Tackling climate change: is it time to ditch GDP?

“We need to mea­sure what we trea­sure,” write for­mer Unilever CEO Paul Pol­man and green busi­ness expert Andrew Win­ston in their new book, Net Pos­i­tive. One of its key themes is that, to com­bat cli­mate change effec­tive­ly, the world must aban­don mea­sur­ing eco­nom­ic progress in terms of “GDP, dol­lars, stock price and share­hold­er val­ue”. 

They are not alone in their think­ing. Many emi­nent econ­o­mists have argued that GDP in par­tic­u­lar is no longer fit for pur­pose. The mon­e­tary mod­el, first pro­posed in 1937, has become the stan­dard mea­sure of val­ue cre­at­ed through the pro­duc­tion of goods and ser­vices in a coun­try over a set peri­od. It’s the fig­ure most prized by gov­ern­ments and ana­lysts. Yet, accord­ing to its for­mu­las, a 100-year-old car­bon-cap­tur­ing tree is worth­less until it’s chopped down and sold as lum­ber. To GDP, nature has no val­ue unless it’s sold on the com­modi­ties mar­kets.  

In Feb­ru­ary, econ­o­mist Pro­fes­sor Sir Partha Das­gup­ta pub­lished a gov­ern­ment-com­mis­sioned inde­pen­dent report on the eco­nom­ic ben­e­fits of bio­di­ver­si­ty. He notes that one of GDP’s key fail­ings is that it doesn’t account for the depre­ci­a­tion of assets, espe­cial­ly nat­ur­al ones. 

“Because of this, we are liv­ing off our nat­ur­al assets with­out recog­nis­ing so,” Das­gup­ta explains. “Nature is free. It pro­vides not only cli­mate reg­u­la­tion, but also waste decom­po­si­tion, pol­li­na­tion and so on. Yet we haven’t been pay­ing for the car­bon we dump that depre­ci­ates it.”

And that’s not all. As Pol­man and Win­ston write, GDP “counts every­thing that rais­es spend­ing as a good thing: more can­cer and med­ical costs, recon­struc­tion after giant storms, wars and con­flicts… But it does not mea­sure peace, qual­i­ty of edu­ca­tion, men­tal health or the pro­tec­tion of nat­ur­al cap­i­tal need­ed for our sur­vival.”

Cre­at­ing alter­na­tive ways to mea­sure pros­per­i­ty has not proved easy. Sev­er­al for­mu­las have been devised that focus most­ly on soci­etal well­be­ing, includ­ing the UK’s own Hap­pi­ness Index. None of these has achieved the same promi­nence as GDP, though. 

Das­gup­ta believes that the pre­vail­ing approach to tack­ling cli­mate change serves to pro­tect the tra­di­tion­al eco­nom­ics of GDP, with­out chal­leng­ing the assump­tion that per­pet­u­al growth in con­sump­tion is desir­able. Despite this, Swiss Re recent­ly esti­mat­ed that cli­mate change could lop $23tn off the world’s annu­al eco­nom­ic out­put by 2050.

“The idea is that, if we invest in clean tech­nol­o­gy to elim­i­nate car­bon, we can go for GDP growth because what is damp­en­ing that growth – cli­mate change – will be tamed. This is mis­lead­ing, because tech­nol­o­gy can’t do every­thing that Moth­er Nature does,” he argues. 

Das­gup­ta pro­pos­es a mea­sure that checks whether a nation’s con­sump­tion is less than net domes­tic prod­uct (GDP minus depre­ci­a­tion on the country’s assets), which would include nature and oth­er assets not cur­rent­ly count­ed in GDP.  

“If con­sump­tion is less than net domes­tic prod­uct last year, we are hold­ing a greater wealth than we did the pre­vi­ous year,” he explains. 

The Depart­ment for Envi­ron­ment, Food and Rur­al Affairs has start­ed audit­ing the UK’s nat­ur­al assets. These clear­ly aren’t easy to quan­ti­fy, but a report by the World Wide Fund for Nature in 2018 esti­mat­ed that the glob­al nat­ur­al cap­i­tal under­pin­ning all eco­nom­ic activ­i­ty was worth $125tn. 

Oth­er experts favour anoth­er met­ric – sus­tain­able domes­tic prod­uct – based on the UN’s sus­tain­able devel­op­ment goals (SDGs). This would mea­sure the sus­tain­abil­i­ty of indi­vid­ual prod­ucts. For instance, the val­ue of a unit of elec­tric­i­ty would be mea­sured against the SDGs and any neg­a­tive envi­ron­men­tal impact sub­tract­ed from that. 

When Pol­man led Unilever in 2009–19, he attempt­ed to decou­ple the company’s growth from its envi­ron­men­tal foot­print and improve its impact on soci­ety through the so-called Unilever sus­tain­able liv­ing plan. Giv­en that his efforts were suc­cess­ful by most mea­sures, he is urg­ing busi­ness­es to take the ini­tia­tive and become “net pos­i­tive”. By this he means adopt­ing the ethos of “liv­ing with­in nat­ur­al bound­aries… Try to repair, restore, rein­vig­o­rate, and regen­er­ate.” 

Pol­man con­tin­ues: “Coura­geous com­pa­nies can thrive by giv­ing more than they take. It’s not just about reuse and recy­cling, which are enor­mous steps them­selves. It’s also about cre­at­ing a men­tal­i­ty of restor­ing nature through activ­i­ties such as regen­er­a­tive agri­cul­ture and reduc­ing food waste. Com­pa­nies must take own­er­ship of both the pos­i­tive and neg­a­tive soci­etal con­se­quences they cre­ate. To do this requires lead­er­ship and a com­mu­ni­ty mind­set.”

No big busi­ness has got to this point, but some are well on their way. UK car­pet whole­saler Inter­face start­ed its quest for true sus­tain­abil­i­ty back in 1994. In the lat­est annu­al Sus­tain­abil­i­ty Lead­ers sur­vey report pub­lished by GlobeS­can and Sus­tain­Abil­i­ty, it ranked as the fifth-most recog­nised com­pa­ny by sus­tain­abil­i­ty experts for its lead­er­ship in the field. Unilever topped the table. 

Hav­ing achieved its tar­get to have no neg­a­tive envi­ron­men­tal impact, Inter­face is now work­ing on what it calls its “cli­mate take­back” ini­tia­tive. This aims to run the busi­ness in such a way that acts to reverse cli­mate change. It entails adopt­ing exter­nal­ly ver­i­fied sci­ence-based per­for­mance tar­gets; offer­ing car­bon-neu­tral prod­ucts; treat­ing nature as a stake­hold­er in deci­sion-mak­ing; and shar­ing knowl­edge. 

Interface’s head of sus­tain­abil­i­ty, Jon Khoo, admits that pio­neers in this field are tak­ing on “more finan­cial risk, because they’re pay­ing for the inno­va­tion. But lag­gards wait­ing for reg­u­la­to­ry com­pul­sion face anoth­er risk: the fact that some of the solu­tions we’ll have imple­ment­ed can­not be adopt­ed overnight.” 

In 2013, Swiss agritech firm Syn­gen­ta Group adopt­ed what it calls its good growth plan. This has estab­lished sci­en­tif­i­cal­ly based envi­ron­men­tal key per­for­mance indi­ca­tors that are linked to man­agers’ remu­ner­a­tion. These include improv­ing resource effi­cien­cy, build­ing up nat­ur­al resources and shar­ing knowl­edge with farm­ers and oth­er stake­hold­er groups. 

“We sell much less vol­ume per acre applied of our prod­ucts today than we did 20 years ago, but we don’t make less mon­ey. That’s because we’ve changed our val­ue propo­si­tion,” says the group’s head of sus­tain­able and respon­si­ble busi­ness, Juan Gon­za­les Valero. “If you want to stay in busi­ness, you need to make more effi­cient use of your resources.”

Many deci­sion-mak­ers in busi­ness and gov­ern­ment will have to make a huge shift in mind­set to stop focus­ing on pure eco­nom­ic growth, but it’s a change that all of us need to make, accord­ing to Pol­man. What’s more, he adds, while there is much evi­dence to show that unfet­tered con­sump­tion is incom­pat­i­ble with the fight against cli­mate change, any alter­na­tive mod­el will need work for every­one.  

“Ulti­mate­ly, we need to answer how we can have a sus­tain­able econ­o­my, which decou­ples growth from resource con­sump­tion and envi­ron­men­tal degra­da­tion, and also not have many peo­ple liv­ing in pover­ty,” he says. “If we don’t solve that equa­tion, as a total, it’s not going to work.”