The King Report on Corporate Governance for South Africa 2002, commonly known as ‘King II”, focuses heavily on sustainability and sustainable development. It recognises that safety, health and environmental (SHE) issues may need to be dealt with separately for reasons of best practice or strategic planning.
The report points out that company directors have individual and collective responsibility for a company’s SHE performance and compliance. It also spells out the need for directors to be aware of the environmental management principles contained in the National Environmental Management Act (Nema) of 1998.
King II points out that there are a number of specific pieces of legislation that place upon directors obligatory duties relating to SHE matters.
The Occupational Health and Safety Act of 1993 paved the way in focusing on the personal responsibilities of directors. The Act identified circumstances where directors and employees could be prosecuted personally for acts and omissions in the workplace.
Nema followed this precedent by placing a duty and responsibility upon company directors to prevent, minimise and rectify pollution and to ensure that employees are not exposed to health and safety hazards through their work activities. If they do not meet these requirements, directors may be found guilty of offences and ultimately fined or even jailed.
The Companies Act of 1973 implied that directors could be held accountable for bad environmental or safety practices if these could be shown to affect materially the business and profits of the company.
In other words, if a company director were to increase the company’s risk profile through bad SHE management and this were to result in the company and its shareholders losing money, this could be seen as reckless use of shareholder funds and prosecution could follow.
The JSE Securities Exchange is in the process of modifying its listing and reporting requirements to ensure that members conform to the principles laid down in King II. Changes to the requirements for integrated sustainability reporting, including management and reporting of SHE matters, will take some time to implement.
In the interim, some companies are using guidelines like those provided by the Global Reporting Initiative as a reference point. Some have begun to report on sustainability in accordance with these guidelines, but say they will need several years to generate the amount of data necessary to reflect many of the social and environmental facets described in the initiative recommendations.
King II highlights the fact that SHE matters are a key part of directors’ legal responsibilities. While there are still some loopholes and inconsistencies within the
applicable laws, the efforts currently under way to correct these problems — including increased allocation of funds by the government for legal enforcement and compliance — will ultimately result in directors needing to take their SHE and sustainability responsibilities seriously, or risk personal financial loss or even jail for their omissions.
Arend Hoogervorst is a corporate environmental adviser and editor of Eagle Bulletin.