Introduction
This report synthesizes key findings on the relationship between informality and sustainable development, highlighting the main conclusions and insights derived from the analysis of European countries. It offers a strategic perspective on how informality impacts sustainability and provides policy recommendations to address these challenges.

Main results
The study build composite indicators of Sustainable Development in three scenarios. Baseline scenario represents the classic SDG score computation, Informal Economy Scenario 1 adds the size of the informal economy as a percent of GDP as estimated by Schneider to the baseline scenario and Informal Economy Scenario 2 takes into account envelope wages, dependent workers, and workers without a formal employment contract, as estimated by Eurobarometer (European Commission, 2019) and reported by Williams and Öz-Yalaman, (2021) in addition to the baseline scenario.
The table below reports a synthetic comparative analysis of the dynamic of sustainable development scores in three scenarios.

We can identify seven clusters of countries:

• Substantial progress across all indices: Austria, Luxembourg, Netherlands, Slovenia, Spain, and Sweden show substantial progress across the general SDI and when accounting for the informal economy and workers. This suggests they have effective and inclusive sustainable development policies that address both formal and informal sectors.
• Substantial progress in SDG, challenges in informal Sectors: Croatia, Denmark, Iceland, Montenegro, and Slovakia have demonstrated significant advancements in their general SDI scores but show that further efforts are needed in managing the informal economy and workers. This implies that while overall development is strong, there are specific challenges in fully integrating the informal sectors.
• Deterioration or limited progress in SDG and informal sectors: Turkey exhibits a pattern of deterioration or limited progress across all indices, indicating comprehensive challenges in sustainable development, including the formal and informal sectors.
• Mixed patterns with room for improvement: Albania, Latvia, Lithuania, Romania, and Serbia show substantial progress in their general SDG scores, but experience either deterioration or limited progress when the informal economy and informality patterns are factored in. This mixed pattern indicates that while overall development is on the right track, the informal sectors require more targeted policies for improvement.
• Consistent limited progress or need for acceleration: Greece, Hungary, and North Macedonia show fair progress or a need for acceleration in their general SDG scores, along with limited or no progress in the informal economy and informality patterns. This suggests that while there is some advancement, more significant and accelerated efforts are necessary to enhance sustainable development.
• High SDG scores with divergent trends in informality: Finland and Norway have high SDG scores but show limited progress or a need for acceleration when considering the informal economy and a pattern of deterioration regarding informal workers. This indicates that these countries might face particular challenges in integrating and supporting their informal workforce.
• Consistent performance, potential plateauing: Belgium, Czechia, and Bulgaria show either deterioration or limited progress across the general SDG and the indices related to informality, suggesting that sustainable development efforts might be plateauing and require revitalization.

Conclusion
The findings underscore the importance of integrating informality into sustainable development strategies. The study demonstrates that informal economic activities, including unreported income, tax evasion, and undeclared work, significantly impact countries’ performance on sustainable development indicators. The inclusion of informality metrics – both the informal economy and informal employment – reveals a consistent decline in sustainable development scores, suggesting that informality poses substantial challenges to achieving sustainability goals.
One of the extended paper’s central conclusions is the inherent difficulty in accurately measuring and integrating informality into sustainable development assessments. The analysis highlights the need for more sophisticated methods to capture the nuances of the informal economy, suggesting that traditional economic indicators may underestimate the extent and impact of informal activities on sustainable development.
The research uncovers significant variability in how informality affects sustainable development across different European countries. This variability underscores the importance of contextual factors, including economic structures, governance levels, and social norms, in determining the extent to which informality influences sustainability outcomes. Countries with robust mechanisms for incorporating informal workers into the formal economy and regulating informal economic activities exhibit less pronounced declines in sustainable development scores.
The findings call for targeted policy interventions and strategic frameworks that address the challenges posed by informality. Policies aimed at formalizing informal economic activities, extending social protections to informal workers, and improving the measurement of informal sectors are critical for enhancing sustainable development efforts. The study emphasizes the need for a multi-faceted policy approach that considers the complex interplay between informality and sustainable development. There is a need for policies that facilitate the transition from informal to formal economy, through regulatory reforms, financial incentives, and support for small and medium-sized enterprises (SMEs). This requires comprehensive data collection and analysis to inform policies that address the challenges posed by informality, ensuring that no one is left behind.
Addressing informality through inclusive and comprehensive policies is essential to ensure equitable progress and resilient economic growth.

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