Businesses, directors and managers are exposed to a wide range of environmental laws with heavy penalties.
The world was relatively empty of us and our furniture, now it is relatively full. But we have not yet switched our thinking from “empty-world” economics to “full-world” economics. Over recent decades, there has been an increasing awareness that perhaps the current pathway of human development is in many ways ecologically unsustainable (and humanly undesirable). Although environmental problems and social concerns continue to be contested and debated, it appears that the trend is for greater evidence and increasing concern with issues, not less.
The developed world has been very successful in producing big houses and high-rise buildings, factories and farms, motor vehicles and power plants, all conceived to serve a purpose: to help make our lives easier, more convenient, more enjoyable and more productive. Unfortunately, during the design phase, little thought went into the long-term impact on the Earth and its ability to continue providing for us into the future.
The foundations of current Western models of industrial and economic systems have origins in the industrial revolution, which began way back in the 1800’s. This was an empty world, a time where labour was scarce and natural resources abundant and relatively free for the taking.
We’re now moving into a full world, an era where there is an abundant supply of global labour, but a shrinking supply of, pollution, or easy access to, important natural resources. We see it in fluctuating oil, gas and coal prices, water restrictions, losses of plants and animals, excessive deforestation and other natural resource shortages. These impacts and the changing patterns of scarcity are also resulting in increasing food, water, gas and electricity prices for householders and businesses.
Business operates in the broader framework of human society, which grants it the licence to operate and determines relevant rules by way of laws and regulation. These rules are the outcome of the trade-off between the positive impacts of business, such as employment and wealth and income-generation, and the possible negative consequences of business operations, such as environmental pollution and natural resource depletion.
As pointed out above, the last several decades has seen the emergence of local and global public expectations that businesses should behave responsibly and accountably in terms of minimising their environmental footprints. In a 2007 survey of more than 25,000 people in 25 countries, GlobeScan, a respected and experienced research firm, found that 69% of respondents held companies “completely responsible” for not harming the environment[1].
Most jurisdictions in Australia (and overseas) are continually reviewing existing laws and regulations, or proposing to introduce new or additional environmental protection legislation, which may greatly increase the regulatory and compliance requirements facing business into the future as governments force the costs of pollution and resource depletion onto the companies that create it.
Where a business commits an offence under specific state legislation, each person who is a director of the business or is “concerned in management” of the business is taken to have contravened the same provision unless they are able to establish a credible defence. Severe penalties exist in most states and territories for environmental malpractice. Corporate fines of over $1,000,000 may be imposed and directors and managers may be subject to imprisonment (up to seven years) and/or face individual penalties of up to $250,000[2].
The growth in environmental legislation and regulations is creating a minefield for corporations, directors and managers who do not adequately manage the environmental risks which their operations pose (especially if their operations cross jurisdictions). Due diligence in environmental matters is essential. Undertaking an environmental audit to identify significant environmental aspects and potential impacts and implementing an effective environmental management system are important risk reduction exercises.
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