Nikita Mirdha and Palak Sharma
1st Year Law Students at Dharmashastra National Law University
INTRODUCTION
Understanding the crisis
The continuous evolution and development of human civilization have resulted in numerous inventions and discoveries. These discoveries have impacted the world in both positive and negative ways. One such impact is that of climate change. The developmental activities of humans have resulted in rapid and long-term changes in the earth’s climate which include changes in global temperature, weather patterns, and other facets of the earth’s climate system. These changes in turn have led to profound disruptions in society, the environment, and the economy. Earlier, the planet’s climate oscillated naturally. However, with the advent of the Industrial Revolution, these changes became largely human-driven. The main factor in the current climate change crisis is the release of greenhouse gases, such as carbon dioxide, nitrous oxide, and methane. The gases trap heat in the atmosphere, which in turn increases the temperature of the planet. Activities such as burning coal, deforestation, industrial processes, etc. are the key contributors to the greenhouse gas effect. Climate change has had a variety of global impacts. These include an increase in the global temperature by 1.2°C, melting of glaciers and rising sea levels, an increase in the occurrence of extreme climate events like floods, earthquakes, etc., acidification of oceans due to the increasing CO2, and many more. The increasing frequency and intensity of storms is also the result of climate change, as it affects the hydrological cycle of the planet. The unprecedented rains that caused the 2022 Pakistan floods, 2017 Bangladesh floods, 2021 European foods, and many more such events affecting millions of people are also a consequence of climate change because rising temperatures have intensified the monsoons, resulting in heavy and more frequent rains. While some parts of the world drown as a consequence climate change, other areas face drought and heatwaves. The summer of 2024 saw the nation’s capital experiencing an alarmingly high temperature of 52.9° Celsius[1]. In other parts of north India also, the temperature went above 45-47 °C, making it the worst summer in the last 120 years. Because of the increasing temperature, the world is facing frequent wildfires; for example, California experienced 6,378 wildfires in 2024, which burned around 1 million acres of forest.
Governments around the world have taken various steps towards mitigating the climate change problem. Various summits have been organized, such as the UN Conference on Human Environment (1972), the United Nations Conference on Environment and Development (1992), the World Summit on Sustainable Development (2002), etc.[2] Numerous pacts have been signed, such as the Paris Agreement, UN Framework Convention on Climate Change (UNFCCC), Kyoto Protocol, Montreal Protocol, etc. But these measures are not enough. Because of the increasing privatization, more and more resources are being used by the corporate world. And during the process of using these resources, their contribution to the already worsening climate change crisis increases. The Carbon Majors Report (2017) found out that over 70% of the greenhouse gas emissions since 1988 were caused by just 100 companies, most of which were private fossil fuel firms[3]. So, it becomes very important to hold the corporate world accountable for its actions. Various legal frameworks and laws are already in place to hold the private world accountable. But a lot more can be done in this direction. In this article, we will deal with the existing legal frameworks and discuss possible steps that can be taken to achieve corporate accountability in mitigating the risk of climate change
CORPORATE SOCIAL RESPONSIBILITY
Accountability means when an individual or an organization is under an obligation to justify or to be answerable to the general public or to those who are being affected by their actions. It refers to taking responsibility for one’s own actions and accepting any consequences based on those actions. Corporate Social Responsibility is a voluntary act that a company undertakes for the betterment of the society. But it is a mandatory requirement for certain companies. There are certain provisions for the same in India. The Companies Act, 2013, Section 135, governs corporate social responsibility (CSR) in India. This provision requires certain companies to spend at least 2% of their average net profits on CSR activities each year. The companies need to meet certain financial criteria to be included in this provision like their Net worth should be more than Rs.500 crore and their turnover must be more than Rs.1000 crore and their Net profit should be more than Rs.5 crore. As stated by Lord Sieff, the former chairman of marks and spencer plc:-“ Business only contributes fully to a society if it is efficient, profitable, and socially responsible.”[4] It can be understood as Corporate social responsibility refers to the concept that besides making profit, companies should also be socially responsible. It should take into cognizance the social, environmental, and ethical concerns before any decision making.
Why do companies need to take corporate social responsibility?
As stated by Wood:-“ The basic idea of CSR is that business and society are interwoven rather than distinct entities.” It can be further elaborated as there is interdependence between business and society in the need for a stable environment[5]. Companies need to engage in Corporate Social Responsibility(CSR) for a multitude of complex and multifaceted reasons such as Reputation Management and brand Equity. Now- a-days consumers are preferring those brands that are socially and environmentally responsible. CSR initiatives can enhance a company’s reputation and can foster loyalty among these environmentally conscious consumers. It helps in good market positioning and differentiation. It gives the company an edge over its other competitors. It will result in long-term profitability and performance due to enhanced reputation and customer loyalty. Investor Relations and Financial Attractiveness is also one of the reasons. Investors decide to invest in a company on the basis of Environmental, Social, and governance (ESG) criteria. So, a company with a pronounced CSR commitment is more likely to attract a larger investment base. Long term Sustainability is also one of the factors that needs to be taken care of. CSR practices mainly involve sustainable practices, which emphasizes on resource optimization that will benefit the company in long term cost savings.[6]
How Companies misuse CSR?
There are various ways through which companies misuse CSR. Greenwashing is one such malpractice. It is a misleading practice of the company that misleads the customer to think that the product he is using is environmentally friendly and sustainable, whereas in reality it is not.As per the reports Volkswagen was fined for billion dollars ($34.69 billion) for using a software in its cars that recorded lower greenhouse gas emissions. Whereas, In reality, the vehicles reportedly produced 40 times the amount of nitrogen oxide pollution permitted by US law. [7]CSR funds are also being used for political gain. CSR is being subjected to political pressure. The main goal of CSR is to allocate a small part of the company’s profits for socially responsible activities but the government is using these funds for extra budgetary spending. For example: As per the reports, for construction of the BJP’s pet project, the Statue of Unity, the funds that were needed for construction came from funds that were designated for CSR under the conservation of national heritage category.[8]
EXISTING LEGAL FRAMEWORK
Climate change is one of the biggest problems grappling with today's world. The governments of various countries are doing their best to deal with this issue. But this could not have been achieved without the participation and responsibility of the private sector. To hold the private world accountable and to make it equally responsible in the fight against climate change, governments across the world have formulated various laws. The government of India too has made many laws for regulating the private sector. One such act is the Environment Protection Act, 1986 which states that any person carrying on any industry shall not discharge or emit any environmental pollutant in excess or such standards as may be prescribed. This act also seeks to punish any company who contravenes any of the provisions of this act by levying a fine which may be between 1 lakh to 15 lakh rupees. Air pollution is one of the root causes of climate change crisis[9]. The Air (Prevention and Control of Pollution) Act, 1981 is a law made by the Indian government to control air pollution. This act states that any person who is operation an industrial plant in any air pollution control area shall not discharge or cause the emission of any air pollutant in excess of the standards laid down by the State Board under clause (g) of sub-section (1) of section 17[10]. Climate change is a global issue and efforts from all the countries across the globe are required to mitigate it. Paris agreement,2015 was one such step taken in this particular direction by the countries. It is a legally binding international treaty on climate change. Its main aim is to curb the emission of greenhouse gases and help countries to adapt to climate change. In order to mitigate climate change and to address all the problems related to it, there was a dire need for a platform where all the parties can come together and discuss and decide on how to address all these issues related to climate change. Conference of parties (COP) is one such platform. It is a series of meetings held by the United Nations. Recently COP28 was hosted by the United Arab Emirates in Dubai
PROBLEMS WITH THE EXISTING LEGAL FRAMEWORK
Even though India has worked towards developing an efficient legal framework to mitigate the climate change crisis, the results are not satisfactory. There are various loopholes in the existing legal framework. The companies identify these loopholes and escape the responsibility that they have in mitigating the climate change crisis. India’s approach towards mitigating the climate change issue is largely policy driven. It means that the legally binding measures are very less and the companies are required to fulfil their responsibilities on a moral basis. On top of that, there is no separate legislation for climate change in India. The existing few laws face the problem of poor implementation due to a corrupt and lax system. To establish a more accountable and responsible corporate sector India urgently needs to find solutions to these problems
SOLUTIONS
India needs to take certain measures to mitigate the impact of climate change. The Government of India should take adequate measures to address this burning issue of climate change. The Supreme Court of India in MK Ranjitsinh and Ors Vs UOI and Ors, recently acknowledged that the fundamental right to Life and Equality includes the right against the adverse effects of climate change. [11]So, the Government should take adequate measures to address this issue. The government can take various measures to address the issue of climate change by changing their policies and by actively participating in resolving these issues. Such as, The government of India should shift the financial flows and investment from coal and fossil fuel based industries to green and renewable energy based industries, just like Denmark. As, Financial support is the backbone of any industry, this financial support will help in the development of green economy. Also, India has a goal to achieve net zero emissions by 2070, and for this the Government cannot do everything on its own, the private sector would need to contribute to this. For this reason, the government should legally bind industries to comply with the goals assigned to them. Companies cannot be trusted to adhere to those goals just on moral grounds, binding legal force is required. When companies will feel the pressure and force of legally binding legislation, they will be obliged to comply and fulfill the goals, which otherwise they would have taken for granted. The government should also give incentives to companies who meet the goal of climate change. This will further encourage those companies to adhere to these goals. The government should also penalize those companies who fail to adhere to the guidelines or goals assigned to them, just like Japan. There should also be a legally binding rule on the companies to submit a carbon emission report annually to the government, and the government should make a separate body to assess this report and keep a check on the companies that adhere to the goals assigned to them. This will compel the companies to take cognizance of the environmental effects of the decisions that they make. This will lead to a more sustainable and environment- friendly approach from the company side.
[1] https://www.business-standard.com/india-news/sweltering-heat-directs-attention-at-disappearing-spring-in-country-124060200229_1.html.
[2] The Sustainability Level of an EcoVillage in the Upper Citarum Watershed of West Java Province, Indonesia, https://www.mdpi.com/2071-1050/15/22/15951 .
[3] (July 17, 2017), https://cdn.cdp.net/cdp-production/cms/reports/documents/000/002/327/original/Carbon-Majors-Report-2017.pdf.
[4] Moir, L. (2001), "What do we mean by corporate social responsibility?", Corporate Governance, Vol. 1 No. 2, pp. 16-22. https://doi.org/10.1108/EUM0000000005486
[5] Moir, L. (2001), "What do we mean by corporate social responsibility?", Corporate Governance, Vol. 1 No. 2, pp. 16-22. https://doi.org/10.1108/EUM0000000005486
[6] Bacinello, E., Tontini, G. and Alberton, A., 2021. Influence of corporate social responsibility on sustainable practices of small and medium‐sized enterprises: Implications on business performance. Corporate Social Responsibility and Environmental Management, 28(2), pp.776-785.
[7] Tamara Davison, Greenwashing Examples : The 9 Biggest Fines Given to Companies, (Feb. 8, 2024), https://blog.cleanhub.com/greenwashing-examples.
[8] Using CSR Funds for Political Gain, https://thewire.in/business/modi-government-csr-political-gain.
[10] Global Toolbox Climate Change and Environmental Law Statutory Provisions Sources of Law, https://www.biicl.org/global-toolbox-1a-4-sources-of-law.
[11] Jatinder Cheema, Supreme Court of India bolts Right To Life with climate justice, (May 6, 2024), https://energy.economictimes.indiatimes.com/news/renewable/supreme-court-of-india-bolts-right-to-life-with-climate-justice/109874429.
Very informative. good work by the authors.