Company directors in Kenya, South Africa and Nigeria could face legal liability if they fail to manage nature-related risks, according to a new report. [AI]
Company directors in Kenya, South Africa and Nigeria could face legal liability for failing to manage nature-related risks, according to a report that links environmental governance to directors' duties.
The report, Directors' Duties and Nature-Related Risk in Africa, found directors must consider risks such as biodiversity loss, water scarcity and land degradation as part of their duty of care and obligation to promote the success of their companies.
The analysis by the Commonwealth Climate and Law Initiative (CCLI), FSD Africa and the African Natural Capital Alliance (ANCA) examined legal and governance frameworks in Kenya, South Africa and Nigeria.
"In advising boards and Kenyan directors, you get the feeling that they understand the environment in a narrower compliance approach, looking at environmental impact assessment (EIA) licences or regulatory requirements," said Sammy Ndolo, Managing Partner at Cliffe Dekker Hofmeyr (CDH) Kenya.
"Few have really internalised what it means to promote the success of the company under the Companies Act, which includes understanding and evaluating the impact of a company's operations on both the community and the environment," he said.
The report says directors who fail to address foreseeable and financially material nature-related risks could expose their companies and themselves to legal, financial and reputational consequences.
It found Africa's economies are particularly vulnerable because 62 per cent of the continent's gross domestic product (GDP) depends moderately or highly on nature.