ESG Central

This is one of the most frequent questions we get, because many EHS professionals and business leaders are understandably trying to make sense of all the additional attention ESG has been receiving over the past few years.  

We can consider the two main drivers of interest in ESG to be investment and management. Let’s talk a little about each. 

Investment. Arguably, investment decisions have been the major driver behind the mainstreaming of ESG over the last several years, because a growing volume of research and data demonstrates a relationship between higher ESG maturity and better financial performance. For example, a 2020 Harvard study found ESG performance to correlate with Economic Value Added (EVA) Margin, which is the incremental difference in the rate of return (RoR) over a company’s cost of capital. What that means in plain English is that companies with higher levels of ESG performance see a better return on their investments than companies with lower ESG maturity. The same 2020 Harvard study found that companies with the highest level of ESG performance had the lowest amount of volatility in business performance, defined as events that disrupted business continuity or caused a loss of a majority of shareholder value. According to the study, the reduced volatility is a function of avoiding the kind of significant events (e.g., fires, chemical spills, explosions) that can threaten employee health and well-being, disrupt business and undermine share price.  

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Yes, there are. While many people still think of ESG disclosure frameworks as being largely voluntary, there are in fact regulations addressing many aspects of ESG.

First, we shouldn’t forget that EHS is part of ESG, and there is a universe of EHS regulations that company leaders need to know about, many of which create significant work in terms of compliance obligations. For example, in the United States, OSHA issues regulations regarding workplace safety, some of which, such as the HazCom Standard and the Recordkeeping Standard, apply to most employers covered by the Occupational Safety and Health (OSH) Act of 1970. The HazCom Standard requires employers to maintain safety data sheets (SDSs) for all hazardous chemicals, a written Hazard Communication Plan, and a hazardous chemical inventory list, as well as to ensure that all containers containing hazardous chemicals are labeled and that all employees who work with these chemicals receive proper training. The Recordkeeping Standard requires many employers to document workplace injuries and illnesses that meet general or specific recording criteria on Forms 300 and 301, as well to complete, sign and post the Form 300A summary report from February 1 to April 30th of each year. A subset of those employers also needs to electronically submit 300A data to OSHA each year, and all employers covered by the OSH Act need to report certain serious workplace incidents directly to OSHA. There are analogous regulations in other jurisdictions, such as in Canada, which has the Workplace Hazardous Information System (WHMIS) Standard for chemical hazard communication and provincial worker’s compensation board requirements to report occupational injuries and illnesses.  

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We’re getting that question quite a bit, because it seems that many EHS professionals are learning about ESG and are either being “voluntold” to manage their company’s ESG programs or realizing there are many professional development opportunities and career pathways open to the professional who makes the effort to learn about ESG.  While there’s no universally applicable answer to this question, we can give a few tips based on our own subject matter expertise and awareness of common organizational pain points. 

First, master the foundation of EHS. As you know, you already have plenty of EHS tasks to manage, like investigation of injuries, development and tracking of corrective actions, management of safety meetings and training, inspections, keeping up with your chemical management and hazard communication responsibilities, and completion of reports, some of which may stem from regulatory requirements. Many EHS professionals are struggling to manage these tasks without the tools or support they need, which makes it difficult if not impossible to start taking on additional ESG projects.  

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The International Organization for Standardization (ISO) develops some of the most widely used global standards outlining guidelines and general practices for many areas of business management. The standards they publish that end with a “1” are intended to be used by businesses for certification purposes – meaning that they go through a multistep process of improving their management practices to confirm they have the elements in place required by the standard, then undergoing certification audits by accredited third party organizations. Other ISO standards that don’t end in a “1” can be used for guidance purposes, often in conjunction with a major standard.

Two very relevant ISO standards in the EHS & ESG worlds are:

• ISO 14001: the international standard for Environmental Management Systems (EMSs).  
• ISO 45001: the international standard for Occupational Health & Safety (OH &S) management systems. 

Both standards have a few traits that make them very useful as roadmaps for navigating the pathway from EHS to ESG. For instance, they task an organization with looking at the full context of their operations to determine factors that can affect their environmental or OH & S performance, and ISO 45001 additionally stresses the importance of “consultation and participation” of all workers – not just managerial level employees.  

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