25th August 2014 Chemical Security RIS
Attorney-General’s Department 3-5 National Circuit
BARTON ACT 2600
CHEMICAL SECURITY: REGULATORY IMPACT STATEMENT
The Chamber of Commerce and Industry of Western Australia (CCI) is pleased to provide a submission in response to the Regulatory Impact Statement (RIS) issued in July 2014 by the Attorney-General’s Department into the proposed measures to enhance chemical security in relation to the 84 identified toxic chemicals of security concern.
CCI is a not-for-profit, member-based organisation providing quality, cost-effective information, advocacy, services and support to over 9 000 member businesses. Our Vision is for WA to be a world-leading place to live and do business. We strive for the pursuit of free enterprise with our goal to make WA the most business friendly state in the nation.
We note that the rationale for the proposed changes to chemical security is to address the vulnerabilities identified through the risk assessment undertaken by the Attorney-General’s Department (AGD) in relation to the ability of businesses to deter, prevent and detect the theft and diversion of chemicals of security concern.
A core value of CCI is our continuous drive to reduce cost and red tape making it easier to do business in WA. Therefore, changes should not be made where they introduce significant costs and burden to business unless clear benefits are identified for individual businesses, or the perceived risk is deemed sufficient to justify regulatory changes, and these changes are identified as the best form of risk management.
Following consultation with our member-base, and in response to the specific questions posed in the RIS, it is CCI’s position that:
- The majority of security risks are likely to be managed in line with societal expectations in the absence of government intervention, particularly by large organisations;
- A targeted awareness campaign is the best option to achieve the government’s objective following on from the establishment of the National Code;
- Linking an awareness campaign to GHS training and implementation programs would be highly effective as GHS system understanding is required by all businesses that use chemicals and is essential to the core functioning of those businesses; - The majority of our member businesses have some form of control currently in
place;
- The estimations and assumption in Appendix A and B need revision as we believe these are underestimations of prevalence and cost.
CCI welcomes the opportunity to further consult with the Attorney-General’s Department in relation to the proposed options for increased chemical security among business. For further information please contact Ms Karin Lee, Manager Safety and Risk Services on (08) 9365 7696 or [email protected].
Yours sincerely
pp
John Nicolaou
Chemical Security: toxic chemicals of security concern.
Consultation Regulatory Impact Statement
CCI consultation with members
The approach to consultation with members consisted of:
Direct email to 8,500 members providing information on the review and requesting feedback on the RIS.
Face-to-face consultation with members of the: Manufacturing Forum, Food Industry Advisory Group, Small Business Panel Forum, Occupational Safety and Health and Workers’ Compensation Committee (approximate, n = 20 per group).
Direct email to CCI member Forums and Committees asking for feedback on six specific questions relevant to the RIS.
Rationale for government intervention
1. In the context of the supply chain that uses/handles toxic chemicals of security concern; to what extent are security risks likely to be managed in line with societal expectations in the absence of government intervention?
In collecting feedback from members there was a markedly different response depending on whether they were a small or large businesses. Small businesses indicated that they typically do not have processes in place to alert them in the event that their chemicals were stolen. Some members however noted that due to the intimate nature of their business they believe they would notice if the chemicals were missing:
“The product used is on our Chemical Register, but no, we don’t have processes in place for the product being stolen. We only carry one container at any given time, so yes, I would notice if it was missing.” – Small Food Industry retailer using hydrogen peroxide
In comparison, large organisations indicated robust risk management processes where they identified use of chemicals of security concern:
“Advice from the Attorney General has indicated that theft of CSC is much more likely in transportation from our facilities to customers. We have detailed tracking capability on bulks bags, sea containers and tanker trucks of our products. Small quantities of some of our products could be stolen by employees (handfuls), however security checks on these individuals prior to employment reduces this risk further. Our toxic chemicals are extremely dangerous to handle and so also difficult and dangerous to steal.” – Large Manufacturing Industry company
Most companies seek to manage the security risks in some form, however dependent on their size and safety maturity/expertise, different levels of controls are implemented. It therefore unlikely that government intervention would not produce significant changes or benefits as large organisations generally have adequate measures and small businesses may struggle to comply with new measures.
Proposed options
There are a number of options available to governments:
continuing with the status quo;
launching a targeted awareness campaign;
extending the National Code of Practice (that applies to the 11 precursors to home-made explosives) to the toxic chemicals of security concern; or
other, less feasible options that are not the focus of this RIS but which are discussed briefly (regulation, industry codes, enhanced enforcement and increased penalties, action at the state/territory level).
One criticism of the PwC data is that it does not differentiate between different business sizes, only industry.
Business size is a critical factor to the effectiveness of any proposed changes. There are fundamental differences between a small business and a large that impact on the way in which safety risks are managed. All businesses of varying sizes potentially use chemicals of security concern however small businesses in particular do not necessarily have basic safety management systems in place let alone the resources, time or expertise required to identify and manage chemical security risks. Therefore any options proposed will need to either have a two-pronged approach targeting small and large businesses separately, or be applicable to both.
CCI members’ responses varied according to organisation size. Small businesses indicated that although they might have chemicals of security concern they are not aware of the National Code or which chemicals are of security concern on a whole. Most of these small businesses indicated use of hydrogen peroxide as well as cleaning and pool chemicals. The RIS provided a summary of previous feedback from stakeholders which suggested that:
More businesses are likely to adopt the proposed security measures under a government code rather than as a result of an awareness raising campaign.
This may be true for large businesses where perceived benefits outweigh the costs but the majority of small businesses are unlikely to enforce a code due to a lack of resources, time or expertise.
Businesses choose to adopt the measures for a range of reasons (for example, good business practice, avoided reputational risk and the psychic benefit of contributing to a safer community). Many of those that have adopted the security measures have benefitted in a variety of ways (for example, enhanced staff quality, enhanced inventory management, and reduced stock losses). Again this may be true for large businesses but these reasons would, in the majority of cases, not apply to small or family run businesses.
Businesses will not adopt measures that they perceive to be unduly costly or impractical. The previous RIS on precursors to homemade explosives concluded that in effect, businesses will adopt measures to the extent that there is an actual or perceived net benefit from doing so (although we also acknowledge that business awareness of security risks associated with chemicals is variable). Small businesses are only likely to implement new processes if these processes are essential to their core functions or facilitate more effective operation of their business.
Most members that provided feedback identified use of one of the 11 commonly used high-risk chemicals, however when asked whether they were concerned about chemical security at their workplace, responded in the negative.
This may indicate a lack of understanding around the risks, in which case the most effective option would be an awareness campaign.
As they have identified chemicals in their workplace they would be required to have in place a chemical register or material safety data sheet (MSDS). Under the model Work, Health Safety legislation businesses are transitioning to the Globally Harmonized System of Classification and Labelling of Chemicals (GHS). Some businesses have already begun using the GHS for classification, labelling and safety data sheets (SDS) of workplace hazardous chemicals; however, the GHS is not mandatory until 1 January 2017. There are a number of GHS information sessions, training programs and support services available to businesses. CCI proposes that a targeted awareness campaign of chemicals of security concern linked into the national GHS training and awareness programs would be the most effective approach. The reach of the GHS program extends beyond that of the proposed awareness campaign in the RIS in that it requires businesses to undergo face-to-face training and the acquisition of new knowledge. As it is a new system that will impact the day-to-day
operations of many businesses including small businesses it has higher levels of engagement then similar programs for optional changes. The GHS training also has greater reach then traditional chemical security messaging through Minister press releases, industry
publications and specific industry groups.
Those businesses that would need to know the new GHS labelling system would also be the businesses that would be targeted by a chemical security campaign.
Impact Analysis: The status quo
3. To what extent will the options reduce the risk of criminal use of toxic chemicals of security concern relative to the status quo?
4. If the options are likely to have more than a marginal impact on the risk of the use of toxic chemicals of security concern, will the benefits associated with this risk
reduction outweigh the costs to governments and industry?
Business needs a compelling reason to adopt any of the options proposed.
It is difficult to quantify the extent to which the risks may be reduced as there is not enough clarity around the likelihood of businesses adopting any new measures. It would also depend on which option was implemented as each option will incur different costs and have varied benefits to different businesses.
Impact Analysis: The proposed security measures
5. Do stakeholders have any comments or information about the likely costs and benefits associated with the proposed measures?
6. To what extent are the cost estimates in relation to the precursor chemicals relevant to the chemicals that are the focus of the RIS?
7. To what extent are businesses who handle any of the 84 chemicals already
2. Are there any other options that could achieve the government’s objectives in light of the identified problem?
implementing these measures as part of good business practice?
Business cost associated with the proposed measures is difficult to determine due to the difficulty in accurately identifying what measures businesses currently have in place and the likelihood of businesses implementing new measures. Overall, small business in particular would be unlikely to implement any measures regardless of costs and benefits due to the nature of these measures as ‘nice to haves’ but not essential to core business function. Our large member organisations have indicated they already have robust processes in place regarding chemical security. One member is particular provided the following information: “Our concern regarding chemicals and their security is managed via a range of controls including: fencing, access card control, pre- employment screening of employees, extensive physical building security on doors and windows (including doors accessing storage areas for CSC) and 24/7 security guards and CCTV. Our organisation has been working closely with the Federal government for over 6 years in regard to CSC.” – Large Manufacturing company Other companies indicate measures such as periodic stocktakes, restricted access and continuous monitoring of ingoing/outgoing stock.
Impact Analysis: Security measure benefits
8. To what extent are the security measures likely to be effective in helping businesses manage the security risks associated with toxic chemicals of security concern (including reducing the risk of individuals or groups using them for criminal purposes)?
9. To what extent are the security measures likely to help businesses prevent, detect and deter the licit purchase of toxic chemicals of security concern by people with long term criminal intent?
10. Are there any practical measures (alternative to the proposed security measures) to address identified risks that this Consultation RIS has not considered?
No comment
Impact Analysis: Costs and benefits of the options
11. Do stakeholders have any comment or information on the likely costs and benefits of these options?
12. The previous RIS found that uptake of the security measures would be higher as a result of a code of practice than as a result of an awareness raising campaign. Would that also be the case here?
13. Error! Reference source not found. provides information on the estimated number of businesses/organisations using or handling toxic chemicals of security concern. These are based on a variety of assumptions. Are these assumptions reasonable? Are there any other businesses or organisations that should be included?
14. Appendix B provides detailed calculations on the cost of reading and understanding the Code. A key input to this is the number of businesses that are likely to actually be aware of the Code. Are these proportions reasonable?
Although the previous RIS found that the uptake of the security measures would be higher as a result of a code of practice than as a result of an awareness raising campaign, CCI believes that this would not be the case here.
At the time of the previous RIS there was no regulation in the form of a code, rather alternative measures were used. Since the release of the National Code there is a greater
awareness in general of chemical security and a number of companies which have adopted appropriate measures. Most of the companies that have adopted measures were high-risk organisations that were typically large in size and frequently used chemicals in their business functions. The focus now should be conveying the message of chemical security to small businesses. As previously stated, small businesses are unlikely to implement measures even if prescribed in a Code, however a greater awareness and perception of risk may provoke a number of minor changes to everyday processes that could have a positive impact on chemical security.
In regards to Appendix A, the assumptions appear reasonable for the majority of nodes where you can reasonably assume relevant businesses based on their ANZSIC division i.e. introducers and wholesalers. In discussion with CCI members there are a number of businesses or organisations that are not addressed in the end-user node. These are businesses belonging to the food, tourism and health care industries such as: catering companies, food manufacturers, residential care services, disability care providers and accommodation services. It is recommended that the end-user node be re-evaluated with inclusion of these types of businesses.
We also recommend a re-evaluation of the estimated cost to business. In our opinion the estimated overall time per business of 77.2 minutes is too low. Considering that in WA alone 97% of businesses are small businesses, we estimate that those that do not outsource this type of work to safety consultancy services will take on average 1 day to read, reference, consult and understand the code. We also question what is meant by ‘understand’ the code as that measure is subjective in nature and may not translate to implementation. We calculate that a figure of $1000 is a more accurate base figure.
