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Corporate responsibility moving up Asian governments’ agenda: Singapore’s Transboundary Haze Pollution Bill

March 2014 marked a significant moment in Singapore’s policymaking with a draft bill on transboundary haze pollution allowing for legal action on entities that partake in conduct resulting in haze in Singapore.

In June 2013, illegal fires in Sumatra, Indonesia, plunged the Southeast Asian region — Brunei, Indonesia, Malaysia, Singapore and Southern Thailand — into a severe haze. The Pollutant Standards Index (PSI) in Singapore peaked at 401 (hazardous range), while in Muar, Johor, the Air Pollution Index (ASI) spiked on 23 June to 746, sending the district into a state of emergency. Figures exceeding 200 for both the PSI and ASI classifies the air as unhealthy for all exposed persons, especially those with health issues.

The Singapore government’s attention turned to errant business practice. Singapore’s Prime Minister Lee Hsien Loong noted that fires were caused by “errant companies and were not likely to just be smallholders slashing and burning”. Addressing questions from parliament, Minister for Environment and Water Resources Vivian Balakrishnan stated that the root cause of the haze is commercial – big plantation and paper mills having “total disregard for their social and environmental responsibilities”.

What is the Transboundary Haze Pollution Bill?

The draft Transboundary Haze Pollution Bill (the Bill) is a legislative measure that transcends national boundaries and actively targets commercial entities suspected of actions that result in haze in Singapore.

The government targets any entity linked to actions resulting in haze pollution in Singapore. Several hotspots have previously been linked to areas that belong to palm oil and pulp-and-paper companies. The proposed legislation will demand a greater degree of accountability from businesses

Singapore will crack down on entities — any sole proprietorship, corporation or other body of persons — that engages, or authorises any conduct or decision that results in haze pollution in Singapore. These entities are susceptible to both criminal and civil liability. Civil action can be taken against errant entities by industries like aviation and tourism, should they be able to provide evidence that the resulting haze caused serious economic impact.

Any persons found guilty of causing or contributing to resulting haze in Singapore, can be fined up to SGD$300,000. Obstructing the duty of investigating officials warrants a penalty of up to $10,000 and a jail term not exceeding three months. Any person in Singapore found guilty of intentional alteration or suppression of documents required by officials to facilitate investigation may face a $5,000 fine or an imprisonment of up to three months, or both.

Who does it affect?

The government targets any entity linked to actions resulting in haze pollution in Singapore. Several hotspots have previously been linked to areas that belong to palm oil and pulp-and-paper companies. The proposed legislation will demand a greater degree of accountability from businesses. The Singaporean government would – with help from foreign governments – exercise authority on any entity or persons involved, regardless of location or citizenship.

This affects not only errant companies. Banks, as well as major investors, will have to be more stringent on loan approvals or investments to avoid possible backlash from being found of having financing practices linked to haze pollution in Singapore.

Bill sends clear message from regulators but questions over effectiveness remain

The new Bill is lauded by environmentalists as a bold step forward although criticism over the effectiveness of the Bill exists.

Some points of concern:

  • There remains the underlying problem of a lack of consensus on differing concession maps.

According to data from NASA’s Landsat 8 satellite, lands leased to industrial oil palm and acacia plantations accounted for 21% of the fires while small to medium-sized plantations accounted for the remaining 79%. Agri-businesses however have argued that the maps used to identify industrial concession boundaries are inaccurate. Regulators looking to enforce the Bill face an uphill challenge in building their cases.

  • Transnational cooperation and coordination required

To rectify deep-rooted complications, governments must think laterally to solve complex issues and take up the challenge of holding responsible entities accountable. How this actually works in practice is difficult to imagine, especially if it takes a cue from past experience on cooperation efforts to deal with concession map consensus.

  • Penalties imposed to be taken as ‘haze tax’?

The danger of imposing fines as a penalty without attributing real responsibility for action could potentially send companies down the route of paying off these fines without making a real effort to change existing business practices.

An example of such a move is the European Union’s emissions trading system (ETS), used in encouraging reduction of greenhouse gas emissions and increase efficiency. International flights operating in EU airspace must purchase official grants for its emissions, or incur heavy fines. Instead, the effectiveness of the ETS has been questioned as costs can be passed on to consumers or used as an outlet for further profit, defeating the purpose of the scheme – as an incentive to improve environmental performance.

However, the potential consumer or community backlash that comes with a company being investigated under the Bill might prevent such nonchalance. The Bill could empower consumers and society to act as an additional pressure point for real change.

These questions aside, in a business market that has traditionally overlooked environmental costs in favour of financial profits, the message Singapore regulators are sending is a welcomed one.

Zheng Ying Chong is a project manager at CSR Asia, while Jacquelyn Chen is a contributor. This post originally appeared in the CSR Asia.

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