Caroline May, partner and head of Hammonds' safety, health and environment group and professional support lawyer Julie Lunt explain changes to legislation governing access to environmental information
The first of January 2005 sees a high point in public access to environmental information held by public bodies and others. It is when the Freedom of Information Act 2000, the Environmental Information Regulations 2004 and the proposed reporting requirements as envisaged in the Operating and Financial Review are expected to become effective.
This follows recent changes to corporate governance reporting requirements set out in the Combined Code for Listed Companies. But will these changes lead to a brave new world of transparency as the government hopes?
In recent years there has been a move towards increased environmental reporting, particularly by larger companies. This has been driven by a shift in the attitude from the financial sector and others including:
Organisations that aspire to being good corporate citizens, whether publicly quoted, privately owned or in the public sector may look to the code and the guidance in the Turnbull Report to see how to achieve a better standard of reporting and transparency.
The code was published in July 2003. It contains a series of principles and provisions intended to improve the governance of companies listed on the UK stock exchange. In addition to the formal provisions of the code, listed companies are encouraged to adhere to related guidance.
Principle D2 of the code states that: “The board should maintain a sound system of internal control to safeguard shareholders investments and the company’s assets.”
The code is often seen as a benchmark for multinational companies which may not be listed but operate in the UK and Europe. The Turnbull Report’s guidance on internal controls was produced by the Institute of Chartered Accountants. One of the report’s recommendations is that listed companies should meet certain reporting requirements and in particular make a public statement regarding internal controls. It states that these should be “meaningful, high level and not give a misleading impression”.
Many companies already voluntarily disclose environmental information. This may be via accredited environmental reporting systems such as EMAS or ISO 14001, or through their own internal controls. Other organisations will have to meet mandatory site-specific reporting rules which require them by law to report to the Environment Agency or other regulator on emissions from their premises. Companies involved in Climate Change Levy Agreements or emissions trading will also be required to report environmental performance information to the relevant authorities.
Since 1992, the public has had a statutory right of access to environmental information held by public authorities and certain other bodies. In January 2003 this right was strengthened further with the introduction of a new European directive which takes account of advances in technology and reflects international developments in access rights, in particular the UNECE Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters and building on the experience of the earlier regime. Member states have two years to transpose the 2003 directive.
Key elements of Aarhus
The Aarhus Convention seeks to strengthen the role of the public and environmental organisations in protecting and improving the environment for the benefit of future generations. The three key elements of the convention are access to information, public participation and access to justice in environmental matters. It advocates allowing the public access to environmental information to enable them to properly understand the issues and through being informed, to be involved in the decision-making process.
The government made a manifesto commitment to the freedom of information and to greater openness and transparency, its rationale being that if the public can obtain information more easily it will be able to understand more fully the consequences of proposals such as the location of incinerators, and hence participate more effectively in the decision-making processes that affect them.
General right of access to information
The FOI Act, which relates to information other than
environmental information, will come fully into force on 1 January 2005. It introduces a general right of access to information held by public authorities, but also includes a provision (at Section 74) enabling the information and associated access to justice provisions of the Aarhus Convention to be met by providing for the introduction of new environmental information legislation. In accordance with this provision the UK government has produced draft regulations, the Environmental Information Regulations 2004, which will also take effect on 1 January. These regulations effectively also implement the 2003 directive into UK legislation.
The focus of both the FOI Act and the Environmental Information Regulations falls primarily on giving the public access to information held by public bodies and
organisations carrying out public functions (which would include the privatised utility sector).
A very broad range of information falls within the
classification of “environmental information” for the purposes of the regulations. It includes, for example, information on the state of the environment, environmental policies and agreements (including the economic analysis/cost benefit of such measures) and information on the state of human health and safety, the food chain, cultural/built structures and the conditions of human life where they are affected by environmental factors such as acid rain.
The new regulations will:
The presumption is that information should be disclosed unless there are compelling reasons to withhold it. However there are exemptions to this including where the release would adversely affect international relations, defence, public security, the course of justice and commercial confidentiality.
If the information request is refused, the organisation refusing to release it must put in writing the basis of the refusal. The refusal can be challenged, initially to the organisation refusing the request and, if the applicant is still not satisfied, subsequently to the information commissioner.
The commercial confidentiality grounds are likely to be the most consistently challenged as competing organisations and NGOs challenge for disclosure of potentially sensitive or commercially valuable information. Even companies which are not carrying out “public functions” are likely to come under pressure to release environmental information. To fail to do so could affect share price as adverse publicity means loss of credibility with both the public and investors.
A greater onus will be placed on businesses to be honest in their reporting and to show that they are taking the environment seriously. Combine these broader powers with the reporting requirements introduced by the Combined Code and the OFR and you have a very wide remit by which environmental performance and credibility can be exposed. It may also affect tender/procurement processes as customers are able to check on potential suppliers.
Many commentators welcome the changes and see them as part of an open and transparent information utopia with access to a raft of information should you be seeking to expose a supposedly “green” organisation for destroying the rain forests or depleting the ozone layer. Hostile takeovers and bid situations may also see competitors seeking information on one another from the regulators to discredit competitors or reduce asset values. Companies must decide whether to embrace these changes and be as open and transparent as the code, the OFR, the FOI Act and the regulations envisage.
If companies want to maintain their reputation and reassure investors, then “openness” and “transparency” would appear to be the best approach. Paying lip service to the rules could be costly. As ever, the well informed will develop a reporting technique which meets regulatory and commercial interests. For those who get it wrong the consequences may be severe.