By Zakaria Zoundi, Policy Advisor, Tracking Progress, IISD

In the lead up to the 2024 Summit of the Future, which will offer the opportunity for global policymakers to agree on multilateral sustainable solutions and foster governance for the current and future generations, the UN Secretary-General published a policy brief inviting Member States to move beyond gross domestic product (GDP), by measuring what truly matters for sustainability and prosperity.

The brief is an input for the Summit and an action-oriented set of recommendations that builds on the 2021 Our Common Agenda where the Secretary-General stressed: “we know that GDP fails to account for human well-being, planetary sustainability and non-market services and care, or to consider the distributional dimensions of economic activity. … It is time to collectively commit to complementary measurements.”

Rethinking progress: Toward a new framework

While acknowledging that the SDGs are significantly off track, the brief notes with concern that GDP has become the global proxy for value creation, wealth creation, development, and resource allocation. Our current economic models, including market-based ones such as GDP, generally overlook many aspects of life that drive prosperity and well-being, while perversely and disproportionately valuing activities that destroy the planet, it warns.

GDP does not account for human well-being, environmental degradation, human and environmental destruction of some economic activities, or informal economy such as unpaid care work in households. For instance, during the COVID-19 pandemic, women spent an estimated 512 billion hours globally doing additional unpaid childcare work that contributed to sustaining our economies during this global health crisis.

Yet, activities such as deforestation, overfishing, the burning of fossil fuels, and other harmful practices are the ones often contributing to increases in GDP. “Global GDP has doubled since 1970, while the depletion of resources has more than tripled, with disastrous consequences for the natural environment,” the brief emphasizes. In addition, expanding economic phenomena such as digitalization and the use of free digital services or the use of crypto assets are often not or insufficiently captured by GDP.

Progress toward the SDGs and long-term prosperity will not be effective until we make a fundamental shift in the way we measure progress. Shifting away from GDP does not mean replacing GDP, but, rather, “develop[ing] complementary met­rics in which what matters to people, the planet and the future is more fully recognized.” To achieve a universal and comprehensive measurement of progress to complement GDP, the Secretary-General recommends the following:

• A strong political commitment to move beyond GDP and create a conceptual framework that can accurately “value what counts” for people, the planet, and the future, anchored in the 2030 Agenda for Sustainable Development and the commitment set out therein to leave no one behind;
• A robust technical and scientific process, informed by sound and disaggregated data; and
• A major capacity-building and resourc­ing initiative to enable Member States to use the new framework effectively.

To be as successful as GDP, the new metric should shift away from the large dashboard of indicators to no more than 10-20 measures that go beyond GDP. It should be concise, widely accepted, comparable, country-owned, scientifically robust, statistically sound, and applicable to decision making. Among the handful of existing measures that go beyond GDP, the Secretary-General highlights comprehensive wealth – that is, the sum of human, natural, social, produced, and financial capital. Among examples of ongoing initiatives that provide the foundation for establishing a shared language and community of practice to go beyond GDP, the brief cites “[m]easures of environmental degradation and depletion, environmental and economic accounting and measures of inclusive or comprehensive wealth by the United Nations Environment Programme and the World Bank.”

Support from the international community

The UN Secretary-General’s call for action comes after decades of discussions among the international community around moving beyond GDP. Many experts believe that moving toward comprehensive wealth is the best way forward:

• At their 2018 meeting in Canada, G7 leaders recognized that GDP alone is “insufficient for measuring success” and acknowledged “the importance of monitoring other societal and economic indicators that measure prosperity and well-being.”
• The landmark Review of the Economics of Biodiversity (the Dasgupta Review) argues that while GDP may be “indispensable in short-run macroeconomic analysis and management, … it is wholly unsuitable for … identifying sustainable development.” Rather, “in order to judge whether the path of economic development [nations] choose to follow is sustainable, [they] need to adopt a system of economic accounts that records an inclusive [or comprehensive] measure of their wealth.”
• The Global Director for Environment and the Blue Economy at the World Bank said recently that “we think [it] is a big deal to go beyond GDP and to develop [comprehensive] wealth accounting … [because] it helps countries see [the] asset base … [that] often is overlooked in standard macroeconomic indicators like GDP. GDP growth that’s at the expense of your assets … [is] unsustainable.”
• For their part, both the Organisation for Economic Co-operation and Development (OECD) and the World Economic Forum (WEF) agree that GDP does not provide a sufficiently detailed picture of the living conditions that ordinary people experience and that we need to rethink GDP as our “key performance indicator” in economic policymaking.

Why does comprehensive wealth matter?

The five assets that compose comprehensive wealth – human, natural, social, produced, and financial capital – are what countries require to ensure well-being both today and in the future. Examples include healthy ecosystems, strong communities, educated citizens, efficient buildings, and sound financial holdings.

In a recent policy brief produced for the 2022 G20 Task Force on Global Cooperation for SDG Financing, IISD argues that even if many people may not be familiar with the term “comprehensive wealth,” they would understand intuitively what it is and why it is important. People understand that, in the long run, their personal well-being is determined not by how much money they earn today but by their capacity to earn tomorrow and beyond. They also understand that it is not just money that counts for well-being, but also what they “earn” more broadly through interacting with family and neighbors, enjoying the benefits of nature, and feeling safe in their communities. And, even though they might not use the term, they understand that it is their assets that determine this “earning” potential. These include both personal assets (e.g., a home and property; money in the bank; skills, knowledge, and experience; and relations with family, friends, and society at large) as well as assets they own collectively with other citizens, such as healthy ecosystems and efficient public infrastructure. These assets make up each person’s wealth portfolio – and determine their prospects for the future. People understand these assets must be maintained over time if their well-being is to be sustained. Depleting one’s assets to support current well-being is, as everyone knows, a recipe for disaster in the long run.

The same is true for countries. National comprehensive wealth portfolios determine the prospects for the long-term well-being of nations. National comprehensive wealth portfolios are made up of the sum of individual comprehensive wealth portfolios of citizens, plus the public assets owned by the nation, such as ecosystems and natural resources, roads and other infrastructure, and institutions. As with individuals, a nation’s comprehensive wealth portfolio must be stable or growing over time for national well-being to be sustainable. If it is not, the country is eroding its productive base, living off its inheritance rather than building for the future.

Looking ahead

The Summit of the Future in 2024 is a unique opportunity for national stakeholders and the international community to foster dialogue and multilateralism and address the pressing global challenges, including the SDGs. The UN Secretary-General, the G7, the World Bank, the OECD, the World Economic Forum, and leading academics and researchers agree on the need to move beyond GDP.

To achieve this, governments would need to confirm their political commitment, agree to establish an independent high-level expert group to develop a value dashboard of a limited number of key indicators such as comprehensive wealth, and support financing and statistical capacity building.

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In preparation for the 2023 SDG Summit and the Summit of the Future in 2024, the UN Secretary-General is launching eleven policy briefs between March and July 2023, offering “concrete ideas” on how to advance Our Common Agenda. Timed accordingly, the SDG Knowledge Hub is publishing a series of policy briefs of its own, offering insights on the issue areas covered in these publications.