With the current geopolitical tensions, a perfect budget for EH&S programs would have to be more changeable than the weather. Creating a budget that covers every aspect of comprehensive EH&S management was difficult enough without the financial setbacks of COVID and the numerous extreme weather events playing with the numbers, as the success of an EH&S management program relies on the management’s ability to anticipate variables and minimize assumptions while forecasting a budget. And unfortunately, there is no crystal ball that indicates whether the next year will entail an economic upswing or an unprecedented recession.

Safety benefits everyone—the company’s bottom line, the employees, and the EH&S manager/consultant. Therefore, ensuring EH&S initiatives are well funded is as important to an organization as budgeting for any other part of the business. Planning for efficiency within EH&S operations means that the budget allocated must be enough to meet the bare minimum of safety necessities and organizational goals. Preferably, more, not less. This will prevent the need to scramble and borrow additional funds in case of a deficit during the fiscal cycle.

Is EH&S budgeting merely guesswork?

The old-school ways of managing EH&S budgets entail:

1. Taking a percentile of the operational expenditure (OPEX) of the organization or a percentile of the Capital Expenditure (CAPEX) in the case of construction projects.
2. Deducing cost estimates, based on the past year’s operational data or data from similar capital projects.
3. Drawing funds from a surplus fund or buffer fund when needed.
4. Requesting EH&S funds on an as-needed basis.

The problem with these approaches is that they are inefficient to ever grow an EH&S program, and as was globally experienced two years ago, having an EH&S program that cannot adapt to sudden changes in requirements for ensuring the safety of people is detrimental in many ways. Furthermore, this method of acquiring means puts EH&S managers in a position for decision-making that trends toward compromise.

Benchmarking factors to determine an EH&S budget.

For a more solid foundation to determine an organization’s EH&S budget, an EH&S manager should minimize the variables and maximize the sources of obtaining reliable financial numbers.

An assessment needs to be made to quantify the factors that can be controlled and separate them from the ones that cannot. Consider the following examples.

Uncontrollable budgetary factors:

• The overall state of the economy.
• “Black swan events” (unpredictable events that have a major effect).
• The current or future state of inflation/deflation.
• Central bank interest rates (and their effect on the money supply).

Controllable budgetary factors:

• What EH&S initiatives are upheld or added within an organization.
• Consultations with stakeholders within the organization.
• Identified EH&S trends and anticipated changes to legislation (discovered through OSHA regulatory update proposals and other resources).
• Inventory of EH&S items using performance metrics.

Strengthening the data collected from these controllable budgetary factors is key to tackling the budget issue. This can be achieved by comparing current company statistics to reports from previous years, researching industry trends, and referring to the organization’s performance metrics (e.g., incident expenses, compensation claim losses, property damage figures, effluent discharge quantities, waste disposal costs, air emission statistics, etc.). Modern EH&S management software can support this effort of ensuring that the budgetary determinants are reliable, measurable, and relevant. Such software helps remove the guesswork and provides data-driven cost estimates for the various elements and tools of an EH&S program.

Manually gathering data to support the creation of an efficiently operating EH&S budget across an organization can be daunting and error-prone (as it may largely rely on estimations and numbers that do not differentiate uncontrollable factors). EH&S software solutions with cross-functional integration can support EH&S managers in focusing on those budgetary projections that are based on more reliable indicators.

Publisher Bio

The SafetyStratus Research Advisory Group (RAG) brings together thought leaders from the global environmental, health, and safety community to promote best practices and provide key insights in the profession and the industries they serve. The Research Advisory Group also advocates, where practical, the intersection of and advances with the use of technology, such as the SafetyStratus enterprise EHS software platform. Group membership consists of representatives from across varied disciplines and market sectors as well as select members of the SafetyStratus team.
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While the objectives of the RAG are varied, the primary public-facing outcome will be available through engaging and practical content found on the SafetyStratus resource pages. Various articles, papers, and other valuable resources will be produced and shared as part of an ongoing effort to cultivate a robust community. Ultimately, the SafetyStratus RAG will expand to have a broader reach and provide opportunities for more inclusion by all interested EHS professionals in a collaborative community environment.