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    The cost of cancer: why health impacts belong on company balance sheets

The cost of cancer: why health impacts belong on company balance sheets

August 19th, 2014|

First published in the Guardian, August 18th, 2014

Like so many of us, I have personal experience with cancer. I’ve had it twice, and so have both of my parents, six aunts and numerous friends. Just last month, someone very close to me was diagnosed with invasive breast cancer. These illnesses are more than just statistics. They require the patient, as well as their families and friends, to journey through a pretty broken medical system, and their emotional price is exorbitant.

My own cancer odyssey started about eight years ago and lasted two years. (I’ve been cancer-free for six years now and I’m doing fine, thanks). When I started feeling physically better, I felt the release of an emotional bottleneck. I went to a support group and each of the six people there told the same story: “I’m sure I got cancer for a reason and I just don’t know what it is yet.”

I responded, perhaps inappropriately: “You got cancer because a variety of companies, governments and shareholders decided that clean air, water and food were less important than their money.”

I’m sure everyone in that group was happy I never returned, but it was a great catharsis for me. At that moment, as an environmentalist working with business, my emotional self met my professional self on very clear terms. I realized we must begin including the environmental costs – including environment-related health costs – in every financial transaction.

Consider this: last year, the US spent $37bn on cancer drugs and over $100bn on cancer treatment alone. Those numbers don’t include the unreported and uncovered costs, such as nurses, acupuncture, psychotherapy, personal travel, supplements and caregivers’ expenses. I spent many thousands of dollars in such costs for each of my cancers, and that’s far from unusual. Of course, those numbers also don’t include the personal costs borne by families and individuals, nor the follow-on effects of cancer treatment in the form of future weaknesses, illnesses, lost wages and lower productivity.

I have grieved and tended too many friends who had cancer in their 30s and 40s, and feel absolutely certain that chemicals, drugs and hormones in the air, water and food play a role in causing this scourge. Reading about the cancer cluster of kids in Toms River, New Jersey, illustrates the difficulty of proving these connections, but for anyone reading the news or sitting by a sick bed, these connections are palpable – and science is getting closer to proving it.

Air pollution kills as many people every year as smoking does, according to Brigham Young University economist C Arden Pope III. Meanwhile, the World Health Organization’s International Agency for Research on Cancer lists 113 agents that are carcinogenic and 66 that likely cause cancer. These chemicals range from the familiar villains – such as tobacco, asbestos and formaldehyde – to the lesser-known fuchsine for magenta production and vinyl chloride used to make the ubiquitous PVC found in industrial pipes, plumbing, packaging and credit cards.

But external environmental and social costs – including health impacts – of these chemicals aren’t often considered in the financial equations that result in their use in many products today. The costs of cancer simply don’t show up in the balance sheets of the businesses that contribute to its prevalence.

GDP, for example, is one of the most important economic indicators in use. All the health care spending I mentioned earlier actually contributes to the GDP, showing up as a positive sign in the profit-and-loss-only model of economic health. When economic growth causes increased illness and healthcare costs, our measurements are missing some basics. It’s not always so great when the GDP goes up. A thriving economy needs a healthy society, not more cancer spending.

We need to construct a new financial ledger. To calculate true profit and loss, broader societal and environmental causes and effects need to be added into the equations. In other words, we need integrated reporting that includes the external environmental and social costs – including health impacts – currently not on the books.

There are signs that some businesses are starting to think about these costs, whether or not they’re including them in their financial statements. Take CVS Caremark, which earlier this year unilaterally decided to forgo $2bn in annual tobacco sales because of the negative health impacts. In a recent column in the Guardian, Eileen Howard Boone, senior vice president of corporate social responsibility at CVS Caremark, wrote: “What we saw was a health epidemic with 480,000 tobacco-related deaths each year, and a $300bn annual economic wallop attributed to smoking.” The company simply looked at the toll tobacco takes on society and – in a courageous move – decided cigarettes didn’t fit into the mission of a healthcare company.

But more needs to be done. Ounces of prevention, in this case, are worth thousands of pounds of cure. Reducing the environmental factors that contribute to cancer could have benefits that ripple across all business – transferring costs from a stressed and broken healthcare system to bolstering the quality of our food, water, clothing, indoor and outdoor air. That seems like a smarter use of our money.

Imagine if profit statements included the costs of illness attributable to the profits. The use of pesticides might be restricted to emergency circumstances and PVC piping would be replaced with nontoxic, greener alternatives.

This truer accounting system would lead to investment in cleaner agriculture and manufacturing, and end the taxes of carbon and pollution that we already pay for our current lifestyles.

Even if the overall costs end up being the same, I’d rather spend our money on cleaner industry and infrastructure instead of on chemotherapy and asthma inhalers. Wouldn’t you?

Forbes’ Inspiring Social Entrepreneur Ideas

May 1st, 2014|

This Forbes website list of inspiring social entrepreneur ideas highlights Amy’s proposal for accelerated depreciation for green infrastructure. See more of her thoughts on the issue here.

From the Forbes list:

#3. Corporations harm the environment but many don’t want to.  Amy Larkin, author of Environmental Debt: The Hidden Costs of a Changing Global Economy explained the connection between the growing environmental crisis and global economics. She noted that many corporations want to invest in clean tech, but choose not to because of the short term financial pain—even though many green investments have positive long term financial impacts. She advocated specifically for accelerated depreciation for green infrastructure investments to incentivize, really enable, corporations to invest in reducing the environmental harm.

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    Climate change survival: companies need courage… and new metrics

Climate change survival: companies need courage… and new metrics

April 25th, 2014|

First published in the Guardian on April 24th, 2014. 

Today, tremendous work is being done to develop the metrics of natural capital. All kinds of very smart people and organizations are making the “business case” for sustainability, making tortuous calculations as they analyze the life cycles, carbon production and water footprints of a variety of products, all in an attempt to make the best possible business and marketing choices.

This arduous work is being done – finally – by gifted and smart accountants, economists and supply chain and manufacturing experts, from the Global Reporting Initiative to the Sustainability Accounting Standards Board to the Carbon Disclosure Project to the World Bank’sNatural Capital Accounting. I appreciate all of this work. We need it.

But, impressive as this work is, it is no replacement for having the courage to actually contemplate the state of the world around us. Right now, we are looking on with a mix of disbelief and ennui as extreme weather engulfs us. In some cases, we are trying to take what appear to be reasonable steps, mostly in order to protect our precarious perch in the world’s economy. The trouble is, the time for reasonable has passed. We have somehow forgotten that if there is no nature, there is no business.

We are in a global environmental emergency, but we are behaving as if incremental improvements to “business as usual” will do. Talk to a scientist, a fisherman, a native of a low-lying island or a farmer stymied by drought, heat or floods. Or for that matter, talk to anyone who has been flooded in southern England or Pakistan; or who is making flood insurance payments in New Jersey or Florida; or who is witnessing the effects of drought in the southwest US or Iran; or who is being scorched by heat waves in Australia or Argentina.

This ripple effects of these environmental disasters continue across the economy, hitting investors whose livelihood relies on predicting commodity prices, managers who are counting on seasonal hotel occupancies, and insurers who are facing double digit losses from catastrophes. Their jobs are getting harder – and many are scared to death.

Everything is upside down, a very very dangerous spiral has begun, and we’re nowhere near ready. Even in California, home of environmentally savvy governor Jerry Brown, voluntary statewide water rationing has only just begun three years into a drought. Voluntary!

My brother, a small businessman in Brooklyn, owns a factory that employs about 50 people. He makes a good living, pays his employees well and has been working in his field (construction parts and machinery) for 35 years. He’s much more conservative than I am, but he lives a fine life with a beloved family and demonstrates honor and courage in most everything he touches.

He took a very conservative approach to the recession and subsequent “end of any building at all” that he saw coming in 2008. Realizing that the boom years of the mid-2000s would not last, he saved for these rainy days, took care of his workers (kept them all on at four days a week despite virtually no new revenue for two years), invested his own money to support the business, slashed his own salary, and hoarded materials when times were flush. All this planning paid off: despite a very rough two years, he was able to withstand the recession. Now, business is booming again.

My brother’s tactics were not about sustainability – they were about survival. Conservative, in this case, essentially means conserving resources to ensure long-term security. In my brother’s case, from the time he became aware of the coming crisis, there was no “business as usual” in anything he did: he took emergency measures to protect his company, his workers and his future. And it worked.

Many companies are looking beyond sustainability to survivability in their radical approaches to environmental issues. KPMG calculated that the environmental degradation caused by the world’s 3,000 largest public companies totaled $2.15tn in 2008. This estimate undoubtedly antagonized many of the company’s biggest clients.

Some companies are addressing sustainability. Unilever committed to double sales and halve its footprint between 2010 and 2020, and created a global advocacy team to help it achieve that goal.

Sometimes, this new knowledge spurs even more aggressive action. When Puma measured its 2010 Environmental Profit and Loss (EP&L) with the help of PricewaterhouseCoopers and TruCost, it learned that its profit would have been reduced by 72% if it had integrated environmental costs into its accounting.

Puma’s parent company, Kering, is now pursuing an even deeper understanding of the company’s real costs, and is creating an EP&L for all of its 16 luxury brands, including Yves Saint Laurent, Gucci and Stella McCartney. And, in 2012, Kering’s vice-chair Jochen Zeitz and Sir Richard Branson formed the B Team, an organization tasked with creating a business model for the 21st century – with the understanding that the current model will not allow us to survive.

All of these corporate leaders are behaving as if their survival is at stake. They dared to read the weather pages and register that the world their businesses inhabit is trembling from environmental damage. And they instructed their companies to take commensurate action.

Only by adding courage to sustainability will we survive.