Hiker follows trail through meadow at sunrise

Why there can be no ESG without EHS transformation

EHS professionals should seize the opportunity to drive change as the focus on ESG performance grows.

In brief
  • A robust EHS framework is a fundamental, but sometimes overlooked, element of ESG performance.
  • The emergence of ESG is creating new opportunities for EHS professionals.
  • By failing to make the connection between the two functions, businesses risk missed opportunities.

For too long, environment, health and safety (EHS) has been viewed as a set of processes to be followed in isolation, rather than an engine that can significantly advance environmental, social and governance (ESG), and overall business performance. Leading EHS visionaries have long recognized the potential of utilizing EHS to drive overall business value and through that, bring value to organizations’ ESG agendas. They have adopted new agile practices to demonstrate this to their organizations — practices that are simpler, more flexible and connected to businesses, and that focus on critical risks. These practices are substantially more suitable for our fast-paced and complex working world.

With the heightening focus on ESG around the world, now is the time for business leaders to reframe the relationship between EHS and ESG, and to leverage the learnings from EHS to drive meaningful change in the way they approach ESG.

Why EHS is the cornerstone of ESG

There is a direct overlap between EHS and ESG, with issues such as waste management, climate risk, employee safety, as well as mental health and wellbeing, sitting at the intersection of the two functions. Data collected by EY EHS teams around these risks can feed directly into ESG reporting, strategies and performance tracking.

There is no ESG without EHS.

However, the value of EHS to ESG extends far beyond data collection, disclosure and compliance. EHS has been embedded in many organizations for many decades; as a result, leading EHS functions can effect real change. An organization’s ESG agenda can be advanced significantly by learning from the EHS profession’s more advanced management system approaches, culture transformation initiatives, and data-driven monitoring and tracking of KPIs.

Benefits of using EHS to drive ESG

As macro issues such as climate change and biodiversity, are becoming more closely identifiable with company reputation and the broader license to operate, the synergies between EHS and ESG are receiving greater attention. Leading EHS professionals are taking a contemporary approach to managing EHS in today’s workplaces. This approach considers both the human elements of the organization (such as leadership, behavior and cultural change), while supporting workers with the necessary processes, structures and tools to stay healthy and safe, along with protecting and restoring the environment. Few businesses currently meet these transformational requirements for ESG, placing them at odds with the future of work. Without learning from leading EHS professionals, a golden opportunity is being missed to incorporate learnings from the past 30 years to build a better world of work that equally benefits employees and the organizations they work in.

EHS Benefits

At a time when ESG disclosures and performance are under increasing scrutiny from investors, stakeholders and the wider public, the stakes are high. Companies risk regulatory fines, loss of existing and potential business, increased employee turnover, and lasting reputational damage.By taking advantage of these strategic connections between the EHS and sustainability functions, we can help ESG avoid the pitfalls of the past and fast-track its maturation.

By taking advantage of these strategic connections between the EHS and sustainability functions, we can help ESG avoid the pitfalls of the past and fast-track its maturation.

A golden opportunity is being missed by not bringing learnings from the past 30 years to build a better world of work.

Path to transforming ESG using EHS

EY research and experience shows that successful EHS transformation relies on an organization’s understanding of how its people and systems interact. It is driven by four key elements:

  1. Integration: embedding EHS in the business process, and replacing silos and linear hierarchies with collaborative networks, supported by digital technologies
  2. Simplicity: making systems straightforward and people-centric to drive employee engagement and participation
  3. Focus: keeping a tight focus on critical risks, using technology and automation, to make data collection more efficient and accurate
  4. Agility: developing agile frameworks, supported by robust processes, that can adapt to the changing world of work

A strong ESG performance may be built on a leading EHS framework with a robust foundation. Organizations that fail to make the necessary connection between the two functions may not only wasting valuable time and resources, but also running a critical business risk.

Supporting EHS transformation

Organizations should consider integrating EHS with ESG in a way that is easy to understand, with a focus on managing critical risks, and is agile enough to adapt to the changing world of work. To begin your journey of understanding how EHS can drive transformation in ESG, consider the questions below.

How EY can help

Board members:

  • What is the role of EHS in leading the ESG agenda?
  • How can EHS leadership programs help build ESG leadership capacity and sponsorship?
  • How do we better integrate EHS and ESG initiatives and outcomes?
  • How can EHS help operationalize ESG?

Functional heads:

  • How can ESG leverage existing EHS data collation, reporting and assurance processes?
  • Where will EHS reporting requirements overlap with the broader ESG reporting requirements?
  • How do we better integrate EHS and ESG initiatives and outcomes?
  • How can EHS help operationalize ESG?

The executive team:

  • What is the role of EHS in leading the ESG agenda?
  • How can EHS leadership programs help build ESG leadership capacity and sponsorship?

Supervisors:

  • How can EHS leverage existing relationships to encourage collaboration?
  • Where do opportunities exist for ESG and EHS to consolidate and collaborate?  

Summary 

Organizations at the start of their ESG journey can accelerate progress and drive meaningful change by leveraging the practices of leading EHS professionals. Business leaders who fail to take advantage of these synergies may be  missing a major business opportunity.

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.