Companies with high sustainability and ESG performance have shown better resilience during times of crisis, lower risks, and higher returns for investors. Poor performance can significantly affect a company’s reputation and stock price. As an essential metric for investors and capital markets, a robust sustainability and ESG strategy is a foundation for sustainable value creation and helps ensure businesses secure access to fresh capital investment.
The critical relationship between PSM and ESG
Since the day your asset became operational, its process safety risk exposure began to change. Impairments, deferrals, overrides, Management of Change issues, the status of safety-critical equipment, and how well processes and procedures are followed have a cumulative impact on operational risk. Unavoidably, risks are often managed in different parts of your organization.
Not having a clear view of all factors that impact operational reality results in operational inefficiencies, long wait times for frontline work teams, unplanned downtime, and the potential for process safety losses. Including Process Safety Management in your ESG program raises vigilance of the program.
The time to act is now. Management of personnel working in hazardous facilities is a complex process. If a process safety incident harms people, the investigation and determining the cause can negatively impact social performance and result in litigation and fines. Additionally, equality, social cohesion, social integration, and labour relations are all affected.
If a company gains a reputation for having poor process safety strategies that result in incidents, it can be fined by legislators, and its EHS governance process can be questioned by shareholders. Additionally, as customer expectations for transparency and ethical partnerships rise, companies should anticipate greater scrutiny of their ESG performance.
How Process Safety Incidents Impact ESG Metrics
Process safety incidents have a cost to the environment, air and water, to the society for workers and surrounding residents and to the business governance and stakeholders in poor ESG reporting and share price drops. The effect on ESG of a Process Safety incident will be a point of focus and could justify more invested capital available for the provision of people, processes, technology, and data to improve process safety management.
- Environmental: Leaks, emissions, and contamination harm ecosystems and inflate your carbon footprint across Scopes 1, 2, and 3.
- Social: Work-related fatalities, serious injuries, and tracking of near misses.
- Governance: Economic performance, litigation risks, investigations, fines, and stakeholder scrutiny can damage brand value and create long-lasting governance questions.
The Environmental Protection Agency imposed $4 billion in criminal fines and more than $14 billion in Clean Water Act penalties and compensation for natural resource damage from the Deepwater Horizon explosion, fire, and hydrocarbon release on April 20, 2010. These costs would negatively affect ESG performance.
What Industry Leaders Are Saying
In recent Sphera Process Safety Reports, organizations were asked “where do you see process safety management fitting into your company’s ESG program?”
The responses revealed both recognition and concerning gaps: while 60.48% saw the governance connection and 55.69% recognized environmental implications, nearly one in four organizations either don’t have an ESG program (13.77%) or believe process safety doesn’t fit within their ESG framework at all (9.58%).
This disconnect becomes costly when reality strikes because while companies may not plan for process safety within their ESG strategy, process safety incidents don’t respect organizational boundaries.
Building an Integrated Safety and ESG Strategy
To navigate these challenges, companies must adopt a holistic approach that integrates digital technologies and strategic risk management practices for Improved ESG and Process Safety. Knowing you have incidents is one thing, pro-actively mitigating the reasons and causes of them over time is another – it takes business process maturity across a multi-disciplined, multi-matrixed team for success.
Key strategies include:
- Comprehensive Risk Management: Leveraging real-time data and analytics to gain a unified view of risks and their impacts. This approach ensures all stakeholders are informed and proactive in mitigating potential issues.
- Enhanced Decision-Making: Utilizing digital tools to improve decision-making processes, ensuring safety and operational efficiency are prioritized.
- Effective Communication and Collaboration: Promoting better communication across departments and teams through a common digital platform, fostering coordinated and effective safety measures.
- Silo Elimination: Breaking down information silos to ensure that all relevant data is accessible and actionable, facilitating informed decision-making at all organizational levels.
- Empowering Frontline Workers: Providing those closest to the plant floor with the necessary information and tools to manage operational risks proactively. This empowerment is crucial for maintaining asset integrity and preventing accidents.
- The Right Data: Having the right spare parts, tools, PPE, and skills available when needed ensures timely repairs on critical equipment. Effective operations require comprehensive data management that include EHS incident/accident reporting systems that provide critical data to prevent injury and death. This demands good, clean, comprehensive, consolidated MRO master data across all sites and ERP systems for effective ESG and PSM performance.
