How can EHS management help reduce your enterprise risk? October 2017 The better the question. The better the answer. The better the world works.
Contents 1 2 How can EHS management help reduce your enterprise risk? About EY Page 2
How can EHS management help reduce your enterprise risk? Page 3
Driving value from EHS management systems Streamlined and interconnected management systems Risk and efficiency 1 Occupational Health and Safety Assessment Series (OHSAS) 2 International Organization for Standardization (ISO) 3 The Committee of Sponsoring Organizations of the Treadway Commission (COSO) Companies have been implementing environment, health and safety (EHS) and business risk management systems for decades. These systems are frequently implemented in isolation so risks and costs are not streamlined (e.g., some areas receive duplicative coverage and other areas none at all). Leading organizations and standard setters are working to harmonize their systems, as this can eliminate risk gaps and reduce costs. Page 4
Companies should assess if their EHS management system is still relevant External events Internal activities The COSO is working with the World Business Council for Sustainable Development (WBCSD) to incorporate EHS matters into COSO s ERM Framework. 1 ISO 45001 for occupational health and safety (OH&S) was approved as a draft standard. Does your EHS management system align with your enterprise risk management (ERM) framework? When was the last time you updated your EHS management system? Does it incorporate the newest standards? U.S. Department of Justice (DOJ) issued guidelines 2 on how to evaluate corporate compliance programs (including root cause analysis). How have you considered and assessed the range of potential EHS risks and exposures? What is the EHS performance of your organization, and how do you set targets and measure? What is the analysis of your EHS data telling you? 1. COSO and WBCSD Sign Memorandum of Understanding, www.coso.org, 7 April 2017. 2. Evaluation of Corporate Compliance Programs, U.S. Department of Justice, 8 July 2017. Page 5
EHS management systems A potential opportunity for improvement EY s methodology Analyzes EHS management system performance in conjunction with the overall business (not just EHS) Leverages our technical, industry and business knowledge to facilitate improvement Includes leading-edge standards and trends such as big data Is flexible and allows for a customizable approach that is outcome-focused Example outcomes EHS and business alignment EHS IT Plan to address rapid data growth EHS cost tracking Business case for efficient EHS processes EY is a leader in EHS risk and has worked with COSO to outline how companies can consider these risks. 3 3. Demystifying sustainability risk. Integrating the triple bottom line into an enterprise risk management program, COSO, May 2013. Page 6
Analyzing EHS from a business perspective A typical customized workflow focuses on risk, data and cost: Step Current state Future state Gap assessment Recommendations Activities Establish scope Example work product(s) Identify stakeholders Conduct current state assessment Develop process map Identify EHS data use Define and identify relevant risks and opportunities Defined current state process map Identify risks and opportunities Future state development Leading practices Data analysis Maturity model Identify criteria or future state Future state analysis, including ERM integration points EHS data recommendations Conduct gap assessment to identify gaps between current state and future state by using observation, inquiry, analytics, substantive testing and other procedures Gap assessment with list of findings Prioritized list of findings Develop recommendations Identify potential implementation plans for select findings Consensus building Develop potential road map for implementation of findings Findings and recommendations report Road map Page 7
Prioritizing outcomes Risk, 4 data, 5 cost Prioritized outcomes example heatmap Impact Low Medium High Low Medium High Cost to implement Risk 1. Update EHS management system to keep it in sync with relevant EHS and ERM requirements and practices so as to reduce gaps that can increase risk. Data 2. Develop EHS data management plan to link EHS data to the business. This includes developing EHS data management dashboards to enhance decision-making and reduce risk. Cost 3. Update EHS procedures and controls to facilitate better estimating, tracking and analysis of EHS costs for more informed decisionmaking and cost control. 4. ES-RISK Environmental, health and safety (EHS) and sustainability risk services, Ernst & Young LLP, 2017. 5. Using data analytics to improve EHS and sustainability performance, Ernst & Young LLP, 2016. Page 8
Taking it to the next level 6 Integrating EHS into the business by creating a single source of procedures for company processes can lay the foundation for compliance, consistency and continuous improvement. Value Data The end result can be an organization that delivers goods or services in a manner that manages risk, cost and value. Costs Risk 6. Make money, save money and manage risk, Ernst & Young LLP, 2017. Page 9
EY brings business focus to your EHS management system EY brings you a mix of skills and resources on a global basis that very few professional services organizations can match. Industry insights EY participates in the world s leading standard setting organizations. This can help you identify and stay ahead of new trends and insights. EY resources EY has teams of professionals who can support almost every area of your company. This includes engineers, scientists, accountants, information technology, finance, tax, transaction professionals and many more. This helps us bring you recommendations that consider the implications to your overall company. Global reach EY s global network and multidisciplinary teams take a broad view of risks and develop recommendations that can support you on your path to managing risk, reducing costs and capturing revenue. Plus One EY s concept of Plus One is a safety approach that applies a different way of thinking about EHS risk. We can help your teams make the right connections within your company and move beyond the regular zero harm approach, to help you to take measures to avoid or help mitigate risks, often exceeding regulations. Page 10
About EY Page 11
Financial Accounting Advisory Services EY contacts Americas Brian Gilbert brian.gilbert@ey.com +1 312 879 2464 Europe, Middle East, India and Africa Christophe Schmeitzky christophe.schmeitzky@fr.ey.co +33 1 46 93 75 48 Asia-Pacific Rebecca Dabbs rebecca.dabbs@au.ey.com +61 3 9655 2630 Japan Kenji Sawami kenji.sawami@jp.ey.com +81 3 3503 1100 Certain services and tools may be restricted for EY audit clients and their affiliates to comply with applicable independence standards. Please ask your EY contact for further information. Page 12
EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2017 EYGM Limited. All Rights Reserved. EYG No. 06003-173GBL BMC Agency GA 1005464 ED None In line with EY s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com