April 20, 2011
When it comes to new technologies, the Precautionary Principle conservatively states: “Don’t build it if you don’t know and understand all the risks involved.” The disaster at the nuclear plant at Fukushima Japan dramatically illustrates that there are a number of complex modern technologies that are now built, and now in operation, but we don’t really understand what the risks are. In its full form, the Precautionary Principle states that: “If an action or policy is suspected of causing a substantial harm to the public or the environment, then the burden of proof, that it is indeed safe, falls on those taking the action or adopting the policy.” In other words, management must determine that high-risk technologies such as nuclear power are safe, and will remain safe, if they are to be used at all. Unfortunately, our modern industrial societies, with a few minor exceptions, do not enshrine the Precautionary Principle with the full force of the law.
Thus management is currently at liberty to take actions and adopt policies that recklessly take on unimagined risks. And thus management in many cases passes the costs of disasters occasioned by these unimagined risks onto third parties (economists euphemistically call these situations “externalities”). And that is exactly what management is doing in many areas, including the dependence on petroleum.
One Japanese governmental official claimed that contingency plans for the Fukushima nuclear plant “failed to anticipate the scale of the disaster.” The problems at Fukushima are so far “beyond the design capacity” of the plants that the Japanese are working in uncharted territory, said Michael Friedlander, a former senior operator at U.S. nuclear power plants. While the odds of a 9.0 earthquake and an ensuing huge tsunami may be low, scenarios like these are entirely within the realm of the predictable. Based on geological evidence, a number of such earthquakes have happened before, so it would stand to reason that a nuclear power plant should have to withstand stresses of this nature.
Let’s be clear that management at many organizations, non-profits, government agencies, and businesses, has failed to anticipate the likely disasters that could happen. We’re not talking about aliens landing on the planet and taking over with up-until-now-unheard-of technology; we’re not dreaming up some way-out crazy scenarios. We’re talking quite reasonable, absolutely predictable, threat scenarios that very likely happen at some point in the not-too-distant future, things like a large earthquake.
Yes, to not properly address these quite predictable risks is negligent, and there may be some serious legal consequences for the managers involved. But this author is not a lawyer, he is a technology risk management consultant, so we will focus on the latter topic instead. So if we admit that building and operating a variety of complex technologies, that are now in operation, has indeed been negligent, where do we go from there? What? You say you don’t agree with the assertion that a number of complex technologies now in operation are very dangerous, and the risks associated with these technologies far exceed our capacity to deal with them?
OK, before we get to the next steps, I’ll offer one other widely discussed example, but certainly many other dangerous complex technology situations could be identified. Consider the Deepwater Horizon drilling platform in the Gulf of Mexico. We, the industrial societies, are pushing the edge on oil exploration technologies, going to very inhospitable places, such as the bottom of the deep ocean, in order to maintain our addiction to petroleum. This is unchartered territory, and as the oil companies in charge of that rig so painfully made clear, they did not have the contingency plans to deal with an oil spill of the size that they encountered in the Gulf of Mexico.
So let’s take it as a given that, this reckless implementation of complex and dangerous technology has happened, and is also happening right now. Additionally, let’s take it for granted that, in large measure, we are unprepared to deal with the disastrous consequences that might occur thanks to the usage of these dangerous technologies. This is easily illustrated in the area of peak oil contingency planning. How many non-profits, how many government agencies, and how many business firms have seriously integrated peak oil, the certainty of the world’s peak in the production of oil, into their strategic planning and contingency planning processes? The answer: VERY VERY few (repetition added for emphasis).
So this author suggests three corollaries that should go along with the Precautionary Principle. These propositions that follow the Precautionary Principle are: (1) if it’s already built and in operation, shut it down, until we know the risks involved, and until we can satisfy independent third parties that those risks can be adequately dealt with, (2) if we can’t shut it down right now, we should invest a lot of money in contingency planning to come up with safety nets to deal with all the serious threat scenarios that might come to pass, and (3) if we can’t shut it down right now, we should immediately begin work to transition to other technologies that are much less risky, and much more likely to be sustainable.
To clarify the importance of these three corollaries, let’s imagine how these propositions might apply to a peak oil contingency planning effort at a major long-distance trucking firm. When prices for fuel go up in a big way, long-distance trucking is going to be seriously curtailed, and other less expensive transportation methods will instead be used. Railroads and boats for example will be used to move a lot more freight that is now handled by long-haul trucks. One serious risk here is to the viability of the long-haul trucking business. Management at the trucking firm may rightfully ask: “Is there even going to be a profitable long-haul trucking business when diesel fuel costs over $10/gallon?” Let’s be clear that peak oil is happening, the only question is when. And we will get to, and go far beyond, the $10/gallon level. Applying the first corollary would involve perhaps selling the long-haul trucking business, or localizing the routes so that trucks do things that railroads and boats cannot do, or in some other way shutting down the long-distance trucking system that we know will soon be unsustainable.
Applying the second corollary, we can adopt a whole slew of safety nets, such as using the futures market to lock in fuel delivery at certain relatively low prices for a few years in the future. Of course, this is only a temporary measure, because ultimately the business will need to be reconfigured to be something else that is sustainable and economically viable. Another safety net that the business could adopt is to lock in long-term contracts with major customers, so that at least for the duration of these contracts, the trucking firm knows it has incoming revenue. Some of the profits from these activities should be reinvested in the business, coming up with other contingency plans, and also – as mentioned below — reformulating the nature of the business itself.
Applying the third corollary, we would rethink the “theory of the business,” as the famous management theorist Peter Drucker would call it. Management would need to admit that the theory of the existing business is no longer viable, and that a new strategy is essential. Management must not wait until an “unimaginable crisis” (such as a nuclear power plant accident) makes it painfully clear that what they’ve been doing doesn’t work. The assumptions on which the organization was built need to be rigorously challenged, need to be comprehensively revised, need to be substantially updated.
Our new and more modern understanding of what is happening in the world, such as the reality of peak oil, needs to be integrated into the very heart of the business strategic planning process. Management must then use that new perspective to show us the way forward, to transition the business so that it soon relies on new technologies that will be sustainable, profitable and viable. For the trucking firm, this may involve running trucks on bio-methane that is gathered from a local sewage treatment plant. There are many options, the critical part is that this work is underway now, before we have yet another crisis on our hands. This is because with each successive crisis, our capacity to redesign and rebuild will be diminished.
Charles Cresson Wood is a technology risk management consultant with Post-Petroleum Transportation in Mendocino, California. He assists organizations with petroleum dependency analyses, peak oil contingency plans, green energy transition plans, and green business strategic plans. He is the author of “Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action” (www.kickingthegasoline.com).