THE cost of pollution and other damage to the natural environment caused by the world's biggest companies would wipe out more than a third of their profits if they were held financially accountable, a major unpublished study for the United Nations has found. The study, conducted by London-based consultancy Trucost and due to be published this summer, found the estimated combined damage was worth $2.2tr (£1.4tr) in 2008 — a figure bigger than the national economies of all but seven countries in the world that year.

The report comes amid growing concern that no one is made to pay for most of the use of and damage to the environment, which is reaching crisis proportions in the form of pollution and the rapid loss of freshwater, fisheries and fertile soils.

Later this year, another huge UN study — dubbed the Stern for nature after the influential report on the economics of climate change by Sir Nicholas Stern — will attempt to put a price on such global environmental damage, and suggest ways to prevent it. The report, led by economist Pavan Sukhdev, is likely to argue for the abolition of billions of dollars of subsidies to agriculture, energy and transport, with tougher regulations and more taxes on companies that cause the damage.

The UN-backed Principles for Responsible Investment initiative and the United Nations environment programme jointly ordered a report into the activities of the 3,000 biggest public companies in the world. It found that the damage equated to six to seven per cent of the companies' combined turn-over, or an average of one third of their profits, although some businesses would be much harder hit than others.

“What we're talking about is a completely new paradigm,” said Richard Mattison, Trucost's chief operating officer and leader of the report team. “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 biggest single impact on the $2.2tr estimate, accounting for more than half of the total, was emissions of greenhouse gases blamed for climate change. Other major 'costs' were local air pollution such as particulates, and the damage caused by the overuse and pollution of fresh water.

The true figure is likely to be even higher because the $2.2tr does not include damage caused by household and government consumption of goods and services, such as energy used to power appliances or waste; the 'social impacts' such as the migration of people driven out of affected areas; or the long-term effects of any damage other than that from climate change. The final report will also include a higher total estimate that includes the long-term effects of problems such as toxic waste.

Trucost did not want to comment before the final report on which sectors incurred the highest 'costs' of environmental damage, but they are likely to include power companies and heavy energy users such as aluminium producers because of the greenhouse gases that result from burning fossil fuels. Heavy water users such as food, drink and clothing companies are also likely to feature high up on the list.

Sukhdev said the heads of the big companies at this year's annual economic summit in Davos were increasingly concerned about the impact on their business if they were stopped or forced to pay for the damage. “It can make the difference between profit and loss,” he told the annual Earthwatch Oxford lecture recently. “That sense of foreboding is there with many, many [chief executives], and that potential is a good thing because it leads to solutions.”

The aim of the study is to encourage and help investors lobby companies to reduce their environmental impact before governments act to restrict them through taxes or regulations, said Mattison.

— The Guardian, London