This Web page has been archived on the Web.

1999 Report of the Commissioner of the Environment and Sustainable Development

Main Points

9.2 In our first report on this project last year, we noted that the federal government has made a commitment to integrate environmental, social and economic considerations into its operational and policy decisions. Almost all departments made further commitments to integrated decision making in their sustainable development strategies. We are concerned that some departments have not yet come to terms with the challenges of this integration and identified how they plan to deliver on their commitments.

9.3 We believe that Parliament needs to know what action departments are taking to meet their commitment to integrated decision making for policies and programs, and when the gap between commitment and implementation will be closed.

Background and other observations

9.5 We reviewed four approaches that would allow departments to consider the environmental, social and economic implications of their policies and programs: foresight initiatives, strategic environmental assessment, multiple accounts analysis, and national environmental accounting. All four approaches are being used in other jurisdictions and all are applicable to Canadian federal departments. One approach, strategic environmental assessment, is already required by Cabinet directive. In last year's Commissioner's Report, we noted slow and inconsistent compliance with this directive across departments.

9.6 We recognize that departments will require time to implement fully an effective mix of tools. Based on the four approaches reviewed, we identified several aspects of implementation that would help departments successfully use these approaches. The aspects include the flexibility to mesh with the policy development process, a balance among the different aspects of sustainable development, consideration of the long-term consequences, early application and clear accountability.

Introduction

Decision makers face new expectations

9.8 Need for integrated decision making. Departmental managers may not yet have all of the pieces of the jigsaw puzzle. To meet the challenge of their new context, they may need to look at the puzzle from a new angle, use existing information in different ways, or collect new information. For example, to identify the effects of particular programs on emissions of greenhouse gases, managers need to make the links between those programs and the resulting economic activity, and from the activity to the demand for oil and coal. They may need to integrate information relating to the different dimensions of sustainable development (environmental, social and economic) to evaluate the trade-offs among alternatives. Is a policy that invests in natural resource conservation preferable to one that provides training for people leaving the industry?

This study is part of a long-term project

9.10 The project objective relevant to the work reported in this chapter is to help departments with policy responsibilities to build practical, cost-effective tools to integrate information from diverse databases into decisions on policies with significant environmental, social and economic effects.

9.11 The first chapter in this project was tabled in the House of Commons in May 1998 as part of the Report of the Commissioner of the Environment and Sustainable Development (Chapter 7 - Counting the Environment In). Chapter 8 (Greening Government Operations: Measuring Progress) of this year's Report is a companion chapter and reports on our work the past year on measuring the environmental performance of departments' internal operations.

Focus of the study

9.13 For more details on the overall project and this study, see About the Study at the end of the chapter.

Observations

Delivering on Commitments

The federal government is committed to integrated decision making

9.15 New commitments to integrated decision making. In the sustainable development strategies tabled in the House of Commons in 1997, 26 of 28 departments made specific, detailed commitments to integrate environmental, social and economic factors in their decisions ( Exhibit 9.1) . Some departments clearly distinguished between integrated decision making in their operations and integrated decision making for their policies and programs.

9.16 How will departments deliver on these commitments? Some were specific about their commitments and referred to tools and approaches that they would use, such as environmental impact assessment, internal training, environmental accounting, consultation and full cost accounting. Others provided few details of their plans for implementation, either in the strategies or in the first sustainable development progress reports included in the Departmental Performance Reports for the period ended 31 March 1998. Based on the progress reports and our review of the strategies, we are concerned that some departments have not yet put in place the action plans necessary to deliver on their commitments and may not appreciate the challenges they face.

Good information is essential

9.18 Three broad types of decisions. The information framework should be tailored to the policy decisions to be made ( Exhibit 9.2 ). The first broad type of policy decision may set the direction and establish the policy agenda. For example, how should immigration influence the design of future social programs? The second type of decision involves considering one or more options, evaluating the implications and weighing the alternatives. It might answer questions such as "What might be the environmental implications of a change in immigration levels?" or "What are the pros and cons of a particular immigration policy in social and economic terms?" The third type of decision involves evaluating a policy or program after it has been implemented. For example, what has been the effect of past immigration restrictions on the rate of urban growth? The case studies discussed later in this chapter focus on these different decision points.

Policies and programs impose distinct requirements

9.20 Potentially greater sustainable development impact. The policies and programs of the federal government have a much greater sustainable development impact than their operations. Three examples illustrate this. First, the greenhouse gas emissions from the federal government's own operations represent less than 0.5 percent of the total Canadian emissions, yet the government has policy levers that can strongly affect the remaining 99.5 percent of the sources. Second, the government directly employs less than two percent of the Canadian work force, yet through taxes, employment insurance and other programs it influences unemployment rates and economic growth across the country. In its sustainable development strategy, Human Resources Development Canada noted that it has the largest direct impact on the broadest range of Canadians of any federal department. It does this by developing and managing major social and labour market programs such as employment insurance, labour standards, student loans, Canada Pension Plan and Old Age Security. As a third example, direct program expenditures ($31.3 billion in 1997-98) represent less than four percent of all spending in the Canadian economy, but through its fiscal policies the government affects the short-term availability of health and education services as well as the debt burden future generations will bear.

9.21 The government has greater direct control over its internal activities. With policy and programs, the links to particular impacts may be less easily quantified, but the opportunities for progress on sustainable development may be greater. In Chapter 8 of this Report, we noted the potential financial and environmental benefits from using integrated information for internal operations. We expect the potential benefits to be greater on the policy and program side. We also expect the possible impacts of policy and program decisions to be reflected in the effort and emphasis departments place on the tools and approaches used to support those decisions, compared with operational decisions.

9.22 Fluid decision-making context. Policies and programs may be established, modified and terminated in a fluid decision-making context, sometimes on very short notice, sometimes as a result of strong political or international forces. Thus they are more unpredictable and less easily captured in the framework of an annual management cycle than, say, operations and maintenance decisions for a building complex. This fluidity and the confidentiality associated with some policy processes also means that it is more difficult to document decision processes publicly and identify accountability. For example, decisions to supply humanitarian aid in the aftermath of natural disasters are usually made quickly and with little public debate.

9.23 Different information demands. Information to support integrated decision making for policies and programs must fit into a different framework than for operations. Given that different policies may be targeted at very different stakeholders, information about activities may not be transferable from one policy initiative to another. The relevant baseline indicators will reflect the overall context for the policy or program (for example, how many farmers are selling wheat, or what the pollution level is in a given river). Decision makers will want to know who will be affected by the policy, how they will be affected and how they are likely to respond (that is, the focus is on results). This means that departments need to maintain the capacity to answer these questions. For example, Agriculture and Agri-Food Canada is developing a set of agri-environmental indicators covering possible impacts on soil, wildlife and water quality to help the Department plan programs and assess their consequences. Departments also need information on the effects of their existing programs and policies, such as the effects generated by their taxes, grants and subsidies. (The government made a commitment to prepare such baseline studies as part of their sustainable development strategies.)

9.24 Measuring results. Previous work by the Office of the Auditor General has focussed on the challenges of measuring the results of policies and programs. The effects are less direct than for operational decisions; this means that it may be more difficult to attribute the outcomes (positive or negative) to any given federal program or policy. Specialized measurement instruments (for example, surveys of program recipients) may be required, and considerable resources may be needed to obtain a clear reading of the outcomes. There may be substantial time lags before some kinds of programs or policies can reasonably be expected to produce desired effects, thus hindering simple evaluation approaches. The specific, possibly unique, character of policies and programs means that measuring progress toward sustainable development may have to be done on a policy-by-policy, program-by-program basis. Despite these constraints, government policy requires that all programs or program instruments be considered for evaluation and that evaluations be carried out where they are material and cost-effective.

Support for Integrated Decision Making

Foresight initiatives are used to anticipate long-term issues

9.27 Foresight has been used in several policy domains. For example, in the United States, the Environmental Protection Agency's foresight study identified 50 specific possible issues. These included the psychological and social impacts of the "information highway", and environmental problems resulting from rapid growth in developing countries and the depletion of fossil fuels, leading to the use of alternatives that could contaminate the biophysical environment or destroy habitat. The issues have since been incorporated into the Agency's strategic planning process.

9.28 Diversity of participants. Foresight is not a single method, but rather an approach or a way of thinking about the future. Foresight initiatives are usually multi-sectoral, multi-disciplinary and multi-stakeholder. The national foresight initiative in the United Kingdom involved 16 sectoral panels, each with representatives from business, "the science base" and government. These panels consulted their respective sectors using a variety of methods, involving a total of about 10,000 people.

9.29 Consensus-building process. Most foresight initiatives also recognize the importance of the process itself. For example, in Japan, foresight methods have built consensus by creating and fostering networks that facilitate the communication of ideas among individuals, organizations and institutions.

9.30 Long-term focus. Foresight initiatives usually focus on the medium- or long-term future (15-50 years), unlike most organizational planning processes, which focus on the short-term future (3-5 years). The Environmental Protection Agency's foresight process used a 50-year time horizon.

9.31 Linked to planning and policy. Foresight processes are most effective when they are linked to strategic planning, policy and decision making processes. In the United Kingdom, the government launched a Foresight Challenge, which provided up to 50 percent of the funding for multi-sectoral projects consistent with the foresight priorities identified. The government also required the Research Councils in the United Kingdom to consider foresight priorities when making funding decisions.

9.32 Experience in the Netherlands. In the mid-1990s, foresight initiatives were started in several sectors important to the Dutch economy, including agriculture. Foresight was used for the agricultural sector because there are many potentially conflicting considerations that must be balanced and optimized over the long-term in agricultural policy. These considerations include environmental (for example, biodiversity and pesticide use), economic and social (for example, agricultural subsidies and support programs) and land use planning (for example, rural development and conservation).

9.33 The Dutch National Council for Agricultural Research used a foresight approach to identify long-term issues for research and policy in agriculture, rural development and fisheries. The approach has resulted in a dialogue and, in some cases, a consensus among participants from research institutions, government and the private sector that would not have occurred otherwise. The link to policy development has been relatively weak, however, possibly because the application of the approach is still quite new and because the Council primarily plays an advisory role, at "arm's length" from the government.

9.34 Application to Canadian federal departments. In Canada, most departmental sustainable development strategies now focus on relatively short-term ways of making progress (such as, on the operational side, the development and implementation of environmental management systems), with little emphasis on intergenerational issues. Implementing foresight processes could encourage the consideration of likely future issues in decision making. Some departments have already implemented or are considering foresight approaches for science and technology policy.

Strategic environmental assessment permits prediction of the environmental effects of programs and policies

9.36 Addressing problems at their source. The systematic use of strategic environmental assessment can promote sustainability by addressing the cause of environmental problems at their policy source, rather than just treating them as symptoms or impacts. For example, a policy decision to undertake a major infrastructure program could be assessed for generic issues of need, alternatives and mitigations, before drawing up plans for the individual construction projects and conducting many separate project environmental impact assessments.

9.37 Several countries use assessments. A small but growing number of countries have established mandatory provisions for strategic environmental assessment. Within the European Union, formal provisions for assessing the environmental impacts of policies, plans and programs exist in Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden and the United Kingdom. There are similar processes in Canada, Australia and New Zealand. The instruments used to implement these requirements are very diverse, including laws, cabinet and ministerial decisions, circulars and advice notices. No country routinely applies strategic environmental assessment to all policies, plans and programs, nor does any require the application of this form of assessment with the same rigour or detail as project level environmental assessment.

9.38 The Danish experience. Denmark has required environmental impact assessments of designated categories of projects since 1989, and has required strategic environmental assessments of government bills and proposed policies since 1993. When the sponsoring ministry introduces a bill or program to Parliament, it must indicate whether or not the bill is expected to have a significant environmental impact and, if so, provide an assessment of the nature of that impact.

9.39 The Danish experience indicates that the strategic environmental assessment of proposed policies and laws is difficult, but feasible. It is important that assessment processes be tailored to the existing policy and planning processes and the existing political culture. This cultural aspect includes the character of the policy-making process, the level and nature of political accountability, and the degree of activism and influence of interest and community groups.

9.40 Improving quality of assessments. A review of the Danish experience indicates that several factors promote a better analysis of environmental impacts, including:

• stipulating detailed requirements concerning the content, scope and process ( Exhibit 9.3 illustrates part of the process);
• establishing procedural checks and balances on assessment quality;
• requiring public involvement that goes beyond organized non-governmental organizations; and
• senior management support.

9.42 Departments are at different stages of using strategic environmental assessment. Agriculture and Agri-Food Canada has developed a guide to help it prepare the environmental assessments of its policies and programs, including those assessments required under the Farm Income Protection Act . Parks Canada evaluates business plans and management plans for national parks and national historic sites for their potential adverse effects on the environment. The Canadian Environmental Assessment Agency is providing guidance on a strategic environmental assessment to support the new Climate Change Strategy.

9.43 Overall, however, this approach does not have a high profile. In their first sustainable development strategies, only 12 of 28 departments mentioned strategic environmental assessment, or the environmental assessment of policies and programs. For some departments, it was mentioned in passing; for others, there was a firm commitment to using it. We believe there are opportunities to strengthen implementation of this key tool to help them deliver on their commitments to integrated decision making.

Multiple accounts have been used to make better trade-offs

9.45 Separate and parallel analysis. Instead of putting a single dollar value on the economic, environmental and social costs and benefits of an issue, multiple accounts analysis involves considering the different aspects of the problem separately, and in parallel. This approach recognizes the importance of value judgments in making trade-offs - for example, between tourism benefits and logging employment. It often includes a public participation component. The users of multiple accounts analysis try to integrate qualitative and quantitative information within a common analytical framework.

9.46 Multiple accounts evaluation entails the systematic documentation and assessment of relevant implications of alternative plans and projects. It involves four major steps:

• establishing the framework of accounts to be analyzed and the effects and perspectives to be considered. This step entails choosing appropriate scales (for example, local, regional and global) and relevant accounts (for example, financial, environmental, economic and Aboriginal) for analysis;
• developing alternative management scenarios;
• defining how each type of effect is to be analyzed and measured; and
• clearly communicating the advantages, disadvantages and trade-offs associated with each management scenario.

9.48 Selecting and weighting variables. The effectiveness of this approach depends strongly on the selection of the variables for analysis (that is, the accounts and their indicators) and the availability of supporting data. For example, short-term economic imperatives, such as job creation, may receive greater weight in areas of high unemployment. The approach's application often also calls on consultation skills because of the explicit nature of the value judgments to be made.

9.49 Application to Canadian federal departments. Multiple accounts approaches have also been used for other purposes not directly related to land management ( see Exhibit 9.4 ). In our view, the multiple accounts approach lends itself to tracking parallel environmental, social and economic effects.

National environmental accounting can be used to track the effects of national policies

9.51 Modifications to national accounts needed. The existing national accounts and associated indicators, such as Gross Domestic Product (GDP), were not intended to be used as measures of human wealth and well-being. National statisticians have recognized some perverse effects from the way the national accounts are currently defined, including the following:

• Environmental expenditures are included as additions to national accounts. For example, the clean-up of the spill from the Exxon Valdez oil tanker contributed positively to the GDP of the United States, despite the environmental and economic damage that it caused.
• Depletion of natural resources, such as oil reserves or iron ore deposits, and the corresponding reduction in "natural capital" are not reflected in the current calculations. (In contrast, depreciation of man-made capital such as buildings and machinery is included.)

9.53 Link to sustainable development strategies. Some developing nations are using national accounting approaches to consider the effects of their sustainable development strategies. For example, Namibia is using its accounting system to help it address water allocation and land degradation issues. Other developing countries with projects on national environmental accounting include Colombia, Ghana, Indonesia, Korea, Mexico, Papua New Guinea, and the Philippines.

9.54 Experience of the World Bank. The World Bank has focussed on developing a series of indicators that are intended to track changes in the wealth of countries, incorporating the effects of natural resource depletion, environmental damage, and investments in human capital, as well as the traditional economic measures. It is using these indicators to evaluate whether, overall, countries are on a sustainable path, and whether the opportunities for future generations are diminished. The World Bank plans to include these measures as part of the background information package as it designs and implements country assistance policies and programs.

9.55 The World Bank has estimated the revised wealth measures for almost 100 countries. Even this relatively early work has clearly documented the relative significance of human capital in the wealth of nations - human capital defined in terms of education, raw labour and social capital. This has important implications for national development strategies, in both poor and rich countries. For example, the World Bank estimates that more than two thirds (69 percent) of Canada's national wealth is due to its human capital; the rest is attributable to natural capital (11 percent) and manufactured capital (20 percent).

9.56 There is continuing debate over how best to adjust the national accounts, but the current work is helping decision makers view their policies and programs from a more comprehensive perspective.

9.57 Application to Canadian federal departments. In Canada, Statistics Canada has already developed satellite accounts to complement the traditional GDP measures of economic performance. The first results of this work, along with other relevant indicators, were released in December 1997. The initial set of indicators generated from the new accounts includes measures of natural resource wealth, agricultural land use and supply, greenhouse gas emissions per unit of household expenditure, and pollution abatement and control expenditures by governments (see Exhibit 9.5 for examples). Once these accounts are produced on a regular basis, departments will be able to use this information to help track the effects of policies and programs, either singly or in combination. For example, the information in Exhibit 9.5 could be used by departments whose programs affect agricultural land use and competing uses.

Departments face barriers to implementation

9.59 Resource demands. The application of each of the approaches reviewed in the case studies will demand resources, time and information, and may require a more sophisticated level of analysis than is often conducted. The recent cuts in departmental budgets have in many cases eroded internal analytical capacity (see Chapter 3 of this Report). Resource constraints may inhibit widespread introduction of these decision-support tools, despite the potential net benefits of this initial investment in the form of more sustainable projects and policies.

9.60 Lack of co-ordination among departments. Effective sustainable development approaches require decision makers to overcome the problems posed by the fragmentation of departmental responsibilities for different issues. Interdepartmental or intergovernmental collaboration and co-ordination has often proved difficult to achieve for a variety of reasons, ranging from incompatible data sets and differing decision-making systems to "turf-protection" (see Chapters 3 and 4 of this Report).

9.61 Lack of attention to the long term. The federal government's approach to sustainable development emphasizes the need to reconcile environmental, social and economic imperatives in the present. The approaches that we have examined here, however, either are explicitly oriented to the future (for example, foresight approaches) or implicitly recognize the need to consider issues over time. The information yielded by these approaches will be most valuable for federal decision makers who place a high priority on the need for longer-term planning and policy development.

9.62 Lack of co-ordination within departments. The departmental officers responsible for strategic planning (including business plans) and policy development are often different from those managing sustainable development issues. This may inhibit the full integration of sustainable development approaches in the delivery of some departmental mandates.

The approaches share several features and point to aspects of successful implementation

• All approaches are designed to improve the quality of information and analysis available to decision makers.
• The approaches demonstrate that environmental, social and economic considerations can be integrated at various stages in the policy process.
• All approaches can be used to manage issues across several departments.
• With the possible exception of national environmental accounting, the approaches all illustrate the importance of stakeholder participation to assist in making value judgments.

• Flexible. The approach chosen ought to reflect the fluid nature of the policy and program development process, the fact that the process can operate at different speeds, and the possibility that the magnitude and implications of policies or programs may differ dramatically.
• Balanced. The approaches chosen ought to cover all the dimensions of sustainable development, reflecting a comprehensive view of policy or program consequences. For example, a strategic environmental assessment, with its emphasis on impacts on the natural environment, would need to be complemented by information on social and economic effects.
• Consider the long term. In our view, it is important that approaches support consideration of possible effects on future generations.
• Applied early in process. A process that only considers the consequences of policies and programs at the last minute will not realize some of the benefits of integrated decision making. Early application is necessary to take advantage of a full and careful analysis of options.
• Matched to initiative. The nature and magnitude of the proposed policy or program and the nature and number of affected parties ought to shape both the mix of approaches used, and the depth and breadth of analysis.
• Allocated sufficient resources. Some applications of the approaches can be time- and resource-intensive. In our view, approaches need to be allocated sufficient resources to do their job effectively, to adequately identify the possible opportunities and areas of concern.
• Developed in consultation. For some policies and programs, stakeholders can provide input about the values associated with different options, offer insight into how policies and programs will be implemented, and provide crucial public support. In Chapter 2 of this Report, we review the central role of consultation in sustainable development strategy development and implementation. (For policies and programs, public consultation may not be appropriate in some cases - for example, due to concerns about confidentiality or national security.)
• Establish clear accountability. Successful implementation will require that the responsibility for preparing information, analyzing it and incorporating it into decisions be clearly assigned.

Next Steps

Conclusion

9.67 Given the dominance of the government's policies and programs in influencing Canada's prospects for sustainable development, we focussed on a sample of relevant approaches that could assist departments to bridge the implementation gap. All four approaches have strengths and weaknesses, but all could be applied by federal departments. In our view, these approaches or other appropriate ones are necessary - as departments grapple with integrating the three dimensions of sustainable development (environmental, social and economic), as they consider the long-term consequences of their plans, and as they find ways of working together. Such approaches are not sufficient by themselves; successful implementation requires more than having the right tool in hand. There are several promising avenues; we look forward to exploring them with departments, jointly developing a road map to better decisions.

9.68 At the same time, we believe that Parliament needs to know how departments will deliver on their commitments, whether the benefits of integrated decision making will be realized, and when the gap between commitment and implementation will be closed.

About the Study

Objectives

1. to help departments with custodial responsibilities to build the tools necessary to integrate considerations of environmental and social effects into capital and operating decisions;

2. to help departments create the baseline reference information necessary for credible, relevant and consistent measures of their sustainable development performance; and

3. to help departments with policy responsibilities to build practical, cost-effective tools to integrate information from diverse databases into decisions on policies with significant environmental, social and economic effects.

This chapter addresses the third objective. A companion chapter, Chapter 8 in this Report, documents our work on the first and second objectives. With respect to the third overall objective, our three sub-objectives for this phase of the project were:

• to document the state of the art for integrating information on environmental, social and economic impacts into policy and program decisions;
• to demonstrate how the use of this approach can contribute to departmental initiatives consistent with sustainable development; and
• to start defining criteria to be applied in future audits of the implementation of policies and programs.

Scope and Approach

Each case study was developed on the basis of a review of the relevant literature and interviews with practitioners, in the applicable organization and elsewhere.

The commitments to integrated decision making in the sustainable development strategies were documented after reviewing copies of the strategies.

Study Team

Principals: Wayne Cluskey and Dan Rubenstein
Director: Peter Morrison

Mary Louise Sutherland

For information, please contact Wayne Cluskey or Dan Rubenstein.