• planning costs
• costs of capital goods
• cost of financing investment
• running costs of the investment
A basic financial principle to which the private sector firmly adheres is profitability. Unless the financial viability of the project over its entire life can be clearly
demonstrated, equity investors and other long-term investors will be unwilling to
provide the amount of funding required at competitive interest rates. The integrity of
the cost of construction must be sound and the revenue stream must be realistically
calculated.
If a project is well structured, international banks will provide funding for
15 years and beyond. Commercial banks are a more flexible source of funds, but
they generally require early repayment and may not be the most appropriate for use
on these long-term projects.
Thus, any business can exist, if it is generating enough revenue to meet all its
costs, and distributing profits to its shareholders.
The business will exist so long as it is selling enough goods to its customers.
Certainly, all customers would prefer buying a product at a price A, lower than
the price B. However, if the customer is aware that the product sold at price A, is
produced without following sustainable development standards, without taking care
of the environment, and continues buying the product at price A, he will ensure that
the company continues with its bad practices.
Only, if he stops buying the product at price A, can he ensure that good
environmental practices are followed by the company selling at price B!
In this way, the customer does hold the power of enforcing or encouraging good
environmental practice!
Depending on the circumstances, an industry really may, at least in the short term,
maximize its revenue and profits, by harming the environment and endangering life.
Such cases still exist, e.g. fishermen in an unmanaged fishery without quotas, and for
international logging companies with short-term leases on tropical rain-forest land in
countries with corrupt government officials and unsophisticated landowners.
The public is ultimately responsible for creating the conditions that allow a
business to generate revenue through danger to the public – e.g., for not insisting
that industries clean up their pollution, or for not stopping to buy wood products
from non-sustainable logging operations. In the long term, it is the public, either
directly or indirectly through its politicians, that holds the power to render destructive environmental policies illegal and unprofitable, and to create sustainable environmental policies profitable, both for the industry and for the people.
As resource extraction concerns usually need to mobilise large capital investments, inputs up front, most of these extraction industries are big corporations which
tend to view environmentalists as potential enemies and vice-versa. It is true that
such corporations may harm people through environmental damage, notwithstanding upholding their pecuniary interests in preference to the public good.
4.4 Important Considerations
121
• costs of capital goods
• cost of financing investment
• running costs of the investment
A basic financial principle to which the private sector firmly adheres is profitability. Unless the financial viability of the project over its entire life can be clearly
demonstrated, equity investors and other long-term investors will be unwilling to
provide the amount of funding required at competitive interest rates. The integrity of
the cost of construction must be sound and the revenue stream must be realistically
calculated.
If a project is well structured, international banks will provide funding for
15 years and beyond. Commercial banks are a more flexible source of funds, but
they generally require early repayment and may not be the most appropriate for use
on these long-term projects.
Thus, any business can exist, if it is generating enough revenue to meet all its
costs, and distributing profits to its shareholders.
The business will exist so long as it is selling enough goods to its customers.
Certainly, all customers would prefer buying a product at a price A, lower than
the price B. However, if the customer is aware that the product sold at price A, is
produced without following sustainable development standards, without taking care
of the environment, and continues buying the product at price A, he will ensure that
the company continues with its bad practices.
Only, if he stops buying the product at price A, can he ensure that good
environmental practices are followed by the company selling at price B!
In this way, the customer does hold the power of enforcing or encouraging good
environmental practice!
Depending on the circumstances, an industry really may, at least in the short term,
maximize its revenue and profits, by harming the environment and endangering life.
Such cases still exist, e.g. fishermen in an unmanaged fishery without quotas, and for
international logging companies with short-term leases on tropical rain-forest land in
countries with corrupt government officials and unsophisticated landowners.
The public is ultimately responsible for creating the conditions that allow a
business to generate revenue through danger to the public – e.g., for not insisting
that industries clean up their pollution, or for not stopping to buy wood products
from non-sustainable logging operations. In the long term, it is the public, either
directly or indirectly through its politicians, that holds the power to render destructive environmental policies illegal and unprofitable, and to create sustainable environmental policies profitable, both for the industry and for the people.
As resource extraction concerns usually need to mobilise large capital investments, inputs up front, most of these extraction industries are big corporations which
tend to view environmentalists as potential enemies and vice-versa. It is true that
such corporations may harm people through environmental damage, notwithstanding upholding their pecuniary interests in preference to the public good.
4.4 Important Considerations
121