See EHS compliance as your starting point to ESG reporting

What does EHS compliance have to do with business sustainability? Only everything when it comes to a strong foundation for your ESG reporting.


by Jillian Stacy

Perhaps the most important contribution that EHS compliance makes to ESG reporting is the evidence.

EHS compliance is so much more than it used to be. Beyond being your company’s first line of defense protecting employees and the environment – this critical data is also your first step in other business initiatives. There is a growing push towards certification and mandatory reporting linked to sustainability, and particularly environmental, social and governance (ESG) reporting.

And the key to staying ahead of that curve is your current program to manage environmental, health, and safety regulations. You are likely to have plenty of data and metrics that can be repurposed without much pain – and more than that, it can keep your sustainability reporting on par with future progress.

Looking back at sustainability reporting and EHS compliance to date

If we look back to the early days of sustainability reporting, it was a bit of a free-for-all. There were few standards or mandatory requirements. Companies could basically report what they wanted under corporate social responsibility.

However, investors became interested in ESG issues, and the big investment firms started to make noises about the difficulties of making investment decisions without reliable information. They pointed out that it is very hard to recommend one fund over another when you cannot directly compare their activities. Over time, this has led to more regulation and standardization around ESG reporting.

There has also been a significant change in stakeholders for ESG reporting. The early corporate social responsibility reporting was mostly for marketing purposes. Now, however, ESG reporting affects investment, and it is therefore the domain of the CFO. Like financial reporting, ESG reporting must be evidenced and audited.

Building on success in EHS compliance

The upshot of these changes is that firms that started ESG reporting early are in a strong position. They already have data that they have been mining across the company. They have people dedicated to reporting, who know how to pull the data together and interpret it. The precise requirements may have changed, but the sources of data have not.

What about companies that had not previously been required to report on ESG issues? Here’s the point: ESG reporting is very closely linked to EHS compliance. There is a lot of crossover of topics—and not just environmental. Plenty of workplace wellness and labor practices translate well into the ‘social’ pillar of ESG, and the practices required to manage EHS compliance are a strong element of governance. Companies that are new to ESG reporting can therefore build on their history of EHS compliance.

EHS compliance as a head start on ESG changes

There are some changes to manage when it comes to sustainability reporting, particularly the requirements to have good, reliable data. There may also be areas that were not being reported before. However, a good EHS compliance audit and overall compliance program is an excellent starting point for meeting ESG reporting requirements. It will tell you what you are doing well, and where you might need to focus more effort. You can also see what is likely to be feasible. For example, if you are not meeting air permit requirements, it is going to be extremely hard to cut carbon emissions by 50%.

Perhaps the most important contribution that EHS compliance makes to ESG reporting is the evidence. EHS compliance requires good metrics to prove what is going on. The new anti-greenwashing requirements in ESG place similar expectations on companies’ level of evidence. The upshot is that much EHS compliance work can be repurposed for ESG with just a slight twist.

EHS compliance provides an evidence-based foundation to ESG reporting

For many companies, the last two years have brought additional benefits in terms of EHS compliance. During the COVID-19 pandemic, workplace health and safety shot up in importance. It was also given greater value and respect. There was considerably more interdepartmental collaboration, which made it much easier to get results. Nobody would claim that the pandemic was a good thing. However, these changes to ESH are paying dividends as a building block for ESG reporting.

Cross-departmental collaboration is essential for delivering reliable ESG reporting. The information provided has to be tailored to the company, including its different risks and opportunities, and also evidence-based.

Your way forward is through your foundation of EHS compliance

These are challenging times. As businesses continue to be more and more closely scrutinized under a changing sustainability “microscope,” EHS compliance metrics will only grow in importance. That means that the work you’re doing to manage environmental, health, and safety regulations gives you a leg up on meeting and addressing the challenges of ESG reporting – however they might change in the future.

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