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Outsourcing of business processes in Health & Safety and Environmental Management

02 April 2015

It is becoming common place for international companies to outsource specific elements of Health, Safety & Environmental (HSE) management. However the types of outsourced function tend to be focused more on the operative side rather than strategic (e.g. providing discrete safety engineers for key projects rather than having someone oversee a multi-country HSE audit program). Is there a benefit for outsourcing to be used in more than the traditional, operative aspects of HSE management?

HSE outsourcing – a more and more common approach?
Focusing on the core business is the key argument when ancillary functions are outsourced. Medium size companies with up to 500 employees usually commission an external provider to deliver occupational medical services and to appoint the safety engineer required by law. Also aspects of operative environmental management, among them waste disposal, are frequently outsourced to suitable service providers. But what about outsourcing of services in the area of health, safety & environmental management (HSE) in international companies? What are the boundaries, limitations, advantages?

HSE is compulsory – but do you have to do everything yourself?
The following is a common mission statement of international companies on the topic of health, safety & environment (HSE): “We consider the protection of the health and safety of our staff and to protect the environment as our highest priority”. But gaping divides open up if one considers how these aspirations are put into practice, ranging from entire HSE departments where a large number of company employees deal with a wide spectrum of HSE activities, to ‘lean models’ in which a handful of HSE coordinators control a number of external service providers. Many companies have learned by experience that in-house management of all HSE tasks is not always the best option. Increasingly companies draw upon, and benefit from, the support provided by –out-of-house experts in the field of HSE.

The ‘Outsourcing Triangle’ in HSE activities
The list of HSE activities that are suitable for outsourcing depends on the specific company in question and a variety of factors. The size of the company is less important. Nevertheless, experience has shown that companies and company divisions benefit most if they are called upon to satisfy both local, national and intercompany requirements, but due to their size or the nature of their business are unable to service these fields on their own. This kind of company benefits from outsourcing in an operative and economic sense, as there is no longer a need to maintain in-house resources. These companies also acquire the capacity to respond quickly to new requirements.

Before making decisions to outsource selected activities it is essential to analyse the different options for outsourcing in the field of HSE management to make it successful. This involves an analysis of the type of tasks and their precise allocation to corporate procedures. Here ERM frequently encounters substantial differences between companies, which if they are not considered, pose significant obstacles to the outsourcing of HSE activities. The ‘Outsourcing Triangle’ has proven helpful in analysing options to outsource functions in the field of HSE management as it helps classifying the different types of HSE activities. 

HSE leadership & governance belongs to the core business
Refining the HSE development strategy for a company, setting upstream HSE objectives and the definition of steps needed to achieve HSE goals are typical aspects of leadership and governance in HSE management. External experts can provide valuable support and legwork in these processes for instance support in the development of strategies, in designing management systems, during benchmarking or in the recruitment of management personnel. By nature, though, the HSE activities assigned to this level remain the ‘sovereign preserve’ of the company itself and are best handled by its own staff.

Assurance – externals boost credibility
Core tasks in the field of assurance include safeguarding the validity of HSE data and providing data on current levels of HSE compliance in regional, divisional or local units within the organisation. Typical assurance activities include regular compilation, evaluation and reporting of data and information relevant to HSE, periodical auditing or conducting root cause analyses in specific situations (e.g. following incidents with environmental impact, near-misses or accidents). Broadly speaking, these areas are suitable for outsourcing, and – provided the outsourcing partner has a good reputation – companies will benefit additionally from a boost in credibility.

Service – DIY or buy-in?
What it comes down to is how organisational units can be supported and empowered to satisfy the HSE expectations they face. Companies that outsource tasks in this field benefit from rapidly available expert services by external providers. Depending on the clients’ needs services in this field can go far beyond typical HSE activities such as training, information services (e.g. on new statutory regulations) or the preparation of approval documents. Instead, many companies bring in full-service HSE IT solutions from external partners (e.g. based on suppliers or products), as these areas require specific HSE expertise and are extremely time-consuming. Oftentimes information handled in HSE IT systems, and the insight acquired through its evaluation, go on to serve as a starting point of activities in the field of assurance (e.g. the planning and implementation of audit programmes).

Challenges in HSE Outsourcing
In corporate practice HSE activities appear in a mixed form of Service, Assurance and Governance which poses a problem to the classification according to the Outsourcing Triangle. In many cases the unclear design of HSE activities leads to internal misunderstanding and resentment. HSE employees who have been assigned to differing and at times contradictory areas of responsibility are more than aware of the difficulties this sometimes creates. Trainers who also fulfil the function of auditors are unlikely to encounter any real openness in dealings with the group. Some audits that are conducted with reference to their training effects will merely produce a confounded mix of assurance and service (with the key phrase: “We are here to help you”). On closer inspection, database management sold internally as a service is show as a blend between governance and assurance. Partial or complete outsourcing of HSE activities permits sharper delineation of these areas, enabling a clearer assignment of tasks and roles within companies and hence boosting the acceptance and efficiency of the HSE activities as a whole.

Success factors for HSE Outsourcing
Successful outsourcing requires a case by case unequivocal clarification of the nature of HSE activities a company is planning to outsource. It even becomes necessary in some cases to modify the scope and current design of HSE activities to prepare them for successful outsourcing. Outsourcing of HSE management activities requires an even clearer focus on a company’s specific situation than in the more widespread practice of outsourcing operative HSE activities. The expertise required in this context includes specific technical, legal, business administration and contractual aspects, also profound knowledge of processes and the industry itself. This is why increasing numbers of companies are drawing on external expertise to develop tailored solutions. Applied, prepared and implemented correctly, outsourcing HSE management activities can deliver new perspectives and synergies in everyday company operations. Ultimately, the release of internal resources by outsourcing selected HSE activities can be used to provide targeted support and expansion in the frequently neglected corporate areas of leadership and governance.

To set up a topic specific discussion, or to find out more about ERM's expertise in relation to HSE outsourcing, please contact:

Peter Fink
Senior Partner 
T: +49 6102 206 253
E: peter.fink@erm.com
Jan Heussen
Principal Consultant
T: +49 6102 206 147
E: jan.heussen@erm.com

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