Historically, military forces have struggled when they were too far removed from their supply lines—delivery of supplies became less reliable and easier to disrupt, and armies could find themselves on their own without support if they moved too far afield. In the new, global economy, businesses are discovering that their far-flung supply chains pose similar risks: The further you are from your ultimate suppliers, the greater your exposure.
When your factory is on one continent, your components are coming from another continent, and your customers are located on a third continent, there are a lot of points where something could go wrong—something that could hit your organization hard. In addition to the obvious risks of supply disruption and legal liability, there is the risk to the organization’s reputation arising from people and circumstances out of your direct control.
For example, if your supplier is contracting with a supplier of its own and something goes wrong at that subcontractor’s facility—a hazardous materials release, a building collapse, an explosion—you could face a supply chain failure and liability from the victims of the disaster, both from workers and members of the community. If the disaster affects your stock price, investors may also hold you responsible—investors are increasingly globally connected and less willing to accept high levels of risk in an organization’s supply chain.
As a result, many organizations are finding that it is not enough to strive for regulatory compliance at facilities they own. The need to identify and reduce organizational risk demands a broader approach—the kind of approach that a comprehensive EHS management system offers.
Evaluating Your Exposure
If you want to manage your organizational risk, you’ll need to first evaluate the extent of your exposure. Just how demanding the process is for your organization will depend on your level of organizational risk.
Risk is a concept with multiple components, including the potential severity of a hazard and its consequences. For any supplier, product, or process, organizations must identify:
- The safety and environmental risks associated with the supplier, product, or process;
- Any populations or ecosystems that are at risk;
- The potential consequences of each risk, including an estimate of potential financial impacts;
- Whether the risks are predictable; and
- Whether the risks are preventable.
The information can then be used to:
- Research ways to control identified risks.
- Rank identified risks in order from those with the greatest to least potential severity.
- Rank identified risks from those that will be the easiest to mitigate to those that will be the most difficult or require the greatest investment.
- Rank identified risks from those that are the most to least likely to occur.
- Set risk reduction priorities and time frames for action.
- Allocate resources for risk reduction.
Enter the EHS Management System
In their efforts to manage EHS risks all the way down the supply chain, many organizations are finding EHS management systems to be a valuable tool. There are well-established third-party consensus standards for both environmental and occupational health and safety risks. However, even with guidance from standards like International Organization for Standardization (ISO) 14001 or American National Standards Institute (ANSI)/American Society of Safety Engineers (ASSE) Z10, creating and implementing an EHS management system can be a demanding process.
Could an EHS management system be just the thing you need?
EHS management systems are not new—but the number of businesses that need one is growing along with the global economy. If you’re new to EHS management systems, the good news is that larger organizations have blazed the trail, and you can use the lessons they’ve learned to make implementing your own program smoother and more successful.
Below are four elements that have been identified by the Occupational Safety and Health Administration (OSHA) and by the nonprofit Campbell Institute as critical to the success of EHS management systems.
In order to create a successful EHS management program, make sure that you have addressed:
- Leadership. It won’t matter how much participation you’re getting from workers at lower levels if the program lacks support and engagement at the corporate level. Only at the corporate level can EHS be integrated into overall organizational management strategies and goals and have allocated the human and financial resources that will ensure its success.
- Risk and impact reduction. Regulatory compliance may reduce your risk of an OSHA or U.S. Environmental Protection Agency (EPA) fine—but it won’t reduce the risk of a disaster that falls outside of EPA or OSHA rules, nor will it reduce the impact of a disaster that regulatory compliance alone failed to prevent. A successful EHS management program goes beyond regulatory compliance to identify EHS risks throughout the organization. More, an EHS management program, like other types of management programs (for example, process safety management), identifies risks that occur both during normal operations and during changes and emergencies.
- Performance measurement. An EHS management system is not a “fix it and forget it” undertaking. The system is designed to collect records and use them to evaluate the organization’s performance. This helps to more clearly identify risks and the measures that reduce them. It can also identify opportunities for continuous improvement.
- Specifics. There’s no such thing as a one-size-fits-all EHS management system. The complexity and level of detail found in an organization’s EHS management program will depend on not only the organization’s size but also (and perhaps more importantly) its level of risk and exposure. The most effective EHS management systems are highly specific to the organization’s needs.