CLIMATE ACTION: WHAT DOES IT TAKE? LEGAL TEETH, NOT JUST CORPORATE WORDS.

• Author: Radon, Jenik

Climate change has become a worldwide phenomenon. While there is some disagreement on what all of the causes of climate change are, there is a consensus that one cause is human activity. The definition of climate change, or more accurately, climate warming, by the National Aeronautics and Space Administration's (NASA) underscores that consensus and highlights on its resources website one significant activity: "Global warming is the long-term heating of Earth's climate system observed since the pre-industrial period (between 1850 and 1900) due to human activities, primarily fossil fuel burning, which increases heat-trapping greenhouse gas levels in Earth's atmosphere." (1) As a consequence of the continued increase in climate warming and a recognition of the impact of human activity, the 195 signatories to the 2016 Paris Agreement are aiming to hold down average global temperature increase to "well below 2[degrees]C above preindustrial levels and pursuing efforts to limit the temperature increase to 1.5[degrees]C above pre-industrial levels." (2) To achieve this daunting goal, there needs to be a change in human activity. But, the world is hit by the reality of the truism that no one really likes to change one's habits.

The results to date have not been encouraging, especially as the achievement of that aim to hold down temperature relies on the political will of states to take concrete action to bring about change. Change in this instance invariably has costs associated with it, not to mention an adjustment in our lifestyles, and costs which will, as is always the case, impact some industries and states more than others. The call for addressing climate change has therefore, not surprisingly created push-back. The United States has withdrawn from the Paris Accords. Energy giants like Chevron, BP and ExxonMobil are spending millions of dollars in lobbying efforts to stop governments from enacting legislation tackling climate change. These companies stand to lose the most if the use of fossil fuels is curtailed by legislation. The consequence will be that they will have to at least adjust their business model, if not find a new one. Although the need to find a new business model will admittedly be a challenge, it is in keeping with the theory of the renowned economist Joseph Schumpeter that economic systems, and by extension, companies, as well as economies, sooner or later, go through a phase of creative destruction. With concern for the environment continuing to grow throughout the world, these companies will have to adjust.

In August, the US Business Roundtable, an influential group of American corporate leaders, issued a statement acknowledging that profit-making is not the only goal of a company. (3) The Roundtable was responding to the rising chorus of criticism of companies for causing increased inequality, making very low, if any, corporate tax payments by playing the tax haven game, and, critically, damaging and polluting the environment and ignoring climate change.

The Roundtable announcement effectively repudiated the accepted wisdom of Nobel Prize-winning economist, Milton Friedman, who famously said, "there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits." (4) The Roundtable executives in their announcement have instead declared that their companies share "a fundamental commitment to all of our stakeholders." (5) They elaborated that all stakeholders includes communities and, accordingly, the environment in which they live: "We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses." (6)

Although this statement is a rejection of Milton Friedman's uni-focus on profits and the primacy of shareholders, the Roundtable actually echoed the earlier but long forgotten words of Donald K. David, Dean of the Harvard Business School from 1942 to 1955, who proclaimed in a presentation to the Interprofessionals Conference in April 1948 that companies had "public responsibilities." (7) However, while the statement of the Business Roundtable is to be welcomed as a (prospective) change of corporate thinking, if not action, the statement will remain an empty vessel unless it is embedded in law and made binding and enforceable on corporations, their executives and boards. Otherwise, the statement will soon join the words of Dean David and again be ignored or forgotten. To avoid that from happening, the United States, as well as other countries, can and should follow the lead of India and give legal force to such statements. The earlier enactment by India of Section 166 (2) of the New Indian Companies Act of 2013 effectively gives the necessary legal foundation and teeth to the Roundtable announcement:

A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment. (8) India, as it is unfortunately becoming a poster child for the ravages of climate change, has no choice but to take pro-active measures to address the challenges presented by the climate. As documented in a 2019 report, The Hindu Kush Himalaya...