Due diligence is an extremely important concept in environmental regulation and compliance. When properly done, it provides a defence to regulatory charges or, at least, can mitigate the amount of fines imposed.
Environmental due diligence is primarily a proactive activity. It involves taking steps to ensure that regulatory standards are met and that environmental mishaps do not occur—so that regulatory and other legal responses do not follow. Documenting the steps, policies, and actions undertaken, including training of staff and supervisors, is an important aspect of the process.
But what does it take to be duly diligent in Ontario?
In this short article, with a focus on Ontario, we highlight some of the key elements of the concept, describe some of the situations in which it may be applied, and provide some examples of how due diligence can be used to prevent civil and regulatory liability in the environmental context.
From a regulatory perspective, Canadian environmental law is comprised of a wide range of statutes, regulations, policies, and by-laws. These laws can be federal, provincial, or municipal. Many of these laws prohibit certain actions or inactions (such as permitting or failing to prevent a spill or an unauthorized discharge) and establish offences for infractions. These are quasi-criminal offences, and convictions usually lead to fines and/or imprisonment. At the federal level, they are treated as criminal offences and can result in a criminal record.
In responding to charges, establishing a defence of due diligence is about demonstrating the steps taken to prevent the environmental offence from occurring. Although a due diligence defence does not require an accused to have taken all possible steps to prevent an offence from occurring, it requires that all reasonable steps were taken that are expected of a person in similar circumstances. Courts have found that simply relying upon industry standards alone may not be sufficient.
Environmental due diligence provides an effective, and complete, defence for most environmental offences. Due diligence can also be a mitigating factor in determining the amount of fines imposed on a conviction.
Due diligence will not normally provide grounds for an appeal of an administrative order (such as an order to remediate a site or stop a certain activity). However, some case law indicates that decision makers (such as the Environmental Review Tribunal in Ontario) may consider due diligence in determining whether a regulatory body has acted fairly in issuing the order.
Due diligence can also provide a defence to certain environmental actions, including negligence, in contaminated land litigation, which usually involves one property owner suing another for causing or failing to prevent its property from becoming contaminated.
Due diligence is also critical to avoid liability relating to the purchase of a contaminated property. The doctrine of caveat emptor—“buyer beware”—protects vendors from liability relating to most property flaws (including contamination) that the purchaser could have uncovered by engaging in due diligence prior to purchasing the property. That is, through due diligence (such as conducting environmental investigations), a buyer can either decide not to purchase contaminated land or establish terms in the purchase agreement to address environmental issues with the property.
What Constitutes Due Diligence?
The behaviour expected of a duly diligent business or individual will vary, but generally depend on numerous factors including the industry in which they operate and the nature of the offence.
Some examples of basic environmental due diligence include:
- staying apprised of and following, if not exceeding, established standards and best practices particular to the industry in which a business operates;
- ensuring all licences, permits, and approvals have been sought and are in place and complied with;
- assessing, understanding, and actively mitigating actual and potential environmental risks in the business, including by retaining experts when necessary;
- having appropriate response procedures in place, including a spill policy and contingency plan and a waste management system, where appropriate;
- producing regular environmental compliance reports tailored to the specific industry;
- developing workplace rules to prevent environmental violations, engaging in employee training, and enforcement of workplace rules; and
- creating a formal environmental due diligence programme in conjunction with industry and/or legal counsel.
Reviewing and updating environmental policies on a regular basis, and documenting all efforts are also key to an effective strategy. Proper employee training is also crucial. Environmental plans and policies that are meticulously crafted and regularly updated but on which employees are never trained are not likely to suffice.
Protect the Environment and Your Business
Being duly diligent means taking all reasonable steps to prevent environmental offences, damage, or incidents from occurring. Due diligence can greatly reduce the risk both of environmental accidents or mishaps as well as regulatory and civil liability.