Corporate Accountability (or Lack Thereof) for Environmental Damage

Eline Janssen

There are several general principles and rules in International Environmental Law that apply to all members of the international community and all activities affecting the environment.[1] These principles are in place to protect the environment and to prevent environmental damage. The no harm principle, for example, determines that States have the responsibility to ensure they do not cause environmental harm to other States when executing their sovereign rights.[2]The principle of preventive action imposes a duty on States to prevent, reduce, limit, or control activities that might cause damage to the environment.[3] According to the polluter pays principle the person responsible for causing pollution should bear the costs of said pollution.[4] Furthermore, the precautionary principle provides that in the case of threats of serious irreversible damage to the environment, the lack of full scientific certainty is no reason to postpone measures to prevent environmental degradation.[5] While these principles are numerous and often acknowledged as customary international law (meaning that they apply to every State regardless if that State has signed and ratified the specific treaty), they do not capture corporate accountability for environmental damage.

International law lags behind on principles or rules that apply to corporations. Corporations are primarily the objects rather than subjects of international law, shielding them from accountability.[6] The mechanisms that are in place for corporate accountability for environmental damage are mostly voluntary.[7] Although a voluntary character of obligations does not necessarily reduce the obligations corporations commit themselves to, the mechanism’s success does depend on its transparency and credibility.[8] Voluntary codes of conduct can be a useful tool in governing corporations to perform their activities in a more sustainable manner, as they offer industries the possibility to come up with a solution that is focused on that industry and is economically effective. Among the mechanisms in place to increase environmental awareness among corporations is the UN Global Compact, initiated by Kofi Annan, which aims to induce corporations to absorb Corporate Social Responsibility (CSR).[9] It entails ten principles, three out of which relate to the environment.[10] However, the UN Global Compact remains unable to provide a meaningful form of accountability, partly due to its voluntary nature and its self-entrenched governance structure.[11] The UN Global Compact fails to sway signatory companies to make meaningful changes in order to implement the CSR principles. The cause of this could be found in the lack of sanctions for example if companies fail to provide accurate information about their activities or if their efforts to implement the CSR principles are insufficient. A possible sanction could be exclusion from the UN Global Compact.

Secondly, there are OECD Guidelines for Multinational Enterprises. In the OECD Guidelines, it is stated that enterprises should take due account of the need to protect the environment, public health, safety, and to conduct their activities in a manner that contributes to the goal of sustainable development.[12] However, the OECD Guidelines do not mention accountability for environmental harm and they comprise of voluntary standards.[13] Therefore they remain unfit to address corporate accountability regarding environmental damage. The most encompassing international legal instrument on corporate accountability would be the UN Guiding Principles on Business and Human Rights (UN Guiding Principles).[14] The Guiding Principles do not specify environmental standards and make no references to international environmental treaties. Instead, Special Representative John Ruggie underlined the importance of international policy coherence, specifically regarding social norms that have gained almost universal recognition.[15] Unlike with the mechanisms mentioned prior, compliance with the UN Guiding Principles by corporations is not voluntary. However, regarding corporate accountability for environmental damage, the UN Guiding Principles are limited due to their nature as soft law and because they lack specific environmental standards.  This leaves a vacuum in International Environmental Law.

[1] Philippe Sands and others, Principles of International Environmental Law (4^th edn, CUP 2018).

[2] UN (1972) United Nations Conference on the Human Environment E.73.II.A.14. Principle 21; UN General Assembly (1992) Rio Declaration on Environment and Development A/CONF.151/26 Principle 2.

[3] Belgium v Netherlands (Iron Rhine case) ICGJ 373 (PCA 2005); Argentina v Uruguay (Pulp Mills case) ICGJ 2 (ICJ 2006). See also Sands and others (n 5).

[4] UNGA (n 2) Principle 16.

[5] Ibid Principle 15.

[6] Amanda Perry Kessaris, ‘Corporate liability for environmental harm’ in Malgosia Fitzmaurice, David M Ong & Panos Merkouris (eds), Research Handbook on International Environmental Law (Edward Elgar Publishing Limited 2010).

[7] Ibid.

[8] S Prakash Sethi & Donald H Schepers, ‘United Nations Global Compact: The Promise–Performance Gap’ (2013) 122 Journal of Business Ethics 193.

[9] Eduardo Gomes and others, ‘Corporate Social Responsibility through the Global Compact: Between Business and Society’ [2017] 4 BRICS Law Journal 93.

[10] Principle 7 UN Global Compact: Businesses should support a precautionary approach to environmental challenges; Principle 8 UN Global Compact: Businesses should undertake initiatives to promote greater environmental responsibility; Principle 9 UN Global Compact: Businesses should encourage the development and diffusion of environmentally friendly technologies.

[11] Prakash Sethi & Schepers (n 8).

[12] OECD, OECD Guidelines for Multinational Enterprises (2011 ed, OECD publishing 2011).

[13] Perry-Kessaris (n 6) 369-370

[14] Elisa Morgera, Corporate Accountability in International Environmental Law (2^nd edn OUP 2020).

[15] Ibid.