The U.S. Environmental Protection Agency (EPA) has led the charge to ensure that all communities, particularly those that have historically been marginalized, are protected from environmental harm and have meaningful participation in environmental decision-making processes.
This initiative is fueled by the decades-old concept known as environmental justice, a policy that seeks to address the disproportionate burden of environmental hazards on marginalized ethnic and socioeconomic communities.
Think the Flint, Michigan, water crisis or “cancer alley” in Louisiana.
In 2014, the city of Flint switched its drinking water source to the Flint River, leading to lead contamination and a public health emergency. The crisis disproportionately affected the city’s low-income and predominantly African American population. Litigation and a $626 million settlement followed.
In Louisiana, a cluster of petrochemical plants in predominantly African American communities has raised concerns about environmental justice and led to litigation by community groups and residents. St. James Parish was accused of intentionally discriminating against Black residents by encouraging facilities to be built in areas with predominantly Black populations, while explicitly sparing White residents from the risk of environmental harm.
Environmental justice concepts have been incorporated into all aspects of regulatory actions. Laws and regulations require the EPA and state regulators to factor in environmental justice issues into setting standards, permitting facilities, awarding federal grants, site assessments, site cleanups and various types of project approvals. More recently, the EPA has extendedthose efforts to their National Enforcement Compliance Initiatives, which now establish environmental justice as a core element of all enforcement and compliance work.
Environmental justice concepts have been incorporated into all aspects of regulatory actions.
Corporations in the crosshairs
It is not just public entities that need to consider the ramifications of environmental justice. Corporations could end up in the crosshairs of costly litigation if they fail to recognize how their operations may impact marginalized communities and fail to adequately address those concerns.
Subsequently, environmental justice litigation, particularly class-action lawsuits, can have significant implications for an environmental insurance policy, as it may lead to increased scrutiny of a policyholder’s environmental practices, potential liabilities and the adequacy of insurance coverage.
Corporations, as well as the environmental consultants they hire, play a crucial role in assessing and addressing environmental justice issues associated with their operations and projects. They may find it beneficial to consider the following factors when working on projects with a potential to impact communities:
- Community engagement: Engage with local communities, especially those that are historically marginalized or vulnerable, to understand their concerns, values, and needs related to environmental issues.
- Impact assessment: Assess the potential environmental and social impacts on nearby communities, particularly focusing on identifying any disproportionate impacts on marginalized groups.
- Regulatory compliance: Comply with environmental justice regulations and guidelines, including those related to fair treatment and public participation.
- Equity and fairness: Strive to promote equity and fairness in all project planning and decision-making processes.
- Data collection and analysis: Gather and analyze data on community demographics, environmental conditions, and health indicators to understand any potential disparities in environmental impacts.
- Mitigation and remediation: Develop and implement strategies to mitigate adverse impacts and remediate any existing environmental hazards if potential environmental justice concerns are identified.
- Collaboration and partnerships: Collaborate with community organizations, advocacy groups, and local government agencies to proactively address environmental justice concerns.
The recent emphasis on environmental justice presents a potential liability exposure for both private and public entities that fail to consider the impact of their operations on vulnerable communities or to involve these communities in the decision-making process. This can potentially lead to legal challenges and reputational damage and, subsequently, claims against any environmental insurance policies that may be in place.
A collaborative effort
Environmental justice is an evolving concept with a complex history, diverse regulatory requirements and potential legal implications for businesses and organizations, whose journey is far from over. By understanding and proactively addressing environmental justice considerations, policyholders can mitigate the associated legal liability.
Federal and state regulatory and enforcement programs will continue to be highly dependent on the priorities and decisions of the current legislative, executive and judicial branches of government in office. Regardless, environmental justice is a well-established concept that will continue to present a potential collective exposure to corporations, environmental consultants and the environmental insurance market if ignored.
It is essential for insurers to engage proactively with their clients and potential clients to discuss environmental justice concerns, corporate social responsibility, potential litigation risks and the alignment of insurance coverage with evolving societal expectations and legal developments.
Collaborative dialogue between insurers, brokers and policyholders can help ensure that an environmental insurance program not only adequately addresses the implications of potential environmental justice litigation but also supports sustainable and equitable environmental practices that mitigate the potential risk.
About the Author
Robin Little is an AVP with AXA XL’s Environmental Risk Consulting team. She can be reached at robin.little@axaxl.com
