Environmental risks can be present throughout your entire product and service lifecycle, and if not managed effectively can result in significant fines, prosecutions, operational disruption and reputational damage to your business.
Where does environmental risk occur?
Environmental risks arise at every stage of the lifecycle of a manufactured product through:
- the irresponsible extraction of raw materials;
- the procurement of products and services from organisations with poor reputations due to a lack of regard for their corporate responsibilities;
- a lack of duty of care for waste management;
- the environmental liabilities associated with contaminated land, asbestos or other hazardous materials;
- inefficient use of energy and natural materials; and
- non-compliance with the producer responsibility for products.
What are the risks and where are they in the supply chain?
- The extraction of raw materials
The extraction of raw materials without following the principles of corporate social responsibility can cause significant social and environmental impacts. This may lead to protests by the local community or wider international action resulting in disruption to operations and severe reputational damage.
- The environmental incidents that occur in the supply chain and during manufacturing
Environmental incidents at manufacturing sites or supplier sites can cause severe disruption to operations as a result of enforcement notices issued by the environmental agency.
- Changes in manufacturing
Expanding or reconfiguring a business absorbs a considerable amount of the senior management’s time and energy - especially when buying or selling businesses and property. The company needs to ensure that it undertakes environmental and financial due diligence so that it does not inherit or retain environmental liabilities when purchasing or selling a business and property.
- The disruption caused by climate change
Disruption to the supply chain may be caused by extreme weather events due to climate change. Although organisations have little control over the likelihood or severity of such events, they can build resilience into their supply chain. Gradual long term changes in climate can be managed through the preparation of a climate change adaptation plan that assess the risks and outlines plans to address the predicted impact.
The government has introduced environmental legislation that requires organisations to reduce their impacts on the climate through a reduction in carbon emissions. On top of this, certain organisations are also required to report their greenhouse gas emissions and failure to comply with best practice guidance may result in fines.
- Waste and products
All organisations produce waste, and manufacturing companies have a duty of care to ensure that this waste is reused, recycled or disposed of in compliance with legislation and best practice. Manufacturers also have an environmental responsibility for products that they place on the market through the ‘extended producer responsibility’ directives.
- Managing these environmental risks
The environmental risks that organisations face can be complex and wide ranging. To manage these risks firms would benefit from formal management processes and should adopt systems that follow the international standard ISO 14001 for environmental management systems.
If a wider scope is required, such as sustainability or ‘corporate responsibility management’ (which takes account of social value and stakeholder benefits) then the equivalent systems can be developed, and implemented, by following the ISO 26000 guidance on social responsibility.
For the design of products, organisations need to take account of the ‘restriction in hazardous substances’ (RoHS) directive and the ‘Ecodesign of energy related products’ directive - all of which have been translated into UK Law.
- The benefits of adopting risk management in your supply chain
By ensuring that environmental risks are kept to a minimum the organisation will benefit from reduced costs right across their supply chain and enjoy significant savings through a reduction in their consumption of energy and natural resources. Such displays of environmental consideration have the added benefit of increasing an organisation’s market reputation, which can have a positive affect on the sales of the organisation’s products and services.
Act today; shape tomorrow. If you would like to know how RSM can help your organisation better meet its environmental responsibilities please contact Matt Humphrey.