Permission Does Not Equal Responsibility: Governing Environmental Burden Across Complex Systems

A system can comply with its formal allocation rules and still distribute responsibility badly enough to preserve the underlying problem.

Compliance answers an important question: what is permitted?

It does not always answer the more difficult question: who is actually responsible for creating, transferring or amplifying the burden?

That distinction becomes critical in interconnected systems. A business unit may produce little direct pollution while consuming energy, feedstocks or services whose environmental burden occurs elsewhere. A shared-services unit may enable several downstream operations. A supplier may carry emissions created by a buyer's specification. A portfolio may remain within individual project tolerances while concentrating system risk in a common dependency.

Formal boundaries simplify administration. Real systems do not necessarily respect them.

The Strategic Context

Khajehpour, Saboohi and Tsatsaronis addressed this problem in a 2017 study of environmental responsibility accounting in a complex energy system. Their starting point was straightforward but consequential: emission permits and environmental responsibility are not the same thing.

The paper argues that responsibility should reflect actual direct and indirect contribution to environmental burden rather than relying only on historical allocations, purchasing power or simple output shares. Their proposed method uses exergy-based analysis to trace responsibility through interconnected service and production flows.

In their case study, the calculated responsibilities differed from emission-reduction limits. Service-consuming units carried higher calculated responsibilities than their limits, while service-providing units carried lower responsibilities. The authors interpret the gap between permits and responsibility as potentially representing environmental damage that has not been internalised.

The exact method is specialist and context-specific. The executive insight is much broader:

Allocation systems can be administratively correct while remaining causally incomplete.

Xu and colleagues provide a complementary perspective in their geographical analysis of manufacturing CO2 emissions across Chinese provinces. Their geographically weighted regression showed that the effects of factors such as economic growth, urbanisation, energy efficiency and industrialisation differed materially across regions.

Together, the two studies challenge a comfortable governance assumption: that one uniform allocation rule can fairly represent responsibility across a heterogeneous, interconnected system.

What Leaders Commonly Misread

The first mistake is treating the legal or accounting boundary as the system boundary.

A factory can report its own direct emissions accurately while depending on electricity, transport, materials and intermediate services generated elsewhere. A project can report its own cost and risk accurately while creating rework, resource conflicts or operating burdens in another program.

The second mistake is confusing authority with causation.

The unit with formal authority to manage a risk is not always the unit whose decisions create the risk. Conversely, the unit producing the visible impact may not control the specification, demand pattern or upstream condition that drives it.

The third mistake is allocating responsibility using a metric that is convenient rather than causally meaningful.

Equal shares, historic shares, revenue shares or direct-emission shares can all be useful in some settings. None is automatically fair in a system with intermediate services and indirect effects.

Reframing the Issue

Responsibility should be designed around contribution and influence.

Contribution asks:

How much of the burden is this actor helping to create, directly or indirectly?

Influence asks:

How much ability does this actor have to change the conditions producing that burden?

Those dimensions do not always align.

A central utility plant may contribute a large share of direct emissions but have limited control over downstream demand. A manufacturing division may create little direct combustion but drive high utility load through product design, schedule volatility or process choices.

A procurement team may not generate supplier emissions itself, but its specification and sourcing model can influence them materially.

A corporate IT function may own a platform outage, while the business units that demand extensive customisation increase fragility and recovery complexity.

This suggests a more useful governance principle:

Responsibility should not be pushed only to the point where the impact becomes visible. It should follow the causal chain far enough to reach the decisions that can materially alter the outcome.

Direct, Indirect and Enabling Responsibility

Leaders can distinguish three practical forms of responsibility.

Direct responsibility

The actor performs the activity that creates the burden.

Examples include a plant burning fuel, a project consuming contingency, or an operating unit creating waste.

Indirect responsibility

The actor's demand or specification causes another part of the system to create the burden.

Examples include energy-intensive product requirements, volatile production schedules, procurement decisions or service consumption.

Enabling responsibility

The actor provides a shared service, platform or resource without which the burden-producing activity could not occur.

This does not imply blame. It indicates system participation.

The distinction is useful because different forms of responsibility require different interventions. Direct responsibility may be reduced through operating controls. Indirect responsibility may require redesigning demand. Enabling responsibility may require changing service architecture or pricing signals.

Why Uniform Targets Can Become Unfair

The geographical emissions study reinforces the importance of context. The researchers found that the strength of relationships between emissions and economic or structural drivers varied spatially.

For executives, the principle extends beyond carbon policy.

A multi-site company may set the same energy-reduction percentage for every plant. That appears fair. It may be strategically weak if one plant has already modernised, another has abundant low-cost improvement opportunities, and a third is constrained by product mix or legacy equipment.

Equal targets can therefore produce unequal effort and poor capital allocation.

The better objective is not identical local action. It is credible contribution to the enterprise outcome.

That requires a common governance framework with differentiated pathways.

Responsibility Without Blame

Responsibility systems fail when they are designed primarily to assign fault.

People then defend boundaries, dispute allocation formulas and minimise reported ownership.

The more useful purpose is to make intervention possible.

A responsibility model should answer:

where the burden originates;
where it is amplified;
who benefits from the activity;
who can alter the demand;
who can alter the process;
who can fund the change;
who bears the consequences if no action is taken.

This converts accountability from a retrospective exercise into a decision system.

Decision Framework

ERANORTH recommends a Contribution, Influence and Benefit review for shared environmental or enterprise burdens.

1. Define the burden

State the outcome to be governed: emissions, energy, water, waste, cyber exposure, common-resource demand, supplier risk or another system effect.

2. Map the causal network

Trace direct activities, intermediate services, inputs, outputs and dependencies. Do not stop at organisational boundaries simply because accounting does.

3. Quantify contribution

Use the most causally defensible measure available. Where precision is weak, show ranges and assumptions rather than disguising uncertainty.

4. Assess influence

Identify who can change demand, specification, process, technology, timing or behaviour.

5. Identify benefit

Who receives the economic or strategic benefit from the burden-producing activity? This can matter when funding corrective action.

6. Compare formal allocation with causal responsibility

Where the gap is material, governance needs attention. A unit may be compliant yet under-accountable, or overburdened with responsibility it cannot influence.

7. Assign action, not just ownership

Specify who must reduce the burden, who must enable the reduction, who funds it, and how disputes will be escalated.

From Strategy to Execution

Immediate action: test one material cross-enterprise burden against current accountability boundaries. Ask whether the unit owning the KPI also controls the decisions causing the result.

Medium-term capability building: improve activity, service and dependency data so direct and indirect contributions can be traced with reasonable confidence. Build joint governance for burdens crossing business-unit boundaries.

Long-term strategic positioning: integrate responsibility into capital allocation and internal pricing. Where appropriate, make consuming units see the real system cost of the services and environmental capacity they use.

Signals to Monitor

Watch for units meeting their targets while enterprise performance deteriorates; disputes about ownership that recur without resolution; shared services carrying most reported burden while downstream demand is unmanaged; identical targets applied to materially different operating contexts; incentives that reward local optimisation and externalise cost; suppliers carrying obligations created by buyer specifications; and compliance reports that show little relationship to where improvement investment is actually needed.

A strong warning sign is the sentence: "That sits outside our boundary." Sometimes it should. Sometimes it reveals the exact governance gap leadership needs to examine.

Questions for the Leadership Team

Which of our material risks or environmental burdens cross organisational boundaries?
Does the unit formally accountable for each burden actually control the decisions that create it?
Where are indirect and enabling contributions currently invisible?
Are our allocation rules based on causal contribution or administrative convenience?
Which units benefit from activities while another unit carries the visible cost or liability?
Where would differentiated targets be fairer and more effective than identical targets?
What action would change if we replaced a blame model with a contribution-and-influence model?

Closing Perspective

Permits, budgets and organisational charts are necessary abstractions. They allow complex enterprises to function.

The risk begins when leadership mistakes those abstractions for the system itself.

Responsibility is strongest when it follows causation closely enough to reach the actors who can change the outcome. That may require shared ownership, differentiated targets and explicit recognition of indirect contribution.

Compliance tells the organisation whether it stayed inside the rule. Responsibility tells leadership whether the system is actually being improved.

Source basis: This article is an original ERANORTH synthesis principally informed by Khajehpour, Saboohi and Tsatsaronis (2017), Environmental responsibility accounting in complex energy systems, and Xu et al. (2017), Geographical analysis of CO2 emissions in China's manufacturing industry: A geographically weighted regression model, both published in Journal of Cleaner Production, volume 166.

About EraNorth Insights
EraNorth Insights publishes practical analysis on strategy, projects, operations, transformation and decision intelligence for professional and organisational use. About EraNorth.