Change Tack!

25 September 2025

“No one would design a system of government today where corporations could cause great harm to the public and then prevent the government from passing laws to make them stop.” 

By Robert C. Hinkley

So far, the climate crisis has been defined as an environmental problem caused largely by big corporations emitting greenhouse gases (GHGs).    The response has been to try to stop new fossil fuel projects or enact legislation to reduce or eliminate the emission of GHGs. But emissions continue to rise and with it global temperatures.  Maybe, instead of relying only on regulation to stop fossil fuel companies (FFCs) and GHG emissions, we should focus on corporate governance--changing how corporations think about the environment.    

I’d suggest the climate crisis is a symptom of a much larger problem, the gaping loophole arising out of the conflict between democracy, which seeks to protect the public interest, and the corporate sector which pursues only its own self-interest.

Recently, the International Court of Justice (“ICJ”), determined that the nations of the world have an obligation to protect the environment from the damage of GHG emissions and, if they do not, they can be held financially responsible by their own citizens, and the people of other countries adversely affected by global warming.  The decision even went so far as to hold thatgovernments may be held liable if they fail to adequately regulate private companies emitting GHGs within their jurisdictions. 

The ICJ decision indicates nations may face substantial risk if they fail to regulate to significantly reduce GHG emissions.  Prudent governments will want to avoid this risk. But what form should the regulation take and how can the nations act in concert to avoid global disaster?  How can that legislation not fall to the same interference from the FFCs as other regulations that have been proposed over the past 30 years?

The Loophole

In a democracy, corporate behaviour is permitted until a law is passed specifically making it illegal.  A serious problem (e.g., the climate crisis) can arise when legal behaviour (e.g., emitting GHGs) is found to be causing severe harm to the public interest and a company or industry won’t stop it voluntarily.  At that point, it becomes government’s job to pass a law closing the loophole.  If an effective law can’t be passed, the behaviour can continue until one has. The climate crisis has taught us this can be a very long time.

Twenty-nine UN Conferences of the Parties on the Environment (COPs) have been held where all the nations of the world pledged to pass laws which would reduce emissions.  When the delegates returned home hoping to fulfill their country’s pledges, they ran into the powerful fossil fuel lobby, intent on blocking any new legislation that would force emission cuts. The companies responsible for the most emissions have learned how to use misinformation to manipulate partisan politics to delay and frustrate the enactment of new laws which would make the emissions stop.  

The fossil fuel companies and their largest customers have too much money invested in the business of burning fossil fuels to stop voluntarily.  Since the first COP, governments have tried to close the loophole through environmental regulation which would make the reduction of GHG emissions mandatory.  These efforts have been mostly unsuccessful.  A lot of time has been wasted while the crisis has grown more dire.

It might be useful to look at the problem differently.  It’s not the emissions or the emitters that are the problem.  It’s governments’ inability to stop them.  Viewing it from this perspective opens up new ways of thinking about how to alleviate the crisis. 

From this perspective, relieving the crisis means either making government stronger or by weakening corporations’ resolve to pursue their self-interest.  One of these may lead to solutions capable of gaining global, widespread, non-partisan support that the fossil fuel industry is powerless to stop.

Starting with global first, figuring out how to make governments more capable of confronting the fossil fuel lobby is probably a non-starter.  The climate crisis is a global problem.  It needs a global solution.  It’s no good if some of the countries in the world follow through and the remainder do not. There are approximately 200 countries in the world, figuring out how they might be changed to more effectively confront GHG emissions is probably an impossible task. 

Weakening the resolve of corporations to pursue self-interest on the other hand doesn’t suffer from this problem.  Their resolve comes from a provision in the corporate law which is universal.  It’s the duty of corporate directors to always act in their company’s best interests.  The relative uniformity of this provision everywhere in the world makes changing it to better protect the environment, not only possible, but possibly achievable.

When large amounts of money are invested, current law encourages (if not requires) directors to continue operating their business, even when it is discovered to be causing severe harm to the environment.  The continuing emission of GHGs from the big FFCs and their customers is the direct result of this provision.

This problem has evolved over more than a century.  No one today would design a system of government where corporations could cause great harm to the public and then prevent the government from passing laws to make them stop.  But that’s what legislatures did beginning in the late 19th century.

Starting back then, governments all over the world began changing the law to eliminate any duty corporations had previously to protect the public interest.  This provision left it to governments to pass laws and regulations when a company’s legal pursuit of self-interest (i.e., profit) harmed an element of the public interest, including the environment.

It wasn’t hubris that led legislatures back then to believe they would always be able to regulate corporations when they began to cause harm. It was the relatively weak state of companies.  They were smaller, operated relatively locally and employed technology which today we would call primitive.  Their capacity to cause severe harm to the environment was nearly, if not entirely, non-existent.  The legislators of the day did not see a time when companies would be able to inflict global harm, and new laws couldn’t be passed to stop it. 

The biggest companies are now multi-billion dollar enterprises, they operate globally, and many employ modern technology that, directly or indirectly, is capable of causing great (possibly even existential) harm.  Not surprisingly, some do.

The climate crisis shows us how eliminating any duty of corporations to protect the public interest, turned out to be a big mistake. The fossil fuel industry and its customers have learned to use their legal rights to delay and frustrate new legislation which would prevent them from continuing to emit GHGs. 

Imagine instead the alternative: that the directors of these companies had a legal responsibility to protect the environment from severe damage from the time they knew the damage the emissions were causing.  Simply put, there would be no climate crisis.  It would have been averted by business, government, inventors, entrepreneurs and others finding ways to solve the problem before it got out of hand.

The duty to protect the environment can be restored by adding a short proviso to the existing duty of directors to always “act in the company’s best interests.”  That proviso^[1] is simply “but not at the expense of severe damage to the environment.”  

This addition will make it the duty of all company directors to stop their company’s intentional continual behaviour that results in severe damage to the environment whenever it is discovered.  Severe damage occurs when companies, industries or several industries are discovered inflicting widespread permanent harm to the environment through actions that are intentional and continuous.  Obligating directors to intercede, stops the damage, and gives governments the time and opportunity to pass legislation making such behaviour illegal and punishable by law in the future.

The proviso won’t make GHG emissions illegal.  It doesn’t impose burdensome reporting requirements.  It doesn’t impose additional taxes on business or consumers.  Nor does it protect the environment from one-off negligent acts. It only intercedes to stop behaviour which the directors know is continuous and causing severe harm. 

The Code, or just the proviso regarding the environment, will make it the obligation of every corporate director to stop their company from causing severe harm to the environment, including especially through the intentional emission of GHGs. It will change how directors must think about their roles, by giving protection of the environment from severe harm priority over even the financial interests of the company. 

The Code will change internal corporate governance--the way corporations are managed not the way they are regulated.   This is likely to make it more capable of being enacted than the attempts at business regulation which have failed in the past.

The Way Out

So, is it possible to change the law to include the proviso?  Or, has democracy created an unsolvable problem which will continue to severely damage the environment and may eventually cause its own undoing? 

For the proviso to gain traction and become law, action will be required.  People will have to tell their legislators they want the duty of directors to once again require the environment to be protected from severe harm (as it was before the current duty of directors was enacted). 

There are good reasons to believe this can be achieved. 

·      The duty of directors in the corporate law is essentially the same in every country.  The change required in Fiji is the same in Australia, Germany and the State of Maine. This uniformity will make it easy for the people of the world to understand.  Further, it will facilitate the enforcement of pledges made to enact the Code.

·      The proviso is a matter of first principles, a uniform simple solution to a now-identified problem which can be applied everywhere.  It doesn’t require special expertise to understand it.  It needn’t be the subject of endless legislative investigation and debate.

·      It’s common sense.  Democracy may not be able to survive without the proviso simply because, without it, one kind of citizen (e.g., the fossil fuel companies) will remain able to endlessly inflict severe harm on the world and everyone that inhabits it with impunity.

·      Furthermore, it need not be a partisan issue.  It’s not about further regulating corporations. It’s not an argument that is allegedly pro-industry or anti-industry.  It’s not a mandate to introduce more red tape or onerous reporting requirements.  It’s not a tactic to increase corporate taxes.  It’s about whether those in charge of corporations should be allowed to continue to use a loophole that allows their company to prey on the Earth and everyone else.

·      While non-partisan, the proviso has the power to become the number one issue for candidates to public office in every election, in every jurisdiction where corporations are formed (basically all over the world).  Every candidate should be asked, “Do you favour closing the loophole in our democracy that allows big companies to continue destroying the environment?”  Everyone should be able to answer that question in the affirmative.  Those candidates that do not should be rejected.

·      The proviso doesn’t try to solve the problem of all corporate anti-social behaviour, only that behaviour which is severely damaging. This means the immediate adverse impact of its enactment will only be on those few big companies which are now causing GHG emissions.

·      The cost of managing a global campaign to enact the proviso (or the full Code) should be manageable and cost-effective.

·      There are only a few hundred jurisdictions where the corporate law needs to be changed (The US includes 50 of them, the EU twenty-eight.)  This may seem like a lot, but it’s the same for any problem which has a global effect.  The uniformity of the problem and the simplicity of the proviso (or the full Code) as the solution will limit the overall difficulty of making it the law.

If there is a barrier to making it the law, it will be opposition from the companies which have the most to lose—those which are already inflicting severe harm.  They may try to get the proposal to adopt the change bogged down in partisan debate.  This need not happen and can be avoided.  This isn’t about regulating business.  It’s about plugging a loophole by changing the decision making process of corporate managers. 

It should by now be obvious that boundaries on the right of corporations to pursue their own interests are necessary.  It’s difficult to see why anyone not heavily invested in the fossil fuel business would support the idea that corporations should have an inherent right to intentionally and endlessly inflict severe harm until a law can be enacted to stop it.   

Addressing the problem globally, should also reduce the power of these companies—a tiny minority of all companies--to lobby to keep the loophole open.  If people all over the world stand up, the power the FFCs have used in the past to lobby in individual jurisdictions can be overcome. 

Further, the FFCs may choose to not interfere in democracy any longer.  They may realize the people advocating for the proviso are their customers.  They may realize the time for burning fossil fuels and releasing GHGs into the atmosphere has finally come to an end.  They must have realized for a long time that the day would eventually come.

Comfort can also be taken from the great deal of positive sentiment among corporates for more socially responsible corporate behaviour.  In the late 1990s, the American Business Roundtable (ABR) claimed the purpose of a corporation was simply to make money for shareholders.    Corporate social responsibility (CSR) was in its infancy.  When CSR did occur, the press would cover it as a human-interest story (“Man Bites Dog”).  There were no B Corporations.  There was very little socially responsible investing (SRI).  There was no sustainability movement or talk of getting to “net-zero.”

Since then, CSR has been rebranded as ESG.  Every business school now teaches it, together with sustainability, as a new business discipline.  Every big company now, at least, pays it lip service.  B Corporations now number over ten thousand.  Proponents of SRI now claim that there is more than $30 trillion under socially responsible management. In 2019, the ABR changed its stance on the purpose of the corporation to include that directors should consider the environment and the interests of other stakeholders (e.g., customers, suppliers and employees).

The only effect of adopting the proviso on companies not already causing severe harm is that they will need to monitor for the risk that their operations might someday be discovered causing severe harm.  For most of these, it will be such a remote possibility that it won’t involve any additional burden. 

For the others, monitoring their business for the possibility of it causing severe harm will not be overly burdensome and will allow them to mitigate the risk while the costs of doing so are still small. 

Changing tack to close a loophole created in corporate governance nearly 150 years ago, may prove to be a more effective strategy to stop the emission of GHGs than continuing to fail at passing new regulations to control emissions or the behaviour of FFCs.  Adopting the new strategy may reveal that most company directors want all companies--including the FFCs--to be good citizens and avoid inflicting severe harm on the environment.  This will make them more likely to be advocates of the proviso (or the full Code) than opponents.

^[1] The proviso is part of a more extensive provision which, if adopted in full would read, “but not at the expense of severe damage to the environment, human rights, the public health and safety, the dignity of employees or the wellbeing of the communities in which the company operates.”  As extended, the proviso is known as the Code for Corporate Citizenship (the “Code”).  It may make good sense to shorten the Code to prioritize just the environment for purposes of simplicity and making it more likely to become enacted.  It was originated by the author, a corporate lawyer with more than forty years’ experience in private practice and government service.