Sustainability at a Profit

Many industries that seem lucrative in fact dump massive environmental and social costs on third parties through their unsustainable production methods. Governments, consumers, and, most of all, companies worldwide must work to transform existing systems and move toward a low-carbon, resource-efficient economy.

NAIROBI – How profitable are the world’s major industrial and agricultural sectors? According to a new report by the London-based consultancy Trucost, when one accounts for these sectors’ costs to third parties in the form of environmental and other damages, the answer is “not very.”

Many sectors seem lucrative when conventional economic calculations are used. For example, pre-tax profit margins for iron, steel, and cement production, and for crude-oil and natural-gas extraction, range from roughly 7% to nearly 20%.

But, after factoring in externalities, the global cement sector has average pre-tax losses of 67%, and crude-oil and natural-gas extraction barely break even. Indeed, Trucost’s report estimates that the top 100 environmental externalities worldwide – including greenhouse-gas emissions, natural-resource depletion, deforestation, climate change, and air pollution-related health problems – cost the global economy roughly $4.7 trillion annually.

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