Sarbanes-Oxley Putting Safety on the Radar

What do the Enron and WorldCom scandals have to do with safety? More than EHS professionals might think.

Scandals such as these precipitated passage of the Sarbanes-Oxley Act of 2002, which mandated a number of reforms to ensure corporate accountability to shareholders and to nip corporate and accounting fraud in the bud.

The world of financial disclosures and fiduciary responsibility might seem far-removed from the world of hazard surveys and toolbox talks, but Kathy Seabrook, CSP, president and founder of Global Solutions Inc., told that Sarbanes-Oxley is increasingly coming into play for EHS professionals at the multinational companies that are her clients.

"What really is happening in the EHS world is a sense of the leadership in organizations wanting to know what their business risks are, and that would include environmental, health and safety risks," Seabrook said.

EHS professionals already know that safety is essential to the financial health of their organizations. However, safety hasn't always occupied an important seat at the boardroom table.

For some companies, that appears to be changing with Sarbanes-Oxley.

"When [Sarbanes-Oxley] first came out, it was really only about financial risks and financial controls – for the shareholder – which is all the legislation actually says," Seabrook explained. "But the way it's playing out, that includes any kind of reputational or any other types of risks that would actually impact the financials of the company."

Safety – or lack of safety – can have a huge impact on the reputation of a company. For example, Seabrook noted that a workplace accident such as the tragedy at BP's Texas City, Texas, refinery can be a bloodbath for a company's reputation. And when a company's reputation takes a hit, often its stock price takes a hit.

"And guess what the CEO [of any company] is looking at every minute of the day?" Seabrook said. "Their stock prices."

In response to Sarbanes-Oxley, Seabrook has noticed that employers are looking at safety and health when they attempt to identify the potential financial risks to their organizations as well as when they examine the way their organizations manage and control those risks.

"Those that have been involved with EHS know that with the management systems and processes that we put in place, it's all about internal controls," Seabrook said.

Safety on the Radar

One of the effects of Sarbanes-Oxley, in terms of occupational safety and health, is that it is motivating employers not only to look at their own operations but also at the operations of their suppliers.

"If you're a consumer products manufacturer, you have to be thinking about your supply chain in Asia, and child labor issues and poor working conditions, which would include health and safety," Seabrook said.

What does all of this mean for EHS professionals? In Seabrook's opinion, "It's actually very positive."

Sarbanes-Oxley, Seabrook said, "is having a huge impact in terms of bringing environmental, health and safety issues to the forefront of leadership and actually putting us on the radar screen."

"[EHS professionals] are actually being invited to the table, if you will, to be part of the business process to assist the organization and identify financial risks to the company," she said. "It's really what safety and health professionals want."

As 2007 approaches, is examining some of the major issues impacting the EHS community. This is the second in a series of online articles. For more, read "Safety Issues on the Table" in the December issue of OCCUPATIONALHAZARDS.

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