Fostering the New Bottom Line

How does the world move away from traditional measures such as GDP, trade volume, or factor efficiency? Encouraging the wider use of newer macroeconomic measures requires political pressure on international, national, and local governments. While there are many examples of alternative indicators used in research settings, clearly adaptation is slow and civil society leadership is key. As one step in the right direction, in November 2007 the European Commission, the Organisation for Economic Co-operation and Development, and several NGOs held a conference in Brussels entitled "Beyond GDP: Measuring Progress, True Wealth, and the Well-Being of Nations." Key objectives of the meeting included clarifying what indices are most appropriate to measure progress and how these can best be integrated into decisionmaking.35

Civil society can also participate in legal and administrative processes to enforce policies already in effect. For example, international finance agencies such as the World Bank are obliged to use benefit-cost analysis (BCA) to evaluate the feasibility of infrastructure development projects such as roads, oil pipelines, ports, and dams. As the Bank acknowledges, BCA "is a technique intended to improve the quality of public policy decisions. It uses as a metric a monetary measure of the aggregate change in individual well-being resulting from a policy decision." Typically, traditional economic measures like GDP are used as a proxy for well-being—a clearly erroneous practice—so there are opportunities to change such practices to be more in line with policy by using substitutes like the genuine progress indicator in these contexts.36

Market forces are already fostering greater

A New Bottom Line for Progress use of sustainable development indicators at the micro level. In their recent book Green to Gold, Daniel Esty and Andrew Winston of Yale University evaluated the stock performance of "Waveriders," a subset of companies they consider leaders in sustainability reporting and initiatives. They found that Waveriders "significantly outperformed the market" over the past 10 years, and they make a compelling case as to why maintaining credible sustainability metrics is a proven strategy for business success in the new century. Nonetheless, there is still a great deal that governments can do at all levels to tip the scales in favor of responsible Waverider-type companies.37

One obvious strategy is sustainable procurement policies. Given the immense resources under their control, governments at all levels can insist that companies they do business with do not just give lip service to sustainable development but demonstrate progress toward it through the GRI and other credible indicator systems. Another emerging strategy is the cultivation of markets for environmental goods and services through payments for ecosystem services and other market-based approaches. (See Chapter 9.) Governments can use their regulatory powers to create markets for flood control, pollination, biodiversity, water purification, and carbon sequestration services of healthy ecosystems by requiring offsets for urban development projects, power plants, or industrialized agriculture or forestry operations. Such markets would stimulate landholders to monitor both the stocks of natural capital under their care and the economic value of the ecosystem services those stocks generate. Taxes and subsidies are other important tools. For example, a simple carbon tax would automatically stimulate widespread use of carbon footprint analysis.

More direct approaches are legal requirements for simple disclosure. As documented in this chapter, the mere reporting of sus-tainability metrics like recycling rates, energy and water intensity, and living wage ratios is a key driver of change. Where sufficient public interest is present, it is reasonable to expect communities to insist on such disclosures as part of annual reports, tax returns, and permit applications. One prominent example of the impact of such practices is U.S. Superfund legislation, which requires companies to report annually on the amount of hazardous chemicals within each of their facilities. As Savitz and Weber note in The Triple Bottom Line, "companies suddenly faced with the simple disclosure requirement immediately began to take dramatic, unprecedented steps to redesign their processes to eliminate the need for these chemicals at all." The result was a 59-percent reduction in the amount of hazardous chemicals stored on-site by U.S. companies, the most dramatic voluntary environmental improvement in history—"all because of a simple disclosure requirement."38

Innovations like these need to be acknowledged and publicized, so that one good measure leads to another. No one indicator can capture all the components of sustainable development. Instead, governments should back a suite of creative indicator initiatives, giving the world a better and more holistic portrait of progress being made in the twenty-first century toward both happy people and a happy planet.

CHAPTER 3

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