Corporate Responsibility Amid Corporate Plunder: Towards New Environment Centric Legal Obligations

A new era of corporate age has dawned upon us. The existence of a vibrant and thriving corporate culture has indisputably become imperative for the economic development and, consequently, the welfare of the country and its citizens. While there are benefits of such corporatization in the form of investment, local production, avenues for employment and generation of revenue that benefits the state, if this corporatization is carried out without necessary regulation then the exercise may leave in its wake horrific evidence of exploits and plunder reminiscent of the colonial enterprise.

It is a palpable fact that economic activity generated through widespread industrialization comes at a price of loss to the environment. To cater to such negative externalities, a legal framework is put into place to prevent, reduce and eliminate environmental damage and measures are developed to contribute towards positive development of the environment in an effort to mitigate the negative impact. This legal structure may specifically be legislated upon or developed through precedents. As easy as it may sound, striking a balance between the promotion of economic activity on one hand and environmental justice on the other is an extremely daunting task fraught with frequent skirmishes between corporations, citizens and the state as multiple competing rights and duties come into play.

The insufficiency of environment conserving legislation has led to the adoption of the common law doctrine of ‘public trust’. This doctrine essentially provides for the state (or government) to act as a trustee of certain (natural) resources and be responsible to protect them for the public against arbitrary private exploitation.[1] Since these are inherently public resources, the state cannot alienate them in favour of private actors. A cause of action accrues to the public, being beneficiaries, against any person who interferes with the enjoyment of these resources and against the state’s failure of its fiduciary duty to protect them.[2] This drives the government to manage natural resources in a reasonable and efficient manner while being held accountable before a court of law.[3] The superior judiciary of Pakistan has applied the principles underlying the doctrine, though it has never expressly mentioned the doctrine by name.[4]

The Supreme Court of Pakistan in the Shehla Zia case,[5] inter alia, interpreted that the constitutional ‘right to life’ included the right to a clean, healthy atmosphere and unpolluted environment. The ratio decidendi of the judgment was also applied in the Salt Miners case[6] where the Supreme Court enforced the right of residents to uncontaminated water as a fundamental right against mining activities in the area. A direct reference to the doctrine was first made in the SIUT case[7] where the respondent-corporation had intended to acquire land to set up an industrial plant which could adversely impact subsoil water. It was declared that resources such as water were part of public trust and the state had a duty to protect them. Conversion of such resources for private use would encroach upon the fundamental rights of the public.

Although the superior courts have applied the doctrine in numerous cases[8] thenceforth, the latest cases pivoting around economic undertakings are worth mentioning. In the Muhammad Ayaz case[9] the court was seized of a matter emanating from a complaint made by residents, which related to air and noise pollution along with vibration emitted by the petitioner’s industrial undertaking. The court adopted the ‘precautionary principle’ which had earlier been touched upon in the Shehla Zia case, requiring the relevant agency to anticipate and take immediate steps to prevent danger or harm to the environment and the public. Elaborating upon the development and adoption of the precautionary principle, the court observed that it was a tool for ensuring ‘sustainable development’ and achieving environmental justice.

‘Sustainable development’, as discussed in the Maple Leaf case,[10] means development that meets the needs of the present generation without compromising the ability of future generations to meet their needs.[11] Even though the petitioner-company was deemed to have approval to extend its industrial unit owing to the inaction of the relevant agency, the court directed the parties to maintain the status quo due to the fact that a survey was being carried out by the Mines and Minerals Department, the result of which might have disclosed that any concession to the petitioner-company might have had an adverse environmental impact. The court thus invoked the precautionary principle and the principles of in dubio pro natura. This maxim dictates that in the event of doubt as to whether an activity is harmful, the adjudicating or decision-making forum should resolve matters in a manner most favourable to the conservation and safety of the environment. The said approach was held to be constitutionally compliant in safeguarding fundamental rights of the public forming the community surrounding the project, including the right to life and dignity.

In the Asghar Leghari case,[12] the court was seized with a petition seeking enforcement of fundamental rights to address the issues of climate change. The court observed that on a contemporary jurisprudential plane, the state had moved from a localized concept of environmental justice towards climate justice. The latter links human rights with development to achieve a human-centered approach so that rights of the vulnerable may be safeguarded and the impacts or benefits of climate change can be shared equitably and fairly among people. The court identified two remedies, namely adaptation and mitigation, to deal with climate change. While mitigation consists of actions to limit the scale or speed of long-term climate change through reduction in greenhouse gas emissions or reforestation, adaptation is the overall capacity of humans to adapt to changing conditions. Adaptation was stated to be more suitable in the context of Pakistan as it would allow for the engagement of multiple stakeholders and include different aspects of climate such as food security, water security, health security and disaster management, etc. It was maintained that while mitigation could be addressed through environmental justice, adaptation could only be addressed through climate justice where courts would be able to build adaptive capacity and climate resilience by engaging multiple stakeholders. The court further explained that water justice was a subsidiary concept of climate justice and since water was required by humans and the wildlife for multiple functions, in adjudicating cases related to water the essential and inseparable connection of water with the environment, the land and the whole ecosystem needed to be kept in mind.

The aforementioned dicta were validated and cited as forceful precedents by the court in the Sheikh Asim Farooq case[13] while issuing directions for the safe management, conservation, sustenance, maintenance, protection and growth of forests and plantation of trees in urban cities. Despite jurisprudence related to climate and the environment developing in a progressive fashion, chasms remain between legislative protective barriers (such as environmental legislation) and non-legislative barriers (such as the evolution of the public trust doctrine, etc.), which the corporate sector may capitalize on in order to achieve business objectives. One such recent instance occurred when the Supreme Court took suo motu notice of companies selling bottled water extracted from the ground without any charge and the fitness of the water for human consumption.[14] The downright plunder by the corporate sector with impunity may not be addressed by mere reproach. In view of the judicial precedents set by the superior courts of Pakistan, the corporate sector is not only obligated to act responsibly, it is also bound by the fundamental rights of the public which are being flouted for profits, adding insult to injury.

To curb injudicious environmental utilization and impose greater responsibility on corporations, certain legal requirements have now been imposed through the Companies Act, 2017. The relevant portions are reproduced hereunder for convenience:

“204. Duties of directors.

(1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.

(2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees the shareholders the community and for the protection of environment.


227. Contents of directors’ report and statement of compliance.

(3) In the case of a listed company, the business review must, to the extent necessary for understanding the development, performance or position of the company‘s business, include:

(a) the main trends and factors likely to affect the future development, performance and position of the company‘s business;

(b) the impact of the company‘s business on the environment;…”

(Emphasis provided)

The statute holds the director(s) of a company liable for the protection of environment by impressing a duty to do the same. It may also be noted that caring for the community is also a duty and it precedes the duty of protecting the environment. Moreover, the director(s) of a listed company must also report and mention in a statement of compliance the impact of the company’s business on the environment. Default of either of the commands will result in legal consequences.

In a first move, such obligations have been introduced positively through an enactment governing companies themselves. This represents a paradigm shift from the erstwhile Companies Ordinance, 1984. By creating positive legal duties, an innovative approach has been taken to make corporations aware of their greater responsibilities and hold them answerable. The way for greater conformity and supervision has been carved out. Together with the existing legal edifice, a complementary and robust system of checks and balances may be utilized to restrain corporate ambitiousness and the disregard of public resources. In present times, the distance towards achieving ideal conservation goals has theoretically decreased owing to new suited legal obligations. Nonetheless, pragmatically, ‘green litigation’ by a cognizant citizenry, with the aid of a conscientious judiciary, will eventually lead towards better conservation outcomes and sustainable development not only for the current generation itself but also for future generations.


References

[1] Muhammad Wajid Munir, Putting Public Trust Doctrine to Work: A Study of Judicial Intervention in Environmental Justice, LUMS Law Journal 2017: 4 (1), 97.
[2] Ibid. 99
[3] Ibid. 100
[4] Ibid. 107
[5] Shehla Zia v WAPDA, PLD 1994 SC 693
[6] General Secretary, West Pakistan Salt Miners Labour Union (CBA), Khewra, Jhelum v Director, Industries and Mineral Development, Punjab, Lahore, 1994 SCMR 2061
[7] Sindh Institute of Urology and Transplantation v Nestle Milkpak Limited, 2005 CLC 424
[8] A significant number of cases have been referred to in LUMS Law Journal 2017: 4 (1), 96-119. Important subsequent cases are being referred to hereinafter.
[9] Muhammad Ayaz v Government of Punjab etc., 2017 CLD 772
[10] Maple Leaf Cement Factory Ltd. v Environmental Protection Agency, etc., PLD 2018 Lahore 255
[11] Section 2 (xlii) of the Pakistan Environmental Protection Act, 1997
[12] Asghar Leghari v Federation of Pakistan, etc., PLD 2018 Lahore 364
[13] Sheikh Asim Farooq v Federation of Pakistan, etc., PLD 2019 Lahore 664
[14] Shahid Bhatti, Tax on Mineral Water and Beverage Companies Through Supreme Court’s Judgment, February 12, 2019 <https://courtingthelaw.com/2019/02/12/laws-judgments-2/judgment-analysis/tax-on-mineral-water-and-beverage-companies-through-supreme-courts-judgment/> accessed 18 June 2020.

The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any organization with which he might be associated.

Haroon Yazdani

Author: Haroon Yazdani

The writer is a practising lawyer based in Lahore. He has keen interest in law, literature and philosophy.

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