We need a new measure of success

How strong is our economy if it can’t absorb shocks? If growth comes at a great expense to future generations? And where is the scorecard that tells us how we are actually doing? Any corporate leader will tell you that you can’t manage what you can’t measure. Yet measurements quantifying sustainability and resilience don’t seem to live together on any national balance sheet or stock market index.

It’s been needed for a while, but the COVID-19 crisis has highlighted why we have to have something that captures both the economic credits and environmental debits we’re accruing. A new dashboard that merges economic and environmental costs and benefits, building off of the world’s new attention to numbers and graphs as we monitor the health care system through a worldwide pandemic.

Sustainability means “meeting the needs of the present without compromising the ability of coming generations to meet their own needs.” In a world threatened by pandemics and fragile ecosystems — two threats whose fates are intertwined — it’s increasingly clear that we are flying without the right dashboard data.

Take the standard measure used by most everyone to calculate the health of a nation’s economy: gross domestic product or GDP. Since COVID-19 was declared a global pandemic and markets started to panic, the brightest minds have furiously revised down their GDP expectations for the coming year, to the point where what looked sensible last week looks foolhardy today.

If this were an airplane, it would be in free-fall with the altimeter spinning down, when just moments before there hadn’t been a cloud in the sky.

Industry and the market for data systems might provide a solution. The link between the management of the natural world and our climate system is not beyond the reach of CEOs running publicly traded companies. Many companies now publicly report their CO2 emissions and the financial industry’s movement into such byways includes Blackrock CEO Laurence Fink’s recent statements about how climate change will reshape finance.

Investors are also favoring the most pioneering companies. Siemens was one of the first major industrials to commit to becoming carbon neutral, employing energy efficiency and management systems in order to avoid 132 million metric tons of CO2 emissions for its U.S. customers; Unilever has banned single-use plastics; Tesla not only provides the electric car but a series of complementary products that point to an entirely decarbonized future.

The need for a new form of corporate measurement is especially critical as prudent financial sustainability, and with it the flexibility to invest in the long-term future, has been cast aside by politicians of all stripes. In two decades the national debt has soared from $6 trillion to $24 trillion, a daunting figure that doesn’t take into account the $2.2 trillion and counting that will be added on to deal with the financial fallout from COVID-19.

Many economists have argued for the inclusion of environmental costs in accounting practices. But such a concept has never been accepted, truly, by anyone other than a few academics, although a politician here and there grabs it as a talking point.

Yet COVID-19, a disease that arose in the animal kingdom, and jumped to humanity, has revealed the necessity of looking at our economy and the natural world as a system and acknowledging that certain resources are in fact “invaluable.” Taking from any such resources should require adjusting the GDP up or down. Such an emergency as this one should lead to creating and reporting into a centralized database that would factor additions and subtractions into the calculation of a revised form of GDP. Maybe that means a GDP estimate that includes the national debt. Maybe it incorporates the total carbon output of our economy.

Whatever the measure ends up looking like, it has to be a better predictor of our near-term future than the one we have today. With the private sector leading, perhaps the government can follow and create a scorecard that measures what moments like these reveal to be valuable.