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July 25, 2016

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Standards: Health and safety at the heart of corporate sustainability

By Adam Roscoe, organisational resilience, sustainability, governance and communications expert

Corporate sustainability is – or should be – the ‘red thread’ running through all aspects of a responsible business, creating long-term value.  Sometimes known as ‘the triple bottom line’ or ‘people, profit, planet’, in layman’s terms, it’s about a business being a mutually-dependent part of both a wider business community and society in general, that responsibly manages its impacts and contributions.

Increasingly today, corporate sustainability is about ‘how’ the company turns a profit and is evidence of what it stands for – its values.  But what of this real or imagined nexus of health and safety, and sustainability?

When I headed a sustainability function in a Fortune 500 company with 145,000 employees in 100 countries, health, safety and environment was at the heart of the function and was a major area for management focus.  The way we viewed HSE within sustainability was that it was one of the ‘social’ or ‘people’ pillars of sustainability, but getting it right or getting it wrong wasn’t just a social and professional competence issue, it had direct impact on business continuity, revenues and profit. So how does this play out on a practical level?

As an example, the safety aspects of the BP Gulf of Mexico tragedy are now well-known.  Needless to say, 11 people lost their lives AND there was a considerable environmental impact.  So already, we have a ‘people and planet’ aspect to the incident.  Given the third element of the triple bottom line is profit, it’s worth noting that BP’s  last best cost estimate for the incident was $53.8 billion [1] .

So a safety issue also became an environmental and a financial issue.  Times have changed: in the Industrial Revolution, mangling a few child workers in the weaving machines while deliberately chucking dye into the river cost the factory owner nothing.

Nowadays, however, failing to address risks holistically can be costly.  Even so, many companies still compartmentalise risk management activities: one team will look after safety, another environment and yet more people monitor human rights and supply chain sustainability risks and cyber crime.  In some companies, there are attempts to bring the strands together and approach risk through an Enterprise Risk Management (ERM) process.

At least annually, the ERM systematically collects suggestions of risks from staff countries, business units and functions and these are captured, noted, assessed (most damaging and most likely) and the mitigation measures are parcelled out to ‘risk owners’.

The key here, though, is that all risks have a habit of becoming interconnected on some level or another and therefore must be considered in a broader context.  Enter the new management standard for safety and health. ISO45001, which has recently been delayed and is currently under revision for approval, following a two-and-a-half year journey from proposal, will bring safety standards in line with other ISO management systems and should be more effective and efficient to apply. It will also provide the framework for looking more broadly at a company’s context: it’s risks and opportunities.

Much of ISO45001 will be familiar, but there will be a requirement for the company to look at its situation in a wider context – including outside the gates, such as in the supply chain and the local community. This requirement is in addition to those of OHSAS18001, and I welcome it.

Some of the ‘wider context’ can be explored as part of an ERM process and some by taking specific risks and drilling down to understand more about detailed areas of exposure.  As an example, many companies delegate dirty, dangerous, commodity work to suppliers (the metal bashers and foundries in China and India) and then go home to their own ‘clean’ work in Europe and the US.  Under the new standard, consideration of safety in the supply chain is now expected and – as these suppliers and their employees represent the ‘extended workbench’ of the organisation – this is only right.

Enlightened companies will already be selecting, training and auditing their suppliers and contractors on a range of sustainability metrics, including human rights, environmental and labour law compliance – and of course health and safety. It’s a good example of where ‘the ISO standards’ covering OHS, environment and quality come together and as such represent a more rounded approach to the company’s place in society.

In addition, under ISO45001, there are key elements, not explicit in OHSAS 18001, that will be pushed up the corporate agenda. One is leadership.

Today, safety professionals can find themselves leading safety training and improvement efforts with the knowledge that the senior management are ‘on side’ and passively support the work.  ISO45001 is designed to ensure these senior managers get involved in leading safety, by setting expectations and direction and by actively promoting a culture where safety matters. Often this visible and felt leadership is the difference between a good company with good safety performance and an excellent company with exemplary safety performance – and good financials.

Other proposed changes in ISO45001 versus OHSAS18001, include worker participation, the application of the hierarchy of controls at the planning and design stages of projects, thus enabling hazards to be ‘designed out’ and ongoing review of both health and safety risks and opportunities and of the management system itself, in order to ensure it’s fit for purpose in changing circumstances.

As IOSH have noted, good safety and health management systems and cultures not only help organisations to prevent injury, illness and death; they also help improve reputation, resilience and [financial] results.   So let’s move to the money aspects of sustainability and health and safety.

Having personally briefed a range of investors on corporate sustainability on numerous occasions, it is clear that ‘sustainability issues’ are becoming more and more important to them and it’s probably worth understanding why.  Five years ago, most mainstream investors didn’t want dedicated briefings on a company’s sustainability and HSE performance.  They thought they had all the business information they needed from the company’s financial reporting.

Over the past four or so years, however, the number of investors attending sustainability group or individual briefings increased from a handful to an average of 50 investors a year in 2015, including some of the company’s top 10 shareholders, each holding millions of shares.  Their main focus was on how well they perceived the company understood and managed its key risks and how well it knew its main sustainability-related opportunities.  Their interest sometimes, but not always, extended to health and safety.

They often use performance in other areas of sustainability as a proxy for the attention (they assumed was) paid to health and safety. In addition, the narrative in the sustainability report – which they now read from cover to cover) – describing health and safety improvement activity, together with positive development in TRIFR and LTIFR rates, gave them a fuller picture.

In summary, it’s my impression that investors’ primary concern is the fear of being embarrassed for having invested in company X, that had a cataclysmic environmental and safety failure.  They also fear the consequential damage of a plunging stock price, reduced earnings and therefore dividend income and the fund manager risks having to explain a reputational and financial ‘double whammy’ to their pension fund clients, the media and their boss.

ISO45001 can provide an antidote to this nervousness, in that it will firstly provide a more robust and updated management system for the organisational development and improvement of a company’s health and safety performance. Second, it will help create and sustain the culture necessary to run a safe, healthy and profitable business. Finally, the standard will push companies to focus on and systematically map relevant risks and opportunities in a wider context than they do today and that in itself will aid investor and other stakeholder briefings.

References:

[1] Citation for $53.8 billion: http://www.bp.com/en/global/corporate/press/press-releases/bp-to-settle-federal-state-local-deepwater-horizon-claims.html

[2]

adam roscoe

Adam Roscoe is a consultant specialising in organisational resilience, sustainability, governance and communications. He spent 14 years in senior roles at a Fortune 500 electrical engineering company based in Zurich.  Between 2007 and 2015 he headed the company’s sustainability function, which included health, safety and environment; security and crisis management; human rights; sensitive countries and sensitive projects.

 

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Gregory S. Leslie, CSP
Gregory S. Leslie, CSP

Ever so eloquently written as usual Adam and you hit the nail directly on the head!! Well done!!

Are you aware of the Barbour EHS brand?