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Predictive Value

Predicting accidents

A poor record in environmental compliance is strongly suggestive of a poor record in worker safety. Companies that exceed the limits set by the EPA on pollutants released into nearby bodies of water are more likely to have worker accidents that have to be reported to the Occupational Safety and Health Administration. Beyond work accidents, facilities that suffer severe accidents typically also have high numbers of EPA violations.

Take for example, the Shaw Industries plant in Irmo, South Carolina. The plant had a fire in a warehouse in late May 2020, which required the help of the local fire department to extinguish. More serious was an accident at a chemical plant operated by Huntsman Chemical in Port Neches Texas. Around Thanksgiving of 2019, an explosion at the plant forced the evacuation of 50,000 residents.

What the two plants have in common is a high number of waste violations relative to peers. The two charts below show the distribution of number of wastes in violation against the number of wastes above the EPA limit for both plants compared to similar facilities in the same industry identified by using SIC codes.

Two facilities with serious accidents plotted against their peers

We found these two plants by working backward: Finding outliers within peer group of facilities with similar industrial activities, and then looking for news about these plants. The process can be reversed, using the peer comparison of environmental performance to assess risk levels. Instead of looking for news of accidents, we instead searched for companies with large numbers of accidents that had to be reported to OSHA. Grouping the facilities by low, medium and high numbers of violations, and then looking for the average number of accidents for each group yielded a clear pattern.

Grouping of wastewater violations against number of OSHA accidents

Looking at the same data for sectors with a wide environmental footprint and blue-collar work forces pointed in the same direction: If you facility scores poorly on environmental measures, it is more likely to have accidents that have to be reported to OSHA.

Wastewater violations against number of OSHA accidents by sector

Not every plant that has an accident has a bad wastewater release track record. The most recent major chemical fire at a plant in Rockton, IL operated by Chemtool (a subsidiary of Lubrizol, which in turn is owned by Berkshire Hathaway) did not have a current Clean Water Act permit but was cited 16 times for not reporting its wastewater discharge numbers in the last few years. It’s by far not the worst offender in this regard relative to its peer group, but it’s closer to the bottom of the class than to the top. The plant reported only sporadically under other EPA programs and had no clean air or hazardous waste violations reported in the last five years. However, the last hazardous waste government inspection at the plant occurred in 2008, while the last clean air inspection took place in 2016.

The Rockton case highlights a gap in the data. Because inspections are so infrequent, and the penalties for not reporting to the EPA non-existent or negligible, there will be false negatives.

The OSHA data suffers from similar flaws: An accident has to be reported to the agency only if it requires outside medical attention. Facilities with high rates of injury, meat packing plants for example, are known to have a first aid unit on site. There have been complaints about plant managers pressuring workers with serious injuries to content themselves with on-site treatment by a nurse rather than going to a clinic or hospital.

These gaps in the data highlight two things. There will be very few cases of false positives. If a facility or company has many environmental violations, and many accidents reported to OSHA, it’s likely to suffer a more serious accident. The other conclusion is that the data needs to be examined for completeness. If a facility is filing all of its reports and still shows no violations, it is at less risk of being involved in an accident than one with large gaps in its reporting and citations for not reporting.