Corporate environmental impacts continue to grow

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The most comprehensive assessment of corporate sustainability activity to date shows that while companies around the world engage in a wide range of sustainability initiatives, the costs to the environment continue to grow.

The sixth annual 'State of Green Business' report (download free here), published by GreenBiz Group in association with Trucost, measures the environmental efforts and impacts of 500 U.S. companies and more than 1,600 of their global counterparts.

It tracks more than 30 metrics - some never before reported on a global basis - from greenhouse gas emissions to environmental R&D, to assess whether businesses worldwide are making progress in addressing planetary concerns. The report also tracks 10 corporate megatrends related to environment and sustainability.

Trucost's Environmental Register, which tracks and values corporate resource use and pollution, shows that the financial costs to natural capital of more than 2,000 companies analyzed surpassed their pre-recession levels in 2011, exceeding $1 trillion globally for the first time.

The amounts are tallied by compiling companies' individual and supply chain impacts, including carbon emissions, water consumption and waste, and assigning a cost to each impact.

'This is the first time that aggregated reporting data has been done for such a large collection of sustainability metrics,' says Joel Makower, chairman and executive editor of GreenBiz Group, and the report's lead author.

'It shows that despite the rapid rise of sustainability on companies' agendas, progress is lacking, particularly in light of the resource and weather risks many sectors are facing.'

Risk is a key focus of the report. Among the megatrends and metrics are those focusing on how companies increasingly view climate change and access to water and natural resources as key risk factors, particularly in an age where floods and droughts in one part of the world can upend supply chains globally, and where water scarcity is becoming a constraint to operations on nearly every continent.

Top Key Performance Indicators - KPIs
One thing is fairly consistent among companies around the world, notes the report: their top four environmental impacts represent about 80 percent of their overall footprint. That confirms the Pareto Principle - also known as the 80-20 rule - that for many events, roughly 80 percent of the effects come from 20 percent of the causes.

In the global view of business, that 80 percent comes from:

  • Greenhouse gas emissions of all types (41 percent);
  • Water abstraction - the process of taking water from any source, for irrigation, energy production, manufacturing, drinking water, or other uses (27 percent);
  • Acid rain and smog precursors, which include sulfur dioxide (SOx), nitrous oxides (NOx) and ammonia for acid rain, and NOx and carbon monoxide for smog (7 percent); and
  • Dust and particles suspended in air, microscopic solids or liquid droplets that are so small that they can get deep into the lungs and cause serious health problems (5 percent).

The mix of top KPIs differs somewhat between U.S. and global companies, and between companies' direct emissions and those of their suppliers, though the 80/20 rule remains roughly intact.

'The cost of protecting natural capital creates strategic opportunities for businesses that can optimize resource use through supply chains and deliver innovative products and services. Applying a financial value to natural capital impacts provides business context and will spur progress through increased engagement,' says Richard Mattison, CEO of Trucost Plc.

'The opportunity is ripe for forward-thinking leaders of multinational companies to take the lead in remaining competitive in a resource-constrained, volatile economy that has become the new normal.'

Notes the report, sustainability leaders continue to be charged with a broad mandate but little direct authority. This requires them to engage employees, value-chain partners and customers in order to achieve their company's strategic goals.

Among the 10 megatrends described in the report is the growing interest in measuring natural capital in the form of 'environmental profit-and-loss' statements; the rise of machine-to-machine communications, and the opportunities it brings to creating radical efficiency in buildings; the increased interest by investors in sustainability as a materiality issue; and the rise of sustainability-related apps for both consumer and business use.

For those companies 'doubling down' on their sustainability efforts the role of dedicated sustainability professionals is becoming more associated with value creation and not just a cost to be managed, notes the report.

The 'State of Green Business' report will be the centerpiece for the upcoming GreenBiz Forums to be held in New York (February 20-21) and San Francisco (February 27-28).

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