By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*
In recent years, the world has experienced awareness in the area of environmentalism. Companies want to reduce pollution, engage in cleaner production, conserve the environment and generally engage in environmentally responsible corporate behaviour. Some companies have incorporated environmental goals into their vision and mission statements. Ideas such as conservation, pollution control, recycling waste, public awareness and education, use of cleaner fuels and the use of Environmental Impact Assessment and Audits have found their way into the management principles of corporations. In turn, the Company Secretary as a member of the management finds herself engaged in environmental issues at both policy and operational levels. The survival of the corporate body may well depend on how environmental issues are handled and the Company Secretary finds herself deeply embroiled in issues of environmental compliance as a matter of law.
There is thus a need for knowledge of what the law requires in this regard. Indeed, it has been observed that many private firms across the world are have adopted different forms of private environmental governance to improve their environmental footprints, going beyond mere compliance with rules of traditional environmental law. As already pointed out in another section, the current Constitution of Kenya 2010 outlines the national values and principles of governance which must guide all persons makes or implements public policy decisions. These values and principles include among others, sustainable development. This is affirmed under the Companies Act, 2015 which provides that a director of a company should act in the way in which the director considers, in good faith, would promote the success of the company for the benefit of its members as a whole, and in so doing the director shall have regard to, inter alia- the impact of the operations of the company on the community and the environment.
In addition to the foregoing statutory requirements on environmental reporting, corporations are also notably bound by the provisions of EMCA depending on the various projects or activities that they are involved in. Under the Environmental Management and Coordination Act, when an offence under the Act is committed by a body corporate, the body Corporate and every director or officer of the body corporate who had knowledge of the commission of the offence and who did not exercise due diligence, efficiency and economy to ensure compliance with this Act shall be guilty of an offence (emphasis added). A Company Secretary is increasingly being viewed as an officer of the company. The law thus imposes a duty on the Company Secretary to ensure compliance with environmental law, rules and regulations. The penalties under EMCA are harsh and can include imprisonment and fines that ran into hundreds of thousands of shillings.
Offences under EMCA relate among other things, failing to submit to inspection, offences relating to Environmental Impact Assessment; offences relating to records; offences relating to standards; offences relating to hazardous waste; offences relating to pollution; and offences relating to restoration orders. The Act imputes personal liability even where the offence complained of was committed on account of another person (corporate body). It is thus possible for a Company Secretary to be personally liable for environmental offences committed by the Company. In other words, the role of the Company Secretary in Environmental Compliance is a statutory one.
The imposition of liability on the directors and officers of a corporation is meant to act as a disincentive to ensure that they establish corporate mechanisms for environmental compliance, and thus avoid passing the cost of non-compliance to consumers and the general public. A Company Secretary as an officer of the company must then logically ensure that where an Environmental Impact Assessment is required to be prepared, the same has been prepared in accordance with the law. Similarly, where an Environmental Audit is required to be carried out, the Company Secretary should ensure that it is prepared in accordance with the requirements of EMCA and its regulations. In brief, the Company Secretary being an Officer of the Company has a duty to ensure compliance with standards set out under EMCA and if s/he does not do so, then liability in criminal law attaches. Similarly, the Company Secretary is bound to ensure that hazardous waste and other chemicals and radioactive materials are handled properly to avoid liability.
The way forward in enhancing for company secretaries is ensuring enhanced corporate environmental compliance, adhering to principles of sustainable development and taking corporate social and environmental responsibility seriously. Environmental compliance by corporate organizations is mandatory under EMCA. The foregoing discussion has demonstrated that breach of environmental compliance may result in civil and criminal sanctions upon an organization. This relates to the sanctions that may be imposed for breach of environmental compliance requirements such as damages or closure of the corporation. Indeed, officers of corporations such as directors and company secretaries have to ensure that all environmental laws, regulations and policies are adhered to and breach of this duty may attract both civil and criminal liability under EMCA.
In addition, adhering to Principles of Sustainable Development Sustainable development is enshrined as one of the national principles under the Constitution and binds all persons including corporations. Sustainable development is also captured under EMCA and incorporates the principles of public participation, international co-operation, inter and intra generational equity, polluter pays principle and the precautionary principle. Corporations should, therefore, adhere to the principles of sustainable development to ensure that their economic activities meet the needs of both the present and future generations.
Related to sustainable development is the idea of Corporate Social Responsibility (CSR) with the difference that sustainable development is a legal requirement while CSR is a voluntary corporate undertaking. CSR is a transparent business practice based on ethical values, legal requirements compliance and respect for the community, people and the environment within which the business operates and contributes to the economic success of an organization through meeting the needs of stakeholders who are critical to its existence. According to proponents of CSR, a firm’s success is dependent on how it is able to safeguard relationship with stakeholders such as employees, communities and customers since being socially responsible helps it gain support from such stakeholders. In Kenya, studies have shown that corporations that have undertaken CSR initiatives such as environmental conservation programs have witnessed success in areas such as sales and market share. Corporations should therefore pursue corporate environmental responsibilities such as environmental conservation programmes which may include clean up exercises, restoration activities, tree planting exercises and environmental awareness campaigns. These activities have the ability to contribute to the economic growth of an organization.
Environmental Insurance can be used as a tool for environmental management. This however is yet to be popularized in Kenya and EMCA does not have provisions on environmental insurance. It has however been suggested that environmental insurance can be popularized in the country for both medium and large corporations to shield them against environmental liability which could turn out to be too costly. Some insurance providers have packages on environmental liability covering environmental damage and clean-up costs for pollution. Company secretaries should consider and encourage use of environmental insurance by corporates in the country since some cases of environmental liability may not be foreseen by a corporation and could arise due to natural acts. However, the strict liability rule imposes liability on the corporation even where such acts could not be foreseen. Through environmental insurance, it may be possible to shield a corporation from cases of environmental liability.
*This article is an extract from the Article: Securing Our Destiny through Effective Management, (2020) Journal of Conflict Management and Sustainable Development Volume 4(3), p. 1. by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.
References
Muigua, K., “Securing Our Destiny through Effective Management,” (2020) Journal of Conflict Management and Sustainable Development Volume 4(3), p. 1.