Environmental crime: A business issue

Environmental crime is a large and rapidly growing illicit economy estimated at approximately USD 300 billion and is embedded in global supply chains and financial systems. It comprises unlawful activities related to fishing, land use conversion, logging, mining, pollution, waste, and wildlife trade that directly damage the environment. These crimes are a major driver of ecosystem degradation and resource instability. Illegal logging, fishing, and wildlife trafficking alone generate economic losses of over USD 1 trillion annually, largely due to ecosystem degradation rather than direct market impacts.

Beyond environmental impacts, these activities create increasing business, financial, and operational risks. With more than half of global GDP dependent on nature, environmental crime contributes to supply instability and operational risk for many businesses. Exposure is pervasive across value chains, with risks arising through sourcing, manufacturing, transport, retail, and financing roles. The consequences for business are increasingly financial, including market exclusion, enforcement action, and disruption. Detection risk is rising as traceability, enforcement, and disclosure systems strengthen.

How environmental crime enters legal markets

Illegal goods and proceeds typically move through manufacturing, retail, transport, logistics, and financial systems before reaching markets. Once mixed with legal goods or financial flows, detection becomes difficult. In agricultural supply chains, legal commodities such as soy, maize, and cattle may be produced on land obtained through illegal seizure, fraudulent titling, or unauthorised land clearance. This creates downstream exposure for manufacturers, traders, retailers, and investors. For example, in Brazil, cattle linked to illegal deforestation entered the supply chain of global meat processor JBS through indirect suppliers. In 2017, JBS was fined the equivalent of USD 7.7 million by the Brazilian environment agency, IBAMA, for these purchases.

Common transmission mechanisms include the mixing of illegal and legal goods at aggregation or manufacturing points, falsified or misleading documentation, and the use of complex, multi-step supply or disposal chains. These mechanisms reduce traceability and visibility, extending liability exposure to third parties and intermediaries. Downstream, retailers and financial institutions often become the points at which hidden illegality is identified through regulatory scrutiny or due diligence.

Regulatory shifts are reshaping exposure

Regulatory approaches are shifting from conservation-focused enforcement towards broader financial crime, liability, and market access obligations. Environmental crime is increasingly treated as a financial crime and a predicate offence across anti-money laundering (AML) frameworks. International bodies including the United Nations, G7, and G20 have called for stronger action on illicit financial flows linked to environmental crime. These shifts are translated into binding obligations through the Financial Action Task Force (FATF) standards and the EU Environmental Crime Directive 2024.

Enforcement is making exposure financially significant. In 2016, Carnival (Princess Cruise Lines) was fined USD 40 million for deliberate vessel pollution and concealment. In 2018, U.S. gold refinery Elemetal LLC pleaded guilty to failure to maintain an adequate AML programme in connection with proceeds linked to illegal gold mining in Peru, resulting in a forfeiture of USD 15 million and a five-year ban on purchasing precious metals from outside the United States. In 2024, individuals were sentenced to 57 months in prison and ordered to pay USD 42 million in forfeitures for illegally importing and selling plywood in violation of the Lacey Act.

Risk exposure in key sectors

Risks are categorised across physical, transition, and systemic dimensions. Transition risks, including liability and compliance-related risks, are immediate and increasing across sectors. Agriculture, forestry, and fishing sectors face very high exposure, where illegal logging accounts for 15-30% of trade globally and up to 90% in high-risk countries. In the mining and metals sector, illegal gold mining is estimated to distort market value by USD 12–48 billion. Illegal fishing accounts for approximately 20% of the global catch.

Leverage sectors such as financial services face high exposure. Analysis has identified a number of financial institutions with exposure to companies producing products derived from endangered species, with one study noting USD 6.1 trillion in exposure across 150 financial institutions linked to deforestation. In the transport and logistics sector, exposure arises when trafficked wildlife is concealed in shipments, leading to repatriation costs, penalties, and operational disruption.

Managing risk to protect value

Leading companies apply core risk management discipline by identifying where environmental crime may enter value chains, embedding controls, and monitoring evolving regulations. This protects value by maintaining market access, controlling liability, and ensuring supply resilience. For instance, gold refiners apply OECD-aligned due diligence to maintain compliance with LBMA Responsible Gold Guidance. Logistics providers like Maersk are strengthening risk-based screening of high-risk shipments in collaboration with customs authorities.

Financial institutions such as HSBC are integrating environmental crime indicators into AML monitoring. Digital platforms like eBay are removing listings linked to wildlife trafficking through coordinated industry initiatives. Businesses are advised to move beyond documentation-based approaches towards verification of origin and legality, combining supplier data with digital traceability, geospatial monitoring, and AI-enabled analytics to improve detection.

Conclusions and priority actions

A two-speed market is emerging between companies that integrate environmental crime into core systems and those that respond only when required. Businesses that act early are better placed to maintain market access and resilience. Companies should focus on three priority areas: identifying exposure across supply chains and financial flows; managing and controlling risk by embedding environmental crime into governance; and monitoring and responding through integrated audit and reporting.

Over time, these differences are expected to create a widening gap in cost, resilience, and market access. As detection improves and expectations tighten, unmanaged exposure will become increasingly difficult and costly for businesses to ignore. Proactive organisations that strengthen verification and due diligence are generally better placed to maintain continuity as global expectations converge around legality and traceability.