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From the Concept to the Measurement of Sustainable Competitiveness: Social and Environmental Aspects

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Objective: This article offers an extensive review of Sustainable Competitiveness as an integrating concept bridging current understandings around sustainable development and encompassing the aspects of economic, social and environmental sustainability. Research Design & Methods: Concepts related to sustainable development are reviewed and their relationships to Sustainable Competitiveness are considered. The concept of Sustainable Competitiveness is related to a set of effective metrics. Findings: The Sustainability Adjusted Global Competitiveness Index (SGCI), which comprehensively measures cross-country sustainable competitiveness, is identified as a credible synthetic metric for measuring separate aspects of sustainable development across a range of countries. Implications & Recommendations: The approach enables disaggregation between three separate elements which have an impact on sustainable competitiveness, namely Basic Conditions, Efficiency Enhancers and Innovation Conditions. It is concluded that extending the measurement from GCI to SGCI offers a potential for considering international competitiveness performance from the environmental and social sustainability perspectives. Extensions to SGCI are also proposed. Contribution & Value Added: The conceptual discussion indicates that the main features relevant to sustainable development appear in the concept and the measure of sustainable competitiveness. The application of the measure to a time-series of data would permit an analysis of the relationships between economic, social and environmental aspects (separately) with measured sustainable competitiveness.
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2017, Vol. 5, No. 4 DOI: 10.15678/EBER.2017.050402
From the Concept to the Measurement of Sustainable
Competitiveness: Social and Environmental Aspects
Eleanor Doyle, Mauricio Perez-Alaniz
A B S T R A C T
Objective
:
This article offers an extensive review of Sustainable Competitiveness as an
integrating concept bridging current understandings around sustainable development
and encompassing the aspects of economic, social and environmental sustainability.
Research
&
Methods
:
Concepts related to sustainable development are re-
viewed and their relationships to Sustainable Competitiveness are considered. The con-
cept of Sustainable Competitiveness is related to a set of effective metrics.
Findings:
The Sustainability Adjusted Global Competitiveness Index (SGCI), which
comprehensively measures cross-country sustainable competitiveness, is identi-
fied as a credible synthetic metric for measuring separate aspects of sustainable
development across a range of countries.
Implications
&
Recommendations:
The approach enables disaggregation between
three separate elements which have an impact on sustainable competitiveness, namely
Basic Conditions, Efficiency Enhancers and Innovation Conditions. It is concluded that
extending the measurement from GCI to SGCI offers a potential for considering inter-
national competitiveness performance from the environmental and social sustainabil-
ity perspectives. Extensions to SGCI are also proposed.
Contribution
&
Value
Added:
The conceptual discussion indicates that the main fea-
tures relevant to sustainable development appear in the concept and the measure of
sustainable competitiveness. The application of the measure to a time-series of data
would permit an analysis of the relationships between economic, social and environ-
mental aspects (separately) with measured sustainable competitiveness.
Article type: conceptual paper
Keywords:
sustainable development; economic, social and environmental
sus-
tainability
JEL codes: Q56, Q20, Q32
Received: 11 July 2017 Revised: 2 November 2017 Accepted: 18 November 2017
Suggested citation:
Doyle, E., & Perez-Alaniz, M. (2017). From the Concept to the Measurement of Sustainable Compet-
itiveness: Social and Environmental Aspects. Entrepreneurial Business and Economics Review, 5(4),
35-59. http://doi.org/10.15678/EBER.2017.050402
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INTRODUCTION
The Commission on the Measurement of Economic Performance and Social Progress (Stiglitz,
Sen, & Fitoussi, 2009) identifies that traditional indicators (i.e. GDP, CO2 emissions) present
a narrow view of what sustainable development should achieve, highlighting the need for
more comprehensive, integrated and holistic approaches. A number of metrics on aspects
of sustainable development compete for policy space and attention, and effective metrics
assist in steering the transition to sustainability. Such metrics highlight current status, areas
where goals are achieved – and areas that need improving. This article addresses the lack of
clear and manageable metrics for sustainable development.
The contribution of this conceptual article is its consideration of the intersections between
economic performance and environmental and social sustainability. It aims to identify, given
current theoretical and conceptual understandings, the impact of economic performance,
comprised as a set of distinct elements of economic performance, i.e. ‘competitiveness pillars’,
on environmental and social sustainability. These issues are relevant across the context of in-
ternational measurement potentials, across countries at different levels of development.
The research identifies how data available from the Global Competitiveness Project (GCP)
of the World Economic Forum (WEF: www.weforum.org) could be complemented with envi-
ronmental and social data from multiple sources. The GCP data covers 144 countries and in-
cluded social- and environmental-sustainability adjusted measures of competitiveness only
since 2015. The measures are derived from international data-gathering efforts contributing
to e.g. the evolution of the Millennium Development Goals (2000) of the UN into the Sustain-
able Development Goals (2015) and build on frontier research. The approach selected here
presents a comprehensive assessment of sustainable development which can be applied to
aid in guiding the transition towards smart and green economy developments.
The focus on competitiveness outlined in the second section stems from under-
standing that economic performance is steered by a set of basic fundamentals, the re-
lationships between them and the enterprise (or micro-economic) environment. In the
third section, the review details extensively the conceptual and theoretical underpin-
nings of the Sustainability-adjusted GCI proposed by the WEF. Both the concept and the
measurement are placed in the wider context of related research and measures of en-
vironmental and social sustainability, the latter theme only recently of research focus.
From this review we identify strengths, weaknesses and potential areas for enhance-
ment of the WEF approach and outline these in the fourth section.
Implications of the review point to alternative approaches which exist for measuring
competitiveness, environmental and social sustainability, and compare these to the sus-
tainability adjustments proposed by the WEF. The sixth section concludes with the main
outcomes of the review of concepts and measurements for sustainable development.
LITERATURE REVIEW AND THEORY DEVELOPMENT
Sustainable Competitiveness – An Integrating Definition and Approach
Underlying & Interrelated Concepts
The World Economic Forum (WEF, 2015) extended its definition of competitiveness to en-
compass sustainability, defining sustainable competitiveness as the set of institutions, pol-
From the Concept to the Measurement
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37
icies, and factors that make a nation productive over the longer term while ensuring social
and environmental sustainability. Within the policy and research spaces key related concepts
of ‘circular economy’ and ‘inclusive growth’ increasingly point to consumption and produc-
tion systems that are in harmony with society and the environment (Corrigan, Crotti,
Hanouz, & Serin, 2014; Piketty & Goldhammer, 2014). A trade-off between environmental
quality and economic growth no longer dominates research or policy narratives – now sim-
ultaneous targets are identified for growth, sustainability and societal development (Ambec,
Cohen, Elgie, Lanoie, Canada, Chabot, & Thornton, 2010; Porter & Van der Linde, 1995).
Competitiveness in this context refers to the level of local (national or regional)
productivity (Delgado, Ketels, Porter, & Stern, 2012) rather than market-share or cost-
competitiveness which focus on cost-efficiency or the ability of nations to compete in the
international market. The level of productivity sets the level of prosperity that can be
reached by an economy – where prosperity is related to the value of economic output and
the quality of that output (Porter et al., 2008), and where the productive capacity contrib-
utes to a general rise in living standards, freeing people to make choices, and enabling
a more equal distribution of opportunities (Commission on Growth and Development,
2008). For Porter (1990), productivity is the only meaningful concept of competitiveness
asit determines the rates of return obtained by investments, and these are the fundamen-
tal drivers of an economy’s output and income growth rates.
Sustainable competitiveness includes several interrelated aspects of the concept of
sustainable development. Environmental sustainability has received a lot of attention
within sustainability debates and the general understanding is that economic develop-
ment must be decoupled from intensive use of natural resources to avoid surpassing the
carrying capacity of the natural environment (United Nations, 2002). Within the economic
growth research, an increasing emphasis on human development, polarisation and ine-
quality impacts prevails (Karabarbounis & Neiman, 2013; Piketty & Goldhammer, 2014).
Much of this work focuses on developing nations, where economic growth is expected to
significantly reduce poverty (Commission on Growth and Development, 2008). Coming out
of deep recession has increased. the focus on social injustice and inequality in mainstream
public policy in more advanced economies (Stiglitz et al., 2009).
For policy, efforts are directed at decoupling economic development from environ-
mental degradation, while leveraging innovation and skill upgrading to foster prosper-
ity for all, especially the most vulnerable (see for example European Commission,
2010). Thus, while the sustainability narrative binds the three key elements of sustain-
able development economic, environmental and social the environmental and so-
cial elements of sustainable development are often studied entirely separately in con-
junction with economic growth despite the core message that sustainability of the
social and the environmental are deeply embedded in each other. Thus, sustainable
competitiveness as a concept and as an approach bridges this gap.
Significant challenges remain when considering how environmental- and eco-innova-
tions contribute to enhancing the three elements of sustainable competitiveness. Val-
lance, Perkins and Dixon (2011) review how the social and the environmental domains of
sustainable development interact in the context of environmentally friendly products and
services. They identify three prominent research areas which shed light on dynamics
around consumer demand for environmentally friendly products.
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1. Sustainability and Basic Needs. Research has largely focused on developing nations
and on how to meet basic needs in an environmentally sustainable way (Commission
on Growth and Development, 2008). Featuring large in studies on barriers to the up-
take of more sustainable technologies and products is poverty (Crabtree, 2005).
2. Behavioural Change. Non-transformative changes, such as recycling schemes,
lead to stronger environmental ethics through the provision of information and
services which do not have a major impact on everyday life (Vallance et al., 2011).
Transformative approaches require changes to perception – the way the environ-
ment and society are socially constructed.
3. Preservation of Socio-cultural Characteristics. Maintenance of social sustainability is
founded upon traditions, practices, preferences and places people would like to see
sustained or improved, such as low-density suburban living, the use of the private
car, and the natural landscapes. Initiatives with limited effect on behaviour run con-
trary to socially constructed values and habits (Assefa & Frostell, 2007).
Implications
Sustainable competitiveness emphasises economic competitiveness as a driver of pros-
perity and long-term growth taking account of environmental and social concerns.
Future competitiveness cannot rely on intensive use of the environment.
Firms must develop new competitive advantages embodied in the concept of the ‘cir-
cular economy’ to transition from a linear ‘take-make-dispose’ system.
Shifting to the circular economy requires preconditions in society if they are to succeed.
Understanding sustainable competitiveness requires a broad perspective drawing
from both social and natural sciences and looking at the relationships between the
economic, the social and the environment concurrently.
Measuring Sustainable Competitiveness
Applied work reflects competing views of competitiveness. The measures of competitive-
ness from market-share and cost-competitiveness views are proposed by organisations such
as the OECD, the World Bank, and the European Union. These measures provide macro-eco-
nomic diagnostics of competitiveness. Other measures of competitiveness that focus on
productivity are also developed by the same institutions, and increasingly by countries, with
the support from academics (see Ketels, 2016; Cunska, Ketels, Paalzow, & Vanags, 2013).
The work of the World Economic Forum can be identified as the most comprehensive effort
to date in its production of the Global Competitiveness Index (GCI). Both approaches con-
sider different aspects of competitiveness and while useful in their own enterprise, they fail
to explain all aspects of competitiveness. For the purposes of this research review, the
productivity view and the GCI are used as the central framework for the study.
Market Share/Cost Approach
Market-share measures of competitiveness propose narrow definitions of competitive-
ness relating to real exchange rate or price and labour cost-competitiveness comparisons
(O’Brien, 2010; Durand & Giorno, 1997; European Commission, 2016).
Some indexes focus on costs from the perspective of firms, often calculated by
consultants and private agencies, to identify the most profitable locations for specific
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firms or industries. Deloitte´s Global Manufacturing Competitiveness Index focuses on
talent, cost competitiveness, workforce productivity and supplier networks (Deloitte,
2016). The Doing Business Report includes additional factors, such as the bottlenecks
firms face when setting up new operations (i.e. red tape, institutional transparency,
etc.). The index has been extended from 5 to11 sets of indicators across 185 econo-
mies in 2012 (World Bank, 2012). These approaches contain an inherent premise of
understanding the underlying dynamics that drive productivity – which places them
close to productivity-oriented approaches (Ketels, 2016).
A general criticism of market-based measures of competitiveness is the focus on
outcomes while failing to identify the ultimate sources of competitiveness (O’Brien,
2010). It is increasingly recognized that changes in the underlying fundamentals driving
national productivity cannot be assessed independently from each other but as interac-
tions in the complex dynamics and synergies across reinforcing factors (Ketels, 2006).
Improving competitiveness might require changes in the underlying fundamentals of
productivity and may involve addressing several interlocking relationships and potential
bottlenecks that may not be identified (and consequently addressed) using more aggre-
gated indicators such as employed in the cost/market share approaches. The dominant
view is that it is at this level of analysis that policy should be most effective to foster
competitiveness. Cost based approaches fail to make a significant contribution in this
regard (Delgado et al., 2012; Porter, Delgado, Ketels, & Stern, 2008).
More recently, increasing recognition of region as the key unit of analysis is re-
flected in growing attention to sub-national regions and agglomeration economies
(Huggins, Izushi, & Thompson, 2013; Kitson, Martin, & Tyler, 2004; Snieška
& Bruneckienė, 2009). The aggregation level of macroeconomic data and important
methodological implications to separate regional from national indicators has led to
further strong criticism of the market-share approaches (Huggins & Davies, 2006;
Huggins et al., 2013; Ketels, 2006; Kitson et al., 2004; Porter et al., 2008).
Productivity Approach
The productivity approach to competitiveness focuses on the fundamental factors ena-
bling locational generation of wealth and prosperity. Pioneered by Porter (1990), three
key themes of research or pillars which map different levels of interlocking relationships
driving productivity are identified. The first pillar is the macroeconomic environment
that provides a broad context for growth. The second pillar includes business sophisti-
cation and the quality of the business environment labelled as the ‘microeconomic en-
vironment’ by Porter and outlined in Porter’s Diamond Model (Porter, 1990), The third
pillar considers systemic relationships between the first two pillars.
Specific factors which have been highlighted to drive productivity are presented in Table
1. They are categorised as traditional drivers, recently identified drivers, and more complex
drivers that have not yet been fully understood (Delgado et al., 2012; Ketels, 2016; Porter et
al., 2008). Measuring competitiveness from a productivity standpoint requires a broad scope
encompassing different interacting dynamics relative to cost-based perspectives.
The GCI is the most recognized index covering 114 countries (2015 edition). The first GCI
was published in 2005 with the collaboration of international experts and is largely derived
from Porter’s contributions until 2009 (e.g. Porter et al., 2008). The GCI identifies twelve
pillars driving productivity. The extent to which different elements contribute to driving
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productivity depends on the stage of the development of an economy. The approach (in its
latest presentation by Delgado et al., 2012) also distinguishes between inherited and created
endowments, focusing on the latter to explain changes in economic prosperity.
Table 1. Drivers of competitiveness: the productivity-based approach
Traditional Drivers Recently Identified Drivers Complex Drivers
Rules & Regulations Company sophistication and firm heterogeneity
Individuals: Culture
and trust
Financial Markets Economic geography: Urbanisation and clusters
Institutions: Quality
and capacity
Physical Infrastructure Economic composition: ‘Economic Complexity’ Social capital and
linkages
Macroeconomic Policy (Creative) skills and locational attractiveness
Institutions and Geography Different levels of geography (within nation)
Economy size
Source: own study, after Ketels (2016).
The twelve pillars result from an aggregation of 111 indicators. These generate 3 sub-
indexes, compiled into one competitiveness score. Both hard statistical data (66%) and
microeconomic data gathered through business surveys (34%) are used to measure the
111 indicators. The approach, while not without criticism (Fougner, 2008; Lall, 2001), is
widely used and recognized as the most theoretically grounded approach.
The GCI uses weighting systems to account for the relative importance of different drivers
of productivity with weights assigned according to different stages of development in line with
the theory which stresses that as nations develop, modes of competing and the nature of
competitive advantage change (Porter et al., 2008). It is increasingly recognized that at differ-
ent levels of development, locations face different competitiveness challenges, where the rel-
ative importance of different dimensions of microeconomic and macroeconomic competi-
tiveness is changing (Porter, 1990). Therefore, the approach of the GCI is considered to pro-
pose a comprehensive representation of the key levers of productivity and how their relative
importance changes over stages of development (Delgado et al., 2012).
The presentation of scores by pillar, by sub-index (Basic Requirements/Efficiency En-
hancers/Innovation Factors) and in aggregate, allows for the identification of vulnerabili-
ties and strengths in national competitiveness. Thus, the GCI-productivity approach is as-
sociated with sound policies like skill upgrading, infrastructure investment, research and
innovation investment that are widely-accepted contributions to development. Develop-
ment debates focus on what specific policies are best applied to support productivity
growth and to diagnose strategies to close gaps as they develop (Ketels, 2006).
Measuring Sustainability: Environmental & Social Aspects
Sustainability arises from the principle that anthropogenic-related environmental pres-
sure (i.e. originating in human activity) is reaching a threshold where the use of environ-
mental resources and services is beyond the capacity of the environment to produce or to
re-generate such resources and services. This can lead to irreversible environmental deg-
radation (Middleton, 2013). Decoupling economic activity from environmentally-intensive
practices is at the core of sustainability (Moldan, Janouvikov, & Hunk, 2012). Sustainability
From the Concept to the Measurement
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also relates to social features which impact wellbeing and relate to judged fairness of re-
source distribution. It has been the least theorised and explored pillar of sustainable de-
velopment (Littig & Grießler, 2005). It is also increasingly understood that both environ-
mental and social sustainability are largely interdependent.
Environmental Sustainability Measurement
Ecologically speaking, environmental sustainability is defined by focusing on the natural
environment’s bio-geo-physical aspects, such as maintaining or improving the integrity of
the earth’s life-supporting systems (Moldan et al., 2012). Assessing environmental sustain-
ability should concern what is happening to the state of the environment; why is it hap-
pening; and what are we doing about it? (Hammond, Adriaanse, Rodenburg, Bryant,
& Woodward, 1995). Questions such as if and how efforts for sustainable development
are achieving decoupling, and what the reciprocal effects between human influence on
the natural environment and economic growth are have also been high on the research
agenda (Patil, 1994). Several approaches have been developed to measure and monitor
environmental sustainability. These may be classified as (1) State of the Environment (SOE)
indicators, (2) Action Indicators (AI) and (3) Composite Index Indicators (CII).
1. SOE indicators measure the state and quality of the environment to make a problem
visible (Dahl, 2011). The work carried out on climate change and the Millennium Ecosys-
tem Assessment exemplify relevant achievements (Moldan et al., 2012; OECD, 2008;
United Nations, 2015). SOE indicators, in combination with economic data, permit the
assessment of the extent to which economies are decoupling growth from resources.
Identifications of environmental features to be measured and the scope of SOE metrics
largely evolved in line with policy needs (UNEP, 2008; Linster, 2003; Dahl, 2011). Table
2 summarises SOE indicators used by the UNEP, OECD and the European Environment
Agency (EEA). There is recognition that there is no universal set of indicators available,
but these serve several purposes and audiences (i.e. monitoring purposes in relation to
environmental policies (Linster, 2003). Data gaps remain and the robustness of indica-
tors is determined by available data which vary in its quality (UNEP, 2008).
2. Action indicators (AI) measure performance and distance relative to environmental
targets (Dahl, 2011; Moldan et al., 2012).
1
AIs aid benchmarking and monitor policy
efforts (i.e. they aim to estimate if efforts have the desired impact and how) with cur-
rent and future focus (Pintér, Hardi, Martinuzzi, & Hall, 2011). The most widely recog-
nized set of AIs are those of the Sustainable Development Goals (SDGs). The SDGs are
time-bound quantified targets for addressing extreme poverty in its many dimensions
income poverty, hunger, disease, lack of adequate shelter, and exclusion while
promoting gender equality, education, and environmental sustainability. They are also
considered basic human rights, to health, education, shelter, and security (United Na-
tions, 2002). Decoupling indicators of the OECD and EEA can also be classified as key
AI globally, regionally and nationally. Table 3 provides a summary of the most widely
used AI indicators. AI provide an international framework to benchmark efforts, iden-
tifying potential limitations and potential solutions (Mayer, 2007).
1
We label them AI in order to reflect a wide array of indicators that respond to an environmental goal without
using the specific language different organisations and literature strands use for matters of simplicity.
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Table 2. Widely used state-of-the environment (SOE) indicators
Indicators (Sets) Issues Included Organisa-
tion
Climate Change Co2 and Greenhouse Gas Emission Intensities OECD
Ozone Layer Ozone Depleting Substances OECD
Air Quality Sox and Nox Emission Intensities OECD
Waste Generation Municipal Waste Generation Intensities. OECD
Freshwater Quality Waste Water Treatment Connection Rates OECD
Freshwater Resources Intensity of Use of Water Resources OECD
Forest Resources Intensity of Use of Forest Resources OECD
Fish Resources Intensity of Use of Fish Resources OECD
Energy Resources Intensity of Energy Use OECD
Biodiversity Threatened Species OECD
Core Environmental Indicators (Cei) Several Core Issues Such as Climate Change, Ozone
Layer Depletion, Natural Resource Use, Etc.
UNEP/OECD
Key Environmental Indicators (Kei) UNEP/OECD
Sectoral Environmental Indicators
(Sei) UNEP/OECD
Indicators derived from Environ-
mental Accounting UNEP/OECD
Decoupling Environmental Indica-
tors (Dei) UNEP/OECD
APE (Air Pollutant Emissions) 11 Indicators Covering Several Aspects of Air
Pollution EEA
CLIM (Climate State and Impact Indi-
cators)
46 Indicators Covering Several Aspects of Cli-
mate Change EEA
ENER (Energy Indicators) 11 Indicators Covering Several Aspects of Use
and Generation of Energy EEA
LSI (Land and Soil Indicators) 2 Indicators EEA
MAR (Marine Indicators) 3 Indicators in Fisheries EEA
SEBI (Streamlining European Biodi-
versity Indicators) 27 Indicators for Bio-Diversity EEA
SCP (Sustainable Consumption and
Production) 1 Indicators On Consumption Levels EEA
Term (Transport and Environment
Reporting Mechanism) 20 Indicators EEA
WAT (Water Indicators)
11 Indicators
EEA
WREI (Water Resource Efficiency In-
dicators) EEA
WST (Waste Indicators) 2 Indicators EEA
Source: own study from UNEP, OECD and EEA portals.
3. Composite indexes include both SOE and AI indicators, primarily at national level,
appropriate for considering how policies, economics, social and cultural behav-
iours are shaped. If environmental conditions are monitored with those concern-
ing human systems, a better opportunity exists for understanding feedback be-
tween them (Kaly, Pratt, & Mitchell, 2005).
A selection from this research includes (1) The Environmental Vulnerability Index (EVI)
prepared by the South Pacific Applied Geoscience Commission (SOPAC), the United Nations
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Environment Programme (UNEP) and their partners; (2) The Environmental Performance In-
dex (EPI), from a project led by Yale Center for Environmental Law & Policy (YCELP) and Yale
Data-Driven Environmental Solutions Group and partners
2
; and (3) The National Footprint
Accounts (NFAs), developed by the Global Footprint Network (GFN).
Table 3. Most commonly used action indicators (AIs)
Indicators (Sets) Issues Included Organ-
isation
Climate Change CO
2
and Greenhouse Gas Emission Intensities OECD
Ozone Layer Ozone Depleting Substances OECD
Air Quality Sox and Nox Emission Intensities OECD
Waste Generation Municipal Waste Generation Intensities OECD
Freshwater Quality Waste Water Treatment Connection Rates OECD
Freshwater Resources Intensity of Use of Water Resources OECD
Forest Resources Intensity of Use of Forest Resources OECD
Fish Resources Intensity of Use of Fish Resources OECD
Energy Resources Intensity of Energy Use OECD
Biodiversity Threatened Species OECD
APE (Air Pollutant Emissions) 11 Indicators Covering Several Aspects of Air Pollution
46 Indicators Covering Several Aspects of Climate
Change
EEA
CLIM (Climate State and Impact
Indicators) EEA
ENER (Energy Indicators) 11 Indicators – Use and Generation of Energy EEA
LSI (Land and Soil Indicators) 2 Indicators EEA
MAR (Marine Indicators) 3 Indicators in Fisheries EEA
SEBI (Streamlining European Bio-
diversity Indicators) 27 Indicators for Bio-Diversity EEA
SCP (Sustainable Consumption
and Production) 1 Indicators on Consumption Levels EEA
Term (Transport and Environ-
ment Reporting Mechanism) 20 Indicators EEA
WAT (Water Indicators) 11 Indicators EEA
WREI (Water Resource Efficiency
Indicators) EEA
WST (Waste Indicators) 2 Indicators EEA
Core Environmental
Indicators (Cei)
Several Core Issues – Climate Change, Ozone Layer De-
pletion, Natural Resource Use, Etc.
UNEP/
OECD
Key Environmental Indicators
(Kei) UNEP/
OECD
Sectoral Environmental
Indicators (Sei) UNEP/
OECD
Indicators derived from
Environmental Accounting UNEP/
OECD
Decoupling Environmental
Indicators UNEP/
OECD
Source: own study from UNEP, OECD and EEA portals.
2
Other partners include the Center for International Earth Science Information Network (CIESIN) at Columbia University,
in collaboration with the Samuel Family Foundation, McCall MacBain Foundation, and the World Economic Forum.
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Both EVI and EPI claim a high degree of scientific rigor, notwithstanding limitations.
First, the EPI focuses on politically-identified targets, an area of the debate contested by
ecologists and environmentalists. Second, the index may mask ‘pollution-haven’ practices,
making developed counties appear cleaner than they actually are (Morse & Fraser, 2005).
Third, the extent to which the EPI effectively deals with trans-boundary environmental
issues and limitations to draw meaningful conclusions from the index have been raised
(Bohringer & Jochem, 2007; Haberland, 2008; Morse & Fraser, 2005).
Nonetheless, the EPI has been incorporated into not only the GCI approach to adjusting
competitiveness scores for environmental and social sustainability (Bilbao-Osorio, Blanke,
Campanella, Crotti, Drzeniek-Hanouz, & Serin, 2013; Corrigan et al., 2014) but also Deloitte’s
Global Manufacturing Competitiveness Index (Deloitte, 2013), and replicated in several re-
gional environmental assessments (see Fischer, Foerster, & Hartmann, 2009; Ihobe, 2013).
With a lack of alternatives that competently integrate rigor and reporting simplicity, the EPI has
increasingly become the preferred approach for assessing environmental sustainability.
Criticism of the NFA centres on the explanatory power of the indicators beyond
a strong warning of current unsustainable practices. Ideally, the indicators should in-
clude all human demand related to environmental resources and services – not possi-
ble due to lack of data (Borucke, Moore, Cranston, Gracey, Iha, Larson, & Galli, 2013).
Secondly, the approach assumes a carrying capacity based on ecological modelling
which fails to include non-renewable resources for which the regeneration approach
may not apply, nor changes in decoupling-enabling technology (Stiglitz et al., 2009).
Thirdly, the worldwide ecological deficit emphasised by the NFAs may not convey the
message it is said to. One can show that the worldwide imbalance is mostly driven by
CO
2
emissions. By definition, the worldwide demand placed on cropland, built-up land
and pasture cannot exceed the world’s bio-capacity (Stiglitz et al., 2009).
Social Sustainability Measurement
The social is the least theorised and explored pillar of sustainable development and, to date,
the most complex to operationalise (Littig & Grießler, 2005; Murphy, 2012). The alignment
of the social domain with sustainability was unheard of prior to the 1990s (Omann & Span-
genberg, 2002; Colantonio & Lane, 2007; Littig & Grießler, 2005; Magis, 2010).
Colantonio (2009) identifies at least 27 approaches to social sustainability from essentially
three overarching categories (Chiu, 2003). The first views the natural environment as an ena-
bler of social relations and dynamics. The second is environmentally oriented, i.e. focusing on
necessary social preconditions to achieve environmental sustainability. The third is people-ori-
ented, focusing on improving wellbeing, including distribution of resources, reducing social ex-
clusion and destructive conflict. Table 4 provides a summary of the most commonly used ap-
proaches. Analytical frameworks are usually applied at regional or community levels (Magee,
Scerri, James, Scerri, & James, 2012; Omann & Spangenberg, 2002; Woodcraft, 2012).
For Colantonio (2009) current social sustainability approaches at the national level
largely leverage traditional criteria and themes from the literature on social development
and new themes emerging from sustainability concerns. Traditional themes mainly focus
on hard policy areas of social development.
The Human Development Index (HDI) published by the United Nations Development
Program (UNDP, 2016) is the most widely recognized framework relying on traditional
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Table 4. Themes & features of social sustainability
Feature/Theme Author
- Livelihood
- Equity
- Capability to withstand external pressures
- Safety nets
- Inclusion
Chambers & Conway (1992)
- Equity
- Poverty
- Livelihood
- Equity
DFID (1999)
- Democracy
- Human rights
- Social homogeneity
- Equitable income distribution
- Employment
- Equitable access to resources and social services
Sachs (1999)
- Paid and voluntary work
- Basic needs
- Social security
- Equal opportunities to participate in a democratic society
- Enabling social innovation
Hans-Böckler-Stiftung (2001)
- Social justice
- Solidarity
- Participation
- Security
Thin et al. (2002)
- Education
- Skills
- Experience
- Consumption
- Income
- Employment
- Participation
Omann & Spangenberg (2002)
- Basic needs
- Personal disability
- Needs of future generations
- Social capital
- Equity
- Cultural and community diversity
- Empowerment and participation
Baines & Morgan (2004);
Sinner et al. (2004)
- Interactions in the community/social networks
- Pride and sense of place
- Community participation
- Community stability
- Security (crime)
Bramley et al. (2006)
Source: after Colantonio (2009, p. 6).
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themes of social development (Omann & Spangenberg, 2002). The HDI was first published
in 1990 as a measure of human achievements across several basic capabilities, in what
people can do, and be. The HDI has been an instrumental tool in social development to
monitor and compare levels of human achievement. It has been presented as an evolving
method, improved since its first publication, adding other aspects of human development
in adjacent indexes such as the inequality-adjusted HDI and the Gender Development In-
dex. Limited understanding of the social domain proposed by the HDI has attracted criti-
cism, in addition to methodological issues (Kovacevic, 2011).
The MDGs has expanded the view of social development to include explicit goals
for several aspects of human development. Eight goals and initially 18 targets (meas-
ured by 48 indicators) were laid out to harmonise reporting on the Millennium Decla-
ration (UN, 2000). Table 5 presents the MDGs directly focusing on social sustainability,
incorporated in the Sustainable Development Goals (UN, 2015). To some extent, the
MDG’s attempted to place social development within the framework of sustainability.
While serving to expand the agenda of human development as initially proposed by
the HDI, the agenda largely centred on traditional themes and criteria based on basic
needs and opportunities (Omann & Spangenberg, 2002).
Table 5. Social sustainable development indicators
Social Sustainability Indicators Source
- Proportion of population living below national poverty line, UN
- Ratio of share in national income of highest to lowest quintile, UN
- Proportion of population using improved water source, UN
- Percentage of population using solid fuels for cooking, UN
- Proportion of urban population living in slums, UN
- Number of intentional homicides per 100,000 population, UN
- Life expectancy at birth, UN
- Percent of population with access to primary health care facilities, UN
- Contraceptive prevalence rate, UN
- Prevalence of tobacco use, UN
- Morbidity of major diseases such as HIV/AIDS, malaria, tuberculosis, UN
- Net enrolment rate in primary education, UN
- Lifelong learning Population growth rate Dependency ratio, UN
- Percentage of population living in hazard prone areas, UN
- Percentage of population having paid bribes, UN
- Under- five mortality rate, UN
- Healthy life expectancy at birth, UN
- Immunisation against infectious childhood diseases, UN
- Nutritional status of children, UN
- Suicide rate, UN
- Gross intake into last year of primary education, UN
- Adult secondary (tertiary) schooling attainment level, UN
- Adult literacy rate, UN
- Total fertility rate, UN
- Ratio of local residents to tourists in major tourist regions and destinations, UN
- Human and economic loss due to natural disasters. UN
Source: UN (2007). Indicators for 2015 are still under development.
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Key strengths provided in the MDG framework are:
1. a clear focus on national policy efforts,
2. a set of clear, simple, quantitative and easily communicable targets,
3. a starting point for improved accountability through simple but robust indicators.
In addition it also served as a tool for advocacy to strengthen international develop-
ment cooperation (UN, 2012). Main weaknesses include inadequate early incorporation
of other important issues for social development, such as environmental sustainability,
productive employment and decent work, inequality, etc.
More recent research on integrating the social with sustainability focussed on
soft policy criteria (Colantonio, 2009) operationalised by process-oriented indicators
for monitoring progress towards specific objectives in a more interactive way than
traditional social indicators like the HDI and MDGs. However, the gap between the
SDGs and research concerned with social sustainability remains. The 2015 revision of
the SDGs (UN, 2015) attempts to bridge this gap.
Two concepts are at the core of recently developed social sustainability ap-
proaches. Quality of Life has been widely proposed for inclusion in sustainability as-
sessments (Stiglitz et al., 2009). Sustainability of Community is concerned with the
viability and functioning of society as a collective entity including its physical envi-
ronment (Douvlou, Papathoma, & Turrell, 2008; Magis, 2010).
The updated SDGs offer a more comprehensive framework which acknowledge all
three pillars of sustainable development and its interactions that lead to better Qual-
ity of Life. In addition, the emphasis is placed on making cities and urban settlements
inclusive, safe, resilient and sustainable. This includes the promotion of sustainable
consumption and production patterns and focuses on society and its institutional as-
pects such as, justice, accountability inclusiveness. The new SDGs are organised under
17 headings with 169 associated targets which are integrated and indivisible (UN,
2015). Updated social sustainability SDGs are presented in Table 6.
Table 6. Social sustainability – updated SDGs
Social Sustainability in Renewed Sustainable Development Indicators
Goal 3: Ensure healthy lives and promote wellbeing for all at all ages
Goal 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
Goal 5: Achieve gender equality and empower all women and girls
Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive em-
ployment and decent work for all
Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialisation and fos-
ter innovation
Goal 10: Reduce inequality within and among countries
Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable
Goal 12: Ensure sustainable consumption and production patterns
Goal 16: Promote peaceful and inclusive societies for sustainable development, provide access to
justice for all and build effective, accountable and inclusive institutions at all levels
Source: UN (2015).
Effective implementation of the SDGs requires further work. As new themes and
criteria are included, improvements in measuring sustainable development are
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needed. The Sustainable Development Solutions Network identified several areas re-
quiring improved data reporting practices and significant investment (SDSN, 2015).
The extent to which the SDG realises its potential is likely to be determined by whether
nations are able and willing to make such improvements.
The emphasis on Quality of Life and Wellbeing as outcomes of social sustainability is
increasingly endorsed by academics and practitioners. Analytical approaches are being de-
veloped to grasp the multiple dimensions of a yet undefined concept.
3
Several recently-
developed approaches for assessing Quality of Life and Wellbeing are available, such as
the OECD’s Quality of Life Index or Better Life Index (BLI) (OECD, 2015), The World Happi-
ness Index (WHI, 2016), The European Social Survey (ESS) and Gallup’s World Poll
.
Most of
this work is largely regarded as explorative – with limited policy influence yet.
A further related development is the redefinition of social progress. The Social Pro-
gress Index (SPI) produced by a consortium of stakeholders including academics, multi-
lateral organisations and the private sector is leading this vein of research where social
progress as a concept bridges traditional hard policy issues with soft policy priorities.
Social progress is defined as “the capacity of a society to meet the basic human needs
of its citizens, establish the building blocks that allow citizens and communities to en-
hance and sustain the quality of their lives, and create the conditions for all individuals
to reach their full potential” (Porter, Stern, & Green, 2016, p. 4). This definition refer-
ences three broad elements or dimensions of social progress: Basic Human Needs, Foun-
dations of Wellbeing, and Opportunity. Each of these dimensions is further broken down
into four underlying components, as presented in Table 7. The SPI was first published in
2013, and in its 2016 publication, it included 133 nations.
Table 7. Dimensions of the social Progress Index (SPI)
Basic Human Needs Foundations of Wellbeing Opportunity
Nutrition & Basic Medical Care
Air, Water, and Sanitation
Shelter
Personal Safety
Access to Basic Knowledge
Access to Infor. & Comms
Health and Wellness
Ecosystem Sustainability
Personal Rights
Access to Higher Education
Personal Freedom & Choice
Equity and Inclusion
Source: Fehder & Stern (2013).
The SPI emphasises outcome indicators rather than input measures. The SPI,
therefore, allows individual countries to identify specific areas of strength or weak-
ness in terms of its social progress, and also allows countries to benchmark them-
selves against peers, both at the level of individual indicators as well as in terms of
an aggregate measure of social progress (Fehder & Stern, 2013). The approach has
been well received in academic and policy circles with several organisations opera-
tionalising the finding of the SPI for aiding policy making. In Europe the approach has
been adapted and extended to sub-national level in Spain.
3
As Stiglitz et al. (2009, p. 143) put it, “what constitutes a ‘good life’ has occupied leading philosophers since Aristotle, and
dozens of definitions of the ‘good life’ are discussed in the literature: none of these definitions commands universal agree-
ment, and each corresponds to a different philosophical perspective. In general terms, quality of life as a concept is used to
refer to those aspects of life that shape human well-being beyond the command of economic resources (Stiglitz et al., 2009).
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Measuring Sustainable Competitiveness – The WEF Approach
The World Economic Forum defined sustainable competitiveness as the set of institutions,
policies, and factors which make a nation productive over the long term while ensuring
social and environmental sustainability (WEF, 2015). The extension of their analytical ap-
plication includes a novel set of metrics which intends to bridge a wide range of dynamics,
often covered by several disparate disciplines into a single index.
4
They report on
measures of sustainable competitiveness in both 2014 and 2015.
The WEF identifies the relationship between sustainability and competitiveness as multi-
faceted. Several channels are identified, including the efficient use of natural resources, im-
proved health, the relationship between biodiversity and innovation, the impact of competi-
tiveness on social sustainability and how more socially sustainable nations might generate
more competitive businesses. The WEF framework to support policies that balance economic
prosperity with social inclusion and environmental stewarding is presented in Figure 1.
Figure 1. SGCI Framework
Source: Bilbao-Osorio et al. (2013).
The pillars representing the environmental and social sustainability domains serve to
illustrate the interaction between sustainability and competitiveness and, therefore, are
used to adjust the competitiveness score obtained through the estimation of the Global
Competitiveness Index (GCI). In this way, a sustainability-adjusted GCI, or SGCI, is ob-
tained. The framework emphasises that competitiveness on its own does not necessarily
lead to sustainable levels of prosperity (Bilbao-Osorio et al., 2013).
The WEF adjustment for environmental sustainability recognizes that the state of the
natural environment affects competitiveness both at the national and at the firm level.
4
The IMD World Competitiveness Yearbook reports it is also in the process of developing relevant adjustments
to take count of environmental and employment creation dimensions of competitiveness.
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Allied to this institutions, policies and other factors concerning the environment are also
important (Corrigan et al., 2014). Environmental sustainability is defined as a “set of insti-
tutions, policies, and factors that ensure an efficient management of resources to enable
prosperity for present and future generations” (Bilbao-Osorio et al., 2013, p. 58). The en-
vironmental sustainability adjustment of the GCI framework is composed of three pillars
encompassing (1) environmental policy, (2) use of renewable resources and (3) degrada-
tion of the environment. Table 8 lists the indicators underlying each pillar.
Table 8. Pillars of environmental sustainability adjustment
Environmental Policy Use of Renewable Resources Degradation of Environment
Environmental regulations
(stringency & enforcement) Agricultural water intensity Particulate matter concentration
No. of ratified international en-
vironmental treaties Forest cover change CO2 intensity
Terrestrial biome protection Fish stocks’ overexploitation Quality of natural environment
Source: Bilbao-Osorio et al. (2013).
An environmental sustainability score is obtained using a similar method as used
in the GCI. Data are normalised into a 1 to 7 scale, followed by a second normalisation
based on the distribution of the sustainability component on a scale of 0.8 to 1.2. This
process transforms the normalised means into a sustainability score that is lowest for
the lowest performer and highest for the top performer. Thus, the adjustment is car-
ried out by multiplying the GCI score by an environmental sustainability coefficient.
Data include a mix of SOE indicators, distance to target indicators and qualitative in-
dicators obtained from the Executive Opinion Survey used for the GCI.
Social sustainability is defined as “institutions, policies and factors that enable all mem-
bers of society to experience best possible health, participation, and security, and to maxim-
ise their potential to contribute and benefit from the economic prosperity of the country in
which they live” (Bilbao-Osorio et al., 2013, p. 59). The three pillars which comprise the social
sustainability adjustment are (1) access to basic necessities, (2) vulnerability to shocks, and
(3) social cohesion. The variables for each pillar are provided in Table 9.
Table 9. Pillars of social sustainability adjustment
Access to Basic Necessities Vulnerability to Shocks Social Cohesion
Access to sanitation Vulnerable employment Income Gini index
Access to improved drinking water Extent of informal economy Social mobility
Access to healthcare Social safety net protection Youth unemployment
Source: Bilbao-Osorio et al. (2013).
Calculating the social sustainability adjustment is similar to environmental sustainability.
The lowest performer scores the least (scaled by 0.8) while the top performer would score
the highest (scaled by 1.2). The adjustment is carried out by multiplying this social sustaina-
bility coefficient by the GCI score. A final SGCI is obtained by the average of the environmen-
tal sustainability and social sustainability adjustment scores (Corrigan et al., 2014).
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DISCUSSION AND IMPLICATIONS
Environmental Sustainability Adjustment Limitations
As the sustainability adjustment approach is influenced by the EPI, its limitations are
relevant here. In summary:
1. Targets used to assess environmental performance may not correspond to natural
environmental thresholds and, therefore, the adjusted SGCI for environmental
sustainability fails to include the carrying capacity of the environment (Barnett,
Lambert, & Fry, 2008; Kaly et al., 2005).
2. Conceptual underpinnings relating environmental sustainability to resource use within na-
tional boundaries largely fail to take account of the effects of consumption and interna-
tional trade. More developed countries can shift pollution and more polluting industries
to other nations with less environmentally stringent regulation, ultimately making devel-
oped countries appear ‘cleaner’ than they actually are (Morse & Fraser, 2005).
The 2014-2015 Global Competitiveness Report stresses that the approach remains a work
-in-progress and the set of variables might not cover all relationships between economic activ-
ity and the environment. It would be interesting to cover areas such as consumption-related
environmental demand while including additional distance-to-target indicators in an expanded
range of environmental services and resources. While environmental vulnerability and how
this can affect socio-economic systems is explicitly discussed in the report, it remains largely
absent from the index. Our research proposes that an expanded set of indicators covering vul-
nerability would further enhance the approach. Problems of data availability and data quality
are often common themes in most methods in producing assessments of the environment,
especially for cross-country analyses. To some extent, this is also true for the GCI.
A noted strength of the WEF method is its bridge between the macro and micro levels
of analysis, rooted in the literature of competitiveness and economic development. This,
however, is largely absent when considering environmental and social sustainability. As Sec-
tion 3 outlines, there are important lessons to be learned from studying firms’ responses to
pressures emerging externally and internally to firms and how the characteristics of the busi-
ness environment and internal resources of the firm enable better environmental perfor-
mance of products, processes and organisations. Indicators considering these dynamics
could further enhance the pillars concerning environmental policy and the use of renewable
resources (i.e. pillars 1 and 2 of the environmental sustainability module).
Social Sustainability Adjustment Limitations
The theoretical underpinnings of the three pillars and indicators of the social adjustment
are largely derived from the basic needs and social inclusion approach to social sustaina-
bility. The authors state that further indicators could be added, such as social participation
and respect for core human rights and treatment of minorities (Corrigan et al., 2014).
Quality of Life indicators could further enhance the sustainability pillars. Section 2.2.2
reviews some potential aspects which can be incorporated into the GCI. The OECD Better
Life Index (BLI) could generate improvements. Data, however, only cover OECD members
in addition to two non-OECD countries and computing the BLI for all countries included in
the GCI would be challenging. The World Happiness Index (WHI) (Layard & Sachs, 2012)
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would potentially offer complementarities to the GCI. In this case, data can be gathered
for all the nations included in the GCI (114 in its 2015 edition). In addition, approaches
emerging from the literature on social sustainability in relation to community resilience
could contribute to the social inclusion and vulnerability sub-pillars (Magis, 2010).
SGCI – Composite Sustainability Adjustments
A significant contribution of the GCI is its identification that as nations develop, they leverage
different aspects of competitiveness (Porter et al., 2009). Research on the environmental
intensity of economic growth and social development also suggests that a similar process
occurs in relation to environmental and social domains; a process that is formalised in the
environmental literature as the Environmental Kuznets Curve (EKC) (Grossman & Krueger,
1991; Stern, 2004). While the foundations of this relationship have been contested, the ex-
istence of different environmental and social relationships in the process of economic devel-
opment have not (Stern, 2004). Researchers increasingly call for rethinking this relationship,
largely omitted in the sustainability adjustment approach (Dietz, Rosa, & York, 2009).
The current construction of the SGCI might, therefore, present biased measures for
developed economies. Dos Santos and Brandi (2014) find a strong correlation between
key environmental indicators and GCI scores suggesting that in some cases, environmen-
tal and social indicators may be used as proxies of competitiveness. This implies that en-
vironmental and social performance is related to the development level of an economy.
Comparing all economies against the same criteria may introduce biases against less de-
veloped nations in the way the index is currently constructed. For Stojanovska (2015), the
competitiveness of emerging economies is vulnerable (i.e. prone to show low perfor-
mance) when sustainability components are considered, which should motivate these
nations to take action. An alternative conclusion might be that emerging economies
might be vulnerable to these adjustments because these adjustments take account of the
very factors that define them as developing or emerging economies. Thus, the extent to
which adjustments add any significant insight for less developed economies is brought
into question. The SGCI may provide better insights for developing economies if an ap-
proach that also takes account of the level of development is adopted and countries can
compare themselves with other nations at similar stages of development.
CONCLUSIONS
To operationalise the concept of sustainable competitiveness the article focuses on how the
concept bridges the interconnected, but often separately considered, pillars of sustainability
across its economic, social and environmental elements. A range of different approaches to
measuring the individual pillars of sustainability are provided to indicate the scope of such anal-
yses. Our primary focus remains on economic development as a central pillar and how the
economic element interacts with the social and environmental domains of sustainability.
We identify that competitiveness defined as productivity is most appropriate for un-
derstanding the foundations of economic development. This productivity-based definition,
and measurement, enables identification of potential bottlenecks and potential policy in-
terventions, in comparison to less comprehensive partial approaches that consider com-
petitiveness from the market-share or cost-comparison perspectives. The GCI produced by
the WEF is identified as the approach which implements the productivity perspective most
From the Concept to the Measurement
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53
effectively and comprehensively. This is because it benefits from roots in the literature on
economic growth and competitiveness and, therefore, includes the most commonly agreed
competitiveness pillars and sources. A key feature is that it allows for comparisons of na-
tions across different development stages, indicating that as economies develop, different
elements of competitiveness play different roles as nations transition from basic require-
ments, through to efficiency requirements and finally to innovation drivers of development.
The extent to which this is evident from empirical examinations will be considered in the
estimations to be conducted in the next phase of this research. Furthermore, the presenta-
tion of a final index built up from a set of twelve separate pillars allows comparisons to
identify bottlenecks and potential roadblocks to competitiveness. The review also identifies
limitations specific to the GCI, and to the overall productivity approach.
The review reports on how the environmental and social elements of sustainability are
researched and measured, and reflects on how the extended metrics of the GCI includes
most prominent themes and topics in an aggregated Sustainability Adjusted Competitive-
ness Index (SGCI). Productivity remains central to the sustainability adjusted measures of
competitiveness considered, both environmental and social. Understanding that the SGCI is
a work-in-progress, some suggestions on how to improve on the method are identified. The
understanding is that some novel metrics have the potential to aid policymaking in different
countries, and are, therefore, selected as the preferred approach in applied research.
The insights obtained from this review point to how policy-relevant research ques-
tions may complement conceptual interest in the drivers of and barriers to sustainable
competitiveness performance. Our conceptual and measurement interests extend to now
turning to answer questions similar to those raised in Hammond et al. (1995) which fo-
cused on environmental sustainability. These questions concern what is happening to the
state of the productive economy, the social environment and the ecological environment.
To understand why-type questions the potential interactions between these spheres must
be considered. This informs the next phase of drawing implications from the research in
terms of what we are doing about it and what can be done.
We propose to develop a panel of data to examine SGCI patterns across a broad range
of economies, leveraging the WEF approach and encompassing data from available
sources identified above. Examining countries at different stages of development permits
consideration of whether and to what extent stage of development features for environ-
mental and social sustainability. Drilling into the components of SGCI will allow the identi-
fication of those levers most relevant to impacting the economic-environment-social
nexus, useful for the identification of potential policy interventions.
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Authors
The contribution share of authors is equal and amounted to 50% each of them.
Eleanor Doyle
Professor of Economics, Competitiveness Institute, Department of Economics, Cork University Busi-
ness School, University College Cork, Ireland. Her research interests include economic development
and innovation through clustering; resource-based view of the firm; and sustainability.
Correspondence to: Prof. Eleanor Doyle, Competitiveness Institute, Department of Economics, Cork
University Business School, University College Cork, Cork, T12 T656, Ireland. e-mail: e.doyle@ucc.ie
Mauricio Perez-Alaniz
Completed this research as Research Assistant at Competitiveness Institute, University College Cork,
Ireland. Current PhD candidate in Innovation at Kemmy Business School, University of Limerick, Ire-
land. Completed MRes. International Development (University of East Anglia, Norwich, UK) and BSc.
International Development and Natural Resource Management (University of East Anglia, Norwich,
UK). His research interests include drivers and constraints to Innovation, National Competitiveness,
International Development and Sustainable Development.
Correspondence to: Muricio Perez-Alaniz, Competitiveness Institute, Department of Eco-
nomics, Cork University Business School, University College Cork, Cork, T12 T656, Ireland. e-
mail: me.perezalaniz@gmail.com
Acknowledgements
and Financial Disclosure
The authors acknowledge funding support from the Irish Environmental Protection Agency
for this research (Project Number: 2015-SE-DS-2).
Copyright and License
This article is published under the terms of the Creative Commons
Attribution – NoDerivs (CC BY-ND 4.0) License
http://creativecommons.org/licenses/by-nd/4.0/
Published by the Centre for Strategic and International Entrepreneurship – Krakow, Poland
The copyediting and proofreading of
articles in English is financed in the framework
of contract No. 799/P-DUN/2017 by the Ministry of Science and Higher Education of
the Republic of Poland committed to activities aimed at science promotion.
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The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has significantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced firms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares, such as increasing profits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics. JEL Codes: E21, E22, E25.
Book
In this article, I present three key facts about income and wealth inequality in the long run emerging from my book Capital in the Twenty-First Century and seek to sharpen and refocus the discussion about those trends. In particular, I clarify the role played by r > g in my analysis of wealth inequality. I also discuss some of the implications for optimal taxation, and the relation between capital-income ratios and capital shares.
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In the present work, we apply the canonical correlation analysis (CCA) to analyze the relationship between competitiveness and environmental sustainability, studying their degree of correlation and the impact of the environmental sustainability and competitiveness indicators in this relationship. We selected seven indicators from the environmental sustainability indicators of the Environmental Performance Index, and 12 competitiveness indicators from The Global Competitiveness Index. The CCA considers 117 countries common in both databases. The method is applied to study of the intracorrelations (correlations, between the same set of indicators) and the intercorrelations (correlations between the sustainability and competitiveness sets of indicators). It is shown that the intracorrelations of the environmental and competitiveness indicators are highly correlated, indicating that the choice of the indicators adequately describes sustainability and competitiveness, separately. For the study of the intercorrelation between the sustainability and the competitiveness sets of indicators, the CCA method reduced the complex multidimensional problem to a one-dimensional situation described by one relevant canonical function. This greatly simplified the interpretation of the interrelation between competitiveness and sustainability indicators allowing a proper analysis of the different degrees of correlation between these dimensions. A discussion on the degree of correlation between these indicators is presented. The results associating competitiveness and sustainability indicators through strong intercorrelation are an indication that the conclusion of the World Economic Forum analysis “the main and very important finding is that there is no necessary trade-off between being competitive and being sustainable. On the contrary, many countries at the top of the competitiveness rankings are also the best performers in many areas of sustainability,” may be related to the specific choice of indicators. The present study suggests that the strongly correlated indicators are good candidates to be part of an adequate set of composite sustainability and competitiveness indicators. Although in this work CCA is applied to study the environmental sustainability, the method can be applied to investigate other metrics in particular the intersection of social and competitiveness toward the achievement of sustainable development.