"Green accounting,", transparency and the future of societal indicators

The Independent recently reported that the British Government is a supporter of “green accounting” and environment secretary Caroline Spelman will advocate its adoption by other countries at the upcoming UN Conference on Sustainable Development (often called Rio +20 following the 1992 Earth Summit in the same city.)  This represents a formal acknowledgement that using GDP as an aggregate measure of social welfare is incomplete since welfare is dependent to such a large extent on natural capital.  The importance of natural capital manifests itself in different forms.  Consider, for example, the Amazonian rainforest.  This provides instrumental value for those who dwell there in terms of provision of watersheds and food, and for citizens across the globe by sequestering carbon and therefore stabilising greenhouse gas emissions.  To many people, rainforests also have great intrinsic value and should therefore be preserved even in the absence of material benefits.  The value, both instrumental and intrinsic, of natural capital is difficult to measure in monetary terms although attempts have been made.  Costanza et al in 1997 valued the “entire biosphere” at $33 trillion per year but this tells us little- with no ecosystems services, there would be no life, making the biosphere priceless.   GDP+ accounting is therefore not simply a case of monetising natural capital and using it as an additional line in conventional GDP.  

Spelman proposes working towards new indicators to measure the green economy, but details on what these indicators might be are currently sparse.  It is well known that the Prime Minister David Cameron is a proponent of incorporating measures of wellbeing into national accounts, yet while there is certainly overlap between this and natural capital stocks, for example the enjoyment from areas of outstanding natural beauty, they are not congruent.  Incorporating the ideas of both Cameron and Spelman could lead to national accounting replicating the “triple bottom-line” approach already used in corporate sustainability reporting, whereby companies consider environmental and social impacts, as well as economic.  National accounts could, analogously, include some indicator of natural capital as an environmental measure and well-being as a social measure alongside GDP, the established economic indicator.  Combining these three indicators would provide an alternative to the Human Development Index (HDI), focussing on the environment and wellbeing instead of health and education. 

If governments are transparent about the value of their environment and natural capital stocks, then citizens can track any changes in this over time.  This would enable them to hold governments to account for any quantifiable environmental degradation.  This happens already to some extent, but it is usually the preserve of dedicated environmental groups who have done their own detailed research.  A more transparent green indicator would therefore facilitate greater accountability with respect to environmental quality for all citizens.