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Sustainability needs to replace environmental compliance

Environmental compliance has always been a game of lagging indicators that creates a drain on profitability and is a necessary, but often inconvenient, requirement of doing business. Unlike a building permit or an elevator inspection, which cause minimal disruption, environmental compliance is a continuous process that can have a significant impact on an organization’s operational reliability and profitability.

Within most organizations, the environmental department of any company is often despised. More often than not, the environmental team spends a majority of their time telling operations and engineering that they cannot do something unless they install pollution control equipment and go through an often lengthy process of applying for and receiving an environmental permit.

State environmental agencies are well known for being slow when processing permit applications. It is normal for the process to take 12 – 18 months in most states. Often, by the time a permit has been issued, market conditions and economics have changed, rendering the project unprofitable. This situation results in wasted time and money by the company.

In other instances, a project can be profitable on paper, but once the environmental department reviews it and recommends changes, such as the addition of pollution control equipment, the increased capital costs push the project into a break-even or negative return.

Environmental compliance programs operate on lagging indicators. A lagging indicator is one that follows an event. In many cases, this is a small change in the method of operation. The change causes emissions to increase on a continuous basis, often at a rate that is small enough to be ignored. Eventually, the emissions exceed a permitted allowance and the facility finds themselves receiving a Notice of Violation from a state environmental agency. Violations often require the payment of a fine and spending money to fix the source of the problem.

Some facilities try to use leading indicators to manage their environmental compliance program. A leading indicator is one that can be used to predict a future event, such as a permit deviation. An example of this would be creating charts of historical emissions data and using the chart trends to predict a potential future regulatory violation. Sometimes this works and allows the company to take corrective action before the emissions limits are exceeded. This is a better approach than waiting to take action after a violation, but more often than not, businesses do not react properly to leading indicators. Whether it is due to a lack of resources or budget or just a poor attitude toward compliance, the EPA’s Enforcement and Compliance History Online (ECHO) database is littered with repeat offenders who ignored the leading indicator and wound up in the penalty box.

Env and Econ Road SignThis is why environmental compliance, the act of merely complying with a rule after it has been made, needs to be replaced with sustainability. Sustainability is complex but has recently become a key industry buzzword. Unfortunately, many Fortune 500 companies create executive level sustainability positions just to say that they have a sustainability department. However, they do not practice or promote the concepts of sustainability.

The simplest definition of sustainability is “meeting current needs while ensuring that future needs can be met.” An illustrative example would be the person who plants ten rows of green beans in their garden. When the green beans are ready to harvest, they only pick beans from eight rows. The other two rows are left to mature and become seeds that they will plant the following year. Had they harvested all ten rows for food, they would not have ensured that they could meet their future demand for green beans.

Environmental sustainability is a slow process that can require a substantial, initial monetary investment. When looked at over time, the benefits can far outweigh the initial costs. In 2008, when I was working as a corporate environmental manager at the Goodyear Tire & Rubber Company, we made a decision to become a Zero-Waste-To-Landfill (ZWTL) company. During the first year that waste was diverted from landfills, disposal costs more than tripled in the United States and Canada. After several years of work, the ZWTL program began making a small profit, all while preventing waste from being put in landfills and becoming a future liability at a much higher cost to correct.

The differences between a compliance and a sustainability program can be focused into six key areas, as noted in the below table. Compliance is classically an issue of damage control and cost minimization to soften the impact of a poorly managed situation. Sustainability, when implemented properly, is a business program that utilizes all departments and functions within an enterprise. It embraces environmental regulations to create a competitive advantage and a strong future for the organization.

Value

Compliance

Sustainability

Vision Looks backwards, usually at previous 12 months Looks forward, planning changes to the business to ensure a secure future
Stakeholders Opinion formers such as politicians, media, activist groups and citizens Full value chain, from suppliers to operations to customers
Management Managed after the fact by communications (explain why something happened) Managed by marketing and operations as an integral part of the overall business strategy
Business Corrective action after a problem has occurred Creating a competitive advantage
Reward (Risk) Lack of attention from politicians, media, activist groups and citizens Increase revenue, industry leader, strong public image
Driver Protect reputation and prevent scrutiny Open new markets, improve performance and ensure strong future

Environmental Sustainability is a concept that very few business leaders seem to grasp. This is because today’s business leaders are bi-focals 1nearsighted.  In this era of ‘instant everything’ including profits and stock prices, leaders often choose to ignore the idea of spending capital on a discretionary environmental project that has no immediate rate of return. This may maximize profits today, but by ignoring both current and future environmental policies, these leaders are dooming their businesses to year after year of reduced profits as they spend capital after-the-fact to correct non-compliance situations.

In my 26 years of industrial environmental work, environmental violations are almost always due to poor planning, inadequate budgeting and a general apathy toward environmental.

Ignoring the movement from basic Environmental Compliance to Environmental Sustainability is like playing Russian roulette. The game can last a long time without any consequences, but eventually everyone loses.

It’s time for industry to replace the outdated concept of Environmental Compliance with Environmental Sustainability and get Ahead of the Curve.

 

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