Corporate Environmental Responsibility (CER) – The Core IAS

Corporate Environmental Responsibility (CER)

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Definition

  • Corporate Environment Responsibility (CER) is a concept that suggests that it is the responsibility of the corporations/companies/departments operating within society to contribute towards economic, social and environmental development that creates positive impact on society at large.
  • It refers to the duty of the company not to indulge in activities that may damage the natural environment in any manner. 

CSR vs CER

  • This concept comes under the aegis of Corporate Social Responsibility. According to the European Union, “CSR (Corporate Social Responsibility) is the process. Whereby enterprises integrate social, environmental, ethical and human rights concerns into their core.”
  • However, it is equally important to learn the difference between the two. CSR spending by a company is linked to the profits earned by it. CER spending is related to the cost of the project. Hence the commitment in the latter is regardless of profit or loss endured by the company. 
  • CSR is concerned with returning to society through a wide range of activities in fields of education, development and creating skilled manpower. CER, on the other hand, is concerned only with green solutions for the area where the company left its footprint. 

Elements of CER

  • Adopting sustainability models that ensure the availability of resources for the future generations 
  • Optimal use of natural resources for productivity enhancement
  • Elimination or zero wastage and reduction of pollution 

Use for

  • The Corporate Environmental Responsibility incorporates the infrastructure creation for drinking water supply, sanitation, health, education, skill development, roads, cross drains, electrification including solar power, solid waste management facilities, scientific support and awareness to local farmers to increase yield of crop and fodder, rain water harvesting, soil moisture conservation works, avenue plantation, plantation in community areas, etc.

Driving forces of CER

  • The driving forces of CER are policies of the government along with rules and regulations in this regard. Effective implementation of tariffs and taxes provide a hassle-free solution for the implementation of CER.
  • Some of the activities which can be carried out in CER are infrastructure creation for drinking water supply, sanitisation, health, education, skill development, roads, cross drains, electrification including solar power, solid waste management facilities, scientific support and awareness to local farmers to increase the yield of crop and fodder, rainwater harvesting, soil moisture conservation works, avenue plantation, the plantation in community areas, etc.

Advantages of CER

  • The introduction of CER as a corporate culture would inculcate in them the essentials of sustainability. This in turn would motivate them to reduce their carbon footprint and regulate emissions. 
  • Though the concept is new, it has gradually carved a niche for itself in a world that is already battling with the climate crisis. Now the companies are realizing that it is better to implement sustainable solutions before they become law. Moreover, companies working with green ethics have now started attracting more consumers. In their bid to beat the competition, they have also begun to come out in support of environmental legislation rather than protesting against them. 

The Indian perspective

  • As per the guidelines issued by the Ministry of Environment, Forest and Climate Change (MoEFCC) in May 2018, CER was imposed as an additional cost to deal with pollution control, environmental protection and conservation etc. A greenfield project with an investment of Rs 100 crore will have to pay up 2% as CER and 1% for a brownfield project.
  • The CER varies depending on capital. For a Rs 10,000 crore project, the CER would be between 0.125% to 0.25%.
  • In the year 2020, the centre has decided against levying costs of CER, which were introduced in 2018 for projects whose capital was more than Rs 100 crore. Instead, the ministry has directed that all the activities proposed by the project proponent or prescribed by the Expert Appraisal Committee or State Level Expert Appraisal Committee.
  • India’s judicial system has always expressed interest in saving the environment. In one such judgment, the judges observed that the scientific and technological prowess of humans has blatantly impinged nature. 
  • Apart from the government notifications and judgment stated above, another document that deals with CER is Draft National Guidelines on the Economic, Social and Environmental Responsibilities of Business. This draft recognizes environmental responsibility as a necessity for economic progression and social wellbeing.

The Global Perspective

  • CER has slowly become one of the best practices for companies i.e., beyond the obligations of any company policy or legislation. They now hold a prestigious place as company ethics.
  • On the other hand, environmental management is part of guidelines issued by international organizations such as the OECD and initiatives such as the Global Reporting Initiative (GRI). 

Challenges in implementation of CER

  • The need for the implementation of an effective CER has been felt by many companies. However, small corporate houses fail to do so due to high regulation costs and their inability to predict economic gains. Technology for green solutions is more often than not pretty expensive which makes it difficult for small and medium enterprises to afford them. Another challenge faced by corporates in conflicting legislations.
  • Legislations made by the Centre and States differ on various aspects making compliance difficult for the companies. Since the main drivers of implementation of CER are government policies, they must align with each other for ease of compliance and effective implementation. 

The Green Way Ahead

  • To let CER be the driving force of companies in reducing their carbon footprint, it has now become important to differentiate it from CSR. CER should now be liberally interpreted as a standalone concept and should be given importance equal to that of CSR. CER should not be constrained to a project-based approach but should work as a mandate for the companies.
  • One way to achieve environmentally friendly solutions through corporates is by forming internal committees committed to the implementation of CER. A periodic evaluation may be done by the committees by conducting audits and reviews.