Corporate Risk and the Growing Case for Sustainable Chemical Management
Being responsible for the impact of a chemical disaster—on staff, local communities, the environment, and the local economy—is every CEO's nightmare.
- By Robert Polito
- Dec 05, 2016
Like much of the developing world, Vietnam has a dilemma on its hands. Keen to attract foreign investment, the government there has been accused of streamlining its approval process for multinationals entering its buoyant market, to the detriment of the environment.
Plenty of evidence points to a huge release of toxic chemicals into the Vung Ang bay on the country’s north central coast as the root cause of a devastating fish kill; some 70 tonnes of dead fish have been washed up on the beaches in the region.
Who is responsible for the chemical spill—which is likely to have huge implications for the Vietnamese seafood and tourism sectors—is unknown. Most eyes instantly turned to what seemed to be the most obvious of instigators: the Formosa Ha Tinh Steel Company (FHS) complex, a deepwater port that has already benefited from more than $10 billion of investment in recent years. Facing a tide of social media speculators, the government has been quick to deny any wrongdoing by the business, with FHS stating flatly that all of its activities complied with Vietnamese laws and regulations, and it just couldn't explain the huge number of dead fish piling up on local beaches.
The argument between a defensive government and a newly liberated, social media-savvy community continues to rage across Vietnam. And the tale highlights once again the implications for business of poor chemical management and the negative impacts of environmental destruction—conscious or otherwise—on corporate reputation.
The world is slowly waking up to corporate environmental or social ills. The advent of social media has armed consumers with a wealth of new information about the brands and companies they engage with. The new generation of so-called Millennials is more concerned than ever with green issues. And people, in general, now better understand issues that have long gone unreported: climate change, deforestation, droughts, floods, erratic weather events, human rights abuses, and modern slavery are all terms about which people are more familiar and concerned.
Social networks also provide new tools to share and shout about such issues, along with whether companies are giving social and environmental responsibility the attention it deserves.
More than a quarter of the value of small and mid-sized companies is tied to their reputation. In the UK, for example, the total value of corporate reputation for all listed companies is around £1.7 trillion, according to the Quoted Companies Alliance (QCA) and BDO. The worrying trend, however, is that few companies are doing something to protect that value. Of the 220 companies polled for the QCA/BDO study, most recognize the importance of corporate reputation, yet only two-thirds have a formal plan in place to manage it. More than half of the financial advisers who were asked whether small and mid-sized firms adequately safeguarded their reputation said they do the “bare minimum,” with 40 percent saying that firms were completely unprepared for reputational shocks.
Just look at what happened to Volkswagen in the weeks following news of how it cheated emissions testing of its vehicles. Some £15 billion was wiped off its value price. Similarly, when the financial practices of insurance broker Quindell were called into question last year, its share price significantly tumbled.
What happened in Vietnam is not new; chemical pollution and accidental spills are commonplace at sites across the planet. In China, more than 40 percent of rivers are considered unsafe for drinking, largely because of unregulated chemical use and incidents of pollution. Every second, 310 kg of toxic chemicals are released into our air, land, and water by industrial facilities—that’s 10 million tonnes of pollution.
And being responsible for the impact of a chemical disaster—on staff, local communities, the environment, and the local economy—is every CEO's nightmare. According to Accenture and the Conference Board, more than one-third of 500 top U.S. CEOs named chemical-related environmental health and safety issues among the biggest concerns in their businesses and industries, placing it in the top five on the list of responses.
The Importance of Building a Chemical Inventory
With more than 70,000 chemicals currently in common use and 1,000 new chemicals coming into use every year, maintaining and managing their effective, appropriate, and responsible use is a challenging task. Cost, process, regulatory, and safety issues converge to make chemical management a critical, complex, and cumbersome activity. But by implementing a range of measures on site and across businesses, the risks associated with chemical use can be eliminated. To start, it is important to have a solid understanding of exactly what chemicals are being used at each facility and what compliance documentation is required for each chemical, including waiver documentation, if appropriate. Building out an inventory of chemicals is crucial to fully understanding how exposed your business might be—not only to regulatory non-compliance, but also to the risk of pollution or breaches of internal health and safety policies.
For Kimberly Williams, an inventory services manager for the chemical data management business SiteHawk, an accurate chemical inventory is the foundation for your overall chemical management initiatives and globally harmonized system (GHS) compliance. "Similar to building a house, periodic chemical inventories will ensure there are no cracks in your foundation," she said. Logging what chemicals you have on site, documenting where they are located, and ensuring up-to-date safety data sheets (SDSs) are available will help your business establish a solid baseline for creating chemical approval and control procedures, meet SDS compliance, and automate regulatory reporting that is efficient and accurate, she added.
Among her top tips for creating an inventory are to: label materials; create chemical "areas," either physically or logically grouping materials; and to develop a routine schedule so the inventory process becomes an annual event. "By employing the right mix of people, process, and technology, you can get a step ahead in your chemical management efforts and ensure compliance," Williams said.
Using Chemical Management Software
Chemical managers are beginning to realize that the most important investment their business will make in the next 10 years is information management software to make life easier, especially technology that integrates wider environmental health and safety data. Software platforms offer a straightforward data interface and reporting function that can access data from a number of sources, fulfilling regulatory demands and supporting business analysis. A fully filterable and searchable inventory of materials can be backed up with comprehensive digitized content provided by third parties, so you get the manufacturers’ details and hazard classifications that you’ll need for compliance reporting. Users also have the ability to register new chemicals associated with a particular product, and they can even request waivers if chemicals contain any Cat 1a substances.
To help build out a picture of potential risks or hazards, site managers can create property profiles for each individual site, noting which chemicals are where, how long they have been there, and whether there is a storage threshold per hazard type. Then there’s the option to create charts and graphs to help analyze chemical inventory metrics.
Philips, the Amsterdam-based technology company that manufactures a range of electronic equipment and lighting, has been making use of chemical management software for the last few years. Eliminating and minimizing its use of hazardous substances in its products and production processes has long been a priority for the business. It maintains a Regulated Substances List (RSL) for products that includes substances banned by law or by Philips, that need to be monitored due to regulatory requirements, or that Philips just wants to monitor. The RSL is something it asks its suppliers to comply with, and it is updated regularly. It also contains a number of substances that Philips wants to phase out from a precautionary point of view, despite there being no regulatory requirement to do so, such as polyvinyl chloride, phthalates, and beryllium.
Perhaps the world will instead turn to greener chemistry for product components and production techniques in the future. According to a new study by the American Sustainable Business Council and the Green Chemistry & Commerce Council (GC3), it is a market set to jump from $11 billion in 2015 to nearly $100 billion by 2020 as companies grapple to build more-sustainable entities and de-risk their processes.
There is a growing realization that the cost of managing chemicals goes far beyond the price of materials. By adopting best practice and looking at the entire lifecycle of chemicals, more and more companies are looking to better integrate the chemical management process so that it can be used to gain strategic advantage in the marketplace, boosting efficiency, improving site health and safety, mitigating corporate risk, and creating sustainable businesses for the long term.