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tal impacts of their business activities and to formulate procedures by which the
company™s environmental standards can be improved. The relevant EMS must be
documented and continually renewed and improved. Staff must also receive all
necessary training to ensure compliance with the relevant EMS.
While EMAS and ISO 14001 share the above noted common features, there
are several differences between the systems that must be recognised. For example,
while it is the company as a whole that registers and complies with ISO 14001,
under EMAS an organisation must register its individual sites.
The primary difference between the two systems is that in order to comply
with EMAS, an organisation must produce an annual environmental report and
make it publicly available. This environmental report should summarise the
activities and compliance performance of the company on a site-by-site basis.
Each statement must be validated by an accredited environmental organisation
that is independent of the site auditor. In the UK, the United Kingdom
Accreditation Service provides this validation service. Due to this requirement
to produce a periodic environmental report, EMAS is deemed to be more strin-
gent than ISO 14001, which can be used as the first step towards obtaining
EMAS accreditation.
The framework of an EMAS includes the following:
Environmental policy: it must comply with relevant environmental legisla-
tion and show a commitment to continuous improvement;
Environmental review: careful measurement and analysis;
Environmental programme: with quantifiable targets;
Environmental management system: operational procedures and controls are
to be set out in detail;
Environmental audit: measures progress against goals;
Part D “ Overview of the Environmental Aspects of Business Risk

Environmental statement: it should be published and tell the public about
the environmental impact of the entity. It should enable reporting of environ-
mental achievements to the entity™s stakeholders; and
Independent validation: i.e. external review.
(Source: Tolley™s Corporate Governance Handbook, Andrew Chambers, 2nd

Choosing the most appropriate form of EMS
The type of EMS which a company adopts depends on the specific nature of
that organisation. The variety of EMS options available should provide the
required flexibility for deciding upon the type of system that is most appropri-
ate for the company in question. The government have indicated that they
would prefer companies to obtain accreditation for their EMS under the EMAS
system because EMAS systems emphasise pollution prevention and legal
compliance, and have the additional requirement to produce and publish
environmental reports.
It is nevertheless not always appropriate for a company to obtain accredit-
ation under either EMAS or ISO 14001. The amount of time and money
required to produce and obtain and retain accreditation may not be cost effect-
ive. It is suggested that while larger companies would be better served obtain-
ing a formal EMS accreditation under either EMAS or ISO 14001, it might be
best practice for smaller companies to have an informal, internal EMS. The
Environment Agency suggests that smaller companies should consider signing
up to the DTI/DETR Project Acorn, which is concerned with simpler EMS. The
Environment Agency™s website also contains a wealth of valuable information
to help smaller companies both understand and manage their environmental
risks on NetRegs.

Supplier management
The requirements for supplier declarations on sustainability which outline
minimum expectations for behaviour on environmental, health, safety and
labour issues were rolled out to key suppliers last year. Case studies of supply
chain improvements include the following:
Crest Nicolson, the UK house builders, are seeking a reduction in number of
suppliers and an increase percentage of suppliers with environmental pol-
icies and management systems. They also hold supplier of the year awards;
Japanese companies are seeking a reduction in the complexity of their
supply/value chains. They are setting targets for reducing the number of
components by 20% per annum, which means fewer suppliers, and a greater
opportunity for quality and environmental control; and
Retailer Wal-Mart Stores Inc. has begun to send engineers into its chain of
suppliers to find ways to reduce greenhouse gas emissions and profit by
Chapter 18 “ Environmental risk management 457

doing so. Its suppliers generate about 200 million tonnes per year, or 10 times
more than the retailer itself:
At only the first factory they audited Wal-Mart helped cut electricity bills by
60% by installing readily available low emissions lighting and technologies.

Innovation and eco-design includes industrial metabolism and increased effi-
ciency from chemical reactions and materials flows in systems as most leaks of
materials are as a result of poor design not by or from accidents. It should
explore issues like those discussed in Chapter 3.
Risk management of these issues should involve procurement and product
development systems, which ask vital questions like:
Does the product produce less pollution than competing products?
Are there alternatives to components that are more environmentally responsible?
Are recycled materials in the product, or could their use be increased?
Can the amount of packaging be reduced?
An assessment toolkit that takes organisations through this process is available
from http://www.iisd.org/pdf/eetoolkit.pdf which was developed by the
International Institute for Sustainable Development, the IISD.

Reporting the benefits to stakeholders
This is covered in Chapter 9. Although in principle it is beneficial to commu-
nicate the risks to stakeholders, for larger companies there are also benefits
from the verification of environmental data.

Chapter summary
Set against this background, there is a potentially overwhelming array of issues
for a company to address in the context of its operations and activities.

Useful web links
* EMAS “ Eco-Management and Audit Scheme Sites: regulatory texts and
background information, guidance documents, and a list of verifiers:
* The EMAS UK relevant site is at: http://www.emas.org.uk/
European Environmental Law website: www.eel.nl
* GRI “ Global Reporting Initiative: including a GRI content index and
guidelines: http://www.globalreporting.org/reportsdatabase/
* International Institute for Sustainable Development: the IISD have pro-
duced an assessment toolkit that takes organisations through the sustain-
ability product design process: http://www.iisd.org/pdf/eetoolkit.pdf
Part D “ Overview of the Environmental Aspects of Business Risk

* INEM “ International Network for Environmental Management: docu-
ments and hyperlinks to other websites of interest, including: EMAS
Tool Kit for Small Organisations, Environmental Policy Checklist, and
Environmental Statement and/or Environmental Report Checklists:
* ISO “ International Standards Organisation “ ISO 14001 Global Overview:
this site provides an up-to-date overview of sites certified against ISO
14.001 and sites registered under EMAS: http://www.ecology.or.jp/
* United Nations: reports on environmental trends: http://www.un.org/
Aspects of environmental risk
19 Aspects of environmental risk

The consequences of our actions are vast and as yet many of the risks “ and
the extent of their impact “ remain uncertain. What has become absolutely
evident over the last few months is a global acknowledgement that
additional urgent action is required to engage everyone in the impact of
human activity on climate change. Many are describing this as the ultim-
ate challenge for all of us. Whereas there has been some understanding
and action since the Rio Conference (see Chapter 18) the urgency of the
need for action in terms of risk management “ sustainable risk manage-
ment “ has been most dramatically evidenced only very recently in the
Stern Report. It is therefore important to develop the discussion relating to
environmental risks in more detail than other areas of risk. Their manage-
ment goes to the heart of sustainable risk management. The SERM method-
ology measures that 5.4% of market value is at risk from these issues.
Overall it may be stated that the risks are going to increase exponen-
tially as a result of the following inputs to businesses. These are taken into
account in the SERM methodology.

Risk analysis
SERM considers the following matters when reviewing the environmental risk
management of an organisation:
Environmental incident risk;
The unequal distribution of the remaining resources, especially water;
Organisations™ direct and indirect impact upon:
Air (leading to climate change and damage to the ozone layer); environ-
mental changes and an increasingly chaotic climate;
Resources use: increased human use of resources (i.e. land and water)
through consumption per person and population growth;
Land (habitat loss, waste disposal and pollution affecting all species™ health
and DNA); and land use degradation from deforestation, desertification; and
Chapter 19 “ Aspects of environmental risk 461

Water (marine life mutations have increased, breeding cycles have been
affected and there are high levels of metal poisoning of fish being recorded).
Other species decreasing in number or becoming extinct. Land use degrad-
ation from deforestation, desertification.

The ultimate risk in sustainable risk management
There is the ultimate risk “ as a global society “ of the end of human con-
tinuity, otherwise known as extinction. This is not as far fetched as it
seems. Living in an interdependent world, survival is based upon the sur-
vival of other species. The biggest sustainable challenges/threats to life
still include the depletion of the ozone layer, which is at its thinnest even
with the successes accrued as a consequence of the Montreal Protocol. The
UK Prime Minister, Tony Blair, seems to share this view. He said that dam-
age to the environment is the greatest threat to humanity:
Climate change is probably, in the long term, the single most important issue we
face as a global community “ the issue is now, very, very critical indeed. (The
Guardian, 27 May 2004)

The climate change and greenhouse gas issue is explored in more detail in
Chapter 20. Clearly the whole debate is so vast that reference should be made in
particular to the Stern Report but also to the many texts devoted to this challenge.
Scientists have been warning of the various dangers for many years. However, the
real risks are usually the ones which suddenly surface, have not been measured
and, therefore, not been dealt with. For example, the ozone hole was discovered,
by accident, by explorers in Antarctica. A certain phytoplankton is responsible
for a chemical which in turn is responsible for producing the protective ozone
layer, without which we would fry quicker than an egg! This species is vulner-
able to the increasingly high levels of pollution in the sea and rapid changes in
climate. There is some belief that the ozone hole is healing: nevertheless there is
no doubt that in terms of environmental risk management the proactive and pre-
cautionary approach is the best strategy in the interests of all stakeholders.
The more localised impacts of the rising sea level and increased flooding
could affect organisations. There is a possibility of new taxes being introduced
on the causes of the environmental problems. The UK government is aiming for
a 15.2% cut in harmful emissions levels from 1990 to 2010, but it is not clear
how this will be achieved.
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).

An overview of scale of the risk
Research and analysis into environmental risk indicates that:
5.4% of market value of the top 500 EU and US companies are at risk as a
result of environmental issues listed in the following subsections; and
Part D “ Overview of the Environmental Aspects of Business Risk

This risk exposure has been reduced from 8.2% of market value by good risk
management techniques (the risk reduction/management factor). Thus risk
management has saved 2.7% of the market value of these companies.

Categories of environmental risks
The chart below shows the environmental risk categories by (net) risk to mar-
ket value for the top 500 companies in the EU and US.

Resource Use “ Resource Use “
Waste Water Water Use, 0.2%
Air Pollution “ Pollution, 0.2%
Peripheral Pollution, Environmental
0.3% Incident Risk,
Air Pollution “ from
Production, 0.4%

Resource Use “
Land and Natural
Resources, 0.4%
Environment “
Historical Liabilities,
Resource Use “
Energy, 0.4%

Air Pollution “ from
Resource Use “ Transport, 0.5%
Raw Materials, Resource Use “
Waste Generation,


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