SYMBIOSIS INTERNATIONAL DEEMED UNIVERSITY

Research Paper on

________________________________________________________________

“Environmental Sustainability and Corporate Law: Analysing the

Role of Directors in India”

________________________________________________________

Submitted by:

Chintanippu Nandadeep PRN: 21010324039

Avishek Palit PRN: 21010324032

SEMESTER- VII, B.B.A., L.L.B

SYMBIOSIS LAW SCHOOL,

HYDERABAD.

1
Abstract:

This research paper explores directors' imperative role in securing environmental

sustainability within corporate firms, concentrating on the Statutory framework and duties
under the Companies Act 2013 (Hereafter after CA, 2013) in India. As Directors and officers
charged with decision-making responsibilities, duties and obligations, directors steer the
intricate balance between corporate interests and environmental stewardship. The paper
examines the increasing responsibilities of directors concerning environmental problems,
which directs them to act in the adequate interests of the company, shareholders, employees,
and the community, including environmental conservation. Insight on principles and judicial
pronouncements, such as the "Polluter pays principle" and "Absolute Liability," the paper
underlines the legal ramifications directors encounter for environmental detriment caused by
corporate actions. Highlight the seriousness of directors' duties in mitigating environmental
hazards and the effects of delinquency.
Moreover, the paper discusses the impact of shareholders in formidable corporate policies
detrimental to the environment and the legal mechanisms to execute corporate
accountability.
Emphasizes the climactic role of directors in navigating corporate decision-making to
promote environmental sustainability. By confining to principles of good governance, due
diligence, and environmental stewardship, directors can catalyse optimistic shifts, enable
sustainable development, and protect the interests of future generations. The research
underscores the requirement for an exhaustive legal framework, proactive measures, and
stakeholder engagement to ensure corporate accountability and environmental protection.
Keywords: Director, Company, Environment, Sustainability, Social responsibility.

Introduction
The discussion on environmental sustainability has recently moved from niche groups to the
mainstream. We must adopt sustainable behaviours to mitigate climate change, biodiversity
loss, and resource depletion. In this context, companies have become key players in the fight
for environmental sustainability. Since these business organisations are profit-making
institutions, they frequently become part of a complicated web of conflicting interests. The
collision between financial gain and ecological protection happens often. The conflict

2
between environmental responsibility and business profits signifies an issue that a
contemporary corporation shall handle. The main job of a business organisation is to
maximise shareholder's profit. However, a business organisation puts its short-term goals
rather than the long-term goal of environmental sustainability. However, as we have set our
way in the 22nd century and are also moving forward, corporations are becoming aware of
the need to reduce ecological impact and help create a more sustainable environment. 1 Hence,
they are implementing more eco-friendly practices. The tension has prompted discussions and
attempts to balance competing goals, resulting in a paradigm shift in favour of more
economical strategies which are environmentally friendly.2 Corporate governance includes
the systems and procedures to guide and manage the organisation. This is fundamental to
discussions in organisations nowadays as it balances the interests of different parties,
including customers, shareholders and the community.
Effective Corporate Governance concerning environmental sustainability means business
strategies and activities should align with the ecological goals while honouring fiduciary
obligations to shareholders. Directors and Officers are essential in establishing corporate
governance structures and guiding businesses towards environmental sustainability. Directors
are given custody of monitoring the organisation's long-term survival and are custodians of
corporate strategy and decision-making. In recent years, the fiduciary responsibility of
directors to consider environmental concerns while considering any big decision has taken
prominence. This indicates the importance of ecological stewardship towards the success of a
company. Subsequently, directors and officers are also crucial for executing environmental
programs and policies inside the business. They can achieve the environmental goals outlined
by corporate governance structures by incorporating sustainability issues into regular
operations and strategic planning. Their dedication and leadership are essential to creating a
business culture that values environmental sustainability, improves the company's financial
performance, and pushes cultural change. This research paper investigates the complex
relationship between environmental sustainability, company profitability, and corporate
governance. The study clarifies how organisations can effectively resolve the conflicts
between profit-seeking and environmental responsibility. In addition, it looks for the best
methods and approaches for incorporating environmental factors into corporate governance
structures to ease the shift to a more sustainable company model. As the need for
1
Manner, R., 2018. Corporate Governance and Corporate Social Responsibility: The Indian Context. CASIRJ, 9,
pp.161-175.
2
Afsharipour, A., 2018. Corporate social responsibility and the corporate board: Assessing the Indian
experiment (pp. 95-119). Springer International Publishing.

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environmental sustainability grows, businesses must balance their need to maximise profits
with reducing their environmental impact. Reaching this equilibrium requires strong
company governance practices that give environmental issues equal weight to financial goals.
This study aims to advance the ongoing conversation on corporate sustainability and open the
door to a more peaceful coexistence of profit and the planet by analysing the influence of
directors and officers on business behaviour and decision-making.
Environmental Corporate Responsibility

Corporate Social Responsibility (CSR) is a conception that states that the goal of the
corporate sector goes beyond the goal of wealth maximisation and that it has to take
responsibility for social and environmental problems.3 During the independence struggle and
after the movement, Mahatma Gandhi postulated the theory of trusteeship and motivated
industrialists and business people to benefit the underprivileged sections of society. 4 The
corporates were invigorated to establish trusts that would help the socio-economic growth of
India by investing in rural education, development and women empowerment, among others.
As public sector undertakings emerged in the Indian economic space during the 1980s, the
idea of corporate social responsibility also gained traction with the goal of proper distribution
of wealth.5 However, the impact of the private sector can be supported. They were stressed to
ensure accountability and transparency in their functioning and working. As decades passed,
in 1992, India opened its gates. India liberalised its economy. More and more private
companies started arriving in India. They started contributing more towards CSR activities.
Society has begun to understand that it is more like a duty than charity.

Section 1356 of The Companies Act 2013 gives the statutory provision for CSR in India. It
states that every "Company having a net worth of Rupees Five hundred crores or more, or a
turnover of Rupees One thousand crores or more, or a net profit of Rupees Five crores or
3
Venancio D'Costa, Astha Ojha, and Samarth Sansar. "Corporate Social Responsibility v. Corporate
Environment Responsibility: Duplication of Efforts for Same Objective." SCC Online. February 7, 2022.
https://blog.scconline.gen.in/post/2022/02/07/corporate-social-responsibility-v-corporate-environment-
responsibility/.
4
Seema G. Sharma, Corporate Social Responsibility in India: An Overview, 43 INT'L L. 1515 (2009)
https://scholar.smu.edu/til/vol43/iss4/10.
5
Dr. Kalpana Sharma, Corporate Social Responsibility (CSR): An Overview of the Indian Perspective,
Manupatra (2016), available at https://docs.manupatra.in/newsline/articles/Upload/35136B5C-B616-4D36-
97E5-F54BB578E9E8.1-A__company.pdf.

6
Corporate Social Responsibility, ClearTax, https://cleartax.in/s/corporate-social-responsibility (last visited
Sept. 29, 2024).

4
more shall spend at least two per cent of the average net profits towards social responsibilities
as determined by the Committee." Schedule 7 7 of the Act gives directions to companies to
include CSR activities, which should consist of the extermination of hunger and poverty,
improving and promoting children's and women's education, ensuring environmental
sustainability and balance in the environment is maintained, improving infrastructure for
research and development and protection of national heritage.

While the law explicitly mentions the importance of environmental sustainability and the
protection of flora and fauna, the Government has made efforts to impose additional
responsibilities on Corporations regarding environmental protection. These efforts are often
called Corporate Environmental Responsibility (CER) or enterprise social commitment
(ESC). The Environmental Impact Assessment, drafted in 2020 8, defines Corporate
Environmental Responsibility as "part of Environment Management Plan wherein the project
proponent is mandated to carry out certain activities for environment safeguard in the
immediate surroundings of the project based on the issues raised during the public
consultation and social needbased assessment carried during the EIA studies." There were
various theories to attain sustainable development; corporations must pay separately and
expressly related to environmental protection. Nevertheless, this has resulted in redundant
efforts towards achieving the same goal, leading to confusion among corporations. According
to the powers enshrined under Section 3 9 of The Environment Protection Act, 1986, the
Ministry of Environment, Forest and Climate Change (MoEFCC) issued an office
memorandum in 2014 stating that project proponents should specify the cost and activities
that they are undertaking to address environmental issues highlighted during public,
consultation and the way to handle them. In 2018, the Ministry of Environment, Forest and
Climate Change issued a memorandum requiring corporations to allocate funds for Corporate
Environmental Responsibility and the expenses outlined for their environmental management
plan. The memorandum distinguished between Corporate Social Responsibility (CSR) and
CER, highlighting that CSR obligations are activated only when companies generate net

7
Schedule VI: Forms of Balance Sheets, Statement of Profit and Loss and Cash Flow Statement [PDF]. (2018).
India Code. https://upload.indiacode.nic.in/schedulefile?
aid=AC_CEN_22_29_00008_201318_1517807327856&rid=79
8
Drishti IAS. (n.d.). Environmental Impact Assessment (EIA) Draft 2020. Drishti IAS.
https://www.drishtiias.com/to-the-points/paper3/environmental-impact-assessment-eia-draft-2020
9
The Environment Protection Act, 1986 [PDF]. (n.d.). India Code.
https://www.indiacode.nic.in/bitstream/123456789/6196/1/the_environment_protection_act%2C1986.pdf

5
profits. However, there are cases where CSR regulations do not apply, mainly if a company
has yet to achieve any net profit.

Following the Environment Impact Assessment (EIA) Notification 2006 10 dated 14-9-2006,
industrial sectors identified with direct environmental impacts are mandated to obtain a prior
ecological permit from the Ministry of Environment, Forest and Climate Change (MoEFCC)
before initiating any new project, expansion, modernisation of an existing project, or
altercations in project mix. The MoEFC, upon granting such EC, imposes specific conditions
and general conditions upon the project proponent (PP); failure to adhere to these may result
in the revocation of the EC. One such specific condition, as mandated by the MoEFCC, is
undertaking corporate environmental responsibility (CER) or enterprise social commitment
(ESC) tailored to local needs and confined to areas directly affected by the proposed project.
It is emphasised that CER activities are integral to the project and are not contingent upon
generating net profits, as CER is approved concurrently with the issuance of EC. It is asserted
that CER and corporate social responsibility (CSR) expenditures are distinct and must be
treated separately.

An instance of separation between CSR and CER became prominent when Ambuja Cement
expanded its cement plant in Himachal Pradesh and claimed a waiver of CER conditions,
stating that they had already spent over and above the statutory prescribed limit in three
preceding years.11 During deliberations, the Expert Appraisal Committee (EAC) noted that
environmental obligations were initially stipulated for five years. Rather than exempting the
condition altogether, the EAC extended the implementation period to 10 years. This indicates
that neither the Ministry nor the EAC supports the complete waiver or removal of conditions
imposed on corporations regarding corporate environmental responsibility.

In 2019, the Ministry issued an official memorandum titled "Standardisation of Environment

Clearance Conditions for Non-Coal Mining Sector," aiming to streamline procedures related

10
Government of West Bengal. (2006). EIA Notification, 2006 [PDF]. Department of Environment,
Government of West Bengal. http://www.environmentwb.gov.in/pdf/EIA%20Notification,%202006.pdf
11
Vinod Kothari Consultants Pvt. Ltd. (2021, April 28). Whether Expense Towards Corporate Environment
Responsibility (CER) Be Eligible as CSR Spending? Vinod Kothari. https://vinodkothari.com/2021/04/whether-
expense-towards-corporate-environment-responsibility-cer-be-eligible-as-csr-spending/

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to CER activities.12 These activities are all bound by time and must be completed within a
specified period. The funds that have been allocated should be allowed for other purposes.

Furthermore, all promises and suggestions made during environmental clearance must be
strictly followed, and compliance will be evaluated regularly. The clearance may be revoked
or suspended by the Ministry for noncompliance. Notably, the Expert Appraisal Committee
for Environment Appraisal stressed in 2015 -before the release of these memorandums-that
the corporate sector should carry out societal welfare functions necessary for upholding
societal interests because owners are considered trustees rather than owners of society. The
uniform distribution of capital costs towards environmental conservation support efforts, in
addition to the company's obligations under The Companies Act, was unanimously adopted
by Committee.13

Corporations voiced dissatisfaction with the need to set aside funds for corporate
environmental responsibility. This prompted a legal challenge against the 2018 office
memorandum before the Delhi High Court in the case of "CREDAI NCR v. Union of
India.”14 Following legal issues and multiple representations to the Ministry, an updated
office memorandum superseded the 2018 version in 2020. The 2020 memorandum said that
the Expert Appraisal Committee should evaluate the promises the project proponent gave and
specify concrete requirements while endorsing clearance applications rather than requiring
funds distribution under CER.15

The progression of this issue thus far indicates a need for more clarity within the Government
regarding the relationship between CER and CSR, whether they are mutually exclusive or
operate independently. The logical inference drawn from the latest memorandum on this
12
Karnataka State Pollution Control Board. (2019). Standardization of Environment Clearance conditions for
non-Coal mining sector - reg [PDF]. Karnataka State Pollution Control Board.
https://kspcb.karnataka.gov.in/sites/default/files/inline-files/36.%20Standardization%20of%20Environment
%20Clearance%20conditions%20for%20Non-Coal%20mining%20sector%20-%20reg_08.01.2019.pdf
13
Department of Environment, Government of West Bengal. (2006). EIA Notification, 2006 [PDF]. West
Bengal State Pollution Control Board. http://www.environmentwb.gov.in/pdf/EIA%20Notification,
%202006.pdf

14
National Green Tribunal. (n.d.). Order: Original Application No. 319/2018 [PDF]. National Green Tribunal.
https://greentribunal.gov.in/sites/default/files/news_updates/319.pdf

15
Ministry of Environment, Forest and Climate Change. (2020). Office Memorandum: Environmental
Clearance for Construction Projects - reg [PDF]. Ministry of Environment, Forest and Climate Change.
https://environmentclearance.nic.in/writereaddata/OMs-2004-2021/236_OM_20_10_2020.pdf

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matter suggests that while the Government has eliminated the mandate for specific funds
allocation for CER, activities addressing environmental concerns raised during public
consultations remain obligatory for obtaining environmental clearance. However, whether
these activities and associated expenditures are additional to standard environment
management and protection measures and whether they qualify as expenditures under CSR
remain ambiguous.

The ambiguity and consequent confusion that organisations experience arises from what
appears to be a convergence of Corporate Environmental Responsibility (CER) and
Corporate Social Responsibility (CSR) goals, even though specific differences imply possible
mutual exclusivity. According to the memorandum, a company's CSR obligations only
become applicable when it meets certain thresholds outlined in the Act. Enterprises not
satisfying this condition are accountable for their projects' social and environmental effects.
As a result, CER requirements are independent of net profits and must be met by the
company regardless of its profitability level.

Moreover, although the Act prioritises CSR expenditure in project-impacted areas, businesses
can direct funds in other directions. CER, on the other hand, is project-specific and limited to
the project-affected area. While environmental preservation is widely recognised as a critical
issue, firms frequently need clarification on the need for more clarity surrounding these
problems. It is difficult to decide whether CER expenses should be included in CSR
programs or kept separate for on-site execution. Pending resolution of the ongoing challenge
before the Delhi High Court, governmental clarification, mindful of the genuine concerns of
project-affected areas, would alleviate corporate apprehensions.

CER ACTIVITIES BY CORPORATES

NESTLE

Approximately 70% of the Indian population depends on agricultural activities; thus, it puts
much strain on our country's water resources. Despite perennial rivers in our country, many
parts of India face water scarcity.16 India stands out for its substantial water withdrawals,
vindicating a shift towards water productivity enhancement to augment agricultural output
amid diminishing water reservoirs. A study by NABARD and ICRIER titled 'Water
Productivity Mapping of Major Indian Crops' focussed on rice and sugarcane cultivation as

16
Nestle India Limited. (2022). Corporate Social Responsibility Policy [PDF]. Nestle India Limited.
https://www.nestle.in/sites/g/files/pydnoa451/files/2022-08/Corporate-Social-Responsibility-Policy.pdf

8
emblematic instances of unsustainable water resource utilisation. Subsequently, Nestle's
Corporate Social Responsibility initiative has initiated a pilot project in collaboration with
AgSri to target the above crops.

In the Kabini River Basin of Karnataka, Nestle and AgSri have started a water stewardship
CSR effort to develop sustainable agricultural practices for producing rice and sugarcane.
Since agriculture uses the most water in the catchment area, farmers participating in
environment-friendly initiatives like the Sustainable Sugarcane Initiative (SSI) and the
System of Rice Intensification (SRI) can reduce water usage while increasing agricultural
productivity. These treatments enable increased productivity and revenue creation by utilising
fewer seeds, water, and fertilisers and lowering labour costs and related expenses. As of
2019, over 300 farmers have implemented SSI and SRI practices on their 180 hectares of
combined agricultural land. CUMMINS INDIA LTD

Establishment of Oxygen Hubs: Legal Framework and Implementation Dynamics. Pune is

becoming a prominent city in India as urbanisation is increasing. 17 It is facing elevated levels
of pollution in India. During the fiscal year 2013-2014, Pune released 46 lakh tonnes of
carbon annually. It had an immediate effect on atmospheric oxygen levels. Cummins
responded to this environmental concern by establishing "Oxygen Hubs" and directed
Corporate Social Responsibility monies towards converting non-forest land into wooded
regions. This was a proactive method to combat pollution. Cummins strategically partnered
with several NGOs, local communities, municipal officials, elected representatives and the
defence department to create oxygen centres through afforestation efforts. The collective
effort ensured comprehensive coverage and synergy in the project implementation, adhering
to established legal frameworks and procedural guidelines. Cummins pledged around 1.112
crores for this project, which indicated the company's financial support regarding
environmental sustainability initiatives in Pune, Maharashtra. The project's focal point was
Pune, Maharashtra, to afforest certain non-forest regions to increase green cover and improve
ecological resilience. Cummins monitored the planting of more than 35000 trees and placed
measures to guarantee the trees' long-term survival and environmental value.

Century Plyboards India Ltd

17
Cummins Inc. (n.d.). CSR Policy [PDF]. Cummins Inc.
https://www.cummins.com/sites/default/files/CSRPolicy.pdf

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As a part of Century Plyboards India Ltd's commitment towards animal welfare, it initiated
programs to help cows in nearby areas that need dire assistance and care because they are
sick, homeless, disabled or in need of care.18 The organisation aimed to increase public
understanding of environment sustainability, health and cow-centric agriculture. One of the
key measures of this program was the creation of a cow hostel in Kolkata and surrounding
areas. The Central Kolkata Prerna Foundation, Gow Seva Sameetee Ghatwa, Friends of
Vrindavan, and the Calcutta Pinjrapole Society were among the critical players who worked
together to make the execution of the project simple. The collaborations ensured that
everyone was included, the resources were used efficiently, and adhered to legal and moral
principles. Century Plyboards India Ltd committed 39 lakhs towards the program advancing
animal welfare and societal well-being. The project was launched in two places: Kolkata and
Vrindavan. These two places were targeted regarding the suffering of distressed cows and
raising public awareness of the issue. At the same time as raising public awareness of the
value of environmental stewardship, sustainable agriculture methods, and cow welfare,
Century Plyboards sought to address the needs of vulnerable bovine populations with
practical aid and financial support. This program contributes to an excellent conversation on
animal rights and ethical issues in business operations while highlighting the company's
commitment to corporate social responsibility.

RELATIONSHIP BETWEEN ENVIRONMENT LAWS IN INDIA AND COMPANIES

The Environment Protection Act, 198619

It is the primary legislation for environmental protection and conservation in India. The
Central Government is empowered under this Act to protect and improve the environment.
Along with that, it also puts forth legislation for penalties and violations.

Water (Prevention and Control of Pollution) Act. 197420

18
Century Plyboards (India) Limited. (n.d.). Corporate Social Responsibility (CSR). CenturyPly.
https://www.centuryply.com/about-us/csr

19
Environment (Protection) Act, 1986. (n.d.). India Code.
https://www.indiacode.nic.in/bitstream/123456789/4316/1/ep_act_1986.pdf
20
The Water (Prevention and Control of Pollution) Act, 1974, India Code, Acts of Parliament, 1974 (India).

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Section 25 and Section 26 of the Act mentioned above require industries to obtain consent for
water usage and discharge of effluents. It also prescribes standards for the treatment of such
effluents.

Air (Prevention and Control of Pollution) Act, 198121

Section 21 and Section 22 of the Act mandate that industries obtain consent related to
emissions. It also states that industries should comply with prescribed emission standards.

The Wildlife Protection Act, 197222

As mentioned above, section 33A of the Act prohibits certain industrial activities within eco-
sensitive zones or areas designated as critical wildlife habitats. It also mentions that there
should only be an industry or operation with the prior approval of The National Board of
Wildlife. Section 33A also paves the way for Environmental Impact assessments for projects
that impact wildlife habitats. This also suggests that any planned development or industrial
project near a wildlife habitat needs to be thoroughly assessed for its possible environmental
effects, and special attention should be paid to the surrounding flora and animals.

The Forest (Conservation) Act, 198023

Section 2 is the primary operative section of the Act, as mentioned above. It states that "no
state government or other authority may issue an order directing the use of any forest land or
the clearing of any forest land for any non-forest purpose, including the establishment of
industries, without first receiving approval from the Central Government, regardless of
anything else that may be stated in any other law currently in effect." The Central
Government must give its prior consent to any organisation which wishes to exploit forest
areas for industrial development. The Act also mentions that any forest land diverted for uses
other than forest land is planted in compensatory afforestation.

21
The Air (Prevention and Control of Pollution) Act, 1981, No. 14 of 1981, India Code, Acts of Parliament
1981 (India).

22
Wild Life (Protection) Act, 1972, No. 53 of 1972, India Code, Acts of Parliament 1972 (India).

23
The Forest (Conservation) Act, 1980, No. 69 of 1980, Acts of Parliament, 1980 (India).

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The Public Liability Insurance Act, 199124

According to this law, it is compulsory for specific industries handling hazardous substances
to take out insurance for any liability due to any accidents which can occur from such
chemicals.

The National Green Tribunal (NGT) Act, 201025

It is a unique judicial body established to entertain environmental matters. According to

section 14 of the Act, it has the authority to hear cases. It also has the power to impose
penalties for noncompliance with environmental laws.

Comprehending how Directors makes some decisions imperatively

Directors are stakeholders who make the decisions for the organisation. It navigates the
functioning of obligation "to act in the best interests of the company." which is read with
characteristics such as "separate legal entity" and "limited liability", consequence of which
affects the decisions and policies of these entities. Which becomes the underlying factor that
affects the CSR and environmental related strategies. directors' responsibilities must not be
taken in ignorance when deliberation is given to development of initiatives adopted to
respond to ESG issues.26

Increasing of Responsibility of Directors To deal concerns related to Environment

As mentioned in §166 of CA,2013, It gives a crucial role and responsibility to work
sustainably and with utmost good faith as their decisions are very critical in decision making
regarding the environmental aspects as part of their regular businesses. Reaching the opinion
revolving around the duty of a director, it is necessary that we balance the duty of a director,
under Ҥ166(2) to act in the best interests of the company, its employees, the shareholders,
the community and the protection of environment, with the duties of a director nominated by
an Institution including a public charitable trust” 27. This means that the special measures
taken by the directors are to operate the company sustainably and lower the impact of the

24
Agricultural and Processed Food Products Export Development Authority Act, 1985, No. 2, Acts of
Parliament, 1986 (India).
25
National Green Tribunal Act, 2010, No. 19, Acts of Parliament, 2010 (India).
26
Stephen J. Turner, A Global Environmental Right (Abingdon: Earthscan by Routledge, 2014), pp.40–44.
27
The Companies Act, 2013 (India), § 166(2), (Act No. 18 of 2013), India.

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environmental imprint. “A director of a company shall exercise his duties with due and
reasonable care, skill and diligence and shall exercise independent judgment.” 28 That includes
his duty to not to violate any provisions related Environment laws and take decisions bearing
in the protection of environment and sustainability apart from profit motive as company gains
its resources, businesses from this environment the duty rests with the company to act in such
way.

Sustainable Management of Resources:

The scope of managing goes beyond the usage of resources. There is a need to Implement
Strategies to minimise the utilisation of non-renewable alternatives. Measures such as
exploration of sustainable options, adaptation to sustainable technologies, energy-efficient
resources, and consumption of reduced reusing and recycling of goods are also needed.
The promotion of the Conservation of Resources across all levels of the organisation is a
paramount need. which includes enlightening employees and all stakeholders for judicious
usage of resources and implementation of measures such as going paperless in most possible
areas and eradicating single-use plastics within the premises and timely disposal are
necessary.
Supporting sustainable techniques within the supply chain of the organisation is very much
necessary. This includes agreements with suppliers to prioritise sustainable practices in their
operations with the organisation.
Minimising pollution:
Director possesses a duty in preventing pollution by inculcate such policies by following
measures such as Environmental impact assessments prior to taking up new projects or
ventures and to advance mitigation strategies. Investment in pollution control technologies
such as water treatment methods, air filters.
Referring to “Tata Consultancy Services Ltd. Vs. Cyrus Investments (p) Ltd”, it shows that
there is a gear change in the corporate sphere. It clearly emphasises on how it changed from
Profit motivated to expanding horizons to social responsibility and environmental
stewardship.29 This is not just seen here but directors across the world are now inculcating
such policies to gain sustainability. These companies working to function in an ecological
friendly manner. Adopting and implementing Environmentally friendly policies.

28
The Companies Act, 2013 (India), § 166, (Act No. 18 of 2013), India.
29
Tata Consultancy Services Limited Vs. Cyrus Investments Pvt. Ltd. & Ors, LNIND 2021 SC 122.

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Some Noteworthy Initiatives
Major giants such as Apple Inc. are now shifting their approach as their initial carbon-neutral
device, Apple Watch marks a breakthrough in their idea to make all the products carbon
neutral by 2030. “They are minimising significant number of emissions through inventions in
materials, clean electricity and low-carbon shipping.” 30 And investments in nature-based
missions to counterbalance the small quantity that remains. IKEA global furniture brand is
implementing measures to minimise its impact on environment by relying on usage of
renewable energy sources across its supply chain. 31 It also took the responsibility of providing
its suppliers the frame work on consumption of complete renewable electricity.

Another major giant, Microsoft, has been committed towards sustainable workspaces and
reduction of carbon footprint. By 2030 they have affirmation to achieve net carbon zero. Its
investments in various renewable energy alternatives and inculcating practices in the supply
chain to make sure products are ecological friendly. This includes using recyclable materials
in their packaging and products. In addition to this, they have also been associated with The
Nature Conservancy and the Wildlife Conservation Society to support protection efforts and
safeguard biodiversity. Directors of the organisation also funded to set up an AI for "Earth
Program", which provides solutions to environmental challenges. 32

Companies like ITC one of major manufacturers of notebooks and cutting down trees is their
essential part of the business so directors of the company as part of their CSR plan taking
opportunity to invest itself in renewable sources of energy and plantation, livestock adoption,
educating rural households about waste managements and water management systems.33

Complying with the Laws related to Environment Directors duty is to ensure that the
company is functioning in consonance with all rules obtaining necessary permissions. Major
30
Apple Environmental Progress Report, Apple,
https://www.apple.com/in/environment/pdf/Apple_Environmental_Progress_Report_2023.pdf (last visited Mar.
17, 2024).

31
New IKEA Program to Accelerate Suppliers’ Transition to Renewable Electricity, IKEA,
https://www.ikea.com/global/en/newsroom/sustainability/ikea-launches-new-program-to-accelerate-suppliers-
transition-to-100-per-cent-renewable-electricity-210610/ (last visited Mar. 17, 2024).

32
Microsoft, Microsoft Environmental Sustainability Report 2022 (Dec. 2022), available at
https://www.microsoft.com/en-us/corporate-responsibility/sustainability-journey#coreui-banner-5lej96f (last
visited Mar. 17, 2024).

33
ITC (2023, December 31). ITC Sustainability Index. ITC: Sustainability at a Glance. Retrieved March 17,
2024, from https://www.itcportal.com/sustainability/index.aspx

14
giants are currently appointing directors to solely deal with Socially responsible and
environment related objectives of the company.

Role of Tribunals and Judiciary

Engagement with Important stakeholders NGOs and communities to address the problems
persistent. Transparency in reporting should be encouraged. Supreme Court has emphasised
and clarified on the word “Environment”. It has maintained a consistent interpretation by
relying on EPA,1986 highlighting the connectedness of “water, air, land and living beings.”
Violation of any such provisions attracts fine upto INR 5 Lakh under §166(7) of CA,201334
for violation of law including environmental safeguarding as mentioned in §166(2) of
CA,2013.35

Courts are significantly using the lifting of the corporate veil to promote Activism. The
sections show that in the contemporary changes in the culture, the lifting of the veil coupled
with environmental protection laws can be administered and regulated. Avoiding
responsibility for Environmental protection by the directors who are covered by the concept
of limited liability. However, such action by the court should be of final resort before
resorting to such alternatives. There should be a proper legal framework regarding the
personal liability of the directors who violate the environmental norms. Directing the
companies to establish an environment management board. In a stricter sense, the corporate
veil is lifted when the court holds the directors liable for the actions of the company.
“It is submitted that an urgent need was felt for the enactment of a general legislation on
environmental protection which, inter alia , should allow co-ordination of activities of the
several regulatory agencies, creation of an authority with adequate powers for environmental
protection, regulation of discharge of environmental pollutants and handling of hazardous
substances, rapid response in the event of accidents, intimidating environment and deterrent
punishment to those, who endanger human environment, safety and health Violating Art.
226.”36
To promote such culture and add more responsibility to the corporates The Ministry of
corporate Affairs have introduced a Guidelines on CSR in 2009, Later which made
mandatory for certain companies above some profit levels to spend “at least 2% of its profits”
34
The Companies Act, 2013 (India), § 166(7), (Act No. 18 of 2013).
35
M.K. Ranjitsinh vs. Union of India, AIR 2021 SC 209.

36
Vedanta Limited Vs. State of Tamil Nadu &Ors, LNINDORD 2020 MAD 160.

15
 on activities such as climate action, Disaster relief, environment related activities by creating
a provision under §135 of CA, 2013.37 Schedule VII of the Act provides for creation of such
laws.
Often, the majority of the development demands long-term commitments, and their
impression usually takes a while to accumulate. “A good CSR practice requires that a
company that is serious about its CSR should develop a long-term vision and approach,
which is reevaluated annually, and the activities and funding are planned annually, the latter
will comply with the CSR policy conditions of the CA,2013.”38
Shareholders’ Activism in encouraging companies to comply with environmental standards
§241 of CA, 2013 is a very crucial weapon in the hands of shareholders in case of directors'
violations or ignoring or negligent about their CSR activities. §241 authorises shareholders to
apply to NCLT in case of policies that are against the interests of the company, which may
include environmental harm occurring due to acts of the company which may lead to loss of
reputation or disruptions in regular businesses or any fiscal loss.
Negligence by avoiding sustainable practices and mismanaging the company in such cases,
shareholders can exercise such power.
NCLT, as per the section, has the power to order the company to initiate remedial action and
can direct it take on special measures such as commitment to work green technologies, and
adhering to CSR practices.
NCLT also holds the power to nominate a person as one of the directors in case if it feels that
it lacks commitment and violation towards environment related aspects. It can urge the board
to inculcate sustainable policies and practices. This legal framework makes the way for a
future where companies are held accountable for their environmental impact, cultivating a
more sustainable business terrain for the benefit of all stakeholders.
Polluter Pays Principle and Absolute Liability
In Karnataka industrial Area Development Board Vs. C. Kenchappa, Hon’ble Supreme Court
observed. “The polluter pays principles demands that the financial costs of avoiding or
remedying damage caused by pollution should lie with the Organisations which cause the
pollution or create the goods which causes such pollution. As per principle, Government does
not have a duty to compensate the costs in avoiding such damage or taking up corrective

37
The Companies Act, 2013 (India), § 166, (Act No. 18 of 2013).
38
Tripathi, Nimisha & Singh, Raj & Pal, Danielle. (2014). Environmental Sustainability through Corporate
Social Responsibility (CSR) in India. 10.13140/2.1.4296.4165.

16
measure, because the consequences of such act will shift the fiscal burden on the taxpayers
the burden is on the organisation and its directors’ capacity to compensate”.39
Bhopal Gas leak:
Post the incident of gas leak of Union Carbide corporation in Bhopal Supreme Court has
ordered to pay compensation of 470Million USD in 1989. Court has come up with a novel
concept of “Absolute Liability” in India.40 But no explicit principle of piercing of the
corporate veil was discussed in this case. The compensation to the victims was further upheld
in “Charan Lal Sahu vs Union of India.”41After setting up of various committees and bodies
by government to compensate the populous even by the end 2022 several hundreds of victims
received compensation. This seriously emphasises the need of legislations regarding
Corporations liability towards the environment. This absolute liability has lifted the corporate
veil and directors are liable even to compensate their personal property as such cases of leak
is to be

maintained properly, due to which has led to death of 20,000 or more lives.42
In another tragic case of “Absolute Liability” can be enforced on an organisation when it
creates any environmental hazard by release of any gas or any such substance which is
treacherous as observed in “LG Polymers Gas leak” in Vishakhapatnam. Liability is borne
and expanded till the Officers and Directors and their passports were seized. 43 Which again
another example of Director’s role in personal capacity to manage and responsible for any
incidence related to environment Inculcating better policy systems and sustainable
technologies and educating the management and business partners about such concepts would
avoid such incidents and loss and setting up of strict agencies by the government to tackle
such cases is to be the paramount consideration for protecting its citizens and its flora and
fauna. Huge establishments governing critical areas such as energy, reserves, and mining,
hold the key to effective minimisation of reliance on carbon fuels.

39
Karnataka industrial Area Development Board Vs. C. Kenchappa, AIR 2006 SC 2038.
40
Union Carbide Corporation Vs. Union of India, (1991) 4 SCC 548.
41
Charan Lal Sahu Vs. Union of India, LNIND 1989 SC 639.

42
National Centre for Biotechnology Information (2004, August 14). Victims of gas leak in Bhopal seek redress
on compensation. National Library of Medicine. Retrieved March 17, 2024, from
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC509368/#:~:text=The%20official%20death%20toll
%20is,disbursal%20to%20the%20people%20affected.
43
Lg Polymers India Private Limited Vs. Andhra Pradesh Pollution Control Board and Ors,
MANU/SCOR/11165/2021.

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In an expert panel discussion on “Corporate Legal Responsibility and Climate Change” at
CMJA conference in 2023 J. BR Gavai has highlighted some key legal principles such as
“sustainable development”, “Polluter pays principle” and highlighted corporates
responsibility and mandated requirement in enactment of such rules towards contribution
towards the environment protection.44
Despite having laws that deal specifically with the environment and companies, there needs
to be more comprehensive deliberation due to deficit of scope of all concerns in the present
laws, which has significantly restricted the potential of such laws. The laws hold accountable
individuals who oversaw the company's operations when the offence occurred. Yet, they will
only be deemed responsible if the offence was carried out with their awareness and if they
took all necessary precautions to avoid it.
Mandatory environmental norms to be framed in consonance with the global
standards and urge every company registered under the CA, 2013 to set up an environment
management board within every itself and a director to be appointed to take such
responsibilities. Already Companies like Microsoft and TATA have already adopted this
framework. This should expand and reach to large number of organisations without confining
to few players.
Legislations in other Countries
In countries like Australia is delivering extensive legislation focused towards the preservation
of the environment.45 some of which impose director liability for the environmental harm
caused by their corporations.46 “Likewise Canada’s environmental protection laws penalises
for the personal liability of those persons who have charge, management or control of the
activities of the corporation or property.”47 “In Hong Kong, criminal liability may be imposed

44
CMJA: Archived News, The Common Wealth Magistrates and Judges Association (Sept. 18, 2023),
https://www.cmja.org/archived-news/ (last visited Mar. 17, 2024).
45
The Federal Australian Protection of the Sea (Civil Liability) Act 1981; Protection of the Sea (Prevention of
Pollution from Ships) Act 1983; Environment and Heritage Legislation Amendment Act (No 1) 2003; World
Heritage Properties Conservation Act 1983; Environment Protection (Sea Dumping) Act 1981; Environment
Protection and Biodiversity Conservation Act 1999; Hazardous Waste (Regulation of Exports and Imports) Act
1989.
46
The state level Australian Acts, The Waste Management and Pollution Control Act 1998 (NT) Art. 91(1); The
Environment Protection Act 1993 (SA) Art. 129; The Environment Management and Pollution Control Act
1994 (Tas.) Art. 60.
47
The Water Act, RSBC 1996; the Ontario Environmental Protection Act, RSO 1990.

18
on directors for damage to the environment.”48 Liability may also be imposed for failing to
take steps to preserve the environment.49
Conclusion
The position of directors in assuring environmental sustainability within corporate entities is
a multifaceted and legally complicated initiative. As fiduciaries designated by stakeholders
and corporate governing rules, directors bear influential responsibilities towards protecting
the environment in consonance with the principles highlighted in various legislative
enactments and judicial precedents.

The legal framework, notably enunciated in the CA, 2013, outlines the responsibilities and
duties of directors towards the company, its shareholders, Media, government, and the public
at large, encompassing deliberations for environmental protection and conservation. §166 of
the CA,2013 directs directors to act in good faith, follow due persistence, and support the
interests of the company, its employees, shareholders, and its community, which includes the
preservation of the environment. This legal provision underlines the mandate for directors to
navigate in corporate decision-making in a style that stimulates environmental sustainability
also while elevating the long-term of goals and objectives of the company.
Further, the evolution of jurisprudence encircling corporate governance and environmental
stewardship spotlights the extreme scrutiny encountered by directors in the current corporate
landscape. Judicial precedents, such as those emphasising "Polluter pays principle", principle
of "Absolute Liability," underscore legal ramifications for directors in cases of environmental
harm caused by corporate actions. The precedent, such as the "Bhopal Gas Tragedy",
emphasises the gravity of directors' duties in containing and mitigating environmental
hazards, as negligence to discharge these responsibilities may lead to alarming consequences,
both lawfully and morally.
Shareholders have the influence to challenge corporate policies that are harmful to the
environment and demand corrective measures to contain such potential environmental harm.
This legal route serves as a potential mechanism for executing corporate accountability and
fostering sustainable business practices, consequently adjoining the interests of directors with
more comprehensive societal imperatives.

48
Hong Kong Dumping at Sea Ordinance (Cap 466). Retrieved from
https://www.elegislation.gov.hk/hk/cap466. Hong Kong. (n.d.). Air Pollution Control Ordinance (Cap 311).
Retrieved from https://www.elegislation.gov.hk/hk/cap311.
49
Hong Kong (Government). (n.d.). Cap. 53 Antiquities and Monuments Ordinance.

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Reacting to the Significantly increasing environmental challenges, directors are more pushed
to adopt assertive steps to mitigate environmental threats and encourage sustainable
development. Plans encircling sustainable management of resources, adopting eco-friendly
and sustainable technologies, meeting the interests of stakeholders, and adherence to
environmental regulations are pressing for directors seeking to discharge their duties
efficiently. Adopting a holistic system of environmental sustainability, directors must
discover and steer through the complicated fight between legal responsibilities, business
imperatives, and societal anticipations to secure their companies' long-term viability and
resilience.

Directors' duties in the sustainability domain exemplify the confluence of various factors
influencing the decision. By sticking to principles of satisfactory governance, exerting due
perseverance, and prioritising environmental stewardship, directors can positively act as
catalysts to change, enable sustainable development, and protect the interests of upcoming
generations. As guardians of corporate virtue and environmental custodianship, directors
exert remarkable impact in structuring a tomorrow, where economic prosperity blends with
environmental protection.

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