The scheme has been developed in line with the Local Agenda 21, the green action-plan development programme for the 21st century agreed at the Rio Earth Summit in 1992.
The borough will create ways of accurately measuring changes within the environment and quality of life.
The first step is to identify the indicators which measure such changes and Merton is calling on its residents to help by filling in questionnaires detailing what concerns them.
Key areas which will be looked at are the reduction of energy, the minimising of waste and pollution, and how to protect the diversity of the natural world.
The emphasis is on creating a global response to environmental pressures by generating action locally.
As well as purely green matters, the project will also study crime, health, employment and safety and how these factors affect people living in Merton.
Tony Colman, the leader of the council and the chair of the national steering group, said he felt pleased and privileged that the south London borough had been chosen.
'In order to take effective action that has long-lasting results we must have ways of being able to tell how successful actions are,' he said.
'Merton has a strong environmental record and I believe that with the help of our community we will make this project a success.'