Measuring the Costs of Environmental Impact Part 1

In order to see if a company is viable as a going concern, environmental costs are vital to know for the long-run. The benefits to preserving the environment in terms of dollars may be surprising, but it’s not to many business leaders these days. A private sector solution may be the best solution on a global scale. Just last week, Puma became the world’s first major corporation to report the details of the cost of the company’s impact on the environment. They said the costs of the carbon emission and the water it used in 2010 totaled $134.3 million. The costs not only included the company, but all of its suppliers as well. The next step for the company is to measure their cost of waste and land-use change. Ecosystems are vital to the performance of most companies, and integrating the true costs of extracting these services could significantly impact bottom lines in the future.

Environmental costs aren’t always easily seen, but in taking a closer look, the results are scary. For example, a fruit farmer in China now has to pay people to pollinate apples trees because there are no longer enough bees to do the job. All types of biodiversity loss, driven by land use change, over exploitation, invasive species and climate change is having a large effect on the world today. Some studies have come out that list the dollar impact of damage done to nature by human activity between $2 trillion and $4.5 trillion, with some estimates up to $6.6 trillion. No matter what the impact is, something needs to be done, and no one realizes this more than businesses who see the huge costs down the road. For example, how can agriculture grow crops to eat without clean and accessible water? How can fisherman fish and people get an essential source of protein with depleting populations of fish?

It’s interesting to see that developing countries are the ones seeing these impacts more.  One of the arguments against reporting these costs is the fact that for developing countries to grow, they need to go through a manufacturing and infrastructure stage that is seen as harmful to the environment (though it doesn’t have to be). On the flip side, it’s the poorer nations that rely more heavily on these natural resources, and without doing something about it, they won’t have the resources to sustain themselves. Environmental costs will not only be hitting the world’s poor, but also businesses' pocketbooks. Soon they will be forced because of regulation to pay things such as pollution taxes, carbon credits, landfill taxes and higher insurance premiums(and some already are). So what can be done, and should these costs be reported to the public? Come back to our blog tomorrow to find out!