Eco-Economic Decoupling: How to Measure a Sustainable Growth

Green Growth, Sustainable Growth, Green Economy – All of these concepts require decoupling. A decoupling, in a nutshell, that maintains economic growth while achieving material de-growth. Instead of consuming ever more resources to produce ever more profits ("traditional" growth), decoupling refers to the idea of consuming less material resources and still generating more profits (green growth).

Absolute vs. Relative Decoupling

Eco-economic decoupling describes the overarching goal: growing the economy while reducing its environmental footprint. But not all decoupling is equal. Scientists and policymakers distinguish between two fundamentally different types.

Relative decoupling occurs when environmental impact grows more slowly than the economy. Resource use or emissions still rise – but at a lower rate than GDP. While this reflects improved efficiency, total environmental pressure still increases. This is the more common form and is observed across many economies. As Tim Jackson, author of Prosperity Without Growth, cautions: relative decoupling is not an "escape route from the dilemma of growth" – it only slows the damage, it does not reverse it.

Absolute decoupling is what genuinely matters for sustainability: the economy grows while environmental impact decreases in absolute terms – not just relative to output. Since 2005, around 32 countries have achieved absolute decoupling of CO₂ emissions from economic growth at the national level, including the US, Germany, and the UK. On a global scale, however, absolute decoupling has not yet been reached.

The 10 indicators discussed in this article are designed to measure progress toward absolute decoupling – the only form that puts an economy on a genuinely sustainable path.

How to Measure Sustainable Growth?

What sounds good in theory, faces some technicalities in practice. The most important one is: how do you measure "greenness" and sustainability? Which of all the shrinking resources should be saved, in order to merit getting a green name? What environmental impact should be prevented to be considered a success on the path of sustainability? And at what point is it justified to call a whole economy green?

We Need Goals and Indicators for Green or Sustainable Growth

It is clear that, first, we need goals and, second, indicators of their achievement. Goals aren't hard to find. The Paris Agreement sets the current operative climate target: limiting global warming to 1.5–2°C above pre-industrial levels – a target whose urgency is underlined by atmospheric CO₂ concentrations reaching 422.7 ppm in 2024 (NOAA), far above the 350 ppm threshold once considered a safe upper limit.

On the energy side, the EU's binding targets call for at least 42.5% renewables in the energy mix by 2030 and an 11.7% reduction in final energy consumption by 2030 (EU Energy Efficiency Directive 2023), with climate neutrality set as the goal for 2050. Reducing the per-capita ecological footprint to a globally sustainable level remains an overarching long-term target.

However, in reference to indicators, Martin Hirschnitz-Garbers and Tanja Srebotnjak summed it up on page 6 of their 2012 Ecologic Brief (from the series "Integrating Resource Efficiency, Greening of Industrial Production and Green Industries"), in which they wrote that goals are indeed essential, but as such, not at all sufficient:

Achieving this [sustainable growth] requires two things: first, a formal definition of what constitutes "green" in the context of sustainable development and the MDGs [millennium development goals] and, second, the use of appropriate indicators to effectively measure and monitor progress towards these goals. Both aspects remain woefully locked in debate and are characterized by a variety of conflicting perspectives.

Note: this brief was published in 2012, when the UN Millennium Development Goals (MDGs) defined the global development framework. Since 2016, the 17 Sustainable Development Goals (SDGs) of the UN's 2030 Agenda have succeeded the MDGs, with SDG 8 (decent work and economic growth), SDG 9 (industry, innovation and infrastructure), SDG 12 (responsible consumption and production), and SDG 13 (climate action) being particularly relevant to eco-economic decoupling.

In the discussion about moving society towards sustainable development, environmental goals play an important role. Slightly less important, but still a number one topic, are goals for the green economy transformation. Indicators, however, have a far less prominent position in discussions, although logical thinkers and everyone striving to be one will note that their existence is a vital prerequisite for a green transformation, assuming you actually take the goals seriously.
 

No Perfect Indicator, Combination Necessary

I was very happy when I read that the Ecologic Institute published a document analyzing indicators of how green industry has become, called "Scoping of and recommendations for effective indicators" (download at ecologic.eu). From an initial 32 indicators, an expert analysis helped to choose 10, which were then further analyzed and ranked. I'll tell you right away: none of the indicators was found to be perfect. Too bad! However, a good way to use them is to combine several, as the authors state on page 6:

Of all selected indicators, none was perfect or outperformed the others on all assessment criteria. Therefore, considering several indicators that complement each other and provide a more complete assessment of the sustainability of an industry or product group is suggested. This approach also balances existing methodological challenges and increases explanatory power.

Is Economic Growth Really Decoupled from Resource Use and Pollution?

Okay, none of them is perfect, but which one is best? Well, in order to find this out, we have to differentiate the initial definition I made of decoupling. It is not only the resource consumption that needs to shrink, but also the environmental impact, whose increase currently correlates to industry's growth. Economic growth equals environmental destruction – the characteristic element of the unsustainable era we need to leave behind. So the keyword is double decoupling or gross domestic product up, resource consumption down, environmental effects down. And how do we measure success and failure with double decoupling? Ah, right, that was the question. Let's ask our authors Hirschnitz-Garbers and Srebotnjak for help by turning to page 7:

The most useful indicators were found to be those that address the environmental impacts not only by quantity of resources used (e.g. EMC) but also by their actual impacts as well as those indicators that include indirect upstream resource flows linked to imports and exports (e.g. resource productivity, if measured including Total Material Consumption). Combining these types of indicators then permits measuring the goal of "double decoupling", which means the progress of industries and industrial development towards decoupling economic growth from resource use (resource decoupling) and from associated environmental impacts (impact decoupling).

The 10 Indicators to Measure Sustainable or Green Growth

The first phrase says those indicators are better that not only measure the resource use, but also the effect on the environment resulting from this use (= "actual impact"). Additionally, "indirect upstream resource flows linked to imports and exports" should also be considered in order to prevent a statistical relocation of emissions. Good indicators include both direct and indirect resource consumption as well as their related environmental effects.

1. EMC: Environmentally Weighted Material Consumption

Alright, enough for the introduction, we want indicators! Let's start with the EMC. This indicator leads the ranking and although its biggest weakness is scarce data availability, it can, methodologically speaking, be called the best one since it matches all of the above-mentioned criteria. EMC stands for Environmentally Weighted Material Consumption and it includes 32 materials and their respective environmental effects. There are, for instance, economy-wide material flow accounts (MFA) and the biggest MFA consists of a country's domestic material consumption (DMC). This figure is weighted by impact coefficients from Life Cycle Assessment (LCA). But the EMC can also be applied at every level, from individual industries to industry sectors, right up to the whole economy.

2. Energy Intensity by Sector

This indicator is quite self-explanatory. On the pro side are full data availability and easy calculation. The downside is its requirement for additional information, e.g. on the renewable energy share, and its exclusion of life cycle stages, both of which would require additional effort in terms of data collection.

3. Production-Based CO₂ Productivity

Again, this is an indicator whose biggest advantage is how easily the necessary data is obtained, thanks to existing greenhouse gas inventories. However, just like the previous indicator, data is missing; it lacks the possible demand and consumption information making it "only partially LCA compatible".

4. Water Consumption by Sector

How is it that all the easily applicable things in life have inherent downsides when it comes to completeness? I guess the inevitable truth is as simple as the saying, life is hard! Indicator number four performs well in terms of data availability (for all countries with environmental accounts the data is available) and it is highly policy relevant. However, just like the two previous ones, it has a data gap – it measures only the amount of emissions, not the way these emissions affect the environment, as can be read on page 18:

[T]he indicator does not measure impacts, but only pressures (water abstraction). As the indicator does not match abstraction with availability, there is no indication as to water scarcity at all. More information would be necessary in order to evaluate whether the water consumption measured is sustainable and whether it fosters sustainable development. Water consumption must be assessed in conjunction with water availability, especially the fraction of water than can be used for economic purposes without depleting resources or harming the environment.

5. SPI: Sustainable Process Index

The SPI is similar to the widely known ecological footprint. It measures how much area of the earth's surface a service or a product requires. The main difference between it and the eco-footprint is that it refers to one process, one product, one region, or one sector, in contrast to one person's behavior (as measured by an ecological footprint). In addition, the SPI relates the necessary area it calculates to the per-capita area available, multiplying it by this factor. See page 18: "More specifically, the SPI measures the fraction of the area per inhabitant related to the delivery of a certain product or service unit." Its main advantage is versatility. It makes every technology comparable with indifference to sector, whatever the source of pollution may be. However, data availability is an issue. Moreover, its complexity has limited its application. See page 19:

[C]alculating the SPI is very complex and requires data on renewable raw material area, non-renewable raw material area, the price of the raw material, the price of one kilowatt- hour (kWh) of energy, the area needed to provide the installation for a process, the number of workers per year in a factory allocated to an area (the more staff a process requires the bigger the pressure on the environment), and the area allocated to dissipation. Therefore, the SPI is used more among universities and research institutions and hardly within businesses or industry.

 

6. Water Abstraction Rates and Water Stress

Instead of just measuring water consumption (indicator 4), these two indicators relate the use of water to available renewable water in a country or region. While the abstraction rates refer to per capita consumption, water stress deals with the total consumption. Both compare use to the total amount of available water. Why is that important? Let's take two locations as an example. Location A has a lower water consumption than location B, but it already faces desertification issues. Every additional cubic meter of extracted water will harm its ecosystems and increase the desertification, while location B benefits from regular rainfall and a constant ground water level.

Under these circumstances, water consumption by sector (indicator 4) would rank location A as better, since it has a lower absolute water consumption. In contrast, water abstraction rates and water stress (indicator 6) would, of course, give location B a better result, despite the higher consumption – because in relation to the available water, it is the more sustainable option.

7. EGSS: Economic Performance of the Environmental Goods and Services Sector

This is a pretty straight-forward approach. If we want to know how environmentally friendly the entire industry is, why don't we measure how all those companies who dedicate themselves to environmentally friendly products and services perform? Three fundamental economic indicators – revenue, value added and exports – are collected for companies that have an "environmental protection or resource management purpose as their prime objective" (definition by Eurostat). This definition basically refers to all companies in the field of clean technology and resource efficiency. The challenges the indicator faces in practice are reviewed on page 21:

This indicator is essential for measuring economic performance within sustainable industries but several aspects complicate its usefulness. The indicator is used almost exclusively for economic performance and cannot, for instance, effectively measure greening industries outside the EGSS. Moreover, it lacks LCA compatibility and often requires extra effort in cases where insufficient data exists, making it only marginally appropriate for the tasks at hand.

8. Resource Productivity + Material Productivity

Productivity always measures the amount of something in relation to gross domestic product, or how much something an economy needs in order to produce its GDP. Be it labor, capital, resources or material – divide the GDP by one of them and you get its respective productivity. In order to get results for this indicator, you can either take the domestic (DMC) or the total material consumption (TMC). The developments in the resulting material efficiency figures directly shows whether decoupling happens or not.

For countries, data is fully available at WU Vienna (see www.materialflows.net) or at OECD's Environment at a Glance Indicators. This data, however, only describes the amount of consumed material in terms of weight, not in terms of environmental impacts. On page 22, the authors conclude:

In spite of the high policy relevance of the Resource productivity indicator and its ability to measure resource quantities used within industries and industrial development, it remains inadequate to consider environmental impacts and hidden flows, and it lacks LCA compatibility, rendering the indicator only partially relevant.

9. TMC: Total Material Consumption

The TMC not only measures all the direct material consumption of an economy, but also indirect material flows from imports. To calculate it, you analyze the material consumption "vice versa", subtracting direct and indirect exports from the Total Material Requirement (TMR). Again, TMC is one of the indicators that lacks balancing consumption against environmental impacts. It only reflects the consumption side by measuring the weight of material used. In addition, data is not fully available, since indirect flows are hard to measure.

10. Ecological Footprint

Only at first sight does this last ranking lose out. The renowned ecological footprint, number one pop star of all environmental indicators, actually still scores as one of the top ten indicators. Just in case – which is of course highly improbable – that anyone is not familiar with it, here comes the description of what the ecological footprint deals with (see page 24):

The Ecological Footprint measures how much biologically productive land and water area is required to 1) meet resource consumption needs and 2) absorb the wastes generated by a human population, taking into account current technology. The methodology also includes a measurement of the annual production of biologically provided resources – called biocapacity.

It is common to measure the impact of an individual's lifestyle. But that's not all that can be done: WWF applied it to the paper industry, SERI to raw material production in Austria and two scientists even analyzed the hotel industry. For details, see page 24. Pro: All data is available; easily comprehensive. Con: Only one impact category; not clearly policy relevant; consumption-oriented. All in all, the report concludes that even though the ecological footprint is a good general sustainability indicator, it is neither optimally nor specifically suited to measuring industry's sustainability.

Conclusion: Basket of 7 Indicators for Green Growth

The highly relevant conclusion for practice is the "basket of indicators" the authors suggest (see page 25). Moreover, they conclude that there are two more promising indicators under development that did not find their way into the ranking. Following the collective review of the literature, data sources, and selected indicators, the following set of indicators is recommended for integration into the SDGs (Sustainable Development Goals) – particularly SDG 8 (sustainable economic growth), SDG 12 (sustainable consumption and production), and SDG 13 (climate action):

• Resource Productivity and Material Productivity
• Sustainable Process Index (SPI)
• Sector-specific or Resource-specific indicators
• Energy Intensity by Sector
• Water Consumption by Sector
• Water Abstraction and Stress
• CO₂ Productivity

These indicators should be supported by metrics revealing the extent of environmental impacts arising from resource use. The Environmentally Weighted Material Consumption (EMC) is therefore proposed as a complementary measure.

Although the EMC has been identified as the most appropriate established indicator for measuring environmental impacts of resource use, the discussion of its limitations shows a clear need to consider further indicators that are currently under development, such as the Overall Environmental Impact Indicator and the Eco-Efficiency Indicator.

It is also worth noting that the indicators discussed here connect directly to the growing field of Circular Economy measurement. The circular economy, which the UN defines as a system that decouples economic activity from the consumption of finite resources, relies on many of the same metrics to track whether material loops are truly closing – or whether efficiency gains are simply shifting environmental burdens elsewhere in the supply chain.

• Martin Hirschnitz-Garbers, Tanja Srebotnjak (2012): Integrating Resource Efficiency, Greening of Industrial Production and Green Industries – Scoping of and recommendations for effective indicators. [Ecologic Briefs on International Relations and Sustainable Development]. Ecologic Institute, Berlin. Direct PDF download

Article image CC by Moritz Bühner, based on this image by Noel Zia Lee (CC) and this image by Tetra Pak (CC) showing the raw paper that is later converted into packaging.