How much do you pay for environmental compliance at your facility? Although the cost of maintaining regulatory compliance can vary greatly from site to site, chances are that your facility’s costs are high like most others. And, there are many facilities that do not even have a clue on how much maintaining their regulatory compliance costs on an annual basis.

In a 2005 study conducted by the Small Business Administration’s Office of Advocacy on the cost of federal compliance for small and large businesses, the study found that the average per employee cost of federal environmental regulatory compliance was $1,249. The study also found a discrepancy between the per employee cost between small and large businesses with large businesses (greater than 500 employees) averaging a cost of  $710 per full-time employee while smaller facilities with 20 employees or less paid in excess of $3,000. Using these numbers, this means that an average facility (50 to 200 employees) would pay in between $65,000 to $250,000 annually for federal environmental regulatory compliance with larger facilities paying in excess of $350,000 each year.

At first glance, these numbers might seem high, but let’s examine some of the real costs. The major cost associated with compliance is labor. Regardless of size, all facilities have someone responsible for regulatory compliance. In some instances, a full-time employee has the sole responsibility for maintaining regulatory compliance whereas other facilities delegate the responsibility to Human Resource personnel, Plant Engineers, Maintenance Department Managers, or perhaps the Plant Manager as a small aspect of their daily responsibilities. Sometimes these individuals have been educated in the environmental field while other times they have attended the school of hard knocks in regards to federal and state environmental regulations. In almost all cases these individuals have some administrative support available to help them prepare reports, maintain files, collect production data, etc. Taking into account the wide range of salaries, full or part time responsibility, the amount of management time necessary to direct the program, and the amount of regulatory tracking required by a facility, we have determined that labor costs alone for maintaining compliance can range from $65,000 to $150,000 at a facility. The low end of this range was determined using an engineer’s salary of $65,000 per year with him/her spending half of their time on environmental compliance related issues, a full-time administrative assistant or a part-time maintenance employee ($25,000), and $10,000 per year in management time (Engineering Manager or above). The upper end of this range was estimated assuming a larger facility with a HR Manager who has overall responsibility for compliance supplemented by a full-time entry-level environmental specialist, administrative support, and floor-supervisors responsible for collecting and reviewing data, all of which report to a Plant Manager or Corporate personnel.

In addition to labor costs, there are taxes, fringe benefits, and overhead, which may include office space, health insurance, payroll taxes, corporate charges, etc. These costs are estimated to be 40 to 50 percent of an office employee’s salary or approximately $26,000 to $75,000.

The next largest expense after labor is the method used to keep up-to-date with all of the changes to various federal and state environmental regulations. Our experience shows, that no matter what labor mix is used to maintain compliance, a significant amount of time and energy is spent reviewing and understanding regulations. Alternatively, firms that do not spend the time and effort to keep up-to-date are often found to be out of compliance in numerous areas. Our surveys have shown that facilities typically spend between $15,000 and $60,000 annually on technical literature, personnel training, trade association participation, regulatory seminars, outside consulting services, and employee expense accounts.

However, no matter how much training and experience a facility has in environmental compliance, the way facilities ultimately confirm their compliance is through a regulatory agency inspection or corporate audit. Both of these methods have significant costs associated with them. In the case of the regulatory agency inspection, facilities will most likely face violations and fines associated with their laundry list of activities necessary to achieve compliance. On the other hand, a corporate audit is usually conducted by a third party and the facility is tasked with implementing an extensive list of recommendations afterwards, which can be costly. It is estimated that the cost for these inspections can range from $0 for a perfect inspection to in excess of $50,000 per inspection depending on the level of non-compliance at the facility.

Assuming these cost are the only costs associated with maintaining and reporting compliance, a facility will pay between $106,000 and $335,000 annually for environmental compliance. It should also be noted that, while summing all of the low ends of the range gives a total of $106,000, it is likely a firm that spends less on labor will spend more on consulting or will be more likely to be non-compliant with a regulatory program causing more expense in these categories. Likewise, facilities spending less on experienced environmental professionals will most likely pay more in training and education which will raise the actual cost of environmental compliance as well.

Ultimately, our experience and research substantiate that most manufacturing facilities will pay at least $200,000, on average, annually to maintain environmental compliance. Given these statistics, regulatory compliance is an expensive business, but being non-compliant can cost companies even more in the long run.