This article is written by Vanya Verma from O.P. Jindal Global University. This article talks about environmental law in light of vicarious and corporate liability along with various other principles under which a corporation can be held accountable if found guilty under the offence of harming the environment.
For the first time in human history, the 100 greatest economies in the world are now multinational corporations, rather than countries, according to data from the year 2000. Friends of the Earth International (FOEI) found that Exxon Mobil produced 20.3 billion tonnes of carbon dioxide emissions in its 120 years of existence, demonstrating that these enormous corporations are a severe threat to the environment. Since its founding as the Standard Oil Trust in 1882, Exxon Mobil has been responsible for between 4.7 and 5.3 per cent of all man-made carbon dioxide emissions worldwide. This massive influence on global resources is most likely the result of “legal” behaviour. Illegal corporate behaviour, on the other hand, maybe more damaging and common than previously thought, though it’s difficult to say for sure because no single international agency tracks it.
This is simply the tip of the iceberg, which is only visible as a result of western countries attempts to collect statistics on these topics. Unfortunately, we do not have such statistics in India to determine the quantity of pollution created by industrial organisations, and even if we did, it would be difficult to verify their accuracy. There are various sectors of corporate activity that have the potential to harm the environment and may hurt the environment when it comes to corporations causing pollution.
The problem of large corporations and globalization
With the growth of the concept of globalization, there is a growth of global warming. Though no scientific studies as to the proportionality of globalization with that of global warming have been done, apparently one can relate these.
Companies- national, multinational, and transnational – have grown as a result of globalisation. This creates a new difficulty of regulation for these massive firms, whose budgets might sometimes exceed those of a tiny developing country.
To convict a company of a crime, the prosecution must show that one or more of its agents committed all of the elements of the crime. When a crime occurs in a small corporation, this is relatively easy to do, but the structure of a huge corporation can make prosecution difficult, especially when mens rea is a factor. Where evidence of multiple guilty agents exists, the defence can exploit this ambiguity to create a reasonable doubt as to each agent.
Vicarious and corporate liability- position in India
The well-known principle of respondeat superior, which establishes an individual’s (or company’s) responsibility for an employee’s conduct or omissions from which a benefit accrues, forms the basis of vicarious liability where the plaintiff has incurred loss, damage, or harm as a result. The company’s tortious liability is based mostly on vicarious liability, which is determined by whether or not employees appear to be acting on its behalf. This is more of a civil matter, and the remedy is fines, so it’s not difficult to follow. The earliest legal remedy for reducing environmental pollution is tort law remedies.
Section 2 of the Indian Penal Code 1860 states that everyone is subject to punishment under the Code. Section 11 defines a person as “any Company, Association, or body of persons, whether incorporated or not,” as is customary in common law countries. The identifying approach has been passed down to Indian courts from England. However, until recently, Indian courts would refuse to sentence a legal person for an offence requiring imprisonment. The Supreme Court of India reversed this position in 2005, ruling that where a statute required both imprisonment and a fine, a court could impose only the fine.
The Supreme Court did not address the situation in which the only punishment prescribed is imprisonment; nonetheless, given the discussion in the Directorate of Enforcement, it appears likely that the Court would conclude that companies could not be prosecuted for such offences.
The Court shied away from expressing any opinion stating that “since all criminal and quasi-criminal offences are creatures of statute, the amenability of the corporation to prosecution necessarily depends upon the terminology employed in the statute. The phrase used by the legislator in the event of strict liability reveals an aim that guilt is based on the establishing of the actus reus, subject to the defence of due diligence. The majority of the law is founded on the provisions of the statutes. No particular state of mind is required to be guilty in the event of absolute liability, where the legislature sets an offence where liability arises immediately upon the violation of a statutory prohibition.
In the face of such a statutory offence, corporations and individuals are on equal footing. It’s a situation where the major duty is assumed automatically. The question of whether a corporation could be attributed with the requisite mens rea to prove the guilt arises exclusively in cases demanding mens rea.” The court did not express a view on the matter, therefore the topic was kept open. Probably, the judiciary is yet to unlock the Pandora box of corporate criminal culpability and its relevance in India.
Liability of corporations under Indian environmental laws
Administrative law is frequently used to classify environmental law. However, in practice, the entire body of environmental law is also criminal law to a great extent. The typical form of environmental law is to impose particular administrative requirements on industry, describing the allowable amounts and quality of polluting emissions, and to punish violators of these requirements as environmental crimes.
India’s environmental laws grew out of another international compliance framework, the Stockholm Conference on Human Environment in June 1972. The Indian legislature was quick to create laws to provide for pollution prevention, control, or abatement, at least in letters devoid of any spirit.
When India’s first environmental legislation, the Water Act of 1974, was enacted, it was similar to the already existing general body of laws. This Act was just a supplement to the licensing-based legislation. Only when the judiciary began to interpret environmental laws more strictly and formulated essential principles for environmental betterment did environmental laws in India truly come into their own. The country’s Apex Court emerged as the saviour of the country’s natural environment, and corporations were required to wear “green glasses.” The Bhopal Gas Leak Disaster in December 1984 adds to the complexity of conserving animals, air, water, monuments, and the environment.
Special provision for corporate offences
It’s worth noting that the provisions for “corporate offences” are identical across all environmental statutes. For example, the provision for offences by companies under the Air Act of 1981 is as follows:
Offences by companies
When a company commits an offence under Section 40 of the Air Act, 1981, everyone who was directly in charge of, and responsible to, the company for the conduct of the company’s business at the time the offence was committed, as well as the company, is deemed guilty of the offence and is liable to be prosecuted and punished accordingly. If he establishes that the offence was committed without his knowledge or that he exerted all necessary diligence to prevent the conduct of such offence, nothing in this section shall render him responsible for any punishment stipulated in this Act.
Where an offence under this Act is committed with the consent or connivance of or is attributable to any neglect on the part of, any director, manager, secretary, or another officer of the company, such director, manager, secretary, or another officer shall also be deemed guilty of that offence and shall be liable to be prosecuted, notwithstanding anything contained in sub-section (1).
Explanation: In the context of this section –
- ‘Company’ refers to any legal entity, which includes a firm or other group of individuals.
- ‘Director’ refers to a partner in a firm.
The section’s content exemplifies an ad hoc approach to enforcing criminal liability on corporations. We can see from the provisions that the section on “offences by companies” provides for both corporate and individual culpability for “officers in default.” The aforementioned liability, however, is limited by the requirement of knowledge or a lack of due diligence, permission or connivance.
Furthermore, there is no unique framework for dealing with the environmental damage caused by a body corporate. This renders the Act ineffective and severely limits the applicability of the principles outlined in these Acts.
As nearly the entire Indian industrial sector is now a corporate entity, and because industries fall within the authority of the aforementioned legislation, these laws must be rendered ‘corporate compatible.’ The industries exist solely for profit, and standards cannot be adequately insured unless they are subjected to exemplary financial liability as well as administrative consequences. The sanctions that exist today are largely insufficient; one can readily evaluate this apathy by examining previous Apex Court judgements; it is clear from these judgments that the amount is not even meagerly sufficient to constitute any sanction.
How to put companies behind bars
This was a question to which the Indian judiciary responded in several ways, mostly in instances involving tax statutes. M.V. Javali vs. Mahajan Borewell (1997) was the first case in this line, and the question was whether a company, as a juristic person incapable of being sentenced to imprisonment, could be prosecuted and, more importantly, convicted for committing an offence under the Act (IT Act), which provides for mandatory imprisonment and fines. The court decided by applying statutory interpretation principles to find that the mandatory penalty of jail and fine is to be enforced when it is possible, but where it is not possible, such as in a corporation, a fine will be the only punishment. As previously stated, this stance was reversed in the Assistant Commissioner v. Velliappa Textiles Ltd. (2003), in which the court held that corporate criminal liability could not be imposed without accompanying legislative modifications (judicis est jus dicere, non dare) When both fine and punishment are mandated, a court of law cannot decide that a corporation is merely liable for fine. The Indian judiciary referred to common law cases such as Tesco Supermarkets, New York Central and others when resolving the issue.
Velliappa was overruled later in 2005 in the case of Standard Chartered Bank v. Directorate of Enforcement (2003), which stated that organisations are not immune from prosecution just because the offences are punishable by obligatory imprisonment. Because the corporation cannot be sentenced to imprisonment, the court cannot impose that punishment; nevertheless, if the company is sentenced to imprisonment and fines, the court can impose a fine that can be enforced against the company. As a result, the judiciary eventually adopted the principle that whenever there is a penalty of jail and a fine for corporations, the provision of a fine applies to corporations. However, the question of what to do about offences that merely carry a sentence of imprisonment remains unanswered.
Inequality arises as a result of the court’s reasoning. For example, a person breaking environmental laws and a corporation breaking the same laws are not on the same level; the ‘individual’ would face both jail and a fine, whilst the “company” would face merely a fine. Furthermore, the fine is set in the context of an ‘individual’ rather than a ‘corporate’ offence, making it extremely low. The fine is a thousand peanuts for corporations, and they would not be concerned about environmental compliance if they were only concerned with paying fines.
Law Commission of India on punishing corporations
Though the Law Commission of India attempted to fix the matter to some extent, it was not implemented, and the situation remains as it is. The provisions, on the other hand, are worth considering. Section 72(a)(1) of the proposed Indian Penal Code (Amendment) Bill, 1972, aimed to give a solution to the aforementioned question in the following words:
Section 72(a)(1) – In any situation where the offence is punishable by imprisonment and a fine, and the perpetrator is a corporation, the Court has the authority to sentence the corporation to a fine alone.
Section 72(a)(2)- When a crime is punishable by imprisonment and any other punishment other than a fine, and the perpetrator is a corporation, the Court has the authority to sentence the offender to a fine alone.
Explanation: For this section, the term “company” refers to any legal entity, including a firm or other group of people.
In paragraph 24.7 of its 41st Report, the Law Commission of India recommended that a provision be added to the India Penal Code to allow the Court to sentence an offender to fine if the offence is only punishable by imprisonment or imprisonment and fine and the offender is a company or other body corporate or an association of individuals.
The Law Commission of India’s 47th report on the “Trial and Punishment of Social and Economic Offenses,” dated February 28, 1972, stressed that imprisonment is necessary for various Acts dealing with economic offences. When the guilty person is a corporation, this clause becomes impracticable, and it is preferable to establish that the court has the authority to impose a fine in such instances. The recommendation was to revise Section 62 of IPC as previously mentioned, but no changes were made.
While dealing with social and economic offences committed by Corporations (including companies, firms, and associations of individuals), the Law Commission noted that because a corporation has no physical body and thus traditional punishments may be ineffective, the real penalty could be inflicted on its respectability, i.e., by way of a stigma. As a result, it was appropriate that the corporation itself be punished, so that the infraction would be associated with the name of the Corporation rather than the name of the director or management, who could be a non-entity in the public view. Levying a fine instead of imprisonment could solve the problem.
Principles for corporate accountability
- Governance and the public must prioritise people and the environment over companies.
- All policymaking should include public participation.
- States should stop implementing policies that jeopardise the environment and human rights.
- Corporations should be subject to binding rules both where they are based and where they operate.
- Due diligence reporting and cradle to grave responsibility for business products and services should be mandated by states.
- States should encourage a race to the top by preventing firms from engaging in activities that are illegal in their home country due to environmental or human rights concerns.
- States should develop policies that promote transparency in all corporate and government actions that have an impact on the environment and human rights, including trade, tax, finance, and investment regimes.
- Corporations and those who oversee them should be held accountable for environmental and human rights breaches done by firms under their control at home and abroad.
- People who have been harmed by environmental or human rights violations should have effective access to redress, including in the home states of the companies if necessary.
- The regulatory and policy frameworks that states construct must be enforced.
How businesses affect the environment
A workplace has a significant impact on the environment, both positively and negatively. One’s employer’s environmental practises in terms of using energy to heat and cool the building, bring things in, and eliminate garbage have a significant impact on one’s neighbourhood and the environment.
Some practical examples of how the working world harms the environment include:
- Heating and air conditioning systems release greenhouse gas emissions into the atmosphere while also consuming a significant amount of electricity. Many buildings aren’t built with energy-efficient systems or technology in mind, so they use a lot of heat and air conditioning.
- Many structures are made of materials that aren’t derived from sustainable resources.
- Lighting, air conditioning, computers, printers, and photocopiers all consume a lot of electricity in office buildings. Even when no one is working, the equipment can be left on 24 hours a day, seven days a week.
- Offices go through a lot of paper. Despite the fact that more offices are recycling paper, a significant proportion of paper trash still ends up in landfills or incinerators.
- People attempting to get to work are squandering time and harming the environment in rush-hour traffic congestion in towns and cities.
- Apart from paper, offices generate a lot of other garbage, such as equipment (particularly computers), which corporations upgrade on a regular basis to stay competitive. Electronics like photocopiers and computers can end up in landfills, where they don’t decompose and, worse, leach hazardous chemicals into the ground and water.
Industrial and commercial energy use (from sources such as electricity, product transportation, industrial processes, burning fossil fuels to power boilers and produce steam, and using gasoline to power vehicles) accounts for nearly 30% of total U.S. greenhouse gas emissions, according to the US Environmental Protection Agency.
How companies pollute the environment and one’s health
In today’s political atmosphere, environmental protection is a controversial issue, with many people believing that pollution protection is unnecessary. Environmental contamination, on the other hand, has a direct impact on human health, which can be quite significant and even fatal. Companies and corporations are far too often directly responsible for environmental contamination, which causes serious and long-term illness in those who are exposed. Companies carelessly harm the environment and endanger people’s health and life in a variety of ways, all of which should result in legal culpability.
Below is a list of some of these types of pollution and their potentially harmful health impacts:
- Dust hazards and dust exposure, particularly silica dust, can cause fatal lung diseases such as silicosis and lung cancer, as well as a variety of other respiratory disorders such as asthma, emphysema, and chronic obstructive pulmonary disease. Many industries produce harmful dust, including construction, glass manufacturing, dental laboratories, foundries, concrete manufacturing, and many others. When organisations like these fail to take the appropriate precautions to prevent harmful dust from polluting the air and being inhaled by their employees or bystanders, they can be held accountable and prosecuted for their carelessness.
- Mismanagement of Waste Products: Waste management can have a number of major environmental and health consequences, particularly if it leaks into a public water source or a public space. This form of water contamination, in particular, can have serious health consequences, especially if you drink polluted water. Water contamination can be caused by chemicals, detergents, food waste products, toxic sludge, and specific metals like lead. Drinking water contaminated with these waste contaminants can cause a variety of long-term difficulties, including developmental abnormalities in children, reproductive problems, gastrointestinal troubles, and neurological illnesses. Many of these disorders are irreversible, affecting a person’s health and quality of life for the rest of their life.
- Toxic Chemical Exposure: Companies frequently mismanage dangerous chemicals by inappropriately disposing of them, allowing them to leak into public air and water spaces, and a variety of other methods. Certain chemicals that are released as a result of pollution and waste can cause a variety of dangerous ailments. Pesticide exposure, for example, can cause cancer, reproductive harm, and endocrine problems in the long run. Acute exposure to these compounds can also cause poisoning, which can be lethal.
Companies that have set great environmental examples
Panasonic, a Japanese electronics corporation, was judged by Fortune in 2014 to have the highest perception gap between its actions and what people believe it has done. Sustainability has affected everything from energy-saving production advances to the adoption of recycling-oriented manufacturing as part of the company’s corporate citizenship efforts.
Panasonic’s new North American headquarters is one of the coolest ways it’s doing the walk. The company, which was previously based in suburban Secaucus, New Jersey, relocated to a premium location in downtown Newark in 2013. The initiative was praised as a critical step toward revitalising the struggling city, but it also served Panasonic’s sustainability goals.
Just steps from Newark Penn Station, a key transit node for both local and regional transit, the corporation developed a new LEED-certified skyscraper (gold-certified exteriors, platinum-certified interiors). Because of this connectivity and transit accessibility, the number of workers who commute to work solely by automobile has decreased by nearly half. According to Panasonic’s vice president of corporate relations, the action has taken 500 cars off the road every day.
The mega-retailer, Walmart has made certain important sustainable decisions that, due to its vast market position, can have far-reaching consequences.
Walmart’s decision in 2014 to stock products from organic supplier Wild Oats drew attention and acclaim for making organic foods more accessible at lower pricing. That came after a 2013 amendment to the company’s chemicals policy, which aimed to improve ingredient disclosure while also replacing ten dangerous compounds with less harmful alternatives. Walmart had already committed to selling only sustainable seafood.
These regulations all have a direct impact on Walmart’s suppliers, in addition to the direct impact of raising organic food sales and reducing sales of products containing harmful chemicals. Walmart’s backing for organic food boosts the sector and gives organic producers more demand and sales opportunities. Suppliers must comply with tighter requirements or risk losing access to Walmart customers, according to the company’s chemical policy.
Apple has a reputation for being ahead of the curve, which remains true when it comes to turning green. Apple’s $848 million energy deal with a California solar farm allowed the corporation to use renewable energy to power all of its businesses. A few months later, it pledged to source all of its paper packagings from sustainable sources in order to save the world’s last virgin forests.
Like Panasonic, it has invested in initiatives to help employees cut commute emissions, with 10,000 employees making use of the company’s transit subsidies and 2,700 employees carpooling on commuter buses.
It’s impossible to overlook Apple’s rejection of climate denial. The corporation publicly resigned from the US Chamber of Commerce in 2009 for its stance on climate change. The first sentence of its 2015 Environmental Responsibility Report reads, “We don’t wish to argue climate change.” We want to put a stop to it.” This strong position by an internationally known corporation contributes to the growing support for climate action and sustainable business practices.
Unilever has also been praised for its environmental initiatives, most notably ranking first among firms in the 2015 Climate Survey, which drew comments from 624 sustainability professionals from 69 countries. More than a quarter of those polled felt the corporation was the most important contributor to climate change solutions.
Unilever has been an open advocate about the significance of halting deforestation, in addition to strong backing from senior management. The corporation pledged in 2010 to achieve zero net deforestation in ten years, which means that for every acre of forest cut, an equal amount of forest must be replanted. Deforestation has been dubbed the “most urgent climate challenge” by Unilever’s CEO.
The organisation is already exceeding its goals. All of its palm oil came from sustainable sources by 2012, three years ahead of plan, thanks to the purchase of GreenPalm credits, a palm oil offset programme. Rather than stopping there, Unilever is working to ensure that all of its palm oil comes from sustainable sources.
Biogen, situated in Massachusetts, has an exceptional track record, having topped the Dow Jones Sustainability Index for biotechnology corporations for two years in a row and been voted the greenest company in the world by Newsweek in 2015. Reaching operational carbon neutrality, the result of a multiyear effort to cut emissions, was a major contributor.
The corporation made expenditures in everything from improving energy efficiency in its facilities to working with suppliers to achieve environmental goals.
This follows the company’s achievement of near-zero-waste status in 2012 (98 per cent of all garbage is diverted), which was achieved by lowering initial operating waste and developing innovative ways to compost and recycle the waste it did generate.
Rather than resting on its laurels, Biogen had set additional ambitious sustainability goals, such as lowering greenhouse gas emissions and water use by 80% by 2020 compared to a baseline year in 2006. It’s also focusing on the final 2% of waste that ends up in landfills, as well as investing in LEED-certified buildings. Don’t be shocked if Biogen continues to dominate top lists in the next few years.
Given the global risks of large environmental deterrents, it is high time for judicial activism, because even while our government is attempting to be as progressive as possible, it is still lagging in filling up the gaps in current legislation. It’s also worth noting that, as our Hon’ble Supreme Court has pointed out, environment and development are two sides of the same coin. If one is changed, the other is bound to be affected as well.
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