By: Javier Vélez Arocho
By the 1960s, environmental pollution, especially in industrialized nations, was so high that it forced countries to take corrective actions. Recurring incidents like the fire at Ohio River and Love Canal event were turning points in protecting the environment. By the mid-1970s, environmental regulation in developed countries became substantially more stringent as part of a new social code wave reflecting greater government willingness to intervene in business decisions.
Many countries established national-level environmental agencies (France’s Ministry of Environment in 1971, Japan’s Environmental Agency in 1971, Puerto Rico’s Environmental Quality Board (1972), and Germany’s Federal Environmental Agency in 1974). Many novel programs were adopted, including the United Nations Environment Programme in 1972 and the European Economic Community’s first Environmental Action Programme in 1973 at the regional and international level.
In the United States, this new interest in environmental regulation fostered the creation of the Environmental Protection Agency in 1970, the Clean Air Act’s passage in 1970, and the Clean Water Act in 1972. These laws have been amended through the years, and additional regulations have targeted toxic waste, requiring firms to report toxic releases and assign liability for cleaning up contaminated waste sites.
Opponents argue that these regulations impose substantial business costs, lowering productivity and prodding firms to move elsewhere. Proponents say that rules can spur innovation, thus providing economic benefits as well as reducing pollution. A better understanding of the costs and benefits of environmental regulation is needed to help optimize design policies.
It is well-known that direct and indirect financial costs for violations of environmental, health, and safety (EH&S) requirements can hinder current and future operations. The direct costs for regulatory bodies’ penalties include the U.S. EPA, OSHA, and many state and local agencies. The EPA is not shy about highlighting their actions detailing annual civil and criminal enforcement results and costs for remediation or restitution for damages. If you’ve ever been involved in one of these events, you know how distracting and disruptive this becomes to operating your business.
Here’s the other point you should know; the fines and penalties for environmental enforcement are going up. Every category of penalty from the Clean Air Act and the Clean Water Act to the Resource Conservation and Recovery Act (RCRA) has experienced an increase in the maximum $ per day, per violation. Fines for health and safety matters under OSHA for willful and repeated violation have increased to more than $80,000 per violation.
Indirect financial costs, including legal fees, can meet or exceed the penalties in some cases. Damages requiring environmental remediation can increase insurance costs. Stormwater Clean Water Act violations have erupted across the Nation. Since the late 1990s, Puerto Rico has seen an increase in environmental litigation that impacts water resources from faulty commercial and industrial operations.
According to Natural Resources Defense Council, In 2015, 99.5 percent of Puerto Rico’s population was served by community water systems in violation of the Safe Drinking Water Act, and 69.4 percent of people on the island were served by water sources that violated SDWA’s health standards . The USEPA has reached an agreement in four significant cases associated with the Puerto Rico Aqueducts and Sewer Authority on violations of the Clean Water Act.
Remember that impacts on your company’s brand and reputation can have long-term effects. Current and potential future employees will view the company’s culture as less valuable due to these events. Your customers, investors, employees, and the communities you operate in demand compliance as a starting point for their business. Your company’s ability to grow by expanding existing facilities and permitting new ones is directly linked to your overall environmental compliance performance.
Your compliance record must show continuous improvement measured by the total number of enforcement actions received in many cases. If your company has been a polluter while operating at a small scale, your neighbors will not like the idea of having a more extensive operation impacting their livelihood.
The good news is that there are several steps everyone can take to improve your company’s compliance performance:
- Focus on compliance daily – compliance is not an initiative; it’s the foundational element of your ability to stay in business.
- Please read all of your facility and operating permits and the associated regulations; know and understand their conditions.
- Be sure to review all draft permits by the appropriate legal and compliance experts – don’t forget you have to abide by all conditions imposed.
- Identify and train personnel assigned to be responsible for specific compliance requirements governing your operations.
- Walk your sites. There’s no excuse for poor housekeeping. Nobody will value your operation more than you. Most of the problems start with poor housekeeping practices.
- Establish a solid recordkeeping system to document compliance with all requirements, including training, inspections, and other facility activities.
Identified compliance problems will not go away on their own; fix them. If you decide not to spend or delay spending capital to fix an existing compliance problem, you must have senior management approval. You should never conduct a “risk of getting caught vs. cost analysis” on any legal or regulatory compliance matter.
Establish a procedure to report incidents up through the organization to senior management and develop a root cause analysis process. You must have little tolerance for repetitive violations, especially where the repeat violation is preventable.
Enforcement agencies are very unforgiving the second time around. It takes putting specific processes in place and scheduling follow-up for assigned tasks. Remember, it will be less costly taking care of a broken hose than paying hefty fines to an environmental regulator.
Start a regular cadence of training events, compliance alerts, and a deeper focus on the underlying causes for your non-compliance citations. Your employees should become partners in the advancement of more compliant company culture.
Finally, best-in-class companies are all using some phase of a compliance assurance tool, using software or web-based tools as a compliance calendar and tracker for your active operations. These software programs have evolved to adapt to any operation with user-friendly applications all employees can embrace as part of your operating culture.
We can say that environmental regulations may raise production costs at regulated firms, though in most cases, the costs are only a tiny fraction of a firm’s total prices. We have seen that productivity tends to fall, and firms may shift new investment and production to locations with less stringent regulation.
However, environmental regulations have had enormous benefits in terms of lives saved and illnesses averted, primarily through airborne particulates reductions and better management of wastewaters. The potential health gains maybe even more significant in developing countries, where pollution levels are high. The benefits to society from environmental regulation hence appear to be much larger than the costs of compliance.
The public has witnessed how environmental regulations have significantly improved air and water quality, especially in the dirtiest areas before laws. We encourage companies to develop and implement the best available environmental control technologies or best management practices to continue safeguarding our environment for the benefit of all generations to come.
