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The Planetary Impact Index

Introduction

One of the guiding principles of Green Economics since its inception has been an awareness of the threat posed to the planet by industrial companies and the system of production for profit which drives them. The theme of `small is beautiful' has stood in direct contradiction to the movement of the international economy towards globalization and the growth of multinational corporations.

The green movement has been split in its approach to industry. The fundamentalist greens have advocated lifestyle change: reducing personal consumption, abandoning personal motor-cars, buying locally, making items for themselves, reusing and recycling, and in general reducing the size of the footprint left on the planet. The problem with this approach is that it requires a huge degree of personal sacrifice and the personal strength to resist a pervasive culture of consumption within a modern industrial economy. To set a standard of minimum consumption may be admired by one's neighbours, but it is unlikely to be emulated when they themselves are bombarded nightly with advertisements persuading them to buy the latest consumer gadget. Like medieval monks, lifestyle greens are often admired, sometimes mocked, but rarely copied.

To proponents of a fundamental green approach industrial capitalism is the monster which is driving the planet towards destruction. It is a force so threatening and deadly that there is no bargaining with it. It must be rejected. The hope is that all the world's citizens will realize the danger posed and will also withdraw from the system of over-consumption. But, since this is unlikely, the fundamentalist strategy is unlikely to succeed, especially within the limited time-frame defined by the more apocalyptic visions of planetary destruction.

The other path has been to attempt to tackle the industrial monster itself. To a Green, negotiating with business is rather like entering a lion's den. Even Greens who understand the need to approach businesses directly recognize that they are indeed the root of the problem. So the dialogue is not an easy one. The main problem historically has been that, as is its habit, the industrial monster has gobbled up the bits of the Green message it finds palatable, and in many cases repackaged them and sold them back to us. Thus, a message about valuing nature's bountiful gifts is translated into a range of bubble baths and shampoos sold under the rubric `Nature's Bounty', flavoured with artificial chemicals, and labelled as `banana conditioner', `apple shampoo', or `peach bubbles', when in fact none has ever been anyway near a real piece of fruit. The less palatable parts of the message¾ those concerned with the need for small-scale enterprises or better conditions for workers¾ are sidelined or totally ignored.

Industrial companies do presently face some pressure to act in environmentally friendly ways. Many countries have legislation to force companies to pay the costs of their pollution; in others Environmental Protection Agencies enforce strict environmental standards. Yet the taxes and fines businesses are required to pay can be absorbed within their voluminous balance-sheets. As was demonstrated in the case of the Bhopal disaster, a multi-national corporation (in that case Union Carbide) can afford to retrospectively buy the lives of the thousands of citizens they have killed or maimed. Their profits are barely dented.

But surely such a disaster will undermine the international standing of the company concerned? In fact, this is unlikely. Modern multinational companies (or transnational corporations¾ TNCs¾ as they are now called) can avoid accountability by operating under different names in different countries. If one part of the corporation gets its fingers burned in an ecological disaster it can simply be sold off: the owning and controlling group is probably unharmed by bad publicity since it is very difficult to make the connection. In the case of BSE, despite allegations, it has been impossible to ascertain from pusillanimous journalists who made the cattle feed responsible for the appearance of new-variant CJD. One of the large agricultural feed manufacturers has taken the profits and avoided responsibility for the deaths and suffering. This problem of accountability results from the fact that TNCs can rarely be named for fear of libel prosecutions. As the McLibel case demonstrates, TNCs have infinite resources to defend their names: citizens and media outlets dare not accuse them since their ability to pay legal costs are much less.

The problem Greens face in dealing with business is the need to tackle seriously the fundamental problems without alienating the managers. In a voluntary framework this is impossible. We are therefore arguing for the creation of a tool (a spanner if you like) which would give governments the ability to exert pressure on industries to reduce the size of their planetary footprint. We have called this tool the Planetary Impact Index (PII). It is an attempt to qualitatively assess or rank both industrial processes and specific examples of factory situations with a view to minimising their impact both on the planet and on its inhabitants.

It should be emphasized that no attempt is being made to accurately quantify the relationship between projected damage to the earth or its inhabitants and those inimical consequences of industrial processes that are being considered. This is a daunting task, since quantifying the deleterious effects on industrial processes is so complicated. Some work to quantify the environmental impact of different production processes has been carried out by researchers at the University of Nijmegen (see Ragas et al.). Their aim was to develop `an absolute environmental measuring tool which can help the government, producers and consumers on their way to sustainability'. However, as they point out, such an absolute categorization of planetary impact faces serious problems in terms of comparable units across categories as diverse as extinction of species, pollution, and safety. They also conclude that `A large number of social and scientific problems have to be solved before the method can be made applicable'.

This work from Nijmegen is an interesting development, since it suggests that quantification of planetary threat is feasible and consequently a comparison of the relative threats of different production processes could theoretically be achieved. However, the complications encountered so far in this research would be compounded were the researchers to include within their analysis social issues connected with the quality of life and total of human happiness offered by different industries or companies. This research is a scientific project concerned with absolute values. For the purposes of control and assessment¾ largely a political project under democratic control¾ a semi-empirical approach is all that is needed. Therefore we see the Planetary Impact Index as a semi-empirical political tool, based on a relative ranking of different industries, processes, and site examples. Before presenting the Index we will briefly turn to review existing methods of voluntary regulation.

Existing Methods of Voluntary Regulation

Life-cycle assessment is a methodology business managers can use to increase the responsiveness of their businesses to environmental concerns. It represents a `holistic cradle to grave approach' so that all stages of the production process are assessed according to different `environmental impact categories' to determine their negative impact on the environment (VITO, 1985). Life-cycle assessment offers businesses a useful framework within which to devise environmentally friendly production processes. However, there is no real pressure for them to do so, and the success of such an approach will always depend on the motivation of the managers involved in it. Few Greens would believe that commitment to the planet will ever outweigh the profit motive in the planning of most companies.

The second approach to influencing producers to become more sustainable is based on consumer pressure. The idea is that now that consumers have become aware of the threat to the planet from certain industrial processes, they will act as ethical agents and buy those goods which harm the planet as little as possible. This approach concentrates on providing information for consumers¾ primarily through eco-labelling, but also via consumer guides such as the Green Consumer Guide¾ so that they can buy products which are less harmful. It faces a number of problems. The first is that it places considerable faith in consumers' ability to select environmentally friendly products. How many people would actual make the effort to read the guide; how many consumers currently read labels? It also underestimates the ability of marketing department to dupe consumers. The range of items labelled `eco-friendly' during the Green boom of the early 1990s included lead-free petrol, recycled paper (chlorine-bleached and often recycled at the mill to increase the price), and low-energy tumble-dryers and dish-washers, and demonstrated the cynicism of the writers of advertising copy, whose concern was only to increase profits. Finally, this approach has underestimated the extent to which most consumers base their purchasing decisions purely on price. In the supermarket, as in elections, it is the extra penny in his pocket that is likely to make up the consumer's mind.

Both these approaches to voluntary control over industry have manifestly failed. Industry has used the Green ideology to increase its own profits. The lesson we should learn is that for companies driven by the profit-motive only financial incentives will work. The incentives to appear Green to appeal to concerned consumers can marginally feed through the companies profits and exert some influence, but for fundamental change, financial fines and incentives will be necessary.

Sustainability and Industry: The Planetary Impact Index

The Green project aims to arrive at a society where all people on earth live within a sustainable, self-renewing ecological system. The industrial processes which are more or less necessary to ensure optimum quality of life within such constraints need to be assessed in terms of their impact on the system in a number of areas besides the obvious ones of toxic or environmental pollution.

Greens recognize the interdependence of societies and the existence of externally generated psychological and social pressures which can force them to act in the short term against their long-term better interests. Thus, social and psychological aspects of proposed or existing industrial processes must also be included in any Green analysis of planetary impact. For example, inhabitants of the upper reaches of a river might need to contaminate the river or build a dam because they wanted a better standard of living. They might feel envious of people living in areas downstream, but this might stem from unhappiness or social unrest following poor working conditions, long hours, difficult communications, or any combination of a number of reasons which, if addressed, might cause these people to have a happier and more secure lifestyle. Hence the PII includes consideration of the social as well as the environmental impact of production processes.

The Planetary Impact Index is a single numerical value determined by the application of rules to an array of qualities or values which are either measured or assessed by a committee established for that purpose. Since both types of industrial process and individual examples of factories involved in any particular industrial process may be assigned a PII value, the tool is clearly able to assess the planetary footprint or 'greenness' of general industrial methods and processes and compare specific instances with a view to minimising such impact. The tool can be used to encourage good practice and discourage bad through systems of tax-linked disincentives or planning refusals to applications with high PII values.

The index would consist of various components which would be taken together to comprise a fully planet-sensitive industrial indicator. Components would initially include: pollution, workers' rights, energy efficiency, distance travelled by inputs, product usefulness, distance travelled by employees to work, although other components might be introduced later. Table 1 gives a list of variables which could be considered in assessing the PII of an industry or process. Each subgroup may contain a number of separate classes of causes, but such causes may contribute to the overall picture through other areas also. For example, in Section 4 of Table 1, well-being or happiness is the result of a number of factors. These could include distance travelled to work: clearly, it makes life more difficult if you have to travel a long distance to work, but this also contributes to the deterioration in the health of other citizens (Section 3) and adds CO2 to the biosphere and affects the climate (Section 1).

Table 1. Planetary Impact Assessment

There is no reason why scales cannot be devised for each deleterious cause shown in Table 1 and values decided on for each industrial process or factory being considered, in order to compare their planetary impact. Thus we can write the PII as a weighted sum of sums of all the values given on the scales devised for those aspects of processes that oppose sustainability.

Here s i is a weighting factor, chosen to scale the different importance of the various sustainability parameter categories Ei given in Table 1.

In turn we can say that:

where the s is and eis relate to the sub-categories of cause for the effects outlined in Table 1.

An Example of the PII at work

The idea is more easily understood by an example of its application to a case where a PII is calculated for a given industry. A new process is developed in Japan for manufacturing a novel plastic material, polyblobylene (PBL). The substance is capable of being made into a number of items, including Mr Blobby Puppets, which can be made more cheaply using this substance than using the present plastic. The process involves large inputs of energy and produces toxic waste including chlorinated hydrocarbons, which are burnt. A proposal to site a factory in the local area of Plonkington will bring money to this area.

The situation today is that all would rejoice at this investment in the UK economy. But the Planetary Impact Commission give it their consideration and produce a report as summarised in Table 2. First, under the category `climate' (i = 1) they look at various js, j = 1, 2, 3, 4. For j = 1 the committee decides that the process emits some greenhouse gases, in this case CO2, and some chlorinated hydrocarbons. From values determined for the process they compare the quantity emitted per annum as tonnes of CO2 equivalent as a proportion of the annual excess over sustainable equilibrium values for the whole planet, and this enables them to establish a value of ej=1 = 3.

For ozone-layer destruction they note that chlorinated hydrocarbon emissions are high and award a value of 7 for ej=2. Again, they base their calculation on proportionate contribution to ozone-layer chlorine loading and the correlation between this and ozone-layer optical density in Dobson limits. The factory does not contribute to soil or tree loss and so these are given zeros.

Before calculating the overall climate component of the PII the next stage is to weight each sub-group so that they carry equivalent values in their contribution to planetary impact. Thus weighting s j are chosen for this by the committee. This is where value-judgement is exercised by the committee, since they are effectively weighing the importance of contributions measured in many different ways and using many different units. There is no reason why this deliberation should be seen as an insurmountable obstacle, however. Decisions like these are taken all the time by governments and politicians, usually with little or no explicit realisation or admission of what they are doing. At least in the case of the Commission, the records are available for all to see and the process is subject to greater accountability.

This aspect becomes important at the next stage, where the sums of each effective planetary impact target group¾ climate, resources, human health, etc.¾ are themselves weighted and summed to give the PII. The weighting factors have to be chosen to establish relative between groups as disparate as human well-being and happiness and resource loss. But again, these choices are made all the time, implicitly, in every agreed planning application and every government policy. We are proposing a Commission that opens the black box of these decisions and lays out their assumptions and oversights for all to see.

In the case of the polyblobylene example, the final PII is the sum of sums of all the weighted categories, in this case, for the polyblobylene process, 5.95. Although in absolute terms this number may be arguable, it is strictly comparable with indices for other factories making the same substance elsewhere. The committee may decide that this is too large a number and may refuse to permit the process altogether. On the other hand, the applicants may feel that they can reduce the number by attending to any of the categories making up the PII. Or perhaps it may turn out that the PII for this process may be lower in some parts of the country than others, due to geographical factors or the fact that some factory owners have naturally made the factory PII-efficient. So we can immediately see a mechanism for competition between factories for lowering their PII by altering their behaviour both within or across processes. Furthermore, the process itself and its usefulness to the planet and to life can be assessed apart from its mere money-making performance.

Table 2. Factory to produce polyblobylene: determination of PII

Ultimately, real pressure can be brought to bear on industry to improve its Green and sustainability credentials by using the PII as a tax assessment tool. For this purpose, the crude PII values would have to be scaled in some way to give a range of tax multipliers for industries or industrial processes. One way of doing this would be to decide on an ideal or most desirable value for a process or industry towards which the society, represented by their Commission, desires the factory to strive.

In the case of our polyblobylene factory the Commission may decide that polyblobylene has a low value in terms of human well-being and give the ideal polyblob factory a PII of 2.0. Thus the tax multiplier for the factory would be 5.95/2.0 » 3. To bring their multiplier down to 1.0 they would have to reduce their PII which would probably be impossible for this sort of industrial process. They might decide to increase the price of polyblob, but then the Blobby puppet manufacturers would have to increase their prices, and so fewer people would buy them.

However, if it were discovered that PBL was useful for making catheter tubes or radioisotope filters then the multiplier could be reduced, perhaps to less than unity so that the factory would be encouraged.

This highlights one aspect of the PII that we have not discussed, that is the use of negative values for compensation or advantages. We recognise that many industrial processes are both negatively and positively impacting. In Table 2 we have included some positive impacts. Under well-being (ei = 4), the cause, positive impacts, fo which the value of -1 is assigned in the case of polyblob, relates to the joy a young child might experience when cuddling a Mr Blobby puppet.

This is obviously a deliberately bizarre example. For many industries, such as farming, electricity generation, and so on, there are positive impacts on human well-being and negative impacts on the planet. In these cases the benefits need to be balanced against the costs. The choice, by the Commission, of the weighting factors and values which make up the PII and the conversion of the PII to a tax-influencing tool, would constitute socially determined steering of industry.

Overall, this discussion should make it clear that the PII and its method of computation would represent exactly the sort of economic tool sought by proponents of a true Third Way in economics. It includes the benefits of social planning for the good of the citizen, via the decisions made by people's representatives on the Commission, while allowing scope for human ingenuity to reduce costs and improve efficiency, taking into account planetary efficiency rather than a thin economic efficiency.

Problems with the PII

As an idea, this Index has superficial appeal. However, devising and updating such an Index might be problematic for a number of reasons.

The first problem is that devising such an Index would be a complicated and costly business. We are suggesting the establishment of an Industrial Impact Commission to allocate ratings to the various companies in the various areas of performance. This would be a time-consuming task, and could also expect to encounter vigorous opposition from the companies facing the prospect of receiving a high index. However, the setting up of the Index would be the hardest part; once it was operating annual adjustments would follow existing formulae and could be implemented on a more-or-less routine basis. Assessing the environmental impact of a given project objectively may not be as difficult task as might be assumed at first since the approach is a semi-empirical one. The actual values might only be important in their relation to one another, not in any absolute sense. Such a system would then enable valid comparisons between factories and processes.

It must be obvious from the above discussion that, while objectivity would be the aim of the Commission, in the final analysis its decisions about the rating for any company would be a matter of judgement. We do not believe that this is a reason to reject such an idea: most of the difficult policy decisions made by governments or by individuals are based on judgements. The processes involved are rarely formally articulated and cannot often be seen to be fair or equally applied in all cases. Since the people who make such decisions should ideally represent all the people who will be affected by them, we suggest that the members of the Industrial Impact Commission should be elected, and that they should at all times be accountable to their electors, via a system of recall. This would ensure that citizens were making decisions about the operations of companies, rather than companies dominating citizens, as is presently the case. Citizens would elect representatives to exercise judgement on their behalf.

Within the existing structure of international capitalism TNCs are free to move from country to country without penalty, moving their capital to an industrial situation they can exploit to their greatest advantage. The introduction of a PII in one country would obviously present no problem to such a company, since it could simply move its operations to a country not operating such strict environmental protection. This is already the situation, with companies moving their operations out of Germany, for example, and into Thailand or the Philippines, where environmental standards and wages are low. It would therefore be important to have international co-operation on the PII to prevent some of the world's poorer countries becoming industrial dustbins for the dirtiest corporations. In any event, even if such a removal occurred, the PII would represent a tool of international pressure. The Company could be called to account in the world media or at WTO if they took a process with a PII of 23.6 from the UK, where it was banned, to India, where the locals would have to suffer the consequences of the 23.6. Imports from such a country might be taxed according to the value of the PII associated with the process or factory.

The PII could be used to counter the deleterious pro-business provisions contained in the MAI. Countries adopting strong measures to control business could lobby the WTO in favour of citizens' protection via the PII, in a way parallel to the lobbying of business via the MAI. Even in the short term, and in the absence of international agreements, a country might consider it worthwhile to impose strict regulation on businesses. While it might lose some jobs by the loss of TNC operations, it would be likely to see the growth of domestic companies engaged in environmentally friendly production (whose existence would be helped by the PII). It might also attract producers of eco-sound manufactures, and even become a haven of bicycle-makers and loft insulation manufacturers!

A Lever on the Whole Economy

By operating directly at the level of business regulation and taxation, the Planetary Impact Index would have knock-on effects throughout the whole economy.

While large companies would have their Indices assessed individually, it would be possible for small producers to band together into guilds, which would then have a shared Index. This would save them money preparing information for the Commission and might have other beneficial effects in terms of creating a co-operative rather than competitive production system. If one company within such a guild were to produce planetary detriment and thus increase the Index for the guild as a whole, its partners would be inclined to lean on the company to end this practice. Thus the PII would encourage self-regulation within groups of producers. More positively, contributions towards reducing the Index would be shared between producers within a guild, thus spreading good eco-friendly practice.

At present companies employ armies of accountants and financial whizz-kids to find tax loop-holes and reduce their contribution to the public purse. After the introduction of a PII this energy would be turned towards protecting the planet, since reducing the PII for a given company would be the most effective way of reducing its tax burden. Thus machinery which presently works against the public interest could be realigned to work in favour of all of us, and the planet.

A Green industrial system would operate within a structure of resource and energy taxes which would already be pushing it towards environmentally friendlier production. The PII would increase the beneficial effect of these other taxes, since it would multiply them in the case of very damaging industries, and reduce, relatively, the tax burden from these taxes for industries leaving only a small footprint.

The PII committee would have to operate at a national level in order to ensure that there were no gradients in PII at local level due to special pleading, in particular the development of dustbin local areas where high PII levels were accepted in exchange for standard-of-living or employment advantages. However, local development boards, being aware of the rating system operated by the Industrial Impact Commission, would now be inclined to encourage eco-friendly businesses within their own areas, since these would be the sectors facing a favourable industrial climate. Thus pressure to support the local economy would also work in the direction of more environmentally friendly industries.

Because the PII would be weighted, it could be responsive to a country's¾ and ultimately to the planet's¾ changing needs. The weightings given to the different components could be altered according to the current seriousness of each factor. For example, if research were to show that CFCs are actually much more damaging than was at first thought, the weighting given to this factor within the Index could be increased. Similarly, as populations decline in industrial economies the pressure to find employment will decline, and thus labour-intensive industries may have their Index increased. Thus the Index provides a mechanism for governments to `manage' industrial economies in a sensitive way for the benefit of all citizens and the protection of the planet.

We have no doubt that the mere suggestion of such a draconian system for the control of industry will be met with howls of derision and powerful criticism. But perhaps if we look to see who is squealing we will understand why.

Ragas, A. M. J., Knapen, M. J., van de Heuvel, P. J. M., Eijkenboom, R. G. F. T. M., Buise, C. L., and van de Laar, B. J. (1995), `Towards a Sustainability Indicator for Production Systems', Journal of Cleaner Production, 3/1-2: 123.

Viaamse Instelling voor Technologisch Onderzoek (VITO) (1995), Life-Cycle Assessment (Cheltenham: Thornes).