Sustainable Competitiveness

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The World Economic Forum has embarked on an important new research project aimed at integrating the concept of economic, social, and environmental sustainability more fully into its competitiveness work. The preliminary thinking and output of this project is presented in a special chapter in The Global Competitiveness Report 2011-2012 and on this page.

The driving force behind this work is the Forum's belief that over the longer term, in order to maintain national competitiveness, a number of characteristics become important that are not presently accounted for in the Global Competitiveness Index. This includes elements such as changing demographics, social cohesion, and environmental stewardship. A high-level advisory board has been working with us over the past year on this critical issue.

A goal of the work is to highlight the relationship between competitiveness and sustainability while isolating the shorter- and longer-term effects, which makes it possible to compare and contrast those countries that are not only preparing well for a short to medium term future, but also for the longer term, and those that are proving less adept at doing so. Another way of looking at this issue is that countries might face a number of vulnerabilities which could be sources of instability tomorrow, and thus erode at their competitiveness over time.

Read the press release announcing the launch of the SCI project

Will the competitiveness champions of today be the same 30 years from now? That is one fundamental question that the SCI project aims to address. The two charts below illustrate some aspects of this problematic.

The first chart plots the relationship between environmental sustainability of a country's development, as perceived by the business community, and the level of competitiveness as measured by the Global Competitiveness Index (GCI) 2011-2012. The relationship is strongly positive: a higher score in the GCI is typically associated with a higher perceived level of environmental sustainability. But the correlation is far from perfect. For a given level of competitiveness (i.e. a similar GCI score), one observes vast variations in terms of environmental sustainability. The United States and Germany both scores very high in the GCI, yet diverge on the second dimension. The same is true for the Russia-Uruguay pair. Though similarly competitive, the business community in each of the two countries have a different perception of the environmental sustainability of their respective country's development. Where current economic development is achieved at the expense of the environment, long-term competitiveness and growth prospects could be negatively affected. This is the kind of vulnerabilities that the SCI aims to highlight.

But sustainability is not only about the environment. The SCI is based on a holistic concept of sustainability which encompasses the economic, environmental and social aspects. We believe that socio-demographic factors matter in determining a country's long-term competitiveness. The second chart plots the expected demographic dependency ratio in 2030, (i.e. the ratio of the population below the age of 15 and above the age of 64 to the total population) against the GCI 2011-2012 score. Many western countries (e.g. Japan, United States, European countries) will have a dependency ratio close to unity by 2030 (i.e. a dependent person for every active person). This will pose enormous challenges likely to affect the competitiveness of these countries. Again, in the context of the SCI project, we aim to investigate this relationship.

Links

Preliminary Structure of the Sustainable Competitiveness Index
The Long-Term View: Developing a Framework for Assessing Sustainable Competitiveness
The Global Competitiveness Report