Managing Supplier Requirements with HSE Accounting

Abstract

As recent disasters in the offshore petroleum and other industries illustrate, managing HSE is 
particularly relevant for companies operating in high risk industrial sectors. HSE management 
systems support companies in minimising adverse health effects, injuries and environmental 
damages as well as in complying with legislation, standards and stakeholder expectations. Key 
elements are risk assessment and control through implementation of preventive and protective 
measures, the preparation of emergency situations and investigation of accidents. HSE manage
ment systems have also become a common element of supply chain audits and management. To 
increase transparency in their supply chains and to reduce risks, large companies aim at align
ing compliance of suppliers with their health, safety and environment (HSE) goals and policy. 
This paper shows with the case of Bisma Jaya, an Indonesian mechanical engineering com
pany, how accounting for HSE can support small and medium sized suppliers to meet the re
quirements of large international customers. This paper proposes a framework for HSE man
agement accounting and examines the use of management accounting to improve the HSE per
formance of an Indonesian company as a response to customer audit requirements. The com
pany is a supplier of a large oil company and seeks for effective and efficient ways of HSE im
provement. The paper unfolds benefits and limitations of narrow efficiency-oriented responses 
to rating systems and audits and highlights that efficiency considerations in HSE management 
are only partially useful and require complementing effectiveness considerations on HSE per
formance.