“Meat shaming,” “flight shaming,” and other carbon-footprint shaming behaviors are familiar phenomena in today’s climate-conscious society. In this context, people harness their ability to cause shame and embarrassment to others to prompt private individuals to adopt climate-friendly practices. A different type of climate shaming involves the shaming of firms by government regulators to achieve climate-related regulatory goals. Importantly, regulatory shaming does not aim to cause shame or embarrassment to individuals but to utilize the reputational sensitivities of firms and the ability of stakeholders to hold firms accountable for their role in the climate crisis.
In a recent article, I discuss “regulatory climate shaming,” a practice by national and subnational regulators of publicizing corporate actions, decisions, and characteristics contributing to climate change to induce compliance with climate change norms. For example, this would include the publication of regulatory rankings of firms, product climate labels, public emission databases, condemning press releases, climate disclosure obligations, and naming-and-shaming of firms via social media posts. The publicized information can relate to companies’ greenhouse gas emissions, corporate climate policies, voluntary compliance with standards aiming to reduce carbon footprints, and firms’ non-compliance with climate laws, rules, and regulations.
Various regulators have already implemented this nascent approach in recent years. For example, Germany, France, the United Kingdom, Spain, and the Netherlands publicize the names of companies that have breached their cap-and-trade obligations––a mechanism based on greenhouse gas emission quotas that allow firms to trade unused emission quotas. The UK Environment Agency, for instance, specifies the names of breaching companies, the sum of the penalty imposed, and a description of the infringement on its website.
In another example, the Israeli Ministry of Environmental Protection scores and rates companies according to their environmental performance, including their participation in voluntary climate programs. This type of information not only assists investors in making informed choices but can also shame companies into better environmental performance. Climate labels, which can be both informational (for consumers) and reputation-damaging (for firms), are also emerging, as regulators like the Swedish Energy Agency require energy companies to label gas pumps with company-specific climate impact ratings for different fuels. Furthermore, French car manufacturers are now required by regulations to disclose each vehicle’s carbon emissions class and to include in their advertising a message that encourages people to prefer public transport and cycling over driving when possible.
In this vein, financial regulators are also considering implementing regulatory climate shaming schemes. For example, the US Securities and Exchange Commission (SEC) has published a new proposed rule that would require public companies to issue detailed climate risk disclosures, such as a company’s level of reliance on fossil fuels. This type of disclosure mechanism is currently being implemented or considered by financial regulators in various jurisdictions. It can inform current and potential shareholders regarding the financial risks involved in their investment and induce investors and other stakeholders to exert pressure on high-risk firms to adjust their business practices and become more climate-friendly. Possible relevant parties in this context may include, in addition to shareholders and potential investors, consumers, environmentally aware citizens, businesses (such as suppliers and competitors), creditors, employees, donors, the media, other regulators, policymakers, NGOs, and plaintiffs.
Banking regulators also consider adopting naming and shaming tactics in climate-related banking risks. For example, the European Central Bank (ECB) is considering publicly listing banks that engage in climate washing by issuing PR information designed to bolster their environmental credentials with no real substance or repeatedly failing to fully disclose their climate risks. In another example, the Bank of Israel’s Banking Supervision Department plans not only to impose climate change disclosure obligations on Israeli banks based on their financial exposure to polluting firms but also to grade them accordingly and publicize the grade ranking.
My article is mostly conceptual and theoretical, offering a normative theory of regulatory climate shaming based on regulatory shaming theory and climate obstruction scholarship. I argue that given the continuous failure of climate law and regulation in international and national arenas, regulators should develop soft regulatory mechanisms that rely on public activism and utilize firms’ social licenses in the age of climate change. I further contend that regulators are currently mostly focused on curtailing corporate greenhouse gas emissions, and they should give more attention to indirect corporate contributions to the climate crisis via climate obstruction, and utilize shaming to that end.
Corporate climate obstruction is any illegitimate, deceptive corporate activity to impede or disrupt climate legislation and regulation. The article discusses two main types. The first is known as the “climate denial machine,” a corporate regulation and reputation management mechanism operated mainly by oil and gas companies via lobbying, litigation, and media campaigns. The second is climate washing–––a more recently developed practice in which firms intentionally misrepresent their products and services as climate-friendly. The article frames these two types of climate obstruction tactics as critical meta-regulation problems that cannot be properly addressed via conventional regulatory tools like emission restrictions and monetary sanctions.
Against this background, the article suggests that regulators incorporate climate shaming into their regulatory toolkit. Namely, I argue that in addition to traditional law and regulation tools, regulators should directly interact with stakeholders using various old and new media platforms to expose companies’ manipulative behavior as exacerbating and directly responsible for the climate crisis. Put differently, I argue that regulators should rely more on the ability of the public to shame companies into being more climate responsible.
The article discusses the different rationales and justifications for regulatory climate shaming, one of which is the ability for shaming to inflict reputational and financial damage onto firms and pose a much more serious threat than any regulatory penalty. Another relates to the symmetry between the intent of certain firms to manipulate public opinion via climate denial and climate washing and the ability of regulators to even the playing field by publicizing contrary and reliable facts. Importantly, this reputation-based tool can also be used positively by regulators to name and praise those firms who are climate responsible and thereby also nudge other firms to do the same. Hopefully, more regulators will come to adopt shaming as a vital tool in the fight against climate change soon.
Sharon Yadin is an Associate Professor of Law and Regulation at the Yezreel Valley College and a Research Associate at the University of Haifa.
This post is adapted from her paper, “Regulatory Shaming and the Problem of Corporate Climate Obstruction,” available on SSRN and is forthcoming in the Harvard Journal on Legislation.