A multi-million pound fine for the retail giant is a sobering reminder that environmental incidents can have significant cost consequences. There are lessons here for all businesses.
Tesco Stores Limited has been fined £8 million by Preston Crown Court following the loss of containment of petrol from a tank at one of its petrol filling stations. We take a look at some of the lessons that all businesses can learn from this incident:
Environmental law affects everyone
Those who think environmental law is only a concern for high-hazard or 'dirty' industries take note. As a retailer, Tesco has a great number of other regulatory regimes competing for its attention, but the environmental and health and safety implications of this incident were significant, and it has paid a significant price for its failures.
Big companies pay big fines
We are seeing the impact of the new Sentencing Guidelines for environmental offences and for health and safety offences, both of which link the size of the fine to the turnover of the business. The objective is clear: for large businesses, fines need to be large to send a message to the management and shareholders on the importance of preventing environmental incidents such as this one. Under both Guidelines, turnover becomes a very significant factor in sentencing, meaning that large businesses that make mistakes may well receive much greater financial penalties than those who have greater culpability but operate smaller businesses. The fairness of this position might be up for discussion, but the reality is not: we have first-hand experience of representing clients following leaks from petrol filling stations over a number of years and we can confirm that fines are now of a different order of magnitude to what might have been handed down only a few years ago.
Prevention is better than cure
A central pillar of the case brought by the Environment Agency and Lancashire County Council was that Tesco was aware of an underlying issue but had not taken steps to address it. If the processes and procedures of a business like Tesco fall short, then how many other businesses are in danger of falling short too? Having robust environmental management systems, and making sure people follow them, is a very important aspect of environmental compliance.
Have a crisis management plan
The Environment Agency criticised Tesco's 'poor emergency procedures' which it claimed 'compounded' the problem. Having been involved in post-incident crisis management for several clients, we know first-hand that well-honed emergency procedures operated by well-drilled teams can make all the difference. If you think 'it won't happen to us', ask yourself whether Tesco might once have thought the same. Last year we ran a crisis management training day for the legal team of a top five UK retailer and the scenario we used for our environmental crisis was the loss of containment of petrol from a supermarket petrol filling station. Of course, the fuel business was just one element of a massive retail operation, and might have seemed at the time to be rather peripheral to the day job for many of the in-house team, but the GC had the wisdom to know that you must be prepared and that when it comes to a crisis, it is all hands on deck.