Are Firms and Managers At Risk When Contributing to Climate Change?
Executives’ personal responsibility to address climate change may be decided in courtrooms.
Topics
Leading Sustainable Organizations
At what point do corporate executives become personally liable for their companies’ failure to take action on climate change?
In 1973, Swiss entrepreneur Stephan Schmidheiny took over as head of the Swiss Eternit Group, a leading manufacturer of asbestos products, three years after the firm had become the biggest single shareholder in the Italian company Eternit. In 2012, Schmidheiny was accused and convicted of causing an environmental disaster through negligence, and of knowingly failing to introduce adequate health and safety measures. This failure led to more than 2,200 asbestos-related deaths in Italy. In 2013 the court of second instance increased the sentence, and found Schmidheiny guilty of causing a permanent environmental disaster with criminal intent. His appeal is currently pending. Should it be unsuccessful, Schmidheiny faces 18 years in prison.1
Being held liable or personally responsible for business decisions can quickly become a nightmare for senior executives. Directors’ and officers’ (D&O) liability insurance has become a multi-billion-dollar market, but D&O insurance is of little use to an executive facing incarceration.
In the wake of perceived malfeasance by corporations, calls for executives to be held liable are common. The Schmidheiny case is worth watching because of its potential repercussions for matters of broader concern. The interesting question is whether or not it is likely that other environmental or human rights issues hold similar risks for executives. A likely candidate here is climate change — or rather, the damage resulting from extreme weather events or regional shifts in weather patterns.
At some point, affected parties will claim damages for losses attributed to climate change, especially if insurance is unavailable or unaffordable. Even today, organizations such as the Climate Accountability Institute and the Climate Justice Programme aim to use the law “to protect the natural environment and people from the adverse impacts of climate change.” Whom will the legal actions target?
The remainder of this article looks at four questions: which organizations might be held liable? On what basis might they be held liable? Will individual executives be targeted as well? Are investors and financial institutions also at risk of being held liable?
Research is already attributing climate change implications, such as rising sea levels and extreme heat, to specific carbon producers.
References (20)
1. "Swiss billionaire gets 18 years jail for Italian asbestos deaths," June 3, 2013, Reuters. http://uk.reuters.com/article/2013/06/03/uk-italy-asbestos-idUKBRE9520UZ20130603
2. Heede, Richard, Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854 – 2010, Climatic Change 122 (2014), pp. 229-241. http://download.springer.com/static/pdf/371/art%253A10.1007%252Fs10584-013-0986-y.pdf?auth66=1409411728_f58acdab2e6938c889b57a28234471c7&ext=.pdf
