The harm economy (and how we fix it)

10 Sept

Written By Hello

By Ben Carpenter, CEO, Social Value International

We live in a harm economy: causing harm can be profitable, because the costs land on other people and rarely appear in the accounts of the business that caused it. This blog names that problem and introduces the project we are building to fix it.

At the end of August, Meta agreed to pay up to $18 billion to settle claims from dozens of US states and territories that Instagram and Facebook harmed the mental health of children and teenagers. The settlement ended a federal trial in California and requires new safeguards for under-18s, including default daily time limits and overnight notification curfews. It will be paid in instalments over ten years. Meta denied any wrongdoing.

And the stock market’s verdict? Meta’s share price rose by 4-5% on the news. Investors looked at a bill of up to $18 billion and saw a manageable cost, safely priced in. Read plainly, that is the market accepting harm to children as an acceptable cost of doing business. As one Guardian columnist put it, “the money men reckon Meta dodged a bullet.”

The pattern is simple. A company profits. The costs of the harm land on other people. Call it a harm economy. Those costs become visible in financial terms only when litigation or regulation forces a remedy. And when the bill finally arrives, it is often one the business can absorb.

Meta is not an outlier. This week, Uber drivers from the UK, the Netherlands and beyond launched a collective legal action on behalf of around 241,000 drivers, over the “black box” algorithm that sets their pay and allocates their work. The claim seeks compensation, but look at how the drivers describe the harm. They speak of living in “constant fear” of a “soulless” system that watches them and learns what they will tolerate. “They have all my information and they are using it against my own wellbeing,” said Kola Oba, an Uber driver in north London. James Farrar of Worker Info Exchange, the group leading the case, calls Uber’s monitoring of drivers “an affront to their dignity as workers and as human beings”. Uber categorically rejects the allegations. But notice what the drivers say has been taken from them. It is not primarily money. It is rest, time with family, dignity, peace of mind. And none of it appears in Uber’s accounts.

The pattern runs across industries and across decades. Opioid manufacturers, distributors and pharmacies in the US have agreed settlements worth more than $50 billion for their role in an epidemic of addiction. 3M has agreed to pay over $10 billion to resolve claims from American water suppliers over contamination by PFAS, the ‘forever chemicals’ now found in rainwater and in our blood. Volkswagen’s emissions deception has cost the company more than €30 billion in fines, penalties and settlements. Hundreds of billions in settlements: every one a harm that stayed profitable until someone forced the bill.

Harm is the language of the courtroom, the regulator and the settlement agreement. It is not rhetoric. It is how the economy currently works.

Only the visible tip

The compensation headlines are only the visible tip. When a harm does get a price, it comes years or decades after the event, long after the profits have been banked and the dividends paid. And most harm never reaches a courtroom at all.

When Jeremy Nicholls and I wrote the Materiality Files series in 2023, we examined the Guardian and TBIJ investigation into Del Monte’s pineapple farm in Kenya, where security personnel were accused of killings and violent assaults on local people. What struck us was the asymmetry. Del Monte’s share price stayed stable throughout. The consequences for shareholders were absorbable. As one grieving father said: “They don’t value life. What they value most is pineapples.”

Why the harms don’t count

Why does this keep happening? Because financial statements decide what counts as a cost. Under today’s accounting standards, a harm generally becomes a cost only once it hardens into a probable legal obligation. Until somebody is forced to pay, the harm sits outside the accounts. Profit is overstated, prices don’t tell the truth, and capital keeps flowing towards the very business models that cause the damage. Profits are privatised. Costs are socialised.

Few of the business leaders and investors I speak to would defend this. The problem is not a shortage of good intentions. The problem is a set of rules that makes harm invisible, and therefore free.

The movement’s next job

The social value movement has been growing for twenty years. Much of our work, through a community of practitioners in more than 60 countries, focuses on capturing positive impact so that organisations can optimise their effects on people’s wellbeing. That work is good and necessary, and we will keep growing it.

But it is not enough on its own. As a movement we must also focus on changing the economic system itself, so that it stops generating harm at this scale. We cannot measure our way to a better world while the rules of the game still reward harm.

How we fix it: the True and Fair Project

Company law already requires accounts to give a ‘true and fair’ view. Our contention is simple: accounts that leave out the costs a business imposes on other people are neither true nor fair. This was backed up by a legal opinion in 2024, stating that directors of companies must consider whether and how to disclose relevant sustainability issues in order to provide a true and fair view.

The True and Fair Project is SVI’s response to the harm economy. It is a phased programme of analysis and advocacy to build the mechanisms for externalised harms to be treated as business costs. The levers already exist. We are examining directors’ duties and the accounting directives that shape corporate reporting across Europe. None of this requires inventing a new system. It requires making the existing one align to a universal principle of do no harm and the third pillar of the UN Guiding Principles on Business and Human Rights: access to remedy.

The prize is worth being clear about. When harm appears in the accounts before the courtroom rather than after it, decisions change. Prevention becomes cheaper than compensation. Responsible businesses stop being undercut by those that dump their costs on the rest of us. Investors get information that reflects reality. That is not anti-business. That is a market that tells the truth.

The rules that permit the harm economy are written down. And anything that is written down can be rewritten.

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