|
31 ELR 10603 | Environmental Law Reporter | copyright © 2001 | All rights reserved Toward Data-Driven Environmentalism: The Environmental Sustainability IndexDaniel C. EstyThe author is Associate Dean of the Yale School of Forestry and Environmental Studies and a professor in both the Yale School of Forestry and Environmental Studies and the Yale Law School. For biographical information, see http://www.yale.edu/envirocenter/bios/dancv.html. The author may be contacted at [email protected]. Too often environmental debates turn on rhetoric and emotion rather than carefully considered data and analysis.1 Firmer factual foundations and a higher degree of analytic rigor would help to narrow the range of dispute over which environmental battles rage and to move us beyond the current polarization over how best to achieve environmental goals.2 At the heart of any shift toward more systematic environmental decisionmaking lies a need for reliable environmental "indicators" or "metrics" and other data that clarify the issues and the trend lines. To facilitate such a shift in environmental policymaking toward firmer underpinnings, the World Economic Forum's Global Leaders for Tomorrow Environment Task Force launched an initiative in 1999 to develop an Environmental Sustainability Index (ESI), the first full-fledged version of which has just been released.3 The ESI project seeks to gauge the ability of countries across the world to meet the environmental needs of their people and to achieve environmentally sustainable development. The ESI assesses environmental circumstances, results, and capacities across 22 core "indicators" based on 67 underlying variables, each supported by an independent database. The ESI, building on the widely used "pressure-state-response" environmental framework, reflects data and information on five broad components of environmental sustainability: . environmental systems (describing the current condition of a nation's air, water, and terrestrial ecosystems); . environmental stresses and risks (measuring the levels of pollution flows and resource exploitation); . human vulnerability to environmental impacts (tracking human capacities to handle environmental exposures and risks); . social and institutional capacity to respond to environmental challenges (describing a society's ability to address pollution and natural resource management challenges); and . contributions to global stewardship (reflecting both the transboundary harms a country emits and its contributions to collective efforts to address these harms). Each of these components is separately analyzed as a function of three to seven core indicators, as is shown in Table 1. Table 1. Environmental Sustainability Index Building Blocks
The environmental systems component, for example, includes indicators that measure air quality, water quality and quantity, biodiversity, and the condition of terrestrial ecosystems. Each of the indicators is made up of between two and six variables. Water quality, for instance, reflects measures of dissolved oxygen, suspended solids, electrical conductivity (a measure of salinity and the concentration of metals), and phosphorous. The databases underlying these variables are drawn from a variety of sources including the United Nations Environment Programme (UNEP),4 the World Health Organization (WHO)5, the World Conservation Union (IUCN)6, the Living Planet Report (developed by World Wide Fund for Nature, the UNEP, the Oak-land-based group Redefining Progress, the Mexican Center for Sustainability Studies, and the Norwegian School of Management)7, and the Organization for Economic Cooperation and Development (OECD)8 in Paris. In addition, the ESI makes use of data collected by the World Economic Forum through its annual survey of 4,000 business and government leaders across the world.9 Measuring performance and trying to provide a factual foundation for decisionmaking is, of course, nothing new in many segments of society. In the business world, companies have long had elaborate accounting procedures, which permit the tracking of various drivers of performance and long-term financial strength including the sales picture for each product line, cost trends, the liability of proposed capital expenditures, the success of marketing strategies, the results from advertising campaigns, and many other dimensions of corporate standing.10 Well-managed companies also use their data tracking systems to benchmark results and to set performance goals based on comparisons within the company (between individual business units and for the enterprise as a whole over time) as well as against industry sector counterparts and the private sector in general. The ESI initiative reflects a belief that both the same capacity for data-driven analysis and comparative performance evaluation can be established in the environmental domain, facilitating strategic decisionmaking and better long-term results.11 The 122 country by 67 variable matrix that lies beneath the ESI represents one of the most comprehensive environmental databases ever assembled. The availability of this data set in an interactive online version provides an extraordinary policymaking tool. It permits comparative analysis of a country's environmental strengths and weaknesses, identification of "best practices," and benchmarking of societal performance, as well as an empirical foundation for goal setting and tracking. The value of distilling data into a single index as the ESI ranking, while controversial in some respects, has been demonstrated in many circumstances. Gross domestic product (GDP), for instance, has come to be viewed as a summary measure of economic results.12 Likewise, the World Economic Forum's Global Competitiveness Report (GCR) rankings have become an important indicator of national economic performance. Governments around the world await the release each year of the new standings as a way of evaluating their performance. In fact, there are even stories of finance ministers who have lost their jobs after the latest GCR results indicated that their nation had slipped down the charts. The ESI seeks to provide a similar focal point for environmental conditions and trends—drawing top-level policymaker attention. Of course, the key to real and durable environmental progress is to get people (the public, the media, as well as business and governmental decisionmakers) to dig into the results and to try to understand the drivers of good (and bad) performance. The 2001 results, released at the end of January, show Finland at the top of the ranking and Haiti at the bottom in position 122. The list is reproduced in Table 2. Table 2. 2001 Environmental Sustainability Index
The analysis is revealing in a number of important respects. First, no country has achieved sustainability or fully succeeded in protecting its people from environmental threats. The countries that do best in some regards, such as in reducing local air and water pollution, often have very poor scores with regard to other issues, such as the degree of contribution to protection of the global commons. In fact, this is precisely the picture of the United States, as noted in Table 3. [SEE ILLUSTRATION IN ORIGINAL] But the facts provide a basis for dispelling unfounded presumptions. For instance, many Europeans have expressed shock at how high the United States ranks (11th overall),13 perhaps unaware of how well the nation has done in confronting some of its pollution challenges. But U.S. citizens may be surprised by how poorly their nation does on controlling greenhouse gas emissions (115th out of 122 countries).14 In brief, every country has important environmental goals that remain unrealized, and the ESI helps to illuminate these challenges. A second striking feature of the ESI analysis is the general weakness of environmental data. Dozens of countries had to be excluded from the analysis because they lacked reliable numbers across so many of the underlying variables. Even among those countries that were ranked, many have large gaps in their environmental data sets. If environmental protection is to be moved on to firmer analytic underpinnings, a much greater investment needs to be made in environmental data at the local, national, and global scales. Finding common methodologies for collecting and analyzing data is also critical so that comparative perspectives will be meaningful and relative performance can be judged. In fact, enormous opportunities exist for environmental gains simply by moving lagging nations up to the "best practices" employed by others. For this to be done systematically, however, data must be available that is accurate and comparable across nations. Third, analysis of the individual variables underlying the ESI reveals a number of interesting relationships. Most notably, of the 67 elements studied, the variable with the highest correlation with overall ESI scores is the level of corruption.15 Jurisdictions in which environmental agency inspectors are paid off rather than issuing pollution citations will undoubtedly experience bad results. But the corruption relationship probably serves more broadly as a proxy for other factors such as respect for the rule of law that directly shape environmental results. Additional information can be gleaned from comparing the ESI results with measures of economic performance. Clearly, as Figure 1 demonstrates, the level of development of a country dramatically shapes its capacity to address environmental threats. Figure 1. Relationship Between the ESI and Per Capita Income [SEE ILLUSTRATION IN ORIGINAL] But, nonetheless, countries at the same level of wealth often show dramatically different degrees of environmental performance. For example, Sweden, with a GDP per capita of $ 20,700, ranks 4th on the ESI, while Belgium, with a GDP per capita of $ 23,200, stands in 79th place. Similarly, Haiti, with a GDP per capita of $ 1,400, would never be expected to match the environmental results of Sweden, but it could aspire to performance comparable to Cameroon, a nation of equal GDP per capita, but with an ESI score that is nearly twice that of Haiti. This finding further corroborates the suggestion that there are significant environmental gains to be achieved by bringing laggards up to the standards of the environmental leaders. In addition, it is striking that countries with high ESI scores also tend to have strong economic positions and tend to rank high on the GCR competitiveness scale, as Figure 2 notes: Figure 2. Relationship Between the ESI and WEF's Current Competitiveness Rank [SEE ILLUSTRATION IN ORIGINAL] This fact suggests that high environmental standards are not inconsistent with a strong competitive posture.16 While the stronger hypothesis—that good environmental performance leads to good economic results—cannot be confirmed, the long-standing development theory, which argues that countries must get rich before they get clean, appears to be strongly disproved. More work needs to be done to understand the underlying drivers of good environmental performance. An initial effort to identify in an empirically rigorous fashion the determinants of good environmental performance, based on the data in the 2000 ESI, shows the potential in this regard.17 The Esty-Porter analysis suggests that the strength of a nation's social, legal, and economic structures, as much as the rigor of its environmental regulatory regime, determines performance.18 Adherence to the rule of law, protection of property rights, and governmental decisionmaking in a transparent and above-board fashion all contribute significantly to good environmental outcomes. Considerable work remains to be done to refine the ESI. The current ranking suffers from a number of serious methodological shortcomings. In particular, limits on the available data drastically restrict the ability of the world community to monitor even the most basic pollution and natural resource trends and to identify policy initiatives that are working to address critical issues. Finding ways to "weight" the indicators that are now added up on an unweighted basis to assemble the ESI ranking would be useful, although differences in values and assumptions about what matters most in the drive for environmental sustainability makes agreement on a single scale difficult. For example, while rich countries might put great emphasis on reducing greenhouse gas emissions as the central element of sustainability, poor nations might see provision of drinking water as their key challenge. Perhaps the better solution, which has been adopted by the ESI project team, is an interactive model of the ESI that permits each user to set his or her own weights. Finally, the exercise of compiling the ESI has highlighted a number of difficulties with the concept of "sustainability." Specifically, because sustainability relates both to the distance a society is from critical pollution or resource consumption thresholds and how fast these thresholds are being approached, the concept has proven hard to translate into clear signals for policymakers. As the relatively high ranking of Russia in the ESI suggests, a nation can be highly polluted but not be at risk of surpassing sustainability thresholds if it has a large enough land base across which to spread pollution harms. Likewise, the relatively low ranking of Singapore (reflecting its very limited natural resource endowments), despite its very strong environmental performance, suggests that a separate emphasis on environmental results and trajectory would be valuable. Despite the shortcomings, the range of applications of the ESI and environmental metrics more generally is vast. Governments clearly have much to gain by knowing where they stand in protecting critical resources, what pollution control policies deliver good results, and what strategies other jurisdictions are using successfully. Shifting the focus of environmental analysis from the national scale to local or community levels and to the corporate scale and perhaps even the household level would provide additional insights and opportunities to refine environmental strategies. To facilitate such multi-scale analysis, environmental indicators are needed at each of these levels. Increasingly, individual companies are eager to find ways to improve their eco-efficiency and to assure that they are achieving maximum resource productivity.19 Good environmental data make this type of analysis easier to do. Investors are also exploring the linkages between corporate environmental performance and stock value. Services such as the Dow Jones Sustainability Index20 and Innovest21 now provide data on corporate-level environmental results that closely tracks the performance measurement structure that the ESI provides at a national level. Although these efforts have been underway for only a few years, it appears that companies with top-tier environmental performance out-perform the market economically as well.22 Again, the correlation does not prove causation. It may be, in fact, that the strength of a company's environmental management may simply be a proxy for good management more generally. But, in any case, the relationship is interesting, and it high-lights the opportunities for further understanding that metrics and data analysis permit. Fundamentally, it is high time the environmental world adopted the business mantra that "what gets measured matters." Historically, environmental decisions have been based, too often, on educated guesses but not hard facts. The lack of analytic rigor has made the environmental field seem "soft" and has allowed critics to dismiss the seriousness of pollution control and natural resource management issues. Of course, a more data-driven approach to environmental decisionmaking will not solve environmental problems. There will remain hard policy choices to be made—and difficult political decisions about how much to invest in environmental programs. Disputes over assumptions and underlying values will not disappear. But a stronger factual foundation, [31 ELR 10612] underpinned by carefully constructed indicators and systematic analysis, should help to clarify the challenges, focus attention, and set priorities. More specifically, indicator-based policymaking will facilitate the identification of programs that are succeeding (and those that are failing), thus giving policymakers a capacity for more decisive policy judgments and course corrections. Of course, the facts will reveal that some long-standing issues do not represent as pressing a threat to public or ecological health as has been assumed. But, on the other side, issues that have not been taken seriously may loom larger as the numbers are unveiled. In this regard, the ESI represents a first step toward a new environmentalism that draws on data-collection, information-sifting, number-crunching, knowledge-building opportunities presented by the Information Age.23 1. See PHILIP K. HOWARD, THE DEATH OF COMMON SENSE: HOW LAW IS SUFFOCATING AMERICA (1994); NATIONAL ACAD. PUB. ADMIN. (NAPA), SETTING PRIORITIES, GETTING RESULTS: A NEW DIRECTION FOR THE ENVIRONMENTAL PROTECTION AGENCY (1995); CLARENCE J. DAVIS & JAN MAZUREK, POLLUTION CONTROL IN THE UNITED STATES: EVALUATING THE SYSTEM (1998); M. LANDY ET AL., THE ENVIRONMENTAL PROTECTION AGENCY: ASKING THE WRONG QUESTIONS (1990). 2. See Daniel C. Esty, Toward Optimal Environmental Governance, 74 N.Y.U. L. REV. 1495, 1519 (1999) (demonstrating how "technicaluncertainty" can be reduced). 3. The ESI, a product of the World Economic Forum's Global Leaders for Tomorrow Environment Task Force in collaboration with the Yale Center for Environmental Law and Policy and the Center for International Earth Science Information Network (CIESIN) at Columbia University, can be found at http://www.yale.edu/envirocenter/esi/esi.html (last visited Mar. 29, 2001) [hereinafter ESI 2001]. * Number of countries for which data are available. 4. See UNEP, GLOBAL ENVIRONMENTAL MONITORING SYSTEM/WATER QUALITY MONITORING SYSTEM, available at http://www.cciw.ca/gems/ (last visited Mar. 29, 2001). 5. See WHO, 1997-1999 WORLD HEALTH STATISTICS ANNUAL (2000), available at http://www.who.int/whosis/mort/download.htm (last modified Mar. 7, 2001). 6. See IUCN, THREATENED SPECIES OF MAMMALS, BIRDS, AND REPTILES (1996); IUCN RED LIST OF THREATENED ANIMALS (1996); Membership List, IUCN-The World Conservation Union, Aug. 1, 2000 (updated with new date on Nov. 10, 2000). 7. WORLD WIDE FUND FOR NATURE, LIVING PLANET REPORT (1999). 8. See statistics maintained by the OECD, at http://www.oecd.org/statistics/#stat (last modified Oct. 2, 2000). 9. See Peter Cornelius & Andrew Warner, The Executive Opinion Survey, in THE GLOBAL COMPETITIVENESS REPORT 2000 (Michael E. Porter & Jeffrey D. Sachs et al. eds., 2000). 10. See CARL WARREN ET AL., CORPORATE FINANCIAL ACCOUNTING (7th ed. 2001). 11. See Daniel C. Esty & Kim Samuel Johnson, Environmentalism by Number, WORLDLINK, Jan./Feb. 2001, at 23. 12. "We look at the [GDP] and its predecessor, the gross national product, as a measure of output of goods and services at market prices, and it's a crucially important statistic to get a sense of where the overall economy is and where it has been." Remarks of Alan Greenspan, Chair, Federal Reserve Board, at the Press Conference Announcing the Commerce Department's Achievement of the Century (Dec. 7, 1999), reprinted in GDP: ONE OF THE GREAT INVENTIONS OF THE 20TH CENTURY: SURVEY OF CURRENT BUSINESS (Bureau of Economic Analysis 2000), available at http://www.bea.doc.gov/bea/aw/0100od/maintext.htm (last visited Mar. 29, 2001). 13. See ESI 2001, supra note 3, at 12. 14. Id. at 250. 15. Id. at 13. 16. This finding supports the "Porter hypothesis." See Michael E. Porter & Claas van der Linde, Toward a New Conception of the Environment-Competitiveness Relationship, J. ECON. PERSP., Fall 1995, at 97, 115-16. 17. See Daniel C. Esty & Michael E. Porter, Measuring National Environmental Performance and Its Determinants, in THE GLOBAL COMPETITIVENESS REPORT 2000, supra note 9. 18. This finding supports a number of recent analyses stressing the importance of a functioning legal regime as a prerequisite for good policy results in many domains. See Jeffrey D. Sachs, Globalization and the Rule of Law, in YALE LAW SCHOOL OCCASIONAL PAPERS (2d Series, No. 4) (1998); Daniel C. Esty, Environmental Protection During the Transition to a Market Economy, in ECONOMIES IN TRANSITION: ASIA AND EUROPE (Wing Woo et al. eds., 1997). 19. See STEPHAN SCHMIDHEINY, CHANGING COURSE (1992); FOREST L. REINHARDT, DOWN TO EARTH (2000); Daniel C. Esty & Michael E. Porter, Industrial Ecology and Competitiveness, J. INDUS. ECOLOGY, Jan./Feb. 1998, at 35. 20. See Dow Jones Sustainability Group Index, at http://www.sustainability-index.com/ (last visited Mar. 29, 2001). 21. See Innovest Strategic Value Advisors, at http://www.innovest group.com/ (last visited Mar. 29, 2001). 22. See Sarah D. Stanwick & Peter A. Stanwick, The Relationship Between Environmental Disclosures and Financial Performance: An Empirical Study of U.S. Firms, 7 ECO-MGMT. & AUDITING 155 (2000). Claudia H. Deutsch, For Wall Street, Increasing Evidence That Green Begets Green, N.Y. TIMES, July 19, 1998, at 7. Innovest has commissioned a number of studies that demonstrate this link, which are available at the Innovest website at http://www.innovestgroup.com/library.html. But see Noah Walley & Bradley Whitehead, It's Not Easy Being Green, HARV. BUS. REV., May/June 1994, at 46 (arguing that many corporate environmental programs negatively affect company profits). 23. See Daniel C. Esty, Digital Earth: Saving the Environment, 226 OECD OBSERVER (forthcoming May 2001). 31 ELR 10603 | Environmental Law Reporter | copyright © 2001 | All rights reserved |