Research project measures global environmental liabilities
by Roger Well
ENFOS, Inc. was originally created with one goal: to address the problem of global environmental liability one entity at a time. Financial transparency to some degree exists in North America and Europe through reporting and disclosure requirements placed on publicly traded companies and governmental agencies. However, in most of the world this is not the case, even though industrialized and militarized countries around the globe surely have significant environmental impacts.
That’s why we have created The Global Environmental Liability Research Project. We believe that companies and governmental entities should be rewarded for transparently reporting their environmental liabilities and using exceptional management and sound science to remediate and mitigate risk. However, we also believe that it is difficult—if not impossible—for organizations to manage a problem that they are unable to measure.
Some of the project’s findings are featured on a map that is available on our website. It is our attempt to estimate each country’s total environmental liabilities and compares that amount to the nation’s gross domestic product. In the United States, for example, total environmental liabilities amount to $635 billion, or 4.04 percent of the country’s $15.7 trillion GDP.
For this project, we defined total environmental liability into two categories. The first is environmental remediation liability (environmental obligations), which includes the future cost of cleaning up real property. The second is asset retirement obligations, which include the cost to retire long-term assets. As an example, the reclamation of oil and gas wells is included in this category.
In order to gather this information, it is crucial to use a good estimation methodology to determine the liability for entities that have chosen not to disclose this information themselves. This is especially true for corporations outside of the U.S. and Europe. Though it is impossible to estimate the total value of environmental liability with high levels of certainty, the goal of this project is to kick start the conversation about the estimated $6.5 trillion global environmental liability and the distribution by country. Tell us what you think about this project and the estimate as a whole or by country.
For more information about this mission, read The Global Environmental Liability Research Project Open Letter.
By Roger Well