Ten years ago, a container of glue was delivered to the Leicester site of GI Solutions and was left in the yard. In itself, there was nothing unusual about this. However, a major environmental problem was silently lurking - the container was cracked and leaking glue across the site into a drain.
"We hadn't realised that it had happened until the local council came knocking on our door," explains GI sales director Patrick Headley. "Luckily, the glue was non-toxic and it happened over a period of three to four days."
The leak found its way into a local brook and, while no permanent damage was done, the glue did turn the water a cloudy, milky colour. It jolted GI into action and transformed its entire approach to the environment. As a result, the company became carbon neutral (the first print firm to do so) and gained ISO 14001 accreditation.
"The incident alarmed us and we could see what impact our actions could have on the environment," adds Headley.
GI's story is a reminder to the print industry that the materials, solvents and chemicals used in the production process can damage the environment if they are handled incorrectly.
Incidents like the one at GI fall under the umbrella of environmental impairment liability, something that has hit many print companies in the past. This carries a huge financial burden and for companies that don't have the appropriate insurance cover, it could have a devastating effect on their business.
Too little too late
According to the Environment Agency, in England and Wales, there are more than 45,000 pollution incidents reported each year. Most fall under the radar of the media, meaning that many businesses don't realise the impact of environmental impairment liability until it's too late. And it's not an area that only affects the large multinationals that deal with toxic chemicals or hazardous materials - small to medium-sized printers ought to take notice as well.
Insurance broker RK Harrison cites several examples of what kind of costs are involved if the worst-case scenario occurs. For instance, if a company is found to be responsible for an incident that causes environmental damage to the local area, then the owner is liable for the clean-up. In one particular case, a company had to pay £100,000 because of corrosion to an underground pipe, which resulted in oil leaking into a stream. On top of the clean-up cost, the firm was fined a further £2,000.
In another case, a fire at a chemicals packaging site resulted in a company shelling out £500,000 after contaminated firewater entered a neighbouring warehouse. In addition, the foam and water used to put out the fire went into the local water course that fed into the main river.
And it gets worse. RK Harrison realls a company that ended up spending in excess of £1.2m to clean up contaminated soil and groundwater following a major spillage of diesel that threatened a local water supply borehole. The incident was the result of a leak in a fuel pipeline between a 4,000litre storage tank and an associated generator. Oil had contaminated the underlying groundwater and the company was fined an additional £15,000, as well as £1,530 legal costs.
Cost build-up
These examples underline that, if the worst-case scenario occurs, companies don't just have to shell out for the clean-up costs, they're also vulnerable to substantial fines from local councils and the Environment Agency.
The Environmental Damages Act was updated in March this year (see box) and requires companies to take steps to prevent environmental damage and notify the relevant authorities. It also requires firms to pay costs claimed by the authority. For those not up to speed with the regulations and what it means for their business, it can be a very steep learning curve.
For instance, in some extreme circumstances, companies can still get caught out, even though the waste went off-site several years ago. If it is traced back to your company, then you have to pay.
The best way to combat this is to have a solid environmental policy in place. While the glue spillage prompted GI to tighten up its procedures, the company went further than any other print firm at the time. "We wanted to do it and since then everyone has seen a positive effect on the business," adds Headley.
GI made huge strides in cleaning up its act. For example, the firm moved away from solvent-based inks and now only uses water-based products.
"The solvent chemicals were hazardous," says Headley. "Our environmental credentials have helped us in terms of health and safety. The strategy has also helped reduce our insurance premiums."
The right cover
That final point may prove to be crucial. Having insurance will cover the costs, but the key is getting the right kind of cover. According to RK Harrison many companies aren't aware of environmental impairment liability and, therefore, don't have the right insurance product. Public liability won't cover a company for its own site clean-up or the interruption to the business. Also, a property insurance policy will cover bricks and mortar only, cautions RK Harrison.
Mark Barnes, environmental insurance consultant at Jardine Lloyd Thompson, cites the case of chemicals company Bartoline. It attempted to claim back on public liability, but found that it wasn't quite so straightforward (see box). So it always pays to check whether or not you are covered. Companies always need to be fully aware of the risks involved.
"You need to make sure that you have a strong environmental policy in place," he says. "Risk management should be bound into that. Indeed, that area is embedded in good management and a good business culture - it's about being socially responsible. The key thing to remember is that these accidents happen when you have something in the wrong place and in the wrong quantity - and an accident can disrupt the business."
Environmental impairment liability can seriously impact the financial and even operating status of a company, so it's worth taking your environmental responsibilities seriously and ensuring you have the appropriate insurance cover. Accidents do happen and on this issue, it's better to be safe than sorry.
CASE STUDY: BARTOLINE
Back in 2003, a fire at Bartoline’s premises in East Yorkshire caused a fair degree of environmental damage, but also proved to be a highly significant legal case, according to Jardine Lloyd Thompson’s Mark Barnes.
The company manufactured adhesives and filled and packed products such as white spirit and turpentine. The site went up in flames in May of that year and chemicals and fire fighting foam heavily contaminated two nearby watercourses, their beds and banks.
At one stage the fire brigade was unable to go anywhere near the blaze, says Barnes. A lot of the chemicals and foams were washed away and the Environment Agency handed Bartoline a bill of nearly £1m for the clean-up.
What happened next proved to be costly for the company. It wanted its insurers to cover the clean-up costs, but Royal Sun Alliance refused – they effectively told Bartoline to get stuffed, says Barnes.
Bartoline claimed that the public liability policy was adequate enough to cover the clean-up costs. While the insurers did pay up for a number of claims, the word ‘damages’ in the policy didn’t cover environmental liability. When it went to court, the judge found in favour of Royal Sun Alliance and noted that the policy was clear enough for it not to contain environmental impairment liability.
Barnes says: It’s an area that we have been talking to many of our clients about – it’s vital that we raise awareness.
LEGISLATION OVERVIEW
The Environmental Liability Directive
If you pollute, then you pay: that’s the very clear message from the EU directive, which came into effect in the UK in March. The purpose is to make companies that cause environmental damage financially responsible for repairing and preventing this damage. The directive defines environmental damage as:
? Damage to protected species and natural habitats, which has adverse effects
? Water contamination that significantly and adversely affects the ecological, chemical and quantitative status
? Land contamination, through either substances or organisms, which create a significant risk to human health
With this in mind, companies must:
? Take steps to prevent damage or further damage and notify the local authority
? Provide information and undertake preventative and remedial measures as required by the authority
? Pay costs claimed by the authority
? Notify authorities of imminent threats or damage with supporting information
