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management techniques (the risk reduction/management factor).
There is a trend towards increased levels of litigation and fines in order to
ensure the security of this resource. Water companies already have to spend up
to £450 million to meet EU Water Directive regulations, which will require the
removal of nitrates and pollution from drinking water between 2005 and 2010.
At some stage the UK legal system will allow water companies to seek redress
from the creators of water pollution.
The US Environmental Protection Agency (EPA) is facing increased pres-
sure from lawsuits and environmental groups to begin enforcing the Clean
Water Act more vigorously, and separate US states and counties are even
encouraging developers to adopt new techniques to reduce pollution runoff.
The following graph shows the environmental risk (net) from waste water
generation by sector.
Waste Water Generation
0.9%

0.8% MINING

OIL & GAS
0.7%
PHARMACEUTICALS &
Net (Residual) Risk




0.6%
BIOTECH
0.5% FOOD PRODUCERS &
PROCESSORS
0.4%
CHEMICALS
0.3% ELECTRICITY

SECTORS
0.2%
FTSE 350 AVERAGE
0.1%

0.0%
0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%
Gross (Inherent) Risk
Part D “ Overview of the Environmental Aspects of Business Risk
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Water pollutants and their sources:

Atmospherics chemicals that can cause acidity levels to rise in water courses
like sulphuric acid from sulphur dioxide;
Biological contaminants such as bacteria, viruses and GMO material;
Chemicals, chemical fertilisers and biological altering chemicals that can
affect the DNA and gender of species;
Heat can directly kill water life forms and also help deoxygenate water;
Heavy metals and other toxic compounds;
Leachates from waste sites, often of a highly mixed and contaminated nature;
Oil and fuel spills;
Organic wastes such as sewage, animal waste (silage), organic fertilisers and
industrial processes like food processing, which acts to deoxygenate and
therefore reduce life sustaining capacity of the water; and
Physical materials such as sediment, silt, and human refuse and waste mater-
ials, plastic bags, shopping carts.
(http://ec.europa.eu/environment/ippc/index.htm)


Case studies
Cadbury Schweppes plc “ Environment Agency officials found three skips
left uncovered for several days in heavy rain. Two contained solid waste with
pesticide residues from raw cocoa beans, while the third leaked liquid sludge
onto the concrete (ENDS Report, November 2000);
Reckitt Beckiser plc was found guilty of exceeding wastewater limits in two
incidents:
According to Reckitt™s Environmental Report 2002 they were fined $1000
for altering wastewater off-site, while a more permanent solution was
investigated; and
They were also fined ‚¬2100 in Spain in 2002 for exceeding the limit due to
a power cut. The company said a fail safe system was being installed.
Thames Water was fined £50 000 for polluting a five mile stretch of the River
Thames in July 2002 killing 15 000 fish (Financial Times, 3 July 2004).
Even in the developed world this issue can pose a large indirect risk. It is
estimated that as much as a quarter of Ireland™s ground water supplies were
contaminated with sewage in 2002; it is alleged that this is largely as a result of
high levels of illegal dumping in the country.
For the rest of Europe the scale of the problem is also large as: ˜More than
half of the freshwater bodies in the EU are polluted and can never be cleaned
up again,™ said Christa Klass MEP (EPP-ED, Germany). ˜This is why we must
protect them better™ (EurActiv.com, 13 December 2006).
There are large risks associated with the long-term contamination of water
by chemicals and pharmaceutical products, as many of the 130 000 manmade
chemicals released into the environment have not been tested for impact on
human health, and pharmaceuticals such as estrogens are altering the biology
Chapter 19 “ Aspects of environmental risk 511



of sea life forms by turning male fish into females. Microscopic plastic pollution
is occurring all over the globe as plastic bags break down. One concern is that
toxic chemicals could attach themselves to the particles, which would then
help to spread them up the food chain.
The pollution of waterways and underground water supplies emphasises
the importance of protecting this resource. Companies may be fined or their
directors given custodial sentences for the contamination of water. In the EU
there are new rules coming into effect under numerous directives on drinking
water, dangerous substances in water, bathing water, groundwater, freshwater
fish, and nitrates. The level of legislation is set to rise and, at the moment, most
of the cost is being borne by water consumers as their industrial and domestic
bills are increased to recover the additional £400 million a year that water com-
panies need to invest in order to reduce the level of contaminants in water
sources.
For example, there are measures to come into effect in 2009 that will
require EU countries to prevent hazardous substances from entering under-
ground water used for human consumption. The European Parliament gave its
formal green light to an agreement on 12 December 2006 on the groundwater-
protection directive.
Decision 2455/2001/EC of 20 November 2001 establishes a list of 33 prior-
ity substances in the field of water policy (ID 3484). The list contains sub-
stances that have been identified as highly dangerous to the aquatic
environment and to human health via the aquatic environment. The following
substances have been included: alachlor, anthracene, atrazine, benzene, bromi-
nated diphenylethers, cadmium and its compounds, C10-13-chloroalkanes,
chlorpyrifos, 1,2-dichloroethane, dichloromethane, di(2-ethylhexyl)phthalate
(DEHP), diuron, endosulfan, fluoranthene, hexachlorobenzene, hexachlorobu-
tadiene, hexachlorocyclohexane, isoprutoron, lead and its compounds, mer-
cury and its compounds, naphthalene, nickel and its compounds, nonylphenols,
octylphenols, pentachlorobenzene, pentachlorophenol, polyaromatic hydro-
carbons, simazine, tributyltin compounds, trichlorobenzenes, trichloromethane
(chlorofrom), and trifluralin.
Penalties for non-compliance are also set to increase in the US with new
legislation like the Coast Guard and Maritime Transportation Act of 2006,
recently passed by Congress. This increases the penalties for oil spill damages
in waterways and rivers, requires anyone to report river obstructions to the
Coast Guard and Army Corps of Engineers, and increases liability limits for
single-hulled vehicles (˜Congress raises penalties for oil spills on waterways™,
Insurance Journal, 30 June 2006).

Risk management
Measures to tackle the discharge and emissions of the substances listed above
must be adopted and organisations should aim at the cessation or phasing out
of discharges, emissions and losses within 20 years after their adoption at
community level;
Part D “ Overview of the Environmental Aspects of Business Risk
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Review the use and facilitate the replacement of particularly toxic or haz-
ardous substances that could cause a pollution incident, or could become
involved in a disaster or terrorist incident (see Chapter 8);
Encourage organisations™ developments and redevelopments to adopt new
techniques to reduce pollution runoff into streams, rivers, lakes and bays.
The adoption of mini-wetlands to reduce runoff and rain gardens to ease the
flow of rain waters in suburban neighbourhoods;
Working with stakeholders (non-governmental organisations and govern-
ments) can help develop increased water supplies and benefit firms that have
high consumption levels. Procter & Gamble is a good case study for these
types of activities as they are working in developing countries to provide safe
drinking water at its point of use;
New online monitoring systems integrate various common analytical instru-
mentation, like pH and chlorine monitors, with advanced interpretive algo-
rithms to enhance detection and identification and real time accident
management; and
There will be the potential for waste treatment to become a resource rather
than just a cost as developments will lead to being able to clean water and
derive energy from the process. An example is that Cornell University™s
College of Engineering plans to recoup energy from wastewater treatment
within the next three years through the use of bacteria.


Chapter summary
It is important for all organisations to keep abreast of this practical area of risk
management:
Whatever their size;
Wherever they operate; and
Regardless of their sector.
As is also clear from Chapter 18 and this chapter, this is a complex aspect of
risk management that can also impact on the sustainability of the organisation
in terms of its viability and its reputation. Those days in which environmental
issues were regarded as a peripheral area of risk management are well and truly
over.


Useful web links
* European Union Environment Resource Homepage: http://ec.europa.eu/
environment/
* GRI “ Global Reporting Initiative: including a GRI content index and
guidelines: http://www.globalreporting.org/reportsdatabase/
* INEM “ International Network for Environmental Management.
Documents and hyperlinks to other websites of interest, including: EMAS
Tool Kit for Small Organisations, Environmental Policy Checklist, and
Chapter 19 “ Aspects of environmental risk 513




Environmental Statement and/or Environmental Report Checklists.
http://www.inem.org/
The carbon trust (www.carbontrust.co.uk/energy) says they can save
*
between 10 and 30% of UK companies™ energy bills annually.
United Nations “ reports on global trends are available from:
*
http://www.un.org/esa/sustdev/publications/trends2006/index.htm
US Environmental Protection Agency: http://www.epa.gov/
*
WBCSD “ The World Business Council on Sustainable Development
*
has been voted the best global resource for case studies on sustainable
development: www.wbcsd.org
Publications
* Ecosystem Challenges and Business Implications. The publication by
Earthwatch Institute (Europe), the World Conservation Union (IUCN), the
World Business Council for Sustainable Development (WBCSD) and the
World Resources Institute (WRI) is based on global scientific facts and
projections from the UN™s multi-year Millennium Ecosystem Assessment.
Available at: http://www.wbcsd.org/DocRoot/TG54Y61bSf5w1ATAROjJ/
Business%20and%20Ecosystems_211106_final.pdf
* ASHRAE “ The American Society of Heating, Refrigerating and Air-
Conditioning Engineers has published a ˜GreenGuide™ focusing on the
˜design, construction, and operation of sustainable buildings™. Available
for purchase at: http://www.engineeringforsustainability.org/
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PART
E
Case Studies of Business Risks
We cover the key environmental aspects of risk which include:
A review of the climate change debate and risks (Chapter 20);
An overview of relevant governance and risk issues (Chapter 21);
Legal risk management in the US (Chapter 22);
Selected international dimensions of risk management and corporate govern-
ance (Chapter 23); and
Conclusions and future trends (Chapter 24).
Although the book includes case studies throughout, here there is some emphasis
on key global risks facing the world today, such as climate change and food safety.
There is no doubt that the Enron catastrophe that embraced economic crime and
mismanagement has been the moment in corporate history which defined the
need for urgent change and ushered in a new era to corporate governance and
Part E “ Case Studies of Business Risks
516



strategic risk management. It highlighted the need for a review and reappraisal of
corporate behaviour and accountability. In turn this had major implications for
sustainable risk management.
Therefore this handbook concludes with some analysis and comment on
the comparative responses to the Enron case study, with some recommenda-
tions based on the need to consider emerging risks in emerging economies that
are so rapidly taking place at the forefront of globalisation.
20
Climate change “ air pollution risk
20 Climate change “ air
pollution risk



CHAPTER OVERVIEW
SERM research indicates that the combined total for greenhouse gas-
related risk from production and transportation amounts to 1.4% of all the
market value of the companies analysed. This figure is an average
although there are wide variances within anticipated loss scenarios.
The Carbon Disclosure Project analysis of 2000 companies estimates
that the worst performer could lose 25% of their earnings due to regulatory
compliance costs, but the best could make a revenue addition of 11% to
turnover.




The issue

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