Course Correction
Measuring Progress as if Nature Mattered
Pavan Sukhdev
Founder-CEO, GIST Advisory& UNEP Goodwill Ambassador

What’s Driving us on Collision Course?

Whose Economy is it Anyway?
U.S. Employment

U.S. Gross Value Added
12.50%

17.2%

7.10%
5.50%

8.4%
74.3%

74.90%

Government
Nonprofit
For-Profit

Government
Households
Nonprofit institutions serving households
Private business2010 data. Source: Bureau of Labor Statistics (Occupational
Employment Statistics), and Johns Hopkins Nonprofit
Economic Data Project2010 data. Source: U.S. Bureau of Economic Analysis

How ‘Green’ is the Private Sector?
Negativeenvironmental
externalities of top
3,000 listedcompanies
estimated at US$
2.15 trillion p.a.

Source: Trucost for UNPRI, 2010.

Corporate Externalities …..

Top 3,000
ListedCompanies

Source: Trucost for
UNPRI, 2010.

….. Are Pushing Planetary Boundaries

Greenhouse
Gases

NaturalResources

Greenhouse
Gases

NaturalResources
NaturalResources
Water
Abstraction

Natural Capital

Navigation Challenge Ahead…
Can we navigate acomplex,
multi-dimensional,
economic space …

Physical Capital… with a simple
economic compass ?
Eg.1: SNA for nations?
Eg.2: IFRS for companies?

“Inclusive Wealth” is a True Balance
Sheet of Nations

The UN (“Inclusive Wealth Report, 2014”) calculates human capital based on average years of schooling,
workers wages, and the number of years they can expect to work before they retire (or die)1.
Source: 1 Inclusive Wealth Report 2014 URL: http://www.ihdp.unu.edu/docs/Publications/Secretariat/Reports/SDMs/IWR_SDM_2014.pdf
Chart Source: http://www.economist.com/node/21557732

8

“Inclusive Wealth” is a True Balance
Sheet of Nations
From: Foreword, Prof. Partha Dasgupta,“Inclusive wealth is the social value of an
economy's capital assets. The assets
comprise (i) manufactured capital(roads,buildings,machines,andequipment), (ii) human capital (skills,education, health), and (iii) naturalcapital (sub-soil resources, ecosystems,
the atmosphere).
Such other durable assets as knowledge,institutions, culture, religion – more
broadly, social capital – were taken to
be enabling assets; that is, assets thatenable the production and allocation ofassets in categories (i)-(iii). The
effectiveness of enabling assets in acountry gets reflected in the shadow
prices of assets in categories (i)-(iii)”

From “National” to “Corporate” Performance
Measurement

PhysicalCapitalHuman
CapitalBusiness
Drivers &Impacts

Integrated
Profit & Loss

NaturalCapitalSocialCapital

Source: Adapted from www.theirrc.org & www.gistadvisory.com,“Towards a Valuation Framework for Business Externalities”

10

From “National” to “Corporate” Performance
Measurement

PhysicalCapitalHuman
CapitalBusiness
Drivers &Impacts

Integrated
Profit & Loss

NaturalCapitalSocialCapital

Source: Adapted from www.theirrc.org & www.gistadvisory.com,“Towards a Valuation Framework for Business Externalities”

11Four ‘Macro’ Capitals and Examples at‘Micro’ Level
Physical Capital

PrivateOwnership:(‘Private Goods’)

Community
Ownership:(‘Club Goods’)

PublicOwnership:(‘Public Goods’)

Human Capital

Natural Capital••••

Factories
Securities
Licences
Patents••

Market design, regulations, rules, etiquette
Civil & Criminal Laws; Judicial systems•

CommunityCentres
CommunitySchools•••••

HealthEducation
Job Skills

Traditional
Community
Knowledge•••••Mines
FieldsPrivateForests
Social Capital
CommunityForests
GrazingCommons•Community rules, norms, customs, culture•••RoadsBridges
PublicHospitals••

Constitutions; Judicial systems; Law & order; Taxation
Social equity; Communal harmony; Cultural diversity••

PublicDatabases
Non-patent
Knowledge••

Social CapitalHigh SeasFisheries
NationalParks/ Forests
Social CapitalIntegrated Profit and Loss
History since 2013
 Enables companies to measure performance from a‘stakeholder’ perspective across all capital classes
 Looks beyond company revenues, profits, market
cap to impacts to broader dimensions of public
wealth critical for a sustainable economy, i.e.
natural capital, human capital & social capital.
 <IP&L> enables companies to• Quantify environmental costs of businessmodel choices & strategies• Quantify social benefits & costs for localcommunities from business model choices,
policies, CSR programs, etc• Quantify positive impacts on employees fromHR & EHS investments• Compute & communicate wider business“performance” to all stakeholder groups.

Some <IP&L> Pioneers…
2013 … 2014 …2015 … 2016

From “National” to “Corporate” Performance
Measurement: Incorporating Externalities
Physical Capital

PrivateOwnership:(‘Private Goods’)

CommunityOwnership:(‘Club Goods’)

PublicOwnership:(‘Public Goods’)

•FCX

•

SCX

•

FCX

•

SCX

•

FCX

•

SCX

Human Capital•

HCX

Natural Capital•

NCX

Social Capital

•

HCX

•

NCX

Social Capital

•

HCX•

NCX

Social Capital

<IP&L> 2015
AMATA
Brazilian forestry & forest products company thatbuilds & benefits from community links, uses lowimpact forestry, aims “Beyond FSC”..

<IP&L> 2016
Yarra Valley Water
YVW, Melbourne’s leading Water Utility, with 1.8 million customers, faces drought,migration, health issues. Victoria State officially targets “liveability”… Melbourne
has been voted “most liveable city” six times (by The Economist Intelligence Unit)<IP&L>
2015/16
A$ millions

YVW is using 2015/16 base year results (above) and prioritizing amongst proposedsocial schemes in order to target doubling social value creation by 2020

Thank You!
Pavan Sukhdev
Founder-Author, Corporation 2020
& UNEP Goodwill Ambassador
www.corp2020.com@CORP2020