Up to now, most manufacturers have looked upon environmental, health and safety (EHS) as a burdensome cost centre. Instead of breaking out their EHS costs and subjecting them to proper accounting, manufacturers have tended to bury these costs in overhead budgets.
Unfortunately, a common result is that far more serious and often unanticipated costs can follow. The penalties for having unsafe work practices are often harsh. A serious property or community cleanup will dramatically impact a firm’s bottom line — or put it right out of business.
The better approach for manufacturers to take, says Deloitte’s Joe Solly, is to view EHS not as an exercise in avoiding penalties, but rather as long-term prevention. Manufacturing leaders should make changes with an eye toward their strategic direction. They should constantly be asking how to squeeze a little bit of value out of every EHS-based initiative.
Solly, a practitioner in the
practice at Deloitte that specializes in
Corporate Responsibility & Sustainability
services, suggests that manufacturers should look at EHS initiatives as a four-part process.
PART 1: Bring EHS up to senior management and the board of directors
Manufacturers who have an effective EHS strategy attach equal importance to the environment, health and safety of their workplaces as they do to all their revenue, profitability and operational matters. Deloitte has helped manufacturers in Canada, the U.S., and abroad set up programs to effectively address EHS issues.
In one case, a multinational manufacturer implemented an EHS program that covers 80,000 staff in 60 countries, and made it one of its three core global business strategies. All of the company’s senior managers, as well as its president and CEO, have signed on to the program. All are committed to revamping the system. “It’s just a different way of looking at everything you do,” says Solly.
EHS must be looked at on a very detailed financial basis. Part of this effort involves environmental cost accounting — breaking out environmental costs, assigning specific budgets to initiatives and making general ledger entries for all related costs.
Sustainable development is also a key part of an effective EHS strategy. “It’s not just how much money you make,” explains Solly. “It’s how you make it and what impact you have on society.”
PART 2: Make EHS part of everybody’s job
In trying to improve EHS performance, companies must make it part of every employee’s responsibilities. One of Deloitte’s manufacturing clients had an EHS manager who performed all accident investigations, corrective actions and problem solving. Unfortunately, the system created a culture of apathy. “A spill would occur and an employee would say: ‘I don’t need to worry about that — that’s the EHS manager’s job,’” says Solly.
But the line manager could be bogged down with issues like throughput, customer delivery targets and product specialization conformance. When all EHS responsibilities fall to a single person, that person may not have the time to ask: How much oil is the company wasting? How can we make this better?
With Deloitte’s help, the company transformed its EHS managers from “drivers” into “navigators” who provide specific advice on a timely basis. “Now it’s the line managers or supervisors who must look at everything they do in terms of product quality, the environment, and health and safety,” says Solly.
PART 3: Integrate your management systems
Many manufacturers, especially in the automotive sector, have been mandated to follow a host of standards: ISO 9000, ISO 14000, QS 9000, TS 16949. A new standard, OHSAS 18000, deals with occupational health and safety.
Complying with various standards is exhaustive and exhausting. Unfortunately, conformance doesn’t necessarily bring management bliss. For instance, duplicate requirements appear in all standards for document control, record control, internal audits, management reviews, employee training and systems for both corrective and preventative action.
The solution, says Solly, is to establish a single, standardized system that satisfies every standard. He suggests companies implement one standard reporting method for all EHS issues, whether it’s an accident, environmental spill or product defect.
PART 4: Commit to continuous improvement
Canada enacted the Kyoto Protocol in February of 2005. Once the government establishes the allowable emissions for every sector, manufacturers will have to lower their emissions accordingly. And in the manufacturing business, energy usage is one area where Kyoto will make continuous improvement necessary.
At most facilities, a plant has meters that gauge usage — but little else. Solly suggests focusing on energy-intensive and inefficient processes and reducing energy consumption. He also recommends companies put together a baseline inventory of their greenhouse gas emissions. That way, manufacturers will be able to determine if they will have surplus credits to sell, or if they will have to buy emissions credits to meet their targets.
Continuous improvement can also be applied in the supply chain. Manufacturers can easily use EHS-type metrics to evaluate their suppliers. Before now, companies have chosen suppliers based on price, quality and delivery. Increasingly, the criteria are: Is this supplier a big polluter? Is it in danger of being shut down and disrupting our supply chain?
With this four-part approach, manufacturers can improve the environment, health and safety of their operations for their workforce as well as their communities. The bonus is that every EHS effort will come back to help the manufacturer in the end. It’s a win-win situation for manufacturers, workers and the environment. And it can be contagious, spreading good EHS habits from company to company. What could be better than that?