CSR vs Regulatory Penalties:

A Critical Organizational Choice & Loss Prevention

StrategiesBY:

ayo ogunkoya, M.Sc., P. Ag., EP, CHSC, CRM, OHS, QSR, NCSO

PRINCIPAL HSE & RISK MANAGEMENT CONSULTANT

GENERATIVE HSE INC., CANADA

Ayo OgunkoyaPrincipal HSE & Risk Management Consultant

Ayo Ogunkoya is a Principal HSE & Risk Management Consultant at Generative HSE Inc. His areas of specialization are: Occupational Health & Safety,

Environmental Management, Enterprise Risk Management and Quality Assurance (Product & Service Quality).

780-462-2033 aogunkoya@generativehse.ca  www.generativehse.ca

https://www.linkedin.com/in/ayo-ogunkoya-msc-pag-ep-chsc-crm-ohs-ncso-a7a57524

OVERVIEW

∞ CSR vs Regulatory Penalties

∞ Poor CSR Scenario: BP Gulf of Mexico Incident

∞ Strategies for Effective CSR Implementation

∞ Beneficial Consequences of CSR Implementation.

CSR vs REGULATORY PENALTIES

Corporate Social Responsibilities (CSR) is an

internally- structured framework designed to

self-regulate organizational business activities,

with the primary goal of preventing the

occurrence of losses when integrated into the

organization’s business model.

CSR vs REGULATORY PENALTIES

There are four major factors driving CSR:

∞Legal

∞Social

∞Economics

∞Moral

CSR vs REGULATORY PENALTIES

There are three key risk areas that largely constitutes significant loss exposures to organizations, namely:

∞Health & Safety

∞Environment

∞Social Impact/Engagement

These risks constitutes hazard risks and may pose additional risks such as financial, operational & strategic.

CSR vs REGULATORY PENALTIES

Regulatory (administrative) penalties are

consequential punitive measures emanating from

non-compliance with specific regulatory

requirement(s), with a primary goal of achieving

deterrence relating to offense(s).

CSR vs REGULATORY PENALTIES

There are two major types of regulatory offences, namely:

∞Absolute liability offences

∞Strict liability offences

However, some offences may be considered criminal in nature where criminal negligence is proven.

CSR vs REGULATORY PENALTIES

Loss exposures (for the purpose of this webinar) are broadly categorized into two major areas:

∞Direct losses

∞Indirect losses

These losses emanate from legal proceedings, reputational, operational sources etc.

CSR vs REGULATORY PENALTIES

Direct losses :

∞Financial i.e. fines

∞Operational i.e stop work order

∞Loss of key employees i.e. imprisonment or resignation

∞Loss of clients/customers

CSR vs REGULATORY PENALTIES

Indirect losses:

∞Reputational i.e. bad publicity

∞Financial i.e. cost of litigation or loss of revenue

∞Market i.e. loss of competitive edge

CSR vs REGULATORY PENALTIES

CSR REGULATORY PENALTIES

Generative / Proactive Reactive

Increase Bottom-line Decrease Bottom-line

Increase Organizational Integrity

Damages Organizational Reputation

Increase Employee Morale Lower Employee Motivation

Lower Investment Cost Higher Investment Cost

Risk Management Unmitigated Risk (Actual Loss)

Matured Corporate Culture Immature Corporate Culture

POOR CSR SCENARIO : BPBritish Petroleum (BP) has had a series of major incidents that had occurred over the years, that includes but not limited to the followings:

∞2005: Texas City Refinery Explosion∞ 15 Deaths

∞ 180 Injured Workers

∞ Environmental Pollution

∞ $50 million fine and subsequent fines over $100 million loss

POOR CSR SCENARIO : BP ∞2007: Texas City Refinery Toxic Substance Release

∞ 143 Workers were exposed

∞ Environmental pollution

∞ Over $100 million financial loss

∞2010: Texas City Refinery Chemical Release∞ Environmental pollution

∞ 7.7 tonnes of Benzene

∞ 17 tonnes of Nitrogen oxides

∞ 186 tonnes of Carbon monoxide

POOR CSR SCENARIO : BP Other incidents occurred that resulted in

financial losses in excess of $100 millions over

the years. However, the corporate culture of BP

never changed until it reached a turning point on

20th of April, 2010 when the Deepwater Horizon

Incident occurred in Gulf of Mexico in US.

POOR CSR SCENARIO : BP Deepwater Horizon Incident was a single incident

with significant multi-layered loss exposures:

∞Hazard Risk Losses:

∞ 11 Deaths

∞ Environmental pollution (4.9million barrels – largest oil spill in history)

∞ Rig loss

POOR CSR SCENARIO : BP ∞Operational Risk Losses:

∞ Zero production attained

∞Financial Risk Losses:∞ Over $50 billion ($50,000,000,000)

∞Strategic Risk Losses:∞ Strained relationship with US government

∞ Compromised reputation and public outrage

CSR IMPLEMENTATION STRATEGIES

CSR implementation requires the development of a

sound CSR framework or management system in place,

prior to the consideration for its implementation.

In today’s business world, effective implementation of

CSR management system is key to the sustainability of

any business organization.

CSR IMPLEMENTATION STRATEGIES

CSR implementation strategies may include:

∞CSR must be overseen by the org. leadership i.e. CEO

∞CSR must be integrated into overall organizational

objectives.

∞CSR management system should be developed by

highly competent professional.

CSR IMPLEMENTATION STRATEGIES

CSR implementation strategies may include (cont’d):

∞CSR must have well-defined and clear deliverables and

KPIs

∞CSR KPIs must be measured, analyzed, reported &

monitored

∞CSR must be periodically audited, at least once a year.

CSR IMPLEMENTATION STRATEGIES

CSR implementation strategies may include (cont’d):

∞CSR training must be provided to key employees of

the organization

∞Management Review (MR) of the CSR management

system must be conducted periodically, at least

once a year

BENEFITS OF CSR IMPLEMENTATION

Effectively implemented CSR have benefits that

includes:

∞CSR implementation offers business organization the

competitive advantage through brand differentiation

∞CSR is an enterprise risk prevention and reduction

strategy

BENEFITS OF CSR IMPLEMENTATION

Other benefits :

∞Increase employee morale

∞Increase bottom line

∞Increase organizational integrity

∞Aids the maturation of corporate culture

CHANCE OF LOSS (MODEL)

REGULATORY PENALTIES

CSR

GENERATIVE HSE INC.Health & Safety, Environment & Risk Management

Consulting1420 – 37C AVENUE,

EDMONTON, ALBERTA T6T 0H8CANADA

Phone (Direct): 1-780-462-2033 (Cell): 1-780-902-2519

E-mail: info@generativehse.caWebsite: www.generativehse.ca

QUESTIONS?

780-462-2033 aogunkoya@generativehse.ca  www.generativehse.ca

https://www.linkedin.com/in/ayo-ogunkoya-msc-pag-ep-chsc-crm-ohs-ncso-a7a57524