Costs of Environmental Impact on Business to Accelerate

by CFO Innovation Asia Staff, 18 June 2012

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External environmental costs in 11 key industry sectors studied by KPMG, such as automotive and telecommunications have jumped 50 percent from US$566 to US$846 billion over the eight years from 2002 to 2010.

This is revealed in a new KPMG report titled "Expect the Unexpected: Building Business Value in a Changing World." It works out to an average doubling of these costs every 14 years.

The report also calculated that if companies had to pay for the full environmental costs of their production, they would lose, on average, 41 cents for every US$1 in earnings.

These environmental costs today are also often not reflected in financial statements, meaning companies can expect these costs to accelerate quickly in the near future, notes the report.

“It is vital for businesses and governments to work together to mitigate future business risk and act on opportunities," says Sharad Somani, Head of Climate Change and Sustainability Services, KPMG in Singapore.

"We are living in a resource-constrained world. The rapid growth of developing markets, climate change, and issues of energy and water security are among the forces that will exert tremendous pressure on both business and society.”

Somani adds that governments alone cannot address these challenges. Business must therefore take a leadership role in the development of solutions that will help to create a more sustainable future.

“By leveraging its ability to enhance processes, create efficiencies, manage risk, and drive innovation, business will contribute to society and long-term economic growth,” says Somani.

Ten megaforces

Beyond calculating the environmental costs to business, the KPMG study also identified and explored 10 sustainability “megaforces” that will significantly affect corporate growth globally over the next two decades.

Issues identified include climate change, population growth, water scarcity and the decline of the ecosystem.

Somani explains these global sustainability megaforces will significantly increase the complexity of the business environment. He adds that without action and strategic planning, risks will multiply and opportunities will be lost.

“Corporations are recognising that there is value and opportunity in responsibility beyond the next quarter’s results; that what is good for people and the planet can also be good for the long term bottom line and shareholder value,” he said.

According to Somani, companies that recognise the external influences on their organisations and leverage them as opportunities are realising a competitive advantage.

"To that end, the exercise of measuring and reporting sustainability activities to stakeholders with clear, accurate data is increasingly relevant and quickly becoming a priority,” he adds.

MORE ARTICLES ON SUSTAINABILITY

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CFO Innovation Asia Staff

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Last week at a conference,

Submitted by Ambrosia Divine on 17 September 2012 - 2:32pm

Last week at a conference, an event speaker was presenting this problem. It's a real thing that many corporate leaders should take into consideration.

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