Should senior managers be held personally responsible for environmental and “human rights” damages caused by the companies for which they manage? A recent article in MIT Sloan Management Review considers the growing trend of liability of directors and officers (D&O) at companies as it relates to environmental damages and climate change.

Much of the focus of the MIT article is on how managers at major energy producing companies (“Carbon Majors”) could face liability for a myriad of planetary and social ills associated with climate change. Is this just the tip of the melting iceberg?

Environmental Liability Resulting in Prison and Fines for Senior Managers

In reality, for senior managers, these concerns are not hypothetical, nor are they just related to carbon emissions and the climate. Stephan Schmidheiny, who took over as head of the Swiss Eternit Group, a manufacturer of asbestos products, is now facing 18 years in prison. In 2012, Schmidheiny was convicted of “causing an environmental disaster through negligence, and of knowingly failing to introduce adequate health and safety measures” (“knowingly” putting the health of workers at risk will gain you few supporters).

While some may consider asbestos to be “old environmental news,” what about common industrial chemicals such as trichloroethylene (TCE)? In neighboring Canada after Northstar Aerospace filed for bankruptcy, the Ministry of the Environment successfully pursued the former directors of the company. They were ordered to pay nearly $5 million dollars of their own personal money to remediate the groundwater at a site in Ontario, Canada.

 

Developing a well-thought-out strategy for environmental investigations should be increasingly important for senior managers.

As we all know, the “environmental landscape” and where regulators and activists focus their attention is constantly evolving. Further, considering the potential liability for senior managers (and anyone else that may have exposure to liability, including environmental managers), ignoring these trends is no longer an option.

Environmental Liability: Vapor Intrusion to Algal Blooms

With the seemingly rising tide of environmental concerns, some real, many perceived, there will be few senior managers that can find safe harbor if this current trend of assigning environmental liability to management continues.

So, what are these areas of potential future environmental liabilities?

Vapor Intrusion (VI) from not just active sites, but old industrial sites, comes to mind. As many are aware, the action levels for VI are becoming increasingly conservative; many would argue that federal regulators are being unrealistically conservative. Nevertheless, there are countless sites across the country where VI may be a liability concern.

I personally don’t think it’s just smokestack industries that should be wary of this trend of tying environmental liability to senior managers. Remember this past summer when the algal blooms in Lake Erie forced people to use bottled water in and around Toledo, Ohio? Could senior managers for municipal governments with wastewater treatment plant (WWTP) discharges be targeted? What about the industries who discharge to those WWTPs? Should senior managers at farm co-ops, who buy from farms and process the food for consumption, be concerned if farms are targeted as a non-point source of discharge?

So what are we to do with all this “encouraging and uplifting news?” I’ll offer two personal conclusions.

First, I think we need a perspective check; let’s focus on the real environmental risks (and there are many). Mankind’s advancements have allowed us to live a life of unparalleled comfort and leisure, and, while I’m pro-environment, I’m also pro-human. To quote author Diane Ackerman, let’s not lose perspective of mankind’s “wizardry of industrial and medical marvels…”

Second, outsourcing environmental compliance, assessment, and environmental issues in general to “just a vendor” rather than a trusted team of advisors is increasingly unwise. And while it may be self serving to say so, my colleagues at Dragun are exceptional advisors, and this is exactly why we have been trusted on some rather consequential projects.

As always, we’ll keep an eye on this and other environmental issues and do our best to keep you informed. In the meantime, if you have a question or concern about an environmental issue, please feel free to contact me at 248-932-0228, ext 134, or by email at ahahn@dragun.com.