Get tough over environment laws

THE Centre of Environmental Rights (CER) has urged shareholders of Jse-listed mining companies, including Glencore, a global diversified commodities giant, to ask tough questions to mine bosses to get a clear picture of legal environmental compliance.

The CER, which represents non-governmental organisations including Earthlife, said this week that when companies break environmental laws, they expose all stakeholders, including shareholders, to serious risks.

“Shareholders must challenge companies on their environmental compliance records, and on their failures to disclose relevant information, to avoid the financial and reputational repercussions of ignoring these issues, and to meet their commitments on responsible investment,” the CER said.

It said that during the assessment period for its Full Disclosure 2016 report, Glencore, South32, Kumba Iron Ore and Coal of Africa Limited (COAL) had either failed to disclose serious violations of environmental laws in their annual reports, or referred to them using vague language.

It said its full disclosure findings demonstrated that the lack of standard reporting requirements for environmental compliance by companies was an enormous impediment to the integration of environmental, social and governance factors into investment decisions.

“A company’s track record of compliance with environmental laws is one of the most important indicators of the environmental risk posed by that company’s operations,” it said. In South Africa, however, each company was free to report to investors on its environmental compliance in any way it saw fit.

It also said this made it extremely difficult to assess the environmental risks posed by a particular operation, or to compare companies’ environmental compliance, and as a result these issues were often ignored. “This reinforces the perception held by many South African companies that investors do not pay attention to environmental reporting. The plethora of integrated and sustainable reporting frameworks used by companies in their reporting appears, despite good intentions, to have made this problem worse,” the CER said.

South African-listed companies still base their decisions about environmental compliance disclosures predominantly on assessments of the potential financial implications for the company and its investors, for example, on whether a particular violation would result in significant financial cost to the company.

Among the major problems with this approach was that environmental non-compliance did not always result in immediate financial outlay, it was extremely difficult to quantify environmental harm in monetary terms and the South African environmental regulatory regime did not yet use a system of administrative penalties which enables the regulator to impose fines on companies for violations of environmental laws.

“Violations are dealt with by way of compliance notices and directives, and as a last resort, criminal prosecution, which has relatively small maximum fines available. Until this system is changed, South African authorities will not beable to impose a financial penalty for environmental violations that will be regarded as significant by investors, regardless of the extent of the damage or the seriousness of the violations.”