23 - Corporate Compliance and Climate Change

Summary

Climate change has dramatically increased the frequency and severity of disasters including hurricanes, floods, wildfires, droughts, and pandemics. In a globally connected economy, climate-change fueled disasters disrupt supply chains and upend markets, affecting corporations no matter where they are located. From a risk-management perspective, however, climate change is just another external threat to hedge against, no different in principle than the risk that interest rates might rise or that an economic downturn could reduce the demand for a corporation’s products or services. Thus, corporations have reason to address the problem of climate change, but only to the extent that corporations can thereby produce value for their shareholders. This chapter argues, to the contrary, that climate change should trigger a compliance response. Unlike risk management, a compliance-based approach would require corporations to internalize the problem of climate change and to give it priority over competing considerations.