What are the Economics of Sustainability vs. Remediation?

Companies that spend a lot of money on remediation, and are doing it only to avoid penalties and fines, are going to end up having bigger and more expensive problems than they were hoping for.

When I was at Robroy, we had an old Duoline factory that was costing us $2.5 million every year in environmental remediation — cleaning up and disposing of chemicals we were using to cure some of our products. When we tore down and rebuilt that factory, we switched to a steam-based curing process that completely eliminated our remediation costs, as well as eliminating errors and scrap, and reducing total overhead, while increasing our output by 400%.

But for other companies that have a lot of environmental remediation issues, most executives tend to ignore and put off the problem until they couldn’t ignore it any more. They usually only deal with it when they get caught. In other words, they probably won’t spend the money until or unless they’re caught in an environmental violation. Then, they’re facing down the double barrels of a humongous governmental fine and possible jail time for CEOs.

So when faced with a potential problems, executives often try to decide whether they want to get ahead of the problem, or if they’re happy to go along until they’re forced to face the reality of the problem. (Many times, they choose the latter and hope the problem never arises, or that they’ve moved on before it does.)

I sometimes wonder what would have happened at Robroy if we hadn’t taken that step of rebuilding the factory. Would they be remediating every year for $2.5 million? Would they have looked for a new solution? Or worse, would they have ignored the problem until the EPA stepped in with massive fines in the tens of millions of dollars and a court summons?

One thing I learned from this experience is that fixing the problem is nearly always better than regularly paying for a Band-Aid solution ad nauseam. And it’s absolutely better than ignoring the problem and hoping for the best.

Because if you can fix the cause, you basically solve the problem forever.

In the case of the Duoline factory, we rebuilt it and saw a 100% ROI after 8 years. That is, 8 years after we built the new factory we paid for it by no longer paying for environmental remediation, waste disposal, and unnecessary overhead.

But oftentimes in legacy businesses that have been around for 20 – 30 years, there are decades-old problems that are not necessarily evident to the naked eye. You have to have the mindset that you’re committed to sustainability and environmental responsibility and you’re going to find the problem. Otherwise, you won’t even go looking for the cause and the solution will never present itself.

You may have to take a longer long-term view, like 50 years into the future. Because the bigger you are, the longer it will take, and you’ll have to phase into the solution. And in some cases, it’s a matter of waiting for the technology that hasn’t even been invented yet. When it comes, companies will need to be willing to fix those problems and invest in the solution, rather than waiting until the fines and immediate solution bankrupt the company and send the CEO to jail.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.

Photo credit: NeuPaddy (Pixabay, Creative Commons 0, Public Domain)