A study conducted by Trucost, a London-based consulting group, recently assessed the environmental use, damage, and loss by 3,000 of the world's largest corporations.

The study draws conclusions and information from eight years of study, and was commissioned by the United Nations Principles for Responsible Investment and the United Nations Environment Programme. The report is the result of increasing concern for major companies not being held accountable for a level of corporate social responsibility in regards to environmental impact.

As policy remains in limbo, government and environmental officials continue to quarrel over abolishing the practice of subsidizing and replacing it with instating a cost for damage, and the stakes increase. Fresh water, fisheries, fertile farming soil, and human quality of life is being negatively effected each year as a result of negligent business practice. 

The companies assessed by the report are from the UK-FTSE and 100 other major markets, including all 500 companies on the Standard & Poor's list of the largest traded companies in the United States (Microsoft, Proctor and Gamble, Apple, Exxon Mobil, etc).

The report, which will officially be published in May, assessed the price tag on the estimated combined corporate damage at $2.2 trillion a year — more than the national economies of all but seven of the world's countries in 2008.

The single biggest contributor of the $2.2 trillion in damages to the environment was greenhouse gas emissions and subsequently, climate change. Greenhouse gas emissions comprised more than half of the $2.2 tril figure; air pollution from particulates and the over-use and pollution of freshwater also contributed heavily to the cost of corporate business on the planet.

That number is likely a conservative estimate, as it excludes damage caused by government and consumer consumption of services and products and it does not include the social impacts of a corporation's business in an area (such as climate change).

What's more, Trucost's research reveals the staggering fact that companies could stand to lose a third of their profit if they were forced to pay for use, lose, and damage of environment by standards enforced by government and policy.

The $2.2tril price tag equates to roughly 6%-7% of combined turnover for the corporations, but does not give us an idea of just how individual companies would be affected by this loss. Obviously, of the 3,000 corporations evaluated in the study, some would be hit harder than others would with a 1/3 cut in profit for corporate responsibility tax.

Later this year, the UN will release a report that will attempt to put a monetary value on the damage corporations have done to the environment, as well as offer suggestions to prevent and improve these kinds of practices.

Pavan Sukhdev is the economist leading the report. According to The Guardian, "[Sukhdev] is likely to argue for abolition of billions of dollars of subsidies to harmful industries like agriculture, energy and transport, tougher regulations and more taxes on companies that cause the damage." 

Sukhdev notes that at an annual economic summit in Switzerland this year, a growing concern for the effect that financial environmental responsibility would have on profit and business resounded among the heads of major corporate outfit. Sukhdev said of that concern, "That sense of foreboding is there with many [CEOs], and that potential is a good thing because it leads to solutions."

Trucost declined comment regarding which particular sectors were responsible for the highest pollution costs — this information will be available when the report is published in May — but among the culprits for fossil fuel use are power companies and heavy energy users, while food companies and clothing manufacturers are likely to rank highly for overuse and damage of water and land.

Trucost COO Richard Mattison says the report is intended to educate investors who want to affect positive environmental change through business decisions.

I hope I am not being optimistic or naïve in saying that the majority of people do think actively about and factor corporate social responsibility into their list of must-haves when they are considering consumer loyalty to a corporation or business.

Even big players like Wal-Mart, Cisco, and Nike have made strides in the last year to be as energy efficient and environmentally conscious as possible with their coveted profit margin still riding in the driver's seat. And for many of us, our hard-earned money is spent in better conscience with an outfit that's making real effort to reform business practices and impact on the communities in which they operate. 

Corporate responsibility increases sustained quality of life for consumers and for the business, and a system of checks-and-balances exists so that those who damage what is not theirs to damage pay for it. Consumers invest in firms that uphold a level of CSR and shop at stores that are conscious of their impact on the environment. It all comes full circle, and at some point, the losses incurred by companies for their poor practices are recouped when they clean up their acts.

One of the first lessons we are taught in pre-school is that if you make a mess, you clean it up. This must be translated into business practice.

Brigid

P.S. Just to give you an idea, the chart below gives a clearer picture of the annual cost of environmental damage by business sector: