While some corporations and organizations have well-thought-out financially driven sustainability programs, others are just beginning their journey, still trying to navigate the waters of ESG (Environmental, Social, Governance) and Sustainability. But chances are, those engaging in ESG and Sustainability reporting are most likely EHS (Environmental, Health, and Safety) professionals. And most likely, that is because many overlaps exist between EHS and ESG data gathering and reporting. Criteria such as emissions, energy consumption, environmental incidents, employee safety, accident rates, policy & documentation, and compliance are critical to effective and successful EHS, ESG and Sustainability programs.
While intuitively, this relationship makes sense, many EHS practitioners do not automatically view their role as part of their organization’s broader ESG and/or sustainability program and initiatives. In this article, we aim to bridge that gap by answering the following questions:
- What is the difference between ESG and Sustainability and what’s the connection to EHS?
- What factors are driving the increased focus on EHS, ESG, and Sustainability programs?
- How do software and digitization impact the reporting of EHS, ESG, and Sustainability programs?
- What are the shared challenges and opportunities across EHS, ESG, and Sustainability programs?
- What is the role of digitization in EHS, ESG, and Sustainability?
What is the Difference Between ESG & Sustainability
ESG stands for Environmental, Social, and Governance and is often used interchangeably with Sustainability. On the other hand, sustainability is broken down into three pillars: People, Planet, and Profit. Although similar, the meaning of ESG and Sustainability vary depending on the stakeholders involved. Consumers tend to be interested in sustainability, while corporate organizations – and their investors – focus on opportunities relating to the long-term viability, or future-proofing, of a business through the lens of ESG and related data collection activities.
ESG is generally the newcomer term between the two and deserves a deeper examination of its core focus areas. A general breakdown is as follows:
Environmental – This includes data and reporting activities focused on factors impacting climate change such as Emissions, Energy Consumption, Water Pollution/Scarcity, and Deforestation.
Social – This includes activities focused on Employee Relations, Working Conditions, Health and Safety, Data Security, Diversity, and Community Relations.
Governance – This area involves a company’s Board of Directors (their structure and diversity), Corruption, Executive Compensation Guidelines, and Hiring Best Practice.
While a little different in their application, both ESG and Sustainability have become increasingly important to companies, investors, and other stakeholders. As such, the need for data collection software is crucial for organizations as they tackle ESG reporting. That is where EHS comes into play. According to a Vertdantix EHS Corporate Survey, 95% of respondents agreed that EHS software would be used to support ESG data collection.
Factors that Drive ESG & Sustainability…and EHS Programs
Many factors are driving the increased implementation of sustainability and ESG programs, including consumer demand, labor relations, investor standards, and government regulations and incentives. Some examples include:
- Increasing pressure from investment firms, boards, and shareholders for businesses to report and act on sustainability data
- Transparency demands on supply chains
- Initiatives that are driven by consumers
- Regulations with financial consequences
- A competitive labor market forcing businesses to re-evaluate their attractiveness to a new generational perspective
If we take a step back and reexamine these factors and examples through the lens of EHS, the connection becomes a little clearer.
- The same investment stakeholders have an eye to the bottom line in terms of waste and utility expenditures, the risk from hazards in the workplace, and a healthy and happy workforce
- Reliable and stable supply chains with the proper chain of custody and quality materials to keep their business operating at optimal levels
- Consumer-led attention to and pushback on unsafe working conditions or manufacturing by-products that impact local health and safety controls as well as local economic resources
- Fines and other financial risks related to improper monitoring and reporting of regulated or compliance heavy EHS activities
- Insufficient training, low workplace satisfaction, high injury & illness rates, and lackluster compensation and benefits impact an organization’s ability to hire and retain talent in a tight labor pool
Reporting: The Crux of Managing EHS & ESG Programs
Anyone working in an EHS field over the last several decades likely has tales of towering collections of binders filled with things like SDS for chemical management, occupational health records, and heavy machinery maintenance records. Managing that data, let alone finding actionable insights was a daunting task.
That was before digitization via EHS software and other tools made it possible to easily collect, organize, and enable insightful analyses of that data. This digitization not only kept EHS programs on track for those who adopted EHS software but also allowed practitioners and leadership to move from reactive management of incidents to proactive approaches to risk identified in the data.
Not only is the data from EHS programs crucial to informing ESG and sustainability metrics but the field has lessons learned in building the maturity of its reporting and analysis systems. Aided by digitized software solutions, the new age and tech-enabled approach most global companies have taken (and now improving and fine-tuning) for supporting their EHS programs is the same path ahead for those working on ESG and sustainability.
Luckily for the folks in the latter category, the hard work of the initial implementation of these tools has already been completed. However, their challenge lies in getting that data into a tool that allows them to not only analyze it from their perspective but also organize it in a way so that it can be reported against various standards like GRI, CDP, TCFD, or the SDGs.
Challenges Shared Across EHS, ESG, and Sustainability Program Management
Considering the overlap of data between them it is no surprise that there are many shared challenges as it relates to EHS, ESG, and Sustainability program management.
Data Chaos – The lack of standardization, organization, and ease of access creates a hectic environment for organizations in the early stages of advancing their EHS or ESG and/or Sustainability program development.
Reporting Redundancy – In the past, metrics for these programs have been documented by a manual process, usually an Excel spreadsheet or a checklist of sorts, and then stored in binders, storage boxes, or hard drives. Those documents were often submitted to different compliance organizations, internal or external, and in various file formats depending on the requestor’s standards. The waste of time and resources on these redundancies becomes exponential with the size of an organization’s operations.
Cost – The overall costs associated with developing and maintaining EHS, ESG, and Sustainability programs can be large. However, the monetary cost, not to mention the impact of bad PR, when something goes wrong or operations are out of compliance is often greater.
Buy-In – While EHS programs have come a long way in gaining a reputation as crucial to an organization, especially during the COVID-19 pandemic, in their early days there was often pushback to implementing them. More often than not, this was due to a lack of understanding of how and why they could positively influence an organization’s bottom line. ESG and Sustainability programs face the same uphill battle from the same lack of understanding.
Opportunities Shared Across EHS, ESG, and Sustainability Programs
Case studies provide clear examples of how using data to inform risk prevention to reduce workplace illness and injuries (e.g. items that are also accounted for in ESG reporting) is effective. For example, Westmoreland Coal Company was able to do just that by implementing Cority’s Safety Cloud solution. The centralized software allowed Westmoreland to take incident investigation from a manual process lacking insights into a world where trend data is quickly available, facilitating root cause analyses, and allowing them to incorporate fixes and resolve issues proactively.
Although costs can be challenging for some organizations, as a company invests in ESG and Sustainability, they also can come full circle to improve support and solutions for EHS.
The Role of Digitization in EHS, ESG, and Sustainability
With the amount of information and data often required, digitization plays a significant role in EHS, ESG, and Sustainability reporting. Professional EHS software solutions that incorporate and support cross-discipline reporting and data sharing, such as CorityOne, provide a central platform for data collection and reporting that can provide a bridge.
Through a powerful integration of EHS functionality within a unified platform, integrated data from various focus areas can be coalesced and reported against sustainability standards, such as GRI, CDP, TCFD, or the SDGs. In doing so, required data can be mapped to avoid redundancy, organized to provide pathways for meaningful analysis, and acted upon in order to meet company or compliance goals. Automated workflows, interfaces to other systems, and the implementation and linking of complex structures are both cost and time-efficient. They also help to accelerate sustainability performance within the company while providing meaningful feedback loops to EHS counterparts.
The new era of responsible business management requires improved management practices, collaborative transfer of data, and appropriate and reliable digital solutions that can successfully accommodate all the nuances of data management. Moreover, responsible businesses must find impactful and meaningful ways to take their insights from the field and into the board room. And in doing so, both EHS and ESG programs earn themselves a seat at the table.
Digitization streamlines data collection and facilitates opportunities for an organization to not only improve its crucial EHS functions but to incorporate those functions, and their mountains of deep data, into the broader alignment of sustainable business decisions, ESG-related attractiveness to investors and other stakeholders, and viability to serve the needs of future generations while still serving the interests of current stakeholders.