Not so long ago, environmentally conscious individuals were discounted as "bunny huggers", to be humoured, at best. But, with the recognition of environmental rights as fundamental rights in South Africa's Bill of Rights, this has changed dramatically, and South Africa's environmental legislation now ranks right up there with First World standards.

From a corporate point of view, this poses a whole new set of challenges: the regulatory environment is becoming increasingly complex and penalties for infringements are severe - both in terms of corporate and directors' personal liability.

In terms of environmental liability, there are essentially two issues: sudden or accidental damage to persons or property; and, slow and gradual pollution. The traditional insurance market provides cover for the former but not for the latter, which is where Alternative Risk Transfer (ART) vehicles can provide cover on a risk financing basis.

Under the Environmental Conservation Act, fines of up to R100000 can be levied, and directors of companies can be jailed for up to 10 years. The National Water Act allows for fines of up to R200000 and imprisonment of directors for up to five years. And the growing prevalence in class-action suits in South Africa could give rise to a host of environmentally driven court cases that could have dire financial consequences for corporates in many different sectors.

Environmental responsibility needs to become a key issue in business planning. Restitution costs are reaching levels that are material to the bottom line; especially since there are generally large discrepancies between companies' estimates of their environmental exposure and their actual financial liability. Some companies do not account for capital expenditure necessary for adequate environmental management, while others fail to take into account the cost of monitoring, on-going rehabilitation and maintenance.

Companies can choose either to carry the clean up costs on the balance sheet or to enter into Alternative Risk Transfer arrangements where there is a combination of risk financing and risk transfer elements.

From the government's point of view, the challenge will be to enforce legislation and bring offenders to book. Perhaps the answer lies in adopting a carrot instead of a stick approach and there has been some talk of tax incentives for sound environmental practices, and initiatives like the introduction of the carbon emission tax, already levied in Europe.

Being a good corporate citizen entails being familiar with all the relevant legislation, taking steps to prevent harm to the environment and being accountable for historic, current and future environmental harm. Environmental responsibility should be part of the company's risk assessment, control and management programme. The risk of personal liability should be recognized and systems should be put in place to monitor all possible environmental impact.

Herman Schoeman, MD, Guardrisk: +27 11 669-1000 / +27 82 376 3821

Melanie Davis, PR@Work CC, Tel: +27 11 615-3309 or +27 83 225 7450