When is a fish worth £800?

Does your firm face serious (costly and reputation-harming) oil pollution risk, and can that risk be quantified in financial terms?: it's not just about tankers crashing or oil platforms exploding.  Many firms store enough oil on their sites to be at significant financial risk.

Companies that store oil for heating, process use, or vehicle fuel are subject to strict regulations to prevent pollution incidents from poor storage.  According to the EnvironmentAgency, on average an oil spill (which might occur due to aging equipment or poor choice of equipment or errors in filling or draining the tank) costs a business £30K in fines, clean up costs and lost operational time.  This figure doesn't appear to include the cost of buying more oil to make up for the amount spilled.

The relevant regulations that firms need to comply with in England are the Oil Storage Regulations and the Control of Major Accident Hazards containment policy; there are equivalent regulations for Scotland and Northern Ireland.

200 Litre oil drum.  If you have a volume of oil storage equivalent
to more than one of these in England you must follow the oil storage regs

Small firms aren't necessarily exempt.  Any firm with at least 200 litres of oil being stored needs to comply.  That's just slightly less than the volume of a typical domestic wheelie bin.  And it's the volume of a conventional oil drum.

The Environment Agency provides quite a lot of advice for free on their website.

Spills happen all the time; they are not a rare problem.  Oil is the most common type of waste pollution in the UK.  The Environement Agency says it records over 5K incidents annually.    Few people know that oil pollution is a criminal rather than a civil offense in the UK.  Recent research in Europe  by The European Space Agency has found that just over a third of oil reaching the oceans came from land-based spills rather than ships or oil platforms, so it makes sense that spills on land are treated so seriously.

Recently the UK's largest producer of malt was fined £20,000 and made to pay £6475 in costs and were ordered to make improvements costing £11K to prevent a recurrence after oil leaked from a faulty storage bund  into a nearby river, killing 47 fish.  That's a cost to the business of about £800 per fish they killed.  That's one way to put a value on environmental assets.  Of course it doesn't make sense in terms of the cost of a fish, but the long term damage to ecosystems in the river will mean many more fish (and other animals and plants) will be affected.  Moreover there may be farm animals downstream drinking this water, and companies drawing it off for process use, and eventually maybe a water company that will recycle and purify it into mains water.

One seriously expensive fish!

Eventually, the firm is reported to have spent £106,304 on clean-up andmaintenance.  The event polluted 4 km of river.

These penalties are perhaps not so surprising at a time when water resources are increasingly under pressure, resulting in hosepipe bans and increased metering, as well as the threat of rising prices: over the  years 2002-07 UK water charges rose 32% (http://www.earth-policy.org/plan_b_updates/2007/update64), considerably faster than inflation.

What can you do about this risk?

Manyspecialist oil storage firms can offer help in bringing your oil storage up to required standards

Julia Lawrence Sustainable Business Management can help you evaluate the risk to your firm and compare the risks, costs and benefits of oil alternatives that would suit your organisation's needs.

Everybody’s talking about it: the cost of going green

Read the papers, listen to pundits, and you will know that everyone says it costs money to “go green” – and in a recession, it’s a luxury few firms can afford. This is consistent with other things we know – we think of environmental regulations, and we know that regulations often add cost to business. Take waste electrical goods – these now have to be disposed of correctly (WEEE regulations), and you can’t just hide them in the skip with the rest of your trash. So if everyone says it, and it makes sense, the logical conclusion is that it must be true.

Why would lemmings commit suicide?

There is a lovely example in this month’s news from an organisation that should know better: The Carbon Trust. This non-profit organisation has laboured with ingenuity and style for many years to help UK businesses become more cost competitive by reducing their emissions. Yet the first line of their press release says that four public sector organisations will “defy” the economic downturn by reducing their carbon footprints and slashing their energy costs by 25%. How cutting costs by reducing waste energy amounts to defiance in the face of pressure to reduce costs, is not made clear in the article. Could the strategy here be to use a standard prejudice about the cost of going green in order to lure readers in?

Many years ago, I was given a selection of books as a leaving present from a generous boss, of which my favourite was You Know What They Say... The Truth About Popular Beliefs. This book tackled a huge number of well-known “truths”, and examined the evidence for them in detail. These varied from things that just about everyone over five years old will tell you (“No two snowflakes are alike”) to beliefs that have serious consequences (“Rewards motivate people”). In some cases the evidence was mixed or reasonably good, but for most, the real evidence was so poor or non-existent that you wondered how people could go on saying these things (“Lemmings commit mass suicide”).

So what’s the evidence for the cost of going green? It is overwhelmingly in favour of saving money. There are of course rare exceptions – green initiatives that attract nothing but cost. In their excellent book Green to Gold, Winston and Esty describe how “going green” can (accidentally) reduce profits – most notably, through misunderstanding the market, for example by expecting a price premium, or planning on customer tastes fitting your planned innovations. However, the book mainly focuses on the plentiful examples of companies generating huge profits through environmentally sound strategies that are implemented well.

Recent research has continued to support the benefits of pursuing a green business strategy. For example, research published in January showed that firms that report emissions produce a bounce in their share price – especially if they’re small. In a study published last month, ISO 14001 certification in Brazilian firms was shown to correlate directly with improved profitability. There is a rapidly growing literature that looks at “green strategy” from a variety of perspectives, and shows that when executed well, green strategies pay dividends.

So, the next time someone tells you that going green will hurt your profitability, ask them if they know anything about lemmings.