Impact classes of superclass S4 - Regulators
SI 4.1 Regulator engagement
Companies engage with regulators in various ways to try to use the regulatory process in favour of their business agenda. In addition to this, regulatory engagement allows for the company to proactively address risks that can harm the reputation of the company/sector with the regulators.
SI 4.1.1 Political contributions:
Political or campaign contributions are used by companies to elect representatives who can influence policy to reduce competition, increase barriers to entry, and increase sales or profits for the company (UNESCO, 2012). For example, renewable energy companies donate money in election cycles to leaders who share their vision for clean energy. Contributions can also be used to support or finance activities of regulatory bodies whose views are aligned with those of the needs of the company. Regulatory oversight (e.g., laxity of regulations or severity of enforcement) may be influenced by such contributions, leading to unfavourable outcomes in the future. Public perception of the regulator's unbiasedness might also be impacted.
SI 4.1.2 Lobbying:
Businesses lobby regulators in multiple ways (UNESCO, 2012):
Direct lobbying: infrastructure companies use governmental relations specialists, industry trade associations, consultants, or a combination of these to directly lobby regulators into making policies favourable for their businesses.
Indirect lobbying: infrastructure companies engage in indirect or grassroots lobbying by influencing employees, stakeholders, or the public to lobby policymakers on their behalf.
Lobbying can help introduce legislation that favours a specific industry, such as increasing protectionism or reducing competition. It can also help delay or forfeit regulatory oversight of the industry, which can lead to unfavourable outcomes for the public and risk the credibility of the regulator. Moreover, lobbying can shape laws that determine the scope of activities under the purview of a regulatory body. For example, successful lobbying by fossil fuel companies can delay the implementation of climate laws (such as the implementation of carbon tax), which can exacerbate climate change, causing physical risks to increase in intensity and frequency globally, resulting in a negative perception of the regulator.
SI 4.1.3 Litigation:
Companies can impact the regulator by bringing litigation against the regulator. For example, see Global Affairs Canada (2019); Guernigou and Vidalon (2015); GlobalAffairs Canada (2017).
UNESCO. (2012). The sustainable business case book. Saylor Academy.
Global Affairs Canada. (2017). Mobil Investments Inc. and Murphy Oil Corporation v. Government of Canada. Available at: https://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/mobil.aspx Accessed on 10 July 2022.
Global Affairs Canada. (2019). Windstream Energy LLC v. Government of Canada claimant. Available at: https://pca-cpa.org/en/cases/36/ Accessed on 10 July 2022.
Guernigou, Y. L., & Vidalon, D. (2015, April 9). Update 2: France strikes deal to end dispute with tollroad firms. Reuters. Accessed on 10 July 2022.