Increased focus to comply with regulations and the need to manage risks is causing companies to adopt new strategies to streamline Environment Health and Safety (EH&S) programs. Companies are looking for ways to reduce the cost of compliance, improve the safety of people, product, and processes while at the same time surpass corporate goals around brand equity and share holder value. Aberdeen Group surveyed the EH&S group at 230 organizations in April 2010 to understand the performance, strategies and execution capabilities of some of most mature and successful EH&S programs in the industry.
Market Pressures and Top Performance Revealed
Environmental, health and safety issues are becoming an increasingly important business concern. As new regulations evolve, internal and external stakeholders are increasingly putting their attention on sustainable business, and the need to stay in compliance to these regulations is at top of mind of these companies. The consequences of not being in compliance with EH&S regulations are drastic. It can result in penalties, fines, damage to the brand image, erosion of shareholder value, plant shutdowns, and in some cases even fatalities. Here are four Key Performance Indicators (KPI) criteria to distinguish the best-in-class from industry average and laggard organizations:
Table 1: Top Performers Earn Best-in-Class Status
|Definition of Maturity Class||Mean Class Performance|
of aggregate performance scorers
of aggregate performance scorers
Source: Aberdeen Group, April 2010
Best-in-class companies are able to effectively manage safety incidents by realizing only 1% repeat accidents and 0.1 injury frequency rate, while at the same time reducing energy consumption by 10%, and performing at 87% OEE. This means that the top companies are not only able to create a safe working environment for their employees but are also able to gain competitive edge in the marketplace by higher operational efficiencies at a reduced overall cost.
From a strategies perspective, there are two major themes that emerge from executing a successful EH&S program, that being: improve visibility into operations and optimizing processes, both being selected by a third of the responding companies as the top two strategies. Organizations understand the importance of improving visibility within operations, and having the capabilities in place to provide visibility to critical EH&S data to the right people, at the right time, and in the right form. Coupled with this, organizations are establishing strategies to use this visibility to optimize their day to day processes such as production, maintenance, and safety, among others.
This strategy aligns well with a certain program manager of a multi-billion dollar healthcare products company. Commenting about their EH&S strategy he states, “our EHS system has been very valuable in helping us better understand our business. We are better able to mitigate risk. And on a higher level, corporate can keep track of what is going on at each facility through the real-time reporting capability – and provide assistance before an adverse event were to occur”
An interesting trend was revealed while analyzing the drivers behind organizations focus on compliance. The research showed that depending on an organization’s maturity class there are different drivers behind their focus on compliance. For the best-in-class, these leaders are concerned with the complexity of managing EH&S compliances across global operations and conforming to the compliance of customer mandates. On the other end of the spectrum, we see that the less mature organizations are more focused on cost.
Laggards see that non-compliance directly impacts their bottom line and they want the pain to stop. In order to overcome the compliance pressures, organizations need to view compliance as more than just a cost-saving exercise, but rather view compliance as a path to better overall performance. Indeed, when organizations are effectively overcoming these pressures, and executing an effective EH&S program, they are more likely to perform at the best-in-class level.
Next month we will run part two of this series, in which we will discuss how best-in-class companies execute the strategies discussed in this article.
Matthew Littlefield is Senior Research Analyst, Aberdeen Group, email@example.com.
Mehul Shah, Senior Research Analyst, Aberdeen Group