Sustainable Trade Index 2023

Methodology

While an economy’s capacity to participate in the global trading system is dependent on economic development, achieving sustainable trade requires prudent stewardship of natural resources and acknowledgment of the externalities to promote its overall environmental capital. The indicators chosen in this section measure an economy’s environmental capital and include measures for air and water pollution. In terms of future impact, we measure national environmental standards, carbon emissions, and share of natural resources in exports. B. Data preparation We establish a reference year for each indicator or sub-indicator. Generally, it is the previous full year, but it may be earlier for some data. For the reference year: 1.0 We first check if data is available for the reference year, if this is the case the data will be considered for calculation. 2.0 If data for the reference year is unavailable, we check the previous five years before the reference year. We choose the closest year to the reference year or we categorize that particular indicator as not available, and the data field is left empty. 3.0 An economy showing an empty data field for a certain indicator will therefore not be listed and ranked for that specific indicator. C. Data processing In this document, ‘values’ denote the raw data of indicators in their original measurement units. ‘Scores’ represent these values rescaled between 0-100, as derived in the third step of our data processing procedure. For all indicators, pillars, and the overall STI, a higher score indicates superior performance in that specific category, while a lower score suggests subpar performance. Lastly, ‘rankings’ are determined by arranging the scores of each indicator in descending order, from highest to lowest. 1.1 For each indicator, we determine its average, standard deviation, and standard values for every observation, specifically for each economy. An economy is deemed an outlier for a particular indicator if its standard value (the difference between the country’s value and the indicator’s average) exceeds four. 1.2 To ensure data normality, when an outlier is detected for an indicator, we take the logarithm of that value. This logarithmic value then replaces the original one in the ranking computation, narrowing the disparity between outliers and the rest of the economies in the sample. 1.0 We check each indicator for outliers:

HINRICH-IMD SUSTAINABLE TRADE INDEX 2023

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