Office for Environmental Programs - Theses
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ItemDirectors' duties in the anthropocene: liability for corporate harm due to inaction on climate change( 2013)The science relating to anthropogenic climate change is no longer in credible dispute. With its physical and economic impacts increasingly observed, the attention of legal commentators has begun to broaden from responsibility for emissions mitigation to liability for climate change-induced harms. At the same time, Courts are demanding higher standards of proactivity and engagement from corporate boards in order to satisfy their statutory directors' duties. This paper combines, and extends, those two areas of scholarship by examining whether common corporate governance approaches to climate change may contravene directors' primary duties under Chapter 2D of the Corporations Act. It concludes that, even where directors' subjective bona fides are not in question, passivity, reactivity or inactivity on climate change governance is increasingly likely to contravene the duty of care and diligence under section 180(1) of the Corporations Act, and increasingly unlikely to satisfy the 'business judgement rule' defence under section 180(2). This includes governance strategies that emanate from climate change denial, a failure to consider its impacts due to ignorance or unreflective assumption, paralysis caused by the inherent uncertainty of its magnitude and timing, or a default to a base set by regulators or industry peers. In addition, even considered decisions to prevail with 'business as usual' are increasingly unlikely to satisfy the duty (or the business judgement rule defence) - particularly if they are the product of a conventional methodology that fails to recognise the unprecedented challenges presented by an erratically changing climate. In addition, whilst unorthodox, it is reasonably arguable that a failure to actively consider the impacts of climate change may also breach the duty to act in good faith in the best interests of the corporation under section 181. Accordingly, directors who do not proactively respond to the commercial risks and opportunities of climate change, now, may be held to account under the Corporations Act if corporate value becomes impaired into the future.