Rethinking “green” economic data: Why definitions matter

By Will McDowall

As the global economy shifts in response to the urgent challenges of climate change, biodiversity loss, and resource depletion, the concept of a “green economy” has taken centre stage in policy and public discourse. Governments are investing in clean technologies, businesses are racing to align with sustainability goals, and financial markets are increasingly focused on environmental performance. In this context, understanding the economic footprint of green industries and products has never been more critical.

But this raises a fundamental and often overlooked question: what exactly counts as “green” economic activity? And how do we distinguish between truly sustainable practices and those that are only marginally better than the status quo?

Our new ESCoE Discussion Paper investigates this complex question. It reviews current definitions and measurement approaches used in the UK and internationally, examines their limitations, and proposes ways to improve how we define, capture, and interpret green economic activity.

Why measure green economic activity?

Transforming the economy to achieve net zero and to meet other environmental goals, is a huge challenge for governments. Policymakers need to understand the risks and opportunities – how new clean activities like renewable energy are growing, whether the UK is developing strengths in emerging areas like advanced batteries, and whether costs associated with environmental protection are holding back some industries. Without good data, getting the economy to net zero is like driving without a map.

What are the problems with existing definitions?

Good data on the green economy is essential for both policymaking and analysis. But current metrics and definitions don’t always capture the full picture.

Crucially, currently agreed definitions of what counts as a green economic activity end up creating inconsistencies and confusion. This results in current guidance including things as ‘green’ that are now being targeted for phase-out because of their poor environmental performance (e.g., landfill of waste, condensing gas boilers). At the same time, the guidance excludes other things that are being promoted because of their green credentials (bicycles, rail electrification). The system needs refinement.

What’s missing from current data?

The UK’s current approach misses a lot of what matters:

• Some circular economy activities like reuse, repair, and leasing. For example, second hand shops have previously been included in UK EGSS estimates but were removed from 2015 onwards.
• Supply chain data for green technologies (e.g. supply chains for offshore wind or electric vehicles are often excluded).
• Emerging industries or products such as alternative proteins and biodiversity services. Food is only mentioned in the context of organic agriculture.
• Granular information needed to track transitions in industries (e.g. steel made from recycled material).

This creates a misleading picture. Ironically, success in making industries more sustainable may shrink the apparent size of the “green economy” under current definitions. EGSS may show declining green activity not because progress has stalled, but because the use of green technologies has become normal – and is no longer seen as having a green ‘purpose’.

A novel solution

Our report proposes an alternative and more flexible methodological approach: rather than assigning each economic activity to a single environmental category, we recommend a system of multi-attribute tagging. This means that activities can be associated with multiple environmental characteristics.

For example, the production of an electric vehicle could be tagged simultaneously as contributing to low carbon emissions, improved energy efficiency, and reduced air pollution. This approach better reflects the multidimensional nature of environmental benefits in real-world technologies. It would also enhance the analytical value of the data for policymakers by enabling more nuanced and comprehensive insights.

What should change?

Our report recommends several shifts in the UK’s approach to green economic statistics:

1. Broaden the scope: Include key sectors currently excluded (like electric public transport, alternative proteins, and precision agriculture).
2. Restructure reporting: Organise data around clear themes like traditional environmental activities, the energy transition, circular economy, and agriculture, food and nature.
3. Increase granularity: Collect microdata on specific products, technologies, and services. This would allow international comparison and enable historical data to be re-estimated.
4. Tag environmental features, rather than forcing one-size-fits-all classifications.

Why it matters

Getting the definitions and measurements right isn’t just a technical detail. It’s about ensuring that green jobs, investments, and innovations are visible, valued, and strategically supported. In a world where governments are competing to lead the green transition, better and comparable data is a key competitive advantage.

The full report provides a roadmap for how the UK can modernise its environmental statistics and better align them with the real-world economic transformations underway.

ESCoE blogs are published to further debate.  Any views expressed are solely those of the author(s) and so cannot be taken to represent those of ESCoE, its partner institutions or the Office for National Statistics.