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True Cost Economy

Posted by Sara Gutterman

Jan 2, 2014 3:18:00 PM

Sustainability advocates throughout the U.S. agree that the Gross Domestic Product (GDP) as an insufficient measurement for our economy, as it does not accurately reflect the cost of negative externalities associated with goods and services. By valuing volume over quality, performance, and sustainability, we’ve created a faulty metric that ignores externalities such as basic environmental services (clean air, fresh water, productive soil) and factors that determine our quality of life (sense of purpose, healthy bodies and ecosystems, and vibrant community interaction), resulting in a skewed assessment of our balance sheet.

In an effort to measure the true prosperity of countries across the globe, the Legatum Institute developed the 2013 Prosperity Index, which ranks countries based on 8 main categories (economy, entrepreneurship and opportunity, governance, education, health, safety and security, personal freedom, and social capital), using 89 metrics including affluence, productivity, happiness, and sustainability.

The index places importance on dynamic economies with ample opportunity for entrepreneurial activity, low costs for business start ups, close communities with high levels of trust, and quality governance. The Scandinavian countries—Norway (1), Sweden (4), Denmark (6), and Finland (8)—stole the show. Switzerland (2), Canada (3), and New Zealand (5) rounded out the top 5. The U.S. came in 11th.

Perhaps more interesting than Legatum’s ‘Top 10’ list was the accompanying ‘To Watch’ list, in which countries with emerging economies like Bangdesh, Indonesia, South Korea, Uruguay, and Senegal joined countries with exploding economies like Germany, Sweden, and Slovakia. Together, these countries are predicted to influence “a new economic world order”.

Fortunately, a recent report by GlobeScan shows that climate change awareness and low-carbon behavior is surging in many of the emerging economies listed in Legatum’s report.

In many of these emerging economies, “aspirational consumers”, who comprise the quickly growing, upwardly mobile middle class (46% of Chinese consumers and 42% of Indian consumers), are leapfrogging the U.S. and other developed markets by circumventing the need for costly and cumbersome energy, water, and sewage infrastructure and gravitating straight towards green, high performance products, ranging from solar to waterless toilets to super efficient appliances. For example, between 2009 and 2013, the purchases of energy efficient light bulbs increased by 20% in China, 13% in Mexico, and 11% in India (in contrast, purchase levels decreased over that same time by 19%in the UK and 18% in the US.)

“All this should be heartening to climate activists, green entrepreneurs and brands with a mission,” says Doug Miller, founder of Globescan. “It indicates that serious amounts of yuans and rupees are being and will be spent in the right direction, even if dollars and pounds are not just now. It also confirms that behavior follows concern, which is promising given the recent resurgence of climate concern (and environmental concerns generally) in Europe and North America. Brands and green entrepreneurs with low-carbon solutions for consumers will get earlier traction in emerging markets in the foreseeable future, so they should focus their attention there.”

Responding to market demand and the revenue potential associated with emerging markets, corporations across the globe are developing simple, resource efficient, environmentally appropriate solutions for these markets. Kohler, as one example, is testing toilet solutions that can be used in locations that don’t have access to ample water sources or municipal sewage systems. GE developed a stripped down version of its ECG system for clinics in rural India who didn’t have the funds or technical expertise to purchase or operate the sophisticated (and expensive) hospital version. Siemens has crafted an entire strategy to respond to emerging economies called SMART, which means simple, maintenance-friendly, affordable, reliable and timely to market.

If the emerging economies on Legatum’s ‘To Watch’ list, coupled with innovative manufacturers, can succeed in making sustainability not just a desirable outcome but an intelligent choice, then we could be further down the pathway of reaching our goals than we think. After all, we don’t need more debate over which political party has a moral right to own the sky or which rich counties will pay for changing climate repercussions. Rather, what we need right now more than anything is a global mind shift that swiftly and effectively ushers in a sustainable future—a cultural tipping point that is driven by masses of everyday people around the world making choices not necessarily because they’re sustainable, but because they simply make good sense.

How can we facilitate that gloabl mind shift? Write to me at sara@greenbuildermag.com or follow me on Twitter @SaraGBM.

For more information about green building and sustainable living, visit www.greenbuildermag.com, like us on Facebook, and follow us on Twitter at @greenbuildermag and @VISIONHouseGBM for regular updates and breaking news.

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