11) MULTINATIONALS DAMAGE GLOBAL ENVIRONMENT

(The following article is from the March 1-15, 2010 issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $30/year, or $15 low income rate; for U.S. readers - $45 US per year; other overseas readers - $45 US or $50 CDN per year. Send to: People's Voice, c/o PV Business Manager, 133 Herkimer St., Unit 502, Hamilton, ON, L8P 2H3.)

PV Vancouver Bureau

     The world's 3,000 largest companies are causing $1.4 trillion worth of environmental damage every year, according to an unpublished UN report. As outlined by the UK's Guardian newspaper, about half the cost arises from the release of greenhouse gases, and most of the remainder is linked to local air pollution, and the over-use and pollution of freshwater and fisheries.

     These unaccounted environmental costs equate to six to seven per cent of the companies' combined turnover, or an average of one third of their profits. Some businesses bear a much higher level of responsibility for the "environmental externalities" they cause.

     Richard Mattison, chief operating officer of Trucost, which wrote the report for the UN, told the Guardian: "Externalities of this scale and nature pose a major risk to the global economy and markets are not fully aware of these risks, nor do they know how to deal with them."

     The $1.4 trillion figure does not include damage caused by social impacts, such as large-scale migration of people and other long-term effects of climate change.

     Later this year, another UN-backed study is expected to propose ways to make firms financially responsible for their environmental damage. This second report, led by economist Pavan Sukhdev, will apparently argue for the abolition of subsidies to harmful industries and increased taxes on companies that cause high levels of environmental damage.

     It is expected to take a similar line to the UK's Stern Review in 2005 on the economics of climate change, arguing that it will prove more cost effective to address the damage done to biodiversity and so-called environmental services such as soil and water supplies now rather than delay action.

     Mattison said it remained to be seen if governments are willing to take action to address environmental externalities. "It's going to be a significant proportion of a lot of companies' profit margins. Whether they actually have to pay for these costs will be determined by the appetite for policy makers to enforce the `polluter pays' principle."

     The Guardian also notes that "Amid growing momentum for more limits on operations, taxes and fines, investor groups such as the US-based Ceres, which represents more than 80 funds managing more than $8 trillion of assets, are lobbying hard for companies to monitor, report and reduce their impact before they are forced to by legislation. So far, however, reporting is patchy and hard to compare."

     A breakdown of the different sectors covered in the Trucost report will be published this summer. By far the most "damaging" companies are energy utilities, where the $400 billion total "cost" was dominated by carbon dioxide and other greenhouse gases which are accelerating global warming, and then by nuclear waste, acid rain and smog precursors, and metal pollution in water.

     The two sectors with the next biggest impacts were "basic materials" such as mining, forestry and chemical companies, with costs of just over $300 billion, and consumer goods such as cars, food, drink and toys, at just under $300 billion. Damage by mining and similar businesses was predominantly from greenhouse gas emissions, followed by coal - which causes both greenhouse gases and smog-forming soot - then freshwater use and pollution, and pollution causing acid rain and smog.

     The biggest problem caused by consumer goods makers is their freshwater use, much of which was caused by food and drink companies, followed by greenhouse gases, and pollution from agricultural chemicals.

     Industrial companies, including construction, aerospace and electronics, and the oil and gas sector, had the next greatest impacts at, respectively, $200 billion and about $175 billion. The damage caused by consumer services, including the media, was valued at approximately $75 billion, again mostly from greenhouse gases, water and local air pollution.

     The four sectors with the lowest impact - telecommunications, healthcare, technology and financial services - all caused environmental damage totalling less than $25 billion each.

     "The swath of companies these revolutions are going to affect is so very varied," said Mattison. "It's incorrect to say - as markets will - that these companies will adjust. Saying `let's ignore it for the moment and governments will deal with that' is not really a position I think is tenable. There's a need for investors to act."

     Meanwhile, a survey published by New Scientist magazine showed a "dramatic mismatch" between public perceptions about how damaging companies are and what they are doing to limit their impacts, and the professionals' assessments. Among the results, it found some companies "enjoy undeserved green reputations" while others are getting little credit for efforts to protect the environment.