Paving the Way for Corporate Benchmarking in the Waste Sector

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Most of the major players in the waste industry have begun publishing environmental performance data using a set of indicators developed in a ground-breaking initiative with the Green Alliance. Companies are clear that there are internal and external benefits to be gained from the exercise, but opinion is divided over whether the indicators can be used to compare companies' performance. Meanwhile, the Environmental Services Association is encouraging members to use the indicators to submit data so that it can publish aggregated information on the sector's performance.

For some years, the waste management industry has believed it has a positive story to tell - if only people would listen. But there is growing recognition in the industry that communication is a two-way street: a more candid approach makes the message more believable.

The industry is anticipating a huge increase in the number of waste facilities over the coming decade, as Britain chips away at its traditional dependence on landfill. Given the number of planning applications involved, consensus-building with local communities and public debate about the sector's environmental impacts are now a central component of business strategy.

A turning point in the industry's attitude to public debate was the adoption of the EU landfill Directive in 1999. In the run-up, much of the British waste industry fought a lengthy but ultimately fruitless battle against the Directive's targets to ban co-disposal and reduce the landfilling of biodegradable municipal waste.

Today, the industry recognises major commercial opportunities in recycling and composting - sharing enthusiasm for them with the green lobby. Until recently, such talk had been confined to a minority of waste businesses.

Opening up

One way of demonstrating environmental commitment and informing people beyond the sector is to publish quantitative environmental reports. Biffa led the way in 1998, having already contributed to those of its parent company, Severn Trent, for some years. Shanks and Waste Recycling Group were close behind, while Viridor has reported as part of the Pennon Group since 1996.

Today, all the major UK players publish reports - a situation hard to imagine five years ago. A parallel development is that some major waste businesses which had long refused to discuss their affairs with journalists are now beginning to open up.

Disclosure in the waste sector is also being driven by the Environment Agency. Landfills are included on its published database of site scores under the operator and pollution risk appraisal (OPRA) scheme. They will also shortly be included on the Agency's Pollution Inventory, the website which gives details on releases from hundreds of industrial facilities.

The emergence of environmental reporting in the waste industry coincided with a project by the Green Alliance, a consensus-seeking environmental charity with good links to central government. The Alliance was developing a set of environmental performance indicators which waste companies could use both internally to measure progress and externally to communicate with stakeholders.

The initiative also coincided with threats from Ministers to make environmental reporting mandatory. At the same time, there was growing demand from shareholders and investment analysts for information on companies' performance.

Shanks already had connections with the Green Alliance, whose former director, Julie Hill, is a member of the company's environmental advisory board. Shanks helped fund the project using landfill tax credits, and it was later joined by Biffa and Viridor.

'Given the situation, we wanted to be proactive,' says Shanks' compliance and risk management director Ross Hilliard.

Measuring progress

Common indicators can improve environmental reporting by providing a consistent means of reporting progress in key areas. They can also provide data that are readily understandable to interested parties, and are probably assumed to indicate a greater level of environmental commitment and expertise than if environmental reports were produced without them.

Indicators can also help a company make its environmental management more effective by identifying impacts which need addressing most urgently or where the greatest cost savings can be made. They can clarify a company's environmental goals and assist with target-setting - and help communicate these messages to a more motivated workforce.

A number of sectors are now using or piloting common environmental indicators, but it is unusual for an industry to work so closely with environmental organisations in their development. Doing so helps build credibility.

Rare examples include the collaboration of the UK's two PVC manufacturers with Forum for the Future, and the adoption by some supermarkets of the 'race to the top' sustainability indicators developed by a group of environmental organisations including Forum for the Future, Sustain and the Royal Society for the Protection of Birds.

Green Alliance's indicators for the waste sector first appeared in draft form in 1999. The organisation then held two seminars to discuss them with waste management companies before publishing the final version in 2001. Other bodies involved in their development include the Environmental Services Association, the Chartered Institution of Wastes Management, Friends of the Earth and Waste Watch.

Eleven waste companies have endorsed the indicators to date, including several smaller firms. A notable absentee is Onyx, which says that its parent company's environmental reporting guidelines prevent it from adopting the new model.

 


At least seven of these companies already publish environmental reports incorporating some of the indicators. Most adhere closely to the Green Alliance's recommendations on how the indicators should be presented and have produced reports that are clear, concise and easy to read.

Two stages

The indicators are designed to be implemented in two stages. Stage one includes those which the Alliance feels a significant number of companies can adopt and report on fairly quickly if they had not already done so. Stage two includes indicators that it knows will require more time to compile, either because the indicators themselves need further development or because the companies need longer to prepare for their adoption.

Some of the indicators, such as the amount of waste transported by rail or water as a proportion of total waste shipments, are relatively easy to compile. But crucially even these depend on the way a company chooses to define certain parameters.

Grundon's technical director, Steve Roscoe, highlighted the indicator for the number of complaints divided by number of sites. This sounds straightforward, he says, but defining what constitutes a valid complaint is not simple when many are made to the Environment Agency or environmental health officers.

Perhaps the greatest controversy has surrounded the indicators for climate change. Methane emissions from landfill sites are the waste industry's largest climate change impact, but models for measuring these emissions are still in their infancy.

Waste companies were keen that the fossil fuels saved by generating electricity from landfill gas should be offset against total greenhouse gas emissions. But environmental groups were concerned that reporting figures incorporating the offset for the energy obtained from waste would reflect a secondary benefit of waste disposal which obscures the primary impact of waste management operations. As a result, the Alliance decided that such offsets should be included separately from the headline figure.

Different portfolios

The waste industry also pointed out that because companies have different portfolios of activity - some focusing more on transport, others more on treatment or disposal - the greenhouse emissions indicator should reflect this.

For this reason, the total figure is broken down and reported according to the various types of activity. But the aggregate figure is still valuable, says Green Alliance, as it allows year-on-year trends to be observed.

A limitation of the indicators in general, says Shanks' Ross Hilliard, is that they obscure inevitable variations in companies' environmental impacts because of differences between their operations.

Even within the Shanks group there are four separate businesses - two based in the UK, plus others in Belgium and the Netherlands. Each is shaped by the waste management policies of its country of operation, and is involved in different aspects of waste management.

The data which Shanks gathered on fuel efficiency, for example, are influenced in the Netherlands by transport of large amounts of construction and demolition waste, which is heavy and needs more fuel to transport it. Meanwhile, in remote areas such as parts of Scotland, where Shanks also operates, vehicles have to drive greater distances.

Consequently, says Mr Hilliard, the indicators have most meaning when used at site-specific rather than national or group-wide level.

Other waste executives agree that using the indicators in this way would provide more value. Sita plans to publish site-specific data on its website using the indicators, probably next year.

Benefits

Gathering the data has been a challenging but worthwhile exercise, say companies. 'Because it required a change in our internal procedures,' says Sita's environmental manager David Baker, 'it required someone with tenacity and persistence to ensure it was collected. There was quite a resource implication - but we are already reaping cost savings in some areas.'

A number of practical problems came to light, says Viridor's external affairs manager Dan Cooke. Good data on water usage proved impossible to obtain because many sites did not have meters. Only crude estimates of electricity usage were possible at sites which share infrastructure with mineral extraction companies.

The argument over whether to publish quantitative environmental data has clearly been won among the waste sector's major players, many of whom showed no hesitation in extolling the virtues of the exercise to ENDS. The benefits fall into two categories, internal and external. Internally, the process can change a company's culture, help it identify cost savings and influence its environmental strategy.

'Some of the aspects of our operations covered by the indicators - fuel efficiency, for example - we hadn't focused on before,' says Grundon's Steve Roscoe, 'and the data we are getting will inform some of our decisions in the future. Other indicators, such as those covering land use and wildlife, are unlikely to influence our landfill restoration operations because the area is dominated by the planning process.'

According to Mr Hilliard, 'the indicators give me the confidence in the business to concentrate on certain areas rather than others. Water usage, for example, is shown to be important at incinerators but not at landfill sites, while landfill gas comes out as a much bigger contributor to greenhouse gas emissions than other sources.'

Externally, such reports can impress investment analysts, potential customers and government by helping to demonstrate that a company is managing its environmental impacts responsibly.

'Feedback - not extensive but very positive - has come mainly from shareholders,' says WRG's Mike Snell. 'We are certainly seeing a greater interest in corporate social responsibility reporting from the City fund managers. There is less interest from local authorities, but more are asking for more CSR information in their tender documents.'

Grundon's Steve Roscoe says that his company has also found the indicators a useful communications tool. 'We were coming under pressure from bigger corporate customers like British Airways and the BBC, so when we saw what the Green Alliance were trying to do it made sense to go down that route as we had no history of reporting. Now it gives us something to include in tender packs - our contract management team have used it quite a bit.'

As the word spreads about the indicators, some potential customers are taking the initiative. ENDS understands that at least one major supermarket is interested in exploring whether they could be used in selecting waste contractors.

Comparing companies

The idea of using common reporting guidelines to rank environmental performance within a given sector has long been a holy grail for some. But the road is beset with pitfalls.

In its final report on the indicators, Green Alliance tentatively says that they can be used 'to work towards, as far possible, comparability of data across companies.'

Julie Hill told ENDS: 'When we developed the indicators we wanted them to allow company comparisons. This is what made the sector most nervous, but I think some of the indicators should be able to be used in this way - those on complaints and transport, for example.'

Many waste executives believe that such comparisons would be meaningless, at least for the time being, given that the data provide a snapshot covering only one or two years.

'Company comparisons will be very difficult and not terribly helpful,' says WRG's Mike Snell. 'The indicators will supply consistency to reporting, but because of disparity in data collection and major differences in what different companies do they will produce incomparable sets of results.'

One waste company told ENDS that a competitor had taken credit in its report for electricity generated from sites to which it delivered waste but which were not operated by the company. The same firm was also failing to include passive emissions from its landfill sites.

Green Alliance acknowledges these concerns. Because different companies have very different portfolios of activities and in very different geographical contexts, league tables compiled from the indicators 'may not compare like with like and may also not actually reflect the efforts that particular companies are taking to reduce their environmental impact.'

But despite this, it adds: 'It is important that the resultant environmental impacts are reported on....The small risk of the indicators being used to make inappropriate comparisons will be more than compensated for by the benefits of their use.'

Some waste industry figures share Green Alliance's vision. 'The indicators allow comparison between waste industry players,' says Sita's David Baker. 'As we move further into reporting and implementation of the pollution prevention and control regime for waste facilities, producing comparable data will become easier.'

In any case, adds Mr Baker, comparisons between waste companies are already being made using the Agency's Pollution Inventory and OPRA risk appraisal scheme - tools which 'make it harder for an organisation to hide its performance.'

For Biffa's external affairs director, Peter Jones, the key to meaningful comparisons between companies is external verification to confirm that the data presented are accurate and backed up by evidence.

'In the early years of using the indicators it would be best to look at improvements within companies but, for some indicators at least, I'm optimistic that as the knowledge of verifiers grows it will allow meaningful comparisons within five years.'

Aggregated industry data

Underlining just how far the industry has travelled over the past few years, the ESA has now incorporated use of the stage one indicators into its code of conduct, and is developing guidance on data collection. A report commissioned from consultants MJ Carter Associates looking at companies' experiences in using the indicators is expected to provide valuable input.

Over the coming years, all relevant ESA members, regardless of size, will be expected to report to the association, which will then publish aggregated data for the sector.

No deadline has yet been set, nor will companies be required to have their data verified by a third party. Nonetheless, this will mark a major step forward for the ESA, making it one of few trade bodies to have conducted such a disclosure exercise.

The leader for many years has been the chemicals sector, which first published quantitative data on members' environmental performance in 1993, and has now drawn up a set of sustainable development targets.

Armed with its new indicators, the waste industry would be well placed to respond to the Government's challenge for sectors to develop sustainability strategies. However, its next steps will be to iron out the problems with data collection and to further develop the stage two indicators.

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