In search of income reference points for SLCA using a country level sustainability benchmark (part 1): fair inequality. A contribution to the Oiconomy project

Abstract

Purpose: This paper is part 1 of our twin articles on income reference points for Social Life Cycle Assessment (SLCA). Preventative costs based LCA systems, such as the EcoCost system and the Oiconomy system, need targets (performance reference points) to determine the marginal preventative costs, the costs of the most expensive measure that globally needs to be employed to reach the target. To extend the EcoCost system for social issues, targets are required for issues like fair wages and fair inequality of wages, issues for which no agreed standard, no effect level or target exists. One way of setting targets is to take best practices as benchmark, e.g. the practices of a group of best performing countries. The purpose of this part 1 article is to first develop a well-founded benchmark group of the 20 % best performing countries and thereafter propose a well-founded target for the issue of inequality for preventative costs based SLCA, which can also serve as performance reference point for SLCA in general and for other uses. In part 2, for the same purposes and using the same benchmark group, we propose targets for fair minimum wages for every country. Methods: A benchmark group of countries for the setting of targets was determined by an assessment of available country performance indicators, based on 5 criteria. Thereafter, we derived a proposal for a maximum inequality ratio based on existing democratically determined inequality ratios in the benchmark group. Results and discussion: The Sustainable Society Index–Human Wellbeing proved the best indicator for a country benchmark for preventative cost-based SLCA. Using the average of maximum democratically determined income differences in a benchmark group of countries determined by this index, a performance reference point for SLCA for the issue of fair inequality was derived and proposed, resulting in a maximum ratio of income differences for governmental institutions of 14.1, for government ruled companies of 18.3 and for industry of a factor 23.8. Conclusions: It proved possible to derive a target for maximum inequality of wages, based on democratic choices in a benchmark group of the 20 % best performing countries. The target for governmental institutions may be called objective, and proposed augmentations for government ruled companies and industry, though value choices, seem reasonable for the consumer who requires prevention of all possible harm as consequence of his purchase choices and who, as a voter, contributes to governmental standards.