From compliance burden to risk management: changing perspective for the transportation of dangerous goods
From compliance burden to risk management: changing perspective for the transportation of dangerous goods
Hans Luu and Amit Bhargava
March 7, 2023
Dangerous goods are essential to our lives and lifestyles
Modern life is enabled by the daily transportation of dangerous goods (“TDG”) across the economic value chain. Generally speaking, a dangerous good is any substance or product that can pose a significant risk to health, safety, property, or the environment, if not properly stored, transported or handled. These goods are ubiquitous, number in the thousands and may be explosive, flammable, toxic, infectious, corrosive, radiating, or oxidizing. Some of the commonly stored chemicals in a household such as bleach, cleaning supplies and even gasoline are classified as dangerous. Whether transported via road, rail, air, or water, dangerous goods are essential to the manufacture and delivery of products and services that our lives and lifestyles depend on. Across global logistics and supply chains, TDG movements number in the multi-millions annually, and each movement of a dangerous good carries with it the potential to endanger human lives and damage the environment if an incident were to occur during transport. Here in Alberta, many people are unaware of the daily movement of dangerous goods on our main roadways that pass through densely populated centres and key public infrastructure (see the Government of Alberta’s Dangerous Goods Regions map here). The risk is so severe that governments strictly regulate all modes and stages of TDG to minimize potential incidents and enforce compliance with applicable laws by manufacturers, shippers, carriers, receivers, and users. In Canada and the USA federal oversight of TDG lies with Transport Canada and Pipeline and Hazardous Materials Safety Administration, respectively, and they are typically supported by complementary provincial- and state-level regulations and agencies.
Public safety drives TDG regulations
TDG regulations were designed with public safety (people, property, and the environment) and security in mind, and have been in place for over 40 years. Regulators enforce compliance through comprehensive classification and identification of dangerous goods, education and training, inspections, incident reporting and investigations, and prosecution. Shippers, carriers, and receivers must ensure that they have in place the required policies, management systems, processes and procedures, qualified personnel, training programs, and tracking documents that will enable them to comply with TDG regulations and ensure that they can continually improve their TDG performance. When any element in this system fails, the results can be disastrous – the recent February train derailment and subsequent toxic chemical release in Ohio is an unfortunate recent example (link).
On February 3, 2023 a train carrying vinyl chloride and other hazardous materials derailed, prompting the evacuation of East Palestine, Ohio as authorities feared an explosion. This incident followed a January 27 derailment in northern Louisiana, where the leak of 10,000 gallons of “acid-related products” prompted an evacuation within a half-mile radius. Then on February 14, a truck traveling near Tucson, Arizona spilled nitric acid when it crashed, forcing an evacuation and extended highway closure. These incidents have put a spotlight on the risks of TDG and refocused public concerns about dangerous goods being transported through our communities.
Compliance is mandatory, however, risk management is critical too
The sheer volume and frequency of dangerous goods transported daily using multiple modes of transportation, coupled with the many touchpoints involved in shipping and handling, often make the task of TDG compliance an onerous and time-consuming one for shippers, carriers, and receivers. Oftentimes, this need to comply with numerous TDG regulations can cause companies to view TDG as a paperwork exercise and lose sight of the rationale for why such regulations exist in the first place – public safety. When we look at TDG through a risk management lens and connect the dots between regulation, compliance, and performance, moving beyond the compliance mindset to a risk management mindset can unlock value and mitigate unintended events and consequences.
Risk management is a critical core function of any organization that wants to achieve specific goals while reducing losses. If we generically define risk management as a process of identifying, assessing, and controlling risks to an organization’s ability to achieve its goals while controlling the probability or impact of undesirable events and maximizing the realization of opportunities, then the benefits of applying this process to TDG becomes clearer.
Case study: TDG shipping documents
One critical example of the benefit of viewing TDG with a risk-based perspective is in the management of shipping documents. Currently in Canada, Transport Canada requires that all shipments of dangerous goods must be accompanied by a shipping document that identifies the dangerous goods that are being imported or transported. The shipping document is typically prepared by the shipper and must be a paper copy for road, rail, and air transport (electronic copies are permitted for marine transport). Carriers must keep an up-to-date copy of the shipping document while the dangerous goods are in transit, and once the goods are delivered, the shipper, carrier, and receiver must all retain copies of the shipping document for at least two years.
Based on our experience and Transport Canada statistics, a typical medium-sized company can generate between 20,000 and 100,000 TDG shipping documents per year (large companies can generate millions of documents per year). This means that in Canada roughly 30 million plus shipping documents are created annually (the North American total is approximately 350 million plus annually). Furthermore, in our estimation, industry currently spends around $20-$50 for tracking, reconciling, filing, and storage of each paper shipping document. This is a staggering amount of paperwork and cost by any measure.
Setting aside the environmental impact, labor burden, and cost associated with the mountain of TDG paperwork, a majority of TDG shipping documents are handwritten, which creates issues around accuracy, completeness, legibility, and accessibility (especially in cases of multiple deliveries where each segment of the delivery requires its own shipping document, resulting in a stack of paperwork accompanying the shipment). Exacerbating this problem is the ever-present possibility of an incident occurring during transport – our rough calculation based on Transport Canada’s statistic of approximately 500 incidents per year in Canada (about half of which happen in Alberta) where emergency responders are involved, is a 17 in a million chance. Although the likelihood of an incident is relatively low, the consequences can be severe, even catastrophic – again, the East Palestine train derailment and toxic chemical release is a tragic example.
An effective, feasible, and available solution to the risks of this paper-based shipping document approach is to digitalize the entire process. By eliminating hardcopy shipping documents and
using real-time digital documents, many of the inherent risks of handwritten paper documents can be eliminated. Not only will the digital shipping documents be more accurate, complete, and legible, they will be instantly accessible to emergency responders, should an incident occur. No longer would a first responder have to arrive to an incident and search for paperwork that may or may not be available or even legible, but they would have access to accurate information using a mobile app on a phone, tablet, or laptop. This ensures that their safety and that of the community is not unnecessarily put at risk. In addition to enhancing safety, other benefits of going digital include improved communication, reduced costs (insurance, compliance, filing, printing, storage, etc.), improved analysis and auditability (for performance management, sustainability reporting, etc.), and continual improvement of performance.
Notwithstanding the many benefits of transitioning to digital TDG shipping documents, most companies still stick to a paper-based approach, likely due as much to organizational inertia as to not taking a risk management approach to TDG. On the other hand, regulators see the value in digitalizing TDG shipping documents and are encouraging companies to transition away from paper.
Transport Canada’s TDG Regulatory Sandbox
In recognition of the need to address the risks and burden of the paperwork-intensive approach to TDG shipping documents, and as part of its risk-based oversight approach, Transport Canada piloted its Transportation of Dangerous Goods Regulatory Sandbox project between January 2020 and March 2022. The goal of the pilot project was to assess whether using electronic shipping documents could be a viable alternative to the mandated paper format for transporting dangerous goods in Canada via air, marine, rail, and road. Transport Canada worked with select companies to trial the use of electronic shipping documents, and also engaged the Canadian Association of Fire Chiefs since firefighters are often first responders to accidents involving dangerous goods. The results of the TDG Regulatory Sandbox project were illuminating, and the full report can be requested on Transport Canada’s website here. Some of the key learnings from the project are:
Using the project’s findings, Transport Canada has identified a number of next steps it will take, the most important being:
EnviroApps provides a cost-effective, efficient, and proven cloud-based digital solution that replaces paper forms, spreadsheets, manual data entry, and automates the reporting process to help organizations track transportation of dangerous goods and hazardous waste. EnviroApps was also the first digital solution provider to offer electronic TDG shipping documents for road transportation under Transport Canada's TDG Regulatory Sandbox Project – in fact 2 out of the 3 road transport companies that participated in the TDG Regulatory Sandbox project relied on EnviroApps to digitalize their shipping documents.
As Transport Canda’s TDG Regulatory Sandbox project makes clear, TDG is inseparable from the operation of our economy and industries and maintaining our quality of life. However, there are aspects of TDG that need to be modernized to ensure that risks can be managed in an efficient and effective manner while reducing the costs and administrative burdens of outdated systems. EnviroApps provides an effective solution that can transform the tracking of TDG shipping documents by lowering costs while reducing errors, enhancing safety, providing valuable business insights, and gathering valuable sustainability data effortlessly. Some additional benefits include:
Transport Canda’s TDG Regulatory Sandbox project highlighted a valuable opportunity for modernizing TDG regulations and processes. Although there remain some issues with switching to electronic shipping documents, these are primarily related to connectivity challenges, implementation costs, and organizational inertia – none of which are insurmountable. It is crystal clear that the advantages of digitalizing TDG far outweigh the challenges. There is very little benefit in continuing to rely on old processes and ways of doing things simply because it is how things have always been done or because of apprehensions around change, especially when the safety of first responders and communities, as well as the environment, are at risk when things go wrong. The TDG world is ripe for change and the digital transformation is coming – are you ready? Connect with us to learn how digitalizing your TDG documentation can help you manage your risks, reduce costs, and improve your TDG performance.
Sustrio Advisors is a trusted advisor that helps organizations design and deliver on their enterprise sustainability/ESG, climate change and energy transition, Indigenous relations, and regulatory compliance goals and objectives, thus enhancing their long-term value. That means addressing changing regulatory regimes, investor demands, and stakeholder and Indigenous concerns by providing a full suite of sustainability/ESG services, Indigenous relations and engagement services, permitting and regulatory services, and legal services. Our partnership with EnviroApps also provides an innovative digital solution to replace manual tracking of transportation of dangerous goods and waste. Connect with us to see how we can help your company navigate the energy transition, optimize your sustainability/ESG strategy and programming, report your sustainability/ESG performance, and track your dangerous goods and waste.