There is no simple definition of a sustainable society although it has long been clear that some activities are unsustainable because they undermine health, economic well-being or the environment. The economy might be improving, but parts of the environment are in decline because of over-exploitation of natural resources and pollution. Some forms of pollution can harm health and the environment and create future economic liabilities in the form of expensive cleanups.

What indicators are about

Whether it is for our personal health or that of our society and economy, we are always looking for ways of measuring and tracking changes. For our health, we rely on such factors as weight, blood pressure and blood sugar. For the health of our environment, we watch such indicators as greenhouse gases, smog, water quality and the state of forests and wildlife.

For many decades, we have been reporting on economic activity with such indicators as GNP, GDP, inflation rate, balance of trade, balance of payments, interest rates, inventories, expenditures on new capital outlays and unemployment rates. The Gross Domestic Product (GDP), an aggregation of the market value of all goods and services, is seen by many as a measure of how well a nation is doing, even though it was never designed to carry such a heavy load.

Paradoxically, depleting the environment often increases GDP, as natural resources are converted into goods and services that are sold. Using them up faster than nature can create them makes GDP grow even faster. The sale of more fossil fuels adds to GDP even though burning those fuels leads to air pollution that increases illness and premature death from respiratory problems. An oil spill creates a mini economic boom because the clean-up costs are so high.

Few reports ever try to show the interconnections among these three spheres, including how human activities depend on a healthy environment. Sustainability reporting seeks to knit a number of these measures together so we can see the big picture, with the linkages. The challenge is to create an accurate and reliable set of important measures of sustainability performance.

During the 1990s, a number of national, provincial/state and municipal governments in Canada and around the world, along with a number of corporations and non-government organizations, started to tackle this challenge.

In 2000, the National Round Table on the Environment and the Economy was asked to lead in the creation of a package of key environmental and sustainability indicators for Canada. By presenting them as a package, it will help people to see that while some measures are improving, others are in dangerous decline, and we will need to make some changes in order to achieve long-term sustainability.

The Environment and Sustainable Development Indicators (ESDI) Initiative involves experts from across the country. Statistics Canada is providing considerable expertise in creating the design for the indicator system, and may well be the organization that produces the reports in the future. Environment Canada is focusing on improving Canada’s environmental information system so it can provide material for environmental indicators as well as helping in the development of the ESDI indicators. 

As part of the overall indicators project, Environment Canada led a task force on a Canadian Information System for the Environment. In late 2001, it reported that a national environmental information network was needed to improve the collection, management and communication of environmental information.  

The Capitals approach

The ESDI project leaders decided in 2001 that they would choose indicators that measure changes in capital in three sectors – human, natural and produced – that we need for a successful economy and that will be needed by future generations. Some of the important assets that will be tracked will include stocks of natural resources, as well as crucial ecosystem services (such as the provision of clean water and soil). The reporting system will also show linkages. For example, are we running down one type of capital at the expense of another, and will this hurt future prospects?

Produced capital

Produced capital, ranging from factories to the goods they manufacture, is the result of human activities, and is an important part of what we measure to take the pulse of our economy. The other key element of the measured economy is services. Produced capital has been measured for a long time, and we have more experience with developing indicators for it. Statistics Canada produces annual estimates of produced capital in the National Balance Sheet Accounts.

Human capital

Human capital is described in the ESDI project as capabilities or capacities that reside in individuals and allow them to work or accomplish other goals. It includes but is not limited to knowledge, skills and health. An experienced and educated workforce is generally more productive, innovative and will work more efficiently. Similarly, a healthy workforce will be more productive than an unhealthy one.

In its initial discussions, the ESDI is looking at several measures of this human capital, including education levels in working age people, scores on literacy and numeracy tests, health-adjusted life expectancy and self-reported overall health status (how we feel about the state of our own health). The indicators are also supposed to show impacts of environmental quality on human health.

A number of other reporting systems have included a broader suite of indicators, though this can be at the risk of having so long a list that it is hard to get a clear picture of the big trends. For example the Toronto Vital Signs project has a list of approximately 90 economic, environmental, social, cultural, health and civic participation indicators. The Ontario Quality of Life report includes: children in care of children’s aid societies, social assistance recipients and public housing waiting lists. The Genuine Progress Index reports for Nova Scotia and Alberta both include income distribution and crime.

Natural capital refers to the natural resources upon which we depend, such as the atmosphere, fertile soils, clean water, crops, forests, wetlands, metals and minerals, fuels and millions of other living species that are often put under the umbrella of biodiversity.

Just as human-built capital such as buildings and switches are needed to provide services such as telecommunications, so natural capital is needed to produce raw materials and energy, and ecosystem services, such as climate, natural water storage and purification, food production, recycling of wastes, maintenance of biodiversity and an enjoyable environment. [Some experts count ecosystem services as part of natural capital.]

Indicators can track changes in the state of natural resources, providing warning signals if human activities disrupt ecosystem functioning to the point where the services provided by ecosystems decline. Finance Minister Paul Martin predicted that the indicators will serve as "a continuous call to arms—an ongoing protection against environmental complacency.”

Natural capital can be roughly divided into renewable and non-renewable categories. Renewable forms, such as trees, fish and freshwater flows are replenished relatively quickly after being used, although we use some faster than they regenerate, leading to depletion. Non-renewable resources, such as coal, oil and natural gas, are produced so slowly by nature that if consumed or dispersed into the environment, they are gone.

The ESDI categorizes natural capital into natural resources, land and ecosystems. Those are further divided into five groupings: air quality and atmospheric conditions, renewable resources, non-renewable resources, land and soils, and water resources.

Experts are looking at indicators for marine resources, timber, minerals, metals and fossil fuels, agricultural land, productive soil, air and water quality, biodiversity, climate change, the stratospheric ozone layer and waste emissions.

One of the most difficult and controversial areas is substitutability. We are used to substituting one form of manufactured capital for another. Machines have replaced human labor in many factories. Oil, coal and gas have replaced wood as our principal fuels over the past century or so. However, there is no manufactured substitute for such forms of natural capital as the atmosphere or clean water. Using built structures to replace natural services from ecosystems such as water cleansing would be either impossible or prohibitively costly. Indicator developers have a challenge in producing signals that show the importance of changes in various forms of natural capital and ecosystem services.

The ESDI team

The ESDI is guided by a 25-member steering committee including representatives from other sustainability indicator initiatives, from business, labour, not-for-profit organizations, and academic and research institutions. Environment Canada, Statistics Canada, Natural Resources Canada, Finance Canada and Health Canada also are represented. The committee is co-chaired by Dr. Stuart Smith, Chair of the NRTEE, and Dr. Peter Pearse, Professor Emeritus in Forest and Resource Management at the University of British Columbia.

The work is supported by about 50 experts from industry, three levels of government, academe and non-government organizations. The indicator design process has split these experts into six groups, mainly to deal with the complexity of identifying measures of natural capital. These six “cluster groups” are working on human capital, non-renewable resources, renewable resources, land and soils, air quality and atmospheric conditions, and water resources. Each group is composed of between five and 12 experts.

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