AXIS Performance Advisors

Demystifying sustainability

Environmental Strategies (Research)

 

Copyright 2000 AXIS Performance Advisors, Inc.

Environmental Strategies

Research Report

by Darcy Hitchcock

At every point in history, there has been a factor that has defined competitiveness:mass production, quality, information. We believe that the next factor will be sustainability. Most people understand that our society is depleting the earth’s resources faster than we are regenerating them: rain forests,fisheries, top soil, etc. And at the same time, human population is expected to roughly double AGAIN in the next fifty years. This sets up a supply and demand problem: more people demanding more stuff while the earth’s ability to provide those things is declining. If your organization keeps on its current course, you can count on higher resource costs, higher disposal costs, more environmental regulations, more customer pressure, and so on.The competitive advantage comes from being the first to market with a product or service that is less dependent upon the earth’s resources.

The benefits are huge. Organizations that get involved in sustainability are amazed at the energy and commitment it yields from their employees.People start thinking outside the box. It forces you to rethink your business.And it drives savings: less regulatory burden, less disposal costs, better process efficiencies, etc. Interface, which makes carpet, has also gotten lots of free advertising in Forbes, FastCompany and other magazines by touting their commitment to become not just a sustainable enterprise but a restorative one, with a goal to never to take another drop of oil from the earth. And thanks to The Natural Step, we now have a scientific definition of a sustainable society which you can use to make better economic and environmental business decisions. (see http://www.naturalstep.org.)

Those of us who have worked with teams and quality are in a great position to add value to this movement. We know how to improve processes and develop effective measurement systems. When you adopt sustainability as a corporate strategy, you need to form teams to create innovative new ways to do things,a tactic straight from quality improvement teams. And one of the biggest barriers is getting people to think creatively about how work should be done. So generalists like you, our readers, and us at AXIS have many skills/knowledge required to lead this effort. You don’t have to be a biologist or chemical engineer to help the planet and your organization’s bottom line.

Marsha and I wanted to test some of our assumptions about:

  • Whether there was in fact a movement in business toward sustainability
  • Whether the obstacles were primarily human/organizational versus technological

We also wanted to learn what the critical success factors were. In late1999 and early 2000, we surveyed organizations in the Pacific Northwest which were respected for their environmental performance to discover what they were doing, what frameworks they found useful, and what obstacles they were facing. While this is not a scientific study, it does reveal some interesting trends.

Survey methodology

We contacted organizations which are respected for their environmental performance and asked them to complete a survey on their environmental strategies.The questions included:

· How do environmental issues fit in to your corporate strategy?

· Which components are present in your environmental efforts and how important is each?

· Who is actively involved in your environmental effort?

· What have the benefits been?

· Do you try to assess the return on investment of your environmental efforts and if so, what has the return been?

· What have been the biggest obstacles and how big of an impact have they had?

· What resources/tools have been the most helpful?

· What advice would you give other organizations?

Many organizations were unwilling to participate and a couple asked that we not reveal their identity. The eight respondents included representatives from high-tech, heavy manufacturing, electric utilities, consumer goods,services and governmental agencies. They included both large and small organizations.

Everyone plans to do more

The first question tried to assess how sophisticated the organization is in regards to environmental issues. We have identified six levels of sophistication through which organizations tend to evolve. While it may not be appropriate or necessary for every organization to reach the top of the scale, each layer tends to incorporate the layers below.

Those companies at the bottom two rungs of the scale, remedial and regulatory compliance, tend to see environmental issues only as a cost and an annoyance.When they reach the point of recognizing eco-efficiencies, they realize that the environmental efforts can save money: by saving electricity, materials,etc. Further up the scale, those in green marketing learn that by touting the environmental aspects of their products and services, they can actually make more money by either attracting/retaining customers or in some cases,being able to charge a premium for their product. Very few companies yet recognize the strategic impact that sustainability can have on their competitiveness,and only a fraction have even sought to restore the environment, investing in their “natural capital.”

The chart entitled Corporate Strategy shows where the organizations peg themselves now and where they want to be in five years. All showed a need to jump up the scale, in some cases, up several levels. The only organization that planned to stay below “sustainability” was an electric utility.

For all the remaining questions, we have segmented the data based on how sophisticated the organizations are now. “Early” includes those in remedial, compliance or eco-efficiency mind sets. “Advanced”includes those who saw themselves as “green” or better.

Management and employee involvement are key

The second question rooted out what components in an implementation are important to success. The following chart shows how many respondents currently had each of the components. Not surprisingly, executive commitment was far more common with the advanced group. We tried but were unsuccessful at getting a respondent which was using the CERES principles as a framework. One organization was ISO 14000 certified.
We also asked how important they felt each component was. We assigned arating of H=3; M=2; L=1 and no response =0. Clearly management oversight is critical, including having management support,an environmental management system, metrics and an environmental report. The need for employee involvement and teams was also high on the list. The Natural Step was seen as being more useful than CERES. Having an EMS wasmore important than ISO certification. Even the organization that was ISOcertified said, “It is more important to develop an environmental managementsystem that matches the organization’s personality and values than to designan EMS for ISO 14000.”

The difference between Early and Advanced is executive involvement

Both early and advanced organizations involve environmental experts, mid-management and front line employees. For the Advanced group, however, almost all also involved top management. This is not surprising given that the higher levels of sophistication raise the issues beyond just “environmental issues” to ones of corporate strategy and image.

Benefits include health, safety, foresight, and disposal costs

The respondents had a listing of possible benefits to choose from. All saw an increase in health and safety. All but one saved money on disposal costs. All but two had improvements in foresight (foreseeing potential threats,giving them time to prepare) and in their public image. A majority improved their processes and reduced legal liabilities. Surprisingly none had either gone after or been able to get reductions in their insurance rates (which OKI Semiconductor had gotten before they were shut down). The issue of access to foreign markets had only affected the chemical company so far.

The respondents in the more capital intensive industries were more likely to have assessed the ROI of their efforts but this focused mostly on capital improvements which would normally require such analysis. One mentioned a savings of $1.7 million in waste water conservation (presumably an annual savings over previous methods). An organization that gathered data on waste minimization found that their paybacks were less than two years in all cases.Other organizations stated that they were developing measures to help assess the return.

Education is the biggest obstacle

Next, we asked about what obstacles got in the way. Surprisingly, “Struggling to find  a practical way to educate all employees” came out on top, followed by “Involvement: Not enough people ‘own’ this issue.” The absence of measures, customer pressure, priority or an integrated corporate strategy were also commonplace.

It is revealing what obstacles the Advanced group didn’t have that the Early ones did. The issues of teamwork, rewards, and getting quick wins that help pay for the effort drop off the list, perhaps indicating thatthey have solved these dilemmas or that they didn’t have them in the first place.

We also asked how important each obstacle was, how much it impacted success. Again we used a rating of H=3; M=2; L=1 and no response =0. In addition to reinforcing the problem with educating employees, this analysis elevated documentation management (“Creating all the documents and keeping them up to date”) and regulations (“Keeping up to date on regulatory changes”) to near the top of this list.

What are the best resources?

We asked people to give us their best resources by category. The most commonly mentioned one was The Natural Step. The Internet was a great sourcefor people, although only a few people included actual web site addresses.NGO’s also were mentioned repeatedly as well.

Internet: Quick assess to EPA updates, reg’s and fact sheets,www.secondnature.org (resources and contacts), http://www.usgbc.org, http://www.greenbuilder.com/sourcebook,interactive training, emerging issues with hot links to other areas.

Government: EPA programs, some cities like Boulder, CO have goodgreen bldg. info; State of OR extension services

Books & Magazines: Technology magazines, update services that
send a monthly reg. summary, Natural Home.

Training: CD interactive training, The Natural Step, ISO

Techniques: Design for environment

Associations: Business for Social Responsibility, OAEP, Edison
Electric Institute, The Natural Step

Framework/Body of knowledge: Franklin Quest, The Natural Step,
ISO/EMS

Other: Like minded companies/peers; NGOs (i.e., NRDC, Environmental
Defense, etc.), World Resources Institute, United Nations Environment Program

What lessons can they share?

We asked what advice they would give other organizations. Their comments centered around being strategic, focusing “up stream” and on results, and partnering. Here are their actual comments:

· Take a comprehensive approach; look at the big picture with strategic planning approach; find easy wins; in planning context, reach out to stakeholders to develop buy-in. Don’t be in the middle of a merger.

· Never give up. Look at cost sheets for hidden treasures.

· Top management leadership (not just support) is critical; partnering with other related businesses has made a huge difference; quality training and org. programs like TNS; sharing resources with others.

· Focus the programs for maximum impact reduction; focus engineering and technology to design environmental impacts out of the process before it is built or installed; focus employees on resource conservation, recycling; aggressively attack automobile emissions as the major community source of
air pollution.

· Be persistent, be thorough, be flexible

· Integrate this into strategic business plan.

· As far as ISO 14000, it is more important to develop an environmentalmanagement system that matches the organization’s personality and valuesthan to design an EMS for ISO 14000. We approach the certification as asign that our EMS meets a high standard. We did not design our EMS componentfor ISO 14000.

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