EHS Will Guide Future ESG Success for Many Organizations
EHS records and reporting provide a baseline for an ESG program.
- By Dan McLean
- Sep 01, 2022
Ever-growing interest by financial investors and consumers in companies that do the right things for people and the planet is great news for environmental health and safety (EHS) concerns. What does one have to do with the other?
EHS has long been positioned as a cost-avoidance function to protect company profits through protection programming. But as businesses show more interest in aligning with the principles of environment, social and corporate governance (ESG), there’s an obvious overlap in concerns between EHS and ESG and one will most definitely help the other.
“With ESG, there's a triple bottom line—profit, people and the planet—that will be demanded not only by the internal stakeholder, but the consumer and those looking to invest as shareholders,” says Intelex Vice President of Health and Safety, Scott Gaddis.
“As we advance, the ability to position EHS as a business partner with an increased value for the ethical and moral view of EHS—and in support of ESG efforts—is a good thing.”
EHS and ESG
EHS compliance expert Enhesa says EHS is foundational to ESG success and that “many of the regulatory areas that your EHS team already manages are crucial to understanding and improving your ESG rating.” In fact, an article posted by Enhesa says that while many ESG concepts can be vague and keeping up with criteria can be daunting, EHS is a first step to success in managing the regulatory compliance that is foundational to achieving ESG sustainability goals.
EHS records and reporting provide a baseline for an ESG program and “serve as a starting point to help stakeholders clearly see where your company stands,” the article says. The people-and-planet concept of sustainability—where business is conducted in ways that neither deplete natural resources nor cause pollution—is what investors BDO Global insists is the future of corporate reporting.
Occupational safety and health are at the heart of what the UK-based Institution of Occupational Safety and Health (IOSH) describes as the second wave of sustainability. They explain, “having good sustainability practices and setting high standards in your business for the treatment of your workforce, communities and supply chains will reward you with stronger performance and growth.”
Jillian Stacy, head of global expert services at Enhesa, says ESG regulations are currently being created in Europe, and many countries in Asia have established requirements for ESG compliance. In fact, many regulatory frameworks now see ESG considerations as a fiduciary duty that investor organizations have to clients, which means organizations that do not fulfill their ESG obligations could face legal and regulatory challenges.
“As ESG reporting becomes more regulated—which is already happening around the world—you’re going to need verifiable data in your ESG reports,” she says. “EHS compliance data can feed into that. It’s data you’re already collecting and compiling. It’s a matter of figuring out a way to make it feed into ESG reporting.”
The Intersection of ESG and EHS
No doubt most EHS professionals would rightly declare the work they’ve been doing has aligned with many ESG principles all along. However, Gaddis notes that some in senior business leadership were too often not interested in EHS concerns unless there was a significant miss in compliance and targets, and they typically only looked at a few metrics to measure success. The outline of ESG gives EHS practitioners a platform to be a business partner that's not simply judged from a cost-avoidance function but as a real partner in the business.
“Their work affects the non-financial impacts investors and shareholders are beginning to demand and an ethical approach to managing businesses,” he says.
There’s clear common ground and intersection between ESG criteria and EHS. Data that’s currently being gathered by EHS systems, such as emissions tracking, climate change information and health and safety information, could likewise feed the “social” part of ESG reporting.
“There are all these topics that are the same for EHS and ESG,” says Enhesa’s Stacy. “By looking at what you’re already doing well…you have a nice starting point. There’s already knowledge that can be gleaned just by looking at EHS compliance (data and activities) to help drive what makes sense for ESG initiatives and what makes sense for ESG milestones.”
Stacy adds that EHS elements are tied to sustainability reporting, which has been around for decades. If you consider what companies report on for sustainability, a considerable amount of it has EHS elements. ESG is a new flavor of sustainability reporting. So, if you’ve got a good EHS program, then you have a great head start on ESG reporting.
Within the three ESG broad pillars, much of “environmental” is also already well reported to shareholders through EHS efforts. These generally have included greenhouse gas, energy and water conservation, wastewater, waste and water management, pollution and compliance. Other areas, possibly new to some in EHS will have an increased focus. In the area of “social,” expect to see emphasis placed on chemical, biological and radiological impacts on people who work in communities with established businesses.
Gaddis says there's a solid intersection within “governance” in procuring materials and managing risk. He notes that for EHS professionals, their deep expertise in managing risk will be a skill relied upon by organizations for ESG programs.
Chris Ward, a former regulator and principal health and safety inspector in the United Kingdom and a former member of the British Standards Institute committee, says EHS processes provide data for disclosure in ESG operations reporting.
“Through the implementation of and adherence to international standards in relation to these areas (of environment, social and governance)—for example ISO 14001 Environmental, ISO 45001 Occupational Health and Safety and ISO 45003:2021 Psychosocial Risks—EHS practitioners can demonstrate ongoing processes of continual improvement in these areas,” he says. “Also, by ensuring their procurement and supply chains are in conformity with these standards, investors will be reassured of the sustainability, conformity and continuity of these policies throughout an organization’s areas of operation.”
The ESG Opportunity for EHS Practitioners
Many of today’s investors are making bets on companies that are “good for the planet” and doing their part to protect people and the environment. Likewise, more and more consumers want to put their money and loyalty behind such brands.
Research shows nearly two-thirds (64 percent) of Americans say they would pay more for sustainable products and 78 percent of people are more likely to purchase a product that is clearly labeled as environmentally friendly. What’s more, 77 percent of Americans say they are concerned about the environmental impact of the products they buy.
Gartner research shows 85 percent of investors considered ESG factors in their investments in 2020. But the Social Science Research Network (SSRN) observes that “while corporate sustainability and ESG investing are increasingly front and center for U.S. companies,” there is a severe lack of relevant expertise among board members of large U.S. companies as only 29 percent of more than 1,100 Fortune 100 board directors examined have relevant ESG credentials. Help is needed and it’s a significant opportunity for EHS professionals to step in.
“Those responsible for talking about ESG at the highest level don’t understand ESG enough to know that it is EHS in many cases,” says Trevor Bronson, a corporate strategy associate and senior product marketing manager at Intelex. “A lot of the things they talk about (regarding ESG) are ultimately managed on a day-to-day basis by the EHS department. ESG in many cases is EHS.”
The ESG metrics that investors and businesses often seek already exist in EHS dashboards, reports and collected data. It’s simply a matter of ensuring its availability, comprehensiveness and accuracy for the various stakeholders, Bronson says.
“Senior leadership is much more aware of ESG data because that’s what people want to hear about, and EHS moves from that classic cost-preventer to value-creator. You often see EHS as this cost center—avoiding unnecessary costs but not always bringing a ton to the organization.
“To contribute to ESG performance is absolutely bringing something to the organization because it improves your standing as a company for everyone that’s interested in it,” Bronson adds. “Pursuing opportunities in ESG and seeking to improve a business’s ESG metrics gives EHS professionals an opportunity to assume strategic thinking within their organizations.”
Bronson says he expects ESG concerns will provide a clear business case for increasing EHS budgets because of new mandates and requirements. He adds there are five key things EHS practitioners can do to support ESG efforts for their organizations. They include:
Get educated in the ESG world. It’s full of new acronyms that EHS professionals need to become familiar with. It’s important to be knowledgeable about general ESG rules and to understand who the key stakeholders for your company are regarding ESG and the material issues for your organization and stakeholders.
Understand the company’s ESG posture. What are your organization’s stated ESG goals? Are there annual and other reports published by the company that may contain relevant ESG information? Who are these going to? Is your company a leader or laggard?
Understand what industry peers are doing. What are the ESG issues within your industry and are you aware of your company’s ESG posture relative to competitors?
Assess the capabilities and limits of current technology. Can your EHS technology help achieve your organization’s stated ESG goals? Can your track progress to those goals and are you doing appropriate follow-up and preventative actions? Are your solutions tied to other ESG systems? How can technology help you? What are the gaps you need to fill? Do you have the right tools?
Be vocal about the role EHS can and should play. Remember that leadership in most companies lacks ESG expertise. EHS professionals are much more visible today in what they do. The metrics they collect will be much more impactful to a business. You should look to leverage existing EHS datasets for ESG reporting—it exists on the EHS devices and software that are already in use.
This article originally appeared in the September 1, 2022 issue of Occupational Health & Safety.