Why you need a global approach to managing EHS

EHS – a bottom-line issue.

I was at a conference a few years ago where the EHS Director of a large global pharma company alluded to (he was not entitled to do any more than that!) the fact that when he joined the company, more than 20 years previously, the direct cost to them of employee injuries, factory downtime and legal penalties amounted to an eight-figure sum, annually.

It is those kinds of numbers that first put EHS on the corporate map as the realization sunk in that this was hitting, or could hit, the bottom line.

In many ways, the company in question was actually a trailblazer. How many companies – even today – really, and accurately, know how much EHS (compliance issues and/or incidents) is costing them across their global footprint? The fact they had the foresight to actually compile the numbers, from across their global locations, speaks of a desire to know, manage and improve. Without the facts, it is all the more difficult to get corporate buy-in.

Individual sites may have had the odd fine, a few lost-work-day incidents, or even, heaven forbid, a fatality to contend with. However, it is the cumulative effect of such incidents that can begin to impact a corporation more broadly, in terms of public perception, culture and ultimately, share price. In this context, a global view is not just a luxury, it is a necessity.

An additional backdrop to this story is provided by the fact that these days, with massive increases in fines and settlements, just one incident could result in multi-million dollar bills.

As EHS has edged its way into the corporate consciousness, so too has it into the public’s mind...and that of the regulators. The challenge to comply, the sheer volume and burden of laws out there mean that the challenge has never been greater – and neither have the penalties for failure.

Global oversight, with local expertise

A global outlook for corporate EHS does not mean taking responsibility away from local site knowledge and expertise. Far from it.

By setting the tone, the standards and the priorities, a corporate EHS function guides, inspires and gives more weight and ownership to on-site personnel working in the field. If, as a plant EHS manager, I feel my corporate heads are watching out for me, giving me the structures and financial support that I need to do my job, I will feel more valued and will perform better. In turn, if I support my global and regional EHS structure through measuring, calculating and reporting on my local EHS performance and challenges, I am directly inputting into the corporate strategy and directly influencing the safe-working and environmentally-conscious practices of my colleagues around the world. “Everyone is a leader” is a phrase I have often heard, and in this context it is particularly apt.

Decentralization? No.

The example cited in the first paragraph refers to a U.S.-headquartered company. This is highly relevant. In my own experience, the corporate approaches to managing EHS can be very different between global regions and even, between individual countries. The U.S. approach has always tended to focus on “strict compliance”, which in loose terms means “being [insert swear word] scared of fines or getting sued”. Needless to say, this has been largely influenced by the regulatory and litigatory culture in the States.

An additional backdrop to this story is provided by the fact that these days, with massive increases in fines and settlements, just one incident could result in multi-million dollar bills.

This, coupled with the fact that U.S. multinationals are some of the most globalized companies out there – has meant that they have led the way in taking a global approach. Corporate oversight with a global approach has meant that very many of the companies we work with at Enhesa apply the same approach to their locations all over the world. The key feature of this is that U.S. company locations around the world are frequently audited against their applicable legal requirements. Compliance is all.

In Europe and Asia, on the whole, the approach has traditionally been one much more influenced by the proliferation of EHS management systems, coupled with the more lenient “dialogue to compliance” approach of regulators in many countries. You are more likely to get a letter from the Dutch labor inspection warning you of an identified non-compliance, for example, than an instantaneous fine. Companies are often given an opportunity to correct their mistakes. In this sense, the focus is not on compliance, but rather one of “on-going management and improvement”. 

This difference is reflected in the different services Enhesa’s clients have typically purchased from us. U.S. companies are very keen on our Audit tools. They want to know, on any given day, that they are compliant (or as near as they can be). In Europe and in Asia, the service offerings that tend to sell more are those based around the concept of a “legal register”. In essence, being aware of what laws apply and managing compliance with those (in a slightly looser manner) on an ongoing basis.

Both approaches have benefits. However, in some countries – particularly in Japan, Germany and the Nordics, there remains quite a decentralized view on managing EHS, and particularly compliance with EHS laws. “The sites will know the law and will know best how to manage compliance with those laws, we don’t need to know or get involved” is a common point of view that we hear in discussions with clients who do not have a centralized corporate EHS function (or at least, not much of one).

This approach may save the cost of having a corporate EHS department. It may give sites a bit more autonomy on the approach they wish to take and it might be “the way things have always been done”, and therefore be an approach site staff are familiar and comfortable with.

However, what a decentralized, local-only approach will NOT do is:

• Make it easier to instill a global corporate EHS culture (or even start to develop one);
• Give a global, coherent and reliable view on EHS performance and liabilities;
• Provide greater confidence in your ability to say you are compliant in any given location;
• Give individual site-locations the impression that EHS is taken seriously across the company.

Of course, regardless of the approach taken, what will not change are the potential direct, and increasingly, indirect, implications of being found non-compliant with the law (before or after any incident that may have brought the issue to light).

It is therefore hard to justify NOT taking a global view, while leveraging local knowledge and expertise every step of the way. This is where Enhesa comes in as the go-to solution.