The world's leading 3,000 companies cause $2.2 trillion in annual damage to the environment, according to a UN report that will be released this spring. Based on eight years of studying a group of companies that includes the entire S&P 500, the report tracks corporate supply chains in order to place a monetary figure on greenhouse gas and particulate emissions, local pollution, water use, and various other depletions of environmental resources.
The report, which the UN commissioned in order to educate eco-minded investors, may be the first step in a global push to factor natural resources into business costs. Environmentalists have long argued that since nature provides services -- "ecosystem services," they're now termed -- vital to doing business, placing a monetary value on these services is the best way to ensure that we do not overuse them. In some instances this extra cost would be passed on to consumers, but in others it would be absorbed by businesses.
The Clean Air Act used this method to tackle acid rain in the 1990s, creating a sulfur dioxide market that effectively controlled the substance. Similar efforts are, of course, under way with carbon, as well as with less easily quantifiable resources. The U.K. is pursuing biodiversity pricing while the U.S. is focusing on pricing systems for wetlands and forests.
The UN is vital to the monetization of environmental resources, since any pricing system would have to be global in order to keep corporations on an even playing field. This report indicates that such an effort may be on the horizon, though if the fruitless Copenhagen climate negotiations are any guide, it may be a nearly impossible sell without legislation on the part of individual nations.
Since it never hurts to be prepared, though, utility, mining, forestry, and chemical companies -- the biggest offenders, according to the report -- would be wise to develop contingency plans for what they would do if forced to pay for the environmentally harmful byproducts of their longstanding business models.
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