In this One-on-One interview, SAI360's expert Christine Adeline talks about EHS, ESG and the new “S” in EHS&S — Sustainability.
Reprinted from Risk & Compliance Magazine, October/December 2021 issue
R&C: How would you describe the rising importance of tracking environmental, social and governance (ESG) performance as a business imperative? To what extent is this driving companies beyond traditional compliance solutions?
Adeline: I'd say it's becoming nothing short of essential. ESG investing is becoming the norm, so if you're not being aggressive about getting a strong framework in place and tracking ESG risks and performance, you're already losing traction with investors. Likewise, consumers are developing a new awareness of an organization’s ability to track things like sustainability, and they're directing their spending to companies that demonstrably follow through on ESG reporting.
From a regulatory standpoint, ESG disclosures may soon stop being a choice. In the EU, the Sustainable Finance Disclosure Regulation (SFDR) is already in place, and it's signaling that the regulatory floodgates around ESG are about to open wide.
R&C: What considerations related to ESG typically fall under the purview of environment, health, and safety (EHS)?
Adeline: EHS and ESG are closely intertwined, with Environment being the greatest overlap. EHS teams already are responsible and have experience in managing ESG issues around the environment, worker health & safety and greenhouse gas (GHG) emissions. How can the business reduce water and energy waste? How bad are air emissions? What's the carbon footprint? Are waste management programs working efficiently and properly disposing of hazardous waste? Is the supply chain optimized for sustainability?
EHS teams keep an eye on these considerations, ensuring the business is currently compliant with all applicable regulations while also developing plans to keep the organization ahead of future regulations.
But more importantly, EHS teams will most likely have the data that stakeholders and investors want to see for ESG reporting.
R&C: What strategies can EHS professionals deploy to enable cleaner, greener and safer workplaces?
Adeline: Greenwashing accusations are a huge obstacle for companies trying to make big changes. Much like what happened with Diversity, Equity and Inclusion (DEI), many organizations will make sweeping statements that ring hollow when it comes time to present the metrics.
Genuine commitment always starts at the top, so C-level executives should educate themselves on what the regulations are, what they will be soon, where the company stands presently and what's attainable in terms of metrics. Only with that robust understanding can they then draft a public commitment and create an accompanying roadmap for actual change.
Let’s also not forget that ESG is accelerating the demands for better ESG disclosures, which will increase the need for better quality data. With a thoughtful approach to ESG information framework, companies can better demonstrate their genuine commitment to ESG.
R&C: What are the key advantages of creating a centralized and integrated EHS and sustainability system?
Adeline: As mentioned, ESG will put pressure on companies to have better information systems to support disclosures. Disparate systems and Excel files that are labor-intensive are simply not going to cut it.
Additionally, at the pace at which business is ramping up, it’s becoming more obvious that manual people power is not going to be enough to make the right strategic decisions in time. Any time you're working with paper checklists or Excel files, there's an extra step to get that information where it needs to go, delaying analysis and bogging down your capability for agile EHS management.
A centralized and integrated system provides a much clearer overview of where the business is in terms of EHS goals and ultimately provides the data in one holistic view to track performance against EHS goals and how EHS is supporting ESG efforts.
R&C: How can companies align EHS and sustainability to facilitate a holistic approach to ESG?
Adeline: For many companies, sustainability has typically been thought of as separate from EHS; it's time to sideline that notion as it leads to missed improvement opportunities. The two concepts don't need to align as much as they need to fully integrate, especially if ESG efforts are going to be successful. LEGO is a great example of that type of unification.
The company set multiple sustainability goals regarding packaging and materials, all of which required significant changes to operations. EHS was the facilitator, taking responsibility for building a roadmap to the new goals while at the same time making sure the company's rigorous health and safety standards were upheld and enforced throughout the transitions. In other words, EHS provides the planning, measurements, and oversight necessary when implementing sustainability efforts in an ESG framework.
It is also fair to say that companies that integrate EHS and sustainability throughout their business will see far more success with ESG and will most likely attract more potential investors.
R&C: Could you describe the important connections between EHS failures, sustainability, and business resilience? In what ways should companies communicate these issues to stakeholders?
Adeline: Stakeholders don't always recognize EHS and sustainability as major risk areas in a business. Robust EHS programs and their sustainability projects aren't just nice-to-haves, they're key in maintaining optimal business resilience. Even one EHS failure such as a factory floor accident, chemical spill or erroneous report on greenhouse gas emissions can be a destabilizing blow to a company's finances and reputation.
Understanding what is materially important to stakeholders is important to crafting the right communication message. Current and prospective employees may want to understand management’s commitment to EHS and sustainability. Other external stakeholders such as investors, may focus on the financial impact of EHS issues on the bottom line. Companies should look to a data-driven approach to communicating these issues. Disclosing these in terms of key performance metrics and impact to business performance can be very effective.
R&C: What advice would you offer to EHS leaders on supporting sustainability efforts and developing strategies that go beyond traditional compliance? What are the likely consequences for companies that fail to develop these practices?
Adeline: EHS leaders must shift their perception of sustainability from one that simply mitigates environmental concerns to one that leverages sustainability to create value through results like waste reduction and improved process efficiencies. When you view sustainability as a growth tool, it's easier to get stakeholders on board and think outside the compliance-only box to future-proof the business.
Companies that continue to respond to sustainability issues piecemeal rather than integrating it with EHS and overall business strategy are going to find themselves swamped as regulations continue to pile on and investors demand a proactive response. Companies will lose on opportunities to increase revenue, reduce costs, and improve their bottom line.
Christine Adeline is vice president of product management and product marketing at SAI360. She has worked in the EHS software industry for more than 14 years in numerous capacities from implementation and project management to advisory roles at some of the largest organizations in the market. Through working closely with leading industry analyst firms such as Verdantix, Gartner and Forrester, she has an enviable knowledge of the EHS software industry and its vision for the future.