Costs of environmental impact on business double once in every 14 years

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, says KPMG.

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

He added, “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.”