Sustainability Language

Data, Technology & Verification Systems

Composite index

A single index constructed by aggregating multiple individual indicators to summarise a multi-dimensional concept.

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Definition

A composite index (or composite indicator) is formed when individual indicators are compiled into a single index on the basis of an underlying model of the multi-dimensional concept being measured — for example the Human Development Index combining health, education and income. The OECD–JRC Handbook on Constructing Composite Indicators sets out the standard methodology: theoretical framework, data selection, imputation, normalisation, weighting, aggregation and robustness testing.

References

Overview

What it means

It trades detail for communicability — one number standing in for many dimensions.

How it is used

Sustainability performance, ESG ratings, resilience scores and SDG progress are commonly expressed through composite indices; the OECD cautions that poorly constructed composites can send misleading policy messages.

Why it matters

Composite indices drive rankings, investment and policy attention, so their construction choices carry real consequences.

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