02.04.2025New Paper: How to Reveal Corporate Environmental Impacts

From mining to large-scale agriculture, corporate activities can have a profound impact on the environment, leading to the loss of biodiversity or water pollution. By contributing to the ongoing environmental degradation, companies are increasingly threatening the very foundations on which they operate. According to a 2023 report, companies identified up to US$77 billion in business value at risk due to water-related issues, including pollution and water scarcity.

At the same time societal and political stakeholders are calling for greater transparency, urging companies to disclose their environmental impacts more openly. Transparent and reliable information helps to hold companies accountable and enables investors to make more informed, sustainable decisions about their investments. Supporting informed decision-making and helping companies minimize their adverse impacts requires data that offers a comprehensive and accurate picture of those impacts.

Equally important are established procedures and protocols to guide the collection and analysis of this data. While disclosure procedures for climate-related risks, such as greenhouse gas emissions, have already been established, disclosures for biodiversity and water are still developing and face significant challenges. One of the main reasons is that it is challenging to obtain reliable, detailed data on these systems as they are locally specific and complex. Satellite remote sensing (RS) has the potential to provide consistent, wide-scale, and independent data on environmental changes affecting biodiversity and water systems. It enables assessments even in remote or restricted areas and can help track changes over time and across multiple locations.

In their recent paper, Dr. Leon Hauser, Prof. Dr. Maria Santos, and Prof. Dr. Alexander Damm, researchers from the Remote Sensing Laboratories at the University of Zurich, discuss the application of satellite remote sensing and its potential to track the impacts and risks of company operations on biodiversity and water.

When using satellite data to investigate how companies affect biodiversity and water systems, there is one fundamental challenge: ecosystems are complex, dynamic, and interconnected. To date, current efforts of capturing companies’ environmental impact on biodiversity and water systems often do not display this complexity. Effective disclosure requires reliable, detailed information across both space and time, but collecting such data is demanding. Current practices often reveal limited insight as they depend on company-reported data, lack consistent standards, and can be biased.

Remote sensing has the potential to help addressing this data gap. It enables the collection of independent, consistent, and longitudinal data over large areas, including remote or otherwise inaccessible locations. A common approach to using remote sensing for corporate environmental disclosure is the application of geospatial overlays, in which company locations are matched with satellite data. This approach often misses important environmental impacts and risks, especially those that occur gradually or accumulate over time, or those that happen outside the direct operations of a company. To fully use the potential of remote sensing, there needs to be structured and standardized procedures and protocols to guaranty that data is reliable and comparable.

The researchers address this demand by proposing a conceptual framework for using remote sensing data for corporate environmental impact assessments. This framework builds on systems theory and suggests considering seven principles: System Boundaries, Multi-Dimensionality, Dynamics, Causality, Directionality, Causality, Directionality, Impact Quantification and Cross-Systems Interaction.

To illustrate these seven principles, consider a multinational mining company operating several extraction sites in the Amazon basin. The company primarily extracts bauxite, an important raw material for aluminum production. Its activities involve clearing forest areas and using large quantities of water. These activities are potentially linked to various environmental impacts, which can happen both near the mining sites and beyond them.

Environmental impacts are not confined to the mine’s boundaries. Mining activities often produce waste. If that waste is not properly disposed, it can get into nearby streams or rivers. Once in the water, it can travel downstream, thereby affecting water quality and wildlife. Accurately understanding and reporting these impacts requires defining the right area and time frame to capture how effects spread and develop over time.

To fully understand the impact of the company’s mining activities on water, it is essential to consider the various systems in which water plays a role. Water pollution can have multiple consequences for the ecosystem: It can alter nutrient and oxygen levels, affecting a range of aquatic species. In addition, water cycling can be disrupted by activities such as forest clear-cutting or changes in groundwater extraction and flow.

Environmental change does not always happen instantly. Some impacts, like a chemical spill turning a river visibly discolored, can be seen right away. But others, such as a gradual decline in water quality, can develop over time. By using satellite images taken repeatedly over time, it becomes possible to track when and where changes occur.

If satellite data indicates an increase in pollution in a river near the mine: Is the company responsible? It is not enough to simply point out the location of the company. There needs to be further analyses to determine whether the pollution is likely a result of the company’s activities like a chemical spill, or if it comes from other sources in the region.

The mine not only impacts the environment, but it also depends on it. if water pollution or changes in the groundwater flwo leads to water shortages, the company may face disruption of the mining process and higher costs. Recognizing this two-way relationship helps explain why reducing environmental impact is also in the company’s long term ineterest.

The mining companys business activities are complex and impact might come from various sources. This means that their environmental impact can not only occur directly from their mining site, as in our example in the Amazon, but can also be caused by their suppliers activities or their investments. To comprehensively quantify their impact, direct effects (like water pollution at the mine) and indirect or cumulative effects (like harm caused by suppliers or impacts that build up over time) must be considered.

The mining company’s activities can create ripple effects across multiple environmental systems. For example, the company plants fast-growing trees to balance out its carbon emissions. This may seem helpful for fighting climate change at first, but it could unintentionally harm local biodiversity. Natural forests, rich in species, provide more lasting environmental benefits than monocultural tree plantations. Understanding these connections across different systems helps the company avoid unintended negative effects.

Considering the seven principles as suggested by Dr. Leon Hauser and his colleagues provides companies and regulators with a structured framework to use satellite data for assessing environmental impacts. But to accurately assess how companies affect the environment, remote sensing must be applied in combination with contextual and complementary data to provide a comprehensive picture. If applied thoughtfully, it can help collecting harmonized data on a global scale. Assessments of different companies will then be standardized, allowing for a fair comparison.

The framework is not an isolated effort, but part of a larger research project called Spatial Sustainable Finance that brings together researchers from different fields. The project aims to create a science-based, transparent procedure for rating companies based on their environmental impact and exposure to ecological risks, particularly related to biodiversity and water. The project team is developing standardized procedures and indicators that replace self-reported company data with more objective information. They will test the accuracy and the suitability of these procedures in real-world case studies. The long-term goal is to turn this research into practical tools.