Costly burdens

LEGISLATION:Complying with Ireland's stringent environmental rules is proving expensive for many small firms.

Since 1972 when the European Commission launched its first environmental policy, the European Union has sought to cajole and compel member states to curb pollution and waste.

Over the subsequent 30-odd years, the body of European environmental legislation has grown steadily and the associated compliance burden has become an accepted, if growing, part of running a business.

Donal Buckley, director of Ibec's environment policy committee says that companies operating in the Republic are starting to grumble about the bureaucracy and duplication associated with compliance.

"There is a need for regulation and most companies accept and indeed welcome that, but very often it is the regulatory requirements that people have an issue with. Smarter regulation seems to be what people want," he says.

There are three broad tiers of environmental regulation in the Republic. The first are the Integrated Pollution Prevention Control (IPPC) licences which aim to prevent or reduce emissions to air, water and land, reduce waste and to use energy and resources efficiently.

Administered by the EPA and governed by the Environmental Protection Agency Act, approximately 600 IPPC licences have been issued to larger industrial units and industries handling hazardous materials.

Waste water discharge licences administered by local authorities are the second tier of regulation and some 2,000 licences have been issued to a range of companies, including food outlets and small factories.

The final tier are regulations those that apply to everyone, including householders, but for which a licence is not required, such as the EU packaging directive and the Waste Electrical and Electronic Equipment (WEEE) directive.

According to Buckley, while bigger, licenced facilities tend to be tightly regulated by the EPA, there is evidence of non-compliance among some of the smaller and medium-sized firms.

"Some of the lack of compliance is capacity and some of it is ignorance, as the requirements are generally more complicated than the average company director can be expected to know," says Buckley.

He admits that there is an element of frustration in industry with how environmental directives have been transposed.

"With the IPPC licences, we have much more stringent limits than across Europe. There are times when we feel that proportionality may not have been adhered to and in many instances we have gone beyond EU limits," he says.

Bob Sutcliffe is the director of Environmental Efficiency, which provides environmental regulatory expertise to industry, particularly those companies that have, or should have, an IPPC licence.

"We have some fairly big clients, employing 50 to 100 people in the engineering and structural steel sectors who should have [ IPCC] licences, but they don't. We are working to help them lower their usage of certain materials to come in below the thresholds, but that can take years."

According to Sutcliffe, the cost of meeting the regulatory requirements can be up to €25,000 a year. "There is so much environmental legislation now that smaller companies increasingly need expert help, but many will muddle along until it is drawn to their attention. Part of the reason for this is that the cost of compliance is much the same for a large company and a small one."

Sutcliffe also believes the current fines for non-compliance are too low to deter firms from not getting a licence. "The fines are usually a fraction of the cost of compliance. So, some won't comply until they are caught."

Michael O'Reilly, a planning and environmental expert with law firm McCann Fitzgerald, said one problematic regulatory requirement is the dichotomy between planning consent and environmental consent. "If a company wants to build a new plant, they have to get both independently."

Mark Fielding, chief executive of the small and medium businesses organisation Isme, agrees that the regulatory burden of environmental law has increased significantly and believes compliance thresholds often ignore the size of the company.

"The costs of compliance are significantly higher as a proportion of turnover for small firms than larger ones, even though the environmental impact of small firms can be much lower," Fielding says.

"The cost of producing the annual environmental report is similar for firms large and small, at around €25,000. This would exceed the cost of the annual financial report. Reporting thresholds, similar to the concept of audit exemption thresholds for company accounts would certainly reduce the burden of compliance," he says.

To counter this, he has called for all environmental regulations to be subject to a regulatory impact analysis. "As this analysis process will take some time, an interim step would be to establish an Environmental Ombudsman to which SMEs could refer inappropriate thresholds and requirements for review," he says.