12

Environmental Concerns and Corporations

 

• Introduction
• Industrial Pollution
• Evidence of Pollutants
• Natural Environment and Business
• Pollution Prevention
• Improving Corporate Environmental Performance
• The Need for a New Approach
• Environmental Management in India
• Corporate India Gets Eco-friendly
• India’s Environment Policy

Introduction

Given the increasing awareness among people worldwide on the issue of global warming and its attendant problems, the importance of environmental preservation through better state and corporate governance practices cannot be overstressed.

 

In this chapter, we trace the history, importance and significance of environmental governance and study the role state which is enjoined to play an active role to protect, preserve and nurture all creatures—human being, the flora and fauna and also to maintain ecological balances for the good of all mankind. In this role, governments worldwide are assisted by the environment-conscious public, media, environmental groups and corporations. Corporations have a special responsibility to bear—they having been the major cause for the environmental degradation. They have a stake in preserving the environment and the ecology for posterity. This chapter also discusses the health and productivity consequences of environmental damage, industrial pollution, role of corporates in environmental management and measures to improve their performance in this direction, and in conclusion, discusses India’s Environmental Policy.

Environmental Concerns

It is well known that contemporary environmental problems are serious, but the specific issues, consequences and priorities are vaguely defined and much less explained. However, there is a clear appreciation today than ever before that environmental quality is an important desideratum in the social and economic development of nations.

The growth of consumerism, leading to the high rate of consumption of natural resources, is at the heart of many environmental problems. Traditionally, industry has been driven by consumer demand to produce goods efficiently, regardless of the consequences. Regulation and innovation are changing this system, but yet have not solved the problems. The need to have clean air and water, fertile soil, biodiversity and the overall cleaner world for the people to live in, are all stressed to ensure the health of the global environment. Environmental problems thus continue to pose challenges and opportunities to business as they have for several decades.

History of Environmentalism

Over the last century, many activists, writers and policy makers have stirred debate about the environment. Since the rapid development of the Industrial Revolution, human activity has taken an increasingly heavy toll on natural resources. As early as the turn of the 20th century, the importance of natural resource conservation led to the establishment of National Parks by Teddy Roosevelt’s administration. Later, during the 1960s, the human health risks posed by pollution raised much concern Slowly, the concept of environmentalism evolved as attitudes about human impacts on air, water, forests and other aspects of the environment did.

Increasing awareness and consequent concern on these issues were fuelled by informed public sentiment, media coverage, corporate attitudes and government policy. Public protest of air and water pollution led to the passing of many environmental laws by the US Congress and to the creation of the Environmental Protection Agency’s (EPA) community-led recycling programmes and protest against polluting businesses in “Not in My Backyard” (NIMBY) campaigns are two examples of how environmentalism has impacted industrial activity. Activists have encouraged industry to change practices and innovate in order to improve environmental quality.

 

Widespread support for environmental protection is a relatively new phenomenon. An enhanced perception of an impending crisis has caused in recent times a spate of law-making, technological innovation, improvisation and even bureaucratic evolution. During the last three decades, businesses have had to respond to many new regulations which have both posed challenges and opened opportunities. However, the interaction of different stakeholders has brought out both strengths and weaknesses of democratic decision making in a capitalistic economy.

The economic implications of environmental problems have been key issues throughout the history of environmentalism. Michael Silverstein argues that environment and economic goals are not irreconcilable.¹ He cites historical evidence dating back to the Industrial Revolution demonstrating that business and environmentalists are not inherently in conflict as they are often perceived to be. The principles of industrial resource use and environmental conservation, he argues, are compatible in that each one focusses on sustainability.

While activists have done much to publicise environmental problems, disasters such as Bhopal, Three Mile Island and Exxon Valdez, and books, such as Rachael Carson’s “Silent Spring” have all raised public awareness of the health hazards of pollution and environmental degradation. This realisation has resulted in an increased demand for industry disclosure and accountability. In many cases, increased awareness, regulation and changed practices have resulted in improved environmental quality. However, many challenges remain unresolved. Moreover, there is also a perceptible shift over time from confrontational activism to co-operative problem—solving among stakeholders.

Environmental Philosophy

Environmental philosophy takes a variety of forms and stances, each with some merit, and all adding to our understanding of the relationship between human beings and the environment. A fundamental aspect of environmentalism is that the players who are involved in it are also often motivated by different philosophical approaches to the natural world. By gaining an insight into the ideologies underlying the environmental movement, we can understand the arguments and stances of the players involved. Environmental philosophy is also important since it is useful in changing attitudes towards the environment.

John Bellamy Foster in “Global Ecology and the Common Good” argues that only a change in common morality will help alter the present means of production and mass consumption, which will otherwise lead to ecological collapse sooner than later. He further argues that the self constructive levels of consumption in developed societies can be curbed by shifting to a more holistic perception of the natural environment. “Nature” according to him should be included as a member of the moral community.

 

Marisa J. Mazzotta and Jeffrey Kline in “Environmental Philosophy and the Concept of Non-use Value” argue that ideas from various environmental philosophies should be incorporated into economic policy formulation. This is because resource economics, traditionally fails to effectively measure non-use values. This leads to a dilemma in that some natural resources lack an easily measurable monetary value, but are important to ecosystems. According to them the ideologies of anthropocentrism, conservationism, preservationism, biocentrism, ecocentrism, deep ecology, social ecology and eco-feminism are all frameworks applicable to the relation between environment and economics.

Another issue in environmental debates address the legal rights of nature. Joel Schwartz in his article “The Rights of Nature and the Death of God” poses the question as to who should represent nature in a democracy, self-appointed environmentalists or elected officials? The practical implementation of environmental philosophy in the debates of public policy and regulation may be the key to natural resource conservation.

Perhaps the most famous work in environmental philosophy is that of Aldo Leopold who in his book “A Sand Country Almanac, 1948” related his ideas that radically alter the framework in which humans relate to the environment. His concern about environmental degradation led him to argue that nature must be protected both legally and morally. Leopold was an expert in natural resource in management who realised the consequences when human beings are alienated from their natural surroundings. His call for the inclusion of “nature” in the moral community was an argument for preserving the environment for its own sake, not simply for human use.

Environmental Preservation: Role of Stakeholders

Preservation of a healthy environment and ecological balances is everybody’s concern. To promote environmental awareness among the people we need the help of different stakeholders to achieve such environmental preservation. These stakeholders are the public, the media, environmental groups, corporations, and the government.

Public Opinion

Public opinion is crucial to the resolution of environmental issues in a democratic society. The public has the power to support interest groups, elect and lobby officials, pay taxes, work for companies, buy products and support or reject policies.

In the US, many polls were conducted to determine what the public thought about various issues, and the results were carefully monitored by incumbent politicians. These results indicated that after decades of being on the fringe, environmentalists had succeeded in making many of their points. There is acceptance among the populace that something must be done about environmental problems.

 

The effects of pro-environment public sentiment are evident in many business and government sectors. Bhushan Bahree and Kyle Pope in their article “Giant Outsmarted” identified the direct correlation between public opinion and environmental policy. They describe how Greenpeace stopped Royal Dutch Shell from scuttling an oilrig in the Atlantic Ocean by organising public protest throughout Europe. The pressure was so much that it forced Shell to alter its policy and dismantle the rig on land at a substantial cost to the corporation. This is a classic example where public pressure compelled a giant corporation change its policy. Here, the perceived risk of environmental damage took precedence over economic considerations thanks to the strong public opinion.

The public perception of environmental risk continues to be a driving force in the US politics. According to Thomas A.W. Miller and Edward B. Keller, health concerns are the primary motivation for public alarm. In their article, “What the Public Wants”, the authors describe how specific language that is used to inform the public has a direct effect on their response. One example involves the use of “non-hazardous” or “hazardous” in the description of a waste site. The ambiguous use of these terms can convey an inaccurate sense of the danger to a surrounding community. Besides, the correlation between human and ecological health is often poorly understood. More public education on environmental issues is required. Communication of problems to the public must improve to build consensus and understanding on vital environmental issues.

The Media

The role of the media in the dissemination of information to the public on issues of grave importance cannot be overstressed. News publications and journals, television and radio are the source of information to the public on environmental issues.

Trends in environmentalism are important to journalism. Studies have shown that positive news about the environment has received considerably less attention than negative news in recent years. This situation is changing and headlines may soon announce the environment-friendly deeds of corporates which may provide valuable publicity to improve their competitiveness in a society that is increasingly conscious of environmental issues. To ensure that the media provides balanced information, it is important for business to play a proactive role in information dissemination. It is a fact that as with many issues, a lack of objectivity often pervades environmental journalism. It is an irrefutable fact that the media wields considerable influence over public perception of environmental groups, corporations and the government.

Environmental Groups

Many environmental advocacy groups have evolved considerably from the liberal, anti business, anti-government periphery of past decades. While some radical groups do remain, many moderate or conservative groups are co-operating with business and government. The role of some groups is shifting from simply bringing attention to environmental issues toward working to solve problems. These organisations are often a reliable source of information and support and represent public sentiment.

Since environmental groups vary greatly in scale, scope and philosophy, it is difficult to discuss them as a distinct entity. Some of the familiar major groups are: Conservation International, Greenpeace and Environmental Defense Fund. These groups play a significant role in environmental issues and must be taken seriously by decision makers in business and government. Cooperation with these groups is essential in the next phase of the movement: industry innovation. Environmentalists are important both as a source of information and as representatives of public interest, though there are substantial obstacles to co-operation, including conflict of interest, compliance, and the size of companies.

 

In addition to environmental groups, there are also organisations that are opposed to environmental regulation, the so-called “wise-use” movement. The Competitive Enterprise Institute (CEI) supports free markets and limited government by opposing most environmental statutes and policy. The group frequently criticises the EPA for using inexact science and inefficient protection measures. It is important to recognise that government environmental policy is not perfect. All stakeholders are responsible for working toward a consensus for effective decision-making on these issues.

Corporations

Corporations had been known in the past to be traditionally unsympathetic to environmental problems The pollution and degradation caused by industrial activities in the 19th and 20th centuries created many of these problems in the first place. As a result of pressure from environmentalists and regulatory legislation, many companies have altered their stance and innovated their policies. In fact, many firms now work proactively to improve environmental quality. This relatively recent phenomenon continues to develop as environmental issues gain the attention of more business professionals.

The key shift occurring in the environmental regulation of industry is from an emphasis on pollution control to an emphasis on pollution prevention. With forethought and ingenuity, the goal of the latter idea is to eliminate pollution before it is produced by innovating processes. Environmentalists encourage corporate investment in technologies to reduce the use of contaminants in industrial production. Therefore, there are now many voluntary business initiatives which promote pollution prevention by improving efficiency in production. This approach is popular because corporations can cut costs while improving environmental quality.

The development of corporate environmental policy has ranged from incremental changes to comply with regulations, to substantially innovating processes. It is the latter formulation that was extolled by Stephan Schmidheiny at the UN Earth Summit in 1992. In many cases it has been found that sound environmental policy can parallel the interests of corporations.

The shift of corporate attitudes is key to environmentalism. Dow Chemical, a corporation that dominates an often criticised industry, is a notable participant in corporate stewardship. Consumer and legal pressures have been important incentives for Dow to develop its environmental policy. Is is now a top priority for this corporation to improve its environmental record. The example of Dow serves as evidence that environmental concerns are urgent and are appropriately being included near the top of the corporate agenda.

In the near future, companies that refuse to “go green” will be unable to survive in an environmentally conscious marketplace. Therefore, it is vital that corporate leaders learn to promote resource preservation through reducing waste and maximising resources while improving profits.

The stance of corporations is shifting toward being proactive stakeholders seeking sustainable solutions. Industry has traditionally been at odds with environmentalists, but the paradigm is changing. Holistic management of natural resources and the necessity of response to public concern are playing a greater role in corporate strategy.

Government

The implementation of effective environmental policy has been obstructed by many factors: inadequate scientific knowledge, budgetary deficiency and conflict between disparate interests. The electoral cycle and public emphasis on a sound economy force environmental issues into a political arena which does not always lend itself to timely decision-making. The Environmental Protection Agency, for example, often has difficulty improving environmental quality when its activities are perceived to hurt the economy. While environmental protection is a broadly supported idea, the reality of its costs are unpopular.

The economic costs of environmental regulation have been criticised by the private sector, and usually the Environmental Protection Agency (EPA) is the target of reproach. While the EPA has come under attack for costly litigation and inefficient regulatory policy, it has been instrumental in monitoring the polluting emissions of industry. The agency is still developing its role in public policy and improving environmental quality.

 

Many stakeholders who advocate or oppose environmental protection seek to influence the government. Even with firm leadership, effective environmental policy will take time to develop in government. The inexactness of environmental science and costs to the economy are key obstacles to developing an effective and efficient environmental policy.

The stakeholders in environmental issues play important roles in policy formulation. Government directives can prevent some of the most egregious environmental damage from occurring, but lasting solutions will take co-operation from all actors. Partnerships at a local, regional or global level may be the best way for stakeholders to participate in joint efforts to resolve environmental issues.

Future Outlook on Environment

Environmentalism in the 21st century can be characterised by three principles that will serve as bases for continued actvism and policy formulation. The first of these is partnerships, an integrated strategy that brings disparate interests together in a co-operative forum to resolve environmental issues. This “common sense” approach is proving to be a practical and effective way to address natural resource concerns. Corporations taking this approach benefit from the knowledge and experience of their partners. The second development fundamental to future environmentalism is international co-operation which is growing in response to the crisis of global environment. Environmental issues have reached the world agenda in United Nations programmes, world conferences and international agreements. The third principle that has evolved as a new foundation for environmentalism is sustainable development, a model for conservation which focusses on natural resources consumption. For economic development to be sustainable, the needs of the present must be met without compromising the ability of future generations to meet their own needs. This task will require a fundamental shift in the world economy to limit natural resource consumption and environmental degradation.

 

Partnerships

Recent co-operation between stakeholders on environmental issues is promising evidence that pressing environmental problems can be resolved. Partnerships are voluntary collaborations between two or more organisations with a jointly defined agenda focussed on a discrete, attainable, and potentially measurable goal. The “life-cycle” of partnerships involves an integrated relationship between stakeholders throughout the decision and implementation process.

It is evident that both corporate and environmental stakeholders gain benefits from co-operation. Dominance of business interests cannot be undermined, but NGOs (Non-governmental Organisations) can maintain substantial influence in the decision-making process by understanding the goals of corporations.

Further evidence of the importance of partnerships is the growing practice of corporations to seek the assistance of NGOs to preserve endangered species in their areas of operation and by pooling the assets of stakeholders and co-operatively reaching a solution.

Partnership may also be an effective way for the government to tap the resources of expertise that exists in environmental groups.

International Issues

Many environmental issues are international by their very nature. These include cross-boundary pollution, common area resources and economic development. Traditionally, state sovereignty and self interest took precedence over the resolution of global problems. In recent decades, an integrated world economy has emerged which is dominated by multinational corporations. The resulting economic interdependence of nations fosters co-operation in resolving international issues. The worldwide recognition of an ecological crisis has moved the global environment higher on the international agenda. The absence of inter-national government, competition between nations and the complexity of international relations all remain as obstacles to global environmental policy.

The United Nations Conference on Environment and Sustainable Development in 1992 though not the first of its kind, was a major breakthrough for environmentalists. The meetings held in Rio were divided into three levels: government leaders, corporations and NGOs. Each group debated issue of social justice, property rights, North-South relations, forest principles, development, biodiversity, responsibility and technology transfer. While it is significant that world leaders address global problems such as ozone depletion and common area resources, lack of funding remains as an obstacle to permanent solutions. The key success of the Conference was that the environment became a priority on the global agenda.

Sustainable Development

A very significant concept underlying international and domestic environmental policy is sustainable development. Its goal is to ensure that the natural resource needs of the present are met without compromising the ability of future generations to meet their own needs. The implication is that there are limitations to the earth’s carrying capacity in the light of present levels of technology, social organisation and population.

The evolution of ideas about sustainable development has been substantial, but the next step is to generate effective policy initiatives. While it is clear that current economic practices are unsustainable it is an undeniable fact that developed countries have the knowledge to operate sustainably. The key will be for government and corporations to change practices in shifting to a more efficient model of resource use.

 

A contradiction of popular opinions about sustainable development is offered by William Nitze in “The Economic Case for Sustainable Development”. The author argues that sustainable practices are no more costly than current industrial processes and that the actual barriers to change are inadequate information, training and incentive. He claims that cleaner technologies are very competitive and that public development institutions should attempt to stimulate innovation, rather than dole out funds for incremental costs. He further argues that organisations like the Global Environment Council (GEF), should change the manner in which they help developing countries to focus on sustainability.

Environmentalism in the 21st century is likely to be characterised by various efforts to implement the sustainable development agenda. International organisations, such as the United Nations and World Bank, will be integral to the development of effective global environmental policy. The questions of financing sustainable development, technology transfer and corporate interests need resolution if lasting change is going to take place.

Corporations maintain a dominant role in these issues, those that adopt a proactive stance in environmental stewardship are likely to compete well in the world economy in the years to come.

Costs and Benefits of Environmental Regulation

Environmental regulations are often criticised as being too costly for business. Certainly protecting environmental quality is an expensive task for many regulated industries. Beyond higher costs for individual firms, however, many people argue that the high level of environmental regulation hurts a country’s competitiveness in the world market. Some economists have countered that strict environmental regulation may actually enhance a country’s competitiveness by fostering innovation. It is evident that forward-thinking firms can turn environmental regulations to their advantage. They argue that clean business practices are more efficient, and therefore, profitable. It is also important to realise that not all firms are affected equally by environmental regulations.

The effect of regulation upon an economy as a whole remains unclear. Many economists feel that environmental regulations raise the price of inputs, putting businesses at a competitive disadvantage in the world economy and hindering growth. Others argue that forward-thinking regulations in the US encourage firms to innovate, which keeps America at the forefront in technology enhancing US competitiveness. Michael Porter is the leading proponent of the pro-regulation view. He outlines his major arguments in “Green and Competitive”. Regardless of the validity of either competitiveness argument, business people should view regulations as an opportunity to gain an advantage for their individual firms.

Trade and the Environment

Historically, nations have had widely varying environmental protection standards. With the increasing recognition that natural resource degradation is a global concern, countries have now begun to negotiate agreements on environmental issues. The first such agreements such as the 1987 agreements, however, have reflected the growing recognition that international trade and environmental protection are intrinsically linked. In the future, any firm with international dealings will have to take environmental issues into consideration.

Because countries have different environmental standards, firms looking to market their services abroad may find it hard to convincingly demonstrate their environmental responsibility to green consumers. The lack of standardisation of environmental regulations between countries has complicated trade issues. For this reason, the International Standards Organisation is taking its success in quality standards with the ISO 9000 series to environmental issues. The new standard, called ISO 14000 has a major impact upon businesses that wish to appear “green”.

 

To help standardise environmental regulations around the world and facilitate collective action on pressing environmental issues, nations have begun to negotiate treaties for the protection of natural resources. The Montreal Protocol is a good example of an international environmental agreement. From an environmental perspective, these international agreements can be very effective in protecting natural resources. Treaties focussing solely on the environment however may not necessarily take economic concerns into due consideration. The resulting costs according to economists may be too high.

In the pursuit of free trade, the world has generally moved towards lowering national trade barriers. National environmental standards, however, can be used as informal trade restrictions requiring that products meet certain restrictions. However, since environmental standard vary widely from country to country, those countries with the highest environmental standards are seen as protectionist. Both environmentalists and free-traders are concerned about the effects of pure trade agreements, such as the GATT Treaty.

The North America Free Trade Agreemnt (NAFTA) is one of first major trade agreements to seriously integrate environmental concerns into trade considerations. Their treaty requires the US, Mexico and Canada to implement pollution prevention strategies and to pursue sustainable development. Future trade agreements will follow NAFTA’s lead and promote prudent use of natural resources.

Industrial Pollution

India’s Toxic Corridor

The road from Ahmedabad to Mumbai runs through what the rulers of Gujarat proudly refer as the “Golden Corridor” of Chemical Industries. Others know it as the armpit of industrial civilisation in India as the cancer corridor or the toxic corridor.

At least 2000 industries compete for resources in this narrow belt of land hemmed-in by gently sloping hills on the one side and the Gulf of Khambat on the other. Virtually all the rivers—Sabarmati, Mini, Tapi Narmada, Par, Kolak. Damanganga—that enter the corridor leave carrying lethal loads of industrial poisons. A July 2000 World Bank sponsored State Environmental Action plan report lists sections of all these rivers as “critically polluted”. That means the rivers are close to losing all capacity to sustain life. The same report also indicates that the groundwater in at least 74 out of 184 talukas in Gujarat is poisonous because of industrial pollution. Another estimate cited by a high powered committee of the Supreme Court says an alarming 70% of Gujarat’s water resource is now contaminated by industrial pollution.

Evidence of Pollutants

The carrying capacity of the land in this part of the country is visibly strained and that is telling on the lives of the people living in these areas.

• Villagers in Haria, Umarsadi, Sarigam, Kolak, Ankleshwar and Sarangpur complain that groundwater containing industrial poisons is affecting their health and causing falling agricultural yields.
• Environmental surveys conducted by Greenpeace confirm the widespread presence of industrial poisons in the environment, including dangerous levels of heavy metal and persistent organic pollutants.
• Emerging evidence indicates that the pollutants have entered the human food chain through vegetable and fish from the region.
• Reports from villages surrounding Vapi, Atul and Ankleshwar claim that infertility is on the rise, that young women suffer from frequent miscarriages; and that respiratory and skin diseases are commonplace.
• In Kolak village, which is sandwiched between the Damanganga and Kolak, both of which are polluted by the Vapi industries, villagers report more than 70 cancer fatalities in 10 years.
• The Mitna Machhi, an adivasi community that sustained itself by gathering fish and mud-skippers from muddy river banks, is now supportless because mud-skippers are locally extinct owing to pollution.²

Natural Environment and Business

Role of Corporates in Environmental Management

Industry is the world’s foremost creator of wealth, employment, trade and technology, controlling and deploying tremendous amount of human and financial resources for economic value addition. It is industrial and business processes that add value to natural resources as these transform them from raw gifts of nature into useful products. Industry today, carried on by giant corporations, is synonymous with the big corporation. Big corporation is powerful enough to influence any situation, be it developmental or environmental. But the mantle of the big producer, creator of wealth and promoter of industry and commerce worn by the big corporation since the 18th century has been discarded in following the so-called ‘green philosophy’. Often blamed for producing massive amounts of waste in an endeavour to produce wealth, they are now expected to become protectors of the environment. The world according to the Brundtland Commission is producing seven times more goods as compared to the 1950s. Today, about 25 years after the Brundtland Report, we are producing several times more goods, but more importantly we are producing several times more waste: solid, aquesous and aerial. In recent years, as awareness about environmental degradation occurring in air, water, soil and the biosphere has grown, most of the blame has been laid at the doorstep of industry, with the big corporations roped in as the main culprits and enemies of the environment. Most types of environmental problems have been attributed to industry, either local or global. Problems such as global warming, depletion of the ozone layer, increase of instances of health problems, etc. are claimed to be the result of rapid industrialisation without a thought for environmental degradation. Industry could no longer continue to live with that damaging image of being responsible for environmental damage. Therefore, industry and business processes have had to re-examine and re-shape their entire enterprise, right from the nature of the products they made, technologies employed, raw materials used and the way they marketed their products. They are no longer defensive and reactive. They are becoming innovative and proactive.

 

TABLE 12.1 Principal health and productivity consequences of environmental damange

Environmental problems	Effects on health	Effects on productivity
Water pollution and water scarcity—water contaminated by industrial waste and toxic chemicals.	More than 2 million deaths and billions of illnesses a year attributable to pollution; poor household hygiene and added health risks caused by water scarcity.	Declining fisheries; rural household time and municipal costs of providing safe water; aquifer depletion leading on economic activity because of water shortages
Air pollution—caused by energy use, vehicular emissions and industrial production.	Many acute and chronic health impacts: excessive urban particulate matter levels are responsible for 300,000–700,000 premature deaths annually, and half of childhood coughing, 400 million-700 million people, mainly women and children in poor rural areas, are affected by smoky indoor air	Restrictions on vehicle and industrial activity during critical episodes: effect of acid rain on forests and water bodies
Solid and hazardous wastes caused by uncollected wastes in cities.	Diseases spread by rotting garbage and blocked drains. Risks from hazardous wastes typically local but often acute	Pollution of groundwater resources
Soil degradation caused by excessive human activity	Reduced nutrition for poor farmers on depleted soils; greater susceptibility to drought	Field productivity losses in range of 0.5–1.5% of gross national product (GNP) common on tropical soils. Offsite siltation of reservoirs, river-transport channels, and other hydrologic investments
Deforestation—due to industrial pollution, also for living space, firewood, plantations, etc.	Localised flooding, leading to death and disease.	Loss of sustainable logging potential and of erosion prevention, watershed stability, and carbon sequestration provided by forests
Loss of biodiversity—excessive human activity	Potential loss of new drugs	Reduction of ecosystem adaptability and loss of genetic resources
Atmospheric changes—emission of green house gases into the atmosphere and ozone depletion.	Possible shifts in vector-borne diseases; risks from climatic natural disasters; diseases attributable to ozone depletion (perhaps 300,000 additional cases of skin cancer a year worldwide; 1.7 million cases of cataracts)	Sea-rise damage to coastal investments; regional changes in agricultural productivity; disruption of marine food chain

 

In the modem world, the role of corporate business has extended from beyond just producing goods and services, or creating jobs, or even promoting industrial growth. Industry’s role is fast changing from the one that is negative to the one that is positive in all areas of socio-economic endeavour. They are now expected not only to further degrade the environment; they are to act positively towards the improvement of the quality of the environment. It has been realised by industrialists that it is imperative to perform their conventional tasks of production of material goods in a way so as not to impair the quality of life.

The distinction made by Adam Smith between justice and benevolence is more relevant today to corporate business than it ever was. Justice, according to him, is a negative principle that prohibits harm; benevolence, however, requires positive action for the realisation of an intrinsically desirable goal—the well being of others. The corporate business today has the responsibility towards the society, not only to render social justice, but also to promote the greatest good to the largest number of people. To the established duties of the corporate sector of diverting a portion of their profits to community purpose, production of goods and services, creation and protection of jobs, etc., has been added another one—by far the most onerous, up-to-date, zealous protection of the environment.

However, while growth in technology promoted by big business has created problems of environmental destruction and degradation, it is this growth and technology that also hold the hope for improvement—the solution also lies there. A better choice of technology—both preventive and curative, can reduce damage to environment already done and prevent further damage. The big business has already moved into a new chain of thinking in which technological dimensions are decreased, and importance of social, economic, political, cultural and especially environmental dimensions are growing in importance. This change was first seen in the 1980s, especially in the attitude of chemical and oil companies. By the time world leaders gathered for the Rio Summit in 1992, a Business Council for Sustainable Development (BCSD) formed under the chairmanship of Stephen Schmidhering, a Swiss businessman, with its 50 members, had put together guidelines for environmental friendly behaviour for companies.

Innovative Business Responses to Environmental Regulations

There are several reasons why those managing business are becoming increasingly conscious of environmental issues and go a step further to convert them to their own advantages:

 

1. For management morale to have a good environment record (especially after the Stockholm Convention) and the desire to earn good reputation as protectors of the environment.
2. In an era of “lean management”, many companies are finding ways and means to cut waste wherever possible. Pollution prevention extends this concept to resources, and firms are finding that they can significantly lower their “end-of-pipe” abatement costs by not creating wastes in the first place. After all, some argue, what is pollution if not wasted resources? “Waste Not, Pollute Not” is the pollution prevention mantra in American industries. “Doing it for Mother Earth” examines the gains that can be realised in both compliance and profits from pollution prevention programmes.
3. The Environmental Protection Act (EPA) has acknowledged the potential gains from pollution prevention as opposed to mere “end-of-pipe” compliance, and recently begun to encourage such practices through the use of voluntary programmes. A break from the traditional strategy of mandating technical abatement solutions, these programmes allow industry to use its innovative ability to protect the environment while lowering costs.
4. Business people have realised the advantages of taking a proactive stance towards environmental regulation. Instead of fighting against regulations, some firms are looking beyond mere compliance and improving their environmental performance. There are a variety of innovative business strategies which involve strengthening the firms’ bottomline as well as the environment.
5. Industry leaders have also realised the potential for additional benefits from pollution prevention. By incorporating principles of waste reduction into industry led voluntary programmes they hope to foster positive public opinion and perhaps forestall inefficient regulations, while exhancing industry wide environment performance.
6. Products may meet regulatory standards when they leave the factory, but may yet cause environmental damage through future use. Changing regulations may create costly burdens for firms that do not examine the life time effects of their products. For example, many firms in the US are incurring huge remediation cost at Superfund sites, where the polluting actions were not always illegal at the time. Recent trends in regulation suggest that forward looking firms will protect themselves through “green design” of their products and enhance their public image by examining the entire life-cycle of their products.
7. To keep their consumers, who are increasingly environmentally conscious, happy companies change their strategies. There have been several instances where the consumer movement has made companies change their activities and processes from that leading to environment degradation to becoming environment friendly. For example, McDonald’s fast food chain used to sell hamburgers in polystyrene “clam-shells”. Environmentalists followed by school children and other consumers demonstrated outside McDonald’s shops and heaps of letters poured into their headquarters at Chicago. The Environmental Defense Fund also approached the company. The company ultimately agreed to replace the clamshells with “quilted paper wrap”, which though still not biodegradable, made much smaller waste heaps, about a tenth of the earlier size. The company did not start using washable crockery on the plea that the detergent and hot water used to clean them would itself not be environment friendly as compared to the throw-away packaging carefully destroyed. This resulted in the company to look for ways to cut down waste by using recycled materials in packaging and restaurant furnishing and transporting products such as ketchup in reusable crates.
8. Eco-labelling is another example of companies trying to pacify consumers’ regarding environment friendliness of their products. The first eco-labelling was done in Germany in 1978. The products carried the “Blue-Angel” label. A study of 22 countries done by the Organisation for Economic Co-operation and Development (OECD) showed that these countries had or were planning eco-labelling. Consumers all over the world today look for the label showing that the product is “green”.
9. Potential savings through pollution prevention measures is another step in this direction. Companies have found that reduction in the use of raw materials and energy and in the amount of toxic waste they produce, could yield savings.
10. The fear of incurring the cost of environmental damage that have risen as regulations have been tightened by governments and courts of law, have prompted companies to be eco-friendly.
11. In the past, environmental advocacy groups and government regulators were seen as opponents of business. Now, however, some firms are finding that they can save a lot of effort and trouble, if they work with these groups to find solutions acceptable to all stakeholders.

Waste Management and Pollution Control

Environmental damage through industrial activity can be of the following two types:

1. Depletion of Natural Resources: Excessive use leads to the reduction in natural resources that are extracted and/or used up in the production of other goods, such as minerals, fossil fuels, etc. These resources are non-renewable. Once extracted, they cannot be replaced. Technology must find a substitute of such raw materials if further depletion of non-renewable resources is to be prevented. Depletion is thus a quantitative concept.
2. Degradation of the Natural Resources: Degradation refers to the deterioration of the quality of the environment. All production creates waste and pollution right through the process of manufacturing to the disposal of the final product. Wastes—air, soil and aqueous or solid—degrade the air, soil and water quality and pose health hazards.

Disposing waste into the environment was cheap, if not free, until recently because the costs from pollution were not borne by the producer of that waste. As a result, waste emission has almost surpassed nature’s capacity to absorb wastes. Waste management has become essential—in many cases it has been made mandatory through government regulations, but with industry and business becoming environment conscious, waste management is finding an increasingly important place in the agenda of big corporations.

Pollution Prevention

As seen earlier, sustainable development has universally been accepted as the common environmental goal in business circles now. Corporate management has a great deal to offer to achieve sustainable development. To implement sustainable development, it requires promotion and application of pollution prevention, whether through source reduction or clean technologies. An effective pollution prevention programme can yield cost savings that will more than offset programme, development and implementation costs. Cost reduction may involve immediate savings that appear directly on the balance sheet or may involve anticipated savings in terms of avoiding potential costs. Cost savings are particularly notable when the costs result from the treatment, storage or services that produce waste, e.g. material costs can be reduced by adopting processes.

 

Wastes may be air, aqueous or solid emissions, and waste management comprises containment, dispersal and remedial measures. Pollution prevention management means both management of wastes and production before they create pollution problems. In the past, environment management strategy focussed on pollution control—waste removal, treatment and disposal techniques, etc. mostly in the manufacturing process. However, the problem of environmental degradation is not limited to manufacturing processes only. That is only the first generation problem, i.e. release of waste within the plant. The problem is much more extensive, as besides manufacture, storage, transportation and use of products also contribute to pollution, waste accumulation and environmental degradation. Thus we need to differentiate between waste management strategies and pollution management strategies. While the former emphasises reduction in waste generation and controlling pollutants in waste, the latter seeks not only to improve manufacturing processes, but also consumption of environment friendly products.

Key Strategies for Industrial Pollution Prevention

1. A systematic waste reduction audit: This will enable manufacturers to inventory and trace input chemicals and to identify how much waste is generated through specific processes. It is an extremely useful tool in diagnosing how a firm can reduce or even eliminate waste.
2. Material balance: Identifying processes, inputs, outputs, recycle and reuse rates, deriving a preliminary material balance and evaluating and re-fixing material balance.
3. Economic balance: Identifying cost and reviews to achieve an economic balance. According to benefit-cost ratio, experience in the industrialised countries has proved that anti-pollution technology has been cost effective in terms of health, property, and environmental damage avoided and that it has made many industries more profitable by making them more resource use efficient. While the economic growth has continued, the consumption of raw materials has held or even declined. For the benefit-cost analysis, industries look for savings and cost effectiveness in any steps they take and any operations they undertake. Pollution prevention has been found to be cost effective and resulting in saving, especially in the long run. Several slogans on pollution prevention programmes clearly indicate this view. For example. Chevron gave the slogan “SMART” (Save Money and Reduce Toxics), Dow Chemicals “WRAP” (Waste Reduction Always Pays). Of course, firms have found that their measures to tackle pollution made big improvements in their environmental performance. Between 1989 and 1991, Chevron Texaco reduced its output of dirty air, water and solid wastes by 40% and toxic emissions by 58%. It would mean saving on waste disposal and clean up operations. Saving from pollution prevention programmes result from several sources. It reduces the need for pollution control equipment and disposal of hazardous and/or non-hazardous wastes. Further, companies found that their pollution prevention and resource conservation and designs and strategies can reduce the use of raw materials and energy costs. Another very important cost saving that results from pollution prevention strategies is the invisible costs such as health problems of workers resulting in decrease in productivity.
4. Identifying waste reduction: Opportunities and implementing them through simple process modifications such as pollution prevention measures through good house-keeping, evaluating opportunities for waste reduction and recycling, designing a waste reduction strategy, implementing internal recycling for same or other use to reduce emission from the process and also to reduce the need for continued supply of raw material inputs.
5. Use of newer, cleaner technologies: Development of preventive technologies to benefit both now and in future, without transferring the problem from one media to another such as air, water and land, which is often the case. For example, waste treatment processes produce large amounts of sludge and residue, which again need disposal programme so as to prevent secondary pollution.

   The answer, therefore, lies in technological change. In the past, technological inventions were mostly made to save resources—both human and natural. The need of the day is to use technological progress for protecting the environment from further damage and damage abatement wherever possible. Experience shows that the technological management has reduced the adverse impact of many activities on the environment. However, the progress in environmental protection technology has failed to keep pace with the fast depletion and degradation of natural resources. Stress has to be laid on both preventive and curative technological progress.

6. Life cycle assessment: This is a process of evaluating the environmental burdens associated with a product or activity. It addresses the entire production system, not just isolated components. It starts by identifying and quantifying energy and material used and waste released into the environment, of assessing the impact of those energy and material uses and releases to the environment and of identifying and evaluating opportunities of affecting environmental improvement. It is a complex process beginning with goal definition, going on to inventory of resources and requirements and assessing, rather than a threat to planet survival. The corporate sector needs to further become proactive, i.e. use technological innovations for environmental progress that can be measured, communicated and also used effectively as a marketing tool to educate all stakeholders.

Business managers must recognise new business ethics and opportunities—clean products and clean technologies will create competitive advantage. Old established companies also need to enter the stream of environmental, technological innovations before the new entrants using the latest, cleaner technologies provide a stiff competition and drive them out of the market. Crime of the future will no longer be failure to comply with regulations. It will be not to act preventively, and failure to measure performance. Judgement pronounced by public opinion in the market, will make or mar the future of a business enterprise. To remain a vital, thriving competitor, a corporate management must gear up to meet the material and produce needs of the next generation of consumers.

 

The United Nations Environment Programme (UNEP, l998) has rightly advised corporate managements to take the following steps:

• Commit to make preventive strategy as preferred option to environmental policy
• Develop pollution prevention action plans and programmes with clear, quantifiable and achievable targets and time frames to minimise waste, maximise resource use and avoid risks to human health, safety and environmental quality
• Develop and implement manufacturing processes, new products and services that are congruent with the principle of pollution prevention
• Improving efficiency in resource consumption, reducing use of toxic materials, reducing wastes, and increasing energy and material intensity of goods and services
• Integrate preventive strategies into all relevant units of business and industry organisations and their management systems and all relevant operations
• Conduct pollution prevention training activity and R&D innovative methodology to overcome potential pollution prevention barriers in implementation
• Share pollution prevention experiences and disseminate information

Companies, as also the world, are realising that they have neither the resources nor newer technologies to clean up the environment damaged by them.

Emerging technologies offer the promise of higher productivity, increased efficiency and decreased pollution. Though they may bring problems of new toxic chemicals and wastes and of major accidents of a type and scale beyond present coping mechanism, implemented with caution, there is no reason why they should not lead to a more prosperous and bright future for the corporate world and respectability for management.

Thus company managers’ roles and responsibilities are undergoing fast transformation not only in the area of maximising return on investment, but the real life proposition of social responsibility and social accountability. With unprecedented growth in information technology, speedy process of globalisation and 24 hour trading in commodities, foreign exchange, bullion, hedges, futures and options, host of swaps and derivatives, managers and other functionaries of the corporate world have urgent need to re-orient their perception and working style.

Improving Corporate Environmental Performance

Environmental performance has become a critical issue in recent times. Environmental disasters can create serious problems for organisations. A good example is the Bhopal gas tragedy in 1984, in which thousands of people lost their lives after methyl isocyanate leaked from the Union Carbide plant in Bhopal. The 1986 Chernobyl nuclear disaster in Kiev, Ukraine is also etched in the minds of many people. The explosion of the nuclear reactor killed 31 people and released large quantities of radio active substances into the atmosphere. In scale, complexity and long term consequences, it was the most catastrophic incident in the entire history of the use of atomic energy across the world.

 

Bhopal and Chernobyl did not mark the end of environmental disasters. The Valdez (US) oil spill of 1989 and the Tokaimura (Japan) nuclear accident of 1999, are other prominent examples. In developing countries like India, environmental issues often take a back seat and accidents are quite common.

In Kodaikanal, India, Hindustan Lever, a subsidiary of Unilever Plc, the Anglo-Dutch multinational, dumped mercury waste from its thermometer factory in the surrounding forests and on an innocent local community. When the scandal was exposed, the company denied initially that there was a problem and later fudged facts and figures until the Indian authorities forced them to come clean. Since then Unilever has retrieved and sent some of the waste back to the US for disposal but are shying away from compensating affected workers and further environmental remedial measures.

Bayer A. G., a German transnational continues to manufacture and sell phased out pesticides such as Methyl Parathion (brand name Folidol/Metacid) in Asia despite an assurance to their European investors and stakeholders that they would stop manufacturing these organo-phosphate poisons.

Ship-owning companies such as Bergesen of Norway and Chandris of Greece regularly violate national and international laws and dump their hazardous wastes at ship-breaking yards in India, Pakistan, China, Turkey and Bangladesh. The voluntary guidelines issued by International Marine Organisation are not enough and it is imperative that these guidelines are made mandatory to make the ship-owners liable and responsible.

In the era of globalisation, multinational companies increasingly move around assets, products and wastes on a global chessboard to maximise their profits and minimise their costs. These companies are using differences and loopholes in national environmental and health laws, for example, to export pesticides and destructive technologies to poorer countries to the detriment of local communities. Most types of environmental problems have been attributed to industry, whether local or global. Problems such as global warming, depletion of ozone layer, increase of instances of health problem are considered to be the result of rapid industrialisation without a thought for environmental degradation.

Industry could no longer continue to live with that bad image of being responsible for environmental damage. They are now expected not only to further degrade the environment, they are to act positively towards the improvement of the quality of the environment from other risks. Typically, a health or safety department deals with issues concerning the environment. Managers are not clear about what and how to invest in improving environmental performance since the benefits are quite difficult to quantify.

Thus, environmental issues must be treated like any other business issue. By tackling environmental problems, there may not be any immediate improvement in the bottom line. At the same time, it is wrong to assume that investments made to improve environmental performance will never pay off. A strategic approach to environmental risks management can generate sustainable, competitive advantages in the long run. For this, environmental issues must be integrated with the companies’ corporate strategies.

One of the more prominent and significant ways of integrating environmental issues with the company’s corporate strategies is by adopting environmental audit as a means of taking initiative to evaluate environmental performance.

The Need for a New Approach

The time has come for companies to take a fresh look at environmental issues. Attempts to improve environmental performance should be viewed as an opportunity to innovate rather than as a burden. As Porter and Vanders Linde have put it, “The relationship between environmental goals and industrial competitiveness have normally been thought of as involving a trade off between social benefits and private costs. The issue of how to balance society’s desire for environmental improvement becomes a kind of arm-wrestling match. One side pushes for higher standards, the other side tries to beat the standards back... The notion of an inevitable struggle between ecology and the economy grows out of a static view of environmental regulation in which technology, products, process and customer needs are all fixed … Properly designed environmental standards can trigger innovation that may partially or more fully offset the costs of complying with them”.³

 

Environmental Audit

Environmental audits provide an in-depth review of the company processes and progress in realising long-term strategic goals. The concept has come into force in recent years and differs from a financial audit in that it is intended to measure the impact of an organisation’s operations on the environment against a predetermined set of criteria and so far as possible to assess them in terms of costs. This audit is part of a continuing and cyclic process rather than an exercise in standard accounting practice at a given point of time. The audit may also be used to assist in determining the environmental expenses incurred by companies.

The environmental audit examines the company’s performance as against its policy, and is undertaken with reference to performance of personnel, technology, system and documentation and how these are related to relevant standards of practice. Therefore, environmental audit is in the nature of a corporate policy audit. The objectives of an environmental audit are evaluation of the efficiency and efficacy of resource utilisation, i.e. man, machine, materials, identification of areas of risk, environmental liabilities, weakness in management system problems in complying with regulatory requirement and insuring the control on waste pollutant generation.

In general, there can be two types of environmental audit: environmental compliance audit—checks the degree of conformance to laws and rules prescribed by the relevant regulatory authorities, and environmental management audit—an appraisal of the company’s internal capabilities to discharge its environment-related responsibilities. A compliance audit may cover issues such as housekeeping, practices followed while storing dangerous chemicals, how hazardous waste is being stored and disposed, the method followed for releasing waste water, etc. Whereas a management audit is more concerned with capabilities, focusses on issues such as organisational structure, accountability, training of employees to respond to crisis situations and relationships between plant personnel and local regulatory authorities. The audit can examine the environmental policy statement of the company, the documented procedures for preventing any damaging crisis situations and the type and frequency of review of the programmes.

 

If used well, audit can generate various benefits for the organisations:

• Problems can be corrected before they are too large to fix
• Opportunities can be identified for cutting costs through measures such as waste
• Minimisation and recycling
• Insurance costs can be reduced
• Employees can be persuaded and motivated to take environment issues seriously
• The corporate image can be improved

More and more companies are now realising the need for a proactive approach to environmental issues instead of passive compliance with the laws. We can take the case of the Canadian paper company as an illustration, when Alberta Pacific Forest Industries (APFI) faced opposition from politicians, farmers, aborigines and other activists over the adverse environmental impact of a proposed pulp mill, it decided to take a range of measures to mitigate the impact. The company designed its plant to keep pollution levels well below those specified by the government. From time to time, APFI apprised the local community of the environment impact of its operations. It also announced plans for afforestation. As a result of all these measures the company successfully improved its relationship with the local community and eliminated costs that could have resulted from potential business disruption. APFI is, however, an exception rather than the rule. Most companies display a high degree of knee-jerk responses to environmental issues. They also believe that command and control mechanisms, and formal procedures and rules will automatically take care of environmental issues.

The right way to manage environmental issues is to integrate them with the company’s corporate strategy. This implies collecting and storing information about environmental issues and dealing with environmental risks like other business risks. Companies should have a clear idea of how investments in improving environmental performance will affect their competitive position. Environmental costs normally do not affect all competitors equally and tend to vary with location, size of the facility, technology used and age of the plant apart from the level of awareness of the local populace on environmental issues. Companies that fail to appreciate these differences miss opportunities to put competitors at a disadvantage. For example, vertically integrated and non-vertically integrated players in the same industry may be affected in quite different ways by a new environmental regulation. Through outsourcing, a firm may be able to put vertically integrated competitors to a severe disadvantage.

Most companies fail to get the best returns from their environmental investments due to poor cost-benefit analysis. They undertake grandiose projects that do not yield commensurate benefits. They would be better off if they concentrate on liabilities which are small today but may escalate in future and where efficient options to the problem are available. Companies also tend to overlook some of the non-quantifiable benefits resulting from better employee morale and higher employee productivity.

Sometimes, companies take decisions without a careful analysis of the deeper implications. What seems to be a right decision on the surface later creates serious problems. For example, companies close plants in a hurry without considering the impact of such a decision. Regulators may intervene and demand expensive clean up operations, because there is no more fear about people losing their jobs. Such an eventuality would not have arisen if the plant was operational and there were fears of job losses.

Managers also tend to forget that the essence of environmental issues is managing stakeholder expectations. Very often managers are committed to improved environmental standards but do not involve nearby stakeholders before taking major decisions. Due to poor communication and a failure to take the local community along, they run into problems, even after making heavy investments to improve their environmental management practices.

Managing Environmental Issues

In general, corporate environmental policies may serve one or more of the following objectives:

• Reducing costs through measures such as recycling or energy conservation
• Reducing the possibility of industrial disasters
• Establishing a good corporate reputation and earning the goodwill of people
• Mitigating employees by providing a better work environment
• Maintaining a good relationship with the local community and regulatory authorities
• Conforming to a code of ethics

Reinhardt suggested five different approaches as the following for managing environmental issues⁴

1. Investing in environment friendly processes or products. The additional costs are recovered from customers through a clear differentiation and product positioning that allows the firm to charge a premium.
2. Managing environmental regulations. This includes investing in environment protection and forcing other firms to make similar investments.
3. Investing in environmental performance improvement, without increasing costs. This may be possible, for example, if input consumption comes down because of effective recycling. This means the company does not have to charge higher prices to recover the investments made.
4. Combining all the three methods mentioned above to change the basis for competition and redefine the market so that both the firm and the environment can benefit.
5. Looking at environmental issues from a risk management perspective. This involves putting in place systems and processes to prevent or minimise the possibility of accidents and dealing with them effectively when they occur.

However, the specific approach to environmental issues would depend on the industry structure, the firm’s competitive positioning, its organisational capabilities and its perceptions about the response of regulatory authorities and environmental activities. The five approaches are being discussed in detail.

Product Differentiation

There is considerable scope to innovate through better environmental performance. A company can design better performing, higher quality or safer products. There may also be a scope to modify the product so that there is higher resale value. If one or more of such conditions are met, the company may be in a position to charge a premium that more than recovers the costs incurred in improving environmental performance.

Industrial customers are often prepared to pay a premium for products with improved environmental performance if their (customer) own costs can be reduced. Some customers may also be prepared to pay a premium, if they consider the superior product to be a hedge against stringent environment regulations in the future. Ciba Speciality Chemicals is a good example inasmuch as its environment friendly dyes have helped consumers to cut expenditure on salt and water treatment and improve quality. This has enabled Ciba to charge a higher price for its dyes.

In the case of consumer goods, retail customers may be prepared to pay more if the environmental benefits can be projected suitably. For environment friendly products to command a premium in the market, the company’s concern about the environment must be consistent with the other signals it sends to customers. If improved environmental performance is not well integrated with the overall product positioning or corporate strategy, it may fail to capture the value created.

Managing Regulation

This can be done in the following two ways:

Self regulation: Firms in an industry can come together and agree to incur additional costs for improving environmental performance. Self-regulation can pre-empt more stringent government regulations. It also gives companies greater latitude in dealing with environmental problems. Self-regulation may also enable companies to develop better environmental standards than the government.

The main problem with self-regulation is that the pay-offs from the improved environmental standards may vary across companies in the industry. Quite often, smaller firms are at a disadvantage while larger firms can leverage the benefits of a good reputation that results from better environmental performance. Thus, self-regulation can change the basis for competition by favouring some firms at the expense of others.

Reinhardt mentions various conditions for the success of a self-regulatory system.⁵ The companies in the industry must be able to set measurable performance standards. They should also be in a position to enforce the rules.

The programme must be broad-based, involving a sufficiently large number of companies, especially all the important players in the industry, so that opponents cannot come together and block it. The programme must have credible mechanisms for standard setting, monitoring and enforcement.

Managing government regulation: A firm may try to put pressure on its competitors by influencing government regulators. But straight and simple lobbying of the type Indian companies excel in may not have the desirable impact in the long run. To use this approach successfully, the firm must have a unique competitive advantage when the new laws come into effect. As Reinhardt⁶ puts it, “There is no long-term benefit in a strategy of pure rent seeking. Without some complementary investment in the market place or some pre-existing source of competitive advantage, the pay-off to an investment in regulatory change will be zero; the firm and its rivals will compete away the economic surplus they are trying to divert into their own pocket. The firm should be able to convince customers, rivals and regulators that the new rule it is proposing are feasible and desirable”.

Porter and Van Jer Linde argue that any antagonism between the regulators and the industry locks companies into static thinking. It also leads to gross overestimates of the costs involved. In many cases, because of the learning curve effect, the cost of compliance with regulations tends to decrease progressively over time. Hence, aggressive lobbying by an industry to dilute environmental standards may not only be opportunistic but also counter productive. They suggest that companies must keep three points in mind while trying to influence environmental standards being set by the regulatory authorities. The standards must create sufficient opportunities for the industry to innovate, the regulations should leave the door open for further improvements instead of locking companies into a particular technology, the regulatory process should create minimum uncertainty about the outcome expected. It should be emphasised that environmental regulations must focus on outcomes and not technologies.

Generating Cost Savings

Conformance to improved environmental standards may be accompanied by process innovations. These include higher process yield leading to higher resource productivity, less downtime through careful monitoring and maintenance, lower output and energy consumption and reduced material storage and handling costs.

In the hotel industry, for instance, many have reduced solid waste generation and slashed water and energy consumption. The Hindu reported on 25 October 2005 that ITC Park Sheraton and Towers Chennai, was chosen as the “Environmental Champion” among large hotels, and awarded the prestigious The Federation of Hotel and Restaurant Association of India (FH&RAI) prize for the hotel which saw a consistent rise its occupancy and a steady decline in power consumption by using solar water heating system, and also for its efforts at recycling of water. The Dutch flower industry at one time faced stringent regulations as the pesticides and fertilisers used in cultivating flowers were contaminating the soil. The industry came up with innovative solutions. It developed a closed loop system to reuse water. In some greenhouses, flowers were grown in water and rock instead of soil. These measures resulted in uniform growing conditions and improved the product quality. As a result, environmental performance improved, even as costs came down. Dow Chemical is another good example of how a company can cut costs and improve environmental performance at the same time. In its California complex, hydrochloric acid gas is scrubbed with caustic soda to produce various chemicals. The earlier practice was to store the waste water in evaporation pond. Regulators insisted that these ponds be closed by 1988.

In 1991, US regulators asked distillers of coal tar to drastically cut their benzene emissions. The regulation motivated Aristech Chemical Corporation of Pittsburgh, Pennsylvania to develop a method for removing benzene from tar in the first processing step itself. This did away with the need for expensive gas blankets. The new pollution control measures enabled Aristech to save $3.3 million.

Redefining Markets

Companies can also try a combination of the various approaches discussed so far. They can use research to develop new ways of offering services to customers and attempt to shape the future of the industry’s environment practices. They can reduce the cost of disposal for customers, through buy-back schemes. They can offer value to customers in ways which competitors cannot match, and charge a premium.

Environmental Risk Management

For many organisations managing environmental issues means avoiding the costs associated with accidents, catastrophes and other environmental mishaps. Reinhardt⁷ has identified the following four different elements of environment risk:

• Probability of occurrence of an adverse event such as an accident
• Probability distribution of the total costs if the event occurs
• Allocation of responsibility if an accident occurs
• Certainty of the assessment

In other words, four different tasks have to be performed by managements while dealing with environmental risks. They must minimise the probability of occurrence of the adverse event. They must cut losses when an accident occurs. They should be able to pinpoint responsibility on other parties when the event occurs. They must obtain more information to make the risk assessment methodology as robust as possible. Managers have to use the right mix of risk reduction, risk shifting and collection of information to manage environmental risk efficiently.

 

The simplest way to manage environmental risk is to buy an insurance policy. This shifts the risk to the insurance company. Such an approach makes sense if the company feels that the premium being paid is small compared to the huge risks involved. Another approach is to set up disaster management cells which can respond quickly when an accident occurs. A third approach involves setting clear guidelines for the operating units in the form of various documents and manuals. Another approach is to link promotion of managers with their contribution to risk management.

Behavioural issues need to be carefully examined so that environmental risks are managed systematically. Reward systems normally favour managers who reduce costs or increase profits. Environment related expenditures show up immediately in the books of accounts but it may take some time for the benefits to be realised. Consequently, there may be a tendency to under-invest in environmental performance improvement measures. Inbuilt mechanisms are necessary to check this.

Though Reinhardt considers environmental risk management as a separate approach, there is a strong case for arguing that the various risk-mitigation measures can be incorporated in each of the four approaches covered earlier. Improving the process, cutting costs, differentiating the product and managing regulation can all be viewed as methods to reduce the risk of incurring heavy losses owing to environmental mishaps.

Thus, environmental issues should be analysed as business problems. A rigorous analysis is necessary to understand which investments generate value for shareholders. While doing the bare minimum to stay on the right side of the law is not acceptable, pouring a large amount of money into environmental projects in the name of discharging social responsibility is unwise. As Reinhardt puts it “Campaigners aren’t in business to solve the world’s problems nor should they be. After all, they have shareholders who want to see a return on their investments”. That is why managers need to bring the environment back into the fold of business problems and determine when it really pays to be green. The truth is that environmental problems do not automatically create opportunities to make money. At the same time, the opposite stance that it never pays for a company to invest in improving its environmental performance is also incorrect.

Managers should look at better environmental performance as an opportunity rather than as a threat. As Porter and Van der Linde put it: “Instead of clinging to a perspective focussed on regulatory compliance, companies need to ask such questions as ‘What are we wasting?’ and ‘How could we Enhance Customer Value?’

Many companies allow environmental issues to be handled by lawyers and consultants who tend to focus on compliance rather than innovation to correct this situation. Environmental strategies must become the direct concern of the top management. Environmental impact should be incorporated in the overall process of improving productivity and competitiveness. Manages should be proactive and go beyond currently regulated areas. They should look for opportunities to improve design, manufacturing and delivery processes on an ongoing basis.

According to Frank P. Popoff, former CEO of Dow Chemical: “Competitive advantage must not be gained through non compliance or minimum compliance. Some companies try to reduce cost this way but this is deadly. Sooner or later, mandates will come into place to prevent such an approach and put the company at an enormous competitive disadvantage. Success truly belongs, I believe, to those companies that not only comply with environmental standards, whether mandated or self-imposed, but do it more efficiently and effectively than others. If they conserve energy more efficiently through internal cycling or on site disposal they will ultimately reduce cost.”

Environmental Management in India

Environmental practices in India have improved significantly in recent times. Used to a fairly lax regulatory environment for a long period of time, many Indian companies had not taken environmental management seriously in the past.

Now, regulations have become more stringent. Moreover, many companies are looking at environmental management as a means to improve their image and to cut costs. A recent survey of 47 companies conducted by Business Today and Tata Energy Research Institute (TERI) has revealed that 75 per cent of them have an environmental policy. Many companies have quantifiable targets in areas such as emissions. Some companies stand out in their effort to upgrade environmental performance. Not surprisingly, quite a few of these companies are subsidiaries of global companies.

 

Bayer India believes that the benefits of successful environmental management programmes far outweigh the costs. The company has made substantial investments in incinerators and leased out 30 of its incineration capacity to other chemical firms. The fees charged by the company has enabled it to recover most of the costs. Better environmental practices have also reduced water consumption.

At Philips India’s Pimpri Unit, tubelights were earlier flushed with 70 mg of mercury each to ensure that 15 mg stayed in the tube. This increased both environmental hazards and costs. Philips switched over to argon flushing, reducing both pollution and costs in the process. At Tata Steel improved environmental practices have increased profits through lower consumption of raw materials and better utilisation of wastes.

Yet environmental management in India still has a long way to go. Consider the Uranium Corporation of India Ltd. (UCIL) mines in Jadugoda. Children in 15 adjoining villages have been affected by radiation, while many workers are suffering from serious ailments. A study conducted by the Jharkand Organisation Against Radiation (JOAR) in 1998 revealed that many women in the region suffered from miscarriages and still-births—16 of the children born to them died in infancy. Lack of safeguards at the mines has exposed 30,000 people in 30 villages to radiation risks. Nuclear waste has been dumped into waste dumps called “tailing ponds”. Wind blows the harmful dust around in summer, while in rainy seasons the river water gets contaminated. In 1994, there were 17 deaths. By 2001, it had gone up to 31. Many people have been affected by cancer.

According to the UCIL Chairman and Managing Director, Ramendra Gupta, the “pan parag” causes bigger health hazards than uranium mining. He felt the journalists must run after the former instead of the latter. He even cited a report stating that the radiation levels within 5 km of Jadugoda were normal. He also contended that malnutrition and alcoholism rather than radioactivity are causes of illness in Jadugoda.

Many Indian companies look at ISO 14001 certification as an end in itself. Most have not integrated environmental management into the corporate strategy. In many instances, “green initiatives” have been launched without a clear understanding of the potential benefits. In the worst cases, companies flout pollution laws and pay bribes to government inspectors when they visit the premises.

Quite clearly, Indian companies still have a long way to go in the area of environmental management. The cost they may have to incur in the event of mishap, may turn out to be heavy as it happened in the case of Union Carbide’s plant in Bhopal.

However, in recent times, public opinion and the active role of the environmentally aware NGOs have gone to courts through public interest litigations to protect the environment for people to have clean air, water and atmosphere. The courts in turn have ordered central and state governments to enforce environmental laws strictly and in extreme cases have come down heavily on polluting industries as in the cases of the hosiery industry in Tirupur and leather tanning activities in some districts in Tamil Nadu. Likewise in Delhi, polluting industries were ordered to be shifted while the metropolitan buses were asked to use non-polluting gas instead of highly polluting diesel.

Charter for Voluntary Pollution Control

The Ministry of Environment and Forests and the industrial sector have entered into a partnership on voluntary pollution control by releasing a Charter on Corporate Responsibility for Environmental Protection in New Delhi on 13 March 2003.

The Charter marks a shift from regulatory enforcement of pollution control norms to voluntary compliance by the industry to significantly enhance the quality of environment. The preparatory work in this regard has been completed with the government holding discussions with the representatives of 17 major polluting categories of industries. Basic issues have been identified for evolving an agreement on National Action Programme at a conference of representatives of government and the polluting industries.

 

In the perception of the government, the regulatory measures have served useful purpose over the years but it is only limited when viewed in terms of overall environmental management. While several industrial units have installed pollution control systems, their operation and maintenance are not yet satisfactory. Also, there were cases where water and air quality did not improve enough though the industries were complying with the effluent and emission standards.

The voluntary Charter seeks to considerably reduce air and water pollution with the industry agreeing on its own volition to take up modernisation of production processes and installation of necessary systems to reduce polluting effluents and their solid wastes. This will be achieved through water and energy conservation, lesser use of raw materials, better monitoring of air and water quality, adoption of waste minimisation options and better work practices.

The Charter also enables the industry to know the government programmes, priorities and concerns in respect of 17 categories of major polluting industries and gives appropriate time for implementation of action points identified in sectoral discussions, thus reducing the industry from the sudden burden and enforcement pressure. The government is in favour of an agreed pollution control programme with the industries to drive towards self-regulation and voluntary compliance which are expected to bring about a positive change in the status of environment and enforcement.

The 17 major polluting industries identified for preparatory approach towards polluting control are: cement, aluminium, thermal power plants, oil refineries, pesticides, iron and steel, pulp and paper, copper and zinc, distilleries, sugar, petrochemicals, dye and dye intermediates, caustic soda, pharmaceuticals, tanneries and fertiliser industry.

An illustrative account of sector-wise issues being considered for an agreement between the government and industry and for adoption in the form of Charter are the setting up of coal washeries, recycling of ash pond effluents by December 2004, according environmental clearance for new thermal plants and expansion proposals only in the particulate matter emission standard of 100 mg/cubic meter is ensured. Fertiliser units will have to bring down water consumption to 8, 12 and 15 cubic metres a tonne of urea produced per plant based on gas, naphtha and fuel oil respectively.⁸

Corporate India Gets Eco-friendly

From planting trees, to using solar-energy, constructing smart buildings and even collecting litter, corporate India is going all green.⁹

 

Private Sector Initiatives

Every corporate wants to be eco-friendly in some way or the other. Take the case of Johnson and Johnson Ltd.’s plant in Mulund, Mumbai, where biodegradable waste is recycled or the Leela Kempinski in Mumbai that has invested in maintaining massive gardens in and around the premises of the hotel to encourage greenery and environment friendly ambience. The hotel also uses natural gas as boiler fuel that almost nullifies the air pollution compared to oil fired ones.

As far as the hospitality industry is concerned, the list of initiatives taken by the hoteliers to conserve the environment is exhaustive. The Orchid, an Ecotel hotel in Mumbai is a best example of this. From the basic architecture of the building, to water conservation, use of rubber wood instead of real wood, use of energy-saving devices, the hotel does it all to qualify as an-eco friendly hotel. The Park in New Delhi, The ITC Park Sheraton and Towers, The Ambassador Pallava in Chennai and The Lake Palace in Udaipur may not be as savvy as The Orchid but they do use energy-saving devices to conserve electricity. Moreover, all of them reuse biodegradable waste generated in their hotels and also deploy various techniques to conserve water.

The mother of all was RETREAT (Resource Efficient TERI Retreat for Environmental Awareness and Training) located in Gurgaon District. The building is country’s first-ever eco-friendly building complex. Home to a state-of-the-art training complex cum conference centre of the Tata Energy Research Institute (TERI), the complex is powered by a photovoltaic-gasifier hybrid renewable energy system, which uses waste biomass and solar radiation as sources of energy. It also boasts of the first solar-roof in India. Air conditioning, equivalent to a conventional 35-tonne capacity system, is provided by an early air tunnel, which consumes a fraction of the energy used in a conventional system. The waste-water is treated using plants, which means that the complex emits no waste.

Companies such as LG Electronics have introduced environment-friendly initiatives such as rainwater-harvesting, solar water heaters for canteen applications and converting effluent treatment plant (ETP) sludge into bricks.

Public Sector Efforts

If private sector initiatives in environmental preservation is praiseworthy, the pubilc sector is not far behind.

Bharat Petroleum Corporation Ltd (BPCL), for instance, has taken various initiatives to prevent air pollution. It launched an environment-friendly petrol pump in Delhi. With vapour recovery system, the petrol pump prevents unburned petroleum vapour from entering the atmosphere by converting it into less harmful compounds. Bharat Heavy Electricals Ltd (BHEL) shares the growing concern on issues related to environment and occupational health and safety. The organisation has launched a host of products such as wind electric generators, solar heating systems, solar photovoltaic systems, solar lanterns and battery powered road vehicles in a bid to conserve the environment.

 

The Punjab National Bank has initiated various environmental drives that include van mahotsav, tree plantation camps, pollution check-up camps, environment awareness camps, maintaining parks, etc. The list is exhaustive. Almost everybody is in the race. And to assist the competitors to take part in the race, there are likes of CoRE, CII’s Environmental Management Division (EMD) and Concept Hospitality Ltd., amongst others.

Eco-efficiency Strategy of Powergrid

The public sector unit engaged in power transmission, Power Grid Corporation of India Ltd (Powergrid) constructs, owns and operates extra high-voltage transmission network in India and carries out real-time supervision and monitoring of power flow on round-the-clock basis over the entire EHV network of the country.

With an asset base of 48,000 circuit kms of transmission lines, 82 sub-stations having 46500 MVA of transmission capacity, Powergrid is committed to the concept of eco-efficiency through conservation of natural resources, reduced impact on nature and increasing the service value by use of efficient and safe technology practices. It is an ISO:9001 company and as a part of its sustainability strategy it is adopting a comprehensive integrated management system comprising ISO: 9001 for quality management system, ISO:14001 for environmental management system and OHSAS:18000 for occupational health and safety management system. Some of the initiatives taken up by it to minimise environmental and social impact are: installation of tall towers to minimise impact on flora and fauna in ecologically sensitive areas; compensatory afforestation and massive plantation in all of its installations; rain water collection and harvesting; and preference to use barren or waste land for its installations. After demonstrating its commitment, Powergrid is aspiring and striving to attain global leadership in the transmission sector through continually improving its environmental standards as per international best practices.

It has constituted a committee of eminent persons and experts in this field, which shall not only review the ESPP document keeping in view the international best practices but shall also oversee its compliance by Powergrid. Multilateral funding agencies such as the World Bank and Asian Development Bank (ADB) have been actively associated in operationalising its sustainability strategy.

Hydropower and Sustainable Development

Another public sector unit, the National Hydro Power Corporation (NHPC) is also committed to the goals of sustainable development and is promoting hydropower development in India. As most of its projects are situated in the remote corners of India, which have not seen the face of development earlier, meeting environmental challenges has become a crucial issue.

It aims for minimum destruction and exploitation and go for various conservation measures to restore the resiliency of nature. Nature must not fall apart due to developmental pressure of our dams, is its objective. NHPC’s compensatory afforestation and biodiversity conservation measures have helped in restoring the ecological balance of nature; catchment area and reservoir rim treatments are aimed at increasing the life of reservoir; green belts around the company facilities act as carbon sinks, purifying the ambient air for people to breathe; restoration of quarry sites and landscaping have added aesthetics to its surrounding.

NHPC has also undertaken massive afforestation, which is an effective tool in arresting soil erosion and enrichment of environment. At Chamera project, it has planted 100 times the number of trees that were felled. At Dulhasti project, it was 1000 times and at Rangit it was 60 times. NHPC gives special attention to the choice of species with greater emphasis on indigenous species while monoculture plantation is avoided.

India’s Environment Policy

The Directive Principles of State Policy of the Indian Constitution commands the state to ensure protection and improvement of environment and to safeguard the forest and wild life. The Directive Principle of State Policy on Environment has been eloquently articulated in Article 48A of the Constitution introduced by the 42nd Amendment in 1977. It reads thus: “The state shall endeavour to protect and improve the environment and to safeguard the forests and wildlife of the country.” Likewise, Article 51 (A) (g) lays down protection and improvement of environment as one of the fundamental duties of every citizen. This duty of citizens would mean that every citizen is duty-bound to protect and improve the natural environment of the country including forests, lakes, and wild life and to have compassion for all living creatures.

 

Laws Governing Environment

The Environment (Protection) Act, 1986, provides for the protection and improvement of environment and for matters connected therein. The Act was the result of the participation of India in the United Nations’ Conference on Human Environment held at Stockholm in 1972. There were also other Acts enacted in India relating to environmental issues such as (i) Water (Prevention and Control of Pollution) Act, 1974, (ii) Air (Prevention and Control of Pollution) Act, 1981; and (iii) the Factories’ Amendment Act, 1987.

Environmental pollution created by individuals or corporates amounts to a public nuisance, and therefore, this can be controlled through Criminal Law. Offensive smells, noise and air pollution are included under “nuisance”. Action against such nuisance can be taken if it is repeated and committed continuously. The nuisance may be public or private in nature. The public nuisance interferes with the quality of life of the society. Therefore, pollutions originated from water, air, noise, etc. can be prevented by Civil or Criminal Laws.

The Criminal Prosecution for offence (IPC Z68 OF 1860), (Cr Pc 133 – 144 of 1873) and a civil action by any member of the public with the direction of the court for a declaration of injuntion (Section 91 of the CrPe, 1908) etc. are the remedies for public nuisance. These laws had been enacted with a view to protecting the environment through better planning and regulation.¹⁰ However, these are not enforced effectively to maintain the ecological balances and environmental stability.

The environmental laws are generally enforced by administrative agencies. But due to inadequate staff, insufficient funds and lack of political will, they are not effectively enforced.

The National Environmental Policy, 2004

A Draft National Environmental Policy, 2004, was released in August by the Ministry of Environment and Forests (MoEF) for public discussion. Environmentalists have welcomed it, because though it is more of a strategy paper than a policy pronouncement—it is still a welcome initiative, given the fact that a policy statement on environment and its effective implementation is long overdue and is the dire need of the hour.

Environment and Economy Are the Two Sides of the Same Coin

The National Environment Policy (NEP) emphasises the often-overlooked truth that what is good for the environment is also good for the economy and that environmental protection “cannot be considered in isolation” from the development process. A fair trade-off between environmental costs, as far as they can be ascertained and monetised, and economic development imperatives is possible and desirable. The NEP is, however, quick to qualify that where money cannot compensate for loss of an environmental good, cost-benefit analyses and trade-offs are better avoided.¹¹

 

Conservation of Life Supporting Systems

The draft policy accords priority to conservation of life-supporting systems such as land, forests and water. The causes of land degradation in India are many, ranging from the direct (water and wind erosion, loss of forest cover, and water logging) to the indirect (fragmentation of land holdings, inadequate tenure rights, wasteful subsidies on agricultural inputs such as water and power).

The NEP’s prescription of adoption of “science-based and traditional land-use practices” developed “through research and development” for combating land degradation is too vague and general. Further, land degradation is often the result of unsustainable and incompatible land-use engineered by the market.

Forest and Wildlife Conservation

Forest and wildlife conservation has been the forte of the MoEF. The NEP breaks new ground in pleading for “legal recognition of the traditional rights of forest dwelling tribe” to “remedy a serious historical injustice”.

This, however, calls for a major overhaul of the Indian foresters’ prevailing mindset that looks upon forests as garrisons to be protected against marauders and of the legal dispensation that extinguishes all traditional rights in protected areas.

Forest Cover

The Ministry of Environment and Forests makes out a case for finding out the ways and means to achieve the target of increasing the forest cover to 25% by the end of the current Five Year Plan and 33% by 2012. This task has been set by the Planning Commission under the Tenth Plan and approved by the National Development Council. But, given the recent performance of tree plantation, which stood at 1.1 million hectares in 2002–03, achieving an annual plantation rate of 4.2 million hectares appears to be a “gigantic” task for the Ministry. But what is perturbing is the fact that of a total of 33.60 hectares required for the purpose, the government could make available only 4.2 million hectares. For the remaining, it will have to depend on private individuals and institutions for forestation projects.

The present forest and tree cover in the country is 23.03%. Thus, an additional 6.4 million hectares of forest and tree cover is required for achieving the 25% forest cover target by 2007 and an additional 33.60 million hectares for 33% cover by 2012. In annual terms, the increase has to be at least 4.2 million hectares in the next eight years. Much of this has to take place on private, non-government and non-forest waste-lands over which the government has no direct management control. The involvement of people—particularly at the grassroots level—and agencies outside the government will be crucial in this.¹²

Biodiversity Conservation

Biodiversity conservation has received adequate attention in the NEP. An important object of the Biological Diversity Act, 2002 is to check piracy of biomaterial and traditional knowledge and to enforce intellectual property rights (IPRs) over them. The Draft Policy reiterates the letter and spirit of the Act.

Concerns on Fresh Water Resources

While dealing with freshwater resources, the NEP expresses alarm over the wasteful and inefficient use of surface as well as ground water and points to a slew of actions that need to be taken for conservation. The policy also refers to levy of proper user charges to reflect water scarcity and calls for a review of the subsidies now being extended to the agricultural sector. Agriculture consumes nearly 80% of the country’s utilisable water. Surprisingly, the NEP makes no reference to the National Water Policy document already available.

Expectedly enough, NEP dwells on subjects such as air quality, mountain ecosystems, wetland conservation, creation of environmental awareness among the masses, and spreading environmental education.

Deficiencies in the Draft Policy

The draft Environment Policy naturally attracted a great deal of attention, controversy and criticism. According to Mr. N. R. Krishnan, former Secretary, Ministry of Environment and Forests, there are, inter alia, three notable omissions in the Draft Policy.¹³ These are: (i) The NEP is silent on the energy front. Energy has much relevance to environment, particularly in the context of global warming. Viewed in the context of the country’s growing needs and the fact that we are already the sixth largest emitter of greenhouse gases that cause global warming, India would be compelled, sooner or later, to accept some limits on its emissions. (ii) Urbanisation has a strong adverse impact on environmental quality. The NEP rightly starts with the premise that the environmental problems of India arise mainly out of its large and growing population. However, the NEP has given short shrift to urbanisation and human settlements. One expects this lapse to be corrected in the final document. The NEP is also silent on the role of urban local bodies in environmental improvement. These institutions are poorly endowed with finances and lack of expertise in managing the local environmental problems. (iii) The NEP has not recognised adequately the potential of the state governments in improving environmental quality. After all, most of the subjects that would fall under the definition of the term “environment” are within the law-making powers of the state legislatures. Unless and until state governments are motivated enough to implement in letter and spirit the Environment Policy, however effective it looks on paper, the net result will be only poor.

Moreover, as experts insist, environmental management should focus on involving the poor for ecological preservation through mobilising them and by participatory governance. Environmental issues should be discussed among the rural people at the grassroot level of panchayati raj institutions. There is also a need to improve participatory governance by involving the SC/ST people and women. “This will develop the capability of economically and socially disadvantaged groups, particularly women’s groups, to deal with community resource management systems with a focus on their livelihoods based on natural resources.”

Though the Draft National Environment Policy needs to be improved in the context of certain glaring omissions and the failure to interlink the past and present developments to project a futuristic environment policy, which if properly implemented faithfully would achieve its objectives, the 2004 draft policy on environment forms a good discussion paper. It is likely to generate much interest among industry, academia and civil society.

• Biodiversity
• Business responses
• Charter
• Conservation
• Eco-friendly
• Environment policy
• Environmental audit
• Environmental concerns
• Environmental damage
• Environmental groups
• Environmental issues
• Environmental management
• Environmental performance
• Environmental philosophy
• Environmental preservation
• Environmental regulations
• Environmentalism
• Evidence of pollutants
• Forest and wildlife
• Forest cover
• Future outlook
• Generating cost savings
• Government regulation
• Industrial pollution
• Industrial pollution prevention
• International issues
• Key strategies
• Laws governing environment
• Life supporting systems
• Managing regulation
• National Environmental Policy
• Natural environment
• New approach
• Partnerships
• Pollution control
• Pollution prevention
• Principal health and productivity consequences
• Product differentiation
• Public opinion
• Redefining markets
• Risk management
• Role of stakeholders
• Self-regulation
• Sustainable development
• Media
• Toxic Corridor
• Voluntary pollution control
• Waste management

1. What are the environmental concerns of modern societies? How are they being addressed by governments?
2. Trace the history of environmentalism. In this context, discuss the role of various man-made and natural disasters in raising public awareness towards the preservation of the natural environment.
3. Explain in your own words the crux of environmental philosophy. While doing so, discuss the different philosophical approaches adopted by environmentalists to the natural world.
4. Discuss the role of different stakeholders in raising the awareness of different institutions/authorities to preserve the environment.
5. Write short notes on any two of the following subjects concerning the environment:
   1. Role of corporations in environmental management
   2. India’s toxic corridor
   3. Waste management and pollution control
   4. Pollution prevention
6. Discuss critically the key strategies for the prevention of industrial pollution.

• Porter, M. E. and C. Vander Linde (1995), “Green and Competitive: Ending the Stalemate”, Harvard Business Review.
• Reinhardt, F. (1998), “Environmental Product Differentiation: Implications for Corporate Strategy”, California Management Review.
• Reinhardt, F. (1999), “Market Failure and the Environmental Policies of Firms : Economic Rationale for Beyond Compliance Behaviour”, Journal of Industrial Ecology.
• Rugman, A. and A. Venbeke (2000) “Six Cases of Corporate Strategic Responses to Environmental Regulation”, European Management Review (August 2000).
• Tietenberg, Tom Environmental and Natural Resource Economics, 6th Ed., First Indian Reprint, Pearson Education, India.

 

 

Case Study

World’s Worst Man-made Disasters

(I) CHERNOBYL NUCLEAR DISASTER

The Unfolding of the Tragedy

At 1.23 a.m. on 25–26 April 1986, the world’s worst nuclear power accident occurred at Chernobyl in the former USSR. The Chernobyl nuclear power plant, located 80 miles north of Kiev, had four reactors and whilst testing reactor number 4, several safety procedures were disregarded by the workers. This caused a chain reaction in the reactor that went out of control creating explosions and a fireball blowing off the reactor’s heavy steel and concrete lid. The accident killed more than 30 people immediately, and as a result of the high radiation levels in the surrounding 20-mile radius caused by the accident, 13,500 people had to be evacuated. The spread of radiation from the plant damaged the Eastern European agriculture. This resulted in the Soviet Union to take the responsibility to pay for all the damage done to the EE agriculture, as the European Community banned their produce for 90 days.

The main factor that caused a lot of contamination and most of the European Countries to be concerned was the cloud of smoke and debris that travelled through Europe, affecting especially the eastern parts of Poland as well as parts of the Federal Republic of Germany. Most of the contamination was caused by the fallout from the plume as it went over Eastern Europe.

What Caused the Disaster?

The Chernobyl disaster was caused by a combination of several unfortunate factors such as: (i) the lack of a safety culture amongst those who organised and administered the plant, (ii) a communication breakdown between those who carried out the test and those who operated the nuclear reactor, (iii) the inherent design fault in the RBMK Reactor and (iv) violation of safety procedures—while running a test of the reactor, numerous safety procedures were violated by the station technicians.

The Damages Caused by the Disaster

The Chernobyl tragedy caused terrible damages such as: (i) Disastrous impact on population inasmuch as the birth rate in many of the affected regions began to decline rapidly following the Chernobyl accident. In the Gomel region in Belarus, the birth rate fell by 44%, mortality rate increased by over 60% and natural population growth was so badly affected that it came down from +8% to -5%; (ii) Various studies conducted by international welfare organisations found that the affected population in Belarus, Ukraine and Russia suffered from several health disabilities, and the situation had been worsening at frightening speed. In 1991, the Ukrainian government had registered around 2000 individuals with “disabilities connected with the Chernobyl disaster,” but their number had risen to almost 100,000 by January 2003. (iii) Studies also showed “children developing severe depression and suicidal tendencies” and were treated by the mobile team of psychologists. There was also a dramatic increase in thyroid cancers. (iv) Beyond the devastating consequences for the living, the impact of Chernobyl has had adverse hereditary effects with a significant increase in Down’s syndrome and other diseases. (v) After the Chernobyl accident, radioactive material was widely dispersed and its adverse effects were practically felt all over the northern hemisphere.

Call for More Compensation

Hundreds of survivors of the Chernobyl nuclear disaster marched in April 2005 in the Ukrainian capital, Kiev, demanding greater compensation from the government. As described earlier, 19 years ago, reactor No. 4 at the power station exploded sending radioactive fallout across Ukraine, Belarus, Russia and northern Europe. At least 3.3 million Ukrainians were affected by the blast, 100 km north of Kiev. The average monthly compensation for those directly affected rarely exceeded the equivalent of $50. About 700 persons joined the march, organised by the Ukrainian Chernobyl Union, a pressure group for survivors. Some bore placards with the slogans “Chernobyl is closed. Are the problems of Chernobyl forgotten?” The group is to ask Parliament for a 10-fold increase in payments, yet doubts its request will be heeded. “We are already tired of hoping for better & it seems the Government does not have such money”, one victim Tamara Tikhonova (68) said. The move is the first serious effort to force Ukraine’s newly elected President, Viktor Yushchenko, to tackle the disaster’s legacy. It comes amid growing financial problems at the plant, which owes $6 millions in unpaid wages and electricity bills.

 

(II) EXXON VALDEZ

How did it occur?

On 24 March 1989, a 987-foot oil-tanker called the Exxon Valdez, carrying about 11.48 million barrels of crude oil was on its way to California. Shortly after leaving the Port of Valdez, the Exxon Valdez ran aground on Bligh Reef. As a result, on 26 March, 10.8 million gallons of the crude oil was spilled into the harbour, making it the largest tanker spill in the American history. The oil did not burn and it proved to be very difficult to remove the same from the surface of the sea. The oil spill swept ashore along a 750-km trajectory that ran from Prince William Sound to the southern Kodiak Archipelago and Alaska Peninsula.

The spill severely affected several species of sea born animals, Alaska’s fisheries, national forests and parks and caused a major decline in tourism, and had severe psychological effects on the human population who lived there. The death toll in terms of wildlife was staggering, the full impact of which could never be assessed.

What Caused the Disaster?

The spill was said to have been caused due to the Exxon Shipping Company not providing a rested and sufficient crew for the Exxon Valdez. It was found that there was inadequate equipment, poor personnel training and lack of effective pilotage services. The grounding of the Exxon Valdez oil tanker was due to the failure of the third mate to maneuver the vessel properly because of fatigue and excessive workload, and the failure of the master to provide a proper navigation watch due to heavy drinking. The combined results of all these failures was an enormous tragic oil spill that had a huge impact on not only all living creatures, but also the entire region.

Impacts of Exxon Oil Spill

The Exxon Valdez oil spill had great impact on trade, the Alaskan fishing industry and on the lives of the fishermen and native Alaskans who lost together more than an estimated $1 billion. The native fishermen are said to have lost a total of $580.4 million since the oil spill tainted the reputation of Alaskan salmon and $154.8 million more due to damage to the ecosystem and depleted fish stocks.

The Alaskan tourism industry was also adversely affected significantly by the spill, reporting substantial financial losses. The business segments most negatively affected by the spill included lodges and resorts, Alaska-based package tour companies, guided outdoor activities, charter and sightseeing boats. As for long term effects, many in the industry opined that Alaska’s reputation for a pristine natural environment is tarnished for ever.

What Happened to the Spilt Oil?

According to American researchers who made a detailed study of the oil spill: (i) approximately 14% of the oil was recovered or disposed off by clean-up processes, (ii) the largest proportion of the oil-between 70–85%—either evaporated or broke up by photolysis or biodegradation in water. But, many of the heavier organic compounds remain as solid residues on the beaches and (iii) this still leaves 15–20% of the oil being around Prince William Sound and the Gulf of Alaska untraced.

The “Recovery” Settlement

The initial cleanup of the spill took three years, and the cost was over $2.1 billion to the US Government. On 8 October 1991, an agreement was reached between the State of Alaska, the Federal Government, and Exxon on both claims of criminal charges and civil damage. In settlement of civil charges, Exxon was asked to pay the State of Alaska and the Federal Government $900 million over a 10-year period for restoration purposes. The amount is to be administered by six government trustees; three federal, three state. In settlement of criminal charges, Exxon was asked to pay a fine of $250 million. Two “restitution funds” of $50 million each were established, one under state control and the other under federal authority. Against strong opposition from many Alaskans, $125 million of the balance was forgiven due to Exxon’s cooperation during the cleanup, and upgraded safety procedures to prevent a reoccurrence. The remaining $50 million was divided between the Victims of Crime Act account ($13 million) and the North American Wetlands Conservation Fund ($12 million).

(III) TOKIAMURA ACCIDENT

Accident in a Nuclear Fuel Factory

On 30 September 1999, a severe accident occurred at a nuclear fuel factory run by JCO, a subsidiary of Sumitomo Metals and Mining in the village of Tokiamura, 130 km northeast of Tokyo. A total of 119 people received a radiation dose over 1 msv from the accident, but three operators’ doses were above permissible limits. Of the three workers who received high doses of radiation in the plant preparing fuel for an experimental reactor, two of the doses proved fatal.

The Cause of the Accident

The accident was caused by bringing together too much uranium enriched to a relatively high level, causing a “criticality” (a limited uncontrolled nuclear chain reaction), which continued intermittently for 20 hours. According to the United Nation’s monitoring body, the International Atomic Energy Agency (IAEA), the accident “seems to have resulted primarily from human error and serious breaches of safety principles, which together led to a criticality event”. The company conceded that it violated both normal safety standards and legal requirements. Criminal charges were filed against the company.

The Occurrence of the Accident

On the fateful day of 30 September 1999, three workers were preparing a small batch of fuel for the JOYO experimental fast breeder reactor, using uranium enriched to 18.8% U-235. It was JCO’s first batch of fuel for that reactor in 3 years, and no proper qualification and training requirements appear to have been established to prepare those workers for the job. At around 10:35, when the volume of solution in the precipitation tank reached about 40 litres, containing about 16 kg of uranium, a critical mass was reached.

The accident occurred when workers preparing nuclear fuels mixed uranium oxide with nitric acid using a stainless steel container instead of a mixing apparatus. This shortcut was described as an illegal act by the operating manual drafted by the company. The shortcut had been used for 7 or 8 years before the accident occurred, to save costs and to be more competitive with foreign fuel suppliers. The three workers were performing this task for the first time and were wearing t-shirts instead of protective clothing and the required film badges to measure radioactive exposure.

The Impact of the Accident

The company did not have any emergency plans in place for handling such critical accidents. Families living near the plant were temporarily evacuated and 300,000 people were asked to stay indoors for more than a day. Afterwards, employees and people living around the facility were tested for radioactive contamination; which showed that 63 people as having been exposed, amongst them 14 workers of JCO (who poured boron into the reaction vessel to help put out the nuclear chain reaction) and the two victims who later died. The three workers concerned were hospitalised, two in a critical condition. One died 12 weeks later, another 7 months later. The three had apparently received full-body radiation doses.

Those who were exposed to the radiation may be affected badly because it could cause a range of cancers, particularly leukaemia; genetic damage, particularly to an embryo or foetus; and damage to the immune and nervous systems.

Case Study

Bhopal Tragedy: Mother of All Industrial Disasters

The Unfolding of the Tragedy

On the night of 3 December 1984, the greatest industrial disaster in the history of the world unfolded itself in a dangerous chemical reaction that occurred in the Union Carbide factory when a large amount of water (500 litres) got into the MIC storage tank 610. The poisonous gas methyl isocyanate (MIC), used in producing the pesticide, Sevin, leaked from the plant. The leakage was first detected by workers by about 11:30 p.m. when their eyes began to tear and burn. They informed their supervisor who failed to take action until it was too late. The factory alarm meant for workers was sounded by a desperate worker at 12.50 p.m. The management not only turned it off, but also delayed the sounding of the public siren until as late as 2 p.m. by which time, about 40 tonnes of MIC, poured out of the tank and escaped into the air, spreading over the city of nearly 900,000 people. More than 3500 people were killed in their sleep or as they fled in terror, and about 400,000 remain injured or affected to this day. The most seriously affected areas were the “squatter settlements” and the densely populated shanty towns surrounding the plant. The victims were almost entirely the poorest members of the population.

The Enormous Human Tragedy

This poisonous gas caused death and left the survivors with lingering disability and diseases. Not much is known about the future medical damage of MIC, but according to an international medical commission, the victims suffered from serious health problems that were being misdiagnosed or ignored by local doctors.

Exposure to MIC resulted in a variety of problems among the victims. These include damage to the eyes and lungs causing respiratory ailments such as chronic bronchitis and emphysema; gastrointestinal problems such as hyperacidity and chronic gastritis; ophthalmic problems such as chronic conjunctivitis, early cataracts and vision problems; neurological disorders such as memory and motor skills; psychiatric problems of various types including varying grades of anxiety and depression; musculoskeletal problems and gynecological. It is estimated that children born in Bhopal after the disaster face twice the risk of dying as do children elsewhere, partly because parents cannot care for them adequately. Surprisingly enough, despite the serious health problems and the deaths that had occurred, Union Carbide claimed that the MIC was merely a “mild throat and ear irritant”.

The Genesis of the Problem

The Bhopal facility was set up as a means to promote India’s Green Revolution that aimed to increase the productivity of crops. Considered an essential input in the effort to achieve self-sufficiency in agricultural production, pesticide manufacture and use increased dramatically during the late 1960s and early 1970s. The decision to manufacture pesticides in India, as opposed to relying on imports, was based on India’s policy of preserving foreign exchange through import substitution.

Until 1979, the Indian subsidiary of the American Union Carbide Corporation (UCC) used to import methyl isocyanate from the parent company. In 1969, UCC, the parent company, set up a small plant through its subsidiary, Union Carbide India Ltd. (UCIL), in Bhopal, the capital city of Madhya Pradesh, to produce pesticides. Bhopal was chosen as the site for the Carbide plant because of its central location in India, a railway system that spanned the country, a large lake which provided a reliable source of water, and sufficient electricity and labour to sustain a large-scale industrial plant. The MIC facility was located in the existing Carbide plant to the north of the city, adjacent to an existing residential neighbourhood, barely two kilometres from the railway station. After 1979, UCIL started to manufacture its own MIC, which is one of many “intermediates” used in pesticide production and is a dangerous chemical. It is a little lighter than water but twice as heavy as air, implying that when it escapes into the atmosphere it remains close to the ground. It has the ability to react with many substances: water, acids, metals, and the small deposits of corrosive materials that accumulate in pipes, tanks and valves. The MIC produced in the Bhopal factory was used for the production of various pesticides, mainly Sevin brand carbaryl insecticide and Temik brand aldicarb pesticide. All the pesticides produced at UCIL were sold in the Indian market.

A Tragedy of Errors

The Bhopal disaster was the result of a combination of legal, technological, organisational and human errors. The immediate cause of the chemical reaction, as mentioned earlier, was the seepage of water into the MIC storage tank. The results of this reaction were exacerbated by the failure of containment and safety measures and by a complete absence of community information and emergency procedures. Ironically, in Bhopal, people living around the Union Carbide plant were warned of potential hazards in a series of local newspaper articles, but residents ignored these warnings because they did not know how to react to them, while local officials dismissed them as sensational reporting. The long-term effects were made worse by the absence of systems to care for and compensate the victims.

Tragedy That Was Waiting to Happen

Though the disaster occurred suddenly and without immediate warning, it was not totally unexpected. There is evidence which supports the view that Carbide (both the parent company and its Indian subsidiary) was a negligent company that failed to improve its deteriorating plant. A report (May 1982) of the Indian subsidiary conducted by a three-member safety team from the Union Carbide headquarters in the US mentioned there was “a serious potential for sizeable releases of toxic materials in the MIC unit either due to equipment failure, operating problems, or maintenance problems thus requiring various changes to reduce the danger of the plant; there is no evidence the recommendations were ever implemented”.

Furthermore, “Carbide persistently shows ‘wanton and willful disregard for the health and safety of its workers and the communities in which it operates” (New Statesman and Society, “Surviving&” p.5). A scientific report published by two US organisations, the National Toxic Campaign and the International Council on Public Affairs, asserted that Union Carbide continued to be “a major discharger of toxic substances into the environment, and a major generator of hazardous waste’. In 1988, the company generated more than 300 million pounds of hazardous waste&an increase of 70 million compared with 1987”. Safety standards and maintenance procedures at the plant had been deteriorating and being ignored for months. There were five safety devices installed in the plant to prevent a mishap like the one that happened in December, 1984: a vent gas scrubber, a flare tower, a water curtain, a refrigeration system, and a spare tank. All of these devices were under repair, or failed to operate on that fateful day. The following defects of the MIC unit were unearthed by various investigations on the tragedy.

• Gauges measuring temperature and pressure in the various parts of the unit, including the crucial MIC storage tanks, were so notoriously unreliable that workers ignored early signs of trouble.
• The refrigeration unit for keeping MIC at low temperatures (and therefore less likely to undergo overheating and expansion should a contaminant enter the tank) had been shut off for sometime as part of the company’s economy drive to save about Rs. 700 per day. Had the refrigeration unit been working, a runaway reaction in the MIC tank could have been delayed or even prevented.
• Another cost-cutting measure included substantial reduction in the workforce at the factory. By 1984, the size of workers was brought down by half from that of 1980. The work crew for the MIC plant was cut by half by then. The maintenance crew was brought down to 2 from the initial 6 workers. In the control room, there was only one operator who was expected to monitor 70 odd panels, indicators and controllers on the console. Worse still, the period of safety training to workers in the MIC plant was brought down from 6 months to 15 days.
• The gas scrubber, designed to neutralise any escaping MIC, had been shut off for maintenance. Post-disaster inquiries revealed that even if it had been operative, the maximum pressure it could handle was only one-quarter of what actually reached during the accident.
• The flare tower, designed to bum off MIC escaping from the scrubber was also turned off, waiting for replacement of a corroded piece of pipe. The tower, however, was inadequately designed for its task, as it was capable of handling only a quarter of the volume of gas released during the accident.
• The water curtain, designed to neutralise any remaining gas, was too short to reach the top of the flare tower, from where the MIC was billowing.
• The alarm on the storage tank failed to signal the increase in temperature on the night of the disaster showing the lack of effective warning systems.
• MIC storage tank number 610 was filled far beyond the recommended capacity.
• The maximum permissible storage limit for MIC is only half a tonne in US and Europe. But the management of US Carbide overruled the advice of the managers of its Indian subsidiary and kept the storage capacity hazardously high at over 90 tonnes. On the night of the disaster, 67 tonnes of MIC were stored in the company’s two tanks.
• A storage tank which was supposed to be held in reserve for excess MIC, already contained too much MIC;
• The Union Carbide Corporation adopted double standards with reference to the Bhopal factory. At its Western Virginia plant at Institute, all the vital systems had back-ups and were automatically linked to computerised alarms and crises control systems. The Bhopal unit not only lacked these precautionary measures, but the sole manual alarm was also switched off so as not to ‘unduly’ alarm people.
• Notwithstanding all these problems that existed, Carbide was able to operate its deteriorating plant because industrial safety and environmental laws and regulations were either lacking or were not strictly enforced by the state of Madhya Pradesh making it indirectly responsible for the tragedy in Bhopal.

Carbide’s Refusal to Take the Blame

Interestingly enough, Carbide tried to hide its poor safety and maintenance record along with the other faults mentioned already, by claiming publicly that the company was the victim of sabotage by a ‘disgruntled employee’. Yet, Carbide did not release the name of this employee or bring charges against him/her till today. The comments made by Carbide officials rubbed salt to the wound. Dr. Loya, Union Carbide’s resident official doctor, commenting on MIC after the tragedy, said: “It is not a deadly gas, just irritating, a sort of tear gas”. “The numerous safety systems with which this type of plant is equipped enable us to control any of the MIC’s potentially dangerous reactions”, observed another company official, making a mockery of the tragedy. The Union Carbide Corporation also tried to wriggle out of the situation by saying that it controlled only 50.9 per cent stake in UCIL, that the Bhopal Plant was exclusively manned by Indians and that the day-to-day functioning of the Indian company was independent of the parent company, and such being the case, it could not be held responsible for the gas leak. The company also charged the government of India and the state of Madhya Pradesh with “contributory responsibility” for the gas leak, since they knew fully well the toxicity of MIC, and yet failed to take adequate precautions to prevent the disaster.

The Legal Wrangling

International law at present plays almost no role in a Bhopal tragedy type of event in which the perpetrator company’s headquarters is located in one country and the victims belong to another. Moreover, substantive international law remains weak in the area of pollution, industrial hazards, and multinational business regulation.

The Bhopal disaster gave rise to the world’s largest lawsuit, one that spanned half-way around the world and dragged on for more than seven years to settle basic issues. Lawsuits were filed in both US and Indian courts, but ultimately it was decided that the case should be tried only in an Indian court. Lawsuits filed in US courts were refused on the grounds that the immediate location of the accident was in India, the victims were all Indians, and the US connection with its Indian affiliate did not appear to give it an unusual degree of control.

Following the disaster, the government of India passed the Bhopal Gas Leak Disaster (Processing of Claims) Act 1985, which authorised the central government to represent all claimants in appropriate forums, to appoint a Welfare Commissioner and other staff and to discharge duties connected with hearing of the claims and distribution of compensation. Under this Act, the government formulated a scheme known as the Bhopal Gas Leak Disaster Scheme, for registration, processing, and determination of compensation to each claim and appeals arising therefrom.

Since the tragedy, the victims have waged an “unrequited struggle for justice, but they have been ill-served by the Indian government, which failed to pursue the victims’ cases aggressively in the Indian courts, opting instead to go easy on Union Carbide and maintain a favourable investment climate”. By deflecting responsibility for the disaster to the Indian government, Union Carbide managed to escape its obligations. By constantly downplaying the damage to limit its liability, it has shown its ethical and moral bankruptcy. Union Carbide has now merged with Dow Chemicals, resulting in the creation of the world’s biggest chemical company. Dow showed no sign of taking responsibility for the Bhopal legacy.

An important aspect in this case is the apparent difference in behaviour of a company in a rich “Western” country which has relatively strict rules protecting people and the environment, and the disappointing behaviour of the same company in “poor” countries where the laws are lax and hardly enforced. The case shows that the global markets make it possible for corporations to practise double standards, misusing lax standards in poorer countries to save on costs and to maximise profits.

Issues of jurisdiction were central to the legal battle that followed the tragedy. These centered around the relationship of the parent Union Carbide Corporation to its Indian subsidiary and the appropriateness of the place where litigation was being conducted. Union Carbide Corporation maintained that its subsidiary was separate from the parent company and so only the subs should be liable instead of the parent corporation. The Indian government’s petition argued that insofar as Union Carbide designed, constructed, owned, and operated the plant from which the chemical escaped, the company should be held absolutely liable for all the resulting damage. It was further argued that the company, in undertaking an activity that it knew was ultra-hazardous to the public at large, was strictly liable for the harm which was the material consequence of such activity, regardless of whether the harm that resulted was through the fault of another or its own negligence. It was also pointed out that the company was negligent in designing, constructing, operating and maintaining its plant and thus failed to exercise its duty of care to protect the public from the dangers inherent in its plant and processes.

With regard to process standards, it was apparent that Union Carbide adopted double standards when operating its plant in India and in West Virginia. An investigation of both the UCIL plant in Bhopal and its counterpart in Institute, West Virginia revealed that “while the latter plant had computerized warning and monitoring system, the former relied on manual gauges and the human senses to detect gas leaks. The capacity of the storage tanks, gas scrubbers and flare tower was greater at the Institute plant. Finally, emergency evacuation plans were in place in Institute, but nonexistent in Bhopal”.

The Aftermath of Bhopal Disaster

More than twenty years after this tragic disaster, the legacy of poisoning continues. Even today chronically-ill survivors remain in desperate need of medical attention. Thousands of survivors and the children born since the disaster continue to suffer debilitating health problems. Many are unable to work. The now abandoned chemical plant is a toxic hotspot, strewn with toxic wastes and materials that have been either dumped or haphazardly stored in rotting sacks and barrels. A survey conducted by Greenpeace International revealed substantial, and in some locations, severe contamination of land and drinking water supplies with heavy metals and persistent organic contaminants in and around the plant. There is evidence that the residual contaminants have migrated off-site, creating new problems, including contamination of groundwater used by families living near the site for their daily drinking and washing needs.

The Settlement

The delay lasting more than twenty years in delivering final compensation to the victims has further aggravated the suffering of the victims. Other elements of relief ordered by the Supreme Court of India such as the medical surveillance programme, the contingency insurance and the establishment of a new hospital have not been implemented. There has been much dissent, and several organisations have voiced that the settlement with Union Carbide for a paltry sum made on behalf of the victims by the Indian government should be voided.

By the end of 2004, Union Carbide, now a fully-owned subsidiary of Dow Chemicals, agreed to pay $470 million to the Government of India as settlement against the $3 billion damage sought by the government of India, thus avoiding any damaging legal precedent or liability. In return, Supreme Court of India ordered the dismissal of all civil and criminal charges against Carbide and its officers, and gave them immunity from future prosecution. The Supreme Court felt that in this case, the victims needed immediate relief. Although the final settlement ($470 million) satisfied the imperatives of the company and the Government of India, it was condemned by the victims. Activists in Bhopal denounced the settlement as a betrayal of the 20,000 victims who still suffer from exposure to the deadly gas that escaped from the pesticide plant. More than 500,000 claims for compensation have been filed. The government itself has spent more than $70 million on relief and health care for victims. “Justice delayed is justice denied.” It is well-known that India has one of the world’s slowest judicial systems. But for more than half a million victims of the Bhopal Union Carbide chemical tragedy, it is better late than never. It has taken them nearly 20 years to get partially compensated.

The petitioners representing the Bhopal tragedy victims argued that the Indian court had no authority to dismiss criminal charges or grant immunity against future charges to Union Carbide since pleas bargaining is not permitted under the Indian law. The petitioners also argued that while the settlement amount was based on an estimated 40,000 severely injured victims, medical studies suggested the number may be closer to 400,000. Also, many medical experts believe that liability to provide adequate compensation and facilities for the handicapped victims requiring long-term follow-up and treatment should rest with Union Carbide Corporation and not with the Indian Government. Moreover, more than 250,000 claims were never documented or classified, making it hard for these victims to obtain compensation. Much to the anger and outrage of these groups and victims and to the relief of Union Carbide, the Supreme Court of India upheld the Bhopal settlement of $470 million dollars in October 1991. Many feel that this is a clear signal from the Indian government that MNC’s investing in the country will receive only a “slap on the wrist” in the event that something like this happens again.

The Supreme Court ordered $325 million to be paid to more than 566,000 survivors and dependents, who still had not received compensation 20 years after methyl isocyanate gas began leaking from the Carbide pesticide plant.

After the initial relief was paid out, the Supreme Court directed the government to hold the balance of the money in the Reserve Bank. That fund has earned interest and increased the value of the original deposit, which would be distributed to the victims on the basis of the formula worked out by the government. Dow chemicals, which owns Union Carbide, has been criticised by activists for doing little to clean up the contaminated site, failing to release information about the gas to the doctors who need to provide patients with better treatment, and providing inadequate compensation to survivors and their families. “When Dow Chemical bought Union Carbide two years ago, it inherited not only its assets but the liability and karma attached to Carbide’s lack of accountability for the Bhopal chemical disaster,” said Gary Cohen of Environmental Health Fund in a statement about the shareholder resolution released by International Campaign for Justice in Bhopal. A $470 million compensation package provided by Union Carbide amounts to approximately nine cents per day per person over the 19 years since the incident occurred, “a pathetically inadequate amount, given the economic and health needs of the survivors,” says the campaign’s Tim Edwards. If the compensation amount was to be equally distributed, it would work out to be a paltry sum of Rs. 10,000 per victim. Contrast this with what the US spent on the rehabilitation of the Alaska Oil Spill. According to a report in the Times of India, the US spent approximately $40,000 on the rehabilitation of each sea otter, besides giving rations of lobsters worth $500 per day. Besides, the compensation package does not include money to clean up the contaminated site, nor does it include compensation for the tens of thousands of ‘second generation victims’ who were born after the disaster but suffer severe birth problems.

More Time for Compensation

The Supreme Court on 25 April 2005 extended the time limit till 30 April 2006 for the Welfare Commissioner, Bhopal, to disburse the compensation amount of Rs. 1,503 crore to over five lakh victims of the Bhopal gas tragedy.

The court by an order on 15 November 2004 had directed that the money deposited by the Union Carbide, following a settlement with the Union Government should be disbursed to 5,72,000 claimants within three months by the Welfare Commissioner, In February, the time limit was extended till 30 April 2005.

In his fresh application, the Welfare Commissioner submitted that in the three months up to 11 February, the amount had been disbursed only to 78,938 claimants to the tune of Rs. 224 crores in view of the complex nature of the identification process. He said due to shortage of judges, only 25 could be entrusted with the disbursement of compensation.

The commissioner pointed out that initially the payment of compensation to 5,72,029 gas victims was carried out in a span of more than 12 years. In the action plan submitted, it was stated that the pro rata amount could be disbursed to the claimants within six months. He agreed that “some tall claims were made, but due to practical difficulties the target that was proposed could not be achieved.” He further said more than 20 to 30 per cent of the claimants were not available, as their whereabouts are not known. Despite efforts none was appearing for those claimants, and therefore, he sought one more year to settle the compensation amount. A bench of the Supreme Court, comprising the chief justice, accepted the request of the Commissioner.

1. What were the factors that caused the Chernobyl Nuclear Disaster? What were the consequences of the nuclear tragedy?
2. Explain the Exxon Valdez disaster. What happened to the spilt oil? How was it retrieved?
3. Discuss the occurence of Tokiamara Accident. Also explain the impact of the accident.
4. Why was the Bhopal gas tragedy nicknamed as the mother of all industrial disasters? Also trace the genesis of the problem and the ultimate consequence.
5. Discuss the aftermath of the Bhopal disaster and the issues relating to compensation to victims.