- Category: Low-Carbon Biz
09 Jan 2013
- Published on Wednesday, 09 January 2013 09:35
- Hits (1880)
Shareholders in a company should also be held liable when the company’s activities harm the environment.
A new study from the International Institute for Applied Systems Analysis suggests that this is exactly what should happen if we want to move the world’s energy systems toward sustainability.
The research, done in collaboration with the Potsdam Institute for Climate Impact Research, found that there is a fundamental rigidity or lock-in mentality by which businesses favors the use of fossil fuels and nuclear power despite their environmental and social costs.
According to the researchers, the reasons behind the global system being “frozen” with fossil fuels and nuclear are what they call “dominant positive feedback.”
Usually, heavy investments in fossil fuels or companies that use fossil fuels and nuclear power have led to big profits for shareholders, encouraging them to invest more as these companies and technologies have proved profitable.
Profits and advantages for shareholders do not include a reckoning for environmental and social damage, so there is little drive for shareholders to consider these factors.
“You could change this system by allowing a form of negative feedback: by stopping the current block on shareholder liability and holding shareholders co-responsible for the damage that their companies cause,” stressed Jérôme Dangerman, lead author of the study.
While companies are penalized for damages to the environment, owners and shareholders are not. Putting liability between the company and its shareholders could spur a shift toward more sustainable energy practices, which will in turn prevent environmental damage as well damage to the shareholder’s portfolio.
“If the shareholders were held liable, then the next time they might consider the risk before investing or reinvesting,” said Mr. Dangerman. – K.R. Jalbuena