Principle Seven: Environment

Businesses should support a precautionary approach to environmental challenges.

What does it mean?

Introducing the precautionary approach, Principle 15 of the 1992 Rio Declaration states that “where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation”.

Precaution involves the systematic application of risk assessment, risk management and risk communication. When there is reasonable suspicion of harm, decision-makers need to apply precaution and consider the degree of uncertainty that appears from scientific evaluation.

Deciding on the "acceptable" level of risk involves not only scientific-technological evaluation and economic cost-benefit analysis, but also political considerations such as acceptability to the public. From a public policy view, precaution is applied as long as scientific information is incomplete or inconclusive and the associated risk is still considered too high to be imposed on society. The level of risk considered typically relates to standards of environment, health and safety.

Why should companies care?

The key to a precautionary approach, from a business perspective, is the idea of prevention rather than remediation. In other words, it is more cost-effective to take early action to ensure that environmental damage does not occur.

Companies should consider the following:

  • While it is true that preventing environmental damage may entail additional implementation costs, environmental remediation often costs much more, for instance in the form of treatment costs, or in terms of company reputation.
  • Investing in production methods that are not sustainable (i.e. methods that deplete resources and degrade the environment) has a lower, long-term return than investing in sustainable operations. In turn, improving environmental performance means less financial risk, an important consideration for insurers.
  • Research and development related to more environmentally friendly products can have significant long-term benefits

What can companies do?

Companies can support a precautionary approach by communicating potential risks for the consumer and providing complete information on risks to the consumer and the public. Supporting the precautionary approach includes obtaining prior approval before certain products, deemed to be potentially hazardous, are placed on the market.

Steps that a company could take in the application of this approach include the following:

  • Develop a code of conduct or practice for its operations and products that confirms commitment to care for health and the environment
  • Develop a company guideline on the consistent application of the approach throughout the company
  • Create a managerial committee or steering group that oversees the company application of precaution, in particular risk management in sensitive issue areas
  • Establish two-way communication with stakeholders, in a pro-active, early stage and transparent manner, to ensure effective communication of information about uncertainties and potential risks
  • and to deal with related enquiries and complaints. Use mechanisms such as multi-stakeholder meetings, workshop discussions, focus groups, public polls combined with use of website and printed media
  • Support scientific research, including independent and public research, on related issues, and work with national and international institutions concerned
  • Join industry-wide collaborative efforts to share knowledge and deal with the issue of precaution, in particular in regards to production processes and products around which high level of uncertainty, potential harm and sensitivity exist
Source: Principle Seven — unglobalcompact.org