There’s a good argument to be made that the Environment, Health, and Safety (EHS) business function has been relatively slow to change over the years. In some respects, it might be considered a laggard; for example in the adoption of enabling technology. Developments in recent years are changing that and bringing EHS management more to the forefront, mostly driven by the need for more rigorous management of operational and supply chain risks to ensure safe, sustainable, operations and products.
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The pace of change in the EHS business and technological landscape should continue to be rapid in 2017. Let’s consider five trends that will impact how EHS will be managed this year and accelerate the adoption of enabling technology.
A central theme in the Trump administration is reducing the regulatory burden on business. Safety and environmental regulations represent a major part of this burden. In the U.S. alone, manufacturers spend an estimated $192 billion per year to comply with financial, safety, and environmental regulations. Much of this is from environmental emissions regulations. (Source: Manufacturing Institute).
Administration actions are taken so far and likely to come include eliminating regulations and freezing new ones, agency budget reductions, and less enforcement. Smart regulatory reform could provide a significant benefit for the U.S. industrial sector regarding cost reduction and improved innovation. However, as I’ve written before, deregulation will not provide a big windfall for U.S. manufacturing, at least not as it relates to EHS management.
2017 Impact: The importance of an effective operational risk management system will be more important than ever. In an environment of relaxed regulatory requirements and reduced enforcement, operations and EHS leaders will need to ensure the right resources are in place to properly manage safety and environmental risks to people, production, the community, and brand value. This will hold true especially for small- and medium-sized business, which may be accustomed to relying on regulatory requirements as best practice.
The long-anticipated release of ISO 45001 standard for Occupational Health and Safety should occur in 2017. This standard will have the same high-level structure as ISO 9001 and ISO 14001, among others. This will bring further harmonization among these standards in key areas such as business strategy, executive involvement, and risk management.
2017 Impact: as the EHS-related management system standards converge further, organizations will take an even harder look at opportunities to integrate management systems. More organizations will see the merits of unifying and standardizing processes and systems such as risk assessment, audits, corrective and preventive actions (CAPA), and the enabling information management systems. Such coordination will be needed to meet the demands of supply chain partners, customers, and other stakeholders.
Over the past several years, billions of dollars of investment capital have flowed into the EHS software space. In 2016 alone, multiple major deals were announced such as Wolter Kluwers’ acquisition of Enablon, CMO Software’s purchase by Mitratech, and strategic investments in Medgate; among others.
2016 also saw transactions in which small specialized EHS software vendors were acquired by larger firms that had previously been acquired or received investment capital. Such moves to fill product gaps and extend portfolios included acquisitions by Enviance, Intelex, and VelocityEHS of Actio, Ecocion, and e3 respectively.
2017 Impact: The EHS software M&A spree can be expected to continue in 2017, albeit at a slower pace as the “game of musical chairs” winds down. There will likely be more deals in which EHS software vendors continue to make in-fill acquisitions of smaller, focused firms to extend and expand offerings, e.g., environmental management, industrial hygiene, product safety, etc. The net result will be more choice of broad footprint EHS platforms, although buyers will need to fully understand vendor plans for business and technical integration of acquisitions.
Most software vendors develop a presence in market segments based on a combination go-to-market strategy and serendipity in which some solution and segment market “beachheads” are established. Strategy subsequently considers how to capitalize on those. Related to #3 above, there is now a group of well-heeled EHS software competitors searching for ways to set themselves apart. This calls for sharpened go-to-market strategies and competitive differentiation.
2017 Impact: There will be further solution specialization, e.g., solutions tailored by industry, geography, market segment, functional area, etc. as vendors seek differentiation. Not every EHS software vendor will succeed as a comprehensive cross-industry platform provider; some will succeed through dominating a market niche whether it be an industry sector, a functional domain such as health and safety, or a market segment such as SMB, and so on. This will provide buyers with more opportunities, but make solution selection even more difficult.
There’s been a lot of talk, and some action, with regards to the application of disruptive technologies to solve EHS problems. Cloud-based EHS software platforms and, to a lesser extent, mobile applications have gained significant traction. Although, the benefits of the Industrial Internet of Things (IIoT) has started to be realized for operational issues such as asset and energy management. However, safety and environmental projects and case studies are few and far between. Of note, EHS software vendors are investing in embedding advanced Big Data and Predictive Analytics solutions in their platforms.
2017 Impact: The IIoT and its key enabler, Big Data, will come to the forefront of EHS management. This will take the form of moving from interesting use cases to case studies showing business value. Increasingly, advanced analytics will be applied to large volumes of operational data from sensor-equipped machines and devices, along with many types of business data to identify trends and patterns that could not be seen before. For example, analysis of sub-second data on machine operating conditions can be used to analyze and identify factors associated with injuries and unplanned shutdowns to prevent such incidents. This will enable EHS management will to move further from describing what went wrong, to being able to predict what will go wrong next.
The field of EHS management and its enabling technology saw significant and rapid developments in 2016. Based on the five trends discussed above, the winds of change can be expected to continue to blow this year. In keeping with the spirit and substance of Operational Excellence, EHS will be further embedded in core business operations, and continuous improvement driven by the application of integrated management systems.
Improvements of EHS software platform offerings and the application of new-generation technology, such as Big Data, will play a big role in enabling this as “more data” becomes more meaningful. The potential benefits will be greater than ever for those willing to make the required investments. The year ahead in EHS should once again prove to be anything but boring.
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