Colombian drug lord Pablo Escobar ran one of the most successful businesses in history. Let’s look at some statistics:
- Escobar was named one of the 10 richest people on Earth.
- Escobar’s Medellin Cartel was once making $60 million per day.
- Escobar once burned $2 million in cash to protect his daughter from the cold weather.
We’re certainly not suggesting that you start a drug cartel or get involved with drugs in any way. We’re merely pointing out that Escobar’s business was incredibly successful, until it became too much to handle.
Running a business that’s making $60 million per day comes with its share of problems. At one point, Escobar had so much money on hand that he had to bury it in various locations throughout Colombia. He even had a staff member who was tasked with keeping track of the burial sites.
But his cash wasn’t only buried underground. Escobar also hid money in rundown warehouses, in ceilings, and between walls. As a result, he attributed about $2 billion lost to “spoilage” — a term that describes cash lost due to the rats eating the cash. As GQ Magazine put it, “He lost more each year than most people will ever own.”
Simply put, Escobar’s business was growing too quickly and he couldn’t keep up. The drug lord accumulated too much money in too short of a time, that his system for managing it all couldn’t keep pace. It’s a problem most companies don’t have too often.
The main point is that what Escobar experienced in the early ’80s was that the growth of his business was too rapid for him to manage. Production outgrew the systems needed to effectively manage the money coming in.
So how does this relate to you and your environmental compliance program?
In honest businesses, problems from growing too rapidly can spill over into areas related to environmental compliance.
Businesses want to grow, of course. That’s the goal. We’ve never met someone who didn’t want to have a growing business. But when growth occurs too quickly, you’re bound to run into problems like Pablo Escobar did.
At the root of it, growth is defined as more cash from sales, and more sales means more demand and higher demand means increased production.
Here are three environmental compliance problems associated with increased production of a product:
- Material throughputs can quickly exceed stated permit limits.
- Equipment may be needed faster than a permit can be obtained.
- Your facility may be subjected to additional regulations to which it wasn’t previously subjected.
Therefore, while growth is good for any business, the rate of growth should be controlled to prevent environmental (and other general business) problems from arising.
4 Ways to Prevent Environmental Compliance Problems When Increasing Production
You can plan for growth (or increases in production) in a way that won’t cause you any problems by following four steps:
1. Determine what permits are required prior to purchasing any equipment that will be necessary when production increases.
More often than not, increasing production will require more equipment or larger pieces of equipment in order to meet the demand.
In certain cases, we’ve seen folks purchase and install the additional equipment needed to operate at scale without getting a permit beforehand. Depending on the regulatory agency, permits are typically required to add equipment to an existing process, and there are few exemptions.
As a result, when you plan for an increase in production, be sure to get a list of all of the equipment changes, including the additional equipment needed to operate the process at scale. With that information, your job should be to determine which pieces of equipment require permits and which don’t.
In addition, people underestimate the time it takes to get a permit. Although it varies, the timeframe should always be taken into account when planning for a bigger operation.
2. Determine how the process will change when production increases.
When you’re issued an air permit, for example, you’ll usually be required to operate the equipment consistent with the information provided in the permit application that was used to obtain the permit.
As a result, you can run into problems when production increases because the process could change in a manner that’s inconsistent with the information provided in your permit application.
If you have a complex manufacturing process, be sure to review any changes to the process that may be mandated in order to operate at scale. That way you can obtain proper permits prior to using the equipment.
3. Determine what limitations your permit imposes when it comes to increasing production.
Production is almost always linked to emissions. Conditions are typically placed on your permit to limit production as a means to limit the emissions from the process. Therefore, prior to increasing production, it’s best to know how much room is left on your current permit.
Typically, a throughput will be listed on the face of a permit. However, depending on the age of your permit, there may not be a throughput listed. In this case, you’ll most likely need to get the permit-processing files to determine what the daily emissions limit is or its basis in order to know what material limitations your permit is imposing.
4. Determine the emissions that result when increasing production.
Many regulatory programs — such as the South Coast Air Quality Management District’s (SCAQMD) Regional Clean Air Incentives Market (RECLAIM) program, Title V, California’s greenhouse gas reporting, EPA’s Greenhouse Gas report and others — are determined by the amount of emissions your facility emits annually.
If your emissions go up because of an increase in production, you could be subjected to an entire suite of regulations that you weren’t subjected to in the past. Knowing what your emissions will be at scale before you scale can help you understand what new regulations you’ll be subjected to. This can allow you to plan accordingly and, at the very least, not pay additional fees when you determine your annual emissions each year.
When done properly, scaling a business while complying with the environmental regulations can make for larger profits and less headache. If done incorrectly, environmental compliance problems are practically inevitable.
h/t: Thanks to our friends at Talley and Company for inspiring this post. Check them out for tips on effectively growing your business.