In previous blogs I’ve mentioned the staff of one large company who counted all the costs of a spill – which didn’t incur any enforcement action, fines or legal fees – and found to their consternation that it added up to over $150,000.
The company was at that time internally reporting around 50 environmental incidents and near misses a year.
When we looked at it, the numbers actually showed that while the level of incident reporting was steadily improving, there wasn’t enough good data in the reporting database to indicate how much time and effort it took to clean up and follow up all these events.
So, taking the very conservative approach we recommend for ROI, I took a guess at what the real annual cost to the company might be of all its incidents.
Here’s what I did:
- assume that 50 reported events per year is an under-estimate, because we know they’re not all being reported. Once we do good training, there will initially be more reports, though not necessarily more incidents. Then as the preventative training kicks in, if it’s any good, there will eventually be fewer events – hence the importance of accurate measurement before and after training!
- assume a bell curve distribution of minor-moderate-serious events, with most of them being minor-moderate and hence quick and easy – and cheaper – to respond to
- take a very conservative number of minor-moderate events: for ease of arithmetic (not my strongest point) I assumed 20 per year
- for similar reasons, assume each event has a real cost in time and money of say $20,000 for response, restocking, debriefing, making any changes to systems and procedures, and carrying out any remedial training
- do the sums: 20 events per year x $20,000 = $400,000.
In my last blog I mentioned in point 2 that ROI is one the few areas where you often have to talk down the potential benefits of your work, because the numbers literally look “unbelievably” good.
So after my succession of conservative estimates, I could easily cut that last figure of $400,000 in time and money incurred from incidents and near misses during a typical year to make my findings more credible to my client.
And if the real cost is half that, or half that again, why would even a big firm leave $100,000 to $200,000 on the table?
We can play with the numbers, but it’s clear that most of the time, most of us in our work as environmental managers and trainers are only measuring the tip of a very expensive iceberg!
Carrying out a thorough ROI analysis of your environment and sustainability training can bring out some compelling numbers if we go about it in the right way; numbers that can justify many times over the cost of developing and delivering our training.
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