Global Policy Forum

By Bill Hinchberger

If you're the sort who switches stations as soon as the reporter begins to drone on about current economic indicators, imagine an entire conference dedicated not only to them but also to environmental and social statistics. But wait - don't touch that dial! A simple change in indicators could engender a quiet revolution in public policy.

"Without the right indicators, I have no way to set goals," said Fabio Feldmann, former environmental secretary of the Brazilian state of Sí£o Paulo. Feldmann made his observation at the International Conference on Sustainable Development and Quality of Life Indicators held here last week. He was joined by 700 participants, including leading experts from China, Slovenia, the United States and Venezuela. Participants hoped to begin to develop and disseminate "triple bottom line" indicators for governments and businesses that would put environmental and social factors on equal footing with purely economic growth measures. The idea is to end our society's fixation on Gross Domestic Product (GDP) and replace it with what the Dutch former banker Sander Tideman called a measure of Gross National Happiness.

Critics argue that GDP represents merely a cash flow model. It ignores environmental and human assets from aquifers to housework, they say. Outlays for education and health are entered into the ledger as costs instead of investments. To prove their points, some speakers resorted to examples that would be comically absurd – if only they weren't sadly true. "If GDP is taken as an accurate measurement of progress, it would be a good thing for a jumbo jet to crash every day," said Roberto Guimarí£es, an economist with the United Nation's Economic Commission for Latin America and the Caribbean. "There would be business for coffin builders and all that activity in the insurance business."

"We must account properly for all these social and environmental costs," said futurist and author Dr. Hazel Henderson. "The cost of cleaning up environmental disasters is added to GDP, not subtracted as a cost. We're fooling ourselves."

Attributed by many scientists to global warming, the increase in extreme weather events is beginning to grab the attention of the reinsurance industry. These are the people who insure the insurance companies, and they are worried. In the 1980s, the cost of injury and property loss due to severe weather around the globe totaled $4 billion, according to Paul Epstein, associate director of the Center for Health and the Global Environment at Harvard Medical School. In the 1990s the figure reached $40 billion. If current trends continue, the figure should reach $150 billion within a decade, estimates the United Nations Environmental Programme. "The heat wave in Europe last summer frightened the reinsurance industry," said Epstein.

If such environmental costs were added to the debit side of the balance sheet, policymakers would be forced to pay closer attention, argue proponents of the new indicators. Sundry pilot projects for sustainable indicators were analyzed at the conference. They ranged from the Calvert-Henderson Quality of Life Indicators, which serves as a compass for investments made by a $9 billion mutual fund, to the quality of life indicators adopted by 22 municipalities in western Paraná, a rural slice of the Brazilian state that hosted the conference. Those 22 mayors are not anomalies in South America's largest country. Many Brazilian businesses have voluntarily adopted a "social balance sheet" proposed by a Rio de Janeiro-based nongovernmental organization called the Brazilian Institute for Economic and Social Analysis (IBASE).

Others, including leading cosmetics manufacturer Natura, have taken a step further and are signing up for a wider ranging reporting system proposed by the Sí£o Paulo based Instituto Ethos, a business association that encourages ethical practices. The Sí£o Paulo Stock Market (Bovespa), Latin America's most important, is about to create an index for socially responsible investment similar to the Dow Jones Sustainability Index. The Brazilian subsidiary of ABN Amro has added to the already advanced social and environmental criteria of its European headquarters when analyzing business loan applications. "Brazil is a world leader in the indicators field," said Henderson. "The international experts have learned from the Brazilians."

The conference engendered yet another initiative by the Brazilians. They decided to create a Brazil Watch project, a national monitoring effort patterned along the work of the Washington, D.C. based Worldwatch Institute, best known for its annual State of the World report. "Organized civil society will no longer have to accept the agenda set by government or the press," said Ricardo Young, chairman of the Instituto Ethos.

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