At a board meeting of JGP Chemicals Limited, the directors were discussing some recent negative publicity arising from the accidental emission of a chemical pollutant into the local river. As well as it resulting in a large fi ne from the courts, the leak had created a great deal of controversy in the local community that relied on the polluted river for its normal use (including drinking). A prominent community leader spoke for those affected when she said that a leak of this type must never happen again or JGP would suffer the loss of support from the community. She also reminded JGP that it attracts 65% of its labour from the local community. As a response to the problems that arose after the leak, the JGP board decided to consult an expert on whether the publication of a full annual environmental report might help to mitigate future environmental risks. The expert, Professor Appo (a prominent academic), said that the company would need to establish an annual environmental audit before they could issue a report. He said that the environmental audit should include, in addition to a review and evaluation of JGP’s safety controls, a full audit of the environmental impact of JGP’s supply chain. He said that these components would be very important in addressing the concerns of a growing group of investors who are worried about such things. Professor Appo said that all chemical companies had a structural environmental risk and JGP was no exception to this. As major consumers of natural chemical resources and producers of potentially hazardous outputs, Professor Appo said that chemical companies should be aware of the wide range of ways in which they can affect the environment. CEO Keith Miasma agreed with Professor Appo and added that because JGP was in chemicals, any environmental issue had the potential to affect JGP’s overall reputation among a wide range of stakeholders. When the board was discussing the issue of sustainability in connection with the environmental audit, the fi nance director said that sustainability reporting would not be necessary as the company was already sustainable because it had no ‘going concern’ issues. He said that JGP had been in business for over 50 years, should be able to continue for many years to come and was therefore sustainable. As far as he was concerned, this was all that was meant by sustainability. In the discussion that followed, the board noted that in order to signal its seriousness to the local community and to investors, the environmental audit should be as thorough as possible and that as much information should be made available to the public ‘in the interests of transparency’. It was agreed that contents of the audit (the agreed metrics) should be robust and with little room left for interpretation – they wanted to be able to demonstrate that they had complied with their agreed metrics for the environmental audit. Required:
(c) Defi ne ‘environmental risk’. Distinguish between strategic and operational risks and explain why the environmental risks at JGP are strategic. (10 marks)