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Elevate Your Undestanding

The Nature of Environmental Obligations - Part 2

In our previous blog post we considered the nature of environmental obligations from the perspective of their compliance approach and the shift from rules and audit-based regimes to performance and risk-based strategies.

This week we continue our look at the nature of environmental obligations through the lens of regulatory, social, and government licenses to operate.

Private and public sector obligations come from multiple sources that can be mapped to the following three type of licenses:

  1. Obligations arising from a regulatory license to operate. These come from accepting public responsibilities to behave in line with the conditions of an operating license. They tend to be mandatory and prescriptive in nature. They are often referred to as external obligations as they are imposed on organizations from external authorities.

  2. Obligations arising from a social license to operate. These come from accepting stakeholder responsibilities where stakeholder is defined in the broadest sense: employees, shareholders, communities, suppliers, customers, residence, the public at large – anyone who has a stake in what the organization is doing. These tend to be voluntary and more performance and outcome-based. They are referred to as internal obligations since organizations choose to impose these on themselves.

  3. Obligations arising from the authority to govern. These obligations are a result of accepting government responsibilities to contend with public risk. In the case of local governments they will have obligations from the previous two categories along with obligations associated with their role as regulator to inspect, enforce, monitor, and implement regulatory acts.

In recent years internal obligations have approached parity and in some cases exceeded external obligations in many organizations driven to a large extent by the adoption of environmental, social, and governance (ESG) objectives. At the same time environmental obligations have increased across all categories in response to climate change.

Unfortunately, compliance for many organizations focuses mostly on external obligations associated with a regulatory license to operate. This leaves a significant number of obligations, many of which are environmental, under-resourced, un-managed and at-risk.

For compliance to be effective it must adapt to the changing landscape by expanding beyond mandatory and regulatory obligations to include obligations from all sources.

This requires knowledge of the nature of obligations and strategies needed to meet them.

Does compliance in your organization cover all your obligations?

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