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In an age where information is easy to find, reputation is an ever-growing necessity in driving value for organizations.

Tiffany Felix is a senior executive specializing in risk management, environmental health and safety, corporate social responsibility, business continuity and global crisis management. She is currently consulting with a global company as they transition under new executive leadership. Tiffany worked most recently at American Apparel as the SVP of Risk Management and Compliance, along with positions at NBCUniversal/COMCAST and ESPN in the past. Tiffany has a bachelor’s degree from the University of California at Berkeley in Environmental Science and an MBA from the University of Redlands.


Christopher P. Skroupa: How would you characterize the relationship between enterprise risk management and good company environmental health and safety practices.

Tiffany Felix: One clear indication that an organization has good company environmental health and safety practices is when they have the appropriate leadership in the organization that is well versed in EHS. When an organization simply groups the responsibility of EHS with the operations leader or the human resources leader and does not utilize any outside the resources for expertise in this area than the perception is that EHS is not important within the organization.  EHS is truly a component of enterprise risk management, yet some organizations consider risk management to simply be comprised of insurance and claims. When an organization recognizes the relationship between enterprise risk management and EHS, they are more likely to have good company EHS practices. These practices will generally be comprised not only of regulatory compliance, but will also include sustainability, social compliance, global crisis management and business continuity just to name a few. EHS practices are ingrained in the organizational culture and the executive leadership understands the importance of EHS as being a strong component within the enterprise risk management program. Additionally, exemplary company environmental health and safety practices are when the focus is more than regulatory compliance. The most profitable organizations understand that EHS cannot be an outlier from the overall operational culture of the company, but there is a symbiotic relationship between EHS and production with enterprise risk management being at the pinnacle of it all.  

 

Skroupa: Does regulatory compliance help companies move to a benchmark–one they might surpass as they gain capacity to ensure best practices?

Felix: There are regulatory requirements that apply to almost every organization in the country.  Those regulations specific to EHS require companies to provide a safe work environment for its employees as well as protect the environment from the operations of the company. Companies now get to showcase their EHS accomplishments along with success in social compliance as well as governance in the form of a CSR report. Yet, the accomplishments don’t generally speak to EHS compliance especially of the data is not favorable for the company. As a result, organizations will tend to showcase their sustainability, social compliance and governance successes, which are very subjective. An organization can have great diversion numbers in their recycling program where they’ve possibly recycled large quantities of plastic and paper, but they are classified as a large quantity generator of hazardous waste and aren’t successful in minimizing the pollutants that harm the environment. Additionally, companies will document their philanthropic achievements in the CSR report, but may neglect to admit to the fatality or serious injury that resulted from their operational performance.  Regulatory compliance is a great benchmark for how successful an organization is performing in EHS and has been utilized as such for decades. Those companies that have excellent injury and illness rates specific to their industry are generally an organization that has implemented EHS best practices. The regulatory information is public record and CSR reports should include this information for a more accurate and transparent account of how an organization is performing in enterprise risk management and ESG. If the CSR report is going to serve as a report card, then an organization should be reporting regulatory compliance as it relates to laws that protect the employees as well as the environment.  

 

Skroupa: To what extent does company reputation drive value?
Felix: There are different perspectives on reputational risk driving value. Social media enables consumers to have global real time information via Twitter, Facebook, and Snapchat.  As a society we forgive but we don’t forget, which makes for a very fickle consumer, especially the millennials. Most recently, we’ve seen some reputational risks where the organization is ridiculed for a day or two, but is removed from the limelight because there is recovery with public repentance. United Airlines is a good example–we all saw the videotape of a man being physically dragged off an airplane resulting in an apology from the CEO with a disclosed payout to the victim all culminating in a matter of less than 2 weeks. United Airlines has not been in the media much since the payout. Yet, there is a direct correlation between reputational risk exposures negatively impacting the monetary value of an organization. We have seen some recent examples of this with “slips” devaluing Uber both reputationally and supposedly monetarily because of sexual harassment in the workplace, the CEO’s association with Trump as well as video footage of him losing his temper with an uber driver.  These are just a few incidents. Even though Uber is a larger brand than Lyft and rides are less expensive in most cases, the consumer is showing less favor with Uber, which is being reflected in profits.  The consumer wants organizations to be reputable brands reflected in their executive leadership team, in how they treat their employees, the environment and the public. Companies with sound enterprise risk management practices understand the power of the consumer and the impact of reputational risk. Most recently Elon Musk (CEO of Tesla and SpaceX) and Bob Iger (CEO of The Walt Disney Company) have removed themselves from President Trump’s advisory council based on the President’s decision to remove the United States from the Paris Climate Agreement. The way I see it, the reputational risk to these organizations was not an acceptable risk to maintain association with someone who doesn’t believe in protecting the environment from climate change and possibly negatively impact the value of their companies.