thanks Distinguished Guests, again to all the partners who helped organise this conference, to the organising team, to the To meet the challenges of the 21st century we staff of the parliament for hosting us, to the need more integrated and transparent poli- interpreters – and most of all to the speakers Conference cies. To design these policies we need to better and participants. I hope that you have found the assess where we are now, where we want to last two days stimulating and also an inspiration go and how we can get there. GDP will be one for the work that is to come. of the indicators that do this job. But not the only indicator. To change the world we need to Thank you. change the way that we understand the world. And to do this we need to go beyond GDP. ©Photo European Commission

19 & 20 November 2007 131

Workshop Programme Workshop Programme

November 19

08:00 Registration

SESSION 1: Introduction: The challenge of going beyond GDP

09:00 Opening by the chair Chair: Anders Wijkman (Member of the European Parliament)

SESSION 2: Technical and policy challenges

09:20 The session offers an overview of recent history and current developments, with a focus on European initiatives. Participants will discuss: – the evolving needs of decision makers and the general public and how to best meet them. – the speciﬁ c methodologies that go beyond GDP, including composite indicators, indicators sets, and extending traditional accounts through integrated accounting; – the key successes, obstacles and opportunities for improving and making better use of the different approaches that complement GDP. Format: two overview presentations and general discussion Speakers: – Marco Mira d'Ercole (OECD): Introduction. – Oliver Zwirner (European Commission, DG Environment): Assessing EU progress. Panelists: Jacqueline McGlade (European Environment Agency); Laurs Norlund (European Commission, Eurostat); Branislav Mikulic (European Foundation for the Improvement of Living and Working Conditions).

10:30 Coffee break

SESSION 3: Breakout session: Key needs and ways forward

10:50 S plit into three groups to identify where energies should be invested to improve the methodologies and increase their adoption. What are the key opportunities for going beyond GDP? What is feasible in the short to medium term and how can implementation be improved? How to engage policymakers, key institutions, business, media and the broader public?

Format: chaired breakout sessions with panelists and general discussion (three groups, each with a chair and three panelists). – Panel 1: Chair: Jeff Mason (Reuters). Panelists: Thais Corral (REDEH, Brasil); Carlos Figueiredo (Environment Ministry, Portugal); Peter van de Ven (Statistics Netherlands). Rapporteur: Fulai Sheng (UNEP). – Panel 2: Chair: Aldo Ravazzi (Ministry of Environment, Italy). Panelists: Isabelle Cassiers (Université Catholique de Louvain); Jean Gadrey (University of Lille); Paul Hofheinz (Lisbon Council). Rapporteur: Anil Markandya (University of Bath). – Panel 3: Chair: Ivo Havinga (United Nations Statistics Division). Panelists: Stuart Bond (WWF, UK); Teresa Fogelberg (Global Reporting Initiative); Andrea Saltelli (European Commission, Joint Research Centre). Rapporteur: Marcel Canoy (European Commission, Bureau of European Policy Advisers).

134 Beyond GDP: Measuring progress, true wealth, and the well-being of nations SESSION 4: Collaboration opportunities

12:10 Collaboration opportunities: improving the metrics and integrating them into policy making Participants and panel members will discuss how to collaborate in taking forward the beyond GDP agenda. The conference should lead to the launch of an interdisciplinary European effort to improve our measures of progress, true wealth, and well-being. The workshop results will be fed into the main conference. Workshop Programme Chair: Pieter Everaers (European Commission, Eurostat) Reports from breakout sessions 3: Fulai Sheng (UNEP), Anil Markandya (University of Bath), Marcel Canoy (European Commission, Bureau of European Policy Advisers). Panelists: Willy de Backer (3E Intelligence); Johannes Blokland (Member of the European Parliament); Bedrich Moldan (Charles University).

SESSION 5: Workshop conclusions

13:20 Chair’s summary of the workshop Anders Wijkman (Member of the European Parliament)

13:30 Lunch for all workshop participants

135 19 & 20 November 2007

Session 1 Introduction The challenge of going beyond GDP Workshop

Anders Wijkman Member of the European Parliament

Opening by the Chair: The challenge of going beyond GDP

Let me welcome you all here to this two-day My own background is one of having worked for Conference on “Beyond GDP”. The theme we are many years on issues related to the environment about to discuss is of extreme importance and I and development. It strikes me that there has been very much hope we shall make some real progress. – and still is - a very strong perception among a The expert workshop precedes the Conference and majority of citizens that a growing GDP will eventu- the purpose is to allow for some in-depth discus- ally help us solve all kinds of problems in society, sion between experts before we meet in the much and address a series of noble objectives in terms larger context after lunch. of equity, in terms of development, and in terms of environment sustainability. For many economists Why a conference on “Beyond GDP”? The answer this is still something of a dogma. But I also feel is very simple. The economy as presently organ- that more and more people today realise that all ised overlooks some very important aspects of kinds of externalities are beginning to overwhelm production and consumption. Market prices do not us and that certain types of growth create more refl ect the true costs of production and consump- problems than they solve. tion. Moreover, the way we measure progress is very narrow, meaning that we send the wrong Being a politician, I can tell you how diffi cult it signals to society. Most people seem to think is for us as a body, whether we talk about the that everything is fi ne as long as consumption European Parliament, the US Congress, the Swedish increases. That may have been a reasonable way Parliament or whatever, to integrate and to act on of measuring progress when living conditions were all those externalities. The assumption seems to be poor and economic activity was limited and nature that the externalities will be factored in and dealt was plentiful. But this is no longer the case. with at political level, but in this globalized world where competitiveness is everybody’s concern, this The conference today is not the fi rst of its kind in is becoming increasingly diffi cult. the European Parliament. In 1995 the European Commission, European Parliament, WWF and the The history of GDP as a concept goes back to the Club of Rome organised a similar conference, the 1930s. We all know that there was a strong need theme being “Taking Nature into Account”. The fact felt by governments at the time to be able to meas- that the OECD is also now one of the hosts today ure the activity in the economy. Before that, there represents a step forward. was very little understanding about what was going on. Simon Kuznets was asked by the US Senate to This conference has been in preparation for quite a develop a measurement of national production or number of months by now, and we are very happy income and this later on became the prototype for indeed to be able to welcome later on today rep- what we call GDP. resentatives from more than 50 nations, from all the continents except Antarctica, with more than I would submit that ever since that time, GDP growth 750 people registered. has been one of the pillars in terms of policy-making and objectives. Listen to any election debate, any- The aim of this expert workshop is to address the where in the world, and everybody - whether from the various challenges in improving our measurements ‘right’ or the ‘left’ - calls for increased growth in con- of progress. Precise suggestions and recommenda- ventional terms. This is quite natural because with tions that can later on be fed into the conference growing GDP jobs have been created, wages have are more than welcome. been raised and taxes and profi ts have increased - so more or less everybody is happy.

138 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 1 Introduction: The challenge of going beyond GDP

There are undeniably strong correlations The whole informal economy, i. e. volunteer between GDP levels and many components of work and work within families, is not accounted welfare such as literacy, nutrition, healthcare, life for. Leisure contributes to people’s welfare; expectancy and so on, but there are, as we are however, seen from the perspective of GDP Workshop increasingly aware, other components of welfare growth, leisure is most often seen as a negative where correlations are not so obvious. thing. With regard to technology, GDP reﬂ ects only the volume of the end products; it doesn’t ©Photo European Parliament

139 19 & 20 November 2007 Workshop

really capture changes in technology and/or the The task of this expert workshop is to elaborate dynamics of capital accumulation. on these various options and try to come up with some precise suggestions. So a number of ques- Human capital and investment in education is tions arise. most often underestimated by GDP. The same goes, of course, for pollution and resource deple- Why do we need new measurements? I think it tion. Probably the single most important un-priced is pretty obvious, but we could maybe spell it out dimension of GDP are the effects of production and even clearer. consumption on natural capital. Some people say that Planet Earth is run like a company without a What real progress has there been over the years? real balance sheet. We know that the OECD, the World Bank, the European Commission, etc. have been working on Equity and distribution is another issue that is these issues for quite some time now. How do we absent from GDP. Social breakdown and other deal with this problem in a globalized economy, forms of social problems if anything add to GDP where national accounts still dominate but where rather than the opposite. increasingly we have to take into account exports and imports – not only of goods and services but Criticism of the GDP concept is not new. Kuznets of pollution too, including embedded emissions. Do himself early on said and I quote, “Distinctions must we have the data required to come up with new be kept in mind between quantity and quality of measurements and indicators and do we have the growth, between costs and returns, between the skills in the various statistical departments, and short and long run. Goals for more growth should the willingness to embark on this? specify more growth of what and for what.” I am old enough to recall a lecture that Jan Tinbergen Last night at the pre-conference dinner I was made gave in Stockholm in the early 1970s. He made aware of the fact that not everywhere in statisti- more or less the same points as Kuznets had pre- cal offi ces are the issues we are going to discuss viously done. dealt with comfortably. How do local communities become involved? Unless people at the ground I have already referred to the 1995 conference level understand these issues correctly can we in this Parliament. It was quite a successful con- really hope for real change? ference – a lot of good recommendations – but somehow they were not picked up. Maybe we What about our systems of taxation? They are very were too early? much based on the assumption that the economy will grow in the conventional way. And how about Instead we have seen developments over the last business models? There are very few exceptions ten to fi fteen years where the conventional growth in the business world that deviate from the norm concept has become even more important. In the that to earn more revenue you have to sell more EU it’s a pillar of the growth and stability pact and volume. it’s a very important component when it comes to distributing the social and regional funds. We have some urgent problems out there - climate change is one, the ecosystem crisis is another. How We are gathered here today to try to come up can we speed up this process so that we end up with some intelligent responses to the limitations by providing society with better signals for what’s of GDP as a measure of welfare. So the question going on in society? is: “What to do? Should we adjust GDP?” That was very much the objective in the debates during the I would submit that there are many other things 1970s, 80s and early 90s – that is to say, the effort we have to do as well, with regard to the economic was to try to incorporate social and environment policy framework, but the theme for this confer- factors and concerns. ence is fi rst and foremost to come up with more appropriate measurements for progress in society. Another way of responding would be to replace GDP I am very much looking forward to this expert by some other indicator, whether it is the human workshop and the Conference later on. development index, the ‘happy planet’ index or whatever. A third alternative would be to complement GDP by a set of new indicators.

140 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges Workshop

Marco Mira d’Ercole OECD Social Policy Division

Honoured to introduce this workshop. Honoured in accounting for these growing anxieties. The to do it on behalf of the OECD. The E in OECD OECD Global Project on “Measuring the Progress stands for Economic, which is often taken to imply of Society” is one step in fi lling that gap. a narrow approach to well-being, where economic considerations trump other factors. But it is also an Let me start by spelling out how the well-being organisation with a broad range of competences, agenda relates to conventional economic meas- hence well placed to bring together some of the ure. Are we arguing that GDP is irrelevant for the themes that come together under the heading of assessment of progress? The answer is NO, for “progress”, “wealth” and “well-being”. reasons that are well explained in the background papers for this workshop. We have simply reminded I offer these introductory remarks with a lot of mod- ourselves of something that well known to National esty. The themes of this conference have been the Accountants but whose implications are often put subject of research for many years and they span on one side in policy discussions: that GDP is a a very wide fi eld of interest. In the early 1970s, measure of production and (very imperfectly) of the social indicator movement fi rst brought in the how much a country can afford to consume. It is public sphere some of the critical dimensions of of limited value for assessing welfare because: well-being that are missed by conventional economic measures, at the same time as the report - First, it does not refl ect differences of experiences by the Club of Rome, “Limits to Growth”, enlarged within a country; and what we now understand as the “capital base” that sustain well-being. Since that time there has been - Second, because it omits many of the items that much progress but also setbacks relative to the matter the most for well-being of each indi- early optimism. What brings us here today is the vidual, even if they are affected by economic view that the agenda of measuring “true progress” processes. need new impetus and that this requires the commitment of all partners active in this fi eld. Developing better measures of well-being requires addressing both of these limits. How can we make The OECD has organised over the past two years progress in these respects? a range of activities on how to measure well- being, which have culminated in the Istanbul World With respect to the fi rst limit, let me be more Forum and declaration. We have also undertaken explicit. SNA aggregates are based on the aggrega- a stocktaking assessment of alternative ways of tion of income fl ows among unattached individuals, measuring well-being, whose main elements are with the total then divided among all persons in a summarised in the background document for this country. We may call these “household measures” conference. I will refer to these activities and what when they are drawn from the household appro- we have learned from them when responding to priation account but this is a misnomer. some of the questions posed by the Chair in his introductory remarks. - First, because each person is treated an “island" disconnected from other household members: What has been driving the OECD interest in this in this way we neglect the pooling and sharing area? In a nutshell, it is the realisation of a large of resources that occurs within families, and and growing gap between what offi cial statistics the social costs of family disruptions and lower tell us about “progress” and the feeling of ordinary family size. people. People are worried about the state of the environment, poverty, lower purchasing power, - Second, because individuals are all assumed crime and insecurity, quality of public services – to be identical, and each country is effectively all areas where offi cial statistics have a hard time treated as one person.

142 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges

I stress these aspects as they relate to a ques- Today, the creation of the UN Committee of tion posed by the BEPA paper on: “how to deal Experts on Environmental Accounting is an with distributive questions when discussing important step to mainstream environmental well-being”. My own answer to this question accounting, to elevate the SEEA to an inter- Workshop lies in better integrating SNA and household national standard, and to advance its imple- survey data. This was one of the recommen- mentation at the national and local level. dations made by Tony Atkinson as he chaired a workshop organised by the OECD and the - The second is represented by the construc- Joint Research Centre of the EU in July 2006 tion of several composite indices aimed to in Milan. He recommended “to do for welfare measure both the impact of human activi- what the SNA has done for economic produc- ties on the environment as a whole (e.g. the tion”, i.e. develop accounts for the household “ecological footprint") and the state of some sector that give visibility to the experiences of specifi c aspects of the environment's health homogeneous groups of people (by age, socio- (e.g. the WWF Living Planet Index with respect economic status, or income groupings). We to biodiversity). While the fi rst set of meas- should start doing this for money income as ures mainly serve a communication function, conventionally measured. But we should then those in the second can also be used at the extend these accounts to other domains such as policy level to monitor the results of different public services to households. I think that the strategies. UK discussion on measuring government output is critical from the perspective of measuring Expanding the “asset boundary” is not limited the well-being, inter alia because it highlights to the environment but brings us to the broader a tension – present since the early days of the agenda of sustainable development. The meas- SNA – between a perspective focused on pro- urement agenda on sustainable development duction and one focused on welfare. The type is tightly connected to that on measuring well- of household accounts mentioned above would being, but there are also differences. As noted allow bringing in information on the quality of by David Pearce: “the problems with the concept these activities and how and they contribute to of sustainable development are perhaps not so the well-being of individuals. much with the word ‘sustainable’ but rather with the term ‘development’”. For some purposes it With respect to the second limit, the challenge makes sense to separate the two rather than is to move beyond income to identify those subsume one into the other – not obviously to items that matter the most from the perspec- forget the agenda of measuring “development” tive of measuring the well-being of individuals but for the sake of making progress one step at a and the true progress of society. This requires time. Some important work in this area is being expanding the traditional boundaries of the pursued by the UNECE/OECD/Eurostat Working SNA with respect to both “asset stocks” and Group on Sustainable Development statistics. “production fl ows”. The discussion in the WG is still ongoing, and others closer to this process are better placed With respect to assets, it most critical extension to inform this workshop about the state of its is to develop tools suited to track the health of deliberations. But the option considered by the the natural environment. The natural environ- draft report is to focus on the “requirements for ment matters for well-being, beyond the serv- sustainability”, i.e. on maintaining a constant ices it provides today, because it is critical for level of total assets per capita, as measured sustaining well-being overt time. While we all through a narrow set of (13) indicators cov- recognise today the scale of the environmental ering the real per capita values of produced, challenges we face, progress on the measure- human, natural and social capita, as well as ment of these environmental threats fails to physical indicators covering a small number convey the urgency of action. Some progress is of critical environmental threats (climate, air, however occurring in two main directions: water, landscapes, biodiversity and soil) as well as education and health (8). The agenda of - The fi rst is represented by the publication in measuring assets is important not just for the 2003 of manual on a “system of economic and environment but also on the social side, we are environmental accounting", to which the OECD still far from having developed suitable tools to has contributed in important ways. Wesselink track in a comprehensive manner the state of et al. rightly describe this as a “landmark human and social capital. achievement" and this is not an oversell.

143 19 & 20 November 2007 Workshop

Expanding the “asset boundary” of economic accounts time but could be more useful when used in is important from the perspective of assessing difference form. “progress” but this is not enough. Also important is to go beyond the “production boundaries” of - Second, the use of these measures is much more the SNA to identify those ﬂ ows that contribute to interesting at the individual level, as they high- well-being. The most critical in my view refers to light the role of both “adaptation" to life-events the different uses of time, and here I would like and of “comparisons" with other people living in to stress two points. the same community for people well-being.

- First, is that time in paid work contributed to - Third, statistical offi ces need to look at this area people's well-being via the income it gener- more than in the past, integrating questions on ates, the role-models that it provides, and the satisfaction with life as a whole and in specifi c socialisation that it offers. But unpaid work and domains in their surveys. leisure time also contribute to well-being, either directly (in the case of leisure) or indirectly - A fi nal conclusion is that policy attention to (through the value of what is produced through these subjective measures is likely to increase household production and voluntary work). Much in the near future. The BEPA background paper of what families do contributes to the welfare identifi es as one limit of these measures that “it of its members through the care they (mainly is not clear how to use them for policy making”. women) provide – and a narrow focus on paid This is a fair comment if it refers to the state work in policy discussion may undermine those of current research. But, let me also add, that immeasurably more valuable functions that par- (by and large) these measures have not yet ents do for society. been tested this type of use. Survey questions about “work satisfaction” surly tells us something - Second, is that a focus on the diverse uses important about the constraints facing working of people's time is also important because an parents, and on the effects of various policies increase in income achieved through more hours to reconcile work and family life. of paid work – i.e. less leisure – has different welfare implications of an increase in income due Let me conclude by trying to respond explicitly to to higher wages: by confl ating the two aspects the questions posed by the organiser: into the same income measure we cannot have an adequate understanding of people's welfare. - How have recent measurement efforts gone beyond mainstream economic indicators? It is an Better measures in this fi eld depend on the availability open ended question, with many possible answers. of suitable surveys. Some OECD countries (e.g. the But the element that I would like to stress as proba- United States) have done the necessary investment bly the most important is the development of large setting in place continuous time-use surveys, which set of physical data pertaining to dimensions lead a panel of the US National Academy of Sciences that matter for well-being: health, education, to argue in 2005 that “time is ripe for developing bet- social, environmental, governance indicators. ter measure on this front”. Other countries (including We have today a rich menu of statistical data Europe) are however lagging. to feed our assessment of well-being and how it is changing. This richer set of data refl ects the All issues I raised above have to do with “objective” initiatives not just of statistical offi ces but also measures of well-being. But “subjective” measures of NGOs, business associations, trade unions, of happiness and life-satisfaction have also driven a and academic researchers. large part of the interest on well-being. The OECD, the JRC and the University of Tor Vergata jointly - What initiatives are underway to further improve organised a workshop on subjective measures of our ability to measure progress, true wealth and life satisfaction in Rome last Spring that gathered well-being? These initiatives are well described researchers on “happiness” and people coming from by Wesselink: single number indicators, often a more policy-oriented background. It has been a started from an environmental side, such as “eco- fruitful discussion as, beyond these differences in logical footprints”, “genuine progress”, “genuine background of various participants, the workshop savings”; indicators sets (such as the structural also highlighted some elements of consensus. and SD indicators used in the EU); and elements on an accounting frameworks (such as the one - First, subjective measures have probably a lim- proposed by the SEE manual). Hence not a single ited leeway to compare countries at a point in contender, but a variety of approaches suited

144 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges

for different purposes. We should accept this a better view of progress, true wealth and diversity because, as noted by Wesselink et well-being. al., different indicators serve different needs within the broad “policy process”. - Agreement that GDP is only a measure of Workshop economic activity rather than well-being. - What are the key technical challenges to implementing new measures? In this respect, the - Agreement that measuring progress requires twin challenges that I would like to stress are environmental, social and governance to achieve parsimony and avoid double count- indicators. ing. There is a trade-off between the two, and the right balance will depend on the use of the - Agreement that priority is to build consensus indicators. Single indicators achieve parsimony among those active in this area: we are not here at the risk of counting twice the same element. to engage in a beauty contest among different Accounting framework are better in avoiding approaches but to identify priority areas and double counting but leave open the question assess the “comparative advantage" of various of how to get to a synthetic representation. I partners to move this agenda forward. would argue that single indicators accounting for all dimensions of well-being are not well One fi nal word. Improving our measures of suited for our (OECD) type of policy audience. progress is a necessary condition for re-ori- But we should strive for parsimony within spe- entating policies – but not a suffi cient one. cifi c domains, though either general indicators First, we need need not just to measure, but (such as healthy life-expectancy, which is a to get the measures used; this require a closer synthetic description of both mortality and dialogue between users and producers of the morbidity, or physical measures of biodiversity indicators as well as novel ways to present and GHG emissions). and disseminate results, and is an important part of our Global Project. Second, we need to These is a personal perspective to the question identify policies that are effective in improving posed. Participants will have different answers to the various items that matter for well-being, the questions posed by the chair, depending on and assess their costs, both the costs of policy their backgrounds and comparative advantages. actions and that of policy inactions (as dome by But, beyond these differences, I want to stress the the Stern report with respect to climate change). points of agreement – which I would hope would Closer interaction with the policy community is be shared by all participants to this workshop: critical for progress and the OECD can play an important role in this respect. - Agreement that GDP needs to be complemented by other measures if we want to get ©Photo European Parliament

145 19 & 20 November 2007 Workshop

Oliver Zwirner European Commission, DG Environment

Assessing EU progress by “existing beyond GDP” indicators

It is an honour and a pleasure for me to address investment in education and deducts depletion of this expert workshop. We heard from Marco Mira natural resources and deterioration of the environ- d`Ercole what was developed in the past and what ment. This concept measures better the increase will come in the very near future. In my presenta- of the “true wealth” of a nation – a term quoted tion I will illustrate what we already have in terms in the sub-title of the conference. of ‘Beyond GDP’ indicators and what kind of stories and insights the existing indicators can give us.

Let us start with the traditional measure of Gross Domestic Product (GDP) per capita.

And what we see here, for example, is that Ireland manages to translate its high GDP into high savings while Portugal, although mid-range in terms of GDP, is less able to translate it into increasing wealth (see also Figueiredo, page 166). A new- Leaving aside the exceptional case of Luxemburg comer to the top ranks is Slovenia, which has an we then have Belgium, Netherlands and Ireland exceptionally high genuine savings rate compared with roughly US $40,000 per capita and year as to its income. It is also notable that the BRIC the EU Member States with the highest ﬁ gures. countries – Brazil, Russia, India and China – save If you compare with the BRIC countries, we see more – at least in terms of this indicator – than that Europe has a high income, but let us keep in the OECD or EU countries. mind that this is only what is produced and sold on the formal and legal markets. My next question is: How does this wealth, this income, translate into quality of life? One aspect of My next question would be: How does this national quality of life is a healthy life. A long and healthy life income translate into national wealth by savings. is certainly an important aspect of quality of life. In economic terms, saving or investing is the way to increase wealth. The question is: Do we get Here we have some interesting newcomers in the richer when we get more income, does our wealth top range: Spain, Italy and France – although more actually increase? I took note of the traditional mid-range in terms of income – translate this mid- measure of investment in man-made physical range income into a long and healthy life, which assets but I chose to present here the genuine is quite encouraging I would say. savings concept of the World Bank as it includes

146 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges Workshop

Let us now look a bit more into the causes and emissions per capita vary quite widely within costs of these developments. I will start with a key the EU; it is more than three times this amount social aspect: (un-)employment. Although the which is emitted in Ireland, Estonia and Finland. unemployment rate is a bit of an ‘in-between’ And we also have a very wide range in terms of indicator because it’s a ‘means’ for income (how carbon intensity, which means how much carbon many people work?), it is also an end in itself is emitted for each euro of GDP. because work is something valuable from a social and human perspective. Climate change is of course the political focus of the moment – very much so – but we also have wider measures of pressure on the environment, one being the ecological footprint.

Here we see that some countries with high income like Luxembourg, Netherlands and Ireland also translate this into a high employment rate or at least a low unemployment rate. Here we see that the average of the BRIC coun- Meanwhile, for example, France is not able tries is still lower than the lowest footprint of to turn high income into low unemployment. any EU country. What we see here is that we However, this might also be a social or political normally have a quite high correlation between choice, to tolerate relatively high unemployment. GDP and footprint, but there are also excep- And let us keep in mind that France realises tions. For example, Finland which has the larg- long and healthy lives. est footprint in the Union is more mid-range in terms of GDP. Let me now pass on to another important perspective, namely at what cost and at what But not only does the environment matter, good expense to the environment this performance governance is also important. is achieved. How well do we perform on environmental issues? For a ﬁ rst step I have chosen Here we see the corruption perception index, the greenhouse gas emissions. which is produced by Transparency International. This is on the one hand a means to produce We see here new top runners to the right: we high income, to preserve the environment and see Romania, Lithuania and Latvia with very low to secure social protection and social inclusion, Kyoto gas emissions per capita, and we see that but on the other hand it is also an end in itself to 147 19 & 20 November 2007 Workshop

Let me ﬁ nish with an indicator that tries to capture what perhaps most of us consider as a ﬁ nal end, which is a long and happy life. This indicator combines subjective “happiness” data with the statistical life expectancy.

have an honest society. Here again we see that the Northern European countries are top ranking and we see for example that Greece, which is normally quite wealthy in the mid-range, here has a lower ranking with the other indicators.

Let me move on to indexes that cover perception and are subjective. Let me continue with something We see that some countries translate their income, which is a ﬁ nal end, and that is the wellbeing that wealth, social and environmental protection into we perceive. a happy life while others, although quite wealthy, perform less. For example, Malta is quite a new- Although Europe is quite small on this world map, comer here in the top range, quite close to the top we see that the divergence is quite high from dark score of Denmark. red which is ‘quite happy’ to some yellow which is ‘below average happiness.’ It would be of course My conclusion on this is that already with the very interesting now to compare in detail these existing “Beyond–GDP”-indicators one can gain ratings with the previous ones, but my time is interesting and politically relevant insights. running out.

Happy Average Unhappy

148 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges

Jacqueline McGlade Executive Director, European Environment Agency Workshop

Accounting fully for ecosystem services and human well-being

“Because National Accounts are based on ﬁ nancial transactions, they account for nothing Nature, to which we don’t owe anything in terms of payments but to which we owe everything in terms of livelihood.”

Bertrand de Jouvenel 1968

Introduction ices generated from ecosystems that are not maintained: their price doesn’t refl ect their full Ecosystems sustain biodiversity, the basis for all cost for the exporting country. life on earth. Ecosystem services are the benefi ts people obtain from ecosystems. They include Allowances should be made for these ignored provisioning services such as food, water and costs and added to the current production output timber; regulating services that effect climate, and imports of countries, sectors and companies water, soil, waste and disease; cultural services for computing the full cost of domestic and that provide recreational and spiritual benefi ts. imported goods and services, called the Full Cost of Goods and Services (FCGS). Ecological truth & market prices in accounting for ecosystem services IDP and FCGS for policy decisions

Ignored beneﬁ ts: The actual value for people’s Once computed, these two aggregates can pro- well being from ecosystem services is accounted vide added-value to policy makers in terms of only when these services are incorporated into better informing decisions on the costs of action the price of products. When their market price versus the costs of inaction, on the internali- is zero, however, as in many cases, they simply sation of environmental externalities and as a don’t exist, whatever their importance. They can result of these, where to target actions around be accordingly appropriated for production or Ecological Tax Reform. The aggregates aim simply degraded without any recording. These at supplementing GDP, not at replacing or free ecosystem services should be measured, adjusting it. valued and added to the GDP for computing a more inclusive aggregate, called Inclusive The two aggregates are based on environmental Domestic Product (IDP). accounting for ecosystems. These ecosystem accounts can be established in both physical Ignored costs: The negative impacts on eco- and monetary terms. Physical accounts of system services of, for example, over-harvest- the natural capital, stocks, material/energy ing, waste disposal, fragmentation by dams, ﬂ ows, resilience, services can be benchmarked and sealing of soil for development have no according to stated policy objectives. This is direct counterpart in GDP. This means that the possible for example in reference to European full cost of producing and consuming domestic environmental regulations and directives and goods and services are not covered in many international conventions. IDP and FCGS can be cases by their market price. This is also the derived by applying monetary valuations to the case for the price of imported goods and serv- results of physical ecosystem accounts.

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Implementation of Europe – Eureca! which will assess what the ecosystem accounts mean for policy, today and in the Environmental accounting is a joint activity between future. Intermediate accounts will be published Eurostat, EEA, OECD, the UN and many EU Member for wetlands and forests ecosystem services and States in the context of the European Strategy on biofuels by 2010. Environmental Accounting and the revision of the UN-SEEA2003. Subjects covered at EEA include The Shared European Environmental Information land, ecosystems, water, and production and con- System (SEIS) is the umbrella under which physical sumption (based on material ﬂ ows accounts and accounts are being developed. SEIS provides the NAMEA). Physical accounts for land and elements basis for a harmonised geographical data infrastruc- of NAMEA have already been published. First water ture for producing a range of indicators such as: accounts will follow in the next year. Landscape Ecological Potential, Ecological Footprint, HANPP and other indicators derived from Material Ecosystem accounts will be delivered through to Flow Accounts. 2012 under the European Ecosystem Assessment

150 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges

Branislav Mikulic European Foundation for the Improvement of Living and Working Conditions, Dublin Workshop

Quality of Life in Europe

I would draw your attention to the quality of life, Further, we tried to measure a concept and we which has already been mentioned in a number developed and designed a survey which is a of previous discussions, and to the concept of quality of life survey, which focused on all these quality of life – and measuring it – which has need concepts. It focuses on individual situa- been developed and applied by the European tions. It uses a multi-dimensional approach. Foundation in Dublin. It measures a number of dimensions. It uses subjective and objective indicators. GDP is a single indicator of economic output. In Dublin, when we were thinking about measuring People who are thinking of going beyond GDP, or and developing a concept of quality of life, we complementing GDP, or making some composite couldn’t use it for our analyses as a key indicator indicators can use our survey and our database. or key analytical variable. We had to develop a Why? Because it is unique, not as to the sample concept of quality of life and to operationalise size or some other characteristic. It is unique this concept in order to measure it. because it covers all of the 27 European Union Member States plus three candidate countries. What is the concept of quality of life for the European We have the possibility to examine a number Foundation? It has three major features: of non-monetary indicators, to compare them between countries, and to examine how they 1. One of the features is that it uses micro- behave in these comparisons, but also to com- perspective. This means that it focuses on pare them over time. Our survey already has individual conditions and circumstances but two rounds. We can compare the period of also looks at their perceptions, attitudes, 2007 with the situation in 2003. These are expectations, goals and objectives. advantages for all those who think about going beyond GDP or complementing GDP or adjusting 2. Another important characteristic of the con- GDP by some other indicators. This is what the cept of quality of life is that quality of life European Foundation offers and what we will focuses on a number of measurements of develop in the future. people’s lives. So it goes beyond the concept of income and living conditions. It broadens Of course we will do our own research and we it. What was also very important for us in will inform the scientiﬁ c community and policy- the beginning was that we wanted not only makers about all ﬁ ndings. Not only about these to look at and to describe the number of indicators, but also about constructive indica- measurements of people’s lives but also to tors, aggregate indicators, which we are going analyze inter-relationships between different to develop in the coming months or year. In the measurements of the quality of life. second round of the quality of life survey, we extended it to cover a number of dimensions 3. Finally, the third feature of our concept of of the quality of life, asking some additional quality of life is that we used both objective questions in order to gauge the weights of some and subjective indicators of quality of life. So of the subjective indicators. We hope that we we went beyond income, we went beyond will be able to produce one composite indicator assets, and we looked at the subjective indi- of subjective well-being. It might be one of the cators: indicators of people’s perceptions, additions to GDP. of people’s attitudes, but also of people’s satisfaction or their happiness.

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Laurs Norlund Director, European Commission, Eurostat, National and European Accounts

I want to start to say that I’m extremely optimistic. like the EU sustainable development indicator set, On the one hand, we are in a situation where the and other indicator sets. Many here in this – room complexity of modern society is clearly more pro- have their own indicator set, but there are many – I nounced than ever before. We have decision-makers would almost say – competing indicator sets. and politicians who are presented with more and more dilemmas and more and more sophisticated The added value of these sets compared to primary trade-offs that they have to have a view on. statistics is that they present indicators in a logical analytical framework. The one I know best is of Why am I optimistic when that is the case? Because course the EU sustainable development indicator set. I think that at the same time we have never had They are intuitively understandable, which makes access, never ever in the history of our species, them valuable for policy-making and for communica- to so much timely, relevant, well-developed, high tion purposes. They provide very valuable insights quality information as we have today. In fact, into how our societies work and therefore hopefully I do believe that to a large extent, a lot of this allow for better decisions. There is one way into information is being presented in a very clear and the – future with these sets - in which I hope we understandable way to decision-makers. I think will invest more in the coming years – and that is the post-war era has been absolutely astounding to build up our understanding of the inter-linkages in that respect. between different indicators in the indicator sets. Because these are often very complex linkages, our What are the elements of this information system? understanding of them is not as good as it should We have a wealth of information coming from the be. It is also, I admit, methodologically very com- primary domains of offi cial statistics and other plex but we should invest more. information providers. It is information which is available about almost any conceivable variable that Thirdly, and now we come in a way, to the title of you can imagine about our society – at all levels of the conference. We have something that I work on, society, at regional level, at national level, and of a very advanced system available for a variety of course we are also interested in the super-national types of economic analysis based on the national level, the EU level and the global level. accounts system. It’s not only one of the balancing items, the GDP. It is a long range of variables and The variety of statistics is extreme. It’s extremely balancing items in different sectors of the system at well developed. It is methodically mature in many different levels of aggregation. They are used for a domains. It allows for a large variety of both inter- variety of types of economic analysis. It is certainly temporal and interspatial analyses and compari- not a perfect system and that is clear when you sons. There is no reason at all to believe that the look at the system and see where the gaps are. availability and quality of primary statistics should But it is a system that is under development and not develop further in the future in line with tech- where the methodology is being improved to fi ll in nological development, which has to a large extent some of the gaps. It is obviously not a well-being been a carrier of the development of statistical measurement system, but it is a system which measurement. This assumes that we continue to provides a very rigorous framework to conduct accept that we, as a society, need to invest also analysis in a variety of situations. in this kind of infrastructure which is the provision of information. That’s the fi rst point. The fourth point then is closely linked to the national accounts and is what Jacqueline McGlade spent The second point is based largely on these primary some time on. It is the development of other statistics, but also on a number of other information systems or integrated systems which would also sets. We now have at our disposal an increasing use the accounting framework but would allow number of valuable sets of relevant indicator sets us to analyse a number of other phenomena in

158 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges

society, like the pressures on use of scarce physi- If we have well working complex analytical cal materials or in principle any other kind of systems, we should be very wary of trying social phenomena. The advantage is – because to amend them by introducing elements into Workshop you use the very strict rules of the account- them which would make them less a refl ec- ing framework – that you are able to analyse tion of observable statistical reality and more these phenomena within a rule-based system. the results of imputations of weakly based This is of course not something new. The only assumptions of thinly argued conventions. regret we have is that we are not very advanced It is very important that we don’t throw the in this system. Look at one of the fathers of baby out with the bathwater. Therefore we modern national accounts, Richard Stone. He should work on accepting parallel approaches made a very good acceptance speech for the and be very careful when we start changing Nobel Prize in 1989 – that speech was called the the fundamentals of some of these analytical ‘Accounts of Society’, it was not called Economic systems. That’s my fi rst challenge. Accounts, or National Accounts, it was called the ‘Accounts of Society’. Towards the end of the The second point is, it would be a mistake if speech, which refl ected very much of course we tried to pretend that we could reduce the the development of the science at that point, he information we provide to policy-makers as a made it very clear that for him, the accounts of basis for serious policy decisions to very simple society consist of economic accounts, environ- indicators. I don’t think that’s possible. It would mental accounts and social accounts. This kind do policy-makers a disservice. The reality is that of analysis, which cannot stand alone but has to life is complicated. The reality is that we need be a complement to the analysis of other direct an extremely complex set of connections and observable phenomena, is extremely useful. We we need very good people to explain, interpret should invest a lot in them. I am very happy and understand these complex connections. So that the Agency, Eurostat, the OECD and others we should not dream of having one indicator to are heavily involved in that work. solve the dilemmas or the trade-offs that the policy-maker has to be faced with anyway. I have two small warnings, if you allow, Chairman. I cannot just agree with everyone on everything.

159 19 & 20 November 2007 OPENING AND DISCUSSION OF WORKSHOP

• Anders Wijkman • Anders Wijkman Member of the European Parliament, Chairman Chairman of the Workshop Session 2 Thank you for some very good points. May I ask a As you can see from the programme of this ﬁ rst ses- question? When I prepared myself for this session, sion, – we will lead off with Mr Marco Mira d’Ercole it struck me that all the countries in the world that who is a senior economist, Head of the Social Policy are towards the top of the ladder in terms of the Division and responsible for the development of human development index, are also the ones with social indicators at OECD. the largest ecological footprint. We can debate whether ecological footprint is the most perfect After that we will have my colleague, Oliver Zwirner measurement, but it’s a good way of describing how from the European Commission’s DG Environment much, on the planet, we need to source materials who has been working 120% of his time on this and to manage our waste materials. What is your conference since we met in January. comment on that, in particular, as a European and as head of the European Environment Agency? Then we will have a discussion with panellists:

- Jacqueline McGlade whom most of you know, • Jacqueline McGlade who is the Executive Director of the European European Environment Agency Environment Agency in Copenhagen. She is a very distinguished professor and an outstand- I think we need to separate this into two discus- ing personality when it comes to a system’s sions: perspective on sustainability; - an ethical discussion on, the redistribution of - We also have Laurs Norlund from Eurostat who wealth across the world and, is Director and responsible for National Accounts on my right here; - the wasteful use of resources at global and regional level. - And last but not least Branislav Mikulic from the European Foundation for the Improvement of What I’m suggesting is that we haven’t got nearly Living and Working Conditions. close enough to that second category to understand the wasteful use of resources. The same time we Hopefully, they will be stimulating as broad a dis- need to be aware of the larger picture of how we cussion as possible of the challenges ahead. So are moving resources around the world. without further ado, I give the ﬂ oor to Mr Mira d’Ercole. Once again, very, very welcome! Now I’m not saying that globalization is either good or bad, but what I am saying is that perhaps For the speech of Marco Mira d’Ercole, we could use our resources better. Take water, see page 142. for example - whatever concept you want to use. For the speech of Oliver Zwirner, see page 148. How many litres of water does it takes to make a For the speech of Jacqueline McGlade, car? Maybe people should know that. But on the see page 149. other hand, I think it is up to agencies like ours and others around the world to show for ourselves just how policies can distort and disrupt the use of resources in an inefﬁ cient way.

For the speech of Branislav Mikulic, see page 151.

160 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges

• Anders Wijkman senting these agencies that provide us with Chairman data, to make sure that most policy-makers and society in general don’t continue to focus Laurs Norlund, before I give you the fl oor, I on what they’ve always focused on? Maybe it’s Workshop would like to say that this is really the fi rst time a question of maturity? Maybe it takes time, that I experience this sort of dual approach to but we don’t have much time. How could you looking both at objective and subjective indi- be more effective in conveying all the vari- cators. That was not really what we discussed ous data in a more coherent way, where the 12 years ago here. Representing Eurostat, interlinkages are clear, etc.? how is your response to that particular sort of dimension? - And last, but not least, we heard that we need to understand better what’s happening at household level. In your remarks, • Laurs Norlund Mr Mira d’Ercole, you said that one chal- European Commission, Eurostat lenge was to understand better how people’s incomes are being complemented by services The immediate reply is probably to fi nd a way from the public sector, and that we have so out for offi cial statistics, because offi cial statis- far limited information about that. It would tics are probably not the best ones to deal with be very interesting to hear you elaborate a subjective measurement indicators. At least, bit on that. we don’t have the same tradition of doing it as other people have, which is why one of the fi rst I realize these are not three easy questions, remarks I wanted to make was to link up with but maybe if you just try to give a spontane- what Marco Mira d’Ercole said in the beginning ous reaction. that one of the keys to having a useful outcome from this discussion is to accept that there is a variety of approaches and there is a variety of • Jacqueline McGlade actors and they have different strengths and European Environment Agency weaknesses. I think on the fi rst one, it’s very clear that the For the speech of Laurs Norlund, interlinkages have been missing. If you take out see page 158. one piece of the system, it has consequences for the others: unintended consequences. The statistics were never set up to establish unintended • Anders Wijkman consequences. That’s the real problem. What Chairman inconsistent accounting does is that it begins to tell you what the unintended consequences Well, we’ve had fi ve very interesting perspec- are of one policy area on another. So, if you tives presented. We’re now going to break up do something in transport, you will affect air into three groups, but I would like to pose three quality. You do something here, you will affect questions to the fi ve of you. Given what you’ve land accounts, etc. So e need to look not just said, fi rst of all, what I sense is that at least at double accounting but also at unintended from the Eurostat point of view and also OECD’s accounting. point of view, you feel that we already have high quality indicators in many fi elds. Just on fi sh, I know for a fact that when Europe negotiated its bilateral fi shing relationships with The question is then, when we look at resource Morocco, Mauritania, and in particular with constraints: Senegal, that the Senegalese sold the fi sh and then the Mauritanians, and then the Moroccans. - Why don’t policy-makers act in the right way? And it was defi nitely the same fi sh. So they Look at fi sheries in Europe. We’ve had very managed to sell the fi sh three times and we good evidence from scientists for I don’t know were stupid enough to buy it three times. It how long, and yet it still doesn’t work. works in both directions.

- GDP, with I do understand that we shouldn’t throw the baby out with the bathwater, but what can we do, or what can you do, repre-

19 & 20 November 2007 161 OPENING AND DISCUSSION OF WORKSHOP

And just on the very last bit. Public services and The last point that I wanted to make refers to the work done in the UK is actually very interesting your question: ‘How can we be more effective in and it would be good to see that accountability and the future?’ There are no easy answers. Of course effectiveness in delivery. But for me it is a matter these types of event occur regularly at ten-year’ of making these data more spatially disaggregated. intervals. Some of you will remember where we The key is: get as much spatial information as stood ten years ago and where we are now. A possible because it’s about the local environment; positive contribution to your question would be ‘in your neighbourhood’ should be the byword of that we should collectively articulate a vision of how we do resource accounting. where we want to be in ten years’ time. Many policies today involve setting objectives and then assessing performance in terms of how far we • Marco Mira d'Ercole are from the target. Each of the partners in this OECD conference should articulate a vision of where he wants to be in ten years’ time. For example, to We are all in the business of policy-making, not develop accounts for the household sector that just producing indicators but trying to infl uence better incorporate the assessment of leisure time the policy process in some way. We should not or public services. Other agencies may say they be too naive in thinking that developing better want to develop accounts for 15 European coun- measures will be suffi cient by itself to change the tries about eco-systems services. Let’s articulate policy process. a vision and let’s be ready in the future to assess the steps we have taken to get there. A big challenge that we will all be facing in the future is not just to identify and measure the items that matter most from the perspective of well- • Anders Wijkman being, but to articulate a sensible discourse about Chairman how different policy levers can infl uence them. We are still very far away from having achieved that Maybe that’s a question to ponder on in the work- goal. In a sense, the social indicator movements ing groups. So, Mr Norlund, what do you say? You of the ‘70s had this ambition. Just having better sounded so optimistic. measures of incarceration, poverty, and family breakdown is not enough to change the policy discourse. You need to be able to say which specifi c • Laurs Norlund policies are capable of changing these outcomes, European Commission, Eurostat and to articulate a vision about the costs of policy actions and inactions. That is why continuous dia- I’m afraid the reply is that there is not much we can logue with policy users will be very important for do in terms of taking the right political decisions. progress in the measurement agenda. That’s not our job. But it’s clear, and that is what I tried to say and what has generally been said On household measures, some steps have already here, that what our aim and objective should be been taken to incorporate the value of the serv- is to present reality in as clear a way as possible ices provided by the public sector to households the choices clear. individually into aggregate income statistics for the household sector. For example, OECD national I’m sure that even if we understood perfectly how accounts include measurements of actual consump- the world functions – considering every detail, tion and actual disposable income, which retain every household, every individual, – there would the SNA conventions but provide a better proxy of still be wrong political decisions taken even then. well-being. The big challenge that lies ahead is to But that is another discussion in my view. What go beyond a perspective which is just focused on we should do, and that’s where I’m optimistic, I production costs and most often on labour costs, think we can deliver on that. We are delivering to apply it to individual cases: to say how much the a large extent. There are a number of issues where health and educational services that are provided we can do much more and that is of course what in each country are benefi ting people that are at is expected of us. different points in the income distribution. We have done some exercises in the OECD. The chal- I do have to say that if you look at the political lenge now is to build up statistical information at debate globally, and some of the key issues we national level that allows to regularly monitor this have today, there is no doubt in the politician’s mind information. about the linkage on some big issues. We all know

162 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 2 Technical and policy challenges

that economic activity exacts a price in terms of • Anders Wijkman the strains on the environment. Our objectives Chairman should not be to do it differently but to do it better. That’s what we are trying to do now. Let me add one comment after listening to you Workshop all, in particular the comment about the interlinkages. I somehow feel that we, the political • Branislav Mikulic system, probably have to rethink the way we European Foundation for the Improvement are organized. We are vertically organized, or sectorised. It seems to be almost impossible to of Living and Working Conditions deal with things that cross sectors or which are As to development of future indicators which more systemic in nature. can better measure progress than GDP, the role of European statistical systems and the United The temporary committee on climate change Nations statistical systems is very important. that we have just established is an attempt to Indicators developed within national statistical try to look at the horizontal consequences. We’ll institutes or some research institute will never see whether we come up with a good report. If be widely accepted and promoted in the same that happens maybe we can start dealing with way as the indicators which have been pro- some of the horizontal issues in a better way and duced by the OECD, Eurostat, United Nations not see sustainability only as an environmental statistical ofﬁ ce. They play a particularly impor- issue that is discussed once or twice every year. tant role in developing and disseminating those Maybe that is a recommendation that we could indicators. come up with.

• Oliver Zwirner European Commission, DG Environment I will focus only on one aspect and that’s timeliness and time lag.

This is a problem we have at least in environmental statistics. They are normally two years old while GDP data are at least quarterly and we can read about the newest ‘nowcast’ and forecast of GDP nearly every week. The Dow Jones is available daily, hourly, every minute. We have a huge time lag on the slow-burning issues although we need very urgent action and we probably need indicators that show us whether we are reversing trends; whether we are indeed changing, our energy system to a low carbon energy system, for example. Maybe we need information on planned rather then existing power plants to indicate whether we are actually changing in the right direction.

For example, the European Environment Agency has near real time information on ground level ozone. This is meaningful to households because then you can decide whether to go jogging or not. It’s like a weather forecast every day. It is meaningful to people. Maybe we can manage to translate pollution data into meaningful information for renting ﬂ ats or buying property. Make it relevant for daily action. The information needs to be more timely and closer to action by

businesses, households, and politicians. ©TI-BC

19 & 20 November 2007 163

Session 3 Breakout session Key needs and ways forward WORKSHOP - PANEL 1

Carlos Figueiredo Environment Ministry, Portugal

Insights on New Measures of Progress

Good morning to everybody!

First of all, I would like to thank the organizers for the Portuguese case of a speciﬁ c indicator, the of this conference for inviting us to participate in Adjusted Net Savings (ANS). this workshop. This indicator is based on national accounts and My name is Carlos Figueiredo and I work at the is consistent with the capital approach to sustain- Portuguese Ministry of Environment, Spatial ability, i.e. the notion that future well-being can Planning and Regional Development. only be maintained if the wealth-producing asset base is preserved. This presentation was prepared with the support of a technical team listed here. This indicator is built upon the National Net Saving (NNS), which considers only the depreciation of built I would like to focus on three main questions. capital and attempts to include the net changes in both human and natural capital, thus providing a Firstly, what do we know about the different indicators measure of an economy’s genuine savings. that are linked to the well-being? Besides we should analyse some empirical results relating to GSI. In this way, The ANS indicator corresponds to the concept of weak sustainability (WS). Secondly, what do we want ? We want a new generation of indicators that should include the All values of those indicators are monetarized. environmental issues in complementing the GDP. Thus the aggregation is easily achieved by adding up the different values considered in the ANS Thirdly, what should we do? We should mobilize the algebric expression. different statistical institutions and also their main stakeholders to provide a set of complementary This is a real advantage to interact with the policy indicators with GDP. makers and to communicate to the general public.

The limitations of GDP and other traditional eco- This concept of genuine saving was considered by nomic measures as indicators of welfare are well- the World Bank to organize a set of data for all known. Moreover, such measures do not show countries that allow international comparisons. whether the economic system is on a sustainable path or not. Indicators that go beyond GDP are Based on data computed by the Environment needed to support better decision making. Department of the World Bank, these ﬁ gures show the path of the listed indicators as a percent- There are different categories of indicators age of GNI – Gross National Income. which can be roughly divided into monetary and non-monetary indicators. The former are generally In this way, we can see the evolution of ANS for based on corrected national accounts; while non- Portugal and the EMU countries between 1983 monetary indicators can be based on environmental and 2004. data or on socio-demographic data. In both cases the path of ANS roughly follows Although there are many indicators available, in this that of the conventional measures of GNS/ presentation we would like to focus on the analysis NNS, but the gap between ANS and NNS has

166 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 1 Breakout session: Key needs and ways forward

been increasing in Portugal for over a dec- Finally, we propose that sustainability in the ade, unlike that of EMU countries, which has EU is assessed at a regional level, which will remained relatively stable. require spatially disaggregated data. This would be important for a consistent framework to sup- Workshop It is important to analyze the role of each com- port decision makers at national and European ponent in the results. The infl uence of educa- policy levels. tion expenditures (EDE) on the gap is high both in Portugal and in the EMU as a whole, but In the long term, we should end up in an estab- there was a signifi cant increase in education lished modular System of Economic and Social expenditures in Portugal from 1990 to 2004 Accounting Matrices and Extensions (SESAME), (larger than one percentage point in terms of with enough fl exibility to answer the needs of the ratio to Gross National Income). different users but that is still consistent with national accounts. As for natural capital depreciation, the Portuguese values show a smaller decrease, This is my guess on that matter! which also contributes to a larger gap. Thank you for your attention. Summarising, the gap ANS/NNS just mentioned shows a positive correlation with EDE and a nega- Feel free to put your questions and comments. tive one with depletion of natural resources and environmental damages since 1990.

Now, we propose moving forward on several levels so that new insights can be gained in the medium and long term.

Firstly, to get a better picture of genuine savings, additional natural resources and environmental damages should be included. In what refers to human capital creation, professional training expenditures should be considered without dis- regarding education and training outcomes.

Secondly, to improve the basic GNI measure, non-salaried time activities such as housework, volunteer work and leisure time need to be valued and included.

Thirdly, to ensure that we are not following paths that are just weakly sustainable, a set of environmental quality indicators, namely for critical environmental services, should be established for international comparisons. Indicators that reﬂ ect ecosystem resilience, such as biodiversity, require particular precaution as the context is of huge uncertainty.

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168 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 1 Breakout session: Key needs and ways forward

Thais Corral Executive Director, Rede de Desenvolvimento Humano (REDEH), Brazil Workshop

I will address the three discussion questions1 by mentality and culture, so that we can really be offering some examples, because conceptually protective of the forest. Because the way that a lot has been said. But when we see what hap- people see wealth is just using the trees in the pens in real life as a consequence of a certain opposite way for money or for cattle. perspective, it’s also helpful to see how we can move forward. And, in terms of opportunities, The second example I want to give is also some of the consequences that we are facing related to consequences, and in this case the with this narrow view of GDP are very important consequences of poverty that are not taken in showing us what can be done, but also how into account in GDP. And it’s true for most these narrow views also reveal some kind of Latin American cities, namely the question of culture that is very difﬁ cult to change. And the safety. opportunity now is climate, as with climate we have a limited time in which we take action. Most of our cities have a high rate of crime today and if you go to people in terms of the And I want to give you the example of Brazil and service we’re doing on perceptions, the most what has happened over three decades in the important thing for them is safety. Because Amazon. As in the seventies we had a policy of of course if you don’t have safety you don’t occupying that region. It was the policy of our have wealth, you don’t have a lot of the things military government, which was very national- money can bring no matter at what level. And ist, and as a consequence of that people were on the basis of that, several cities starting with given subsidies to occupy the forests. So most Bogotá started a movement which was called of this was done just by chopping down the Bogotá ‘como vamos’, and then we had ‘Rio trees and putting cattle there, which was the How We Are’, and Sao Paulo, ‘Our Sao Paulo’. easiest way to get hold of the subsidies. Over And the idea is to match the perception with the years the consequence of that was major the statistics that are available and make them occupation of the Amazon, 30% of the forest usable for people, so that they can not only act was destroyed. And today it goes on because themselves but create a dialogue and a mobi- this trend still continues. So Brazil now occupies lisation that can be translated into action and the 16th position in terms of a global produc- can involve politicians and mayors. And there tion of greenhouse gases and 75% of this is are goals for the mayors. In the case of Bogotá produced by deforestation. The Amazon alone after ten years of this movement the situation is responsible for 3% of the global greenhouse in the city has totally changed. And I think this emissions and at the same time produces only shows us how indictors can be used by people 0.1% of our GDP. So now of course Brazil wants and produce change, because after all this is to change that perspective urgently and also what we want. doesn’t want to be seen as the villain on the global scene. We are changing; we are start- In an attempt to do that, in 2003 together ing to implement now a new law from 2006 on with Hazel Henderson and the corporate social incentives. It takes an opposite approach by responsibility movement of Brazil, statisticians, giving people a kind of salary to protect and policymakers and a lot of grass roots organisa- to maintain the standing forests, to maintain tions and social entrepreneurs, we organised the trees. The question is how long this shift in this big conference with the participation of terms of policy is going to take in terms of our 700 organisations. And the most important

1 What are the key opportunities for going beyond GDP? What is feasible in the short to medium term and how can implementation be improved? How to meet the needs of policymakers, key institutions, business, media and the broader public?

19 & 20 November 2007 169 Workshop

lesson of that conference was dialogue, because And my ﬁ nal point is that ICTs (Information actually we have to understand each other. I think Communication Technologies) are very important it’s important, we need complex data, but how assets on our side. And I think that there are are we going to follow the path unless we can several examples, like the Community Right-to- really understand each other and make this useful? Know in the United States, that actually helped. Because all these very complicated methodologies, This was a law, integrated with access to ICTs, unless they are translated into something that can on information and helped the United States to be put into action, are very limited. And this con- overcome toxic release into the environment. And ference was an example of that, as an outcome of this is an information and model that is 20 years all these movements. There are all these examples old, but is an example of how information put in of cities working on their own neighbourhoods, the hands of the people can really make a change. schools, no matter what level. But the important Thank you. thing is that people can handle the complexity and are not afraid to use them.

Peter van de Ven Statistics Netherlands

I would like to put forward two arguments, two My second message is that we can learn from messages I want to convey. The fi rst one is a plea the worldwide success of the system of national for cooperation. I think that we as researchers, accounts. There are some factors which we should statisticians, policy analysts, and policymakers learn from in making environmental accounting should look more for the common ground and or, more broadly, the measurement of well-being should do a better job in looking for the areas a success. where we agree instead of stressing the points of disagreements, and that for two reasons: To go back to the fi rst point, as I have said, I have a long experience in national accounts and I can tell - The fi rst one is that I see from the discussions on you that hardly any national accountant considers environmental accounting that people are very GDP or economic growth as the ultimate indicator engaged and very personally involved. In my of societal progress. There is no argument about opinion, progress in measuring and analysing that. Of course economic growth is considered to broader concepts of welfare and broader concepts be an important indicator of economic activity, and of well-being society may sometimes even have an indicator for production and income with strong been hampered by the discussion about rival indi- relationships for example with employment, and cator approaches by what in the documentation for that reason also with, for example, issues like for this conference is called “beauty contests”. social exclusion.

- The second reason is that we have totally differ- On the other hand it’s clear that GDP has its limi- ent ideas and concepts of welfare and well-being. tations. We all agree about that, including 95% Every introduction showed a different approach. of national accountants. So that’s not an issue My question is, do we actually know what we want and it’s important to realise that. In my opinion, to measure? It seems that everybody has a dif- the discussion is much more on the way to arrive ferent idea. Therefore, we should also look for the at a broader measurement, to a more inclusive common ground of what we want to measure. measurement of welfare or wellbeing. Personally,

170 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 1 Breakout session: Key needs and ways forward

I think that welfare and wellbeing is a mul- help each other and support each other. As a tidimensional phenomenon and as such I’m statistical offi ce, by providing the relevant data, strongly in favour of a limited set of headline the relevant statistics, and researchers can help indicators in which, for each aspect of welfare, by telling us what kind of data are needed. “We Workshop an indicator is defi ned that is directly observ- can help you”. able and measurable. In addition, these indicators should preferably be embedded in an The second point, as stated before, was that integrated system of accounts. By doing this, we can learn from the success story of national it is possible to analyse the interrelationships, accounts. Factors in that success are: one set the interlinkages, and the trade-offs between of international standards; a conceptual frame- different indicators. That’s very important when work with worldwide commitment to apply these discussing and analysing policy choices. guidelines. In addition, there is international agreement about a set of tables that a critical On the other hand, I know that there are other number of countries compile in practice, making approaches that try to capture these different international comparison possible. Furthermore, aspects of welfare or sustainability in one indica- there is agreement, implicitly or explicitly, about tor. Just to name a few examples: Sustainable headline indicators. National Income such as developed by Dr Hueting who is present here – he is a pioneer in this work In my opinion, it is important to have such – or Genuine Saving developed by the World an international standard for environmen- Bank. There are other approaches as well. tal accounting as well, like the system that is already mentioned in the introduction, the Personally, I think that there are still a lot of SEEA, the System of Integrated Environmental theoretical as well as practical problems involved and Economic Accounting. This system is now with these single indicator approaches, certainly being developed to an international standard when it comes to the inclusion of this kind of by the United Nations in close cooperation with research in the programme of offi cial statistics. other international organisations. However, I am But that’s not a point I would like to make. quite sure that it will not be possible to agree on aggregate indicators. On the other hand, I My main argument is that all these approaches think it will be possible to develop a system in are not mutually exclusive; that initiatives like which economic development can be related to Sustainable National Income or Genuine Savings environmental issues. It is very important to complement or supplement information from look into such international standards, agree multiple indicator systems. We should not com- on them, and agree on a set of tables which as pete with each other, instead we should try to many countries as possible compile. ©TI-BC

19 & 20 November 2007 171 OPENING AND DISCUSSION OF WORKSHOP

• Jeff Mason ceptual framework of national accounts. I am a Reuters, Chairman of Workshop Session 3 member of the advisory expert group on national Panel 1 accounts which is responsible for the revision or the update of international guidelines on national My name is Jeff Mason and I’m a correspondent accounting. I’m also, perhaps more importantly in for Reuters based in Brussels. It is my privilege this context, a member of the UN Committee of to be the chair of this working group. Thanks for Experts on Environmental Accounting, a committee joining us. I see my role as simply one of facilita- that started two years ago with the goal of arriv- tor and getting the conversation rolling. I’m looking at international standards for environmental ing forward to having a good conversation. Also, accounting and a better common approach to to talk a little bit perhaps about the needs of the environmental accounting. media in an issue like this, so feel free to throw questions my way about that later once we get to For the speech of Carlos Figueiredo, the discussion. see page 166. For the speech of Thais Corral, see page 169. What I’d like to do ﬁ rst is just have all the panellists For the speech of Peter van de Ven, brieﬂ y introduce themselves and then we’ll start see page 170. with our presentations. Please go ahead.

• Jeff Mason • Carlos Figueiredo Chairman Environment Ministry, Portugal A couple of thoughts came to my mind listening to My name is Carlos Figueiredo. I work at the Ministry the speakers that I think it might be interesting to for Environment, Special Planning and Regional explore; the idea of complexity and making sure Development. I’m an economist and I worked with that whatever the direction that we go doesn’t get a small technical team to prepare this presenta- too complex. It’s appealing at least to a journalist tion. We have the full presentation available on whose job is to boil it down to that lead sentence in the website of the conference. a story or in a TV report in a 1½ minute package, so I think that’s an interesting issue that maybe we can touch on. • Thais Corral REDEH, Brazil Also both of you gentlemen talked about having an international standard. I would be curious to My name is Thais Corral, I come from Brazil. I hear more from the panel about what that stand- am the head of an NGO called Network for Human ard should be, and I’d also be curious to hear Development. I was involved in the Rio Conference what some of our audience members think about in 1992, the UN Conference for Environment and that. Development, and since then we have been working on how to translate information into action, espe- The three issues that we are supposed to be fol- cially with local sustainable development, renewable lowing during this session are as follows: energy, and empowerment of women in the community. I am also an old friend of Hazel Henderson - What are the key opportunities for going and in 2003 we organized together a big confer- beyond GDP? Some of those have just been ence on indicators on quality of life and sustainable discussed. development and that’s the reason why I’m here. - What is feasible in the short to medium term and how can implementation be improved? • Peter van de Ven Statistics Netherlands - And then thirdly: How do we meet the needs of policymakers, key institutions, business, media My name is Peter van de Ven. I have more than and the broader public? 20 years experience in national accounts. I still like national accounts very much. My present posi- So I suggest we start maybe with the ﬁ rst question is director of national accounts at Statistics tion: “What are the key opportunities for going Netherlands. I have been and I still am heavily beyond GDP?” Does anyone have a question along involved in international discussions on the con- those lines?

172 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 environmental integrated accounting, avery 1993 andtheSEEA,system ofeconomicand to suchanissue.Inmy viewgoingbackto perhaps wecanseewhat wouldbetheapproach I thinkthatitisadif certain products. because whenyou gotothe shopyou lookat aggregated level butalsoproductbyproduct, an estimateoftheunpaidcost,notonlyat So thequestionis:areweabletocomeupwith the pictureabit. remuneration ofproducedcapital,tosimplify paid, i.e.theremuneration oflabourandthe what you seeisonlyare when you gotoashopand lookattheprice, which areinvolved inmarket transactions. So paid except forasmallpartofthenatural assets course thisisnotre that weareconsumingpartofnature.And to policy-makers buttothepublicatlarge,is which isincreasinglyclearinmy viewnotonly and fundamentalproposalbecausetheissue, In my viewthiswas avery, very interesting my point. the expressionwas notperfectbutthisis called theenvironmental price.Unfortunately price tobepaid,andthissecondwas shop-owners – toaddasecondpricethe proposed toshop-owners– the bigchainof was madeandtheministerinchargeactually what aretheunpaidcosts.Andsuggestion was raised on,howtoshowpeople,consumers, ronmental conference,theinterestingquestion which was bothapolitical,economicalandenvi- Conference.” Inthecontextofthisconference, has beencalledthe“GrenelleEnvironmental In France inrecentmonthstherehasbeenwhat in thecontextofnationalaccounting. question whichperhapscanbeusefullystudied will notanswerthequestion,butIraise a success ofthesystemnationalaccounts.I said, onhowtotrytake advantage ofthe of 19 but nationalaccountingdidnotexistinthe Ven, nearlyfromthe19 de van Peter probably anoldernationalaccountantthan Vanoli,I amAndré anoldnationalaccountant, • the Environment whichisactuallyastatistical the Scienti eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 1 fi ce. I will elaborate on what Peter van de Ven de van ce. Iwillelaborate onwhatPeter th The FrenchInstitutefortheEnvironment André Vanoli century. InFrance Iamretired,butchair fi c BoardoftheFrenchInstitutefor fl ected inthecoststhatare fi cult questiontoanswer, fl ection ofthecost th century… tution, it’s whatismostimportant… will agreewithmebutit’s notanissueofinsti- on environmental issues.IsupposeJacqueline substantial. Andmy advicewouldbetofocus of notachievinganything reachingsomething wide. Ifyou want todo too muchthereisarisk the conferenceasawhole–isperhapsbittoo mean onlytheworkshopbut conference –Idon’t I am afraid thatperhapstheobjective ofthis demand. Andinmy viewthisisabasicissue. could beallocatedtothevarious partsof estimates ofunpaidcostsandtoseehowthey certain mainissues.Oneistotryhave global me thatitwouldbenecessarytoconcentrate on able toanswerthisquestion.Butitseems tion isinyour countries,butwearenotreally raised knowwhatthesitua- inFrance, Idon’t main objective. Andnowadays thequestionis been pursuedinsteadofconcentrating onthis reasons toomany objectives inmy viewhave give avisualsymbol.Unfortunatelyforvarious the costofnotdegrading theenvironment, to is whatwouldbeorhave been was theestimateofmaintenancecost.That important pointwas stressedatthetime: it make therightdecision. of pricesforproductsto helptheconsumers second approachwould betohave amultitude havebecause you tomonetisethings.The don’t might bemoredirect,ismaybe lesspolemical the previousspeaker was defending,andwhich Then thesecondapproach,whichapparently prices, you needacorrectprice. needamultitudeof correct price,you don’t on obviously, istosay: whatyou needisthe one theenvironmental economistsareworking in it.Somaybe oneapproach,andthatisthe then themonetarypricealreadyhasthosecosts taxes fortheenvironmental costsorwhatever, If you have themonetarypriceandifyou have that wewant thingstobein prices. them atthesametime.Oneofistodecide between, orwecandecidetogoforbothof Basically wehave twoapproachestochoose is relevant. the issuethatpreviousspeaker broughtup I amanenvironmental economistandIthink • Lisbon University, Portugal Catarina Roseta-Palma fi nal 173

Workshop OPENING AND DISCUSSION OF WORKSHOP

Now I think we should be clear about what we’re communication their job? A lot of statisticians feel proposing. We don’t want to do both at the same that when they put fi gures out their job is fi nished, time because that would be wrong. For example, while of course it is not, at least in my view. And imagine you have a carbon tax and the carbon so it’s diffi cult to convince not only statisticians content of the product is already being considered but other institutions that the communication of in the price, then you don’t need to have a spe- information is part of the role of knowledge build- cifi c indicator for carbon content in the product. ers. This is a big shift in the culture of statisticians This relates to a question that I had before the and again this requires investment. previous speaker took the fl oor, and this question is directed to the statisticians in the room: how advanced are statistical systems in terms of price • Jeff Mason valuations for environmental or social indicators? Chairman Especially environmental indicators where I know that a lot of work has been done, but it is analytical I’m going to come back to you in just a second. work. There’s a lot of methodological discussion on We’ve got three comments. I’m going to start by what’s the best way to analyse monetary values saying as journalist on the panel “good communi- for environmental goods. And so, how has this cation is very important to us.” If you have a mes- been incorporated into statistical systems? These sage that you want to get across to a journalist, are not observable data, these are data that are just throwing a bunch of numbers at us without constructed by people working in the fi eld and I a little bit of interpretation will be less successful. was wondering whether these data are useful; So I am pleased that you brought that up. are they considered; are you thinking of including them in the statistical systems? • Peter van de Ven Statistics Netherlands • Enrico Giovannini OECD Well the fi rst issue is about valuation and how to show people the unpaid costs and how advanced I am not sure, Peter, that past experience with are our statistics to do that? Let me fi rst stress national accounts could be taken as a good model that, in my opinion, it is important to have this to go forward. The community of national account- kind of research and this kind of experimenting ants at the beginning, and even now, is relatively on the valuation of these costs. On the other hand small, and the number of those who have the however, I think at the moment that we are not capacity to produce data according to national so far that we can integrate these kind of valu- accounts, which is big machinery, is very limited. ations into offi cial statistics. When you look, for Today a lot of people are trying to put forward example, at the interrelationship between envi- indicators of wellbeing or other environmental ronmental pollution, the effects on ecosystems measures and we cannot close the door to those and backwards, and the effects of ecosystems on who are trying to do it. The real problem is how the services that the economy derives from the can we try to build a taxonomy that brings together ecosystems, we hardly know how this relationship the existing taxonomies? This is one of the most works. And to value this, to put it into money, is important issues and we are working on this with too complicated. A fi rst step could be to value and some people in San Francisco, who are trying to subtract depletion of natural resources. We are develop algorithms able to transform the natural well advanced in that fi eld, but when it comes to language into taxonomies in order to understand ecosystems it’s too diffi cult. what these hundreds of initiatives around the world are developing in terms of taxonomies. So this is Another point I want to make, is that we are not something that we need to do, otherwise we will only dealing with a statistical problem; it’s also give the impression of tremendous confusion, while a societal or a political problem. We know what my guess is that in the end the key words are not happens to the environment, we don’t need sum- so different around the world. mary indicators to show that we are using up our environmental resources. Still we do not act upon My second very quick point is about what can we it. And then I come to what Enrico Giovannini said do in actual terms, also in the short run. I think about the importance of communication. In my that communication is so important that we need opinion, as statisticians, we should do a better to invest. But to do that, the fundamental question, job in communicating. Sometimes, we put too especially for statistical offi ces, is: to what extent is much emphasis on economic growth. Instead,

174 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 GDP because economicgrowthisvery important. GDP. It’s very dif the nextindicatorsetmust beacomplementto re The cation andhowtosensitize thepolicy-makers. There isanotherproblemintermsofcommuni- need togoaheadstepbystep. is astartingpointprobably, andIfeel thatwe resources. We have environmental damage.This indicator. We alsohave the depletionofmineral ment toanindicatorlike thegenuinesaving probably needtodoamethodologyimprove- of educationandweneedtobalancethat.We but wehave someproblemswiththeoutcomes because wehave highlevels ofexpenditure, We have alotofproblemsinPortugal withthat compatible withoutcomes. I thinkthat’s very importanttomake expenses probably missingtheoutcomesforeducation; with expenditures,educationexpenditure.It’s capital anddepreciation,human tant components:buildcapital, genuine netsaving becauseithasthreeimpor- son wehave chosenlotsofdifferentquestions answeratthesametime.Thatisrea- can’t need togatherthemtogether. AndIthinkwe for energy. We have madesomestepsbutwe and energy. We have NAMEA,nationalaccounts natural capital,like depletionofnatural capital, attempt toimprove somecalculationsabout initiatives, andsomeindicatorsthatmake areal side thebox. Becausewealreadyhave some think thatatthismomentweneedtoout Yes, IagreetosomeextentwithPeter, butI • on broaderpicture. this monitor, wewant toprovide information and theSocialCultural PlanningAgency. With Forecasting, theEnvironmental PlanningAgency, planning agencies,theBureauforEconomic venture betweenStatisticsNetherlandsandour monitor onsustainability. Thisisaco-operation have concreteplanstodevelop andpublisha do. IntheNetherlands,forexample,wenow tant thingsaswell.That’s somethingwecan growth, andshowthatthereareotherimpor- tal orsocialprogressonaparwitheconomic we shouldputotherindicatorsonenvironmen- publish somedatalike GDPWorldwide.think I is credibility. We needaninstitutionthatcould eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 1 fl ected inmonetaryvalues. Thesecondone Environment Ministry, Portugal Carlos Figueiredo fi rst isthatweneedtohave indicators fi cult tocreateanalternative to fi xed formation in ordertointroducethingslike The thirdoneisthatweneedmoreadvances improvements have alsotaken placeduringthe a very importantreferencesystem.Alotof included inthenationalaccountsbecauseit’s And very easytheaggregatecomponents. of indicatorsisre posite indicator, buttheevolution ofthesekinds Another thing:it’s very dif makers’ awareness. step; it’s very importanttoheightenthepolicy- and forestry. AndIthinkweneedtogostepby indicators arenotincluded,forinstance other wealthstocks,becausethesekindsof of re with thesekindsofindicatorsandexploreways something like that.Butweneedtogoahead some improvements inGDP, like GreenGDPor We needtoadjusteconomicgrowthandmake really challengeourselves inthatrespect. to usetheinformation,from thebeginning,and munication butalsoallthe peoplewhoaregoing more tointegrate peoplethat dealwithcom- for thatreason,Ifeelisweneedmoreand in whichyou’re elaborating thatthinking,and yourself andyour way ofthinkingintheprocess alone, you know. You have to reallychallenge work on whatyou said,tothinkthe box doesn’t work.AndIthinkthat,building And thatdoesn’t complex workthatmaybe tookustenyears. there andunderstandsin ever, andthenwe pretendthatsomebodygoes statistician orasasocialentrepreneurwhat- work.Becausewe didn’t stand why thesemulti-disciplinaryapproaches understanding. Ittookmealotoftimetounder- are about. Ithinkthatweareinanera wherewe need peopletounderstandwhatwearetalking tors, amongdisciplinesandlevels, we are togetintomoreco-operation amongsec- for theera inwhichwearein.Becauseifyou question ofcommunication,whichiscritical I justwant tomake abriefcommentaboutthe • forget that. last decadeinnationalaccountsandwecan’t REDEH, Brazil Thais Corral fl ooded withinformationbutvery little fi fi ning thesecalculations. nally, these kindsofindicatorsmustbe fl ected inmonetaryvalues, it’s fi nish doingajobas fi fi cult tohave acom- ve minutesallthat fi sheries and sheries fi sheries 175

Workshop OPENING AND DISCUSSION OF WORKSHOP

Of course maybe we will go less quickly but we will So we have to create a system which builds from go further. And I think that’s what we need now, the bottom. If we just have a top-down system, it and I like that sentence of Al Gore, “if you want to remains an academic exercise. People won’t relate go quick you go alone, if you want to go together to it, so if you’re going to have national accounts and far you have to see that it will take more time”. of wellbeing, it’s got to be a bottom-up process, And I think that time now is very helpful. and that’s my plea. Thank you. Nick Marks, New Economics Foundation. And the second point I want to make is about including the price in the products. I also think that we have to take into account the effort that • N.N. was done over the years by all the people that built the certifi cation process, which is not so clear I would like to say more or less the same thing. in this environment but very helpful in terms of Today we have a kind of disequilibrium. We are in a responsible consumption. good position to produce indicators as Peter van de Ven said. We have good indicators, we have good institutions. All this is functioning, but the problem • Jeff Mason as he said is what do we want to measure? And Chairman the next question is who is the ‘we’? Who decides what we want to measure? That is the problem. Just a reminder that the second two questions on our list were: First of all it is a problem of democracy, which is to choose the right indicators we want for society. - What is feasible in the short term, short to The indicators, for instance, the government can medium term, and how can implementation be choose what kind of indicators they want. We do improved? it in the Council of Europe for instance. We have and some benchmarks we defi ne together between - How to meet the needs of policymakers, key governments. And also at local level. When we say institutions, business, media, etc? we speak about well-being, what is well-being? We want to measure well-being, but who is able to say what is well-being? So we have to get the • Nick Marks citizens themselves to tell us What they consider New Economics Foundation their own criteria for indicators of well-being. We always say we need to make things understand- I want to address the last question about how to able and useful and communicate well. We are make it useful for policymakers. Policymakers are always in the same framework, which is that we interested in adding value and it’s a question of are producing indicators and we want the people what we value. And it goes back to your fi rst point, to use them. We have to change that. We have to Peter, what are we trying to measure here? start from the democratic process and help them to build it. The technical services are a good place I think what we’re trying to measure here is people’s because they can help. We have done it in some lived experience; it’s their experience of actually cases and showed that it is possible. what services provide and what national governments provide. And we have to get into the realm of the subjective if we’re going to do that. So in the • N.N. UK local governments are very, very interested in wellbeing, because they know that they have cer- This trade of information for decision-making has tain economic situations which they can’t control. been going on for quite a while. But what service provision can do is affect people’s experience of their life. So if you’re going to create What has developed quite well over the past 10-15 a system of national accounts, you’re going to build years is our ability to look ahead, to make forecasts. them up from the bottom. I don’t think there’s any Scenario driven, model based outlooks. way that they’re going to be useful if they’re not built from the household upwards, through the local One of the short-term possibilities is to take the authorities, through super output areas where you sometimes crude indicators that you have. A set can see where deprivation is felt and experienced, like Peter van de Ven said to show trade-offs and where crime is experienced, where fear of crime apply them in a forward-looking manner like GDP is experienced, and that’s how we have to do it. has always been forecast traditionally. As a very

176 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 producing is “toaddvalue.” production, value added,andthede national accountsand incomemeasure because theyarenotproduced byman,whereas outside thenationalaccounts, whichislogical the nationalaccounts.Also, theirlossesremain goods humanitydisposesof, remainoutside tions, whicharethemostfundamentaleconomic ent. Byde environment, onwhichhumanlifeisdepend- possible usesofthenonhuman-madephysical environmental functionsarede remain available forfuturegenerations, and which ensuresthatenvironmental functions for themaximalattainableproductionlevel, an importantone,becauseitisindicator ity. That isonlyoneaspect,butitmightbe are preferencesforenvironmental sustainabil- There isoneindicatorthatassumesthere takes toomuchtime. on assumptions.Iwillnotdothat,becauseit tions. ItcanbeshownthatGDPisalsobased measure. Whatwecando, ismake assump- these indicatethepreferencesthatwecannot and welfareissimplysatisfactionofwants, and key totheproblem.We cannotmeasurewelfare be given becauseofpreferences.Thatisthe rates ofeachaspecttheseindicatorscannot because theyentailcon it isnotagoodideatobuildcompositeindicators I wouldlike tomake twocomments:oneisthat a previoussession. with Jan Tinbergen, whosenamewas citedin than 40years. I’ve alsopublishedtogether I’ve beenworkingonbeyond GDPformore • work onthat. that’s partofthediscoursenowandwecan outlooks includingprojections.It’s something reporting toSpringCouncilbasedonworldwide to thestructural indicators,astheindicators be feasibletocobbletogetheracomplement 10-15 years. That’s thedifference.Soitwill less becomeaccustomedtothatover thepast Decision makers andtheaudiencehave moreor this sortofprimitive butstillfeasibleforecasts. worldwide environmental outlooksthatinclude next springthattherewillbenolessthanfour on, itisbysheercoincidencethisautumnand short-term opportunitythatwecancapitalize eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 1 National Income,TheNetherlands Foundation forResearch onSustainable Roe fi e Hueting fi nition, theseenvironmental func- fl icting goalsandthe fi ned asthe fi nition of nition Third,sustainablenationalincomeprovides - Second,sustainablenationalincomerelates - First,sustainablenationalincomeistheonly - has fourfeaturesthatnootherindicatorhas: This indicator–sustainablenationalincome damental environmental functions. production level thatleaves intactthosefun- able nationalincome.Thisisde national income,theenvironmentally sustain- and maybe alittlebitbetter, isthesustainable least thesamelivingconditionsaswehave, in suchaway thatfuturegenerations have at Based ontheassumptionthatwewant tobehave about that. maybe theEuropeanUnioncould do something indicator hasnochance ofbeingdeveloped; important andscienti So weareinasadsituation thatmaybe themost national income,thosesubsidies werecancelled. Parliament tosubsidize furtherelaboration of although theDutchgovernment promisedthe a very seriousproblem.The sadthingisthat So thereisabiggap. We aretalkingabout about 50%ofthecurrentproductionlevel. Netherlands, andthatestimatetooarrived at more advanced estimate was madeforthe duction andconsumptionisunsustainable.A at about50%.Thatmeansthat50%ofpro- for theRioConferencein1992andwearrived Tinbergen andmyself income was madebyJan The Inthefourthplace,sustainablenationalincome - the distancebetweenactualproduction I cannotshowyou atthemoment. the economy hasshownina Ecology relatestosubjective preferencesthat to themeasurable, physical environment. the systemofnationalaccounts. mated inaccordancewiththeconventions of standard nationalincome,becauseitisesti- indicator whichisdirectlycomparable with tions available forfuturegenerations. de further away fromenvironmental sustainability, or not,asIsaidalready, acountryisdrifting the courseoftimeandthusshowswhether shows thedevelopment ofthisdistancein or towards it. a countryisdriftingaway fromsustainability provides thisdistance,so itshowswhether level asmeasuredinnationalincome.Itthus fi fi rst roughestimateofsustainableworld ned askeeping vitalenvironmental func- fi cally bestunderpinned fi fi ned asthe gr which gure 177

Workshop OPENING AND DISCUSSION OF WORKSHOP

• Victoria Thoresen • Carlos Figueiredo Consumer Citizenship Network, Norway Environment Ministry, Portugal

I have a comment and a question related to the I think that these are very good questions, but we reasons that we are here. We asked what are we are still at the beginning of this debate. On the one measuring. We have heard much discussion this hand we need to have indicators that need mobili- morning about indicators but very little about the sation of statistical institutions, governments and human development index, which I have under- society in general in order to simplify the methods stood UNDP based very much on theories of needs. and to clarify the contents of these kinds of indi- Yet as was mentioned, needs change. This is a cators. It is my feeling that some indicators need problem, but one of the basic deﬁ nitions of human universal application and need to have some cred- development was participation in decision-making. ibility in order to be useful for policy-makers. If this is one of the key indicators of human development, than it is interesting to see that in the ISO There are a lot of indicators all over the world, - International Standards Organisation – process like ecological footprint, happy planet, and so on. on developing standards for social responsibility There are a lot of indicators like this, but we need for all organisations in the world, which is going to create an environment in order to put some on at present, they also focus on stakeholder people together to discuss that. It is very impor- involvement as one of the criteria for measuring tant to make a linkage with national accounts and social responsibility, because this also changes the recent improvements in national accounts, constantly. because we have some physical indicators, and monetary indicators. So we need to correctly adjust So my question is: if we are talking about bottom- the concept of sustainable development in order up, if we are talking about democracy, perhaps one to put different indicators to use. I think that we of the most important criteria that can be devel- need to go step by step. oped in whatever indicators we now work on, or choose to focus on, is participation at grass-roots level, which again will connect with the question • Thais Corral of dealing with communication; because if people REDEH, Brazil there to help make the indicators, then they will understand them better when they are made. So From what I have heard here and from what I I think we have to consider that very carefully in sense and feel after all these years working with the our work today. information, one of the challenges that we have is to maintain the integrity of the information and the methods we know about, in order to guarantee the • Ruut Veenhoven diversity of the needs, the need for participation and Erasmus University, Netherlands the actual use of the information. I think that is still a challenge, because we do not know exactly how I would like to pick up on the question Peter Van to do that. Even in what I see as multi-stakeholders der Ven raised: what do we want to know? Well, processes, it is still at the very beginning, because it one of the things we want to know is how we can is more or less the same people that continue to go save the world, while leading a decent life? I think to the same meetings, because these are the people an answer to that question is in the Happy Planet who actually know about it, and can understand the Index by the New Economic Foundation, which on level at which we communicate those things. How can the one hand takes happy life years in nations, and we really make information useful for the different on the other hand, sees how large the ecological levels, so that people can really make something footprint is, and allows us a picture of how efﬁ cient out of that information? That is still a challenge. We countries are in realising good quality of life while do not know the answer yet. at the same time preserving the environment. The other point I want to comment on is this whole This is a very simple index which everybody under- new trend of happiness and how we measure stands. It is not yet perfect. We have data problems happiness. We also have to consider the diversity but these can be solved pretty easily. in that, because they are situations in which happiness is very different. In the city where I live, I think that for most people nowadays happiness is just to feel safer, and just to be able to go out on the street. So it is probably very different from

178 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 ademocratic processtode - theneedtohave abottom-up approach, - things like: key messagesIgot fromthesessionincluded here andtohearthevarious presentations.The Just avery quickone.Iam very pleasedtobe • comment? Does ourRapporteur want tomake any • because oflacktime. asking therightquestions.Iwillleave itatthat, that point.Butiswheresciencestarts, urement issues.Iammuchmorehesitanton opinion, however, whenitcomestothemeas- on asustainablepath?We have differencesof What wouldnationalincomebe,ifwehadbeen with Dr.Hueting onthevalidity ofhisquestion: On SustainableNationalIncome,Ifullyagree policy happen. society theinformationtheyneedtomake this to thatneed,andgive politicians,togive as statisticianshave aresponsibilitytorespond factors, whenitcomestosocietalprogress?We from society, frompolitics:whatareimportant isticians, weshouldbemoreopentofeedback democratic processisavery valid point.Asstat- in othercountries.So, whattomeasure?This be safetyinRiodeJaneiro, andotherthings know whatdrives happiness.Asyou said,itmay cannot make apolicytoactupon.You needto factors drivingthishappiness.Otherwiseyou On theotherhand,you stillneedtoknowthe that. Itisvery valid, very goodinformation. of happiness,indeedweshouldknowmoreabout About subjective well-beingorthemeasurement • challenges wehave intheworldtoday. embrace thatdiversity, whichalsore Norway orDenmark.Ithinkwealsohave to the way wearegoingtolookathappinessin eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 1 to bemeasured, and United NationsEnvironment Programme Fulai Sheng Chairman Jeff Mason Statistics Netherlands Peter vandeVen Rapporteur fi ne what needs fl ects the ects fi nal , of you. ApologiestothepeopleIhadcut Thank you tothespeakers. Thankyou toall • take thisworkforward. the kindofdirection,inwhichwewouldlike to fully begettingcloserperhapstodetermining questions thathave beenraised, wewillhope- though wemay notbeabletoanswerallthe Hopefully, asaresultofthisdiscussion,even should beopen-mindedtodifferentpossibilities. several times,thisisnotabeautycontestandwe other kindsofindicators.Butaswehave heard familiar withforthelasttwodecades,andalso sustainable nationalincomewhichIamvery rest ofyour day. Please keep thedialoguegoing,andenjoy the to thoseofyou whoIwas notabletocallon. off orencourage tohurry, andapologiesalso the systemsthataredeartopeople’s minds, We have heardseveral propositions,someof issuesincludingalsotheneedfordiversity, - for differentkindsofindicators. Chairman Jeff Mason 179

Workshop WORKSHOP - PANEL 2

Isabelle Cassiers Professor of Economics, University of Louvain and National Fund for Scientiﬁ c Research, Belgium

As a panellist invited to the expert workshop, I shall We should recognize that we live in a kind of comment on the key points to which the speak- schizophrenic society: ers were asked to react. I shall tackle four issues: - On the one hand we know that the path we are on is not sustainable and brings forth questions on life satisfaction: this conference, many NGO’s 1. Beyond or beside GDP? activities, and some academic work on the subject bear witness to this trend. We should be coherent about the status of GDP. - But on the other hand we are ﬂ ooded by adver- One of the key points raised for speakers (The tisement and by all kinds of encouragement to merits and limitations of GDP) states that: consume, and produce, and drive and ﬂ y as much as possible. “GDP is not an indicator of well-being or welfare; it is an indicator of economic market activity; Going beyond GDP requires addressing this it does not pretend to be an indicator of well- contradiction. being or welfare, but some use it as such; GDP growth is not necessarily a progress indicator, In the same line, the move beyond GDP is an implicit though the news often portrays it as such”. recognition that the market cannot respond to our aspirations and that there is today a strong need We now have a consensus on this statement. for public intervention, from local to global. This Nevertheless, another key point (New tools need might also encounter some political resistance. to be applied to measure progress, wealth, and well-being) suggests that : 3. Consider the distributional concerns

“More adequate indices of progress, of wealth and The distributional concerns are not included in well-being must include environmental and social the Core messages. Inequalities (not only income indicators, in addition to the traditional economic inequalities, but also unequal access to education, ones.” to healthcare, to culture) have risen during the last thirty years and will probably still rise in the future, The expression “in addition” is questionable. If we despite the millennium goals. On this point we are agree that GDP is not an indicator of well-being, if moving backward as compared to the model that we recognize the existence of negative correlations was set up after the WWII, at the time when GDP between GDP growth and the quality of life, then was implemented. Besides the fact that inequalities why should we keep it as a ground for a new indi- are often felt as a limit to social wellbeing, inequali- cator? Of course there might be a strategic issue ties give in fact more power to the wealthy citizens here. Leaving GDP aside might appear unfeasible and hamper the democratic process of redeﬁ ning in the short run and nevertheless be kept as a long the progress of societies. On the move towards a run target. In any way the status of GDP should more even share of income and wealth, we might be explicitly stated, otherwise the risk is that huge as well encounter political resistance. efforts eventually lead to very minor changes. 4. A normative issue that requires 2. Economic interests against a democratic process challenging GDP Being a normative issue, the move beyond GDP cannot be a technocratic process but must be We should put more emphasis on the fact that rooted in a democratic ground, because it is. A there are strong economic interests involved in question such as “Where do we want to be in ten pursuing economic growth without restriction and year time” has to do with values and ends. If we in keeping GDP as proxy to well-being. seriously want to address the question of what is

180 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 eso ae Breakoutsession:Keyneedsandwaysforward debate onGDPandthede That majorinstitutionshave launchedacritical possible andatevery stageoftheprocess. be allowedtoexpressthemselves asmuch well-being andhowtoenhanceit,peopleshould Session 3–Panel 2 ﬁ nition ofprogressis and sustainableconsensus. cratic way. Thisistheonlychanceforabroad questioning asfarpossibleandinademo- pivotal, butitisnowcrucialtowidespreadthe 181 ©Photo European Parliament

Workshop Workshop

Jean Gadrey Professor of Economics, University of Lille

I largely agree with Isabelle on her four points. we want to go beyond GDP in a way that is coher- In less than ﬁ ve minutes I will only insist on two ent with the three pillars of sustainable develop- complementary questions and a few key opportu- ment policies, which is a condition of success in nities that I’ve personally experienced. my view.

First question: If we want to enlarge the circle For environmental factors or for well-being con- of stakeholders for new indicators, what is the tributions such as leisure time, domestic labour, main political change? Do we need sets of multiple unemployment costs, and so on, progress has been indicators or synthetic indicators? made towards economic valuations even though other good methods exist. But it is much more Answer: we need all types depending on what they risky to give economic valuation to contributions are intended for, but considering the aim of this such as equality between men and women, social session, I defend a limited number of synthetic indi- security, decent work, and so on. This is why most cators as key opportunities for three reasons: existing indicators in these ﬁ elds, beginning with the UNDP’s one, are based on a weighted aver- 1. If we want to challenge the excessive attraction of age of selected variables and this is why they are GDP in public debates, sets of multiple indicators often accused of being arbitrary. In my view, this are simply in a position of unfair competition. is unfair. As far as we recognize that any indica- For citizens, for policy-makers, and the media, tor, even GDP, is based on value systems and on synthetic indicators are more appealing. Oliver judgement of what is worth measuring and what Zwirner’s presentation this morning was based is not, we should also admit that it is possible to on them, this is an indication. organize democratic debates on what should be included in a synthetic social indicator and on 2. It is true that they have serious shortcomings, the weightings. That could even be a remarkable but they are young and they will increase in contribution to policy design and to democracy. It reliability. is an opportunity.

3. They lead people who discuss them to go beyond And the last opportunity: There is a rapidly them, and to enter the complex ﬁ eld of the sub- growing interest in local indicators, whether syn- indicators on which they are built. They may thetic or not. I am convinced that the popularity of open up some very rich debates. European policy for a proper use of new indicators will largely expand on a local and territorial basis Second question: How to take care of social in the future. This is a key opportunity that I have considerations in new synthetic indicators? This is also experienced. another challenge and an opportunity to grasp, if

182 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 2 Breakout session: Key needs and ways forward

Paul Hofheinz Lisbon Council Workshop

I’m from the Lisbon Council. We’re a think tank. have here. The main difference is growth, and We have as our mission the Lisbon Agenda and GDP in particular. Let me just say that when we do a great deal of work in all areas trying to I say that I’m not standing up for any economic make that process happen. We can talk more interest, quite the opposite. It’s GDP, it’s the about it later if there is interest. strength of our economy that has allowed us to invest heavily in public health, that has given I’m going to take issue slightly with some of us this thing that we call the European social my fellow panellists here and with some of model that we fi nd so precious, that pays for an what we heard this morning. I do think there enormous number of social advances. I think you are some points of consensus, here and I will ignore GDP as a social indicator at your peril. It end on the points of consensus, but I want to is one thing to sit here in Europe or perhaps in start out talking about differences before we a country like Sweden and say GDP no longer move into the less controversial areas where I matters. But go and say that in Botswana and do think we can agree. you will hear a very different explanation of why this process is important. Let me stress that the areas where we agree are probably the most important. We agree on We can talk about inequality in the world in a what needs to be done. There may be a bit of moment, which is related, but I’m going to set a difference in the diagnosis. that aside for now. I do think there is a very big problem with GDP, and not simply with GDP but I think GDP is really important and that it is a with the entire range of indicators that we use social indicator and let me tell you why. If you go to think about the economy today. The problem back to the world 200 years ago – Ms Cassiers, is that those indicators are stuck quite fi rmly I think you are a professor of economic his- in the industrial era. It is still essentially based tory, are you not? – I’m going to talk about the on the assumptions that the world had in the historical development and I suspect you have 1930s when these indices were created. a different interpretation or you couldn’t have said the things that you did. So what’s different between that era and ours? I would argue that there are three things that In the year 1820, the standard of living here in are very important: Europe, where we are today, according to the very good economic historian in the Netherlands, - The fi rst one is that in the 1930s we didn’t Angus Maddison, was roughly 90% of the stand- think of the earth’s resources as limited. ard of living in Africa today. The world was a Now, anyone who is honest and reads the very poor place 200 years ago. Most people newspapers and follows the public debate lived until their mid forties; that was the life understands and accepts that we have a very expectancy. Most women had seven or eight serious problem with the way we are using children, the majority of whom would not reach the world’s resources and are going to have adulthood. Obviously an enormous number of to make important, vital changes in precisely things have changed in the last 200 years, in that area in the next 20 years. By the way, particular here in Europe. What you fi nd today they are going to be hard but that doesn’t is a very different standard of living. You fi nd a mean that we don’t have to make them. very high standard of living in the industrial part of the world. You continue essentially to have a - The second big difference is most of us standard of living in Africa that is roughly the are no longer working in manufacturing. same as it was here 200 years ago. They have Manufacturing is still about 20-25% of our not made progress in the same way that we economy, but it no longer drives jobs. That’s

19 & 20 November 2007 183 Workshop

been the case for three decades now. If you The second is inter-generational accounting. There look at the statistics, you’ll see I’m correct. Long is an awful lot of very interesting work going on in before any of us heard of the word ‘globalisation,’ that area right now. I would argue that if 60 years we were losing jobs in manufacturing. We’ve ago we did have a very clear division in our econ- been taking on jobs in the service sector and omy between labour and capital, the principal that is why our economy continues to expand. division we have today is between generations. We We’ve also been losing them in agriculture. The have a generation alive right now that is frankly three principal sectors of the economy: agri- consuming the resources of the generation right culture, industry, and services are moving in behind it. That’s true in the environment where different directions. Losing jobs in agriculture we have a generally clear understanding but it’s and manufacturing, gaining them in services. also true in our social system too. There has been a real delay in reforming social systems in ways - The third area that I think is profoundly different that are putting genuine strain on their ability to now, and we can discuss this if you like, is that deliver equity in the 21st century. We need to pay we no longer have a very clear division between much more attention to the way that generations labour and capital. I think that 60 years ago manage the earth’s resources, one for the other. we absolutely did. There was much less access to education, there was very real poverty here The third would be the nature of our workforce. in Europe. We still have it but not like we did I mentioned the three sectors, and people often 60 years ago. throw out the statistic that 70% of our population is working in the service sector. I don’t think we A couple of things have changed. One of them is know or understand the service sector nearly well home ownership. You have much broader home enough. It lumps together far too many things ownership throughout Europe and indeed the ranging from architects and engineers to janitors industrial world right now. Those home owners and what we sometimes call McDonalds jobs. There – are they labour or are they capital? And also are very good jobs in the service sector and we pensions. Because whether we like to admit it or need to try a lot harder to understand better what not, a lot of our pensions are tied up in the global the service sector means, because as I mentioned capitalist system. They are invested out there in a moment ago, the service sector is the only sector various ways. The point I’m trying to make is that of our economy where we have been adding jobs the distinctions that used to be fairly clear to us for 30 years. If – we want to attack our employ- 60 years ago are no longer so clear. Where we ment problem, it means we need to add jobs have unclear distinctions, it leads in my view to there not in McDonalds jobs, but in good jobs in shabby thinking. the service sector.

Let me give the six areas where I think that we The fourth, an area in which the Lisbon Council do need to work on statistics. I hope and believe has been quite active, is human capital account- that there will be some consensus around this area ing. In an era of globalisation, if we are going to even if there is not on the diagnosis. go to our population and say that this transition is important, you are going to have the highest The fi rst one is green growth. I think that to say wages in the world, you are going to have the most that we will solve any of our problems, in par- generous social welfare system in the world, and ticular the social ones, without growth is simply you’re going to do it by high value-added work, we incorrect. There is a wealth of evidence to support need to do much more to develop people’s minds that. But that doesn’t mean that we can afford to give them the capacity to develop themselves. the same type of growth that we have had. We Not just as children but through life-long learning need to fi nd a way of looking at our statistics and throughout their lives and anything that statistics forcing it – as a bare minimum – to give us the can do to help us understand that is useful. We cost of carbon. We cannot continue growing by have a project at the Lisbon Council called the treating our atmosphere, as Al Gore put it quite European human capital index where we have memorably, as a giant sewer. It is in many ways been trying to measure this as a way of shedding up to the statisticians to help us understand that. light on it in the public policy domain. To help us understand the cost of carbon and the cost of excessive use of environmental resources The fi fth area is benchmarking. We can do an awful so that we can track it and improve. lot more there, including some fairly simple things. In particular, benchmarking where we stand versus the values that we profess. A perfect example is

184 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 2 Breakout session: Key needs and ways forward

Kyoto. We talk about Kyoto all the time and it’s I was going to say something about Pisa and a source of pride that we have signed it and what’s happening in education. We have a ten- embraced it, but very few European countries dency to talk a lot about social inclusion whereas will meet their Kyoto targets by the year 2010. our statistics tell us that we are doing very badly Workshop In fact, there are only two, according to two on that, in particular in immigrant communities. studies that have come out from the IPPR and Pisa tells us that when immigrants come here, the European Commission. The two are Sweden fi rst generation immigrants do better on their and the UK. The reason is particularly interesting Pisa than second generation immigrants. is that Sweden and the UK are also two of the four countries that will likely reach their Lisbon Last but not least, is something that my col- targets on employment. There is a fair amount leagues mentioned and with which I totally of evidence out there that if the policy mix is agree. Gini coeffi cients. It’s a very important right, there needs not be a trade-off between area of analysis. The problem with Gini coeffi - jobs and environmental standards. That may cients – this sounds strange – is that the analysis sound obvious to you, but read the newspapers. behind it is important and we need to fi nd a way Quite often environmental standards are being to get better measurements of inequality into attacked as job destroying. They are not. We the public domain. can use statistics to settle that argument. ©Photo European Parliament

19 & 20 November 2007 185 OPENING AND DISCUSSION OF WORKSHOP

• Aldo Ravazzi will open the ﬂ oor at the end for comments, and, Ministry of Environment, Italy, if we have time, the speakers will come back with Chairman of Workshop Session 3 Panel 2 comments on the comments.

My name is Aldo Ravazzi. I happen to be an econo- This is a session, like the two other parallel groups, mist lost in the jungle of the Italian ministry of trying to fi nd ideas to see where we are and how environment. I also happen to be chairing the OECD we can go forward. It will be an open discussion. committees for national environmental policies and Professor Anil Markandya has been asked to be for taxation and environment. our rapporteur in the plenary. I have also asked him to give us his opinions since we cannot lose The reason I have been asked to facilitate our this opportunity to have him with us and hear discussion here, I imagine, is because Italy has what he thinks. recently moved forward an important ‘delegated law’ as we call it, on environmental accounting With your permission, if the rules of the game are clear, and budgeting. This means that the Italian public I would like to give the fl oor to Isabelle Cassiers who administration at all levels – state, region and is teaching at the Catholic University de Louvain. city – must include environmental accounting and greening of the budget in national accounts. For the speech of Professor Isabelle Cassiers, We have about 24 months to establish a national see page 180. system. A very advanced draft has been passed through government and parliament, and requires only one last passage through parliament, which is • Aldo Ravazzi planned during the next few weeks. Then we will Chairman have 24 months to establish this system. Thank you very much Professor Cassiers. Quite The problems and challenges are quite clear – but interesting points, reminding us that GDP never not the answers. We have a number of good statis- pretended to be a measure of welfare although ticians, economists, and environmentalists and we it has very often been interpreted as such. And hope to bring good news in the near future. This is the balance between technocratic and democratic a rare attempt to have a specifi c law on environ- processes is another very key issue. How do we mental accounting and budgeting go forward. prepare the world for the future? We probably need technocracy to have data available, but then Our organizers have asked us to discuss together we have to be able to make the decision-making and to come up with some ideas, some convictions process effective in order to have useful indicators that we can try to share together here, and then in and measures of welfare and production. the general conference this afternoon and tomorrow morning. We have a number of specifi c questions: For the speech of Professor Jean Gadrey, see page 182. - What are the key opportunities for going beyond GDP? - What is feasible in the short and in the medium • Aldo Ravazzi term? Chairman - How can implementation be improved? - How to engage policy makers, key institutions, Thank you very much Professor Gadrey. It is not business, media, the broader public, and stake- easy to synthesize years and years of work. holders in general? It is interesting to see the problem of social and There is a general consensus that a lot of work environmental aspects integrated into economics. has been done by a few people, who deserve our That is one of the major challenges we are working admiration for their efforts and capacity. Now, we on at European level. The Lisbon and Gothenburg have to try to transform all the efforts of research strategies are trying to push forward in this area. and institutional capacity-building which have been The use of indicators for Lisbon and Gothenburg at attempted in recent years into policy and decision- the Spring European Council may be also a point making which is effective and recognized. for refl ection.

To help our discussions we have speakers who have I would like to give the ﬂ oor to Mr Hofheinz of the been invited to share their views with all of us. We Lisbon Council.

186 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 these different formsofcapitalinsome workin We have made someattemptstotrymeasure human capital,natural capital, and socialcapital. cal capitalbut,ashas been pointedout,also assets. Thestockofour assets isnotjustphysi- goods andservices,but forthestockofour accounting isnotforthe beyond GDPiswealthaccounting. Wealth The otherelementthatisusefulhereingoing come upandareusefulfordecision-making. importance. Like itornot,monetaryvalues do doing damagehereandyes, thesearethingsof so thatpolicy-makers canseethatyes, weare GDP, butitgives someideaoftheirimportance to GDP. meanwehave toaddit Thatdoesn’t the environment thataretakingplacerelative value oftheexternalities,damagesto been concernedwithtryingtodeterminethe suggested someofthese.Myownworkhas dovery well.Thepreviousspeaker doesn’t give values totheotherimpacts,whichGDP pointed outistoplay thesamegameandto One ofthethingsthathasbeensuggestedand people willtake asseriouslytheytake GDP? thing thatwillbeaheadlineindicatorwhich In thatcontext,whatcanwedotohave some- focus onwhenwetalkabout‘beyond GDP’. of nationallevel indicatorsthatwearetryingto valuable, butitisnotareplacementforthekind in welfareofaparticulargroup. Thatisvery which ismoreappropriatetoshowthechange a regionorproject,toidentifysomething tant, butperhapstheywillapplyatthelevel of the national level. Anumberofthepointsmadeby look atsomethingwhichwillbeanindicatora talking about‘beyond GDP’, wearegoingto emerging, butthe There aredifferencesofopinionwhich Just afewpointsonwhathasbeensaid. • your key viewswithus? Professor Markandya, wouldyou like toshare • page 183. For thespeechofPaulHofheinz,pleasesee eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 2 University ofBath,UK,Rapporteur Anil Markandya Chairman Aldo Ravazzi fi rst twospeakers arerelevant andimpor- fi rst thingisthatifweare fl o of ow well-being oryour well-beinganditwillnever really goodmeasure,itisnotameasureofmy a measureofwell-being.Ofcourseit’s nota perfect.Asthe It isn’t We doeverything withtheGDPindicator. can’t that formofaccountingwouldbeuseful. important sourcesoftheircapitalandmaybe actually losingcapital.Theyaresome a biggerimpact.We needtoshowthattheyare ‘so what?’Thefactisthatwemay needtohave for thesekindsoffactors,theIndonesianssaid growth rate fellfrom7%to6%whenyou allowed would. InIndonesia,whenweshowedthatthe much impactonpolicy-makers aswethoughtit have as useful. Ourearlyworkonthatdidn’t impose. Theideaofgreengrowthwouldbevery in thelightofenvironmental coststhat we more carefully. We needtounderstandthem Yes, wedoneedtounderstandourgrowthrates will begoingoninthefuture. a usefulindicatorofsomethethingswhich are losingcertainformsofcapital,which to develop. Itwilltellusthingsaboutwherewe are very imperfect,butthisisanimportantline are stillnotvery welladvanced. Ourmeasures was engagedwiththeWorld Bankbutwe which I Howtomeettheneedsofpolicy-makers and - Howcanimplementationbeimproved? - Whatisfeasibleintheshorttomedium - Whatarethekey opportunitiesforgoing - put tous: Please give shortreactions tothequestions • social indicatorsthathave beenmentioned. and measuresofwealth,sometheother we have talked about:measuresofinequality and supplementitwithalltheotherthingsthat and improve thatqualityanduseitjudiciously contexts andforsomepurposes.So, let’s try gone up3%,no, butitwillbeusefulinsome you ifGDPhasgoneup3%,thatwelfare beagoodmeasuretotell bad measure.Itwon’t years agowithnowandGDPmay notbea 200 societies. Asthepreviousspeaker said,compare indicator oftherelative well-beingofdifferent ciously andover time,itisperhapsnotabad be that.Butinsomecomparisons,ifmadejudi- other stakeholders? term? beyond GDP? Chairman Aldo Ravazzi fi rst speaker said, it isn’t rst speaker said,itisn’t 187

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• Viveka Palm at the regional level, we have created a tool, a Statistics Sweden prototype.

I’m working at Statistics Sweden with environmental There are many problems with implementation, accounts, so obviously I’m going to talk about what but the main problem is to ﬁ nd the key words to I think we could do with environmental accounts. disseminate the results to our policy-makers. Our work is very hard but also very fruitful, because We’re using the system for national accounts as a there has been a lot of interest in the work, in the basis and we’re adding in environmental data and four corners of Europe from southeast England to giving it to policy-makers. All the questions you’ve North Brabant in the Netherlands, Emilia-Romanga, been addressing are things we also discuss. and Maloposkie in Poland.

However, what has not been said here, but what The team did good work, but the problem was I think is one of the main things that our policy- to transfer the results and the process we imple- makers use, is that we are tracking what type of mented to the policy-makers. Those involved in economic instruments or institutional instruments disseminating the results also question how to that are being used to actually change what is interest the media. going on. Another issue is to achieve more of a mixture Swedish society knows that we have a problem and between institutional statistical ofﬁ ces at the we don’t really need a measure to tell us that we national level and this kind of ‘experiment.’ Because have a problem. We rather need to know how we our statistical ofﬁ ce debates with the person con- can get out of it and move towards development cerned but does not want to be directly involved. that is better. There seems to be some concrete dividing wall at local level. What we are doing is looking at where we have environmental taxes, how they are working, where One last thing, a colleague of Mr Markandya, they are not working and what type of carbon University of Bath, Allister Hunt, was involved in emissions, for example, are not taxed at all. one of our conferences in Bologna.

We are also looking for the regular investments that are being made in the economy to understand • Aldo Ravazzi what type of environmental damage you get from Chairman them so that you can change your perspective on what you should invest in, preferably using tech- It is very interesting that the challenge is at the nology that will take you further on. same time local, regional, national, European, and probably beyond. That is something I would like to add to this debate, to actually look at what we’re doing right now and see how we can invest differently. • N.N.

I’m involved with sustainable development • Maria-Paola Dosi indicators. Emilia-Romagna Region, Italy I was interested to hear the number of panellists I am Maria-Paola Dosi from Italy. I am the coordina- mention the different types of capital that are tor of an INTERREG IIIC project that involves the behind the generation of well-being. I’d be inter- issue of this conference, i.e. the implementation ested to have your individual views on the last type of the Lisbon and Gothenburg agendas by means that Anil Markandya mentioned, social capital, and of international projects and sub-projects that whether you think that has anything more than transfer actions on the ground by local authorities metaphorical value compared to the other types of and local organizations, universities, etc. capital, and whether you could really measure it in a meaningful sense, in an accounting sense. In particular, one of these sub-projects deals with the implementation of the NAMEA matrix at You also mentioned as an avenue, giving value the regional level. Using Eurostat guidelines on to the different types of capital. Do you think it air emissions, in particular greenhouse gases, would also be possible to give a monetary value

188 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 eration whenrevisiting indicators. would beimportantto take themintoconsid- stitutional value toasocietyorcommunity, it documents thatcanbe summarized asofcon- important goalsandvalues areestablishedin level ofpoliticaldiscourse.Asfarasthemost frequently usedinnationaldiscourseoratany about theconstitutionalityofindicatorsthatare at theUN,EU, andnationallevels. We cantalk certain anchorsasfarvisionisconcerned, linked tothevisionandprocess.We have I certainlyagreethattheindicatorhastobe • of whatshouldbemeasured. both, butweneedtohave avery goodgrasp nocratic versus democratic processes.We need speaker, ProfessorCassiers,thenotionoftech- Coming backtothepointraised bythe have allthesediscussionsaboutthoseterms. weight thanhumancapital,forexample?You in termsofvalue. Shouldhealthhave greater this morningweightingissuescreateproblems and therearenoweightingissues.Aswesaw the analogywithGDP, theyardstick iscurrency being reallyisandwhatmatters.Ifyou use sis therejusttounderstandbetterwhatwell- What shouldwemeasure?We needmoreanaly- ceptual framework behindthesocialaccounts. I have aquestionthatismoreaboutthecon- resources andsocialdevelopment. opment ofsocialindicatorsrelatedtohuman I’m headingagroupwhichworksonthedevel- • separately inany case? that you doneedtomeasurethedifferenttypes much ononeaggregatingvalue andforgetting any case.Istherenotariskinfocusing too have tomeasurethisaggregatingin ited andsoeven withonemeasureyou would between thedifferenttypesofcapitalsarelim- otherwise, given thatsubstitutionpossibilities one aggregatingmeasure,monetaryvalue or make any sensetoreallyfocustoomuchon monetarizing allfourtypesofcapital,wouldit to socialcapital?Andgiven thelimitationson eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 2 for Central andEasternEurope Regional Environmental Centre Janos Zlinszky Development, Canada Human Resources andSocial Raynald Létourneau ﬁ rst

information aboutachievingornot bring inotherindicatorstohave afuller setof it isforreally. I think thatanewinitiative to the electorate doesnotunderstandGDP. What itself wouldbeunderstood.Iventure tosay that only have halftheproblemofGDPbecause If wehave suchscienti human capitalinthisrespect. tremendous responsibility, andwetalked about has tremendousimportanceinthissenseanda make apointhere,thatsecondaryeducation and rudeundiplomatic,butIjustwant to politicians, andforgive meforbeingvery rough and again.Ifwedividesocietyintoexperts This isapointwecannotavoid raising again ences, natural sciences,andtechnicalsciences. scienti call itscienti a minimumthresholdofliteracy – you could sive one,asyntheticoneorsetofindicators, any indicator, beitasimpleone,comprehen- My secondpointisthatforthecomprehensionof used. Several speakers referredtothat.I agree constructed, buteven morewiththeway itis problem isinsomedegree withtheway GDPis We dohave abigproblem, bytheway. The be important. injecting goodandpractical ideas,isgoingto energy, whichisrealenergy andwillcontinue doing theirownthing.Managingthatlevel of communities, sectors,companiesandsoon,are are alotofautonomousprocessesoutthere: will have onlyapartialeffect,because there try todiscussherewhatwearegoingdo,this out therethatisvery decentralized. Whenwe We have torealize thatthere isamovement multiple levels fromcommunities uptonational. community whereinitiatives aretakingplaceon fi years. It’s15 interestingtoseethatthewhole We’ve beenlookingatindicatorsforabout • elaboration onthat. social indicator, andIwouldlove tohave abit me thatMr Hofheinz saidthattheGDPisa Finally, Ihave avery briefquestion. It struck a betterunderstandingabouttheGDP. the newindicators,aparallel effortingetting our constitutionalgoalsshouldhave, beside eld hasreallymushroomedintoavery diverse Development, Canada International InstituteforSustainable Laszlo Pinter fi cwemeanhumanities,arts,socialsci- fi c literacy – isnecessary. Andby fi c literacy, thenwewould 189

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also with the previous speaker that we have to societies. Some societies with the same GDP have do work on that front. I do agree on incremental different outcomes. change, but at the same time we also have to be clear that any adjustments to the GDP system The problem is how society uses GDP to produce along the lines of Markandya’s comments counting well-being. This is the central issue. The problem the uncounted adjustments will take signifi cant of what is well-being, what are the ends, is a amounts of time. Despite the progress we have democratic and political problem. We should not made in keeping track of physical accounts, our put indicators of outcome and means on the same monitoring systems are still not strong enough, level. They do not have the same importance. We particularly if we want to base a solid economic cannot mix means and ends of development in a valuation on them. composed indicator. We should be very careful how we decide which indicator to use. And that is my last point. For a while we will have to live with both working with physical accounts From this point of view I agree that a very long list and making better use of new types of physical of indicators where we mix together means, ends, accounts in decision-making, and at the same resources and the end results of the functioning time build up economic valuations and learn how of society is not a good approach. We should pri- to use them better. oritise. We should have a democratic discussion about the prioritisation of outcomes that we want to pursue to create a good life for people. We should • Aldo Ravazzi not mix together the means to get a good life and Chairman the outcomes of a good life. Thank you very much for reminding us how much My last point is about subjective indicators. I am GDP has evolved through time (since it was intro- very worried about the mix of means and ends. duced after the ’29 crisis) as well as the debate Subjective indicators are another category of indi- on ‘beyond GDP’ in the last 10-20 years. We all cators. They are very attractive and fashionable know the debate among experts on how to defi ne now, but there is no real theoretical discussion the GDP, fi nding international agreements: the about the real meaning of subjective indicators. The national accounts experts have been fi ghting for subjective perception of our lives is important, but a very long time and are still fi ghting on a large sometimes, for the poor especially, the perception number of issues, like the rate of unemployment, and the reality are very different. how many defi nitions we have in different countries and how delicate the debate is. We need objective conditions and subjective perception as well. But we should consider the fact that the private sector especially is very good at • Pasquale De Muro mental adaptation and will not refl ect real con- University of Rome ditions in their survey because they adapt very strongly to hardship and tough circumstances. It I work at the University of Rome. Currently I am is very dangerous to take for granted that subjec- working on a European research project that deals tive indicators are very good. with these issues.

I want to make a point about the approach that • Jörg Mayer-Ries we are following. We cannot limit our discussion Federal Ministry for the Environment, to a mere statistical, ecological, or even political Germany problem because there are a lot of theoretical problems that are in the background and that we I work with the federal ministry of environment cannot avoid. A relevant entry point from this point in Germany. I’m also an economist lost in this of view was made by Amartya Sen: we cannot bureaucracy, but only for a few weeks. This is a avoid distinguishing between means and ends. new position. Of course we cannot consider GDP not useful. It is a very important tool, but it is just a tool. That We are working on the general aspects and stra- is its job. We cannot consider growth per se as tegic questions around sustainable development negative or positive. It is just a means to an end. and the role of accounting in this context. Let me But to which end? It is the way we use resources make a more general comment. for well-being, which is the central problem of

190 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 thing. Notonlyonthenational level. with theenvironment, thiswouldbeawonderful household, toshowwhat you areactuallydoing paper aboutGDP. Ifyou hadanindicatorinyour environment ornot,you donotreadinthenews- an individualofwhetheryou aredestroying the If you wouldlike tohave apictureforyourself as projects andthenlookforlinkages. ent perspectives andtocarry outexperimental a wonderfulopportunity. Thisisapleafordiffer- old things.Thisisapoliticaldiscussionandit will beeconomicinterestintryingtokeep the derful –greengrowth,humancapitalbutthere All thequestionsandtasksyou listedarewon- a specialsocialindicator. result butasocialindicator–asyou said–but show thatGDPisnotaneutral natural scienti for economists,journalists,andpoliticiansto For example,weshouldcreatenewcurricula economy butalsowithsocietalquestions. is interlinked withecologyandnotonlypure work onalternative perspectives onhowsociety is agoodtimeforpoliticiansandscientiststo interesting. Thiswillpersistasaproblem.Now levels, fromdifferentperspectives, itwillnotbe try toconvince societytouse it.Ondifferent It makes nosensetocreateanewGDPand learn bythat. between thedifferentways andthenwecan look atmakingabenchmarkandcomparison about lookingfromnewperspectives. We should The wholediscussionaboutbeyond GDPisone was goingon,openedupdifferentpossibilities. as thelevel andinterestinsociety, andwhat and thespeci conceptualised sincethe1930s.Itwas wartime, what was decidedinmakingGDPasithasbeen look beyond GDP, weshouldlookbeforeGDPand national accountingavailable. Ithinkbeforewe I studiedeconomy, therewas nohistoryof My experienceasaneconomistwas thatwhen be mixed withotherlevels. This isavery importantaspectandshouldnot we needtotalkaboutGDPonanationallevel. The lasttwospeakers madeitvery clearthat make asocialindicator. or interestfromwhichyou lookatsocietyand tistics insociety, andtheparticularperspective is alotoflinkagebetweenaccountingandsta- I thankthepanelformakingclearthatthere eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 2 fi c macro-economictheoriesaswell fi c understand whatisimplicitbehindGDP. give otherexamples.Our so on.Advertising isaservicebutit For example,greenhousegas,advertising, and be devaluated, whatwillhave anegative value. value. Itisademocratic taskto decide whatwill it hastobedevaluated. Ithastobeanegative greenhouse gasdoesnothave tobevaluated, so not bevaluated. For example,you say that The otheraimistoknowwhatshouldand not createpro is notvaluated. For example,domestictasksdo pro ate everything thatmakes apro goals andaims.Themainimplicitaimistovalu- understand whatGDPmeans.hasimplicit be accounted.My is whatshouldbeaccountedandnot I comefromtheCNRSinParis, France. Mytopic • because I thought thatthebackground ofthis an indicatorofrelative well-being of societies, Mr Markandya say thatGDPshouldbekept as ellists andsay thatI’mvery surprisedtohear I would like toreactsomepointsof the pan- in danger. Thisisanimportant point. value, because theyputthesocietyorplanet decide whichitemshave toreceive anegative to knowbeforeyou change orkeep it,andto sued throughthismeasure?Itisvery important valuated itemsinGDP. Whatarethe goalspur- to decideandunderstandwhataretheimplicit remark. Beforegoingbeyond GDP, you have would say isthatItotallyagreewiththelast to reactallthecomments.The Unfortunately, thereis nottimeenoughtotry • very limited. now, choosingsomekey issuesbecausetimeis views withus.Alastroundfromthespeakers My thankstoallthosewhohave sharedtheir • should notbevaluated forsocialgoals. a pro that entailsmoreinequalityandeven itifmakes CNRS, France Georges Menahem University ofLouvain Isabelle Cassiers Chairman Aldo Ravazzi fi t isvaluatedmake apro andwhatdoesn’t fi t, even ifitisvaluated bytheGDP, it fi tsotheyarenotvaluated. Ican fi rst pointisthatwehave to fi rst aimistobetter fi t. What makes t. Whatmakes fi rst thingI fi t 191

Workshop OPENING AND DISCUSSION OF WORKSHOP

conference was the fact that we want to establish people do. I just want – like most people here – to clearly now that GDP is not an indicator of well-being put GDP in its rightful place as one of the means to of societies and so it cannot be used in a compara- an end which is something like having happy people tive way. in harmony with nature. No more, no less.

Along the same lines, when Mr Hofheinz takes Today, many economists are trying to save GDP as Maddison’s long-term data to show that we have being a proxy of well-being. Not perfect, but not succeeded in so much more welfare today than too bad. It is going to be more and more difﬁ cult 200 years ago, again, this is through GDP data, as the ecological crisis will concern more and more reconstructed for 200 years. This is probably total people. But we should save GDP as a good measure nonsense, although Maddison is a very great econo- of what the founders of national accounts built in mist and produces the best known and most solid their time without any confusion with well-being. data we can use for long-run studies. No less and no more.

It is only one component. All the work in this conference should show that GDP is not all of progress • Paul Hofheinz and maybe not only progress is in GDP. Suppose Lisbon Council that in 20 years, if we succeed in establishing another global index that really represents what Just listening to the debate, it strikes me that this is people understand as well-being, and that - as a little bit of a medieval conclave. That we are argu- Maddison did – reconstructed this index through ing over the fi ne points and that actually we agree time to go back – 200 years, I’m not sure that broadly. I sense more consensus than disagreement we would have the same image of the progress on all of the points that have been made, including accomplished. Probably we have very different the ones that the panellists have just made. ideas of economic and social history. In my view, we cannot have a linear interpretation. We have to The gentleman here asked to hear more about have a systemic interpretation. For instance, when what I said about GDP as a social indicator. This we compare our level of growth today with that of is exactly what I said. I said it is a social indica- Africa, we have to understand how the West built tor. I did not say it was the social indicator. There part of its wealth on slavery and colonization and are quite a few other things we can look at, but how it hampered Africa’s development. GDP does tell us something about well-being, in some ways, in different parts of the world. I used the example of Botswana; if you go there it does • Aldo Ravazzi mean something that their GDP is as low as it is Chairman compared to what GDP in Europe means. The debate between ecological economics and Just to give an example of an area in transition, I environmental economics is reaching a very high would mention China. We are all seeing very serious level with refi ned elements, but we have to go problems with China’s growth both environmentally forward. Professor Gadrey, you have the fl oor. and socially. But let’s not overlook what lies right behind it, which is that their country has come out of a situation only four decades ago where many • Jean Gadrey of them were on the verge of famine. These aren’t University of Lille statistics that I’m disputing, I’ve been to China and talked to people about it and that is how they First, trying to answer Paul Hofheinz, we may see the difference between the social market they or may not disagree on the fact that unlimited have today and Chairman Mao’s time. growth is possible in our rich countries with respect to ecological constraints. I don’t know, but I’m Briefl y about what the lady said about measuring sure that we can agree to adopt indicators that the different types of capital. Thank you for that allow us to better measure sustainable well-being question. Bring it to a lot of other conferences. You and to see if continuous growth is and can be a are absolutely right. We need to do more of that. long-term contribution to sustainable well-being, We have tried to come up with a way of measuring which nobody can say today. precisely what you said, in accounting terms, human capital. I’d be happy to talk to you about it later. Second, responding to Anil. Personally, I don’t want It’s been problematic, but what we’re trying to do any suppression of GDP. I don’t think that many is to get the debate moving in that way because if

192 Beyond GDP: Measuring progress, true wealth, and the well-being of nations I thinkthereisroomforboth.Boththingscan 19 &20 November2007 everywhere. It dependswhatkindof growth reduce poverty by6-7%.Notthesameamount correlation. You increase GDPby10%andyou reduction withrespecttoGDP andthereisastrong done worktolookatthe elasticityofpoverty say that.Webecause GDPisperfect.I didn’t have saying thatweshouldnot gobeyondwasn’t GDP To replytothecommentfromMs Cassiers, I more workcanbedonetoimprove onthat. the residual.That’s nottheonlyway togoand present value ofconsumption andthenpicked up other formsofcapitalrelative tothediscounted a residual.Inotherwordswede World Bank,socialcapitalwas measuredas In theaccountingthatweweredoingat Somebody asked aboutthevaluation ofwealth. used withthesamedegreeofcon asensethatthesemightbeableto wasn’t subjective indicatorshadsomeproblems,there that oneortwopeoplefeltsomeofthese go intothatsyntheticindicator.do sense WhileI time, wearenotabsolutelysurewhatshould some kindofdemocratic process.At thesame priate weightingsneedtobedeterminedin that theappropriateindicatorsandappro- rapporteur, Icansensethatthereisafeeling going tobeeasydetermine.Inmy roleas What theappropriatenewindicatorsareisnot to betaken. feels thatthereisscopeforboththeseactions sions, fromthetable,thataudiencealso be done.Icertainlybelieve fromthediscus- Theotherdirectionhasbeenwhatnewindica- - OneishowwecanmodifyGDPorimprove - two ideas: Just brie • what we’retryingtodowiththat. we canmeasureit, sustainability indicators. we mightbeabletousemodi eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 2 or dothisjobbetter. tors canweproducewhichwouldcomplement working inthatdirection. and ofsustainability. Someofushave been cator, butasausefulindicatorofwell-being it asanindicator, perhapsnotaperfectindi- Rapporteur Anil Markandya fl y, thedebatereallyisfocusingon change fi ed oradjusted fi it. Andthat’s fi dence, that dence, ned all the us understandwealthandwell-being. to can useitasaproductionmeasureandtrying GDP’, inotherwordsusingGDPasfarwe munities areinvolved inre experts. Itisgoodnewsthatsomany com- key issuesfromvery differentcommunitiesof One minutejusttoclose.We hadanumberof Professor Markandya. of reportingonthesethingsintheplenary, You willhave thepleasure–anddif • perfect indicator, butthecorrelationsarethere. is linked tokey socialindicators.Itmay notbea and togobeyond GDPinthatcontext,but to understandwhattheelementsofgrowthare you have. Ofcourse,that’s why itisimportant plenary. Thank you very much.Itistime togobackthe many ofusaretrying todotogether. and tonotwaste all thisimportantworkthat done attheresearchlevel andinpublic affairs on; i.e. institutionalising indicators,measures,andso ourselves to izers areaskingustohelpthemand tohelp European Commissionandalltheotherorgan- Finally, my lastpointisthatourfriendsinthe contributions canalsocome. From theseareasofworkgoodresultsand the areaofG8butgrowslargerandlarger. Reuse ofwaste andresources).Thelatterisin Initiative (Reduction ofwaste, Recycling and R the Japanesearepushingforward withthe3 rials management,aswelltheworkthat resource productivity, andonsustainablemate- forward, whichisworkon material OECD ontheseissuesthatmay helpustogo May Ialso mentionthegoodworkdoneat good stepintherightdirection. centres, anduniversities. Thiscouldbeanother administration, NGOs,enterprises,research experts fromthedifferentcommunities,public ful thattheyhave broughttogetherallthese good opportunityandwemustbevery grate- Fund andClubofRome have given usavery Commission togetherwithOECD, World Wildlife The EuropeanParliament andtheEuropean fi Chairman Aldo Ravazzi nd indicators,complexornot,which help fi ndingways topro fi nd ways tomove forward by fi fl tfromallthework ection on‘beyond fi cult job – job cult fl os and ows 193

Workshop WORKSHOP - PANEL 3

Stuart Bond WWF, UK

I would like to start by suggesting that the scien- ferent ways, looking at carbon ecological footprints, tifi c evidence shows – and we heard a lot about it greenhouse gases, and a range of environmental this morning – that the human economy has gone indicators. beyond limits. It’s very clear that the scientifi c evidence is very strong. We can measure it in many In the UK, we’ve used an input/output-based different ways. There are a lot of measurements approach largely because it talks the language out there. They can be in ecological footprints, of economists. It allows us to be able to talk to carbon footprints, and water footprints. They can economists as well as to environmentalists. This is be in the very stark realities of greenhouse gas a statistical base for the foundation of a lot of the emissions and of climate change. All these unin- work we are involved in. I would recommend that tended consequences from our past endeavours a comprehensive multi-regional input/output model are becoming very diffi cult to address: soil degra- is developed for the EU, and if money allows, a true dation, water stress, biodiversity loss and so on. system that integrates country accounts in a com- Many of the issues that we all hear are very close plete multi-regional input/output framework. to our hearts. This statistical base is almost nothing unless we get What we really need is not just a step change, but a policy-makers and decision-makers to start using whole-scale revisioning, an evolution in our econo- and interpreting it and to start making decisions mies, our patterns of production and consumption. based upon it. Hand in hand with an evidence base, Most crucially, what we are here to discuss today we need applications and we also need to build is the tools that we use to measure the successes capacity. As part of an ongoing work programme or otherwise of that market transformation. on the one-planet economy, I have been working on an integrated solutions approach that is based If the human economy has now gone beyond limits, upon a resource fl ow model as the underlying the rules of the game have simply changed. While dynamic of society. Increasingly, this turns the we keep a very detailed track of the stocks and costs of climate emissions into opportunities for fl ows of money, we need to keep just as strong, supply chain transformation. or even stronger, track of the stocks and fl ows of materials and energy. I’m not suggesting that we A one-planet economy is not just an idea from WWF supplant traditional monetary accounts. I think UK, it is also an idea from the UK government itself that they do a very good job in the right place. and is enshrined in the sustainable development But if we are to preserve and improve upon our strategy. However, there is no defi nition of what stocks of natural capital, clean air, fresh water, and a one-planet economy is, so the programme of the soil to grow things in, we now need to invest work that we’ve been espousing is starting with heavily in a programme that measures and tracks this evidence base, moving on to applications, and materials and energy stocks and fl ows. building capacity. As part of that, we’ve developed a defi nition we’re calling ‘an economic system We also need to measure stocks of material and of production and consumption’, which respects energy fl ows both on a production basis and on a all environmental limits while being socially and consumption basis. For a globalised economy we fi nancially sustainable. need measures that transcend G8 political boundaries. The footprint approach is one way of doing Clearly such a whole supply chain transformation this. It reallocates to what economists would call strategy is not possible overnight. We need to ‘fi nal demand.’ tackle slow structural changes fi rst if we have any chance of success. So far, most policy is based on Much work has already been undertaken in produc- quick easy wins. We haven’t tackled the systemic ing a whole series of accounts in a number of dif- issues.

194 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 3 Breakout session: Key needs and ways forward

I would like to direct your attention to a couple little about it. We’ve been tinkering at the margins. of facts and fi gures to highlight the size and the While this produced some reductions in emissions scale as well as the urgency of the challenge. with some increases in resource effi ciency, it is We can defi ne the target rate for change by not going to produce the large-scale systemic Workshop setting a one-planet target at a strategic point transformation that is required. A 75% reduction such as 2050, which is the current horizon for is a massive number in 40 to 50 years. It’s a very climate policy. This would mean a year-on-year short time. The time scale is compressing our reduction in total resource use of 3-3½% per needs to be able to act and to act very fast. year as measured by the ecological footprint. By 2020, the reduction of the total footprint will We need to follow this up. Not only with meas- be about 35%, and by 2050, 75%. If we factor ures and metrics that go beyond GDP, but with in economic growth at an average of 2¼ -2½%, commitments, real political commitments for it’s all country dependent, then the required rate tenacity to implement a vision – a key vision - of decoupling or improvement in the resource over a 40-year time scale. It will take courage effi ciency of footprints of the Euro GDP would and leadership to start now on a long and com- be a reduction of more than 5½% year-on-year plex journey. Metrics that lead beyond GDP are for the next half century. This is about twice the an important start but they need to be clear, rate that we’ve seen in the recent past. transparent and robust, and they need to transcend boundaries between environmentalists and This one-planet target of 3-3½% absolute economists and to be trusted by both camps. resource use and 5½% in relative decoupling is the ultimate benchmark for a pathway to This strategic programme of transformation in environmental sustainability. It is also a guide markets, of governments, technologies, and to the long-term policy framework for public consumer behaviour will also require political policy and business performance that enables maturity that accepts the principle of multi-level organizations to plan ahead. It can then translate and multi-lateral governance. This will help to easily into schemes such as the cap and trade secure a one-planet agenda that works across principle of the EU ETS, using the cap as a ceil- every sector from feed and agriculture to public ing on emissions, and this should be reduced services, to business and manufacturing, to con- by 3-3½% per year. sumer lifestyles. We can produce the metrics. As we heard earlier, it is not just about producing Aside from the technical case, what is clear, and the right sort of metrics for the right sorts of this is really where I started, is that we know people; we also need the political leadership to something is wrong. So far we have done very be able to take this forward. ©Photo European Parliament

195 19 & 20 November 2007 Workshop

Teresa Fogelberg Deputy Chief Executive, Global Reporting Initiative

Measuring by reporting

I will share with you a method whereby, through and is now ofﬁ cially part of the United Nations a system of global voluntary reporting bottom up, Environment Programme. It has some 25,000 mutually inter-validating information can be publicly network members and is based in Amsterdam. It communicated on issues which are traditionally has a board comprised of business, governments, not covered by GDP but are key to measuring and academics, labour representatives, and interna- assessing the economic and sustainable health of tional accountancy specialists. Together, they have main actors of society, namely and particularly the developed and negotiated a reporting framework business community. and principles on how reporting should happen with 70 indicators, both economic, and environ- If you look at the list of these issues, we all agree mental, and including all kinds of labour practice, that most of them are not included in the traditional human rights, society and product responsibility GDP indicators, and that we all think that they are indicators. All of these indicators have been com- important for us to cover today. If you look at the monly negotiated between all these civil society, sources of information on these indicators, we have business, and government representatives and are to look at all kinds of different sources mentioned in that sense owned by them. There is agreement here on the slide. In order to fully capture that we on them and they are also formulated in an easily need three kinds of innovations, three changes. understandable and usable fashion.

First of all, the nature of the indicators. Now there are 1,200 organizations issuing annual reports where they give information on both their Secondly, we should not look only at the geographi- fi nancial performance but also specially on these cal entry point such as nations, states or munici- sustainability indicators. Of these, 600 are based palities, but we should also look at actors that in Europe, but the majority are multinational com- borders, i.e. global players, such as the corporate panies and therefore they also give information on sector, that go beyond national borders and have their presence in other parts of the world. operations in many countries of the world. What I would like to end with is the question: ‘What Thirdly, we also have to look at how the informa- is feasible in a few years?’ and if I go back to the tion is actually reaching politicians, those who question of the early plenary this morning: ‘Where make decisions on investments, such as fi nancial would we be in 10 years from today?’ We could eas- analysts. Therefore we have to look at a variety ily manage to have 75% of multinationals producing of actors who provide these data and informa- these kinds of sustainability report. It may be a tion and who share them in an inter-subjective bit more diffi cult to reach, 75% of public agencies, interplay and interaction, what we call a ‘naughty and here I mean ministries or organizations like the stakeholder process.’ European Commission, to also produce reports on their own sustainability performance. And about All of these approaches can be found going beyond half of SMEs will be doing so. In order for this to national borders using information on environmental, happen, civil society has to continue to be very social, and economic performance and using informa- critical and watchful of the content of these data tion from different stakeholders and actors in what and policy-makers should make it happen through we call the ‘sustainability reporting approach.’ their regulatory framework, either by making this kind of reporting mandatory or by creating stimuli About ten years ago, an organization called the to do it on a voluntary basis. Global Reporting Initiative (GRI) was formed

196 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 3 Breakout session: Key needs and ways forward Workshop

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198 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 3 Breakout session: Key needs and ways forward Workshop

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200 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 3 Breakout session: Key needs and ways forward

Andrea Saltelli, Jochen Jesinghaus and Giuseppe Munda Workshop European Commission, Joint Research Centre, Italy

Well-being stories Disclaimer: The opinions are those of the authors and not of the European Commission.

First story Here is the UK ISEW as we all know it: GDP The index of sustainability of fi scal and is rising steadily, while the ISEW reaches its ecological development. peak in 1975, shortly after the First Oil Crisis (1973/74), and shortly after the publication “Russia is outpacing the US, UK and Germany in of “Limits to Growth” (Meadows & Meadows & securing its population’s long-term economic and Randers, 1972) – here is The Scientifi c Proof that environmental future, according to a new study”. we have already exceeded the environmental limits, and that we urgently need to change Thus incipit a piece of the FT (September 13 2007) course to Save The Planet. looking with polite disbelief at an 18-country index of “Sustainability of fi scal and ecologi- Personal Indicator Sustainable Economic Welfare cal development” developed by Economists £ per Capita 10000 – GDP at Germany’s Allianz Insurance and Dresdner Your ISEW Bank. The index ranks Russia sixth in, ahead of the UK (placed seventh), Germany (ninth), 8000 – and the US (17th).

6000 – The index is a composite of ﬁ ve indicators: public debt, current account and net borrowing 4000 – balances, carbon dioxide emissions and energy use per unit of gross domestic product. 2000 –

Second story 0 – – – – – – – – – – – – – – – – – – – – – – – – – The Index of Sustainable Economic 1950 1958 1966 1974 1982 1990 1996 Welfare, ISEW – also available as Genuine Progress Indicator, GPI. Here is a slightly modiﬁ ed purely environmental ISEW: we eliminated all “social”, i.e. inequality, Gini, household work etc. corrections but Indicator Sustainable Economic Welfare £ per Capita kept the environmental, i.e. air pollution and GDP 10000 – climate change items. The result: GDP is still ISEW rising steadily, but the ISEW outperforms GDP 8000 – from 1982 onwards!

6000 – Third story The Ecological footprint 4000 – Carrying capacity of ecosystems including 2000 – humans are difﬁ cult to compute as humans’ footprint depends on population density, consumption levels as well as on technology. What

0 – – – – – – – – – – – – – – – – – – – – – – – – – 1950 1958 1966 1974 1982 1990 1996 are the policy implications of the remark that

201 19 & 20 November 2007 Workshop

Netherlands occupies 15 times its actual size in use of these accounts to give a crystal clear mes- E-footprint? Would the impact of Netherlands’ sage what satellite accounts are good for. people for the world be better if they were spread thinly over free spots on the planet? How would Second suggested inference. The danger of the EF capture the practice of exporting production reductionisms. Only economy and environ- and pollution abroad? Can we trust EF data when ment matter. we know that trees absorptive capacity depends on age and location and that world averages are used? As the stories of the index of the Allianz-Dresdner These are but some of the most common criticism Bank (sustainability of fi scal and ecological develop- to EF heard in Ecological Economics Circles. ment) and the Ecological Footprint show, reducing well being (in the sense of Eudaimonia) to economy The Ecological Footprint, while an excellent advo- and environment runs two major risk: cacy tool, suffers from the same weakness as GPI etc., i.e. from the attempt to aggregate disjoint 1. to yield a measure scarcely informative for both indicators on the basis of “acres”. Neither dollars nor dimensions. What, implications for policy can Russia acres are neutral enough to be applied to a wealth draw from the Allianz-Dresdner Bank index. of indicators that do not always fi t neatly into the metaphor (try using “acres” for the fragmentation 2. to leave an entire universe of dimensions of landscapes, or to subtract “dollars” from GDP for uncharted. Would anyone like to live in a coun- correcting gender inequality). This is indeed a strong try which is prosperous and ecologically minded narrative underpinned by a weak model. under a dictator? Would we accept therein the existence of slaves? Incidentally Aristotle would. How can we build a measure of well being in dollars or acres forgetful of equity, cohesion, Some Inference education and culture? Who would be convinced of it across disciplines and in society? First suggested inference. The metric fallacy. In our opinion ISEW and the Ecological Footprint The environment has an important role in poli- suffer from the same problem: “Incommensurability, tics, but assuming that economists (including the i.e. the absence of a common unit of measure- National Accountants whose GDP someone wants ment across plural values, entails the rejection to modify), social scientists and others can be not just of monetary reductionism but also any treated as “optionals”, is a tactical error that will physical reductionism (e.g. eco-energetic valua- not promote the good cause of the green com- tion). However it does not imply incomparability. It munity that is so active at “Beyond GDP”. allows that different options are weakly comparable, that is comparable without recourse to a single Third suggested inference. Where to go type of value”. [Joan Martinez-Alier, Giuseppe Munda, John O’Neill, 1998, Weak comparability There is a long path ahead toward a model for of values as a foundation for ecological econom- well being - while we do not know what the fi nal ics, Ecological Economics, 26, 277–286]. One of model will be, we know that the initial input vari- the most widely quoted paper in the Ecological able set will include as a point of departure what Economics literature is “The value of a songbird”, statisticians have painfully collected. by Funtowicz and Ravetz. One can imagine the argument from the title. The same considerations A look at Eurostat’s “key” indicators shows that apply to other attempts to ‘adjust’ GDP, e.g. by the environment does indeed play a signifi cant satellite accounts. role among the 250 Sustainable Development and Lisbon (Structural) indicators present there. But any Satellite Accounting is an excellent tool for mod- attempt to go “Beyond GDP” must recognise the elling the interactions between the economy and complexity of the task to measure societal progress the environment. It is an essential tool for energy (wellbeing, sustainability, eudaimonia or whatever use, greenhouse gases, and a handful of other label one wants to adopt). Picking a dozen of envi- indicators; however, we fear that non-practitioners ronmental variables, adding a handful of economic misunderstand “environmental accounts” as a and social fi g leaves, and aggregating them on the generally applicable methodology for calculating a basis of some magic but unfortunately not so trans- “Green GDP”. It is in the interest of the concerned parent unit is clearly not bound to be a successful services of the European Commission fostering the strategy when trying to challenge GDP growth in its role as key policy guidance indicator.

202 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 3 – Panel 3 Breakout session: Key needs and ways forward

on the SDI headline 13 as it played with the Structural Indicators 12!

Clearly our still unknown model will aggregate, Workshop and here the trite arguments of the apples and oranges which would be added and the even more trite one of the arbitrary nature of the

weighting process. If one were to see how CO2 emission are converted in dollars by reduction- ists (a 4 orders of magnitude uncertainty range is considered by practitioners) then some carefully and transparently negotiated aggregation may seem a better option.

If we are to indicate a good practice, then Yale/ Columbia Environmental Sustainability Index and Environmental Performance Index are egre- gious measures of environmental stewardship and we would have liked to see more of them at this conference.

A careful modelled aggregation performed by respected academic or international organisations can bring to page 1 of the literate press issues as diverse and at time specialised such as university ranking, good governance, and the freedom of press which would otherwise be lost on page 14.

Here what the Financial Times says about the World Bank sixth annual Worldwide Governance Indicators (July 12).

Economists are often accused, justly, of thinking that what cannot be counted does not count. In this case, economists are trying to count what - many would say - cannot be counted. The alternatives, however, are worse. Either we ignore this fact or we make subjective guesses. For all its weaknesses, the Bank remains best- equipped to crunch the numbers and deliver

©Photo European Parliament the judgment, however unpalatable.

By the way, NOT aggregating a battery of indicators is also not a viable option; neither the 13 Sustainable Development headline indicators, http://composite-indicators.jrc.ec.europa.eu/ nor the 12 Lisbon headline indicators are suffi ciently simple to be understood by ordinary citizens not to capture a headline. In 2004 the Commission ‘published’ the 12 SI headline indicators and the Financial Times produced itself the aggregation to slam the story in page 3! See Saltelli, A., 2007, Composite indicators between analysis and advocacy, Social indicators research 81(11), 65-77. Further these e.g. SDI 13 variables can generate monsters. FT would be surprised to fi nd Romania fi rst if it played

203 19 & 20 November 2007 OPENING AND DISCUSSION OF WORKSHOP

• Ivo Havinga I would like the presenters to concentrate on these United Nations Statistics Division, three questions. Chairman of Workshop Session 3 Panel 3 With that, I would like to give the ﬂ oor to I would like to welcome you to this breakout ses- Stuart. sion. It is a pleasure having this large audience to help us get going on this particular topic. We have For the speech of Stuart Bond, a list of excellent speakers but before doing that please see page 194. let me just brieﬂ y introduce myself.

I am Ivo Havinga from the United Nations Statistics • Ivo Havinga Division, UNSD, responsible for economic statistics Chairman in a broad sense and environmental accounting. I know, we all have opinions, but it’s not for me to Very succinct and very clear. You make a couple of speak. My job is to moderate this meeting. I do points about opportunity and feasibility. You say that with pleasure. we have to have clear policy goals and we have to communicate them very clearly, and you say We have excellent speakers. Let me introduce by 2010 and 2020, 2050. You talk about overall them. transformation in terms of looking at production, consumption and accumulation. - We have Stuart Bond, he is sustainable development offi cer from the WWF, a pleasure, Stuart, With that, Teresa, can I ask you to continue? to have you here; - We have Teresa Fogelberg; she is responsible For the speech of Dr Teresa Fogelberg, for the global reporting initiative. She’s deputy please see page 196. chief executive and has an extensive background in sustainable development and she has also worked extensively in development aid. A pleas- • Ivo Havinga ure, Teresa, to have you here; Chairman - We also have, Mr Andrea Saltelli; he is an applied statistician at the Joint Research Centre in Italy. We know that the global reporting initiative is a Andrea, welcome; prima facie case of moving forward in a terrain - Then we have Marcel Canoy; he is economic at international level, at UN level. Thank you for advisor from the European Commission of making that clear. Thank you also for explaining European Bureau Policy Advisers, and he is our feasibility, because feasibility was also created Rapporteur. under the UN auspices and also in terms of the way forward by setting clear goals. In terms of organizing the session, I will take the speakers as I have introduced them to you. That is With that, I would like to ask Andrea to take the fi rst Stuart Bond, then Teresa Fogelberg, and then fl oor. Thank you. Andrea Saltelli. Basically what I’ve been asked to do by the organizers is to concentrate on three For the speech of Andrea Saltelli, see page 201. particular questions. I will read them to you so that you know that I will try to focus discussion on these issues, because this discussion will lead • Ivo Havinga into the next session. Chairman The questions are: I enjoyed listening to some of your fallacies. You have strong views on the single metric that is used. - What are the key opportunities for going beyond You don’t want to compete between the social GDP? dimension and the economic and environmental - What is feasible in the short to medium term dimensions. These are strong points. and how can implementation be improved? - How to meet the needs of policy-makers, key Laurs mentioned that also from Eurostat he is institutions, business, media, and the broader very optimistic. I hear the same thing from you. public, i.e. how to meet the needs of the So much is already being done and we could stakeholders?

204 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 concerned. do that,butthisisakey issueasfarIam to resources.Thereare someotherways to advice inGermany is toshifttaxes fromlabour that wehave throughresourceuse. Our policy other words,tointernalisetheexternaleffects do thatistoincreasethepriceofresources.In save resourcesandthemosteconomic way to What canwedo?Thekey issueistobegin side. Thatistrueonamicrolevel forproducts. That isresourceproductivityonthesystems of decouplingagainstwhatwedotonature. take any indicatorsyou wish.Itisaquestion resource productivityperunitoutput.You can we arereallythinkingabouttheinputside,and If ontheotherhandwetake a systemsapproach, right thing. only tosymptoms,weusuallydonotthe ronmental policiesthatifwerelateourthinking on CO the outputside.Thereisalotofconcentration One isasymptom-orientedchoice.Thaton have twochoicesbasically. of thehumaneconomy onthe environment. We have tolookatwhataretheprofoundimpacts what arethelimits?Ifwetake thisseriously, we gone beyond limits.Ifullyagree.Thequestionis It hasbeensaidthatthehumaneconomy has ing factorsforwhatwecandoinoursocieties. guardrails ofthelawsnaturethatarelimit- any socialdevelopment. Inthatsense,itisthe cannot have aneconomy andwecannothave ronment, withouthealthy natureservices, we The to allthree. I have very fewpoints,Chairman,thatrelate • for goingbeyond GDP? First question:whatarethekey opportunities can take thequestionsonebyone. fl Thank you, panellists.Iwouldlike toopenthe improve ourcommunications. capitalize onwhathasbeendoneandmaybe We have learnedinthelast30 years ofenvi- There aremany othersthat wecouldregard. eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 3 oor, moresystematicallyifImay. Maybe you Factor 10Institute Friedrich Schmidt-Bleek fi rst isthatwithoutafunctioningenvi- 2 rightnow. Thisisoneofthesymptoms. are onthetableandwetookISEWasoneof Saltelli talked aboutthevarious measuresthat Commission’s, JointResearch Centre.Andrea I’m JochenJesinghausfromtheEuropean • scarce, that’s partofit. To save resources,you have tomake themmore • prices recognized. of humansocietyontothemarket andgetthe What Ihearisthatyou want tobringtheeffects • audience. It isnotasustainable strategy tocheatthe unless werelyonapublic thatiseasytocheat. Going forgreenGDPisjustnottherightway, the general heading‘greenGDP’orwhatever. these blackboxes thatareonthetableunder I justwant tohighlighthowmisleadingare action thatWWFisaskingfor. that wewouldhave toimposeonCO I’m notsure.Butitisonly1/100 25 US dollarspertonneorso. Maybe itis40, check. You will has tobeinthisgreenGDPmeasure.Goand It’s oneofthemostimportantindicators,soit the ISEW, thereisCO dollars perbarrel.In to addataxofabout100 not 100aswehave currently. Sowewouldhave dollars perbarrel, to increasetheoilprice200 introduce environmental taxes. We wouldhave catastrophe. Buttodothatwewouldhave to We have toactandwehave toavoid thebig IPCC. Iagree,wehave adoomsday scenario. scenario thatwearecurrentlyhearingfromthe and it’s incomeinequality. It’s notthedoomsday into thedetailwe how weareonthewrongtrack, butifwelook graph showingthegapthatopensandtellsus Everybody goesaroundwiththisfamousISEW not tolookatthedetail,intomethodology. the strikingexamplesofhowmisleadingitcanbe Joint Research Centre European Commission, Jochen Jesinghaus Factor 10Institute Friedrich Schmidt-Bleek Chairman Ivo Havinga fi nd thatitisvalued atabout fi nd thatit’s householdwork 2 . It’s somewhereinthere. th ofthesum 2 to getthe 205

Workshop OPENING AND DISCUSSION OF WORKSHOP

• Hans Diefenbacher • Jean-Louis Weber Institute for Interdisciplinary Research, European Environment Agency University of Heidelberg I will answer your three points separately because I belong to the Institute for Interdisciplinary you asked us to do so, but I would have preferred Research, University of Heidelberg. I’m one of to start with the last one which is the answer to the young fossils of this debate because I’m one the questions of the stakeholders. But I will take of those who made the time series of the ISEW them in the order you propose. for Germany about 15-18 years ago. The opportunities of going beyond GDP. I take it as I completely agree with you. This is just another a producer of information for policy-making. First fi gure and not a better fi gure. But the GDP is a of all there is strong political demand. This confer- single measure as well. And everybody looks at ence is one example. The Potsdam Initiative of the it. This is the problem. The problem is how do we G8+5 is quite high-level. I don’t know if there is get rid of the one single measure that is mislead- a higher level of demand in the world, and they ing us. Maybe it is a good idea to have such a clearly expressed the question about the cost of measure, the GDP, and another just in a tiny box not taking care of biodiversity. Like it or not, but on the same page of the publication? So every the question is there. As professionals we have to time you look at the GDP, there might be another answer these kinds of questions. truth that is worth a debate. As long as we are not able to get rid of the GDP, I would like to at There is a millennium ecosystem assessment that least raise the idea of another single measure. I will be revised now and will be updated by UNEP completely agree that it is a better to have nice by 2015. The question of accounting for the eco- headline indicators. But we cannot get rid of the nomic costs and benefi ts of the ecosystem and other strategy for the moment. ecosystem services is now on the table. It was not that clear in the fi rst millennium but it is now. You can say that you also have several initiatives • Marco Malgarini in Europe at country level. Several countries are Institute for Studies and Economic engaged in ecosystem assessments and in ecosystem accounting, including with monetary valu- Analyses, Italy ation. You also have initiatives at local level, and In answer to your question of what do we have last but not least, at company level. Companies to do to go beyond GDP, I am more interested in are interested in having complete accounting of the part related to subjective measurements of their environmental impacts. Not only the direct personal and national well-being. In this sense, impacts of their use of materials and emissions there is some scope perhaps to enlarge the avail- of residuals, but the indirect impacts linked to ability of indicators that are on the table right their degradation, maybe involuntary degrada- now. If I understand correctly, basically we have tion, of the environment. Politically, this is a huge indicators that are available over quite a long opportunity. time span. You’ve got surveys that try to measure personal well-being every three or four or fi ve Technically, we now have access to a huge number years. I wonder, as a question to the audience, if of databases. Maybe the problem is to fi nd one’s it is worth trying to increase the frequency of this way trough all this data. We have a lot of statistics kind of measure. That would be of some interest available. A lot of scientifi c knowledge. A lot of especially if we are able to look at the individual software to process the data. You have AGS now, dimensions of this data. Looking at the individual very common software on your desktop. What we dimensions of this data may allow us to measure are missing is some framework to organize the the impact of different policy measures on sub- activity of various communities of statisticians jective well-being. In this sense, we could think and scientists of various domains. We have one about developing some high frequency subjective framework which is not perfect, but which is under well-being measures. revision and will be perfect by 2010. It is a system of economic environmental accounting. This system is candidate framework to help in organizing the necessary multiple activities.

206 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 you canaddare needs. Apartfromyour own thoughts,maybe feels thatwealsohave toconcentrate onthe term have beencuedbyMarcelonthat,buthe key opportunitiesareandtheshortmedium coming very closetounderstanding whatthe we meettheneedsofpolicy-makers? We’re to concentrate onthethirdquestion,howdo Before you start,Iwouldaskyou, ifpossible, • whole process. one couldlookintoasamethodtocontrolthe million citizens. Thisisoneofthethings with 800 approach, whichhasworked for47countries the wholecycle beginsagain.Thisisasectoral build capacitytoreachtheseindicators.And up. Thenagain,targetedmechanismsexistto that thenissuerecommendationsonfollow- This isthenveri common benchmarksdecidedbygovernments. purposes. Thisistranslated intoconventions, discussing indicatorsandneedsforcertain from thebeginning,withcivilsocietyexperts management process.We have atotalcycle regional andsectoral approacheswith apolicy this ispreciselyamodelwherewecombine To commentonwhattheCouncilofEurope does, available. and methods,tousethebestpractices plementary approachtodifferentareas,sectors action? Itisindeedtruethatweneedacom- get politicianstotranslate theknowledgeinto do weactuallyfollowupindicators?How And thequestionofprocessmanagement,how in particular, theso-calledsubjective ones? indicators areweusingandforwhatpurpose, a consensusontheindicators.Whatkindsof If wewant tomake animpactweneedtohave • eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 3 Chairman Ivo Havinga Council ofEurope Andreas Siegel fi ed bymonitoringmechanisms fl ection ontheneeds. discourse isvery muchaboutboth:atraditional native approach,becauseatthemoment really pushingvery hardforthiskindofalter- But now, alltheevidenceisthattheyare not that theCommissionisinapositiontodoit. feel At thesametime,atmomentwedon’t of measuring. a regiondecidestoadoptthisalternative way global level, itcouldbeavery strongsignalthat you wouldthinkofaEuropeaninitiative. At the of actorsthatcouldbringthischange.Ideally, seewhere isthecriticalmass moment wedon’t very keen tohave alternatives toGDP. For the have aneed.AssocialNGOs,wewouldbe to policy-makers, you To concentrate onthelastquestion.Relation a broadcoalitionofEuropeansocialNGOs. I’m thedirectorofSocialPlatform,whichis • ure theyneedfortheir purposes. and make theappropriatedecisionformeas- overwhelming forpolicy-makers tosiftthrough of ourtime,itmakes itvery cumbersome and we give toperhapsoneoftheleadingproblems it relatescloselytotheincreasingattentionthat so, whilethatisapositive development, because to themeasurementofhumanwell-beingand indicators thatrelateinsomeform orother 300 the UNDPthatshowstherearemorethan by statisticians.We nowhave arecentstudyby I feelthatthethirdquestioncanpartlybehelped • of NGOs. on growthandjobs.Thatistherelative worth work inacontextwherethekey EUstrategy is important, butatthemomentitisdif presidency oftheEUcouldtake it.Alltheseare are readytotake thiskindof approach.Anew working withagroupofMemberStatesthat old way. I’mreallywonderingifwecouldstart alternative. Theyarehappytocontinuethegood of policy-makers feelneedthis whowedon’t icy-makers, atthemomentwehave agroup For us,whenwetalkabouttheneedsofpol- of theNGOs. on CSRhasreallysloweddownintheopinion approach tobothandeverything thatwas done Social Platform Social Platform Roshan DiPuppo Yale University Tanja Srebotnjak fi rst have toseethey fi cult to cult 207

Workshop OPENING AND DISCUSSION OF WORKSHOP

So I think statisticians have an important role to fi ll I will not dwell much on that, I will just give you by helping policy-makers with decision-making, by an example, the time distance method, which is providing the index most suitable for their needs. on the virtual indicators’ expo, so you can see it In part we have talked about many measures, but there. But basically it means you can reach new so far very few of them come with uncertainty conclusions, for instance, in the European Union, assessments, confi dence intervals, anything that if you are comparing two time series, one is life gives the user an idea of how valid and reliable expectancy male and female. If we compare it and how variable a measure really is. So that was statistically, it’s 8% higher. If we compare it over just what I wanted to add to the debate. It has time - this is my measure – looking for the same only come forward in the margins so far. level of the indicator at two times, believe it or not: 29 years, what is the policy conclusion? That you have to have both measures, because if you • Mathis Wackernagel wish to fi nd out if it is a diffi cult problem, you use Global Footprint Network time distance. If you wish to say it’s no problem whatsoever, you use 8%. So we need different What does it mean that Holland uses fi ve times uses of data, which are already there, better uti- their own resources? Essentially, to use more than lisation of data, because otherwise the interest you have, you have to either deplete your own groups, which would like to put it one way would assets or you have to import the difference from use one measure, and the other interest group somewhere else. So that exposes you to the risk would use the other measure. So, I would simply of overshooting. It also means that other countries suggest that we don’t look for new perspectives that try to imitate Holland should probably think on indicators but at the way we discuss, interpret twice, because it may be diffi cult to import that and communicate them. much from other places.

I think it’s an important indicator, which leads to • Ivo Havinga your third question: How can we serve stakehold- Chairman ers? Essentially I think we have to focus on how do indicators frame the key question? I think the key Wonderful. It is good that you brought it out. You question for the 21st century really is as Professor know, it’s not just statistics. It’s also that we have Schmidt-Bleek said “How can we live properly on to build knowledge out of your two analyses. Thank one planet?” So, rather than having one Holy Grail you for this intervention. indicator, we need to have indicators that look at tension. We need indicators that look at how well we live but also, to an extent “Do we live within the • Richard Walton budget of one planet?” And it’s through this tension European Central Bank that we manage both the interest of stakeholders and the innovation that is necessary to overcome To answer the third question, I can only say that, of this tension rather than just look away from it. course, the needs of policy-makers will undoubtedly vary with the political orientation of the policymaker concerned. • Pavle Sicherl University of Ljubljana, Slovenia I would rather address the fi rst question: key opportunities for going beyond GDP. In that I see I just want to say a few words about how to meet a limited set of undisputed core indicators, which the needs of the stakeholders. I will link it to what are linked by an accounting system. Frameworks Andrea was saying. There is a lot of work done in of national accounts and environmental accounts collecting indicators. So we have a good start from have been mentioned. This is nothing new, because that point of view. But I think that there is also an we already have important target variables like important aspect which I call “human interface”, infl ation, monetary aggregates, the unemployment and that is understanding information and com- rate; so the challenge in answering the fi rst ques- municating that information. So what I want to tion is to supplement the list of policy indicators say is that when we have indicators, we should with a few social and environmental indicators that take up what OECD is suggesting from statistics are easily incorporated into forecasting models. to knowledge to policy, and for that we don’t just Examples include life expectancy, adult literacy need new indicators and new ways of thinking, rates and greenhouse gas emissions. but also to see the results of statistical measuring.

208 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 impressed with, becausewhenwe talkabout which isthesecondthing politiciansarevery ter re footprint nexttomaybe another one thatbet- We doneedamainindicator like ecological being aboutquestionssuchas and maybe acceptitasaproxy forthetime not seeksomething type ofrecognitionyet asGDP. TheEUshould have thesame The onlythingis,itdoesn’t missions andsoon,thisisbeingrecognised. contributions tosustainabledevelopment com- is gainingmoreimportance.Ifyou lookatEU perfect indicator?Ithinktheecologicalfootprint be believed whenweareperfect.ButisGDPa are beingdiscussed,wetendto, wecanonly the viewthatwhenenvironmental indicators deterioration, water scarcityandsoon.Buttake footprints nowthereistoomuchfocusonCO lack thatabit,andIpersonallyfeelwith climate wehave IPCC,withotherindicatorswe to anagreedobjective, anagreedgoal.With ronmental indicators,wealways have to link peoplearenothappy.it isn’t, Butwithenvi- When growthishigher, peoplearehappy, when indicators isthatGDPjustaboutgrowth. I think thecomplicationwithenvironmental of theenvironment, butalsopredictstrends. is important-give informationaboutthestate outlook 2030,whichdoesnotonly-andthis OECD willcomeoutwithanewenvironmental European Environment Agency. Nextyear the tal decline.We have very goodreportsfromthe We have alotofinformationaboutenvironmen- minds ofpoliticianstodeterminetheirpriorities. becomes asin ronmental organisationsneedanindicatorthat level. Asforourneeds,it’s very clearthatenvi- environmental organisationsworkingonthe EU Environmental Bureau,whichisafederation of I’m SecretaryGeneral oftheEuropean • communicate well. Basically you’re saying, keep itsimple,but • are wemakingimprovements. economic growthbadfortheenvironment, or rather tion aboutothervery importantthingslike soil and thismay intheendgive toolittleinforma- eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 3 European Environmental Bureau John Hontelez Chairman Ivo Havinga ﬂ

ects social indicatorslike employment, look atthingslike ecologicalfootprint, ﬂ uential asGDPtoin

instead ofGDP, butshould

is thequalityof ﬂ uence the uence 2

the Lisbonprocess,weneedakindofinherent is very clear. For instance,inEUstrategy itis sustainable development andwell-being,Ithink, measures ofwell-being.Andthelinkbetween to usethisbigpolicyframework topushother countries. SoIthinkitisagreatopportunity At theEuropeanlevel, weseethatinmany driver forpolicyactions. in thegeneral publicmeaningthatit is aclear development hasgotmoreandattraction arching goalofpolicies.Thisissuesustainable recognised intheEuropeanUnionasover- the sustainabledevelopment strategy, whichis for goingbeyond GDP, onebigpushshouldbe To comebacktoyour issueonopportunities • in theEU. critique ofthequalityeconomicdevelopment wrap itup. Andrea, canIaskyou tostart? the othersession.I’llgive you alloneminuteto because wehave tostopby12:10hgo I wouldlike toturn tothepanellists,simply • need differentkindsofmeasures. order todeliver amoreef sustainable. Whatdoesitmeanforthem?In the ecologicalfootprintby5%inordertobe them, forinstance,thattheyhave to decrease tive. We cannottalktopolicy-makers andtell go alone,even if, to recognisethatthosekindsofindicatorscannot composite indicators.Butindoingso, wehave is perhapsthecasewithsomewellestablished expect indicatorstobemoreattractive, andthis social developments. Butweshouldcertainly kinds ofmeasureeconomic,environmental, of topics-objective, subjective andvarious interesting, becausetheycover alargevariety sets ofindicatorshave theirlimits.Theyare ticularly truewhentargetingpolicyneeds.Large to addressthesedifferentusersanditispar- Certainly weneeddifferentkindsofindicators ing aboutthefactthatwehave differentusers. There wereseveral speakers thismorningtalk- see clearlythislinkbetweenthetwo. being ofpresentandfuturegenerations. Sowe de ﬁ European Commission,Eurostat Pascal Wolff Chairman Ivo Havinga ned asmaintainingandenhancingthewell- a priori , theyaremoreattrac- ﬁ cient message,we 209

Workshop OPENING AND DISCUSSION OF WORKSHOP

• Andrea Saltelli • Teresa Fogelberg European Commission, Global Reporting Initiative Joint Research Centre I also wanted to refer to the gentleman from Mathis Wackernagel has done a fantastic job. No Heidelberg, but not because of the ranking of his other indicators I know of have had the power institute, but because of the remark that he made of advocacy that his indicator has had. Jochen about trying to endeavour to use maybe two main Jesinghaus, who knows these things better than indicators for the general public. Having said that, I do, tells me that the ecological footprint can do listening to this discussion, there has been an overall a great job, especially in efﬁ cacy of development, focus on the environmental. Somebody said, you when you talk about ofﬁ cial development aid in should not over-focus on climate change issues,

global partnership studies. That is when you want CO2 reduction, but I think if you are trying to make to make sure that we do not deplete the resources a third very important indicator, I would again like of developing countries. to draw attention to issues of social empowerment, social inclusion, emancipation, equal pay, to that I was just making an argument about the metrics, whole grouping of social rights, which maybe in which is something I feel strongly about. The care- Europe we have already attained to a large degree, ful, cautious aggregations of a variable done by but we should have the ambition to have these an institution, which has the legitimacy to do this indexes at a global level. So that’s my ﬁ rst reaction aggregation and is done with extreme care, is the to your point. Yes, simple, but let’s not forget about way to go and Tanja’s work here is a good exam- these very important social ambitions that we also ple. Look at the environmental sustainability index have as a global community. and environmental performance index produced by Yale and Colombia Universities for the World The second point is the remark of Tanja, about the Economic Forum. EPI as a measure of a country’s validity of data. I think it’s a very valid point that stewardship to uphold the environment is a very you made, but I would say, let’s not listen only to good example of how far you can go. statisticians, listen also to civil society, which also has a critical role in following data. And ask the Of course, at the same time you have to be detailed question, are these the right data, and if they are, and parsimonious. You can do that with statistical is the content valid? methods nowadays. I cannot go into this now. And of course you must also be transparent, because I would also like to draw your attention to a if the users and stakeholders cannot understand whole new profession, and that is the profes- how you have reached some kind of aggregation, sional assurors. Now that companies are coming this will not be useful. Finally, of course, you must up with their own data, of course, we have the be able to assess the uncertainties, because if we ﬁ nancial; we have the accountants, who are all

know beforehand that CO2 ‘numeraire’ is uncer- following Sarbanes-Oxley and all the European tain by orders of magnitude, we won’t go very far laws on fi nancial reporting. But the more important with it. Then we will have a model which is totally environmental and social accounting becomes, qualitative. the more important it also becomes not only for civil society to critically watch those fi gures, but One last point and here I return to the question by also for professional assurors. For instance, the the Chairman: the media. Now, I argue that you International Assurors Standard Board has now can get even the most abstruse topic on page 1 of developed very concise methods in order to vali- the Financial Times by careful aggregation of the date the data being produced by companies. So nature which I discussed just now. Two days ago, you get a whole new profession of sustainability the Times supplement review of higher university assurors; for instance some universities already ranking (THES), was on page 1 of the Financial give Masters degrees in that very specifi c new Times. The title was “Heidelberg only 60”, so all profession. the Germans readers opened the journal and go to page 4 and read the article on university ranking. My last comment is that some speakers indeed You know it’s done carefully and well by a reputed spoke about the importance of the corporate sector. institution, so it made it to page 1 of the Financial We should not forget that the corporate footprints Times. This is what we have to do. I could give of some individual companies in terms of annual examples of global governance and other examples, budget and turnover, bypass by for the GDPs of but this is enough for today. national economies. That disappeared a little bit in the discussion, and that was part of my presenta-

210 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 we’re notreallytaking action. All ofusthinkwewould like togetthere,but to worklessandwhere you gettolive more. somewhere better?Somewhere whereyou get ligent enoughtomove somewhere smarter, get tothatstageorarewecollectively intel- well above 200dollarsabarrel.Dowewant to to astagewherepeakoildrives oilpricesup talked aboutoilpricesandsoon.We couldget goals andsoon.Therewas agentlemanwho – millenniumdevelopment goals,biodiversity sense ofachievingsomevery key objectives with environmental limits,andthatalsohasa to createaneconomy thatlives with,andworks to business,andgovernment. Thisistheidea: and communicatingnotonlytoconsumers,but measuring, weneedtokeep oncommunicating, not onlyindicators.We have tokeep don’t on and outsofit,theycangettheconcept.Andso gettheins about, andeven thoughtheydon’t print: peopleunderstandwhatwe’retalking That ispartlythepowerofecologicalfoot- and themeasuresneedtobecommunicable. change. We needtoproducerelevant measures The pointofmeasuringistoactuallycreate really needtomove beyond simplymeasuring. forcing ustotake action,tomake choices.We that isreally, reallycompressingtime,anditis climate changeisoneofthosebigdrivingforces preclude action,andIthinkthereisatime, measure thingstothen we neednewperspectives? Ithinkthatwecan comments? Doweneednewindicators,ordo Can Ijustpickuponthefatheroftimeseries • and alsointermsofcompetitiveness. policy-makers bothintermsoftheenvironment, statistical importance,butitisalsoimportantfor their ownfootprints.Thereforeit’s notonlyof providing thesekindsofstatisticsanddataon that theyactuallygothroughthedisciplineof advantage fortheEuropeancorporate sector this summer, andheseesitasacompetitive companies). AndImetVice-PresidentVerheugen the majorityofthesecompanies(Fortune 500 about thefuture,butatthisactualmoment, now bythese-atthismoment.Iwas talking the dataandinformationbeingproduced I thinkthatpolicy-makers cannotaffordtoignore global reportinginitiative. tion inthebeginningwhenItalked about the eso ae Breakoutsession:Keyneedsandwaysforward Session 3–Panel 3 WWF, UK Stuart Bond th degree,butdoesthat well acrossthemediaallway throughthe logical footprintsofcities,whichwas picked up We’ve donealotofworkrecentlyontheeco- Indicators arereadilypicked upbythemedia. I’ll justpickuponyour pointaboutthemedia. increased resourceef measure,norcan they get consumers can’t about householdsandsoon.It’s very clearthat talk aboutbusinessandtherewas talkearlier And thenjustto the rightdirection. if it’s notdrivingchange,it’s notmoving usin know? Isitgoingtohelpdrive change?Because policy? Isitgoingtomeasurewhatwewant to story. For us,wewant toknow:Isitusefulfor I’m smallerthanyou –whatever. That’s amedia up onkey issuesthatsay, I’mbiggerthanyou, want toknow. Andthemediawillhappilypick for policy, anditmeasuressomethingthatwe can communicateit,wemake itrelevant all thatsortofstuff. Whatisusefulthatwe UK. You know, my footprintisbiggerthanyours, forward tothecontinuation. excellent meeting.Ithankyou allandIlook two minuteswhichtheyhad.Ithinkitwas an they have beenwillingtostickin the oneor for theirinteraction andthesuccinctnesswhich discussion. Iwouldlike tothanktheaudience I wouldlike tothankthepanellistsforthis • we want togetto. we allknowarenowtoabetterplacewhere transformation totake usfromtheplacewhere from business,toleadasortofkey sectoral board, fromconsumers,interestgroups, multi-level, multi-lateral partnershipsacrossthe have theabilitytopulltogetherrightsortof to bevery clearthatitisgovernments that a sortofgovernance perspective. Italsoseems ally derives fromacollective will,largelyfrom is good,andthat“growthgood”modelactu- models arepredicatedonthefactthatgrowth can do. Butit’s alsoclearthatcurrentbusiness facturing andsoon.That’s somethingbusiness Chairman Ivo Havinga ﬁ nalise, we’ve hadsome ﬁ ciency fromcarmanu- 211

Workshop

Session 4 Collaboration opportunities Workshop

Bedrˇich Moldan Professor at the Charles University, Czech Republic

I will try to summarise my recommendations in salient indicators to answer this issue. There are 5 points. certainly many other policy issues with concrete targets, so we should really respond to that and My fi rst point is that I would recommend focusing develop indicators which are adequate for these on modifi cations and supplements to GDP, and not purposes. replacing it. In fact it was said here too and I think that after all, GDP itself and its use, is modelled My fourth point is that certainly you can cite that approach, because we are all talking about many features which good indicators should fulfi l. GDP as an overarching indicator. But if you look at I would focus on just one and that is the indicators what the statistical offi ces are reporting regarding should be scientifi cally robust. I would prefer simple economic performance, there are other indicators indicators with units based on concrete measures which are also very important and which supple- and I am afraid that I personally do not believe ment GDP from the economic point of view, like too much in democratic weighting and the like. By labour productivity, like unemployment, etc. So we training I am a natural scientist and I would prefer should not forget that GDP does not stand alone. simple, robust indicators like material fl ow analysis, So we should not go the way, in my view, of hav- which is quite a straightforward approach and is ing a ‘magic bullet’ just replacing GDP. very telling. It could be a model for that.

My second point is – and here I quote Oliver Zwirner, My fi fth point is that when we are talking about who said this morning and I think it was very impor- environment especially, I would recommend three tant – is that our approach should also include things: timeliness. I think that it is extremely important if we are about to really supplement economic - First to my mind the most reliable and fruitful indicators like GDP, like unemployment, all that, approach is to focus on pressures, because this is that it should be developed in such a way to be something very concrete and very instructive. equally timely, and it is up to the statistical offi ces to fi nd ways as to do it. We environmentalists - Second, and again I quote one of the previous who are monitoring and measuring have so many speakers of the morning, Jacqueline McGlade: try online systems, it is a pity and it is a shame that to develop indicators on eco-systems services, we are not able to deliver timely information like because this is something which is really very economists. In fact I don’t understand the reasons important. for that. - Third, focus on linkages, and one typical link- My third point is that we should rely more on age is decoupling indicators, try to compare indicators and measures which respond to specifi c and economic performance and pressure on the policy requirements. Look at climate change, for environment. This is an example which I would instance. We should focus on reliable, good and very much recommend to develop further.

214 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 Collaboration opportunities

Willy de Backer 3E Intelligence Workshop

I am of course fi rst and foremost a journalist of mine, they do not know what it is. It maybe now, an independent journalist after having fantastic, it may be very good, but ecological worked for about 8 years as a chief editor for footprint, they know what that is. And now - and Euractiv.com, the policy portal that probably there is a bit of a problem with it - it is even a lot of people in the room will know. But my being “hijacked” by others, by business. I was background, as you said, has been in politics. listening to CNBC last week, where some busi- Anders Wijkman started this morning by saying nessman was saying “we have a big footprint in that there was a similar debate about ten years Asia.” He means of course a presence in Asia, ago in the parliament. I know, Anders. Back in but he calls it a big footprint. You see, it has the eighties already I was in a similar debate fi ltered through, to the businessmen, which is in the UK called the Other Economic Summit, I an important thing. I think the ecological foot- think where also Hazel Henderson was present. print is something that we should build upon, So it is not something that is absolutely new or and maybe in a way we can “ecologise” GDP only from the last ten years. by trying to combine them and then creating a new hegemonic myth. What is the problem? If it was already discussed in the eighties, why hasn’t it reached politicians The use of media: that is the next point I would yet? There seems to be a problem between like to tackle, having been in the media myself the good instruments, the indicators that you and being a journalist. I think you will have a have, how to communicate it, and then after very diffi cult time working through traditional you have communicated it, how to get it into media to get your new alternative indicator of policy-making. And I would like to try to address this new hegemonic myth across. There is, on these kinds of things. the other hand, another system, or another instrument now, which is blogging. As a journal- First of all, I think the problem is that we do ist, I have moved from traditional online media not see that GDP has become what I call a to professional blogging. I can give the exam- “hegemonic myth.” And when we try to tackle ple of the Peak Oil Community. I do not know it , when we need to come up with something if lots of people know about it here, I am not new, you will have to come up with another going to go into details, but it is about reserves hegemonic myth. Otherwise you will not be able of oil, gas, etc – this Peak Oil Community has to get it into politicians’ heads. What does that actually managed – in about three years (using mean? It means it has to be simple. It has to be blogging) to create a community and to start comprehensive. I know it has been said several infl uencing the politicians now. So you can use times already, this is not a beauty contest about that, and I think it is something to pick up for what is the best indicator. So in a way you do this conference as an instrument later. See if not need to make a decision on should we use you can actually create a “beyond GDP blog” this one or that one, or should we concentrate community and just not have this kind of meet- more or put more money into this or that one. ing every ten years. But you should fi nd a communicatable narrative on the basis of some of the indicators. If I look An other point. It was said that we have no at all the different indicators that I have been lack of data. I would like to contest that. In following over all these years, I think there is the area of resource depletion, there is a big only one up to now that has really reached the lack of transparent data. Even the International awareness of the media, and probably also the Energy Agency - I was in London when they awareness of some parts of citizens. And that presented their last outlook - was very clear on is the ecological footprint. That is the only one. this, and next year they want to concentrate As for the happiness index, if I talk to friends on bringing more transparency into the data on

19 & 20 November 2007 215 Workshop

resource depletion, because it is not clear at all cies, etc. They have sort of become independent what our oil reserves, our gas reserves, and our from politicians, so that the whole lobbying proc- coal reserves are. So let us also make sure that ess and all that does not come into play anymore. we get transparency there. Maybe we need, and this is my question, like the European Central Bank, a kind of independent And then one last question. There is one institu- sustainability institution that looks at policies and tion where we also have lots of statistics, and can, like the bank does, feed in their ideas and where it actually goes into policy-making. That is say to politicians “Sorry but this is the wrong way the European Bank of course, and national banks. to go, because of these and these data.” I think They use statistics to make policy. The difference that is what I wanted to say broadly. I have a few is that actually when they monitor monetary poli- more ideas, but I’ll keep it to this. ©Photo European Parliament

216 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 Collaboration opportunities

Johannes Blokland Member of the European Parliament Workshop

In the seventies we had in the Netherlands a long I have some criteria for that: debate about employment and unemployment. Different institutions all had their own indica- - First, we need harmonised measurement tors. Some of them used mainly employment methods. whereas some of them more used unemployment. And so you saw that there were different - Second point: reproduction is very important. indicators. For each goal there was an indicator Each scientist must be able to see how the about employment and unemployment. This others have developed their fi gures. When gave rise to a lot of discussion between politi- that is impossible, and each scientist has cians. It was not very helpful. So in the end, his own fi gures, then we are on the wrong The Netherlands took the decision to give the track. job of employment and unemployment fi gures to the statistical offi ce, an independent institu- - A systematic approach is very important. tion. Ever since we have no discussions about Comprehensibility of the system is very impor- the fi gures. That was fi ne. tant, as well as comparability and objectivity. We also need time series. We have to see Two years ago, we had a debate in this parlia- what the development in time is, and what ment, and also in the Netherlands, about the we have to do with the fi gures is also to make fi gures on air quality. And each party, each prognoses. We have to see what will happen in partition had its own features. There were dif- the future if we continue in the same way. ferent measurement methods, different models and different correction factors. What was My last point is that we already had an accepted the conclusion? That it is not very helpful for accounting system. More than ten years ago, the politicians when each organisation has its own European Parliament and the Council accepted features. So what we have to do is to fi nd con- a system of economic accounts, environmen- ditions for the development of indicators of tal accounts and social accounts as a basis for progress through wealth and well-being which thinking. Therefore we can go further along are broadly accepted. that path. What is fi ne with this system is that it meets all the conditions. So it is objective, we have time series, we can make prognoses so I think that we have to go further in that direction. I am very afraid when each party has its own indicators. Then we just fi ght each other with indicators and have no common basis to go further. And this is ten years after acceptance of the accounting system the Parliament established. This is a pity.

19 & 20 November 2007 217 OPENING AND DISCUSSION OF WORKSHOP

• Fulai Sheng Rapporteur Session 3 Panel 1

I just wanted to report to you that in Panel 1 we had a very interesting discussion, and we heard a diversity of views on how to move this work forward and how to address the questions raised. Let me try to summarise some of the key streams of thoughts that came up from the panel discussion.

Number one. I would describe it as the issue of • Pieter Everaers empowering people to use indicators. In this stream Director, European Commission, of thinking, I just wanted to identify some of the Eurostat, Chairman of Workshop key points or phrases, not always in complete Session 4 sentences. There is a point that people at different levels should be able to use the indicators. People My name is Pieter Everaers. I am Director at from different groups need to understand each Eurostat, responsible for agricultural statistics, other better, what indicators mean to them. Also environment and statistical cooperation. very importantly: how do we translate indicators into meaningful policy actions? Of course in terms I have the pleasure to chair this session number of empowering people, that would really take us 4, “Collaboration opportunities”. We have the big to the next stream of thinking. challenge to give a message to Anders Wijkman so that he can this evening take the output of the Number two. I would describe it as really the expert workshop to the large conference. emphasis on a bottom-up approach, which means that in order to be able to use the indicators to Next to me I have the three rapporteurs and on initiate actions, to be able to understand each my left I have two of the panellists. We are still other, we really need to build indicators from the waiting for Johannes Blokland. We have about bottom, from the grassroots level, because we need 30-35 minutes. I have asked the rapporteurs to to know what issues are important to people. And be brief and to focus on the main points. I will give what are the issues that people really care about? them each about 4 minutes and then I will ask In this regard, there has been a lot of emphasis on the panellists to discuss the steps forward. The communication, how we could utilise communica- main questions - just to repeat them – are: What tion techniques and communication tools, different are the key opportunities for going beyond GDP? ways of communication to engage people at that Second question: What is feasible in the short to level, or rather at different levels. In this regard, medium term? And how can implementation be as far as communication is concerned, there was improved? And the third question: How to engage some discussion on the role of statisticians, whether policy-makers, key institutions and business, and statisticians have done their job once they have other stakeholders? I think that is the summary and compiled the data and statistics, or should they I am sure (I was watching and listening to panel be doing a little more. Certainly the role is not of number 1) that it is not easy to summarise along course conﬁ ned to statisticians. Other players have the lines of these questions, but I hope that you perhaps an even more important role to play, in will give some provoking statements to which the other words, to take the results from statisticians panellists will be able to react. So let me start. and then to communicate really to different levels of communities. I also wanted to emphasise that Mr Blokland, welcome. Let me start by asking the there is a question of integrating data users, indica- rapporteurs to react. I am starting with the rap- tor users, from the beginning, from the beginning porteur for Panel 1, Fulai Sheng. He is an econo- of a process, to compile meaningful indicators. mist working for UNEP, focusing on integrated policy-making. Previously he worked for the World The third stream of thinking from the group is Wildlife Fund, actively involved in taking nature something I would describe as the diversity of into account. I am ready to listen to the report ideas. Diversity of ideas, or perhaps it is rather a from panel 1. plea, a plea for cooperation, a plea for tolerance, for the diversity of ideas. And certainly we did hear a number of ideas here. We heard for example that in France there was an idea to put environmental

218 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 4 Collaboration opportunities

price on products. But there were some different • Pieter Everaers perspectives in terms of avoiding multiple prices Chairman and rather to include ecological cost into the pricing mechanisms directly through taxation and I am now giving the fl oor to Anil Markandya, Workshop other instruments. There are ideas of taking the who is working at the University of Bath. I’d like role of environmental certifi cation into account in to ask him to report from Panel 2. the valuation exercise. There is the idea of really including public services, very importantly, in the compilation of indicators, because people’s • Anil Markandya well-being is signifi cantly infl uenced by the kind Rapporteur Session 3 Panel 2 of services that are provided. The discussion showed more convergences than So there are various streams of ideas and dif- I thought would emerge when we started. The ferent ways of articulating what should be in fi rst point was that most people accepted that the indicators. There are also ideas for using GDP is certainly not a perfect, or even a very the data we already have, the kind of indica- good measure of well-being and sustainability, tors we already have to do some projections, to but that it is linked to some important aspects make use of existing indicators to project into of well-being and there are modifi cations pos- the future trends, linking in to several major sible to improve it. These modifi cations are global and environmental outlooks that are possible, and the work in this direction is use- being released this fall or next spring. ful and important. In this context there is also ongoing work in terms of sustainability using In a nutshell, in this stream of thinking, there are wealth accounting and wealth indicators. As to these different ideas, but one issue that seems how good – or imperfect – a measure it is, there to stand out is that it may be very diffi cult to was some difference of opinion. Some thought really measure the individual preferences for it was pretty useless, others thought maybe it well-being or what each individual considers to has some saving graces and can be saved. be well-being, or sustainable development. That remains a major challenge, but the concluding The second broad conclusion was that it is worth remark on that stream of thinking is that a lot trying to develop some other synthetic indica- of these ideas are not mutually exclusive. We tor of well-being which can complement or run should really try to identify synergies and build alongside the modifi ed GDP indicator. The exact on the synergies rather than try to compete determinants of such a synthetic indicator were with one another. not provided in the discussion we had, but most people’s comments suggested that a lot of work The fi nal stream of thinking coming from this needs to be done to develop such an indicator. group is really an emphasis on how to move A few points were made which are relevant to the technical part of this work forward. There this. One was that the process of selecting the is an emphasis on having a limited number of components and the weightings should be demo- indicators. There is emphasis on the importance cratic. There should be some degree of public of linking the indicators to national accounts, accountability, public discussion as to exactly and to achieving international comparability. what goes into such an indicator. It is important, There is also an emphasis on the importance agreeing with the previous rapporteur, that issues of having indicators from authoritative bodies, of information and knowledge about the indicator to be published by authoritative bodies. There are also important and need to be stressed. The is also an emphasis on a stepwise approach, on issue of where and how to apply these indica- trying not to rush into this exercise. tors, and when to use them and for what purposes, needs to be clarifi ed and discussed. This, Finally there is a plea for simplicity. Again, back of course, applies also to the modifi ed GDP indi- to the fi rst point of using the indicators in order cator. Even with these modifi cations it will not be to be able to communicate, to mobilise different the appropriate indicator for all policy purposes, communities of people. but it will be for some, and where it is appropriate and where it is not, are issues that need to be worked on. As to the areas that we need to cover in developing or modifying the existing structure or developing new structures, one that was raised was the distributional question: how

19 & 20 November 2007 219 OPENING AND DISCUSSION OF WORKSHOP

issues of the distribution of well-being in society are know that aggregation is needed. Somehow the picked up; and obviously issues related to changes fi rst opportunity is there: how can we aggregate in the environment, green growth and especially data in a meaningful way to get a limited set of of course greenhouse gas emissions; questions of indicators? We know that there are problems with sustainability more generally and questions relating aggregation but as long as we know what is behind to the development of human and social capital. Are there, communication can continue. So that would we able to pick these things up in our indicators? be the fi rst opportunity. In some of the discussions there was brief mention about the use of subjective indicators, indicators of The second opportunity is that we know that we happiness, and things like that. Some doubts were live in a world of wasteful usage of resources, but expressed on that front. we also know that there are many countries with high GDP who are much less wasteful than other The last point I would make is that a number of countries with high GDP. And the same applies for speakers noted that the indicators that we need countries with low GDP. So how can we decouple of course have to be linked to what use is made of growth and GDP with more effi cient resource allo- them. But not only are those indicators relevant at cation? This is a very important opportunity. national level, it is also important to have indicators that are appropriate for decision-making at The third opportunity has nothing to do with meas- a regional and local level. The structure between urement. It is well known by most politicians by the regional, local and the national also needs a now what to do about certain aspects of well-being, degree of clarifi cation. for instance, in particular about the climate. So how can we use these instruments, in particular pricing instruments, which every scientist knows • Pieter Everaers is the thing to do, but every politician knows is Chairman diffi cult to implement? So these are the groups of opportunities. We are now going to Panel 3, and I am happy to introduce Marcel Canoy, who is working at the Then there was another question related to what Bureau for European Policy Advisors, which is the are the short-term and medium-term goals that think tank advising President Barroso. we can achieve. Here again, I did not look for consensus. I just picked up a couple of interesting thoughts because they can steer the debate. • Marcel Canoy One thought was very concrete. It says: OK, in Rapporteur Session 3 Panel 3 2020 (or you can have another date) 75% of all multinationals should report on sustainability. Now, In selecting the input from the group as a rappor- this is a different way of approaching things. First teur I have decided to concentrate on the more of all it focuses on business, which is an impor- concrete results, because there is always a certain tant aspect which is sometimes neglected in the risk in this type of conferences that everybody debate, and it is very concrete. Similarly, not only agrees more or less. Environment is very important, 75% of multinationals should report but also gov- social stuff is important as well, and we share the ernment bodies. Governments can report on their experience almost like Hare Krishnas and eve- own impact, and not another policy report which rybody goes home with a warm glow. So I think states that we want to do this and this, but what the purpose of this conference is not only to go is the ministry of fi nance in Germany’s imprint? beyond GDP but also to go beyond warm glow as How much paper does it use? Just to give you an it were. I will just go through the three questions example. SMEs, similar story. So this is a very and take them one by one. concrete idea, to which I would add: policy-makers when they draft policy papers should also target First one was: what are the opportunities or chal- themselves: a minimum something percent and lenges? Starting with what are not opportunities or they should mention indicators other than GDP. challenges according to the group: there is no lack Then they are setting a good example. I mean of data. There is no lack of indicators. We really leading by example is always a good thing. have a lot of information available, more than at any other time in the past. So the opportunity then Still another very concrete idea that came up was comes not from gathering extra data, but group- that by 2020 we should achieve a 3% reduction ing it together in a meaningful way. We all know in resource usage (you have other ways of calcu- that aggregation has its problems, but we also

220 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 really helptosteerthe debate. sion betweenwasteful usageandGDPcould thorough debateonhow toovercome thisten- these alternative indicators, butalsohaving a Finally, notonlyisitimportantto articulate bit intothebackground. maybe thisothermessagegetspushedalittle long asthecoremessageisgrowthandjobs, of indicators.Societywilldeliver them.Andas articulate very clearlywhat theyneedinterms from theEuropeanCommissionorelsewhere, could helpus,isifEuropeanpoliticians,whether sions ofwell-beingarenotthere.Ithinkwhat growth andjobsisallvery well,butotherdimen- Commission, therewas somebodywhosaid:OK The secondoneisthatlookingattheEuropean board. this wouldbeoneway ofgettingpoliticianson we canalways gobacktowhatisbehind.But least whatisbehindit,soiftherearedebates, to it,asimpleindicator, inwhichweknowat more orless,buttherecouldbeanequivalent Europe becausethecountriesareallsame ment”. Humandevelopment, may notworkfor Fulai Sheng himselfcalled“avulgarinstru- like thehumandevelopment indicator, which ple aggregateindex,whichweknowhas European humandevelopment indicator, asim- First: canwenotgoforwhatIcallasortof Three typesofproposalwerementioned. decisions aretaken. Collaborationopportunities get themessagethroughtolevels where a lotofmaterialbutapparentlyitisdif there? Becausewestartedbysaying thereis ers toactuallyusetherichmaterialthatisout we convince policy-makers orotherstakehold- Another questionthatcameupwas: howcan I have justpicked outafewconcreteresults. That was thestrand ofquestionsontargets,and that canbeworked on. showing adifferenttruth.Thisisalsosomething thing, theygive GDPandthenanothernumber would begreatifevery timetheyreportsome- Financial Times,orotherequivalent outlets,it be thatwhenever thereisareportin,say, the Another totallydifferenttypeoftargetwould is somethingthatpolicy-makers canaimat. lating this).Thisisalsovery concreteandthis Session 4 fi cult to cult fl aws, see page214. fi discuss. national level, couldbeinterestingissuesto with politicians,butalsodowntoalowerthan perspective wheredemocracy andcooperation munication perspective butalsofromapolitical possibilities toreactthat,notjustfromacom- a termwhichwas used.Ithinktherearealso approach was mentioned:“empowering”was nication withthegeneral public.Democratic from atleastthe If Ilookatcommunication,animportantpoint terms usedbythepanels. grating systems,astep-by-step approachwere a certaindirection,compositeindicators,inte- to beenoughdata.Integration, orworkingvia side. Whatcameupisclearlythatthereseemed is clearthatwehave avery goodpanelonthis In listeningtotherapporteurs, atleastformeit • For thespeechofBedr useful. debate thismorningwhichwas very richand some viewsonthat,alsofromlisteningtothe books, soI may sharesomeexperienceand more than10 years. We have publishedsome been inthisindicatorsbusinessforsomething a moretechnicalpointofview, becauseIhave In fact,Iwas planningtosay somethingfrom • on thepoliticalissues.SoIamgiving could imaginethatMr Blokland wouldfocus centr I wouldbevery happyifMr de Backer wouldcon- maybe on themoretechnicalissue. Charles University inPrague, toconcentrate and directoroftheEnvironment Centreofthe Bedr listening andlookingthepersons,Iwouldlike to concentrate onjustoneoftheissues.Ithink thought, butIwouldlike toaskthepanellists I thinkforthepanelthisisenoughfood rst toBedr Chairman Pieter Everaers Charles University, Czech Republic Bedr ˇ ich Moldan, whoisuniversity professor ate onthecommunicationissue,andI ˇ ich Moldan ˇ ich. fi rst twopanelswas commu- ˇ ich Moldan, fl oor 221

Workshop OPENING AND DISCUSSION OF WORKSHOP

• Pieter Everaers • Johannes Blokland Chairman Member of the European Parliament

Thank you, Bedrˇich, for these very concrete rec- Before I became a member of the European ommendations. When introducing you, I forgot to Parliament, I had a long history as an economist in say that you, of course, have been for many years different institutions, and also as an environmental the chair of the scientiﬁ c board of the European economist. So I am not only a politician. I will give Environment Agency in Copenhagen, and I think you some small experience from the past. this experience is very much appreciated in this context. For the speech of Johannes Blokland, see page 217. For the second part, I would like to give the ﬂ oor to Mr de Backer. Willy de Backer is as an independent businessman, working on environment, energy • Pieter Everaers and economy. He has worked for the Parliament, Chairman even been in the Parliament, but that is ten years ago I understand. So you also have some links I think as a statistician you are speaking from my to politics. own heart, I would almost say. Being responsible for the system of economic and environmental For the speech of Willy de Backer, see page 215. accounting in Eurostat, this is a way which we naturally see as one of the options, and the option on which most of the emphasis can be put. Anders, • Pieter Everaers I think it is your turn, to try to summarise what Chairman came out of this expert workshop. We invite you to tell the audience. Thank you very much, Willy, for these ideas, some – in the context of statisticians – quite innovative ideas. The word is now for politics, for the Parliament. Mr Blokland, please.

222 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 5 Workshop conclusions Workshop

Anders Wijkman Member of the European Parliament

Conclusions by the chair

It has been a rich discussion, in all three working means for the economy, for development, for groups. I will now try to summarize what I heard the ecology and for the atmosphere. So we need this morning, both from the working groups and accounting at different levels, and I would suggest from the ﬁ ve speakers in the ﬁ rst session. I will not we need a combination of a top-down approach be able to cover everything, but I hope to capture and a bottom-up approach. We cannot manage the main points. with one or the other.

Firstly, there seems to be total agreement that Another area where we need more information GDP is not sufﬁ cient as an indicator of welfare and and better understanding concerns the interlink- well-being. Some people even think it is useless. ages between different areas, including the unin- Others say: let’s keep it and let’s complement it tended consequences of various policy decisions, in important policy areas where we face particular as Jacqueline McGlade put it. And that of course problems. There are some of you who dream of goes to the heart of policy-making. In the European or aspire to a corrected GDP, call it sustainable Parliament or in the European Union, we have three national income or whatever. Others, and that parallel processes ongoing, with high relevance for seems to be the majority, say let us instead use the theme of this Conference: parallel indicators and present them in a way so that the linkages are well understood. - The Lisbon Strategy, which aims at strengthening jobs, growth, competitiveness, etc; There seems to be a general impression, particularly from the point of view of statistics that we - Parallel to that there is the Sustainable Development have good data in many areas. How to package Strategy. A few of us said early on, in 2001 – when and present the data then becomes the critical both strategies were being launched - let us merge issue. Also, it was pointed out that in some areas them. Very few listened to that message and it there are statistics available for each quarter or did not happen. Today the argument in favour of annually, while in other areas we do not have a merger is even stronger, if not overwhelming. the same kind of precision when it comes to time But we still have two parallel tracks, although I limits. It appears to be very important to get a see a “narrowing trend”; balance here. - The third strategy, of course, is climate change Now we have also heard that in several areas we mitigation. do not have information, we do not have the data required. One such area, obviously, is ecosystem How we are organised in relation to these three services and natural capital. We need ecosystems objectives is critical! Of primary importance, of accounting, at local level, national level, and glo- course, is for the experts to tell us about the inter- bal level. We have heard a lot of discussion about linkages between these policy areas. But then it is bottom-up approaches and participation, and the up to us, as politicians, to draw the right conclu- need for people at local level to be informed. sions when it comes to the way we are organised. And here we still have a long way to go! That being said, I would submit that if I go to a small village in Sweden, and start discussing these Yet another area where information has to be issues, they will have difﬁ culties understanding the improved concerns information to consumers about global linkages. They will not be able to understand the consequences of the choices they make in by themselves what outsourcing in China or India their daily lives. There was a representative from

224 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Session 5 Workshop conclusions

France, referring to recent debates in France – which obviously have been interesting compared with the past – where consumers call for information both about the market prices Workshop of products, but, as well, about the “shadow prices”, in order to obtain information about the hidden environmental cost. Obviously we don’t have enough data to do that properly today, but it’s an interesting approach and we have to improve whatever we do in the ﬁ eld of consumer information - whether we call it eco-labelling, information based on lifecycle analysis, etc. The European Commission is coming out with some proposals early next year, one on sustainable consumption, one on sustainable production and one representing a review of the European Ecolabelling System.

Then, from a social point of view, I was struck by the plea to understand better – at a disaggregate level – what is happening at household level, both in terms of income but also about access to public sector services. It goes without saying that a lot needs to be done here in order to respond to people’s needs, to improve their well-being.

We also touched upon the apparent tension between leisure time and time with your family on the one hand, and the fact that all governments in Europe now want as many grown-up people to work full time as possible. There is a tension here and many families experience a lot of stress, a lot of unhealthy living, etc. These are dimensions of measuring welfare and well- being that have to be better captured.

I also picked up, that when it comes to human capital – education and investment in education, knowledge and skills – we need to improve the statistics.

One comment made early on shows how dif- ﬁ cult it may be to agree on a precise deﬁ nition of well-being and happiness. It was a lady from Brazil who said, that ‘in my city, Rio de Janeiro, probably the most important thing for happiness is to feel secure.’ In my country, Sweden, I can say that most people feel secure. So for us “security” would come ‘way down’ whereas in Brazil it comes ‘way up’ on the list of priorities. That is just one example.

Lastly but not the least, let me make a general point with regard to the interface between growth and the environment. I am a little bit hesitant regarding this notion of “decoupling” economic

growth and resource use. I do understand and ©Photo European Parliament

225 19 & 20 November 2007 Workshop

appreciate that in Japan for instance they are much Another important suggestion was: set clear goals more efﬁ cient in their resource use than what is the on where we want to be in ﬁ ve and ten years. case, for instance, in the United States. The differ- Maybe the conference could try to address some ence is almost a factor of three. of those goals tomorrow afternoon.

On the other hand, if we start describing “decou- Then, fi nally, a few personal comments. I strongly pling” as the solution, we give the impression that think we have to take a fresh look at how taxation you can somehow grow without using energy and is being organized. Finance Ministries depend on resources and you cannot. Of course, we can and the system we have in place today and they are should make resource use much more effi cient, normally dead scared of changes in the way the but we cannot separate the economic model from economy is organized – so here we need specifi c the natural world and this notion does not seem studies. to be well understood by people in general. There are limits to growth! I also think that we have to take a fresh look at education. If we don’t give people a better pos- Finally, how do we package information once we sibility to understand how things are interlinked, have all that beautiful data? Information and knowl- how can we then expect them, in their professional edge result in very little action unless they lead to capacities, to address those linkages with a view better understanding – so that is of course a very of policy integration? important challenge. One of our speakers shared some experiences from the media world and we all I would particularly single out economists. I trained know how diffi cult it is. When asked to comment as an economist. I would submit that in most to the media on issues related to growth and the schools of economics in the world, it is not compul- environment we are asked to express things very sory to learn anything about the atmosphere and briefl y – normally ten, fi fteen seconds – whereas the biosphere and the interconnections between what we are called upon to explain is very com- economics and the natural world. To me this is an plex and can hardly be done in the form of “sound unacceptable situation! How can it be like that? bites”. The market economy is said to be good at deal- We need better information for policy-makers like ing with scarcity. This may be true for products me, but also for people in general and this is a huge traded in the market, but it is defi nitely not true challenge. I think we should employ some of the for environment scarcity. Here we need an instant best marketing companies in the world to help us reform of the economic model to help us address do this, because otherwise we will fail. the depletion of natural capital and ecosystem services. There were a few interesting suggestions from the discussions in terms of information. One was to put Let me close there. Once again, many thanks pressure both on governments and companies to for your active participation and many valuable spell out more clearly how they are using resources contributions. I am looking forward to seeing you and how the trends are going in terms of effi ciency. all at the Conference, starting immediately after That’s a very simple message that would help us lunch! to elevate the discussion on these issues.

226 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Virtual Indicator Exhibition Virtual Indicator Exhibition

Adjusted Net Saving by Alexandra Sears and Giovanni Ruta, The World Bank

What is Adjusted Net Saving? subsistence. Resource dependence complicates the measurement of saving effort because deple- Adjusted net saving measures the true rate of tion of natural resources is not visible in standard saving in an economy after taking into account national accounts. The same is true for pollution investments in human capital, depletion of natu- damages to existing assets. ral resources and damages caused by pollution. Adjusted net saving, known informally as genu- Adjusted net saving overcomes this problem by ine saving, is an indicator aiming at assessing an measuring the change in value of a specifi ed set economy’s sustainability based on the concepts of of assets, excluding capital gains. If a country’s extended national accounts. net saving is positive and the accounting includes a suffi ciently broad range of assets, economic Positive savings allow wealth to grow over time thus theory suggests that the present value of wellbe- ensuring that future generations enjoy at least as ing is increasing. Conversely, persistently nega- many opportunities as current generations. In this tive adjusted net saving indicates that an econo- sense, adjusted net saving seeks to offer policy- my is on an unsustainable path. makers who have committed their countries to a “sustainable” development pathway, an indicator In addition to serving as an indicator of sustain- to track their progress in this endeavor. ability, adjusted net saving has several other advantages as a policy indicator. Adjusted net saving is derived from the standard national accounting measure of gross saving by • It presents resource and environmental making four adjustments: issues within a framework that fi nance and development planning ministries can (i) consumption of fi xed capital is deducted to understand. obtain net national saving; • It reinforces the need to boost domestic (ii) current public expenditure on education is savings, and hence the need for sound added to account for investment in human macroeconomic policies. capital; • It highlights the fi scal aspects of environ- (iii) estimates of the depletion of variety of ment and natural resource management, natural resources are deducted to refl ect since collecting resource royalties and charg- the decline in asset values associated with ing pollution taxes are basic ways to ensure extraction and depletion; effi cient use of environmental resources. (iv) deductions are made for damages from carbon dioxide and particulate emissions. History of the Indicator Gross national saving – Consumption of fi xed capital = Net National Saving + Education Expenditure The publication of the Brundtland Commission – Energy depletion – Mineral depletion – Net forest report in 1987 introduced a critical new dimen- depletion – Damage form carbon dioxide emissions sion to our conception of economic development – Damage from particulate emissions = Adjusted by raising the issue of sustainability of develop- net saving ment. The United Nations Conference on Environ- ment and Development (the Rio Conference) in The indicator is measured in percentage by 1992 helped to cement this understanding and dividing ANS by GNI. prompted most countries to commit to achieving sustainable development. Achieving sustainable development is at heart a process of creating and The Need for Adjusted Net Saving maintaining wealth.

Saving is a core aspect of development. Without Wealth is more than the value of produced assets. the creation of a surplus for investment, there is It includes natural resources, healthy ecosystems, no way for countries to escape a state of low-level and human resources. The measurement of com-

228 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Adjusted Net Saving as percentage of GNI

prehensive wealth falls entirely in the realm As part of this reporting effort, the World Bank of integrated economic and environmental ac- launched, Where is the Wealth counting or green national accounting – and of Nations? (World Bank, suggests that expanding our traditional nation- 2006), which offers new esti- al accounting measures of savings and wealth mates of total wealth, includ- could be an important step in guiding policies ing produced capital, natural for sustainable development. resources, the value of human skills and capabilities, and indicators Virtual The idea that saving, or changes in wealth, is updated measures of saving. crucial for sustainability is already present in Blueprint for a Green Economy (Pearce et al (1989)). But it is in Pearce and Atkinson (1993) Challenges that the concept is introduced formally.

We should be cautious in interpreting a posi- Indicator Exhibition Virtual Pearce and Atkinson combine published es- tive genuine saving rate. Some important as- timates of depletion and degradation for 20 sets from the analysis are omitted for meth- countries with standard national accounting odological and empirical reasons, which may data to examine true savings behavior. By this mean that saving rates are only apparently measure many countries appear to be unsus- positive. Challenges include: tainable because their gross savings are less than the combined sum of conventional capital • Lack of data (i.e. underground water, land depreciation and natural resource depletion. degradation, ﬁ sh stocks, diamonds) • Lack of methods (i.e. how can we put a value Hamilton and Clemens (1999) provide a theoret- on biodiversity) ical foundation and empirical evidence showing • Measurement errors that levels of saving are negative in a wide range of countries when the environment and natural resources are included in the savings measure. The Path to Sustainability Negative genuine saving is more than a theoretical possibility, therefore, and the evidence is The following graphs illustrate the directions that many countries particularly in Sub-Saharan Malaysia and Venezuela are taking on the path Africa are being progressively impoverished as a to sustainable development. result of poor government policies. In Malaysia, positive saving has been associat- The World Bank has a 35-year time series of ed with substantial growth leading the country ANS estimates which has permitted empiri- to become an important example of success in cal tests of whether net saving today does in East Asia. In Venezuela, negative saving rates fact translate into future increases in wellbe- have been associated with a poor rate of eco- ing. Ferreira and Vincent (2005) show that nomic growth. Between 1980 and 2006, the this relationship holds if the sample is limited country has experienced one of the slowest to developing countries only; Ferreira et al. growth rates in Latin America. (forthcoming) show that these results can be extended to incorporate the wealth-diluting effects of population growth. Adjusted Net Saving for Malaysia

50 Today, the World Bank publishes two important sources of indica- 40 tors that provide an annual snapshot of progress in the developing 30 world: The Little Green Data Book 20 and World Development Indicators. These indicators allow us to assess 10 the scope of the problems we face 0 1980 1990 2000 and measure progress in solving them. Both set of publications fea- Gross savings (% of GNI) Adjusted net savings (% of GNI) ture the ANS indicator. Net national savings (% of GNI)

229 19 & 20 November 2007 Virtual Indicator Exhibition

Adjusted Net Saving for Venezuela Additional Resources:

50 • Adjusted Net Saving Web Page 40 30 (World Bank) (ﬁ nd everything from tools, 20 papers, and data to manuals) 10 http://go.worldbank.org/3AWKN2ZOY0 0 • For a full set of publications on -10 Green Accounting please visit -20 -30 our Publications Site 1980 1990 2000

Gross savings (% of GNI) Adjusted net savings (% of GNI) Net national savings (% of GNI)

* For an Interactive Tool on obtaining the ANS References: for every country, please go to http://go.worldbank.org/7QFHSRIE40 • Ferreira, S. and J. Vincent, 2005. Genuine Savings: Leading Indicator of Sustainable Development? Economic Next Steps Development and Cultural Change 53(3):737-54. A number of efforts are currently underway to • Ferreira, S., K. Hamilton and J. Vincent, strengthen the measurement of adjusted net (forthcoming). Comprehensive Wealth saving. These include: and Future Consumption: Accounting for Population Growth. • Updating methods to estimate energy and World Bank Economic Review. mineral extraction costs and their evolution • Hamilton, K. and M. Clemens. 1999. over time. This is necessary to correctly mea- “Genuine Savings Rates in Developing sure the value of energy and mineral resource Countries.” World Bank Economic Review, depletion, which constitute a major deduction 13, No. 2, 333-56. to saving and a large source of rents for many • Pearce, D., A. Markandya, E. Barbier. 1989. developing countries. Extraction costs are not “Blueprint for a Green Economy.” usually available and must be estimated using London: Earthscan. scattered data from extractive companies. • Pearce, D. and G. Atkinson. 1993. “Capital Theory and the Measurement of • Adjusting for population growth. While nega- Sustainable Development: An Indicator of tive saving rates are an indication of unsustain- Weak Sustainability.” Ecological Economics ability, positive saving rates may be masking 8: 103-8. a potential source of unsustainabiliy if popula- • World Bank. 2006. Where is the Wealth of tion is growing fast enough. Population growth Nations? Washington, DC: The World Bank. dilutes the effect of capital accumulation as it • www.worldbank.org/environmentalindicators increases the number of people that share the country’s total wealth. Estimates of changes in wealth per capita are presented in World Bank (2006). Numbers for Ghana, for example, show that it is possible to have positive genuine saving but declining wealth per person.

Areas for which future work is needed include the improving of estimates of the investments in human capital. Genuine saving treats public education expenditures as an addition to the saving effort. However, current expenditure of $1 on education does not necessarily yield $1 of human capital. The calculation should capture the varying effectiveness of education expenditure, include private expenditure, and value the depreciation of human capital.

230 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Canadian Index of Wellbeing

Canadian Index of Wellbeing (CIW) by Lynne Slotek, CIW National Project Director

The Canadian Index of Wellbeing drive people to distraction, it’s no wonder that so A Transformational Initiative many Canadians are feeling that the rosy economic picture presented in the news is at odds indicators Virtual The Canadian Index of Wellbeing (CIW) is a new with what they know to be our everyday reality. and transformational initiative that will report on the quality of life of Canadians. It is our hope Even within the limited scope of the economy, that it will one day become Canada’s principle the GDP fails to distinguish between economic means of measuring genuine progress. activities that are beneﬁ cial and those that

are harmful to our overall wellbeing. The sale Indicator Exhibition Virtual The CIW will chart and provide unique insights of cigarettes and trans-fat-loaded fast foods, into how the lives of Canadians are getting for example, causes the GDP to go up, but no better or worse in areas that really matter to: one would really argue that this is good for our our health, our standard of living, the quality wellbeing. of our environment, the way we use our time, our education and skill levels, the vitality of our The CIW will treat benefi cial activities as communities, our participation in the demo- assets and harmful ones as defi cits. It will, for cratic process, and the state of our arts and example: culture. Most importantly, the CIW will shine • distinguish between good things like health a spotlight on how these important areas are and clean air, and bad things, like sickness interconnected. How, for example, changes in and pollution; income are linked to changes in health, or how community engagement and living standards • promote volunteer work and unpaid care- are connected. giving as social goods, and overwork and stress as social defi cits; The CIW is being built by the CIW Network – a partnership of national indicator experts and • put a value on educational achievement, practitioners together with business and civic early childhood learning, economic and leaders, and representation from government personal security, a clean environment, and and grass roots organizations across the country social and health equity; and in consultation with international experts. Our goal is to help refocus the political discourse in • encourage a better balance between in- Canada, reshape the direction of public policy, vestment in health promotion and spending pinpoint policy options and solutions that will on illness treatment. genuinely improve the wellbeing of Canadians, and give Canadians a tool to promote wellbeing with policy shapers and decision makers. Description of the CIW Model

The CIW will track changes in eight quality-of-life Why Canada Needs National Indicators domains. The development of each domain is under the leadership of world-class experts and In Canada, as in much of the world, the most backed by rigorous Canadian and international commonly cited measurement of progress is the peer review and public consultation. GDP but there is a growing awareness among Canadians that the GDP focuses on a narrow The following are the working deﬁ nitions that set of economic issues. By relying on such a have been adopted for each of the domains: limited perspective, it fails to capture many of the things that really matter to Canadians. As Living Standards measures the quality and the natural environment is depleted, the gap quantity of goods and services, both public and between rich and poor grows, chronic diseases private, available to the population, and the skyrocket, life for Canada’s Aboriginal peoples distribution of these goods and services within fails to improve, and the pressures of time stress the population.

231 19 & 20 November 2007 Virtual Indicator Exhibition

Healthy Populations measures the physical and mental wellbeing of the population — experiencing disease, dis- ability and delaying death, lifestyles people lead, and care people receive. Healthy Populations

Educated Populace measures the lit- Living Standards Community Vitality eracy and skill levels of the population, including the ability to function in various societal contexts and plan for and adapt to future situations.

Time Use Community Vitality measures the Civic Engagement CIW Composite Index strength, activity and inclusiveness of relationships among residents, private sector, public sector and voluntary organizations. Arts and Culture Educated Populace Ecosystem Health measures the state of wellbeing and integrity of the natural environment. This includes the sustain- Ecosystem Health ability of Canada’s natural resources and the capacity of ecosystems and water- sheds to provide a sustained level of ecological goods and services for the wellbeing of humans and other species. A Short History Civic Engagement measures the health of Canadian democracy. It addresses three aspects In 1999, The Atkinson Charitable Foundation (ACF), of public life and the governance of society: How a prominent Canadian foundation, recognized the engaged are citizens in public life and governance? need for a credible national voice to measure Do Canadian governments function in an open, the economic, health, social and environmental transparent, effective, fair, equitable, and accessi- progress of Canadians. The ACF convened a group ble manner? And are Canadians, their governments of index experts from across Canada, including and their corporations good global citizens? Statistics Canada, to discuss what it would take to create such a voice. Time Use measures the use of time, how people experience time, what controls its use, and how Following a number of years of public consulta- it affects wellbeing. tions, research and development, a pan-Canadian National Research and Development Working Group Arts and Culture (working concept and not a was established in May 2004, and from 2005-2007 defi nition) measures activity in both the very broad held annual two-day working meetings, and devel- area of culture, which covers all forms of human oped the CIW model. In November 2005, an initial expression, and in the much more focused area of model was presented to a workshop led by compos- arts, which includes performing arts, visual arts, ite index experts from the Joint Research Centre of media arts, and art facilities and institutes. the European Commission, and received favourable reviews. The model was further tested through two The domains will be blended into a composite rounds of cross-Canada stakeholder roundtables index that will provide a quick snapshot of whether in 2006 and 2007, and further modifi ed. overall Canadian wellbeing is changing for better or for worse. CIW reports will present detailed information on both the composite index and the Current Status individual domains. The CIW’s ‘basket’ of domains will be reported regularly with clarity about trends The CIW model will shortly be reviewed by inde- and interrelated stories (e.g., “While X is on the pendent validation groups consisting of national rise, it is interesting to note that Y is fl at, and Z is and international experts who have not been declining. Possible explanations include...”). involved with the project. Reports have been pre-

232 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Capability Index

pared on three domains: Living Standards, In the meantime, the CIW Network is viewed Healthy Populations, and Community Vitality. internationally as a global pioneer in developing These reports will also be reviewed by valida- a holistic, integrated approach to measuring tion groups and updated for release. Further wellbeing. Because of this position of leadership, development and reﬁ nement of the models for we are often invited to partner with experts in Educated Populace, Ecosystem Health and Time other countries and participate in international Use domains is underway. Work on the Civic conferences to help build this important global Engagement and Arts and Culture domains will movement. These connections are important begin in 2008. in raising the benchmark of research and data indicators Virtual integrity and changing the global dialogue about genuine progress. Our continued contribution on The Future the international scene will not only strengthen the CIW project in Canada, but at the same The CIW will be publicly launched at a high-proﬁ le time, give the project access to the best inter- event in the next year or so. national minds. Indicator Exhibition Virtual

Capability Index by Ingrid Robeyns, Radboud University Nijmegen, The Netherlands and Robert van der Veen, University of Amsterdam, The Netherlands

Need for a capability approach In opposition to this view, the utilitarian tradition to quality of life identifi es quality of life (or in effect synony- mously: well-being) with a metric of subjective Several approaches exist to conceptualise utility – which is often measured as happiness and measure ‘quality of life’ (as is refl ected in or alternatively life satisfaction. The happiness the large diversity of indicators in this Virtual indices in this Virtual Exhibition are examples Exhibition). What quality of life is, is not merely of the utilitarian approach. a philosophical issue. The practical implications of different theories on what constitutes quality The third approach understands life quality as of life lead to diverging recommendations on a set of capabilities, that is to say of real pos- what, if anything, government should undertake sibilities for people to function effectively in to promote it, and also give rise to distinct ideas diverse domains of social life, in accordance concerning the design of social and economic with their own views of the valuable life in institutions. Three theoretical approaches to terms of one’s ‘doing and being’. According quality of life can be distinguished that argue to the capability approach, the government is for a distinct interpretation of the substantive tasked to make available the resources which content of life quality. are necessary for the capabilities of individuals. This concerns both individual and collective The fi rst of these approaches is the liberal resources. We claim that on theoretical grounds resource approach: people need access to cer- the capability approach is to be preferred as the tain resources, in order to become capable of foundation for a measure of quality of life. At developing and pursuing their own conceptions the request of the Netherlands Environmental of the good life, by deploying their resource Assessment Agency (MNP), we have developed shares autonomously within the boundaries of initial ideas for a capability index that measures equitable social institutions. An example of an quality of life (see Robeyns and van der Veen, index representing a narrow view of resources 2007, http://www.mnp.nl/en/publications/2007/ is GDP. Sustainablequalityofl ife.html).

233 19 & 20 November 2007 Virtual Indicator Exhibition

Situating the capability approach are presented as outputs of the all-purpose means at the resource end. However, there are two dif- Figure 1 presents the causal relations between the ferences. First of all, capabilities and functionings three approaches to quality of life. are outputs that can be intersubjectively identifi ed only within a given society, in open discussion. We should debate and discuss their relevance, for the notion of life quality is not intercultur- ally and universally Figure 1: The direction of causal relations between determinable by philosophical refl ection. By con- resources, capabilities, and subjective well-being. trast, happiness, life satisfaction, or satisfaction on domains, are purely subjective outputs of persons’ resource utilisations. However, secondly, in so far as life satisfaction issues from the way in which The resource-based approach holds that the ‘qual- people experience their opportunities to function, ity of life’ is what people do with their resources. and their actual functioning levels, it is also a Questions about the content of the quality of life causal output of functionings and capabilities. For are not considered to be a legitimate task of the as fi gure 1 shows, functionings and capabilities are government, which needs to be neutral between situated as intermediating between resources and the divergent views that people have about the subjective well-being. good life. The government needs to restrict its care to guaranteeing access to collective resources and Next, it is important to note that capabilities -the to regulate entitlements to individual resources, real opportunities to function effectively can have and it ought not to impose its own views about a strong effect on life satisfaction, independently the appropriate use of those resources. of the satisfaction that people derive from their actual functioning. Even the secure knowledge The capability approach holds that resources are that certain opportunities are open to persons important inputs for the quality of life, but that the can have a positive effect on their happiness. The quality of life itself is captured by the functionings presence of these capabilities subsequently pro- and capabilities of individuals. In contrast to liberal- duces subjective well-being, quite apart from the ism, which doesn’t want to go beyond identifying choices that citizens actually make to divide their resources that can be used for a wide range of goals, time over political participation and other activi- the capability approach argues that a debate about ties that generate life satisfaction. The capability the general and specifi c opportunities to shape our approach thus allows that causal relations between lives surely lies within the legitimate domain of the resources and subjective well-being follow differ- government. The subjective well-being approach ent chains. Thus, even if one ultimately prefers a agrees with the view that resources are means for subjective approach to the quality of life, it may multiple goals, but in addition holds that the only still be important to examine functionings and neutral indicator for judging how well people fare capabilities, as is in fact being done in some of the in their achievement of those goals, is their life literature. A similar observation holds for those satisfaction. This is why the subjective well-being who prefer the resource-based approach to life situates quality of life at the righthand end of the quality. For it is by no means immediately evident causal scheme of fi gure 1. Thus the subjective what types of resources are actually required for approach holds that it is the government’s duty people to realize their own and diverse conceptions to advance ‘happiness’ or ‘life-satisfaction’, even of the good life. though not all variants endorse giving an absolute priority to the utilitarian master principle of maxi- mizing average life satisfaction. Against this, the Towards a capability index capability approach argues, on ontological grounds, that subjective well-being cannot be regarded as We propose the following list of capabilities in a the ultimate measure of the quality of life, but range of domains that we believe should be included should rather be seen as a (undoubtedly desirable) in a policy-relevant index of life quality (see Robeyns by-product. In the scheme in fi gure 1, capabilities and van der Veen, 2007, http://www.mnp.nl/en/ and functionings, but also subjective well-being, publications/2007/Sustainablequalityofl ife.html):

234 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Capability Index

remain far removed from an adequate capability- index of life quality. Since in this chapter we are primarily interested in a conceptual exploration, we assume that there are no constraints on the data that can be gathered.

Another insight from the existing literature concerns the character of the index itself: at what level of abstraction and aggregation would one indicators Virtual like to construct an index? One of the criteria an index should meet is that it be useful for policy design and evaluation. A capability-index which seeks to inform governmental policies should be formulated at a lower level of abstraction than

the very general dimensions that have typically Indicator Exhibition Virtual been worked out ni the literature.

State of play and work left for the future

Early attempts of concretising and If we consider all advantages and disadvantages quantifying the capability approach of the different approaches that were discussed in this chapter, our conclusion is that on theo- The literature on the capability approach evolves retical grounds the capability approach is to be rapidly: a survey written today may be outdated preferred as the foundation for a measure of the in six months from now. A recent survey of quality of life. However, it must be kept fi rmly empirical applications shows that at present, in mind that the empirical development of the no scholar even has worked out the theoretical capability approach is still in an early stage. It is foundations of a capability-index of life quality, possible that further research will reveal disad- let alone engaged in the work of operationaliz- vantages of a capability-based life quality-index ing and testing empirically such a quality index that are insuffi ciently appreciated at present. (Robeyns, 2006). Thus in the prevailing state The full construction of a capability-index will of the art, developing a capability-index is a still involve a lot of hard and detailed work. pioneering task. Nevertheless, current literature does offer two important insights. References The fi rst insight is that we need to distinguish between the design of an index based on exist- • Robeyns, I. (2006) The capability approach ing secondary statistics, versus an index con- in practice. Journal of Political Philosophy structed against a background of suffi cient time 17(3), 351-376. and resources to collect most of the data on the capability-domains. Existing empirical applica- • Robeyns, I. and van der Veen, R.J. (2007) tions are strongly determined by the available Sustainable Quality of Life: Conceptual, datasets, both with respect to the selection of Analysis for a Policy-Relevant Empirical capabilities, as well as the possibilities to mea- Specifi cation. MNP Report 550031006. sure capabilities rather than levels of realised Bilthoven and Amsterdam: Netherlands functionings. Almost all these applications work Environmental Assessment Agency and with datasets constructed with other purposes in University of Amsterdam, mind. This is a disadvantage. If we are limited http://www.mnp.nl/en/publications/2007/ by available datasets, then it is likely that we will Sustainablequalityofl ife.html.

235 19 & 20 November 2007 Virtual Indicator Exhibition

Comparing welfare of nations by Hans-Olof Hagén, Statistics Sweden

Why it is necessary to use composite indica- included in it, to explain the differences between tors and make sensitivity test of them: countries in economic standard and welfare has also been tested. Finally, it has been studied which In my paper 1 I have done an attempt to show how countries are most effective in creating economic a complex reality can be illustrated using differ- standards and welfare, respectively. ent statistical methods. The purpose of this report was not to exhibit the actual results of analysis, but rather to show the methods used to arrive at The indicator those results. The example chosen for analysis was a comparison of the level of welfare in OECD The fi rst part of the indicator is of course the eco- countries and the effi ciency of these countries to nomic resources in a country. I have argued that create a high economic standard and welfare for GNI is a better measure of that than GDP. But work their citizens. Because welfare is an extremely is not everything why I did try to assess the existing ambiguous concept, it is very diffi cult to measure. labour input in the different countries by determin- There are no given answers on the meaning of the ing how much has been set aside for leisure time concept of welfare, nor any explanations on how in the form of shorter work weeks, longer holiday to measure it. Attempts to do so are thus much leave, early retirement, housewives and other debated. In simple terms, a composite indicator reasons that people of working age are not part is a way of putting apples and oranges together of the labour force. However, other factors affect in order to decide which fruit basket is the most one’s well being besides consumption space and attractive. But this indicator can be problematic. leisure time. Of employed persons, Koreans take For example, to someone who only likes grapes, it the lead by far in working the most hours per year, doesn’t matter how many apples and oranges there and the Icelanders have the highest proportion of are in the baskets. Furthermore, many statisti- people of working age that are employed. However, cians also believe that only single variables can be people from Netherlands, Italy and France have on reported in a satisfactory way. But neither decision- the whole chosen to give up a signifi cant share of makers nor the general public wants a report that their potential economic standard by using a large looks like a huge catalogue where variable after share of this potential in leisure time. variable is listed page after page as a base for their understanding. Even though subjectivity is Not everything can be bought with money, even inevitable, they prefer to fi nd out which fruit basket though economic resources are very important in is probably the most interesting, rather than a list many areas. Health is one of these other factors. that states how many twenty or so different kinds How to measure people’s health is justifi ably a of fruit each basket contains. debatable subject. However, nearly all illnesses and health aspects affect length of life. In principle, In this analysis, the composite indicator that is we can maintain that there is another dimension created is an attempt to measure welfare in the to health other than survival and that dimension OECD countries. A sensitivity analysis of this cho- is suffering. Of course, no international statistics sen example has been conducted to study how the exist on such a subjective occurrence as reducing results are affected if certain partial components pain and increasing comfort, even if these occur- and extreme values are excluded. In addition, the rences would be of great signifi cance for well being signifi cance of different valuations of variables is as well as for welfare. In addition, these measures tested. The correlations between these components most likely also increase length of life indirectly, have also been studied, as well as the correlations just as many other factors that increase quality of between them and the measurement of welfare. life. The environment is also signifi cant for welfare. A composite indicator for the input has also been In the end, the environment is also a question of created. The signifi cance of different valuations of survival and affects all aspects of health. But the the various inputs for the ranking of the countries effects on health may only be visible a relatively has been studied for this index as well. The abil- long time afterwards, so it is a good idea to also ity of the input indicator and the factors that are include the environment in the concept of welfare.

1 http://www.scb.se/statistik/OV/OV9999/2004A01/OV9999_2004A01_BR_X100ST0415.pdf

236 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Comparing welfare of nations

This section discusses suitable indicators for the components, sub-components and extreme environment. The selected indicators show that values. An attempt to fi nd correlations between the geographically large countries with heavy the different indicators is also made. Here it is industry such as Australia, Canada and the only room for showing how robust the ranking US have by far the highest emissions of envi- order of countries is for changes in the weight ronmentally hazardous gases per inhabitant. system. To analyse the importance of which However, New Zealand and the Czech Republic weight that has been given to the different are at the other end of the scale. factors, a comprehensive sensitivity analysis has been done. In this analysis, the 8 different indicators Virtual In the end, the environment is also a question standardised indicators have been weighed with of survival and affects all aspects of health. random weights, after which of the different But the effects on health may only be visible a countries have been ranked according to the relatively long time afterwards, so it is a good value on their welfare index. This has been done idea to also include the environment in the con- for a million alternative weights. cept of welfare. The state of the environment Indicator Exhibition Virtual will then be a kind of early warning of health The program generates a list of the number of aspects and the quality of life in the future. times each country has been ranked with the Besides, the threat of a worsening environ- highest value on the welfare index, the second ment usually affects how we regard quality of highest value etc. down to the 27th place and life, long before it can be traced as an effect on the lowest value. To obtain an overall picture length of life. Besides health risks, a worsening of the results, a fi gure has been made showing environment can also deteriorate quality of life how often each country has come fi rst, among in other ways, while a good environment can the 3 best, among the 5 best, and fi nally the 10 be seen as quality of life in itself. All in all, it best. The choice of these limits is based on how is preferable to include the environment in the the structure of the actual results looked. design of this welfare indicator.

What is the cost of welfare? Sensitivity analysis, importance of choice of indicators A composite indicator for the input factor has also been chosen. Sensitivity for selected weights A sensitivity analysis of the welfare index has is tested in the same way as for the welfare been done by studying the effects of removing index. Further, the correlations between the

The robustness of the ranking of countries according to the welfare index for different weights for the sub-indices

237 19 & 20 November 2007 Virtual Indicator Exhibition

different components are analysed. The correlation shown clear effects of more developed IT use. between the components that can be said to form Combinations of organisational changes and IT indicators on the knowledge society; quality of the investments have produced results. labour force, formation of knowledge and IT use are strongly correlated. However, the quantitative There is a considerable variation in values of the wel- input of labour is independent of all these other fare indicator between different countries, even if they indicators. To determine if a country has succeeded have about the same value on the input indicator. in producing welfare effectively, the results must relate to the resources a country has invested to Korea, Iceland and the US are among those coun- obtain welfare. The vital resource is labour, and tries that have high values on the input index, but since there is comparable data for the share of the considerably lower values on the welfare index. population of working age, which is the relevant Meanwhile countries such as Italy and France have measure in this case, the choice is simple. However, high values on the welfare indicator with low inputs. in addition to quantity, quality is also signifi cant. Those countries that have obtained a relatively high The broadest available measure of quality of the welfare with small investments can be regarded labour force is the level of education of the labour as effi cient in this respect. An effective instrument force, measured in a number of ways. to fi nd out which countries belong in this category (and how far behind other countries are) is known Besides the level of education of the labour force, as the frontier production function. other formation of knowledge is also important. Therefore, other indicators such as research and development innovation activities are often The general conclusion included among the selected input indicators. In this example, R&D costs per inhabitant, adjusted The general conclusion of this analysis is that if we for differences in cost levels among countries (PPP want to compare the complex concept of welfare in adjusted), have been used. Another area of growth different countries, we must be ready to evaluate is IT development. The IT revolution is very impor- and compare factors of very different character. tant for development in many areas, even though Since there are no undisputable choices, different it is not directly evident that IT investments have evaluations and access to data can lead to more or led to larger production profi ts. This applies on a less separate conclusions of analyses of the same more aggregated level, but studies of individual phenomenon. For this reason it is very important enterprises or smaller groups of enterprises have for credibility of results that the data that is used

A frontier production function with the welfare indicator as the production variable and the input indicator as the input variable

238 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Corruption Perceptions Index

and choices that have been made are openly a more detailed analysis of separate phenom- reported. It is also important that a compre- ena is required. Then what has the analysis of hensive sensitivity analysis has been carried out the chosen example of a welfare index and the and is presented together with the main results. attempt to illustrate this measure in different Furthermore, it is worthwhile to point out that ways provided us with? First, a general reserva- the technique with random weights is a very tion must be made, namely that the conducted relevant and effective instrument in the sensi- analysis has in no way shown what the conse- tivity analysis of the weight system. Concerning quences would have been if other factors had comparisons of efﬁ ciency, the frontier production been included. It is of course possible to justify indicators Virtual function is also a good tool. with very good reasons why many other aspects of welfare should be included in this example. Finally, even if the composite indicators provides In general, it is also apparent that other factors a valuable base for preparing basic information besides those that create economic standard for political processes, we must realize that are important to study, if the goal is to obtain these results only give us an overview of one a high level of welfare (as has been deﬁ ned in Indicator Exhibition Virtual area. When forming concrete political measures, this example).

Corruption Perceptions Index by Transparency International

Aims and Objectives sure of corruption worldwide. It is one of the most quoted indices in the social science com- The Corruption Perceptions Index (CPI) is a munity and has provided an incentive to conduct composite index – a survey of surveys – that complementary local diagnostics. It responds to assesses and compares perceived levels of cor- a need among researchers, policy makers and ruption among public offi cials and politicians in others for global and comparative data refl ect- a wide range of countries around the world. The ing the views of people who infl uence decisions. CPI is produced annually, refl ecting the views By generating public debate and creating incen- of business people and country analysts from tive for reform, it has proved to be a power- around the world. ful awareness raising tool both at national and global levels. Many countries have used the CPI The overall objective of the CPI is to provide a as a starting point for launching reforms, and the global assessment of corruption and enhance worldwide anti-corruption movement has used it comparative understanding of levels of cor- as a powerful tool to advocate for change. ruption worldwide. It is an infl uential advocacy tool that stimulates worldwide media coverage, The CPI Method promotes public debate and drives demand for change. The CPI was the fi rst successful attempt The CPI draws on corruption-related data from to measure and compare corruption levels in a surveys of experts and business people carried wide range of countries, and has continued to out by a variety of independent institutions ex- do so since 1995. It has proven that corruption ternal to TI. The interviewed experts and busi- can be measured with a sound methodological ness people are both residents and non resi- instrument and has opened the way for further dents of the countries evaluated. A minimum corruption research of all kinds. of three surveys have been conducted for each country included in the CPI, which increases the reliability of each individual fi gure and low- CPI Achievements ers the probability of misrepresenting a coun- The CPI has greatly contributed toward putting try. In 2007, 180 countries were included in corruption on national and international agen- the CPI, achieving the greatest scope for the das. It is widely credited to be the main mea- index to date.

239 19 & 20 November 2007 Virtual Indicator Exhibition

The CPI gathers data from sources that span the United Nations Economic Commission for Africa last two years (for the CPI 2007, this includes and Global Insights. In 2007, resident business surveys from 2007 and 2006). In 2007 it was leaders evaluating their own country were part of calculated using data from 14 sources originat- surveys carried out by Institute for Management ed from 12 independent institutions. All sources Development, Political and Economic Risk Consul- measure the overall extent of corruption (fre- tancy and the World Economic Forum. quency and/or size of bribes) in the public and political sectors and all sources provide a ranking By combining the sources available through roof countries, i.e., include an assessment of mul- bust statistical methods, the CPI provides a rank tiple countries. of countries according to their level of perceived corruption. For more detailed information on the For CPI sources that are surveys, and where mul- methodology please visit http://transparency. tiple years of the same survey are available, data org/policy_research/surveys_indices/cpi/2007/ for the last two years are included to provide methodology. a smoothing effect. While for sources that are scores provided by experts (risk agencies/coun- The CPI scores countries on a scale from 0 to try analysts), only the most recent iteration of 10, with 0 indicating high levels of perceived cor- the assessment is included, as these scores are ruption and 10 indicating low levels of perceived generally peer reviewed and change very little corruption. In order to avoid the distorting effect from year to year. on scoring that could be caused by recent events such as exposure of corruption scandals, the Evaluation of the extent of corruption in coun- score combines expert assessments from the last tries is done by country experts, non resident two years. To qualify for inclusion in the CPI, data and residents. In the CPI 2007, the non resident must be well documented, provide a ranking of evaluations were performed by the following orga- countries and measure the overall extent of cor- nizations: Asian Development Bank, African Devel- ruption. This condition excludes surveys mixing opment Bank, Bertelsmann Transformation Index, corruption with other issues such as political in- World Bank - CPIA, Economist Intelligence Unit, stability or nationalism. All countries with enough Freedom House, Merchant International Group, qualifying sources are included in the index.

240 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Bribe Payers Index

CPI 2007 Results show that genuine political will and reform can lower perceived levels of corruption. The 2007 Corruption Perceptions Index looks at perceptions of public sector corruption in Other countries with a signiﬁ cant improvement 180 countries and territories – the greatest include Costa Rica, Croatia, Cuba, Czech Re- country coverage of any CPI to date – and is public, Dominica, Italy, FYR Macedonia, Roma- a composite index that draws on 14 expert nia and Suriname. Countries with a signiﬁ cant opinion surveys. It scores countries on a scale worsening in perceived levels of corruption in from zero to ten, with zero indicating high lev- 2007 include Austria, Bahrain, Belize, Bhutan, indicators Virtual els of perceived corruption and ten indicating Jordan, Laos, Macao, Malta, Mauritius, Oman, low levels of perceived corruption. Papua New Guinea and Thailand.

A strong correlation between corruption and The concentration of gainers in South East and poverty continues to be evident. Forty percent Eastern Europe testifi es to the galvanising ef- of those scoring below three, indicating that fect of the European Union accession process Indicator Exhibition Virtual corruption is perceived as rampant, are clas- on the fi ght against corruption. At the same sifi ed by the World Bank as low income coun- time, deeply troubled states such as Afghani- tries. Somalia and Myanmar share the lowest stan, Iraq, Myanmar, Somalia, and Sudan re- score of 1.4, while Denmark has edged up to main at the very bottom of the index. share the top score of 9.4 with perennial high- fl yers Finland and New Zealand. For more information

Scores are signiﬁ cantly higher in several Afri- For more information on the CPI, can countries in the 2007 CPI. These include please contact Juanita Riaño Namibia, Seychelles, South Africa and Swazi- at the TI Secretariat at land. These results reﬂ ect the positive prog- [email protected] ress of anti-corruption efforts in Africa and or +49 30 34 38 20 417.

Bribe Payers Index by Transparency International

Aims and Objectives bility between companies operating abroad and their home governments. The BPI highlights The BPI assesses the supply side of corruption, achievements and failures of governments to targeting policy makers in developed countries control the corruption by companies headquar- and emerging market economies. By measuring tered within their national borders when they the extent to which a state appears to engage operate abroad, and indicates, for their part, in corrupt business practices, it helps identify whether companies have successfully ensured where reforms and enforcement are needed. In that their employees comply with the highest turn, this helps advocates push for change. standards of business practice. Thus, it serves as benchmark for assessing enforcement. The BPI results demonstrate clearly which countries are paying bribes, and where. It provides the views of the private sector (re- The BPI Approach presentatives of local and foreign companies) on foreign bribery, based on their experience The Bribe Payers Index 2006 (BPI) is a ranking in a particular country of operation. Given the of 30 leading exporting countries according to criminalisation of bribery through laws and the propensity of their ﬁ rms to bribe abroad. It conventions such as that of the Organisation for is the most comprehensive survey of its kind, Economic Co operation and Development, the capturing the direct experience of business supply side of corruption in international bu- executives with foreign ﬁ rms paying bribes in siness transactions implies a shared responsi- their country. It asks business executives about

241 19 & 20 November 2007 Virtual Indicator Exhibition

the practices of foreign fi rms operating in their The BPI 2006 results country, specifi cally their propensity to pay bribes or to make undocumented extra payments. The BPI 2006 shows a considerable propensity of companies from all states to bribe when operating The BPI was fi rst released in 1999, with further abroad. Companies from the wealthiest countries editions in 2001 and 2006. The fi rst two editions rank in the top half of the index (indicating less of the survey scored 19 and 21 countries res- perceived tendency to bribe), with Switzerland pectively through surveys in emerging market leading the ranking at 7.8. However, companies economies. The 2006 edition ranked 30 leading from these countries tend to behave differently exporting countries by surveying respondents in when operating in OECD countries than in deve- more than 125 countries worldwide, the largest loping countries, where they still routinely pay and broadest sample to date. bribes. Companies from emerging export countries are perceived to be the most likely to pay bribes in order to win contracts abroad, with India, The BPI Method in 2006 China and Russia ranking among the worst.

The BPI 2006 is based on the responses of 11,232 business executives from companies in 125 coun- For more information tries to two questions about the business practices of foreign fi rms operating in their country. It was For more information on the CPI, carried out as part of the World Economic Forum’s please contact Juanita Riaño Executive Opinion Survey 2006. The combined at the TI Secretariat at Gross Domestic Product of the 125 economies co- [email protected] vered represents 98 percent of the world total. or +49 30 34 38 20 417. Please visit: The sample of respondents was representative of http://transparencyorg/policy_research/ the national business sector, both in terms of the surveys_indices/bpi share of production by industry, the size of company and the range of company types (domestic, foreign and partly state owned). Respondents were asked to rate the countries of origin of foreign-owned com- Rank Country / Territory BPI Score Number of Margin of error % of global panies doing the most business respondents (at 95 % confi dence) exports (2005) in their country on a scale of 1Switzerland 7.8 1744 0.12 1.2 1 (bribes are common) to 2 Sweden 7.6 1451 0.14 1.3 7 (bribes never occur). The 3 Australia 7.6 1447 0.14 1 answers were then converted 4 Austria 7.5 15600.130.5 5 Canada 7.5 18700.123.5 into a 10 point scale, in which 6UK 7.4 3442 0.09 3.6 10 represents the lowest pro- 7 Germany7.338730.09 9.5 pensity of companies to bribe 8 Netherlands 7.3 1821 0.123.4 9 Belgium7.2 1329 0.158.9 abroad. The ranking refl ects US 7.2 5401 0.07 3.3 the simple averages of respon- 11 Japan 7.1 32790.1 5.8 ses. 12 Singapore 6.8 1297 0.17 2.2 13 Spain 6.6 2111 0.12 1.9 14 UAE 6.6 1928 0.14 1.1 The countries ranked were: 15 France 6.5 3085 0.11 4.3 Australia, Austria, Belgium, 16 Portugal6.59730.180.3 Brazil, Canada, China, France, 17 Mexico 6.5 17650.152.1 18 Hong Kong 6.0 1556 0.16 0.4 Germany, Hong Kong, India, Israel6.0 1482 0.16 2.8 Israel, Italy, Japan, Malay- 20 Italy 5.9 2525 0.123.6 sia, Mexico, the Netherlands, 21South Korea 5.8 1930 0.132.8 Portugal, Russia, Saudi Ara- 22 Saudi Arabia 5.8 1302 0.17 1.8 23 Brazil 5.7 1317 0.16 1.2 bia, Singapore, South Africa, 24 South Africa5.6 1488 0.16 0.5 South Korea, Spain, Sweden, 25 Malaysia 5.6 13190.17 1.4 Switzerland, Taiwan, Turkey, 26Taiwan 5.4 1731 0.15 1.9 27Turkey 5.2 1755 0.150.7 the United Arab Emirates, the 28 Russia 5.2 2203 0.142.4 United Kingdom and the Uni- 29 China 4.9 3448 0.11 5.5 ted States. 30 India 4.6 2145 0.140.9

242 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Global Corruption Barometer

Global Corruption Barometer by Transparency International

Aims and Objectives included, a representative sample of the general public has been polled. Respondents are The Global Corruption Barometer is an opinion men and women aged 15+ and all samples survey of the general public that assesses the have been weighted to bring them in line with indicators Virtual perceptions of corruption and experience with national and global populations. In 2006, the bribery. The Barometer provides information Barometer survey was carried out between July on the extent of corruption across government and September of that year in 62 countries and and private sector institutions based on the territories. Nearly 60,000 respondents were responses of ordinary people, supplementing polled, including men and women. the views of experts presented in other sur- Indicator Exhibition Virtual veys. It can therefore show the credibility of The Barometer explores experience of citizens anti corruption efforts as seen through the eyes with petty bribery presenting which institutions of ordinary people. The Barometer is unique in and public services most affected by bribery, the sense that is the only worldwide public opi- the frequency of bribery, and how much peo- nion survey on perceptions and experience of ple pay. It also explores the public’s evaluation corruption that allows trends to be established of their government’s efforts to ﬁ ght corrup- over time. It does not rank countries, but ins- tion and assesses which institutions the public tead offers comparative results of countries, judge to be most corrupt and what aspects of regions and institutions as well as information their lives – political, personal or business – on trends in public perceptions of corruption. are most affected by corruption. Thus, it is a complement to TI’s other measurement tools, the Corruption Perceptions In- dex (CPI) and Bribe Payers Index (BPI). Global Corruption Barometer 2006 Results

The Barometer 2006 results indicate that ex- The Global Corruption Barometer Approach perience of bribery is widespread outside Eu- rope and North America, with the police being The Barometer survey is carried out for Trans- the institution most affected (See table 1 and parency International by Gallup International ﬁ gure 1). In Latin America for example, one as part of its Voice of the People Survey. It has third of respondents who had contact with the been published annually since 2003. The TI police had paid a bribe. Bribery for access to Global Corruption Barometer is a public opinion services is most common in Africa. The most survey. That means it is a poll of the general commonly bribed sectors in Africa are the po- public across the world and in each country lice, tax revenue and utilities.

Table 1 Countries most affected by bribery

More than 40 %Albania, Cameroon, Gabon, Morocco Bolivia, Congo-Brazzaville, Czech Republic, Dominican Republic, Greece, Indonesia, Kenya, Mexico, Moldova, 16-40% Nigeria, Paraguay, Peru, Philippines, Romania, Senegal, Ukraine, Venezuela Percentage of respondents Argentina, Bulgaria, Chile, Colombia, Croatia, that have paid a bribe in the 6-15 % Hong-Kong, India, Kosovo, Luxembourg, Macedonia, last 12 months Pakistan, Panama, Russia, Serbia, Thailand Austria, Canada, Denmark, Fiji, Finland, France, Germany, Iceland, Israel, Japan, Malaysia, Netherlands, Norway, 5% or less Poland, Portugal, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Turkey, United Kingdom, USA Source: Transparency International, Global Corruption Barometer 2006

243 19 & 20 November 2007 Virtual Indicator Exhibition

As in past years, public perceptions are that poli- For more information tical parties and parliaments are the most corrupt institutions, followed by business and police. The For more information on the CPI, please contact public regards governmental efforts to curb cor- Juanita Riaño at the TI Secretariat at ruption inadequate in most countries. Only 22 per [email protected] or +49 30 34 38 20 417. cent of respondents worldwide evaluated their go- Also please visit http://transparency.org/ vernment’s actions as ‘effective’ or ‘very effective’. policy_research/surveys_indices/gcb

Figure 1 Worldwide bribery: respondents who have had contact and paid a bribe, by sector (%) 60%

t 50% c onta c

h 40% e it b w ri b 30% aid a p ondents p ave h 20% at h t

entage of res 10% c er P 0% Total sample Africa Latin America NIS SE Europe North America EU+

Source: Transparency International, Global Corruption Barometer 2006

National Integrity Systems (NIS) Scoring System by Transparency International

What is the NIS scoring system? have considered developing an NIS scoring system of some kind. While the current NIS Country The NIS scoring system is a new tool that is being Studies provide important benchmarks for the developed by Transparency International. The NIS success of anti-corruption efforts, they offer only scoring system will provide a quick summary look narrative analysis that can be specialised and at the strengths and weaknesses in a country and cumbersome to absorb. Scores that rate the dif- will facilitate comparisons within a country over ferent NIS pillars in a country will provide clear, time. It will not produce a ranking of countries, nor understandable information that will improve the will it replace the NIS narrative Country Studies; use of narrative NIS studies. instead, it will provide complementary information that, in conjunction with the narratives, will Other organisations already produce quanti- be an even more effective tool for advocacy and tative indicators on governance at the country awareness raising. level. Examples include the World Bank governance indicators, Global Integrity’s integrity indicators and Freedom House’s Countries at the Why create an NIS scoring system? Crossroads. However, TI’s network of National Chapters and our focus on anti-corruption gi- Since TI began producing NIS Country Studies ves us a unique niche in this ﬁ eld. We have the in 2001, the TI Secretariat and many chapters opportunity to produce a scoring system that

244 Beyond GDP: Measuring progress, true wealth, and the well-being of nations National Integrity Systems Scoring System

is generated by and for the countries under Overview of the Scoring Model consideration, focused on the aspects of a governance system that make it most vulnera- Those who implement the scoring system will ble to corruption. use the same methods to obtain the data that are used to prepare traditional NIS Country In addition, TI will be responding to the interest Studies: a combination of desk research, in- among donors in governance assessments. NIS dividual consultation and focus groups. Ex- studies are already used by donors in their de- perience has shown that the very process of velopment work, but countries such as Britain doing research in this participatory way can indicators Virtual and the Netherlands have recently been com- generate the kind of communication and coo- missioning their own governance assessments peration that in itself can improve the system to meet their own needs. Moreover, donors are under evaluation. This process will be enhan- increasingly interested in quantitative assess- ced by the introduction of the scoring system, ments that enable comparative work and help which presents an added opportunity for en- target reform programmes. In order to stay gaging stakeholders. Indicator Exhibition Virtual relevant in this changing landscape, TI needs to capitalise on our knowledge and experience The scoring model under development will have to produce a useful tool that brings our impor- two components. First, a standard model will tant perspective to the governance debate. be developed, comprised of broad categories (a derivation of the NIS pillars) that can be applied in any country. Second, a unique country (or Process for Development regional) model will contain the individual questions for gathering data in the country under The process for development of the NIS sco- examination. Detailed guidelines will help Chap- ring system began in 2006 with consultation ters to develop their own country model accor- across the TI movement. Responses confi rmed ding to their national situation. The researchers that Chapters have interest in such a tool, but will assess the country model questions, which that the scoring system should be limited to in turn will provide the data points necessary to comparisons within a region and avoid a new calculate scores in the standard model. Quality international ranking. Chapters also stressed control will be done at the TI-Secretariat. that the scores should not be divorced from the narrative reports; the scores and the re- Chapters will also have the option of going fur- ports should complement each other. ther than the guidelines proposed and adapting the country model in a number of different Building on this baseline, TI-S is working with ways. Chapters can include different informa- National Chapters, external experts and a tion and local data sources in their country scoring consultant to design a robust scoring model, as well as different questions or even methodology that also refl ects the priorities new NIS pillars. and needs of the TI National Chapters. In the latest stage of the process, consultants from The data collected from each country will be the Madagascar offi ce of Pact – an NGO based stored in an electronic database that will be in Washington DC committed to capacity buil- made public upon completion. This can be ding of local leaders and organisations – wor- utilised to present the data in different ways, ked with TI to produce the initial draft of the such as charts or graphs. It will also facilitate scoring model. The draft will be reviewed by exchange of information. a methodology committee, bringing together scoring and issue experts. For more information The model will then be piloted in Guatemala and Panama. Subsequent modifi cations will be For more information on the NIS scoring made before the scoring system is launched system, please contact Sarah Repucci in 2008. at the TI Secretariat at [email protected] or +49 30 34 38 20 661.

245 19 & 20 November 2007 Virtual Indicator Exhibition

Promoting Revenue Transparency Project by Sophie Buxton, Transparency International

The Importance of Revenue Transparency Promoting Revenue Transparency Project in the Extractive Industries The Promoting Revenue Transparency (PRT) Proj- Revenues from the extractive industries are an ect supports the transparent and accountable important source of income for the governments management of revenues generated from the of many developing countries. However, much extractive industries as a step towards reversing of this wealth does nothing to reduce high lev- the ‘resource curse’ and ensuring such revenues els of poverty and improve the lives of citizens. directly benefi t society. The Project seeks to raise Rather than fostering economic growth and de- awareness in both government and the private velopment, high revenues from the extractive in- sector of the various steps required for reve- dustries have often fuelled corruption, economic nue transparency to be achieved, sustained and stagnation, inequality and confl ict. This paradox mainstreamed. By providing robust standards for has been labelled the ‘resource curse’. revenue transparency and tools to measure progress in this fi eld, companies and governments There is a growing recognition that the transpar- engaged in the extractive industries are encour- ent and accountable management of revenues aged to improve transparency and accountability from the oil, gas and mining industries helps to to citizens and investors. ensure that natural resource wealth is translated into societal well-being and sustainable develop- The Promoting Revenue Transparency Project has ment. Corruption and mismanagement breed in three specifi c objectives: opacity, and the resulting instability in countries of operation is bad for business, damaging com- 1. To measure revenue transparency perfor- panies’ reputations and resulting in lower inves- mance and diagnose areas for improve- tor returns. ment. 2. To develop broad standards for revenue Transparency can help change the extractive re- transparency. source curse into a blessing by facilitating and 3. To support the use of the revenue trans- improving the accountability of companies and parency standards and measures of perfor- governments to their investors and citizens. En- mance by companies, rating agencies, inves- suring access to information about how much tors, government regulators and civil society. money governments are receiving from extractive industry revenues empowers citizens to hold The project will measure and compare the degree their governments accountable, monitor how the of revenue transparency among selected compa- money is spent and lobby for responsible public nies, host countries (resource rich) and home spending. Greater accountability should limit bad countries (where the companies are based) in the practices and the mismanagement of extractive oil, gas and mining sectors. The PRT project will industry revenues, which all too often fuel corrupt produce the following reports: elites and deepen social confl ict. If properly managed, revenues from natural resources provide a 1) A Companies Report, covering 42 companies basis for poverty reduction, economic growth and and their operations in 21 countries in 2007 sustainable development. 2) A Host Governments Report, covering approximately 10 countries, expected in 2008 The Promoting Revenue Transparency Project 3) A Home Governments Report, expected in 2008 makes clear that publishing key data on extractive industry operations on a country by country These reports will focus on the oil and gas indus- basis is both in the interests of corporations and tries. A feasibility study of extending these re- supports sound accountability by host govern- ports to the mining industry is planned for 2008. ments. The Project is part of a growing international multi- stakeholder movement of governments, companies, investors and civil society which seeks to

246 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Promoting Revenue Transparency Project

promote improvements in transparency and companies concerned is now drawing to a close accountability in natural resource revenue and the report is in the pre-publication stage. management. Participants of this movement recognize that revenue transparency improves broader governance, strengthens the invest- Companies covered: ment climate in which business operates, and provides a necessary condition for achieving Amerada Hess (USA) • Aramco (Saudi Ara- sustainable development. bia) • BG (UK) • BHP Billiton (Australia) • BP (UK) • Chevron Corporation (USA) • China indicators Virtual National Petroleum Corporation (China ) The Companies Report • CNOOC (China) • Conoco Philipps (USA) • Devon Energy (USA) • Eni SpA (Italy) The Companies Report 2007 applies a method- • Exxon Mobil Corporation (USA) • Gaz- ology which allows an assessment to be made prom (Russia) • GEPetrol (Equatorial Guinea) of revenue transparency policies, practices and • Inpex (Japan) • Kazmunaingaz (KMG) Indicator Exhibition Virtual management systems of oil and gas companies (Kazakhstan) • Kuwait Petroleum Corpo- in their upstream operations. The research is ration (Kuwait) • Lukoil (Russia) • Mara- based on publicly available information. The thon (USA) • National Iranian Oil Compa- method incorporates aspects of the context of ny (Iran) • National Nigerian Petroleum operation that may support or hinder compa- Company (NNPC) (Nigeria) • Oil and Natural nies’ performance on revenue transparency. Gas Corporation Limited (ONGC) (India) The framework applied serves as a measure- • Nexen (Canada) • Pertamina (Indonesia) ment tool which demonstrates the steps which • Petro China Company Limited (China) companies can themselves undertake to further • Petrobrás (Brazil) • Petrocanada (Canada) improve revenue transparency. • Petróleos de México (Mexico) • Petróleos de Venezuela (PDVSA) (Venezuela) • Petro- Multi-stakeholder engagement and consulta- liam Nasional phd (Petronas) (Malaysia) tion has been a crucial elements in the process • Qatar Petroleum (Qatar) • Repsol YPF (Spain) of producing the report and is critical to the • Rosneft (Russia) • Shell (The Netherlands) advocacy aspects of the project. The project • Sinopec (China) • Société Nationale des incorporates multi-stakeholder input through Pétroles du Congo (SNPC) (Congo) • So- the participants in its Working Group and its nangol (Angola) • Sonatrach (Algeria) broader Reference Group, which include in- • Statoil (Norway) • Talisman Energy (Can- dustry experts, company representatives, civil ada) • Total (France) • Woodside Petroleum society activists and members of the EITI sec- (Australia) retariat. The engagement of the companies covered by this research has been sought by: Countries of Operation: 1) Opening channels for communication and exchange on the PRT project and its prog- Algeria – Angola – Azerbaijan – Brazil – China ress, including ongoing opportunities for – Congo Brazzaville – Equatorial Guinea – India dialogue about changes needed and ave- – Indonesia – Iran – Kazakhstan – Kuwait – nues to address issues and concerns. Malaysia – Mexico – Nigeria – Norway – Qatar 2) Creating space for companies to provide – Russia – Saudi Arabia – US – (and Gulf of their input from the earliest stages, includ- Mexico) – Venezuela ing the methodology and framework revision. 3) Seeking participation of companies in the The Host Governments Report Working Group of the Project. 4) P roviding an opportunity for companies to The PRT Project is currently working on the check the data gathered on them for ac- initial stages of a Host Governments Report curacy. which will focus on government transparency regarding extractive industry revenues in The Companies Report covers 42 oil and gas countries where extraction is taking place. It companies and their operations in 21 different is designed to create local ownership and to countries, as listed in full below. The year-long promote engagement and participation of local process of research and engagement with the stakeholders, particularly governments.

247 19 & 20 November 2007 Virtual Indicator Exhibition

Data gathering and analysis will be performed The two parts of the report measure company by country implementers (TI National Chapters, performance and home government regulation. Publish What You Pay (PWYP) coalition members or other organisations) selected according to pre- Promoting Revenue Transparency is the new established criteria in consultation with the Work- phase of the project and is being implemented by ing Group of the project. A pilot project will be Transparency International, in partnership with fi rst be implemented in 2 countries. The full list of the Revenue Watch Institute. Building on the pre- countries to be covered has yet to be confi rmed. vious work in this area, the initiative also complements the efforts of the Extractive Industries Transparency Initiative (EITI). It includes those History of the concept aspects of transparency and anti-corruption relevant to revenue transparency, and contributes Measuring Transparency was fi rst conceived by to sustaining awareness of the responsibility of Save the Children UK and developed in collabora- both companies and governments to implement tion with investors, independent consultants, rat- EITI commitments and encouraging them to go ings agencies and other members of the Publish beyond these. What You Pay NGO coalition. In 2005, Save the Children UK produced the fi rst reports on revenue For further information please refer to Promoting transparency, “Beyond the Rhetoric: measuring Revenue Transparency at www.transparency.org revenue transparency in the oil and gas industry”1. or address queries to [email protected]

1 See “Beyond the Rhetoric: Measuring Revenue Transparency -Company Performance in the Oil and Gas Industries”. This assessed 25 companies and their revenue transparency performance in Angola, Azerbaijan, Indonesia, Nigeria, Timor Leste and Venezue- la. “Beyond the Rhetoric: Measuring Revenue Transparency – Home Government Requirements for Disclosure in the Oil and Gas Industries” assessed the regulatory performance of Australia, Canada, France, Italy, the Netherlands, Norway, the UK, USA, South Africa and Russia. Both are available electronically at: http://www.transparency.org/policy_research/surveys_indices/promoting_revenue_transparency

Core Set of Indicators by Ove Caspersen, European Environment Agency

The Core Set of Indicators are stable, but not static, and that give answers to selected priority policy questions. These indi- In 2004, the European Environment Agency (EEA) cators should, however, be considered alongside launched a core set of indicators http://themes. other information if they are to be fully effective eea.europa.eu/IMS/CSI. This exercise was carried in environmental reporting. out with three main objectives in mind, namely to: The core set comprises 37 indicators covering six • Provide a manageable and stable basis for indi- environmental themes (air pollution and ozone cator-based assessments of progress against depletion, climate change, waste, water, biodiver- environmental policy priorities; sity and terrestrial environment) and four sectors • Prioritise improvements in the quality and cov- (agriculture, energy, transport and ﬁ sheries). erage of data ﬂ ows -improvements that will enhance comparability and certainty of information and assessments; Criteria • Streamline contributions to other indicator initiatives in Europe and beyond. The indicators in the core set were selected from a much larger set, on the basis of criteria widely used When establishing and developing the core set, elsewhere in Europe and by the OECD. Particular the Agency was guided by the need to identify a attention was given to the relevance for policy small number of policy-relevant indicators that priorities, objectives and targets, the availability

248 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Core Set of Indicators

of high-quality data over both time and space, Information Management and the application of well-founded methods for indicator calculation. The EEA takes its responsibility as an information provider seriously, emphasising quality Using the core set assurance of the data used. We also ensure that users know about the uncertainties related to The core set, and particularly its assessments the data and indicators, both in terms of the and key messages, is targeted mainly at policy rationale and concept behind the indicator and makers at the EU and national level who can use when it comes to the quality of the input data. indicators Virtual the outcomes to inform on progress with their This high degree of transparency enables users policies. EU and national institutions can also to judge the quality of the information. It also use the core set to support streamlining of data adds to the credibility of the assessments made fl ows at the EU level. Environmental experts can on basis of the data, even when these are made use it as a tool for their own work by using the by bodies other than the EEA. underlying data and methodologies to do their Indicator Exhibition Virtual own analysis. They are invited to look at the The Agency strives to improve the quality and set critically, give feedback and so contribute availability of environmental information and to future EEA core set developments. has an ongoing programme of developing tools and support to facilitate use of environmental General users will be able to access the core information, by civil servants, researchers, policy set on the web in an easily understandable way, makers and the public at large. and use available tools and data to do their own analyses and presentations. Two examples from the core set indicators Decoupling from main reports 1. Progress in management The core set is updated when data becomes of contaminated sites (CSI 015) available. This is linked to the cycles of the countries’ data reporting rather than to the Key policy question: How is the problem publishing timetable of the Agency’s big reports of contaminated sites being addressed (for more, see the reporting obligations data- (clean-up of historical contamination and base ROD, http://rod.eionet.europa.eu/index. prevention of new contamination)? html). This means that the EEA has access to an information base that is available for several According to recent estimates, there are presently purposes (e.g. speeches, other reports, brief- approximately 250 000 sites with contaminated ings) and which can be used at short notice soil requiring cleanup in the EEA member coun- to underpin timely input into policy debates. tries - and this number is expected to increase. It also means that the EEA member countries Potentially polluting activities are estimated to have access to comparative information when have occurred at nearly 3 million sites (includ- needed for their own state of the environment ing the 250 000 sites already mentioned) and reporting cycles and policy needs. investigation is needed to establish whether remediation is required. If current investigation The other benefi t of maintaining an independent trends continue, the number of sites needing information base is that if the offi cial review and remediation will increase by 50% by 2025. acceptance of the data is separated from the assessment -the assessments have more impact By contrast, more than 80 000 sites have been as the discussion will tend to focuses on what cleaned up in the last 30 years in the coun- might be causing the trends and results, rather tries where data on remediation is available. than on whether the data are correct or not. The range of polluting activities (and their relative importance as localised sources of soil con- This was the main reason for the success tamination) varies considerably across Europe. and impact of the EEA scorecard compar- However, industrial and commercial activities ing environmental country performance and as well as the treatment and disposal of waste progress that was published as part of the are reported to be the most important sources. report The European Environment – State and National reports indicate that heavy metals and Outlook 2005, http://reports.eea.europa.eu/ mineral oil are the most frequent soil contami- state_of_environment_report_2005_1/en. nants at investigated sites, while mineral oil and

249 19 & 20 November 2007 Virtual Indicator Exhibition

Overview of progress in the management 2. Renewable energy consumption of contaminated sites in Europe (Ver. 1.00) (CSI 030)

Key policy question: Are we switching to Remediated Sites 80.7 renewable energy sources to meet our energy consumption?

Contaminated Sites 245.9 The share of renewable energy sources in primary (estimate) energy consumption is increasing slowly in the EU 27 – from 4.4% in 1990 to 6.7 % in 2007. This has

Potentially helped to reduce otherwise higher greenhouse gas Contaminated Sites 1823.6 emissions. However, rising overall energy consumption in absolute terms is offsetting some of the environmental benefi ts from more use of renewables. Potentially Polluting Activity Sites 2965.5 (estimate) The strongest increase comes from wind and solar energy; although their combined share in 0 500 1000 1500 2000 2500 3000 renewable energy consumption still stands at less Number of sites in 2006 (x 1000) than 6%. In absolute terms, about 80% of the increase is accounted for by biomass, which takes Source: EIONET priority data fl ows on contaminated sites, Turkey: NATO/CCMS-Turkey, 2006; United Kingdom: Environment Agency of a share of more than two thirds of all renewables. England & Wales, 2005. Hydropower has been falling in the past years as a result of lower rainfall and its share stands at chlorinated hydrocarbons are the most frequent about 22% of renewable energy consumption. contaminants found in groundwater. A consider- Signifi cant progress will be needed to meet the able share of remediation expenditure, about 35% indicative target of a 12 % renewables share for on average, comes from public budgets. Although the EU by 2010. The European Council of 8-9 considerable efforts have been made already, it will March 2007 endorsed a binding target of a 20 % take decades to clean up a legacy of contamination. share of renewable energies in overall EU energy consumption by 2020.

Breakdown of industrial and commercial activities causing local soil contamination Contribution of renewable energy sources to primary energy consumption in the EU-27, Greece 1990-2005 Malta

Switzerland 7.0

Romania 6.5 6.0 Solar Lithuania 5.5 Bulgaria tion (%) 5.0 Serbia Wind mp 4.5 Czech Republic

onsu 4.0 c

Croatia y 3.5 Geothermal Hungary 3.0 energ

Norway y 2.5 ar

Latvia m Hydro

ri 2.0 p Slovakia Industrial production 1.5 and commercial services Estonia 1.0 Biomass and Municipal waste ares in

treatmen and disposal Sh FYR of Macedonia 0.5 waste Industrial waste Italy treatment and disposal 0.0 Mining Belgium Oil industry 1990 1995 2000 2005 Austria Power plants Source: EEA, Eurostat. Sweden Military Storage Spain Transport spills on land Denmark Others

Finland Source: EIONET priority data ﬂ ows Luxembourg on contaminated sites 0% 20% 40% 60% 80% 100%

250 Beyond GDP: Measuring progress, true wealth, and the well-being of nations European Benchmark Indicators

Share of renewable energy in primary The EEA core set is highly structured around energy consumption (%) 1990-2005 the DPSIR analytical framework (Driving forces, Pressures, State, Impact 1990 1995 2000 2001 2002 2003 2004 2005 and Responses) and is supported EEA 5.5 6.2 6.9 6.8 6.8 6.9 7.2 7.6 EU-27 4.4 5.1 5.8 5.9 5.8 6.0 6.4 6.7 by a large information base con- EU-15 4.9 5.3 5.9 6.0 5.8 6.0 6.4 6.7 taining expert knowledge, as well Belgium1.4 1.4 1.3 1.5 1.5 1.92.1 3.5 Bulgaria 0.6 1.6 4.23.6 4.44.95.25.6 as qualitative and quantitative informa- Czech Republic 0.2 1.5 1.5 1.7 2.1 3.44.04.1 tion. This currently includes about 500 indicators Virtual Denmark 6.7 7.6 10.8 11.4 12.4 13.5 15.1 16.2 Germany 1.6 1.92.83.03.43.6 4.04.8 indicators, data viewers for greenhouse Estonia 4.58.8 10.8 10.4 10.39.5 10.6 11.2 gases, ozone, water and air emissions. Ireland 1.6 1.5 1.8 1.7 1.9 1.82.1 2.6 Greece5.05.35.04.54.7 5.1 5.1 5.2 The Agency focuses on providing geo- Spain 7.05.55.7 6.6 5.5 7.0 6.5 6.1 referenced information that allows peo- France 7.0 7.5 7.0 7.1 6.4 6.4 6.3 6.0 Italy 4.24.85.25.55.35.9 6.8 6.5 ple to seek information from their local

Cyprus 0.42.1 1.8 1.8 1.7 1.7 1.92.0 area, for example in the ozone and Indicator Exhibition Virtual Latvia 13.1 27.534.334.1 34.533.1 36.036.3 Lithuania 2.05.7 9.28.48.1 7.98.08.8 water viewers mentioned above and Luxembourg 1.3 1.4 1.5 1.3 1.4 1.4 1.6 1.6 the recently launched environmental Hungary1.82.42.1 1.93.43.43.7 4.2 Malta 0.00.00.00.00.00.00.00.0 technology atlas, http://technologies. Netherlands 1.4 1.6 2.42.42.6 2.6 2.93.5 ew.eea.europa.eu/atlas_map. Austria 20.222.023.222.222.2 19.320.820.5 Poland 1.6 3.94.24.54.6 4.54.7 4.8 Portugal18.8 16.3 15.4 15.7 14.0 17.1 14.9 13.4 The EEA has also developed tools to Romania 4.25.9 10.99.39.8 10.0 11.7 12.8 Slovenia 4.6 9.4 12.3 11.5 10.9 10.3 11.6 10.6 support environmental education and Slovakia 1.6 2.92.83.93.7 3.33.94.3 training, and is committed to develop- Finland 19.021.223.922.421.920.923.023.2 Sweden 24.926.031.428.326.325.325.829.8 ing, testing and communicating new United Kingdom 0.50.9 1.1 1.1 1.2 1.3 1.5 1.7 and best practice approaches to creating Turkey18.5 17.4 13.1 13.2 13.4 12.7 13.2 11.9 Iceland 64.9 67.6 71.4 73.2 72.8 72.8 72.3 73.0 environmental assessments. Norway 53.248.951.044.051.7 38.337.7 40.4 Source: EEA, Eurostat. For more information Other information available through the EEA to support assessments. http://themes.eea.europa.eu/IMS/CSI

European Benchmark Indicators (EBI) by Edward Vixseboxse, Netherland's Environmental Assessment Agency (MNP)

Why we need the European Benchmark mance in this way, within an enlarged European Indicators? Union, facilitates the improvement of policy effectiveness in a Member State and stimulates With the knowledge that there is a growing learning from the success of frontrunners. need for comparative indicators to measure Member State’s environmental performance, To sum up, the EBI is a tool by which environ- MNP has developed the European Benchmark mental performance within and between Mem- Indicators (EBI) to draw comparisons between ber States can be measured and compared, Member States. on a 100+ indicator environmental indicator database. Datasources are many-sided and The indicator database is primarily meant for include among other organizations: Eurostat, decision makers, but is also useful for the gene- World Bank, the European Environment Agen- ral public and scientists. Measurement of perfor- cy (EEA) and the World Resources Institute.

251 19 & 20 November 2007 Virtual Indicator Exhibition

Description of the EBI History of the EBI initiative

MNP has composed an indicator set of existing The fi rst version of the EBI was published in 2006 indicators that refl ects the environmental perfor- after 1 ½ years of research in concepts, method’s mance on different themes and issues within the and existing indicators initiatives. economic and social setting of a country. Especially within an European Union of 25 there is need for Information and downloads on the EBI webarticle, nuance. The environmental performance of coun- database (MS Excel) and background article (pdf) tries can be very different because of differences can be found at the following web addresses: in e.g. demography and economic structure. http://www.mnp.nl/en/publications/2006/Euro- peanBenchmarkIndicators.html Through the EBI the user is able to judge national environmental performance in a better way and within the proper country context. The air Current successes and key challenges quality of the Netherlands is e.g. below average for the EBI and heavily infl uenced by, among other things, the high car and population density. Performance Since introduction the EBI tool is getting more judged by the deployment of clean air technology and more popular. After media attention in Europe on the other hand gives exactly the opposite result: (Ends daily), the US (Crosslands Bulletin) and the the Netherlands performs better than average. Netherlands (Dagblad de Pers 2007, Milieu 2007) the database is increasingly being used by media, Practically speaking, the EBI indicators have been general public and scientists. divided into two parts. First a socioeconomic profi le, that should put environmental performance Foreseen in 2008 is the fi rst major update and re- into proper perspective. Indicators refl ects e.g. vision of the EBI. The EBI will also be integrated in countries’ economic performance, -structure and MNP’s environmental data-compendium through social characteristics. Where possible, each indi- 7 environmental dossiers. That is to say: biodi- cator covers data on the present situation and a versity, air-quality, water quality, climate change, trend from the past. waste, natural resources and ‘government & enterprise’. Second, an environmental profi le, that has been based on the OECD Pressure-State-Response (PSR) framework. Within themes as Air Quality Future steps, needs and prospects and Climate Change, performance is measured on the basis of environmental pressures, – tech- The main focus for the future is to keep the EBI nology –quality and progress towards Interna- updated, adjusted to changing environmental po- tional Commitments. licy perceptions and adapted to new availability of environmental data on issues not covered before. Existing aggregated indicators, like the Growth A dynamic and challenging task as a structured Competitiveness Index (Xavier Sala-I-Martin, availability, processing and publishing of environ- Columbia University) and the Ecological Footprint mental data has a far less long history compared (Wackernagel and Rees) can be and are indivi- to (socio) economic data. dual indicators in the EBI. Such composite indicators have the advantage that they provide an overall ranking of a country but also have quite a few disadvantages. The EBI individual indicator scores are not aggregated to a composite index as this is an area of methodological controversy.

Thus, the MNP indicator set is a product of a quite pragmatic method of working and ﬁ nds its rationale in the creation of a collection of “environmental policy stories”, like Climate Change, Air Quality and Biodiversity.

252 Beyond GDP: Measuring progress, true wealth, and the well-being of nations European Benchmark Indicators

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253 19 & 20 November 2007 Virtual Indicator Exhibition

Member States’ performance on the environmental dossiers: air quality, climate change and biodiversity through indicators taken from EBI

254 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Ecological Footprint

Ecological Footprint by Mathis Wackernagel, Global Footprint Network

Why we need the Ecological Footprint Ecological Footprint adds up these ecosystem areas to measure total human demand on na- One fundamental requirement for sustainabi- ture. In other words, Ecological Footprint ana- indicators Virtual lity is using renewable resources slower than lysis builds on “mass fl ow balance,” and each nature can replenish them. Societies who do fl ow is translated into the ecologically produc- not meet this minimum condition run ecological tive areas necessary to support these fl ows. defi cits. Ecosystems have a limited ability to supply us

To know whether we meet this requirement, with natural resources (this is based on factors Indicator Exhibition Virtual and to properly manage our ecological assets, such as available water, climate, solar energy, we need to measure our use of nature. We technology and management practices). This is need resource accounts that keep track of called biocapacity. When a population’s Ecologi- how much nature we have versus how much cal Footprint exceeds its biocapacity, biological we use. Ecological accounting operates like resource ‘overshoot’ occurs. fi nancial accounting: it tracks available capital, revenues and expenditures. As with fi nan- Global Footprint Network calculates the Ecolo- cial assets, it is possible to spend more of our gical Footprint of nations on an annual basis. ecological assets than are being regenerated From this data we undertake global analysis. – for some time. But such overspending deple- Overshoot measured on a global scale is an tes the natural capital and cannot be sustained indicator of unsustainability. Data shows that in the long term. Continued ecological defi cit humanity’s resource demands and waste pro- spending leads to environmental bankruptcy, duction began to exceed planet Earth’s ability eroding economies, lessened quality of life and to meet this demand around 1986. Today hu- societal instability. manity exceeds the planet’s ability to provide biological resources by 30 percent – thereby In short, like any successful business that dipping into the natural capital stock. While keeps track of revenues and expenditures, so- the world average capacity was 1.8 hectares ciety needs robust accounts of its demand on, per person, the world average Footprint was and supply of, ecological assets. This is what 2.2 hectares per person. In contrast, the ave- Ecological Footprint accounts offer. rage Footprint in EU-27 was 4.7 hectares per person against a biocapacity of 2.2 hectares per person. Description of the Footprint

The Ecological Footprint is EU-27 Footprint and biocapacity, 2003 an indicator that measures people’s demand on nature. This demand includes both the resources we consume as well as the waste we produce. We obtain these resources from forests, cropland, ﬁ sheries, and grazing land, among other ecosystems. The built environment com- promises the land’s ability to provide biological resources. Additionally, ecosystems absorb and assimilate the waste we produce as a result of resource consumption. The

255 19 & 20 November 2007 Virtual Indicator Exhibition

National Ecological Footprint accounts can also History of the concept inform us about local or regional ecological performance. An Ecological Footprint Assessment of The original Ecological Footprint methodology re- the European Union sponsored by the European sulted from collaboration between Dr. Mathis Wac- Environment Agency and published by WWF kernagel and Dr. William Rees at the University of International shows, for instance, that Europe British Columbia in Vancouver, Canada. The pu- has an Ecological Footprint more than twice its blication of their book “Our Ecological Footprint: biocapacity (http://www.footprintnetwork.org/ Reducing Human Impact on the Earth” in 1996 newsletters/gfn_blast_europe05.html). This means made the concept more widely accessible. that more than half of the ecosystem area on which Europe depends is outside of Europe. Europeans Global Footprint Network was founded in 2003 with have about twice the Footprint of what is available the goal of advancing the scientifi c rigor and practi- per person world-wide (and this available bioca- cal application of the Ecological Footprint, and ma- pacity also needs to support wild species that are king the Ecological Footprint as prominent a metric competing with people for food and space). All of as the Gross Domestic Product (GDP). Global Foot- the EU members have per person Footprints above print Network is made up of a 23-member advisory what is globally available. All but three – Sweden, board of leading scientists and politicians, an offi ce Latvia, and Finland – are running a national eco- in Oakland, one in Switzerland, and, soon, one in logical defi cit by using more than what is available Brussels. More than 75 organizations, spanning six within their boundaries. The Ecological Footprint of continents, have become formal Global Footprint Europe has increased by almost 70% per person Network partners. The Ecological Footprint is now since the 1960s (see fi gure below). in wide use by governments, communities, and businesses to set targets and monitor their ecological performance.

The adoption of the Ecological Footprint as a trusted sustainability metric depends upon the scien- tiﬁ c integrity of the methodology, consistent and rigorous application of the methodology across analyses, and on results being reported in a straightforward and non-misleading manner. To meet these goals, Global Footprint Network and its partners have created a consensus-based committee process for improving the method and for developing international Ecological Footprint Standards (www.footprintstandards.org).

As underlined in many publications, the Ecological Examples of current activities Footprint measures merely one aspect of sustainability: the availability of, and the human de- The tool is getting increasingly popular: a sim- mand on, Earth’s regenerative capacity. Other ple Google search yields hundreds of thousands measures are needed to complement this tool for of websites discussing the Ecological Footprint. assessing social well-being, depletion of non-re- The effort of advancing this accounting tool is newable resources, inherently unsustainable acti- also increasingly recognized. For instance, Glo- vities such as the release of persistent pollutants, bal Footprint Network is the recipient of a 2006 or the degradation of ecosystems. Skoll Award for Social Entrepreneurship. Global Footprint Network is one of only 10 organizations honoured with the USD 1,000,000 prize paid over three years, in recognition of the most innovative and effective approaches to resolving critical social issues.

256 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Ecological Footprint

The Footprint is also entering new arenas. solutely right (because it will take signifi cant For instance, work with the Swiss Agency for investments), and you are absolutely wrong Development and Cooperation applies Foot- (because it is profoundly necessary). print analysis to human development in Africa (www.footprintnetwork.org/africa). Future possibilities New tools are available to calculate the Foot- print. For businesses, for instance, www.foot- The method of calculating the Ecological Foot- printer.org or TBL3 (http://www.bottomline3. print continues to be refi ned under the scienti- indicators Virtual com), and for UK municipalities REAP (http:// fi c guidance of the National Accounts Commit- www.sei.se/reap/index.php). tee, housed by Global Footprint Network. For detail regarding the key aspects of the metho- A number of government organizations have dology targeted for future work see Kitzes et active Footprint initiatives, for instance EPA Vic- al. (http://www.brass.cf.ac.uk/uploads/fullpa- toria in Australia (http://www.epa.vic.gov.au/ pers/Kitzes_et_al_M65.pdf). Indicator Exhibition Virtual ecologicalfootprint), the city of Calgary (http:// www.calgary.ca/footprint), Wales (http://www. Updates to the fi rst edition of Footprint stan- footprintwales.org) or Scotland (http://www. dards are in the works and expected to be scotlandsfootprint.org). Various countries have released in late 2008. The next step is to initiated research collaborations with Global establish a certifi cation system for standards- Footprint Network to strengthen the Footprint compliant applications. analysis of their country: Switzerland, Japan, Belgium, and the United Arab Emirates. DG In 2005, Global Footprint Network launched its Environment has commissioned a study on “Ten-in-Ten” campaign with the goal of institu- how to use the Ecological Footprint for poli- tionalizing the Ecological Footprint in at least cy assessments – the fi nal report should be ten key nations by 2015. The aim of this pro- available by the end of the year. gram is to have ecological accounting be given as much weight as economic accounting and WWF has committed to help humanity reduce for the Ecological Footprint to become as pro- its Footprint to the size of one planet Earth by minent a metric as the Gross Domestic Pro- 2050. If you think this is radical, you are ab- duct (GDP).

257 19 & 20 November 2007 Virtual Indicator Exhibition

(environmentally) Sustainable National Income (eSNI) by Roeﬁ e Hueting, Foundation SNI

The need for eSNI So in view of the widespread perception that NI indicates economic welfare and success and even Standard national income (NI) is in politics, news- that production has to grow for fi nancing envi- papers and most economic literature identifi ed ronmental conservation, we greatly need an NI with economic growth and economic success. adapted for environmental losses, alongside the However, according to economic theory econom- standard NI, in order to counter this wrong per- ic success can solely mean increase in welfare ception. (the satisfaction of wants derived from our deal- ings with scarce means). Welfare is dependent on This is the (environmentally) Sustainable Nation- more factors than the production and its growth al Income (eSNI). The eSNI is the only indicator as measured in NI. Examples are: labour condi- which (1) is directly comparable with standard tions, income distribution, employment, and, of NI because it is estimated in accordance with the course, the possible uses c.q. environmental func- conventions of the System of National Accounts tions of our non-human made physical surround- (SNA), (2) relates the measurable physical envi- ings (the environment). The latter encompasses ronment (‘ecology’) with subjective preferences renewable and nonrenewable resources, includ- (economy) as shown in Figure 2, (3) provides the ing bio diversity and the life support systems of distance between the actual (NI) and sustainable our planet. Humanity is completely dependent on (eSNI) production level in factor costs and (4) these non-human made environmental functions. shows the development of this distance in the Since the use of functions is going more and more course of time and thus shows whether or not at the expense of other functions, environmental society is drifting further away from environmen- functions have become by defi nition scarce goods, tal sustainability defi ned as keeping vital environ- indeed the most fundamental scarce goods hu- mental functions available for future generations. manity disposes of. Loss of one or more vital func- Therefore the eSNI is indispensable information tions leads to a drop in production (see Figure 1). for society and policy.

In standard economic theory producing is de- ﬁ ned as adding value. This value is added to the Description non-human made physical surroundings. Conse- quently, environmental functions that are indis- Environmentally SNI in a given year is deﬁ ned as pensable for human life, including production, re- the maximal attainable production level by which main outside the measuring of standard NI. This vital environmental functions remain available is logical because water, air, soil, plant and animal for future generations, based on the technology species are not produced by humans. available at that year (the OECD has accepted

Figure 1 Actual standard national income observations (ya, ﬁ ctitious example) compared with the net national income (y) on three optimal paths, calculated with a dynamic environmental economic model. The red path (index b, business as usual) approximates the actual path (index a) by assuming incomplete expression of preferences for the environment. These preferences are assumed to be completely expressed on the sustainable path (index s) and the transition path (index t). The point

By indicates the level of national income y on path b in

the year of investigation; Sy is the corresponding point on the sustainable path s. The path b drops dramatically because of the loss of one or more vital environmental functions, as happened already in some regions (http:// www.millenniumassessment.org/en/condition.aspx).

258 Beyond GDP: Measuring progress, true wealth, and the well-being of nations eSNI

this defi nition http://stats.oecd.org/glossary/ ‘space for growing food crops’ and ’space for detail.asp?ID=6587). Thus the eSNI provides natural ecosystems such as forests’ with the information about the distance between the function ‘space for growing bio-fuel crops‘; the current and a sustainable situation. The length function ’regulating the water fl ow of e.g. for- of the period to bridge this distance, that is the ests’ (that prevents fl ooding) with the function transition period towards a sustainable situa- ’forests for harvesting wood’. tion, is limited only by the condition that vital environmental functions must not be damaged The availability of functions, or, in terms of the irreversibly. In combination with the NI, the SNA, their volume, decreases from ‘infi nite’ indicators Virtual eSNI indicates whether the part of the pro- (abundant with respect to existing wants) to fi - duction that is based on unsustainable use of nite, that is falling short. As a result, the shadow the environment is increasing or decreasing. price of environmental functions rises, and with Because of the precautionary principle, future it their value, defi ned as price times quantity, technological progress is not anticipated in from zero to an ever-higher positive value. This the calculation of eSNI. When constructing a rise in value refl ects a rise in costs. To deter- Indicator Exhibition Virtual time series of eSNI’s, technological progress mine the extent of the loss of function, we must is measured after the event on the basis of know the value of the function. Since environ- the development of the distance between the mental functions are collective goods that are eSNI and standard NI over the course of time. not traded on the market, supply and demand When this distance increases, society is drift- curves have to be constructed. Without data ing farther away from environmental sustain- on both preferences as well as on opportunity ability, and vice versa. costs, determination of value is impossible.

In our physical surroundings, a great number The estimated costs of measures necessary of possible uses can be distinguished, which to restore functions, that rise progressively are essential for production, consumption, per unit of function restored, can be seen as breathing, et cetera, and thus for human ex- a supply curve, because the measures sup- istence: environmental functions, or in short: ply the availability of functions. We call this functions. As long as the use of a function does the cost-effectiveness curve or the elimina- not hamper the use of an other or the same tion cost curve, because it refers to measures function, so as long as environmental func- that eliminate the pressure on the environ- tions are not scarce, an insuffi ciency of labour, ment. Except in the case of irreparable dam- that is intellect or technology, is the sole fac- age, this curve can always be constructed. The tor limiting production growth, as measured in measures consist of technological measures, standard NI. As soon as one use of a function stimulating direct shifts such as from private is at the expense of another or the same func- car to bicycle and stimulating birth control. For tion (by excessive use), though, or threatens non-renewables elimination measures take the to be so in the future, a second limiting factor form of developing and bringing into practice is introduced. The emergence of competition alternatives such as solar for fossil fuels. between functions marks a juncture at which functions start to fall short of meeting existing Preferences for environmental functions, on wants. Competing functions are by defi nition the contrary, can only partially be determined, scarce and consequently economic goods. In a since these can be expressed only very partially situation of severe competition between func- via the market, while willingness to pay tech- tions, in which we live today, labour is not only niques cannot yield reliable data precisely for reducing scarcity, and thus causing a positive vital functions. Their expression via the mar- effect on our satisfaction of wants (welfare), ket and budget mechanism is blocked by so but it is also increasing scarcity, thus causing called blockages or barriers (www.sni-hueting. a negative effect on welfare. The same holds info). Therefore it is not possible to construct for consumption. So today production not only a complete demand curve. In order to provide adds value (viz. goods for consumption) but the necessary information, assumptions about also nullifi es value (by damaging environmen- preferences have to be made. In the physical tal functions). Examples of competing func- environment these assumptions take the form tions are: the function ’air, water and soil as of physical standards. See Figure 2. It follows dumping ground for waste’ with functions like from the previous sentences that (1) these ‘air for physiological functioning‘, ‘drinking wa- standards have to be clearly distinguished ter‘ and ’soil for raising crops‘; the functions from whether or not people are willing to at-

259 19 & 20 November 2007 Virtual Indicator Exhibition

tain them and (2) they contain information and percent of the production level or national income are by no means actual political target setting. (www.sni-hueting.info).

Figure 2 Translation of costs in physical units into This corresponds with the production level in the early seventies. Consequently our production level is two times higher than the level that can be sustained for future generations. In the period 1990-2000 the distance between NI and eSNI increased by thirteen billion euro. (http://ivm5. ivm.vu.nl/sat/?chap=14)

History

The concept of eSNI has been designed by dr. Roefi e Hueting and has been worked on since the mid 1960’s, since 1990 together with ir. Bart de Boer. Central in the theory is the concept of environmental function. A diffi cult problem has been to establish the value of these functions and conse- costs in monetary units: s = supply curve or marginal elimination cost curve; d = incomplete demand curve or quently the costs of their loss in order to arrive at marginal benefi t curve based on individual preferences an NI adapted for loss of environmental functions. (revealed from expenditures on compensation of func- In his cum laude dissertation New Scarcity and tions, on restoration of physical damage due to loss Economic Growth (1974) and later publications of function e.g. the ‘hydrological regulation’ function Hueting arrives at the conclusion that this prob- resulting in erosion, and so on); d’ = ‘demand curve’ lem is insolvable, that consequently the correct based on assumed preferences for sustainability; BD = prices of market goods are equally unknowable, distance that must be bridged in order to arrive at sus- but that the indispensable information for policy tainable use of environmental functions; area BEFD = weighing can be given on the basis of estimates of total costs of the loss functions, expressed in money; factor costs and making assumptions about pref- the arrows indicate the way via which the loss of envi- erences. This ‘solution’ of the valuation problem ronmental functions recorded in physical units is translated into monetary units. holds true and is applicable for both not in GDP recorded environmental losses and other shortcomings of GDP. It is widely accepted, never disputed One possible assumption is prevailing prefer- and can for instance be found in the article that he ences for sustainable use of vital environmental wrote together with Nobelist Jan Tinbergen for the functions, which takes the form of a rectangular, Rio conference in 1992: ‘GNP and market prices: curve d’ in Figure 2. This assumption is legitimate wrong signals for sustainable economic success because governments and institutions all over the that mask environmental destruction’ (Tinbergen world have stated support for this. is one of the founders of the GNP/GDP indicator in the 1930’s and has strongly supported Hueting’s The cost-effectiveness calculations and the stan- efforts to estimate a fi gure alongside the GDP, dards are input in an economic model that has as right from the start in the mid 1960’s). output among other things the level of eSNI and the prices of products in a sustainable situation, with The work on eSNI received the Global 500 Award, strongly changed price ratio’s between environ- the royal honour Offi cer in the Orde of Oranje ment burdening (much higher real prices) and less Nassau and a nomination by Jan Tinbergen for the burdening products (about the same real prices). Sasakawa Prize. International symposia on eSNI were organised at the Royal Academy of Art and A fi rst rough estimate of the eSNI for the world Sciences in Amsterdam, by the OECD in Paris and in 1991 by Tinbergen and Hueting arrives at fi fty by The World Bank in Washington D.C. At the lat- percent of the production level of the world: the ter occasion the book ‘Economic Growth and Valu- world income (www.sni-hueting.info). Estimates ation of the Environment: a Debate’, dedicated to for The Netherlands by a co-operation of Statis- eSNI and with comments on eSNI by the world’s tics Netherlands, the Institute of Environmental most outstanding environmental economists such Studies and the Netherlands Environmental as Daly, Pearce and Beckerman, was handed by Assessment Agency also arrived at about fi fty minister Pronk to WB president Wolfensohn in

260 Beyond GDP: Measuring progress, true wealth, and the well-being of nations EU set of Sustainable Development Indicators

2001 (http://info.worldbank.org/etools/bspan/ Future PresentationView.asp?PID=494&EID=235). In the SEEA manual of the UN Statistical Ofﬁ ce Plans are elaborated in notes for (1) model im- is written: “Much of the initiative to look at an provements, (2) the set up of, among other alternative path for the economy rather than a things, deﬁ ning the measures and estimating different measure of the economy came from their costs to arrive at sustainable use of soil the work of Hueting in the late 1960’s and the that prevents erosion, one of the serious prob- early 1970’s. He introduced the concept of lems in developing countries and (3) eSNI es- environmental function referred to throughout timates in other countries e.g. Germany and indicators Virtual this manual, explaining how pressure on func- some developing countries. Representatives of tions leads to scarcity or competition for these The World Bank and the OECD have insisted functions (…).” (http://unstats.un.org/unsd/ on this. Although the Dutch Parliament has envaccounting/seea.asp). asked for funding this and the Dutch government has promised to do so, subsidies have

An estimate of eSNI for the world was made not been granted. The theory and elaboration Indicator Exhibition Virtual in 1991. Estimates of eSNI for The Nether- of the eSNI has received international scien- lands are made for the years 1990, 1995 and tiﬁ c recognition. It is the eldest and most com- 2000. A multidisciplinary team of biologists, plete environmental indicator as follows from chemists, physicists, electrical engineers and e.g. the four points mentioned in the Section economists worked for nearly forty years on ‘Need’. It provides information not given by the eSNI and the environmental statistics it any other indicator. However, because of lack is based on. of funding further development of the eSNI is hardly possible. Hopefully the European Union will help to change this situation.

EU set of Sustainable Development Indicators (SDIs) by Laure Ledoux, European Commission, Eurostat

The need for a European set of SDIs Measuring progress towards objectives and targets is an integral part of the renewed strat- The renewed sustainable development strategy. Eurostat is foreseen to produce a moni- egy identifi es seven key challenges which are toring report every second year, based on the seen as threats to achieving the overall long- EU set of SDIs, which underpins the European term objective of improving the quality of life Commission progress report. and well-being on earth for present and future generations. While it could be argued that there is some interest in having an aggregated Historical context measure of well-being, it is also important to measure the different elements that infl uence In 1996, the United Nations Commission on it over time, as they are not perfectly substi- Sustainable Development (UNCSD) proposed a tutable. Through identifying key challenges to list of indicators, linked to the thematic chap- sustainable development, the strategy implic- ters of Agenda 21, to be tested, developed and itly identifi es what are these key infl uences on used by governments. Eurostat contributed to well-being and the threats to long term devel- the international testing phase and issued two opment. The EU set of sustainable develop- publications drawing from the UN list of indica- ment indicators (SDIs) is designed to monitor tors. the related objectives and targets.

261 19 & 20 November 2007 Virtual Indicator Exhibition

Following the adoption of the EU sustainable de- The SDI set also describes indicators which are velopment strategy in Gothenburg in June 2001, not yet fully developed but which would be nec- a task force was established to develop a com- essary to get a more complete picture of prog- mon response from the European statistical sys- ress, differentiating between indicators that are tem to the need for indicators on sustainable de- expected to become available within two years, velopment. The Commission endorsed a fi rst set with suffi cient quality (‘indicators under develop- of 155 indicators based on this work in February ment’), and those to be developed in the longer 2005. Some 98 indicators from this list formed term (‘indicators to be developed’). the basis of the fi rst monitoring report published by Eurostat in December 2005. Upon the expiry Figure 1: The SDI pyramid of the mandate of the task force at the end of 2005, a working group on sustainable development indicators (SDIs) was set up, composed of both statistical and policy representatives at na- Level 1 Lead objectives tional and EU levels. Following the mandate of the renewed strategy, the review of this fi rst set Level 2 SDS priority objectives was carried out by the Commission in close cooperation with the working group on SDIs, with Level 3 Actions/ Explanatory variables the objective of adapting the 2005 SDI set to the renewed strategy, taking into account recent sta- Contextual indicators Background tistical developments.

Description of the reviewed SDI set Current success and key challenges The purpose of the SDI set, as seen in the strategy, is to ensure an adequate assessment of prog- National sets of sustainable development indica- ress with regard to each particular challenge. The tors in EU Member States and the rest of the world reviewed set therefore specifi cally aims at mea- may differ from the EU SDI set, refl ecting different suring progress towards the objectives and tar- policy priorities, and different levels of availability gets of the sustainable development strategy. of statistics. There is however some added value in measuring the same objectives with the same The SDI framework is based on ten themes, re- indicators to allow for meaningful cross-country fl ecting the seven key challenges of the strategy, comparisons. The EU SDI set is already guiding as well as the key objective of economic prosper- this convergence process to a certain extent. ity, and guiding principles related to good governance. The themes follow a general gradient from The Eurostat monitoring report provides a factual the economic, to the social, and then to the envi- analysis of progress focusing on trends and dis- ronmental and institutional dimensions. They are tances to targets (fi gure 2). Evaluation is based further divided into subthemes to organise the on quantitative rules applied consistently across set in a way that refl ects the operational objec- indicators, and visualised through weather sym- tives and actions of the sustainable development bols that illustrate whether changes are favour- strategy (see table 1). able in the context of sustainable development objectives (fi gure 3). The reviewed set of SDIs retains the three-storey pyramid structure of the 2005 set. This distinction The fi rst progress report on the sustainable de- between the three levels of indicators refl ects the velopment strategy has used sustainable devel- structure of the renewed strategy (overall objec- opment indicators extensively, demonstrating the tives, operational objectives, actions) and also re- usefulness of factual and objective assessment sponds to different kinds of user needs, with the as a background for policy analysis. The combi- headline indicators having the highest communi- nation of a policy relevant set of indicators with cation value (see fi gure 1). The three-levels are rigorous analysis based on independent statistics complemented with contextual indicators, which is key in this context. do not monitor directly the strategy’s objectives, but provide valuable background information for the analysis.

262 Beyond GDP: Measuring progress, true wealth, and the well-being of nations EU set of Sustainable Development Indicators

Table 1: Themes, Sub-themes and headline indicators

HEADLINE THEMES SUB-THEMES INDICATORS

Innovation, Socio-economic Economic competitiveness, Growth rate of GDP Employment

development development and eco-efﬁ - per inhabitant indicators Virtual ciency

Sustainable Resource use Consumption Production consumption Resource productivity and waste patterns patterns and production

Monetary po- Indicator Exhibition Virtual Social verty Access to labour At-risk-of-poverty rate Education inclusion and living market after social transfers conditions

Demographic Old-age income Public Finance Employment rate Demography changes adequacy sustainability of older workers

Health and Healthy life years and Determinants of health life expectancy at birth, Public health health inequalities by gender

Greenhouse Climate change Climate gas emissions Energy and energy change Consumption of renewables

Social and Sustainable Transport environmen- Energy consumption Transport prices transport growth tal impacts of by transport transport

Common Bird Index Natural Freshwater Fish catches Biodiversity Marine Land resources resources ecosystems use outside safe biological limits

Financing for Global Global Globalisation Ofﬁ cial Development sustainable resource partnership of trade Assistance development management

Policy cohe- Good Openness and Economic rence and ……. governance participation instruments effectiveness

Figure 2: Example of individual indicator presentation in the 2007 monitoring report

263 19 & 20 November 2007 Virtual Indicator Exhibition

Figure 3: Conclusions table in the 2007 monitoring report Evaluation of changes in the headline indicators (from 2000) SDI theme Headline indicator EU-27 evaluation of change Socioeconomic development GDP per capita Greenhouse gas emissions 1 Climate change and energy Consumption of renewables

Legend: Sustainable transport Energy consumption of transport 1 favourable change/ Sustainable consumption and production Resource productivity on target path Common birds 2 no or insuffi cient change Natural ressources Fish catches 2 unfavourable change/ far from target path Public healthHealthy life years 1 insuffi cient data/ : EU aggregare not available Social inclusion Risk of poverty: 1 Evaluation based on EU-15 Demographic changes years and over Employement rate of older workers Usual EU aggregates 1 2 not applicable Global partnership Offi cial development assistance

Future developments rationale of maintaining stocks of ﬁ nancial, natural, human, and social capital to preserve oppor- The Commission, with the assistance of the work- tunities for the well-being of next generations. ing group on SDIs, is committed to constantly This should yield useful insights for the selection review the situation regarding the development and interpretation of sustainable development in- of new and better indicators. This development dicators. work will contribute substantially to further improve the homogeneity of the set of indicators. In response to current policy needs, Eurostat is also in the process of launching a feasibility study A joint UNECE/OECD/Eurostat working group on on a well-being indicator, by reviewing the mer- statistics for sustainable development is current- its and shortcomings of existing approaches and ly assessing the use of the Capital approach to examining the feasibility of selected indicators at measure sustainable development, based on the EU level.

The Human Development Index (HDI) by Amie Gaye, UNDP Human Development Report Ofﬁ ce

Why an alternative measure to Gross Domestic growth enhances human development depends Product (GDP) on how that growth is generated and used. The economic growth paradigm neglects important Gross Domestic Product (GDP), which is the stan- aspects of development, such as income inequal- dard measure of a nation’s total economic activity ities, unemployment, and disparities in access to has been a dominant measure of a country’s level public goods and services like health and edu- of development for a long time and was assumed cation. For economic growth to enhance human to translate directly into improved human well be- development, it should provide an opportunity ing. However, while growth-oriented policies may to enhance workers’ knowledge and skills along increase a nation’s total wealth, whether or not with opportunities for their efﬁ cient use, provide

264 Beyond GDP: Measuring progress, true wealth, and the well-being of nations The Human Development Index

better job opportunities and support greater The scores for the three HDI components are democracy at all levels of decision-making. then averaged in an overall index. The HDI is Thus, the growth paradigm does not capture currently calculated for 177 countries and ar- adequately the multi-dimensionality of devel- eas for which data are available. opment. While the concept of human development is much broader than this composite measure, What is the Human Development Index the HDI offers a powerful alternative to GDP (HDI)? as a summary measure of human well-being. indicators Virtual It provides a useful entry point into other rich The HDI serves as a frame of reference for information contained in the indicator tables both social and economic development. It is covering a wide range of human development a summary measure for monitoring long-term issues presented each year in the Human De- progress in a country’s average level of human velopment Reports. development in three basic dimensions: a long Indicator Exhibition Virtual and healthy life, access to knowledge and a decent standard of living. It sets a minimum What the HDI reveals and a maximum for each dimension, called goalposts, and shows where each country stands The HDI reveals that some countries do bet- in relation to these goalposts, expressed as a ter on human development with relatively low value between 0 and 1. GDPs per capita. For example, Italy’s GDP per capita is only about two-thirds of that of the The life expectancy component of the HDI United States but the two countries have simi- is calculated using a minimum value for life lar HDI values (see Figure 1). expectancy of 25 years and maximum value of 85 years. This is because even with HIV/AIDS Figure 1: GDP vs. HDI; it is unlikely for life expectancy at birth to fall comparing Italy and USA below 25 years.

The knowledge component of the HDI is measured by adult literacy rates and the combined gross enrolment ratio in primary, secondary and tertiary education, weighted to give adult literacy more importance (two-thirds). While at the national level it is unlikely for any of the knowledge indicators to assume a zero value, at disaggregated levels, it is possible for some population sub-groups to score very low on the indicators. For this reason, the lower end of the goalpost is set at 0 and the upper end at 100 per cent.

For a decent standard of living, which is measured by GDP per capita in purchasing power parity (PPP) US Dollar terms, the goalpost for minimum income is $100 (PPP) and the maximum is $40,000 (PPP). GDP per capita is converted into PPP terms to eliminate differences in Source: HDRO web site http://hdr.undp.org national price levels in order to make standards of living comparable across countries. Disaggregating the HDI by income quintiles for countries for which representative data are In the calculation of the HDI, a logarithm of available is also revealing. For instance, the income is used to reﬂ ect the diminishing impor- gap between the value for the richest 20 per tance of income with increasing GDP. This is cent and the poorest 20 per cent of households premised on the belief that people do not need in the United States is about 17 per cent. This an inﬁ nite amount of money for a decent qual- is similar to the gap between average HDIs ity of life. for the United States and Cuba respectively.

265 19 & 20 November 2007 Virtual Indicator Exhibition

In other words, while the richest 20 per cent in the nature, distribution and quality of economic the United States would be at the top of the HDI growth. It became clear that economic growth league table, the poorest 20 per cent would be alone is not an adequate yardstick for a country’s at the same human development level as people level of development. The need for a conceptual living in Cuba (see Figure 2). shift and alternative policy options that create a balance between economic growth and protection Figure 2: Human development index of the interest of poor and marginalised members by income groups of society became imperative.

The HDI, which was introduced in the ﬁ rst Human Development Re- port published in 1990, was a response to this demand. The idea of a composite index that measures socio-economic progress was conceived by Mahbub ul Haq a re- nowned economist, whose vision was to come up with one measure which is as crude as the GDP, but “not as blind to social aspects of human lives as the GNP is”.

Limitations of the HDI

Like any other composite index, the HDI suffers a limitation of not capturing all the different dimensions of human development. Data availability poses a major challenge to capturing other important dimensions of human development such as po- Source: 2006 Human Development Report litical freedom, environmental sustainability and degree of people’s self respect. The variation in HDI value marked by unequal opportunities and capabilities calls for public poli- Secondly, the HDI is not designed to assess pro- cies aimed at equalizing opportunities and choic- gress in human development over a short-term es. Apart from the moral imperative to overcome period because some of its component indicators extreme inequalities in income, access to edu- are not responsive to short-term policy changes. cation and health, inequalities pose a threat to Thus, the index partially measures past achieve- national and global securities. ments as the components are made up of both stock and ﬂ ow variables.

History of the human development concept Future Possibilities For decades, the economic growth paradigm do- minated the national development discourse. Since its introduction in 1990, the HDI’s analyti- However, in the 1980s unemployment levels es- cal framework, methodology and data have been calated; and access to social services deteriora- subjected to rigorous scrutiny. Some of the mated in many countries including some industria- jor criticisms have led to major reﬁ nements of lised countries while at the same time, economic the methodology and component indicators but production was expanding. In other words, high the index continues to evolve. For example, the rates of economic growth did not automatically HDI by income groups, calculated for 15 coun- translate into improved human well-being. During tries (13 developing and 2 developed) with data the same period, some countries were registering and published in the 2006 HDR, points to a need improvement in human well-being with modest for bringing out inequalities in HDI for evidence- economic growth. These raised questions around based planning. This is one area that the HDRO

266 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Index of Individual Living Conditions

would like to extend to as many countries as There are also discussions around capturing data availability would allow. the environment dimension of human development either as part of the HDI or as a new in- Another future plan is to construct a separate dex. However, these discussions are at a very HDI for women and for men to better present early stage and data availability will inform gender inequalities in human development. any the ﬁ nal decision. But this depends on reliable data on income for women and for men. Virtual indicators Virtual

Index of Individual Living Conditions Indicator Exhibition Virtual by Heinz Herbert Noll, GESIS, Social Indicators Research Centre

The Index of Individual Living Conditions data from the European Community Household Panel Study, which was established in 1995 and The Index of Individual Living Conditions pre- discontinued in 2001. However, the variables used sented as part of the European System of Social to calculate the Individual Living Conditions Index Indicators (EUSI) is a composite index aiming have been selected with a view to be included to give a summary view of the quality of living into the EUSILC – the follow-up database to the conditions in a single measure. The Index allows ECHP – as well. Thus, depending on the avail- to easily and unequivocally assess the living ability and accessibility of the EU-SILC microdata conditions of a population – which are multi- sets, the index will be updated for years beyond dimensional by nature – and to compare them 2001 and will also be calculated for EU member across countries and across time. It measures states not represented in the ECHP. progress in the improvement of living conditions of the European citizens beyond GDP. Since this index, contrary to others, is based on microdata Development of Living Conditions on personal and household level, the Living in EU -Countries Conditions Index can be broken further down and thus allows to compare the situation of The index currently allows to monitor the devel- subgroups (e.g. age groups, men and women, opment of average individual living conditions educational level) within a population. for a number of EU member countries for the period from 1995 to 2001. Chart 1 shows the generally high level of living conditions in Europe Composition of the Index of Individual (with scores between 3.4 in Portugal and 4.1 in Living Conditions Denmark), but also the discrepancy between northern and southern countries of Europe. The The Living Conditions Index is supposed to con- development across time displays a general dense and simplify the complexity of information slight improvement of living conditions, while the provided by the multitude of single indicators distance between the countries has decreased in the European System of Social Indicators only marginally. As soon as the Living Conditions addressing the various dimensions of living con- Index can be calculated on the basis of the ditions comprehensively. In order to present EU-SILC data, the scope can be extended to all a representative measure of individual living 27 EU member countries, which allows to moni- conditions, the index is calculated as the mean tor and assess the whole range of living condi- score of seven subindices, all ranging from 1 tions in Europe, i.e. not only differences between to 5: Income and standard of living, housing, northern and southern, but also between eastern housing area, education, health, social relations and western countries. Also, the change over and work. The Living Conditions Index thus also time, including processes of convergence and varies between 1 (worst) and 5 (best). Up to divergence, and the success of EU cohesion poli- now, the calculation of the index is based on the cies can be further monitored and assessed.

267 19 & 20 November 2007 Virtual Indicator Exhibition

Chart 1: Individual Living Conditions Index 1995-2001

Chart 2 presents the index values for two coun- are pretty similar in both countries: In Denmark tries, Italy and Denmark, in 2001, but broken and in Italy the better educated and higher in- down by a few socio-demographic characteristics. come groups are also enjoying better general The possibility to do this is a major advantage of living conditions than less educated and poorer an index based on individual survey data. The people, the employed are better off than the un- chart shows very clearly that living conditions employed or inactive, the middle aged are better overall turn out to be better in Denmark, but the off than the young and the elderly or the divorced patterns of group differences in living conditions and widowed are worse off than the married or

Chart 2: Index of Individual Living Conditions: Denmark and Italy, 2001

268 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Index of Individual Living Conditions

singles. Overall the ﬁ gures seem to indicate however deﬁ ned by the member states of the that the index brings about plausible and reli- European Union. Depending on data availability able results. Of course one could also do all time series start at best at the beginning of kinds of statistical analyses, e.g. calculations the 1980s. Most of the indicators time-series of correlations or regressions, which is another are broken down by various sociodemographic major advantage of an index based on indi- variables. Also regional disaggregations at the vidual survey data, like the Individual Living NUTS-1 level are being offered whenever pos- Conditions Index. sible and meaningful. At its present stage the European System of Social Indicators offers indicators Virtual time-series data for more than 600 indicators The European System of Social Indicators from 9 out of the projected 13 life-domains. The system will subsequently be completed and The Index of Individual Living Condition is an continuously be updated. integrated part of the European System of Social

Indicators. Within this system it is considered as The European System of Social Indicators Indicator Exhibition Virtual a summary measure of the objective living con- is based on data sources ensuring the best ditions for life as a total. The European System of possible level of comparability across coun- Social Indicators has initially been developed as tries and time. The data sources used include an EU-funded project (EuReporting) within the international aggregate ofﬁ cial data, e.g. from TSER program and was then institutionalised as Eurostat, the OECD or the WHO, as well as part of the German Social Science Infrastructure microdata from crossnational surveys, e.g. Services (GESIS). from the European Community Household Panel (ECHP), the European Social Survey (ESS), the The European System of Social Indicators has Eurobarometer studies or the International Social been developed with a view to be used to continu- Survey Programme (ISSP). To some extent, the ously monitor and analyse quality of life, social indicator system reverts to national data, too. cohesion and sustainability as well as changes in the social structure of European societies The European System of Social Indicators and the European Union. Since it is supposed addresses social scientists, policy makers at the to be a concept driven system, the selection of national and the supranational level, university indicators is based on a conceptual framework and school teachers, students as well as journal- that distinguishes eight principal dimensions of ists. The database is considered to be particu- welfare measurement and general social change larly useful for all kinds of comparative research and covers 13 life domains: on the development of quality of life, social cohesion, sustainability, social structures and • Population, Households and Families value orientations within and across the coun- • Transport tries covered. Moreover, the European System • Leisure, Media and Culture of Social Indicators constitutes an important • Social and Political Participation database for the policy making processes as a and Integration tool to monitor progress in the achievement of • Income, Standard of Living, national and international policy goals. and Consumption Patterns • Education and Vocational Training • Health For more information see: • Housing • Labour Market and Working Conditions www.gesis.org/eusi • Social Security • Public Safety and Crime • Environment • Total Life Situation

The indicators system provides time series data for more than 30 nations: the EU member states, Switzerland, Norway, as well as Japan and the United States as two major reference societies. The primary focus of the indicators system is

269 19 & 20 November 2007 Virtual Indicator Exhibition

Genuine Progress Indicator (GPI) by John Talberth, Redeﬁ ning Progress

Sustainable Development and the Genuine other green GDP accounting systems all involve Progress Indicator three basic steps. Computation usually begins with estimates of personal consumption expenditures, An updated methodology and application which are weighted by an index of inequality in in policy settings (http://www.rprogress.org/ the distribution of income to refl ect the social costs sustainability_indicators/genuine_progress_indicator. of inequality and diminishing returns to income htm) received by the wealthy. Additions are made to account for the non-market benefi ts associated with volunteer time, housework, parenting, and other What is the Genuine Progress Indicator? socially productive time uses as well as services from both household capital and public infrastruc- During World War II gross domestic product (GDP) ture. Deductions are then made to account for accounts were introduced to measure wartime purely defensive expenditures such as pollution production capacity. Since then, GDP has become related costs or the costs of automobile accidents the world’s most ubiquitous indicator of economic as well as costs that refl ect the undesirable side progress. It is widely used by policymakers, econo- effects of economic progress. Deductions for costs mists, international agencies and the media as the associated with degradation and depletion of natu- primary scorecard of a nation’s economic health and ral capital incurred by existing and future genera- wellbeing. Yet, as we know from its creator Simon tions are also made at this stage. Table1 provides a Kuznets the GDP was never intended for this role. line by line summary of these adjustments in 2004 It is merely a gross tally of products and services for the U.S. GPI, the latest year for which data are bought and sold, with no distinctions between available. By making these adjustments, the GPI transactions that enhance well being and those corrects the defi ciencies of GDP by incorporat- that diminish it. Instead of distinguishing costs ing aspects of the non-monetized or non-market from benefi ts, productive activities from destruc- economy, separating welfare enhancing benefi ts tive ones, or sustainable ones from unsustainable from welfare detracting costs, correcting for the ones the GDP simply assumes that every monetary unequal distribution of income, and distinguishing transaction adds to social well-being by defi nition. between sustainable and unsustainable forms of In this way, needless expenditures triggered by consumption. crime, accidents, toxic waste contamination, pre- ventable natural disasters, prisons and corporate fraud count the same as socially productive invest- What Improvements Were Made in 2006? ments in housing, education, healthcare, sanitation, or mass transportation. It is as if a business tried The GPI 2006 Update makes a number of improve- to assess its fi nancial condition by simply adding ments and additions to the basic GPI methodology up all “business activity,” thereby lumping together fi rst developed in the late 1990s. These improve- income and expenses, assets and liabilities. ments can be grouped under two broad headings: new data sources and new calculations. Examples Beginning with the seminal work of Daly and Cobb of new data sources include the Bureau of Labor (1989) there have been several attempts to develop Statistics’ American Time Use Surveys (ATUS) in alternative national income accounting systems 2003 and 2004. The new ATUS data was used to that address these defi ciencies. Collectively, these improve our calculations of the value of house- systems measure what is commonly referred to work, parenting, and volunteering. As another as “green” GDP. Major objectives of these green example, we incorporated new research from the GDP accounting systems are to provide a more U.S. Forest Service on logging related erosion and accurate measure of welfare and to gauge whether deforestation. We also used new data as well as or not an economy is on a sustainable time path. new valuation studies to assign costs to farmland, Two of the most popular green GDP systems are wetland, and forest losses. the Index of Sustainable Economic Welfare (ISEW) and the Genuine Progress Indicator (GPI). While The GPI 2006 update also includes calculations that methodologies differ somewhat, the ISEW, GPI, and did not appear in our previous GPI publications. One

270 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Genuine Progress Indicator

calculation is the non-market benefi ts associated • Globalization has exported America’s vast with higher education – benefi ts that amount to manufacturing infrastructure overseas and $16,000 per year per college educated worker. with it a source of productive investments. We expanded our deforestation estimates to As a result, an increasing share of foreign in- include economic damages associated with loss vestment in the U.S. today is used to fi nance of roadless areas, ancient forests in the Pacifi c consumer debt and government spending for Northwest and Alaska, and loss of loblolly pine tax breaks and the wars in Iraq and Afghani- forests in the Southeast. We also added carbon stan. This puts us in the position of being a emissions damage to refl ect the ever-increasing net borrower. Net borrowing today is a record indicators Virtual costs of global warming. A complete column $254 billion, a cost overlooked by GDP. by column explanation of these improvements appears in the full report. • The GDP counts all $600 billion plus spent on wars each year as a benefi t – despite the fact that over half of all Americans disap-

Key Results from the 2006 Update prove of the war and decry its daily toll on Indicator Exhibition Virtual American families, our long term security, Figure 1 shows GPI account trends for the the environment, Iraqi and Afghanistan so- 1950 – 2004 period. The results are alarming. cieties, and our international reputation. While per capita GDP has risen dramatical- The GPI recognizes that this spending is de- ly – from $11,672 in 1950 to $36,595 today, fensive – at best it helps maintain the status per capita GPI has stagnated in the $14,000- quo, at worst, it is a liability on our future. $15,000 range since the late 1970s. This implies In any case, it should not be counted to- that since the late 1970s, the benefi ts of eco- wards progress. nomic growth have been entirely offset by rising inequality, deteriorating environmental condi- • The increase in the number of college gradu- tions, and a decline in the quality of our lives. ates in the population is increasingly paying Key fi ndings of our 2006 update include: off in the form of many non-market benefi ts such as increases in the stock of knowledge, • Drought, fl oods, sea level rise, and severe worker productivity, civic participation, job storms exacerbated by global warming are market effi ciency, savings, research and de- taking their toll on the U.S. economy. Con- velopment activities, charitable giving, and servatively, we estimate the costs of our car- health. These benefi ts amount to roughly bon emissions on existing and future genera- $828 billion each year. tions to be just over $1 trillion per year. • Volunteerism is on the rise, and represents • Income inequality is at its greatest level some of the most valuable work performed since 1950. The income distribution index in our country. The GPI estimates the val- – which measures income inequality – in- ue of volunteer work in America to be over creased by 20% since 1968, the year the $130 billion. On a per capita basis, the value nation’s income was distributed most equi- of work performed by churches and syna- tably. When growth is concentrated in the gogues, civic associations, neighborhood wealthiest income brackets it counts less groups, and non-profi ts rose from $202 in towards improving overall economic welfare 1950 to $447 today, implying that over the because the social benefi ts of increases in past few decades, Americans have become conspicuous consumption by the wealthy more generous with their time. are less benefi cial than increases in spending by those least well off. So a dollar of economic growth today counts far less than it Towards National Programs on Genuine did when our income distribution was more Progress Accounts equitable. RP is seeking government and NGO partners • Urban sprawl gobbles up prime farmland, to launch national level Programs on Genuine increases commute times, exacerbates ur- Progress Accounts to make GPI a regular com- ban air, water, and noise pollution, and in- ponent of national and sub-national economic creases accident rates. We estimate the performance measurement, program and project costs of urban sprawl to be over $1.1 trillion assessment, higher education curricula, and each year. economic media coverage. National and sub-

271 19 & 20 November 2007 Virtual Indicator Exhibition

national GPI accounts would Figure 1: GPI vs. GDP Time Trends be supported by ongoing non-market valuation studies coordinated at major universities and NGO institutes. While national level leadership is important, as with climate change, it may well be that local government leadership will be the key driver of change. Thus, we seek partners who can help develop GPI adapta- tions at the local level and demonstrate GPI’s relevance in multiple policy settings such as debates over land use, taxes, living wages, and localization.

Table 1: U.S. GPI Contributions and Deductions (2004)

Contributions Amount (Billions) Personal consumption expenditures $ 7,588.60 Weighted personal consumption expenditures (adjusted for inequality) +6,318.41 Value of housework and parenting + 2,542.16 Value of higher education + 827.98 Value of volunteer work+131.30 Services of consumer durables +743.72 Services of streets and highways + 111.55 Net capital investment (positive in 2004, so included in contributions) + 388.80 Total positive contributions to the GPI: $ 11,063.92

Deductions Amount (Billions) Cost of crime - $ 34.22 Loss of leisure time -401.92 Costs of unemployment and underemployment - 176.96 Cost of consumer durable purchases - 1,089.91 Cost of commuting - 522.61 Cost of household pollution abatement - 21.26 Cost of auto accidents - 175.18 Cost of water pollution - 119.72 Cost of air pollution -40.05 Cost of noise pollution - 18.21 Loss of wetlands -53.26 Loss of farmland -263.86 Loss of primary forest cover - 50.64 Depletion of non-renewable resources - 1,761.27 Carbon emissions damage - 1,182.82 Cost of ozone depletion - 478.92 Net foreign borrowing (positive in 2004, so included in deductions) - 254.02 Total negative deductions to the GPI: $ 6,644.83

Genuine Progress Indicator 2004 $ 4,419.09 Gross Domestic Product 2004 $ 10,760.00

272 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Happy Life Years

Happy Life Years (HLY) by Ruut Veenhoven, Erasmus University Rotterdam, The Netherlands

Need for a measure of quality of life Measure of Happy Life Years in nations indicators Virtual How can we assess how long and happy peo- How to assess how well a nation is doing? One ple live in a country? This can be done com- way is to look at the quality-of-life of the peo- bining data on average happiness assessed in ple who live there. This view is gaining promi- surveys of the general population with data on nence, both among policy makers and the longevity taken from civil registration. general public. This begs the question what Indicator Exhibition Virtual quality-of-life is precisely and how that can be Happiness measured comprehensively. Happiness is how much one likes the life one lives. Since this is something people have in mind, it can be measured using single direct Assumed quality-of-life questions. An example of a survey question on happiness is: Quality-of-life in nations is commonly mea- Taking all together, how satisfi ed or dissatisfi ed sured by taking stock of conditions that are are you currently with your life as a whole? believed to make for a better life, such as eco- 1 2 3 4 5 6 7 8 9 10 nomic affl uence, full employment and educa- Dissatisfi ed Satisfi ed tion. Measures of such conditions are added in an index, like the Human Development Index Longevity (HDI) or the Index of Social Progress (ISP). How long people will live in a country can be estimated on the basis of longevity of people Items in such indexes are typically things that are who have passed away. Statisticians call this on the political agenda and as such these indexes life expectancy. inform about progress on the way chosen. Yet these indexes do not tell us whether we are on the Happy Life Years = Life expectancy at birth x right track, that is, whether these policy achieve- 0-1 happiness ments really improved the lives of citizens. Still Suppose that life expectancy in a country is 60 another problem is that such measures typically years. If everybody were perfectly happy in assume that more is better and do not inform us that country (average score 10), people would about an optimum, e.g. how many years of edu- live 60 Happy Life Years in that country. If the cation is optimal for a good life. average score is 5 the number of Happy Life Years is obviously lower, in this case 60 x 0,5 = 30. If life expectancy is also 60 years but Apparent quality of life average happiness 8, the number of happy life years is 48 (60 x 0,8). Another approach is to assess how well people thrive in a society. The focus is then on the outcomes of life, rather than on the preconditions. Large differences in Happy Life Years How well an organism thrives is typically re- across nations fl ected in its lifetime. In higher animals, thriving refl ects also in affective experience and hu- Theoretically, this indicator has a broad varia- mans are moreover able to estimate how well tion; HLY is zero if nobody can live in the coun- they have felt over longer periods of time. try, and will be endless if society is ideal and its inhabitants immortal. The practical range is These estimates of how we feel most of the about 50 years, the highest number of Happy time are at the basis of the appraisal of how Life Years is observed in Switzerland (63.9) happy we are. Hence in the case of humans, and the lowest in Zimbabwe (11.5). thriving refl ects both in how long and how happy they live.

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Gains in Happy Life Years over time in EU8, This illustrates the above difference between as- Japan and the USA sumed quality of life and apparent quality of life.

Happiness has risen in slightly in most developed nations since the second half of the 20th century Societal Qualities and Happy-Life-Years and life-expectancy has grown substantially. As a in 67 nations in the 1990s result, the number of Happy Life Years has grown remarkably. Correlation with HLY Condition in nation Wealth Zero Con- N order trolled Wealth • Purchasing power +.73 - 67 per head Freedom • Economic +.71 +.38 64 • Political +.53 +.13 63 • Personal +.61 +.31 45 Equality • Inequality -.10 +.37 62 in incomes • Discrimination -.46 -.12 51 of women Trend lines for 16 nation available at: • Inequality in -.64 -.37 54 http://worlddatabaseofhappiness.eur.nl/hap_ happiness (SD) nat/ﬁ ndingreports/TrendReport2007-2.pdf Brotherhood • Tolerance +.72 +.43 55 • Trust in compatriots +.20 +.20 37 Happy Life Years sensitive for things that policy makers can improve • Voluntary work +.40 +.31 53 • Social security +.34 -.27 34 There is a system in the differences in Happy Justice Life Years across nations. About two-third of the • Rule of law +.65 +.20 64 large differences in HLY across nations can be ex- • Respect of plained by societal variation in economic afﬂ u- +.60 +.20 60 ence, freedom, equality, brotherhood and justice. civil rights The table below presents correlations with indica- • Corruption -.73 -.32 40 tors of these matters. Explained variance 66% 60

All variables in the table are things over which Source: Veenhoven, R. (2005) policy makers have some control. So the data Apparent quality of life: How long and happy people live leave no doubt that policy matters for ﬁ nal quality of life and also indicate what matters most. Economic afﬂ uence still stands out as a mayor factor, but ‘tolerance’ and ‘rule of law’ appear to be quite important as well.

Yet not everything deemed desirable appears to go with more happy life years. For instance, incomeinequality rather appears to be positively related to HLY and social security spending negatively.

274 Beyond GDP: Measuring progress, true wealth, and the well-being of nations The Happy Planet Index

Happy Life Years in nations in the early 2000s

Top Middle range Bottom > 60 years ± 40 years <25 years Switzerland 63,9 Philippines 44,1 Moldova 23,7 Denmark 62,7 South Korea 43,8 Uganda 23,3 Virtual indicators Virtual Iceland 62,2 Iran 41,4 Angola 17,6 Austria 61,0 Hungary 40,0 Tanzania 15,2 Australia 60,7 Morocco 37,9 Zimbabwe 11,5

Full list of 95 nations available at:

http://worlddatabaseofhappiness.eur.nl/hap_nat/ﬁ ndingreports/RankReport2006-2b.htm Indicator Exhibition Virtual

Literature

• Veenhoven, R. (1996) Available at: http://www2.eur.nl/fsw/ Happy life-expectancy: A comprehensive research/veenhoven/Pub2000s/2005j-full.pdf measure of quality-of-life in nations. Available at: http://www2.eur.nl/fsw/ • Social Indicators Research, vol. 71, pp. 61-86 research/veenhoven/Pub1990s/96b-full.pdf World Database of happiness, continuous register of scientiﬁ c research on subjective • Social Indicators Research, enjoyment of life Erasmus University Vol. 39, 1 – 58, Veenhoven, R. (2005d) Rotterdam, The Netherlands. Apparent quality of life: How long and Available at: http://worlddatabaseofhappi- happy people live. ness.eur.nl

The Happy Planet Index prepared by Sam Thompson, Nic Marks, Saamah Abdallah, nef (the new economics foundation); Ed Matthews, Friends of the Earth UK nef (the new economics foundation) a Lon- Background don-based think-tank, introduced the Happy Planet Index (HPI) in July 2006 as a means Although GDP is routinely used as a proxy for of comparing the progress of nations toward standard of living, it was never intended to the goal delivering high levels of experienced function as one and its founders explicitly cau- well-being within the constraints of equitable tioned against this interpretation. Two familiar and responsible resource consumption. Inde- critiques relate to: 1) insensitivity to income pendently, at around the same time, the IUCN distribution, and thus potentially to extreme (The World Conservation Union) called for a inequality, within a country; and 2) failure to metric capable of measuring “the production distinguish expenditure that is incurred in cor- of human well-being (not necessarily material recting or compensating for undesirable events goods) per unit of extraction from or imposi- – both collective (e.g. natural disasters, wars) tion upon nature” – the HPI does just that. The and personal (e.g. acute health problems, ﬁ rst HPI report, published by nef, with the sup- family breakdown). port of friends of the earth UK in 2006 covered 178 countries across the globe. A second, in- However, a further two – equally important – depth report focusing exclusively on Europe, limitations of using GDP as a measure of hu- was released in 2007. man progress need to be highlighted. Firstly,

275 19 & 20 November 2007 Virtual Indicator Exhibition

such an interpretation implies that GDP should correlate with experienced well-being at the national level, such that – all else being equal – aggregate experienced well-being will increase as the economy grows. As ﬁ rst shown by Easterlin (1974) and repeatedly since, this is not generally true in practice. GDP thus seems to be ﬂ awed as a proxy for experienced welfare.

Secondly, GDP doesn’t account for the natural environment; there are no internalised costs of environmental damage and pollution and it treats depletion of stocks of natural capital as income. previous GDP alternatives in that it makes no use To quote the economist Herman Daly, “it treats of income or income-adjusted measures. Rather, the earth as if it were a business in liquidation”. it treats the economy as just one amongst several In short, GDP is a very poor indicator of sustain- mediating processes within a larger system. able welfare. HPI takes the stock of the planetary resources Most attempts to refi ne GDP to take better ac- that sustains life and supports all human activities count of both lived experience and sustainability as the fundamental input. The ultimate output is have taken one of two approaches: adjusting and the goal of all human endeavours – experienced supplementing. In the former, GDP has been ad- well-being. To the extent that wealth, material justed to take account of costs attributable to in- possession, technology and so on are important, equality, environmental damage and expenditure it is because they contribute to this ultimate goal. due to negative events, as well as the “hidden” Conceptually, the HPI is a measure of input-out- value of unpaid and voluntary work. Probably the put effi ciency – it indicates well-being produced best-known example is the Index of Sustainable per unit of resource consumption. Economic Welfare (ISEW). The second approach has been to use GDP data “as is”, but to combine Experienced Well-being it with explicit welfare measures such as health HPI= Resource Consumption and education; the most widely-known example is the UN’s Human Development Index (HDI). How the HPI is calculated Both approaches improve on GDP, but neither fully meet the challenge of refl ecting both lived The HPI uses Dutch sociologist Ruut Veenhoven’s experience and environmental sustainability. concept of Happy Life Expectancy (HLE) – a com- And, it is increasingly clear that we are run- bination of subjective life satisfaction and objec- ning up against very real environmental limits. tive life expectancy (Veenhoven 1996) – for its Unless we are able to move towards a position measure of experienced well-being. To calculate where we begin to live within the environmen- a nation’s mean HLE, ratings of subjective life tal budget that the planet has to offer we face satisfaction (on a scale of 0-10) are multiplied ecological bankruptcy in the form of crises like by mean life expectancy at birth and divided catastrophic climate change, and the loss of by 10. The resulting scores represent, in effect, conditions on Earth that are convivial to human happiness-weighted life expectancy. Veenhoven life. To avoid this we need a new compass to describes this as an “ultimate output measure”, help navigate the extreme challenges of sharing because it incorporates both “apparent” and “as- a volatile world. sumed” quality of life.

The bottom half of the equation, resource con- Introducing the Happy Planet Index (HPI) sumption, uses Carbon Footprint per capita. This is expressed in terms of the land area required to The HPI is multi-dimensional and composed of dis- support the plant life needed to absorb and se-

tinct variables that each reﬂ ect a different aspect quester CO2 emissions from fossil fuels used by a of the human condition. However, it differs from country, given its levels of consumption. The mea-

276 Beyond GDP: Measuring progress, true wealth, and the well-being of nations The Happy Planet Index

sure takes account of “embodied” carbon associated with the production of goods including imports.

Calculating the HPI requires three discrete steps. Firstly, the data is normalised so that the variances in the top and bottom halves of the equation are made equal. Then, indicators Virtual experienced well-being is divided by resource consumption. Thirdly, to make interpretation easier, the resulting scores are transformed onto a 100 point scale, using a theoretical maximum score de- Indicator Exhibition Virtual termined on the basis of plausible “ideal” performance on the three component variables. good well-being outcomes but only at extremely high environmental costs.

What the HPI shows As planetary resources have become increasingly constrained over the years, it might be To the right is a scatterplot of Happy Life Years hoped that this would have been accompanied against Carbon Footprint for countries of Eu- by an upwards trend in HPI, reﬂ ecting increas- rope. The top-left corner of the graph is where ing efﬁ ciency. In fact, as the graph on the countries should aspire to be – maximising left shows, this has not been the case in the well-being and minimising footprint. countries of Europe for which reliable longitu- dinal data exists. Rather than increasing, the HPI scores of the nine oldest EU members are around 10 per cent lower now than in 1961 (the earliest point where adequate data is available).

Value of the HPI

As a metric of sustainable welfare, the HPI provides a radical alternative to existing GDP- based indicators. The ﬁ rst HPI report (nef, 2006) showed that some countries around the world achieve similar lev- AT: Austria - BE: Belgium - BG: Bulgaria - CH: Swizerland - CY: Cyprus - CZ: Czech Republic - DE: Germany els of experienced well-being DK: Denmark - EE: Estonia - ES: Spain - FI: Finland - FR: France - GR: Greece - HU: Hungary - IE: Ireland IS: Iceland - IT: Italy - LT: Lithuania - LU: Luxembourg - LV: Latvia - MT: Malta - NL: Netherlands whilst exerting much less en- NO: Norway - PL: Poland - PT: Portugal - RO: Romania - SE: Sweden - SK: Slovakia – SL: Slovenia UK: United Kingdom vironmental pressure. For instance, Costa Rica’s per capita Strikingly, it is the Scandinavian nations who carbon footprint is less than a quarter that of are closest to achieving this goal and hence the average European nation, and yet levels of score highest on the HPI. These nations have subjective well-being and life expectancy are wellbeing outcomes that are amongst the both higher. highest in Europe, yet relatively low per capita Footprints. By contrast, many countries in Results of the European analysis – reviewed Eastern Europe fail to provide good levels of brieﬂ y above – demonstrate clearly that in a well-being, whilst others in the West achieve world of real environmental limits and climate

277 19 & 20 November 2007 Virtual Indicator Exhibition

change, much of Europe is squandering the Future plans world’s resources on drastically diminishing returns. Moreover, the trends over time are in the In addition to updating and reﬁ ning the Global wrong direction. HPI, we are currently exploring opportunities for estimating the HPI at a state-by-state level in the Unlike a focus on ever increasing GDP growth, US and at a regional level in China. HPI provides a clear road-map to a sustainable and equitable future. More information

Impact www.happyplanetindex.org www.neweconomics.org The fi rst HPI report has been downloaded from www.foe.co.uk www.happyplanetindex.org around a million times. It received extensive print and broadcast media coverage across the world, in countries References: as far afi eld as Japan, Denmark and Colombia. The European HPI report, released a year later, • Abdallah S, Thompson S and Marks N (in was widely covered in the European press. The press) ‘Estimating worldwide life satisfaction’ HPI has been presented at a number of academic Ecological Economics. conferences and a paper based on elements of • nef (2006) The (un)Happy Planet Index: the HPI methodology will shortly be published in An index of human well-being and environ- Ecological Economics (Abdallah et al, in press). mental impact (London: nef). • nef (2007) The European (un)Happy Planet Index: An index of well-being and carbon The HPI has also attracted considerable political effi ciency in the EU (London: nef). interest. Earlier in 2007, the UK’s Conservative • Veenhoven R (1996) ‘Happy life expectancy: party referred to the HPI in their Quality of Life a comprehensive measure of quality-of-life in report and came close to recommending it as a nations’ Social Indicators Research 39, headline indicator for the UK government. Mean- pp. 1–58. while, several Local Government Authorities in the • The global HPI (nef, 2006) used the full UK and other regional/local agencies in Europe Ecological Footprint for its calculations. have expressed interest in calculating city-and region-level HPIs.

JFS Sustainability Vision and Indicators by Kazu Kobayashi, Japan for Sustainability

Why we need JFS Sustainability Vision and To what degree do individual initiatives and Indicators achievements by each ministry, corporation, mu- nicipality, NGO and citizen contribute to a collec- In Japan, a number of environmental-related ef- tive advancement towards an environmental sus- forts and initiatives are underway by a Variety of tainable society? players. Some say, as a whole, the level of activities in this ﬁ eld could be among the most ad- As a result of these efforts, is Japan closer to vanced in the world. Yet regrettably, these posi- sustainability, compared to the year before? Have tive endeavors are not strong enough to reverse we moved forward and closer even by an inch? the trends of global warming, environmental de- Or somehow have we moving backwards, farther struction and pollution, which steadily continue from sustainability? with no apparent end in sight.

278 Beyond GDP: Measuring progress, true wealth, and the well-being of nations JFS Sustainability Vision and Indicators

In order to make answers to these questions ranging discussion on how to build a sustain- visible, we at JFS envision deﬁ ning indicators able society in Japan, and speciﬁ cally, promote and work little by little to draw a big picture the adoption of a comprehensive national sus- of a “Vision of a Sustainable Japan” or “The tainability strategy. shape of a sustainable country.” • Nature: 16.4 (1990) up to 24.0 (2005) Greater People do something only after they realize those awareness still needs to be acted on. problems. We aim at raising the people’s aware- • Economy: 37.6 (1990) down to 18.2 (2005) ness by visualizing and quantifying the “Vision Worst decline; massive debt threatens future indicators Virtual of a Sustainable Japan.” We hope the indicators generations will give an opportunity for many people to look • Society: 43.4 (1990) down to 35.4 (2005) at the “Overall Picture of Sustainable Japan”. SRI, women’s participation up, traditional industry down. • Well-being: 67.6 (1990) down to 56.4 (2005)

Description Overall high ﬁ gures tainted by high suicide Indicator Exhibition Virtual rate. We have chosen 20 headline indicators for sustainability based on an analysis of over 200 data sets in several sustainability-related categories. This is the ﬁ rst ever numerical evaluation / trial calculation of national sustainability for Japan. Results show a score of 33.5 points for 2005 in relation to a hypothetical perfect score of 100 projected for 2050. Japan’s score for 1990 was 41.3 points, meaning sustainability in Japan has declined about 19% since 1990.

Though these are still trial calculations, they delineate the gap between the ideal and the reality of sustainability in Japan. JFS’s aims are to point out the problem, evoke a wide-

Figure 1: Overview of the Project

Sustainability

Five value compositions of Sustainability

Fairness across Time Capacity and Resource

Diversity

Fairness across Space Human will and Networking

+ Consideration of Japan's speciﬁc circumstances

Vision for sustainable Japan (four areas of sustainability)

Overall Framework (relationship between the ﬁve value compositions and four areas)

Measuring Sustainability of Japan by 20 indicators (4 areas X 5 headline indicators)

Selection of indicators / Screening

Nature Economy Society Well-being

Classiﬁed into 4 Areas About 200 Sustainability data constellation

http://www.japanfs.org/en/view/index.html

279 19 & 20 November 2007 Virtual Indicator Exhibition

MDG Dashboard of Sustainability by Jochen Jesinghaus, European Commission

Why we need the Dashboard What exactly is the Dashboard of Sustainability? The complexity of societies in the 21st century requires an adequate information system. As Europeans, Over ten years ago, in 1996, IISD convened the we are proud of our democratic system. However, a Consultative Group on Sustainable Development functioning democracy needs citizens who under- Indices (CGSDI1) with the “overarching goal .. to stand what their governments are doing. help arrive at an internationally accepted Sus- tainable Development Index (SDI)”. After four Currently, public debates on government perfor- years of intensive debate, the dashboard meta- mance are driven by two overwhelmingly domi- phor was adopted: Steering a society into the 21st nant indicators: The GDP growth and the unem- century needs a dashboard, i.e. a panel of instru- ployment rates. Strangely enough, GDP growth ments that allows the “pilots” to monitor all essen- is not even used in its original sense “we got tial trends. It took some more years to translate 2% richer, hooray!” – in fact, practically all in- the idea into an operational instrument; the ﬁ rst terpretations of GDP growth in the media relate prototype Dashboard was presented at the 2002 to labour market prospects, i.e. economists and Johannesburg World Summit on Sustainable De- journalists interpret a high GDP growth rate as a velopment (WSSD). Since then, many new fea- chance to get lower unemployment in the next tures have been added, and many indicator sets two or three years. have been translated into the Dashboard format.

This media focus on GDP growth and unemployment At present (November 2007), a Google phrase is unhealthy for democracy. With the Dashboard search for “Dashboard of Sustainability” (DoS) yields software, we have developed a tool that makes a about 1,000 page hits, and about one-hundred for wealth of new indicators accessible. Today, some “MDG Dashboard”. Most pages refer implicitly to the 250 “key indicators” can be downloaded from DoS as some kind of “Global Sustainability Index”. Eurostat’s Sustainable Development and Structural Actually, the story is a little bit more complex: The indicators website. However, journalists and ordi- DoS is both a software tool for displaying complex nary citizens will ﬁ nd it virtually impossible to get indicator sets, and the application of this tool to one simple answers to their questions from the 250+ particularly important indicator set, i.e. the United data tables found there. Nations Commission on Sustainable Devel- opment indicators. Below is a colour-coded map The Dashboard puts such “indicator batteries” into (green is good, red is bad) showing what happens a meaningful tree structure, aggregates their scores when we aggregate the 60 UN CSD indicators to a in a simple, transparent way, and displays them “Global Sustainability Index”. in a user-friendly “street light colours” format; in addition, it gives the user at all times the option to “drill down” to the deepest level of detail. Here are the elements of the “Dashboard language” for presenting complex indicator sets:

1. the size of a segment reﬂ ects the relative importance of the issue described by the indicator; 2. a colour code signals performance relative to other countries: green means “good”, red means “bad”; 3. the central circle (PPI, Policy Performance Index) sum- marizes the information of the component indicators.

This “language” may seem a straight-jacket for many indicators; however, it is the only way to present very heterogenous indicators in a common format. The three SD pillars shown here are illustrative: the software is ﬂ exible and can accommodate other structures, e.g. the eight Millennium Development Goals.

280 Beyond GDP: Measuring progress, true wealth, and the well-being of nations MDG Dashboard of Sustainability

Very good good fair average bad very bad serious Virtual indicators Virtual Virtual Indicator Exhibition Virtual

The colours shown on the map are obtained mental, institutional), the sum of the scores is as follows: We calculate for each of the 60 in- divided by the number of indicators. The overall dicators a score from 0-1000 points, using the score is the sum of the “pillar scores” divided formula Score=1000*(x-worst)/(best-worst). by four. Example “Life expectancy in the U.S.”: best=80.7 (Japan), worst=38.1 (Sierra Leone); for a val- The example of the UN CSD set demonstrates ue of 76.8 years, the U.S. receive 907 points: the difﬁ culties that indicator experts encoun- P=1000*(76.8-38.1)/(80.7-38.1). For each of ter when trying to measure “Sustainable De- the four SD pillars (economic, social, environ- velopment”: Would you agree with the overall

Sustainable Development Index for United States 2000

Social Environment Economic Institutional

Other Pesti- Phos- Faecal Energy Nuclear SD Poverty Child Child Crowding GDFI Internet mortality immuni- GHG cides phorus coliform use waste indicator zation coverage

Life Forest Coastal Key Renewable Equity Contra- Crime CFCs CAB Recycling Telephones expectancy ception area population eco-systems energy

Unemploy- Sani- Primary Population Urban Wood Aqua- Protected Ext Energy Car use R&D expenditure ment tation schools growth air harvesting culture area Debt efficiency

F/M Safe Secondary Deserts & Water Mammals Municipal Disasters, Urbanization Cropland ODA SD strategy wages water schools arid land use & birds waste human cost

Child Health Hazardous SD Disasters, Literacy CO Fertilizer Squatters BOD GNP Materials weight care 2 waste membership economic damage

Since the overall results shown on the map above may or may not meet the intuitive expectations of the audience, we show to the left the breakdown for the United States (with CO2 and energy use as particularly weak issues).

1 Alan AtKisson (Redeﬁ ning Progress), David Berry (Director of the Interagency Working Group on Sustainable Development Indica- tors, U.S. Government), Arthur L. Dahl (Coordinator, UN System-wide Earthwatch, UNEP), Edgar E. Gutierrez-Espeleta (Director of the Development Observatory at the University of Costa Rica), Allen Hammond (Director of the Indicator Program at the World Resources Institute, WRI), Peter Hardi (Director of IISD Indicators Program, CGSDI co-ordinator), Jochen Jesinghaus (European Commission, Eurostat & JRC), the late Donella H. Meadows (lead author of “Limits to Growth”, the 1972 report to the Club of Rome), Bedrich Moldan (Chairman UN CSD-9 and former Czech Republic Environment Minister), Yuichi Moriguchi (Head, Resources Manage- ment Section, Social and Environmental Systems Division, National Institute for Environmental Studies, Japan), Adil Najam (Boston University, Associate Director of the MIT-Harvard Program on Public Disputes at the Program on Negotiation, Pakistan/USA), and John O'Connor (former Head of the World Bank’s indicator team).

281 19 & 20 November 2007 Virtual Indicator Exhibition

One key feature of the Dashboard is the analysis of linkages between indicators – for example

between income and CO2 emissions. Sweden scores “good” for “Income per capita” (Y axis, 761 points for 26400 Atlas method GNP (US$ of 2000)) and

“good” for CO2 (X axis, 766 points). In contrast, Czech Republic gets a “critical” for “Income per capita” (Y=110 points for 5140 Atlas method GNP (US$ of 2000)) and

“average” for CO2 (X=766 points). Note that Sweden, a country with pretty cold climate, manages to combine high wealth with low

CO2 emissions.

structure, i.e. the four pillars of SD? Would you based on the new CSD set; therefore, for didactic agree with the indicator set (e.g. nuclear waste, purposes we still keep the old CSD set online. recycling, energy use as “economic” indicators)? After the 2000 Millennium Summit, a new set Do you trust the data – for example, would you of indicators emerged as a global standard: The have expected the U.S. in the green zone for “car Millennium Development Goals indicators. use”? The Dashboard is a powerful tool, but it re- Nowadays, the downloadable Dashboard package veals merciless the weak points of indicator sets, contains this new set of approx. 60 indicators for simply by displaying them in a format that users over 200 countries and 15 years. The data come can understand. directly from the MDG site of the United Nations Statistics Division, and we update them every The graphs above have been created “on the ﬂ y” one or two months. Apparently, the MDG Dash- based on 2000 data compiled by John O’Connor, board is a popular alternative to downloading former Head of the World Bank’s environmental an 8 MB Excel spreadsheet: a Google search for indicators division. In the meantime, the data Millennium Development Goals Indicators puts have become pretty stale, and UN CSD has ad- the MDG Dashboard on rank 2, directly behind opted a new set of 50 “core” indicators struc- the ofﬁ cial UN MDG site but before UNDP, OECD, tured by 14 themes: 1. Poverty, 2. Natural haz- WHO, World Bank and a number of other promi- ards, 3. Economic development, 4. Governance, nent institutions. On the next page an example 5. Atmosphere, 6. Global economic partnership, from the MDG Dashboard: 7. Health, 8. Land, 9. Consumption and production patterns, 10. Education, 11. Oceans, seas and coasts, 12. Demographics, 13. Freshwater, State of play & next steps 14. Biodiversity. The Dashboard’s Wikipedia page lists over 20 There is little hope, though, that anybody will translated indicator sets. New features are still perform in the near future a data compilation being added to the software, e.g. an interactive

282 Beyond GDP: Measuring progress, true wealth, and the well-being of nations MDG Dashboard of Sustainability

Millennium Development Goals Index for India most recent year

Eradicate Gender equality Combat HIV- Ensure Universal Child Improve maternal extreme poverty and empowerment AIDS, malaria & environmental primary education mortality health and hunger of women other diseases sustainability

Income Primary Girls Maternal HIV/ SD Decent Youth Women Women CMR Immunisation poverty education literacy in secondary employment mortality AIDS policies housing and natural

parliament indicators Virtual resources

Grade Girls Girls Malaria Nutrition IMR Reproductive Biodiversity 5 primary tertiary and health Tuberculosis

Child Maternal Contra- HIV Protected Improved Secure Pop Poorest AIDS Tuberculosis Malaria Tuberculosis Forest CO2 mal- mortality ceptives Condoms know- area UNFCCC Area drinking tenure below 1$ 20% nutrition orphans prevalence bednets deaths married at school hrs men ledge water women men sources Indicator Exhibition Virtual

Adult Births Persons HIV DOTS Malaria DOTS CO Ozone Improved Poverty Condoms detection 2 gap malnutrition attended living with knowledge treatement treatment CDIAC depletion sanitation HIV/AIDS hrs women facilities women

Not surprisingly, the MDG set differs a lot from the CSD set, with less focus on environmental and more focus on social and economic issues. The Dashboard displays detailed info for each indicator when hovering over the respective label. Example: Births attended by skilled health personnel: 42.5 %; Source: UNICEF estimates; 390 points for India 2000; Valuation: "bad", Rank 94 of 119; best South Korea, worst Ethiopia; Estimated. The last word, “Estimated”, is one of over 20,000 footnotes included in the MDG Dashboard.

browser interface for the MDG set. Currently, Contact: the team at JRC tries to translate most of Eu- rostat’s 250+ Sustainable Development and Jochen Jesinghaus, Structural indicators into the Dashboard for- European Commission, mat, using a tree with four Agenda 21 style DG JRC G-9 TP 36/170, main pillars, each containing seven sub-indi- Via Enrico Fermi 1, I-21020 Ispra (VA); ces, each hosting on average seven indicators. email: [email protected] This structure will accommodate 4*7*7=196 indicators, and serve as a “Virtual Labora- tory” for studying possible options for going “Beyond GDP”, i.e. for challenging GDP growth with an adequately detailed “Societal Progress Indicator”.

283 19 & 20 November 2007 Virtual Indicator Exhibition

The Natural Capital Index framework (NCI) by Ben ten Brink, Netherlands Environmental Assessment Agency (PBL)

As any successful business that keeps track of ‘Species abundance ‘ (number of individuals of a revenues and expenditures, society needs robust species) has turned out to be a far more sensiti- accounts of its ecological assets. That is what the ve, more measurable and a more accurate indica- Natural Capital Index framework accounts for tor of biodiversity loss than the more traditional next to complementary indicators such as change species-richness indicator. The CBD has selected in the extent of ecosystems, the Red list and the ‘species abundance’ as a key indicator to evalua- ecological footprint. te the progress towards the 2010-target.

The Natural Capital Index framework (NCI), developed as a contribution to the implementation of the Convention on Biological Diversity (CBD), was designed to answer the questions “How much biodiversity remains?”, “What are the causes of loss?” and “What can we do about it?” for policy-makers and public. NCI measures human impact on biodiversity and has been implemented in national, regional and global assessments. It is not so much The Natural Capital Index framework (NCI) one single –fi xed-indicator but merely a fl exible indicator framework which can be tailored to the The challenge is to create a tangible, powerful specifi c scale, available data, and demand. composite indicator that accurately describes the above process for meeting policy requirements. Furthermore, this indicator must be relevant and Which process to indicate? appealing for policy development, quantitative, sensitive, affordable, measurable and universally The rate of biodiversity loss has been accelera- applicable. Finally, it should represent the entire ting rapidly throughout the industrial era. Accor- ecosystem and must be linkable with socio-eco- ding to the Global Biodiversity Assessment, spe- nomic scenarios to make projections. For these cies are now becoming extinct at 1,000-10,000 reasons NCI considers biodiversity as “natural times the natural rate. However, extinction is just capital”, containing all original species with their the fi nal step in a long process of ecosystem de- corresponding abundance. gradation, in which a decline in the abundance of many original species is accompanied by the Given its two main components, as mentioned abo- increase in the abundance of a few other, often ve, NCI is defi ned as the product of the size of the human-favoured, species. This we call the homo- remaining ecosystem (quantity) and its quality. genisation process. NCI = ecosystem quantity (%) x ecosystem quality (%) This trend has two main components: i) loss of habitats, or “ecosystem quantity”, resulting from the The NCI can be established for natural areas such conversion of natural areas into agriculture and as forests, inland waters and grasslands, as well built up land and ii) loss of ecosystem quality due as for man-made areas such as agricultural land to factors such as climate change, pollution, ha- and urban areas. Ecosystem quantity is calcula- bitat fragmentation and over-exploitation. In the ted as a percentage of the total area (% area fi gure below, the grey cutouts illustrates the ha- of the country or region). Ecosystem quality is bitat loss, while, in the remaining natural areas, calculated by counting the average abundance of the decline in ecosystem quality is shown by the a core set of characteristic animal and plant spe- decreasing abundance of many original species. cies. Quality is defi ned as the ratio between the Notice the initial increase in the species richness. current situation and baseline state (percentage

284 Beyond GDP: Measuring progress, true wealth, and the well-being of nations The Natural Capital Index framework

100% 100% 100% 100% Ecosystem Quality Quality 70% quality 25%

0%100% 0%100% 0% 100% Ecosystem QuantityQuantity

quantity indicators Virtual of the baseline). The three diagrams “ecosys- lated baseline, set in pre-industrial times” or a tem quantity and ecosystem quality” above “low-impact baseline” as being the most ap- show how the process of ecosystem degrada- propriate. The baseline i) allows aggregation tion can be visualised using the Natural Capital to a high level, ii) makes ﬁ gures within and

Index. If for example 50% of the natural area between countries comparable, iii) is a fair and Indicator Exhibition Virtual remains, with a quality of 50%, than the NCI is common denominator for all countries, being 25%. This means that the average abundance in different stages of economic development, of the original species is 50% of the natural or and iv) is relevant for all habitat types. Simi- low-impacted state, and so on. To avoid mas- larly, agricultural ecosystems are compared king, signiﬁ cant increased populations of ori- with the traditional agricultural state as the ginal species are truncated at 100%, although baseline, actually before industrialisation of they should actually have a negative score. agricultural practices started. Exotic or invasive species are not part of the indicator, but their impact is represented by It has to be stressed that the baseline is not the decrease in the abundance of the original the targeted state. Policy-makers choose their species they replace. The NCI ranges from 0 to ecological targets somewhere on the axis 100% representing an entire deteriorated and between 0 and 100%, depending on the po- intact ecosystem, respectively. The dimension litical balance between social, economic and is ‘mean species abundance of the original spe- ecological interests. cies’ or brieﬂ y an species abundance’ (MSA).

Smart sampling Baselines needed

Ecosystem quality cannot be determined without defi ning a baseline. Baselines are starting points for measuring change from a certain state or date. They are common practice for such items as medical care, economic development and climate change. Since there is no unambiguous natural baseline point in history, and all ecosystems are also transitory by nature, a baseline must be established at an arbitrary but practical point in time. Because it makes the most sense to show the biodiversity change when human infl uence was accelerating rapidly, the fi rst CBD Liaison Group on How can ecosystem quality be determined in a Biodiversity Indicators recommends “a postu- practical and affordable way? It is neither necessary nor possible to monitor all species. A representative cross-section of characteristic species suffi ces to describe – the above men- Present Target tioned-the uniformity process of the entire ecosystem. For each species, quality is calculated as the ratio between the current state Measures and the minimum baseline value. Ecosystem 0% 100% baseline quality is a function of the abundance of species relative to the baseline. Ecosystem structure

285 19 & 20 November 2007 Virtual Indicator Exhibition

variables such as ‘area coral reef and canopy co- Netherlands, together covering more than 75% ver’ can be used as substitute in case of lack of of the area of natural ecosystems and displaying data on species abundance. This selection and medium quality. Forests, heath and inland lakes averaging method is similar to that for economic are examples of smaller areas with a lower qua- indicators, such as the retail price index, a re- lity. In the diagram alongside the x-axis has been presentative selection of products monitored in enlarged in order to see the contribution of the a subset of stores, the so called “shopping bag”. smaller ecosystem types. Subsequently, the changes in prices are also averaged and weighted; this is because a price in- A snapshot of NCI values taken in the year 2000 crease in bread cannot simply be averaged with a does not provide suffi cient information for policy- price increase in cars. makers. What happened in the past, what were the main causes, what can be done to restore biodiversity in an effi cient manner? The NCI for How much Natural Capital is left Dutch natural ecosystems has declined rapidly in in The Netherlands? the last hundred years. Much of the area was lost in the fi rst half of the century, while ecosystem The quantity of natural aquatic and terrestrial quality decreased, especially in the second half ecosystems in the Netherlands has declined to of the century. A scenario analysis shows that the 40% of its total territory, while the average qua- Natural Capital Index may improve from 18% up lity of these ecosystems is estimated at a modest to even 27% over a 30-year period, which repre- 44%. The resulting NCI is thus 18%, the product sents a signifi cant increase in natural capital. of quantity and quality. So roughly speaking, 18% of the average abundance of the original species remains in comparison with the baseline state. History of Natural Capital & Future trends The NCI for agricultural land is 17%. in The Netherlands

The contribution of the various natural ecosystem types to the Dutch Natural Capital is presented in the ﬁ gure below. Quantity and quality are given for each ecosystem type. Marine and large fresh-water ecosystems are very important in the

286 Beyond GDP: Measuring progress, true wealth, and the well-being of nations The Natural Capital Index framework

How much Natural Capital is left (ten Brink, 2000). The GLOBIO model is a joint in the World? cooperation between the Netherlands Environ- mental Assessment Agency (MNP), UNEPWCMC If there are no data on species abundance and UNEP-GRID Arendal in conjunction with available a pressure-based NCI may be used many partner institutes. GLOBIO has been im- as substitute. The underlying assumption is plemented for example to UNEP’s Global En- that the higher the pressure on biodiversity the vironment Outlooks, the CBD Global Biodiver- lower the probability of a high mean species sity Outlooks (GBO), and OECD’s Environment abundance of the original species (MSA). The Outlook and Strategy. The maps below show indicators Virtual GLOBIO model contains global cause-effect re- the calculated MSA in 2000 and 2050 and the lationships between agriculture, forestry, clima- global NCI over the period 1700-2050 (95% te change, N-deposition, fragmentation and in- ->63%) (CBD technical series no. 31, 2007). frastructure and MSA, based on more than 700 publications (Alkemade et al. 2007). For each Contact: grid cell the considered pressure values are ad- Indicator Exhibition Virtual ded and calculated into a MSA value. The NCI at Netherlands Environmental Assessment global and regional levels is the sum of the MSA Agency (PBL) of the underlying grid cells, in which each squa- [email protected] re kilometre of every biome is equally weighted 0031-30-2742210

287 19 & 20 November 2007 Virtual Indicator Exhibition

(Regional) Index of Sustainable Economic Welfare (ISEW) by Prof. Tim Jackson, RESOLVE, University of Surrey, UK, Nat McBride, Independent Consultant, Saamah Abdallah, nef (the new economics foundation)

Few people would now disagree that we need to In summary: move beyond GDP if we are to make any meaningful assessment of society’s overall well-being. ISEW = Personal consumer expenditure In particular, we need measures which will ac- – adjustment for income inequality count for changes in societal welfare and envi- + public expenditures ronmental impacts. (deemed non-defensive) + value of domestic labour Clearly, any credible alternative to GDP will have & volunteering to pass tests of rigour and objectivity. It will also + economic adjustments probably be asked to impart a simple message – defensive private expenditures about the direction of progress to a general audi- – costs of environmental ence. Delivering this simple headline trend must degradation happen without losing focus on the constituent el- – depreciation of natural capital ements of the indicator. If the fi rst question is “Are we really making progress?” then the second is: “Where are we doing well, and where do we need Why monetarise – and how? to try harder?” There is a danger in replacing GDP with any other one-dimensional measure, even if the replace- What is the ISEW? ment is more in tune it with our current understanding of well-being. But replacing GDP with a The Index of Sustainable Economic Well-being is suite of indicators covering a range of disparate an adjusted economic indicator which attempts factors also has problems. How do you compare to incorporate costs and benefi ts not traditionally different metrics? How do you balance the loss measured in monetary terms. It brings together a of 500 jobs against an increase of 10mg nitrates wide range of economic, social and environmen- per litre of river water? Is it preferable to reduce tal issues into one analytic framework. Time series 600 tonnes of carbon dioxide, or avoid 16 car ac- data are drawn from robust sources, typically from cidents? Although there are problems inherent in government statistics. Non-monetary statistics are monetarising certain social or environmental costs converted to cash values based on unit costs from and benefi ts – establishing a unit cost sometimes credible government or academic sources. involves subjective valuations – this does offer a coherent framework for the kind of holistic analy- The basis for the index is consumer expenditure. sis needed to guide policy. For each component of Positive and negative adjustments are made to this the ISEW where unit cost estimates are required, basis to account for a series of social, economic and we draw on the relevant literature to establish environmental factors. For example, the values of suitable working values. For instance, the costs household labour and volunteering are added to the of climate change are based on a Treasury / DE- index, together with public expenditure on health FRA meta-survey of the literature on the social and education. On the negative side, the ISEW sub- cost of carbon. Air pollution costs are based on tracts environmental costs associated with habitat average costs taken from several studies which loss, localised pollution, depletion of nonrenewable assess their impacts on health, buildings, crops resources and climate change; social costs associ- and natural habitats. ated with crime, divorce, commuting and unequal income distribution; and the health costs of accidents on the road and in the workplace. Some ad- A brief history of monetarised indicators ditional adjustments are made to account for net capital growth and net international position. These In 1972, Nordhaus and Tobin published a land- may be positive or negative depending on the par- mark paper entitled Is Growth Obsolete?, in which ticular economic situation in each year. they constructed a ‘measure of economic welfare’

288 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

(MEW) by adjusting GDP to account for certain progress against other regions. The R-ISEW economic and social factors. They concluded was developed with the backing of the UK Re- that GDP still represented a robust indicator of gional Development Agencies, with particular well-being. When Nordhaus re-examined the support from the East Midlands Development question from an environmental perspective in Agency (emda). emda commissioned a think 1992 (Is Growth Sustainable?), he discovered piece from nef in late 2004, on the relationship that the new MEW began to diverge signifi - between well-being, quality of life and regional cantly from GDP. development, which led to a pilot R-ISEW for the East Midlands in 2005, developed with the indicators Virtual The ISEW was fi rst posited by Daly and Cobb University of Surrey. emda incorporated the R- in their 1989 book For the Common Good. ISEW into their Regional Economic Strategy as They laid down the framework of consumer the top level indicator of progress towards their expenditure plus services from the informal vision of a “fl ourishing region”. In the National economy, plus public expenditure on certain Audit Offi ce’s 2007 performance assessment public goods; economic corrections to account of emda, the development of the R-ISEW was Indicator Exhibition Virtual for capital fl ows; and deductions for ‘defen- welcomed as a positive and innovative step. sive’ expenditures on social and environmental problems. The original model was revised Over the next two years, nef and the Univer- a little in 1990 by Cobb and Cobb to address sity of Surrey constructed R-ISEWs for fi ve some criticisms of the original methodology. other regions, and in 2007 a complete suite Since then, ISEWS have been produced for was calculated for all English regions, plus an countries as different as the USA, Thailand and ISEW for the whole of England on the same Chile. The ISEW has proven particularly pop- basis. For the fi rst time, R-ISEWs were calcu- ular for European researchers, and has now lated for all the regions of one country, using been constructed for a number of countries exactly the same methodology, allowing direct and regions. To date, the list includes Austria, comparisons to be made between them. The Belgium, Germany, Italy, the UK, Wales, Scot- R-ISEW revealed that traditionally ‘wealthier’ land, Sweden and several English regions. An regions are not always performing better than attempt at constructing an ISEW for Lombar- poorer ones in terms of sustainability. Howev- dia in Italy was made in 2006 by a Milanese er, it did not simply reduce cross-regional dif- research institute with nef assistance, but ferences. Some poorer regions perform much has now been put on hold due to limited data better than others. availability. Yorkshire Futures, the Regional Intelligence In each case, some revisions to the original Network for Yorkshire and the Humber, are Cobb and Cobb methodology have been made keen proponents of the index, noting that it to tailor the indicator to specifi c national re- would be “an opportunity missed… if the ISEW quirements or data sources. In Thailand for is not seriously incorporated into policy and instance, an estimate of the social cost of sex planning procedures.” tourism was included. In 1994, Jackson and Marks produced the fi rst UK ISEW for nef (the new economics foundation) and the Stock- Results of the English ISEW holm Environment Institute. This was updated by Jackson and colleagues at the University The structure of the ISEW allows two levels of of Surrey in 1997 and again in 2004 – when analysis. In the fi rst graph overleaf, the ISEW the updated version was released as the MDP for England is plotted against GVA showing a (Measure of Domestic Progress). simple headline trend: growth in both measures, but with a wide and growing gap between ‘conventional’ and ‘real’ progress. In Measuring regional progress: the second graph, a more detailed story un- the R-ISEW folds, in which some components of the ISEW are enjoying progress and others are deterio- Together with the University of Surrey, nef rating. This second graph also illustrates the has recently pioneered the development of a relative importance of different components in regional variant of the ISEW. The R-ISEW al- the overall ISEW. lows individual regions within a nation to monitor progress within the region and compare

289 19 & 20 November 2007 Virtual Indicator Exhibition

The future of the ISEW References

In 2007, a seminar was hosted by the Sustain- • Jackson, T and N McBride 2005. able Futures division of the Welsh Assembly to Measuring Progress? A review of adjusted present a recent attempt to construct an ISEW measures of economic welfare in Europe. for Wales. Economists and statisticians from the Report to the European Environment Agency. Assembly discussed the possibility of adopting Guildford: University of Surrey. the ISEW as an offi cial Welsh Assembly statistic. • Jackson, T 2004. Chasing Progress? Although they decided against this, it is worth Beyond measuring economic growth. noting that the only signifi cant objection was the London: nef (the new economics foundation). lack of methodological consensus amongst ISEW • Jackson, T, N Marks, J Ralls and S Stymne researchers. Herein lie the key challenges for the 1997. Sustainable Economic Welfare in the future development of the ISEW: collaboration UK – a pilot index 19501996. London: nef and consensus-building around the assumptions (the new economics foundation). used in the index. Firstly, what is the defi nitive set of economic, social and environmental factors to be included in the index? Then, how exactly do Contacts: we value certain non-monetary factors included in the account? These are signifi cant hurdles, but [email protected] by no means insuperable: GDP has faced and [email protected]@surrey.ac.uk overcome similar issues. Like the ISEW, GDP also makes potentially arbitrary exclusions of certain goods and services; and where the ISEW wres- tles with subjective valuations of social and environmental factors, GDP simply refuses to address them. By recognising, and placing a value on social and environmental outcomes, the ISEW represents a signifi cant advance on GDP as a measure of genuine progress. Its logic of adjusted economic well-being translates easily into the language of policy makers.

290 Beyond GDP: Measuring progress, true wealth, and the well-being of nations System of Environmental-Economic Accounting

System of Environmental-Economic Accounting (SEEA) by London Group on Environmental Accounting

Why we need the SEEA ral resources and the environment. A consensus emerged supporting a satellite approach, Conventional national accounting does not ful- in which the analytical capacity of the national indicators Virtual ly account for the role of the environment in its accounts is expanded to include environmen- measurement of economic activity. Recogniz- tal data without overburdening the central ing this limitation resulted in the development framework of the System of National Accounts of the System of Environmental-Economic Ac- (SNA). counting (SEEA).

The 1993 System of National Accounts (1993 Indicator Exhibition Virtual Environmental-economic accounting brings to- SNA) also endorsed the link to the environ- gether economic and environmental informa- ment by including a chapter on satellite action in a common framework to measure the counts (Chapter XXI), a large part of which contribution of the environment to the econo- is dedicated to environmental-economic ac- my and the impact of the economy on the en- counting. In 1993 the United Nations also vironment. The framework builds on concepts published the Handbook of National Account- defi nitions and classifi cations consistent with ing: Integrated Environmental and Economic economic statistics supplementing them with Accounting (SEEA-1993) demonstrating how environmental data that refl ect the environ- several environmentally-adjusted national ac- ment in terms of the resource, sink and ser- counts aggregates can be derived. vice functions it provides. After the publication of the SEEA-1993, sev- The SEEA can be used to analyze sustainable eral developing and developed countries start- paths of development through a broad range ed experimenting with the compilation of the of indicators. These indicators can be directly SEEA. These compilation experiences were obtained from the accounts, such as, mate- shared in the London Group on Environmental rial fl ows and energy use by industries and Accounting, one of the City Groups established households; or natural resource indicators can under the auspices of the United Nations Sta- be derived, such as, energy effi ciency and wa- tistical Commission (UNSC) in 1994. As man- ter effi ciency by industry. In addition, indica- dated by the UNSC, the London Group advanc- tors, such as, ‘ecological rucksacks’, ‘virtual es methodologies in environmental-economic water’ and ‘total material requirement’ can accounting and provides a forum for practitio- also be derived through the application of the ners to share their experiences in the develop- accounts, for instance, by using input-output ment and implementation of the SEEA. modeling. At its twenty-ninth session, in 1997, the UNSC requested the London Group to collaborate History with the United Nations Statistics Division (UNSD) on the revision of the SEEA-1993. This Environmentally sound and sustainable socio- eventually materialized in the revised Hand- economic development has since the 1970s book of National Accounting: Integrated En- received increased attention from the inter- vironmental and Economic Accounting, Rev. 1 national community. It was particularly stimu- (SEEA-2003). The SEEA-2003 was submitted lated by the report of the World Commission to the 33rd session of the UNSC in 2002 and on Environment and Development (1987) and subsequently issued in 2003 by the United Na- Agenda 21 of the United Nations Conference tions, the European Commission, the Inter- on Environment and Development (1992). national Monetary Fund, the Organization of During the 1980s and early 1990s, joint work- Economic Cooperation and Development, and shops, organized by United Nations Environ- the World Bank. ment Programme (UNEP) and the World Bank, set out to examine the feasibility of physical Although the SEEA-2003 handbook is widely and monetary accounting in the areas of natu- accepted as the reference for recording the

291 19 & 20 November 2007 Virtual Indicator Exhibition

interaction between economic processes and the processes, including their natural resource inputs, environment, it still falls short of being an inter- product throughputs and residual outputs, i.e. national statistical standard. It does not provide wastes. unique guidance or a preferred treatment for various issues. The UNSC therefore, created the The accounts also quantify the material depen- United Nations Committee of Experts on Environ- dencies of economies via imports and exports. mental-Economic Accounting (UNCEEA), with one When combined with monetary data they are of its main objectives to establish the SEEA as an called hybrid fl ow accounts. These accounts il- international statistical standard. lustrate how economic growth is interrelated with natural resource use and pollution. By way of example, Figure 1 presents a decoupling indicator, Description of SEEA: which illustrates the effect of major economic de- modules and indicators terminants of pollution over time. Notwithstand- ing higher levels of production in the economy The SEEA is an integrated information system (read), emissions (blue) from the production consisting of several modules. It can be used processes have stabilized since the middle of the to respond to different types of policy questions 1990s. This development can be attributed to concerning, for instance, the pollution of the at- improvements in the effi ciency of the production mosphere, water bodies or soil from production processes (i.e. less emissions per unit of value and consumption, and the sustainable use of added by industry) due to technological improve- natural resources and ecosystems; or to provide ments (yellow), and structural changes in the information regarding environmentally related production processes (pink) refl ected by a great- transactions, such as taxes and subsidies to ex- er share of the services industries in total value amine cost-recovery or polluter pays principles. added. The SEEA does not support particular schools of thought and can therefore be universally applied, Asset accounts underscoring its role as a multi-purpose for strategic planning and policy analysis. Asset accounts record stocks and changes in stocks (fl ows) of natural resources such as land, Physical and hybrid fl ow accounts fi sh, forest, water and minerals for the accounting period. The SEEA include all environmental Physical fl ow accounts provide a systematic physi- assets that provide option, bequest and existence cal description of production and consumption benefi ts and combined with produced assets

Figure 1 Global warming emissions of CO2, CH4 and N2O in the Netherlands

Source: Statistics Netherlands

292 Beyond GDP: Measuring progress, true wealth, and the well-being of nations System of Environmental-Economic Accounting

Figure 2 : Per capita wealth in Botswana Virtual indicators Virtual

Source: G.M. Lange (2004), Environmental & Resource Economics, 29:257-283 Indicator Exhibition Virtual

provide a better indicator of the wealth of a penditures on the protection of the environment country. Asset accounts can be compiled in and resource use. Other monetary transactions both physical and monetary terms. Monetary connected with the environment are covered as asset accounts illustrate the changes in the well, speciﬁ cally those economic instruments value of environmental assets and whether being used to manage natural resources, such they are being depleted. Asset accounts can as taxes, permits and licenses for extracting be particularly relevant for countries which are natural resources or using the environment as economically dependent on the exploitation a sink. Such accounts can for example illustrate of natural resources. Figure 2 shows that Bo- the importance of environmental taxes (and tswana has been successful in using its natu- subsidies) in the total tax regimes of countries ral capital (primarily minerals) to build nation- (i.e. ’greening of the tax system’). al wealth as evidenced by a rising per capita wealth in recent years. Environmentally-adjusted national accounts aggregates Economic accounts and environmentally related transactions As an integrated and multipurpose system serving different policy needs, information from the These accounts separately identify environmen- various modules of the SEEA can be combined tally related transactions presented in the exist- to form a full-sequence of accounts from which ing SNA ﬂ ow accounts in order to make them aggregates such as an environmentally-ad- more explicit for analysis. They cover both ex- justed gross domestic product (‘Green GDP’),

Figure 3 : Environmental taxes as share of total tax revenues in 2003

Source: Eurostat

293 19 & 20 November 2007 Virtual Indicator Exhibition

or environmentally-adjusted net saving (‘Genu- international organizations (UNSD, UNEP, Eurostat, ine Saving’) can be derived. These adjustments World Bank and OECD) and expert groups like could include depletion, defensive expenditures the London Group on environmental accounting and degradation. and the Oslo Group on energy statistics.

The SEEA revision and implementation pro- Future – SEEA as an international statisti- gramme is expected to improve the accounting cal standard concepts, the international harmonization of the accounting guidelines and subsequently the poli- The UNSC, recognizing the SEEA as a mature cy relevance of environmental-economic account- framework for the analysis and policy formulation ing considerably. In this context it is important to on environmental-economic issues, entrusted the emphasize that the SEEA is not an indicator list, UNCEEA to promote the worldwide implementa- but an integrated information system providing tion of environmental-economic accounting and the underlying statistical framework for thorough to establish the SEEA as an international statis- analysis and policy formulation. tical standard. In this regard the UNCEEA has the challenging task to revise the SEEA-2003. More information The work of the UNCEEA will be carried out in on the SEEA is available on the website: http:// close cooperation with national statistical ofﬁ ces, unstats.un.org/unsd/envaccounting/default.asp

Sustainable Society Index (SSI): a new comprehensive index for world-wide use by Geurt van de Kerk, Sustainable Society Foundation, Arthur Manuel, Sustainable Society Foundation

Do you know how sustainable – or should we say Sustainable Society Index – SSI unsustainable? – your country is? Probably not. The Sustainable Society Index shows you at a The newly developed SSI is based on a solid defi - glance how far your country is on its way to full nition: the world-wide respected Brundtland defi - sustainability, what is going well and what needs nition. In order to express that sustainability in- urgent improvement. cludes human well-being, we have extended the defi nition of Brundtland by adding a provision so that the qualitative aspects of human life are ex- Need for a new measurement tool plicitly included. We have formulated the Brundt- land+ defi nition as follows: The notion of what is meant by sustainability differs strongly among people. Even among scien- A sustainable society is a society tists there are numerous defi nitions of sustainability. However, to be able to adequately manage • that meets the needs of the present our efforts in achieving a sustainable way of living generation, on our planet, a clear defi nition of sustainability • that does not compromise the ability of is required. Since none of the numerous indexes future generations to meet their own needs, that have been developed until now show at a • and in which each human being has the glance the level of a country’s sustainability, we opportunity to develop itself in freedom, developed a new measurement tool: the Sustain- within a well-balanced society and in harmony able Society Index, SSI. with its surroundings.

294 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Sustainable Society Index

Starting from this defi nition, 22 indicators The Sustainable Society Index has been cal- have been determined, covering this compre- culated for 150 countries. This offers the op- hensive defi nition of sustainability in its broad tion for comparison between countries using sense. The 22 indicators are clustered into 5 various viewpoints: neighboring countries, categories as shown below. more or less similar countries, regional comparisons, comparisons between rich countries like the OECD-members, comparison I Personal Development between “North” and “South” etc. 43 of the existing 193 countries had to be left out due indicators Virtual 1 Healthy Life to lack of data. The bigger of those are Af- 2 Suffi cient Food ghanistan, Djibouti, Eritrea, Somalia and Su- 3 Suffi cient to Drink rinam. But mostly it concerns smaller coun- 4 Safe Sanitation tries including small island states. For the 5 Education Opportunities calculation of the indicators of the SSI only

6 Gender data from public sources has been used. Indicator Exhibition Virtual

II Clean Environment Each indicator has been expressed on a scale from 0 to 10. A 10 expresses full sustainabil- 7 Air Quality ity; a 0 no sustainability at all. This quantita- 8 Surface Water Quality tive approach requires that it should be de- 9 Land Quality ﬁ ned what full sustainability for each indicator means. For some indicators this is very clear; III Well-balanced Society for example the percentage of people with access to safe drinking water should be 100 to 10 Good Governance receive a score of 10. For some other indica- 11 Unemployment tors where this is not obvious, one can make 12 Population Growth an educated guess as to full sustainability and 13 Income Distribution for some others even that is not possible. For 14 Public Debt the latter group the highest score in any of the 150 countries has received a 10 and the IV Sustainable Use of Resources lowest score a 0. One has to bear in mind that the sustainability value of an indicator might 15 Waste Recycling be subjective to some extent. Moreover, it is 16 Use of Renewable Water Resources likely to change over time. For instance popu- 17 Consumption of Renewable Energy lation growth: now our planet seems overpop- ulated by human beings. However, it can very V Sustainable World well be that in the future one has a different view on this issue. 18 Forest Area 19 Preservation of Biodiversity A more detailed description of the calculation 20 Emission of Greenhouse Gases methodology and all results can be found on 21 Ecological Footprint www.sustainablesocietyindex.com. 22 International Cooperation

The most well-known indicator, GDP per cap- Results ita (Gross Domestic Product per capita), is not included since economy is not explicitly As could be expected, the world at large is far included in the Brundtland+ deﬁ nition. Only from sustainable. The average ISS score of few people still consider GDP per capita to be all countries on our planet is only 5.5. See a useful indicator for development towards Figure 1. Does that mean half-way down or sustainability. In that respect other indica- half-way up? When updates of the ISS become tors, the ISEW or the Dutch DNI (Duurzaam available in the coming years this question can Nationaal Inkomen, Sustainable National In- be answered. come), are far more indicative. Unfortunately they cannot be used for the SSI on a world- Norway is currently topping the SSI ranking wide scale since these two indicators are avail- list with a 7.0. Though being the best in class, able for no more than a couple of countries. even Norway is way below full sustainability.

295 19 & 20 November 2007 Virtual Indicator Exhibition

Figure 1 Overall SSI score for 150 countries

The average indicator scores for the 27 EU-mem- History of the SSI ber countries are shown in the spider web diagram in Figure 2. From this ﬁ gure it is clear that The concept of the SSI has been developed by in several areas there is much room for improve- the Sustainable Society Foundation during the ment. It concerns in particular the indicators of past three years. It was published late 2006 and category IV (sustainable use of resources) and presented in May 2007 at the Amsterdam Confer- of category V (sustainable world). The scores for ence 2007. The SSI received a warm welcome, the indicators in category I (personal develop- and at the same time, as could be expected, ment) are relatively high. questions and criticism.

These results show clearly that aggregation of Research and further development of the SSI is a scores for the individual indicators into one over- continuous process. In the meantime we are already all index entails a danger: it smoothes the dif- working on the next biennial update of the SSI. ferences between the individual scores. The fi nal result, the score for the SSI, has less variation between maximum and minimum than the un- Examples of using the SSI derlying fi gures, i.e. the scores of the indicators. So it is important always to look at the underlying The SSI can be used in many ways: fi gures as well. 1. To enlarge the awareness of people of the level of (un)sustainability of their own country. 2. As a policy instrument for all government levels. Figure 2 For instance at national level, each indicator Average SSI can be assigned to a specifi c ministry. This indicators for ministry will then be responsible for the devel- the EU-27 opment towards sustainability with respect to this indicator. Frequent monitoring of progress will stimulate to reach the objectives set according to an agreed time schedule. 3. By NGOs to help them with their strategy towards Sustainability. 4. To compare the scores of countries in order to learn from, and to stimulate each other to make progress on the way to sustainability. 5. For educational purposes at all levels.

296 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Time Distance Method for Analysing and Presenting Indicators

The SSI already has stimulated and supported tainability policies in the country. Spreading various new developments. to other countries is foreseen. • The SSI is being used for educational pur- • The international Peer Review of the Neth- poses at colleges and universities. erlands’ sustainability policy used the SSI in its considerations. • The SSI has played a role in the planning We hope to present a – further developed and and monitoring of the sustainability policy improved – Sustainable Society Index by the of the Netherlands Government. end of 2008, when the next update will be indicators Virtual • Based on the SSI a sustainability index for published. We welcome your comments and greenhouse culture is now under develop- suggestions. ment. • Recently a project has started to introduce the SSI in Romania, both on national and Contacts:

regional level. It is the intention to use the Geurt van de Kerk, [email protected] Indicator Exhibition Virtual SSI as tool for planning and monitoring sus- Arthur Manuel, [email protected]

Time Distance Method for Analysing and Presenting Indicators by Pavle Sicherl, SICENTER

Why we need the time distance method • Expressed in time units it is an excellent for analysing and presenting indicators presentation tool easily understood by policy makers, experts, managers, media and The time distance methodology offers a very general public, it can support decision-ma- interesting new way of analyzing and presenting king as well as infl uence public opinion. indicators and time series data in general. Well- being and development are multidimensional and long-term phenomena, people compare Defi nition of S-time-distance and policy and assess over many dimensions and over implications: different statistical measures time. Time, besides money, is one of the most may lead to different perceptions about important reference frameworks in a modern the situation society. The time perspective, which no doubt exists in human perception when comparing Statistical measure S-time-distance measu- different situations, has been with the S-time- res the distance (proximity) in time between distance method systematically introduced both the points in time when the two series com- as a concept and as a quantifi able generic sta- pared reach a specifi ed level of the indicator tistical measure. X. The observed distance in time (the number of years, quarters, months, etc.) for given • The new generic time distance approach levels of the indicator is used as a temporal offers a new view of existing data that is measure of disparity between the two series, exceptionally easy to understand and com- in the same way that the observed difference municate, and it allows for developing and (absolute or relative) at a given point in time is exploring new hypotheses and perspectives. used as a static measure of disparity. • It can also make important contribution to better exploitation of information resources S-time-distance measure is a measure with in new ways and to the visualization of fi n- clear interpretability that delivers a broader dings; it is also well placed to be used jointly concept to look at data and to compare situa- with other methods. tions, including benchmarking and monitoring.

297 19 & 20 November 2007 Virtual Indicator Exhibition

This innovation opens the possibility for simulta- tance amounts to 29 years. For a more realistic neous two-dimensional comparisons of time se- conclusion all measures should be presented si- ries data: vertically (standard measures of static multaneously. difference) as well as horizontally (Sicherl time distance). In graphical terms, the usual way is This is important for analysis and policy debate to compare the time series in the vertical di- for a single indicator and especially for compari- mension, i.e. for a given point in time. The time sons across indicators with different growth rates distance approach uses an additional perspecti- in different ﬁ elds of concern as needed for the ve; it compares the respective time series in the Beyond GDP approach. The better the analytical horizontal dimension, i.e. for a given level of framework the greater the information content the variable. Empirically, the degree of disparity provided to decision makers, experts, media and may be very different in static terms and in time general public. If one does not use explicitly the distance, which leads to important technical and broader framework outlined here, there is a possi- policy consequences. bility that in political debate and policy formulation various interest groups would intentionally look only at the measure which will suit their particular Benchmarking and gap analysis interest.

Two time series can and should be compared in two dimensions: Monitoring and evaluation – how to present 1. static gap for a given point in time it better for public debate 2. gap in time for a given level of the variable A substantial effort of the international and national organizations as well as research organizations has been and will be channeled into collecting and analyzing the necessary data for the systems of indicators under discussion. However, the beneﬁ t for better decision making and wide participation of broad range of stakeholders will depend critically on the human interface: understanding of the information and communication of that understanding (Sicherl, 2006b). Monitoring and evaluation of the degree of implementation of policy targets are indispensable phases of the policy circle. The interpretation of the deviation of actual development from the line to target with S-time-distance measure is straightforward and Comparing the EU15 for male-female differen- intuitively understandable; it deals with lead or ces in life expectancy in 2000 the female life ex- lag against their own target. It is like tracking the pectancy was 6.3 years higher (absolute static actual arrivals in comparison with the train or bus difference), which amounted to about 8 percent timetable, the difference being that the concept difference (relative static difference) in relation of geographical space is in our application repla- to that of men. However, the S-time-distance was ced with the indicator space. an astonishing 29 years. This means that women attained the value of male life expectancy for With EUROSTAT we agreed on a selection of sus- 2000 already in 1971, about three decades ago. tainable development indicators to be tested The perception whether the gender difference in using the time distance methodology. In a single life expectancy in the EU15 is large or small de- table there is a wealth of clear information about pends on the measure used: static percentage being on or off the track to targets for 12 selected difference is only 8 percent, while S-time-dis- indicators from 7 themes of SDI for all years.

298 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

People will intuitively un- Monitoring implementation of Lisbon 1 targets for EU 15 accross 7 thems of SDI derstand the lead or de- (S-time-distance deviation from the linear hypothetical path to target) lay in time of actual im- Theme Proposed SDI 2000 2001 2002 2003 2004 2005 2006 Theme 1 - Economic plementation against the development 1Life-long learning, %01.0 1.8-1.0-2.0-2.1 -1.1 assumed time table to Theme 1 - Economic 2 Share of R&D in GDP 00.8 1.7 2.9 >4 >5 >6 the proclaimed targets. development Theme 1 - Economic development 3 Total employment rate, %00.1 0.8 1.6 2.02.1 2.1 Theme 1 - Economic This type of analysis can development 4 Employment rate, females, %0-0.5-0.5-0.2-0.6 -1.1 -1.6 Theme 2 - Poverty indicators Virtual be repeated in the EU and socila exclusion 5 Early school-leavers, %00.5 1.2 1.52.02.7 3.4 case for all 27 countries Theme 3 - Ageing Employment rate of older society 6 workers, % 00.20.0-0.20.1 -0.2-0.1 across a selected num- Theme 5 - Climate Total greenhouse gas change and energy 7 emissions 0 >1 >2 >3 >4 >5 ber of available indica- Theme 5 - Climate Share of electricity from tors with established tar- change and energy 8 renewable sources 00.2 >2 >33.9 >5 Theme 6- Production gets. In the case shown and consumption 9 Municipal waste lanﬁ lled, 00.1 -0.9-2.5-4.2 TA TA pattern kg per capita it is easy to observe the Theme 8 - Transport 10 People killed in road accidents 0 0.50.90.4-0.2-0.1 Indicator Exhibition Virtual large delays in the theme Road share of inland freight Theme 8 - Transport 11 transport 0 >1 >2 >3 >3 >5 >6 5 Climate change and Theme 10 - Global 12 Oﬃ cial development 0-0.1 0.40.90.9-1.3 energy; as well as in the partnership assistance, % of GNI S-time distance in years: - actual ahead of path to target, + actual behind the path to target road share of inland frei- TA Target already achieved ght transport and share > x Actual value is worse than the starting value, therefore S-time-distance is more than x of R&D in GDP.

Visualisation for the latest available S-time-distance estimate for SDI for EU15 The above analysis for -5 TA one unit across many -4 indicators can be also -3 performed for a given -2 indicator across many -1 -1.6 -1.3 countries or regions or -1.1 -0.1 0 -0.1 socio-economic groups. 1 Tracking the time table to 2.1 Lisbon for total employ- 2 ment rate is here shown 3 3.4 against the EU overall 4 >5 >5 target, for NRPs the indi- 5 >6 >6 vidual country targets for 6 indicators will be taken into account. Lisbon 1 target of 70% employment rate in 2010 for all countries If the relevant EU and (S-time-distance deviation from the linear hypothetical path to target) national bodies would 2000 2001 2001 2003 2004 2005 2006 care to assess the S- EU (25 countries) 0 0.5 1.52.32.83.23.0 EU (15 countries) 0 0.1 0.8 1.6 22.32.1 time-distance measure DenmarkTA TA TA TA TA TA TA Netherlands TA TA TA TA TA TA TA by the same eight criteria Sweden TA TA TA TA TA TA TA applied to the selection United KingdomTA TA TA TA TA TA TA Austria 0 1 0.7 0.30.04.3 TA of structural indicators Cyprus 0 -3.9-4.7 -5.1 -3.4-1.5-3.8 like 1. Easy to unders- Estonia 0 0.40.30.4 1.30.8-2.0 Finland 0 -2.2-1.2 1.22.6 0.7 -1.5 tand, 2. Policy relevant, Ireland 0 -0.2 1.42.4 1.7 0.0-1.1 Latvia 0 0.1 -0.3-0.40.20.4-1.0 3. Mutually consistent, … Spain 0 -0.1 0.40.40.5-0.1 -0.2 6. Comparable between Slovenia 0 -0.4 1.2 >30.50.6 0.7 Lithuania 0 >1 1.3 1.22.1 1.8 1.9 countries, etc. (Munoz Germany 00.5 >2 >3 >4 >52.4 Greece01.1 1.3 1.4 1.92.32.7 2004), then for this ap- Italy 00.30.9 1.5 1.6 2.6 3.1 plication in monitoring Slovakia 0 1 2.02.33.84.34.0 Luxembourg 0 0.5 1.0 >3 >43.84.8 implementation of the France00.1 0.9 1.52.7 3.7 4.9 Lisbon EU and NRP stra- Hungary 0 >1 >22.53.6 4.6 5.3 Czech Republic 0 11.2 >3 >4 >55.4 tegies by structural in- Belgium 0 >1 >2 >3 >44.45.5 Malta 0 0.9 1.93.0 >4 >55.6 dicators as well as for Portugal 0-2.7 -0.5 >3 >4 >5 >6 sustainable development Poland 0 >1 >2 >3 >4 >5 >6 S-time-distance in years: - actual ahead of path to target, + actual behind the path to target. 299 19 & 20 November 2007 Virtual Indicator Exhibition

strategies the S-time-distance measure would monitoring the implementation of the Millennium pass the test with ﬂ ying colours. Development Goals on its ofﬁ cial MDG web site to enable countries and other stakeholders to take advantage of this complementary statistical Wide range of possible applications measure for policy debate at various levels.

In empirical research and in decision-making the SICENTER is in the process of developing a web art of handling and understanding different views application which would allow a variety of inte- of data is crucial. We need innovative perspecti- rested users such as international and national ves also in statistical concepts and measures, not organizations, NGOs, experts, managers, educa- only in qualitative and other dimensions. The pos- tors, students and media to monitor with S-time- sibilities for S-time-distance analysis range from distance the lead or lag in time from the Lisbon a simple analysis of monitoring implementation and NRP targets in the case of EU and for the UN of targets to more complex benchmarking and Millennium Development Goals or other planned, to a very complex econometric analysis (Gran- budget, or aid disbursement targets at world, re- ger and Jeon used time distance as a criterion gional, national, sub-national and business levels. for evaluating forecasting models). The time dis- The ﬁ rst version of the free web monitoring tool tance approach can thus contribute a useful pie- for Lisbon targets is available at www.gaptimer. ce of the mosaic in building up an internationally eu/content/view/25/34. supported methodology to measure and assess the overall “position” and “progress” among and within countries. Examples are available on www. Contact: sicenter.si and www.gaptimer.eu Pavle Sicherl, SICENTER, Brajnikova 19, 1000 Ljubljana, Slovenia, UN Statistical Division decided to put the softwa- email: [email protected], re to calculate the S-time-distance measure for [email protected]

300 Beyond GDP: Measuring progress, true wealth, and the well-being of nations World Happiness Index

World Happiness Index by Pierre le Roy

1 – World Happiness Index: why? • Selected global indices are the followings : > Peace and security : 1 – number of nu- indicators Virtual • Limits of GDP as an indicator to assess clear warheads, 2 – number of victims of the world or a country situation are widely major armed conﬂ icts, 3 – military ex- acknowledged. As an example: Equatorial penditures, 4 – number of violent deaths, Guinea, thanks to oil production, shows a GDP 5 – number of refugees, 6 – number of per capita of 20,000 dollars (in purchasing victims of natural or technological disas-

power parity), which is equivalent to Greece, ters, 7 – corruption, 8 – economical and Indicator Exhibition Virtual but the under-5 mortality rate is 204 in fi nancial security, 9 and 10 – probability Equatorial Guinea and 5 in Greece… of dying before age 60. • More generally speaking, GDP is not a sat- > Freedom, democracy, human rights : isfactory index because it ignores impor- 1 – number of people living freely, 2 – tant things of daily life: when a tree is cut level of democracy in the world, 3 -press down, GDP grows; traffi c accidents increase freedom, 4 – children rights: under-5 GDP, and so do wars potentially! Conclusion mortality rate, 5 – death penalty, 6 – by Robert Kennedy: GDP “measures women rights: gender development in- everything, in short, except that which dex, 7 – percentage of female parliamen- makes life worthwhile”. tarians, 8 – women’s school enrolment, 9 • The only signifi cant progress to go beyond – boys’ and girls’ school enrolment, 10 GDP has been the creation, in 1990, of the -child labour. human development index (HDI), cal- > Quality of life : 1 – GDP per capita, 2 – culated and published yearly by the United GDP per capita, disparities, 3 – life expec- Nations Development Program (UNDP). For tancy at birth, 4 -human poverty index,

each country and globally, HDI aggregates: 5 – GINI coefﬁ cient, 6 – suicides, 7 – CO2 GDP, life expectancy at birth and edu- rate, 8 – forest area per capita, 9 – water cation level. and hygiene, 10 – clean air. > Research, education, information, com- World Happiness Index (GHI) goes further! munication, culture: 1 – Research and Development, 2 and 3 – boys and girls education rate, 4 – adults literacy rate, 2 – World Happiness Index: how? 5 – education disparities, 6 – number of copies of daily newspapers per capita, • The ﬁ rst question to answer is: what is a 7 – number of television receivers per happy world? What is a happy country? capita, 8 – ICT: phones, PC, Internet, 9 Answer: it’s a world or a country: – number of movies, 10 – international > Where people live peacefully and safe- tourist trips. ly; > Where people live freely and democrati- • We emphasize here the importance given cally, and where human rights are re- to education in all aspects, disparities spected; and women status. > Where quality of life is good; • Initially calculated for the year 2000, > Where research, education, information, which sets the basis 100, WHI evolves communication and culture are shared every year, increasing or decreasing, by all. depending on the average of these 40 • As a result the idea is to choose, for each of indices. these 4 chapters, 10 indices from reli- • Results are published once a year on www. able sources and published every year globeco.fr, section: “GLOBECO, la revue”, (UNDP, World Bank, WHO, SIPRI, Amnesty, under the title: “bonheur mondial, édition HCR…); WHI is, for any given year, the 2007” (world happiness, 2007 edition), average of these 40 indices. for the last edition.

301 19 & 20 November 2007 Virtual Indicator Exhibition

3 – Country ranking

• Country ranking is calculated on the same > Quality of life : GDP per capita, GINI co- basis as the world happiness index, from the efﬁ cient, life expectancy at birth, suicides, 20 following indices: clean air; > Peace and security : war and peace, violent > Education, information, communication : edu- deaths, corruption, economical security, cation (coefﬁ cient 2), newspapers, TV, In- human security; ternet. > Freedom, democracy, human rights : de- • This ranking is done over 60 countries which mocracy, press freedom, women rights, represent 85% of worldwide population children rights, death penalty; and over 90% of global GDP.

4 – «World happiness, 2007 edition» : the results

WORLD HAPPINESS INDEX

2006 / 2005 (2005 = 100) 2006/2000 (2000 = 100)

Peace and security 100,95 90,50 Freedom, democracy, human rights 101,09 105,08 Quality of life 101,97 99,11 Research, education, information, 101,80 114,44 communication, culture RESULTS 101,45 102,28

COUNTRY RANKING 2007 1 – NORWAY 21 – CZECH REPUBLIC 41 – PHILIPPINES 2 – SWEDEN 22 – SOUTH KOREA 42 – MOROCCO 3 – NETHERLANDS 23 – HUNGARY 43 – ALGERIA 4 – DENMARK 24 – BALTIC COUNTRIES 44 – EGYPT 5 – AUSTRALIA 25 – ISRAEL 45 – CHINA 6 – CANADA 26 – POLAND 46 – SAOUDI ARABIA 7 – FINLAND 27 – CHILI 47 – RUSSIA 8 – GREAT BRITAIN 28 – ROMANIA 48 – VIETNAM 9 – IRELAND 29 – BULGARIA 49 – PERU 10 – SWITZERLAND 30 – MEXICO 50 – INDONESIA 11 – GERMANY 31 – MALAYSIA 51 – SRI LANKA 12 – AUSTRIA 32 – ARGENTINA 52 – IRAN 13 – SPAIN 33 – VENEZUELA 53 – UZBEKISTAN 14 – BELGIUM 34 – BRAZIL 54 – INDIA 15 – FRANCE 35 – COLOMBIA 55 – PAKISTAN 16 – JAPAN 36 – UKRAINE 56 – BANGLADESH 17 – ITALY 37 – TURKEY 57 – NIGERIA 18 – GREECE 38 – TUNISIA 58 – DR OF THE CONGO 19 – PORTUGAL 39 – THAILAND 59 – ETHIOPIA 20 – UNITED STATES 40 – SOUTH AFRICA 60 – UNION OF MYANMAR

For further information: In the same section, you’ll ﬁ nd another article on www.globeco.fr ; Contact: [email protected] the issue, entitled “Mesurer le bonheur, à quoi Full text of “Bonheur mondial, édition 2007” bon ? La réponse de GLOBECO et de quelques will be online (in French) on www.globeco.fr by autres” (Measuring happiness, what for? november 14, 2007, section “Globeco : la revue”. Answers from GLOBECO and a few others).

302 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Overview of conference background papers Overview Conference background papers

Measurement Beyond GDP Bart Wesselink, Jan Bakkes, Aaron Best, Friedrich Hinterberger and Patrick ten Brink, 2007. Full paper available at: http://www.beyond-gdp.eu/download/bgdp-bp-mbgdp.pdf

Abstract • Application of existing aggregated single-number indicators in a forward-looking manner using Policy makers and the general public would benefi t present-day and future modelling capacities; signifi cantly from improvements in our ability to assess the well-being of people and the health of • Satellite accounts – improvement and imple- nature. Being able to discern and measure progress mentation of the Integrated Environmental and more comprehensively than with GDP per capita is Economic Accounting (SEEA) system, including a key prerequisite for improved decision making. environmental asset accounts. For example, Since the early 1990s, a broad range of indica- increasing application in offi cial statistics of tors have been developed to assess our progress, Genuine Savings at the national level; and many of them developed in the context of helping to achieve the objective of sustainable develop- • Risk assessment – including economic risks of ment. More recently, attention has been paid to ecological decline in economic outlooks – even if they improving our ability to measure well-being and cannot be quantifi ed and monetised with certainty. happiness. These new indicators and measurement approaches both challenge and complement the • Quantitative and qualitative surveys of traditional economic indicators that continue to emerging concepts like quality of life, life-sat- play a dominant role in guiding decisions. isfaction, well-being, happiness.

This brief paper provides a historical and theoreti- In this paper, we also introduce the policy cycle as a cal background for the November 2007 conference framework to show how different indicator approaches Beyond GDP: Measuring progress, true wealth can serve, or be tailored for, speciﬁ c phases of the and the well-being of nations. The paper suggests policy cycle. The paper primarily uses environmen- several lines along which the role of different indi- tal indicators as illustrative examples of the various cators used by policy makers, the media and their indicator types, but the same arguments extend to constituencies can be strengthened. These possible social and economic indicators as well. Using the ways forward include: policy-cycle framework reveals the key strengths of each indicator approach and points to a way forward • Indicator sets – the development of indicator where multiple measurement approaches, comple- sets with a small number of high-level indicators mentary to GDP, can be relied upon for improving with a strong signalling function; measurement and decision making.

Beyond GDP: Overview paper for the Beyond GDP conference Marcel Canoy and Frédéric Lerais, 2007. European Commission, Bureau of European Policy Advisers (BEPA). Full paper available at: http://www.beyond-gdp.eu/download/bgdp-bp-bepa.pdf

The European Commission, European Parliament, the decision-making process and taken up by public Club of Rome, OECD and WWF will host a high-level debate. The conference will bring together high- conference with the objectives of clarifying which level experts and policy makers to address these indicators are most appropriate to measure well- critical issues. Over 300 people from economic, being, and how these can best be integrated into social and environmental spheres will attend.

304 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

The conference will host several high-level ing practitioners will consider progress in the speakers, including internationally recognised development and policy application of indicators leaders and government representatives, mem- of well-being. bers of the European Parliament as well as speakers from civil society, think tanks, industry, There is a sense of urgency to discuss mea- and key institutions such as the World Bank and sures of well-being that move beyond GDP. The the United Nations. European Commissioners interdependent, global and long-term nature José Manuel Barroso, Joaquín Almunia, Stavros of current challenges such as human capital Dimas and Vladimir Špidla are conﬁ rmed speak- investment, environmental challenges, migra- indicators Virtual ers. Preceding the main political conference, tion and security issues, requires a broad view an expert workshop will be held, where lead- on well-being and ways to measure it.

Alternative progress indicators to Gross Domestic Product (GDP) as a means towards sustainable development Yanne Goossens et al. 2007 IP/A/ENVI/ST/2007-10. Study provided for the Committee on Environment, Public Health and Food Safety of the European Parliament.

Full paper available at: http://www.beyond-gdp.eu/download/bgdp-bp-goossens.pdf background papers Overview Conference

Executive summary ing the links among a community’s economy, environment, and society. Assessing existing policies or developing new policy options requires indicators showing where The study highlights the benefi ts and some of a community stands, where it is going and how the shortcomings of GDP. It serves a crucial and far it is from where it wants to be. Indicators helpful role in macroeconomic policy, both mon- are necessary in all steps of the policy cycle: etary and fi scal policies. GDP is also fairly unique to describe the current situation/problem; to in that it combines simplicity, linearity and uni- analyse the causes; to identify possible solu- versality, as well as carries the objectivity of the tions and analyse, select and implement policy ‘observable market price’ as its guiding principle. proposals; to monitor and evaluate the policies Attempting to abolish GDP, therefore, would be and to communicate the outcomes at all steps neither feasible nor recommendable. The real of the policy cycle. problem presumably is that GDP growth is too often confused with (sustainable) welfare growth Economic performance is generally being mea- in people’s, and policy-makers’, minds. While sured through GDP (Gross Domestic Product), a there certainly is a correlation between the two, variable that has also become the de facto uni- this study shows that this is a highly conditional versal metric for ‘standards of living’. However, correlation, void of substantial causality for GDP GDP does not properly account for social and levels observable in the European Union. environmental costs and benefi ts. It is also diffi cult to achieve sustainable decision-making Failing the discovery of a perfect substitute, aiming at sustainable progress and wellbeing GDP can continued to be used for (economic) if welfare is being considered from a purely reform assessments and particular questions of fi nancial point of view. Sustainable development economic policy (such as fi scal and monetary can be defi ned as “Development that meets the policy), but beware of interpreting it as a general needs of the present without compromising the sustainable development and welfare measure ability of future generations to meet their own giving any substantial and universally valid idea needs”. Therefore, in order to effectively mea- about people’s well-being. For these purposes, it sure ‘progress, wealth and well-being’, one must is better to turn to alternative measures going go beyond GDP. This requires clear and at the beyond GDP, some of which were analysed in same time multidimensional indicators show- this study.

305 19 & 20 November 2007 Overview Conference background papers

Using so called SWOT analyses, several alterna- not always a realistic option for decision-making. tive progress indicators have been assessed in the Nevertheless, these indicators can serve as valu- context of this study. This allows for an assessment able instruments to improve public participation of the internal Strengths and Weaknesses and and to assess and communicate several aspects the externally-driven Opportunities and Threats of sustainability and well-being. of each indicator for going beyond GDP1. To do so, the selected indicators have been divided in The category supplementing GDP seems to be three categories: those replacing, adjusting and the most realistic and acceptable option for going supplementing GDP (the latter being divided into beyond GDP. Within this approach, GDP is being two subcategories).The fi rst category contains complemented with additional environmental and/ indicators adjusting GDP. In this approach, or social information. A fi rst group are the ‘sat- traditional economic performance measures like ellite account systems’ which complement the GDP or national saving rates have been adjusted conventional statistical national accounts with by including monetised environmental and social environmental and/or social information. A second factors. Such indicators can serve as a valuable group sets social and environmental information communication tool whereby the end result sends in relation to GDP. For the fi rst group, a good deal out a positive or negative signal to the audience. of statistical data is already available and best However, diffi culties arise when trying to monetise practices of its use and its potential for decision- environmental and social factors. making exist. However, in comparison to the GDP itself these approaches often lack public percep- The category replacing GDP contains indicators tion and political support. The establishment of an that try to assess wellbeing more directly than overarching, transparent and popular reference GDP, e.g. by assessing average satisfaction or indicators system for EU policies might therefore the achievement of basic human functions. By be the next step for improving decision-making in replacing GDP, these indicators might not appro- support of sustainable development. priately consider the advantages of GDP which is

Measuring Well-being and Societal Progress Enrico Giovannini, Jon Hall and Marco Mira d’Ercole, 2007. Organisation for Economic Co-operation and Development. Full paper available at: http://www.beyond-gdp.eu/download/oecd_measuring-progress.pdf

Introduction will not yield the same improvements in the well- being of the citizens is backed up by numerous For many years, using a monetary measure like studies that indicate that this divergence between GDP per capita as a proxy for the population’s well- added income and added well-being holds true being made much sense, at least for developed both within and across societies. At the same time, countries. GDP per capita provides an accurate concerns have emerged on how economic growth measure of a country’s capacity to deal with the led in many countries to environmental depletion, material needs of its residents. And so long as the an element that is not included at all in GDP. basic necessities of life remain scarce, additions to GDP per capita can be expected to equate closely Several studies have been published over the last with improvements in meeting the population’s two decades on alternative measures of well-being/ basic needs, and hence in greater well-being. quality of life/ sustainable development/ societal progress, all terms closely related to each other. The consensus on the use of GDP per capita as Academic researchers, ofﬁ cial statisticians and a good proxy measure of well-being is, however, international organisations have proposed alterna- becoming less obvious also for economists, as the tive measures, which can be classiﬁ ed according more developed societies move from a situation of to different criteria. A consensus has not emerged scarcity to a situation of plenty. The intuitive notion yet on the best way to go, but with the “Istanbul that, once a certain level of material needs has Declaration” – signed in June 2007, at the end of the been met, further increments in economic growth II OECD World Forum on “Statistics, Knowledge and

306 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

Policy” by the European Commission, the OECD, with GDP per capita. Second, it reviews mon- the Organisation of the Islamic Conference, the etary measures of economic resources derived United Nations, the United Nations Development from national accounts. Third, it looks at ways in Programme, UNICEF and the World Bank – one which these monetary measures can be adjusted can say that the need to go “beyond GDP” is to take into account other factors that inﬂ uence now fully recognised at political level. well-being, in particular leisure time, household size and aversion to inequality. Finally, it con- This paper presents a synthetic review of dif- siders subjective measures of happiness and ferent approaches to the measurement of well- life satisfaction. indicators Virtual being. The review does not quote all initiatives and proposals, but provides an overview of The second part of the paper deals with more what alternative approaches propose and some recent initiatives undertaken at international empirical evidence, as well as some information level to measure sustainable development, espe- about research projects currently underway in cially to incorporate environmental concerns and the international statistical community. The ﬁ rst phenomena. Finally, the third part describes part of this paper considers four approaches to recent OECD initiatives: the main conclusions measuring well-being, especially looking at the of the recent Istanbul Forum and the content social side of it1. First, it presents evidence on of the Global Project launched by the OECD to the importance for well-being of social indicators measure the “Progress of Societies”. and on the extent to which they are correlated

1 This paper draws on analysis provided in Boarini et al. (2006) and in OECD (2006a). Overview Conference background papers Overview Conference

Accounting for the Environment - The European Development Elisabeth Møllgaard, 2007. European Commission, Eurostat, Unit Environment statistics and accounts. Full paper available at: http://www.beyond-gdp.eu/download/bgdp-bp-mollgaard.pdf

Economic and social aspects of our society infl u- dimensions. All these different aspects of the ence the pressures that are exerted on environ- economy may have detrimental or benefi cial mental systems. The environmental accounting effects on environmental pressures. framework (SEEA, 2003) is particularly useful to assess the infl uence of the economy on the The System of Integrated Environmental and environment both directly and indirectly. The Economic Accounting (SEEA) has been developed environmental accounts have the advantage to link environmental and economic statistics. that they are consistent with National Accounts. An important characteristic of environmental Furthermore, they can be coupled to input- accounting is that the data are consistent with output tables, which make it possible to perform the National Accounts which mean that the in-depth analyses of the relationship between environmental data can be directly compared to the economy and the environment. In this paper well known macro-economic indicators such as we will summarise the activities in the European GDP, infl ation and investment rates, developed countries and the main future challenges in in the System of National Accounts (SNA). order to Account for the Environment. Specifi c accounts in the SEEA cover e.g. (1) The economy is a complex system of which natural resources such as forests, oil and gas extraction of natural resources, production, con- (stocks); (2) fl ow accounts for material use, sumption, technology, investment, imports and air emissions, water, waste; and (3) economic exports, and release of wastes (and pollution) accounts for environmental expenditure and rev- are just a few of the many different interrelated enues, eco-industries and taxes. Combined with

307 19 & 20 November 2007 Overview Conference background papers

the national accounts, the environmental accounts statistics: are we reaching the desired decoupling provide a powerful tool to analyse to what extent (economic growth with less and less impact on the our current production and consumption patterns environment)? Are we respecting the Kyoto tar- are degrading natural resources or are polluting gets in terms of greenhouse gas emissions or are the environment. Up to now there no work to put we simply exporting the emissions by relocating these pressures in relation to potential thresholds production activities? What are the more or less in the environment beyond those the degradation harmful economic sectors for the environment? becomes irreversible and how the degradation of What is the productivity from natural resources at the environment harms the economy. In addition European level? How much employment is gener- the data includes information about policy measures ated by environmental protection? Are eco-indus- such as environmental related taxes or subsidies. tries growing? Are Market-based policy instruments increasingly used? Environmental Accounts can answer tricky political questions and give a complement to environmental

Accounting fully for ecosystem services and human well-being EEA contribution to the Beyond GDP conference, 2007. European Environment Agency. Full paper available at: http://www.beyond-gdp.eu/download/bgdp-bp-eea.pdf

“Because National Accounts are based on fi nancial services that provide recreational, aesthetic, and transactions, they account nothing for Nature to spiritual benefi ts (see Figure 1). which we don’t owe anything in terms of payments but to which we owe everything in terms Human well-being is assumed to have multiple con- of livelihood.” stituents, including the basic material for a good life, such as secure and adequate livelihoods, enough Bertrand de Jouvenel, Arcadie, 1968 food at all times, shelter, clothing, and access to goods; health, including feeling well and having a healthy physical environment, such as clean air Introduction: Ecosystem services and human and access to clean water; good social relations, well-being including social cohesion, mutual respect, and the ability of help others and provide for children; secu- An ecosystem is a dynamic complex of plant, ani- rity, including secure access to natural and other mal, and micro-organism communities and the resources, personal safety, and security from natural non-living environment interacting as a functional and human-made disasters; and freedom of choice unit between themselves and with human economic and action, including the opportunity to achieve and social systems. There are a wide range of what an individual values doing and being. ecosystems in Europe and globally – from those relatively undisturbed, such as natural forests, to People are integral parts of ecosystems and a landscapes with mixed patterns of human use, to dynamic interaction exists between them and ecosystems intensively managed and modifi ed by other parts of ecosystems, with the changing humans, such as agricultural land an urban areas. human condition driving, both directly and indi- For operational assessment and valuation, ecosys- rectly, changes in ecosystems and thereby causing tems have to be considered as socio-ecological changes in human well-being. At the same time, systems. social, economic, and cultural factors unrelated to ecosystems alter the human conditions, and many Ecosystem services are the benefi ts people obtain natural forces infl uence ecosystems. The actions from ecosystems. These include provisioning that people take infl uence ecosystems not just services such as food, water, timber, and fi ber; from concern about human well-being but also regulating services that affect climate, fl oods, from considerations of the intrinsic value of spe- soil, disease, wastes, and water quality; cultural cies and ecosystems.

308 Beyond GDP: Measuring progress, true wealth, and the well-being of nations

Well Being Stories Andrea Saltelli, Jochen Jesinghaus and Giuseppe Munda, 2007. European Commission, Joint Research Centre, Ispra (Italy) Full paper available at: http://www.beyond-gdp.eu/download/bgdp-bp-saltelli.pdf

Abstract able lessons to be learned at a societal level. indicators Virtual This paper tackles with three main issues: This paper deals with the difﬁ cult issue of measuring well-being. We are aware that 1. The role of GDP as main policy indicator this concept is very complex and we are not 2. Lessons learned from already existing giving any ﬁ nal answer here. However we well-being stories are convinced that even the simple attempt 3. Practical steps to develop an empirical of measuring well-being may produce valu- well-being composite indicator.

The use of indicators in the European Commission Stephen White and Oliver Zwirner, 2007. European Commission, Directorate-

General Environment, Unit Sustainable Development and Economic Analysis. background papers Overview Conference Full paper available at: http://www.beyond-gdp.eu/download/bgdp-bp-white.pdf

Introduction steps, from awareness rising, decision-making to monitoring of implementation. The overall The European Commission is bound to pro- indicator picture is dynamic rather than static pose evidence based policies to Council and – more indicators are being used and existing Parliament. These policies originate in the social, indicators are being continually updated and economic or environmental policy spheres but upgraded. The indicators used differ in their often have impacts across a number of policy make-up, coverage, and the emphasis put on areas. them. What they have in common is that they have been designed to be used, and since the The European Commission uses a range of indi- policy context differs from situation to situation cators to support policy making in its various so does their design.

309 19 & 20 November 2007

Annexes Welcome letter to the participants Annex 1

Dear participants,

On behalf of the conference partners, it is my pleasure to welcome you to the Beyond GDP conference.

The maxim that we need to “measure what matters” has grown increasingly important over the years. Never before has so much information been available on such a wide array of topics. And as new challenges emerge so do new measures. Who could have predicted decades ago that

today’s society would be talking of CO2 concentrations in our planet’s atmosphere?

The conference partners – the European Commission, European Parliament, Club of Rome, WWF and OECD – are each committed to improving how we measure, evaluate, communicate and respond to the challenges of our times. Our hope is that this conference will be an important catalyst for the work to come in improving our measures of progress, true wealth, and the well- being of nations so that we can manage our new challenges.

I would like to thank all the organisers and staff for their hard work putting on this conference, and especially the European Parliament for their hospitality in offering to host the event in the Hemicycle. We have gathered an impressive array of speakers and chairs for both the conference and expert workshop, and I am grateful to each of them for sharing their experience and insights with us.

Lastly, and most importantly, I thank each of the participants for your contributions at the conference and in the future work to come.

Sincerely,

Stavros Dimas Commissioner for the Environment European Commission

312 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Press Pack Annex 2

Quotes from the Partners Annexes Annexes • José Manuel Barroso • Pier Carlo Padoan President of the European Commission Deputy Secretary-General, OECD

“It is not enough for us to talk about freedom, “The OECD believes better statistical information climate change, health, security and the envi- is an essential support to democratic govern- ronment. We need widely accepted communi- ance. So, yes, the OECD thinks it is time to move cation tools that show progress in these ﬁ elds. beyond GDP to provide better and more useful And that progress can only be measured with information. We believe that by using GDP and suitable indicators. So it's time to go beyond indicators covering other aspects of our life it is the tools developed for the very different world possible to develop new measures of progress of the 1930s. It's time to go beyond today's and we are ready to support the growing glo- confusing surfeit of unorganised data. It's time bal movement which shares these views. This to go beyond GDP.” is why we have launched a Global Project on “Measuring the Progress of Societies.”

• Hans-Gert Pöttering President of the European Parliament • HE Chief Emeka Anyaoku President, WWF “Major negative effects of globalisation such as climate change pose new risks not only to our “What we currently measure as development eco-system but to our entire economies and is a long way away from the EU and world’s eventually our societies as a whole. This is why stated aim of sustainable development. This is new indicators of wealth are needed and the because economic decisions routinely ignore European Parliament - the EU's directly-elected natural capital expenditure.” body which is answerable to the citizens - can play a key role in helping to shape the required “Economic indicators are essential, but without broad democratic consensus.” natural resource accounting, ecological deﬁ cits will go unnoticed and ignored. It is as if we spent our money without realizing that we are • Ashok Khosla liquidating the planet’s capital.” Co-President, Club of Rome “If we are to end gross disparity and poverty, reduce rampant climate change and species extinction, avoid massive depletion and destruction of resources and preempt the resulting overshoot and collapse of societies, we must go well beyond simplistic indicators such as the gross domestic product that have today become the grossest mismeasures of progress.”

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IP/07/1718 Brussels, 19 November 2007

Measuring progress, wealth and the well-being of nations Measuring progress, true wealth and the well-being of nations are the topics that will be discussed at a high-level conference on 19-20 November organised by the Commission in partnership with the European Parliament, the OECD, the Club of Rome and WWF. The aim of the conference is to move towards a better appreciation of what progress, wealth and well-being actually are, decide how they should be measured, and highlight the beneﬁ ts of integrating them into decision-making. The Beyond GDP conference will be opened by the President of the Commission, José Manuel Barroso on the ﬁ rst day and the President of the European Parliament, Hans-Gert Pöttering, on the second day.

GDP no longer a good measure of well-being Over the last two decades a number of alternative indicators have been designed to complement Moving towards a low-carbon economy, preserv- GDP in measuring progress and the health of the ing biodiversity, promoting resource effi ciency and economy. They introduce aspects not covered achieving social cohesion are today as important as by GDP such as the long-term accumulation of economic growth. Measuring these elements in a wealth (natural, economic and social), the levels comprehensive manner to quantify the well-being of of life expectancy, literacy, and education and a country is highly complex and most economic indi- the negative impact of pollution and resource cators used today – such as GDP (Gross Domestic degradation. Product) – do not fully address these issues. Some of these indicators are already in use today The GDP indicator was created in the wake of the to measure ‘real progress’ in setting targets and great depression and the subsequent second world objectives. In March 2001 the Welsh Assembly war as a means of providing decision-makers with was the fi rst administration in the world to do so. a measure of economic performance and activity. However, these indicators are neither homogene- But today's economy and society are substantially ous nor is their use widespread. different from those of the mid-20th century when GDP was conceived. The European Union is now developing an indicator that would measure environmental progress and GDP has arguably helped decision-makers avoid also use integrated accounting and other sub- a second great depression, guide reconstruction indicators to improve policy-making. A preliminary efforts after the war and maintain unprecedented version is due to be operational by 2009. The economic growth over the past 40 years. But the initiative is linked to the Global Project launched indicator alone cannot refl ect all facets and needs by the OECD at the Istanbul World Forum (June of modern society. Indeed a growing GDP can 2007) where a call was made on the need for mask substantial losses in wealth and well-being. international indicators to measure the progress of A country could, for example, cut down all its societies. Another Beyond GDP conference partner forests or send children to work instead of school – the World Wildlife Fund for Nature (WWF) – has and this would have a positive effect on GDP or established an indicator which takes into account a hurricane killing thousands and wreaking wide- the depletion of ecological assets. spread destruction could prove benefi cial to GDP due to the ensuing reconstruction efforts. The Beyond GDP conference

Moving beyond GDP The Beyond GDP conference is the launching pad for the political debate on the need to move beyond GDP indicates that the output of the world's major the principles of Gross Domestic Product. It will economies have been growing steadily from the be held at the European Parliament building in 1950s to date. But using other indicators it is clear Brussels. Some 600 participants from the economic, that progress has not kept pace with GDP and that social and environmental sectors will be attending. during certain periods some countries' economic Speakers include José Manuel Barroso (President welfare has even stagnated. of the European Commission), Hans-Gert Pöttering

314 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Commission Memo - Joint press release of the Beyond GDP partners

(President of the European Parliament), HE Chief The 12:30 press conference on 19 November Emeka Anyaoku (President, WWF), Ashok Khosla and some sessions will also be available to tel- (Co-President, Club of Rome), and Pier Carlo evision stations Annexes Padoan (Deputy Secretary General, OECD). http://ec.europa.eu/avservices/ebs/schedule.cfm.

The entire conference will be webstreamed live and can be viewed on the conference's website http://www.beyond-gdp.eu

MEMO/07/472 Brussels, 19 November 2007

Questions and Answers on Gross Domestic Product (GDP)

1) What is GDP? such as GDP corrected for depreciation or by better measuring nations' balance sheets. GDP is the gross domestic product of a country. It measures the total ﬁ nal market value of all But the way GDP takes into account social and goods and services produced within a country environmental issues in measuring economic during a given period. GDP is the most frequently growth is questionable. GDP does not factor in used indicator of market activity and is most a number of elements important in determining often measured on an annual or quarterly basis the well-being of people. For example, it over- to gauge the growth of a country's economic looks the value of certain non-market goods and activity between one period and another. GDP services such as natural resources and unpaid is also a measure of total consumer, investment activities and leisure. GDP highlights average and government spending plus the value of income which may not correspond to the actual exports minus imports. income of any speciﬁ c group of the population. Average income provides no indication about GDP is the most widely used indicator from the the distribution of income between citizen. And System of National Accounts (SNA). Its method- it focuses on short-term economic activities ology is standardised internationally thus ena- rather than longer-term sustainable development bling comparison between countries anywhere aspects such as the growth of natural, economic in the world. GDP was created in the wake of and human capital. the great depression and second world war to provide decision-makers with a measure of Most other mainstream economic indicators are economic performance and activity. also limited in the way they tackle non-economic issues such as progress and well-being. It is 2) What are the limits of GDP? not alternatives to GDP that are needed, but additional indicators to complement it. It is still There is nothing wrong with GDP itself. It is a valu- important to know how many goods and services able economic indicator which serves an impor- are produced or how strong an economy is. But tant purpose in economic policy making. Due to more needs to be taken into account, such as the implicit link between economic growth and the state of the environment, the evolution of aspects of well-being such as employment and social issues, and progress towards sustainable consumption, GDP is often regarded as a proxy development. indicator of human development and well-being. Within the existing framework of national accounts Citizens are as a general rule better off if they are the information covered could be broadened by richer. However, the quality of life or well-being putting more emphasis on net domestic product also depends on the type of goods consumed,

315 19 & 20 November 2007 Press Pack Annex 2

the amount of leisure time available, the relation- would include stock taking of natural resources and ship with families and friends, and the health of the human and social capital rather than just the use surrounding environment. Today a greater number of these resources. The system would also focus of people feel their well-being is undermined by on the role of eco-systems in providing welfare. too much pressure of work, unemployment, family break-ups, pollution and climate change. This is The EU is also committed to developing an indica- why policy makers are interested in having more tor to measure environmental sustainability and statistics that address these issues instead of pure to use integrated accounting and other indicators economic indicators. to improve policy-making.

3) What other indicators besides GDP The European initiatives are being co-ordinated are there to measure wealth and well- by the European Commission as part of a global being? process linked to the Global Project launched at the Istanbul World Forum (June 2007) where the To compensate for the limits of GDP a number of European Commission, the OECD, the Organisation alternative and complementary indicators have of the Islamic Conference, the United Nations, the been developed. These can be grouped according UN Development Programme, and the World Bank to the aspects of social progress they cover. made a commitment to measure and foster the progress of societies in all dimensions with the ulti- Some indicators such as the Genuine Progress mate goal of improving policy making, democracy Indicator considers additional economic factors not and citizens’ well-being. covered by GDP while others such as the Genuine Savings approach look at long-term capital accu- 5) How can measure wealth and well-being? mulation, including the value of natural, economic and social capital. Another approach is to produce GDP does not measure wealth. It measures con- a single index – such as the Human Development sumption and investments in a given year, not how Index - which weighs a number of sub-indicators rich people are, or how much wealth society has by combining measures of life expectancy, lit- through the accumulation of buildings, machinery, eracy, and education in addition to GDP. Indicator consumer goods, schools, universities, road and sets such as those they comprise environmental, rail networks, and art. economic and social indicators are another way to complement the use of GDP. Such an indicator is There are very few statistics on material wealth and being developed in Canada (the Canadian Index even fewer on natural, environmental, social and of Well-being). cultural wealth. Material wealth too often overshad- ows the pursuit of non-material wealth. Access to Some countries have also applied the interna- improved data on non-material and non-economic tionally recognised environmental and economic wealth would help citizens and policy-makers better national accounting standards found in the balance the various aspects of well-being. This is what sustainable development is all about. Handbook of National Accounting: Integrated Environmental and Economic Accounting 2003 Other facets of well-being such as happiness are (SEEA 2003). more diffi cult to measure. But researchers have now developed reliable ways of measuring how More information on various indexes can be satisfi ed people are with life in general and with found on the Beyond GDP website: specifi c aspects such as the level of satisfaction with work, family, friends, neighbourhood, income http://www.beyond-gdp.eu/links.html and wealth, and country and government. This research is important for policy-makers in imple- 4) What is the European Union menting policies that foster a higher degree of doing to move beyond GDP? public satisfaction and happiness.

The European Union is committed in taking leader- Further information on the GDP is available at: ship in the move to integrate non-economic factors into policy-making beyond those currently used http://www.beyond-gdp.eu/links.html by mainstream economic indicators. A preliminary version of an integrated environmental economic accounting system is due to be operational by 2010. The special importance of this system is that it

316 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Commission Memo - Joint press release of the Beyond GDP partners Annexes

317 19 & 20 November 2007 Press Pack Annex 2

Interesting Facts and Quotes on GDP and measuring progress, true wealth and well-being Did you know…?

On GDP1 On GDP and learning from business

• “Without measures of economic aggregates like • “No one would look just at a fi rm’s revenues GDP, policy makers would be adrift in a sea of to assess how well it was doing. Far more rel- unorganized data. The GDP and related data are evant is the balance sheet, which shows assets like beacons that help policy makers steer the and liability. That is also true for a country.” economy toward the key economic objectives”. Joseph Stiglitz, 2005 in Foreign Affairs, see Paul Samuelson, in Samuelson and Nordhaus http://www.foreignaffairs.org/.html (1995) On One Planet Economy and Footprints • “Distinctions must be kept in mind between quantity and quality of growth, between its costs • If everyone lived and consumed like Europeans and return, and between the short and the long do, we would need 2.6 planets. Source: WWF / term. Goals for more growth should specify more Global Footprint Network, 2007 growth of what and for what.” Simon Kuznets, the creator of GDP, in 1962 • The Welsh Assembly was the fi rst administration in the world to use the Ecological Footprint On GDP and well-being (EF) as an indicator of ‘real progress’. The EF was formally adopted in the National Assembly’s • “The welfare of a nation can scarcely be inferred Sustainable Development Scheme, ‘Learn to Live from a measurement of national income”. Simon Differently’ in March 2001. Kuznets in 1934 • South Australia is using the Ecological Footprint as • For countries above $15,000 per capita per a regional target – aiming to reduce its Footprint year, a rise in average income has very little by 30% by 2050. Source: South Australia’s effect on average happiness. Source Lord Layard Strategy Plan (2007) (2004) On Adjusting GDP On GDP and natural resources • In the USA, the GDP indicator suggests that the • A country could cut down all its forests and deplete economy has been growing steadily from the 1950s its natural resources and this would show only as a to date, but using the ‘genuine progress indicator’ positive gain to GDP despite of the loss of capital. (GPI) suggests that the economy has been stag- Source: Millenium Ecosystem Assessment (MA) nating since the 1970s. Which is right about the 2005 see http://www.millenniumassessment.org health of the economy? Which is a better progress indicator? See http://www.rprogress.org/ On GDP and social equity • The World Bank uses adjusted net saving (also • “Progress measured by a single measuring rod, called genuine saving) to measure the true rate of the GNP, has contributed signifi cantly to exa- savings in an economy after taking into account cerbate the inequalities of income distribution” investments in education, depletion of natural Robert McNamara, President of the World Bank, resources and damage caused by pollution. For 1973 country data see http://www.worldbank.org/

Examples of Country Performance …

1 Gross domestic product (GDP) is the total monetary, market value • Within the EU, Ireland was #1 on genuine savings of all ﬁ nal goods and services produced in a country over a period in 2004. See World Bank, 2004 http://www. of a year. GDP is also equal to the total consumer, investment and worldbank.org/ government spending, plus the value of exports, minus the value of imports in that year.

318 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Interesting Facts and Quotes

• Norway was ranked #1 in the Human • Within the EU-27, Latvia had the lowest carbon Development Index (HDI) in 2004. see http:// footprint in 2006, with 4.7 tonnes green house hdrstats.undp.org/indicators/10.html gas emissions (measured in CO2 equivalent) Annexes per capita. Source: UNFCCC, 2004 (green- • Norway is also currently #1 in the Sustainable house gas inventory) Society Index (SSI). Though being the best in class, even Norway is way below full sustainability. See http://www.sustainablesoci- For further details on indicators see http:// etyindex.com/ www.beyond-gdp.eu/indicators.html and you are also welcome to visit the indicator exhibi- • The Danes were ranked #1 on happi- tion at the Beyond GDP conference taking place ness (or ‘subjective well-being’) in 2006. on the 19th and 20th November 2007 at the see the University of Leicester http:// European Parliament. www2.le.ac.uk/ebulletin/news/press- releases/2000-2009/2006/07/nparticle.2006- 07-28.2448323827/?searchterm=happiness

• The United States of America have the largest Ecological Footprint in the world (9.57 global hectares per capita). See http://www. worldcentric.org/stateworld/footprint.htm ©TI-BC

319 19 & 20 November 2007 Press Pack Annex 2

Useful Information for the Press

OVERVIEW

– A VNR (video news release) on the topic of progress, true wealth and well-being will be available to the press. Circulated week starting 12 November. Contact [email protected] – Live web-streaming will be available on www.beyond-gdp.eu. – EU-27 benchmarking for different issues & indicators available on the day. – GlobeScan survey results for BGDP questions launched 12:00 on 19 November. – Exhibition stands for a range of indicators will provide facts and ﬁ gures. – The Press pack will contain further interesting facts on practice (see further below)

PRESS EVENTS

– Commission press conference at 12:30 of the 19th November 2007 at the Berlaymont. – Press reception: meet the partners and speakers at 14:10 of the 19th November 2007 at the ‘Bar Presse’ of the EP. Short speeches by partners at 14:30.

USEFUL DOCUMENTS & INFORMATION

– List of speakers – on www.beyond-gdp.eu + see attached – Conference and Workshop Programme – on www.beyond-gdp.eu + see attached – Interesting facts and quotes - see attached – Information on indicators – Virtual indicator exhibition – series prepared for Beyond GDP – attached and also available on http://www.beyond-gdp.eu/background-papers.html#selected – Useful links to indicator home pages - http://www.beyond-gdp.eu/links.html – There will be indicator stands at the EP during the conference – Background reports – Canoy, Marcel and Frédéric Lerais. 2007. Beyond GDP: Overview paper for the Beyond GDP conference. Bureau of European Policy Advisers (BEPA), European Commission on http://www.beyond-gdp.eu/background-papers.html#background – European Parliament, Policy Department A, Economic and Scientiﬁ c Policy, Alternative progress indicators to Gross Domestic Product (GDP) as a means towards sustainable development, Study carried out in October 2007. see http://www.europarl.europa.eu/comparl/envi/pdf/externalexpertise/gdp.pdf – EUROPE 2007: Gross Domestic Product and Ecological Footprint. WWF Report to be launched at the Conference. – Eurostat – the EU environmental accounting – a tool for decision making – attached – Giovannini, Enrico, Jon Hall and Marco Mira d'Ercole. 2007. Measuring Well-being and Societal Progress. Organisation for Economic Co-operation and Development. Background paper for the conference 'Beyond GDP', 19-20 November, Brussels on http://www.beyond-gdp.eu/background-papers.html#background – Istanbul Declaration – signed during the II OECD World Forum on "Statistics, Knowledge and Policy" can be downloaded for printing in English, French and Spanish from the Istanbul Forum website: http://www.oecd.org/oecdworldforum. – Wesselink, Bart, Jan Bakkes, Aaron Best and Friedrich Hinterberger. 2007. Measurement Beyond GDP. Background paper for the conference Beyond GDP: Measuring progress, true wealth, and the well-being of nations http://www.beyond-gdp.eu/background-papers.html#background – White, Stephen and Oliver Zwirner. 2007. The use of indicators in the European Commission. Directorate-General Environment, Unit Sustainable Development and Economic Analysis, European Commission on http://www.beyond-gdp.eu/background- papers.html#background

320 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Useful Information for the Press

– Existing Press Coverage, includes – Article by Commissioner Dimas on the Wealth of Nations in The Parliament Magazine http://www.theparliament.com/NR/rdonlyres/1025D9E2-468B-4223-9D0E- Annexes 7E5B78DB0B06/0/parl_mag_29oct07_fullmag.pdf – Environment for Europeans EFE on Beyond GDP http://ec.europa.eu/environment/news/efe/index_en.htm – List of participants – Conference and Workshop and potentially press - attached

PRESS PACK

Commissioner Dimas’ welcome letter then: – #1 Joint press release of the Beyond GDP partners – #2 Beyond GDP Memo – annex to joint press release – #3 List of background documentation and indicators – this doc – #4 Information on Beyond GDP partners – #5 Conference and Workshop programmes – #6 Supporting press releases – GlobeScan press release – embargoed until 12:00 19 November – WWF press release – embargoed until 12:00 19 November – #7 Information from Beyond GDP partners – WWF: GDP and Ecological Footprint – OECD: The Istanbul Declaration – Eurostat: EU Environmental Accounting brochure – EP: Executive summary of Alternative progress indicators to Gross Domestic Product (GDP) – CoR: About the Club of Rome; Ex. sum Money and Sustainability – the Missing Link – #8 Interesting and (newsworthy) facts – #9 Participants list – #10 Beyond GDP contacts for press: contacts for each organisation

321 19 & 20 November 2007 Press Pack Annex 2

Beyond GDP Partners

The fi ve host organisations are the European European Parliament Commission, European Parliament, Club of Rome, OECD and WWF. This note presents a short back- The European Parliament is the ground on each partner and why they are co- only directly-elected body of sponsoring Beyond GDP. the European Union. The 785 Members of the European Parliament are there to European Commission represent the 492 million citizens of Europe. They are elected once every fi ve years by voters right The European Union (EU) is a family of across the 27 Member States of the European democratic European countries, com- Union. Parliament plays an equal role with the mitted to working together for peace Council (of Ministers) in amending, adopting or and prosperity. Now the EU embraces 27 coun- rejecting legislation which has an impact on the tries and 490 million people, and it deals with a daily lives of its citizens, in fi elds such as environ- wide range of issues of direct importance for our mental protection, consumer rights, equal oppor- everyday life. tunities, transport, and the free movement of workers, capital, services and goods. Parliament The European Commission represents and upholds also has joint power with the Council over the the interests of Europe as a whole. It is independ- annual budget of the European Union. ent of national governments. It drafts proposals for new European laws, which it presents to the Assessing existing policies or developing new policy European Parliament and the Council. It manages options require indicators showing where policy the day-to-day business of implementing EU poli- stands, where it is going and how far it is from cies and spending EU funds. The Commission also where it wants to be. The Gross Domestic Product keeps an eye out to see that everyone abides by (GDP) is only an indicator for economic perform- the European treaties and laws. ance. GDP does not properly account for social and environmental costs and benefi ts. It is diffi cult Why the Beyond GDP conference? The European to achieve sustainable decision-making aiming at Commission recognises a need for a better appre- sustainable progress and well-being if welfare is ciation of what progress, true wealth and well-being being considered from a purely economic point of are, that there is a need for improved measure- view. Therefore, in order to measure ‘progress, ment, scope for wider set of evidence for decision wealth and well-being’, political decision-makers making and potential for greater discussion in must go BEYOND GDP. press and public. Different institutions and organisations at all levels The EU, and indeed the planet, face a range of new have carried out a signifi cant number of activities important challenges – climate change, globalisation, to develop indicators for measuring policy progress growth and competition for fi nite resources, security, beyond GDP. The “Beyond GDP Conference” is social cohesion and equity, employment, migration, aiming at presenting and discussing these initia- health and education in a fast changing world. tives in order to identify possibilities to make such The European Commission initiated the Beyond approaches applicable in practical decision-making GDP conference to bring together key institutions, at national, European and global level. This is organisations and expertise to explore how we especially important given global challenges such can improve our measurement of progress, true as climate change, global poverty, pressure on wealth and well-being and launch a process for resources and their potential impact on societies, this improvement. The European Commission is but it is also important given the national and committed to responding to the range of challenges European challenges having an impact on the daily though its policies, legislation, research and assist- lives of our citizens. ance. It is a global challenge, involving actors from across the globe, and the European Commission http://www.europarl.europa.eu welcomes collaboration to bring forward solutions.

http://ec.europa.eu/

322 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Beyond GDP Partners

Club of Rome (CoR) goods” that do not have a price, CO2 emissions, depletion of minerals and forests, degradation Mission statement: The Club of of air and water caused by economic activi- Annexes Rome’s essential mission is to act ties are barely counted as costs. Also, national as an independent, global, non-offi cial catalyst accounting includes as benefi ts the costs of of change. Thus it aims at the following: reparative measures arising from the negative • The identifi cation of the most crucial problems environmental effects of economic activities. facing humanity, their analysis in the global context of the world-wide problematique, the Today the planet is facing squeeze from two sides: research of future alternative solutions and resource use which underpins development, and the elaboration of scenarios for the future. pollution resulting from the development proc- • The communication of such problems to the ess. It is becoming abundantly clear that we are most important public and private decision- living in a natural resource constrained world. makers as well as to the general public. As long as these resources are not given proper political and economic weight, decision-makers Why the Club or Rome decided to co-spon- are fl ying blind into the future. sor the Beyond GDP conference: The Club of Rome, pursuant to its own research on the prob- http://www.wwf.org/ lems of conventional economic measurement, joined in the co-sponsorship of the Beyond GDP conference as an important new initiative by the European Commission. The Club of Rome has OECD - Organisation fully participated in the design of this conference for Economic Cooperation and will continue to support further efforts to and Development measure national progress by integrating into national accounts all the broader indicators of The OECD brings together the governments of quality of life already available. 30 member countries committed to democracy and the market economy. It aims to support http://www.clubofrome.org sustainable economic growth, boost employment, raise living standards, maintain fi nancial stability, assist other countries’ economic development and contribute to growth in world trade. The OECD also shares expertise and WWF - World Wide Fund exchanges views with more than 100 other for Nature countries and economies. It is one of the world’s largest and most reliable sources of comparable Mission statement: WWF’s mission is to stop statistics, and economic and social data. the degradation of the planet’s natural environment and to build a future in which humans live Why the OECD decided to co-sponsor the in harmony with nature, by: Beyond GDP conference: Developing a • Conserving the world’s biological diversity broader range of indicators to assess progress • Ensuring that the use of renewable natural and well-being is a key aspect of the OECD’s resources is sustainable global project on “Measuring the Progress of • promoting the reduction of pollution and Societies”, launched after the Istanbul World wasteful consumption. Forum. The project promotes international debate and cooperation to establish a culture of The WWF European Policy Offi ce contributes to evidence-based decision making and to develop the achievement of WWF's mission by helping reliable and shared measures of societal prog- shape European Union policies impacting on the ress. Underpinning the project is the conviction European and global environment. that access by the public and governments to reliable economic, social, and environmen- Why WWF decided to co-sponsor the Beyond tal indicators can improve governance and GDP conference: GDP only addresses one strengthen the capacity of citizens to infl uence question: “How much value added an economy the decisions which affect their lives. generates”. But it fails to adequately account for the depletion of our ecological assets. As http://www.oecd.org/ natural resources are treated as “free unlimited

323 19 & 20 November 2007 Press Pack Annex 2

Press release 19 November 2007 Worldwide Support for True Wealth Measures: Three-Quarters Say Governments Should Look Beyond Economics and Measure Social and Environmental Progress

Three-quarters of people in ten countries believe and Italians are most enthusiastic, with 85 percent their governments should look beyond econom- of people supporting true wealth measures from ics, and include health, social and environmental health and social statistics. Only 10 percent sup- statistics in measuring national progress. Only 19 port purely economic indices. In the developing percent believe that economic growth alone is the nations of India and Kenya, around 70 percent most important measure. agree with the broader growth measures, but a signiﬁ cant minority of 27 percent still believe in Around 1,000 respondents in each country were economics alone. asked which of two points of view was closest to their own: This survey was conducted by GlobeScan, on behalf of Ethical Markets Media, in June to August 2007, • that governments should measure national and looked at opinions in Australia, Brazil, Canada, progress using money-based statistics because France, Germany, Great Britain, India, Italy, Kenya economic growth is the most important focus and Russia. Alignment in the United States seems for the country; or likely. Previous studies (from the Americans Talk Issues Foundation) have shown up to 79 percent • that health, social and environmental statistics approval of a ‘scorecard’ of quality of life indicators are as important as economic ones and that in the United States. governments should also use these for measuring national progress. These international polling results are timely as a handful of governments have started using Support for the ‘beyond GDP’ statement is espe- growth measures that look beyond pure econom- cially strong in developed countries. The French ics. The ‘Green GDP’, unveiled by Chinese Premier

324 Beyond GDP: Measuring progress, true wealth, and the well-being of nations GlobeScan Press release Annexes

Wen Jiabao in 2004, was an effort to adjust This research across 10 countries shows pub- China’s economic model to take more account lic support for such broader measures of true of its environmental consequences. Although wealth, looking beyond GDP. Clearly, interna- recently suspended, the concept was popular tional public opinion would be supportive of the with the Chinese population. And Bhutan’s Gross goals of the Beyond GDP Conference in the National Happiness Indicators have received European Parliament in November 2007. media attention worldwide. More recently, the British Conservative Party policy paper recommended using a beyond GDP index as a superior measure to GDP. For media interviews, please contact:

Further, many governments and non-govern- Mr. Chris Coulter, Vice-President ment organizations have taken the initiative GlobeScan Incorporated and devised their own indices. The best-known London, UK and emulated worldwide is the United Nation’s +44 20 7253 1441 Human Development Index, founded in 1990, [email protected] which measures quality of life criteria. The World Wildlife Fund’s (WWF) Living Planet Index GlobeScan Incorporated is a global public employs data on species loss. Ecological Footprint opinion and stakeholder research consultancy. analyses measure hectares used to sustain our For more information, please visit: lifestyles. Other similar indices include the www.GlobeScan.com Canadian Index of Well-being (CIW) and the Calvert-Henderson Quality of Life indicators, assessing national trends in the USA since 2000. Many local and city indexes are now in use worldwide, such as those in Sao Paulo, Brazil and Jacksonville, Florida since 1985.

325 19 & 20 November 2007 Press Pack Annex 2

Press release Embargo: 19 November 2007, 12:00 CET EU economies living beyond ecological means: WWF

Brussels, Belgium – The growing economic strength On the other hand, Greece and Spain are still of the European Union has doubled the ecologi- expanding in both economic and consumption cal pressure on the planet in the past 30 years, terms. Greece has experienced the highest growth according to a new report from WWF, the global of ecological footprint, accompanied by a limited conservation organisation. Despite technological growth in terms of human development. advances, environmental pressure has been growing at a faster rate than the European population, France parallels the general EU trend. With improved creating a defi cit of natural resources for the rest technology, its resource availability is increasing of the world and for future generations. but is outpaced by growth of consumption, with the largest component being energy. “Just a generation ago much of Europe was an ecological creditor, using fewer resources than it Among Eastern European countries, Hungary’s foot- had,” said Tony Long, Director of WWF’s European print – as other former centrally planned European Policy Offi ce. “But today Europe lives beyond its economies – has fallen since 1991, mainly because means. If the world’s citizens lived as Europeans, of economic shifts resulting from the ending of the we would need 2.6 planets to provide the neces- Soviet era. Back in 1995, Slovenian citizens were sary resources and absorb the waste.” practising, in global terms, sustainable development, but in 2003 Slovenia’s ecological footprint per In the new report, “Europe 2007 – Gross Domestic capita had more than doubled while the develop- Product and Ecological Footprint”, WWF has compared ment level rose by less than 5 per cent. Romania EU countries’ performance in three key areas since has the lowest ecological footprint in the EU-27, 1971: economic growth measured by Gross Domestic yet it remains an ecological debtor. Product (GDP), pressure on natural resources measured by Ecological Footprint, and human development “Countries are increasingly realizing the signifi cance measured by the UN’s Human Development Index. of ecological assets for economic competitiveness, national security and social justice,” says Tony “What we currently measure as development is Long, Director of WWF’s European Policy Offi ce. a long way away from the EU and world’s stated “Development has to be redefi ned. Improving the aim of sustainable development. This is because quality of life for hundreds of millions of people will economic decisions routinely ignore natural capital have to be separated from ever growing material expenditure,” says WWF’s President Chief Emeka consumption and waste.” Anyaoku. “Economic indicators are essential, but without natural resource accounting, ecological The report was produced as a contribution to defi cits will go unnoticed and ignored. It is as if the conference “Beyond GDP”, organised by the we spent our money without realizing that we are European Parliament, European Commission, OECD, liquidating the planet’s capital.” WWF and the Club of Rome in Brussels from 19 to 20 November 2007. WWF has co-sponsored the All but three EU Members – Finland, Latvia and conference in Brussels with the expectation that Sweden – run an ecological defi cit. Though these it will lead to an action plan to reform Europe’s three countries have greater ecological reserves accounting procedures so that natural resources than others, they do not necessarily manage their are considered when accounting for economic assets well. Finland’s pressure on environment, for growth and progress. example, has grown by 70 per cent since 1975 and is now the highest among EU countries. For further information:

Germany, together with Bulgaria and Latvia, man- Claudia Delpero, Communications Manager at WWF aged to reduce their ecological footprint in the past European Policy Ofﬁ ce, Tel. +32 (0)2 7400925, three decades while growing in human develop- Mobile +32 (0)497 406381, Email cdelpero@ ment. Nevertheless, its footprint is two-and-a-half wwfepo.org times its natural resources and remains more than double the world average per person.

326 Beyond GDP: Measuring progress, true wealth, and the well-being of nations WWF Press release

Notes to the editors: - Full data on EU and world countries’ ecological footprint are available on the WWF’s Living - The Ecological Footprint measures human- Planet Report 2006: http://www.panda.org/ Annexes ity’s demand on the biosphere in terms of the news_facts/publications/living_planet_report/ area of biologically productive land and sea index.cfm. required to provide the resources we use and - Photos to illustrate WWF Press Release: to absorb our waste. The footprint of a country “Europe 2007 - Gross Domestic Product & includes the cropland, grazing land, forest and Ecological Footprint” are available on https:// fi shing grounds required to produce the food, intranet.panda.org/photos/albums/ext/index. fi bre and timber it consumes and absorb the cfm?action=list&alid=825. The image(s) made waste it emits. Biocapacity is the total supply available through the above link are copyright of productive area. The difference between protected and can only be used to illustrate Ecological Footprint and Biocapacity shows the above mentioned press release. Any other whether countries are ecological creditors or subsequent rights are not allowed and are debtors. subject to approval by WWF International and by the photographer(s) concerned. This - The EU is home to 7.7 per cent of the global restriction includes that the link must not be population and 9.5 per cent of the world’s made available to any third party, in particular biocapacity. The EU is also responsible for 16 it may under no circumstances be published per cent of global ecological footprint. Europe’s on a public web site. Individual photo credits shares have diminished since 1971, largely are mandatory. Credit information is available as a result of increase in global population. from the IPTC fi le info of the downloaded images or you can download a separate text - The report “Europe 2007 – Gross Domestic fi le with the relevant information. Product and Ecological Footprint” is available under embargo on http://assets.panda.org/ - B-rolls with TV images are available upon downloads/europe_2007_gdp_and_ef.pdf. request. Graphs can be downloaded from http://assets. panda.org/downloads/europe_2007_fi gures. - This press release and related material will pdf and http://assets.panda.org/downloads/ be available after the embargo time on www. europe_2007_table.pdf. panda.org/eu. ©OPT

327 19 & 20 November 2007 Press Pack Annex 2

The Club of Rome

The Club of Rome is one of the world’s oldest, yet most innovative global think tanks. For more *The World Problematique than 30 years, the Club of Rome has put tomorrow’s issues on today’s agenda. With its network “World Problematique” is a concept created of outstanding members, the Club examines and by the Club of Rome to describe humanity’s proposes future topics in the ﬁ elds of governance, most crucial problems. This includes politics, economy, ecology and civil society across cul- economy and technology as well as culture and tures and across generations. The Club’s reports, ethical values. The complexity of the World conferences and publications are designed as an Problematique lies in the way these problems early warning system for opinion leaders, decision depend mutually on each other, and on the makers and everyone interested in our planet’s incapacity of societal systems to recognise future. them, let alone deal with them. They are aggravated by the length of time the impact The Club of Rome is independent of any political, of acting and reacting in this complex system ideological or business interest. becomes evident.

Birth of the Club of Rome The approach of the Club of Rome to the solution of the world problems is to identify In April 1968, a small group of leaders from diplo- crucial problems before they actually emerge macy, industry and civil society met at a quiet villa as issues in the general public. It proposes in Rome. Invited by Italian industrialist Aurelio analysis from an integrated, global, interdis- Peccei and Scottish scientist Alexander King, ciplinary and long-term perspective which they came together to identify and address the addresses alternative solutions and scenarios. world’s most critical problems. This group agreed The results of this work are communicated to to launch for the fi rst time an initiative on what high-level decision-makers and to the general they called “World Problematique”*, long before public worldwide. many problems which today dominate the global agenda were even recognised as issues for wider discussion. Named after the place where the fi rst Club of Rome Reports meeting was held, the Club of Rome was born. The outcome of this meeting was a process that led to Club of Rome reports provide unique insights into the fi rst Report to the Club of Rome: “The Limits the world’s key issues far away from fashion- to Growth” in 1972. With its future-orientated able statements and short-term thinking. Even views and provoking scenarios the report sold the scenarios and warnings in the Club’s earlier more than 12 million copies in some 30 languages reports are still as valid as they were at the time and established the serious reputation of the Club, of their publication. It is this quality which makes particularly among leaders and decision-makers in the Club of Rome reports a classic reading for all all spheres of society. who are interested in value-based, future-oriented thinking. Following the example of Limits to Growth, many other reports have continued to inspire whole gen- The upcoming Report “Money and Sustainability erations of economists, politicians and scientists. – the Missing Link” by Bernard Lietaer and Stefan In the more than 30 years since the Big Bang Brunnhuber (see below) looks at essential linkage created by the publication of Limits to Growth between our money system and sustainability the Club of Rome has continued its unique and which tends to be overlooked by both ecologists insightful way of identifying important aspects of and monetary specialists. This study shows com- the World Problematique and evolving practical, pellingly why this linkage is so powerful and its credible solutions for them. effects so ubiquitous.

328 Beyond GDP: Measuring progress, true wealth, and the well-being of nations 19 &20 November2007 AbouttheClubof Rome 1 Source: beyond whatcouldbesustained over time. demands ontheplanet’s resourcesandsinks we had“overshot” ourlimits,orexpanded Beyond theLimits was moving deeperinto unsustainableterritory. called Growth anniversary ofthepublication In 1992,thiswas nolongertrue.Onthe20th we couldexaminelonger-term options. that therewas stillroomtogrowsafelywhile the planet’s carryingcapacity. Theteamfound tion andeconomy werestill comfortably within the time.In1972,however, theworld’s popula- growth, anovel andeven controversial ideaat use interacted toimposelimitsindustrial how populationgrowthandnatural resource 1900 to2100.TheWorld3 scenariosshowed of worlddevelopment over twocenturiesfrom – possible patterns–andenvironmental outcomes analyzed 12scenariosthatshoweddifferent model called“World3,” thebookpresentedand Using systemdynamicstheoryandacomputer from theU.S. andseveral foreigncountries. to Growth Commissioned bytheClubofRome, to Growth More than30years ago, abookcalled The LimitstoGrowth ited to100. and moral qualitiesonly. Theirnumberislim- appoint memberswithoutstandingintellectual highly diverse thinking.TheClubcontinuesto scientists. Thesemembersbringintop-quality, business, internationalcivilservants, andtop leaders fromgovernment, civilsocietyand Heads ofState,decisionmakers andopinion Members oftheClubRome includeformer Club ofRomeMembers there was compellingevidence thathumanity White River Junction,VT: 2004),Web: http://sustainer.org/limits/ BeyondtheLimits , theteamupdated A Synopsis:LimitstoGrowth:The 30-YearUpdate was compiledbyateamofexperts createdaninternationalsensation. arguedthatinmany areas 1 . Alreadyinthe1990s Limits Limits to in abook The Limits The

Limits (DonellaMeadows,JorgenRanders &DennisMeadows;

problems. give acomprehensive, coherentviewofmany The authorsinclude80tablesandgraphs that nomic structurethatleadstotheseproblems. however, isthatitpresentstheunderlyingeco- Limits toGrowth ti have beenthefocusofconferences,scien- fi cies extinction.Since mate change,dwindlingoilsupplies,andspe- hundreds ofbooksondeforestation,globalcli- have beentreatedatlengthbefore.Thereare later.” For example,thegapbetweenrichand trend extrapolations …stillaresome30years the bookishowaccurate many ofthebasic recently wrote,“Themostamazingaspectof As notedenergyeconomistMatthewSimmons overshoot inthe21 world istoavoid theseriousconsequencesof they conclude,andmuchmustchangeifthe correct ourcurrentcourseover thelast30years, Humanity hassquanderedtheopportunityto far morepessimisticthantheywerein1972. of environmental problems,theauthors are nologies, newinstitutions,andaawareness has shownsomeprogress,includingnewtech- a stateofovershoot. Whilethepast30years they concludethathumanityisdangerouslyin hensive updatetotheoriginal Update In anewstudy, Limits. The mainchallengeidenti economic problemsdiscussedin proved themwrong.Alltheenvironmental and system andthestratospheric ozone layer have systems. Butexperiencewiththeglobalclimate and economy enoughtoalter theEarth’s natural nable thathumanitycouldexpanditsnumbers decades. Thirtyyears ago, itseemedunimagi- poor hasonlygrownwiderinthepastthree rst published30years ago, theseproblems fi c research,andmediascrutiny. Whatmakes , theauthorshave producedacompre- Limits toGrowth : The30-Year Updateunique, st century. The LimitstoGrowth fi e in ed Limits Limits toGrowth : Beyond the The 30-Year , inwhich was 329

Annexes Indicator Exhibition Annex 3

The following non-governmental organisations – Global Footprint Network and government agencies exhibited their work at the Indicator Exhibition at Beyond GDP. Each – Global Reporting Initiative group represents some aspect of the “state of the art” in indicator development. At the exhibition – Happy Planet Index booths, representatives provided information on the methodologies and practical applications of – International Institute for Sustainable these measures. Development

– Jacksonville Community Council Inc.

– Calvert-Henderson Quality of Life Indicators – Joint Research Centre of the European Commission – Club of Rome – Mapping Worlds – Erasmus University Rotterdam (World Database of Happiness) – new economics foundation

– European Commission, DG Environment – OECD

– European Environment Agency – Transparency International

330 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Registered participants Annex 4

LAST NAME FIRST NAME ORGANISATION COUNTRY

Abdallah Saamah nef (new economics foundation) United Kingdom Annexes Abreu Andre France Libertes Foundation France Abruzzini Arnaldo Eurochambres Belgium Adams David William University of Tasmania Australia Addo Mary-Anne Ministry of Finance & Economic Planning Ghana Adorni-Braccesi Giovanni Ministry of Foreign Affairs Italy Alibert Caroline WWF European Policy Offi ce Belgium Allende Alberto CESE Allin Paul Offi ce for National Statistics United Kingdom Almunia Joaquín European Commission Belgium Alrabah Ibraheem Saudi Fund for Development Saudi Arabia Amati Carlo Italian Ministry of Economic Development Italy Anderson Jason Institute for European Environmental Policy (IEEP) Belgium Anyaoku Emeka WWF International Switzerland Arevalo Angela World Savings Banks Institute Belgium Ariyoshi Koichi JIJI Press (Japanese news agency) Belgium Arkhipov Anton Arsenault Jean-Francois Centre for the Study of Living Standards Canada Atkinson Giles London School of Economics and Political Science United Kingdom Aubaret Helene Planete Vie Belgium Avlonas Nikos Center for Sustainability and Excellence (CSE) Greece Baba Ould Boumeiss Bacigalupi Barbara European Commission Belgium Baco Peter European Parliament Slovak Republic Baeva Mariela European Parliament Belgium Bago Eszter Hungarian Central Stasticial Offi ce Hungary Bakkes Jan Adrianus Netherlands Environmental Assessment Agency The Netherlands Baleiras Rui Government of Portugal Portugal Bandazheuski Yuri Bandura Romina UNDP USA Bangura Osman Bajito Onda Africa Foundation Sierra Leone Barbaro Francesco Barbieri Giovanni Alfredo National Institute of Statistics (ISTAT) Italy Barroso José Manuel European Commission Belgium Barten Natalya Ministry of Statistics and Analysis of the Republic of Belarus Belarus Bassi Samuela Institute for European Environmental Policy Belgium Bauer Martin Statistics Austria Austria Bauler Tom Université Libre de Bruxelles Belgium Baumuller Andreas WWF EPO Belgium Becic Emira Ministry of Science, Education and Sports Croatia Bedford Timothy University of Oulu Finland Bender Szonja Hungarian Chamber of Commerce and Industry Representative Offi ce in Brussels Hungary Benians Stephen EPAA Belgium Beres Pervenche European Parliament France Bergheim Stefan Deutsche Bank Research Germany Best Aaron Ecologic Germany Bianconi Patrizia Emilia-Romagna Region Italy Biegs Ronald WWF Belgium Belgium Bienvenu Mbiye Kalumbu Youth Development of Congo Congo Biffi gnandi Silvia University of Bergamo Italy Bilsborough Simon Welsh Assembly Government Wales Blain Claudine Saint-Etienne Métropole France. Antenne à Bruxelles Belgium Bleys Brent Free University of Brussels Belgium Blokland Johannes European Parliament The Netherlands Blumenthal Karin European Commission Luxemburg Boelhouwer Jeroen The Netherlands Institute for Social Research/SCP The Netherlands Boer Joan Delegation of The Netherlands to the OECD France Bohata Marie European Commission Luxemburg Bolbás Gyöngyi Hungarian Chamber of Commerce and Industry Belgium

331 19 & 20 November 2007 Registered participants Annex 4

LAST NAME FIRST NAME ORGANISATION COUNTRY Bonazzi Elisa Arpa Emilia-Romagna Italy Bond Stuart WWF United Kingdom Boon Bart CE Delft The Netherlands Bordage Francoise Born Kerstin CSR Europe Belgium Bottazzi Gianfranco University of Cagliari Italy Bottega Valentina Unioncamere Piemonte Brussels Ofﬁ ce Belgium Bouder Frederic Emmanuel Sustainable Development Commission United Kingdom Bourdeau Philippe F. Université Libre de Bruxelles Belgium Bozkurt Emine European Parliament Belgium Braat Leon Alterra (Environmental Sciences Department), Wageningen University & Research Centre The Netherlands Brar Sarvjeet Singh GGS Insitute of Information Communication Technology India Bray Nicholas Paul OECD France Breier Siegfried European Parliament Belgium Bremsmits Raivis Ministry of Regional Developement and Local Government Latvia Briguglio Lino Pascal University of Malta Malta Broeckaert Céline Club of Rome Belgium Brunerie Philippe European Commission France Brunker Donald Australian Bureau of Statistics Australia Bruun Marjo-Riitta Information Centre of the Ministry of Agriculture and Forestry Finland Bryman Petter Martin European Parliament Belgium Buchow Hartmut European Commission Luxemburg Buechele Susan Craig Environmental Resource Center Romania Buscaglia Francesco Italy Bushill Matthews Philip European Parliament Belgium Cabeca Julio European Commission Luxembourg Caillierez Laurent ADEME Belgium Callens Marc Gustaaf Research Center of the Flemish Government Belgium Cami Geert Friends of Europe Belgium Campi Giovanni Eurochambres Belgium Canevari Clara Committee of the Regions Italy Cannellini Lucia Committee of the Regions Belgium Canoy Marcel European Commission Belgium Capannelli Elisabetta European Commission Belgium Carl Mogens Peter European Commission Belgium Carré Hervé European Commission Luxembourg Casini Claudio Permanent Representation of Italy c/o E.U. Italy Caspersen Ove European Environment Agency Sweden Cassiers Isabelle Universite Catholique de Louvain Belgium Castilleja Guillermo WWF International Switzerland Cattoir Philippe European Commission Belgium Cavalieri Sandra Ecologic Germany Celmins Viesturs Laboratory of Analytical and Strategic Studies Latvia Cento Pier Paolo Government of Italy Italy Ceppi Contigiani Antonella Cultural Association L’arte del vivere con lentezza (the art of living slowly) Chandogova Katarina University of Cologne Germany Chane Kune Bernard Committee of the Regions Belgium Chang Wushou Peter Taiwan Representative Ofﬁ ce Chevillard Eve Maison du Languedoc-Roussillon à Bruxelles Belgium Chiesa Giulietto World Political Forum Italy Chotard Francoise Représentation de l'Ile-de-France à Bruxelles Belgium Chouinard Marie-France Permanent Delegation of Canada to the OECD France Christensen Ole European Parliament Belgium Ciriolo Emanuele European Commission Belgium Collins Ken Scottish Environment Protection Agency United Kingdom Comi Nicola Italian Ministry of Foreign Affairs Italy Commenne Vincent European Network for a Responsible Consumption Belgium Connor Hélène HELIO International France Contigiani Bruno Cultural Association for a Slower Way of Life Italy

332 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Registered participants

LAST NAME FIRST NAME ORGANISATION COUNTRY Dratwa Jim European Commission Belgium Dreze Jean-Roger Annexes Marie Ghislain Federal Public Service for Health, Food chain safety and Environment Belgium Du Toit Daan South African Mission to the European Union Belgium Dupressoir Sophie European Trade Union Confederation Belgium Dziworski Wojciech European Commission Belgium Eklund Inger Statistics Sweden Sweden Elardo Theodore Elliott Natalie Candice Foreign Affairs and International Trade Canada Canada El-Mikawy Noha U.N. Development Programme (UNDP) Norway Elmkvist Tobias Nils-Johan Central Sweden Belgium Emberger Geraldine DG Competition/ Unit A6 Belgium Espa Efi sio Gonario Offi ce of the Prime Minister, Italy Italy Ettl Harald European Parliament Belgium Everaers Pieter European Commission Luxembourg Evers Michiel Ministry of Economic Affairs The Netherlands Eysackers Erwin Flanders Social and Economic Council Belgium Fabbris Tiziana Permanent Representation of Italy c/o E.U. Belgium Fabrizio Fabbri Permanent representation of Italy to the EU Belgium Farrar-Hockley Christian Health and Environment Alliance Belgium Farrugia Nadia University of Malta Malta Fayl Gilbert European Academy of Sciences and Arts Belgium Fedrigo Doreen European Environmental Bureau Belgium Fenwick David Offi ce for National Statistics United Kingdom Ferreira Elisa European Parliament Portugal Fiala Ingeborg Austria Figueiredo Carlos Manuel Ministerio do Ambiente do desenvolvimento Regional e Ordenemento do Território Portugal Filzmoser Eva Maria Weber Shandwick Belgium Flammini Beatrice Gplus Europe Belgium Fleischer Ingrid Arbeitsgruppe “Frieden und Nachhaltige Entwicklung” Forschungsstätte der Evangelischen Studiengemeinschaft Fleuret Aurore Ministry for Ecology, Sustainable Developement and Spatial Planning / Department of Economic Affairs and Environmental Assessment France Flores Rivera Ernesto Sonora Institute of Technology Mexico Fogelberg Teresa Global Reporting Initiative The Netherlands Fortuin Julia ICODA Frey Bruno University of Zurich Switzerland Gadrey Jean University of Lille France Galatola Michele DG Research, EC Galvano Giuseppina Ministry of Economics and Finance Italy Gardner Nina OECD Italy Gee David Taylor European Environment Agency Denmark Geier Jörg The Club of Rome Germany Georgiev Zahari Bulgarian National Assembly & member of the Parliamentary Assembly of the Council of Europe Bulgaria Georgieva Kristalina The World Bank USA Gerdes Holger Ecologic Germany Gil Sebastian European Commission Belgium Gimenez Daniel Oslo Region European Offi ce Norway Giovannini Enrico OECD France Godar Milan Rural Area Development Programme, RADP Nepal Göpel Maja Charlotte World Future Council Germany Goralczyk Malgorzata Polish Academy of Sciences Poland Goossens Yanne European Parliament Belgium Graichen Jakob Oeko-Institut e.V. Germany Gréaume Francois ADEME Belgium Grinbergs Artis Ministry of Regional Development and Local Government Latvia Grinwis Mona Vrije Universiteit Brussel Belgium

333 19 & 20 November 2007 Registered participants Annex 4

LAST NAME FIRST NAME ORGANISATION COUNTRY Grooten Monique WWF The Netherlands Guarinoni Monica Health & Environment Alliance Belgium Guerin André-Jean Ministry for Ecology and Development France Guerin Emmanuel Institut du Développement Durable et des Relations Internationales France Guiramand Maryline International Institute for Sustainable Development Switzerland Gusmao Regina Centre for Strategic Management and Studies Brazil Gustavsson Lasse WWF Sweden Sweden Gutierrez Belen Spanish institute for Aerospace Research Belgium Gyan-Baffour George Government of Ghana Ghana Haag Marcel European Commission Belgium Haffer Sören Ecologic Germany Hagén Hans-Olof Statistics Sweden Sweden Häger Oliver TV1.DE GmbH Haines-Young Roy H. University of Nottingham United Kingdom Hak Tomas Charles University Czech Republic Hall Jonathon OECD France Hall Stephen Department for Environment, Food and Rural Affairs United Kingdom Hamdan Fouad Friends of the Earth Europe Hammarström Susanne The Centre Belgium Hanauer Jörg European Commission Luxembourg Hannerz Fredrik European Parliament Belgium Harangozó Gábor European Parliament Belgium Hassi Satu European Parliament Belgium Hauser Andreas Roman Federal Offi ce for the Environment Switzerland Havinga Ivo United Nations USA Healy Sean CORI Justice Ireland Heidorn Christian J.A. European Commission Luxembourg Henderson Hazel Club of Rome USA Henderson Judy Global Reporting Initiative (GRI) Australia Herbert Sophie Ecologic Germany Higgins Jim European Parliament Belgium Hingel Anders European Commission Belgium Hinterberger Friedrich Sustainable Europe Research Institute (SERI) Austria Hivonnet Joëlle European Commission Belgium Hobza Alexandr European Commission Belgium Hoffmann-Müller Regina Statistical Offi ce Germany Germany Hofheinz Paul The Lisbon Council asbl Belgium Hontelez John European Environmental Bureau Belgium Hope Erica European Parliament Belgium Hoppenstedt Karsten European Parliament Belgium Howells Imogen European Parliament Belgium Hubert Agnes European Commission Belgium Hudson Alana New Zealand Hudson Christian DG ENV G1 United Kingdom Hueting Roefi e Foundation for research on sustainable national income The Netherlands Hugé Jean Free University of Brussels Belgium Hughes Jonathan Scottish Environment LINK Scotland Hultin Bjorn Intercity Consulting Belgium Hywel Jones CORDIS Belgium Ignatova Larisa Permanent Mission of the Russian Federation to the European Communities Russia Ilesic Primoz Permanent Representation of the Republic of Slovenia to the EU Slovenia Ion Mariano MIXCOACH NETWORX Belgium Ivanov Ivan Nikolaev Bulgarian National Assembly Bulgaria Iztueta-Azkue Anjeles Basque Government Spain Jackson Tim University of Surrey United Kingdom Jacobsson Frida Central Sweden Belgium

334 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Registered participants

LAST NAME FIRST NAME ORGANISATION COUNTRY

Janowski Mieczyslaw Edmund European Parliament Belgium Annexes Jansons Martins European Commission Belgium Jany-Catrice Florence Clerse University Lille France Jaquet Sylvie European Foundation for the Improvement of Living and Working Conditions Belgium Jeanrenaud Sally The World Conservation Unit (IUCN) Switzerland Jesinghaus Jochen European Commission Italy Jetté Stéphane Mission of Canada to the European Union Belgium Jin Zhouying Chinese Academy of Social Science China Johnson Daniel Edward Blekinge Institute of Technology USA Johnston Peter European Commission Belgium Jones Hywel Cordis Belgium Jorns Axel Bayer AG Germany Juffermans Jan P. Foundation De Kleine Aarde/The Small Earth The Netherlands Jult Wiske European Parliament Belgium Jurakic Zeljka Environment Protection Fund Serbia Kahn Charlotte B. The Boston Foundation USA Kampelmann Stephan Lille University, Internationalist Review Foundation France Kapuran Slavko Statistical offi ce Serbia Serbia Karametou Panagiota Harokopio University of Athens Greece Karlsson Sylvia Club of Rome Finland Kaschl Arno European Commission Belgium Kaukewitsch Robert European Economic and Social Committee Belgium Kekkonen Sirpa Prime Minister's Offi ce Finland Kellens Jean-Pierre TOTAL Belgium Kempf Hervé Le Monde France Kerger Martin Ecologic Germany Kerr Graeme Alexander Natural England United Kingdom Kettner Claudia University of Graz Austria Khosla Ashok Club of Rome India Kiss Karoly Corvinus University of Budapest Hungary Kitson Michael John London Metropolitan University United Kingdom Kiuchi Tachi The Future 500 / E-Square,Inc USA Klein Daniel DG ENV Belgium Kleinpeter Marc-Antoine Ministry for Ecology, Sustainable Development and Spatial Planning France Kletzan Daniela Austrian Institute of Economic Research (WIFO) Austria Kluzer Franc Klvacova Eva University of Economics, Prague Czech Republic Kmet Zupancic Rotija Institute of Macroeconomic Analysis and Development Slovenia Knott Lauren European Parliament Belgium Kobayashi Kazunori Japan for Sustainability Japan Kohl Andrea WWF European policy Offi ce Germany Korzinek Annika European Economic and Social Committee Belgium Kosonen Katri European Commission Belgium Koster Francis Independent Consultant; Advisory Council Member USA Kraemer R. Andreas Ecologic Germany Krovak Jiri Czech Statistical Offi ce Czech Republic Kruzinska Daniela Ministry of Education Slovak Republic Kur Iwona Regional Offi ce of Warminsko-Mazurskie Voivodeship Belgium Kurrer Helga Kwiecinska Katarzyna European Parliament Belgium Kwon Tae-shin Permanent Delegation of Korea to the OECD France Labat Ariane European Commission Belgium Lachance Marc Canadian Council on Learning Canada Laconte Pierre Laffi te Aurelie WWF Belgium Belgium Laible Carol Domini Social Investments LLC USA Laicu Simina

335 19 & 20 November 2007 Registered participants Annex 4

LAST NAME FIRST NAME ORGANISATION COUNTRY Lalanne Laure European Commission Belgium Lambert Carine FICEB Belgium Lambert Jean European Parliament Belgium Lambert Patricia European Commission - Joint Research Center Belgium Landa Ortiz De Zarate Lucia Lang Stefanie WWF Belgium Langeweg Fred Netherlands Environmental Assessment Agency The Netherlands Lanzillotta Franca European Commission Belgium Lasiauskas Lina Lautar Katja Government Ofﬁ ce for Growth Slovenia Laxton Hugh UK Nature and Landscape Ofﬁ ce Belgium Le Donne Fabio Ministry of Economy and Finance Le Laidier Syvlie INSEE France Le Roy Pierre Globeco France Lebatt Boumeiss Baba Mauritania Ledoux Laure European Commission Luxemburg Lee Yoon OECD / Graduate School of International Studies at Seoul National University France Lejeune John Federal Public Service for Sustainable Development Belgium Lerais Frederic European Commission Belgium Letemendia Elena European Banking Federation Belgium Létourneau Raynald Human Resources and Social Development Canada Canada Levy Kedem The Israeli Forum for Sustainable Economics Liever Taillie Lievesley Denise International Statistical Institute United Kingdom Lilliehöök Anna Swedish Parliament, PACE Sweden Lindkvist Ewa European Commission Belgium Lissowska Maria Lloyd Susan Elizabeth LLoyd Consulting, Inc. USA Loh Jonathan WWF International and Zoological Society of London United Kingdom Lomba Patricia Lone Oyvind Ministry of Environment Norway Long Alexandra Long Mariana Long Tony World Wide Fund For Nature International Belgium Lopez Dominguez Virginia European Commission Belgium Lopez Fernandez Izidoro Lorens Pierre-Jean Regional Council of the Nord-pas de Calais France Love Brian Reuters Lucas Caroline European Parliament Belgium Lukács András Clean Air Action Group Hungary Lussu Francesca Arpa Emilia-Romagna Italy Luyckx Marc Club of Rome/ CBA Business Academy, Zagreb Belgium Lyubcheva Marusya European Parliament Belgium Machavela Tatiana Maastricht Graduate School of Governance The Netherlands Madziar Piotr European Commission Belgium Maes Fre ABVV - FGTB Belgium Maier Rolf Germany Maina Alex University of Cape Town South Africa Mäkelä Timo European Commission Belgium Makipaa Arttu European Parliament Belgium Malgarini Marco (ISAE) Italy Mampengu Madeleine European Commission Belgium Manchin Robert The Gallup Organisation Europe Belgium Mandarino Antonella Italy Mansaray Amidu Bajito Onda Africa Foundation Sierra Leone Mansbridge Helen Scottish Executive Scotland

336 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Registered participants

LAST NAME FIRST NAME ORGANISATION COUNTRY Manuel Arthur R. Sustainable Society Foundation The Netherlands Maratou Alexandra European Commission Belgium Annexes Mardiste Peep European Parliament Belgium Marin Moreno Ines UK Nature and Landscape Ofﬁ ce Belgium Markandya Anil University of Bath United Kingdom Marks Nic new economics foundation United Kingdom Marneffe Thierry France Martins Maximiano Parliamentary Assembly of the Council of Europe Portugal Marton Zoltan Focus Eco Center Romania Marx Thomas Green Party Styria Austria Mason Jeff Reuters Belgium Matuszak Agnieszka European Parliament Belgium Maxson Peter Concorde East/West Sprl Belgium May Douglas Memorial University - Newfoundland Canada Mayer-Ries Jörg Federal Ministry for the Environment, Nature Conservation and Nuclear Safety Germany Mbeyela Thomas National Artiﬁ cial Insemination Centre Tanzania McGlade Jacqueline European Environment Agency Denmark McIntosh Miranda Christina European Commission Belgium McKenzie Emily Joint Nature Conservation Committee United Kingdom McLoughlin Aaron WWF Belgium Meinzer Lothar BASF Germany Melcak Milos Czech Parliament Czech Republic Meloni Giulia Italy Menahem Georges CNRS - University Paris 13 France Mende Susann GTZ Belgium Mensink Julia London School of Economics United Kingdom Miege Mireille CONCORD Belgium Miege Robin European Commission Belgium Miguel Marinas- Depasse Madrid Chamber of Commerce and Industry Spain Mikander Nina Permanent Representation of Finland to the EU Finland Mikulic Branislav European Foundation for the Improvement of Living and Working Conditions Ireland Millar Sarah Greater London Authority United Kingdom Miller-Mayer Jacqueline Belgian Federal Council for Sustainable Development, European Environmental Bureau (EEB) Belgium Mills Philippe Centre d'analyse stratégique France Mira d'Ercole Marco OECD Italy Mitchell Gay European Parliament Belgium Mitsotaki Alexandra ActionAid France Moench Barbara European Commission Belgium Moerman Koen Belgian Council for Sustainable Development Belgium Moldan Bedrich Senate of the Parliament Czech Republic Moldoveanu Mihaela Cornelia European Parliament The Netherlands Mollgaard Elisabeth European Commission Luxemburg Momoh Josephine Bajito Onda Africa Foundation Sierra Leone Monni Salvatore Italy Morosini Marco Swiss Federal Institute of Technology Switzerland Moroz Sergey WWF EUROPEAN POLICY OFFICE Morris-Mensah Emmanuel Rural Environmental Network Ghana Mortensen Jorgen Centre for European Policy Studies,Brussels France Mortimer Diana Joint Nature Conservation Committee United Kingdom Mosná Marta Ministry of Education of the Slovak Republic Slovak Republic Mouffe Céline Central Council of Economics Belgium Mracek Karel University of Economics, Prague Czech Republic Müller Patrick European Commission Luxembourg Muurman Jarmo Ministry of the Environment Finland Nagy Michael Umweltbundesamt Austria Nash Timothy Jack Blekinge Institute of Technology Sweden

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LAST NAME FIRST NAME ORGANISATION COUNTRY Nauen Cornelia E. European Commission Belgium Necerette Norma Neuville Aude European Commission Belgium Neves Joao IAPMEI Neves Costa Antonio Committee of the Regions Belgium Nicholson Sally WWF European Policy Offi ce Belgium Niestroy Ingeborg European Environment and Sustainable Development Advisory Councils (EEAC) Belgium Nilsson Ann European Commission Germany Nirascou Francoise French Institute for the Environment France Noirfalisse Joelle WWF Belgium Nommann Tea Stockholm Environment Institute Tallinn Center (SEI-Tallinn) Estonia Norlund Laurs European Commission Luxemburg Notat Nicole Vigeo France Notenboom Jos Netherlands Environmental Assessment Agency The Netherlands Ntahompagaze Pascal O'Hanlon Gerry Central Statistics Offi ce Ireland Ireland Ohmori Takatoshi Mission of Japan to EU Japan Olenski Jozef central statistical offi ce Poland Olivieri Francesco ENEL Italy Opoku-Ahwenee Michael Economic Support Foundation Ghana Osborn Derek European Economic and Social Committee United Kingdom Othman Jamal UNIVERSITI KEBANGSAAN MALAYSIA Malaysia Ott Jan Cornelis Erasmus University Rotterdam The Netherlands Owens Kathryn Committee of the Regions Belgium Padoan Pier OECD France Palazzi Marcello Progressio Foundation The Netherlands Pallemaerts Marc Institute for European Environmental Policy Belgium Palm Viveka Statistics Sweden (SCB) Sweden Panayotopoulos Marie European Parliament Belgium Paneli Meropi European Commission Belgium Panella Lauro European Commission Belgium Panneels Anne FGTB Belgium Pans Michèle Belgian Central Council for Business Belgium Papazoglou Clairie BirdLife International Belgium Parry Morgan WWF-UK United Kingdom Patton Hank World Steward Perez Javier Cantabria Regional Government. Brussels Offi ce Belgium Perry Ian European Commission Belgium Petroz Isabella Region Aosta Valley Italy Piana Valentino Economics Web Institute Italy Pinter Laszlo International Institute for Sustainable Development (IISD) Canada Pirozhnikova Liudmila State Duma Russian Federation Pisani Stefano Italian Revenue Agency Italy Plesnik Jan Agency for Nature Conservation and Landscape Protection of the Czech Republic Czech Republic Poggi Patrizia European Commission Belgium Poirier Virginie UNIFE - The European Railway Industries Belgium Pollard Duncan WWF Switzerland Poppe Charly Friends of the Earth Europe (FoEE) Belgium Porcu Mariano Università degli Studi di Cagliari Italy Potschin Marion B. University of Nottingham United Kingdom Pöttering Hans-Gert European Parliament Germany Pradelle Perceval European Commission France Presmanes Marta Catholic University of Leuven Belgium Prodi Vittorio European Parliament Belgium Promteau Thierry OECD France Proschek Michael Ecosocial Forum Europe Austria Pulselli Federico Maria University of Siena Italy Pursey Stephen International Labour Organization

338 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Registered participants

LAST NAME FIRST NAME ORGANISATION COUNTRY Pyoos Marjorie Department of Science & Technology South Africa Quatman Johanna Maastricht University, University College Maastricht The Netherlands Annexes Quinn Martijn European Commission Belgium Quinti Gabriele Raciborski Rafal European Commission Belgium Radermacher Walter Federal Statistical Offi ce Germany Radvilaite Vilma Ragnarson Richard EFTA (European Free Trade Association) Luxembourg Raheem Nejem Center for Sustainable Economy USA Raingold Andrew Aldersgate Group United Kingdom Ramanauskaite Aiste Parliamentary assembly of the council of europe France Ransdorf Miloslav European Parliament Belgium Ranson Florence European Banking Federation Belgium Rasmussen Rune Transparency International Denmark Ravazzi Douvan Aldo Ministry of Environment, Land and Sea Italy Reck Jennifer Ecologic Germany Reineke Ninja WWF Belgium Reitschuler Gerhard Federal Environment Agency Austria Rekker-Weber Sonja Ministry of Economics Luxembourg Renshaw Nina T & E - The European Federation for Transport and Environment Belgium Revelli Barbara Global Reporting Initiative The Netherlands Reymen Dafne IDEA Consult Belgium Rickard Louise European Environment Agency Denmark Ridgway James Edward University of Durham United Kingdom Rijnhout Leida Flemish Platform on Sustainable Development Belgium Rillaers Alexandra European Commission Belgium Riontino Antonio I&D Consulting Italy Riss Jorgo Greenpeace Belgium Ritchie-Dunham James Loomis Institute for Strategic Clarity USA Ritschelova Iva Jan Evangelista Purkyne University Czech Republic Roca Zamora Amparo European Commission Belgium Roche Jerome European Economic and Social Committee Belgium Rodrigues Duarte Cabinet of Portuguese Secretary State for Regional Development Portugal Rogelj Melita Legend Systems Group Belgium Rondinella Tommaso Lunaria Italy Rosenstock Manfred European Commission Belgium Roseta-Palma Catarina Lisbon University Institute - ISCTE Portugal Rosling Hans Karolinska Institute & Gapminder Foundation Sweden Rosselli Angiolo Independent Consultant Italy Rotbergs Ugis Pasaules Dabas Fonds (PDF) Latvia Rottmann Katja Parliamentary Group of the Greens / Germany Belgium Rousson Marianne Green Strategy Belgium Roux Jean-Luc Planete Vie Belgium Rubinstein Robert Brooklyn Bridge - TBLI Group The Netherlands Ryba Jacek Offi ce of the Committee for European Integration Poland Saboia Ana Brazilian Institute for Geography and Statistics(IBGE) Brazil Saks Katrin European Parliament Belgium Saliez Jean-Yves Inter Environnement Wallonie Belgium Saltelli Andrea Joint Research Centre Italy Salvaris Mike RMIT University Australia Sanchez Juana International Statistical Literacy Project USA Sanchez Shenna Lao Vrije Universiteit Brussel, WWF Philippines Sansoni Michele ARPA Emilia-Romagna Italy Santagata Giulio Government of Italy Italy Santos Jacqueline Federal Ministry of Economy Belgium Sasi Kimmo Eduskunta, MP & member of the Parliamentary Assembly of the Council of Europe Finland Saulnier Jerome European Commission Belgium Scaffi di Alessandra Cafebabel.com Italy Scaglione Giovanna Ministry of Economy and Finance Italy Schaubacher Daniel Robert Brussels-EU Chapter, Club of Rome

339 19 & 20 November 2007 Registered participants Annex 4

LAST NAME FIRST NAME ORGANISATION COUNTRY Schauer Thomas Club of Rome Austria Schepelmann Philipp Wuppertal Institute for Climate, Environment and Energy Germany Schmitz Miriam European Parliament Germany Schneider Christoph Austrian Federal Economic Chamber Austria Schneider Francois Research and Degrowth France Schneider Roland TUAC France Scholtalbers Roeland Gerhard European Commission - Joint Research Center Belgium Schoof Ulrich Bertelsmann Foundation Germany Schotterberg Roland Schulmeister Anke WWF Belgium Schwalba-Hoth Frank Bündnis 90/Die Grünen Belgium Schweiner Jan Ministry of Labour and Social Affairs Czech Republic Schwendener Daniela Médiatrice pénale & généraliste Scott Jesse E3G Climate Change Belgium Seeber Richard European Parliament Austria Segol Bernadette UNI-Europa Belgium Segre Elisabetta University of Rome “La Sapienza” and Lunaria Italy Semeta Algirdas Statistiscs Lithuania Lithuania Sendil Ercan Shearn Jean WWF Belgium Sheng Fulai United Nations Environment Programme Kenya Shrotyria Vijay Kumar India Shvarts Evgeny WWF-Russia Russian Federation Sicherl Pavle SICENTER and University of Ljubljana Slovenia Sidhu Amar GGS Insitute of Information Communication Technology India Sidhu Mandeep GGS Insitute of Information Communication Technology India Siegel Andreas Council of Europe France Simon Hermann Josef Representation of Rhineland-Palatinate Germany Simpura Jussi Stakes National Research and Development Centre for Welfare and Health Finland Singh Bhupinder GGS Insitute of Information Communication Technology India Sinha Rajiv Arizona State University USA Slabe Anamarija Institute for Sustainable Development // EEB Slovenia Sleszynski Jerzy Warsaw University, Faculty of Economic Sciences Poland Slonimskaya Marina Ministry of Statistics and Analysis of the Republic of Belarus Belarus Smeets Ruben Joachim Telos - Tilburg University The Netherlands Smits Jan-Pieter Statistics Netherlands The Netherlands Smits Jeroen Department of Economics, Radboud University The Netherlands Smyth Michael CESE Soebech Olaf Vrije Universitet Brussels and Institute for European Studies Belgium Somavia Juan International Labour Organization Switzerland Sonntag William United States Environmental Protection Agency USA Spalding Carol Florida Community College at Jacksonville USA Spangenberg Joachim Helmholtz Centre for Environmental Research Germany Speroni Donato Odysseus Statistical Communication Italy Speroni di Fenizio Pietro Dublin City University Ireland Špidla Vladimír European Commission Belgium Spielmann Hans Jürgen STNJ Foundation for Social Development Thailand Spillemaeckers Sophie HIVA, University of Leuven Belgium Spinaci Gianluca EU Committee of the Regions Belgium Spruijt Desmond Mapping Worlds The Netherlands Srebotnjak Tanja Yale University USA Stampa Nikita European Commission Belgium Stanhardt Iben European Environment Agency Denmark Stansﬁ eld Sally Health Metrics Network (HMN) Switzerland Steigenberger Markus German League for Nature and Environment Germany Steinbuka Inna European Commission Luxembourg Stephens Rachel Stewart Joanne GHD Australia

340 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Registered participants

LAST NAME FIRST NAME ORGANISATION COUNTRY Stoczkiewicz Magdalena CEE Bankwatch Network/Friends of the Earth International Belgium Strocco Roberto Turin Chamber of commerce, President Staff Annexes Strohm Wolfgang Federal Statistical Offi ce Germany Strupczewski Jan Reuters Belgium Sturis Valerijs State Chancellery Latvia Suesser Jan French Ministry for the Economy Finance and Employment France Sukhdev Pavan Green Indian States Trust (GIST) & Green Accountiny for Indian States Project (GAISP) India Suleimanova Karina Committee of the Regions Belgium Suvorov Mojca Statistical Offi ce of the Republic of Slovenia Slovenia Suzenet Gaetane Water UK Belgium Swanson Eric The World Bank USA Szaraz Krisztina European Parliament Slovak Republic Szymanowska Mariola European Commission Belgium Tada Hiroyuki Japan for Sustainability Japan Tagliafi erro Carolina Queen’s University of Belfast United Kingdom Talberth John Redefi ning Progress and the Center for Sustainable Economy USA Taleb Nassim University of Massachusetts Amherst USA Taruffi Eleonora Emilia-Romagna Region Italy Taylor Jane United Kingdom Telgmaa Juhan Estonian Society for Nature Conservation Estonia ten Brink Patrick Institute for European Environmental Policy Belgium Teule Paul Ruben GLOBE Europe Belgium Thage Bent Statistics Denmark Denmark Theophilou Vassilia European Commission Belgium Thirion Samuel Division for Development of Social Cohesion - DG III Council of Europe Thiry Geraldine Nelly Universite Catholique de Louvain (UCL) Belgium Thomas Karin Maria Thomas Consulting The Netherlands Thoresen Victoria The Consumer Citizenship Network Norway Thyssen Marco European Economic and Social Committee Belgium Todorov Todor National Statistical Institute Bulgaria Tomase Dace Central Statistical Bureau of Latvia Latvia Tönshoff Silke Committee of the Regions Belgium Torregrossa Marco European Partners for the Environment Belgium Torta Giuliana European Commission Belgium Tubb Adeline The University of New South Wales Australia Tubb Graham Frederick SEEDA United Kingdom Turchetto Eleonora Veneto Region Belgium Tzvetana Eugenia Vaccari Alessandra Università di Ferrara Italy van Brusselen Patrick Belgian Federal Planning Bureau Belgium Van Daele Daniel General Federation of Belgian Labour Belgium van de Kerk Geurt Sustainable Society Foundation The Netherlands van de Ven Peter Statistics Netherlands (CBS) The Netherlands van Dieren Wouter IMSA Amsterdam The Netherlands Van Donge Walter Research Centre of the Flemish Government Belgium Van Eijl Henriette European Commission Belgium van Engelen Donne The Netherlands Society for Nature and Environment The Netherlands van Ermen Raymond European Partners for the Environment (EPE) Belgium van Hasselt Willem Ministry of Foreign Affairs The Netherlands Van Laer Jeroen European Commission Belgium Van Peteghem Michiel Flemish Environment Agency (VMM) Belgium Vanden Abeele Michel European Commission Belgium Vanhonacker Arnaud Universal Human Development Research Belgium Van Keunen Eduard Vanoli André The French Institute for the Environment France Vanwissen Amelie European Parliament Belgium Varis Tuula Permanent Representation of Finland Finland Veenhoven Ruut Erasmus University Rotterdam The Netherlands

341 19 & 20 November 2007 Registered participants Annex 4

LAST NAME FIRST NAME ORGANISATION COUNTRY Veljkovic Natasa Environment Protection Fund of Republic of Serbia Serbia Vereecken Frank Flemish Government Belgium Vermeylen Margareta European Foundation for the Improvement of Living and Working Conditions Ireland Vigneron Dominique European Parliament Belgium Vignon Jerome European Commission Belgium Vijverberg Cornelis H.T. Ministry of Housing,Spatial Planning and the Environment The Netherlands Villa Margherita So-ge-STAR The Netherlands Villanueva Elena Committee of the Regions Vincent Damien WWF Belgium Viveret Patrick Cours des Comptes, France France Vlachos Panagiotis National Statistical Service of Greece Greece Vöö Stefan University Hospital of Maastricht The Netherlands Vos Hans European Environment Agency Denmark Vrettos Konstantinos Parliamentary Assembly Greece Vrtiskova Lenka Ministry of Environment of the Czech Republic Czech Republic Vukmirovic Dragan Statistical Ofﬁ ce of Serbia Serbia Wackernagel Mathis Global Footprint Network USA Walton Richard European Central Bank Germany Warner Benjamin USA Weaver Paul Michael University of Durham United Kingdom Weber Jean-Louis European Environment Agency Denmark Weiler Raoul Club of Rome Belgium Wejchert Jakub European Commission Belgium Whitaker Celina CEDAL France Wijkman Anders European Parliament Belgium Williams Evan Scottish Environment Protection Agency United Kingdom Wilson James R. Basque Institute of Competitiveness Spain Wolff Pascal European Commission Luxembourg Woods John Friends of the Earth United Kingdom Wurm Nikolaus European Commission Luxembourg Yamamoto Norio Global Infrastructure Fund Research Foundation Japan Japan Yoon Myun-Shik Permanent Delegation of Korea to the OECD France Yost Linda Institute of Ecology and Environmental Management (IEEM) United Kingdom Young Abimbola Sylvester International Labour ofﬁ ce Switzerland Young Peter Enviros Consulting / Aldersgate United Kingdom Yrjö-Koskinen Eero Finnish Association for Nature Conservation Finland Zamparutti Tony Milieu ltd Belgium Zenie Alexandre International Development Consultant France Zhega Kreshnik European Parliament Belgium Zieschank Roland Free University Berlin Germany Zimmermann Matthias European Parliament Germany Zlebir Silvo Environmental Agency of the Republic of Slovenia Slovenia Zlinszky Janos Regional Environmental Center for Central and Eastern Europe Hungary Zuinen Natacha Federal Planning Bureau Belgium Zuleeg Fabian European Policy Centre Belgium Zwirner Oliver European Commission Belgium

343 19 & 20 November 2007 Istanbul Declaration Annex 5

ISTANBUL DECLARATION

We, the representatives of the European Commission, the Organisation for Economic Cooperation and Development, the Organisation of the Islamic Conference, the United Nations, the United Nations Development Programme and the World Bank,

Recognise that while our societies have become more complex, they are more closely linked than ever. Yet they retain differences in history, culture, and in economic and social development.

We are encouraged that initiatives to measure societal progress through statistical indicators have been launched in several countries and on all continents. Although these initiatives are based on different methodologies, cultural and intellectual paradigms, and degrees of involvement of key stakeholders, they reveal an emerging consensus on the need to undertake the measurement of societal progress in every country, going beyond conventional economic measures such as GDP per capita. Indeed, the United Nation’s system of indicators to measure progress towards the Millennium Development Goals (MDGs) is a step in that direction.

A culture of evidence-based decision making has to be promoted at all levels, to increase the welfare of societies. And in the “information age,” welfare depends in part on transparent and accountable public policy making. The availability of statistical indicators of economic, social, and environmental outcomes and their dissemination to citizens can contribute to promoting good governance and the improvement of democratic processes. It can strengthen citizens’ capacity to inﬂ uence the goals of the societies they live in through debate and consensus building, and increase the accountability of public policies.

We afﬁ rm our commitment to measuring and fostering the progress of societies in all their dimensions and to supporting initiatives at the country level. We urge statistical ofﬁ ces, public and private organisations, and academic experts to work alongside representatives of their communities to produce high-quality, facts-based information that can be used by all of society to form a shared view of societal well-being and its evolution over time.

Ofﬁ cial statistics are a key “public good” that foster the progress of societies. The development of indicators of societal progress offers an opportunity to reinforce the role of national statistical authorities as key providers of relevant, reliable, timely and comparable data and the indicators required for national and international reporting. We encourage governments to invest resources to develop reliable data and indicators according to the “Fundamental Principles of Ofﬁ cial Statistics” adopted by the United Nations in 1994.

344 Beyond GDP: Measuring progress, true wealth, and the well-being of nations Istanbul Declaration Annexes To take this work forward we need to:

• encourage communities to consider for themselves what “progress” means in the 21st century;

• share best practices on the measurement of societal progress and increase the awareness of the need to do so using sound and reliable methodologies;

• stimulate international debate, based on solid statistical data and indicators, on both global issues of societal progress and comparisons of such progress;

• produce a broader, shared, public understanding of changing conditions, while highlighting areas of signiﬁ cant change or inadequate knowledge;

• advocate appropriate investment in building statistical capacity, especially in developing countries, to improve the availability of data and indicators needed to guide development programs and report on progress toward international goals, such as the Millennium Development Goals.

Much work remains to be done, and the commitment of all partners is essential if we are to meet the demand that is emerging from our societies. We recognise that efforts will be commensurate with the capacity of countries at different levels of development. We invite both public and private organisations to contribute to this ambitious effort to foster the world’s progress and we welcome initiatives at the local, regional, national and international levels.

We would like to thank the Government of Turkey for hosting this second OECD World Forum on “Statistics, Knowledge and Policy”. We also wish to thank all those from around the world who have contributed to, or attended, this World Forum, or followed the discussions over the Internet.

Istanbul, 30 June 2007

______

Signed during the II OECD World Forum on “Statistics, Knowledge and Policy”

345 19 & 20 November 2007 Conference organisation Annex 6

The Beyond GDP conference built on the ongoing work of many international organisations and beneﬁ tted from the collaboration of high-level experts from around the world. On the initiative of Commissioner for Environment Stavros Dimas, the conference was organised by the European Commission, together with the European Parliament, Club of Rome, OECD, and WWF, and the organisational support of Ecologic, the Institute for European Environmental Policies (IEEP) and the Netherlands Environmental Assessment Agency (MNP). The conference was part of the ofﬁ cial list of events of the Portuguese EU Presidency.

• Organising Committee Members

Pieter Everaers: European Commission, Eurostat Enrico Giovannini: OECD Hazel Henderson: Club of Rome Tony Long: WWF Robin Miège: European Commission, DG Environment

• Advisory Board Members

Ken Collins: Scottish Environment Protection Agency Wouter van Dieren: Club of Rome, Netherlands Amy Domini: Domini Social Investments, USA Dan Esty: Yale University Jean Gadrey: Université des Sciences et Technologies de Lille Enrico Giovannini: OECD Kirk Hamilton: World Bank Hazel Henderson: Club of Rome, USA Zhouying Jin: Chinese Academy of Social Sciences Inge Kaul: United Nations Development Programme Anil Markandya: University of Bath Bedrichˇ Moldan: Charles University, Prague László Pintér: International Institute for Sustainable Development, Canada Fulai Sheng: United Nations Environment Programme Anders Wijkman: Member of the European Parliament

• Conference project team

Mariola Szymanowska, Jeroen Van Laer, Oliver Zwirner: European Commission, DG Environment Siegfried Breier, Dominique Vigneron: European Parliament, Secretariat of the Committee on the Environment, Public Health and Food Safety Aaron Best, Sandra Cavalieri, Sören Haffer: Ecologic Patrick ten Brink: IEEP Jan Bakkes: MNP Fritz Hinterberger: SERI

346 Beyond GDP: Measuring progress, true wealth, and the well-being of nations European Commission Beyond GDP: Measuring progress, true wealth and the well-being of nations Luxembourg: Oﬃ ce for Oﬃ cial Publications of the European Communities 2009 — 346 pp. — 21 x 29,7 cm ISBN 978-92-79-09531-3 DOI 10.2779/54600

Copies of this publication are available free of charge while stocks last from : European Commission Directorate-General Environment Information Centre (BU-9 0/11) B-1049 Brussels http ://bookshop.eu/ KH-30-08-562-EN-C