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March 26, 2015
Corporate Sustainability Measures Fail to Address Impacts
    by Robert Kropp

The 2015 State of Green Business report, published by GreenBiz with environmental data supplied by Trucost, confirms that corporate sustainability efforts and disclosures are insufficient.


The recently published 2015 State of Green Business report, authored by the staff of GreenBiz with environmental data provided by Trucost, paints a largely bleak picture of the effects of corporate sustainability efforts thus far.

“The business risks of unsustainable natural capital consumption are increasing,” Trucost CEO Richard Mattison wrote in the report foreword. “The costs of pollution, ecosystem depletion and health impacts have grown steadily over the past five years and now exceed $1 trillion per year for US companies — equal to 6.2 percent of national GDP — and almost $3 trillion for global companies.”

“If businesses had to pay these costs, they would more than wipe out their profits,” Mattison continued.

The value of the concept of natural capital is debated in some quarters—when the Natural Capital Declaration launched in 2012, BankTrack described it as “a false and disturbing response of the financial sector to the profound ecological crises of today”—but the concept is at least helpful in the abstract, in that it quantifies the financial impacts of environmental degradation.

The largest natural capital impacts, both directly and in supply chains, are greenhouse gas (GHG) emissions and water abstraction. “Over the past five years, the proportion of company profit at risk consistently exceeds 100 percent of their profit,” the report states. “This means that, on average, companies would be unprofitable if they had to pay the actual costs associated with the commodities they consume and pollution they generate.” Furthermore, natural capital impacts increased by 15% from 2007 through 2013, although the growth slowed somewhat in 2013.

In short, by any measure corporate sustainability efforts fall far short of what is necessary. Corporate profitability may have risen dramatically over the past five years, but corporate responsibility for externalized costs continues to be excluded from balance sheets. And corporations continue to wield outsized political power in order to keep those mounting costs externalized and off their balance sheets, which is where there would be in a just and rational economic system.

Yet GreenBiz sees hopeful signs that may not offset Trucost's alarming environmental data. An initiative to source sustainable palm oil and therefore stem the tide of rampant deforestation in Indonesia and Malaysia has been joined by 34 mostly global corporations. Corporate management of supply chains, where natural capital impacts occur most often for most industry sectors, may be becoming somewhat more transparent. And science-based emissions reduction goals are slowly being incorporated; although, as author Andrew Winston pointed out, “Our corporate carbon goals are wholly inadequate to the task at hand.”

One encouraging development described in the report has been the growth of sustainable investment. According the 2014 Trends Report published last November by US SIF: The Forum for Sustainable and Responsible Investment, the $6.57 trillion in sustainable assets “represent nearly 18 percent of the $36.8 trillion in total assets under management,” and in fact increased by 76% since 2012.

Also, although regulatory regimes have failed to keep up with necessity, “Companies are increasingly required to contribute to external costs through regulations or economic instruments such as carbon taxes or allowances, which “'nternalize' costs per unit of resources used and emissions released.”

“One measure of company engagement going forward will be companies' proactive involvement on political issues that could accelerate the transition to a low-carbon and more sustainable economy,” GreenBiz Executive Editor Joel Makower wrote. “Will they start lobbying, individually and collectively, for carbon pricing, for example, or for removing the various roadblocks to accelerating deployment of renewable energy and other clean technologies?”

The data provided by Trucost does indeed paint a bleak picture of corporate commitment to sustainability. But with major initiatives such as sustainable development and climate change treaties due to be considered later this year, at least a thread of hope that something of significance might be accomplished remains.

 

 
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