Risk of environmental contamination is the worst kind of risk for a business. Environmental risk is expensive but it’s expensive in more than just dollars. Let’s take a moment and explore the ways which environmental risk could adversely affect your bottom line.
The motivating factor for environmental contamination concerns affecting profits is fear of the unknown costs. Unknown and unquantified or worse unquantifiable risks are what throws sand in the gears of business. It stops sales and purchases of property and companies. Just quantifying the risks can be expensive in the environmental industry. As the old adage goes, “Time is money”. Environmental contamination takes money AND time. Some projects can take decades to wrap, depending on the type of contamination and the plans to remediate it.
If it was just money you were burning as you fix an environmental issue, it would be one thing. Unfortunately, when environmental contamination issues arise they have a habit of gaining media attention. Being responsible for putting chemicals in the water supply, air or ground and risking someone else’s health can irreparably damage your company’s image, brand and standing in the community. It makes it hard to be an employee and hard to retain talent. Nobody wants to work for a business risking the health of the community.
Spills of environmentally hazardous substances are not just harmful because they are poisonous to health and human safety when they are in the soil or air. They are often flammable and explosive. Spills happen in industrial settings in large quantities and long before we worry about aquifers, soil and streams we are concerned about employees or the general public getting burned or poisoned.
Regulatory Compliance Risk
Nobody wants to be on the radar of the regulatory agencies because once you get on their list, it’s hard to get off it. Running a business is difficult enough without the government breathing down your neck. In addition, the government can add a new layer of financial risk that goes over and above just fixing the problem.
How do I protect my business from these environmental risks?
A Phase I ESA is a service rendered by an environmental professional, used during a purchase or sale of commercial real estate. Most often these are simple commercial real estate transactions but they can also be mergers and acquisitions or M&A in the common parlance.
In a commercial property or business sale everything about the purchase needs to be checked out to make sure the price being offered is fair and profitable for the buyer. There’s a time period outlined in the contract called “due diligence”. Inside this timeframe, a buyer will have a property appraised for comparison values to the properties around it.
It could also have its mechanical structures and facilities evaluated in what’s known as a Property Condition Assessment (PCA) to evaluate deferred maintenance.
Finally, it will be researched and evaluated for environmental contamination risk in a process known as a Phase I Environmental Site Assessment (ESA). This environmental due diligence produces a document that is generally required by any lending institution (bank) before they lend on a property. It outlines the environmental risk factors in the executive summary as Recognized Environmental Concerns or “REC’s”.
The bank’s fear, and it’s a valid one, is that they will accidently fund a loan against a property which is hundreds of thousands of dollars less valuable than the value they thought. If the signer for the loan walks away, the bank inherits the property and the liability that comes with it. It’s not unheard of for a property to be so contaminated that the value of it is below zero.
If you’re concerned about Environmental contamination on your property or one you are interested in purchasing, give A3 Environmental Consultants a call. We’ll get your project done with the utmost in confidentiality, we’ll meet or exceed ASTM Standard E1527-13 on any sort of commercial or industrial property. Our reports meet the requirements of all lenders and government agencies such as the Small Business Administration (SBA), Housing and Urban Development (HUD) and the United States Department of Agriculture (USDA). A3 Environmental Consultants can be reached at (888) 405-1742 or by email at Info@A3E.com.