EH&S managers pride themselves on using the latest software systems to collect and track metrics. The displays are impressive and the reports give one a good feeling of being in control. In reality, some EH&S managers may be winning the battle to efficiently sort data, but losing the strategic war to gain competitive advantage for their companies. Metrics theory and practice has undergone a quiet revolution during the past five years and the long-term business implications are profound.This is the first of several columns that will be devoted to EH&S metrics. Future topics will examine the what and the how of metrics; this one takes a look at the why, namely, emerging trends that will drive more robust metrics systems. If this material is new to you, I hope you are a fast learner—the long-term implications for your company may be significant.
Early EH&S metrics focused on regulatory compliance, injury rates, and regulated emissions tracking. In the mid 1980s, this list was expanded to include waste reduction and toxics data. The results attracted both the public’s and senior management’s attention. Not surprisingly, this information often formed the factual core of early environmental reports. This “traditional” set of metrics remains the nucleus of most internal and external environmental reports.
Conventional wisdom recognizes that an EH&S program focused exclusively on minimum compliance offers no competitive business advantage.1 A company’s existing operations are allowed to stay in operation and that’s about it. What is not widely recognized today is that a traditional set of metrics offers few insights and strategic guidance for business management to gain competitive advantage. Metrics theory and practice has undergone a significant evolution and leading companies are now beginning to position themselves to take full advantage of these emerging tools.
Financial metrics matter because they are comparable, consistent, credible, and relevant to various stakeholders’ needs. The majority of EH&S metrics provide essentially none of these elements. Taken narrowly and in isolation, a specific measure for a company may possess most of these traits, but as soon as one tries to make company-to-company or company-toindustry sector comparisons, the task becomes problematic. Comparisons matter. Using the financial metric analog, investment analysts may be interested that Alpha Company made a profit, but they will put their money in Beta Company if it has a higher return on equity. Typically, companies report total emission numbers, but what is the significance of these numbers relative to those of competitors? What processes are better than others? What
products? What company is truly green? Trend data show progress over time within a firm or facility, but how is this progress relative to others? Is this progress adequate to attain sustainable production? What are the leading indicators? How do we manage performance, and not just track end results? In summary, EH&S metrics were just numbers in the past; in the future, they will be used to support decisions by all stakeholders. This is a fundamental shift. Many companies still have not begun to sort out the full implications. Today’s deficiencies in EH&S metrics have not gone unnoticed. Organizations such as the Investor Responsibility Research Center (IRRC) have struggled to make meaningful comparisons among companies to facilitate social screening of investment portfolios.2 The job is difficult, since information is lumped together in various ways, and no generally accepted standards exist to sort, normalize, or report the data. Over the past five years, organizations such as the National Roundtable on the Economy and the Environment (NRTEE),3 the Center for Waste Reduction Technologies, (CWRT),4 the World Business Council for Sustainable Development (WBCSD),5 the Global Reporting Initiative (GRI),6 and the National Academy of Engineering (NAE)7 have started to address the fundamental issues of comparable, consistent, credible, and relevant EH&S metrics. The current work by BRIDGES to Sustainability, supported by the U.S. Department of Energy (DOE) and the American Institute of Chemical Engineers (AIChE), represents the cutting edge of integrating metrics theory into practical business tools. BRIDGES is a nonprofit organization that fosters sustainable development through partnerships between universities and industry, resulting in practical business tools and real-world experience for students and faculty.8 In May 2000, in Austin, TX, BRIDGES brought together leading companies, government representatives, and academics to review their interim sustainability metrics results and share an impressive sampling of future EH&S metrics. These include measures of material intensity, energy intensity, water usage, toxics, and other pollutants.