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Environmental Risk

Finding the Help You Need in this Highly-Regulated Area

Environmental risk is an increasingly common and complex issue for all kinds of businesses.September 15, 2016

Among the many regulatory burdens that companies face today are environmental regulations, which can come from a variety of agencies. Although traditionally, manufacturing and heavy industry have been more affected by these regulations, this is becoming an area that every company needs to look at when assessing risk.

The fact is that environmental regulations are affecting more issues that directly relate to all kinds of business, whether it’s emissions, water pollution, shipping of hazardous material, keeping chemicals onsite, and more. And, as noted above, companies must deal with range of agencies, including the federal Environmental Protection Agency (EPA), state regulators, and local governmental bodies.

DO YOU HAVE ENVIRONMENTAL EXPOSURES?

To assess risk, companies have to figure out their possible exposure. The definition of exposure in this case is pretty broad. Basically, if you own real estate, operate a business, manufacture products, generate waste, create emissions, or store chemicals, then you have some degree of exposure to environmental risk.

Companies with these risks have a very large range of issues to consider. What is their cleanup liability? Do they have the proper equipment to store and dispose of waste? Are they equipped to keep up with new regulations and the cost of compliance? Do they have good processes in place for employee training and record retention?

Many companies feel overwhelmed by the regulatory demands from environmental agencies, but it helps to look at this area as similar to the burdens of tax compliance. Just as many companies hire a tax specialist, it can be invaluable to turn to someone who is an expert with the regulations in this area.

Consultation with experts in the environmental risk and compliance field can help an employer identify their level of risk. Again, nearly every company has some exposure to risk. Some of the industries that are most affected include energy, manufacturing, real estate, health care, construction, transportation, and academic institutions.

THE DIFFERENT AREAS OF ENVIRONMENTAL RISK

There is a very wide range of services an experienced consultant can offer an employer when assessing environmental risk.
For operations, a consultant can assess compliance with environmental, health, and safety regulations. Developing management systems for environmental risk is another service that can be offered. If there are legal issues, a good consultant should be able to help with expert witness and litigation support. And consultants can serve as a liaison to regulatory agencies and the community, which often is affected by environmental issues.

In the area of merger and acquisitions, consultants can help with the appropriate due diligence associated with assessing environmental risk. They can model risk and outline possible liabilities and insurance solutions. They can also help with the claims management issues inherited in a merger or acquisition.

Similar to the M&A arena, another area of concern is legacy environmental risk, which is often driven by historical operations and/or contaminated real estate that may or may not have been related to the company’s current operations.

Finding a partner to help quantify and address environmental risk is especially important for employers with:

  • Mergers and acquisitions that create new operations outside a traditional core business.
  • Plans for expansion into new markets, jurisdictions, or business lines.
  • Increased environmental activism or regulatory enforcement in their industry or geography.
  • Concerns that manageable environmental exposures may become financial liabilities.
  • Community development encroachment near their operations.
  • A need to prioritize environmental spending and activities based on actual financial risk.
  • The need to attract new financial partners who demand clearer understanding of environmental risks.

WHAT CAN A CONSULTANT OFFER?

A good consultant will take a “cradle to grave” approach to environmental risk. That is, if your company generates or creates anything that generates waste or affects the environment in some way, the assumption is that your company has liability from the creation of that risk until it is no longer a risk.

If Company A’s factory produces industrial waste, for example, and hires a trucking company to haul the waste to the landfill, Company A still has liability if the truck has an accident on the way to the landfill—or at the landfill. Advising on how to recognize and manage every detail, every step of the process when it comes to environmental risk, is where a consulting company can be very helpful.

A common initial step is to do a full-scale audit to determine what your company needs to manage its environmental risk. Identifying risk, providing training, keeping employees and managers up-to-date on regulatory changes, and community relations are all areas that can be addressed.

Environmental issues are often the subject of media headlines---including, these days, social media. The damage to a company’s brand that an environmental problem may cause can be long-lasting. Experienced consultants will know how best to prepare for the possibility of managing community relations if an accident occurs.

Perhaps most importantly, leading consultants can create a calendar for your company that shows every regulatory deadline and each step that is needed to stay in compliance with those federal, state, and local requirements. This document will include guidance on staying current with changing regulations, and how to ensure that employees are trained on any new requirements. The consulting relationship includes regular check-ins and updates, ensuring that there are no surprises in maintaining compliance.

CASE STUDIES

MMA Environmental has helped many companies nationwide by identifying where their risk lies and working closely with them to develop a plan to address that risk.

To help understand the specifics of how an environmental compliance consultant can help your business, consider these examples of work done by MMA Environmental:

  • Interaction with contractors: MMA Environmental performed a thorough environmental compliance and environmental risk audit of a multi-billion dollar industrial construction project in New York. At the time of the audit, this was the largest construction project in the United States and was immensely complex from both a technical and a regulatory standpoint. MMA Environmental performed the audit for the owner to help them better understand the degree to which the general contractor and associated subcontractors were successfully following environmental regulatory requirements and pre-startup permitting at this highly visible project.
  • Incident consulting: MMA Environmental supported a warehousing and packaging client respond to an industrial accident during which approximately 50 employees were treated for possible carbon monoxide exposure. MMA Environmental completed inspections, conducted post-event monitoring and advised management and their legal counsel during regulatory, legal, and financial negotiations.
  • New energy technology: MMA Environmental developed a protective environmental, health, and safety program for a global leader in the home and business energy storage retail sector. This client is developing a global growth strategy for providing energy storage solutions (i.e., batteries) in the U.S., Europe, and Asia. MMA Environmental identified health and safety as well as environmental requirements applicable to their global production and retail distribution operations and is currently developing protocols to ensure regulatory requirements are met.
  • Addressing compliance deficits: MMA Environmental performed comprehensive environmental compliance and environmental risk audits at numerous company distribution and retail sales facilities for a national auto parts retailer. Audit reports were submitted to the EPA as part of a negotiated voluntary audit disclosure. Over $900,000 of proposed penalties were waived by the EPA as a result of the company’s actions.

Across all industries and sizes, organizations are turning to environmental risk identification and quantification to meet their strategic needs. Today’s environmental risks can have far reaching impacts on your organization. In response, MMA Environmental can develop a unique approach to help you better understand and manage these risks.


This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.