On 15 April 2013 the Victorian Environment Protection Authority (EPA) released new guidelines on the level of due diligence expected of directors, officers and managers when complying with their organisation’s environmental responsibilities. The EPA provides advice on four key areas: environmental policies, environmental risk management systems, internal reporting systems and annual reviews. The new guideline highlights the need for officers and directors to have an active role in environmental management and systems. 

What has happened?

The Victorian Environment Protection Authority (EPA) has released new guidelines on leadership actions which will help directors, officers and managers to lead their organisation so as to avoid a breach of Victorian environmental legislation and to reduce their own personal risk of liability under environmental law.

Who needs to know?

The new guidelines address the EPA’s expectations for directors, boards and managers of companies, partnerships and unincorporated associations to be able to demonstrate ‘due diligence’ through understanding and having an active role in the environmental risk management systems of their organisation.

What is the due diligence requirement?

Under the Environment Protection Act 1970 (Vic) (the EP Act), if an environmental offence is committed by an organisation, each director or person concerned in the management of the organisation is also deemed to be guilty of that offence.1 Directors, managers, supervisors and senior employees can be found personally liable if they were in a position to influence the conduct of the organisation. It is a defence to a prosecution under the Act if the individual can prove they used all due diligence to prevent the contravention.2

What does due diligence look like at your organisation?

This latest EPA guideline describes actions to assist leaders to ensure their organisation meets its environmental responsibilities and legal obligations. It also contains recommendations for individuals on how to personally demonstrate that they have used due diligence. A failure to take the steps in the guideline could mean that if prosecuted, an officer would not be able to rely on the due diligence defence. The guideline appears to require greater involvement in environmental management by officers than what many have previously thought to be sufficient.

The environmental due diligence defence hadn’t been fully articulated in Victoria prior to this guideline. We had a good idea of what was expected and guidance from decisions from other jurisdictions. In State Pollution Control Commission v Kelly (1991) 5 ACSR 607,Hemmings J of the NSW Land and Environment Court held that although the defence does not necessitate ‘perfection’, it requires that everything properly regarded as due diligence should be done. It contemplates a mind directed to the likely risks, and the adoption of specific, rather than general, precautions and processes. Conduct is assessed objectively from the standard of a reasonable man in the circumstances, without regard to his/her particular abilities, resources and circumstances.

The new guidance note builds on the concepts from case law and emphasises the need for proactive leadership, engagement and communication. Officers are expected to take an active and inquisitive role in planning, delivering, monitoring and reviewing environmental performance. The guidance note outlines four core actions to assist officers in complying with their legal responsibilities under the EP Act:

  1. Environmental policy

The policy should be part of and tailored to the organisation’s culture, values, performance standards and corporate citizenship. It should outline the role of the board and individual board members in leading the environmental management of the organisation. Specifically, it should require officers to own and understand key issues affecting the organisation and decide how to best communicate, promote, embed, monitor, review and enhance environmental management. The policy should also be integrated into governance structures such as the risk and audit sub-committee.

Examples of good practice include incorporating environmental performance on board meeting agendas, nominating an ‘environmental champion,’ and setting environmental targets for the organisation.

  1. Environmental risk management system

This system should be proactive, preventative, adequately resourced and properly implemented. It should be adapted to your organisation and its particular environmental activities or risks. It is expected that officers keep abreast of relevant environmental issues and risks, and consider the environmental implications of new processes, plants or practices. Officers must ensure they are up to date with environmental risks that affect the organisation and understand the preventative measures in place.

Examples of good practice include appointing an environmental compliance officer, risk management or environmental committee that reports through to the board, a contingency plan for emergencies, assessing environmental compliance of third party contractors or suppliers, and providing environmental training to some or all of the senior officers in your organisation.

It should also be noted that ISO14001, the international standard for establishing an environmental management system, is currently under review by the international organisation for standardisation. The review is likely to introduce more prescriptive requirements on managing environmental risks and measuring and attaining improved performance.

  1. Systematic internal reporting system

This system should ensure that information about environmental hazards and unsafe practices is promptly conveyed to, and acted on, by senior management, and that the board is provided with regular updates on both preventative information and incident data.

The board and senior officers should also periodically audit the effectiveness of the risk management system. An effective risk management system is a system that provides both specific and routine reports on environmental performance and notifies officers of incidents or events that arise between the formal annual review periods (see below).

Examples of a good practice internal reporting system includes one that monitors events, notifies appropriate company officers, and is able to identify underlying environmental problems before they escalate into an incident or environmental concern for your organisation. It may also collect and monitor data on the environmental performance of the organisation, its subsidiaries and related entities, assess the contribution of senior managers to environmental performance, and allow for employee involvement in environmental monitoring.

  1. Annual review

The board and senior officers should review the environmental performance of their organisation annually.

Examples of what should be included in the review include:

  • an assessment of the environmental policy;
  • check that the board is receiving updates on risk management;
  • consider what should be provided in the organisation’s annual performance statement required under your licence; and
  • whether incidents were appropriately managed and what could be improved.

Next steps

This EPA guideline emphasises the need for strong and active leadership, employee involvement, and assessment and review to be embedded in the organisation’s environmental management. However, environmental management systems also need to be tailored to the institutional structures of the organisation, and where necessary have procedures regarding the production and management of information in the event of an environmental incident.

We would recommend the following steps are taken to evaluate whether your organisation’s systems conform with the EPA guidelines:

  • review your organisation’s environmental policy and risk management system;
  • ensure internal reporting systems are adequate and that senior officers and the board receive regular updates on environmental management;
  • review environmental training for senior officers on liability;
  • reassess and sanity-check the environmental risks identified for the business; and
  • investigate and implement improvements to your environmental management system