Why Puma, Natura and Greif track environmental externalities

[Editor's note: This is the fourth installment of WRI's five-part blog series, "Aligning Profit and Environmental Sustainability." Each post, which will run on Thursdays over the course of five weeks, will explore solutions to help businesses overcome barriers to better integrate environmental sustainability into their operations.]

David Roberts at the online news organization Grist commented last week on Twitter that "people talk about 'externalities' like they are just bad vibes or something. But that money is real money. Those costs are real costs."

How real is that money? Pavan Sukhdev, author of "The Economics of Ecosystems and Biodiversity" and "Corporation 2020," claims that these "externalities" -- or costs to society from carbon emissions, water use, pollutants and other byproducts of business activities -- are more than $2 trillion.

Putting a financial value on these environmental costs can help businesses make better-informed decisions about how they manage their environmental risk. Not all companies recognize this -- and even fewer actually know how to value these externalities correctly. But a few corporations are starting to show us the way.

Learning from Puma's environmental profit and loss statement

Puma is one company that thinks this is an important issue. While all companies have to develop profit and loss statements, Puma is the first to develop an environmental profit and loss statement. The company valued the environmental impact of its operations and supply chain in 2010 at about $190 million, factoring in impacts like water use, greenhouse gas emissions, land use conversion, air pollution and waste.

The company is now using this statement as a way to drive environmental initiatives, which it views as key to its long-term commercial survival. Puma's environmental profit and loss statement is helping employees, shareholders and suppliers understand the magnitude of the company's environmental impacts, prioritize which ones to tackle first and incorporate this information into decision-making.

Next page: Natura and Greif use externalities to push sustainability