January 2004

A growing role for HSE in the business mix

The profile of Health, Safety and Environmental considerations in modern business has been heightened for the PM industry with the current passage of chemicals legislation in Europe. But that is only one aspect of an increasingly complex web of rules, the aim of which is not only immediate HSE objectives, but also the enforcement of the principles of sustainable development. The European Powder Metallurgy Association has just published the fifth edition of its guide to EU legislation on HSE, setting out a comprehensive guide for specialists and managers alike…

Twenty years ago it was still quite common to find opposition in industry to the proposition that "a safe environment is a profitable environment". Not any more. For as safety aspects of industry, and the safety records of companies, have become more and more identified with the overarching umbrella of quality management (QM), so its values have been recognised and the voices of dissent stilled.

As QM has developed, standards have been laid down, starting with the ISO9000 series so familiar to companies seeking to gain and maintain accreditation. That process has been carried through so that ISO14000 now sets standards for Environmental Management, and ISO18000 is the equivalent for Health and Safety Management.

Why is this important? The simple answer to the question, says the EPMA's Guide to EU legislation and environmental health and safety in the PM industry, is that non-compliance is not an option. The consequences of non-compliance are quite nightmarish, stretching from possible repeated financial penalties, which are becoming more and more severe, to bankruptcy.

In the worst cases the imprisonment of company officers is an increasingly realistic option, and in this respect it could be argued that the EU is only coming into line with legal sanctions already available in the US, Canada and Australia.

But even without the horrors of those "big stick" policies, the day-to-day financial costs can be substantial. Compensation claims are becoming more common and settlements getting larger. So although insurance may cover a claim, insurers seek to recoup their costs and make what they consider to be a realistic assessment of risk through increased premiums. If a company cannot find an insurer willing to take the risk, it would not be able to continue in business.

While it is true that accidents happen, compliance with health and safety legislation can go a long way towards cutting frequency by eliminating the conditions that lead to accident causation. Modern thinking about the true cost of accidents also goes a long way beyond the cost - probably insured - of replacing plant.

The "hidden costs" include loss of production; the need to train or retrain staff, and low staff morale, culminating in a final true cost of between five and nine times the insured cost.

Stick to the rules By adopting a management style based on the three mutually compatible ISO standards 9000, 14000 and 18000, managers do much to give confidence to customers, the public and their own employees. Using these powerful tools, managers can fulfil their legal obligations and at the same time do much to protect the long-term viability of their business. The illustration sets out in simplified terms the "virtuous circle" of continuous improvement, in this case for occupational health and safety, but applicable to environmental and other considerations as well.

Public respect for established institutions has waned in recent years, be they business, the church or the state, so companies have to work harder to justify their "licence to operate" in a community. Public perception is important. Reputation as a "good" operator is hard-won and easy to loose, but there are other aspects of image to be considered. When things go wrong a company can become a burden on a community by way of increased social security payments and support of dependents, without counting the cost of emergency services. In order to be able to continue in business companies need to be perceived both as good employers, and good neighbours.

Industrial disasters at Seveso in Italy, Bhopal in India, Basel in Switzerland and the North Sea catastrophe of Piper Alpha in the closing decades of the last Century concentrated minds and forced business to look hard at its practices in the run-up to the Millennium.

Legislation and codes of best practice have aimed to eliminate the sloppy thinking which led to the conditions that made these incidents possible, but things have gone much further in the years since.

In hard business terms, the trend is for customers to prefer suppliers with environmental accreditation. But more and more often, the term "prefer" is a euphemism for require.

It is not uncommon for customers to demand the right to audit suppliers' performance on health, safety and the environment, and the reason is simple enough - continuity of supply. Customers seek assurance of this basic need.

Tier One PM automotive contractors feeding the remorseless production lines of the original equipment manufacturers are tied by tight contracts themselves; they cannot afford to do business with a company whose working practices are not entirely above board and transparent.

Markets are increasingly driven by environmental considerations, and suppliers who are environmentally aware are more likely to be able to offer the products being demanded. In a similar fashion, companies whose health and safety policies make their staff feel comfortable are more likely to be able to tap the intellectual resource represented by their workforce to come up with the answers needed by their customers. These are senior management issues that should be an integral part of company planning.

The issue of HSE legislation and regulation is not one that can be shrugged off. The increase in legislative activity in the EU connected with health, safety and environmental considerations will evolve further through "harmonised" global legislation via the Organisation for Economic Co-operation and Development (OECD), particularly in the areas of environment and classification of carcinogens.

The proposed new REACH Regulations affecting chemicals, including metals and alloys, are a good example. Producers, whether in the EU or importing into it, will have to provide data on the health and environmental effects of the preparations they want to market. Without the data it will be illegal to trade, and there will be no markets.

The increase in legislative activity brings with it a commensurate breadth for interpretation with new opportunities for litigation. The social climate means that there will be a tendency for claims and eventual settlements to be for larger amounts.

The emphasis is likely to move away from the "easily" measured physical accidents towards longer-term improvements in health brought about by working conditions. Workers will expect to retire after a working life of 40 years or so with no health impairment, and if it is otherwise, compensation will be expected.

"These are inevitable trends in our modern world", says the Guide. "The legislation which facilitates this, however, should not be looked upon negatively. It is part of corporate responsibility and it does point the way to 'getting it right' and putting managers in control of the situation.

There will undoubtedly be opportunities to offset regulatory costs by developing more economic processes, inventing better products and pioneering new markets."

So what needs to be done? "The key to successful health, safety and environmental management is risk assessment," says the Guide. "This is achieved by identification, monitoring and recording various conditions, as well as thorough investigation and record keeping of every accident and dangerous occurrence."

Assessment, it goes on, is not an end in itself, merely a structured way of analysing the risks and showing where improvement is needed.

"Improved targets will be set which, in turn, will be monitored, recorded and assessed. These aspects will be embodied in a Safety Policy, signed by top management, that additionally specifies responsibilities, action plans and auditing procedures."

These principles, contained in the ISO14000 and 18000 standards for the environment and health and safety respectively, are similar to those embodied in ISO9000 for quality management. The concept of continuous improvement is equally relevant.

"It is important that all records are in a form that can be kept for 30 or 40 years. This is the time span over which managers - or their successors - will need to be able to say what conditions really did exist and be able to prove that they acted responsibly, based on the knowledge available at the time.

"Top management must be totally committed to a high level of achievement. It is they who are ultimately responsible in law."

The fifth edition of the European Powder Metallurgy Association's Guide to EU legislation and environment, health and safety in the European PM industry contains a wealth of information based within European legislation, but also explaining the relationship with national legal frameworks.

It is intended for use by both HSE specialists and industry management. The edition includes a comprehensive index as well as a glossary of terms for ease of reference. It was prepared by the EPMA's Working group on environmental, health and safety issues and is available from the
EPMA at:

Old Bank Buildings,
Bellstone,
Shrewsbury SY1 1HU,
UK.
Price: Members, Euro100;
Non-members, Euro200.