ERM alerts executives to business cost of ignoring the environment

The business cost of failure to consider environmental impact management extends beyond reputational damage and could entail jail time and multi-million-rand fines for law-breakers. Other impacts include significant project delays and heightened risk that investors will pull the plug on funding.

These possibilities seems alarmist, but should be raised as risks could sharpen as a new standard for environmental management systems (EMS) comes into force, says ERM Southern Africa, part of the global Environmental Resources Management group.

Among other things, a revised ISO 14001 standard for EMS (ISO 14001:2015) makes it obligatory for environmentally responsible businesses to integrate sound environmental practice into corporate strategy and business processes, including procurement, capital authorisation, product and leadership development and operational efficiencies.

Challenges arise, says ERM principal consultant Jonathan Sevitz, as the previous standard allowed many environmental management functions to be offloaded to environmental specialists. Hands-on engagement by top management was not obligatory.

In a much-changed business environment, miscommunication between technical specialists and business leaders becomes a new area of risk, says Sevitz.

“It’s quite possible that a report in technical jargon is accorded low priority by top management,” he explains. “The report might raise numerous red flags, but these could be ignored by executives unfamiliar with technical terms.

“The specialists might think they have strongly communicated a risk of contamination, but business strategists with little experience of environmental challenges could miss the warning.

“Using business-speak rather than technical jargon has a better chance of communicating strategic environmental risk. Of course, to really make the point a specialist might entitle his report ‘You could go to jail for this’!”

The National Environmental Management Act already makes provision for up to 10 years in jail and fines of up to R10 million for failing to comply with certain provisions.

Risks sharpen for senior management, says Sevitz, as the new ISO 14001 standard will raise expectations that top executives are aware of the strategic implications of environmental issues in their business, and as a result build good environmental practice into their planning.

The revised standard comes into effect in September 2018, but it can take up to 18 months to develop and implement a compliant EMS as new protocols involve a fundamental shift in business’s approach and insist on effective environmental interventions. The previous focus, notes Sevitz, was on conformance to the system rather than demonstrable improvements in environmental performance.

Low awareness of the impact of the new standard and lack of action by companies to revise their EMS to the standard’s new requirements are cause for concern.

“There is little discussion around these issues at strategic level,” says Sevitz. “The possibility of criminal prosecution, site closure and lack of funding seems dramatic, but it is necessary to sound the alarm before the deadline creeps up on business and some companies find themselves woefully unprepared.

“Wake up now and businesses can reap the long-term benefit of proper integration of EMS into corporate strategy. Leave it too late and businesses could lose ISO 14001 certification while failure to educate senior executives to new requirements could expose them to a new level of risk.”

Top