How Going Beyond Mere EHS Compliance Can Yield Financial Benefits

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Cutting edge environmental health and safety (EHS) management goes beyond mere compliance with OHS and environmental laws to embrace more onerous voluntary standards, such as those from ISO and CSA, and independent initiatives. Although complying with these standards and implementing voluntary programs consume more resources, they also provide the kind of positive ROI that improves the company’s financial performance. At least that’s the argument. Unfortunately, specific evidence documenting the economic benefits companies actually accrue in going beyond mere legal compliance is in short supply. That’s why a case study on Johnson & Johnson’s award-winning efforts is so notable.

Johnson & Johnson’s Approach

Johnson & Johnson is the parent company of about 200 subsidiaries that manufacture healthcare products for the consumer, pharmaceutical, medical devices and diagnostics markets in 57 countries. Its Technical Resources & Compliance Group (TRCG) provides EHS leadership, support and consulting services to all subsidiaries. In 2005, due largely to TRCG’s efforts, Johnson & Johnson won the Robert W. Campbell Award from the National Safety Council for business excellence through safety, health and environmental management.

The company has a “Credo” that embodies three themes:

  • Healthy People—Valuing all workers while promoting healthy lifestyles and safe work practices;
  • Healthy Planet—Conserving natural resources, respecting ecosystems and reducing its environmental footprint; and
  • Healthy Futures—Improving healthcare and supporting the well-being of people and communities.

The first two themes are primarily the responsibility of the TRCG, which uses a “beyond compliance” approach that emphasizes not just meeting regulatory requirements but also doing more. For example, under its Climate Friendly Energy Policy, Johnson & Johnson voluntarily committed itself to reducing  carbon dioxide emissions by four percent by 2005 and seven percent by 2010 (using 1990 as a baseline). In addition, by the end of 2004, 97% of its facilities were certified under ISO 14001.

The beyond compliance approach has paid off financially for the company in several ways. Examples:

Wellness program leads to $9 to $10 million in annual savings. In 2003, the company launched a comprehensive wellness program that set aggressive targets for improving workers’ overall health. By June 2004, the targets for reduction of smoking, high blood pressure and cholesterol were all exceeded. Nearly 20,000 people participated in the program, which produced savings of $225 per employee per year ($9 to $10 million) primarily from reduced use of medical services and lower administrative expenses.

Ergonomics program saves $50,000 a year. A subsidiary in Mexico made changes to a manual packaging line to address ergonomics risks. As a result, it:

  • Cut the risk of musculoskeletal injury by 48%;
  • Increased production by 20%; and
  • Saved $50,000 in costs per year.

SAFE Fleet program reduces vehicular accidents by 40%. The company’s SAFE Fleet initiative was designed to reduce traffic accidents by sales associates. As part of the program, regional sales managers include safe driving objectives in their performance reviews of sales associates. And district sales managers ride along with sales associates at least twice a year to evaluate their driving performance. As a result, the number of accidents per million miles driven over a 10-year period was reduced by 40%, which is particularly impressive in light of the fact that the number of fleet cars increased by 139% during that same period.

The benefits Johnson & Johnson has gained from its beyond compliance approach aren’t limited to the safety arena. For example, a subsidiary’s use of a “Design for the Environment” tool that evaluates processes based on environmental factors, such as water usage, energy consumption, hazardous materials requirements and overall efficiency, cut raw material consumption and waste generation in half—representing $2 million in annual cost savings. And a subsidiary based in Brazil developed an innovative program for recycling industrial waste that:

  • Increased the amount of waste recycled from 42% to 73%;
  • Reduced the amount sent to landfills from 57% to 20%; and
  • Saved the facility $1.1 million in raw material and waste disposal costs—in one year alone.

Insider Says: Johnson & Johnson recognizes the efforts of workers who contribute to EHS initiatives. For example, as of 2004, more than 20 EHS professionals were awarded various certifications for projects that generated over $2 million in savings or cost avoidance for Johnson & Johnson.

BOTTOM LINE

One of the reasons for the success of Johnson & Johnson’s EHS initiatives is that the “beyond compliance” philosophy is what drives senior management. In fact, the company adopted this approach as a “management imperative” for all aspects of its business. Senior management not only financially supports EHS efforts but also is actively involved in communicating the EHS message and monitoring the progress of EHS projects. As an EHS coordinator, use this study to show your executives that, with their commitment, adopting a similar approach in your company can reap benefits for workers, the environment and the bottom line.

Insider Source

J&J Safety, Health and Environmental Goes “Beyond Compliance” to Create a Competitive Advantage, Robert W. Campbell Award Winner, National Safety Council, 2005