Business leaders across the globe have been widely criticized for failing to consider the effect of global warming on the company they are overseeing. Climate change in Australia, for instance, have been mostly ignored by company directors in the country playing on ignorance that predicting such cost was beyond their capacity. But barrister Noel Hutley begs to differ.
Directors Fail To Account Effects of Climate Change In Australia To Their Company
Hutley released a new legal advice this Monday that will likely result in directors of an Australian company facing legal actions for neglecting to properly take into consideration the impact that climate change brought to their company. Penalties for such an oversight will include fine up to $200,000, prevention of holding directorship in the future, and compensation to the company for damages incurred. The Corporation Act dictates that directors carry the burden in accounting all the risk that might affect their business.
And one such risk is climate change in Australia. This isn't to say that that the act requires these leaders to go full Captain Planet. However, it seems that even the most rudimentary aspects of the problem weren't even accounted and disclosed by certain directors.
Now, there are two categories of risks that these top boots need to look out for. First is the physical risk. This category includes but is not limited to rising sea levels, severe weather conditions, and power outages due to the worsening climate, directly and indirectly, affecting the sales of a given company. Flooding in coastal areas, for instance, makes it riskier for banks to conduct their business, SMH reported.
Worsening climate? The insurance company is likely going to take a hit from it. Power outages will result in a complete halt of operation resulting in businesses bleeding profits. The second category is what's called a "transition risk."
Industry Forced To Shift From Fossil Fuel To Renewable Energy To Decrease CO2 Levels
Because of accords struck between countries - such as the Paris Agreement - the Australian government will likely impose businesses to shift from using fossil fuel to renewable energy. This shift will be difficult if the director failed to foresee the threat that climate change in Australia poses. While it's true that for the past five years the cost of solar and wind energy has decreased to a third and two thirds respectively, sudden implementation of such drastic change may hurt finances of company that's been scheduled to be invested in certain areas, The Australian reported.
These penalties already have an on-going precedent in the United States, case in point the legal actions faced by the firm Peabody Coal. Climate change in Australia is hurting the coal sector tremendously as governments are tightening laws regarding carbon emissions. As such, the industry as a whole is being ushered into a greener energy age in the hopes of decreasing greenhouse gasses in the atmosphere that's making unprecedented changes in the planet unseen since millions of years ago.
