We are deeply confused. Even regulations (which many people think are good) are are actually an awful workaround the concept of 'total liability'.
The term 'limited liability' speaks for itself. What a massive hack it is! If liability is limited; it immediately begs the question; who is paying for all the excess damage which exceeds liability limits?
I hate how people keep saying stuff like "Show me the incentive, and I show you the result" yet those same people will say "We need to regulate X..."
What are regulations? Nothing is worse than regulations in terms of creating perverse incentives and encouraging neglect. What regulations do, psychologically, is akin to saying "So long as you stick to these guardrails, you can do whatever you want! You won't be held liable, so long as you're compliant with our regulations. It's on us, the government, not you."
This is a horrible message to convey. What should be conveyed instead is "There is no regulation, YOU are responsible for the harms YOU cause. If YOU cause harm, YOU will PAY. You better think hard about what you're doing, make sure you're not causing harm. Regulate yourself! Because if you don't, you will lose it all and it will all be your fault."
The messaging behind regulations disempowers individuals and encourages neglect... It's horrible in terms of incentives. Also, it makes a deeply misguided assumption that the government is capable of understanding some industry or process better than the people who created the industry/process...
Reality shows us, clear as crystal, that regulations always lag behind, are full of loopholes and basically kill all competition from smaller companies, allowing large companies to be even more neglectful.
It shocks me that there's people who still believe this. Suggesting regulations encourage otherwise moral businesses to be unethical is extreme propaganda. Just because someone finds a loophole in a regulation does not mean the alternative (everyone can do whatever they want and God will sort 'em out) would be better.
We have fire codes, which are regulations, because building fires were relatively common and often catastrophic in the 19th century. Did that lead to more house fires?
That is not a priori a net negative.
I propose a new model; 'total liability'.
Every time something bad happens, you identify every person who contributed to the harm, calculate each person's liability and they have to pay. If some of the culprits cannot be identified, then the remaining culprits who can be identified have to absorb the unallocated liability... Not allocating full liability to people who do harm is akin to allocating it to everyone, including those who played no part in the harm. This is immoral and creates perverse incentives for continued harm.
For example, someone discards an empty plastic Coca Cola bottle on the ground in a public park, the person is fined maybe 95% but 5% of the fine is directed to the Coca Cola company for having made the decision to make the bottle out of plastic instead of tin or glass; thus being complicit in the harm. The money for any harm done, by any entity should go directly towards UBI and be paid out equally to all citizens.
The government could also use statistics to fine companies based on reasonable estimates of current harmful practices. For example, how much damage is microplastics causing in terms of medical costs globally? Make a list of all companies responsible, fine each one proportionally to their contribution to the harm.
People should be paid for identifying, reporting and successfully proving harmful practices (they deserve a commission, like a lawyer).
Identifying and reporting problems adds value to society and should be rewarded.
The majority of the proceeds should go to UBI. Why UBI? Because diffuse harms require diffuse remedies. It's not possible to award damages for widespread harm in a fair, non-corrupt way, so distributing to all citizens equally is the best approach. It's not perfect, but people know how to count and it's easier to identify and prove fraud if the rule is simple like 'each person gets the same amount of UBI'.