Key Point

  • Sustainability is rapidly moving from an aspirational goal to a practical decision-making tool, as shown by changes in environmental laws in recent years.

Talk of "sustainability" is all the rage. It occupies entire conferences and journal volumes, within Australia and around the world. Initially, the discussion focused on the concept in theory (that is, what it means), but now there is considerably more attention on the concept in practice (that is, how it works).

The concept of sustainability has been recognised internationally since the early 1990s1, and has been incorporated in Australian law for around a decade2. However, until recently, the challenge has been how to make sustainability a real, enforceable legal requirement, rather than an aspirational goal which simply appears in the "objectives" of various legislation or statutory bodies.

Now, it seems, there's an increasing number of examples of the law giving sustainability real bite. In this article, we highlight a few of these.

First - what is "sustainability"?

The concept of "sustainability" means different things to different people. For example, one might consider economic financial sustainability or social sustainability. This article concentrates on environmental sustainability, or, as the concept is better known, "ecologically sustainable development" ("ESD").

The basic message of ESD is that social, environmental and economic factors should be integrated in decision-making. This message is guided by four core principles of sustainability. We have set out the most commonly-used definition of ESD, which identities these four core principles, at the end of this article.

ESD in the courts

ESD, or at least some of its principles, has been applied in Australian courts since the early 1990s. In 1993, the NSW Land and Environment Court applied the precautionary principle (one of the best-known principles of ESD) as a "public interest" consideration, to refuse an application for a permit associated with the proposal to construct a link road3.

The current Chief Judge of the Land and Environment Court, Justice Preston, and his predecessor, Justice McClellan, have shown an increasing preparedness to apply ESD principles in decision-making under environmental laws. Justice McClellan, when dealing with a case under the Water Management Act 2000, described the precautionary principle (one of the core principles of ESD) as
"a central element in the decision making process".

There are indications that courts and tribunals in other jurisdictions are also recognising the role of ESD in decision-making.

Justice Preston recently stated that one of the key provisions of the Environmental Planning and Assessment Act 1979, which relates to the determination of development applications ("DAs"), "obliges the consent authority to have regard to the principles of [ESD] in cases where issues relevant to those principles arise". He provided a comprehensive analysis of ESD and its practical application in the case in which he made that statement4, which we reviewed in a recent edition of Planning and Environment Insights.

Justice Preston has also highlighted the importance of ESD in criminal proceedings, referring extensively to ESD in a recent case which involved illegal clearing of native vegetation (Bentley v BGP Properties Pty Limited [2006] NSWLEC 34).

ESD in the development process

We have mentioned above the relevance of ESD in determining a DA under NSW planning laws. It is clear from recent cases that, increasingly, decision-makers will employ the principles of ESD to inform the way in which they analyse a development proposal. At the Commonwealth level, environmental approval laws require the Minister for the Environment to take account of the precautionary principle when making certain decisions under those laws5.

A more direct, and more controversial, application of ESD in NSW is the BASIX scheme (or Building Sustainability Index). BASIX provides a mandatory certification mechanism to drive the incorporation of specific water and energy efficiency measures in development proposals. Developers are required to demonstrate prescribed reductions in water use and energy use in new developments when compared with a notional average dwelling, and the measures which are proposed to achieve those reductions are then "locked in" via BASIX certificates and associated compliance requirements throughout the DA process.

BASIX currently applies to residential developments, and requires water savings of up to 40 percent and energy savings of up to 25 percent when compared with the notional dwelling in the relevant development category. While most stakeholders support the ideas which underpin BASIX, many are concerned about the development costs which the BASIX scheme adds, especially in relation to multi-unit residential developments. Recent proposals to increase the energy efficiency target met strong criticism, and the Government has now agreed to review its position.

Other States apply, or are considering the implementation of, schemes similar to BASIX, but will, no doubt, tread cautiously in light of recent publicity about the operation of the scheme in NSW.

A new initiative is the proposed biobanking regime in NSW. Biobanking essentially involves the creation of "biodiversity credits" through actions to conserve biodiversity, and the trading of credits to allow developers whose proposals will have adverse biodiversity impacts to acquire credits as offsets for those impacts. The NSW Government hopes to create a market for biodiversity credit trading, and, in turn, to promote conservation initiatives. Another by-product of the scheme is intended to be more efficient DA processing. We have commented on biobanking in the following article, "Will biobanking simplify the development consent process?, please click on 'Next Page' link at the end of this article to view.

ESD in transactions

ESD is also becoming part of the transactional matrix, as stakeholders in development projects consider the long-term benefits of an environmentally sustainable approach to those projects.

Increasingly, financial and insurance institutions consider environmental sustainability in their commercial decision-making. The adoption of the Equator Principles by a growing number of financiers worldwide in respect of project finance provides a good example of this trend6.

The adoption of ESD-related building rating schemes is also becoming more common. A growing number of property transaction documents include requirements for development projects to achieve particular ratings on accepted "green building" scales. In April 2006, the Commonwealth Government announced that the National Australian Built Environment Rating System (NABERS) had been revised to provide ratings for commercial buildings on both energy efficiency and water efficiency scales7.

What's the bite?

It is clear that, from both a policy perspective and a legal perspective, ESD is gaining some bite. The trend appears to be towards closer incorporation of ESD into decision-making.

The practical consequences for developers include the following:

  • Development proposals must be designed and built so as to comply with a range of specific legal requirements which are founded on sustainability, such as the BASIX scheme.

  • Developers may need to convince regulatory decision-makers that proposals are consistent with the core principles of ESD in order to obtain approvals for those proposals. This may require, for example:

    • more focus on the whole of life assessment of a particular proposal, including demonstrated efforts to reduce resource consumption and waste production; and

    • dealing with increasing pressure to internalise the long-term environmental costs of a particular proposal.
  • There is also the prospect of further regulation to apply the principles of ESD, although it appears that Australian governments currently favour reductions in the regulatory burden on development projects8.

  • Governments are devising economic incentive schemes to promote ESD goals (eg. biobanking, trading in water rights and renewable energy initiatives), so developers should consider the legal and economic merits of these schemes.

  • The consequences of non-compliance with environmental laws are becoming more significant, as regulatory authorities and the courts consider the long-term costs of non-compliance.

Definition of ESD

"Ecologically sustainable development requires the effective integration of economic and environmental considerations in decision-making processes. Ecologically sustainable development can be achieved through the implementation of the following principles and programs:

(a) The precautionary principle, namely, that if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation.
In the application of the precautionary principle, public and private decisions should be guided by:
(i) careful evaluation to avoid, wherever practicable, serious or irreversible damage to the environment, and
(ii) an assessment of the risk-weighted consequences of various options.
(b) Inter-generational equity, namely, that the present generation should ensure that the health, diversity and productivity of the environment are maintained or enhanced for the benefit of future generations.
(c) Conservation of biological diversity and ecological integrity, namely, that conservation of biological diversity and ecological integrity should be a fundamental consideration.
(d) Improved valuation, pricing and incentive mechanisms, namely, that environmental factors should be included in the valuation of assets and services, such as:
(i) polluter pays, that is, those who generate pollution and waste should bear the cost of containment, avoidance or abatement,
(ii) the users of goods and services should pay prices based on the full life cycle of costs of providing goods and services, including the use of natural resources and assets and the ultimate disposal of any waste,
(iii) environmental goals, having been established, should be pursued in the most cost effective way, by establishing incentive structures, including market mechanisms, that enable those best placed to maximise benefits or minimise costs to develop their own solutions and responses to environmental problems."
Footnotes

1 The international instruments more commonly cited in relation to the origin of the concept of environmental sustainability include the 1992 Rio Declaration on Environment and Development, the 1992 UN Framework Convention on Climate Change and the 1992 Convention on Biological Diversity.

2 One of the earliest cases applying sustainability principles is Leatch v Director-General of National Parks and Wildlife and Shoalhaven City Council (1993) 81 LGERA 270, a decision of Justice Stein in the NSW Land and Environment Court. More research by Justice Stein in 2000 indicated that sustainability concepts were adopted in almost 50 separate items of legislation in NSW - see Stein (2000) "Are Decision-makers too Cautious with the Precautionary Principle?" 17(1) EPLJ 3.

3 See the decision in Leatch, cited in note 2 above.

4 Telstra Corporation Limited v Hornsby Shire Council [2006] NSWLEC 133.

5 See section 391 of the Environment Protection and Biodiversity Conservation Act 1999 (Cth).

6 At the time of writing, 40 financial institutions had adopted the Equator Principles. Earlier this year, revised Equator Principles were adopted. The revisions broaden the application of those principles to a larger number of projects, and strengthen the social and environmental standards which are applied to projects.

7 See www.nabers.com.au

8 On 15 August 2006 the Commonwealth Government responded favourably to a report by the Taskforce on Reducing Regulatory Burdens on Business entitled Rethinking Regulation, which recommended reductions in the duplication of environmental regulation and Commonwealth and State levels. In addition, in NSW, the Independent Pricing and Regulatory Tribunal (IPART) released a report entitled Investigation into the Burden of Regulation and Improving Regulatory Efficiency in July 2006, which also recommended the streamlining of some aspects of environmental regulation.

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