Management systems at the limit?

Large public companies, banks and insurance companies in Switzerland have had to publish reports on non-financial matters since the 2023 financial year. Since 2024, companies have also had to disclose their climate impact as set out in the Climate Reporting Ordinance. What's more, at the end of June 2024, the Federal Council opened a consultation on further provisions on reporting obligations. As in the EU, even more companies are to report on the risks of their business activities in the areas of the environment, human rights and corruption and explain what measures they are taking in this regard.

Many companies are now faced with the question: Can the evaluation of such ESG obligations be integrated into existing EHS management systems? Or does this require additional efforts? The answers are not easy. It is therefore worth comparing the topics of "ESH" and "ESG".

EHS: locally and regionally oriented management system

Safe and environmentally friendly operating and production processes, resource conservation (e.g. cradle-to-grave optimization approaches or cradle-to-cradle cycles) and the avoidance of critical incidents and thus the avoidance of monetary and reputation-related costs are established in many companies. Such EHS management concepts are often institutionalized in the form of ISO 14001 and ISO 45001 certification systems, in which compliance plays a central role in addition to the mission statement, environmental or safety policy, continuous improvement process (CIP), the use of measurable indicators and the derivation of key figures. For example, audits are carried out to check whether the site-specific operating processes are designed in such a way that, for example, the heating systems do not exceed the applicable limit values in accordance with the Ordinance on Air Pollution Control (OAPC) or whether waste water is treated in accordance with the Water Protection Ordinance (WPO). Other points include the legally compliant storage of chemicals and waste disposal. In the area of occupational health and safety, the aim is to protect employees, for example, from dangerous mechanical impacts as a result of suboptimal installation or improper handling. There are many other examples of EHS. What they all have in common is that most of the potential impacts or resource consumption are of an internal, local or regional nature. Aspects relating to international supply/value chains, the "upstream", as well as consumption and end-of-life-related issues, the "downstream", are not included here.

ESG: Thematically, geographically and stakeholder-related expanded

In contrast, ESG has a global, universally diverse claim: although "E" and "S" in the term ESG basically mean the same or similar concepts as in the case of EHS, they extend the frame of reference to the global level. Upstream processes that, as part of the supply chain, are associated with a disregard for environmental regulations or human rights are searched for with a sustainability telescope, identified and dissected as precisely as possible under the microscope, evaluated, the necessary conclusions drawn and measures taken. Downstream processes are also at least considered (e.g. with regard to modular product design and therefore better reparability). Finally, the "G" in the meaning of integral, exemplary and ethical corporate management extends the concept of sustainability to the ethical and philanthropic.

Investors and decision-makers are involved in the stakeholder-centered sustainability strategy and policy, as are manufacturers far "upstream" in the supply chain. Furthermore, price structures are established that allow living wages in low-wage countries, and agreements are made with local authorities in other countries or NGOs, e.g. to support the education system. "Downstream", consumer organizations are consulted in order to initiate or establish, for example, the recycling, upcycling or reuse of certain goods. The ESG claim to overall social responsibility contrasts with the self-serving ESG drivers that also exist to position a company as "sustainable" in order to increase its reputation, turnover and shareholder value.

Which decrees and obligations apply? Difficult to see through

Establishing legal conformity in terms of ESG within the framework of ISO 14001 and ISO 45001 therefore falls short. These standards do require the identification of applicable regulations, status quo analyses, the formulation of measures and their review in the sense of continuous improvement. The legal compliance evaluation remains a key criterion for successful certification, but is limited to the EHS criteria and takes too little account of global aspects. In addition, while the obligations are being extended to even more companies - unless the EU "omnibus laws" pointing in the opposite direction come into force - the mountain of laws and regulations that must be taken into account (e.g. CSDDD, CSRD, CBAM) is also growing in parallel. This means that an orientation solution is needed to keep key regulations on the radar, monitor ongoing changes and define measures. The consulting firm IPSO ECO identified around 40 key Swiss and European regulations. From these, the most important company-relevant, specific articles were prepared as separate question masks and categorized into meaningful topics and sub-topics. Such a user-friendly electronic solution in the form of a checklist can serve as an evaluation tool. Today, it should be part of the basic equipment of good corporate management. n

Author

Niklaus Renner, a qualified environmental scientist (ETH), is Head of Compliance Management and SENS eRecycling Auditor at IPSO ECO AG. www.ipsoeco.ch, www.complyant.ch