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THE GREEN ECONOMY DEBATES: MEASURING WHAT MATTERS Report on our evening debate: 15 February 2012, IIED, London

The Green Economy Coalition (GEC) is working on five themes of change for driving the transition to a green economy. One of these focuses on Measuring what matters and the quest to find metrics that help us define and assess the priorities for the economic system we want. Numerous Rio 2012 Zero draft submissions call for change in metrics on various levels: There is a call for more robust and integrated corporate reporting, alternative national metrics beyond GDP that measure environmental and social well-being, and international Sustainable Development Goals that define the global trajectory. The GEC brought together experts in these fields to hear about the latest thinking on each of these propositions and, most importantly, to find linkages between the agendas. How might these conversations at the corporate, national and global level inform one another? In fact, would it possible to align these agendas, underline the linkages and bundle the energy to create a transformative new system of metrics? Also, what are the limits of alternative metrics and how can we avoid negative side effects? From the debate, it became clear that the each conversation holds great energy. There is an increasing trend towards corporate reporting in the developed and developing world alike; governments have come to acknowledge the limits of GDP as a measure for progress and recognise the need for all-encompassing measures; and, pushed by newly emerging economies such as Colombia, the international community is likely to kick off a process of defining Sustainable Development Goals in Rio. Rio 2012 therefore presents a unique opportunity to bring each of these discussions to the next level. Linkages between the corporate, national and international level have started to emerge however, they are not explicit and the role of businesses in a governments commitment to sustainability is still unclear. Equally, the ways in which Sustainable Development Goals (SDGs) will define a nations commitment to sustainability is still uncertain. But one thing we know is that we must uncover these linkages to create a system in which these transformative metrics reshape our business models, realign a nations definition of progress and create a new global vision. A policy framework for corporate reporting In order to take corporate reporting to the next level, governments must create the necessary policy framework to reward companies that are performing well and punish those that are not. Only then will corporate reporting become mainstream and companies will be incentivised to align their business operations with environmental and social benefits. Synthesising individual companies sustainability reports at the national level would be the first step to provide a much clearer overview of the accumulative costs and benefits of a nations business operations. There is tentative evidence that some governments (i.e. Italy and Netherlands) have started to compare their national statistics with companies sustainability reports. This is one emerging connection between the corporate and national level but it must be scaled up. For corporate reporting to evolve, it needs to be guided by a national policy framework so that governments and companies can interpret their impact in a wider sense.

Similarly, to ensure that corporate reporting benefits all companies equally and to combat reporting distortions, governments must reform their fiscal policies. For instance, there is concern that SMEs do not have the capacity to operate successfully with an additional reporting framework and might lose out due to an additional administrative burden. Taxation mechanisms and subsidies could counter-balance these limitations and ensure that all companies receive rewards for good performance in sustainability reporting. Corporates and global goals Corporations around the globe have started to issue sustainability reports a positive trend, that also poses complex questions. On the one hand, companies must be given the flexibility to choose indicators specific to their particular context; on the other hand, we need indicators that are relevant for all companies worldwide to enable global comparison. A call for a international global reporting indicators could feed into the process of defining global SDGs one way to link the corporate and the international level. In general, panellists remarked that whereas in the past, governments were the main actors and Millennium Development Goals (MDGs) were essentially goals for governments, we now live in a different world. Given the large impact business operations have on our environment, companies are the prime actors to deliver on SDGs. Also, while MDGs could be achieved through foreign aid, SDGs will require a change of our own pattern of resource use as well as our consumption and production behaviour. Success or failure of our global goals will thus depend on the behaviour of the private sector and governments alike. Conclusions Conversations at the global level are still at an embryonic stage, but there is new energy in multilateralism which represents a great opportunity for all actors to come together and build a global vision. Rio +20 presents an exciting chance to unite all agendas and emphasise how each area complements and reinforces each other. However, we must keep in mind that a change in metrics should aim to steer our behaviour towards a sustainable path. Corporate reporting must be underpinned by a clear moral commitment to improve a companys footprint and work towards internalising costs. The Beyond GDP agenda must provide the policy framework for both, corporate and international metrics and provide the necessary information, tools and mechanisms towards progress. And global sustainability goals can only be successful if they are underpinned by sound, tangible and scientific indicators and information from corporations and governments. Richard Mattison, Trucost: 1) Externalities create costs in economic terms. China, for instance, actively harvested timber for decades. As a result, the yellow river dried out, which cost $30 billion to fix. In economic terms, this cost wiped out the benefit the country gained from timber harvest in the first place. 2) Principles for responsible investment. It is estimated that externalities cost roughly $6.6 trillion globally and the top 3000 publicly listed companies are responsible for 1/3 of this cost. While companies largely cause these issues, they can also address them. 3) The limits of sustainability reports. Sustainability reports are useful as companies can see the cost which might be internalised in the future. Nevertheless, a sustainability report cant provide visibility of the companys supply chain. For example, due to a

drought, the prize of wheat and therefore cattle increased in Russia which led to a 70% increase of Pumas leather price. This chain of events shows the links between economics and the environment. Teresa Fogelberg, Global Reporting Initiative: 1) Mainstreaming corporate reporting. Corporate reporting has appeared prominently in the zero drafts and The Future we want synthesis call[s] for a global policy framework requiring all listed and large companies to consider sustainability issues and to integrate sustainability information within the reporting cycle. The integrated reporting movement is campaigning to include sustainability reporting in annual reports and investors as well as rating agencies will increasingly seek information through sustainability reports. 2) Critical Mass. About 6000 companies (95% of which are part of the global 250) worldwide issue sustainability reports, with a large geographic spread, including all continents and a steep upward trend in the Global South. Yet, according to UN data, there are 82 000 MNCs worldwide, so there is still room for improvement. 3) A concrete goal. Campaigning for a corporate reporting framework at Rio 2012 is a concrete goal. GRIs campaign rests on the report or explain principle, where companies who choose not to report have to state why. A successful trajectory for the next few years would be go improve the number of reporting companies, to make sustainability reports easier to use for investors and to ensure that companies aim to improve their environmental and social impact. 4) Forging links. How can we link the performance of individual companies to national accounting? Rio 2012 is a great moment to bring the corporate reporting and the beyond GDP agendas together. For example, Italy and Netherlands have compared information of their natural bureaus of statistics with the GRI indicators and information collected from companies. Such work exists but is not yet well-known. Farooq Ullah, Stakeholder Forum: Not everything that be counted counts and not everything that counts can be counted (Einsteins office). 1) The failure of GDP. GDP is only a snapshot in time, which takes no account of intergenerational fairness and the sustainability of our current productive behaviour. 2) Beyond GDP in the Zero drafts. According to a Stakeholder Forum analysis, 31 submissions included the term Beyond GDP only 2 of which were by member states (Croatia and USA). The synthesis documents recognises the limitations of GDP and acknowledges the need of further development and strengthening indicators complementing GDP, though it doesnt pledge for indicators going beyond GDP. 3) Developments in the UK. Caroline Spellman underlined the UK governments position on green growth and emphasised the need for GDP+ rather than envisaging a new way of measuring. 4) The importance of metrics. The beyond GDP attempts to redefine progress, our societal values and our priorities, which must include some consideration regarding personal wellbeing, prosperity, environmental and planetary health. Also, The Stern review stated that it would cost 2% of GDP in 2005 to combat climate change now and up to 20% to deal with climate change if it did happen. However, if sustainable

development was measured appropriately, it wouldnt cost anything and the benefits one would get would equate the cost in economic terms. Camilla Toulmin, IIED: 1) Current trend. The Rio 2012 summit, might not agree on a set of Sustainable Development Goals (SDGs) but hopefully kick off a 2-3 year process that defines SDGs. Colombia is leading the SDG these discussions, which shows great new energy in multilateralism. We have a renewed opportunity to define these goals. 2) Who should design the SDGs? How would we set up the metrics to evaluate progress? One proposition would be to set up learning groups, with diverse members who all aim to set targets for a big global vision. Questions and comments from the audience: 1) How can we measure resources? GDP adds monetary terms, but how can we add up other measures? 2) Millenium Development Goals (MDGs) can commonly be achieved through aid, SDGs will have to be achieved through changing what we do therefore SDGs will be more difficult to establish. 3) There is a risk that the Beyond GDP agenda becomes a technical process without sufficient political momentum. 4) What would a successful trajectory in terms of reporting and transparency in the corporate sector look like? 5) What is the impact of metrics on SMEs which provide employment opportunities for 40-60% in UK? These organisations cant take on an additional administrational burden as easily as big companies can. 6) Since we still live in a corporate system, companies want to fulfil demand in order not to go out of business. If metrics interfere with this goal, it will be difficult to mainstream. Also, there are safety checks in the capitalist system (i.e. insurance firms) which help companies get around the higher prices/ unintended consequences of unsustainable behaviour.