If you are an Environmental, Health & Safety professional, you know how challenging it can be to plan and budget for the EHS program. Undoubtedly, you have also experienced the disappointment of budget shortfalls which limit much needed progress and improvements. Even though most companies feel that environmental, health and safety challenges are a top priority, they don't automatically budget accordingly.
Since all company departments are competing for a limited amount of budget dollars, it’s imperative the EHS budget is easy to read and understand, logically organized and most of all justifiable. The focus of this article will be EHS budget justification.
Ask your employees
What PPE will need replacing in the coming fiscal year? What would they like to see changed in order to improve safety? Your employees' input can be invaluable given they have the hands on experience when it comes to what is working and what is not.
Research OSHA's compliance data
Go to www.osha.gov and research OSHA's most current data as it relates to your industry for the Top 10 Most Cited standards. Compare OSHA's numbers to your safety data from the last couple of years and see where you stand. This could be a good indicator of areas that need focus. Click here to read our article on OSHA's Top 10 Most Frequently Cited Standards for 2014.
Identify goals and forecasts for the coming year
Revisit the company’s mission statement and review the last Annual Report to understand the company's objectives for the coming year. Taylor your budgeting report to be in alignment with the company's vision and support it with the company's own forecast. If the company is expecting an increase in personnel, determine their safety risk factor based on their job titles, thus establishing the company's expenses for training, equipment, etc.
Understand each department's needs
Acquire each department's forecast for next year's growth early in your budgeting process. Collecting this information early in your budgeting process will help identify additional compliance needs and/or costs. Switching your focus from overall company growth to each department's forecasted needs allows you to accurately justify your budget plan with specific needs.
Watch for industry trends and emerging regulations
As you research safety trends and regulatory requirements that may go into effect within the next year, determine if the emerging safety trends support the goals of the company and if the data supports implementing them. Use this data along with the potential benefits to support your expected budget requirements.
Revisit the EHS department goals
Are your department's goals for the current year sufficient for the next year or are there foreseeable changes? Do your goals compliment the company's vision and overall goals? Have you met all of your goals? Your budget analysis should include areas that need improvement due to safety factors, areas that need adjusting to better compliment company goals and areas that have met and / or exceeded expectations in order to show budgeting successes.
Forecast costs of the EHS departments annual expenditures
It is a given that expenses for basic departmental needs will increase next year. But do you know by how much and have you considered all areas of expense?
- Safety Training and Training Management – online training, instructor time, developing / implementing new training programs, updating curriculum, developing reporting to measure key performance indicators, training materials and supplies, car rental and mileage
- Direct EHS Department Costs – salaries, telephones, computers and office equipment, office supplies
- Safety Programs – incentives and awards, safety promotional programs and materials
- Safety Equipment / Systems – specialized safety equipment, testing / monitoring equipment, routine maintenance and replacement
- Corporate Meetings or EHS Conferences - travel and lodging expenses for EHS personnel to attend
- Registration Fees, Subscriptions and Dues – conferences, seminars, associations, publications, standards
Lastly, look for areas that have the potential for big improvement not already listed above
For example, in its Global Claims Review 2014, AGCS identifies the top causes of loss and emerging trends from over 11,000 major business claims, each above $136,455, between the time-frame of 2009 and 2013.
As you will notice below Bodily Injury is number six on the list.
Top 10 - Global Claims Review 2014
3. Aviation crash
6. Bodily injury
8. Professional indemnity
9. Product defects
10. Machinery breakdown
Remember, the EHS budget must be easy to read and understand, logically organized and most of all justifiable.
Each of these segments needs to be approached with the big picture in mind. The goals of the EHS department are not only to have a sufficient and justifiable budget, but to align with the company's trajectory, safety needs and vision.