Beyond GDP Indices: Well-being
In recent years, the term "well-being" is attracting attention as a key for the sustainability of society as a whole and the creation of new corporate value, beyond feelings of happiness or satisfaction that people have (here, this paper envisages subjective well-being; for the concept of well-being and measurement methods, see Kumagai, Managi (2024)). Well-being is also mentioned in the Japanese government's Basic Policy on Economic and Fiscal Management and Reform and is receiving increasing attention in financial and industrial circles.
Gross Domestic Product (GDP) has long been considered as a major index for economic growth as it is a measure of the amount of production of goods and services. However, it is impossible to truly measure people's sense of abundance or quality of life with the GDP, meaning their good health, spiritual richness, social ties, and the quality of the surrounding environment. With the increasing awareness that economic growth does not necessarily enhance people's well-being is spreading, other indicators that complement the GDP are required (Managi, 2019).
Against such a background, the perspective of evaluating capital as the basis of economic activities in a multifaceted manner is important. The significance of human capital (the knowledge and skills that workers possess) and natural capital (benefits from natural environments) is now recognized in addition to physical capital (factories and infrastructure, etc.), which has long been studied in conventional economics. Comprehensive evaluation of these different types of capital is raising awareness of the actual sustainability and well-being of society as a whole (Inclusive Wealth Project: https://www.managi-lab.com/iwp/iwp_home.html / Managi, 2021). The idea of physical capital, human capital, and natural capital here is based on the idea of production-based capital advocated by Dr. Kenneth Arrow, who was awarded the Nobel Prize in Economic Sciences, Dr. James Tobin, and Prof. William Nordhaus (Polasky et al., 2019).
Roles to be Played by Industry and its Approaches
It is evident that the quality of living and working environments and urban spaces exerts direct influence on people's well-being, such as their mental and physical health and social ties (Ida et al., 2024). For example, real estate and urban development play the role of creating the foundation for people's livelihoods and are closely associated with well-being. Leading companies in this field in Japan, such as Mitsui Fudosan Co., Ltd. and Nippon Steel Kowa Real Estate Co., Ltd., are examining their approaches in relation to physical capital, human capital and natural capital and are conducting the Joint Research into Sustainable Future Forms for Advanced Industrial Clusters, jointly with Kyushu University.
Companies are also asking how they can contribute to the enhancement of well-being or evaluate their contributions. The first step is to objectively quantify well-being and to understand the current situation. By quantitatively analyzing what factors influence people's well-being and how their business activities relate to those factors, companies will be able to establish more effective strategies.
In terms of quantifying well-being, simply compiling the results of questionnaire surveys is insufficient. For example, in urban development, relevant companies should make indicators for a variety of factors including the areas of green spaces (Tsurumi & Managi, 2015), the convenience of public transportation (Li & Managi, 2023), and the abundance of cultural facilities, and analyze the influence of these factors on local residents' well-being (Li & Managi, 2024). It has been noted that environmental pollution in urban areas can have negative effects on the subjective well-being of residents (Li & Managi, 2022), and therefore, maintaining and improving daily living and environmental quality is also an important factor. In working environments, comprehensive analyses of employee engagement scores, stress levels (Piao & Managi, 2022) and health examination data (Piao & Managi, 2022) will enable companies to determine links between specific business situations, including increased productivity and reduced turnover rate.
Needless to say, industry will be undertaking most of the efforts in such an approach, but cooperation among government, industry and academia is absolutely necessary for the development of indicators which companies can use to evaluate themselves and determine their future directions. Cooperation among government, industry and academia is already progressing, and we are collaborating with the Ministry of Economy, Trade and Industry and private companies in relation to the development of circular economy indicators and are accelerating our initiative to create a new economic system that balances the improvement of human capital, reduction of environment load, and enhancement of people's well-being. Our initiative will serve as the basis of a future society in which the quantification of well-being is a generally accepted consideration.
Evaluation Indicators for Physical Capital, Human Capital, and Natural Capital
In order to ascertain well-being in a multifaceted manner, it is necessary to take into account evaluation indices for physical capital, human capital, and natural capital.
- Physical capital (artificial capital): Physical assets, such as buildings, infrastructure, and machinery and equipment, whose amount, quality, and efficiency serve as the basis for economic activities. Evaluation indicators for physical capital include the status of the development of infrastructure, the level of aging of facilities, and the level of technological innovation.
- Human capital: The entirety of people's capabilities to improve productivity, including their knowledge, skills, health and other factors. Education level, average life expectancy, healthy life expectancy, and skill acquisition level are used as evaluation indicators. In recent years, such factors as employees' engagement and creativity are considered important.
- Natural capital: Natural environments, such as forests, water, soil, air, and biodiversity, that bring about benefits to society. The amount of resources, ecological integrity, environmental pollution level, etc. are used as evaluation indicators. As the deterioration in natural capital directly affects people's health and the basis of their livelihood, natural capital is an important factor for ensuring well-being (Managi, 2019).
Companies need to improve and maintain these three types of capital in a well-balanced manner in order to contribute to sustainable growth and improve well-being. AI can be used to easily ascertain and forecast future changes in the population for each region (Li & Managi, 2023). Under these circumstances, companies are required to utilize capital in locations where they operate while making the most of their new strategies.
Toward the Enhancement of Corporate Value beyond Societal Contribution
When companies make their contributions to well-being clear, in addition to contributing to society, they enhance their corporate value. As investors and consumers become increasingly aware of corporate social responsibility, proactive approaches to well-being will improve the brand image and strengthen the competitiveness of companies. In the future, there may come an era in which contributions to well-being are recognized as a key indicator contributing to corporate reputation.
As well-being indicators become increasingly accepted throughout society, companies may be able to create new business opportunities from the perspective of solving societal problems. In fact, a system could eventually be established to certify companies as superior well-being providers.
Companies that contribute to enhancing people's well-being, for example, through providing transportation support services in areas with aging populations or developing products and services which support the work-life balance of the childrearing generation, have a high potential to cultivate new markets, while responding to societal needs.
Numerical analyses of well-being focus on the true wealth of people and society, which cannot be ascertained by GDP alone, and will provide guidelines for companies to achieve sustainable growth as members of society based on a variety of perspectives. Through strategic efforts based on objective data, companies will be able to contribute to bettering people's lives while simultaneously enhancing their own values.
April 23, 2025
>> Original text in Japanese
