Managers’ environmental responsibility and ESG best practices

Adopting good environmental, social and governance (ESG) practices is not just about being fashionable. It is more than this: it facilitates the raising of funds with better rates, the integration of sustainability indexes, being targeted by more demanding investors and consumers, and contributing to the continuity of business and the sustainability of the planet. Another aspect is risk mitigation, which is essential for any organization. Bringing the discussion to the field of managers’ legal responsibility, governance is a central factor to ensure environmental compliance and reduce the chances of crises along the way. Those who are not aware of this issue, in addition to not reaping its benefits, assume greater risks.

Law no. 9,605/1998 deals with the possibility of various actors being held criminally liable, including: “(…) directors, managers, members of the board and technical bodies (…) who, if they are aware about criminal conduct by others, fail to prevent it being committed, when they could have acted to avoid it.”

Given the subjective nature of criminal liability, it must be demonstrated that managers had control over the facts and, if they were aware of the criminal conduct, failed to act to prevent it from being committed. There must be a causal relationship between the imputations and the conduct of the company’s manager. Some criminal actions have sought true objective [strict] liability due to the position held, which does not prevail.

In the civil sphere, the National Environmental Policy (Law no. 6,938/81) set forth the figure of indirect polluters. The following excerpt of case law from the Superior Court of Justice (STJ) on the subject is renowned: “For the purpose of ascertaining a causal link in environmental damage, those that do it, those that do not do it when they should do it, those that fail to do it, those that do not care if they do it, those that finance those that do it, and those that benefit when others do it are equated.”

While companies are held objectively jointly and severally liable for environmental damage, and the causal link between their conduct and the degradation is sufficient for liability, the personal liability of managers must be handled with great caution, only if it is proven that they were aware of the potential harm and did not adopt measures that were their responsibility.

This understanding coincides with the Brazilian Corporate Law (Law no. 6,404/1976), which sets forth managers’ duty of diligence. It is not an obligation of an end, but rather of a means: it is necessary to demonstrate effort to achieve the result. It is essential to maintain diligent management in the company, both to prevent and solve socio-environmental problems, recording evidence in this regard.

The legal provision that the legal person may be disregarded whenever its personality is an obstacle to redress for damages caused to the quality of the environment, pursuant to Law no. 9,605/1998, should be recalled.

As can be seen, managers’ legal responsibility in the environmental sphere is broad. Some corporate initiatives such as environmental compliance programs, socio-environmental management systems, sustainability advisory committees, biodiversity protection programs, climate risk management, sustainability reports and targets, if well managed, are examples of practices that strengthen environmental governance beyond compliance and help meet the desired risk mitigation versus value creation relationship. Management guided by good ESG practices contributes significantly to strengthening the protection of managers and, at the same time, attract and maintain investments.