Long relegated to the list of necessary evils for doing business, health, safety and environmental initiatives have struggled with lack of budgets, lack of support and lack of visibility. Today's EHS teams, however, are seeing light at the end of the tunnel.
At a recent Customer Advisory Board meeting, EHS professionals zeroed in on this theme: “How can your department help us deliver more strategic value to our organization?” While continuing to focus on core health, safety and environment compliance programs, the audience discussed the opportunity (and the reality) of becoming more involved in the strategic business direction and operation of their respective companies.
These companies discussed current involvement in initiatives such as:
- New product development and introduction
- New market identification
- Risk management
- Sustainability and corporate responsibility
While this sounds like more work for the already overworked, it actually is great news for all EHS professionals. In other words, this may be the golden ticket for EHS to get a seat at the business table.
CHALLENGES AND AN EVOLVING ROLE
Maintaining the health and protecting the safety of employees has long been standard business practice, particularly in manufacturing organizations. Typical goals of such programs range from minimizing employee risk to complying with regulations to avoiding potential negative perception from a workplace incident.
However, research shows that there is a long-term business and financial impact of suspect workplace health and safety programs. According to OSHA statistics, “Businesses spend $170 billion a year on costs associated with occupational injuries and illnesses — expenditures that come straight out of company profits.”1 And that is just the impact on employees, notwithstanding the cost of environmental issues that are equal or greater in size.
Granted, the global financial impact doesn't necessarily reflect what EHS professionals deal with on a daily basis. Today, our profession is dealing with both internal and external business pressures. Externally, the greatest pressure is coming from a dynamic regulatory environment, particularly in the hazardous substance and chemical arena. Global directives, national initiatives and state regulations all are affecting what companies should or should not use in their products.
Additional pressure from consumers, employees, business partners, non-government entities (NGOs), etc. affects the way we do business. A rising sentiment for greener, safer products is a clear message to us all: This competitive peer pressure is forcing product-focused companies to be more innovative with the products they take to market, the materials that go into the product and the materials and substances that are used in the manufacturing process.
In other words, the concept of sustainability is moving from “nice to have” to “need to have.”
The Aberdeen Group's paper, “The ROI of Sustainability: Making the Business Case,” highlights the top four challenges to achieving sustainability business benefit. Ranked by percentage of respondents agreeing, the top challenges (see Figure 1: Top 4 Challenges of the Sustainability Business Case above) include:
- Budget challenges
- Difficulty in demonstrating ROI
- Fear of disrupting the business process
- Lack of knowledge
It's no surprise that budget and ROI are the two top challenges. For the profit-driven enterprise, any introduction of cost to the financial equation is going to be met with skepticism unless there is an equal or greater addition to revenue. This is where it's time to think strategically.
THINKING AND ACTING STRATEGICALLY
While many in the EHS profession are compelled only to maintain the compliance-focused mindset, now is the time to think bigger, broader and more strategically about the role of EHS in the organization. To do so, just think in terms of the top line and the bottom line. In its most basic form, business strategy defaults to focusing on one or both of these goals to either increase the top line via revenue growth or increase the bottom line (profit) through cost reduction.
An added dimension is time, specifically, near-term impact today or long-term impact tomorrow. Depending on the organization, some companies may be focused on short-term results to improve financial performance today. There may be investor pressure for a higher stock price. There may be employee incentives to hit performance goals this year.
Alternatively, other companies may be willing to forego profits today by increasing current investment in order to boost revenue and profits in the future. Taking this from another angle, EHS leaders must prove their case along a recognizable business benefit such as:
- Risk reduction;
- Faster time to market for new products;
- Greater work force productivity;
- Increased process efficiency; or
- Products with greater market appeal (e.g., safer and greener).
Therefore, thinking via this lens, let's discuss some of the specific opportunities that EHS professionals have to positively influence the top and bottom lines, today and in the future.
Figure 2: EHS Strategic Opportunity Matrix on page 44 lays out some of the specific cases where EHS can get involved and influence the business strategy of an organization.
Given the market focus of our company, let me center on product-focused companies and, specifically, the chemical management aspect of environment, health and safety responsibilities.
Utilizing the business dimensions of cost reduction or revenue growth and the time perspectives of today or tomorrow, some specific strategic opportunities include: compliance management, risk management, new product development and introduction and product stewardship.
COMPLIANCE MANAGEMENT
All companies manage chemicals and chemical compliance initiatives in one form or fashion. The method may be as simple as maintaining a paper-based binder, but it's still a current responsibility.
The focus here is how you can reduce the internal cost of managing material safety data sheets (MSDS) and your chemical inventories while also managing to get more value from your efforts. Additionally, you should consider the need to reduce immediate regulatory risk from enforcement efforts by the regulatory agencies.
Here are some specific considerations for the chemical compliance efforts that will reduce the cost of your hazard communication program and minimize risk of citation:
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Automate material approval and introduction. The vast majority of compliance risk comes from the fact that many companies don't have defined controls and procedures for introducing “one-off” chemicals into the facility and then ensuring that an MSDS exists and is available for employees. A full-featured electronic MSDS management system will provide this for you.
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Automate chemical inventories by using software that scans material barcodes and integrates to your MSDS database. An accurate chemical inventory is the first step towards best practices chemical management and will minimize short-term and long-term cost and risk.
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Automate your vendor MSD management program so that it becomes a “hands-free” process that frees you up for core objectives.
NEW PRODUCT INTRODUCTION
For product-producing companies, the new product introduction process is the lifeblood of the organization.
From research to design to prototyping to full production, the product lifecycle process requires significant investment of capital. So, how important do you think it would be to be able to identify potential market and marketing risk at the beginning of the process versus the end, when all the investment has already been made? As discussed above, with an overwhelming interest from all stakeholders to produce greener and safer products, it's paramount for companies to identify any risks early in the design process.
Equally important is the ability to identify material substitutes for the product, the packaging or even the substances used in the manufacturing process.
The role that EHS professionals can play here is to provide the tools and the data to pre-screen materials during the early stages of the product lifecycle to identify potential environment, health and market risk. For example, it may be meaningful to compare your product ingredients or raw materials against the SIN (Substitute It Now) list, which names substances that are likely to be restricted or banned in Europe in upcoming years. As such, the production and use of these substances contains both a market and financial risk that can be prevented with the right data and tools.
At the end of the day, working with the product and marketing teams to accelerate the successful commercialization of products is a huge strategic win for EHS professionals.
RISK MANAGEMENT
Risk management is a broad but important topic for businesses today. It clearly has the attention of all levels of the organization because even when you think you're doing the right things as a business, sometimes the unforeseen can transform risk into reality and have negative consequences on the bottom line.
Obviously, risk is involved with hazardous substances, so your job is to help identify, quantify and control the risks that your organization faces. These risks may be employee health risks (short-term and long-term), environmental risks or even market risks. So what can you do to identify, quantify and control the risk for your organization? Consider the following:
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Leverage the data on the MSDS to define and quantify your hazard footprint for both employees and the environment. Your material safety data sheets, coupled with an up-to-date regulatory database, include a vast amount of information about the properties, health effects, environment impact, physical dangers and regulatory list cross-references that will impact your hazard footprint.
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Electronically scan and cross-reference the regulations against the materials in your work area, facility and corporation.
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Link material hazard data with work environment factors such as length of exposure, use and material volume. Taking a control banding approach to risk assessment and industrial hygiene issues factors in all of the key ingredients of risk:
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The inherent risk of the materials;
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The work environment/exposure risk based on usage and duration; and
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The regulatory risk in the countries where you do business.
PRODUCT STEWARDSHIP INITIATIVES
Product stewardship initiatives can be described in many ways, but at its core, product stewardship embraces the concept of making health, safety and environmental protection an integral part of the entire lifespan of a product including design, material sourcing, manufacturing, distribution, service and disposal or recycling. Product stewardship not only requires the necessary material and regulatory data related to a product, but also a systematic approach to managing and communicating that data and related risks throughout the supply chain and demand chain.
The role of EHS here is to know the details of your product — not just the end result, but also the detailed formulation of substances in and in use during the manufacture of the product. An electronic chemical management system will help with this, as well as MSDS authoring systems which will assist in the review, classification and regulatory cross-referencing of the products that you are distributing. Furthermore, chemical management systems can monitor and review changes to material formulations or properties, as well as updated regulatory cross-references that may alter the classification, packaging or labeling of your products.
The last step is to employ a hosting and distribution system to automatically distribute updated material safety data sheets to your customers and distributors as those changes occur. The goal is to communicate fully the nature, precautions and substance of your product or the materials that your employees are dealing with throughout the supply chain.
AN ACTION PLAN TO BECOME STRATEGIC
So how do you do this and what should you consider in your journey to become strategic? Here are some elements to consider:
- Element 1
Address people, process and technology collectively, as follows:
People — What needs to change in corporate culture from the top down to embrace environmental, health and safety as part of the business equation? Show management how you're helping meet their core business objectives.
Process — What needs to change in our business processes to enable strategic input as well as results?
Technology — What tools and data are required to implement this vision?
- Element 2
Make sure that you have content (chemical data, regulatory content, etc.) in a usable form. Start with your own data collection to define your own hazard footprint and then benchmark against others.
- Element 3
Get beyond the technical compliance aspect of the EHS role and look to organizational, business process and technology modifications that leverage your knowledge in a more strategic manner and impacts business results today and tomorrow.
- Element 4
Make it simple for business to understand and implement a strategic EHS program. Remember, you're either reducing cost, increasing revenue or reducing risk. Every project should fit one of those criteria.
In Katherine Hart's PDC session at the 2010 ASSE conference, she described the right mindset of a strategic EHS department. “Their focus has moved from enforcing EHS to selling and marketing EHS to those within the organization … The new frontier requires a mindset that moves from the individual and coach to the partner, collaborator and strategist.”2
As Kermit the Frog says, “It ain't easy being green” — and it certainly isn't easy being strategic — but the rewards are abundant both professionally and personally.
So what are you waiting for? Go out and earn your seat at the table.
References
1“Safety and Health Add Value,” OSHA publication. http://www.osha.gov/Publications/safety-health-addvalue.html
2ASSE 2010 PDC session, Katherine Hart of ClearVision Consulting. http://www.asse.org/professionalaffairs-new/bosc/docs/PDC2010/501.pdf
Kraig Haberer is the COO of SiteHawk, an MSDS management provider that offers software and managed services to help companies manage their chemical management, hazard communication and employee health and safety initiatives. Visit http://www.sitehawk.com for more information. Haberer can be reached at [email protected].