Yesterday, we talked about how identifying your organization’s value drivers and linking EHS programs to specific business values can help you promote safety and health in your organization. Today, we identify barriers to the successful achievement of that goal.
EPA identified five primary barriers to understanding the relationship between a company’s environmental performance and financial performance in a 2000 study titled Green Dividends? The Relationship Between Firms’ Environmental Performance and Financial Performance. These barriers may apply to safety issues as well as environmental issues.
Barriers include
- Imprecise terminology for describing EHS performance. There is no common terminology between EHS managers and financial analysts, making it difficult to relate EHS performance to financial performance. If EHS performance cannot be precisely defined, it cannot be accurately measured. The indicators of EHS performance must be defined in the context of an organization’s operational objectives in order to be relevant to managers and investors.
- Uncommon language between financial and EHS professionals for describing environmental values. There is no uniform way to convert industry-specific or company-specific EHS data into a language that will correlate with established drivers of corporate value. Financial analysts, EHS managers, regulators, and environmental advocates each have different professional vocabularies to evaluate and describe the same conditions.
- Lack of technical skills to understand how EHS strategies affect financial outcomes. The lack of institutional means to translate EHS issues into financial terms was the greatest single barrier to integrating information about EHS strategies into financial analysis.
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- Lack of market mechanisms incentives for EHS-related value to a product. There is currently no way to demonstrate an industry-recognized standard of EHS performance that increases a product’s value in the marketplace. Sulfur dioxide emissions trading in the utility and manufacturing industry has shown some success as a market incentive, but the trading model has not yet been proven in other industries.
Why It’s Worth Overcoming These Barriers
According to a study that measured the relationship between workforce health and safety and an employer’s performance in the marketplace (The Link Between Workforce Health and Safety and the Health of the Bottom Line, conducted by HealthNEXT), companies that emphasize employee safety and health are more successful.
Researchers looked at companies that have been recognized for safety and health excellence by the American College of Occupational and Environmental Medicine’s (ACOEM) Corporate Health Achievement Award. These businesses were more profitable than the S&P 500 for a 15-year period from 1997 to 2012, and for a 13-year period from 1999 to 2012. In various scenarios tested, the award-winning companies outperformed the S&P 500, with excess annual returns ranging from 3.03 percent to 5.27 percent.
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