For companies, considering EHS (environmental, health, and safety) and ESG (environmental, social, governance) can be beneficial for employees, business, and the environment. Implementing EHS and ESG initiatives can help companies foster safe work environments, prepare for changing consumer and market demands, meet regulatory requirements, and can even benefit a company’s bottom line. Below are a few advantages that can come from integrating EHS and ESG into your organization’s business strategy.
For many industries, there are numerous environmental and health and safety laws that companies must abide by. Increasingly, there are more ESG regulations being enacted, both at state-level and globally, which still have implications for US companies. To stay in compliance with these regulations, there are often monitoring and reporting requirements that may be a hassle for companies to complete. However, not complying with them puts them at risk of fines, lawsuits, and damage to their reputation. Businesses that invest in their EHS or ESG programs are going to be better equipped to abide by the applicable laws. Within these programs, they can assign responsibilities and ensure the necessary resources are available. This may include budget, third-party consultants or analysts, software, training, specialized staff, plans and procedures, and equipment. By integrating EHS and ESG into operations and business decisions, companies can be better prepared to manage regulatory compliance.
While establishing EHS and ESG programs for your company does require budget to maintain year on year, it is likely less than the cost for any negative consequences because of issues stemming from EHS and ESG topics. Fines for regulatory noncompliance can be in the tens of thousands and can accumulate each day you are out of compliance resulting in massive losses for businesses. Maintaining safe working environments can reduce the number of serious injuries that would result in paying out of workers compensation. It also reduces the amount of lost time ensuring companies can operate at full capacity. Investing in training prepares employees for their role, especially if it involves operating equipment or handling materials, which can help prevent accidents and equipment malfunction. Ensuring materials are properly stored and maintained to prevent spills can also avoid cleanup costs. EHS and ESG initiatives often are involved in risk identification and management allowing companies to avoid future disasters. With ESG strategies, companies often set targets to reduce environmental impact, including targets on waste and GHG emissions. Oftentimes, companies will find ways to make their businesses operate more efficiently to meet these goals resulting in reduced operating costs. The cost of managing challenges your business may face almost always will outweigh the consequences.
Making an effort to implement more EHS and ESG initiatives do more EHS and ESG work tends to have a positive impact on employees. Health and safety programs ensure employees are well protected for the environments that they are working in. They also establish incident management procedures that establish corrective actions to avoid future incidents of the same nature. When risks are minimized and employees well protected, it can lead to better safety outcomes and higher productivity. Companies that implement actions to create diverse and inclusive workplaces make employees feel more valued, which may also positively affect productivity. When employees find their work to be meaningful and enjoy the company they work for, it benefits both the employee and employer.
Similarly, employees who approve of their company’s EHS and ESG efforts will be more likely to stay with the same employer and not seek work elsewhere. These initiatives may also be an attractive feature when recruiting potential employees. Hiring and onboarding processes can be time-consuming and costly for most companies so it’s better to reduce turnover and invest in current employees. In addition to avoiding the added cost of hiring, employees tend to improve their skills and productivity over time, so companies get more out of employees who remain with the company for several years.
Like anything, things change. New regulations will come into place and there will be new consumer demands and market trends and businesses need to be able to adapt to the changing landscape if they want to stay competitive. Companies don’t often remain stagnant and will review EHS and ESG programs to determine their success and to develop new initiatives. This gives them the opportunity to assess what competitors are doing, what new regulations are coming into force, industry trends, and risks they might be facing in the near and long term. Getting input from employees and other stakeholders can be beneficial to gain insights into what they see as important and what changes they would like made. This gives them the opportunity to adjust strategies, create new initiatives, and prepare for new regulations. By maintaining this flexibility and adjusting to their business needs, companies can identify and solve problems and generate new ideas to stay competitive in their industry.
By staying flexible, companies have the ability to adapt to changes quickly. But they also find it easier to innovate. If meaningful EHS and ESG initiatives have already been taken, there are fewer steps to finding creative and innovative solutions to new problems. Companies can also push the envelope further and look to do more innovative projects that can help with employee safety, environmental safety, and other areas that fall under the EHS and ESG purviews.
The types of companies that are able to innovate with new EHS and ESG solutions become trendsetters and industry leaders. This helps to attract more attention and good publicity to the company. Needless to say, that type of attention is going to be good for business. Of course, companies that aren’t set up to be innovative and adapt quickly to the changing world aren’t going to become the creme of the crop.
A company’s reputation can affect how suppliers and customers do business with them, which can have positive or negative impacts on the company’s financial performance. ESH and ESG programs often help mitigate larger issues that may damage a company’s brand. Significant workplace accidents, environmental disasters, human rights violations, and poor sourcing of materials can tarnish a company’s reputation. Suppliers may not target them as a customer and customers may not purchase goods or services. Rebuilding trust within your company’s value chain can be a complicated and time-consuming task.
On the contrary, good reputations allow companies to establish relationships with their stakeholders. Companies that go beyond just compliance and have good standing in the market can make themselves more valuable. Establishing a best practices safety culture, achieving B Corp status, manufacturing products with materials that are sustainability sourced and meet quality standards, making commitments to diversity and inclusion, setting environmental targets, and reporting on EHS and ESG can all positively impact how suppliers and customers view a company. These factors can attract new customers and retain longstanding relationships with its current customers and suppliers, positively impacting business.
Risk management is important for any company to avoid potential consequences that could harm the business. Having a strategy that identifies risks from all aspects of the business allows management to build strategies to mitigate them should they materialize. In high-risk industries, risk management is crucial for keeping employees safe and operations running. Part of having a comprehensive ESG strategy involves evaluating climate risks. Understanding how climate risks, such as natural disasters, prolonged drought, and soil degradation, can impact your business and your supply chain can give important insights on how your business may be affected so your business can appropriately prepare for and manage the risks. As ESG becomes more important to consumers and investors, it’s also important to understand the risks of not having an ESG strategy and goals. Additionally, regulatory compliance is a form of risk management as it outlines procedures for industries to avoid disasters such as oil spills, hazardous waste contamination, and worker injuries. Investing in EHS and ESG strategies makes your company more resilient.
In a world that is increasingly dependent on technology, investing in new ideas and strategies may help your company leverage or develop new technologies. EHS and ESG software is a tool used by many companies in a variety of industries to gain insights into their business, track progress towards goals, and maintain regulatory compliance. As companies look to make workplaces safer, they may make improvements to the equipment and technologies they use in operations. If looking to decarbonize, technology is going to be a keystone factor in that effort, and it is likely that we will see innovative new technologies to make processes lower carbon. As companies look to expand upon current EHS and ESG strategies, they will look to find ways to improve, streamline processes, and cut costs, which can often be done using technology.
EHS and ESG strategies are an integral part of a company’s overall business strategy. These strategies capture and plan for additional risks, meet regulatory requirements, and can find new ways to stay competitive. Whether it’s maintaining a strong workforce, creating new products and services, or finding new ways to stay competitive in the market, the case can be made the investment in EHS and ESG is worth it.