17 January 2019

Food production businesses face rising environmental risk

As food production businesses look to utilise new practices to create extra efficiency or to use improving technology within their business, they could also be unwittingly increasing their environmental risk exposure.

More businesses within the food production industry are utilising waste water treatment and biogas technology to improve costs and become ‘greener’ and more self-sustaining. However these technologies can raise risks, according to Stephen Elms, National Head – Food Production at Gallagher.

Stephen Elms-2“While these technologies do have many benefits to businesses, they can also bring increased risks,” Stephen Elms, National Head of Food Production at Gallagher said.

For example, if a waste water pond leaches into the ground water and remains undetected for a long period of time, once it is discovered, the clean-up costs can be significant, not to mention the potential fines or penalties that could be levied by the Environmental Protection Agency (EPA).

The EPA has the power to levy fines and penalties against any business that is found to have damaged the environment. Whilst environmental insurance cover cannot be utilised when a business knowingly damages the environment, it is an important cover to maintain in the event that the business is unaware of any issue that may be occurring until it’s too late.

Environmental liability policies protect companies if they have been found liable for a breach of environmental law. The production of food and the integrity of the product has never been more in the spotlight and, due to the increased activity of the EPA, the tightening of legislation and public scrutiny - particularly on social media - means that producers need to seriously consider environmental liability as one of their annually purchased suite of products.

Another issue that is becoming a topic of discussion with food production clients, particularly those in the regional areas is potential loss of produce due to contaminated ground water due to the use of PFCA’s (Perfluorinated Carboxylic Acids). 

PFCA’s are typically found in firefighting equipment. The chemical foam or soluble liquid contained within these apparatus’ have been used for decades by fire fighters to assist in reducing the spread of fires however these foams and liquids have been proven to be carcinogenic.

“These foams are typically used in the practice of back burning but can do lasting damage to soil, groundwater and waterways,” Elms said.

“I was driving out in a regional area recently when I could see the remnants of the foam that had been used in a back-burning exercise but the startling fact to me was that this foam was clearly degrading slowly in the sunlight and it was located next to a large water channel that was used as an irrigation source for a fruit producer.”

“If these PFCA’s leech into the ground water and the water is used in the irrigation of food products, it’s not inconceivable that we could certainly being looking at contaminated products potentially being consumed by the general public. This scenario could be catastrophic for farmers and the food and beverage industry as a whole”.

Whilst the Department of Environmental and Science has established an operational policy around the use of PFCA’s, this does not factor in the historical use and consequences of this carcinogenic material. This is where clients must protect themselves first and ensure that they are mitigating all their exposures the best way possible and the purchasing of an environmental liability policy is a major step in being able to offset future costs in the event that any environmental issues arise regardless of whether it’s the clients fault or a third party driven issue.

Elms explained that clients can purchase two types of environmental insurance cover. Clients can opt to purchase first and third party or just third party environmental insurance. The policy coverage will cover circumstances such as:

  • Gradual pollution and any sudden & accidental pollution event
  • Historical site specific pollution events and operational exposures
  • Clean Up costs associated to a pollution event

First party covers are the clients own costs associated to the pollution event such as clean-up costs and any fines and penalties levied by a governmental agency or body. Third party are the associated costs and losses by third parties with respect to either bodily injury or property damage.

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