For breaches of green rules, the buck will stop at the boardroom

Written by Ronojoy Banerjee | Ronojoy Banerjee | Kirtika Suneja | New Delhi | Updated: Sep 14 2011, 06:49am hrs
Environmental negligence and apathy to genuine social concerns over industrial projects will cost corporate India dear, with the government planning to make company boards directly accountable for such lapses.

The corporate affairs ministry has inserted a clause in the Companies Bill under which the board of every company would be held directly responsible for any adverse environmental impact on geographical areas within which they operate. Currently, these issues are addressed through sectoral regulations that lack uniformity and, more often than not, teeth.

According to sources, this will be the first time these responsibilities are fixed once and for all, under law. Over 8 lakh registered companies will be impacted by the move. The Bill, vetted by the parliamentary standing committee, is set to be taken up by the Cabinet anytime now and the plan is to introduce in in Parliament in the winter session.

According to sources, though the 2009 draft of the Companies Bill had also sought to address environmental concernns, the Bill, as revised by the ministry following the House panels vetting, would take the matter to the next logical level by fixing responsibility of environment protection to the corporate boardrooms.

We have added this clause in the Bill because we felt that sectoral regulations would not be enough to make companies responsible towards the environment and society within which it operates, a government source told FE.

Currently, there are disparate guidelines for making companies accountable to the environment and human costs of projects. For instance, the Mines and Minerals Development and Regulations Bill of 2010 has directed companies to take initiatives for protection of the environment including control of air and water pollution, progressive reclamation and rehabilitation of the land disturbed by the prospecting operations, a scheme for plantation of trees, restoration of local flora and water regimes.

The source said the concerns of environment and society cannot be restricted to a handful of mining or steel companies but should be more broad-based. Companies have to be responsible towards their shareholders. Similarly, they will also be required to be responsible towards their surroundings, he added.

The ministry will also look at framing specific rules and regulations on the issue once the Bill is passed. This is not the first time the ministry has sought to fix responsibility for cases of environmental neglect. Earlier this year, the MCA issued a set of guidelines on social and environmental matters. However, these guidelines lacked legal sanction. The latest move assumes significance as there are no corporate governance policies for companies related to the environment and the ministry of environment and forests (MoEF) imposed conditions only at the time of clearing the projects. A per MoEFs diktats, companies are required to comply with the conditions and go back to the ministry every six months with their compliance reports. This is usually done by either the environment manager or plant manager who is responsible for the reports.

The plant manager is of the rank of a vice-president at the most, but with the involvement of the board, the level of importance accorded to environment will increase, said Chandra Bhushan, deputy director general at the Centre for Science and Environment. He added that environment committees comprising the board members should be constituted along the same lines as the financial audit committee of the companies.

Diljeet Titus, partner at Delhi-based law firm Titus & Co said termed the move constructive and sensitive. Corporates will see this as a sense of responsibility towards the environment. But for the law to be properly implemented, industry concerns if any, must be taken into account, he said.