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.

Does UK manufacturing need more patriotism?

"Make it in Great Britain"  Credit: bisgovuk

At the EEF Manufacturing Conference in London today, Ed Miliband spoke about a need to be more patriotic about manufacturing in the UK.  Unfortunately for the Labour Party leader, protectionism isn’t as easy as it used to be – so how can we be more patriotic without violating our international trade agreements?

Suggestions from Mr Miliband and others include wider use of the “Made in the UK” mark, a greater effort to find acceptable ways for the government to give manufacturers more money (e.g. greater capital allowances), and even better education for the next generation’s workers.

The last suggestion holds considerable promise, though as it stands it is too simplistic.  Education focuses too often on learning what is already known.  Worse still, engineering is considered irrelevant to the country’s success by many, and anti-capitalist protests suggest that among the young, the whole idea of gaining personally by bringing innovation and growth to UK’s manufacturers and services is highly suspect.  By failing to educate young people effectively about the opportunities for social, cultural, and economic advancement for all (as well as individuals) that engineering, innovation, and enterprise bring, we are letting them down.

I recently visited a highly respected and academically league-topping independent school for girls whose syllabus in Design & Technology incorporated only cookery and sewing – not even covering food safety or textile engineering.  The idea that bright young people will somehow learn about innovation, engineering, and related subjects outside the curriculum is fanciful.  A few may be so lucky, but most will not stumble across the right sources of inspiration, and will presumably grow up considering technology to be wholly irrelevant to them.

What should we be doing?  First, young people need to learn about the mechanics of capitalism, and how money is used for investment, which can drive innovations and advancements that create jobs, better and cheaper products and services, and benefits of all kinds touching every part of our lives.  This sounds like a very basic lesson, but it is one that is clearly missing in the discourse of many young people today.

Second, young people – as early as possible in their education, i.e. primary school – should be introduced to innovation as something that they can get involved in, and where they can have impact.  First Lego League does this for children from the age of 9, involving them not only in Lego robotics (a good draw), but also in product and service innovation projects which have nothing to do with plastic bricks.  An engineer involved as a referee remarked to me recently that the youngest teams are often the best – and it’s important to capture their interest while they are still young enough to “think outside the box” relatively easily.

Third, and perhaps most difficult of all, we need to teach teachers about manufacturing and industry.  How can we expect them to impart an enthusiasm for an activity of which they have little or no direct experience?  How do we think they will answer their pupil’s questions?  They are no more likely to absorb this understanding by chance from their private reading and hobbies than their students are.

These days, many young people who go into manufacturing learn everything they know on the job, from their colleagues and superiors.  While this is an excellent way to learn, it is not adequate on its own – it ensures that firms carry on doing things exactly the same way they always have.  In order to innovate and compete effectively, manufacturers need employees who have a wider experience and understanding than they can get solely from studying traditional methods and practices.

What does this have to do with sustainable business, the subject of this blog?  For business to be sustainable, it must not rely on government support or protection.  It needs to be able to survive on its own, and to adapt to new conditions.  Ultimately survival depends on the ability to change.  Firms will not be able to do that if their staff think innovation is something other people do, growth is something legislated by governments, and that design and technology are about copying best practices that their elders pass down to them.  UK manufacturing has a proud tradition of radical innovation, risk-taking in investments, and visionary change.  If there is anything to be patriotic about it is this – as a cultural entity, UK manufacturing has led the world, and with capable people, can continue to do so.

Why your waste costs 20 times more than you think

Waste disposal costs are rising.  Heightened attention is being turned to dealing with it cost-effectively, diverting it from landfill and getting the best possible income stream from recycling or re-using it.  This attention to waste is a good thing.  We want to reduce the cost of it, to make our businesses more competitive.  However the truth is that most managers are missing 95% of the cost of their waste.  If your facility’s waste costs were 20 times higher than you thought, what action would you take?

The answer is obvious – you would stop trying to maximise the recycling and re-use value of your waste stream.  Instead, you’d try to stop producing it in the first place.

Let’s look at a hypothetical manufacturing company[i].  Imagine a firm that produces high quality ready meals.  Our firm has operating costs of £50 million a year, and runs two shifts a day.  They produce 500 tonnes of waste per year, and it costs them £100 per tonne to dispose of it (fees and handling costs).  So this firm believes that its cost of waste is £50,000 per year.  This is significant enough to get attention, but at just 0.1% of total cost, it is not the highest priority.

Now, imagine that each day, an average of 10 minutes of each 8-hour shift produces waste.  This takes two main forms: 

• Occasional quality failures (e.g. too little product in one tub, or a run with wrong dates)
• Planned waste, while a new run is started, and the machines are adjusted to get the machines aligned perfectly

So for an average of 20 minutes per day (10 minutes for each of two shifts), the facility is producing waste.  That’s roughly 2% of a 16 hour day.  In other words, 2% of the operational time, and therefore 2% of the operational cost (electricity, people, facilities costs, materials, etc) is waste.  In a facility that costs £50 million per year to run, that’s a cost of £1 million, spent on producing product that will never be sold.

This is just a hypothetical example.  Is it typical?  In fact, this is close to the average for the UK economy as a whole.  As I’ve reported elsewhere, DEFRA estimates there are £23 billion of resource efficiency savings with a year payback or less, just waiting for firms to take advantage of them – about 1.6% of GDP.

A million pounds of a £50 million budget is a substantial sum – it could be better spent holding off the next round of unwanted redundancies, investing in new capital equipment, or developing new products.  If this were your firm, wouldn’t you do whatever you could to stop the waste?

So... just how much of your operational time each day is spent producing waste?

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[i] This could apply just as well to a service company.  For example, in a call centre, it might include outbound calls to wrong numbers, and times when the computers or phone lines are down.