Introduction
David McGuinty, President and CEO, NRTEE

The workshop began with words of welcome from David McGuinty.

McGuinty stressed the fact that the National Conference on Sustainable Development Indicators held the previous day had exceeded expectations making it one of the most comprehensive gatherings on the subject.

Noting that one set of indicators cannot contain the whole range of aspirations, he remarked that members faced a tough challenge. The initiative will contribute to helping Canadians determine whether or not today's economy is threatening or augmenting the ability of future generations of Canadians to have a healthy economy, and maintain quality environments.

In this regard McGuinty stressed that the NRTEE will endeavour to develop a broad framework that includes all aspects of sustainability, with the exception that existing and future work by a range of groups in Canada would contribute other elements to the overall indicator framework. He reiterated that all feedback would go to the Steering Committee ensuring a transparent and consultative process.

Stuart Smith, NRTEE Chair, ESDI Initiative Co-chair

Stuart Smith thanked participants for attending the workshop and the previous day's conference. He summarized that the Minister of Finance had committed funds to both Environment Canada and the NRTEE to undertake a two-pronged approach to sustainable development: Environment Canada (EC) is developing an information system for the environment (CISE); and the NRTEE has taken on the ESDI Initiative.

Smith continued by stressing that due to time constraints and the need to deliver concrete indicators, the NRTEE's work is focused with the end result of showing whether we are living well today at the expense of future generations. This work is by no means meant to displace work being done by others, and Smith reiterated that he hopes to be able to use some funding to encourage other work particularly in the social arena.

Presentation of the Proposed Approach to Indicators
Robert Smith, Assistant Director, Resources and Environment Accounts, Statistics Canada

The ESDI Steering Committee asked Statistics Canada to develop a draft conceptual framework for environment and sustainable development indicators based on a broad interpretation of the notion of capital, with the economy taken as the object of sustainability.

Robert Smith, the lead author on the framework, explained the main elements involved in the capital approach and why it was an appropriate overall approach for the ESDI indicators. He noted that capital is the theoretically correct measure of sustainability - it is matter that endures and renders services over time, as opposed to goods that are consumed over time. Capital does deteriorate, but more slowly, and continues to provide service over a long term or indefinitely. Capital is that matter necessary for maintaining the function of society over the long term, and is a necessary basis for ensuring that actions taken today do not undermine the future by removing the options of future generations. This emphasis on capital shifts the focus of indicators from traditional measures of current economic activity, such as gross domestic product, to trends in the use and investment in the stocks of different forms of capital.

This model of sustainability requires an expansive view of capital that includes elements that are not traded within the marketplace. For instance, we all rely on basic ecosystem services to provide clean air, water and a stable climate. To reflect this wide range of capital, the NRTEE has recommended developing indicators for three types of capital: produced capital, natural capital and human capital.

Smith noted that some of the most interesting work would be in determining how to measure ecosystem services. "They are extraordinarily complex" and cannot be measured with a yardstick. "We need to think about them, identify the fundamental services they provide, and build proxies for the services they provide".

A key issue to be addressed in developing a set of indicators is the extent to which different types of capital are substitutable for one another. Smith commented that it is possible to substitute produced capital for human capital - for example; one can use more machines and less human labour. Similarly, it is possible to substitute produced capital for some forms of natural capital, as witnessed by the development and use of fibre optics to replace copper. However, there are limited or no possibilities for the substitutability of other forms of natural capital such as ecosystems.

Whatever indicators are used, Smith urged that they be supported by coherent, consistent information services, and be regionally and sectorally detailed.

Andrew Sharpe, Executive Director of the Centre for the Study of Living Standards

The proposed framework presented by Andrew Sharpe comes from two different papers prepared for and presented to the NRTEE. Both papers are positioned in light of the Statistics Canada framework.

Sharpe defined human capital as follows: the aggregation of investments such as education, health, on-the-job training and migration that enhance an individual's productivity in the labour market and also in non-market activities.

In his view, the sustainability of capital perspective can be easily extended to human capital, both in terms of education and health. Human capital can be thought of as the labour analogue to produced capital. The concept of human capital can be described as the capabilities or capacities, both innate and derived or accumulated, embodied in the working age population that allow it to work productively with other forms of capital to sustain economic production. The term human capital has traditionally applied to education broadly defined and includes the knowledge and skills that the working age population (or more narrowly the labour force) accumulates through formal educational attainment, training, and experience.

Four specific indicators, two for health and two for education, were proposed in the second paper. Sharpe said that they were restricted to four for several reasons: to capture something important; to use output, not input indicators; and to choose only indicators that are easily understandable and transparent.

For education, the first summary indicator could be the average educational attainment of the working age population. Additional years of education increase the knowledge and skill base of the population and thus increase human capital stock. The second indicator could be standardized test results in literacy and numeracy. Both Statistics Canada and the OECD have undertaken work in this area.

For health, the HALE, or health-adjusted life expectancy, could be the first summary indicator. Sharpe acknowledged that this is a little harder to capture than is the average life expectancy at birth, but it can be done in Canada, and it can be desegregated. The second indicator is self-reported overall health status, which correlates well with actual health status. Sharpe said that there are already fifteen to twenty years of data in this area.

"It is feasible to develop indicators of human capital," said Sharpe adding that thresholds, which must be considered in dealing with natural capital, do not complicate them. "The real challenge in human capital is to improve our human capital to compete with our competitors," he concluded.

Plenary Discussion
Moderator: Monte Doyle

Identifying himself as an ecologist, a participant took issue with the objective of the initiative, (i.e. that the economy should be taken as the object of sustainability). "I think it's the problem, not the solution. The object should be the health of the ecological system." He suggested a set of indicators to determine the health of ecosystems, measuring their productivity, organization (biodiversity) and resilience.

Another participant forcefully noted that the NRTEE's concept of sustainable development embodied in the framework is not what the concept is all about. Sustainable development is about sustaining natural resources or natural capital as well as about building human capital and social capital, the speaker stated, adding that the GDP is also an ideologically based concept.

Stating that he understood the political and timetable agendas, another participant commented that he was pleased to hear Smith situate this project as a building block. "We have a disease in public policy in Canada called 'hardening of the categories'" he said, urging the NRTEE to be respectful of what else needs to be done. "Don't dismiss income; the economy is not an end unto itself. Statistics Canada recently said that income distribution is the most important determinant of health, so it makes no sense not to include it."

"This focus misses the opportunity to ask 'What kind of economy do we want to sustain?'" remarked a participant. Failing to rise to the challenge of examining what kind of society we want to have misses an opportunity for economic transformation that would improve the well-being of Canadians.

Stuart Smith

In outlining some of the constraints of the project, Smith said that he wanted to address the concerns that had been expressed.

He noted that the NRTEE does not intend to negate the other approaches or ignore the elements of social capital and other social issues. The question being asked is whether society can continue to develop and still sustain the environment. He urged participants to remember that this project is designed so that the Minister of Finance can say whether we are living well at the expense of future generations.

He went on to assure those worried about the scope on sustaining the economy that "at the end of the day we will be measuring the same things you asked for — ecosystems."

Smith concluded by inviting participants to come forward with ideas about what should be measured. The thinking so far is designed to measure the health of ecosystems. "If you have a measurement of social capital or other social measures that are rigorous and defensible, then bring them forward."

Break-Out Groups

Workshop participants divided into four break out groups, which where asked to discuss the following topics:
i) Feedback on the ESDI Initiative's Proposed Approach (morning session)
ii) Using Indicators in Decision Making (afternoon session)

These groups gave critical inputs into the framework and provided specific areas where indicators could be developed.

Wrap-Up Plenary

The session began with reports back from the four breakout groups. For each group an ESDI Steering Committee member provided a five-minute summary on the discussions.

Group Four

David Marshall reported that his group had focused on five main topics: the general approach, the capital approach, social capital, criteria for indicators, and specific criteria.

Participants were virtually unanimous that the NRTEE has set out a "modest and limited" approach to sustainable development indicators,and has a real opportunity to go beyond its mandate from the Finance Minister. They compared that initial mandate to the first couple of rooms in a house, and stressed the importance of building the rest of the structure, warning that if this exercise crashes and burns, there may not be another opportunity for some time to develop a comprehensive set of indicators.

The group agreed that the capital approach is worthwhile and practical, but suggested incorporating qualitative factors like forest age and extending the definition to include goods and services. Social capital emerged as an important part of the discussion, with discussion focusing on indicators like crime rates, voter turnout, voluntarism, and membership in organizations. The group agreed that it would be useful to incorporate indicators associated with specific policy initiatives, such as use of mass transit. Participants also stressed that value of addressing risks to sustainability, using a set of practical indicators that are grounded in adequate information.

The group left the NRTEE with two challenges: To look at the sustainability of consumption and production, and to let stakeholders know what role they'll be able to play as the indicators initiative progresses.

Group Three

Annette Trimbee acknowledged the NRTEE's initiative in bringing 600 people together for the National Conference to talk about sustainable development indicators. She urged the NRTEE to demonstrate that it is listening, and to keep the audience engaged.

Participants in this group underscored the need to do away with "false advertising", position the NRTEE's indicators project as one part of an overall blueprint for sustainable development, clarify its links to other indicators initiatives, and show some leadership in relation to those other initiatives.

The group stressed the need for rigour and clarity, and urged the NRTEE not to reinvent good work that has already been done. Researchers will need robust information at the sectoral and regional levels, since disaggregation will be the first step in working through the policy implications flowing from a set of indicators. The scarcity of environmental data in comparison to economic and social statistics emerged as a major concern.

Participants called for a clear link between environment and human health, and a strong identification of people as one part of the ecosystem, as one way of keeping the work relevant.

The group also discussed the international dimensions of natural capital accounts, noting that Canada's natural capital can be drawn down by others, "as we may draw on theirs". Delegates suggested that future work might focus on quantifying risks, place higher priority on use values than non-use values, and explore parallels between thresholds and the concept of a safe minimum standard. Discussion also touched on the need for indicators of environmental stewardship, recognizing that current categories of indicators cover assimilative capacity and use of resources but not the process of reclaiming and restoring natural capital. By adding these elements, the indicators initiative would send the message that the path toward sustainable development does depend on the actions of individuals.

Participants suggested a couple of new indicators, including vegetation cover as a proxy for clean air or biodiversity that would otherwise be difficult to measure. A mechanism is also needed to capture the non-renewable nature of harvestable resources like old-growth forest. In its discussion of a protected areas indicator, the group agreed that clear standards will be needed to account for differences in the level of protection in various jurisdictions. Delegates also noted that an endangered species indicator would be most useful if it reflected the number of species awaiting study, as well as the numbers moving on and off the endangered list.

Group Two

Linda Nowlan echoed another group's comment about false advertising, noting that participants in her breakout had stressed the broad nature of sustainable development and expressed interest in placing the NRTEE initiative within a broader framework. The group also called on the NRTEE to be explicit about the need to sustain the environment as well as the economy, by redefining the mission of the ESDI initiative as:

"...to develop environmental and economic indicators that address the sustainability of the economy and its impact on the sustainability of the environment."

There was no consensus within the group on whether the capital approach is appropriate for this initiative. If it is to be used, most participants agreed that social capital must be examined.

The group noted that most other initiatives in this area have developed selection criteria before putting indicators in place. Although the NRTEE seemed not to have developed a complete set of criteria, the group strongly endorsed the focus on intergenerational equity.

Participants agreed on the importance of using historical data to track different indicators over time, and called on the NRTEE to adopt indicators that are already in use rather than relying solely on the capital approach. There was some support for new indicators in three categories: ecological footprint, biologically productive land per capita, and energy use.

Group One

Paul Antle stated that the NRTEE's overall approach to indicators received a mixed response. Some participants expressed interest in incorporating social dimensions in the NRTEE's framework, and others questioned whether the initiative is actually about sustainable development indicators.

The group agreed that the framework was missing a global perspective, and should draw more heavily on past work by Statistics Canada and the Canadian Council of Ministers of the Environment. In a discussion of the utility of sustainable development indicators, participants concluded that the purpose of the exercise is to advise decision-makers on whether current macroeconomic policies can be sustained.

Participants agreed that sustainable development indicators must be credible, representative of ecosystems, cost-effective, robust, evolutionary, relevant to policy, built on available data, and suitable for creating a sense of permanence. The group agreed on a series of focal points for the exercise, including environmental health, ecosystem stress, species at risk, extreme climate events, and vegetation cover. Children were identified as a critical component of human capital, with early childhood development and poverty emerging as important measures.

The group agreed that the exercise should place greater emphasis on natural capital and less on produced and human capital, but stressed the importance of adding a social dimension, maintaining a focus on intergenerational equity, and being attentive to concerns about thresholds. Participants also urged the NRTEE to keep in touch with other indicators initiatives that are running in parallel, to take advantage of synergies and overlaps and ensure solid data all around.

Closing Remarks

Peter Pearse, Co-Chair of the ESDI Steering Committee, stressed that a "truly remarkable conference" had "reflected an enormous breadth and depth of interest on the subject of sustainable development indicators in Canada". He added that the level of effort on indicators and the expertise available in Canada went beyond what he had previously understood.

"What this means, I think, is that the opportunities for constructive collaboration between the NRTEE and the wider community of effort are more diverse," he said. "I hope we can play a useful role in facilitating that collaboration."

Pearse took note of "both the critical and complementary comments" on the NRTEE's initial approach, especially in relation to the scope of the initiative. "We've portrayed this project as one that would produce sustainable development indicators for Canada," he said. "Our mandate is actually much narrower than that," but the title of the project might imply otherwise and "people can be forgiven for interpreting that it means what it says." Even if the focus on economic development remains, Pearse acknowledged the need to include other parts of the sustainable development umbrella. "We have to think about how we can promote work on these other relevant aspects of sustainable development, and especially give more thought to how this other work fits with ours and how we can bring it together."

Stuart Smith, Co-Chair of the ESDI Steering Committee commented that the meeting had not lacked for frankness. "It was the kind of open discussion where there's give and take, and that we really needed to hear," he said. "Sometimes, the best help is criticism where it's justified. We're used to that, we need it, we accept it, and we continue to value this kind of process, even more when we receive this valuable input."

Smith acknowledged the importance of social development indicators, but recalled earlier discussions about limitations in the available data in that area, particularly in relation to intergenerational aspects. He said the NRTEE had continued to claim a broader focus on sustainable development indicators, not to mislead people, but because it eventually hopes to cover the full range of issues that relate to sustainability.

"What we heard today is that we dare not go forward without clearly acknowledging that the work we're doing is a small part of a broader field," he said. "This was always our understanding but, plainly, we did not acknowledge it properly. We definitely have to revise the way in which we explain the context of what we're doing." While the "label on the box" won't necessarily change, "we'll make it clear to everyone who sees our work that this is part of the larger context of sustainable development, which includes not only human capital, but the relatively new concept of social capital." While there is some doubt that a suitable social development indicators is available, "we have to open our minds to that. That was a message that was loud and clear, and I have to tell you that our minds are open."

Smith acknowledged some participants' objections to the notion of sustaining the economy with insufficient reference to the environment. "We have to rework that, to make it clear that we're trying to sustain both the environment for its own sake and the environment on which the economy depends." He linked this point back to the ultimate goal of giving the present or future finance minister a mechanism for reporting back to the public on whether the current performance of the economy can be sustained.

Based on the discussion, Smith concluded that the majority of participants — though not necessarily a big majority — had agreed with the notion of capital as a basis for sustainable development indicators. "It's one way of putting it, and it's a way that finance people and economists are quite used to." He added that there's no purpose in developing a set of indicators that lacked the "face validity" that would enable a finance minister to explain the concept to his or her constituents.

Smith said the NRTEE will continue its moral and financial support for other efforts to develop sustainable development and quality of life indicators. And members of the NRTEE's ESDI Steering Committee will roll up their sleeves to incorporate participants' comments and plan further consultations. "We've got our work cut out for us, as you can imagine," but "you will certainly be hearing from us."

Smith closed by thanking participants for their involvement and their passion. "Even when we're stung a bit by what's being said, we appreciate that people of your ability and distinguished background would come and share your passion with us. We've listened, and we think you will be happy with what comes out of this."