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Module Another type of framework is based on capital accounting. This framework focuses on changes in in
4 physical, natural, human or social capital. The goal of this model, which is in use by the World Bank, is to

ensure that “future generations receive as much or more capital per capita than the current generation”
(World Bank 1997).

Types of capital include:
9-12 December, 2013 ? ? Natural capital – renewable and non-renewable natural resources;
Physical capital – buildings, structures, machinery and equipment, and urban land etc.;
?

Human capital – e.g., return on investment in education; and

?
Social capital – norms and social relations, social cohesion.

Capital accounts first must be tracked and may also be reported in physical units. Using physical measures
helps reduce ambiguities, but it leads to indicators being reported in different units, thus assessing overall
progress and comparison between different jurisdictions is often difficult. As an optional subsequent
step, some or all forms of capital may be converted into a monetary equivalent. This may help with
aggregation, but economic valuation methods related to non-market goods and services is wrought

with challenges, particularly when one intends to apply it consistently across a wide range of social and
ecological issues, over large geographic areas, and regularly over time (Hardi and Muyatwa 2000).

Further methodological aspects on economic valuation are discussed in Module5.

Flow of indicator development
Indicator development often begins with a conceptual framework, followed by the selection of
indicators based on criteria of suitability. Indicator development is often an iterative process, where a

large number of environmental or sustainable development issues are narrowed down in successive
rounds of dialogue with stakeholders and experts to a few high-level measures.

Figure 11 provides an example of the process used for indicator development in South Africa. The main
steps are further described below.

Step 1 involved identifying a framework to guide the selection of indicators. The framework was based
on a review of environmental and local government legislation, and consultation with stakeholders. It
was built around core environmental mandates for local government, and if a core mandate was not

present, then around the role of provincial and national government.

Step 2 involved drafting a set of indicators based on a set of criteria for indicator selection. The draft
set of indicators was reviewed by local, provincial and national government, to ensure that the new

52 Monitoring, Data and Indicators