Concerns are growing over the potential for environmental damage caused by pollution from food and beverage operations, as scrutiny of issues such as effluent and wastewater discharges increases.
In our 2024 Global Food and Beverage survey, 69% of respondents named pollution among their greatest environmental risks, up from 61% in 2022. Directors are increasingly required to report on environmental impacts and show they're taking environmental issues seriously.
Fines and penalties are increasing in frequency and governments around the world are becoming more proactive in strengthening and enforcing environmental law.
In this blog, we looked at emerging environmental risks within the food and beverage industry, how they can affect human health and biodiversity, and what you can do to manage and mitigate them.
Why are food and beverage companies at risk?
- Wastewater discharges: most food and beverage firms have wastewater discharges that are managed by environmental permits. If the treatment process isn't adequate or fails, chemicals can be released into sewage systems and lead to river pollution. Pollution can also be caused by a direct spill or run-off from land into groundwater and rivers. This type of pollution is often very visual and gets a lot of media attention.
- Non-hazardous pollutants: You don't need to work with hazardous chemicals to cause environmental damage. For example, a large spill of a liquid such as milk into a waterway, can cause serious environmental and biodiversity damage and open your business to prosecution and claims. Cleaning chemicals not handled correctly can quickly become an environmental issue.
- Odour: can be significant for food processing plants, and claims are increasing in this area. It's important that businesses have an up-to-date odour management plan in place.
- Biodiversity damage: A physical change in the environment can cause biodiversity damage. This might be due to mismanagement of groundwater resources lowering groundwater levels so that soil is damaged and protected plants killed.
- Historic pollution: If your company takes over a site, it could come with a risk of historic pollution such as buried toxic waste. The costs to remediate historic pollution can be high, so it's important to have due diligence in place.
What can you do to get ahead of emerging challenges?
Put strong environmental control systems in place
- Environmental management plans: a good environmental management plan deals with all aspects of environmental risks, such as environmental impact assessment (EIA), groundwater monitoring, air and water emissions, and environmental permits and compliance.
- Waste management plans: it's vital to make sure the waste you produce goes to the right waste processing sites and any wastewater or effluent you discharge is well managed.
Consider environmental insurance
Standard general liability policies and property policies typically only cover third party damage from pollution caused by a single, sudden and accidental incident. Environmental insurance can cover first party clean-up costs, historic pollution, pollution from expected or gradual causes, as well as helping mitigate risks before they happen.
- Biodiversity restoration: EIL policies will pay the cost of restoring lost biodiversity.
- First party costs: Policies cover clean-up costs, not just on third party sites but on your premises too. These costs are not covered by other liability policies.
- Statutory clean-up costs: if the regulator carries out an emergency clean-up on a business' behalf.
- Site investigation: EIL pays for investigations to assess the nature and extent of the pollution caused by incidents such as spillages and developing a remediation plan.
- Loss mitigation: EIL policies will pay for preventative measures if there's an imminent risk of environmental damage occurring. For example, paying to pump out toxic water before any damage is caused.
- Crisis management response: You can access a team of PR consultants to manage the message to the media, local residents and stakeholders to limit reputational damage.
- Business interruption: caused by a pollution incident.
- Ground water monitoring: Where an incident has occurred, EIL policies provide cover for monitoring the success of remediation for up to 10-15 years.
- Legal defence costs: If a claim goes to court.
- Directors and Officers liability: if directors are held personally responsible.
How WTW can help
WTW's environmental team has a deep knowledge and breadth of experience in analyzing and assessing pollution risks. Our risk experts and insurance brokers can help you design, negotiate and deliver competitive insurance programs with favorable terms and insurers matched to your specific environmental risk and exposure profile.
We can help you to:
- Improve your environmental reporting and evidence that your risks are being well managed
- Get the technical expertise and tools you need to respond quickly and effectively to environmental damage
- Meet your contract obligations to funders, investors and landlords
- Protect your balance sheet
- Reduce your risk of reputational damage
- Defend your company against regulatory action and complex legal claims
Conclusion
There's increasing attention on food and beverage businesses' impact on the environment, especially in areas such as effluent, wastewater and potential contamination of groundwater. Companies should review their environmental management and waste management plans to make sure they are managing these risks effectively.
Environmental insurance can help prevent and mitigate losses and increase your resilience if a pollution event occurs, enabling you to pay for immediate crisis response and long-term clean up and remediation costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.