Green is no longer optional

Businesses and organisations remain largely unaware of the full implications of the Environment Liability Directive now in force, according to Mark Brumwell

In the Ray Bradbury story ‘A sound of thunder’, time travellers who stood on a butterfly’s wing affected the course of history. In the same way, legislation is now calling to account all businesses whose operations might affect the environment. To avoid any doubt, that’s all businesses. The EU Directive on Environmental Liability, which came into effect in May 2007, spares no-one the burden of responsibility for any changes they may deliberately – or inadvertently – cause in the world about them.

And for anyone who still thinks their business is too small, too pure or too administrative to be affected by the new legislation, let’s be clear – it is almost impossible to do any sort of business and not have an effect. The legislation now goes way beyond previous laws affecting just contamination, to cover causing almost any form of ecological change whatsoever.

The directive is extremely wide-ranging, covering land contamination where it affects human health, protected species, natural habitats, water and ecology. And it brings a raft of new obligations for dealing with the unowned environment. The directive requires organisations to make effective restitution where their operations pose any environmental challenge. And for an environmental lawyer, the biggest current challenge is how to deal with assets which have never before been valued – in financial terms at least.

Putting a value on wildlife

For example, how do you value the loss of an otter’s habitat in order to make appropriate restitution? How do you value the loss of one acre of natural habitat for a wild orchid, or a moth? Prevention is better than cure, and the directive urges companies to actively preserve the ecological status quo. It is therefore imperative all businesses make themselves aware of their responsibilities, and they should be actively assessing the potential impacts of the new legislation.

A whole new category of environmental economists is starting to emerge to deal with the challenge of the new legislation. They will carry out impact assessment studies, and work out the financial costs of any proposed development with an environmental impact. They will also put a value on appropriate restitution where any new-build or business development causes unavoidable change to the area in which it will operate.

There are no plans at present to make the legislation retrospective. But, as of now, any organisation or company should be in no doubt that their environmental responsibilities are now legal responsibilities. Any business plans should include an assesment of environmental impact, backed by an analysis of any additional costs which might be entailed. Case law is almost non-existent at the moment. But there are past cases suggesting that for every hectare of land deforested, for example, one-and-a-half hectares should be replanted.

Where more complex changes cannot easily be replaced, the proposed standards have generally been tougher, and we have seen ratios of compensation as much as 4:1. Roughly speaking, there are three types of restitution covered by the directive:

  • primary – where conditions can be restored to their original state following interruption by human intervention
  • complimentary – where the original site may suffer change but investment is made elsewhere to effectively compensate for this change. For example, creating an alternative habitat and moving species affected
  • compensatory – where losses of natural resources cannot immediately be dealt with, companies may incur further charges to provide interim measures to minimise environmental disruption. This may be particularly significant in larger civil engineering projects when there is a need to have a large site presence during construction.

The detailed obligations of the directive suggest that a much more sophisticated approach will be needed than we have seen in the past for the valuation of the lost or damaged environment, and the required restitution measures. Valuations based on environmental economics are likely to become more prevalent. The body that will apply these sanctions in the UK is still being debated, with the likely front-runner being the Environment Agency. The new legislation does have teeth, however, and it is not just something on the horizon. The legal responsibilities under the directive are real and apply already, even though the implementing UK regulations have not yet been introduced.

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