The economic power of nation states is normally measured in gross domestic output (GDP) or gross national income (GNI). However those figures only count the measurable economic output. They do not take into account a whole range of issues that affect the future potential of sustained or increasing current wealth levels: social fabric, intellectual capital, natural capital, governance.
GDP growth rates and changes in growth rates are often used as an indicator for an economy’s well-being and development. However, due to the lack of integrating all aspects of development drivers – natural resources, efficiency, innovation capabilities and social cohesion - the GDP describes a moment in time. Current GDP levels therefore have limited informative value relating to the future potential of achieving and sustaining inclusive development and creation of wealth.
However, economic activities have certain adverse side-effects on the natural environment, resources, and on the socio-cultural and socio-economic fabric of a society. In addition, natural resources are not renewable and many vital resources – water, energy, but also certain minerals and metals – are scarce (or are set to become scarce goods in the near/medium future). Yet none of these adverse effects, external, or “non-financial” aspects are factored into the commonly expression of wealth of Nations, the GDP. In other words – the GDP is a very limited expression of a national balance sheet. What is worse - conventional evaluation of competitiveness and associated risks, such as sovereign credit ratings that determine the cost of capital for a country, are also based on fragmentary financial and perceoved political risks. Credit ratings therefore cannot reflect full investor risks (and opportunities).
The sustainable competitiveness model incorporates all relevant pillars of sustained growth and wealth creation of a nation – natural capital availability, resource intensity, innovation and business capabilities, and social cohesion.
"Sustainable competitiveness is the ability of a country to meet the needs and basic requirements of current generations while sustaining or growing the national and individual wealth into the future without depleting its natural, intellectual and social capital."
In addition to the full integration of sustainability performance data, the sustainable competitiveness index also analyses and incorporates the data trends over time to allow for a better expression of the future development potential. The results aim at serving as an alternative to the GDP, and to be used to analyse future development prospects of nations.