The world’s publicly listed companies depend on natural capital for their operations yet cause trillions of dollars in environmental costs that are not accounted for each year, according to new research produced by S&P Global Sustainable1 with feedback and support from Capitals Coalition.

To read the full report, click here.

This research, a significant analysis of the hidden costs to the environment and society generated by corporations worldwide, aims to put a price tag on the most significant negative externalities in the global economy — the indirect impact of economic activities affecting third parties not directly involved in the activities, and not reflected in market prices. It examines these costs for more than 12,000 companies included in the S&P Global Broad Market Index. 

The study finds that:

• Companies in the S&P Global Broad Market Index (BMI) were responsible for $3.71 trillion in unpriced environmental costs across their direct operations in 2021 — equal to more than 4% of global GDP that year.

• More than 26% of companies in the S&P Global BMI generated unpriced environmental costs larger than their net income.

• Greenhouse gas (GHG) emissions were responsible for the majority of unpriced environmental damage costs (63.6%) for these companies, followed by air pollution (26.2%) and land use (4.7%). The impacts of generating electricity from fossil fuels — particularly coal — represented the largest source of environmental costs globally.

• S&P Global BMI companies in the crop cultivation and livestock sector groups have high dependency on ecosystem services, but also generate the majority (57%) of land use-related environmental damage costs.

• Companies in some regions are taking steps to address their responsibility for human and social capital through commitments to protect human rights, but these commitments don’t always cover a company’s full supply chain.

The report analyzes the environmental costs produced by publicly listed companies around the world through several lenses: impact, also referred to as environmental key performance indicators; sector and sector group; and geographic region.

This report also provides analysis of nature dependency risks, through the lens of each company’s reliance on ecosystem services around the world, and important social and human capital issues that contextualize these environmental costs across multiple capitals.

The scale of the environmental damage costs estimated in this report underscores their potential materiality for the world’s publicly traded companies, especially as pressure grows from investors, regulators and the public to measure and mitigate these costs. 

To read the full report, click here.