What misguides environmental risk perceptions in corporations? Explaining the failure of Vale to prevent the two largest mining disasters in Brazil

Corporate misperceptions of environmental risks are relatively frequent and can have catastrophic consequences, as in the case of the two recent tailings dam breaks in Brazil of the mining company Vale. By analysing Vale's documents and testimonies of investors, managers and engineers in the period between the two accidents (2015-2019), we investigated why Vale disregarded potentially disastrous operational risks after the largest tailings spill in the history of mining in Brazil. The results reveal that the sources of risk considered important at Vale were those that could potentially affect the company's short-term financial performance. Overall, these findings indicate that the focus on shareholder value can generate strong biases in the perception and assessment of environmental risks, which can not only cause massive social and environmental impacts, but also, paradoxically, the destruction of shareholder value in the long run.

Automated summary

Corporate misperceptions of environmental risks can lead to catastrophic consequences, as they often prioritize short-term financial performance over potential disastrous operational risks and environmental impacts.