A recent global survey has revealed that a staggering 85% of investors believe corporate reporting is tainted by greenwashing. This revelation comes alongside the EcoMap Project, which analyzed 20,000 public companies across 86 countries and 381 industries, uncovering that many firms are not living up to their environmental commitments. More than half of these companies are becoming less environmentally efficient, despite promises to reduce their carbon footprints. These findings suggest a significant disconnect between corporate environmental promises and actions, raising questions about the sustainability of their reported profits.
The EcoMap Project, developed over two years by the Norwegian School of Economics, MSCI Sustainability Institute, and a Harvard Business School-affiliated non-profit, highlights alarming trends. In Canada, the 343 companies profiled exhibited a negative decoupling rate of minus 4.06%, indicating that profits are increasingly tied to rising emissions. If the environmental costs incurred by these companies were accounted for, one in four public companies would become unprofitable. Furthermore, the analysis suggests that environmental costs could outpace global profits by 70% in 2023.
“I think this is a game-changer for how we think about corporate success,” said Kaja Dahl, reflecting on the project's implications.
The project revealed stark contrasts among companies. Teck Resources Ltd., for instance, reported an operational environmental cost of $793 million, while Telus Corp.’s costs stood at $79 million—significantly lower than its telecommunications peers. On the other hand, Fortis Inc.'s operational environmental costs surged from nearly $2 billion to an astounding $26 billion when factoring in its product-related costs. Air Canada’s earnings would have dramatically fallen from $3.6 billion to $297 million if operational environmental costs were included.
The EcoMap Project also highlighted that if companies accurately accounted for direct carbon emissions from operations, they would face a 34% drop in profits. This insight underscores the precarious nature of current profit structures reliant on unaccounted-for environmental impacts.
“One of the main reasons we're also doing this work is because we've seen a lot of demand for it now, more than ever,” Andrea Serra stated, emphasizing the growing call for transparency and accountability in corporate environmental reporting.
Suncor Energy Inc. provides another startling case study; its operational environmental costs were under $7.8 billion in 2022, but soared to $39.6 billion when accounting for the burning of its products. This raises significant concerns about the sustainability and environmental responsibility of such enterprises.
The analysis unearthed that 10% of profitable companies worldwide were operating at a net cost to the environment in 2023. The ramifications are severe: if businesses were held accountable for the damages caused by their carbon emissions, profits would tumble across the board.
Yann Robiou de Pont commented on this unsettling trend: “Their profit is not sustainable over a large scale and over a long period of time.”
