I.CHEM.E. SYMPOSIUM SERIES NO. 110

ASSESSMENT OF SAFETY, HEALTH AND ENVIRONMENTAL CONTROLS IN DEVOLVED MANAGEMENT SYSTEMS

C J Luck and C Howe*

Recent mergers and acquisitions have led to large corporations containing many business units with widely diverse interests in different countries. Such corporations generally retain strong financial reporting links between the corporate, divisional and operating units, but devolve other management activities far down the organisation, with corporate guidelines setting general principles. However, recent accidents have shown that corporations cannot simply rely on corporate guidelines for activities involving potentially hazardous materials. Practical experience is described of two types of review - assessment (snapshot) and audit (regular checks).

Responsible companies handling hazardous materials have set up management systems to control potential safety, health and environmental risks. Even so, major disasters such as Love Canal, Seveso and Bhopal have occurred, causing immense impacts in the immediate vicinity and threatening the continued existence of the parent corporation. It is clearly insufficient for a corporate board to issue a set of safety, health and environmental guidelines, and then to assume that these will be implemented at all their facilities. The problems are particularly acute for corporations:

• With diverse business activities, each having different safety, health and environmental concerns.

• Operating in many countries, with different regulations and cultures.

• Formed by the merger of two or more large organisations, with different management systems and styles.

THE DIVERSITY OF HAZARDS TO BE CONSIDERED

There is a wide range of potential safety, health and environmental hazards associated with industrial operations. These hazards can arise for a variety of reasons:

• People who: do not know or do not understand regulations and procedures; are careless; are inadequately trained; are sick; are under the influence of drugs or alcohol; etc.

* Arthur D. Little Ltd., London

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• Physical facilities that are: inadequately designed; poorly maintained; inadequately protected; defective; misused; or damaged by an unrelated accident.

• Management systems that are: limited in scope; inflexible; or not supportive of open communication.

• Procedures that are: inadequate (or non-existent); inappropriate; or outdated.

• External forces: earthquakes; aircraft; storms; riots; or sabotage.

THE DIFFERENT POSTURES OF SAFETY, HEALTH AND ENVIRONMENTAL MANAGEMENT

Most companies address safety, health and environmental issues on one of three different levels. The most basic level (Stage I companies) is problem solving ("If we've got a problem, we'll fix it"). Firms that routinely employ this approach do little or nothing until it becomes apparent that a problem exists - for example, the local water supply has become contaminated by discharge from one of the firm's facilities. This approach leaves the company vulnerable to 'hidden hazards' associated with its operations.

Other companies (Stage II companies) have adopted a compliance management approach in recognition of the fact that safety, health and environmental issues can be managed in much the same manner as other legal matters. Management determines which requirements apply and what actions are needed to bring the organisation to an appropriate level of compliance with existing regulations. Some of these companies strive to meet all applicable regulatory requirements; others may weigh the potential penalties of non-compliance. But even careful compliance management will not protect companies from the potential risks inherent in accidents occurring in areas where regulations simply are not adequate to protect the public or employees.

The third level (Stage III companies) includes those relatively few firms which, out of enlightened self-interest, apply broadscale risk management perspectives to their safety, health and environmental affairs. This approach can be costly; it may mean doing things that are not legally required. It is difficult to justify, on purely financial grounds, the costs of 'voluntary' protective actions against future savings which cannot readily be estimated. But the costs of not taking such actions can prove catastrophic in terms of human lives, international relations, and the future of a corporation.

Following a number of tragic accidents, many companies began to question their own levels of control. Safety, health and environmental review is a technique which has been adopted by an increasing number of companies who wish to determine how their various facilities match up to both local and corporate standards.

TWO KEY APPROACHES

It is a legal requirement to audit financial management systems; many corporations find it effective to review their safety, health and environmental management systems in a similar way. There are two key approaches:

• For a corporation which is unsure about the adequacy of its basic programmes, a safety, health and environmental assessment provides

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management with an impartial opinion on its overall performance in this area.

• For a corporation which believes it has adequate systems, a safety, health and environmental audit determines whether individual facilities actually meet legal and corporate requirements.

WHAT SIGNALS SUGGEST AN ASSESSMENT WOULD BE USEFUL?

If any of the following statements sound familiar, a corporation may want to review its environmental, health and safety programmes and management's perceptions of them:

"I wonder how our environmental, health and safety programme compares with general practice in the industry?"

"We have operations in many countries. How can we be sure that they are managing environmental, health and safety matters properly?"

"Responsibilities for environmental, health and safety matters are decentralised. Are corporate needs being met?"

"We have seen other companies suffer the serious consequences of environmental, health or safety incidents and are not sure whether we are doing all we should."

"We have cut back on our environmental, health and safety staff. Do we now have too few resources to get the job done?"

"We are moving into new business (product or technology) areas where we are less familiar with the environmental, health and safety issues."

"This environmental effort is costing too much in capital investment, operating expenses, output and management time."

"We are under attack from the press, the public and/or government for our environmental, health and safety record."

WHAT ARE THE PRIMARY OUTPUTS OF AN ASSESSMENT?

• A timely and impartial assessment of the corporation's environmental, health and safety programmes and activities, with emphasis on operating performance measured against government regulations, the corporation's own policies, procedures and guidelines, and "good environmental management practices".

• A profile of the corporation's programmes compared with those of companies with similar environmental, health and safety risks.

• Identification of weaknesses in the company's approach to environmental, health and safety management.

• Advice and counsel on current and future issues and approaches to a more effective environmental, health and safety management system.

• Reinforcement of the corporation's stance on social responsibility and its concern for employees and the public.

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• Strategies for improving the corporation's approach to environmental, health and safety management.

• If programmes are in good order, confirmation that:

policies and procedures are clearly defined and promulgated throughout the organisation;

corporate risks resulting from environmental hazards are being acknowledged and brought under control;

the company is not endangering the health of its employees or the general public;

the company has the right staff for environmental work and is in control of its future.

An independent review offers not only an added degree of objectivity, but also the broader perspective gained from experience with the way in which other organisations manage similar environmental, health and safety risks.

WHAT IS THE SCOPE OF AN ASSESSMENT?

Corporate environmental, health and safety obligations are substantial, particularly when all possible risks to the physical environment, to employees, to anyone who does business with the corporation, to customers and to the public at large are taken into account. Accordingly, an assessment can include functional activities in any or all of five salient areas:

• Environmental control: air and water pollution, solid waste disposal.

• Occupational health: exposure of employees to toxic and carcinogenic materials, to noise, stress and radiation.

• Occupational safety: accident prevention, safe working procedures.

• Product safety: liability to direct customers or third parties for defective or harmful products.

• Loss prevention: prevention of fires, explosions or toxic releases that may affect people and/or property.

An Independent Assessment will also include an examination of the corporation's effectiveness in the following areas:

• Risk management: Approaches for minimising risks to the environment and consequent risks - whether legal, financial, or those concerning public image - to the corporation.

• Strategic planning: Integrating environmental, health and safety issues into the corporation's strategic planning, and maximising the extent to which strategies for environmental management support corporate and business goals.

• Auditing: Verification that regulatory and corporate requirements are being met throughout the company.

• External affairs: Relationships between the corporation and influential

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external groups, including the Authorities and the general public. This includes a review of monitoring, forecasting and planning activities regarding external factors and forces affecting the corporation's environmental, health and safety activities.

• Readiness: Assessment, through rehearsals and drills, of how people will perform under incident/emergency conditions and whether contingency plans ensure environmental safety.

SOME CORPORATE ISSUES

While environmental, health and safety management may be firmly established in a corporation, there may be some issues still to be resolved by the firm's managing and governing bodies. These include:

• Societal concerns: today a corporation is expected to fulfil social as well as business obligations. Moreover, this viewpoint is being translated into legal obligations for top management. A board-commissioned assessment can demonstrate the company's serious concern for employees, neighbouring communities, and the environment.

• Identification of blind spots: despite the presence of technically competent environmental, health and safety specialists, blind spots exist in any organisation. An outside, independent view can help identify those weak spots and provide recommendations to correct or minimise them.

• Participation of board committees: what responsibilities might be assigned to a committee on public responsibility? Should a new committee on environmental, health and safety policy be appointed? These questions are highly sensitive. Legal implications and management style must be considered.

• Liabilities of corporate officers: the abundance of recent regulation, litigation, publicity, and public concerns regarding the management of industrial risks suggests that corporate executives may be held personally liable for environmental, health and safety problems, thus heightening executives' responsibilities for oversight in these areas.

HOW IS AN ASSESSMENT CONDUCTED?

An assessment, whether of a corporation or a division, must be initiated at the most senior level in the organisation and must be conducted by personnel with wide experience of safety, health and environmental management in other similar organisations.

Typically, a three-person team will spend about one week understanding the corporation's organisation and policies in this area, and will then visit a representative selection of operating facilities.

The team will spend two to five days at each site (depending on its complexity). Prior to each site visit, it would expect a list of the relevant hazardous materials and their annual usages. The site kick-off meeting should include a one-hour outline of the site (history, activities, management structure, key concerns, etc.), followed by a one-hour facility tour. The team then splits up to address three main areas, although these inevitably overlap:

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• Activity review. This is an extremely rapid 'hazard and operability study1, commencing at the import of raw materials, through the operations, to product storage and shipping. Utilities such as waste disposal, flares and refrigeration systems will also be considered. Technical drawings will be used where available, and site technical and operating managers typically take part in that review. Frequent plant visits are made to check items of interest identified during the study.

• Management aspects. Interviews are conducted with key managers and supervisors to review management responsibilities, recruitment and training, preventive and breakdown maintenance, proof testing, control of offsite facilities such as warehouses, security systems, effluent treatment and disposal, etc. Inspections of records and plant equipment supplement the discussions.

• Emergency response, occupational safety and product liability. Items reviewed will typically include:

- emergency plans; emergency team manning and training;

- maintenance of safety equipment; accident records, including depth of investigation; quality and speed of follow-up on previous safety audits;

- occupational exposure to toxic materials; vessel entry procedures; breathing air; product analyses for harmful contaminants;

- product safety data supplied to customers; 'good manufacturing practice' for any food-grade materials.

The team then meets to review its concerns, which it ranks into several categories reflecting the particular concerns of the company. These may include some items outside the remit of 'major concerns' but which nevertheless have been noticed on the visit and will be reported verbally. The major concerns are listed and discussed at a two-hour closeout meeting, when site management are able to comment on the items and, in some cases, correct the team's understanding. For a small number of potential accidents, the team may suggest further investigation to check whether or not the consequences are serious.

After completing all the site visits, a report is prepared which comments on the overall preparedness of the company and highlights the main points of concern. Appendices, one for each plant, contain a half- to one-page discussion of each point raised in the close-out meeting and suggest risk-reduction measures.

HOW DOES AUDITING DIFFER FROM ASSESSMENT?

An assessment is conducted in a limited time period and provides management with a 'snapshot' of their safety, health and environmental preparedness. Auditing on the other hand is an ongoing activity, which gives regular reports to management. Typically, a small corporate group is responsible for conducting the audits, each of which follows a format similar to the site assessment previously described, although possibly concentrating on only one or two of the five areas of concern (environmental control, occupational health, occupational safety, product safety, and loss prevention). Every year, a representative selection of facilities across the corporation's activities will be audited. Each audit team may be entirely staffed by

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corporate personnel, or by a combination of corporate, divisional and independent personnel; the audit manager will report periodically to the corporate board.

WHAT ARK THE FINDINGS OF ASSESSMENTS AND AUDITS?

It is important to tell people about the things they are doing well, so they can build on their successes, as well as to highlight deficiencies. Many organisations prove to have good systems, which generally are working well. However problems identified on different reviews have included:

• Incompatible standards in different operating divisions (while systems need not be identical, they should achieve similar levels of control).

• Failure to adapt corporate standards to the different regulatory climate of foreign operations.

• Failures to file legally-required reports of minor accidents or pollutant discharges with authorities.

• Lack of fire protection on pumps handling flammable materials in congested areas.

• No procedures to take rapid action to prevent a runaway reaction should power and steam supplies fail simultaneously.

• Potential for 'common mode' instrument faults which could cause an unsafe situation without any warning to operators.

• Concrete delivered to site for a critical construction project being carefully checked for 'wetness' yet the results being recorded only in a notebook on site, with no action taken on deliveries out of specification.

• Alarm and interlock systems which prove unreliable in practice so have no credibility with operators.

• Failure to use wheel chocks to avoid accidental vehicle movement when loading or unloading road tankers.

• Service hoses used for the wrong duty, with potential for connecting to the wrong service, or for the hose bursting while in use.

• Solid waste carefully collected on site, then shipped away by a waste disposal contractor, with no checks that the waste reaches its authorised destination.

• No routine checks for groundwater contamination around sites handling polluting liquids.

• Inadequate procedures and training for emergency response.

• Inadequate liaison with public emergency services.

• Safety equipment weekly check records being falsified because the safety technician was overworked following staffing reductions.

In some cases, these findings confirmed the opinion of the manager who

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commissioned the study, giving him direction in improving the systems; in other cases, the findings came as a shock, to people who honestly believed that their systems were in good shape.

THE MESSAGE

For a corporation to manage its safety, health and environmental affairs effectively, it must:

• IDENTIFY the areas of potential concern.

• ESTABLISH appropriate management control systems.

• CHECK that the systems really work in practice.

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