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Environmental Externalities Cost Global Economy $4.7 Trillion Annually

Agriculture, coal power, steel manufacturing and several other high-impact business sectors face an economic loss when accounting for damages to natural capital, according to a study released by the TEEB for Business Coalition during the recent Business for the Environment Summit in New Delhi.

Natural Capital at Risk: The Top 100 Externalities of Business estimates the global top 100 environmental externalities are costing the global economy some $4.7 trillion a year in terms of the economic costs of greenhouse gas (GHG) emissions, loss of natural resources, loss of nature-based services such as carbon storage by forests, climate change and air pollution-related health costs. The report says companies and investors can mitigate risk and gain a competitive advantage when they include natural capital impacts in their decision-making.

While an increase in middle class consumers, especially in emerging markets, will cause consumer demand to significantly grow over the next few years, natural resources will become scarcer as the natural environmental degradation continues.

The report claims one of the primary challenges companies face is how to understand the value of the natural capital they rely on so it can be better managed. For example, water usually is not priced according to how scarce it is.

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“Incorporating the use of natural capital into a business’ sustainability strategy is something that every company must do to understand their real sustainability issues in order to engrain them into day to day operations and overall planning,” said Jochen Zeitz, Director of Kering and Chairman of the Board’s sustainable development committee and Co-Chair, The B Team.

“This is no longer an option and now more than ever it is critical for reporting requirements to include natural capital accounting and government legislation to address corporate transparency and accountability,” he added.

The report assesses more than 100 environmental impacts using the Trucost environmental model which condenses them into six environmental key performance indicators (eKPIs) to cover the major categories of natural capital consumption: water use, GHG emissions, waste, air pollution, water and land pollution, and land use. These eKPIs were then quantified by region across more than 500 business sectors.

In March, the Ecosystem Markets Task Force (EMTF), an independent task force aimed at finding new opportunities for UK businesses to drive green economic growth, released its Final Report stating the opportunities available for businesses that properly value nature. ast year, twenty-four major companies representing over $500 billion in combined revenues agreed to incorporate ecosystems and biodiversity into their business strategies, including Nike, Patagonia, The Walt Disney Company, Dow Chemical and Coca-Cola, among others.


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