Profits of the world’s 3,000 largest companies would be cut by $2.2 trillion per year if they were forced to pay for environmental damage caused by their operations, according to an upcoming U.N. report detailed by The Guardian.
The study, conducted by Trucost, a consultancy, and scheduled to be released this summer, estimates that pollution and degradation of natural resources by the world’s 3,000 largest companies amount to six to seven percent of total revenue, or roughly one-third of profits.
The Yangtze when it reaches Shanghai. Photo by: Rhett A. Butler.
“What we’re talking about is a completely new paradigm,” Richard Mattison, Trucost’s chief operating officer and lead for the report, 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 report attributes the largest damages to greenhouse gas emissions, followed by air and water pollution. The estimate does not include social impacts, long-term costs of climate change, or “damage caused by household and government consumption of goods and services,” according to The Guardian.
“[The cost is] going to be a significant proportion of a lot of companies’ profit margins,” Mattison 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. We should be seeking ways to fix the system, rather than waiting for the economy to adapt. Continued inefficient use of natural resources will cause significant impacts on [national economies] overall, and a massive problem for governments to fix.”
Mattison hopes the report will spur companies to take action before governments step in with regulation.