The Top 100 Externalities of Business

[Poor Richard’s note: in most cases “externality” is a euphemism for accounting fraud.]

“…the profits of high impact business sectors would be wiped out if the costs of environmental damage and unsustainable natural resource use are accounted for.”

Natural Capital at Risk
 

Report: Natural Capital at Risk: The Top 100 Externalities of Business

A publication from The Economics of Ecosystems and Biodiversity for Business Coalition

The study, “Natural Capital at Risk: The Top 100 Externalities of Business” was commissioned by the TEEB for Business Coalition to identify the world’s largest natural capital risks and opportunities for business and their investors. The report, authored by Trucost, quantifies environmental externalities such as damages from climate change, pollution, land conversion and depletion of natural resources, across business sectors and at a regional level. It demonstrates that the profits of high impact business sectors would be wiped out if the costs of environmental damage and unsustainable natural resource use are accounted for. This report highlights the urgent need for businesses to manage natural capital assets and reduce liabilities. Businesses and investors can take account of natural capital impacts in decision making to manage risk and gain competitive advantage.
 
 Headline findings are:-

  • The primary production (agriculture, forestry, fisheries, mining, oil and gas exploration, utilities) and primary processing (cement, steel, pulp and paper, petrochemicals) sectors analyzed are estimated to have externality costs totaling US$7.3 trillion, which equates to 13% of global economic output in 2009. The value of the Top 100 externalities is estimated at US$4.7 trillion or 65% of the total primary sector impacts identified.
  • The majority of environmental externality costs are from greenhouse gas emissions (38%) followed by water use (25%); land use (24%); air pollution (7%), land and water pollution (5%) and waste (1%).
 Highest impact externalities are:-

  • Coal-fired power in Eastern Asia and Northern America rank 1 and 3, respectively estimated at US$ 453 billion per annum and US$ 317 billion. These consist of the damage impacts of greenhouse gas emissions, and the health costs and other damage due to air pollution. In both instances, these social costs exceeded the production value of the sector.
  • The other highest impact sectors are agriculture, in areas of water scarcity, and where the level of production and therefore land use is also high. Cattle ranching in South America, at an estimated US$ 354 billion ranks second. Wheat and rice production in Southern Asia rank fourth and fifth respectively.
The report assessed more than 100 environmental impacts using the Trucost environmental model which condenses them into six eKPIs to cover the categories : water use, greenhouse gas (GHG) emissions, waste, air pollution, water and land pollution, and land use. These Environmental Key Performance Indicators (eKPIs) were then quantified by region across over 500 business sectors. The method used has limitations and is only designed to give a high-level indication of the priority sectors and regions where natural capital risk lies. Limitations in the method are outlined in the report to support ongoing development of this type of analysis.
 
————
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: