« Back to Home Page

Report: Environmental Cost of Corporations in the Trillions

RP Siegel | Tuesday March 30th, 2010 | 0 Comments

A recent UN study by the British consulting firm Trucost, as reported in the Guardian, assessed the environmental impact that the three thousand top global corporations inflict. The study clocked this impact at a cost of $2.2 trillion dollars–a sum greater than the national budgets of all but seven countries in the world and approximately one-third of the total profits of the companies included in the study for the year 2008.

The study was commissioned by Principles for Responsible Investment, an investor initiative in partnership with UNEP Finance Initiative and the UN Global Compact.

The full report is scheduled to be published this summer. Some preliminary findings just released show the cost impact of the ten biggest sectors as follows (in $US billions):

  • Utilities                      $420
  • Basic materials          $312
  • Consumer goods        $281
  • Industrials                 $ 201
  • Oil and gas                $175
  • Consumer services     $73.7
  • Technology               $ 20.3
  • Financials                  $26.7
  • Healthcare                 $15.5
  • Telecommunications   $ 8.6

The tab for a sector such as utilities can be further broken down into: Greenhouse gases ($172.3B); water abstraction ($151B); acid rain and smog ($26.4B); nuclear waste ($21.5B); dust and particles ($20.5B); and other ($28.2B).

The report comes amid growing concern over how society can address the costs that industrial activity has imparted to the natural world. The study sought to quantify the magnitude of this impact in financial terms.

“Externalities of this scale and nature pose a major risk to the global economy and markets are not fully aware of these risks, nor do they know how to deal with them,” said Richard Mattison, Trucost’s chief operating officer who led the report team. “It’s going to be a significant proportion of a lot of companies’ profit margins,” Mattison told the Guardian. “Whether they actually have to pay for these costs will be determined by the appetite for policy makers to enforce the ‘polluter pays’ principle.”

The final version of a second, larger UN report, that has been dubbed by some as “Stern for nature,” referring to the report by Sir Nicholas Stern on the economics of climate change, is also expected to be completed this summer. This report, led by economist Pavan Sukhdev, a senior banker at Deutsche Bank and a Founder-Director of the Green Accounting for Indian States Project, is being released in several drafts. An earlier draft of the report issued for policy makers last fall stated that, “We show that the failure of markets to adequately consider the value of ecosystem services is of concern not only to environment, development and climate change ministries but also to finance, economics and business ministries. Evidence presented here shows pro-conservation choices to be a matter of economic common sense in the vast majority of cases.”

The report is an attempt to shed light on the question of the role economics can play in addressing the problems of environmental degradation inflicted by industry.  Sukhdev is a special adviser to the United Nations environment program’s green economy initiative and study leader for The Economics of Ecosystems and Biodiversity.

RP Siegel is the co-author of Vapor Trails.


▼▼▼      0 Comments     ▼▼▼

Newsletter Signup