EHS Regulatory Enforcement: Why it pays to stay compliant with EHS laws.

In today’s challenging economic environment, where budgets are being tightened and any expenditure is keenly scrutinised, it can be tempting for companies to dismiss environment, health and safety (EHS) issues as overheads or non-business expenditure. However, as Enhesa has found in tracking the enforcement of EHS laws across the globe, such an approach to EHS issues could be costly and ultimately, dangerous, for any business and its employees. Prosecutions for non-compliance can impact business in a variety of ways, from direct fines, enforcement orders, product-recalls, cessation orders and even prison sentences for directors.

Over the past year, enforcement activities around the world have seen a marked increase. Countries where in the past there has been less attention paid to enforcing environmental and workplace safety issues are now finding their feet. Compliance with EHS laws is becoming a global necessity for business, where previously it may have been seen as a luxury.

For example, in the Philippines a strong focus has been placed on environmental enforcement in recent years – with the creation of an environmental police force, “green” courts and the recruitment of environmental lawyers. This has culminated in one case publicised in April 2009, where two companies were forced to cease operating. In one case, Cebu Precious Metal Resources was found to be violating both the Clean Water Act (Effluent samples taken from the company’s wastewater greatly exceeded the standards for oil and grease) and the Clean Air Act (for operating air pollution source equipment without a permit from the DENR). In the other case, Meng Hong Trading, which extracts bunker oil from used tyres, was operating without the necessary environmental permits, such as the environmental compliance certificate (ECC), permit to operate air pollution facilities and discharge permit for its effluents. The company was also not registered with the EMB as a hazardous waste generator.

In addition, in Azerbaijan in February 2009 it was reported that environmental inspections conducted in several cities by the relevant unit of the Ministry of Ecology and Natural Ressources (4 saylı Ərazi Ekologiya və Təbii Sərvətlər şöbəsi xidməti) revealed a variety of breaches of environmental laws. The relevant persons/companies were fined. The breaches identified related to, amongst other things, air emissions, wastewater discharges and drinking water pollution.

Countries that have traditionally been at the forefront of EHS regulatory enforcement, such as the USA, the United Kingdom, Ireland and other EU countries are continuing to lead the way in imposing heavy fines and even prison sentences for non-compliance as well as publishing and on many occasions publicising enforcement cases. Some of the more recent high-profile cases include a Petrochemical company that was fined over $170 million for a variety offences relating to an explosion at one of its US refineries. Another company, Atlantic States Cast Iron Pipe, Co. (Atlantic States) was fined $8 million and four former managers were sentenced for environmental crimes and worker safety violations. The company and its managers was convicted of engaging in an eight-year conspiracy to pollute the air and Delaware River in violation of the Clean Air and Clean Water Acts, exposing its employees to dangerous conditions and impeding and obstructing federal regulatory and criminal investigations.

Cooperation with enforcement agencies has also become a more prominent feature of the regulatory enforcement structure as newly developed legal instruments impose further requirements on business. A strong example of this is the enforcement of EU Directive 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment (the “RoHS” Directive). By way of example, the Environment Agency in the UK has taken a cooperative approach to enforcing the requirements of the Directive, where it works with, rather than against companies to facilitate compliance. Part of this approach is the provision and sharing of information and advice – to give companies the time and support needed to comply with newly introduced laws. If a company does not comply after having received such support and cooperation then it will still be prosecuted.

However, the cooperative approach leads to many other ways for non-compliance issues to be addressed. For example, rather than prosecuting firms and imposing fines, the Environment Agency in the UK, following some 250 inspections, instead resulted in 12 improvement plans, 3 EU notifications, 4 product withdrawals, 5 compliance notices and 3 warning notices. As companies become more aware of the requirements in new laws, such enforcement activities are likely to become less lenient.

In a similar case of cooperation with enforcement bodies, a chemical intermediates manufacturer in the US recently self-reported environmental violations that it had identified at facilities in seven states as a result of an internal environmental auditing program. The company disclosed more than 680 violations of water, air, hazardous waste, emergency planning and preparedness, and pesticide regulations to EPA after auditing 12 facilities it acquired from another chemicals manufacturer in 2004. The company had to pay a fine of $1.7 million but this would have been a good deal more had the company not cooperated with the EPA and had the violations come to light as a result of enforcement inspections.

Corporate EHS audits are therefore a vital tool in keeping track of compliance issues and addressing them in a timely and effective manner – before they start to cost your business millions in remediation or settlement costs. Currently, the global challenge is to achieve high levels of compliance while watching the bottom line. Many companies, for example, are choosing to move away from third party audits and are bringing their EHS compliance auditing in-house, using a reliable user-friendly tool, like Enhesa’s Audit Protocols to carry out the audits, and thereby reducing expenses while effectively supervising regulatory compliance worldwide.

On September 24th & 29th and October 1st 2009  Enhesa will be hosting a free Webinar on the subject of ”How to Optimize Your Corporate EHS Compliance Audit Program – Balancing increased enforcement with resource constraints”.

To register for this Webinar, please contact Maria Panteris at mp@enhesa.com.

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