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

"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.

Comparing U.S. and U.K. Government Approaches to Green Procurement & Supply Chain Management- Which is Better?

Two news items caught my eye this week, not only for what they were attempting to achieve but for the (possibly?) vastly different approaches being taken.  Two governments- one the U.S, the other the U.K.  Both governments have been progressively stepping up efforts to engage federal contractors and vendors to support government green spending efforts, but by different approaches.  First let’s start stateside.

Last week’s GreenGov conference in Chicago generated a lot of buzz.  One notable outcome was the creation by the White House Council on Environmental Quality and US General Services Administration-led effort called the GreenGov Supply Chain Partnership and Small Business Pilot.  The primary goal of this voluntary collaboration between the federal government and its suppliers to enhance the federal governments compliance with Executive Order 13514 by creating frameworks for a greener, more efficient supply chain.  One primary goal of EO 13514 “to establish an integrated strategy towards sustainability in the Federal Government and to make reduction of greenhouse gas emissions (GHG) a priority for Federal agencies.”  The EO goes beyond just focusing on reduction of greenhouse gas emissions though, encouraging suppliers and vendors to take a proactive approach to environmental management (even going so far as encouraging voluntary certification to standards such as ISO 14001)

According to Council on Environmental Quality Chair Nancy Sutley, “The Federal Government purchases $500 billion in goods and services annually, so you could say the Federal supply chain represents an enormous opportunity to support a clean energy economy.  Through our new GreenGov Supply Chain Partnership, Federal suppliers can agree to voluntarily measure, reduce, and report their greenhouse gas emissions to help GSA design an incentive-based approach to developing contracting advantages for companies that share our sustainability goals.  We’ve already partnered with 60 small businesses for a pilot program that will explore the benefits and challenges of measuring greenhouse gas emissions for small business participants.”

Participating companies will share their experiences to help GSA develop a phased, incentive-based approach to developing contracting advantages to companies that track and disclose their greenhouse gas emissions.  Small Business Pilot Program participants will receive technical assistance through GSA to measure, report and reduce their greenhouse gas emissions as a part of the effort. More information on the GreenGov program is available at www.whitehouse.gov/greengov.

Meanwhile, “across the pond” (I love saying that), the British government recently made a similar announcement, but the tactics are quite different.  In October, the Department for Environment, Food and Rural Affairs (DEFRA) published its “Action Plan for Driving Sustainable Operations and Procurement Across Government”. In this document they state that  “The Government is committed to becoming the ‘greenest ever’ and will lead by example in its operations and procurement”. This  is a sweeping program to green government (very much like the US. plan,  but going well beyond greenhouse gas emissions reduction).  In planning to achieve these goals, DEFRA has established “Government Buying Standards”.  The Suppliers guide provides detailed standards and best approaches to sell goods and services to DEFRA .  Other agencies in the British government have developed similar standards as well.  In  each case, robust approaches haven been developed to engage suppliers,  educate them on environmentally and socially responsible practices.  But thanks to information provided to me on a chance Twitter encounter with fellow Twitterer @garethkane,  many U.K. agencies are now scoring suppliers and giving them points (as  much as a 10% edge) for enhanced green practices as part of the tender  process.

Whereas the U.S. GSA approach on the surface appears collaborative and designed to create a robust procurement process, the downside in my view is that progress will be slow (I view this as the “carrot” approach).    The U.K. approach is more of the “stick”.  In both cases, transparency and collaboration are keys to success.  But I cautiously view the GSA approach as somewhat unnecessary and it does little more than slow down the inevitable.  As GSA says, it wants “design an incentive-based approach to developing contracting advantages”- OK, then do it, just like the British government did.  And while I like the small business “pilot”, is it really necessary to make efforts “voluntary” for larger businesses?

Perhaps the U.K has been at this a while longer, though I doubt it.  Greening of the U.S. government has been in slow motion (almost glacial) progress since President Clinton signed Executive Order 13123 in 1999.  What are your thoughts?  Are you in favor of the carrot or the stick?  As I recently said, private industry needs to stop procrastinating on green supply chain management or risk losing customers.  Why delay the inevitable so you can get it just right.  Perhaps my message to the GSA and U.S. policy makers is to also stop procrastinating and (as they say in Texas) “git ‘er done”.

Organizational Collaboration, Transparency, and Metrics CAN Foster Sustainable Change

In an earlier post I mentioned the soon to be availability of “The Portland Bottom Line: Practices for Your Small Business from America’s Hotbed of Sustainability”.   Well, the book has arrived and I am more proud than ever to be a contributor to this publication.  The short 400 word essays by myself and over 50 contributors explores how small businesses can effectively and efficiently shift toward sustainability and thrive in a challenging economy. Contributors collectively chose, by vote, the local community organization Mercy Corps Northwest, which supports the launch and growth of sustainable ventures, to receive 100% of the profits from the book’s sales.

You can buy the book now on Lulu for $16.95 (paperback) or $6.95 (download).   www.portlandbottomline.com

My excerpt from the book can be found in Part 3- Prosperity and is included in its entirety below.  Enjoy, buy the book and make a contribution to the growth of sustainable enterprise!

A few years ago, I assisted a water utility in implementing a sustainability focused initiative based on the International Organization for Standardization (“ISO”) 14001-2004 Environmental Management System standard. Many public and private organizations operate in functional silos, often don’t coordinate well, communicate effectively or run efficiently. Creating a triple bottom line-focused organization requires that all parts work together—like organs of a living being. This utility was inefficient with taxpayer dollars and under intense public scrutiny to improve its operations. It was not healthy. Through the two-year journey with the [utility], I worked hard to know each of its parts, how they interacted, where the trouble spots were, and where good health was. The goal was to build a holistic, sustainable organization that capitalized on its best assets: the staff.

To be truly optimized and efficient, it was vital to shore up operational weaknesses. The program focused on new communication techniques, champion-building, public environmental awareness, and creating a culture of continuous change management. Public agencies are often stuck in a business-as- usual (“BAU”) mindset. The ISO 14001-2004 program and other internal performance turn-around initiatives required moving beyond the BAU mindset. Key steps and measures that contributed to the turnaround included the following spheres:

• Environmental: Early establishment of cross-functional performance improvement teams that focused on key measurable indicators, e.g. energy efficiency, resource management, and waste reduction.
• Operational: Collaborative fact-finding, problem resolution and decision-making around staff utilization and scheduling, resource optimization, asset management, emergency response, and predictive maintenance.
• Social: Proactive external public education and awareness campaigns at city-run facilities to engage community support related to natural resource management and watershed conservation efforts; employee initiatives that encouraged buy-in and financial rewards for cost saving measures and led to a reduced environmental footprint.

The organization achieved its ISO 14001-2004 certification, garnered prestigious national awards, and saved the City over $100 million in 5 years. After the certification award, a 30-year veteran of the department approached me. He hadn’t believed in the programs value at the start—maybe because of his BAU approach, or maybe he didn’t like change. He said, “Dave, I want to thank you. You made us do something that we would not have done ourselves”. That is what cultural change is all about. For once, I was speechless.

The keys to the success of this sustainability program and others like it are: cross-functional collaboration and employee input (early and often), early stakeholder collaboration, and metrics. These ingredients alone will go a long way toward laying the foundation for long term success of your organization’s sustainability initiatives and going beyond business-as-usual.

Green Supply Chain Gets a Boost from ULE 880- Draft Sustainability Standard for Manufacturing Organizations

Today marked the end of the initial 45 day comment period for ULE 880 – Sustainability for Manufacturing Organizations. [NOTE: the comment period has been extended until September 21st]. This draft sustainability standard is the culmination of a partnership between UL Environment (ULE), a division of Underwriters Laboratories, and Greener World Media.  The standard for businesses and other organizations, focusing on their environmental and social performance, was designed “to create uniform and global metrics for customers, stakeholders and trading partners”, essentially ‘harmonizing’  the wide variety of standards, guidelines and specifications for driving sustainability in organizations.

According to the draft document preface, “Our vision is to create a uniform, globally applicable system for rating and certifying companies of all sizes and sectors on a spectrum of environmental and social performance characteristics. ULE 880 will fill a major void in being able to consistently understand and measure how, and how well, a company is doing in understanding, addressing, and communicating its environmental and social impacts. It will also provide a standardized mechanism that allows organizations and their stakeholders to factor companies’ environmental and social performance into their core decision-making processes, thereby elevating the importance of these issues within companies.”

At its core, ULE  880 is designed principally as a procurement tool, allowing companies,  public agencies, and institutional buyers to assess the performance of  their supply chains and trading partners. It is intended to complement  existing and future product procurement specifications throughout many layers of an organizations supply chain.

ULE 880 covers five domains of sustainability:

• Sustainability Governance: how an organization leads and manages itself in relation to its stakeholders, including its employees, investors, regulatory authorities, customers, and the communities in which it operates
• Environment: an organization’s environmental footprint across its policies, operations, products and services, including its resource use and emissions
• Workplace: issues related to employee working conditions, organization culture, and effectiveness
• Customers and Suppliers: issues related to an organization’s policies and practices on product safety, quality, pricing, and marketing as well as its supply chain policies and practices
• Social and Community Engagement: an organization’s impacts on its community in the areas of social equity, ethical conduct, and human rights

The 60-plus page draft standard contains 102 questions (or “indicators”), including 18 in Governance, 45 in Environment, 15 in Workforce, 15 in Customers and Suppliers, and 9 in Social and Community Engagement. Each of the indicators has certain “weightings” and not all of them equally distributed.  The Environment, for instance covers 80 points, Governance and Customers/Suppliers 40 points each, and Workplace and Social/Community 20 points each. In addition, there are also 18 “Innovation Points” — 3 points each for 6 different indicators — that reward companies for going above and beyond the standard.

Sustainable Supply Chain Elements

Direct sustainable supply chain elements mentioned in Section 6.5.3 of the standard include requirements and related point allocations for:

• Supply Chain Policy
• Tier 1 and Tier 2 Supply Chain Inventory (why not Tier 3 or Tier 4?)
• Supply Chain Monitoring and Assessment (not a great deal of detail in this element)
• Supply Chain Reporting

Also, like other elements of the proposed standard, ‘Innovation Points’ are allocated for Training and Targeted Continual Improvement Metrics.  In addition to this specific clause of the standard, there are specific elements associated with Environmentally Preferable Purchasing and ‘greener’, more efficient transportation planning and logistics…all of which represent vital parts of the sustainable supply chain.

The ULE 880 standard offers promise to take sustainability to a whole new level e.g. organization based certification, and acknowledges that supply chain considerations are vital to a ‘sustainability-focused’ organization.  The next step for the standard will be a peer-reviewed response to the more than 600 commenters from over 30 countries that have requested and reviewed the document to date.  In coming phases, a small set of manufacturers will be engaged to pilot  the standard and the verification/certification delivery model, prior to wider release and market implementation. Stay tuned!

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog