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Corporations Cause $2.2T in Environmental Damage Every Year

A new, unpublished report from the United Nations calculates the actual cost of pollution from business operations as part of a long-term plan to make companies accountable for their environmental impacts. Read More

(Updated on July 24, 2024)

[Editor’s note: This article originally appeared on BusinessGreen and is reprinted with permission.]

The world’s 3,000 largest companies are causing ?1.4 trillion (US$2.2 trillion) worth of environmental damage every year, according to an unpublished U.N. report seen by the Guardian.

The report calculated about half the cost was associated with the release of greenhouse gases, while the remainder of the costs arise from local air pollution, and damage caused by the over-use and pollution of freshwater and fisheries.

These unaccounted environmental costs equate to 6 to 7 percent of the companies’ combined turnover, or an average of one-third of their profits. However, the report also noted some businesses would be much harder hit than others if made financially responsible for the environmental externalities they cause.

Richard Mattison, chief operating officer of Trucost, which carried out the report for the U.N., told the Guardian: “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.”

The actual environmental cost of firms’ activities is likely to be even higher, because the ?1.4tn does not include damage caused by social impacts such as large-scale migration of people and other long-term effects of climate change.

Later this year, another U.N.-backed study is expected to recommended a number of mechanisms for making firms financially responsible for the environmental damage they cause.
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This second report, led by economist Pavan Sukhdev, is likely to argue for the abolition of subsidies to harmful industries and increased taxes on companies that cause high levels of environmental damage.

It is expected to take a similar line to the UK’s Stern Review on the economics of climate change, arguing that it will prove more cost effective to address the damage done to biodiversity and so-called environmental services such as soil and water supplies now rather than delay action.

Mattison said it remained to be seen if governments are willing to take action to address environmental externalities. “It’s going to be a significant proportion of a lot of companies’ profit margins,” he 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.”


Photo CC-licensed by Flickr user James Jordan.

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