The Importance of Process Safety Management in your ESG Strategy

In recent years, the corporate sustainability agenda has expanded beyond carbon accounting and social disclosures. Today, investors, regulators, and boards expect ESG strategies to demonstrate real control over operational risks, not just reporting frameworks. Within this expectation, one critical but often underrepresented area is Process Safety Management (PSM). For industries such as energy, chemicals, pharmaceuticals, and manufacturing, PSM is not a compliance add-on but a core determinant of ESG outcomes. 

Recent global reports confirm this trend. Nearly 90% of S&P 500 companies now publish ESG reports, yet a considerable portion underrepresents safety as part of governance and environmental commitments. According to Sphera’s 2025 Process Safety Report, 60% of organizations see governance as tied to process safety and 55% recognize its environmental implications, but almost a quarter either lack ESG programs or fail to integrate PSM into their frameworks. This disconnect exposes businesses to risks that directly erode ESG credibility. 

Understanding Process Safety in ESG  

To understand why PSM must be central to ESG, it is critical to differentiate it from general workplace safety. Occupational safety aims to prevent individual accidents- slips, falls, or minor injuries, that, while serious, do not typically disrupt entire ecosystems or communities. 

Process safety, however, deals with preventing large-scale catastrophic incidents- explosions, chemical leaks, fires, or toxic releases. These are events with far-reaching consequences that can claim lives, devastate communities, and inflict long-term environmental damage. 

The Occupational Safety and Health Administration (OSHA) defines PSM as a structured framework consisting of interdependent practices such as hazard identification, process hazard analysis (PHA), management of change (MOC), mechanical integrity, emergency planning, and operator training. Each of these elements plays a role in ensuring industrial processes run reliably, safely, and without catastrophic disruption. 

Within the ESG safety management lens, process safety becomes a question of whether a company can credibly claim environmental stewardship, social responsibility, and good governance if it does not actively prevent major industrial accidents. 

Why Process Safety Is Core to ESG Strategy 

1. Environmental Dimension 

The environmental pillar of ESG is highly vulnerable to process safety failures. Sustainability initiatives, whether targeting carbon reduction, biodiversity conservation, or water management, can collapse instantly if a catastrophic incident occurs. 

The Deepwater Horizon disaster stands as a stark reminder. Beyond human lives lost, the operator incurred over $18 billion in fines and compensations, while millions of barrels of crude irreparably damaged marine ecosystems.  
 
Such incidents not only create toxic contamination but also inflate greenhouse gas emissions through unplanned leaks, methane discharges, or emergency flaring. They undermine net-zero pledges and jeopardize climate transition plans. 

By embedding Process Safety in ESG frameworks, companies protect the integrity of their environmental goals. Preventive safety measures reduce the likelihood of accidental emissions, ensure pollution control systems remain effective, and safeguard biodiversity from unexpected disasters. 

2. Social Consequences 

The social pillar of ESG is equally dependent on process safety. Worker wellbeing, community trust, and stakeholder relationships all hinge on how well an organization manages its operational hazards. 

Accidents involving hazardous chemicals rarely remain confined to factory premises. Communities living nearby face the brunt of toxic exposure, evacuation orders, and long-term health risks. This erodes the company’s “social license to operate,” which is increasingly recognized as a critical intangible asset. 

Within the workplace, insufficient focus on safety undermines employee morale and engagement. Workers are less likely to remain loyal to organizations where their lives are at constant risk. On the other hand, companies that integrate PSM into ESG demonstrate a genuine commitment to protecting their workforce, which strengthens trust, reduces attrition, and fosters long-term employee alignment with corporate values. 

3. Governance and Financial Risk 

Governance under ESG encompasses risk management, compliance, ethical conduct, and transparency. Process safety sits at the intersection of all four.  
 
When organizations fail to implement strong PSM, they invite regulatory scrutiny, shareholder lawsuits, and reputational crises. For instance, the U.S. Environmental Protection Agency (EPA) and other global regulators have levied billions in fines against companies whose process safety failures led to catastrophic accidents. 

Beyond penalties, the financial markets are signaling a shift. ESG-focused institutional investments are expected to reach $33.9 trillion by 2026 with capital allocation increasingly favors firms with demonstrable operational risk controls, including process safety, as part of governance. Boards that fail to connect PSM with ESG risk exclusion from investment portfolios and heightened cost of capital.