The 2018 State of Green Business Report – produced by GreenBiz and Trucost – stated that the corporate carbon emissions of the largest 1,200 global companies and the largest 500 US companies fell in 2016 reaching the lowest level in the past five years, as a result of a switch to cleaner fuels.
There have also been modest improvements globally in water use and waste management. The numbers of companies setting carbon and water reduction targets have increased by around 10 percent over the past five years. However, the State of Green Business report stated that the carbon reduction targets set by the companies in 2016 accounted for only around a fifth of their share of the reductions needed by 2050.
Companies use natural resources and generate pollution as a result of their business activities. Every year, Trucost estimates the costs associated with these impacts by the top companies in the United States and the world. Richard Mattison, chief executive wrote in the report that worryingly the research found that while the natural capital costs of companies had previously been falling, the latest year’s results (2016) showed a sharp increase.
The total cost in 2016 was approximately 24 percent higher than 2015. As a result, the natural capital cost generated by the largest global companies was nearly two times higher than their net income.
The cause seemed to be increased production of agricultural commodities and, hence, increased farming-related environmental impacts, in particular, water pollution from fertilizer and pesticide use. These impacts occur in the supply chains of large global companies, increasing their overall natural capital costs. This is more evidence of the failure of markets to price in the natural capital costs of production, Mattison said.
He noted however that by far the majority of environmental impacts are embedded in the supply chains of companies rather than their direct operations. This posed serious risks for companies as climate-related impacts such as droughts disrupt supplies of water-intensive commodities. So he said it was positive that more companies were disclosing supply chain carbon emissions and water use.
Meanwhile, Libby Bernick, global head of corporate business at Trucost, predicted that 2018 would be the year that the term non-financial reporting would stop being used to describe ESG issues as more and more investors
understood its financial implications and demanded that it be integrated into company decision-making.