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Boardroom warming – A role for company directors in climate change mitigation

Berry, Jessica (2013) Boardroom warming – A role for company directors in climate change mitigation. Honours thesis, Murdoch University.

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Abstract

Current climate change mitigation policy has been entirely ineffective in bringing about a reduction in greenhouse gas emissions. The adoption of a top down management approach combined with an over reliance on environmental law principles indicates that policy makers have failed to understand the unique nature of the climate change problem. Climate change is a ‘wicked’ problem – it does not respond to the top down and internationally focused approaches currently employed. Further, our approach to managing climate change and its impact is dependent on our understanding of the problem at any given time. This is particularly problematic with climate change as our understanding of its likely impacts and how we respond to them shifts rapidly. Climate change and the governance of climate change are complex and difficult issues involving many parties. Negotiations around national and international climate change policy must take into account a wide range of interests and have become more complex due to the increased role of non-state parties. It is argued here that forms of governance that work at a lower level and embrace the participation of non-state actors such as corporations are more effective in dealing with wicked problems such as climate change.

Despite the fact that corporations are among the largest greenhouse gas emitters and are responsible for almost all significant environmental outcomes, their potential to play a key role in climate change mitigation has been largely ignored. This essay proposes that the impact of climate change would be better managed by a bottom up approach that incorporates corporations and their directors as key decision makers. It is proposed that the best way to do this is by the introduction of a new directors’ duty that requires company directors to take into account the interests not only of shareholders, but also of future generations and the climate itself. Principles of intergenerational and intragenerational equity and stakeholder theory are called upon to inform this new approach. These theoretical tools allow for the development of a model that accommodates several stakeholders while still preserving the economic benefits brought by incorporation. Corporate social responsibility initiatives and separate legislation are examined and found wanting as alternative methods for incorporating corporations into a bottom up approach to climate change mitigation. It is argued that directors’ duties, because of their established legitimacy, wide acceptance and well understood enforcement mechanisms are the ideal legal tool for the job. Under the current law, directors face uncertainty about how far they can go in acting in the interests of stakeholders other than shareholders. It could even be said the current law creates a disincentive to divert corporate resources to reducing a corporation’s greenhouse gas emissions. It is argued here that a new duty that imposes an obligation on company directors to take into account the interests of shareholders, the climate and future generations will remove uncertainty and allow corporations to meaningfully participate in a bottom up approach to effective climate change mitigation.

Publication Type: Thesis (Honours)
Murdoch Affiliation: School of Law
Supervisor: Goodie, Jo
URI: http://researchrepository.murdoch.edu.au/id/eprint/22719
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