Tracking externalities in the private sector

Negative and positive externality costs and benefits are rarely the stuff that makes headlines. While they are easy to identify on a principle’s level graph ,in the real world it is harder to find them stated in such black and white terms outside of the classroom or economics journal. But those days might be coming to an end soon. Surprisingly, it might also be of the corporation’s own volition. A pioneer in this effort is the German sporting company Puma. In 2011 they hired several private consultants to calculate their impact on the environment, as well as the positive production externalities. This “environmental profit and loss statement” evaluated the company’s damage at $190 million, taking into account not just carbon emissions, but also factors like water land use. Not only was this report created, but it was published, allowing for an increased level of transparency and potentially accountability going forward.

The difficulty going forward will be to incentivize other corporations to undertake these kind of assessments. They are neither cheap nor fast to produce, let alone what the findings might do if they make their way into the public discourse. For these studies to be conducted, we must find a not only encourage firms to undertake these studies, but utilize them to make decisions that will benefit society, even if it cuts into their bottom line.

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