THE ROLE OF INDUSTRY: EMPOWERMENT & ENVIRONMENTAL PROTECTION 

JONATHAN PLAUT

Director, Worldwide Environmental Programs, Allied-Signal Inc., P.O. Box 1013,

Morristown, NJ 07962, United States of America.

1    SUMMARY

The focus of this paper is industrial environmental management and the ownership or empowerment which leads to good environmental management.

2    BASIC COMPONENTS

The basic components of managing for environmental assurance are all of the following:

  • A policy that states the values of the institution, clearly and forthrightly as well as assuring that the operations of the institution will be in compliance with all environmental regulations, and that all environmental risks will be managed appropriately;

  • A risk management philosophy that emphasizes the importance of managing for environmental assurance;

  • A plan that sets forth environmental objectives for the future and delineates the manner in which implementation will be achieved;

  • An organization design and management process that reinforces and facilitates the implementation of the plans for environmental risk management;

  • Procedures and practices that guide the organization on how to operate so that the standards established in the objectives will be met;

  • A communication and reporting system that (1) provides timely information to management on the institution's performance in managing its environmental risks and complying with environmental laws, regulations, and (2) effectively communicates the philosophy, needs and aims of management to all members of the organization;

  • A control system that monitors and audits performance of the organization against the standards and objectives established for environmental assurance; and

  • A system of review that provides for a fresh look at all activities of the institution and encourages revision and up-dates to reflect changing conditions in their operations or in the environment, as well as changes in the institution's understanding of their risks.

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    These components when carried into an environmental management process will lead to an effective environmental management system in which these basic elements are covered: Policy, Program, Standards, Professional Expertise, Disclosure, Training and Inspections in an integrated program of environmental, health and safety.

    3    STAKEHOLDERS

    Companies serve many interest. It is useful to think of those interests as stakeholders--literally those who hold a stake in the company's activities and future. Environmental Management works best when the stakeholders feel ownership and empowerment to protect long range interest and good environmental management of the company, including the interests of the communities in which the companies operate.

    Stockholders: The stockholders represented by the Board of Directors are the owners of the company. Through shares publicly or privately traded they invest their funds in trade for dividends (income) and the hope for growth in the value of the shares (investment). Thus, the shareholders have a stake in the profitability and long term good health of the company, including its good name engendered by its environmental conduct. They are due regular reports and the fidelity of the management to pursue their interests, since they are in fact the holders of the private property right in the company.

    Employees: Employees require training and supervision. Their performance should be measured to assure safe operations and quality product or service, and competitive profit on a continuing basis. It is the obligation of the company to provide the information as to hazards and protective work processes and equipment to keep the employees safe. But it is the obligation of the employees to watch out for their own safety and the safety of their work mates. Employees have an interest in the stability and well being of the company, including a vested stake in the future of the organization. In many ways the employees and the stockholders have similar interests as stakeholders. Indeed, in many companies the employees are an important part of the stockholder family, and management encourages that stakeholding by employees to encourage a feeling of responsibility for the company.

    Management: Of course, management is composed of employees at the top of the organization. But management - the chief executive and officers of a company - have great stake in the affairs of the company. While they are paid the most, their pay and even their careers are usually most at risk if the business does not go well or the reputation of the concern falters. Environmental liability and care for safety of the employees or community is a great responsibility of top management. It has generally been found to be useful to include oversight at top management and the Board level of environmental, health and safety activities to assure responsible action.

    The Government: In the United States, environmental, health and safety regulations appear at every level. Laws and regulations must be obeyed and leadership companies try to do that in a manner that will give it competitive advantage (e.g. in product design, in packaging, in plant safety, in disposal, in quality product, in cost abatement). Government regulates and controls actions which are not in the public interest and endanger it. Leadership companies learn not to be in conflict with the government, but in partnership with its aims, to its (the company's) advantage.

    The Community: Perhaps the interest group whose stake in company affairs became most obvious in the last few decades of the twentieth century is the community. Simply put, the community neighboring or harboring the factory or industrial plant has as obvious stake in the unit. This first became obvious, of course, because the work force (the employees and, to a lesser extent, the management) in the plant comes from the community. Thus, economic reality dictates an interest in the plant's well being. But reality also increasingly dictates that the community also be interested in the surrounding environment. As wastes are transported greater distances or products carry with them health or environmental concerns, the definition of community has broadened to include local, regional and even international interests. Rene duBois said, "think globally, act locally," and a cogent argument can be made that the community of interest is best viewed from both a local and an international perspective.

    Non-Governmental Organizations: Many assessors of the environmental degradation in Eastern Europe feel that the greatest shortcoming in those Communist countries was not be form of government, but the absence of free press and effective forms of environmental conservation. NGO's advocate environmental positions. This idea of public advocacy for the environment reached its zenith, perhaps in the 1980's, when the United Nations adopted an advocacy stance in its world report, Our Common Future, and the United States when the head of a leading environmental organization (William Reilly) became the EPA Administrator. Companies recognize the strength of the responsible NGO and encouraged dialogue as a part of empowerment. There are strong dissenters who say that the most vocal and radial environmental NGO's are irresponsible and playing at an elitist game of encouraging minimal economic activity to the great disadvantage of the large majority of the world's people who need economic growth and prosperity, but to many others that is simply an extreme.

    The media: Perhaps the most influential outside force on the industrial organization, whether stakeholder or not, is the media - television and newspapers particularly. Environment issues are played out in a fish bowl, with daily events often overtaking reasoned and deliberate decision making. While industry and academia call for the application of good science, including analytic assessment of exposure and harm, the media's need for a daily story will overcome the ability for scientific certainty to evolve, or the patience of the community or government to be very deliberate. Thus, industry management will often have to act under the glare of the public spotlight to show prudence and protect its good name and shareholders, before sufficient evidence is in. Whether or not the media is a stakeholder in the environmental concern itself, it does represent the public interest and must be taken very seriously by the industrial organization.

    The Academic and Professional Community: Perhaps one more stakeholder group should be mentioned. Universities and colleges do environmental and health research, teach environmental, health and safety management, and join with professional societies to set standards of professional conduct. They are the propagators and the beneficiaries of the development of environmental science and technology, and investigation into the vexing problems we place under the rubric of environmental concerns is often their role. They are also propagators of environmental literacy, as in the programs at Tufts University which my company supported as a sponsor.

    What makes this system of multiple stakeholders work in my judgment - that was missing in Central and Eastern Europe - is a sense of ownership or empowerment relative to the problem. The rights and obligations of property encourage in investors that sense of ownership and obligation, as long as they are properly monitored and regulated by the other stakeholders.

    4    PRINCIPLES

    Companies have their own internal principles of conduct for environmental, health and safety standards of behavior. Here is one from my company which has been in evolution for twenty years.

    The key elements in carrying out this code of conduct or policy in Allied Signal are:

  • obeying the law and having our higher standards of conduct, worldwide (one policy);

  • promoting disclosure of problems so they can be fixed (open communication);

  • adopting proactive programs, like safety management, waste reduction and formal review, that is environmental auditing (preventative action); and

  • adopting a system to bind every employee to the policy and measure performance to assure the policy is being carried out (quality assurance).

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    While there still is much to be accomplished, such proactive environmental, health and safety programs have become the ethic of management of many of the largest multinational companies. The chemical industries of the U.S., Canada, Europe, Australia and Japan have joined together in association to sponsor and live by a code of conduct they call "Responsible Care". As a matter of continuity, it is interesting to note that my company, Allied-Signal (with the policy presented above), is a Responsible Care company. The overall Responsible Care Code says:

    Responsible Care is not only a code of general conduct, but a specific series of specific prescribed guidelines on subjects like waste reduction, emergency preparedness and response, process safety and product safety to which the companies pledge processes of improvement and against which they measure performance.

    Further in example, the International Chamber of Commerce (ICC) has promulgated a universally respected code on environmental auditing. All of these point to need for developing and embracing global standards of environmental conduct, which can be tailored and adapted to local needs and conditions to meet the interests of all the stakeholders.

    Perhaps one final example of such a code -- the ICC Charter for Sustainable Development, subtitled the Principles for Environmental Management -- is exemplary of industry self empowerment. About 1,000 of the most important international companies have now embraced it. It is the most all encompassing industry action to meet stakeholders' needs and environmental concerns in a free market, and reflects the optimism and empowerment for good environmental management one cannot help but sense exists for continued progress.

    5    ACQUISITIONS

    When investing in a new project, a company responsible for its workers and the environment will investigate a number of factors, including:

  • type of operation(s)/employees/location

  • history

  • process and materials

  • plant site details

  • past and present chemicals

  • storage

  • wastes and where discharged/spills/air emissions

  • PCBs

  • permits

  • on and off-site waste sites utilized

  • soil, groundwater, surface water studies

  • employee safety and health data

  • medical support/workers compensation cases

  • boiler/facility inspection reports

  • identification of environment agency

  • litigation before environmental agency

  • visitation

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    Detailed questionnaires utilized by companies in acquisitions demonstrate the care and diligence that potential ownership and responsibility for assets and problems will generate.

    6    TECHNOLOGY COOPERATION

    It is fair to say that the co-issues of technology transfer as a means of meeting local needs and sustainable development and safety requirements instituted and maintained at the local workplace are well understood. While they do not need to be, they are often competing priorities. At least neither should be advocated and advanced without due regard to be other.

    Without proper safety, health and environmental programs and safeguards, properly maintained at the local level, technology transfers can and probably will become dangerous where hazardous materials or conditions are present, as evidence at Bhopal. The responsibility for such safety lies with the transferor and the receiver of the technology, and the governments of the host country. Adequate and continued training, maintenance and inspection may be required.

    Without movement of new technology to lesser developed regions, however, the world picture will remain that of the "haves" (the rich North) and the "havenots"(the poorer South).

    The multinational national companies and their environmental management often bridge this gap. After all, many MNC's have an ethic or practice taking their standards with them wherever they go. It is a clear responsibility of the transferor organization to assure that in the transfer of technology appropriate safety precautions have been assessed and are in place. It is an important responsibility that in many cases may require continued auditing and perhaps retraining, as well as financial support.

    7    MEASUREMENT

    Where a company or organization is empowered with the responsibility for its short and long term will being, it will measure its environmental status and progress to continuously improve, if it is to remain commercially competitive and viable.

    There are many useful indicators of the level and, more importantly, trend of health, safety and environmental performance. Measurement is indispensable to risk assessment and hazard control. Furthermore, measuring performance not only tells the organization the status of operations and identifies deficiencies to correct, but gives the positive signal to the employees that management cares and they should care about such performance. Ownership or empowerment requires protection of the asset. Measurement and response to indicators is the good environmental practice of the empowered. Here are a few of the indicators for illustrative purposes, and how they can be most effectively used.

    Total case incident rates (TCIR) using one of a number of standard formulas (e.g. No. of cases X Total Hours Worked/200,000) allows the organization to show trends in overall accidents and occupational illness on the job and to compare similar operations and operators against peers or even best in class. Charting lost work day case incident rates (LWCIR) will similarly allow analysis of performance and trends. The U.S. National Safety Council estimated 20,000 of cost for the average lost workday case, so considerable cost avoidance is possible by lessening the rate of those more serious cases. Of course, analysis and investigation of each accident or occupational illness will identify systemic problems and result in better safety and health performance and a safer and more productive workplace.

    Workers Compensation or Social Costs

     

     

    Annual workers compensation in the U.S. or social costs elsewhere are in the millions of dollars for many concerns. They result from injury or occupational illness, or other causes such as labor unrest or plant closings, or even fraud. Reduction in accidents will improve safety and at least partially decrease these costs.

    Hazardous Waste Reduction

     

    One of the most productive monitoring programs management can pursue in improving environmental performance is reviewing facility and then in the aggregate reduction in hazardous emissions and toxic waste. Not only will the reduction of toxic materials probably result in a diminution of control procedures required in costs, because the transportation of hazardous waste is very expensive and there may be future potential liability problems connected with its disposal no matter what the safeguards, since state of the art changes.

    By requiring the operations to establish targets of reduction (similar to targets of safety improvement) and identifying projects and action steps to accomplish the targeted reductions, the management assures progress will be made (and communications its interest in such progress by measuring and requiring reporting through such a measurement system). The waste and toxic reduction prescriptions in legislation, such as in SARA or the clean Air Act, and as carried out in the EPA 33-50 program build on and stimulate these internal industrial programs.

    Loss Prevention

     

    Losses at facilities from fire, explosion, machinery breakdown, storms, power failures, etc. are extremely expensive for operations, because not only do they result in costly damage and in lost productivity, but down time to the operations and thus expensive business interruption. In some cases the reputation of the company as a reliable supplier or as the operation of the company as a reliable supplier or as the operator of safe facilities may be at risk. Again, the monitoring of performance by capturing all losses facility by facility and then aggregating them will provide the basis for improvement. That improvement should include standardizing around good practice and training for good operation, as well as working with outside insurance inspectors so they can reinforce the company procedures and programs. An exception analysis of all deficiencies identified and not corrected as a result of internal or external inspections should be monitored and diligently followed, to assure safe operations, lessening of losses and reduction of future liability.

     

    Life Cycle Analysis

     

    Analyses of new and existing products or processes for identification of risk and potential liabilities, and resultant modification or institution of greater control is more difficult to measure. A three tier system of review,from product design inception to pre-marketing and bench scale production to final production, with each step being more detailed as full production and sales eventuate will result in that greater control. To be effective, analysis should include detailed, check-off of environmental, health and safety factors including hazard identification and control, in design, manufacture, transportation, sale and disposal, across the life cycle as some would say.

     

    Environmental Auditing

     

    A system of environmental measurement and review, which checks on all processes, is environmental, health and safety auditing. Like a financial audit, environmental auditing relies on a regular system of spot measurement and verification of conduct and performance, as measured against government standards, company guidance and standards and local practice. It should be carried out by professional environmental auditors, who are technically trained and experienced, who may be within the company, with written findings of deficiencies which have to be addressed by the operations within a specific period of time to avoid future liability. The assigning of a value to each audit which may include air, water and land pollution factors, occupational health and medical practice, employee safety and process safety, emergency preparedness and response, and product safety and integrity, will allow comparison of performance from year to year and between facilities. the chart shows such a comparison, in one system on an A-B-C-D basis, with D being seriously out of compliance, C complying, B an acceptable level of assurance of performance, and a total quality approach. The Allied-Signal environmental auditing system and the environmental management process in which it operates is described in the UNEP Journal article of October/November/December 1988.

     

    Proactive Programming

     

     

    This last chart depicts, a causation to the lessons of this paper. While the tools of measurement shown, an others that can be devised, will provide a lot of information for management and the employees to improve the quality of the health, safety and environmental process, without proactive programs beyond what regulations require, the organization will find itself running hard just to keep up with regulatory requirements and liability issues. To get ahead of the curve, or to put it another way to be a "B" to "A" performer with full environmental assurance, the organization must design and implement its own programs of proactive environmental management, beyond what the law requires. Environmental auditing was such a program for the companies that adopted it in the 1970's an 80's. Voluntary waste reduction initiatives are such programs in the 90's. Other such programs are described, for example, in the World Resources Institute publication about company practices entitled, "Beyond Compliance", and the ICC book, "The greening of Enterprise: From ideas To Action," detailing company programs under the ICC Charter. The point is that with such proactive programming engendered by ownership and responsibility, the organization's return on good environmental, health and safety management will be better managed and more productive processes, people and products, as well as avoidance of compliance issues and cost avoidance. Ownership and economic competitiveness provide the incentive for good environmental management and sustainable development. This is the increasingly understood message in the global marketplace.