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International governmental organisations: there are numerous international
laws governing legislation of the environment.
Part D “ Overview of the Environmental Aspects of Business Risk

The UN Global Compact has also been launched at the World Economic
Forum in Davos in 2000 and covers principles for corporate practices in three pol-
icy areas, one of which covers environmental measures. Organisations should:
Principle 7: support the ˜precautionary principle™ to environmental issues as
noted above;
Principle 8: undertake initiatives and programmes to promote responsible envir-
onmental behaviour;
Principle 9: encourage the development and distribution of environmentally
friendly technologies.
There is a large body of legislation that covers the environment and a sample is
indicated below:
On air pollution
1979 Convention on Long Range Transboundary Air Pollution;
1985 Helsinki Protocol on Reduction of Sulphur Emissions;
1985 Vienna Convention for the Protection of the Ozone Layer;
1987 Montreal Protocol and 1990 amendments;
1988 Sofia Protocol on Nitrogen Oxides;
1991 Geneva Protocol on Volatile Organic Compounds;
1992 Framework Convention Climate Change;
1994 Oslo Protocol on Further Reduction of Sulphur Emissions;
1997 Kyoto Protocol;
1998 Aarhus Protocol on Persistent Organic Pollutants (POPs) and 1998
Aarhus Protocol on Heavy Metals;
1999 Gothenburg Protocol to Abate Acidification, Eutrophication and
Ground Level Ozone;
Convention, Kyoto Protocol.
Biodiversity and nature conservation
1971 Ramsar Convention on Wetlands;
1973 Convention on International Trade in Endangered Species (CITES);
1979 Berne Convention on the Conservation of European Wildlife and
Natural Habitats;
1979 Bonn Convention on Migratory Species of Wild Animals;
1992 Convention on Biological Diversity;
2000 Cartagena Biosafety Protocol.
On water pollution
1973 ˜MARPOL™ Convention on Pollution from Shipping;
1982 UN Convention on the Law of the Sea;
1989 Basle Transboundary Waste Convention on Waste Shipments;
1992 ˜OSPAR™ Marine Council Convention on Regional Seas.
Procedural conventions also exist that try to standardise general frameworks
for national and international laws. There are conventions on: environ-
mental assessments, the rights of civil society, environmental
liabilities and environmental criminal liability.
Chapter 18 “ Environmental risk management 451

European Community (EC) law
Framework Directive 1996/62 on ambient air quality assessment and man-
Directive 1996/61/EC on IPPC
Directive 1999/13/EC on volatile organic compounds
Directive 2000/76/EC on the incineration of waste
Directive 2001/80/EC on large combustion plants
Directive 2001/81/EC on national emissions ceilings

Indirect environmental risks
The consequences of our actions are vast and as yet the risks are largely
unknown. There are also indirect risks (explored in Chapter 19) which are
going to increase exponentially as a result of the following.
Increased human use of resources through consumption per person and popu-
lation growth;
Other species decreasing in number or becoming extinct;
Environmental changes and an increasingly chaotic climate;
Land use degradation from deforestation, desertification;
The unequal distribution of the remaining resources, especially water; and
Organisations™ direct and indirect impact upon:
Air (leading to climate change and damage to the ozone layer);
Land (habitat loss, waste disposal and pollution affecting all species™
health and DNA); and
Water (marine life mutations have increased, breeding cycles have been
effected and there are high levels of metal poisoning of fish being recorded).
For example, it is estimated that 5500 children die each day from diseases
linked to polluted food, air and water (WHO quoted in State of the World, 2003).

Risk management best practice
Internal compliance and management procedures have become the hot busi-
ness topic of the early 21st century. However, some of the most embarrassing
damage done to organisations on the public relations front is from suppliers
and other stakeholders, and this is true of environmental risk.

Rewards vs risk
Without taking risks there will be no progress in human society and especially
commerce. The idea is to minimise the consequences of our actions and max-
imise the rewards. Examples of business opportunity maximisation, while
potentially reducing risks, include the following:
A US study of experts from the Toxics Use Reduction Institute (TURI) at the
University of Massachusetts Lowell has found toxic chemicals are more
Part D “ Overview of the Environmental Aspects of Business Risk

expensive than switching to safer alternatives. They identified safer, cheaper
alternatives to five heavily used hazardous chemicals widely used in the
drycleaning, wire and cable, metal finishing, healthcare, cosmetology and
other industries. The ˜Five chemicals alternatives assessment study™, com-
missioned by the state authorities, investigated whether fewer toxic alterna-
tives were available for lead, formaldehyde, perchloroethylene, hexavalent
chromium, and di(2-ethylhexyl)phthalate (DEHP) and the results that the
alternatives were cheaper came as a surprise (quoted from Risks, issue num-
ber 265, 15 July 2006);
The use of solar energy and wind power which has grown by more than 30%
annually over the past five years (compared to 1“2% annual growth for fossil
fuels) in countries such as Germany, Japan and Spain thanks to policies
which have encouraged their use; and
The 100% brownfield housing development by McCarthy. But these in turn
open up additional risks. When redeveloping a ˜brownfield™ site Persimmon
Homes uncovered a toxic mound in Dilton Marsh. The site had been a
landfill site for the disposal of surplus military explosive devices in the
1970s. Persimmon Homes planned to make this safe but there was an
increased risk to the local community, who feared the work could put their
health at risk.

Environmental management systems
Due to the variety of its subject matter and the volume of environmental legis-
lation, it is important that a company adopts a structured approach to the man-
agement of its environmental risk. Both the Environment Agency and the
Scottish Environmental Protection Agency (SEPA) recommend that this struc-
tured approach should take the form of an Environmental Management System
(EMS). An EMS will normally be a written document, and is generally
described as the method by which a company identifies:

All of its potential environmental liabilities;
The effect that those liabilities will have upon the company™s business; and
The means by which a company may effectively manage those liabilities.
A good EMS should therefore improve a company™s environmental, and thus
potentially its social and financial performance by focusing on both best prac-
tice and regulatory compliance. It should also help a company anticipate and
cope with any changes in existing legislation.
It should always be remembered that ultimately an EMS would only be of
use if the company:
Complies with it; and
Ensures that it is kept up to date.

An EMS should therefore not be seen as an immobile policy document. Instead
it is a living set of ideals and guidelines which will grow and develop as the
Chapter 18 “ Environmental risk management 453

company itself evolves. Although the government have encouraged companies to
adopt an EMS in one form or another, the debate over their true value continues.

The advantages
The Environment Agency, Scottish Environment Protection Agency (SEPA), the
Department for Environment, Food and Rural Affairs, the Department for Trade
and Industry, the National Assembly of Wales and the Scottish Executive,
together with the FTSE4Good and the Dow Jones Sustainability Group Index,
have all at one point or another contended that establishing a well-developed
and well-maintained EMS will bring the following benefits for an organisation:

The company will have a greater awareness of its legal liabilities under envir-
onmental law. This will in turn allow the company to identify and manage
their environmental risks, thus allowing it to be proactive and prevent future
compliance failure;
As part of the EMS, the company will be required to review the efficiency of
its resource use. This information can be used to pinpoint possible cost sav-
ing opportunities;
Producing an EMS will give the company a greater appreciation of its inter-
action with, and impact upon, the environment. This will allow the company
to formulate a ˜best practice™ strategy to allow it to raise its environmental
standards; and
The cumulative effect of the points above is that the public reputation of the
company will improve in a number of ways. Primarily, the company will be
able to differentiate itself from competitors who are not as ˜environmentally
friendly™. This will help the company build trust with various parties, such
as consumers, suppliers, government bodies (i.e. local planning authorities),
neighbouring proprietors and its employees. The FTSE4Good and Dow Jones
Sustainability Group Index also suggest that a company with a good reputa-
tion in environmental matters will find it easier to attract inward investment
from stakeholders.

The disadvantages
Regardless of what type of EMS a company decides to establish, it will be
required to invest a certain amount of time and money into the endeavour, e.g.
in collating data, establishing the relevant management systems, training of
employees and publishing environmental reports. Thus far there is no empir-
ical evidence to suggest that this expenditure is cost efficient as the link
between adopting an EMS and either improved environmental performance or
cost savings has not yet been established.
The disparity in the quality of the various certification bodies has also been
criticised. The Environment Agency has hit out at the lack of uniform standards
between the various EMS certification bodies. They believe this undermines the
Part D “ Overview of the Environmental Aspects of Business Risk

entire process as too few certification bodies are concerned with actual legislative
The European Commission, in conjunction with the LIFE Environment
Fund, the Environment Agency, SEPA, IEMA (Institute of Environmental
Management and Assessment) and IEPA (Irish Environmental Protection
Agency), have commissioned and financed a study that is designed to investi-
gate the validity of the criticisms levelled at the adoption of an EMS. Beginning
in autumn 2002, the Remas Project is a UK-based three-year study linking
environmental performance and management in up to 500 industrial sites
across Europe. The aim of the Remas Project is to establish whether EMS
actually delivers identifiable benefits to regulators, organisations and the
The Remas Project also aims to prepare a European-wide approach to EMS,
and to this end a collaborative workshop was held in July 2003 with the
Netherlands Environment Ministry EMAP programme to promote a harmon-
ised approach to EMS. It is believed that the project will, in time, provide
the hard evidence required to prove that the adoption and use of an EMS is
beneficial to business.

Types of EMS
The content of an EMS will be company specific. The first question that a com-
pany should ask itself is whether it wants an informal or formal EMS. An infor-
mal EMS will essentially be an internal set of policies and procedures by which
that company will manage its environmental risks. The other option is to
develop an EMS that will be formally certified or accredited by an external
organisation. The most common type of external accreditation of EMS is given
by the International Standards Organisation (ISO) and Eco-Management and
Audit Systems (EMAS) (see below). As of January 2006, there were approxi-
mately 3700 EMAS registered companies in Europe, of which 76 are in the UK.
At that time there were also approximately 103 583 ISO 14001 certified compa-
nies in Europe, of which 6223 were in the UK. For national figures go to:

ISO standards
The ISO series is an internationally recognised set of business standards pro-
duced by the International Standards Organisation. Guidance for the establish-
ment of an EMS framework is given in ISO 14001 and adherence to this
standard is, of course, voluntary. ISO 14001 attempts to monitor not only the
environmental impact of a company™s actions but also those of its products and
services, although the emphasis is upon process, not performance.
ISO 14001 focuses upon compliance with legislation and the maintenance
of ˜best practice™ within the company. In order to achieve these goals ISO 14001
encourages organisations constantly to review and improve their EMS while
Chapter 18 “ Environmental risk management 455

also providing all necessary and relevant training to their staff. The five core
principles of ISO 14001 are said to be:
Implementation and operation;
Checking and corrective action; and
Review of activities.
It should be noted that ISO 14001 is only one part of the ISO environmental
series. It can be used as a starting point for companies who want to incorporate
other environmental management tools provided by other standards in the ISO
environmental series. It is an increasingly popular standard as the number of
ISO 14001 certified facilities reached 46 836 certifications by the end of
December 2002. This is a 27% increase compared to 12 months earlier.

While the ISO series is a set of voluntary international standards, EMAS is a volun-
tary European standard introduced by Council Regulation 761/01. EMAS is similar
to ISO 14001, as it requires participating organisations to identify the environmen-


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