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The Keys to Building A Strategic EHS Framework for Enterprises

Risk cannot be overcome, at best it can be managed. Today, enterprises navigate in an environment of risks across each domain of their business. Environment, Health & Safety (EHS) risks are critical and need to be managed well for effective functioning and success of any business. To emphasize this risk, United Nations International Labor Organization (ILO) reports that estimated 2.3 million people die every year due to work safety and health related reasons. 2.3 million is the population of Houston, the fourth biggest city by population in the USA. It is critical that the EHS risks posed to enterprises are addressed for a sustainable, long-term future of any company and the communities it serves. Building a strategic framework to manage these risk is a must-do for every company operating around the world, not just for the large enterprises, and it is an important to have an effective, sustainable and long-term approach in building this framework.

Understanding history helps us avoid the same mistakes, but even after many well documented disasters many companies still tend to delay putting in place a strategic framework to manage EHS risks. The Tokyo Electric Power Company was criticized for ignoring early warnings regarding their Fukushima Nuclear Power Plant, and post the earthquake in the area, more than 2 lac people were evacuated from the area with long term radiation effects not only on the employees of the plant, but the communities surrounding it. Apart from this, there are other events with disastrous consequences; one from recent memory would be BP’s Deepwater Horizon oil-rig explosion in 2005, which killed more than 11 people and had a lasting damage to ecology, marine and bird life in the area. From a business perspective, these two events cost the companies an aggregate loss of USD 77 Billion with a drastic impact on their share prices.

Before building a framework to effectively manage EHS risks, we must first learn to understand the risks associated with each business.  The risks associated with each business differ in terms of the industry they operate within, but when building a risk compliance program, every risk is just as important as any other. Before organizations look at managing the risk, they need to understand ways to understand all the risks possible and identifying the root, fundamental method of each risk to address the same.  When enterprises can effectively understand the risks, they will be able to manage them effectively, consistently, and as a standard business process.

In India National policy on EHS focuses on the protection of the environment, reduction of health risk at workplace, all without compromising sustainable growth of business Some of the regulations in this context are Environmental Protection Act 1986; 2010, Chemical Accidents Rule 1996, Hazardous Waste Rules 2008, 2016, National Green tribunal 2010, Bio-medical rules 2016, plastic waste management rules 2016, The Air Act 1981 and water prevention and control of pollution act 1974.

Industrial Health and Safety comes under the aegis of the Govt. of India: Ministry of Labor and Employment. The key regulation to be looked into is the Factories Act, 1948.

Despite the regulatory framework in place, the key challenges in India have been

  1. Lack of regulatory compliance due to difficulty of regulatory authorities to monitor industrial clusters

  2. Rapid industrialization leading to major manufacturers subcontracting various manufacturing processes to smaller suppliers. Suppliers generally do not have stringent EHS policies and processes in place.

    1. Illegal units running in residential areas

    2. Difficulty in effectively monitoring areas of operation (small-scale and other illegal units)

  1. Proliferation of auditors of ISO 14001 and OSHA 18001 has led to an ‘audit raj’, besides widespread ‘one-time inspection’ and audit fatigue, and a lack of focus on continuous performance improvement

Access to global markets has led to rising awareness of EHS requirements. Basic minimum being:

  • Comply with applicable EHS laws and regulations

  • Prevent workplace injuries and illnesses, and provide a safe and healthy working environment

  • Assess EHS impacts of new activities and products

  • Reduce use and release of toxic and hazardous materials

  • Ensure EHS systems and performance are an integral part of overall operational strategy

Several EHS incidents, starting with Bhopal Gas tragedy to the pharma industry effluents discharge in Andhra Pradesh, to how Indian cars have been built on an-assembly line of broken fingers, the fire at Rana Plaza in Bangladesh has brought EHS to the forefront.

Companies now have a deeper understanding of EHS risks, but beyond that they need to manage the EHS function more strategically and effectively. To have a consistent effort in mitigating and managing these risks, a process needs to be put in place, so risks can be parameterized as KPIs, which can be monitored, measured and acted upon in real time. Risks have to be managed dynamically and continuously, and a framework created with the use of technology to manage them in real time, Technology disruption has led to cost effective digital platforms that empower organizations to monitor, measure and manage risks on a real-time basis. This is an opportunity to build the necessary organizational capability to effectively act on critical EHS risks in this risk-prone environment, and become a globally competitive business.