BP has paid $25.4 billion in environment, health and safety cases brought by federal regulatory agencies since 2010, according to a database that tracks major EHS violators. But the oil giant isn’t alone in its staggering EHS compliance costs.
Seven other major firms — including Anadarko Petroleum ($5.2 billion) and GlaxoSmithKline ($3.8 billion) — have shelled out more than $1 billion because of federal EHS violations in the past five years. The database includes some 100,000 cases with penalties of $5,000 or more initiated by the EPA, the Occupational Safety & Health Administration and 11 other agencies, including cases referred to the Justice Department.
Effective environment, health and safety programs, however do more than help companies manage risks and drive compliance. Proactive EHS integrated with sustainability programs also helps firms make money and save money, according to an Ernst & Young report.
Make Money, Save Money
The report says in addition to decreasing the cost of compliance and related insurance and injury costs, robust EHS and sustainability programs help companies reduce raw materials used and cut waste and energy used in production, which all lead to cost savings. EHS programs can also lead to increased revenue “by helping to enhance [a company’s] reputation with customers, the public and other key stakeholders. In creating an atmosphere of improved employee morale, it also makes it easier for companies to recruit and retain top talent — and put themselves in better position to win in the marketplace.”
This also translates into opportunity for EHS providers, where the market is seeing increased spending on EHS consulting and software services. A Verdantix report published earlier this year forecast the global market for business and IT consulting services related to EH&S information management and EH&S software will grow from $475 million in 2015 to $817 million in 2020.
IHS, a leading EH&S software brand according to Verdantix, says effective EHS management requires internal and external reporting to a wide range of stakeholders about everything from meeting compliance and customers obligations to improving share price. “Strong EHS programs require sophisticated reporting, which requires information management systems, people and standardized processes,” says J. Scott Lockhart, senior vice president, IHS Operational Excellence & Risk Management.
The result is increased operational oversight. With this comes “insight needed to address critical risks and act upon predictive indicators to drive behavioral changes and improve operational performance,” Lockhart says. “Everyone from the CEO to the plant operator shares in the rewards from improved clarity, including better access to capital, enhanced corporate sustainability and greater long-term shareholder value.”
To help EHS professionals and executives determine how sustainability can bring value to their business and supply chain, the Global Environmental Management Initiative last month published the Sustainability 101 Quick Guide. The guide includes five action steps as well as member-provided case studies and recommended resources.
Effective EHS programs bring value to companies from multiple directions, says GEMI chair Bill Gill, Smithfield Foods’ assistant vice president, environmental affairs.
“Many leading companies are building long-term value from sustainability programs as a way to examine their use of resources, social impacts, and life cycle efficiency to reduce risk and cost, as well as create significant new growth opportunities through innovation in new technologies and business models,” Gill says.
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