The Hidden Benefits of Regulatory Compliance

Regulatory compliance is the process by which a company ensures that it follows all of the rules and regulations pertaining to its industry. Depending on your location, the applicable law may be a federal, state, or regional regulation.

There are several legal consequences for breaking regional, state, or federal laws, including fines and even prison for the most severe offenses. Exhibiting a track record of regulatory compliance helps reassure customers that a company will live up to its obligations under contracts and act ethically in its dealings with others.

Benefits to Management

When it comes to health, safety, and environment (HSE) requirements, management tends to lose their employees' trust in an atmosphere where compliance is not appreciated or adhered to. Employees have high regard and level of support for managers and supervisors who consistently show that they have the well-being of their staff in mind. 

When management fails to demonstrate compliance with regulatory obligations, employees may feel pressured to only accomplish the bare minimum required of them. They may not be willing to go above and beyond when it is required of them. Additionally, it becomes difficult for the worker to invest and commit to the company over the long term. As a result, there is a potential for excessive employee turnover, and in some instances, the management team may be engaged in increased legal litigation.

Operating in a compliant way can help management gain the trust and support of employees, customers, stakeholders, regulators, and the overall community. If a company's management is known for keeping things in line with the law, the authorities may choose to conduct fewer inspections.

Benefits to Employees

In an environment where a company routinely operates in a state of noncompliance, employees tend to lack trust in management and the company. Eventually, employees may begin making their own decisions regarding the legality of their work practices.

Maintaining a compliant and secure workplace can boost productivity, morale, and employees' faith in their superiors and the company. In a compliant workplace, employees are more sure that their workplace is safe and gives them the chance to do their jobs in a way that lets them go home safely at the end of the day.

Benefits to Stakeholders

Penalties imposed for regulatory noncompliance can diminish a company's financial performance and stock value. Depending on the degree of the non-compliance, a substantial penalty may be imposed, reducing the company's profits and the amount paid to stakeholders. Noncompliance can also diminish confidence in the management's capacity to run a safe and compliant operation that does not negatively affect workers and the environment.

Stakeholders are more likely to feel at ease with the company's operations and more inclined to lend help if they consider that the company has accepted the duty to protect the employees and the environment. For instance, when a new or revised environmental permit is required, the risk of objections from the community can be reduced during the public hearing phase if the company has historically demonstrated responsibility and concern for the health and safety of the workforce and the community.

Benefits to Environment

Chemicals and materials released into the environment can contaminate the soil and air, killing plants and animals. Environmental noncompliance can result in hefty fines and damage the company's reputation.

Protection of the environment is essential for winning and maintaining the trust and support of employees, customers, and other stakeholders. There are numerous regulations meant to protect the environment from the adverse effects of commercial operations. In a compliant workplace, the likelihood of irreversible environmental damage lowers dramatically, as do penalties imposed by regulatory authorities. 

Final Words

Workers, the environment, stakeholders, and management can all suffer when a business takes a noncompliant stance. Noncompliance with an HSE regulation may result in the following penalties:

  • Enormous monetary fines
  • Reputational damage to the organization
  • Reduced capacity to acquire projects in their respective business line
  • Increased regulatory monitoring

All penalties, even if they are not monetary, have an effect on the company's financial performance.

Reference: Alston, Frances, and Emily J. Millikin. “Guide to Environment Safety and Health Management.” Developing, Implementing, and Maintaining a Continuous Improvement Program, CRC Press, 2015.

HSE Windsock

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