[Ed. note: Today is Part 2 of a 3-part guest blog on how EPA’s revised National Enforcement Compliance Initiatives (NECIs) relate to company ESG initiatives. Part 1 was published yesterday. The articles were written by Doug Parker and Mary Ann Grena Manley. Doug is the Co-Founder and CEO of Ecolumix. Mary Ann is the Founder and President of 15E Communications.]
Having discussed National Environmental Compliance Initiatives (NECIs) generally, and the proposed updates for 2024-2027, let’s take a closer look at what they mean for corporate ESG programs. How do the NECIs impact ESG evaluations and commitments?
Climate NECI
Climate change is typically a core ESG commitment and corporate leaders must pay attention. They must understand how the new climate change NECI will impact their companies and investment funds. To do this, it’s essential to look at the scope and potential impact of the proposed language:
Mitigating Climate Change. A potential climate NECI would seek to combat climate change through a focus on reducing non-compliance with the illegal import, production, use, and sale of hydrofluorocarbons [HFCs]… excess emissions from sources within certain industrial sectors, including municipal solid waste landfills and oil and natural gas production facilities; as well as non-compliance with other requirements such as mobile source, fuels, and methane regulations. Climate change poses substantial risk to public health and safety, water resources, agriculture, infrastructure, and ecosystems. Addressing climate change using EPA’s available compliance and enforcement tools is critical to EPA’s mission of protecting human health and the environment, particularly protecting populations that may be especially vulnerable to the effects of climate change, including those in overburdened, underserved, and economically distressed communities.
HFCs are highlighted, but excess emissions from sources in specific industrial sectors, and non-compliance with other requirements such as mobile sources, fuels, and methane regulations are specifically mentioned as well.
This new NECI signals that non-compliance linked to the administration’s climate change initiative could be fair game for enforcement scrutiny. If you’re one of the 2,000 or so entities reporting to EPA’s greenhouse gas reporting program, and your data submission is incorrect or suspected to be false, that could prompt an enforcement action – including a criminal fraud investigation. And once the SEC finalizes its climate disclosure rulemaking, that will open up a bevy of submissions to scrutiny for accuracy. When the government commits itself to pursuing a “whole of government approach” to tackling climate change, it casts a very wide net. Understanding the implications of the new climate NECI is imperative for all sustainability leaders and will be critical in ESG evaluations and data controls/validation.
PFAS NECI
The proposed addition of addressing PFAS contamination to the NECI list comes as no surprise as EPA implements its PFAS Strategic Roadmap. This approach focuses on research, restriction, and remediation efforts to mitigate and address the potentially significant liability and staggering cleanup costs associated with PFAS pollution, which are estimated in the billions of dollars. The proposed NECI [in part] states:
A PFAS NECI initially would focus on identifying the extent of PFAS exposures that pose a threat to human health and the environment and pursuing responsible parties for those exposures … EPA intends to focus enforcement efforts on PFAS manufacturers whose actions result in the release of significant amounts of PFAS into the environment, and on federal facilities that may be a significant source of PFAS contamination.
The proposed NECI specifies that PFAS manufacturers are at the top of the list for enforcement scrutiny. Looking through a compliance and ESG lens, this approach underscores the importance of addressing PFAS concerns within a company’s operations and supply chains. Taking steps to proactively identify and mitigate the PFAS risks will be (and in reality, already are) critical for companies to avoid targeted enforcement connected to this NECI. Failure to do so will not only open a company up to potential legal and financial liability as new regulatory frameworks unfold but will also damage corporate reputation, expose the company to third party claims, and undermine the credibility of corporate ESG programs and related goals.
The Environmental Justice Overlay
Viewed in the context of the overarching EJ considerations outlined in the NECIs, it’s critical not to forget that these listed priorities will receive even greater enforcement scrutiny when non-compliance impacts disadvantaged communities. The whole of government approach to climate and the agency-wide approach to PFAS prioritize environmental justice and the protection of disadvantaged communities. As such, sustainability leaders must broadly consider all potential EJ impacts that stem from their operations as part of an effective, credible ESG program built on an environmental compliance baseline.
