Volume: 4 | Issue: 3

Accounting for HSSE in an Enterprise Resource Planning System

Topics

Enterprise resource planning (ERP) software systems help organizations manage data from product planning to shipping. By automating primary business-related processes, the systems allow companies to define their business models and plan workloads.

However, most companies do not include processes related to health, safety, security, and environmental (HSSE) concerns within the scope of their ERP systems, and failing to account for HSSE may be a costly mistake, an expert said.

Jeff Morgheim, a former climate change director at BP, said the early inclusion of HSSE practices in ERP systems is a good business practice because it sets a societal expectation that leads to improved decision making.

He spoke at a webinar, “What About HSSE? Why Early Inclusion of HSSE Into Enterprise Resource Planning Efforts Makes Sense,” held by the SPE Gulf Coast Section’s Health, Safety, and Environment study group. Morgheim, who was part of BP’s executive team in the aftermath of the Macondo incident in 2010, is the founder of Edge Consulting.

HSSE plays an important part in the operational excellence of an organization, Morgheim said. However, financial issues may make it difficult for a company to execute primary HSSE functions.

“When an enterprise decides that it needs to implement something that allows all this information to flow together, the usual motivator has to do with getting a better handle on their accounting systems,” Morgheim said. “So, what you’ll find is that the executive sponsor within an enterprise will tend to be someone from within the finance function. That has an impact on the scope (of ERP implementation).”

The following factors drive the inclusion of strong HSSE policies in an ERP system:

Morgheim said near-term process improvements provide organizations with a framework for identifying the processes for simplification or elimination, and removing duplicity in data collection and reporting. An organization’s ability to use its HSSE policy in the investigative process in a consistent way with the rest of the ERP system is a powerful opportunity.

“It’s a fantastic opportunity for your function to be able to sit down and look at how exactly our processes work,” he said. “Where do we get information from? Who do we get information to? How do we validate that information? What do we do with that information?”

Avoiding rework on ERP systems is critical to keeping their cost down. Morgheim said incorporating good HSSE practices into a plan early will always cost less in the long run than retrofitting a plan to incorporate those practices after an incident.

“As anyone who has done house remodeling knows, there is a lot less pain and suffering and mental anguish involved in designing all the rooms ahead of time rather than building two separate parts of the house and figuring out how you’re going to integrate them together,” he said.

In addition, fostering collaboration between functions (operations, drilling, accounting, human resources, and the supply chain) helps reduce workload and errors within an organization. Leveraging an ERP’s risk reduction potential helps improve compliance, risk management, and operational assurance, which leads to long-term benefits in accounting and finance.

Enhancing the HSSE workforce’s sustainability helps lower turnover costs and risks. It expands the pool of potential HSSE employees and lowers the costs to bring in new people. By emphasizing the importance of the role of HSSE, an organization is making it part of the creation of a culture of operational excellence. Morgheim said companies should reinforce the belief that good HSSE practices lead to good business practices.

The webinar is available at https://webevents.spe.org/products/what-about-hsse-why-early-inclusion-of-hsse-into-enterprise-resource-planning-efforts-makes-sense