EHS & Sustainability Investment Case

19 minuteslast update: 05/20/2025

Written by Mouttou Natanasigamani

Drawing on over two decades of my experience as a Management Consultant and Client Strategy Leader in Environment, Health, Safety & Sustainability (EHS&S) domain across various industries, I've observed a significant trend: companies increasingly prioritize people and planet alongside profit, often reflected in their social, environmental, and economic values. This shift underscores a crucial reality: investing in the safety and environmental standards of your operations is no longer optional for firms seeking to thrive in today's competitive landscape.

My aim today is to guide you through the key dimensions of building a compelling investment case for an EHS&S solution. We will define your challenges, explore effective solutions, understand your current systems, quantify the value proposition, and financially evaluate the potential return on investment to help align your EHS&S strategy with your broader business objectives. 

Defining the challenges

The crucial first step in building your EHS&S investment case is to clearly define the specific challenges your organization faces. Whether common across industries or unique to your operations, these issues present risks of varying severity. Failing to address these risks can lead to disruptions ranging from minor operational hiccups to significant legal battles with wide-reaching consequences, potentially affecting the public and resulting in financial penalties for non-compliance. Most critically, unmanaged or undetected challenges can tragically lead to fatalities. Strategically, these failures can severely damage your organization's reputation and erode trust with key stakeholders. 

Discovering the right solution

To effectively monitor and resolve EHS&S-related challenges, organizations must invest in appropriate resources, including state-of-the-art EHS&S software and streamlined processes. An EHS&S software solution can significantly improve performance in critical areas:

• Improving Health & Safety: By preventing incidents, assessing and mitigating risks, and providing accessible online guidance. 
• Strengthening Risk & Audit Management: Through clear program objectives, comprehensive risk analysis, robust internal audits, and better alignment with external stakeholders.
• Ensuring Legal Compliance: By maintaining legal registers, managing inspections, and facilitating change and content updates. 
• Optimizing Hazardous Substances Management: With workflow-oriented approvals, compliant chemical management, and tracking of application, storage, and dangerous goods.
• Enhancing Environmental Management: Through improved air, water, and waste management, and streamlined environmental and sustainability reporting. 
• Controlling Work Effectively: By managing permits and implementing safeguards. 

Beyond these core functions, new EHS&S technologies offer valuable advantages, including:

• A user-friendly experience. 
• A fully integrated, all-in-one platform. 
• Accessible and insightful mobile reporting. 
• Expert support from customer success and consulting teams. 
• The flexibility to adapt to evolving needs. 
• Simplified IT management with SaaS deployment. 
• Adherence to ISO certified management systems. 

Assessing Value

In addition to pinpointing your organization's EHS&S challenges and considering hazard classifications like those from OSHA (Biological, Chemical, Ergonomic, Physical, Safety), a key step is to evaluate the value an EHS&S solution offers through proactive hazard resolution, continuous monitoring, and early problem prevention.

Ideal “To-Be” Scenario: 

While the specific value of an EHS&S solution is unique to each organization, several generic value drivers are crucial to consider: 

• Solution Requirements: Meeting the fundamental needs and expectations defined by the organization's specific challenges and identified hazards. 
• Risk Mitigation Capabilities: The breadth of functions and the solution's ability to effectively address and mitigate identified risks. 
• Reputation Protection: Maintaining the organization's reputation by preventing short- and long-term damage from hazards. 
• Vendor Support: The quality of services and warranties provided by the EHS&S solution vendor.
• Vendor Trust: The level of trust and confidence in the vendor's ability to ensure mutual success. 

With these value drivers established, the next step is to define detailed business and technical requirements. This will enable us, as the EHS&S solution vendor, to determine the solution's cost, including implementation, hereafter referred to as 'New Solution Cost,' representing the estimated total cost of the new EHS&S solution and its added value.

Factual “As-is” Scenario:

In addition to evaluating the new solution's cost, a comprehensive understanding of the financial consequences of the current situation is essential. Just as value drivers are organization-specific, so too are the financial aspects of EHS&S management. 

• A critical step is to assess the cost of current EHS&S systems and processes, which may include tools like Excel or others. 
• It's equally important to quantify the financial risks and losses stemming from current shortcomings. This goes beyond the Total Cost of Ownership to include the financial impact of: 
  • Inadequate incident management 
  • Increased vulnerability to non-compliance 
  • Negative effects of safety risks on employee engagement and retention 
  • Hazards arising from unplanned events 
  • Production delays attributable to EHS&S issues 
  • Loss of customer confidence due to perceived EHS&S risks 
  • Competitive disadvantage resulting from EHS&S deficiencies 
  • The totality of financial losses incurred due to these factors

By quantifying these costs, which we'll term 'Expected Savings,' we establish the financial baseline of current systems and processes. This baseline is crucial for determining the potential savings achievable with an improved EHS&S solution in the Ideal 'To-Be' Scenario." 

The buck doesn’t stop here!!!

Crunching the Numbers

Following the 'As-is' and 'To-be' scenario analysis, a thorough evaluation of long-term financial impact is essential. This involves: 

• Cash Flow Analysis: Projecting cash flows over a period such as five years (Year 0 to Year 5). Year 0 includes initial capital expenditures, while Years 1-5 reflect net pre-tax income (expected savings less new solution cost). 
• Net Present Value (NPV): Calculating the NPV by applying the organization's cost of capital to the projected cash flows. 
• Payback Period: Determining the payback period (in months), indicating when the investment becomes profitable. 
• Return on Investment (ROI): Calculating the ROI as the total net pre-tax income over five years divided by the total project cost. 

Although these financial calculations require careful attention, a systematic approach with clear inputs will facilitate a straightforward assessment. 

For increased clarity on the calculations as described above, the following is a rough template of the example steps provided for your convenience.

Instructions for using the template

To use the template efficiently, follow the detailed explanations below, for all template elements.

Objective of Table A above: To calculate the expected savings when your organization gets rid of current EHS&S related issues and existing legacy solution. 

i. Quantified issues: Annual average predictable costs over next years (for e.g. costs of accidents, human loss, recovery time, replacements, trainings, bringing back-to-normal stage, non-compliance, etc.) based on the history in the past years. 

ii. Current solution costs: The cost of current outdated legacy solution and additional resources to maintain. 

iii. By adding the above costs (i + ii), the expected savings as benefits in Euros can be derived. 

Objective of Table B above: To calculate the Net pre-tax income for future years, considering the expected savings and total cost of the New EHS&S solution. 

iii. The expected savings from getting rid of the current issues and legacy solution as calculated in Table A. 

iv. The total cost of ownership of New EHS&S solution for future years (years 1 to 5). The initial cost on hardware and one-time software license fees if any need to be captured as Capex in Year 0. 

v. The annual Net Income before taxes can be derived by subtracting the new solution cost from expected savings. 

Objective of Table C above: To calculate the net present value of the project as a whole. 

vi. First determine the present value for respective years by: 

A. Filling the cash flow for years 0 to 5 in the above table. The cash flow = Annual Net pre-tax income as calculated in step v. 

B. For respective years’ cash flow, calculate the present value by either 

Using Excel PV function (with Excel help) or 

Using formula PV = FV / (1+r) ^n where PV is Present Value, FV is Future Value from the cash flow, r is Cost of Capital, n is Number of the time period 

vii. The Net Present Value of the project is sum of the present values for the whole term of 5 years. 

Objective of Table D above: To calculate the Payback period of the project. 

viii. The steps as follows: 

A. Fill the Present Value of cash flow for respective years as calculated  

B. Calculate the cumulative values for respective years from year 0 to 5. 

C. Payback period = (i – c)/o where 

1. i = Initial investments in year 0 
2. c = Cumulative present value in the year just before break-even 
3. o = Original cash flow in the break-even year 

viii. Payback period can be represented in months or years. 

Objective of Table E above: To calculate the Return on Investment of the project. 

Steps ix. & x. is explained as above. 

In summary, applying the appropriate financial figures to the outlined templates will reveal:

1. The Net Present Value (NPV) of your EHS&S investment, reflecting its total long-term value considering future savings and costs. 
2. The Payback Period, indicating in months when the benefits of your EHS&S investment will begin to be realized during the project term. 
3. The Return on Investment (ROI) percentage for your EHS&S investment over the entire project duration. 

Closing Statement

It's vital to remember that EHS&S challenges and the resulting value of a new solution are unique to each organization, shaped by industry, location, market, and products. This article aimed to provide foundational insights and encourage you to build a detailed investment case aligned with your specific end-to-end EHS&S processes and overall strategy. Achieving accurate financial projections, including quantifying current issues and the comprehensive value of a new solution, often requires deeper analysis. I offer my expertise to support you in this process. If you're interested in a discovery call and exploring potential workshops as next steps, please contact us. 

In closing, extensive experience confirms that investing in EHS&S delivers substantial returns. While this discussion focused on financial justification, the broader positive impact on your employees and stakeholders globally is of paramount importance.