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EHS and Business Sustainability

EHS is the abbreviation for “Environment, Health, and Safety”.

What is the relation and importance of EHS with the main business processes? How should these be addressed in the modern competitive business scenario? Were there any deficiencies in the way these issues were addressed in olden times? Have the new technologies brought in any further sense of urgency to tackle these issues? And most important, Are the EHS requirement to be complied with, merely as statutory requirements? How do these affect Business Sustainability!

To grapple with these questions and to solve the related equations it is essential to understand the respective business processes thoroughly well. Many questions and queries arise, as care for Environment, care for the Health and Safety of Employees and the public, involve expenditure, involve costs that may, sometimes seem excessive, extraneous, and debatable. The first question would be, how do we separate out the fixed costs and variable costs incurred on EHS and place them under appropriate cost heads in our accounts books as well as in the product costing algorithms. The second question would be, how do we compare the costs with their corresponding benefits.

As a result of poor understanding of the subject, industries and business houses have diverse approaches and many industries tackle EHS in a slipshod manner, not caring to go beyond what is called for by statutory standards. The main reason is that the costs incurred are tangible. They are in hard currency, which is easily and accurately measurable while the benefits accrued are mostly intangible and not readily measurable in money value. It is, therefore, necessary for the business houses to install appropriate systems to measure the benefits from expenditure incurred on EHS and decide on a dynamic or real-time basis the adequacy and sufficiency of EHS expenditure.

This is easier said than done, as all measurements of benefits accrued, need to be brought in a cost format and further, to be appropriately seen in their totality as well as specifically with respect to various categories of beneficiary stakeholders. The next question is, what is the correct method of measurement? Will the "what if" approach and “scenario projections” lead to correct answers? These may not, for the simple reason, that, in some cases, the loss due to inadequate spending on E or H or S would occur far in the future and iterative loops of corrective measures at that time, may or may not be effective. On the other hand, while benefits can be projected with much better accuracy, their monetary projections may not be very accurate.

In many business houses, a myopic methodology of converting the benefits to cost form has resulted in a bloated perception of expenditure on EHS. Such a myopic approach results mainly due to inadequate measuring systems put in place, basic lethargy towards the fulfillment of stakeholder’s requirements, and resulting in incorrect integration of EHS measures in an overall business scenario. On the other side, the vagueness of approach and hyper apprehension may result in excessive and uncalled-for EHS expenditures which may be detrimental to business interest.

It is to be noted that business is sustained by the intricate support system of all stakeholders. Adequate care for Health, Environment, and safety needs to be treated as an integral part of the business model used. The cost-benefit analysis should be truthful, impartial, and transparent. The measurement and analysis system should be dynamic and iterative. An incorrect or inadequate system will result in misinformation and incorrect strategic planning. The effects of misjudgment of EHS measures grow in a cumulative manner and may take a shape that would threaten business sustainability, leading finally to the total collapse of the business.

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