As a decision maker for your business, you're skilled at taking a systems approach to business and seeing things holistically. You see how different departments are all connected and, more importantly, how they all affect your bottom line.
Surprisingly, many executives overlook the Environmental, Health & Safety department when it comes to mapping out how their different types of operations affect each other and their bottom lines.
In fact, EHS management may actually be the bridge that brings all your operations together and can be your entry point into better decision making in all aspects of your business.
Below we'll examine some of the often-overlooked ways that EHS compliance improves your bottom line and the operations of your other departments. If you want a closer look at these concepts, you can download your free copy of ERA's ebook Business Advantages of Oil & Gas EHS (the information and take-aways can also be applied to nearly any industry).
Better Value for Investors - Being Green is the New "In the Black"
You are operating in an era where sustainability and responsible business are not just perks, they are requirements. Stakeholders, potential business partners, and other investors are paying particular attention to your compliance record as part of their valuation process.
As an executive, you are responsible to your shareholders and to ensure you increase the value of their investment and protect it from risk.Today that means making EHS compliance a priority.
Two identical businesses, one with a clean compliance record and one with a history of regulatory violations, won't have the same market value. And while that's not shocking news to most executives, only a few appreciate the added-value of EHS, or monitor and measure their investments into EHS compliance in terms of market value growth.
That's why having a clean compliance record is about more than preventing money leaving your pocket in the form of noncompliance fines - it's really about improving your business' overall value.
Protect Brand Value - Green is Always Marketable
Your customers (and those markets you want to capture) pay attention to your environmental performance as part of their buying decisions. On top of that, environmental watch groups and community groups have increased ability to scrutinize and react to your compliance successes and failures. The strong brand you've worked hard to build can be toppled by just a few small compliance missteps.
That's why we like to frame EHS compliance investments as Reputation Insurance. In the same way you put funds towards other types of insurance, improving your EHS compliance is about protecting your brand's value.
If you already pride yourself on a good compliance record, some industries are inherently risky - in the Oil & Gas industry the public backlash after the Deepwater Horizon event affected the entire industry, even the most responsible businesses.
Whenever there's a major Public Relations disaster, it can usually be traced back to a lack of EHS resources:
- Major oil or chemical spills
- Tragic accidents or death
- Unethical suppliers found in your supply chain
All of these issues can be prevented by having solid EHS compliance management - and that requires an EHS department with the resources and tools to succeed.
Being able to concretely prove you take EHS compliance seriously is the best defense. And that directly translates to improved corporate value during times of industry turmoil, when you need it most.
As a bonus, increasing your corporate sustainability is a marketing gold mine. Your marketing department can turn each incremental improvement you make into another reason to buy your product. EHS projects are essentially Public Relation projects that have the added bonus of improving internal operations at the same time.
Increase Overall Operational Efficiency - Green is Lean
EHS managers are your go-to professionals when it comes to pinpointing ways to improve efficiency.
Unlike other departmental managers, EHS managers deal with a wide range of metrics that measure your entire business' performance. Being able to interpret a wide range of complex operational data, like energy use, water use, and waste generation, gives your EHS department advanced insight into the other parts of your business.
For example, one EHS Manager was able to look at water usage records to determine when and where a pipe had burst somewhere in his large facility - effectively ending months of wasted water and reducing utility costs. No other facility manager noticed signs of the leak because they were only looking at the monthly expenses and not connecting it to the larger picture of utility usage, production, and which sources relied on those utilities.
By increasing your capabilities in the EHS department (like improving data management systems, encouraging specialized training, or better tools for sustainability), you aren't just improving your environmental reporting, you're increasing the department's ability to provide in-depth operational Key Performance Indicators and spot opportunities for improvement.
Here are some of the most common improvements that EHS specialists are pros at implementing:
- Finding materials you can squeeze more production out of - less material cost, more end product
- Standardizing shop-floor procedures to reduce operational costs (one manager we know dramatically cut costs of his business' paint booths by training the staff how to minimize paint use but ensure uniform coating)
- Identifying cost of use and ownership for each and every piece of equipment you use in production
- Finding small sustainability wins that add up to savings each year (i.e. energy efficiency projects)
And as an executive, you'll have superior insight into your business, inside and out: utility usage, waste generation, cost centers, and other essential KPIs all belong in the realm of EHS. If you're not already using the data produced by an intelligent EHS department, you're missing out on valuable information.
Giving you the ability to make smarter, faster decisions about your business produces better profits and lower operating costs.
Is Your EHS Department a Business Driving Force?
We've only touched on a few of the ways that your EHS department can improve your bottom line, both directly and indirectly. The most successful businesses in the world recognize that EHS can be a driving force in creating profits and be a source of continuous improvements - they tap into the big data and specialized knowledge of EHS.
Ask yourself: does your EHS department have the tools and resources it needs to be a profit driver? Is it a source of growth, or does it struggle to get by each year?
Investing in your EHS department makes sense from an executive standpoint: it has an excellent Return on Investment for the entire business, not just the EHS staff. More efficient reporting means more time for improvement projects. Better data tracking gives you superior operational insight and decision making with the right KPIs. Your marketing and PR departments will be given a continual stream of green fuel to improve and protect your brand. The list of benefits to your bottom line is surprisingly large - if you know how to make them a reality.
October 27, 2014