Corporate Knights recently awarded the CK Award of Distinction to former Canadian PM Paul Martin for his environmental leadership, and sat down for a Q & A at the event.

CK: You have been a long-time advocate for natural capital indicators. Why is this a vital issue for the 21st century?

Martin: When you are the minister of finance you spend your whole life being governed by several measurements: GDP, the inflation rate and the unemployment rate. It becomes very clear to you that your success or failure is going to be determined by these indicators, and that they form the basis for your public policy agenda. If these measurements are not accurate, then the policy-making that it influences will not coincide with your beliefs as to what is important.

The problem with the GDP is that it’s a measurement of economic activity. From a government’s view, it’s roughly what tax revenues are going to be based off of. But to say that the GDP is essentially a measurement of how your economy is doing is simply incorrect, because it doesn’t take into account costs. If you were making widgets, and at the end of the year you reported your earnings on a before-depreciation basis, after 20 years you’d go broke. That’s what happens with the GDP—we are taking into account our economic activity without taking into account the costs of that activity.

CK: Who, besides the federal government, needs to throw their support behind this initiative to give it some needed momentum?

Martin: Statistics Canada will need to play a leadership role, as they have a huge amount of independent credibility. When they put their weight behind an initiative, people pay attention.

More than anyone, though, the economic profession as a whole needs to be behind this. They should be arguing for transparency and openness with the numbers that they’ve got. Economists think they’re scientists, but they’re not. Anybody who thinks that they are should look back at the last three years. The theory of honest numbers is one that should be advocated for ferociously by economists, but the profession is not living up to what it should be in this area.

CK: What do you think will happen if we successfully place natural capital on the balance sheets? How will this change policy-making on the ground?