Tag Archives: iso_14001

“Continual Improvement” Using Sustainability Metrics Takes Planning, Accountability & Resources

23 Jun

"Jump Start" by Jenny P (CC License)

Note:  This post marks the 75th since I started writing in early 2009.  When I launched ValueStreaming, I did so with the intent of providing timely, relevant, quality content over quantity.  The feedback that I’ve consistently received  is that this blog gives readers detailed, value-added content and thought leadership in the sustainability, supply chain and environmental policy space.   I humbly thank you all for your readership and support…you are the sustaining “wind in my sails”.  Paz, Dave

“On your mark, get set”…BANG.  As a competitive swimmer in my youth, I learned the rhythm of a good start off the blocks, kept my head down and paced myself through to the finish line.  I never won the “big” race, but always went for my personal best.  It’s that way with sustainability initiatives. Having a good baseline and pushing the limits to improve to the next level

Back in the late 1990’s I was working with one of my many semi-conductor clients on their ISO 14001 Environmental Management System.  A hallmark of ISO 14001 is “continual improvement”, focused primarily on going beyond compliance to reducing the overall environmental impacts and footprints of operations.  This particular company had identified hazardous waste generation as a “significant aspect” of its operations and developed some programs and targets intended to reduce generation.

One of the facility engineers was very excited one day when I showed up at the facility, proudly telling me that the company had managed to reduce waste generation by 25% over the past several months since he’d started tracking metrics.  “That’s great!” I said. “How’d you do it?”  He responded, “Well I ‘m not sure exactly”.  So I prodded.  “How has production at the plant been the last quarter?” “Well, it’s down…um, about 25%”, he answered in a muted tone.  See a problem here?  The company didn’t “normalize” the data (pounds of waste generated per number of units produced, for instance).  So in effect, there was no “continual improvement.  Oh well, back to the drawing boards!

Setting the Sustainability Mark…and Missing It

So it was interesting to read a summary of Green Research’s latest report, “Setting and Managing Sustainability Goals: Trends and Best Practices for Sustainability Executives.  I had the pleasure of meeting Green Research’s founder, David Schatsky, at the recent Sustainable Brands ’11 Conference in Monterey,  California.  In this latest report, David seems to have touched on some issues which get to the core of a value-added sustainability initiative…that being, demonstrating “continual improvement”.

As  this week’s by Mr. Schatsky article in Environmental Leader notes, while a flood of public and private companies (across many sectors) are “increasingly using public goals to signal their commitment to sustainability and their superiority to rivals…many are unprepared to meet those targets”.  The report suggests that sustainability planning, implementation, and performance measurement are still in an early maturation phase compared to financial and other operational goals.  Some of the key findings were:

  • A quarter of the 32 sustainability executives surveyed in Europe and North America for the study say their companies have set “aspirational” sustainability goals and lack a clear plan to achieve them.
  • Over 40 percent said progress on sustainability goals is reported to senior management only semi-annually or annually.
  • 57 percent of respondents characterized at least some of their sustainability goals as “stretch goals” – that is, challenging but probably achievable – and 54 percent said at least some of their goals are “realistic”.

 “Despite the best of intentions, even some excellent companies are challenged to execute on the sustainability goals they announce,” said David Schatsky, principal at Green Research

As I noted back in August 2010 in a post on Environmental Leader, there are two old axioms:

1)      “You are what you measure”, and

2)      “What gets measured gets managed.”

As Green Research’s study revealed, without an effective strategy to establish an internal benchmark for continual improvement, it becomes harder to innovate, advance and proactively respond to stakeholder expectations. Finally, good metrics if applied properly will foster innovation and growth.  Therefore, it’s vital that there be a systematic process in place that maintains focus on continual improvement.  Continual improvement is the primary driver for monitoring and measuring performance. If metrics don’t add value, they will not support continual improvement and eventually will not be used.  It’s a vicious cycle that can be avoided if the proper system is firmly implanted in organizational strategy and operations.

Setting Goals That Matter

Many times over the past several months, I’ve been asked by colleagues and clients”what can I measure that means something”.  And I answer them usually by asking “what matters to your organization and its stakeholders”?  “I see what your saying”, they say “but I can’t always see the payback”.  Well, sometimes the “payback” is hidden and can’t always be realized in tangible, hard dollar terms. Sometimes, especially if companies are not water, energy or resource intensive, or don’t produce a lot of waste byproducts, you need to peel off some layers.  What this often means is looking at other production, operational or worker activities that can’t be measured in hard dollars but in terms of “efficiency”.  Sometimes metrics can be measured in terms of avoided costs rather than actual expenditures.  As an example,  a client of mine “avoided” $2.4 million in accrued fines and violations (over a three year period) due to enhanced sewer infrastructure maintenance and reduced response times to effluent spills when they occurred.

"Bullseye" by TimSnell (CC License)

As the Green Research found, many companies initially establish said that “targets for realistic or stretch goals…through a bottom-up process, beginning with a baseline of current performance.”  I view this finding as similar to what I coach my clients to do in environmental management system or sustainability engagements- perform a risk-based evaluation of what poses the greatest environmental, social or governance risk and establish measurable (and achievable) objectives and targets.   Some of my clients like the Natural Step “back casting” process too , which attempts to envision a company’s “desired state”, measure a baseline “current state”, and fills in the gaps with programs and activities intended to reach the desired state.

Remember, when companies establish sustainability objectives (whether they are social, environmental, operational or financial) and define their targets, here are a few simple things to remember about metrics.  They must be:

  • Representative
  • Understandable
  • Relevant
  • Comparative
  • Quantifiable
  • Time-based and Normalized
  • Unbiased and Validated
  • Transferable

Staying on Track Within the Four Walls and in the Supply Chain

As I mentioned in last year’s post, once organizations decide what’s important to measure to meet sustainability related objectives, they needed to assure that they actually track metrics, report, calibrate and keep on measuring.  It’s called keeping your eye on the ball.  And this applies to supply chain management as well.  As I have reported in this space many times before, supply chain sustainability and responsible sourcing are two key ingredients for an organization to consider itself to be “truly” sustainable.  Many of an organizations greatest product and operations related impacts (like carbon emissions, resource or toxic chemical inputs, etc.) actually come from within its upstream supply chain.

Photo by HeraldMM (CCLicense)

A few tips to get your continual improvement process started:

  1. Measure things that add value to organizational decisions. Measuring for the sake of measuring is a waste of time.
  2. Make goal-setting a 360-degree exercise- Look inward through the organization rank and file for innovative ideas.  Seek advice and input from external stakeholders too (your suppliers and customers matter too!).
  3. Commit to what you can control or influence.  Don’t make broad declarations that you cannot achieve because you’ve no influence. Don’t over commit ( although a few heretically goals here and there aren’t too dangerous)
  4. Get some quick wins under your belt.  This will enhance the momentum behind the effort.  Remember to scale performance incrementally in line with the financial and labor resources that you’ve budgeted
  5. Own the goal and be accountable.  It’s not likely that organizations will succeed in meeting their goals without someone keeping track.  Make sustainability performance part of personal or group performance evaluations.
  6. Measure, Report, Repeat.  Don’t stop at the first sign of success or trouble.  Look for ways to press on, raise the bar and continually improve.  Report progress regularly (sometimes monthly, sometimes quarterly.  It all depends on what is being measured. 
  7. Go Short, Go Long.  Set some targets as short term goals, but think long term too (three to five years out), and in alignment with corporate strategies.  Most large companies like my client (Johnson & Johnson), Unilever, Sony and many others usually set five to eight year planning horizons.
  8. Measure things that compare well but slightly differentiate yourselves from your competitors. Novel and unique metrics are just as important to differentiating you as your products.
  9. Seek out globally-recognized metrics (like the Global Reporting Initiative) to assure that multi-national companies who also measure sustainability metrics can apply the data to their own goals.
  10. If you are a large company with multiple department, divisions or sites, the metrics of the subordinate organizations must be able to be “rolled up” in a way that addresses the entire organization but still meets site or department specific needs. 
  11. Report the Bad with the Good:  No one’s perfect and a little self deprecation, even in business can pay handsomely from a reputational point of view.  In this WikiLeaks era, information moves swiftly.  Stay ahead of “the story”, own up to the shortfalls, you’ll be forgiven and given more credit for your successes.
  12. Build off of prior continual improvement initiatives to track perform over longer periods of time.  It’s not like you flicked on a switch one day and became the sustainable organization that you aspire to be.  It takes time.

On second thought, I did win a “big” race.  My freshman year in high school I placed first in a 100 yard Individual Medley event against an arch rival high school in the Chicago suburbs.  That was my greatest moment in the pool…for a race many said I wouldn’t even finish.

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Studies Prove Business $en$e From Proactive Environmental Management Initiatives & Certifications

31 Mar

I always find it rewarding when a study comes out that underscores the business value of sustainability, especially when backed up with statistics and hard dollars.  Such is the case with a 2008 study by researchers from the Georgia Institute of Technology (GIT).  The research study, entitled An Empirical Investigation of Environmental Performance and the Market Value of the Firm, was authored by Brian W. Jacobs, Vinod R. Singhal, and Ravi Subramanian.  The study analyzed the shareholder value effects of environmental performance by measuring the stock market reaction associated with announcements of environmental performance.

The study focused on how markets react to Corporate Environmental Initiatives (CEI) and Environmental Awards and Certifications (EAC).  The results of the study provided compelling data that suggested that “announcements of philanthropic gifts to environmental causes are associated with significant positive market reaction, voluntary emission reductions are associated with significant negative market reaction, and ISO 14001 certifications are associated with significant positive market reaction”.  For me this report validates my devotion over the past 15 years working with small to large manufacturers and public agencies in designing, implementing and maintaining ISO 14001 certifications and in making the argument that “proactive environmental management makes business sense”.  I’m not some crazed environmentalist after all (although my passion occasionally borders on the “evangelical” side)!

The research study focused on reviewing the “market value impacts of specific events (such as use environmental announcements) as a “proxy for the difficult-to-measure construct of environmental performance”.   The study found a statistically significant market reaction to the hundreds of environmental performance announcements evaluated, suggesting a causal link between environmental performance and financial performance.   Specific to ISO 14001 announcements, the market was seen as reacting positively (on a statistical basis) to announcements of ISO 14001 certifications. Years of literature and case studies have offered volumes of data that support the positive impact of environmental management systems in general as well as direct evidence that ISO 14001 certification improves company performance over long periods of time. The authors of the GIT believe that they are the “first to provide empirical evidence of the impact of ISO 14001 certification on market value”.

Body of Evidence

Forays into proactive environmental management and attainment of internationally recognized certifications like ISO 14001, RC 14001 or LEED are not always “window dressing’ to demonstrate commitment to sustainability, as some may believe.  These efforts are more often than not the real deal when it comes to demonstrating value-added savings and long-term return on investment and access to new market.  While the skeptics continue to throw cold water on CEI’s and EAC’s the evidence continues to stack up in favor of long-term benefits.

The results were based on analysis of 811 announcements (430 CEI announcements and 381 EAC announcements) that appeared in the daily business press during the period 2004-2006.  Now, you may pause and say “well that was a long time ago…what about post recession?” A recent article by Phil Covington in Triple Pundit asked that same question. Covington cites a recent Fast Company’s recent article concerning Bloomberg’s business of measuring companies “Environmental, Social and Governance” (ESG) performance, which found that “the number of investors accessing ESG data is up by 29% comparing the first half of 2010 with the second. Investors use it to identify smart practices – for example, companies who operate in a socially responsible manner may be viewed as forward thinking and well-managed.” While this report suggests that there is increased attention being paid to companies that “do good” or that implement proactive ESG practices, the results are still not statistically treated like the GIT study.  But either way, as Covington concludes “This surely portends that markets will inevitably respond favorably to sustainability efforts, especially when the data shows improved governance and profits result directly, and in the long run, from sustainability”.

Since the 2006 study period cited in the GIT study, there have been more studies that provide compelling proof of the market value of environmental initiatives or certification.  Here are a couple of stand-out examples.  First, a study entitled Which Competitive Advantages can Firms Really Obtain from ISO 14001 Certification? demonstrate statistically that there is a significant difference between firms with ISO 14001 certification and firms without ISO14001 certification.  Internal efficiency benefits are considered significantly higher for firms with ISO 14001 certification.  Therefore managers’ expectations of improving internal efficiency might be the real reason that encourages firms to make the voluntary decision of investing in ISO 14001 certification.

Another study, by the Arava Institute for Environmental Studies entitled Comparative Advantage: The Impact of ISO 14001 Environmental Certification on Exports, suggested that EMS certification appears to imply a supplier who is managing its business well and is showing ethical responsibility. The fact that a supplier was awarded the ISO 14001 or EMAS certification by an independent entity enhances perceived reliability. Importers evaluated felt more confident engaging a new supplier, saving time and effort associated with clarification and research prior to placing a purchase order.  The survey results, as well as other available literature, corroborate the view that ISO 14001 accreditation confers economic benefits and greater “market value”. These include a standard of worldwide recognition, organizational efficiency, better waste management resulting in costs reduction, marketing advantages, and competitiveness by reducing risk and exposure to costly litigation.

What Are You Waiting For?

As of 2008, when the GIT study was published, more than 188,000 organizations worldwide had become ISO 14001 certified in 155 countries and economies. Worldwide, ISO 14001 certifications grew by more than 77,000 from 2004 to 2008 – a 70% increase.  These companies must be onto something. As I had written about previously, throughout a variety of industries, there are leaders and there are laggards.  Innovators who lead and can establish “first mover” status have the most market share to gain from proactive environmental management and attaining certifications like ISO 14001.

The GIT studies and the many others that have been produced over the past five years or so are healthy indicators of how proactive approaches to sustainability can positively influence behavior up and down the supply chain, and can add total market value in a recovering economy.