In this post, EHSQ Alliance Affiliate, Enhesa, provides best practice solutions for handling staffing challenges, preparing for the impacts of acquisitions/mergers and divestitures/de-mergers, and getting leadership commitment.
By Tjeerd Hendel-Blackford, Head of Thought Leadership, Global EHS Regulatory Compliance
(Originally published as Volume 1, Volume 2, and Volume 3, by our EHSQ Alliance Affiliate partner Enhesa. Republished with permission.)
Greetings reader! Thanks for joining us on the first volume of the 12 Best Practices of Compliance Solutions Series.
Given the extensive research we have undertaken, and experience that our team at Enhesa have in this area, we are going to make some assumptions about you…
- You are a seasoned EHS (environment, health, safety) and/or Sustainability (and possibly even a Quality management) professional.
- You work for a multinational company that operates factories, sites or offices in many different countries around the world.
- You are in some way responsible for ensuring that a particular site; sites within a region; or all of your global locations – are doing their best to comply with locally applicable EHS laws.
- The chances are that your company has a (relatively) small corporate EHS team, who are based at your company HQ, and that you most likely have regional and then individual site personnel who are responsible for EHS management.
- If your company has its HQ in North, Central or South America – it is our experience that you will most likely have some form of corporate EHS audit program in place – whereby you will send in 2nd or 3rd party auditors to your global sites (or select, higher-risk) sites – and do a spot-check on their EHS compliance – either with corporate standards, local legal requirements, or both.
- If your company has its HQ in Europe, Asia, Africa or Oceania, our research shows your management of EHS compliance is most likely based on some form of management system standard – such as ISO 14001 or OHSAS 18001 (soon to be ISO 45001). As part of this approach your sites will be required to have some form of register of applicable laws in place and be able to demonstrate awareness with those laws, and be able to demonstrate compliance with them. You may, or may not, have a system in place to verify your compliance with those laws…
- Regardless of your approach, the people managing your company’s compliance with EHS laws are most likely not lawyers.
- Your team around the world will have many other EHS issues to manage in their daily life beyond compliance with the laws, or staying on top of regulatory changes. EHS compliance is an important component of any EHS program, but it remains a small part of a big puzzle. Your time and resources are precious and you need to balance what you spend your time on, based on the risks you face.
- You are under pressure to balance the peace of mind that your EHS compliance approach (whatever that is) with your departmental budget. Whether any of us like it or not, EHS is too often still considered an overhead…
- The final assumption is that you are open to improving and enhancing your approach to EHS compliance – to be more efficient and effective – at both individual site level – and all the way up to corporate…
How many assumptions did we guess correctly? We hope to address each of the challenges you face, one-by-one throughout this series, with best-practice advice derived from over a quarter of a century of support to global industry!
VOLUME 1 - STAFFING RESOURCES & DEPARTMENTAL HEALTH
Issues around employee turnover, the constant battle to justify resources (and save on them wherever possible) and how best to structure the EHS functions are familiar challenges to our clients. However, the starting point of any program needs to be the right people in the right roles. They need the qualifications, skills and importantly, motivation to do well. This is, of course, easier said than done and the EHS domain, in particular, has its own set of specific challenges in this regard. Sometimes the truth can be painful, and one of those challenges is that EHS is not always seen as the “sexy” career option.
To set the scene around some other challenges, we often hear variations on some, all, or a combination of the following situations regarding corporate EHS department structure:
- Your company operates a “lean” corporate department – perhaps with only a maximum of 10 people fulfilling responsibilities around Compliance; Continuous Improvement; Industrial Hygiene; Remediation; Sustainability; Security, Environment…or variations thereof.
- The Corporate EHS Department tends to be supported by a larger number of Regional or Business Unit leads – who may, or may not be – full-time EHS professionals.
- In global multinationals, this team will be often responsible for supervising and supporting site-level EHS representatives across dozens, or even hundreds, of manufacturing sites (as well as offices, warehousing, labs, etc.).
- Corporate/regional managers will not be local EHS regulatory experts- and in many cases, will not have local language skills – but they want to know that all their locations are, at the very least, doing all they can to be as compliant with applicable laws as possible.
- Site-level personnel are likely to have some awareness of the EHS laws that apply to them – but they are unlikely to be lawyers or have regulatory experience; will not have resources to stay on top of regulatory change and they have plenty of other important EHS-related tasks to fulfill other than compliance with the law.
- “Brain drain” – With staff departures (through retirement or other reasons), an organization can often lose a lot of knowledge and expertise, particularly when it comes to knowledge of EHS regulatory obligations and compliance practices.
Another issue concerns who your EHS Department is actually staffed by. Again, with our clients there are a number of approaches and considerations, with the related challenges, that come up time and again:
- At the corporate level, EHS departments are typically staffed by professionals who have specialized in EHS following a career in (Chemical or Process) Engineering, Manufacturing, Quality or Security.
- At regional/BU level it will be a similar story, with managers often recruited internally having been in a site or country-level role previously.
- Most EHS positions require at least a college degree.
- EHS roles are difficult to fill by generalists as it is quite a specific subject-matter – many EHS staff may not have any EHS (or specifically EHS regulatory) experience.
- Most EHS-personnel across an organization will only deal with EHS on a part-time basis – and will have other responsibilities around Quality, Security, Sustainability and Facilities Management. As a result, people are asked to do a lot, often with limited time and resources.
- Turnover can be high – we have evidence from one of our clients that their EHS department has the second-highest rate of turnover of any department in their global organization.
- EHS can be seen as a “peripheral” function, and perhaps is not as attractive a career path as others for young graduates.
- Finally, it is worth noting that in large organizations, EHS can often be managed differently under different departments or divisions of the same company. This means that it can be hard to plan, hard to get a sense of overall compliance, and companies will struggle to have consistent visibility of their compliance status across all of their business units, operating locations and real estate (for example).
Drawing on our experience of working with corporate, regional and local EHS departments over the years, here are a few examples of how leading global companies address their EHS staffing and departmental structure problems:
- This is also a challenge in its own right! However, as much as you can influence this, there needs to be leadership from the top of the company – ensure that EHS is integrated into the business (right from the top, down to the bottom, and vice versa). The CEO and their C-suite sets the corporate tone, strategy and commitments. Although the C-suite often sit atop a huge organizational pyramid, the growing importance of corporate and brand reputation means that EHS is increasingly being heard at the top table. It is also possible to influence the views, and therefore priorities, of your company’s leadership by demonstrating the benefits, in real terms that your department brings to the organization’s bottom line.
- Avoid departments becoming victims of their own success (i.e. having budget cuts if accident/incident rates drop to the point where the perceived risk is less). Make your department visible by demonstrating that EHS provides assurance, reduces risks and keeps your name out of the media for the wrong reasons.
- Structure your EHS compliance program around an integrated management system (IMS) – to ensure continuity and clarity in case of employee turnover.
- Make it mandatory for people to manage compliance using the same processes and systems – if you want a truly standardized global approach, everyone needs to be on the same page.
- Regulatory compliance is not everyone’s cup of tea and they have many other tasks to stay on top. Where appropriate, outsource certain elements of your compliance program and give your teams the tools, knowledge and training they need.
- Implement a global minimum standard on compliance performance. This can be based on self-assessment and/or audit findings or close-out numbers, for example.
- Encourage and foster collaboration amongst facilities with similar operations and processes.
- Potentially get buy-in from facility personnel by assigning specific EHS tasks to personnel outside the EHS department.
- Many companies will hold regular internal EHS/HSE conferences when they get teams from different geogrpahies together to foster discussion, teamwork and learn from each other and outside presenters. This is a great way to bond and enhance your EHS team.
- Some of our clients have an “EHS Champion” program, where they will identify employees ‘on the shop floor’ who show a desire and aptitude for EHS. This can be a great way to enhance and guide people in their EHS careers.
- I have spoken with one VP of EHS who takes great pride in the fact that he has been to more of his companies sites than any other Manufacturing Operations executive, this has greatly enhanced the profile of EHS within the company and solidified the company’s dedication to it – it has had a galvanizing effect.
There is no one magic answer to the challenge of EHS staffing and departmental structure. Each organization will have its own specific challenges in this regard. Some turnover will be inevitable. However, with global teams communication (face-to-face) where possible is crucial. It is also critical to have clear consistent systems and tools in place that facilitate continuity and make it easier for people to do their jobs. Making EHS a high-profile, valued department is not always easy, but if EHS is rightly considered as part of the overall risk management, business continuity and governance of your organization, it makes this much easier.
VOLUME 2 - THE IMPACTS OF ACQUISITIONS/MERGERS AND DIVESTITURES/DE-MERGERS
The challenge can probably be summarized in one word: “change”. Enhesa has been in business for almost three decades and we have seen many companies grow or shrink in that time. To name just a few examples; Alcatel merged with Lucent Technologies; GE sold off its plastics business to Sabic; Johnson Controls spun off its automotive interiors business, which became Adient; Shire merged with Baxalta; and Dow and Dupont are merging before then splitting into three separate companies. There are daily examples. Needless to say, with all of these acquisitions, mergers, divestitures and de-mergers, company EHS compliance programs can face a number of challenges. For example:
- Companies can explode in size, in terms of locations and operations, virtually overnight (or of course, decrease in size). It is a common occurrence that global EHS managers don’t actually know with 100 percent certainty how many sites they are responsible for across their company’s entire portfolio. Obviously this could lead to situations where sites are not supported, are not yet integrated into a corporate compliance program, or indeed corporate (EHS) culture.
- When companies split or merge it can create an atmosphere of turmoil and uncertainty (not only in EHS), which could lead to gaps in EHS compliance at every level of the organization.
- Organizational changes can lead to a lack of a clear program and leadership in place for several months – and we have witnessed this happen over even a year or two.
- A corporate downsizing can often lead to decreases in EHS department resources and personnel – we have even witnessed the complete removal of an entire EHS department at some companies in the past. A corporate restructure gives an opportunity to look at things anew and start with a blank slate.
- It is common for companies that grow rapidly through acquisition to end up with a multitude of different solutions or even competing solutions to help them manage their EHS legal compliance across all of their regions and sites. Sites can often be wedded to the systems and processes they have in place and be extremely reluctant to change. The challenge is how to go about consolidating and standardizing processes across your expanding organization.
- The reorganization of resources can also directly impact the continuity of pre-existing programs as people in key roles may be moved from one plant, business unit or division to another – taking their knowledge and experience with them – and leaving a gap to fill. Many companies fall behind on updating their written Standard Operating Procedures (SOPs), often using old company names and contacts, which can be super easy for regulators to spot if they come to inspect.
- Transition can also be challenging on a personal as well as professional level for EHS departments. Conflicts and tensions can arise.
- Businesses are increasingly changing what they do…in the digital age a lot of companies are fundamentally re-examining the products and services that they offer. This means that the types of processes and operations that EHS personnel are required to manage day-to-day can also change dramatically – again opening up a possibility of gaps in experience and knowledge.
Concerning the explosive growth or reduction in size of companies there are a few steps that we have witnessed leading global companies take to face the problems that result. Here are some examples:
- In the event of a merger or divestiture leading to a restructure of the EHS function, it is important to have a clear transition plan in place for your EHS compliance program. Make it clear who will do what, where, when and how.
- EHS compliance is typically a very important aspect of due diligence prior to the decision taken of whether to buy or sell particular company assets. This importance could be leveraged to ensure that EHS considerations are at the heart of consolidation or restructuring efforts. It is an opportunity to demonstrate your value to the organization.
- Make sure to identify, upfront, the leaders, structure, key people and systems you want to use in your “new” organization. We saw a good example of this when Johnson Controls divested its automotive interiors arm – which subsequently became Adient. To ensure a smooth transition, Adient virtually cloned the program they had been used to at JCI. There is no need to re-invent the wheel if you don’t need to.
- Adopting a lean approach is fine – but make sure it is efficient and effective with the right people. Having a small corporate EHS team can actually be beneficial in some ways as decision-making can be more streamlined and effective. It can also foster ideas, innovation and challenging the normal way of doing things.
- A clean slate, and fresh pairs of eyes actually present a fantastic opportunity to challenge and change “how things have always been done”. Look at the big picture across your organization in terms of existing EHS compliance programs and evaluate the approach that will provide the greatest consistency (it may a good opportunity to introduce a new global, coherent system and approach)
- Use an easily configurable compliance tool whereby you can add (or remove) facilities; set up and administer user access rights to facilitate continued compliance management during the transition in your organization. Make any transition as smooth as possible with scalable/flexibles tools and services.
- Communication, communication, communication! Make sure that your team is informed of what is happening in terms of a restructure. This will keep your team engaged and motivated.
In summary, to ensure business continuity, corporate governance and the management of risks presented by organizational changes, it pays to invest in an EHS regulatory compliance solution that is configurable, scalable and easily implemented and adopted for new users. This will enable the ripples of change to be minimized and for the management of compliance with EHS laws, globally, to remain a steady ship on choppy waters.
VOLUME 3 - GETTING LEADERSHIP COMMITMENT
This is the million-dollar question: How do you get senior corporate leadership in your company engaged in EHS regulatory compliance as a value proposition to your organization? There are a number of sub-challenges to this question, including:
- Of course, any CEO’s ultimate responsibility is to his shareholders. Regardless of whether it is justified or not, EHS is often seen as a cost-center.
- C-Suite executives will rarely have experience managing EHS. This is highlighted by the fact that extremely few MBA and other management programs have any kind of focus on EHS as a fundamental part of doing business.
- In many companies this challenge is exemplified (and amplified) by the fact that EHS may not have a direct reporting line to the CEO/C-Suite. This often raises the question of where the EHS structure falls within your company. Is EHS best handled by Legal? HR? Chief Sustainability Officer? Compliance & Risk Officer? EHS can impact each of these areas.
- If EHS is not taken seriously, leadership risks being reactive if there is a negative event or incident. This can have major repercussions if an adverse event takes place that could damage the company’s reputation and finances, both long and short-term. You may have engaged current leadership, but a (sudden) change in leadership can lead to changes in priorities and different ways of doing things—which can impact priorities and budgets for EHS (and other departments).
- Leadership can change, and change frequently. CXOs and CEOs all must retire at some point. Executives don’t typically stick around with one company for their entire careers—they come in with a mission and a fixed-term contract and when these are completed—they move on.
- The circumstances and context of your company’s overall corporate strategy will likely have a huge impact on resources for EHS. If a company is struggling, tightening belts and seeking simply to stay afloat, it is a real danger that corners are cut and EHS slips further down the slippery slope that leads to the C-Suite door.
- These questions are exacerbated by the fact that the benefits of an EHS program can be hard to visualize/demonstrate.
- It can be hard to compile clear data points, especially in environmental compliance.
- It is extremely difficult to explain and assign a cost to noncompliance that does not result in penalties or jail time (think brand reputation).
Clear commitment to EHS from company leadership is vital. If EHS is part of the key strategic priorities of the business (i.e. it is integrated into corporate policy from the CEO, right down to the lowest level)—it sets the tone for success. How do you achieve this? Here are some ideas:
- Best-in-class companies structure their EHS programs around (global) integrated management systems, such as ISO 14001 and soon-to-be-adopted ISO 45001. Under the new standard structure of ISO management systems, there is a renewed focus on the importance of leadership. Leadership need to be involved for companies to maintain their certifications. Certifications are increasingly an essential part of working with customers and suppliers. Systematic management of EHS issues is increasingly a must have, not just a nice to have. With the focus on leadership, there is no avoiding their need to be engaged and involved.
- Recent regulatory and judicial developments mean that there are increased prosecutions of company managers and directors for EHS failures. These failures are often put down to a failing corporate culture.
- Growing bodies of evidence indicate that CEOs of companies taking on the challenge of sustainability, social responsibility and employee welfare outperform those that don’t.
- There are various resources out there to help you make the business case clearly and succinctly for proactive management of compliance. Ask your EHS-related consultants/service providers for documentation or presentations to help you. Use existing resources; there is no need to reinvent the wheel!
- Highlight and communicate the impacts of EHS on other corporate departments and where synergies lie. For example: Operations, HR, finance, legal and insurance all benefit from managing compliance with EHS laws.
- Compliance metrics, enforcement statistics and other resources, such as insurance and worker compensation costs, can be useful to help persuade of the importance of managing EHS as something impacting the bottom line.
- Use clear, concise resources that allow clear reporting and data analysis. Keep plugging away and getting results! Do the right things well and make communication a large part of your program, so that the work you do and value it brings does not go unnoticed.
- Encourage environmental and safety communication from non-EHS leaders to the rest of the company and the outside world. This encourages the development of a workplace and corporate culture that can also help with your marketing and branding.
If leadership are on board with EHS and the value it brings, from day one, then it will have a positive impact right down through the organization and your job will be made easier.
However, if leadership in EHS is not coming from the top of your company, you probably have a mountain to climb in catching the attention and buy-in from the C-Suite. There are a variety of steps you can take to try to get commitment from your corporate executives; each of these revolve around making a business case and talking in terms of shareholder value, business continuity, corporate governance & reputation, risk management and sustainability.
Enhesa helps global multinational companies be compliant with, and stay on top of, Environmental, Health & Safety (EHS) Regulations wherever they operate. Enhesa’s in-house team of multilingual regulatory analysts provide clear, concise and standardized content and insight on current and future EHS regulatory obligations in more than 286 jurisdictions worldwide. Enhesa’s Compliance Intelligence and Regulatory Forecaster services can be provided as an automated data feed - integrated with the world’s leading EHS software platforms, such as Intelex. Enhesa has offices in Brussels, Washington, D.C., Tokyo, Shanghai and Toronto. For more information, please visit enhesa.com or email firstname.lastname@example.org
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