unit 5, gre401

© Jeremy B Williams 2012

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Sustainable Development Indicators

Sustainable Development and Competitive Advantage

Unit 5:


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Outline

1) An introduction to indicators2) The Bellagio Principles3) Macro measures of sustainability4) Corporate measures5) The credibility of sustainability

reporting6) Summary and conclusions


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1) AN INTRODUCTION TO INDICATORS

• Indicators help us to quantify and simplify phenomena in order to better understand the complexity of reality

• They give historical perspective of the current state of affairs and clues as to the likely direction of change in these affairs into the future.


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Are all indicators useful?• There are occasions where indicators are used

frequently but inappropriately

• The use of the rate of GDP growth as a measure of the change in value of national output of goods and services from year to year is perfectly valid

• It is less appropriate to use such an index to make judgements about the level of societal welfare.


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GDP and its detractors…

Mike Nickerson, The Sustainability Project, Ontario, 1997

Source:http://www.foe.co.uk/campaigns/sustainable_development/progress/annex1.html

‘If a truckload of toxic chemicals spills somewhere, the money spent cleaning it up is added to the GDP. If nearby

residents can no longer use their wells for water, their expenditures on bottled water is added to GDP. If they

become sick from exposure to the substance, their medical costs are also added to the official measure of well-being’.

http://www.foe.co.uk/campaigns/sustainable_development/progress/annex1.html


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Barber B Conable Jr, Former Republican

Congressman and Former President, World Bank,

1989

‘Unfortunately GDP figures are generally used without the caveat that they

represent an income that cannot be sustained. Current calculations ignore the degradation of the natural resource base

and view the sale of non-renewable resources entirely as income. A better way must be found to measure the prosperity

and progress of mankind.’



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Simon Kuznets, (creator of GDP concept) 1962


‘The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP... goals for ‘more’ growth should specify of what and

for what.’



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Criticisms of GDP as an indicator of economic well-being

Traditional criticisms:• Measurement problems:

- The underground economy- Domestic production- Quality and composition of output

• Leisure time• Income distribution

Contemporary criticisms:• The counting of ‘defensive’

expenditures as positive contributions to GDP

• Failure to account for changes in the value of ‘natural capital’.


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So what makes a good sustainability indicator?

• A key element in the design of a sustainability indicator is to have an appreciation of the values, goals and aspirations of the target audience

• This indicator will provide useful feedback on issues the community knows about, but it will also provide information about issues that are central to sustainable development, yet poorly understood; e.g. ecosystem health and how this might impact on human health

• Different communities will have much in common, but sometimes this commonality might manifest itself in different ways.


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Balance between general and specific criteria

• Indicators will be selected based on general selection criteria (e.g. simplicity, validity, time-series data, affordability of data, ability to aggregate information, sensitivity and reliability), but also on the basis of context-specific conditions

• Sustainability practitioners must avoid falling into the same trap as the national income accountants – a careful selection process is required to determine the indicator that is most relevant to a given context (i.e. region, economic sector, institution)

http://www.iisd.org/measure/compendium/searchinitiatives.aspx


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Relevant indicators • e.g. salination is important to farmers in central

Queensland, but less significant to fishing communities in NSW.


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The evolution of sustainability of indicators

• Early efforts at sustainability reporting followed the Brundtland Report in the shape of national State of the Environment (SoE) reports using the DPSIR model


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DPSIR• Driving Forces

– the underlying human activities underpinning environmental change

• Pressure– exerted on the environment and natural resources; e.g. soil

degradation• State

– current state of play, trends• Impact

– the consequences of pressure on the environment• Response

– government policies and management strategies


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2) THE BELLAGIO PRINCIPLES

• Developed in Bellagio, Italy, in 1996 by an international group of practitioners and researchers, the Bellagio Principles may be looked upon as an overarching guide, serving to link theory and practice.


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Overview of the 10 Principles• The principles focus on the assessment of progress toward

sustainability in 4 areas:• Principle 1: a vision of sustainable development and clear

goals that provide a practical definition of that vision• Principles 2 – 5: deal with the content of any assessment and

the need to merge a sense of the overall system with a practical focus on current priority issues

• Principles 6 – 8: deal with key issues of the process of assessment

• Principles 9 & 10: deal with the necessity of establishing a continuing capacity for assessment.

Source: http://www.iisd.org/measure/principles/bp.asp

http://www.iisd.org/measure/principles/bp.asp


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3) MACRO MEASURES OF SUSTAINABILITY

• Leading examples include:– UN Human Development Index (HDI)– Genuine Progress Indicator (GPI)– Index of Sustainable Economic Welfare

(ISEW)– Ecological Footprint


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The HDI

• The 2011 Human Development Index places Norway no. 1

• Focuses e.g. on adult literacy, life expectancy, level of education

• 1 Norway• 2 Australia• 3 Netherlands• 4 USA• 5 New Zealand • 6 Canada• 7 Ireland• 8 Liechtenstein• 9 Germany• 10 Sweden• 11 Switzerland• 12 Japan• 18 Belgium• 20 France• 26 Singapore• 28 UK• 73 Brazil• 101 China• 134 India• 187 Congo

Source: http://hdr.undp.org/en/statistics/

http://hdr.undp.org/en/statistics/


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The GPI for Australia

Source: http://www.gpionline.net/index.htm

http://www.gpionline.net/index.htm


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The ISEW for the UK

Source: http://www.gpionline.net/othergpi.htm

http://www.gpionline.net/othergpi.htm


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The GPI for the United States

Source:http://www.foe.co.uk/campaigns/sustainable_development/progress/international.html

Further reading:

Clifford Cobb, Ted Halstead, and Jonathan Rowe (1995), ‘If the GDP is Up, Why is America Down?’, Atlantic Monthly Source: http://www.rprogress.org/newmedia/articles/9510_atlantic.pdf

http://www.foe.co.uk/campaigns/sustainable_development/progress/international.html

http://www.rprogress.org/newmedia/articles/9510_atlantic.pdf


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What the GPI counts that GDP doesn’t …

• Personal consumption • Income distribution • Public consumption

expenditure • Value of household and

community work • Costs of unemployment • Costs of underemployment • Costs of overwork • Private defensive expenditure

on health and education • Services of public capital • Costs of commuting • Costs of transport accidents • Costs of industrial accidents • Costs of crime

• Costs of noise pollution • Costs of irrigation water use • Costs of urban water pollution • Costs of air pollution • Costs of land degradation • Costs of loss of native forests • Costs of depletion of non-

renewable energy resources • Costs of climate change • Costs of ozone depletion • Costs of problem gambling • Value of advertising • Net capital growth • Net foreign lending

Source: http://www.gpionline.net/whatis.htm

http://www.gpionline.net/whatis.htm


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The ecological footprint

• How many planets would we need if everyone lived like you?

http://www.myfootprint.org

http://www.myfootprint.org/


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4) CORPORATE MEASURES• One of the leaders in the quest to develop internationally

accepted standards for triple bottom line reporting is the Global Reporting Initiative (GRI) http://www.globalreporting.org/

• 1st draft of reporting guidelines (G1) was piloted by 21 companies during 1999-2000

• 2nd version of the guidelines (G2) was released in 2002• Version 3 (G3) came out in 2006 • Since this time, more than 1500 companies worldwide

have used the guidelines, making it the de facto global standard for reporting

http://www.globalreporting.org/


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5) THE CREDIBILITY OF SUSTAINABILITY REPORTING

• FTSE4Good index has come under attack because > 3/4 of the FTSE 100 are in it – questions are being asked about the stringency of standards

• Similar criticisms have been levelled at the Dow Jones Sustainability Indexes (DJSI).


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‘Greenwash’• ‘Greenwash’ is defined as disinformation disseminated

by a business so as to present an environmentally responsible public image

• BP, the world’s second largest oil company and one of the world’s largest corporations, advertised its new identity as a leader in moving the world ‘Beyond Petroleum’

• It made much its $45 million purchase of the largest solar energy corporation, Solarex. But BP continues to spend billions on oil exploration in Alaska alone.


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‘Greenwash’ (cont’d)

• Shell, the world’s third largest oil company, continues with its ad series ‘Profits or Principles’ which touts Shell’s commitment to renewable energy sources and features photos of lush green forests, yet Shell spends < 1% of its annual investments on renewables.


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6) SUMMARY AND CONCLUSIONS

• Sustainability indicators are important because, in the words of Peter Drucker, “what isn’t measured, isn’t managed”

• The SoE reporting that emerged after the Brundtland Report provided a useful impetus for sustainability reporting

• Approaches have become more sophisticated as efforts like the Bellagio Principles project and the GRI have served to provide guidance to businesses and other organisations.


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Summary and conclusions (cont’d)

• Much remains to be done, and it would be fatuous to assume that sustainability reporting is an ‘advanced science’

• Greenwash is likely to prevail so long as the ecological consciousness of the majority of businesses remains underdeveloped of non-existent.


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Case Study:

Growing Pains in China

Sustainable Development and Competitive Advantage


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Think


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Calculating the ecological footprint

• Official statistics on consumption are used to calculate the amount of biologically productive land and water area required to produce the resources consumed and to absorb the wastes generated using prevailing technology

Image source: http://www.ew.govt.nz

http://www.ew.govt.nz/


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Worldwide, there exists about 1.8 biologically productive global hectares per person

Image source: www.adbusters.org

http://www.adbusters.org/


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Image source: http://www.footprintnetwork.org/

http://www.footprintnetwork.org/


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China



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Environmental Cost of China's Growth (NYT, Aug 2007)

video.nytimes.com

The Cost of Economic Growth in China: A case study


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Discuss


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Consider, for example …

• What if all Chinese people lived like North Americans?

• What needs to be measured (to be managed)?

• Can ecological degradation be reversed? If so, how?

• If not, what are the possible geopolitical consequences?


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Deliver


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• The Chinese Environment Minister is very worried about the ecological consequences of rapid economic growth …Pan Yue, Minister of China's State

Environmental Protection Administration


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• Fortunately for Mr Yue, a group of erudite, and highly respected ecological economists are confident they have the solutions

• A number of teams from are scheduled to give a 10-minute presentation to Mr Yue.

unit 5, gre401

Education

conclusions jeremy b

institution jeremy b

indicators indicators

criticisms of gdp

gdp quality

gdp figures

relevant indicators

indicators useful