A two-pronged route to accountability for corporate harm
In this article Balanced Economy Project’s Claire Godfrey, and Social Value International’s Jeremy Nicholls make the case that our economy rewards harm labelled as profit. Skewed accounting lets companies offload environmental and social costs, while weak competition enforcement allow monopoly firms to use their ability of a firm to influence or control the terms and conditions of a market including squashing more responsible rivals. We need accounting that counts real costs and competition policy that tackles concentration so we have our economy s rewards value creation, not value extraction.
A company that pollutes a river, underpays its workers or sits on public resources it has no use for can be, by its own accounts, highly profitable. Nothing in financial reporting requires it to record the damage, and in many of these markets nothing in the competitive landscape forces it to stop. Two systems are meant to discipline corporate behaviour (i) competition, which should stop any firm growing powerful enough to dictate terms, and (ii) financial accounting, which should measure honestly what a firm does. Both ignore the harms of doing business, and these failures reinforce one another.
The accounting paradox
At the heart of the problem lies a distortion around what counts as a “cost.”
In standard financial accounting, costs linked to production and operation such as salaries, raw materials, and rent are methodically counted; others, while real economic costs, are excluded and picked up by society. These costs can extend to include river and air pollution, climate damage, resource and nature depletion, or poor health outcomes, community disruption, household labour, or inequality effects.
The standard accounting system ignores these so-called “negative externalities”; in other words, the ability of companies to externalise these costs for society to pick up. The result is a system that includes costs that don’t reflect real value, while excluding those that matter most. As argued in The Accounting Paradox, modern accounting doesn’t just fail to capture harm—it actively incentivises it. By focusing narrowly on financial returns, it rewards value extraction while ignoring value destruction.
There is also wider structural costs to consider. When a business becomes so big that it can influence the operation of a competitive market, there are costs as competition is reduced. Prices go up. Innovation in new products and services goes down. Lobbying power even reduces government’s ability to regulate to protect consumers and citizens.
Weak competition enforcement enabling value extraction
This accounting ‘blind spot’ is not accidental; it’s created and reinforced at the structural level. Competition enforcement has centred on a presumptive efficiency of companies that is often reflected in their ability to convert revenues into profits while maintaining competitive pricing. It assumes state non-intervention in the market except to correct for non-conformity with this norm.
Decades of underenforcement of competition law and merger control has led to most sectors - agriculture, retail, banking and financial services, asset management, pharmaceuticals and media – being dominated by just a few firms with the ability to influence or control the terms and conditions on which goods are bought and sold. These firms use their monopoly power to design and embed value extraction strategies that maximise short-term returns across entire sectors, regardless of the broader social or economic consequences.
The 2017 UN Trade and Development report warned of the impacts of “rentier capitalism” because of corporate consolidation. Research by SOMO illustrates how monopoly power played out 2020 to 2022 with the top 1 per cent of firms (by market capitalisation) being able to exploit events to gain a phenomenal 78 per cent nominal rise in gross profits across the two years (the bottom 50 per cent of publicly listed firms worldwide saw their profits decline by 29 per cent). This system of monopoly has emerged in part because of competition authorities principal analytical tools essential are concerned with prices and profits. Yet the externalities run far wider and deeper than just manipulating prices of goods and services.
Consequently, dominant firms have built positions of market and strategic power where they've been able to gain two advantages: they can externalise costs, effectively dumping environmental and social damage onto society. They can also undercut responsible competitors, shaping the market in their favour. Over time, this dynamic entrenches power. In many industries, firms have become too big to fail, too powerful to challenge, and too insulated to care.
The UK’s Digital Markets, Competition and Consumers Act (DMCC) 2024 is a case in point. It empowers the Competition and Markets Authority to designate firms with strategic market status and impose conduct requirements tailored to each. In October 2025 the CMA designated Google in general search, and Apple and Google in mobile platforms. Since then the CMA has imposed three conduct requirements, all of them on Google's search business. On mobile platforms, where the firms' revenue model is at stake, it took a different route, accepting voluntary commitments that took effect in April 2026 and which it cannot enforce without reopening the conduct requirement process. Binding rules on steering, the practice that sits closest to that revenue model, were only put out to consultation at the end of June 2026, twenty months after the regime began. Every delay widens the gap between public interest and market reality.
Data centres: a case study in system failure
Nowhere are the failures of these two systems more visible than in the rapid expansion of AI data centres.
The race to build these facilities reflects a familiar “growth-friendly” playbook; privatise returns through stable, long-term rents and strategic control over emerging markets, and socialise costs by passing environmental, economic, and infrastructure burdens onto the public. Data centres are often granted priority access to electricity grids ahead of residential developments and industrial users. The opportunity costs are immense, yet they remain largely invisible in both company accounts and policy decisions. Would data centre expansion look so attractive if accounting fully captured its societal costs, and if competition policy prevented excessive concentration? The answer is plainly no.
What needs to change
Changes to accounting standards
We need to redefine what accounting is for. Instead of treating profit as a purely financial metric, accounting standards should require firms to internalise the cost of compensating for harm done to people and the environmental, and allow positive impacts, where they exist, to be disclosed. In practice, disclosure should mean recognition of harm being included in the profit and loss account and balance sheet. Missing costs should be recognised, irrespective of any arguments regarding any other benefits and these costs cannot be netted against those benefits. Businesses accounting for this harm as a cost would create a feedback loop, the more harm the higher the cost, the higher the cost the lower the financial returns. Investment moves away from businesses that cause harm.
This would require a change to the International Financial Reporting Standards (“IFRS”) Conceptual Framework for Financial Reporting to align accounting with both investor expectations and the public interest. This change would provide a truer picture of value, while aligning business incentives with societal outcomes.. Ultimately, it would transform accounting into a tool for both private and societal accountability.
A change in purpose would mean that costs imposed on consumers and businesses from monopoly power would now be relevant and would be included in the accounts if they can be faithfully represented. Company directors, accountantsand auditors would need to work together to develop measures of these costs that met this requirement. This will be easier for some costs than others, and perhaps more difficult in the context of market influence, but the realisation that these costs are relevant drive the work required.
A competition policy ‘paradigm shift’
Competition and contestable markets are a pre-requisite for growth. Policymakers should stop treating them as a barrier to it. We have the essential legal frameworks in place to tackle abuses corporate power but regulators need to move beyond the narrow focus of price and profit metrics and make competition policy responsive to real-world social concerns while maintaining legal and institutional integrity. This means enforcing existing laws more decisively, tackling entrenched economic concentration and incorporating broader public interest considerations into competition decisions.
The bottom line
Right now, our economic system rewards companies for generating profit even when that profit is built on harm. As long as accounting ignores those harms, and competition policy tolerates the power that sustains an extractive model, the cycle will continue.
Fixing one system without the other would change little. Fixing both could reshape the rules of the game by supporting value creation rather than shifting the cost of it.