Recognizing, Identifying, Prioritizing and Addressing EHS & ESG Risks

All businesses in one form or the other have positive and/or negative impacts on the environment and upon their workforce. Creating, implementing and improving upon the positive impacts and effects is a key focus for business growth and success. Likewise, eliminating or minimizing the negative impacts and effects caused by the business operations and activities are expectations for its successful future. A clear view and understanding of the environmental, health and safety (EHS) risks created by a business is paramount to its success and longevity.

Recognizing EHS & ESG Risks

A root cause of catastrophic environmental disasters and workplace injuries, illnesses and incidents is the failure to identify or recognize hazards. The effective management of EHS and environmental, social and governance (ESG) risks to an organization are critical for its performance, reputation and success. Over the last 30 years, we have witnessed serious accidents that have devastated communities and financially crippled businesses that did not effectively manage their EHS & ESG risks.

Examples include:

• The accidental release of the toxic gas methyl isocyanate from the Union Carbide facility in Bhopal, India that killed nearly 4,000 employees and citizens in the nearby community and injuring over 500,000 others in the community.
• The Deepwater Horizon oil platform explosion in the Gulf of Mexico that killed 11 workers, injured 17 more and led to an oil cleanup and environmental restoration over the past 10 years at a cost exceeding $50 billion.
• Numerous combustible dust incidents (greater than 150) that have occurred in the last 5 years across the United States killing 12 people and injuring 144.

Identifying EHS & ESG Risks

EHS & ESG risks generally exist throughout an organization from office environments to production plants, and all along the supply chain. It is important for organizations to understand their EHS & ESG risks so that they can obtain resources, implement systems and monitor performance to effectively control these risks. The EHS & ESG risks must be identified and ranked from lowest risk to highest risk such that the medium to high risks are well-known, communicated and properly controlled to prevent an accident or negative outcome. We need to implement a methodology to identify, evaluate and rank the applicable EHS & ESG risks of the organization’s operations and activities.

The key to minimizing the probability of serious environmental impacts and/or workplace accidents starts with a thorough understanding of EHS & ESG risks specific to your operations. Begin with a methodical process to effectively identify these risks for your business that includes:

• Determination of the scope of the EHS & ESG risk review related to your operations and activities. Establish clear objectives and target what is going to be looked at – what is in? …what is out?
• Identify possible EHS & ESG hazards and/or risks that could occur if they were “uncontrolled” or inherent with the operation. Examples of uncontrolled risks could be a chemical spill from a single-walled tank with no secondary containment and/or release, exceedance of air emissions from a power boiler due to emission control equipment not being adequately maintained or failure in the administrative system to know that a regulatory report must be submitted within an applicable timeframe.
• Identify and understand job tasks, processes and work activities related to your operations. Engage your teams! Workers performing these processes and tasks are critical team members in the identification of EHS & ESG risks and likely the controls that are needed to prevent them from occurring. Sustainability of the controls increases when team members agree on the best approach.
• Identify who (e.g., employees, contractors, the public, etc.) might be placed in harm’s way should things go wrong. Similarly, consider the environmental impacts that could result from an uncontrolled risk.
• Conduct hazard identification and be sure to include non-routine activities and processes and potential upset conditions. Typically, the hazard assessment is conducted by process/work area or production line so there is a boundary around the process being reviewed. This methodical approach helps to focus the team and cover all activities, equipment and processes that could present a risk.
• Assess potential health risks and understand potential exposures to heat, stress, chemicals, cold, radiation, etc.
• Review existing controls in place. Are they appropriate and/or sufficient to control the risk to an acceptable level? Are more effective controls available to consider for high risks? Are any moderate or high risks missing appropriate controls?

Prioritizing EHS & ESG Risks

We have now identified what the risks are. How do we know where the highest risk lies, and which processes pose the greater threat to our communities and/or our workforce? Where do we need to focus staff resources and budget spending first?

Prioritizing EHS & EGS risks can be challenging. Formal processes to assist with this vary greatly and it is important to find the one that works best for your operations. Some key considerations for prioritizing risks would include:

• How serious would the impacts be if the hazard is uncontrolled? This is probably the most important question to start with and understanding how severe the end result would be aids the decision making when establishing priorities.
• Consider the probability of the specific EHS &ESG risk occurring. The greater the likeliness of the risk occurring will elevate its importance for control.
• For each of the possible uncontrolled EHS & ESG risks identified, rank or score the strength of the operational controls for each. This effort will identify whether the current EHS & ESG risks are being sufficiently controlled or not. Ranking systems can be as simple as “low, moderate or high” or more sophisticated numerical scores that take into consideration the additive and relative risks or concerns associated with a given process. The scoring system must be capable of reliably separating the low, moderate and high risks to help in prioritizing the efforts to ensure adequate controls are in place. To help assure a standardized approach to risk ranking, some companies develop general criteria related to what constitutes a low, medium or high risk.
• Address the higher risk scores first. Then, work through the moderate and low EHS & ESG risks using a similar approach through completion.

Addressing EHS & ESG Risks

Now that we have identified and segmented the EHS & ESG risks into low, moderate and high categories, we want to focus on the activities and equipment needed to effectively control these risks such that we do not experience any moderate or high-risk outcomes. We place our initial focus on the high-risk activities so that they are appropriately controlled, and then we focus our attention on the moderate risk activities.

Consider additional controls if needed to lower the EHS & ESG risks to a level that prevents injury to the workers, community or the environment, and that can be effectively implemented and managed using work practices, technologies, equipment, procedures, etc. The goal is to ultimately lower all risks (both controlled and uncontrolled) to a low-risk status. Examples of operational controls needed to appropriately manage the EHS & ESG risks may include:

• Material replacement/substitution from highly hazardous chemicals to less hazardous/non-hazardous materials (i.e., the best solution for addressing an EHS & ESG risk is elimination, removing the risk from occurring by eliminating the hazard)
• Controls and treatment technologies for air emissions, chemical releases and wastewater discharges that could impact the environment (i.e., treatment, filtration, recycling, etc.)
• Process safety management activities that prevent releases or accidents within the covered process (i.e., routine inspections, testing and preventive maintenance)
• Use of engineering controls to eliminate industrial hygiene exposure concerns (i.e., engineering controls such as isolation of hazards and proper ventilation to establish a healthy and safe work environment)
• Standardized procedures to follow when engaging in work activities such as ergonomics, lockout-tagout, confined spaces, hazard communication, etc.

Using a well-established methodology to identify, rank (both uncontrolled and controlled) and address EHS & ESG risks is critical to an effective and sustainable ESG management system. Key to the methodology is the engagement of qualified and knowledgeable resources to accurately identify and rank each risk, as well as identify effective and reliable controls to manage the EHS & ESG risk. By completing EHS & ESG risk assessments, you can be confident that the EHS & ESG risks are thoroughly understood, operational controls are in place and the risks are being properly controlled.

In addition, the results position you to conduct routine evaluations of your highest EHS & ESG risks to further reduce or eliminate workplace injuries, impacts upon the community and the environment, and may help to improve operations by minimizing down time which usually results from responding to an unplanned incident or release.

Learn More About Our Integrated Approach This insights post is a follow up to our recent white paper Managing EHS & ESG Risks Through Integrated Systems. TRC offers integrated EHS services that help organizations better manage EHS and ESG associated risks and improve performance at the corporate and plant levels. Download the White Paper