Corporate and government accounting will likely reflect environmental profit and loss within a decade, thanks partly to progress made this week at a U.N. conference in Rio de Janeiro, backers of the plan told Reuters on Thursday.
Company accounting and calculations of gross domestic product (GDP) are flawed because they fail to show governments, consumers and managers the true costs of their activities, said Pavan Sukhdev, a board member of U.S. environmental group Conservation International and a former Deutsche Bank AG banker.
The main reason is that accounting practices fail to account for the creation, use and degradation of air, water, trees, and other "natural assets" in the same way they account for factories, credit and other assets, he said.
He estimates that the top 3,000 companies fail to account for $2.1 trillion of charges related to the use or pollution of natural assets - say by releasing carbon dioxide into the air or waste into a river. That figure nearly doubles to $4 trillion, or about 6.7 percent of global GDP, when the world's entire corporate sector is included, he said.