Environmental degradation is a growing global concern, exacerbated by the rapid expansion of corporations. Particularly in sectors like mining, manufacturing, and energy, corporate activities significantly threaten environmental health. Exposure to silica dust, improper waste management, and toxic emissions can cause serious diseases, highlighting the urgency of corporate accountability. Corporations must therefore act responsibly and be held liable for the environmental harm they cause.
This article explores corporate liability for environmental damage through legal frameworks, key Indian cases, CSR, cross-jurisdictional comparisons, and policy recommendations.
Understanding Corporate Liability
According to former Chief Justice Marshall of the USA,
“A company is a person, artificial, invisible, intangible, and existing only in the contemplation of the law.”
Under Section 2(20) of the Companies Act, 2013, corporations are considered separate legal entities. So, criminal liability is imposed upon the corporation, not the individual, unless the “corporate veil” is lifted. This was established in L.I.C. India v. Escorts Ltd. & Others (1985).
In India, criminal liability is based on mens rea (guilty mind) and actus reus (guilty act). It was debated whether a company could possess mens rea, but in Iridium India Telecom Ltd. v. Motorola Inc., the court held that a company’s intent can be derived from key members like directors. Thus, if actions like violating environmental laws or improperly dumping hazardous waste were done knowingly, the company can be held criminally liable by attributing the guilty intent of its officers.
Legal Framework for Environmental Protection
India’s early environmental laws include the Water Act (1974) and Air Act (1981). After the Bhopal Gas Tragedy in 1984, which killed thousands due to UCIL’s negligence, stronger legal frameworks were introduced to ensure corporate accountability.
The Environment (Protection) Act, 1986, is a comprehensive response to this disaster. Sections 6 and 25 empower the Central Government to make environmental rules, and Sections 15 and 16 prescribe penalties, including imprisonment and fines for violations.
The Factories Act, 1948, particularly Section 12, mandates waste management by factories to protect both workers and the environment.
The Public Liability Insurance Act, 1991, ensures immediate relief for victims of hazardous material accidents. Section 7A also allows the Central Government to create an Environmental Relief Fund.
Another landmark case was M.C. Mehta v. Union of India of 1987 about the Oleum Gas Leak from a fertiliser plant, which established the principle of Absolute liability. In this case, the Supreme Court ruled:
“Once the activity carried on is hazardous or inherently dangerous, the person carrying on such activity is liable to make good the loss caused to any other person by his activity, irrespective of the fact whether he took reasonable care”.
This decision made clear that the companies engaged in risky operations would have to pay for any damage that they cause to the environment or individuals, thereby connecting corporate responsibility to environmental preservation and public safety. It showed that big companies which profit a lot from these kinds of operations should not be excused for their environmental violations.
This ruling also established a precedent for upcoming legal interpretations by extending the scope of Article 21, which protects the fundamental right to life and personal liberty, to also include the right to a healthy environment. So, the company was held liable under the principle of Absolute liability, which helps to enforce stronger industrial safety standards and regulations.
Other regulations include the E-Waste (Management) Rules, 2016, requiring producers to manage and recycle e-waste and the Hazardous Wastes (Management and Handling) Rules, 1989, which mandate safe handling, transportation, and disposal of hazardous waste.
Now coming onto international treaties, the Stockholm Conference on Human Environment, of June 1972, provided another international regulatory framework from which India’s domestic environmental laws evolved. This Conference was attended by former Prime Minister Indira Gandhi and it resulted in developments such as the 42nd Amendment to the Indian Constitution in 1976 which added that it is the duty of both the state and its citizens to together conserve and protect the environment from degradation and the establishment of United Nations Environment Programme (UNEP) at an international level to oversee international environmental protection initiatives.
Some of the other treaties include the Kyoto Protocol (1997) and the Paris Agreement (2015), which included discussions regarding lowering carbon emissions and strengthening climate resilience. India, as a signatory of these treaties, tried adopting sustainable practices, especially at the corporate level and contributing to these goals was recommended for the corporate sector. India also followed the Minamata Convention on Mercury in 2013. This convention imposed obligations on companies handling mercury and encouraged the use of safer substitutes as well as appropriate waste management.
Thus, India’s participation in these international conferences and conventions shows its determination to address the issue of corporate responsibility for environmental harm.
Role of CSR in Mitigating Environmental Damage
Corporations should not only be about profits but also about protecting the planet. India focuses on this through Corporate Social Responsibility (CSR) and strict corporate liability for environmental damage. CSR is about companies taking responsibility for their impact on the environment. Through this, companies are expected to reduce their carbon footprint, conserve resources and even restore damaged ecosystems.
But if a company messes up on the above-mentioned goals, then that is where corporate liability comes in. Indian law is quite tough on companies that cause environmental harm. It is like the saying, “You broke it, you bought it”, because even if a company did not mean to harm, they are still responsible for fixing the damage due to the principle of Absolute liability. This approach is beneficial for everyone, especially citizens and the environment, as it encourages companies to be more careful and find ways to do business without harming the environment and consequently people. It also helps protect our natural resources and ensures that future generations have a healthy environment to live in.
Section 135 of the Companies Act, 2013 also requires large companies with a net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year to give a portion of their profits towards socially and environmentally beneficial activities. If a corporation chooses not to use these funds, it is required to explain in its annual report, which depicts the growing pressure on businesses to behave responsibly. This also implies that businesses must accept responsibility for their effects on the environment and work to better the local community.
CSR is a means for companies to show their concern for society and the environment, and not just merely for compliance with regulations. Companies that adopt these values can also enhance their brand by winning over consumers’ and communities’ trust and contribute significantly to the development of a more sustainable future. So, CSR motivates businesses to make positive environmental contributions and holds them responsible for their actions in this way.
Analysis of Different Jurisdictions
India
As discussed before, in India, companies are held accountable for environmental damage under laws like the Environmental Protection Act (EPA) of 1986 and the Water and Air Pollution Acts. The principle of “Absolute liability,” established in cases, holds companies fully responsible for harm from hazardous activities, even if unintentional. The Companies Act, 2013, requires profitable companies to spend at least 2% of their earnings on CSR initiatives. However, enforcing these laws can be tough due to limited resources with the regulatory bodies, like inadequate infrastructure and manpower.
USA’s Approach
On the flip side, the United States has a more complicated set of environmental laws at both the federal and state levels. Important laws include the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Resource Conservation and Recovery Act (RCRA). Under CERCLA, companies are responsible for cleaning up hazardous waste sites, no matter whose fault it is. This ensures that polluters take care of the mess they make.
In the USA, regular people and advocacy groups are also stepping up by suing companies for environmental harm. There are growing protests also for the same. This gives everyday people the power to hold businesses accountable by putting extra pressure on them to do the right thing.
European Union’s Approach
The European Union has its style with the Environmental Liability Directive (ELD). This sets clear rules for companies about their responsibility for environmental damage, especially regarding biodiversity and water resources. Companies have to take steps to prevent harm and fix any damage they cause. Plus, the EU wants big companies to be open about their environmental impact and CSR activities. This transparency pushes companies to act responsibly and be accountable to the public.
Recommendations
So to begin with, the Central Pollution Control Board (CPCB) and State Pollution Control Boards (SPCBs) can improve by making proper investments in their infrastructure and technology for better assessment of pollution levels in various industries and also work on staff and their training. This will help in having a better check on the companies polluting the environment.
Furthermore, it also needs to be defined what counts as environmental damage and corporate liability in a way that is specific and easy to understand. Having clear guidelines will help companies know what is expected of them and make it simpler for courts and tribunals to handle cases regarding environmental damage caused by corporations
Another suggestion would be to hit companies harder when they break environmental laws. The government should be looking at bigger fines, forcing them to clean up their mess and even throwing some serious charges at the companies if they mess up, like the incident of the Bhopal Gas Tragedy as it led to a lot of deaths and its effect is still being seen in people in the form of diseases.
Finally, companies should be required to share their environmental practices and CSR activities with the public. This increases transparency and makes it easier to hold companies accountable for their inaction.
Conclusion
To conclude, holding the corporation liable for the environmental harm that it causes is important for sustainable development. Even while regulations have improved globally and in India, issues like loopholes or a lack of technology and manpower still exist. Incidents such as the Bhopal tragedy and the Oleum gas leak highlight the need for more stringent regulations.
CSR is beneficial, but more stringent laws and effective enforcement are required. In the future, promoting practices that corporations follow to protect the environment will be essential to safeguard the environment and prevent damage from occurring due to industrial activities.
References
- The Companies Act 2013, Section 2(20)
- L.I.C. of India v. Escorts Ltd. (1986) 1 SCC 264
- Iridium India Telecom Ltd v. Motorola Inc. (2011) 1 SCC 74
- The Water (Prevention and Control of Pollution) Act 1974
- The Air (Prevention and Control of Pollution) Act 1981
- The Environment (Protection) Act 1986, Sections 6, 15, 16, 25
- The Public Liability Insurance Act 1991, Section 7A
- M.C. Mehta v. Union of India (UOI) and Ors. 1987 SCR (1) 819
- Constitution of India 1950, Article 21
- E-Waste (Management) Rules 2016
- Hazardous Wastes (Management and Handling) Rules 1989
- United Nations Conference on the Human Environment (Stockholm Declaration) (1972)
- Constitution (Forty-Second Amendment) Act 1976.
- United Nations Environment Programme, established by UNGA Res 2997 (XXVII) (15 December 1972).
- Kyoto Protocol to the UN Framework Convention on Climate Change (adopted 11 December 1997, entered into force 16 February 2005).
- Paris Agreement (adopted 12 December 2015, entered into force 4 November 2016) UNTC No 54113.
- Minamata Convention on Mercury (adopted 10 October 2013, entered into force 16 August 2017).
- The Companies Act, 2013 Section135
- Comprehensive Environmental Response, Compensation, and Liability Act 1980 (CERCLA) 42 USC §§ 9601–9675.
- Directive 2004/35/CE of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage
- Resource Conservation and Recovery Act 1976 (RCRA) 42 USC §§ 6901–6992k