One in four public companies would be unprofitable if they had to pay for damages caused by their carbon pollution, according to a new database monetizing the hidden environmental damages of thousands of firms around the world.
The EcoMap Project was released Friday after two years of development by a group of researchers from the Norwegian School of Economics, MSCI Sustainability Institute, and a non-profit created at the Harvard Business School. It spans 2020-23, and includes about 20,000 public companies in 86 countries and 381 industries.
Kaja Dahl, whose master's thesis and later work sparked the mapping project, said the database is meant to offer accountability and transparency in how companies operate, while making complex environmental and climate data useful for people who struggle to understand it.
“I think this is a game-changer for how we think about corporate success,” Dahl said.
Combined, the thousands of companies analyzed would see a 34-per-cent drop in profits if carbon directly emitted from their operations were properly accounted for, Dahl and her colleagues found.
That's not far off an estimate from 2023, which found 44 per cent of the global profits from 15,000 companies would be wiped out if they had to pay for damages from their carbon pollution.
The EcoMap researchers also looked at what would happen if the companies counted the cost of carbon emitted from their products — for example, fossil fuel companies counting emissions from the burned oil and gas they sell. In that case, environmental costs would outpace global profits by 70 per cent, the researchers found.
Environmental costs would drop earnings of big Canadian companies
Consider the Canadian oil company Suncor Energy Inc. — while its operational environmental costs sat at just under $7.8 billion in 2022, its total environmental costs soared to $39.6 billion after counting the burning of its products, according to the database.
The company’s earnings before interest, taxes, depreciation and amortization, or EBITDA, was $12.7 billion in 2023. But according to the database, environmental costs would have cut that in half to just under $5.6 billion.
Like many airlines in the database, Air Canada would have seen its earnings plummet — to $297 million from $3.6 billion in 2023 if operational environmental costs were factored in. In 2022, the company's adjusted earnings dropped to minus $1.37 billion, meaning its cost of environmental damage was more than the money it generated.
An analysis of the data shows 10 per cent of profitable companies around the world were operating at a net cost to the environment in 2023.
“Their profit is not sustainable over a large scale and over a long period of time,” said Utrecht University fellow Yann Robiou de Pont.
The analysis also measured decoupling rates — how successful companies have been in separating profits from the cost of their emissions.
The 343 companies profiled in Canada were found to have a combined negative decoupling rate of minus 4.06 per cent, meaning the profits made by companies are becoming more closely linked to rising emissions.
Big B.C. companies see large downstream environmental costs, slipping efficiency
The highest operational environmental costs were found in the energy sector, followed by mining and manufacturing.
Fortis Inc. (TSX:FTS), the parent company of the gas utility FortisBC, saw its 2022 operational environmental costs soar from just under $2 billion to $26 billion if the cost of its products were counted.
B.C.’s second largest public company, the mining company Teck Resources Ltd. (TSX:TECK), was found to have a relatively small $793 million operational environmental cost. But when use of the company’s products was considered, the total environmental cost spiked to $17.3 billion in 2023.
The province’s largest public company, Telus Corp. (TSX:T), was found to produce $79 million in operational environmental costs — significantly lower than other telecommunications companies. However, over the four years of data, the company showed a negative 7.33 per cent decoupling rate, meaning its operational environmental costs were increasing faster than revenue.
Around the world, more than half the companies analyzed were becoming less environmentally efficient, despite commitments to reduce their carbon footprint.
A balance sheet for the public good
Andrea Serra, a chief market development officer at the Harvard-affiliated International Foundation for Valuing Impacts, said she hoped the database would help people imagine a future world where environmental balance sheets can exist alongside financial ledgers.
She pointed to a recent global survey showing 85 per cent of investors think corporate reporting contains at least some greenwashing — a term used to describe a company making false green claims to sell a product or service.
“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,” said Serra.
Dan Le, who led the technical development of the EcoMap platform, said he hopes costing out greenhouse gas emissions data will serve the public good.
To do that well, the team plans to expand the environmental metrics that show up on the balance sheet to include everything from wastewater and consumption to the conversion of natural landscapes.
“And that's [going to] start with the rollout of other pollutants,” he said.
