The challenge comes, though, in identifying an effective and robust way to measure well-being that can provide appropriate peer-to-peer comparisons.
One of the most common ways to measure success at a social and macro-economic level is to use gross domestic product (GDP) – the total value of a country’s domestic output in a given year. This value is based on the market prices of goods and services bought and sold that year, which presents a significant limitation: GDP excludes non-market or non-exchange activities such as housework, care work and digital value (goods exchanged over the internet; value generated by open source software and services and digital platforms).
The 2018 Equity Gilt Study by Barclays Research states that traditional macro-models (with GDP or national output at their centre) ‘struggle to explain the puzzles behind weak output growth, low productivity, muted wage increases and subdued inflation’.5 This requires adjusting the theoretical toolkit which guides our economic analysis to include broader measures of societal well-being. For instance, with the rapid technological changes of the last few decades, the manufacturing-focused concept of GDP often fails to capture digital quality improvements and the build-up of intangible (or even social) capital. Moreover, current approaches to measurement often understate the contribution of the digital economy. Policy analysis needs to expand beyond GDP in assessing well-being and progress.6
In addition, high growth has not always implied lower inequality (not all boats have been lifted by the rising tide), and per capita measures of national output paint a mixed picture in a country as unequal as South Africa.
In response to some of the weaknesses in GDP measurement, many institutions have developed alternative and complementary measurements aimed at painting a fuller picture of the dimensions that contribute to individual and collective well-being. For example, the Kingdom of Bhutan introduced the Gross National Happiness (GNH) Index. This looks at living standards, education, healthcare, the environment, community vitality, time use, psychological well-being, good governance, and the resilience and promotion of culture. The UN Sustainable Development Solutions Network publishes the World Happiness Report, a composite indicator consisting of four variables which constitute happiness or well-being (or both) in the broadest sense. These include having someone to count on, generosity, freedom to make life choices, and the absence of corruption.
What was needed was an index that could provide a framework for strategic thinking about well-being both at a national policy level and at a corporate policy level. In that regard, perhaps the best work done to date has been provided by the Social Progress Imperative, the non-profit organisation behind the Social Progress Index. Born out of conversations held at the World Economic Forum, this is an aggregate index of basic human needs (nutrition, water and sanitation, safety and shelter), foundations of well-being (access to information and communication technology, basic knowledge, health and wellness, and environmental quality) and opportunity (personal rights, freedom of choice, inclusion and access to advanced education) that are loosely aligned to the 17 SDGs. What makes this measure distinctively different is that it is the first measure of social performance that is independent of economic indicators. As Michael Green, the CEO of the Social Progress Imperative pointed out in an interview in The Actuary:
We measure social progress independently of economic progress, not because we think the economy doesn’t matter, but because then we can look at the relationship between economic and social progress, and try and unpick this question of what ‘inclusive growth’ is. In so many places we are seeing the economy growing but people’s lives are not getting better.7
The Social Progress Index provides a basis for translating the basic concepts reflected in the 17 SDGs into an action plan that can be applied to both countries and companies in their strategic planning agendas. Given the fact that different countries and different businesses face different challenges, the Social Progress Index allows groups to compare themselves to their appropriate peer group. Green emphasises that by using this lens, it’s no longer about which country or company ranks first:
When we look at which countries overperform on social progress relative to their GDP, it’s not Denmark or any of the other usual suspects; it’s Nepal, Malawi, Costa Rica and Ghana. That’s important to say, because it’s a group of developing countries doing a really good job, which sometimes gets forgotten, and it provides much better examples of peer learning for the poorest countries.8
Similarly, when the index is applied at the corporate level, it forces companies to think about the communities that are important to their supply chains. This has critical relevance for our discussions in South Africa, particularly as it relates to enterprise and supply chain development for small, medium and micro-sized enterprises (SMMEs). In effect, the index provides a roadmap for how corporates can engage with other stakeholders in their ecosystem, both private and public, to ensure that these collaborations employ a common language that can be applied consistently to address those needs that are greatest to that ecosystem. All these measurements highlight two issues that are central to both evaluating and attaining individual well-being and a well-being economy: an enabling ecosystem (social, economic and environmental) and social capital (networks between individuals and groups) that facilitate and expand our freedom to make key life choices that resonate with our respective contexts. The social contract that underpins the roles that different stakeholder groups play in the pursuit of greater well-being is also key.