Gross Domestic Product (GDP) is a measure of economic activity and does not account for wealth or prosperity that includes social well-being or nature. Redressing this is, however, complex and multi-faceted.
Integrating natural and social capitals into GDP may be difficult and ineffective. One option could be to measure social and natural capital separately from GDP. There already are applicable approaches, such as using the ‘six capitals’ of stocks of value (financial, manufacturing, intellectual, human, social, and natural).
Defining indicators and collecting data is complex but there are methodologies already available, from the OECD’s Better Life Index to BS 8632 the BSI standard on natural capital accounting.
Developing indicators and ways of measuring GDP along with any nature-based or social indicators is not enough - they must be put to use, effectively integrated and limitations clearly communicated.
The EAC’s work on aligning economic goals with environmental sustainability is an opportunity to explore the longer-term value of investing in natural capital but also to identify a common way of measurement for both government and businesses. Linkages between GDP, macro-economic policies and environmental policies are vital.
IEMA’s recommendations to the committee in full:
- The Government create and supports the development of a methodology or a framework of reporting on natural and social capital, in order that the value of investment in these areas is better understood across the economy and opportunities for doing so are unlocked.
- Steps are taken to ensure that the value of nature is integrated into macro-economic policy thinking, capital allocations and budgetary decisions.
- The Government consults and takes learnings from international benchmarks on indicators (social, environmental and economic) to help define what constitutes natural capital accounting within a UK economic context.
- Reforms of the UN System of National Accounts are welcomed and needed to make sure that natural capital accounting is properly mainstreamed (and systematic) into national accounts and policy development.
The submission to the EAC is here.
Read more about the economics of nature in this month’s Transform magazine in the interview with Sir Partha Dasgupta.
Posted on 8th February 2022
Written by Lesley Wilson
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