Environment & Business – review of the year 2005

2005 is likely to be remembered by the environmental business community for Gordon Brown's shock announcement that Government was scrapping the Operating Financial Review just months before it was due to come into effect but there have been plenty of other changes for the number crunchers to get their teeth into.

The doomed OFR followed a familiar path through 2005.

First, there was the anticipation, even excitement, that the Government was effectively going to legislate for CSR, forcing the big players to behave by obliging them to report on their social and environmental impact (see related story).

With OFR on the horizon, the engines of industry began gearing up for it with many recognising the value of being ahead of the game (see related story) and large, in some cases massive, amounts of money was invested in the preparation.

Then, as the year drew to a close, came Gordon Brown’s bombshell – actually, scrap that idea, we won’t have OFR after all as responsible business can regulate itself (see related story).

Even industry was flabbergasted, on the one hand pleased the burden had been removed, on the other more than a little annoyed that significant sums had been wasted on complying with legislation that had now been unceremoniously dumped.

Environmental campaigners took it further, saying they would mount a legal challenge against the Chancellor who they argued had no right to scrap the review without following due process (see related story).

November brought further disappointment for campaigners with the publication of Government’s draft Company Law Reform Bill.

While green lobbyists had been pushing for directors to be given a duty of care holding them responsible for their company’s environmental and social impact, the draft legislation asked them to take these things into consideration but did not make it a legal obligation to do so (see related story).

Although the year might have ended at a low ebb, it had not been all doom and gloom.

There had been sure signs that Corporate Social Responsibility had continued to raise its profile in the financial sector and everyone from insurers to investors was beginning to wake up to its potential importance and the damage that could be done by industry that failed to protect the environment (see related story).

Encouraging words from UK Pensions Minister Stephen Timms may have also helped the cause of CSR, as he argued it made sound financial sense to invest in companies which could demonstrate they behaved responsibly as they had less of a reputational risk than those which could not ( see related story).

The year will also be noted for a growth of grassroots activism in the developing world and an indication its peoples will not settle for deals imposed on them by the IMF or accept the unchallenged wealth and power of the huge multinationals that operate within their borders.

Bolivia saw riots over the privatised water supply while Venezuela reined in the energy giants, tearing up existing contracts and rewriting them, making the government the majority partner in all oil and gas extraction projects rather than giving the companies a free hand.

Chevron found itself in court as Nigerian villagers alleged the oil company had paid soldiers to kill those who had complained about its operations in the Niger Delta (see related story).

In Tanzania the government unexpectedly terminated a contract with international consortium City Water, claiming the private partnership had not done enough to improve the water and sewage network to justify the money it had received (see related story).

Coca Cola also ran afoul of the authorities, this time in India, where the long-running dispute over pollution and excessive water use at one of its plants in the state of Kerela led to the facility’s closure (see related story).

And it was not just in the developing world that soft drinks mega-corporations were in trouble. Back in the USA a Seven-Up subsidiary received a record US$1m fine for failing to tackle pollution problems at a riverside plant (see related story).

But even this mammoth fine was dwarfed by that handed to a little-known shipping company, MSC Ship Management Hong Kong, which was forced to pay a staggering US$10m after a Coast Guard inspection of a ship in Boston Harbour discovered a ‘magic pipe’ – a device designed to actively pump oil sludge and other pollutants into the ocean when travelling between ports (see related story).

Closer to home Henderson Global Investors published the estimated carbon emissions of FTSE 100, showing that Shell topped the chart by producing almost a quarter of the total of that emitted by all the listed companies.

Taken together oil & gas, electricity, mining, steel and leisure generated 85% of the total, despite netting nowhere near that figure in terms of market share (see related story).

By Sam Bond

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