Can an EMS learn a new language?
- Business & Industry ,
- Reporting ,
- Employee engagement ,
- Corporate governance ,
- Stakeholder engagement
Greg Roberts explores how environment management practices can be reinvigorated by corporate responsibility approaches
Critics often accuse environment management systems (EMSs) of being insular, anonymous and stagnant. Corporate responsibility (CR) and sustainability practices, on the other hand, are lauded for delivering success.
Marks & Spencer’s Plan A, for example, delivered a £105 million net benefit in 2011/12, while the sustainability strategy adopted by Dutch electronics firm Philips resulted in “green” products accounting for 45% of its turnover in 2012.
Uptake of CR and sustainability initiatives has increased dramatically in recent years. Corporate Register, the online resource for CR reporting, says that 5,000 more reports were published on its website in 2011 than in 2001.
And, while the original driver for embedding sustainability was to meet the expectations of investors, organisations are increasingly recognising the value of being transparent, accountable and better able to manage medium- and long-term risks.
Research conducted for Business in the Community in 2010, for example, revealed that publicly listed companies that manage and measure their CR activities financially outperformed those that do not.
The ISO technical committee overseeing the ISO 14001 revision process is looking at whether EMS practice can learn from the wider sustainability approach, and be more outward looking, accountable, strategic and deliver real business value. The committee has also been asked to promote the role of EMSs in providing the “green pillar” of sustainability.
Companies that are integrating sustainability into their operations will often be using an EMS to deliver the environmental underpinning. And, for those firms looking to begin incorporating sustainability into their organisation, a starting point could be to reinvigorate an existing and perhaps underperforming EMS.
From the top
The first observation to make about organisations that are successfully embedding sustainability is that it tends to be led at the board level. Often it is the chief executive officer who publicly promotes sustainability, such as Ian Cheshire at Kingfisher, which operates B&Q. These figureheads buy into the need to do things differently to ensure that social inequalities and environmental degradation do not constrain the firm’s long-term viability.
By contrast, environment management systems often have little support from top management. This is largely down to the business case for EMS not being fully understood or articulated beyond the need to have the 14001 “badge”.
Too frequently, after certification has been achieved the system is left to stagnate. Without senior leadership, the EMS does not become fully integrated throughout the organisation and can be left to just one or two people to manage. Successful sustainability, on the other hand, is the responsibility of many, including the procurement, HR, finance, health, safety and environment, marketing and sales teams.
Sustainability is increasingly about recognising the importance of looking beyond the factory gates or the office doors to understand the upstream and downstream impacts associated with the use and disposal of products and with their supply chain.
Unilever, for example, uses the value chain approach and has discovered that its biggest greenhouse-gas impact is not in manufacturing, but with its suppliers and consumers. For this reason, Unilever is encouraging consumers to wash clothes at lower temperatures, so consuming less energy.
Meanwhile, without senior leadership, environment management systems tend to concentrate on incremental, operational improvements rather than looking at the step change required to ensure the business is future proofed.
While it would be naive to claim that all organisations working to embed sustainability are making revolutionary changes, there are examples of firms beginning to evolve their business models to become less reliant on resources.
Outdoor clothing firm Patagonia is one such business. The company has created what it calls its “common threads partnership”, which encourages customers to mend, reuse and recycle their garments before buying new ones. And customers of flooring manufacturer Interface can now rent its carpet tiles rather than buy them.
Given that some of the biggest advantages of integrating sustainability into a business are around the environmental pillar – reduced resource costs, new green products and increased risk management, for example – why is the business case for EMS frequently missed? The simple answer is that it is often poorly researched and communicated.
Environment practitioners are not always experienced in wider business matters and can struggle to develop a business case that resonates with the managing or the finance director. The opposite is often true of sustainability leaders.
According to a recent report from analysts Verdantix, a significant portion of corporate sustainability leaders come from a business background, potentially providing them with the skills to effectively articulate the tangible business benefits of sustainability.
Things are changing, however, and the environment sector is looking to cultivate the skills and knowledge needed to develop the business case. IEMA’s environmental skills map addresses such issues and is a major step forward for the profession.
14001 requires an organisation to prioritise risks through the “significance of environmental aspects”. A significant aspect is one that has, or could have, considerable impact on the environment.
Sustainability practices, meanwhile, apply the concept of “materiality” to determine significance. It is a term originating in accountancy to mean issues important within the context of a financial report. For example, “material information” is data an investor would analyse first when deciding whether to invest in a firm.
Using “materiality” to describe environmental and social risks allows the senior management team to consider these issues alongside financial risks.
The revision of 14001 is considering requiring organisations to account for the impact the environment can have on their operations. This would make the EMS more valuable as a business risk tool, and bring it closer to the way companies consider sustainability risks.
A major disadvantage of 14001 is that the standard does not require organisations to engage with stakeholders, other than to manage incoming communications. This leads to a very insular and defensive EMS. Meanwhile, the best sustainability strategies are based on broad stakeholder engagement.
Such an approach allows an organisation to design its sustainability strategy, and ideally its business strategy, so as to consider the needs and expectations of those affected by its operations.
Coca-Cola illustrates how this works in practice. The drinks company used stakeholder engagement to identify its “Big themes”, the key areas of its CR strategy. These include: water stewardship, sustainable packaging, healthy living and working with local communities.
It talked to consumers, staff and other stakeholders in 2009 and 2011 about their concerns with its products and operations and found that nutrition was the ranked as the top concern, followed by environmental issues such as water and energy use.
Given the wide range of stakeholders a typical organisation can potentially engage with, it is often not a simple task. This is where using the concept of “materiality” can help to prioritise issues.
Nonetheless, a stakeholder-led approach makes perfect sense; why would any firm develop a strategy that does not consider what customers want, employees require and local communities expect? Unfortunately, many EMSs are developed without understanding who their stakeholders are, let alone considering what they want.
The revision of 14001 is looking to address this by requiring organisations to identify stakeholders – or “interested parties” – and their needs and expectations. This could be a simple desktop exercise using existing knowledge to develop a list of stakeholders and their needs. The outcomes could then be used as criteria to identify significant aspects.
As the EMS matures, more sophisticated techniques could be deployed, such as interviews, surveys, online platforms and focus groups. Reviewing a customer’s sustainability report, polling employees and meeting local residents could all make an EMS more relevant to those who, ultimately, ensure the viability of an organisation.
It is worth noting that many companies engage with the sustainability agenda to publicly disclose their performance and to be accountable to stakeholders. And yet 14001 does not require any form of public disclosure.
However, with mandatory greenhouse-gas reporting for publicly-listed firms starting this year, it seems likely that disclosing environmental performance will become an issue of regulatory compliance for an increasing number of companies in future.
The revised 14001 standard is likely to require organisations have a communication strategy. And, in line with the principles of continuous improvement, this would need to mature over time to engage in providing stakeholders with more information. Greater communication would be a positive step, as reporting how well a firm is doing in reducing packaging, for instance, will appeal to customers.
While learning from sustainability practices can help to improve an ailing EMS, it should be remembered that sustainability is still in its infancy. By contrast, EMSs are well established and have the potential to be the basis from which organisations progress into sustainability. The first step in doing so will be to reinvigorate these undervalued engines for environmental improvement so they are able to deliver to their true potential.
The new version of 14001, due in 2015, is likely to go some way to incorporating the benefits of the sustainability approach, but organisations should not wait to start making their EMS more outward looking and, ultimately, able to deliver real business value.
Learning sustainability’s tricks
- Business case – revaluate the business case for your environment management system (EMS). What extra benefits, other than the badge, can it bring? How will it deliver real value to the business?
- Leadership – use the business case to get a senior leader’s buy-in so that they actively champion the EMS.
- Integration – cross-department and value chain involvement will help to deliver a step change.
- Risk management – consider the risk of the environment to the business to make the EMS a fundamental part of your organisation’s risk-management process.
- Engagement – do not develop your objectives and targets in isolation; listen to those who hold your licence to operate.
- Communication – maximise the benefit of your efforts, communicate what you want to do and what you have achieved.
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