Quality and Sensitivity of Composite Indicators for Sustainable Development

Abstract

Composite indicators can be understood as a summary of well-chosen and relevant sub-indicators which are combined into a single number. Their aim is to represent a multi-dimensional construct and map the performance of entities such as countries or companies. These multidimensional constructs are for example sustainability, poverty or well-being. Composite indicators are widely applied in various disciplines such as social or economic research and benefit from their apparent ease of interpretation. In the context of the Sustainable Development Framework a composite indicator over all 17 sustainable development goals, as been proposed. As composite indicators are commonly applied in highly sensitive areas this, urges the need to discuss methodical advantages and disadvantages as well as their adequacy for performance comparisons. In this paper we discuss and illustrate quality issues with regard to aspects of the subjective choices made in the construction process of composite indicators, imputation of missing data and the survey design. As an example we construct a composite indicator on sustainable economic development using data of the Sustainable Development framework. Furthermore, we exemplify and discuss strategies and methods for the quality assessment of a composite indicator.