Brand Story - They may not realize it, but the manufacturers of many of America's favorite foods (beer, bread, coffee, jerky, salsa, salad dressing, etc.) are subject to a multitude of environmental regulations for food and beverage companies.
Not only do environmental regulatory agencies such as the U.S. Environmental Protection Agency and state and local departments of environmental protection keep food and beverage manufacturing companies in their sights, but consumers and environmental organizations are able to sue these companies directly in federal court under some of the major environmental laws of the United States. Careful adherence to environmental regulations is good for food and beverage companies' bottom line—environmental enforcement can cost thousands of dollars, if not millions—as well as for their reputation under the watchful eye of social media.
Food and beverage manufacturers and processors are regulated based on a variety of factors; there is no cookie-cutter approach to determining applicable regulations. Factors such as the Standard Industrial Classification (SIC) code, facility size, amount of contaminants being discharged, products used in operations, or the quality of the specific environmental media being impacted, to name just a few, must be carefully considered.
For day-to-day operations, the most common laws/regulatory program that apply to food and beverage manufacturers are those related to stormwater, wastewater, and air. Stormwater is often overlooked because its regulation is based on an industry-specific system of inclusion that does not factor in much of a business's actual operations. Site-specific considerations typically only come into play when a business wants to opt out of the permit program through a conditional exclusion based on "No Exposure." SIC code 20, which broadly applies to food and kindred products, pulls food and beverage companies into the regulatory scheme for stormwater. Therefore, unless a facility can demonstrate that there is no contact between industrial operations (which also includes loading and receiving, just not administrative and office facilities) and stormwater, food and beverage manufacturers must obtain permit coverage if they discharge stormwater to a water of the state (such as rivers, lakes, or certain wetlands), either directly or indirectly through a municipal stormwater conveyance system.
Water going down the drain to a municipal treatment system must comply with an industrial pretreatment program. This requires a permit and that operators test and manage wastewater for a variety of edibles that are actually pollutants, such as flour, sugar, or yeast.
Regulated air discharges can come from multiple sources at a facility, either from operations or equipment. On the operational side, yeast metabolism in baking, coffee roasting, alcohol manufacture, and food and grain storage can produce particulate matter, volatile organic compounds, certain toxic compounds, odors, smoke, and ethanol, one of the main components of smog. Regulated equipment includes mixers, boilers, driers, and generators.
Toxic air pollutants are receiving more and more attention as many states (including California, Washington, and Oregon) now regulate heavy metals, chemicals, and pollutants potentially harmful to people living or working near industrial and commercial facility.
Hazardous waste management and disposal, pesticide use and disposal, large-scale storage of oil (including edible oil), and the use and presence of aboveground or underground fuel storage tanks also could come into play. What’s more, given the increasing focus on climate change, greenhouse-gas emissions, ozone-depleting substances in refrigerants, and regulations on carbon are receiving more and more regulatory attention.
Failure to comply with environmental regulations has significant costs. Enforcement actions can be taken by all levels of government, including local water utilities. Actions taken could include warning letters, directives to conduct or stop doing certain actions, requirements to build, implement, or enhance treatment facilities, and of course, fines.
One of the most notable enforcement examples is the 2016 action taken by the U.S. Environmental Protection Agency against Pennsylvania beer-maker D.G. Yeungling and Son Inc. for noncompliance with the industrial pretreatment program. In addition to a $2.8 million penalty, the agency required the beer maker to implement improvements to its breweries’ treatment systems at an estimated cost of $7 million.
One of the best ways to find out if business operations and facilities are in compliance with environmental requirements is to conduct an environmental audit. Audits can be done with internal staff or, better yet, using an outside, third-party environmental consulting firm. In either case, the company should ensure its audit is conducted in compliance with the federal and state (if available) audit privilege. Audits can be done before the acquisition of a business or new property, or at any time after operations have started. Audits for due diligence purposes pre-acquisition are worth every penny because new environmental permits often come with a steep price tag.
Manufacturing industries are regulated by a complex system of environmental laws—even if the products are hoppy India pale ale, dark French roast coffee, crunchy dill pickles, or your daughter’s favorite brownies. Those in the food and beverage industries will do well to keep this in mind – doing so could save them the bitter taste of losing time and money.
Jeanette Schuster, Partner
Tonkon Torp LLP