© 2009 Capaccio Environmental Engineering, Inc. “Helping Industry and the Environment Prosper” Pollution Prevention Saves Money By Reducing Operational Risk Robert B. Pojasek, Ph.D.

© 2009 Capaccio Environmental Engineering, Inc. Pollution Prevention The Pollution Prevention Act defines "source reduction" to mean any practice which: reduces the amount of any hazardous substance, pollutant, or contaminant entering any waste stream or otherwise released into the environment (including fugitive emissions) prior to recycling, treatment, or disposal reduced the hazards to public health and the environment associated with the release of such substances, pollutants, or contaminants The term includes: equipment or technology modifications, process or procedure modifications, reformulation or redesign of products, substitution of raw materials, and improvements in housekeeping, maintenance, training, or inventory control.

© 2009 Capaccio Environmental Engineering, Inc. Making the Business Case How does a business make the financial case for P2? Using the general ledger Activity-based costing Real options – more intangible items Operational risk management

© 2009 Capaccio Environmental Engineering, Inc. EMFACT Software Energy and Materials Flow and Cost Tracker Used within companies for systematically tracking materials and energy use, releases, discharges and wastes along with associated costs Seeking ways that can create value for company Resource use and its relation to production and planning that can help improve both business and environmental performance

© 2009 Capaccio Environmental Engineering, Inc. Show Me the Money Principle Many companies maintain an interest in a green program However, investing in lower risk is important to sustain the management interest and grow your brand strength Look at your entire value chain – suppliers can often provide great ideas for P2 projects Maintain a high level of employee involvement in these programs – facilitation v dictation!

© 2009 Capaccio Environmental Engineering, Inc. Types of Risk Financial Market Risk –Interest rates, currency, commodities, equities –Socially Responsible Investment Business Risk Operational Risk

© 2009 Capaccio Environmental Engineering, Inc. Business Risk Business Continuity or disruption Competition Public Image Liquidity Risk Disruptive Innovation High costs M&A Unrealized or lost revenue Inappropriate management policy and or decision making process

© 2009 Capaccio Environmental Engineering, Inc. Operational Risk The risk resulting from uncertainties related to internal processes, people and systems, or from external events

© 2009 Capaccio Environmental Engineering, Inc. Framework for the Analysis of Risk Risk Assessment 1.Identify hazard and determine levels of exposure 2. Estimate risk Risk Management 1.Develop options for controlling risks 2.Select appropriate strategy “The culture, processes and structures that are directed towards realising potential opportunities whilst managing adverse effects” ISO 36000

© 2009 Capaccio Environmental Engineering, Inc. Managing the Risks Use proven tools and methods Integrate risk management into the approach Integrate the methods Drive into the core business Make the program part of what every employee does every day Make the program part of every management decision

© 2009 Capaccio Environmental Engineering, Inc. ISO – Risk Management ISO/TMB WG on Risk management N 047 Date: ISO CD Risk management — Guidelines on principles and implementation of risk management Can integrate with ISO – Environmental Management System

© 2009 Capaccio Environmental Engineering, Inc. Risk Appetite Risk Appetite” – “….at the organizational level, is the amount of risk exposure, or potential adverse impact from an event, that the organization is willing to accept.” » What is the Risk Appetite of your organization?

© 2009 Capaccio Environmental Engineering, Inc. Risk Management Pro cess

© 2009 Capaccio Environmental Engineering, Inc. Risk Register

© 2009 Capaccio Environmental Engineering, Inc. Probability/Impact Matrix

© 2009 Capaccio Environmental Engineering, Inc. Risk Map

© 2009 Capaccio Environmental Engineering, Inc. Risk Response Plan

© 2009 Capaccio Environmental Engineering, Inc. Risk Management Regular checking & Continuous Monitoring Line Management Review Audit

© 2009 Capaccio Environmental Engineering, Inc. Organization Risk Management Program

© 2009 Capaccio Environmental Engineering, Inc. Preventive Action Items Preventive action #1 Develop Documented Risk Appetite Statement –Include Reference to P2 Program Train all staff to develop preventive approach to risk Preventive Action #2 New Management Review Element – “RM” –Changes that could Affect the EMS Ongoing Preventive Actions #3 - ∞ Assess Risk – Source Reduction with Appropriate Controls (P2) 20

© 2009 Capaccio Environmental Engineering, Inc. Risk Identification methods include: Scenario Analysis Stress Testing Real Options Risk Analysis/Evaluation: If possible, assign a $ value for expected impact (such as profit reduction, revenue loss etc) of each risk event/scenario Conduct Sensitivity Analysis See the impact of these risks on financial strategy of the company Risk Management and $$$

© 2009 Capaccio Environmental Engineering, Inc. Take Away Points Top management understands risk All employees and stakeholders understand risk Risk can be expressed in financial terms P2 opportunities are designed to avoid risk – positive risk EMS Policy includes a commitment to P2 EMS has a requirement for preventive actions Risk has a management system – ISO Integrating your EMS with ISO can set the stage for an enhanced P2 program that is part of the way the organization is operated day-in and day-out!

© 2009 Capaccio Environmental Engineering, Inc. Robert B. (Bob) Pojasek, Ph.D Ext