Companies should do more to report their impact on nature to help curb damage that drains trillions of dollars a year from the world economy, a leading U.N. expert said on Monday.
Pavan Sukhdev, head of the U.N. Environment Programme’s Green Economy Initiative, said it could take five to 10 years to develop rules that would enable comparisons about which firms were best or worst in protecting the natural world.
The Institute of Chartered Accountants in England and Wales (ICAEW) is helping study how to track impacts such as greenhouse gas emissions, pollution, strains on fresh water or involvement in deforestation.
“Today there is no disclosure requirement for companies of your cost to nature, or your cost to society,” he told Reuters on the sidelines of a seminar by insurer Storebrand in Oslo. “We’re saying that it is possible to quantify this.”
Studies led by ICAEW could be widened via the International Accounting Standards Board, he said, estimating that a new accounting system would likely cost $20-$30 million to develop.
Companies frequently boast they are “green” but there is no common system of measurement in sectors including cement, pharmaceuticals, electricity or construction.
An international Carbon Disclosure Project that has tracked corporate greenhouse gas emissions has done the most to establish a yardstick for rating companies’ green performance. But there are no comparable ways to rate impacts on the natural world such as deforestation or water use.
Up to $4.5 trillion annual damage
Last year, a report Sukhdev headed, the Economics of Ecosystems and Biodiversity (TEEB), estimated that damage to natural capital including forests, wetlands and grasslands was running at between $2 and $4.5 trillion a year.
It showed, for instance, that a mangrove in Thailand is far more valuable intact — for uses such as protecting the coast against tsunamis and storms or as a source of wood for building — than if converted to a shrimp farm.
He said that some companies were unilaterally adopting good targets and that firms should ideally seek to have a “net positive impact” on nature.
Among examples, Brewer SABMiller had cut water use, Sumitomo Trust and Banking Co launched a biodiversity investment fund in 2010 and Danone aims to be carbon neutral by the end of 2011.
Richard Spencer, head of sustainability at ICAEW, said that the group was seeking funds for a range of initiatives to follow up the TEEB report for businesses.
“The first stage is developing the valuation techniques” of the natural world, he said by telephone. Work would seek to engage policymarkers and those setting standards.
Idar Kreutzer, chief executive of Storebrand, said the world was on track to use 2.3 planets’ worth of natural resources by 2050 on current trends. “It’s clearly unsustainable,” he said.
Sukhdev, a Deutsche Bank economist, noted accounting precedents for reporting risks beyond pure profit and loss.
Companies have, for instance, to report possible costs from court cases that are under way as “contingent losses.”
Or an oil company would have to report a big oil spill on January 2, 2012, as a “significant post- balance sheet event” in its 2011 annual report, he said.
