We need to close the corporate accountability gap

The world’s largest companies are becoming more valuable, powerful and concentrated. By 2030, the number of people living in extreme poverty could increase to over one billion and even if we implement everything governments committed to at COP last November, we’re still headed for 2.4 degree temperature increase by the end of the century.

It’s not surprising that the United Nations and its member states are asking the private sector to help achieve the Paris Agreement and the Sustainable Development Goals. Achieving such goals has traditionally fallen in the domain of governments but they know they can’t do it on their own. Governments aren’t the only ones who see this. The 2022 Edelman Trust Barometer shows that trust in governments, media and institutions is at an all time low, and that people expect businesses to step up and fill the void.

Some are finding hope in unprecedented commitments from companies and financial institutions, the most eye-catching example being the 130 trillion dollars pledged by the Glasgow Financial Alliance for Net Zero – a consortium of more than 450 banks, asset managers and insurers. Others are sceptical. The dazzling investment sounds too good to be true, not to mention the questionable climate credentials of some of the financial institutions in the mix. Besides, we all know there isn’t a single institution or government that can or will hold this group of the most influential global financial institutions to what they’ve pledged. And without accountability, talk is cheap.

This lack of corporate accountability isn’t just limited to the financial industry. Our world lacks a mechanism to hold the most influential companies accountable on their impact to planet and people in virtually every industry. As a result, the majority of companies avoid their responsibility and don’t take the urgent action that is needed. Equally, those that do live up to their responsibility are not rewarded accordingly.

The companies with the biggest impact on our society and planet have one thing in common, they are global players that operate across countless different jurisdictions. Whether it’s a company like Parlevliet & Van der Plas – a family-owned, Dutch seafood company that fishes in front of the coast of Mauritania and sells its catch to countries in West-Africa; Saudi-Aramco, the world’s largest oil and gas company; or Facebook that has become synonym to internet for millions living in developing countries – for most of their operations none of them are bound to the legislation of the country in which they’re headquartered. And nor is their impact. Governments are therefore not able to hold their own companies to account.

The impact of companies is of course to a large degree positive. Businesses create jobs. Fish is a healthy and important source of animal protein. Oil and gas bring in much needed revenue for some of the world’s poorest nations. And people can’t thrive in today’s world without internet access. And yet, we also know that we’re depleting our oceans, we need to urgently move away from fossil fuels and that social media risks undermining society.

Therefore governments, multilaterals, institutional investors, civil society organisations and ultimately the citizens of the world must be crystal clear about what we need from companies and under what conditions we expect them to deliver this. If not, we risk leaving our future to the logic of the free market. Which we now know – left unchecked – to be detrimental.

Once we’re clear on our expectations, the question is: who will hold the world’s biggest companies accountable? So far, we’ve produced mostly singular answers: ‘Consumers will vote with their wallets. Businesses need new kind of leaders. Governments need to create the right set of regulations. NGOs and the media need to name and shame companies. Investors will correct companies through ESG assessments.’ The list goes on.

Unfortunately, for every person who believes in the power of one of these pressure points, there’s someone else who points out its limitations. These debates can be intellectually satisfying, but they need to stop. The urgency demands that while different (state and non-state) actors naturally pursue different strategies, they need to start pulling in the same direction, so they reinforce and build on each other. This isn’t a ground-breaking idea but it does require doing the hard, often unseen and unglamorous work of multilateralism, collaborating and compromising.

This needs to be driven by the understanding that only collectively can we successfully hold the most influential companies accountable. It’s only with proper accountability companies can and will take the urgent action needed to put the world on course towards a sustainable future that works for everyone.