Hidden Costs of Profit
A study on the hidden costs of profits finds that top industries rely on free natural capital. This study found that business sectors—cement, chemicals, energy, farming, fishing, forestry, mining and utilities—use $7.3 trillion worth of free natural capital (i.e., clean water, soil) annually. This reliance on natural resources is the sole reason they make a profit.
“Externalities” is a concept widely discussed in environmental communities. It refers to industrial processes that release pollutants into the air or water, for example. But at the end of the day, the companies that create the pollution don’t pay for them. In fact, it is us, not the polluting businesses, who cover the hidden costs. Thus, organizations privatize profits and socialize costs.
Most of the unpriced natural capital costs are from greenhouse gas emissions (38%), followed by water use (25%), land use (24%), air pollution (7%), land and water pollution (5%), and waste (1%).
Usually, capital refers to money. But it can also mean any resource with value. Natural, social, and human capital operate similarly to traditional capital. When we invest in them, value grows. When we neglect them, their value diminishes.
Top Industries Rely on Free Natural Capital
The study reveals that over 1,000 global primary production and primary processing region-sectors consume $7.3 trillion of unpriced natural capital annually, accounting for 13% of the 2009 global GDP. Coal, especially from China and North America, has the most significant environmental impact. Deforestation in South America also causes substantial ecological damage.
The study’s key finding is that none of the top 20 region-sectors would be profitable if they fully accounted for environmental costs. This highlights that the current global industrial system is unsustainable and relies on exploiting natural capital. In essence, according to Paul Hawken, “we are stealing the future, selling it in the present, and calling it GDP.’
We’ve know about these findings for over a decade and yet, we continue to report on the shortcomings of the organizations.
Getting Back to the Source
Did you know that the term “profit” originates from the Latin noun “profectus,” signifying “progress”? And the verb “proficere” means “to advance.” In earlier times, before modern corporations, businesses were typically managed, owned, and directed by a single individual.
This person’s earnings encompassed management wages, capital returns, and entrepreneurial gains. When wages and raw materials made up the total costs, everything else was considered profit. Profit was initially connected to progress and advancement.
But can we actually see the opportunity in front of us to build a new global industrial system that doesn’t exhaust our natural capital? This isn’t merely about crunching numbers or tweaking economic models. It demands a fundamental shift in the way we provide for human wellbeing.
We need conscious leaders who genuinely care about people, society, and the planet to bravely look beyond profits and forge pathways for our future. Our own ability to learn about the source of everything we bring into our lives matters.
Our world thrives when we appreciate the sacredness of all things–whether living, inanimate, or even invisible. By fostering this understanding, we cultivate a harmonious relationship with our environment and each other. Peace only comes when we recognize the holistic value in everything and respect all natural resources. It’s up to each of us to take our own first steps through creation, not criticism.