3-2. EHS Risks Questioned at the Board of Directors and Management's Accountability

Recently, EHS (Environment, Health, Safety) risks have become a critical issue in corporate management. An industrial or environmental accident can lead to operational shutdowns, legal penalties, and a loss of social credibility, severely impacting a business. As a result, boards of directors are now strongly demanding that companies demonstrate appropriate EHS risk management and that executives fulfill their duty of accountability. Here, we will explain the types of EHS risks scrutinized by boards of directors and the necessary accountability from executives.

1. Types of EHS Risks Scrutinized by Boards of Directors

Boards of directors primarily address EHS risks from the following perspectives:

• Legal Compliance Risk: Penalties and administrative guidance resulting from violations of laws such as the Industrial Safety and Health Act, Basic Environment Act, Waste Management Act, and Pollutant Release and Transfer Register (PRTR) Act.

• Operational Risk: Operational shutdowns due to industrial accidents, explosions, or fires, and the impact on customers from supply interruptions.

• Financial Risk: Financial burdens from workers' compensation, environmental remediation costs, and administrative fines.

• Reputational Risk: Damage to the brand image and loss of trust from business partners and investors due to accidents or violations.

• ESG Investment Risk: Inadequate EHS disclosure or inappropriate responses can lead to a lower ESG rating, affecting a company's ability to raise capital and its stock price.

2. The Scope of Executive Accountability

Executive accountability to the board of directors goes beyond simply reporting accidents.

• Clarity on Risk Assessment: Executives must explain the existence and potential impact of EHS risks using both quantitative and qualitative data.

• Presentation of Countermeasures and Management Systems: It is essential to present concrete preventative measures and management systems, such as risk assessment results, emergency response manuals, and the status of education and training.

• Sharing KPIs and Results: It is effective to use measurable indicators like the reduction in the industrial accident rate, a decrease in CO2 emissions, and the status of corrective actions for audit non-conformities to demonstrate progress.

• Future Projections and Improvement Plans: Part of an executive's accountability is to present future improvement plans based on emerging regulatory trends and international standards.

3. Practical Tips for Fulfilling Accountability

• Regular Risk Reviews: Establish a system to evaluate EHS risks quarterly and report them to the board.

• Ensure Data Transparency: Use external audits and third-party verification to back up your explanations.

• Analyze and Share Incident Examples: It is effective to report on accidents from other companies or internal near-miss incidents to the board and discuss preventive measures.

• Link with ESG Reporting: Ensure consistency between what is disclosed to the board and what is presented in integrated reports and sustainability reports to assist with investor relations.

4. Accountability as a Driver of Corporate Value

When executives accurately explain EHS risks to the board, it is more than just fulfilling an obligation; it is directly linked to strengthening governance and increasing corporate value. By providing transparent explanations, companies can gain the trust of stakeholders, which not only mitigates risk but also enhances their competitive advantage.

EHS risk management is closely tied to the business strategy itself. Fulfilling accountability to the board of directors is a prerequisite for a company's sustainable growth.