Bobir Turdiev
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Environmental degradation in Uzbekistan

Environmental issues are becoming the main discussion topic as global warming, and climate change are transforming lives and landscapes worldwide. Still, the issue is a top discussion topic on the global agenda, the state of ecology is significantly deteriorating in developing countries as modernization of the economy and industrialization progresses. Uzbekistan is experiencing severe environmental degradation and pollution as well. A poor state of ecology can be seen in Uzbekistan’s low ranking (107 with a 38.2 score) on the Environmental Performance Index and abysmal performance on air quality (ranking 167, scoring 16.7). According to air quality, Uzbekistan is one of the 12 most polluted countries. The annual delicate particulate matter (PM2.5) concentrations in 2021 were 8.6 times higher than the World Health Organization Air Quality Guidelines level. Discharge of harmful substances and industrial processes, cutting down trees and reduction of green zones, widespread construction works, overexploitation, and inefficient use of natural resources are the leading causes of irresponsible conduct leading to environmental deterioration. 

To tackle these problems, corporate action for a sustainable future is required as the corporate sector remains the main contributor to environmental pollution globally. Therefore, businesses in developing countries are taking steps to adhere to green practices and mitigate and reduce the environmental burden of their operations. Corporate social responsibility (CSR) is one of such self-regulatory tools and mechanisms that intends to enhance the responsibility of businesses for their impact on society and the environment. Corporate environmental responsibility (CER) is the main tributary of CSR that aims to contribute to sustainable business practices by preventing and mitigating adverse impacts of business on the environment and further improving the state of the ecosystem.

CER standards can also be an effective tool for enhancing the environmental responsibility of business in Uzbekistan. Therefore, this blogpost seeks to apply CER standards and mechanisms as a supplementary tool to increase the accountability of businesses for their impact on the environment and promote sustainable business practices. 

Regulatory framework of CER in Uzbekistan

The concept of CSR is still new for Uzbekistan, let alone CER. Still, the roots of responsible business conduct go far back into history; it remains one of the least studied topics in the country. Legal analysis of environmental responsibility indicates that the straightforward concept is rarely found in national legislation and other voluntary compliance tools (Corporate governance code, Code of Business Ethics, and Listing Rules). However, it is possible to find an implied concept of CER in national legislation. For instance, articles 50 and 54 of the Constitution of Uzbekistan oblige citizens to take care of the environment and insist that applying property rights must not cause damage to the environment.

However, the scope of the primary law regulating entrepreneurship is minimal, which states income generation and law compliance as the primary responsibilities of business. Similarly, the Law “On Protection of the Environment” does not encourage proactive corporate action and voluntary measures for environmental protection that go beyond what is required by law. Although Uzbekistan imposed an indefinite moratorium (starting November 1, 2019) and increased fines and compensation for cutting valuable trees, cases related to cutting down trees for business interests continue to happen. The situation is identical regarding self-regulatory and voluntary compliance standards. The Corporate governance code(2016), the Code of Business Ethics (2018), and the Listing Rules of the Republican Stock Exchange “Toshkent” have hardly any point about environmental responsibility. 

Cases related to cutting down trees reveal that mandatory legislation (corporate and environmental law, administrative and criminal liability) and voluntary guidelines were insufficient to prevent corporate misconduct in Uzbekistan. This is because the Government impact is limited in many developing countries, and it cannot ensure the rule of law, compliance, and enforcement either. The situation is more difficult due to the prioritization of business interests and financial return over sustainable business practices. This failure calls for finding regulatory strategies and mechanisms to enhance business accountability.

CER: a possible remedy for developing countries

What can be done to promote sustainable business practices in such a situation when law compliance and the rule of law are weak, legal regulation and government support are lacking, sanctions and penalties for breaches of law do not bring expected results, and weak institutions and oversight mechanisms are not able to monitor compliance. In such cases, CER standards and policies as a self-regulatory tool can supplement the governance gap to enhance the responsibility of business for its impact on the environment, promote sustainable business practices, and enhance environmental resilience and thus can be mutually beneficial for all stakeholders. CER does not mean just obeying the law but going beyond what is required by law and taking proactive action. 

Environmental responsibility standards press companies to consider their impact on society and the environment to prevent possible negative consequences, encourage corporate disclosure, and proactive sustainable or green practices. Research indicates that CER standards improve environmental performance and assure environmental legitimacy, better reputation, competitive advantage, and more profitability. 

CER is an emerging framework for Uzbekistan. Companies that practice CER do so as a prerequisite of global market standards or pursuant to policies of founding companies that are foreign affiliated entities. Still, there is no legislation or clear guidance; CER practices can be traced in some multinational, foreign or joint ventures operating in Uzbekistan. For instance, the US-Uzbek joint venture “Silverleaf” LLC conducts business in water-intensive sectors (agriculture, irrigation, and textile industries) typical to local farmers and agricultural clusters. CSR commitments of the company are explicitly stated in the Code of Conduct, while sustainability and responsibility are set as the primary strategy pillars of the company. It is also involved in various social, environmental, and community projects. For instance, the company’s water and land management projects aim to reduce water use by 30-40% and improve soil health through the modernization of irrigation systems and laser land leveling.

Therefore, the government should take the initiative to introduce, support, and implement CER standards to pave the way for green business practices. Still, cost estimation of the CSR strategy is challenging due to inherent uncertainties and many dynamics involved. However, implementation of CER is far more inexpensive than the harm or damage it may cause due to the lack of such standards.

Recommendations for sustainable business practices 

Considering the significant impact of RBC on enhancing the environmental responsibility of business, I propose three main points for the development of CER in Uzbekistan.

First, CER standards should be incorporated into national legislation as the main principle of doing business. Economic, social, and environmental interests should be equally balanced in the entrepreneurial and environmental legislation. 

Second, companies with a high and moderate level of environmental impact should produce environmental reports on a mandatory basis at the initial stage. Step by step, mandatory reporting should be extended to other large companies and all state-owned enterprises. They should prepare and publicize annual non-financial reports about the company’s impact on wider stakeholders and the environment. After the introduction of CER standards, legislation should be further reviewed based on expertise and enforcement challenges.

Third, self-regulatory and voluntary guidelines (Corporate governance code, Code of Business Ethics, and Listing Rules) should be further revised to support responsible business conduct. Relevant regulatory agencies and business unions should upgrade respective codes to internationally recognized standards, considering local factors and sociocultural peculiarities and emphasizing environmental considerations.

Oversight and monitoring of the implementation of these self-regulatory standards can be achieved by encouraging corporate transparency and public control mechanisms. The wider public, civil society, NGOs, and media should assess the effectiveness of enforcement measures. Noncompliance should be strictly scrutinized by civil society and environmental watchdogs that can bring the case into publicity to press the corporate sector to be more accountable.

The introduction of CER standards will bring costs related to developing new instruments and enforcing new systems for business soon. While in the long term, companies try to excel at their sustainable business practices by reducing costs and increasing efficiency. In addition, investors and manufacturers prioritize CER and sustainable goods when making an investment or dealing with local companies due to reputational risks and enhanced standards regarding the supply chain. Therefore, enhanced CER standards and policies can improve business attractiveness for foreign investors and trade partners.

Conclusion

Strengthening the legal basis of CER standards in national legislation and soft-law tools and the introduction of mandatory reporting will enhance the environmental responsibility of businesses, encourage environmental conservation measures, and contribute to more green practices and initiatives. The only challenging task is to develop adequate standards and encourage its wide acceptance and implementation by the corporate sector.

Cite as:  Bobir Turdiev, “Environmental pollution & corporate misconduct: is a solution possible?”, Uzbekistan Law Blog, 19.12.2022.