Here are three examples of companies that successfully used TCA to win approval for EHS initiatives—and to identify and thus avoid initiatives that weren’t financially sound. Although the case studies involve environmental initiatives, the financial issues they raise are also common to the evaluation of safety initiatives. Thus, these case studies can be used to demonstrate the value of TCA, whether applied to an environmental or safety initiative.
1. Circuit Company Gets Approval for Rack Switch
A circuit board manufacturer evaluated a project that would eliminate the use of nitric acid as a stripping agent by replacing stainless steel racks with plastic coated racks. Under a conventional cost analysis, only the purchase price of the new racks and the savings associated with eliminating the purchase and subsequent disposal of nitric acid were included; no labour, paperwork, permitting or analytical costs were included. This approach suggested that the project would just begin to yield a positive return in its fifth year. In contrast, a TCA of this project showed a five-year net present value of $33,000. When product quality improvements and worker health and safety benefits were also factored in, the project was easily approved.
2. Printing Company Uses TCA to Improve Profitability & Reduce Waste
A commercial printing company wanted to upgrade the wastewater treatment system at one of its facilities but the project didn’t appear to be sufficiently profitable under a conventional financial evaluation. A TCA was conducted to ensure that all relevant direct and indirect costs were included in the analysis. The project’s rate of return actually turned out to be 17.8% using TCA, as compared to 14.7% under a conventional analysis. And its 10-year net present value rose from $51,887 to $81,152, while payback dropped from 6.9 years to 5.6 years when TCA was applied. Bottom line: The TCA demonstrated that in addition to better immediate financial performance, the upgraded facility would generate less hazardous waste and produce a potentially marketable by-product.
3. TCA Reveals that an Environmental Initiative Isn’t a Sound Investment
The environmental management division of a large paper coating mill conducted a TCA on a coating conversion project that involved switching from a solvent/heavy metal base coat to an aqueous/heavy metal-free formulation. Expected environmental benefits included reductions in flammability and explosiveness, worker exposure to solvents, VOC emissions, hazardous waste and solvent/heavy metal usage. But when the TCA was conducted, it showed that previously omitted utility costs outweighed the waste management savings. The project’s 15-year net present value, already negative at -$203,000, dropped to -$395,000 under TCA. Its rate of return dropped from 11% to 6% and the payback period rose from 7.6 to 11.7 years.