Environmental Cost of Business Estimated at $4.7T Annually

Photographer: Tomohiro Ohsumi/Bloomberg

The Joban Joint Power Co. coal-fired power station in Iwaki City, Japan. Close

The Joban Joint Power Co. coal-fired power station in Iwaki City, Japan.

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Photographer: Tomohiro Ohsumi/Bloomberg

The Joban Joint Power Co. coal-fired power station in Iwaki City, Japan.

Bloomberg BNA -- The environmental impact of doing business costs the global economy $4.7 trillion a year, according to a report released April 15 .

That figure includes the top 100 environmental impacts, such as air pollution-related health costs, the effects of greenhouse gas emissions, the loss of nature-based benefits such as carbon storage by forests, and loss of natural resources.

The top six environmental costs are from greenhouse gas emissions, water use, land use, air pollution, land and water pollution, and waste, according to Natural Capital at Risk: The Top 100 Externalities of Business.

The report was released by the TEEB for Business Coalition, consisting of organizations that support accounting for natural capital in business. TEEB stands for The Economics of Ecosystems and Biodiversity program backed by the Group of Eight economic powers and the United Nations Environment Program.

Members of the coalition include the World Business Council for Sustainable Development, the Institute of Chartered Accountants in England and Wales, and the World Wildlife Fund. The report was commissioned by TEEB and prepared by Trucost.

Some business sectors with significant environmental impact, such as mining, create an economic loss when accounting for such things as natural resource use and pollution costs, according to the report, which considered impacts in various regions.

For instance, the environmental and social costs of coal-fired power generation in East Asia and in North America outweigh the production value of the sector, according to the report.

Coal-fired power generation in East Asia costs an estimated $452.8 billion in natural capital impacts, making it the highest-impact regional sector. Revenue for the regional sector is $443.1 billion.

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Cattle ranching and farming in South America has the second-highest regional sector impact, with $353.8 billion in natural capital costs, compared to $16.6 billion in revenue. Coal-fired power generation in North America has the third-highest regional sector impact, with an estimated $316.8 billion in natural capital costs, compared to $246.7 billion in revenue. The natural capital costs for coal-fired power generation include greenhouse gas emissions and health costs and other damage from air pollution. Wheat and rice production in South Asia rank fourth and fifth respectively.

Gaining Competitive Advantage

Companies that consider their natural capital impacts can better manage risk and gain competitive advantage, according to the report.

Companies that measure and manage the natural capital they use and mitigate their exposure to risks such as water scarcity and volatile energy and agriculture prices can ensure more resilient supply chains and better investment strategies, it said.

“This study makes the business case for companies and investors to take natural capital into account if they wish to save on resource use, access markets and financing, and mitigate major environmental and social risks,” said Usha Rao-Monari, director of the sustainable business advisory department at the International Finance Corp., in a statement.

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