An Analysis of Corporate Environmental Crime and its Regulatory Framework

I. Introduction

Industrialization has contributed to much of the wealth that we see today. It is not only a catalyst for employment but also acts as a forum for the development of technology. The rapid development of medical sciences, transportation, lifestyle, entertainment helped in contributing to the rapid expansion of cities. An industry equipped with machines robots and other mechanical devices along with human workforce can manufacture goods more efficiently and at a much larger scale. By the use of capital-intensive methods of production industries extract the most out of the raw materials used in production which in turn helps for maximum utilization, cost reduction and efficient production.

The modern trends of anthropogenic activities in the form of industrialization have increased the rate of environmental pollution globally. The practical solution for the same is to club all the three actions of the executive, legislature, and judiciary in one set which gives rise to environmental impact assessment. The analysis of environmental impact assessment which has been distributed into procedures, principles models and predictions of the impact assessment has mitigated the problem of industrial effluent discharge, greenhouse emissions to a larger extent. EIA has also clubbed the other principles of intergenerational equity together with the polluter's pay principle and sustainable development. The discrepancies of the legislative and executive framework have also been analyzed through the evolution of landmark judgments concerning EIA.

II. Environment and sustainable development goals

The term Sustainable Development indicates the process by which people satisfy their present needs and improve their quality of life while safeguarding the ability of the future generations to meet their own needs². Each passing year there is a multifold growth of human population, but the resources remain finite which if the pace is kept the resources would not be able to sustain the population spurt. The term 'sustainable development' was first used in Cocoyoc Declaration on Environment and Development in the early 1970s³

Environmental protection is not categorically defined in the Charter of the United Nations but while undertaking the gravity of the problem, the organization has become the leading director and advocate of activities directed towards the improvement and sustenance of the environment. The UN conference on the environment (Stockholm, 1972) and the UN conference on the environment and development (Rio de Janeiro, 1992) has adopted principles that have guided environmental protection activities of the UN and the member states.

Sustainable development goals (SDGs) were propounded at the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012. These environmental objectives were formulated to succeed the Millennium Development Goals (MDGs). These were a set of eight goals such as gender equality, hunger, poverty, child mortality among others which the UN classified to be the foremost ideal for global development. These were formulated in such a manner that it catered to both the local areas and also addressed the global concern. States can focus on their areas of concern and work on the fields in which the most effort is required.

For the duration of its enactment the MDGs drove sustainable progress in several areas. This was done by making wealth accessible to several communities. Wealth when mixed with technology therefore resulted in the progress of standard of living and decreased poverty. They also inspired an drive which lead to the awareness and compelled government to emphasize on education. The same trend was also applied in India when the Constitution was amended through the Eighty-Sixth amendment in 2002 and Article 21-A was inserted making education a fundamental right for children falling under the age group of six to fourteen. Health was also improved, and massive strides was made against diseases such as HIV/AIDS and other diseases which were treatable such as malaria and tuberculosis.

Similarly, the SDGs were formulated after a revision and analysis of global concerns. The agenda again being the same that is to solidify the objectives for the goals of sustainable development. It is of paramount necessity that our future generations possess enough resources and technology to enjoy the planet like their previous generations and also to not be constantly occupied to gather the bare needs of essentials. Unchecked, unregulated and laissez-faire exploitation of limited resources will result in its depletion. This may even result in mass extinctions, which may be an extreme probability, but is a probability not immune from occurrence.

III. Ethical responsibility of corporations towards environment

A corporation is a juristic person, an institution which has a legal personality. It is governed by a people involved in it which may differ in range such as the promoters, the people responsible for the incorporation of a company, or may be the board of directors. These groups of people are collectively responsible for the activities of the company. It is therefore, because of this reason that the responsibility and accountability owed by a corporation to the society shall be much larger than any individual⁴.

To focus on this theory, the concept of Corporate Social Responsibility (hereinafter ‘CSR') has been propounded. The viewpoint of corporations having a responsibility towards the society started appearing in the 1940’s. (Carroll 2008) Jurists around the world were now posed with a new question⁵. It was the responsibility to determine what was to be CSR and what shall be the specific social responsibilities owned by businesses⁶. Therefore, in the present day, CSR is observed and implemented in the schemes of corporate governance all around the world. CSR shall not be equated to charity and other philanthropic activities undertaken by the company⁷.

Traditionally, CSR has been an ethical responsibility more than a formal requirement. In its oldest forms, corporate responsibility in India included the concept of corporate philanthropy and the Gandhian trustees⁸.

This was changed in 2013 with the introduction of the new legislation, The Companies Act, 2013. With this enacted, India is the first country in the world to make CSR a legislative mandate which was followed by the United Kingdom.⁹5 of the act, titled Corporate Social Responsibility directs with a net worth of 500 crore or more, or turnover of rupees 1000 crore or more or a net profit of rupees 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board and that board will be responsible for overseeing that the specified 2 percent of their average net profits of the preceding three years on CSR.

The activities which will be considered as a part of CSR are enlisted in Schedule VII of the Companies Act. Clause 4 of the Schedule makes accommodation for the environmental aspect of CSR which includes: ensuring environmental sustainability, ecological balance, protection of kora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water. This clause was amended in 2014 to include contributions made in the Clean Ganga Fund set up by the Central Government for rejuvenation of river Ganga.

A new development during the coronavirus pandemic (COVID-19), is that the Ministry of Corporate Affairs to enable the society for a better financial defence against the virus notified that the contributions to the Prime Minister’s Citizens Assistance and Relief in Emergency Situations Fund (PM-CARES) will be considered as expenditure in CSR.

The Government, corporations and society as a unit shall not underplay the role of preservation of the environment. The major source of generation of pollutants is the manufacturing of products. Instances such as oil spillage while shipping crude oil, fires and accidents in factories and their subsequent effect, nuclear disasters, release of toxic gases, leakage of toxic gases, gross pollution of water bodies, arsenic poisoning, release of soot, loss of habitat are just an insignificant amount of examples of pollution by industries. From an economic point of view, growth of industries is the single most contributing factor when it comes to economic prosperity. Therefore, the system which includes the people, corporations and the government shall work in such synergy that the harmful effects of production are reduced to its minimum and the legislation should be such as to not act as barrier for Industries but to accessorize it’s operation and growth.

IV. The regulations

Every nation requires a stringent, comprehensive, and elaborate set of rules to regulate the environmental aspects of a nation. It does so, principally, to curb excessive pollution and to prevent the degrading of environment for the stakeholders of the society. The laws on such a subject matter are drafted with the help of various experts whilst taking into consideration the various stakeholders such as a community, industries, etc. In India, environment protection cannot be said to be of prime importance¹⁰. After independence, the economy was left crippling, therefore the focus of the administration was concentrated on economic revival and growth irrespective of the soft costs that it left. Using capital-intensive methods of production industries extract the most out of the raw materials used in production which in turn helps for maximum utilization, cost reduction and efficient production.

The aspects are classified in the form of forest and wildlife, water, and air. India is a party to most of the international conventions on environment; hence obliged to take appropriate steps for preservation of natural resources of the earth, as well as protection and improvement of environment¹¹.

The Constitution of India under Article 48A of the Directive Principles of State Policy specify that the State shall embark on the task of safeguarding the forest and the wildlife. The point earlier mentioned can now be clarified through this aspect. It is in the Directive Principles of State Policy (DPSP) that the environment that we depend upon for sustenance find any recognition. Therefore, it can be stated that environmental protection was not the priority of the makers of the constitution. Same can be later be found in the fundamental duties. Under Article 51A(g) the duty is imposed on citizens for the protection of natural environment. Both the DPSP and the fundamental duties are not enforceable by law, hence little heed is paid to them and are practically overlooked. It was in Subhash Kumar v. State of Bihar¹²that the court held that right to life includes right to access to pollution free water and air.

The Department of Environment was established in 1980 and later in 1985 became the Ministry of Environment and Forests (MoEF). There are certain general laws which exists for the overall protection of environment. These are:

• The Environment (Protection) Act, 1986 - It can be considered as the Magna Carta for Indian environmental laws. India learned the lesson in a crude manner in 1984 from the Bhopal Gas Disaster. The demand for stricter regulations increased mostly due to public backlash. It was the amalgamation of these scenarios which led to the enactment of the Environmental Protection Act, 1986 and the Public Liability Insurance Act, 1991. The object of the Public Liability Act was to the provision of immediate relief to the persons who are injured or affected in an accident by the handling of any hazardous substances. Before the enactment of legislation such as the Environmental Protection Act, the dictating law for regulating any disregard for the environment was combated by the penal laws or the project-specific laws. After the new environmental regulations, the forum for adjudication of matters relating to the legislation was with National Environment Tribunal, 1995, and the National Environment Appellate Authority Act, 1997, which have now been repealed by the National Green Tribunal Act, 2010.
• The Hazardous Waste (Management and Handling) Rules, 1989 – It lays down the procedure and method regarding the discharge, generation, handling, treatment of pollutants which are hazardous. There are also several other rules notified under the Act of 1986 such as the Environment (Protection) Rules, 1986, the Manufacture, Storage and Import of Hazardous Rules, 1989, Biomedical Waste (Management and Handling) Rules, 1998.
• Environment (Sitting for Industrial Projects) Rules, 1999 – This legislation consists of comprehensive provisions barring the areas for establishing of industries, preliminary measures to be undertaken for selection of site and also the aspects of environmental protection that shall be incorporated in the industrial projects.

There are also several other acts and rules which regulates the matter of environmental protection such as the Municipal Solid Wastes (Management and Handling) Rules, 2000, Batteries (Management and Handling) Rules, 2001 and the Biological Diversity Act, 2002.

There also exists other acts such as the Forest Act, 1927, Air (Prevention and Control of Pollution Act), 1981 and a list of other which deal with the issue of environmental protection. The group of acts, therefore, provide the machinery for environmental protection in India. These acts are also compliant to the international pollution and emission requirements that are set by the United Nations and also the agreements which India may enter.

Environmental Impact Assessment - Environmental Impact Assessment is a mitigatory procedure that considers the environmental implications of an area before approving any anthropogenic activity or project in that area. In other words, an analysis is done both at the central and state levels to assess the impact of any anthropogenic activity on the environment. The analysis does not only table the negative outcomes but also specify the positive outcomes on the environment¹³. The origins of this evaluative program started back in the 1960s in the united states when a proposal for the evaluation of river valley projects for the environment was introduced which further led to the codification of this scheme in 1969 under the National environmental policy act.

EIA was notified in India in 1994 under the powers delegated to the government through the Environment Protection Act, 1986. Since then it has undergone 21 amendments, the latest being in 2006. A new amendment is also proposed in 2020, the zero drafts of which is already released to the public for discussion. The frequency and volume of these amendments cast two perspectives, one being constant efforts of the government to revise the policy and to make constant developments to clear any grey areas and the other perspective being that failure of such instruments to provide a comprehensive guideline for analyzing the environmental cost. The Kyoto protocol legally compelled a major part of the industrialized countries to lower their greenhouse gas emissions by 8 % until 2012.

The protocol has been prolonged until 2020. Today, the industry stands for 20 % of the world's greenhouse gases. Energy-intensive industries such as the steel industry have not developed much and best practice has at most 10-30 % potential to decrease energy usage. EIA was notified in India in 1994 under the powers delegated to the government through the Environment Protection Act, 1986. Since then it has undergone 21 amendments, the latest being in 2006. A new amendment is also proposed in 2020, the zero drafts of which is already released to the public for discussion. The frequency and volume of these amendments cast two perspectives, one being constant efforts of the government to revise the policy and to make constant developments to clear any grey areas and the other perspective being that failure of such instruments to provide a comprehensive guideline for analyzing the environmental cost.

EIA was notified in India in 1994 under the powers delegated to the government through the Environment Protection Act, 1986. Since then it has undergone 21 amendments, the latest being in 2006. A new amendment is also proposed in 2020, the zero drafts of which is already released to the public for discussion. The frequency and volume of these amendments cast two perspectives, one being constant efforts of the government to revise the policy and to make constant developments to clear any grey areas and the other perspective being that failure of such instruments to provide a comprehensive guideline for analyzing the environmental cost.

The EIA notification of 1994, classified industries and infrastructure projects and directed them to undertake an EIA study. The study shall be forwarded to the government which may give the required clearances. The EIA report shall be submitted to the central Ministry of Environment and Forests (MoEF) which will after the review of the report grant the environmental clearances. The EIA study must be prepared by every enterprise which is planning for the construction of a new project or if any expansion/ modernization/renovation of any existing project is proposed to be made.

Social Impact Assessment - Similarly, the Land Acquisition, Rehabilitation and Resettlement Act, 2013 requires the developers to conduct a Social Impact Assessment (SIA). This study is similar to the EIA. The difference which may be stated is that the EIA is mandated in an area with no substantial human population and the SIA is required to make in areas where there is a stable population. SIA study is more comprehensive and elaborate as it requires a study of the environment and the population and their co-existence.

Environmental Clearances – Under the said regulations, the government of India has classified industrial projects into 38 categories. These projects, before any type of construction is initiated, must acquire environmental clearances and the appropriate approvals of the MoEF. These categories include but are not limited to textile processing, sugar industries, tanneries, ship breaking operations, e-waste recycling, paint varnish and pigments, cement, fertilizer, coal preparation plants, nuclear plants.

Any disputes arising in relation to the construction or operation of a unit is referred and adjudicated by the National Green Tribunal (NGT). The NGT Act, 2010 which is the guardian of all the environmental laws enforced in India can, under Section 26(1) of the Act, can award a punishment of 3 years or a fine which is limited to 10 crores for non-compliance with the orders of the NGT.

The MOEF has its scanner placed on every industrial project. It carries out continuous physical inspection of the emissions and pollutants in the industry. The check is on if proper compliances are being adhered to or not. But during the initial phase of the projects, it mandated developers to apply for and acquire permits for construction and operation¹⁴. This is done because the harm which may have been done to the environment without the clearance is avoided. Permit is a document allowing or premising the corporation and the developer of the project to advance with or continue the construction or operation of a unit. Therefore, permit are an essential end tool for minimizing industrial pollutants. For this particular purpose there are three types of permits granted by the government.

Single or Separate Permits

Before talking about permits, the government through the MoEF has published a notification which has classified some industries into a new classification. By introducing the concept of 'white industries', there has been a serene change in the way we look at industries. These industries have been termed as 'non-polluting' companies. The specialty of this classification is that the units operating under this particular class does not have to acquire a permit for operation. Only requirement is that they need to notify their respective SPCB.

Now for the industrial units which require permits for operation, the classification has been made to red, orange and green industries depending on the severity of environmental concern which revolves around the unit. Multiple permits may be required for operation depending on the size, scale and nature of business. The condition for granting a permit will be based on various scores that it will be given. The Pollution Index (PI) score depends on the features of an industry in relation to the efficient utilization of resources, water pollution, emissions and the hazardous waste that will be generated and alike factors are taken into consideration for analyzing the PI score.

The PI score to assign the classification of a unit into the given categories of industries are:

Red –PI score of 60 and above fall under the red category. The industries which are generally falling under this category are heavy chemical industries such as nuclear energy, ship breaking, asbestos, and also other industries.

Orange – PI scoreunder this category of the unit must be between 41 and 59. Light chemical industries such as pharmaceutical, paint, ink manufacturing and food processing industries may be falling under this category.

Green –PI score must be under 21 and 40 to befall under this category.A total number of 63 industries have been listed under this category mostly consisting of plastic and rubber producing industries.

White –A PI score of 20 or less gives the industry a position in this coveted category. Industries utilizing renewable resources of energy such as hydro and solar power falls under this category.

Integrated Permits

It is a comprehensive permit, on permit can be acquired and it gives a bundle of consents to the holder corporations. In a scenario, a combined consent application can be made to the relevant SPCB and the grant of it may permit under the 'consent to operate' under the Air Act, Water Act and other relevant legislations.

Duration – It is the SPCB under whose discretion the units operate. Therefore, it is also their discretion in relation to the duration for validity of a permit. Generally, an initial 'consent to establish' has the validity for a year which needs to be renewed. Other consents such as the ' consent to operate’ under various air, water and other legislations has a validity which may range from 3 to 5 years.

Any application for renewals must be made before 60 to 120 days before the expiry of the permit. In the use of their ordinary powers the SPCB may revoke, deny the renewal or cancel the permit in case of any violation of the terms of the permit.

V. Major incidences of environmental pollution by corporations

The need for bringing such stringent laws for environmental protection stems from industries over exploiting resources and ignoring any moral duty to preserve the environment. Industries have numerous people working in them and the only objective which the management strives for is the profit¹⁵. In achieving those the industrial units often overlook regulations.

There are numerous instances of industrial units involved in environmental pollution. Either they are the sole factor or the are the major contributor when it comes to environmental degrading. The two major instances in the recent history which stands out are the cases of environmental pollution caused by the Volkswagen Auto Manufacturing Industries and second being the Sterlite Copper case. The former had a global impact on air quality and the later was a much-highlighted case by the means of media because of the major social backlash involved.

Volkswagen Defeat Devices

Volkswagen is a German car manufacturing company. It is the biggest car manufacturer in the world selling its cars in over 153 countries in the world. Originally, it was an initiative sanctioned by German chancellor, Adolf Hitler to create a people friendly car which would be in the budget of most of the German citizens. The Volkswagen emissions scandal, popularly referred to as the Diesel Gate following the name of the Water Gate Scandal. The scandal came into picture in 2014.

It was found out by a group of researchers that Volkswagen were using a defeat device in their cars, which made the cars sense that they were being tested for emissions and similarly allowed it to alter its gasses. In the United States the Environmental Protection Agency issued a notice for the violation of its Clean Air Act. It was discovered that the manufacturer's diesel vehicles all around the world were equipped with defeat devices. The company had programmed such devices to recognize the conditions of factory testing and consequently programmed their Turbocharged Diesel Injection engines to modify its behavior accordingly. Respectively, the device would turn back to normal if the vehicle was not being tested and was to be driven on normal roads, the consequence of which was s significant increase in the car's emissions. On a large scale, this was catastrophic for the environment. The device aimed to portray that there were less NOx gas coming from the car. Nitrogen Oxide is a pollutant that causes bronchitis, emphysema and other respiratory diseases. During the research, it was found that some car’s emitted 40 times the permissible limit of Nitrogen Oxide gases. Volkswagen after the expose clarified that a total number of 11 million car’s were fitted with such devices.

In Saloni Ailawadi v. Union of India¹⁶ the National Green Tribunal in 2019, after much due consideration revised the award for penalty and set it to rupees 500 crores. The analysis of the parallel proceedings in the United States were taken into consideration¹⁷. Also, the report of the expert committee was analyzed which was appointed to assess the total environmental damages caused by the vehicles in question in India. The liability attached was founded as there was a twofold problem on behalf of the company. Volkswagen was in criminal breach of trust to its customers and the environmental compliances were not satisfied. This is an amount which is not in the same lines with what the other nations of the world has fined. The fines in United States of America and the European Union are much higher. This may be because they take environmental protection and the minimization of pollutants emitted in a much more acute manner.

Sterlite Copper

Sterlite Copper is a subsidiary of Sterlite Industries which is part of the Vedanta Conglomerate. It was the largest copper smelting plant of India. It is located in the town of Thoothukudi in Tamil Nadu. It had planned expansion of the copper smelting plant, public dissent burst out and there were vehement protests against the expansion. The unit was already receiving some backlash from the residing community. Its backlash was due to excessive pollution caused to the area and the pollution of water sources such as lakes and underground water. When the news for expansion reached the people, there emotions got the best of them and they organized themselves in stern protests. The protests were peaceful until the police got involved. When the police tried to clear the area so the industry can pollute freely the protests turned violent. A total number of 18 people were killed in the duration of the conflict.

Vedanta Industries has been involved in numerous cases of environmental pollution. Similar cases of ignorance of compliances such as in Odisha, Goa, Chhattisgarh and even in foreign countries of Zambia as well. The company has never been shy from controversies. But due to this outrage, which was an unfortunate event going on in Tamil Nadu, the great outcome was that the company that is Vedanta gave an application. It gave an application through its London Branch Office and it got itself delisted from the London Stock Exchange. This was done so that the industry did not have to bare the brunt of the financial impact which it could have suffered. The valuation of the company had fallen due to the news of the pollution and the community backlash and death of people in protests. At present the plant has been shut down and the High Court has reserved its judgement on this issue.

VI. Conclusion

The environment and its components are invaluable to us. The raw materials which we use and the unscientific exploitation of the same causes irreversible damage to the earth's atmosphere and ecosystem. Industrial pollutants are the catalyst and the leading cause for global warming. However, the presence, operation and growth of industrial units are of prime importance when it comes to the survival of modern world. The economies and population of the world depend on corporations for their survival and fulfillment of needs.

The corporations shall be sensitive to the health of the general public. Reputed organizations such as the Tata Steel Group have good relationship with the cities in which their units operate in. Tata Steel City or Jamshedpur is an entire town established on the roots of a steel industry. The industry regularly conducts health check-ups, especially for respiratory diseases. These create an understanding with the public of industries and furthers the utopia of their synergetic co-existence.

The laws in India always seem to be a step behind but the overall blanket of laws and the possibilities that they cover are massive. The nature of those laws must abide to the numerous United Nations guidelines and such a task is difficult to undertake. However, the cluster of environmental laws in India have provided with a firm base for environmental protection.

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