Zambian mining judgment calls for new depths in sustainability reporting.

Author:Pollitt, Michael
Position:Perspective - Vedanta Resources PLC

A recent judgment allowing Zambian villagers to pursue their case against Vedanta Resources in the UK courts could have important implications for multinational companies doing business in Africa. Michael Pollitt examines the issues

Villagers from the Chingola District of central Zambia have been allowed to pursue their case against UK-based Vedanta Resources in the London courts, after alleging their water supply was polluted by the company's Zambian subsidiary. The 1,826 citizens of Zambia's Copper-belt Province claim toxic materials were discharged from the Nchanga Mine into watercourses providing their only source of crop irrigation and drinking water.

The judgment comes after repeated appeals from Vedanta and its Zambian subsidiary, citing corporate laws that ordinarily protect parent companies from domestic liability for the actions of their foreign subsidiaries. The court's most recent ruling found that Vedanta's level of intervention, in the mine might mean it owes a "duty of care" to the communities it affected, and that these communities might not gain "substantial justice" if the matter was tried in the Zambian courts.

Duty of care

In establishing whether Vedanta might owe a duty of care to the Zambian community, the court looked first at the level of control it exercised over the mine.

It found that Vedanta had publicly laid down group-wide policies and guidelines with which it asked its subsidiaries to comply. This is very common and not enough, in isolation, to constitute any responsibility owed by the company to the communities affected by its subsidiaries. The key differentiating factor was that Vedanta had also publicly committed to enforcing these policies at its subsidiaries, rather than simply expecting them to comply.

The court found that companies who claim, in theory, to enforce high ethical standards at their international subsidiaries, through training, supervision or intervention, may create for themselves a "duty of care" towards the societies affected, whether or not these enforcements are carried out in practice.

Evidence submitted by the Zambian claimants included references to public reports issued by Vedanta in which it asserted its responsibility for establishing group-wide environmental and sustainability standards, as well as for implementing these standards across the group through training, monitoring and enforcement.

These published sustainability materials included a report, Embedding Sustainability...

To continue reading