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Metrics for the Triple Bottom Line

Accessing the triple bottom lineMany are suggesting that our metrics need to assess the triple bottom line  (TBL). The health of the planet and measures of human happiness are not included in the leading economic indicators. The most commonly used measure of a nations health is gross domestic product (GDP) which refers to the market value of all final goods and services produced within a country in a given period. Although GDP per capita is often considered to be an indicator of a country’s standard of living, it is a statistic that has been criticized as a grossly inadequate measure of well-being.

While the GDP is primarily concerned with the value of goods produced, the TBL concerns itself with people, planet and profits. Other metrics have been introduced which are far better than the GDP in assessing the TBL.

One such measure is the assessment of gross national happiness (GNH). This is an indicator that measures quality of life or social progress in more holistic and psychological terms than GDP.

The term “gross national happiness” was coined in 1972 by then Bhutan’s King Jigme Singye Wangchuck, who opened Bhutan to the age of modernization. He used the phrase to signal his commitment to building an economy that would serve Bhutan’s unique culture based on Buddhist spiritual values. The Centre for Bhutan Studies developed a sophisticated survey instrument to measure the population’s general level of well-being.

Proposed policies in Bhutan must pass a GNH review that is similar in nature to the Environmental Impact Statement required for development in the United States. An environmental impact statement (EIS), under U.S. environmental law, is a document required by the National Environmental Policy Act (NEPA) for certain actions “significantly affecting the quality of the human environment”. An EIS is a tool for decision making. It describes the positive and negative environmental effects of a proposed action, and it usually also lists one or more alternative actions that may be chosen instead of the action described in the EIS. Several U.S. state governments require that a document similar to an EIS be submitted to the state for certain actions. For example, in California, an Environmental Impact Report (EIR) must be submitted, as described in the California Environmental Quality Act (CEQA).

In Canada, a new report on the “Index of Wellbeing”  (CIW) was recently released; it is intended to do what standard economic tools such as GDP cannot. In addition to the state of the economy, it measures the well-being of people, communities, the environment and the nation’s democracy. The comprehensive index is based on 64 indicators from eight broad domains: living standards, community vitality, democratic engagement, education, healthy populations, environment, time use, leisure and culture.

The CIW takes into account the complexity and interconnectedness of human society. It offers a deeper understanding of what constitutes social and individual good. It speaks about relationships, social interaction and general enjoyment of life.

The Happy Planet Index (HPI) is another indicator, it reveals the ecological efficiency with which human well-being is delivered. The HPI is the first ever index to combine environmental impact with well-being to measure the environmental efficiency.

The HPI shows the relative efficiency with which nations convert the planet’s natural resources into long and happy lives for their citizens. The second compilation of the global HPI, published in July 2009 shows that the nations that top the Index are not the happiest places in the world, but the nations where people live long, happy lives without over-stretching the planet’s resources.

The 2009 HPI shows that high levels of resource consumption do not reliably produce high levels of well-being, and that it is possible to produce high well-being without excessive consumption of the Earth’s resources. The model followed by the West can provide widespread longevity and variable life satisfaction, but it does so only at a vast and ultimately counter-productive cost in terms of resource consumption.

Clear patterns do emerge that point to how we might better achieve long and happy lives for all, whilst living within our environmental means. The happy planet charter (HPC), launched alongside the latest report in July 2009, provides some key goals to help the planet achieve good lives that do not cost the earth.

Because over-consumption in rich countries represents one of the key barriers to sustainable well-being worldwide, the HPC has put forward the following goals:

  • A new narrative of progress is required for the twenty-first century.
  • A good life without costing the Earth.
  • Governments should strive to identify economic models that do not rely on constantly growing consumption to achieve stability and prosperity.

The HPC calls for governments to measure people’s well-being and environmental impacts and to develop a framework of national accounts that considers the interaction between the two so as to guide us towards sustainable well-being.

Developed nations must set an HPI target of 89 by 2050 – this means reducing the per capita footprint to 1.7 gha, (The global hectare or gha is a measurement of biocapacity of the entire earth – one global hectare is a measurement of the average biocapacity of all hectare measurements of any biologically productive areas on the planet). HPI targets also include increasing mean life satisfaction to eight (on a scale of 0 to 10) and continuing to increase mean life expectancy to reach 87 years.  Developed nations and the international community are also expected to support developing nations in achieving the same target by 2070.

It makes sense to re-balance our social and economic programs in order to assign more weight to the planet and people. But social indicators like GNH, CIW and HPI are hard to accurately measure with any degree of mathematical precision.

The world is more complicated than can be assessed by happiness alone. In some sense it seems a little Pollyanna to make happiness or well-being the leading economic indicator. There are lots of good reasons why we sacrifice our happiness and well-being; in fact this may represent what is best about humanity. Our efforts to altruistically help one another sometimes result in decrements in objective measures of our happiness and well-being. But these types of altruistic sacrifices often contribute to improvements in our society as a whole.

Despite serious omissions, the GDP is still a useful economic indicator. While it is difficult to accurately measure well-being, it is nonetheless a worthy aspiration, but if we are ever to incorporate the TBL into our metrics, we must factor environmental health.
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Richard Matthews is a consultant, eco-entrepreneur, green investor and author of numerous articles on sustainable positioning, eco-economics and enviro-politics. He is the owner of THE GREEN MARKET, a leading sustainable business blog and one of the Web’s most comprehensive resources on the business of the environment. Find The Green Market on Facebook and follow The Green Market’s twitter feed.

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