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Welcome to World Ocean
I’m Peter Neill, Director of the World Ocean Observatory.
In past editions of RESCUE, our new plan for the ocean, we have focused on the core function of accounting as a tool for measurement of value based on existing or prospective premises. And behaviors. When we are confronted with a proposal or an investment, we typically evaluate the options through the numbers, the projected expenses and revenues, the investment costs and estimated returns. The outcomes can be shaped by the premises, but the present system for evaluation and reporting will have produced calculations to justify structures and behaviors that have compromised or exhausted natural resources and produced by-products, unexpected and absent from the estimates. Suddenly, outcomes, many with unpredicted damages, have created a need for a different system, or at least a more inclusive system that estimates predictable external costs and returns that depict a different analysis and, therefore, a different decision.
Let’s take a not-so-hypothetical example. An investment group proposes to build a manufacturing facility in my town, located on a river, promoting increased jobs and taxes, and enhancing the work culture and financial security of the locale. Offerings are made, accompanied by financial pro-forma as persuasion for investment; estimates of returns, financial and social, are presented to augment approval; permits are sought, accompanied by the required environmental impact statements, financial projections, investor guarantees, and promises of urban renewal and community enhancement. Expectation runs high. Approval is granted.
The essence of such proposals is in the numbers, the accounting, before and after the fact, that make for excited approval. But, in fact, in those numbers, so much is left out: the cost of water removed from the aquifer or river essential to the manufacturing process; the cost of emissions and outfall from energy burned or toxic by-products produced; the cost of public health issues generated by changed air quality, working conditions, and unforeseen infections; the cost of depletion of that aquifer; the cost of downstream effect by pollution and waterflow; the cost even further downstream effect on coastal wetlands and marine resources; and then certainly the cost of adequate insurance and necessary reparation.
What would the the project proposal budget look like if all those costs were also included? Would it be viable, so exciting and approvable? How would the investment, incentives, and subsidies be recalculated? Would the public approve? Would the project be feasible at all?
But there is yet another missing component. What is also not included is the positive value to the community if all conditions were met: the savings to government of costs associated with public health services, remediation, workforce conditions, community development, and quality of life? These, too, are calculable and can be factored into the other side of income/expense discussion.
Some argue that this re-calculation is naïve and impossible. But the expenses after the fact are real, paid out in damages and personal health, and it is government, in some form or another, that is expected, and now so frequently does, reimburse for the loss, usually at a loss -- ironically, taxpayers subsidizing the debit with the credit paid up front to investors, perhaps long gone when the true financial consequence is evident to all.
It would be interesting to see how approvals would run if all proposals were required to show both forms of financial analysis, first, as is, or also as a reflection of economic service truly accounted for? What would get funded? What would make the most sense? What would it mean if we applied accounting inclusion before commitment, instead of after outcome? And finally, what would be the bottom line when the natural resources, like clean air and water, mineral extraction, and public health, are exhausted? Would we understand the false premise after the fact? Would we understand that we are enabling deficit spending and irredeemable debt without understanding near-term and without benefit long? The balance sheet does not reconcile. It is bankruptcy from the outset, insolvency sure to follow. It is abandonment to circumstance within our control, the antithesis of RESCUE: R for renewal; E for environment; S for society; C for collaboration; U for understanding; and E for engagement.
We will discuss these issues, and more, in future editions of World Ocean Radio.
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