It's time to end corporate impunity

Harmful business practices can damage society and the planet. We have to hold companies accountable

December 14, 2021
Many of the companies linked to global deforestation can be found on our high streets. Photo: Joao Diniz / Alamy Stock Photo
Many of the companies linked to global deforestation can be found on our high streets. Photo: Joao Diniz / Alamy Stock Photo

Harmful business practices concern us all—whether through climate change, deforestation or modern slavery. While the dumping of sewage in rivers was prominent in recent domestic headlines, most of the damaging impacts of poor UK business practices remain out of sight, hidden in a web of complex global supply chains supporting the British economy. 

The UK is a leader in the export of plastic waste, and many of the companies linked to global deforestation can be found on our high streets. A recent criminal trial also highlighted the nexus between British business and some of the millions of people trapped in forced labour worldwide. The case shone a light on an international human trafficking ring, in which hundreds of victims were subjected to labour exploitation. The products they helped to make later entered the supply chains of many of the UK’s largest retailers. 

So how should the UK government address this? Some progress has already been made on environmental issues: the government has introduced measures to ban products grown on illegally deforested land and at COP26 a group of countries pledged to end deforestation by 2030.  Reporting on climate targets will become mandatory by 2025 and new taxes that target plastic packaging come into force in 2022.

Regulating corporate conduct

While these moves are positive, a piecemeal approach is insufficient. Technologies and business models are constantly evolving, and regulators face an uphill battle to keep pace with businesses’ impacts on the environment and the community. Politicians cannot legislate against every type of harm and enforcement agencies cannot police every supply chain.

But although the government cannot be expected to have detailed knowledge of the social and environmental impacts of all UK business around the world, the companies themselves can police their own processes.

If the UK is serious about protecting the environment and ending abusive labour practices, it should begin by creating a legal duty for companies based in Britain to conduct environmental and human rights due diligence. Businesses should be given the responsibility of reporting on the environmental and social damage they are contributing to, and instructed to prevent or at least mitigate such harms. 

We have to ask businesses to take ownership of their decisions, their relationships and their practices. We can reward responsible business conduct and end impunity by allowing abusive corporate practices to be challenged here in the UK, regardless of where in the world they actually take place. 

Market failure

Any expectations that consumer pressure or market forces could disincentivise damaging business practices have been dashed. The majority of large corporations now publicly trumpet their sustainability credentials with commitments to net-zero emissions, for instance.

But voluntary, ad-hoc corporate pledges, with no means to hold companies accountable if they change course or fail, are insufficient. Most CEOs will be long gone by the time we find out whether or not their promises have come to fruition. 

In the meantime, a new study by researchers at Harvard details how many companies are creating environmental costs that exceed their total profit. The 3,000 companies researchers assessed created an estimated $4 trillion of environmental damage, which in the case of 450 exceeded their profits. New research from the University of Oxfordsets out that delayed climate action by companies may cost the financial sector up to $150bn per year. 

Markets alone will not address our worsening environmental situation. We urgently need new incentives and minimum standards on corporate conduct. 

Level the playing field 

Of course, responsible businesses are being undermined by firms that don’t factor in their true cost to society. As a result, some British businesses and investors are themselves calling for new regulations, asking for clarity on expectations and a level playing field on which to operate. Responsible businesses value sound public policy and now need clear direction from government.

The UN and OECD have already developed principles and guidelines for states and companies to address human rights abuses committed in business operations. To be effective, due diligence legislation should be based on these principles and have three clear goals: prevention, accountability and remedy. 

Without accountability or remedy for non-compliance, legislation will not serve as a deterrent or incentivise businesses to change. Legal liability is essential to allow those harmed by the decisions of British-based companies to seek redress here in the UK. 

Due diligence legislation would not dictate where or what businesses can trade; it would simply require companies to be proactive in monitoring environmental risks and safeguarding workers in their supply chains. By implementing a proper standards regime, UK-based companies can help raise living standards across the world through vital employment opportunities in their value chains.

Leader or laggard

France, Germany and Norway have robust legislation in place, and the European Commission has also pledged to act. The UK still has an opportunity to be at the forefront of this debate.

We are putting extreme pressures on our planet. Our current patchwork of legislation is inadequate. While there is no instant fix to the environmental crisis or the inequality it causes, due diligence legislation could be a critical first step towards a safer, cleaner, healthier and more sustainable world. 

The opinions expressed here are those of the authors alone