Academic journal article
By Anielski, Mark
Journal of Business Administration and Policy Analysis
WHAT IS THE GPI ACCOUNTING PROJECT?
The GPI (Genuine Progress Indicators) accounting project is a pioneering research effort to develop a new system for measuring the total well-being and sustainability of nations or states. This project, led by the Pembina Institute for Appropriate Development with research funding from Western Economic Diversification, selected Alberta as the first region in the world to construct a full set of GPI accounts using the new GPI System of Well-being Accounting architecture. The development of this new system is presented as an alternative to the current measures of economic progress like the GDP (Gross Domestic Product). The Alberta GPI project addresses these long-standing concerns by explicitly measuring the quantity and quality of all living capital or real wealth. Real stewardship is about carefully managing the wealth of our households and nature, as well as our money.
In the Spring 2000 federal budget, Finance Minister Paul Martin committed $9 million over three years to research and design a national set of environmental and sustainable development indicators to guide decision making. In his budget speech, Mr. Martin noted:
In the years ahead, these environmental indicators could well have a greater impact on public policy than any other single measure we might introduce.
The GPI sustainable well-being accounting system is currently being considered along with several other alternative approaches for measuring and monitoring sustainability for Canada.
MEASURING GENUINE PROGRESS
The GDP makes no distinction between expenditures that contribute to genuine well-being and those that many might view as regrettable costs associated with environmental or social degradation. The GDP and the UN System of National Accounts in fact violate basic financial accounting principles by treating the liquidation of assets, such as oil and gas, coal and timber, as income rather than as a reduction in the inventory of natural capital.
The GPI pilot for Alberta is a significant step towards providing an alternative to an outmoded system of accounting for economic well-being. The GPI accounts for Alberta show how the province is doing in relation to its sustainable development objectives -- development that embraces social and environmental objectives as well as economic ones. As a starting point, this requires an adjustment in our perspective-how we define and measure wealth, equality and progress -- and a return to the origins of the words "economy" and "wealth.
WHAT IS GPI ACCOUNTING?
The GPI accounting system is built on the traditional application of common bookkeeping systems, including ledgers, a balance sheet and a net sustainable income statement that can be used to prepare a sustainability report to citizens. The GPI accounts measure progress and changes in the condition of all living and built assets, similar to the way in which a business measures its financial health. The main features include:
* GPI Balance Sheet. The GPI Balance Sheet is a set of measures or indicators that describe the many facets (physical, qualitative, monetary) of the state of well-being of individuals, communities and the environment over a specified period of time. The GPI balance sheet is similar to a traditional accounting framework in that it shows assets, liabilities and shareholder (citizen) equity of all capital or wealth.
* GPI Net Sustainable Income Statement. This is a national or provincial income statement that differs fundamentally from the GDP in that it subtracts from our gross output (i.e., GDP) the human, social, ecological and natural resource costs that were incurred to generate that income. It also recognizes the positive contributions of unpaid work, such as volunteering, childcare and housework that lie outside the market yet contribute to well-being. Finally, it recognizes that not all expenditures in the economy represent positive contributions to our well-being; some things like automobile crashes and suicide should be treated as costs, not revenues as they are in current national income accounts and GDP. …