Measuring economies’ impact on the planet - Financial Times

Deciding which is the top-performing economy is not easy. Rank by income per person and top of the list are those that offer tax advantages to attract corporate relocations (Luxembourg, Ireland and Singapore), or those rich in fossil fuels (Norway, the United Arab Emirates and Qatar). Alternative measures, such as the UN Development Programme’s human development index, see others rise up the rankings. Norway and Ireland still come top but northern European countries, such as Sweden and Germany, gain ground, as do the rich English-speaking countries such as Australia, Canada and New Zealand.

Metrics of this kind are important not because they reveal anything new about the world but because they can change our perspective. “What gets counted counts,” as the saying goes. In an era focused on rankings and quantifying performance, measurements focus minds. The idea behind the UN index, now in its 30th year, was to present a different take on economic progress. Rather than simply measure the ability to produce things the HDI looks at what a country achieves: alongside a measure of national income, the index includes healthy life expectancy and educational outcomes. 

The UNDP’s latest adaptation of its HDI shakes up the league table once again. The agency’s 2020 report, published on Thursday but covering human progress in 2019, includes a ranking that takes into account countries’ impact on the planet. This, say the authors, adjusts the index for the era of the Anthropocene — a proposed new geological epoch that reflects how humans are transforming their world. By factoring in carbon emissions and an economy’s material footprint — the volume of raw materials used divided by population — the UNDP has adjusted for planetary pressures.

The effects are biggest for the richest countries. The adjustment knocks Norway off the top spot it would otherwise have occupied; the impact of its sizeable oil production on the planet means it falls 15 places. This is not quite as steep a fall as coal-producing Australia, down 72 places, or Singapore’s 92-place drop. Canada and the US fare badly too. In fact, fossil fuel exporters including the UAE, Qatar and Kazakhstan all drop substantially. Luxembourg is the biggest loser, however, since its commuter-based economy uses a lot of material resources relative to its population; the Grand Duchy falls 131 places. 

No country’s HDI score goes up because all economies do at least some damage to the environment. But some rich European countries — France, Italy, Spain, the UK and Portugal — gain places in the adjusted table thanks to a relatively low proportion of fossil fuels used in their energy mix, and service-based economies that use fewer raw materials. A planetary-adjusted human development index is just the latest of many attempts to update national accounting to capture a broader concept of wellbeing — not only the level of prosperity but how sustainable it will be in the future. 

The corporate world, too, is looking to new kinds of accounting that reflect broader social goals. The Harvard Business Review’s impact-weighted accounts initiative calculates how much companies would be worth if they had to pay the full cost of environmental damage they cause; many would see all their earnings wiped out. In 2015, Jeff Bezos, Amazon’s chief executive, went from first to 87th in the magazine’s ranking of best-performing CEOs after adjusting for environmental, social and governance factors. Working out who belongs at the top is tricky; making it there is even harder.

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https://www.ft.com/content/b19a1c6c-dd53-4683-aef0-e3d61b002eb0

2020-12-18 18:59:00Z
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