Pollution Prevention and the Bottom Line - What does it really mean to be "business driven?"

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Courtesy of Weston Solutions, Inc

It is good business practice to encourage efficiency. If the truth of this statement can be held self-evident, pollution prevention efforts should be ingrained in our businesses. The past decade has witnessed impressive progress toward this end; it is a simple task to locate multiple examples of reduced or eliminated waste streams. Yet, when surveyed, environmental managers most often cite the need to satisfy regulatory requirements as the primary driver behind pollution prevention efforts. Cost savings and enhanced profits may be everyone's goal, but meeting permit limits and reducing unplanned emissions are the daily battles that are won and lost.

This situation may not seem to be a problem to some. However, responding to statutory requirements does not always guarantee practices that will maximize a business's interests. Today's economy teaches us that innovation is rewarded and the status quo is passed up quickly. We now hear stories of proactive companies able to reduce waste costs and increase profit margins by effectively engaging their environmental knowledge. While regulatory compliance always will provide the basis for environmental performance requirements, companies that maximize efficiency internally, and simplify efficiency across the supply chain, will emerge as winners. The challenge is to move pollution prevention programs into line with the rest of a business's goals.

Business drivers

Maximizing profits and minimizing costs are easily uttered mantras. The difficult jump is to understanding the relationship between daily activities and end-of-year balance sheet results. A first step in making this connection is understanding how a business strategy can link a business's core mission and its continuity functions. Business continuity depends on functions such as environmental health and safety (EH&S), human resources and legal departments keeping the company out of trouble so it can continue to meet its core mission. Many companies pursue a compliant strategy for business continuity: Play by the rules and everything will be all right. This approach essentially separates those things the company must do to maintain operations - the continuity departments - from the rest of the organization. And it views them as a cost of doing business. This is especially true of environmental departments.

Other companies have begun to see that continuity functions can add value to the core business mission. They replace the compliant approach with a strategy focusing on gaining a competitive advantage from the entire business effort. This approach often involves detailed measurement and assessment of the direct and hidden costs associated with environmental and other continuity efforts. However, the companies with the greatest competitive advantage employ strategies that go beyond direct cost minimization to strategies that increase revenues.

Extending benefits

It is possible to categorize the driving forces behind environmental programs into three groups. The most traditional drivers also are the most tangible. Regulatory requirements and permit levels are immediately recognizable and manageable objectives. The direct costs associated with meeting these requirements, whether from capital expenditures for control structures, operating costs or full-time employees on the environmental staff, are equally tangible and usually represent the main target for cost-cutting efforts.

A second category is made up of the costs associated with environmental operations that normally are hidden in general operating costs. Examples include training, auditing and monitoring, waste handling and labeling, and record-keeping costs. These cost elements have been the subject of greater attention in many organizations because of formalized environmental management system (EMS) projects aimed at streamlining environmental management efficiency.

Reducing the traditional and/or hidden costs of environmental operations is perhaps the most practiced method of increasing efficiency and gaining a competitive advantage. Extending beyond the company's boundaries to include suppliers and customers can provide opportunities for further cost reductions, as well as for improved marketing, reduced costs of ownership and greater margins in specific sectors. Many companies are realizing that some of their pollution prevention efforts and other environmental management costs are caused by regulated constituents in their supply feedstocks.

DaimlerChrysler, Auburn Hills, Mich., has targeted a number of hydraulic and lubricating fluids containing restricted materials that cause considerable administrative, handling and disposal costs. Working with its suppliers, DaimlerChrysler has developed a management program in which functionally similar products with fewer hazardous components are identified and substituted. The program has met with so much success that the company now requires suppliers with products containing listed hazardous substances to supply this information.

Looking ahead in the supply chain opens more opportunities for business-driven benefits. Techniques learned from pollution prevention, environmental cost accounting, life-cycle assessment and other environmental programs can be applied to a business's product line to understand the ownership cost incurred by the business's customers. . A detailed analysis along these lines can be a powerful marketing tool for sales staff.

Essential components

True integration of environmental considerations into a business depends on a number of factors and usually must be accomplished over a period of years. The first prerequisite is a solid understanding of the link between core mission and business continuity.

Beyond management commitment, active engagement and training at all levels of the organization are of utmost importance. The knowledge and capabilities needed to wring efficiency out of a company's environmental performance is not necessarily resident within the environmental department. By enabling the people who are dealing with environmental management and operational issues on an everyday basis, it is possible to eliminate the wasted effort that decreases efficiency.

Finally, it is necessary to identify performance metrics - whether based on cost, material flow and/or energy flow - that are pertinent to the organization's objectives. The ISO 14031 standard for environmental performance metrics offers excellent guidance in this area. It describes three categories of metrics: Environmental Condition Indicators (ECIs), Operational Performance Indicators (OPIs) and Management Performance Indicators (MPIs). ECIs track impacts on properties with a potential for legacy problems. OPIs track ongoing operational activities and the environmental considerations associated with them. MPIs track the management programs that control the company's environmental objectives. Not every organization will require, or even benefit from, a complex measurement program. However, it is impossible to manage that which cannot be measured.

First steps
As environmental departments shift their attention to include overall business drivers, the various tools, techniques and approaches may become overwhelming, and initial visions of efficiencies and improvements are lost. Therefore, the best advice after becoming familiar with all the literature is to move that information to a reference stack and talk with people in the company. Business-driven pollution prevention is common sense-driven business. Common sense can be described in articles and books, but it can be practiced only when people share perspectives and decide which option is best. Use expert resources for what they are worth. However, expertise combined with front-line experience is what drives performance.
 

John R. Heckman, Ph.D., is a project manager with Roy F. Weston Inc., Lakewood, Colo.; phone, 303-980-6800; e-mail, heckmanj@mail.rfweston.com.

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