6-13. A Scandal of EHS Data Management: Loss of Trust Due to Discovery of Falsified Records

Managing EHS (Environment, Health, and Safety) data is a crucial element of corporate operations that directly impacts compliance and social credibility. When data falsification is exposed, the effects go beyond legal penalties, causing serious damage to the company's brand and its reputation among investors. This article explains the typical issues and lessons learned from EHS data falsification scandals.

1. Background and Motivation for Falsification

In many cases, data is altered or measurement results are deleted to conceal the fact that a company has failed to meet environmental or occupational safety standards. This is often driven by pressure from management or a focus on short-term cost reduction. Additionally, in companies with superficial internal controls, data falsification at the operational level can become a regular practice.

2. The Impact of Discovery

When falsification comes to light, in addition to direct consequences like administrative penalties, fines, and the revocation of ISO certifications, economic losses can escalate through contract cancellations and a drop in stock prices. Furthermore, the company loses the trust of its employees, local residents, and investors, leading to a long-term decline in corporate value. In today's world, where scandals spread instantly via social media and news reports, the damage to a company is more severe than ever.

3. Vulnerabilities in Internal Controls

Many companies where EHS data falsification occurs have audit processes that are formalistic and ineffective. Management methods that rely on paper or Excel spreadsheets also have a weakness that makes falsification difficult to detect. A major contributing factor is also an environment where the internal reporting system is dysfunctional, and employees are unable to report misconduct.

4. Directions for Recurrence Prevention

To prevent scandals, it is essential to ensure data transparency and traceability. This requires building a system that makes falsification difficult, such as introducing a cloud-based EHS management system, conducting regular third-party audits, and operating an effective internal reporting system. It is also crucial for management to accept "inconvenient truths" and show a willingness to invest resources in improvement.

5. Lessons and Implications for Businesses

While data falsification may seem like a way to temporarily avoid risk, it is a serious long-term threat to a company's survival. Increasing transparency should not be viewed as a burden but rather as an investment to gain the trust of stakeholders. As ESG ratings become more stringent, the credibility of EHS data is becoming a fundamental component of corporate value.

In summary, EHS data falsification scandals are actions that fundamentally shake a company's credibility. To prevent recurrence, reforms in systems, organization, and culture are essential. By ensuring sincere data management, companies can maintain social trust and achieve sustainable growth.