Enhesa Flash - Global EHS Compliance Assurance

EHS on the Rise in Africa:
A closer look at the increasing regulation of EHS across Africa and what this means for your business

Enhesa’s March 2011 webinar explored recent developments and future trends of environment, health & safety (EHS) requirements in Africa. As the economic potential of Africa becomes more attractive, multinational companies have correspondingly increased investments throughout the region. Enhesa Experts found that this growing presence of large companies coincides with a strengthening of EHS regulations in many African countries. Over 250 EHS professionals from a broad spectrum of industries and home countries attended the webinar, and completed an online questionnaire that gave Enhesa a closer look at the experiences and concerns related to complying with EHS requirements in Africa.

Challenges to complying with African EHS Regulations

As the EHS regulatory requirements throughout the region have become more rigorous and are enforced more regularly, webinar participants expressed clear challenges to complying with these EHS standards.
Compliance challenges faced by webinar participants include:

• absence of infrastructure and political stability;
• differences in safety culture and risk toleration;
• dearth of employee education and training;
• lack of consistent and established regulations.

Often in an effort to ensure a responsible approach to EHS issues in the absence of clear or comprehensive EHS regulations, multinationals impose either the laws of their parent company or some type of internal corporate requirements often without taking local conditions or culture into account. However, as mandatory requirements increase throughout the region, it is imperative that companies understand the unique nature of EHS regulations in each African country. Companies need to develop programs that consider cultural nuances to ensure effective and ongoing compliance.

Enhesa’s analyses of regulations and enforcement

During the webinar, Enhesa unveiled its EHS Regulatory and Enforcement Matrix. In order to comprehensively understand the developments and trends of EHS requirements in Africa, EHS consultants analyzed the number of EHS issues regulated, whether there are effective EHS enforcement measures in place, powers of enforcement authorities, and powers of internal EHS positions. The result of the analysis is the EHS regulatory and enforcement matrix on the right:

The EHS Regulatory and Enforcement Matrix displays countries lacking EHS regulation and enforcement in the bottom left quadrant and displays countries with strong EHS regulation and enforcement in the top right quadrant. While South Africa has the strongest regulation and enforcement capabilities amongst African countries; Algeria and Nigeria are not far behind.
Enhesa also highlighted the major trends in the environmental, health and safety and products areas.

Environmental:

Experiencing the fastest rate growth, the strengthening environmental framework often results in direct requirements for a facility and fines, shut-downs, and clean-up costs for a non-compliant company.
For example, in Nigeria, a proposed regulation would require a permit for all discharges into surface water and compliance with all permit conditions. The proposed regulations would also require a facility to notify the national environmental enforcement agency before a facility uses an injection well.

One can also expect increased regulation as African countries address the illegal import of waste electrical and electronic products. Specifically, in Nigeria, the national environmental enforcement agency proposed a regulation that would require importers, exporters, manufacturers, and distributors to participate in a used EEE product take back scheme. Additionally producers would have to comply with new environmental impact assessment, discharge and emission, and underground storage tank requirements.

Occupational Health and Safety:

Due to a rising awareness of poor labor conditions health and safety requirements are increasing. Non-compliance can result in court cases, punitive damages, and compensation payouts. Countries in Africa will also continue to take the first steps to implement requirements of the Globally Harmonized System (GHS).
In 2004, Mauritius fully implemented GHS in 2004. In 2011, Kenya took the first steps to implement a national chemical risk management program and requires a facility using, handling, or producing a chemical to have a correct MSDS and carry out a chemical risk analysis.

Zambia introduced a 2010 Occupational Health and Safety Bill that would establish health and safety committees and introduce general health and safety requirements such as the regular medical surveillance of employees.

Products:

Product-related requirements are being established, albeit at a slower pace. Non-compliance can result in fines, failure to pass customs, and product recalls.
One example is in South Africa, which has recently strengthened prospecting protection for those companies involved in the pharmaceutical sector.
Foreign countries may also establish requirements for a company to analyze and report its activities in Africa. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that companies listed on the stock exchange disclose whether conflict minerals have originated in the Democratic Republic of Congo (DRC) or any adjoining country and to exercise due diligence to analyze the chain of custody of the minerals. This requirement would only apply if a conflict mineral is necessary to the production and functionality of the product.

Summary

Economic growth throughout Africa will continue to provide opportunities for companies to expand and move operations into Africa. Companies should expect African countries to strengthen EHS regulatory frameworks, which will differ from the typical U.S. and European approach. Companies that understand local conditions will be much more successful at complying in an efficient and cost effective manner.

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Overcoming the International Audit Challenge
Enhesa Experts reflect on their auditing Experiences

As the trend of corporate expansion into new international territories shows no sign of slowing, Corporate Audit Programs must find efficient ways of embracing global complexity. Companies must address the challenge of building one standardized and consistent compliance system in face of different languages, cultures, perceptions, regulations and enforcement practices.

This month, Enhesa would like to get a little personal with its readers. In this article, we interviewed a few of our seasoned experts on international audits. Fabio Cherubini, Director at Enhesa, Paul Soler-Sala, Enhesa Senior Consultant, and Ellen Zhang, China EHS Consultant, would like to share their experiences and offer advice on what makes an International Audit Program successful.

What are the biggest challenges you have faced while conducting international audits?

Paul: One of the first issues I find most often is ensuring that the expectations of the audit program are clearly communicated. Audit program language is generally very English-intensive, so it is important to be clear and open to additional explanation, from pre-audit to post.

It is also vital to make sure the auditee understands what the value of the audit is – not just getting through it. Some audit programs base their bonuses off of audit performance. It’s really imperative that the purpose is fully conveyed and embraced to lessen any unnecessary anxiety or gaps in information – especially in countries that are not fully used to the process.

Fabio: In my experience, auditing at an international level is not that much different than auditing in the US except for the fact that you are confronted with a language you do not understand, and that you’re trying to make sense of legal requirements that have been created by a mind clearly not following your same logic. You often find yourself discussing it with people that rarely share your same appreciation of the relative importance of the issues you are raising.

Ellen: Another challenge is varying enforcement practice. In China, I’ve seen some companies claim "no enforcement" as a legitimate excuse for non-compliance.

Paul: I agree, Ellen. I’ve also experienced issues with enforcement practice. Sometimes you’ll have a serious finding at a facility, but the local government and plant manager told them they didn’t need to do it. It then becomes difficult to convince them that the issue is significant.

Ellen: Knowledge beyond EHS issues is also critical. For example – a regulation obligates a facility to notify Bureau "A" about one issue, but in practice or due to changes in government authority or function, that issue is now being taken care of by Bureau "B." Some related regulations are not updated immediately, so it is up to the Auditor to consider that if a company fails to notify Bureau "A", it could be possible that the notification was just sent to a different government authority.

What might be an example of a cultural misunderstanding during an audit that could lead to confusion?

Paul: Familiarizing yourself beforehand with cultural behaviours is crucial. For example, in some cultures, it is uncommon for someone to ask questions or to admit that they don’t understand something, because in their culture, saying "no" or admitting confusion is perceived as offensive. This is why clarity and openness should be taken very seriously.

Ellen: Clarity is vital to avoid any cultural misunderstanding and it has to be constantly reiterated. During one audit I experienced, the auditor was talking about issues of hazardous chemicals, but the locals thought they were talking about dangerous goods. Constant reminder was needed to have both sides on the same page.

Paul: You might also run into unanticipated and sometimes humorous "time challenges" to your audit day. In one audit, I lost half of the day due to a lunch that took up the entire afternoon. In that culture, however, extended lunches were a norm. In another instance, you might find that the locals are so proud to show you their facility that the initial tour of it also takes up half the day. These situations might present you with a time crunch you weren’t prepared for.
We’ve touched a lot on field experience. What are some issues for EHS Managers to take into account while developing a successful International Audit Program?

Paul: An international management system needs to have accurate and complete regulatory information available. I’ve always believed that you can have a great team, good resources and lots of funding, but if you don’t have someone on site that has the proper tools to access the regulations, then a lot of energy is wasted on figuring out what those regulations are.

Fabio: Without the proper tools, figuring out those regulations is not easy. There is often the absence of a codified regulatory framework that can be clearly framed as a "scope" of the audit. Contrary to, for example, the US CFR Title 40, most international environmental requirements are scattered in a multitude of individual and, at best, interconnected pieces of legislation. The scope of an audit or portions thereof cannot therefore be defined by simple reference to one or several specific articles, but must be linked to more general "areas" (air, water, fire safety, etc) whose actual regulatory content must be pulled together and digested into auditable requirements.

Paul: It’s also really important to realize that a lot of legislation out there was not written to be translated into a protocol. There will be ambiguities, lack of clarity, gaps, vagueness and poorly written legislation in the world. Understanding the applicability and jurisdiction that your facility falls into is essential, and, as Fabio said, finding the right tools and practices to interpret these regulations into something comprehensive will help make any international audit program successful.

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Define and Disclose:
The EU moves forward with nanomaterials regulation

Over the last few months, the debate around nanomaterials has matured. The policy initiatives of the European Union and France regarding nanomaterials, presented in the September 2010 issue of the Flash, have turned into concrete proposals. Determining the real nano-effects, as a result of improved scientific data and research, appears to be the key for effective regulation of nanomaterials.

The European Commission has decided to first define nanomaterials to ensure harmonization for future regulation. In October 2010, a definition of the term nanomaterial was proposed in a draft Recommendation. A Recommendation would not give this definition the full force of law but it would contribute to the development of new EU policies and regulatory developments and the implementation of existing regulations. "Nanomaterial" would be defined as any material which meets at least one of the following criteria:

• consists of particles, with one or more external dimensions in the size range 1 nanometre (nm) to 100 nm for more than 1 per cent of their number size distribution;
• has internal or surface structures in one or more dimensions in the size range 1 nm - 100 nm; or
• has a specific surface area by volume greater than 60 m²/cm³, excluding materials consisting of particles with a size lower than 1 nm.

However, uncertainty about the definition may remain. The draft definition of nanomaterials is the outcome of scientific research, studies, opinions and consultations at the European level, and specifically the Opinion of the Scientific Committee on Emerging and Newly Identified Risks (SCENIHR). According to the results of the stakeholder consultation carried out by the SCENHIR and published in March 2011, the definition of nanomaterials suffers from a lack of agreement: while certain stakeholders favour a definition based on the weight of the particle, others favour one based on the number of particles. A final definition has not yet been issued by the European Commission and could undergo further amendments to gain wider agreement.

At the same time, attempts to improve our understanding and knowledge of nanotechnology continue. From a consumer perspective, the Belgian Presidency of the EU proposed in late 2010 to ensure the traceability of nanomaterials through a register of nanotechnology and to strengthen the information provided to consumers on the presence of nanomaterials in everyday products. The register of nanomaterials could be the first step to assess the risks nanoparticles present. The European Commission Joint Research Centre also launched the first European Repository of Reference Nanomaterials. The Repository contains 25 types of different nanomaterials as a representative range, in order to enhance the safety assessment and standardization of nanomaterials. The repository aims to further study the impact of nanomaterials, by addressing those mostly used in consumer products such as titanium dioxide, silver nanoparticles or carbon nanotubes. Aside from these proposals, the European Commission is examining how to better address nanomaterials within the existing REACH requirements without having to introduce specific nano-requirements therein.

Meanwhile, in January 2011 France moved on with its innovative approach requiring compulsory declaration of nanomaterials by issuing a detailed proposal. Prior to the proposal, all that was known was that manufacturers, importers, or persons that place on the market nanoparticulate substances, including mixtures, would be required to periodically declare the identity, quantities and uses of these substances, as well as the identity of the professional users they supplied them to. This requirement would apply to various products containing nanoparticulates such as medicinal products, cosmetics, or plant protection products. Nanomaterials falling under the scope of the declaration, thresholds and reporting periods had not been previously defined.

In the proposal, the French Government avoided the complex job of defining nanomaterials by using the definition prepared at EU level and clarified that the declaration would concern aggregates, agglomerates, compounds, nanotubes, nanothreads, nanolayers, quantum dots and dendrimers. The declaration would be required as long as at least 10 grams of nanomaterials would be manufactured, imported or placed on the market in France. The declaration would have to be done electronically at the latest before the first of May for the nanomaterials placed on the market the previous year. If the declaration was deemed incomplete or insufficient, the competent authority would be able to request the declarant to provide further information. An exception for the protection of national defence would be applicable on specific request.

The proposal indicates a research purpose for the declaration, as the collected data would be transferred to French public agencies in charge of environmental and safety research or surveillance for the development of further studies on the risks of nanomaterials for the environment or human health and safety. Although this text has not yet been adopted and other implementing measures are not yet drafted, France demonstrates its willingness to handle and regulate the presence of nanomaterials on its territory in a precautionary manner.

The regulatory activity on nanomaterials in France and the European Union are just two examples. Several other countries are issuing policies to avoid negative impacts of the growing presence of nanomaterials in everyday life. Germany is for instance considering developing a nanomaterials’ register, and Switzerland authorities have issued guidelines on how to take into account the unique properties of nanoparticles in material safety data sheets. If you are concerned by the upcoming regulations and policy developments on nanotechnology, it is one of the many issues that Enhesa keeps track of global level with its monitoring service.

The way forward in the debate over nanomaterials will necessarily require a definition of the real risks they present for the environment and for human health, which might trigger a global search for scientific and technical data.

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Cracking down on Fracking:
The US Regulatory Trend and what that means for Oil Companies

In June 2011 Enhesa is focusing on an emerging Oil & Gas issue, which has recently become a major concern for Oil Companies in the United States. Hydraulic fracturing or "fracking" has long been used for natural gas and oil production in the United States. However, due to growing concern on its environmental impacts, the US Federal Government and various states are assessing the need for Fracking regulation. According to Enhesa’s research, the regulatory trend will most likely continue to grow, and major oil states are already taking the lead in the rulemaking process.

Fracking is the primary method for stimulating wells to recover natural gas and oil from geologic formations. The U.S. Department of Energy projects by 2020, approximately 20% of the total U.S. gas supply will be a product of shale gas, collected from states such as Texas, Wyoming, and Pennsylvania. Hydraulic fracturing fluids are commonly composed of water and chemical additives, and are pumped into a geologic formation at high pressure to maximize the extraction of underground natural gas and oil resources. What to do with the resulting hydraulic fracturing fluid is a significant issue for industry at both the state and federal levels, as concerns on how to protect limited water resources throughout the U.S. continue to gain the attention of citizens, lawmakers, and industry.

At the federal level, the U.S. Environmental Protection Agency is currently conducting draft studies to determine the potential impacts of hydraulic fracturing on drinking water and groundwater. EPA regulates surface water discharges from hydraulic fracturing flowback through the National Pollutant Discharge Elimination System program, which requires flowback to be treated prior to the discharge into surface water. EPA does not currently regulate the chemical components used in hydraulic fracturing for wells.

In response to growing citizen concern, some states have implemented regulations to address the chemical constituents used by industry. Throughout the U.S., states have started requiring the disclosure of chemical constituents found in hydraulic fracturing fluid either prior to hydraulic fracturing or as resulting wastewater. Texas and Pennsylvania are two such states, currently addressing hydraulic fracturing fluids through the rulemaking process. The Railroad Commission of Texas, the energy regulatory body for the U.S.’s largest oil and natural gas producing state, announced it will begin the process of drafting rules to mandate disclosure of certain chemicals used in the hydraulic fracturing. Pennsylvania already has regulations in place that require generators of wastewater produced from the drilling, completion, and production of a shale gas well to disclose the chemical analysis of the wastewater produced.

In the absence of federal regulation concerning the chemical composition of hydraulic fracturing fluid, it is likely other oil and gas producing states will follow Texas and Pennsylvania and require chemical disclosure for hydraulic fracturing fluid.

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