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P2/CP for enviro consultants



Forwarded on behalf of Burton Hamner.  Please respond directly to Mr. Hamner or p2tech@great-lakes.net.
  Do not reply to this message.

One more comment on estimating cost of pollution control:



Most managers complain about the cost of pollution control.  But in many
cases they don't think the cost is really high enough to devote serious
attention to it, so they don't have the motivation for Pollution
Prevention / Cleaner Production (P2/CP).  So it is helpful to have a
quick way to get their attention with money.  Let's use an example.



Firm X estimates that their wastewater treatment or other pollution
control system costs $50,000 a year to run.



1.  Every study done on the true cost of pollution control (this is cash
cost, not fuzzy stuff) shows that for every dollar they do recognize,
another dollar AT LEAST is hidden in the overhead.  References are
available (you will have to be nice to me to get them).

SO!  It is not $50K, it is more like $100k, counting all the hidden
costs.  In my experience, most managers will unhappily agree with this
that the cost is double what they know on paper.



2.  That $100k is money being spent on waste, not on production or
investment.  So there is lost profit because the money is not making
more money.  How to estimate this cost?  Many firms have some standard
Internal Rate of Return that they demand if they are going to invest in
new production.  Most of the time they say it is about twice the local
cost of capital.  Say you can get money for 15% interest, so you want to
make at least 30% on any investment.  BUT!  Here is the awful truth. 
They don't want to make 30%, they want AT LEAST 50%, and most of the
time they want 100%.  Or more.  Really, just ask an owner some time.  So
that $100k spent on waste management is costing another $100k in lost
profits if the money was spent usefully elsewhere.  So this is a $200k
problem.



3.  The cost will go up at least 10% every year because of inflation and
new regulations.  And many regulations now sure to affect them will be
coming into effect in the next five years.  So let's forecast for five
years.  At 10% inflation, after five years, that $200k annual cost will
be $292,820 per year.  The total five year cost of this pollution
control system will be $1,221,020 under our assumptions (which are
pretty conservative).



So!  Unless they do something about their pollution generation, they
will spend $1.2 million over the next five years to treat their wastes. 
Now, we began with them thinking they had a $50,000 problem.  Now we
have them thinking about a $1.2 million problem.  Do you think we have
their attention now about reducing pollution?  Well it's a start.



In case you think I am being flip, two days ago I visited the oldest
hospital in Peru (200 years old).  It serves the poorest people, who
have no money.  In the laundry room where they wash all the linens and
other cloths, the old machines are leaking boiling water onto the floor
in large amounts.  Sick and dying people are lined up outside because
they don't have enough doctors.  Sometimes they die while in line.  I
held a bucket under one machine and timed how long it took to fill it,
and then did some rough estimates against the other machines.  Then I
found the hospital accountant.  To make a short story shorter, they may
be spending about the cost of 4 full time doctors to heat the water they
are leaking on the floor.  How would you feel about their water
conservation practices if you were at the back of that line of patients,
waiting for a doctor?



As I said earlier, if you can't do a total cost of waste estimate
quickly, you should not be a P2/CP consultant.  And no, I will not give
any more details on the hospital, we have a lot of work to do yet.  I go
to the back of that line and look at the children waiting there, and I
am more motivated to get the math right.



****************************************
Burton Hamner
Hamner and Associates LLC
www.CleanerProduction.com
5534 30th Ave NE
Seattle, WA 98105
206-526-5308
fax 208-279-4991
email bhamner@cleanerproduction.com