One of the most important and growing topics in the world right now is the environment. As the years’ pass, there seem to be more and more environmental issues that affect the well-being of the plant, animals and us, humans. It’s an issue that has been a hot topic for generations and is something that most or almost everyone cares to improve. A clean and sustainable environment is the best future we all dream to live in. Sadly, as you read this, we are far from the ideal environment due to pollutions, growing plastic waste, and much more. Climate change is the enormous environmental problem humanity will face over the next decade, especially in cities like Hong Kong. Climate change is an outcome of the pollution and products humanity creates.
Even if you don’t feel it, everyone is affected by pollution somehow and sadly some in the worst way. Millions of people worldwide die due to polluted air, and even more, animals die from marine and air pollution. Unfortunately, a large sum of the pollution is caused by businesses and large corporations, due to the factories, toxic chemicals, plastic, oil and more. Over the decade, many companies have been blamed for many environmental problems worldwide, resulting in costly lawsuits. It is a devastating topic, but there is always a light end of a tunnel as it is not too late to save this beautiful plant and everyone. The way a business deals with environmental issues can affect its profitability and reputation.
Environmental insurance is one the best ways to protect the business and the people affected by any pollution caused. A company will never mean to cause the environment harm but accidentally may create an environmental issue that would cost them millions or even more. This article will discuss how environmental insurance can help the business fight against sudden environmental lawsuits and also help fix the mistakes caused for a better future.
What is Environmental Insurance?
Environmental insurance, also known as pollution liability insurance, protects the business from claims and lawsuits due to the pollution caused while operating the business. The insurance is crucial to any business industry involved with the use of chemicals, manufacturing, transportation, warehousing and any company that produces products.
Environmental insurance is a policy that will also help a business clean up the pollution or waste created. It is an insurance that will help the firm and the environment around them. As accidents can happen at any time, there should always be a protection to deal with these accidents and help the parties affected.
The losses or damages covered by environmental insurance usually include claims for bodily injury, property damage, clean-up costs, defence costs and business interruption due to the environmental issue.
Why Does A Business Need Environmental Insurance?
Air pollution is the fastest-growing pollution on our planet, and it is so bad that the World Health Organization (WHO) estimates that 90% of humanity breathes polluted air. From first-world cities to small villages, air pollution harms humans and animals. The leading cause of air pollution is businesses that run factories, manufacture vehicles and burn toxic fossil fuels. These businesses try their best to create the products they intend to without realising the effect on the environment. As a result, air pollution slowly but surely affects the way we breathe and damages the ozone layer protecting us from the sun’s heat.
Many environmental organisations monitor the pollution caused by business and the effect on the environment. When a business is liable for a certain amount of air pollution, the environmental organisations and the government have the full right to sue the company and stop their business activities. For instance, there is an ongoing lawsuit against automakers BMW in Germany for refusing to tighten carbon emissions goals. The non-government organisation (NGO) believes that the famous automobile company does not respect and follow German climate change rules and targets. A case like this can ruin a company’s reputation and possible income, as the general public will not purchase their products due to the air pollution it may cause or is already causing.
Environmental insurance for such cases is a great asset as the insurer will pay for any claim against the business and help provide funds to allow the company to defend itself in court. Additionally, a business that has purchased environmental insurance will also be connected to environment experts by the insurer to get advice on how to plan their future environmental goals to meet the country’s carbon emission target. Finally, a business must respect the public around them and the environment to gain a better brand image for a better tomorrow.
A fact that may surprise you: is that water makes up 75% of the world. The sea, rivers, marine life are essential factors to various business industries and the public. It is that same water that is treated and turned into drinking water worldwide. The same water where we get those delicious fish. Regrettably, it has become normal to walk by the sea or even the beach and see water and shore polluted by garbage or chemicals over time. Various factors cause water/marine pollution, and the main factors are business dumping their wastes into the ocean, accidental cargo oil spills and littering of plastic. Even if a public member throws plastic into the ocean, the public accuses the business for producing plastic.
Many businesses have been sued or fined by environmental firms due to their part in water pollution. These cases can cost a company a large sum of financial loss and reputation damage if not dealt with quickly. For example, in august 2021, China reported oil spills off the coast after tanker bulk carriers collided. These two companies will be liable for the oil spill, marine fine and clean-up costs. The costs will add up to a significant amount that the business will have to pay to keep operating and avoid reputation loss.
These instances are why environmental insurance is crucial. The insurance will cover all the claims related to the accident and the fines. In addition, the insurance provides clean-up costs for the business to fix the mistakes they may have caused, which will benefit the environment and stop harmful contaminations that the company could have caused.
When a business has created some form of pollution in the environment: it is always the third party affected first. Third-party include the customers/clients, public living near the production site, and the area’s property. Third-party damage can be bodily injuries or property damage due to pollution caused by business activity. A business will always be liable if a third party is affected by the pollution their company has created. In these cases, the business will pay for medical care, repair, compensation and more.
For example, if a small village has noticed that more and more children are falling sick due to the air pollution caused by a factory nearby. The town’s citizen has full rights to sue the company and demand compensation for their illness. The company will have to pay the compensation costs and may have to temporally shut down to improve their process, which will fit the environmental needs. The example will cost the business a significant financial loss due to the compensation fees and production shut down.
When a third party is affected, environmental insurance will pay for the bodily injuries or property damage. Additionally, the insurance company will also provide business interruption costs to operate again in the future without losing too much income. Therefore, environmental insurance can save a business considerable money and brand value when the problems are solved quickly and effectively.
Long-Term Protection (Gradual Pollution)
There are times that pollution may not be noticed instantly and may be harmful over gradual time. This pollution is known as gradual pollution and is as bad as any other sudden pollution. For example, a chemical spill in water may not affect the safety of the water in the first few years, but after a few years, it could turn toxic and harm the environment interacting with that water. Even if the pollution and harmful effects have taken years, the business is still liable to gradual pollution and harm. The gradual pollution can still lead to lawsuits, compensations and reputation damage.
A famous case is Coke, Pepsi, Nestlé, and other companies that environmental groups are suing for creating plastic pollution and misleading consumers about the recyclability of plastic. Plastic pollution is a big part of gradual pollution, as the bottles not decaying over the years make it long term pollution. The public holds these brands liable for creating plastic pollution that affects the sea, land and animals. They will have to pay the compensation costs and clean-up costs. The costs can lead to a significant financial loss and, over time, profit loss. More consumers are becoming plastic aware and would not buy from brands that use plastic in any part of their products.
Environmental insurance cover can protect businesses with gradual pollution by providing costs for claims and, most importantly, clean-up costs. The insurance makes a big difference for a business as it does not suffer from a significant financial loss and allows the company to clean/ fix the spread of pollution. In addition, the clean-up will have a positive effect on a business’s brand image.
When Does A Business Need Environmental Insurance?
Businesses should buy environmental insurance at the start of production, as accidents can happen at anytime. Therefore, insurance should protect businesses before it is too late. As mentioned, it can save a company a large sum of financial loss and reputation damage. It is also crucial to keep updated on environmental insurance and renew to avoid unwanted risks and prepare for surprising pollution accidents. Environmental insurance is vital for industries, such as chemical, manufacturing, transportation, warehousing and waste disposal.
Countries around the world are making environmental insurance compulsory. As the government believes businesses should be aware of their environmental responsibilities. Such as Poland, Germany, Philippines and the list is growing.
A business needs to take responsibility for its negative environmental actions. However, it is still not too late for companies to do their part for the environment and protect it from unwanted pollution.