Photo by Richard Miller
12/16. Enforcing the Code. (Part 5). Some have asked how the Code for Corporate Citizenship (Code) can hold individual companies responsible for causing severe damage to the environment, when the damage is the result of many companies acting at the same time. This is a good question.
Probably no company alone causes severe damage to the environment—at least not globally. Yet less than 300 companies (i.e., those responsible for emitting significant quantities of greenhouse gases (GHGs)) are collectively inflicting incredibly severe damage on our planet.
The initial purpose of the Code is to make these companies (both individually and collectively) stop such emissions and alleviate the climate crisis. After passage of the Code, it is hard to imagine how directors of one of these companies could reason that their company should be allowed to continue emitting GHGs simply because it isn’t causing the problem all by itself.
However, if they do, it’s a problem with a simple remedy. Companion legislation can be passed to make it clear that these companies must stop their emissions. While passing similar legislation ahead of the Code has so far proven to be impossible, passing it after the Code has been enacted, if necessary, should be much easier.
Adding the Code to the duty of directors will change what is considered normal and acceptable corporate behaviour. It will reflect a decision that companies should no longer be allowed to cause severe harm to the environment until government can make it stop. It will set outer limits on corporate behaviour and require directors to enforce those limits. It will create a new normal. No longer will companies be expected to be single-mindedly focussed on profits.
It will also eliminate the excuse the law now gives directors to allow the severe harm to continue. Customers, employees, activists, legislators, and others will become almost as much aware of this new legal obligation as directors. All this should make it easier to pass legislation designed to curtail corporate damage.
In this brief five-part discussion regarding enforcement of the Code, we’ve talked about:
· Why the Code should be able to get the political support necessary to become law,
· How the Code tells directors that, if regulation is unable to stop the severe damage their company is causing, then the task falls to them to make it stop,
· Why not defining the term “severe” will make the Code more effective rather than less, and
· Why specific provisions regarding enforcement should be unnecessary.
Enough for now about enforcement and why the Code can be expected to be effective. Next time, I’ll address why changing the duty of directors is worth the effort even if it turns out to be less effective than hoped. See: www.codeforcorporatecitizenship.com.