Develop an Environmental Management Strategy (EMS)In order to remain competitive, businesses need to be green, sustainable, transparent, and carbon neutral / friendly. An EMS helps businesses manage the environmental demands placed on them by customers, clients, employees, and government, while remaining viable and competitive.
A business must first understand its environmental footprint. To do this, each business must answer the following questions: Is government reporting required? Are you impacted by SOX, SAB 92 ruling, FIN 47, or GASB 49? Do you generate a waste stream, air emissions, or storm water runoff? Do you use TRI (Toxic Release Inventory) chemicals? Should you get ISO 14000 certified? Should you go carbon neutral? Do you have a neighbor contaminating your property? Do you have underground or above-ground storage tanks?
An EMS is an evolving strategy based upon doing better today than yesterday, and doing better tomorrow than today. It starts with a team-based approach to ensure that the necessary environmental intelligence is gathered. The EMS team primarily interacts with upper management. The makeup of the team can vary, but in general will include:
- Insurance agent/risk manager
- Key employees
- Legal counsel
- Accountant
- Financial institution
- Environmental service providers
- Land realtor
Assessing Environmental Risk
The Environmental Efficiency Evaluation (EEE) becomes the foundation of the EMS. In identifying the direct and indirect environmental issues affecting a company, an EEE begins with four basic questions that provide an environmental baseline. The answers generate further steps that represent areas a company can expand, based on individual needs.
1. What is coming in your front door?
Why do your clients do business with you? Evaluate raw materials, suppliers, business vendors, sales people, tenants, students, products, etc. What's your strategy if a vendor has an environmental loss that impedes its ability to deliver goods and services, or that will generate a suit for your company? Clients and vendors can create direct and indirect environmental liabilities. It is critical to know who you are doing business with.
Example: Company A hired a transportation company to bring in a liquid solvent used in making detergents and paints. When the truck carrying the shipment veered off the road and tumbled into the river below, the tank ruptured upon impact, leaking its contents. A cloud of toxic vapor settled over the area, causing the evacuation of eight thousand people in neighboring towns. Hundreds of gallons of the chemical traveled down stream polluting a nearby lake and destroying vegetation and thousands of fish. Claims costs were $3 million. Poor vehicle maintenance was determined to be the cause of the accident, but Company A was named in the suit because it owned the pollutant, and the transportation company had no pollution insurance for this loss.
2. What is going on in and around your corporate walls?
How do you store, handle, treat, and dispose of raw materials, supplies, waste, etc.? Are you subject to any environmental laws or regulations? What vendor services are going on inside your corporate walls?
Example: A manufacturer stored bag houses dust containing heavy metals in an uncovered dumpster behind its facility. Whenever it rained, storm water mixed with the dust, forming a slurry, which ran off-site. Soil testing of a nearby stream bank showed high levels of lead, cadmium, and mercury. The contaminant source was determined to be the dumpster runoff. The manufacturer was responsible for cleanup costs exceeding $250,000.
3. What is going out your back door?
This includes finished products, equipment or services, recyclables, waste materials, vendor services, etc. The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), also known as Superfund, is based upon joint, strict, and several liability. CERCLA states you own your waste from cradle to grave. If you reduce your waste stream you will reduce your potential liabilities. When was the last time you had your waste stream characterized?
Example: A service station's waste hauler transporting its used motor oil overturned and spilled its load into a nearby stream. Since under CERCLA you own your waste from cradle to grave, the service station had to contribute for its apportionment of the load for cleanup costs. Cost to settle the claim for the service station was $600,000.
4. Who are your neighbors?
You can be executing your EMS but still experience an indirect environmental impact from one of your neighbors. Who are your neighbors and what potential environmental liabilities can they create? What about vapor intrusion?
Example: Chlorine released at a nearby wastewater treatment plant resulted in toxic air emissions. Area residents and businesses were evacuated for the better part of a day (including yours) and several people (including some of your employees) were hospitalized for inhalation of fumes. Bodily injury and worker's comp claims amounted to $70,000, and business interruption claims totaled $120,000.
Executing an EMS
After compiling information from the EEE questionnaire, the EMS team combines its professional intelligence. The result is an EMS that takes all areas of the enterprise into account, assesses and prioritizes the company's environmental risks, and blends them into the business platform.
