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were fined £11 000.
Part D “ Overview of the Environmental Aspects of Business Risk
478



Risk management
Even if one is sceptical of the causes of global warming and climate change,
there are benefits in following precautionary principles and reducing air
emissions and, therefore, a company™s exposure to future litigation or volatility
of fuel prices. If what can be measured can be managed, there ought to be more
movement in the direction of energy efficiency and the reduction of an organi-
sation™s reliance on external energy supplies. Dependence on any supplier is a
risk, especially for something as critical as vehicle fuel.

The Co-operative Bank is one of the first organisations to move towards
100% renewable energy supplies for their operations. They are reducing the
volatility of their energy costs and also the insecurity of energy supplies in a
world overly reliant on the Middle East;
BT plc have managed to reduce their reliance on global warming CO2 emis-
sions by a significant 42% since 1996 (BT Social and Environmental Report
2004 www.btplc.com);
Centrica plc (owns British Gas in the UK) has joined a carbon reduction
scheme and will invest in the reduction of emissions in developing countries
(particularly at a Chinese chemical plant) and will use the credits to meet
their European carbon reduction requirements. The project is estimated to be
worth £445 million;
French energy group Total said, on 16 December 2006, that it aims to cut gas
flaring at its installations around the world by half by 2012;
Dell says it is the first global technology company to offer customers the
opportunity to offset the emissions associated with the electricity used to
power their computers; and
On an international level, there have been successes like the Montreal Protocol,
which has helped reduce the emissions of ozone depleting chemicals. There are
also an increasing number of organisations which are retiring equipment that
contains ozone depleting materials.

The best risk management options for these issues are to use the same services
more efficiently as follows:

Increased efficiency in delivering services from a given energy input, elim-
ination of waste, more efficient products and more efficient power generation
and transmission;
Redesigning products, services and premises, as well as substitution and
lifestyle changes, from high energy to low energy services (assuming they
have the same or better utility). For example, video-conferencing as a
substitute for tiring and expensive business travels;
Re-engineering the systems by substituting high carbon forms of energy with
low carbon sources, such as natural gas instead of coal, and from gas to zero
carbon sources, such as renewable energy and possibly nuclear energy;
Reclaiming CO2 through the creation of sinks to absorb the organisation™s
greenhouse gases; and
Chapter 19 “ Aspects of environmental risk 479



There should be strict measures to control the release of ozone depleting
materials which can be found in old refrigeration equipment and the follow-
ing items:
Solvents (CFC 113 can last up to 90 years in the atmosphere; also carbon
tetrachloride solvents);
Fire extinguishers (these can contain Halon 1301 which has an ozone
depleting life of 110 years); and
Aerosols, foam air conditioning and refrigeration units (CFC 11 and 12,
which can last up to 73 years).


Air pollution risk “ from transportation
Research and analysis into the risk of air pollution from transport indicate the
following results:
Air pollution emissions from transport-related risk are 0.5% of market value
of the top 500 EU and US companies; and
This risk exposure has been reduced from 0.8% of market value by good risk
management techniques (the risk reduction/management factor).
This section covers emissions to the atmosphere resulting from an organisation™s
use of transport (such as low-level ozone, SOx and NOx, PM-10s from diesel fuel,
etc). It specifically covers greenhouse gases emitted from any vehicles which are
used by the company.
The following graph shows the environmental risk from air pollution from
transport by sector.


Air/GHG Emissions from Transport
1.8%

MINING
1.6%
TRANSPORT
1.4%
OIL & GAS
Net (Residual) Risk




1.2%
FOOD PRODUCERS &
PROCESSORS
1.0%
ELECTRONICS & ELECTRICAL
0.8% EQUIP'T
CONSTRUCTION & BLDG
0.6%
MATERIALS
0.4%
SECTORS
0.2% FTSE 350 AVERAGE

0.0%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5%
Gross (Inherent) Risk
Part D “ Overview of the Environmental Aspects of Business Risk
480



Case studies
The greatest risk and liability arises among the companies that have to trans-
port people and materials as part of their core business. Transport contributes
significantly to the greenhouse gas effect and climate change. Although there
have been some improvements to air quality, such as the dramatic reduction
in the lead levels present in the air, the general trend is increased emissions
from transport. The UK may even miss its Kyoto reduction targets because
of increases in transport traffic. EU working papers note that the benefits of
reducing these emissions are vast:
At the community level, the policy of internalising all external costs of transport would
reduce carbon dioxide emissions on average by 11.5%. In addition to carbon dioxide
reductions, the net benefit to European citizens from reduced time spent suffering con-
gestion, and from decreased accidents, noise and other emissions, would range from
28“78 billion ECU per year. (EU working paper (CEC, 1998, p. 17) quoted from Earth
Summit 2002: A New Deal)
There are new transport taxes coming into effect, there are others which affect
company cars and personal use of company vans, as well as the London conges-
tion charge which is to be copied in cities around the UK and the world. Such
regulations will increase the base operating cost of organisations with a high-
risk profile in this area. A recent report for the UK government by former British
Airways chief Rod Eddington, said properly targeted and priced road tolls could
save 28 billion pounds a year by 2025 and all but torpedo the case for major new
road building. Thus the marketplace will be used to price users off the road, so
businesses need to be prepared for this extra type of expense.
The likely methods of dealing with these issues impact businesses. The
London congestion charge is a prime example of this impact. There will be a
continued extension of market principles to transport pricing with:
Increased research into and subsidisation of alternative fuels and vehicle types;
Increased inner-city charges for entering and parking in these zones;
Increased prices for and taxation of private cars, vans and fuel, with the
stated objective of encouraging more resource efficient vehicles;
Greater land management to minimise travel distances (e.g. use of urban
brownfield sites); and
More developments where good transport infrastructure already exists.
Further developments in legislation and product labelling are likely:
The European Directive 99/94/EC sets standards for consumer information on
passenger cars in respect of their official fuel consumption and official emissions
of CO2. The Directive was implemented in the UK by the Passenger Car (Fuel
Consumption Carbon Dioxide Emissions Information) Regulations 2001 (SI 2001
No. 3523). These require all car dealerships to attach labels to all models of pas-
senger cars in the showroom, and list the CO2 emission and fuel consumption
figures of all models available from that dealership on a poster. Fuel consump-
tion and CO2 information must also be included in all promotional literature of
passenger cars (ENDS Report, issue number 350, March 2004, pp. 35“36);
Chapter 19 “ Aspects of environmental risk 481



The Canadian E3 Fleet system was the first green rating system for vehicle
fleets in North America. It provides an environmental Rating Guide, a points
system for determining just how green a fleet is, a third party audit of fleets
and a rating of Bronze, Silver, Gold, or Platinum level; and
At the 2007 North American International Auto Show Sunday, General Motors™
head Rick Wagoner unveiled the Chevrolet Volt concept sedan and a new gen-
eration of electric vehicles could eliminate gas stations for Americans who live
close to their workplaces.
Key findings of the US Opinion Research Corporation survey suggest most
Americans think: ˜President Bush and Congress could help U.S. automakers be
more competitive by increasing the federal fuel-efficiency standard to 40 miles
per gallon.™ Such a move is supported by 78% of Americans, including 45%
who back it strongly. Support for a 40 mpg fuel-efficiency standard cuts across
party lines: Republicans (70%); Independents (78%); and Democrats (84%).
In response to the survey Civil Society Institute President Pam Solo said:
What Americans are saying to American carmakers is that they are ready for change. We
know the technology exists for higher fuel efficiency that will save money, reduce this
nation™s dependence on foreign oil and diminish the pollution linked to global warming.
(GreenBiz.com, 24 November 2006)
Whereas it would seem Toyota has hit the jackpot with its electric hybrid, the
Prius.

Risk management case studies
BT plc is an example of a company pre-empting the impact of resource cost
increases as they reduced their fleet of vans by 832 vehicles in the 2004 finan-
cial year. This has reduced their fuel consumption by 4% as they are also using
smaller vehicles for the rest of their fleet (BT Social and Environmental Report
2004, www.btplc.com);
Japan™s largest refiner, Nippon Oil Corp., and auto giant Toyota Motor Corp. are
planning to develop bio diesel from palm oil with Malaysian state oil firm
Petronas;
UK retailer, Tesco has saved £720 000 annually on diesel fuel costs; cut the
number of miles travelled by three million; and reduced their CO2 emissions
with a new groceries distribution system;
Transport initiatives: ˜Taxi Zero Pollution™ vehicles are to combat air pollu-
tion in Mexico. The Mexican government has commissioned an unnamed
French company to build 40 000 ˜Taxi Zero Pollution™ vehicles to try to com-
bat air pollution in Mexico City;
Richard Branson™s Virgin Atlantic started trialling a new plan aimed at cut-
ting aviation emissions by towing aircraft to take-off areas at London airports
from December 2006; and
US healthcare giant Abbott was the first company to sign up to PHH
GreenFleet (developed jointly by PHH Arval and Environmental Defense to
reduce pollution), designed to improve vehicle efficiency and reduce fuel
consumption among commercial fleets. Abbott says that this will help it meet
Part D “ Overview of the Environmental Aspects of Business Risk
482



its corporate goal of reducing operational greenhouse gas emissions to 10%
below its 2004 levels by 2010.

Air pollution risk “ peripheral pollutions
Research and analysis into the risk of peripheral air pollution (odours, noise,
visual pollution and dust) shows that:
Peripheral pollution risk is 0.3% of market value of the top 500 EU and US
companies; and
This risk exposure has been reduced from 0.5% of market value by good risk
management techniques (the risk reduction/management factor).
This section concerns the effort a company makes to mitigate the impact
of transportation of products and staff, noise, odour, dust, light and delivery times
on the public, especially in the immediate vicinity of company operations.
The following graph shows the environmental risk (net) from air pollution “
peripheral pollutions by sector.

Peripheral Pollution (Noise, Light, Visual)
1.2%

TRANSPORT
1.0%
CONSTRUCTION & BLDG
MATERIALS
Net (Residual) Risk




0.8% STEEL & OTHER METALS

MINING
0.6%
ELECTRONICS & ELECTRICAL
EQUIP'T
0.4% AEROSPACE & DEFENCE

SECTORS
0.2%
FTSE 350 AVERAGE

0.0%
0.0% 0.5% 1.0% 1.5% 2.0%
Gross (Inherent) Risk

Most of the impact of noise pollution is measured upon the impacts on
humans and their quality of life. There is now a growing view that noise pollution
is a serious concern and in the UK there has been a sixfold increase in complaints
over the last 20 years, primarily domestic noise issues. There are growing views
that noise disturbances cause an effect upon wildlife, whether it is noise scaring
breeding birds, industrial seismic activity in oil exploration harming whales and
dolphins, or air craft causing disruption to noise sensitive species. Our increasing
moves as a species towards a 24 hour society is undoubtedly having adverse
impacts upon each other and the species we share this planet with.
Chapter 19 “ Aspects of environmental risk 483


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