MANDATORY RESPONSIBILITY
I don’t think it will ever happen, but consider
this scenario. Imagine Congress passes a law requiring
every corporation — in exchange for limited
liability — to have a triple bottom line. The law
also says that at least a third of corporate directors
should represent workers, nature, and communities in
which the company operates. And it protects directors
from lawsuits if they favor nature over profit.
You’re the CEO of Acme Corporation. What changes do
you make after the law takes effect?
Well, you might start by increasing your accounting
budget. You’ll need, henceforth, to keep track not
only of money but also of your nonmonetary impacts on
society and nature. This isn’t easy, though
presumably shortcuts will be developed. Next, you assign
people to find ways to reduce Acme’s negative
impacts on nature and society, ranking the proposals by
years to payback. You budget a modest sum for the most
cost-effective projects, giving preference to those with
public relations value. You publish ads and reports,
patting yourself on the back for doing what the law
requires. And you remind your board of directors that, if
they choose, they can snub offers from the likes of
Charles Hurwitz and forgo large capital gains for
shareholders.
All this would be well and good. But given the
algorithms that still rule, how much difference would it
make? And even if it did have some effect, would it make
enough difference in the right ways? After all, you might
spend your small green budget on one thing, while nature
most needs something else.
Now, as an alternative, imagine that the price
of nature is no longer zero. All of a sudden, it
costs big bucks to pollute or degrade ecosystems.
Overnight, your managers scramble to cut pollution and
waste. The higher the price, the faster their behavior
changes. And it changes in response to specific natural
scarcities, as indicated by specific prices.
The question is, which of these approaches would work
better — mandatory social responsibility, or
increases in the price of nature? The answer, without
doubt, is the latter. ...
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