Environment Change And Corporate Environmental Responsibility

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ENVIRONMENT  CHANGE AND CORPORATE ENVIRONMENTAL RESPONSIBILITY

 Adapted from the inaugural speech by Dr. Tariq Hassan delivered to the participants of the “Corporate Summit on Climate Change: A Catalyst for Climate Action” organized by LEAD Pakistan and held in Karachi on 19 February 2009.

Climate Change in Pakistan

Climate change is an inconvenient truth that we can no longer afford to ignore. It is causing widespread damage globally with not only extensive environmental but social and economic impacts as well. Environmental damage is being done by greenhouse gases and the consequent depletion of the ozone layer. The resultant increase in ultraviolet radiation has increased the risk of global warming and contributed to the adverse socio-economic effects of climate change.

Increase in average global temperatures and constant climatic variations are affecting human settlements and economy in Asia. In South Asia, where large populations live in low-lying coastal areas or adjacent to river deltas, coastal inhabitants of such areas are vulnerable to the consequent rise in sea-level and associated back water flooding. Even in other areas, rising global temperatures are causing significant changes in crop yields affecting low-income rural populations that depend on traditional agricultural systems. There is thus a growing concern in South Asian countries for environmental security.1

It has been observed that “the consequences of climate change are starker for the developing world, which is already resource starved. As the climate change is global in its impact, Pakistan, like other developing countries, is vulnerable too.”2 Pakistan is among the top twenty countries in the world that will be affected by climate change. Its status as a developing country, dependent mainly on agriculture, makes it particularly susceptible to the effects of climate change. Agricultural productivity in Pakistan is being affected by the changes in both land and water resources. Dry land areas in arid and semi- arid regions are most vulnerable and are putting the country’s food security at risk.

1. Gurneeta Vasudeva, Environmental Security: A South Asian Perspective, 14, Tata Energy and Resources Institute.

2. Arif Azad, “The Looming Crisis,” The News on Sunday (Policy III) 30 March 2008.

Climate change does not only affect agriculture and water regimes.3 It also affects urban centers, industry and human health. Urban centers and industry in Pakistan depend on hydro-power for cheap electricity due to the non-availability of sufficient quantities of indigenous oil, gas or fossil fuels in the country. Therefore, depleting water resources are also putting the country’s energy security at risk with all its attendant consequences.

Response to Climate Change

Nonetheless, the issue of climate change, even though considered to be important, has not generated any urgent response in Pakistan. The following observation by James Dailey in this regard is noteworthy: “I looked in vain for any mention of climate change in the opinion pages of local newspapers, and while there was vibrant debate over important international issues (e.g., the nature of democracy, government ineptitude, pollution, poverty, the U.S. playing kingmaker, and energy shortages), there was nothing on climate policy.”4 He went on to suggest that: “Unless it is linked to issues of social justice, energy security, economic growth, and the aspirations of a growing middle class in developing countries, support for action on climate change will remain pegged to the fortunes and attention of environmental liberals in the developed North.”

3. See generally, Imtiaz Ahmed, “Global climate change and Pakistan’s water-resources”, Paper published in the Proceeding of National Workshop on Water-Resources Achievements & Issues, in 20th Century & Challenges for the next Millennium, Pakistan Council of Research in Water Resources (June 1999).

4. James Dailey, “Climate change and Pakistan’s priorities”, Grist (Gristmill: The environmental news blog) . The change mitigation is related to building democracy and decreasing poverty:”Responses to climate change should not be put in a box as an altruistic thing to do, but should be a central component to improving the well-being of people around the world and promoting stable, prosperous democracies.”

The corporate response specifically to climate change in Pakistan has also been lukewarm. Dr. Harish Kumar Jeswani, who examined the “warmth” of corporate response to climate change in Pakistan and UK earlier,5 has now produced a more detailed study on the subject.6 The results of this study indicate that companies in Pakistan have recently begun to focus on improving energy efficiency even though the, mativating factor behind this effort is financial benefit on account of cost savings.

The reason for indifference to climate change in Pakistan, as in other developing countries, is generally the lack of awareness among the public and low priority given to environmental issues by the government. The government has, however, made an effort to communicate nationally on the subject. It has indicated that the energy sector is the single largest source of greenhouse as emissions in Pakistan but suggests that, as such, it is also the sector which is believed to have the greatest potential for development of mitigation options. Pakistan has vast potential for renewable energy development; the three provinces of Pakistan i.e. N.-W.F.P., Balochistan and Sindh provide vast untapped resources for hydropower, wind and solar energy. These sectors therefore represent an added opportunity for the corporate sector and foreign governments to undertake viable investments that will also assist Pakistan in utilizing its cleaner forms of energy.7 The government also appears to be keen to conform to international legal instruments regarding climate change.

5. Harish Kumar Jeswani et. al., “How warm is the corporate response to climate change? Evidence from Pakistan and the UK”, 17 Business Strategy and the Environment (No. 1) at 46-60 (2006). This research paper (by Centre for Environmental Strategy, University of Surrey, UK) compares corporate responses to climate change in Pakistan and the UK. By analyzing the divergence of strategies adopted by industries across different sectors in two countries, the paper examines the key factors influencing corporate adoption and implementation of greenhouse gas reduction and energy-efficiency strategies in Pakistan and the UK.

6. Dr. Harish Kumar Jeswani, “Corporate Response to Climate Change in Pakistan”, 24 Occasional Paper (LEAD Pakistan, 2008). The study discusses key factors affecting corporate reaction and recommends several measures to encourage more proactive responses of companies in Pakistan.

7. Government of Islamic Republic of Pakistan Ministry of Environment, Pakistan’s Initial National Communication on Climate Change, at 28 (November 2003).

Legal and Policy Framework

The United Nations Framework Convention on Climate Change, Rio de Janeiro, 1992 (“Climate Convention”), acknowledging that change in the Earth’s climate and its adverse effects are a common concern of humankind, provides the international legal framework to protect the climate.8 The Kyoto Protocol to the Climate Change Convention, 1997 (“Kyoto Protocol”) further establishes benchmarks for the reduction in emissions of carbon dioxide. Pakistan is a party to both these instruments.9

8 For details see, Robert K. Dixon (ed.), THE U.N. FRAMEWORK CONVENTION ON CLIMATE CHANGE-ACTIVITIES IMPLEMENTED JOINTLY (AU) PILOT: EXPERIENCES AND LESSONS LEARNED (Springer, 1999).

9. For details see, Sebastian Oberthur et at, THE KYOTO PROTOCOL INTERNATIONAL CLIMATE POLICY FOR THE 21St CENTURY (Springer, 1999). See also, Professor Dr. Herbert V. Morais, “International Law in Crisis: Reaffirming the Rule of Law in a Divided World”, Inaugural Lecture of the Tunku Abdul Rahman Chair in International Law, Faculty of Law, University of Malaya, Kuala Lumpur (9 October 2007).

Pakistan has pursuant to the Climate Convention, which requires States to enact effective environmental legislation, promulgated the Pakistan Environmental Protection Act, 1997.10 This enactment empowers the government to make rules for carrying out the purposes of the Act and for implementing the provisions of various international environmental Agreements specified therein, including the Climate Convention.11 As part of its environmental commitments, Pakistan Government has also laid down various environmental regulations12 and standards,13 and established an institutional framework for administering the environmental sector.14 The compliance framework for enforcing the laws, regulations, and standards is a mixture of administrative measures, judicial, sanctions and active civil society involvement.15

10. For a thorough examination of the provisions of this Act, see Jawad Hassan, ENVIRONMENTAL LAWS OF PAKISTAN (2006).

11. Sec. 31 read with item 14 of the Schedule to the Pakistan Environmental Protection Act, 1997.

12. See, e.g., Pakistan Environmental Protection Agency Review of Initial Environmental Examination and Environmental Impact Assessment Regulations, 2000.

13. The National Environmental Quality Standards (NEQS) finalized in 1993 provide standards for industrial and municipal effluents and air emissions, including 32 liquid and 16 gaseous parameters.

14. The Pakistan Environmental Protection Act, 1997 has established the Pakistan Environmental Protection Council (PEPC) and the Pakistan Environmental Protection Agency (PEPA) for the purpose of formulating and implementing policies and administering the laws.

15. Nelma Akhund and Zainab Qureshi, “You can make a difference”, IUCN publication, Karachi (1998). The Pakistan Environmental Protection Act, inter alia, provides for liability for offences by corporate bodies. See, Sec. 18, Pakistan Environmental Protection Act, 1997.

Furthermore, the government has taken major policy initiatives in the environment sector such as the enactment of a National Conservation Strategy in 1992 (NCS) and the finalization of a National Environmental Action Plan in 2001 (NEAP).16 Both the NCS and NEAP have indirect relevance to climate change issues.

16. The NCS lays out the fourteen key priority areas for policy formulation and intervention, while NEAP outlines four priority areas for development and implementation of environmental conservation programs-clean air, clean water, solid waste management, and ecosystem management. The NEAP also identifies five additional areas of concern in which additional support is needed to strengthen the base for environmental management in the long run.

The NCS emphasizes that development must be conservation-based: It suggests that development must’ protect the structure, functions and diversity of the world’s natural systems on which our species depend. To that end, it advocates the conservation of life-support systems: “These are the ecological processes that keep the planet fit for life … They shape climate, cleanse air and water, regulate water flow, recycle essential elements, create and regenerate soil and enable ecosystems to renew themselves.” In order to achieve this, the NCS specifies various training policies and measures, which include: (i) the introduction of special courses on sustainable development and conservation issues at existing training institutes for corporate managers; (ii) incorporation of sustainable development in training in business administration, and encouraging these institutes to offer special courses and seminars for the corporate sector; and (iii) organization of periodic, concurrent training programs for senior government decision makers and the corporate sector, and for decision makers at the Federal and local levels, to facilitate a better understanding of each other’s roles in achieving sustainable development.

The government training policies and measures provide an opportunity for academic and training institutions to fulfil their social responsibility to enhance public awareness and provide education to the concerned policy makers.17

17. Non-Governmental Organizations (NGOs) like LEAD Pakistan have taken on this challenge. LEAD Pakistan has conducted several trainings and capacity building workshops on renewable and alternative energy, multilateral environment agreements, natural resource management, as well as poverty-environment nexus and community mobilization.

Corporate Environmental Responsibility

In addition to the government, academia and NGOs, the largest share of responsibility for climate change mitigation falls on the corporate sector. It has, therefore, been recommended that the corporate and business sector should be mobilized to finance the transition to a low carbon economy. Transition to a sustainable low carbon economy can be promoted through approaches such as Corporate Social Responsibility (CSR), Socially Responsible Investment (CSI), and Principles for Responsible Investment (PRI).18

18. Asia Pacific Regional Statement to the Ninth Global Civil Society Forum and the Tenth Special Session of UNEP’s Governing Council and Global Ministerial Environment Forum, Seoul, Republic of North Korea, 25-26 October 2007. For a detailed examination of this Statement see, Dr. Parvez Hassan, “Climate Change: Some National and Regional Responses”, Remarks made at the APFED Policy Dialogue on Climate Change on the occasion of UNFCCC/COP13 in Bali, Indonesia, 8 December 2007.

It has accordingly been suggested that “harnessing the power of corporations and encouraging their cooperation is one of the key areas for building environmental security. Both individually and as cartels and coalitions corporations have the size, influence and financial resources to wield control internationally. Multinational corporations can play an influential role in advancing environmental protection by shaping technological advances and commercialization of products and technologies, participating in negotiations on global environmental issues thereby contributing to consensus building, supporting programs for public education and awareness and creating international institutions to advance sustainable development principles.”19

I believe and have on an earlier occasion stated that businesses need to have a common vision centered on “enlightened self-interest”, a situation where companies would serve community-specific needs and safeguard the environment knowing that such actions generate greater well-being among existing as well as potential customers, and as a direct consequence generate greater business opportunities.20 Consequently, I had in my previous capacity as Chairman of the Securities and Exchange Commission of Pakistan, made a categorical commitment to advancing corporate social responsibility: “We are fully committed to CSR. We will not shy away from our obligations. But for this we need widespread partnerships.21 A compelling case for corporate partnerships has been made out in view of the broadening and expanding roles and responsibilities of businesses and stakeholders in society, in particular global businesses.22   

19. Gurneeta Vasudeva, Environmental Security: A South Asian Perspective, 22, Tata Energy and Resources Institute.

20. Statement quoted in Ambreen Waheed, “Evaluation of the state of corporate social responsibility in Pakistan and a strategy for implementation”, Report prepared by Responsible Business Initiative for Securities & Exchange Commission of Pakistan and United Nations Development Program, at 89 (PAK/98/011 PARADIGM-UNDP) (September 2005).

21. Id. at 90.

22 See, Alyson Warhurst, “Future roles of business in society: the expanding boundaries of corporate responsibility and a compelling case for partnership,” in THE FUTURES OF ETHICAL CORPORATIONS (edited by Ted Fuller and Jane Collier), 37 Futures (Issues 2-3) at 151-168 (March-April 2005).

In my view, a higher form of social responsibility can be attributed to corporate entities in respect matters relating to climate change on the basis of a parallel that can be drawn from the theory of “differentiated responsibilities” laid down in the Climate Convention. The Climate Convention has laid down this theory for the purpose of observing the principles and fulfilling the commitments thereunder. Article 3(1) thereof provides: “The Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities. Accordingly, the developed country Parties should take the lead in combating climate change and the adverse effects thereof. 23

23. See also, Art. 4, United Nations Framework Convention on Climate Change, Rio de Janeiro, 1992 and Art. 10, Kyoto Protocol to the United Nations Framework Convention on Climate Change.

The theory is based on the recognition of differences in capabilities and socio-economic conditions between the developed and developing countries. It has been noted that: (i) the largest share of historical and current global emissions of greenhouse gases has originated in developed countries; (ii) per capita emissions in developing countries are still relatively low; and (iii) the share of global emissions originating in developing countries will grow to meet their social and development needs.

These differences prevail in the context of different state actors in developing countries as well. Corporate bodies are by far the most capable and socio-economically developed entities in developing countries. Furthermore, being the biggest energy users, they have the largest share of greenhouse gas emissions in the country. Consequently, they should bear the larger share of the commitment to preserve the climate within national boundaries. Within the corporate setup, foreign companies in developing ‘countries form the higher echelon of the corporate sector and should, as such, voluntarily aim to apply the higher environmental standards prevalent in their home countries in order to set an example for others to follow.

It would not be too burdensome for the corporate entities to discharge their environmental responsibility given the fact that management of climate change related risks mostly involves mitigating measures to save energy. To the extent that these measures provide substantial energy cost savings, companies may find these to be good business practices and hence be drawn willingly into actions against climate change.

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