Bigger Profits, Bigger Responsibility: Large Firms Urged To Bear Environmental Costs

If a company profits more from its scale, it has to bear more responsibility for the environmental costs, the Supreme Court said on Friday while upholding an NGT order that imposed an environmental compensation of Rs 5 crore on a builder for violating green norms.

A bench of Justices Dipankar Datta and Vijay Bishnoi said in cases relating to protection of environment, linking a company's scale of operations (like turnover, production volume or revenue generation) to environmental harm can be a powerful factor for determining compensation.

Observing that bigger operations signify a bigger footprint, the court said a larger scale often means more resource use, more emissions and more waste, leading to more environmental stress.

"If a company profits more from its scale, it is logical that it bears more responsibility for the environmental costs. Linking scale to impact sends a message that bigger players need to play by greener rules.

"If a company has a high turnover, it reflects the sheer scale of its operations. Such a company, if found to contribute generously to environmental damage, its turnover can have a direct co-relation with the extent of damage that is caused. Thus, in our considered opinion, to contend that turnover can never form a relevant factor in quantifying compensation to match the magnitude of harm is fallacious," the bench said.

The NGT held in 2022 that Rhythm County had violated environmental norms at Autade Handewadi in Pune and carried out construction without obtaining an environmental clearance, for which it was liable to pay a compensation of Rs 5 crore.

In its order dated August 22, 2022, the NGT held that Rhythm County had carried out construction activity in violation of environmental norms and without obtaining the mandatory consents under the Air and Water Acts.

The NGT rejected Rhythm County's contention that such consents were not required, holding that statutory compliance could not be diluted on the basis of interpretative convenience and that the firm had continued construction activities even after the Maharashtra Pollution Control Board had issued a stop-work direction.