EHS oversight: what's wrong with this picture? Most European companies are vitally concerned at the board level about environmental health and safety issues. Why aren't boards of U.S. companies equally as concerned?

• Author: Pilko, George
• Position: ENVIRONMENTAL OVERSIGHT - Environmental health and safety

THE ISSUE OF environmental health and safety (EHS) governance is big enough to affect a company's reputation, its competitive position, its share price, and its future, particularly in the chemicals, energy, power, and metals industries. Yet the response I have seen from the boards of many U.S. companies is inadequate and sometimes pitiful. Many still act as if serious global environmental realities and consequences don't exist or don't count.

The contrast with European companies is particularly striking. In Europe, most companies in heavy industry have made EHS governance a vital aspect of their top-level corporate direction and management. They don't see EHS governance as a compliance or legal millstone but as the way to protect shareholder value--and even as a potential source of competitive advantage. Why the U.S.-European disparity?

Part of the answer may lie in the compliance-oriented way that EHS management has evolved in the United States. Stringent regulations and stiff penalties have encouraged U.S. corporations to focus on every tree along the trail without regard for the size of the forest, whether the current trail is the best way to get through the forest, or even whether they should turn around and find a meadow instead.

By trusting that compliance is the answer to every EHS question, U.S. corporate boards are effectively assuming that government regulators are smart enough to know what their companies need to do to protect shareholder value. By not being involved with environmental issues in a meaningful way, boards effectively abdicate key responsibilities to the whims of regulatory agencies.

How can I so denigrate the EHS focus of U.S. boards? Don't I know how many boards have an environmental or public policy committee? Don't I read the annual reports and notice the comforting OSHA statistics? Don't I know how many plants are now ISO-certified?

Yes, I know this. But what keeps me awake at night is that I know more.

First, some major corporate entities do not even have a board committee devoted to EHS or public policy. A Pilko & Associates survey found that while many U.S. and Canadian chemical companies do have a board EHS or public policy committee, not one of the master limited partnerships we surveyed in the energy industry does--and this includes publicly traded, multibillion-dollar companies.

Second, take a look at the membership of the board EHS committees: How many of these directors have in-depth understanding of the current best practices for EHS governance in their industry?

Third, check the EHS committee meetings. Too often the committee meets only twice a year with the company's VP of EHS, who makes a presentation about spills, lost-time...