KPMG has published the results of the survey Expect the Unexpected: Building Business Value in a Changing World.
The KPMG study, Expect the Unexpected: Building Business Value in a Changing World, explores 10 “megaforces” that will significantly affect corporate growth globally over the next two decades: 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.
Igor Korotetskiy, Head of Corporate Governance & Sustainability, KPMG in Russia and CIS, noted: “KPMG clients and other organizations can see that the link between compliance with sustainability principles and financial performance is becoming clearer and clearer. The companies that are able to recognize the specific external factors that have the largest impact on their activities and leverage this knowledge will obtain a competitive advantage. Accordingly assessment of activities in the area of sustainability and the submission of corresponding reporting to stakeholders containing understandable and accurate data is being used more and more actively and is rapidly becoming one of the priority objectives. The conclusions of KPMG’s research are particularly relevant for Russian business, which has significant potential to raise productivity through the implementation of the best technologies and business processes, which ensure that their business activities leave the smallest possible environmental, power and resource footprint.”
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.
Over the next 20 years there is likely to be increasing pressure for the price of resources, products and services to reflect the full cost of their production including the cost of environmental impacts. It is prudent for companies to expect to pay in the future a rising proportion of their external environmental costs.
External environmental costs could account for a considerable proportion of earnings (EBITDA) and thus represent significant business value potentially at stake: across the 11 sectors, the average external environmental costs per dollar of earnings would have been approximately 41 cents in 2010.
The two sectors perceived as being at highest risk from sustainability megaforces, but least ready are Food Producers and Beverages. The cluster of sectors in the center of the risk-readiness matrix indicates that perceived sustainability risk remains high for Oil & Gas, Electricity, Mining & Metals and Airlines. Telecommunications & Internet sectors are perceived as being the least at risk and the most ready.
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.
The 10 global sustainability megaforces that may impact business over the next two decades are:
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