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ERA's Environmental Compliance Management Blog

Paying EHS Compliance Fines: Buying Time, or Plain Bad Business?

Posted by Alex Chamberlain

Alex Chamberlain is a writer for ERA Environmental Management Solutions.

ehs compliance finesIn the face of shifting compliance requirements (like ever-changing emission factors and types of permits) and new technologies to keep up with (new e-reporting requirements, new types of control technologies), getting compliance management tasks done on time can be the most challenging parts of your EH&S department's jobs.

It's a pressure felt by everyone in your business, including executives in charge, facility managers, and floor staff. 

 

Who hasn’t felt the pressure of a looming deadline and thought to themselves “how bad would it be if I finished just a little bit late?” Do you trust your team to resist that temptation? 

When it comes to environmental compliance reporting, this type of thinking can get very costly, very quickly.

It’s not unheard of for some businesses routinely put off their mandatory reporting or fudge the data “just for now” so they can fix it later. And some executives are willing to pay an EPA fine if it means a bit of extra time for their business to complete a report, install the required control technology, or write an emergency response plan. They think it's a small price to pay for a sense of control.

But this simply doesn’t make any business sense. In terms of your bottom line, even small fines will build up and create a cumulative negative effect on your profits and brand value. Fines for late reporting can cost you thousands of dollars per day.

If you think that absorbing late reporting or small noncompliance fines is part of your clever business strategy, we've got a list of reasons for you why you absolutely should reconsider:  

1. Your Brand and Reputation get Damaged 

Even a single small violation or late report is considered a history of noncompliance. That means you are more likely to get heavily scrutinized and penalized next year. Think of taking on small violation fines as having bad debt - it costs you more than you think in the long run.

If you have a soured relationship with your regulators (and letting small things slip through the cracks is probably the best way to accomplish this) will turn your next 1-5 years of environmental audits and assessments into a real nightmare. There will be less trust, so they'll really dig into your records and search for more and more violations. It's like having bad credit, on top of your bad debt - a perfect storm for a bottom-line disaster. Executives in charge of preserving brand value and creating value for investors will quickly find that overlooking a small compliance slip-up can have lasting damage on brand and share value. (In fact, a 2012 Freshfields study found that EHS incidents keep share value down for more than an entire year in a quarter of all businesses) If you're an EHS Manager, that means more of your staff's time will be eaten up by increased audit prep work, costing you more.

2. Fines Can't be Planned for or Managed

If you plan on absorbing the cost of a noncompliance or late-reporting fine in order to buy more time for your business (this happens often with TRI reports), it's nearly impossible to tell how big your fine will be or what it's impact will be.

Did you know:

  • The Deepwater Horizon incident cost the responsible business $3.7 billion in restitution fines.
  • The EPA collected more than $4.5 billion in combined fines from violators through criminal sentencing, and over $1.1 billion in civil penalties in 2013.
  •  Walmart payed $80 million last year for mishandling pesticides and hazardous waste.

Even if your business isn't operating on the same scale as some of the big names mentioned above, you could be facing some unexpectedly enormous fines for what you might consider a small violation. 

Budgeting for unpredictable fines is a poor business stategy. Counting on paying for fines is a bit like spinning a roulette wheel and gambling with your budget - will it be a small fine or a massive fine? Even if you can afford it now, can you afford the next one? 

Your profits are too important to gamble away. Many executives keep a tight grip on their bottom lines but then take on huge risks with it in their EHS departments. The key is to put the right systems in place so that your team doesn't have to worry about last-minute time crunches and late reporting to begin with.

3. You’re Stuck Playing Catch Up

Don't think of paying fines for late reports as "Buying Time" so much as "Borrowing Time" from your more important tasks. All you've accomplished is pushing back the next deadline and the next... meaning that your next compliance management task is at increased risk for being late.

More importantly, it takes away what little time your EHS department has left for profit-creating sustainability projects and a accident-prevention. All of the time you let your EHS department borrow decreases their ability to keep your operations running smoothly and cost-effectively. 

By taking that extra day out of your EHS schedule, you could be compromising chemical data entry and making mistakes. You could be failing to react to a spill or workplace accident. And then that becomes just another barrier to success for the next report... it can become an endless cycle

4. You Won't Be an Environmental Leader

Being on the cutting edge of sustainability practices and environmental stewardship is one of the most powerful tools a business has for growing market value and staying competitive. Having a bad compliance record means you’ll have less market appeal, and other businesses or potential clients could pass you over in favor of a similar business with a greener history.

There’s a huge push right now, especially in manufacturing, to implement sustainable supply chain practices, and that definitely includes cutting out suppliers that have a bad environmental reputation.

If you’re feeling the pressure of getting your reporting done on time, just think of all these great reasons why it’s worth doing right, the first time and on time.

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About the Author: Alex Chamberlain is a writer and blogger who regularly contributes to ERA Environmental Management Solutions' blog. You can find Alex on Google+LinkedIn & ERA's Environmental Compliance Blog

Image credit: quinnanya