Catastrophe Prevention Begins with Valuing Compliance

Carol Singer Neuvelt

As the BP disaster continues to unfold before our eyes, the inevitable finger pointing has begun. There are some who point to Wall Street for demanding profit at any cost, while others point to the government for not enforcing the existing regulations. Mostly, though, everyone’s pointing to BP and Transocean for not anticipating this scenario.  While it’s clear there’s plenty of blame to go around, the oil spill in the Gulf is only the latest reminder that because all corporate behavior carries the risk of unintended consequences, compliance needs to come first.

Within the last few months, we’ve seen the tragic results of compliance failure repeated in several different ways. First it was Toyota, whose President publicly apologized for failing to remain vigilant about quality control during the company’s rise to the top.  Then it was Massey Energy, whose repeated safety violations resulted in the deaths of 25 miners in West Virginia. What these examples have in common is that the systems these companies had built to prevent these kinds of incidents became vulnerable to the drive for higher profits.

While the cost of basic compliance is not insignificant, those regulatory thresholds are almost arbitrary because society expects companies to do much more than the bare minimum. Thus said, the cost to go above and beyond the minimum requirements is expensive — much more expensive than basic compliance itself. So during periods of economic downturn, when companies naturally start looking for ways to cut costs, the EH&S infrastructure often is the first budget to go. On the face of it, this seems to be okay because we’ve been in a period of compliance, but really, it merely leads to greater financial and environmental risk.

Every day these kinds of cost-benefit decisions are being made in C-suites across the globe. Not every decision will result in a catastrophe on the scale of the Deepwater Horizon spill, but collectively lots of small decisions can have dramatic impacts. While we understand that businesses operate in a complex decision-making environment driven by competing priorities, companies still need to have basic values that govern how they act. Compliance needs to be one of them. Corporate leaders need to promote strong compliance through robust environmental health and safety budgets, fully staffing the departments and giving EH&S managers the support they need to be effective.

Ultimately, environmental health and safety programs are about much more than just complying with regulations. They are  about valuing the preservation of our natural resources, the well-being of employees and a responsibility to society. And that is something you can’t legislate, you can’t regulate and you can’t see reflected in the price of the stock.

 

About Carol Singer Neuvelt

Carol Singer Neuvelt is Executive Director of NAEM. Her long-term perspective and insights into corporate EHS and sustainability best practices also have been featured in a variety of publications, including The Chicago Tribune, the Bureau of National Affairs, Environmental Leader, the National Safety Council’s Safety+Health magazine and Sustainable Life Media. She is the former Deputy Director for the United States Environmental Protection Agency’s (EPA) Office of Public Liaison, where she managed the agency’s interaction with external stakeholders. Follow her on Twitter at @carol_neuvelt.

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1 Comment
  1. lmheim

    May 10, 2010

    Going beyond valuing compliance, I suggest a significant factor is also within the philosophy of simply identify environmental risks and exposures. Noted author Nassim Nicholas Taleb has coined the term “Black Swan” to describe an event that is (a) so low in probablility that it is unforeseeable and (b) so catastrophic in impact that it changes history.

    As engineers and technical folks, my experience is that it is prevalent for EHS professionals to say “I think there is a 95% chance that X won’t happen, therefore I don’t need to consider it”. Unfortunately, that philosophy ignores another dimension of risk – the impact.

    It generally proves very worthwhile for EHS staff to coordinate with their internal risk management departments to understand how risk is defined, identified and managed within the company. This can help EHS professionals improve their risk management activities and valuations.

    A couple articles on Black Swans and environmental risk assessment that may provide some insight are at:

    http://elmconsultinggroup.wordpress.com/2010/05/03/incubating-environmental-“black-swans”-in-the-nest/

    http://elmconsultinggroup.wordpress.com/2010/05/03/a-question-from-your-company’s-presidentceo-how-come-the-audit-didn’t-find-that/

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