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  • Robert Hinkley

Thought for the Day


12/9. Enforcing the Code.  (Part 4). Sceptics may suggest directors will ignore the Code because it fails to define what is meant by the term “severe damage” or because it doesn’t include specific penalties. Their low opinion of corporate directors is probably not justified.

 

They fail to take into consideration that directors tend to be good citizens and are concerned with their personal reputations. If the decision to stop severely damaging the environment was up to them, very few would choose to continue. But existing law, doesn’t leave the decision up to them. It says that they have a legal obligation to act in the

Photo by Richard Miller

corporation’s best interests (even when it results in severe damage). By the Code giving them the latitude and legal protection to safeguard the environment, there will be plenty of reason to hope that they will.

 

They also fail to account for how the Code stopping the emission of greenhouse gases (GHGs) will change the mindset of all business. Shutting down GHG emissions in the electricity generation and motor vehicle industries will serve as a powerful example that the Code has teeth. It will make the boards of all companies more cautious whenever they make a capital investment or other major decision. 

 

Thirdly, sceptics fail to recognize that damage to the environment usually builds over time.  It starts out small and builds until it becomes severe. Just as it became clear that GHG emissions were becoming a more and more threatening problem over the past three decades, the next corporate generated environmental problem will almost certainly take time to develop. Before it becomes severe, scientists, activists, employees, and others will spot the potential problem and sound the alarm.

 

The next time, however, directors will recognize the danger it poses not just to the public but (because of the Code) to their company. The earlier the problem is caught the better able they’ll be to keep the damage from becoming severe. They would be foolish not to quickly commence finding alternative strategies to reduce the risk before the company ends up being forced to halt or alter its operations at great cost.

 

Fourthly, severe damage eventually becomes readily apparent to everyone. Whether it manifests itself in extreme weather, kills millions of people, destroys billions of dollars’ worth of property, or raises sea levels and threatens low lying nations. Eventually, the severity of the damage becomes undeniable.

 

Finally, not precisely defining “severe,” makes the risk more foreboding. To avoid the consequences of causing severe damage, directors will be more cautious with the environment than if it is precisely defined. In other words, leaving the word “severe” undefined is a positive feature of the Code not a fault.

 

Next time I’ll discuss the application of the Code to individual companies when the damage is the cumulative effect of many companies acting simultaneously. See, www.codeforcorporatecitizenship.com.   

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