Executive summary

The growing dissatisfaction with gross domestic product (GDP) as a measure of national welfare has sparked an interest in alternative metrics. The limitations of GDP in accounting for social, environmental, and distributional factors have been well-documented, highlighting the need for comprehensive approaches to welfare measurement. In response to this, Nordic countries, known for their progressive social policies, are poised to take a global lead in adopting alternative frameworks. This report aims to assess the performance of Denmark, Finland, Iceland, Norway, and Sweden through three key alternative metrics: the Sustainable Development Index (SDI), the Transition Performance Index (TPI), and Doughnut Economy Indicators.

Methodology

The research employed a structured literature review to identify a broad set of welfare metrics. After an initial evaluation of 38 indicators, three were selected based on their relevance and applicability to the Nordic countries: the SDI, TPI, and Doughnut Economy Indicators. These metrics were evaluated across thematic areas of sustainability, social inclusion, and wellbeing.

Sustainable Development Index (SDI): This metric integrates human development with ecological impact. It uses five key indicators—education, life expectancy, income, consumption-based CO2 emissions, and consumption based material footprint. The SDI is a composite measure that divides human development by ecological overshoot, making it particularly suited for assessing sustainability.
Transition Performance Index (TPI): Developed by the European Commission, the TPI evaluates countries across four dimensions—economic, social, environmental, and governance. Its aim is to measure progress towards sustainable and inclusive economies.
Doughnut Economy Indicators: This framework is based on ensuring that societies operate within planetary boundaries while also meeting basic social needs. The report utilised existing datasets to assess the performance of Nordic countries against both the ecological ceiling (also using consumption based data) and social foundations defined by the Doughnut model.

Overall, the Nordic countries generally perform well in terms of social outcomes but–when we look at environmental impacts from consumption rather than just territorially– face challenges in reducing their ecological footprints. While they all perform in the upper echelons of the TPI rankings, the SDI and Doughnut Economy Indicators demonstrate that every Nordic country is significantly overshooting the planetary boundaries required for ecological safety.

This report thus underscores the need for a more holistic approach to welfare measurement in the Nordic countries. While their social outcomes are laudable, ecological sustainability remains a critical challenge. The findings suggest the importance of integrating alternative welfare metrics, such as the SDI, TPI, and Doughnut Economy Indicators, into national policymaking to ensure a balanced approach to social and environmental sustainability. These indicators are salient to the Nordic countries as they contrast strong performance relative to European peers and measured by the yardstick of ongoing transition (TPI), with a sobering view of ecological boundary transgression which points to a complete lack of long-term sustainability of the welfare performance the region has become known for (SDI, Doughnut Indicators). This contrast should come as an urgent reality check to Nordic policymakers who may be otherwise convinced that the Nordics’ ecological transition is proceeding effectively.

The report concludes with several findings and recommendations:

Aligning Metrics: There is a need for greater alignment and standardisation across alternative welfare metrics to ensure consistency and comparability.
Governance Integration: Without governance structures that integrate these alternative metrics, measurement alone will not lead to meaningful change.
Ecological Focus: Policymakers look to alternative ecological interventions to address the significant, consumption based environmental overshoot identified across all Nordic countries. Demand side policy frameworks such as sufficiency solutions are highlighted as promising.
Leadership Potential: The Nordic countries are well-positioned to lead the global shift towards a wellbeing economy, provided they can reconcile their economic policies with the ecological limits.

This report makes a case for an urgent recalibration of the metrics used to define success, advocating for a move beyond GDP to foster a more sustainable and inclusive future for the Nordic region.