INDUSTRIAL ENVIRONMENTAL MANAGEMENT PRACTICES:
DECISION PROCESSES AND PERFORMANCE MEASUREMENT
A WORKSHOP CO-HOSTED BY
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF POLLUTION PREVENTION
AND
CENTER FOR ENVIRONMENTAL MANAGEMENT
TUFTS UNIVERSITY
'Patricia S. Dillon no
Center for Environmental Management
Tufts University
with
Peter J. Pizzolongo
and
Gerald J. Filbin
Technical Resources, Inc.
Prepared for:
James E. Hayes
Office of Pollution Prevention
U.S. Environmental Protection Agency
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1.0 INTRODUCTION
As part of an ongoing process to promote voluntary improvements in industrial
environmental management, the U.S. Environmental Protection Agency's Office of
Pollution Prevention and the Center for Environmental Management at Tufts
University co-hosted a forum to discuss current environmental management practices
in industry and ways to improve industrial practices. The workshop, held on June 5,
1990, at Tufts University, focused on two issues: the integration of environmental
management issues into business and operational decision processes and measurement
of environmental performance. The discussions concluded with recommendations for
future activities. The workshop agenda appears in Appendix A.
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Workshop participants included representatives from industry, government,
academia, and non-governmental organizations. Individuals from a broad range of
industrial sectors participated, including the petroleum, electronics, paper, public
utility, photographic, and heavy machinery industries. A list of workshop participants
appears in Appendix B.
This report is intended for broad circulation in the industrial, regulatory, and
academic communities. The authors hope that this report will inform and guide
companies seeking to improve their practices and will trigger further dialogue,
research, and training initiatives that advance the state of the art in industrial
environmental management.
2.0 DISCUSSION
2.1 Integration of Environmental Issues into Decision Processes
Workshop participants agreed that environmental issues are of increasing
importance to companies and central to the operation of corporations. Environmental
issues can be managed like any other business activity, that is, by planning, organizing,
executing, and controlling. Ideally, environmental management should be integrated
into business operations rather than operate as an independent function. To varying
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degrees, the companies represented address environmental issues in key business and
operational decision processes, including: production, strategic planning, product and
process design, and vendor management.
At the present time, participants agreed that their companies focus attention
predominantly on existing rather than on future problems; on production issues rather
than on product and process development; and on short-term rather than on long-
term solutions. They linked the short-term environmental focus to the time frame in
which managers, including the CEO, must show bottom-line profits. Participants
agreed that it is easier to comply with regulatory requirements than to go beyond
them; it is difficult to volunteer the effort and money without a legal mandate.
Ensuring the success of efforts to go beyond regulatory compliance requires
endorsement from the highest levels of the corporation.
The perception that environmental management is inconsistent with profitability
can impede the integration of environmental issues into business activities. However,
according to workshop participants, total environmental costs presently are not
considered in business decisions. When making decisions, managers consider those
environmental expenditures that companies can easily and routinely quantify such as
capital expenditures and waste disposal costs. Although a company's profitability can
be affected adversely, the environmentally related costs associated with factors such as
customers and markets, consumer and public image, and long-term liability are not
incorporated routinely into decision processes, in part, because they are difficult to
quantify. Participants identified the need for an accounting method that provides for
the quantification of total environmental costs. Such an accounting method would
provide managers with an understanding of how an action would truly impact
company profitability. With knowledge of total environmental costs, environmentally
preferable alternatives would be better able to compete for company resources.
To ensure that corporate and facility personnel address environmental issues in
decision processes, companies use a variety of techniques, most of which are common
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to other aspects of business management. These include developing policies and
procedures, assigning responsibility, setting goals, holding managers accountable,
training personnel, and providing reward and incentive systems for environmental
performance. In addition, environmental staff may interact with those responsible for
business and operational decisions by providing assistance upon request, through
training and through rotational assignments with business or production units. Some
participants felt that environmental management can be complicated in decentralized
corporations and in companies with diversified product lines.
The group unanimously recognized the importance of line personnel in ensuring
the companies' compliance and progress in meeting environmental goals. In addition,
participants were optimistic about employees' desire to "do the right thing." However,
the group considered the provision of training and information to line personnel
essential in fostering environmental awareness, and subsequently, in the environmental
performance of line personnel. Participants also indicated the importance of
employee rewards for environmental management efforts.
The following sections summarize topics discussed at length during the
workshop.
2.1.1 Strategic Planning
According to workshop participants, companies can integrate environmental
issues effectively into production through their strategic planning processes. Some
company representatives noted that individual plants are required to include
environmental issues in their business plans (such as five-year plans) which they
develop in concert with the goals and objectives of the company. For example, at
one company, corporate staff and division management jointly develop guidelines. A
directive from the Chairman of the Board requires each division, and subsequently
each facility, within the company to incorporate environmental performance goals and
objectives into its business plans.
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2.12 Product and Process Design
According to the workshop participants from industry, much attention to date
has focused on existing environmental problems and production issues, although some
of their companies are beginning to incorporate environmental issues systematically
into research, product development; and process design. Participants agreed, however,
that all of their companies could address environmental concerns more in the design
phases than they currently do. Current methods for incorporating environmental
issues in product and process design, as cited by participants, include: development of
general design criteria, provision of lists of acceptable chemicals to these departments,
and process hazard analysis.
While participants noted some examples of customer product specifications
restricting opportunities that benefit the environment, other examples showed that
customer education can lead to a willingness by the customer to pursue creative
alternatives.
2.13 Vendor Management
Some workshop participants noted that environmental concerns such as vendor
compliance with environmental regulations are factored into the decision to hire or
retain a vendor since reliability of a supplier is critical to business operations. For
example, customers rely on timely deliveries of materials. If regulators shut down a
vendor's operations for non-compliance, the customer's raw materials or equipment
would not be delivered. Unless another source of the materials were available within
the necessary time frame, the vendor shut-down would affect adversely the customer's
operations. Participants also discussed, inconclusively, the responsibility of the
customer to ensure vendor compliance and good environmental practices.
2.1.4 Environmental Goals
A number of the participants indicated that their companies recently had
developed and announced publicly company-wide environmental goals such as waste
and emission reduction and recycling goals. These goals specify target environmental
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media or pollutants, a numerical target (for example, a percentage), and a time frame.
They cited public demand for environmental quality as the major factor influencing
their decisions to adopt and publicize environmental goals. Some participants said
that their companies adopted environmental goals despite a lack of knowledge of the
full cost and available technology to reach the goal. However, other participants said
that their management would be reluctant to adopt environmental goals without
complete knowledge of the associated cost and available technology.
Participants generally agreed that numerical goals are important and valuable in
motivating change within companies. They said that goals help disseminate
environmental issues throughout the company. Most workshop participants consider
far-reaching or "stretch" goals desirable because they make people think differently,
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moving in directions that they might not have if goals were easy to accomplish.
However, participants disagreed on the best process for setting goals. For example,
should corporate officials set company-wide goals and allocate responsibility for the
accomplishment of goals, that is "decree from above;" should business units be allowed
to develop strategic plans and their own specific goals; or should the process be a
combination of top-down and bottom-up planning and consensus building?
Participants noted that their corporate environmental departments keep track of the
company's overall progress as well as the progress of the manufacturing units in
achieving company-wide goals.
EXAMPLE: Environmental Goals
One company established a company-wide goal of SO percent reduction in toxics use and wastes in
five years. More specifically, the company is striving for:
• SO percent reduction in chemical use for its highly hazardous chemicals;
• SO percent reduction in chemical by-products for less hazardous chemicals.
For its toxic use and waste reduction program, the company categorized all chemicals (over 1000)
used at its locations into four categories, based on risk to the environment. Each business unit
must have a strategy to meet the company-wide goals with progress measured in units of production,
as defined by each facility. In addition to measuring progress towards these quantitative targets,
facilities also are evaluated on their method of waste management for less hazardous chemical by-
products. Facilities are encouraged to move up the waste management hierarchy towards preferred
waste management alternatives (for example, from direct discharge to water to recycling).
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22 Performance Measurement
Companies are beginning to develop measurement and evaluation tools to
assess the quality of environmental management systems and their progress in
addressing environmental issues. Other organizations, representing industrial and
public sectors, are also moving in this direction. Workshop participants discussed
measurement and evaluation at three levels:
• company performance;
• facility performance; and
• performance of individual managers.
Workshop participants provided the following examples of how their companies
measure the environmental performance of facilities and individual managers.
• Some companies use environmental audit programs to measure faculties'
performance against legal requirements and company standards. Audits
tend to be subjective and provide facilities with recommendations for
improvements.
• Some companies measure the performance of facilities and individual
managers against specific company-wide goals such as those outlined above.
• In an experimental program, one company uses a centralized computer
system to track the number of controllable incidents (for example, permit
excursions, citations, notices of violations) reported by facilities and to
measure facility performance. The program allows each facility to develop
its own goals and includes a reward system. Eventually, the corporate
environmental department would like to incorporate this performance
measure into the performance reviews of plant managers.
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• One company applies seven criteria, four production measures (cost, quality,
inventory, and schedule) and three social performance measures (safety,
environment, and affirmative action) in the evaluation of individual
managers.
• Based on members' concerns regarding the quality and effectiveness of their
internal environmental management systems, the Environmental Auditing
Task Force of the Edison Electric Institute developed a self-assessment
program for the evaluation of environmental management system design
and performance.1 Using this program, companies rate subjectively 15
characteristics and elements of their environmental management system,
including: top management commitment, functional reporting arrangements,
environmental awareness and training, environmental planning process, and
policies and procedures.
Since a number of the performance evaluation systems are based on legal
requirements, which can vary across states or countries, some participants cited the
need for a performance measure which is independent of regulatory compliance. In
addition, some industry participants expressed the desire for more quantitative
measurement systems.
While the development of multiple performance measurement systems designed
to meet the objectives of individual organizations or special interests groups is
inevitable, there was concern that multiple measurement systems, some of which might
be developed with incomplete information, could lead to misinterpretation of company
activities, public confusion, and possibly unjust damage to companies' reputations.
Therefore, participants suggested that a process, which reflects a variety of interests,
be established to develop performance measurement systems systematically. A first
Edison Electric Institute, Environmental Management Systems Assessment Workbook (Washington,
D.C.: Edison Electric Institute, 1989). •>•
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step in such a process would be to set environmental priorities collectively and then
work towards quantifiable measurement systems.
2.3 RECOMMENDATIONS FOR FUTURE DIRECTIONS
2.3.1 Research and Information Needs
Participants identified a number of areas that warranted new or continuing
research. They agreed that past and future research findings should be widely
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disseminated and discussed and that additional federal funding is essential for
continuing research and information exchange in the area of industrial environmental
management. Discussed below are particular research or information needs identified
by the workshop participants.
• Demonstration project. A demonstration project could be developed to
implement an array of best practices at a facility. Successful techniques,
barriers to implementation, and incentives used could be documented in
order to facilitate the transfer of information to other facilities. The U.S.
Environmental Protection Agency could fund a research effort, a company
could provide the demonstration site, and a neutral third party could assist
in project development and oversight.
• Documentation of successful programs and practices. The documentation
of successful programs and practices continues to be an important research
need. Dissemination of this information through workshop and conference
settings as well as through written material was considered essential to the
advancement of environmental management practices throughout large and
small corporations. In particular, participants called for further research
and discussions of successful strategies to improve the incorporation of
environmental issues into business decision processes.
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• Development of environmental performance measures. Participants
perceived the need for the development and standardization of techniques
for the measurement of the environmental performance of companies and
manufacturing facilities. Performance measures could serve a variety of
purposes ranging from internal performance evaluation to investment by
stockholders. Some participants suggested that a systematic process with
the input of various interest groups be established to offset the
development of numerous and disparate measurement systems.
• Quantification of total cost. At the present time, environmental costs
usually encompass just those costs that companies can quantify easily and
routinely such as capital expenditures and waste disposal costs. Participants
identified the need for an accounting method that provides for the
quantification of total environmental costs, including factors such as
negative public/consumer image and long-term liabilities. Such an
accounting method would provide managers with an understanding of how
an action truly would impact company profitability. With knowledge of
total environmental costs, decision processes might favor environmentally
preferable alternatives.
• Establish an institute for industrial environmental management.
Participants suggested establishing a dedicated institute to develop standards
for environmental management and to identify best practices for industry in
general as well as for specific industries. This institute also could provide
training and disseminate information.
2.3.2 Methods for sharing information
Participants generally agreed that information dissemination was a valuable
component of the process of improving environmental management practices. They
cited forums such as roundtables, workshops, and conferences as important
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mechanisms for information exchange. Dissemination of information could occur in
the following formats:
• Roundtables. A roundtable format offers opportunities for intimate
discussion and sharing of experiences among a small group of participants.
Participants suggested that a group of companies or a university organize an
ongoing roundtable.
• Conferences. A conference offers opportunities to share information with a
larger number of participants in a more formal setting.
• Publishing in business literature. General business literature such as the
Harvard Business Review provides a vehicle to reach non-environmental
professionals. Such efforts can help integrate environmental issues into the
everyday decision processes of businesses.
• Case studies. Government agencies, research organizations, and industry
should develop and disseminate case studies of successful industrial
practices.
• Educational programs. In particular, participants cited the need to educate
present and future business managers in the area of environmental
management as a means of encouraging and facilitating the incorporation of
environmental issues into business decisions.
2.3.3 Technical Assistance
The issue of technical assistance arose several times, particularly as it applies to
small and medium-sized companies. Assistance for these companies could come in
the form of information, hands-on training, and discussions with upper level
management. Technical assistance roles were articulated for EPA and industry.
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3.0 SUMMARY
This workshop convened a small group from industry, government, and
academia to share experiences and insights in the search for cooperative and voluntary
solutions to environmental issues facing the industrial community. While the majority
of the examples summarized in this report are based on the experiences of industry,
they extend beyond and into other institutions such as government agencies and
educational institutions. Participants indicated that a need for additional research and
discussions on industrial environmental management issues remains.
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Appendix A
Agenda
THE INDUSTRIAL ENVIRONMENTAL MANAGEMENT FORUM
Center for Environmental Management
Tufts University
June 5, 1990
8:30 - 8:45 Welcome and Introduction
Patricia Dillon, Center for Environmental Management, Tufts University
Gerald Filbin, Technical Resources, Inc. (Moderator)
8:45 - 9:15 Forum Objectives
James Hayes, Office of Pollution Prevention, U.S. EPA
9:15 - 9:45 Corporate Environmental Management: Current Status and Future Challenges
William Moomaw, Director, Center for Environmental Management, Tufts University
9:45 - 10:00 Break
10:00 - 11:00 Are environmental management issues addressed in business/operational decision processes?
What are the business/operational decision processes (e.g., budget reviews, performance reviews,
product and production decisions)? What is the status of incorporation of environmental issues?
11:00 - 11:45 How can business/operational decision processes be better utilized to meet environmental
management objectives?
How can this be accomplished? What are the problems and considerations associated with
implementation? Which tools are inappropriate? Which are appropriate?
11:45 - 1:00 Lunch
Overview of Pollution Prevention Priorities at EPA
A. Henry Schilling, Director, Office of Pollution Prevention, U.S. EPA
1:00 - 1:45 What strategies or tools are unique to environmental management?
What is the current status of these practices? What improvements are needed? Do new tools
need to be developed?
1:45 - 2:30 How and in what terms can industry assess the effectiveness of enhanced environmental
management practices? Such as:
Improved Community Relations
Positive Public Image
Better Compliance Record
Reduced Number of Unintentional Releases
Pollution Prevention - Waste Minimization - Source Reduction
Reduced Risk/Liability
Lower Disposal Costs
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Consider environmental and economic criteria. For economic criteria, consider costs and
benefits that are not often quantified nor taken into account in decision processes.
2:30 - 3:15 What systems are available or need to be designed to measure improvements in environmental
performance?
3:15 - 3:30 Break
3:30 - 4:00 Summary/Synthesis of Today's Discussions
Anthony Cortese, Dean of Environmental Programs, Tufts University
(with input from participants)
4:00 - 4:30 Discussion of Future Direction
James Hayes, Office of Pollution Prevention, U.S. EPA
Patricia Dillon, Center for Environmental Management, Tufts University
(with input from participants)
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Appendix B
Participants List
Richard Allison
Chair, Administrative Sciences
School of Business and Public Administration
University of Houston - Clear Lake
2700 Bay Area Blvd.
Houston, TX 77058-1056
Mark Citroni
Environmental Project Engineer
United Technologies Corporation
1 Financial Plaza 507
Hartford, CT 06101
Anthony Cortese
Dean of Environmental Programs
Tufts University
474 Boston Avenue, Curtis Hall
Medford, MA 02155
Vinay Dighe
Director of Environmental Affairs
Occidental Petroleum Corporation
10889 Wilshire Blvd., Suite 1160
Los Angeles, CA 90024
Patricia Dillon
Sr. Environmental Research Analyst
Center for Environmental Management
Tufts University
474 Boston Avenue, Curtis Hall
Medford, MA 02155
Margaret Fresher
Environmental Research Analyst
Center for Environmental Management
Tufts University
Curtis Hall, 474 Boston Avenue
Medford, MA 02155
Harris Gleckman
TNC Affairs Officer
United Nations Center for Transnational
Corporations
Two United Nations Plaza
New York, NY 10017
Stephen Greene
Environmental Consultant
Digital Equipment Corporation
150 Coulter Drive
Concord, MA 01742
James Hayes
Pollution Prevention Division
Office of Pollution Prevention
U.S. EPA (PM-219)
401 M Street, SW
Washington, DC 20460
Ken Joerger
Manager of Safety and Industrial Hygiene
Building 17401
General Electric Aircraft Engines
1000 Western Avenue
Lynn, MA 01920
Dean R. Miracle
Environmental Compliance supervisor
Georgia Power Company
333 Piedmont Avenue
P.O. Box 4545
Atlanta, Georgia 30302
William Moomaw
Director, Center for Environmental Management
Tufts University
474 Boston Avenue, Curtis Hall
Medford, MA 02155
Ann Rappaport
Sr. Environmental Research Analyst
Center for Environmental Management
Tufts University
474 Boston Avenue, Curtis Hall
Medford, MA 02155
John Romanovsky
Manager, Corporate Environmental Engineering
AT&T (2WA-103)
One Oak Way
Berkley Heights, NJ 07922
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William Ryan
Director, PIRG Toxics Action
1912 Bonita Avenue
Berkley, CA 94939
Ken Salsman
Director, Business Development
David Sarnoff Research Center
P.O. Box CN5300
Princeton University
Princeton, NJ 08540
Henry Schilling
Director
Office of Pollution Prevention
U.S. EPA, (PM-222)
401 M Street, SW
Washington, DC 20460
William Schwalm
Senior Manager, Environmental Programs
Manufacturing
Polaroid Corporation
W-2, 1265 Main Street
Waltham, MA 02254
Ken Strassner
Vice President
Environmental and Energy Affairs
Kimberly-Clarke Corporation
1400 Holbomb Bridge Road
Roswell, Georgia 30076
Kurt Taylor
Environmental Services Manager
Power Plant Maintenance
P.O. Box 118
S. Mam Street
Society Hill, SC 29593
Moderator
Gerald J. Filbin
Technical Resources, Inc.
3202 Tower Oaks Blvd., Suite 200
Rockville, Maryland 20852
Rapporteurs
Sarah Creighton
Center for Environmental Management
Tufts University, Curtis Hall
474 Boston Avenue
Medford,MA 02155
Peter Pizzolongo
Technical Resources Inc.
3202 Tower Oaks Blvd.
Rockville, MD 20852
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