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.