Sustainability ‘Megaforces’ Impact on Business to Accelerate
Companies should expect increases in external environmental costs which today are often not shown on financial statements. Businesses and policymakers must take joint strategic decisions and act now. New research from KPMG International has identified 10 “megaforces” that will significantly affect corporate growth globally over the next two decades.
This is according to global accounting and consulting firm KPMG’s study, Expect the Unexpected: Building Business Value in a Changing World, which explores issues such as climate change, energy and fuel volatility, water availability and cost and resource availability, as well as population growth spawning new urban centers.
The analysis examines how these global forces may impact business and industry, calculates the environmental costs to business, and calls for business and policymakers to work more closely to mitigate future business risk and act on opportunities.
Michael Andrew, Chairman of KPMG International, said: “We are living in a resource-constrained world. The rapid growth of developing markets, climate change, and issues of energy and water security are among the forces that will exert tremendous pressure on both business and society.
“We know that governments alone cannot address these challenges. Business must take a leadership role in the development of solutions that will help to create a more sustainable future. By leveraging its ability to enhance processes, create efficiencies, manage risk, and drive innovation, business will contribute to society and long-term economic growth.”
The KPMG research finds that the external environmental costs, which today are often not shown on financial statements, of 11 key industry sectors jumped 50 percent from US$566 to US$846 billion in 8 years (2002 to 2010), averaging a doubling of these costs every 14 years.
The report calculated that if companies had to pay for the full environmental costs of their production, they would lose 41 cents for every US$1 in earnings on average, the study found.
Yvo de Boer, KPMG’s Special Global Adviser on Climate Change and Sustainability, said global sustainability megaforces will significantly increase the complexity of the business environment.
“Without action and strategic planning, risks will multiply and opportunities will be lost. Corporations are recognizing that there is value and opportunity in responsibility beyond the next quarter’s results; that what is good for people and the planet can also be good for the long term bottom line and shareholder value,” said Mr de Boer.
John B. Veihmeyer, Chairman of KPMG’s Americas region and Chairman and CEO of KPMG LLP (U.S.), said KPMG has taken a leadership role in helping organizations to understand the opportunity side of the equation, not just the risk.
“KPMG’s clients and others are seeing the link between sustainability and financial results becoming increasingly clear. Companies that recognize the external influences on their organizations and leverage them as opportunities are realizing a competitive advantage. To that end, the exercise of measuring and reporting sustainability activities to stakeholders with clear, accurate data is increasingly relevant and quickly becoming a priority.”
The report was released on the opening day of KPMG’s global “Business Perspective on Sustainable Growth: Preparing for Rio+20” summit occurring this week in New York. The event has attracted more than 400 top CEOs and senior business leaders from many of the world’s major corporations, along with key policymakers.
KPMG International is hosting the event, in cooperation with the UN Global Compact (UNGC), the World Business Council for Sustainable Development (WBCSD) and the United Nations Environment Programme (UNEP).