Environmental Impacts and Profits
This is important because it will provide information concerning how much effect that a specified company has had on the environment so as to realize certain profits. In addition, it can be used to predict the impact that an organization would have on the environment if it continues operating at a similar rate. This can help a government in determining the organizations causing the largest impact on the environment so as to impose fair laws on certain organizations for the purpose of reducing impact that organizations have on the environment. Therefore, environmental impact should be included in a company’s calculations of profits.
Since organizations are being pushed to make decisions that favour the environment, having a financial value on environmental impact could help in this quest (Pino & Perera, 2013). This is because the organizations can make the desired decisions based on the environmental cost that is realized. Moreover, the value could be essential in determining the progress of an organization in reducing emission of greenhouse gases in to the atmosphere. When an organization identifies a goal that it intends to realize in a specified period, it can use the environmental figures to determine its progress with respect to the identified goal (SME Sustainability Roadmap, 2011). An example of a company following this idea is Puma that estimated its environmental impact at €145 million by 2010 and has been using this information to establish initiatives geared towards better environmental conservation (Wheeland, 2012).
It should also be included in the company’s profit as it is in line with the establishment of positive corporate impacts. Here, organizations are expected to practice corporate social responsibilities that are realized by preservation of the environment among other activities. Including the impact of organizational activities in the profits is in conjunction. In addition, this would help an organization in internalizing the externalities (Meyers & Waage, 2014). This would also be beneficial to the society because an organization would show accountability for its actions, which is a positive development towards environmental preservation. When required to take accountability, it would mean taking away a large share of a company’s profits that can help in persuading them to establish initiatives directed towards preservation (Jowit, 2010).
In conclusion, due to the current trend in environmental degradation, it would be beneficial to support the idea of including environmental impact in a company’s calculation of profits. This is because it would encourage accountability, corporate social responsibility, and be used to determine a company’s progress towards eradication of greenhouse gas emission. It can also be used to predict the future if companies continue operating at a specified rate.
Jowit, J. (2010). World’s top firms cause $2.2tn of environmental damage, report estimates. [Online] Available at <http://www.theguardian.com/environment/2010/feb/18/worlds-top-firms-environmental-damage> [Accessed 27 Apr 2015].
Meyers, D. & Waage, S. (2014). The Environmental Profit and Loss: The New Corporate Balancing Act. [Online] Available at <http://www.greenbiz.com/blog/2014/02/18/environmental-profit-and-loss-new-corporate-balancing-act> [Accessed 27 Apr 2015].
Pino, S. & Perera, A. (2013). Accounting for Environmental Externalities is Good for Business and the planet. [Online] Available at <http://www.wri.org/blog/2013/03/accounting-environmental-externalities-good-business-and-planet> [Accessed 27 Apr 2015].
SME Sustainability Roadmap. (2011). [Online] Available at <https://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/rs00184.html> [Accessed 27 Apr 2015].
Wheeland, M. (2012). Puma’s Eco-Impacts Report Kicks the Ball Forward on Transparency. [Online] Available at <http://www.greenbiz.com/blog/2012/02/10/pumas-eco-impacts-kicks-ball-forward-transparency> [Accessed 27 Apr 2015].