Update on director’s liability

J.M. Madeleine Donahue, a senior partner with the law firm Norton Rose Fulbright, has published a useful paper updating the liability situation for corporate directors in Ontario. The news, at least for directors, is not good. Her paper is titled Environmental liability of directors — lingering uncertainty.

A recent case involving Northstar Aerospace has complicated the advice on directors’ liability that came out of the Bata Industries case in 1992. The Bata case established a “minimum due diligence profile” under which, to avoid personal liability, directors were expected to take steps to ensure that their company was following a reasonable level of environmental performance. Now the Northstar case has thrown that situation into some doubt.

The Northstar situation relates to a contaminated industrial site in Cambridge, Ontario. Ms. Donahue states that what differentiates Northstar is most of the directors had not been directors when events leading to the Cambridge site contamination took place or at the time Northstar began to actively monitor the site’s contamination. Many directors had resigned before the MOE issued orders requiring them to carry out the remedial work at an estimated annual cost of $1.4 million ($15 million overall). Some were not even on the Northstar Canada board. For example, one was an innocent independent director of a publicly traded parent company. According to the MOE the “fault” of the Northstar directors was failing to anticipate the insolvency or allowing the filing under the Company’s Creditors Arrangement Act without the remediation being dealt with, and neglecting to set aside any funds for a 10-year remediation program.

Norton Rose Fulbright suggests the following conclusions from the Northstar case:

  • The Ontario Ministry of the Environment is willing to look to current and former directors of Canadian companies and their corporate parents to fund remediation of seriously contaminated sites, particularly in insolvency and bankruptcy situations where the public interest warrants.
  • The MOE has argued in more than one case that director and officer liability does not require any proof of fault. It flows from the mere fact that they are, or were, directors and officers. They have the onerous burden of proving they lacked personal management or control over the assets of a corporation and if they cannot do so, they may be held liable.
  • Corporations need to evaluate and estimate future costs of remediation of their sites and of off-site impacted properties and arrange some form of financial assurance to ensure funds will be available to address the contamination before issues about the financial viability of the corporation arise.
  • According to the Environmental Review Tribunal and the Ontario Ministry of the Environment, the issue is not so much whether directors and officers maintained “management and control” to the present time, but whether the environmental risk present when they did have management and control persisted to the present time.
  • “Fairness factors” may take a back seat to having innocent parties remedy environmental contamination when the responsible polluters are deceased, bankrupt or wound up.
  • The applicability of the Northstar precedent in jurisdictions other than Ontario is difficult to assess at this stage.

It is suggested that companies requiring advice on these issues consult with their legal team. The Norton Rose Fulbright discussion paper is more comprehensive than the summary presented here and may be found at http://www.nortonrosefulbright.com/ca/en/knowledge/publications/109233/environmental-liability-of-directorslingering-uncertainty

Environmental engineer proposes an updated approach to drinking water quality management

For the last 20 years the California-based National Water Research Institute has awarded the Clarke Prize, a medallion and $50,000, to an individual in the U.S. who has implemented better water science research and/or policy development to solve real-world water challenges. This year’s winner is Rhodes Trussell, Chairman and CEO of Trussell Technologies, Inc., an environmental engineering consulting firm based in Pasadena, California.

NWRI considers Dr. Trussell to be an authority on a vast number of treatment technologies, ranging from conventional treatments such as filtration, disinfection, and biological processes, to advanced treatment such as membranes and advanced oxidation. He is the author of peer-reviewed articles and technical reports on all of these topics, including the textbooks MWH’s Water Treatment: Principles and Design and Principles of Water Treatment. He has also worked on hundreds of water and wastewater engineering projects across the globe, and has developed the process design for treatment plants ranging in size from 1 to 900 million gallons per day in capacity. Because his focus is on implementing practical solutions to improve water quality and meet regulatory and public health needs, his efforts have resulted in better water policy and the widespread adoption and acceptance of many new treatment technologies.

Recipients give a lecture on a topic of their choice to the award ceremony. Dr. Trussell chose the topic How Safe Is Safe in the Treatment of Drinking Water for the Public? He provided an overview of the topic relative to both the growth of human commerce and the development of our scientific understanding. He said that the new era calls for a hybrid of the precautionary approach because, if implemented in a simple way, the Precautionary Principle could quickly deplete resources to solve problems that may not ultimately prove important. He suggested that there are four principles that environmental engineers might adopt as guidelines:

  1. We should generally agree that we prefer not to have these man made chemicals in our environment or drinking water.
  2. We should recognize that this first principle is not universally achievable; therefore, we need a screen to help make intelligent investments and decisions before settled science is available.
  3. In the treatment of both drinking water and wastewater, we should seek continuous improvement, implementing affordable broad spectrum treatment technologies as they become available.
  4. We should find substitutes for man made compounds that persist through our treatment processes and in the water environment, giving priority to those with adverse effects.

He went on to say that of the four guidelines, the second – developing a screening process for toxics – is arguably the most important and most difficult to achieve. The need for a screen that can be used before settled science is available, however, leads to an essential question: Does the dialogue in the drinking water community need a new, more robust discussion on the questions of risk and when water is safe? As a society, when we gather scientific data about what our collective risks are, we reach agreement easily.

For example, data from the Centers for Disease Control and Prevention (CDC) (CDC, 2012) show a U.S. citizen’s risk of dying from heart disease is about 24 percent, and the risk of dying from cancer is about the same (23 percent). But when we have a community or national discussion about the appropriate level of risk to which each citizen should be exposed as a result of a public service, such as the provision of drinking water, consensus is much harder to find. So far, where both environmental risk and risks associated with drinking water are concerned, our industry generally tries to engage the public in a discussion about the risk on the outcome side of a proposed project, attempting to find what risk is acceptable. The problem is one of communication.
When an engineer or scientist seeks to understand the safety of alternative outcomes, he or she normally begins by estimating the level of risk. For the layman, however, seeking safety is about avoiding risk altogether. Better bridges must be built between the scientist’s understanding of risk and the layman’s understanding of safety. That bridge might be the concept of de minimis risk. The term comes from the Latin “de minimis non curat lax,” or “the law does not concern itself with trifles.” A de minimis risk, then, is a risk that is too small to be concerned with. Someone exposed to that risk is considered “virtually safe.”
While most agree on the de minimis principle, there are often strong disagreements in specific circumstances as to what level of risk is, in fact, de minimis. For the public to accept the decision, the specifics cannot be resolved by science alone and are usually decided by an accepted authority, a regulator, court of law, or organizations like the National Academies.

Dr. Trussell’s lecture also includes discussion of considering both pathogens and anthropogenic chemicals in a similar framework as “Chemicals of Concern”.

He concluded his lecture by saying:

“Conquering waterborne disease was one of the greatest accomplishments of the Twentieth Century. Beyond treatment, our Twentieth Century paradigm was to seek natural water sources that had not been contaminated. The trace organic compounds we now see in drinking water are harbingers of a new era where the growth of population and commerce make the natural water paradigm increasingly unworkable.
Where trace organic chemicals are concerned, a new paradigm is needed for safe water. Ultimately, conventional regulations must be expanded to more effectively address impaired sources, but our traditional approach of risk assessment and regulation is too cumbersome to deal effectively with this new age. We should examine the Precautionary Principle to see if we can implement a more proactive approach.”

The entire Clarke 2013 lecture is available at http://www.clarkeprize.com/resources/2013_Clarke_Prize_Lecture2.pdf

Questions about sucralose

A review paper published recently in the Journal of Toxicology and Environmental Health, Part B: Critical Reviews raises potentially interesting concerns about the sweetener sucralose, often known by the brand name Splenda. Sucralose is used in a wide range of consumer foods and beverages including diet soft drinks. It was first approved for use in food products in Canada in 1991.

The article, which cites 476 scientific papers, indicates the following potential risks as being among those which warrant further study:

  • early studies asserted that sucralose passes through the gastrointestinal tract (GIT) unchanged but subsequent analysis suggested that some of the ingested sweetener is metabolized in the GIT. The identity and safety profile of sucralose metabolites are not known at this time.
  • sucralose and one of its hydrolysis products have been found to be mutagenic at elevated concentrations in several testing methods.
  • cooking with sucralose at high temperatures has been reported to generate chloropropanols, a potentially toxic class of compounds.
  • at doses approved by the FDA and EU, sucralose has been shown in studies on male rats to reduce the bioavailability, and hence presumably the effectiveness, of therapeutic drugs.
  • sucralose has the potential to bioaccumulate in a variety of animal species and tissue types.

Other research, for example see http://link.springer.com/article/10.1007/s00216-009-2881-y#page-1 , suggests that sucralose, much of which is excreted by humans, and/or its metabolites are not significantly removed by sewage treatment plants and, due to their slow biodegradation, concentrations may be increasing in surface waters around the world.

The authors of the Journal of Toxicology and Environmental Health article propose that further scientific research is warranted due to these potentially significant findings. The article can be found at www.tandfonline.com/doi/full/10.1080/10937404.2013.842523

Ecosystem services and real-world decisions

A recent paper describing experiences in situations where the concept of ecosystem services has been applied to biodiversity (biodiversity and ecosystem services: BES) may provide guidance in how to apply this relatively new concept to a wide range of environmental and sustainability decision-making. Ecosystem services are those benefits, such as water, air, and natural composting that are provided to humankind by ‘nature’.

The paper’s authors, led by Mary Ruckelshaus of The Natural Capital Project, Department of Biology and the Woods Institute for the Environment at Stanford University, find that

  • applying a BES approach is most effective in leading to policy change as part of an iterative science-policy process;
  • simple ecological production function models have been useful in a diverse set of decision contexts across a broad range of biophysical, social, and governance systems. Key limitations of simple models arise at very small scales, and in predicting specific future BES values;
  • training local experts in the approaches and tools is important for building local capacity, ownership, trust, and long-term success;
  • decision makers and stakeholders prefer to use a variety of BES value metrics, not only monetary values;
  • an important science gap exists in linking changes in BES to changes in livelihoods, health, cultural values, and other metrics of human well being; and
  • communicating uncertainty in useful and transparent ways remains challenging.

The cases studies reported in the paper range from modelling of vulnerable areas to understand the protective services and values of particular habitats on Vancouver Island to management of a ‘water fund’ (a means for water users to pay upstream land managers to improve watershed management as a way to regulate water flows and provide natural filtration for water quality) in Colombia.

Practitioners interested in advancing the ecosystem services approach in Canada, for example the Ontario Network on Ecosystem Services, see http://www.onecosystemservices.ca , are facing challenges arising in part from a lack of understanding of the concept. This paper may be of significant interest not only to practitioners but also to businesses interested in applying the ecosystem services approach to development and conservation activities.

The paper is currently available as an article in press for The Transdisciplinary Journal of the International Society for Ecological Economics at http://www.sciencedirect.com/science/article/pii/S0921800913002498

Exaggerating employment from fracking

A just-published study from the Multi-State Shale Research Collaborative, a group of independent, nonpartisan research and policy organizations in New York, Ohio, Pennsylvania, Virginia, and West Virginia, tells us something that many readers probably already suspected: that industry claims of the number of jobs to be created in the fracking industry are greatly exaggerated. The most interesting part of the Collaborative’s report is that a non-governmental organization in the labour market statistics business is undertaking this kind of analysis. Proponents of large projects promising multitudinous new jobs might be well advised to take note that a similar well-researched challenge could be coming their way.

Findings include:

  • While shale-related employment has made a positive contribution to job growth, the number of jobs created is far below industry claims and remains a small share of overall employment in the region.
  • Many of the core extraction jobs existed before the emergence of hydrofracking.
  • Drilling is highly sensitive to price fluctuations, which means that job gains may not be lasting.

The 32 page report leads a member of the Collaborative to claim that “Industry supporters have exaggerated the jobs impact in order to minimize or avoid altogether taxation, regulation, and even careful examination of shale drilling,” Another spokesperson is quoted as saying “Shale drilling has made little difference in job growth in any of the six states we studied. We know this because we now have data on what happened, not what industry supporters hoped would happen.”

The report, and a press release which includes a summary of findings, are available at http://www.multistateshale.org/

IKEA Canada purchases Canadian wind farm

IKEA Canada, the flat pack furniture retailer, has announced that it has purchased a wind farm in Pincher Creek, Alberta, that will produce more than double the total energy (we suspect they mean total electricity, not total energy) consumption of IKEA Canada. The 20 turbine farm  is expected to generate 161 gigawatt hours each year. It is currently being constructed by Mainstream Renewable Power using Siemens’ turbines and is expected to be fully operational in the autumn of 2014.

According to IKEA the wind farm’s expected annual production of 161 GWh is equivalent to:

  • 32 IKEA stores’ electricity consumption
  • 60 per cent of IKEA Group electricity consumption in North America
  • Eight per cent of IKEA Group electricity consumption worldwide
  • 13,500 average Canadian households’ electricity consumption

GallonDaily commends IKEA for this initiative. Too many companies, when approached by renewable energy developers, claim that ‘we are not in the electricity generation business’. Then they decline to purchase renewable power because it is seen as too expensive. IKEA Canada is demonstrating that if you are in the business of using electricity it is also a good idea to understand where it comes from and how to reduce your energy-related environmental footprint.

More information about the IKEA wind power initiative at http://www.ikea.com/ca/en/about_ikea/newsitem/wind_farm_purchase

Prince of Wales lauds industry action on climate change & sustainability

Prince Charles is well known in the UK as an advocate for corporate sustainability but his words are much less well-known in Canada. The Prince spoke at the launch of the Carbon Disclosure Project’s 2013 forests report in London yesterday. Among his key points:

  • I am particularly impressed to see such a high-powered list of people from the private, public and NGO sectors in this room today all working of course on vital matters to do with tropical forests and climate change, integrated reporting and the post-2015 sustainable development goals.
  • the devastating impact of Typhoon Haiyan in The Philippines should surely have been a poignant and telling reminder of the intimacy and interdependence of man’s relationship with the natural world.
  • when we were in India last week I visited the foothills of the Himalayas, a state called Uttarakhand, where they had the most devastating floods earlier in the year and the Chief Minister of that State bent my ear about the disaster and the problems they were having in trying to come to terms with what will probably likely to be even more extreme weather events.
  • the frequency and intensity of extreme weather events has increased, and is set further to increase, in many parts of the world, as a direct result of anthropogenic climate change.  The facts and the science are clear and inescapable,  and so before us we have a rapidly narrowing window of opportunity – as individuals, as governments, companies, nations, and as an international community – to act with the scale and urgency needed to undertake the transition towards a radically more sustainable and resilient long-term global economic model.
  • one vital aspect of a global response to climate change will, I hope, entail international agreement – coupled with decisive action – to reduce emissions from tropical deforestation and degradation.
  • I am delighted to see the progress made by developing countries in decoupling deforestation from agricultural production, and the significant commitments made by many companies to reduce deforestation in their supply chains.
  • I am convinced that a global climate agreement in 2015, with provisions for significant international payments for emission reductions from forests and land use change at its heart, would enable all the good work done to date to be consolidated and strengthened.
  • new and exciting partnerships to reduce tropical deforestation are continuing to be formed – for instance I understand that later today the U.K. Government, with the U.S., Germany, the World Bank and others will make new announcements.
  • the role of leadership and practical action from the private sector could not be more vital, and so I very much welcome today’s opportunity to hear from CDP, Unilever, Marks and Spencer and others about the efforts undertaken by many companies to understand and reduce their forest footprint as part of their broader effort to ‘measure what matters’ and to ensure integrated reporting is at the heart of their operations.
  • I have been heartened to hear of the work that Unilever and some of the world’s largest palm oil companies are undertaking to move the industry further in the direction of trade and production free from deforestation and exploitation.
  • I can only congratulate the companies involved for what they have done to date, and hope they don’t mind if I just exhort them – and all others not yet as committed – to do more to think about their impact in an integrated manner, and to sign up to further commitments.
  • In the same vein, I would hope Governments will go further in their efforts to develop integrated reporting models to pursue the ‘beyond G.D.P.’ agenda at the national level.
  • the international community has another enormous challenge before it between now and 2015: to negotiate a new set of highly ambitious post-2015 sustainable development goals, capable both of ‘finishing the unfinished business’ of the Millennium Development Goals, whilst at the same time, equally critically, enabling humanity to live within planetary boundaries and in harmony with the natural environment upon which we so wholly depend.
  • a vital role for the private sector is envisaged: one in which a wide range of private sector actors – from multinational corporations to small and medium enterprises; pension funds; banks; institutional investors; insurance companies; sovereign wealth funds – can each play a role, through taking a long-term, responsible view in delivering and investing in low carbon development.
  • things like genuinely sustainable cities – not just the “business as usual” model and a coat of “green wash”  – and resilient landscapes for people, forests and agriculture: in other words, the private sector’s role in creating ‘the world we wish to see’.  But we can only do that, I would suggest, in proper consultation with local communities so that things are done with people, rather than to them.

His full remarks are available at http://www.princeofwales.gov.uk/media/speeches/speech-hrh-the-prince-of-wales-meeting-global-sustainability-and-the-post-2015

In its next issue, Gallon Environment Letter will review the CDP’s Global Forests Report 2013 and, among other articles, will include some commentary on the outcomes of the Warsaw climate conference. For a complimentary subscription send an email with Add GL in the subject line to subscriptions@gallonletter.ca.

Cotton for clothing may be produced with forced child labour

The problem with low prices for Bangladesh-produced clothing goes beyond unsafe factories and human rights abuses in sewing factories, according to the UK-based Environmental Justice Foundation. The cotton from which clothing is produced may come from forced child labour. According to EJF:

  • In Uzbekistan hundreds of thousands of children are forced by the regime to handpick cotton during the harvest season with little or no pay. EJF states that negotiations are underway for a new multi-annual deal that could see Bangladesh importing 200,000 tonnes of cotton from Uzbekistan each year
  • In the Indian state of Andhra Pradesh, an estimated 100,000 children below 18 have been reported to work 13 hours a day in cottonseed production for less than half a euro per day. These children are often bonded by loans given to their parents, since many farmers are unable to pay the local minimum wage and advance money to parents who are then bound to send their children to the fields.
  • In Egypt, each year an estimated one million children aged between 7 and 12 work to manually remove pests from cotton plants. For periods of up to 10 weeks each year, they work 11 hours a day, 7 days a week. Abuses reported include exposure to pesticides, beatings from foremen and overwork.
  • Children across Asia and Africa may also work on family farms, a symptom of the inequity of the cotton supply chain that gives poor rewards to farmers in the developing world.

EJF reports document many of these claims and add information on the adverse environmental impacts of cotton production in developing countries. The organization is running a campaign to promote a more sustainable future for the cotton industry. More details at http://ejfoundation.org/cotton/cotton-and-child-labour  and http://ejfoundation.org/cotton/Bangladesh_Uzbekistan_import_deal

Thailand shrimp workers face human rights abuses

The Environmental Justice Foundation, a UK-based non-profit organisation working internationally to protect the environment and defend human rights, has recently published a report and a video entitled The Hidden Cost: Human Rights Abuses in Thailand’s Shrimp Industry. Many of the shrimp sold at retail in Canada are labelled as product of Thailand.

The detailed report claims that:

  • The Thai shrimp industry is heavily reliant on migrant workers, many of whom are trafficked and face arduous journeys before having to endure abusive conditions in Thailand’s exploitative shrimp factories.
  • The pre-processing stage of production, known as peeling sheds, where the heads, veins and hard shell are removed, is the most labour-intensive and least regulated aspect of an otherwise sophisticated supply chain. The informal nature of this step in the supply chain makes it particularly prone to poor working conditions, breaches of national and international labour standards, child and forced labour, exploitation and abuse.
  • Conservative estimates put the number of unregistered peeling sheds in operation at approximately 400, though Thai NGO the Labour Rights Promotion Network (LPN) puts this figure closer to 2,000.
  • Through interviews with workers, EJF documented reports of trafficking, confiscation of identification documents, withholding of pay, forced detention and bonded labour.
  • In Samut Sakhon, Thailand’s main seafood processing region, there are thought to be more than 400,000 migrant workers from Burma alone. A 2011 United Nations Inter-Agency Project on Human Trafficking report concluded that more than one third of Burmese seafood processing workers in Samut Sakhon had been trafficked into forced labour.
  • National policies that exist to facilitate legal migration and the registration of illegal migrants are short-term, conflicting and lack enforcement mechanisms. Their complexity and high costs create vulnerabilities to trafficking and deter victims from communicating with authorities.
  • Thai police and border officials frequently subject migrants – documented or undocumented – to harassment, 
  • extortion and arrest. Insiders are also known to have informed owners of abusive factories before an impending raid by Thai authorities.

The report contains extensive recommendations, including that:

  • The international community should actively consider trade embargoes on Thai shrimp in the absence of conclusive, independent evidence that action is being taken to combat human trafficking, forced and bonded labour in the industry as a whole.
  • Retailers and buyers of Thai shrimp should require 100 per cent traceability of Thai shrimp and rigorous third-party monitoring of pre-processing facilities in their supply chains. Buyers of Thai shrimp should commit to conclusively demonstrate that their supply chains are free from trafficking in persons and labour violations.
  • Retailers of Thai shrimp should provide clear and robust information to consumers on the origin of fisheries products, and the actions that they have taken to guarantee that they are not connected to human rights abuses, labour violations or environmental damage.

The 27 page report and 7.5 minute video are available at http://www.ejfoundation.org/shrimp/hiddencostfilm

UK renewable energy finance platform reintroduces green Father Christmas

According to Abundance NRG Ltd, Father Christmas was fairly slim and dressed in a green coat before Coca-Cola re-imaged him in the 1920’s. Abundance is seeking to bring back the green Father Christmas! It is a clever marketing campaign, like many of those which Abundance uses, so good that it has caused GallonDaily to tell you what a good idea Abundance NRG is!

Abundance describes itself as a crowdsourcing platform for renewable energy projects: wind, solar and hydro. Unlike crowdsourcing platforms such as Kickstarter, Abundance is regulated as a financial services company by the UK’s Financial Conduct Authority.

In brief, Abundance lists a number of UK renewable energy projects which are open for investment. Investors can choose the project which interests them and purchase debentures in any amount from £5 upwards. Debentures, which are for the long haul, usually 20 to 25 years, are slowly repaid over their life along with a share of the energy project’s profits. The amount of profits depends on the success of the energy project and Abundance puts all disclosure information into plain language. Funds received by the debenture holder can be reinvested or withdrawn. Private investors may sell their debentures prior to their expiry on a bulletin board sponsored by Abundance but debentures are not intended to sell at amounts significantly above their face value.

Abundance NRG is a tremendous mechanism for encouraging individuals to invest in renewable energy projects. Unfortunately it is only available to UK residents but all of the information about how it runs is available at https://www.abundancegeneration.com/ The short animation on that home page is a great place to start! Financial professionals interested in learning more about Abundance NRG may prefer to start with the terms and conditions document at https://www.abundancegeneration.com/docs/legal/Abundance_T&Cs_1.5.pdf