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TRANSCRIPT
Using Integrated Sustainability Management
Systems to Leverage Supply Chain Management
& Environmental Performance
Dave R. Meyer Founder/Principal
ValueStream Performance Advisors
Champagne Sports Resort, Central Drakensberg,
KwaZulu-Natal, South Africa
ValueStream Performance Advisors
Helping companies maximize the value of
sustainability - improving environmental
performance, implement creative thinking,
realize corporate responsibility, and achieve
profitable growth.
– Sustainability Best Practices
– Integrated Management Systems
Planning/Development
– Sustainable Supply Chain
Alignment
– Environmental and Sustainability
Audits
– Product Stewardship/Life Cycle
Analysis
– Governance and Policy
Sustainability Consulting | Compliance | Finance | Development
Managing Resources in a Finite World
• 30% of Earth’s natural
resources have been
consumed in the past 30 years
• We over consume earths
resources by 30% per year
• Will need two additional earths
to support 6 plus billion people
Important Questions
# 1 – What position should we assume on “sustainability” ?
# 2 – What initial steps should we take?
TRENDS THAT CAN AFFECT YOUR
ORGANIZATION • Equity and capital markets increasingly screen
for sustainability risks and performance
• Customers are looking to “green supply chains”
• Multinationals are adopting a “strategic view” promoting innovation at all levels
• Risk, compliance and cost must still be managed to reduce impacts
THE ORBIT OF SUSTAINABILITY
Social and Ethical Economic and
Financial Health, Safety, and
Environmental
Financial
• Revenues
• Rates
• Reserves
Environmental
• Beyond compliance - ”green”
• Restorative to nature
• Cradle-to-grave management
Social
• Community values and
culture
• Civic pride
• Esthetics
It represents direct interactions between business, society and the environment to create the maximum benefits for all three elements.
• Progress is measured by performance under each element. Some examples:
1) Environment: preserving resources versus “once through” uses
2) Society: employment opportunities and quality of life
3) Financial: market share, profitability and growth
• The “Triple Bottom Line” indicates the “dynamic balance” between the three elements.
Sustainability
Equal levels of Performance
Triple Bottom Line
Environment Society Financial
SUSTAINABILITY IS AN IDEAL.
•Ignoring environmental impacts can create liabilities or resource depletion and lead to business loss
• Failing to understand social concerns may lead to loss of social license to operate
• Failing to be profitable may lead to bankruptcy and no environmental or social progress
Focus on profits only
Philanthropy is not business’ sole
function
“Over protection” drains the business
FOCUS ON ONE ELEMENT CREATES INSTABILITY
THE BUSINESS CASE FOR SUSTAINABILITY
• Increased Revenue / Market Share
• Reduced Operational Expenses
• Reduced Waste- Enhanced Environmental
Benefit
• Reduced Liability/Cost of Compliance
• Reduced Risk– Enhanced Financial Position
• Increased Employee Productivity
• Competitive Advantage
• Enhanced Recruitment & Retention of Best
Talent
HOW A COMPANY ADOPTS SUSTAINABILITY IS A
CRITICAL SUCCESS FACTOR
• Need to align the business mission and sustainability principles – How can sustainability improve the business?
– Where can we have the biggest impact?
• What does our current “triple bottom line” look like?
• Should we adopt an international standard, develop our own code of conduct or both?
Getting the most business value from
Sustainability requires strategy
SUSTAINABILITY-FOCUSED EHS
MANAGEMENT SYSTEMS DEFINED
A collection of EHS and organizational
best practices that increase long-term
business value manage your EHS
“footprint”, improve organizational
efficiency, recognize social values and
enhance sustained competitive
advantage.
Important Questions
# 1 – Is all this really relevant?
# 2 – Will it affect my company?
MAGIC PILLS OR FORMULAS?? …THINK AGAIN
• No single model for a “sustainable” organization
• There are no universal performance standards
– Emerging “standards” … codes of conduct and metric specific
– Examples: Global Reporting Initiative (GRI), World Business
Council on Sustainable Development
• Performance is typically “relative” to company baseline and sector
– Basic tenants of “code of conduct” must be followed
– Example: Climate Change performance is judged by GHG
emission reductions over time
FIVE STAGES OF ORGANIZATIONAL CONSCIOUSNESS
5. Purpose / Passion
-------------------------------
4. Integrated Strategy
3. Beyond Compliance
2. Compliance
1. Pre-Compliance
• Eco-efficiencies
• Regulatory Threat
• PR Crisis
• Passionate Founder / CEO
• Regulatory Pressure / Enforcement
• Business Opportunities – “Carrots”
• Risk Management – “Sticks”
Pollution Control &
Loss Prevention
Systems
Compliance Assurance
Systems
Emergency Response
System
Most organizations have some type
of environmental compliance
management system in place….
…the “Silo” Effect
“WE ALREADY HAVE AN ENVIRONMENTAL MANAGEMENT SYSTEM”
INTEGRATION BUILDS CONTINUITY
EHS AND SUSTAINABLITY PROGRAM DESIGN ALTERNATIVES
Model 4:
ISO Conformity,
Compliance Assurance,
Environmental Performance
Model 3:
ISO 14001/OHSAS Conformity
& Compliance Assurance
Model 1:
Regulatory Compliance
Model 2:
ISO 14001/OHSAS 18001
Conformity
Model 5:
ISO Conformity,
Compliance Assurance,
Environmental Performance,
Sustainability
How Does Your
EHS/SMS Program
Stack Up?
The Four
Walls
The SMS Fence
line
A B C
Activities
Review Legal and Other
Requirements
Aspects
(Routine/Non-Routine)
Legal Requirements
ID Significant
Impacts/Risks
Regulated
Scale &
Severity
Interested Party
Concerns
Probability &
Duration
Significant
Aspects/Hazards
Significant or Not
Significant
CORE OF THE SEMS
Neighbors
Suppliers
Environmental
Economic
Social
Exploration
Project Design
Mine Development
Extraction
Processing
Closure
CROSSWALK BETWEEN EMS &
SUSTAINABILITY
• Regulatory Compliance Assurance
• Waste Management & Minimization
• Air Emissions Management
• Chemical & Natural Resources Utilization
• Energy Utilization/Management
• Maintenance Optimization
• Water Conservation
• Governance & Management
• Stakeholder Engagement.
• Environmental Process Improvement
• Environmental Products/Services
• Local Economic Growth
• Community Development
• Human Resource Management & Development
EMS FEATURES SUSTAINABILITY FEATURES
ENVIRONMENTAL-FOCUSED
RESOURCE FLOW
INPUTS
•Water use
•Energy use
•Raw material use
•Vehicles use
•Chemicals
OUTPUTS
•Finished goods
•Emission to air
•Emission to water
•Noise generated
•Disposal to land
•Hazardous waste
•Abnormal situation
(e.g. start-up &
shut-down conditions)
•Emergency
conditions
•Leaks and spills
•Illness/injury
PROCESS
FLOW
(Activity,
Product
or
Service)
SUSTAINABILITY-FOCUSED
RESOURCE FLOW
INPUTS
•Investor Issues
•Employment
•Training/education
•Labor demographics
•Capital Investment
OUTPUTS
•Public Perception
•Return on Investment
•Staff Retention Rates
•Social Diversity
•Training
•Stock Value
•Community Based Metrics
CHANGE
(Activity,
Process)
ISO 14001/OHSAS 18001 BASED
OBJECTIVES/TARGETS TYPICALLY
CONSIDER: Significant
Environmental /OHS
Aspects/Hazards
Legal and
Other Requirements
Operational
Requirements
Views of
Interested Parties
Technology
Considerations
Financial
Considerations
Objectives
and
Targets
Business
Considerations
Integrated Sustainability
Management
System
Categorize
Objectives and
Targets
Develop Management Programs
“Project Plan”
CORE OF THE SEMS
Develop
Procedures and
Work Practices
l Tasks, Responsible
Parties, Time
Frames
l Operational
Controls
l Monitoring and
Measurement
EMP’s
Procedures
Work Prt.1 Work Prt.2 Work Prt.3
Objectives and Targets SEMS Programs
Procedures/Work
Practices
Control/
Maintain
(e.g., Regulatory
Compliance) Improvement
(e.g., Chemical
Reduction and
Maintenance
Planning)
Study
(e.g.,
Feasibility
Study)
Significant
Aspects
Mining Sector and Integrated
Management Systems
WHY SUSTAINABLE MINING??
• The status quo is not sustainable
• Our social license is at risk
• The bar keeps rising
– Mines must improve and account for performance,
both operational and social
– Mines must improve public opinion by taking action
collectively
GOT SUSTAINABLE ENVIRONMENTAL
MANAGEMENT?
• Mines
– ASARCO (Consent Order)
– Newmont (gold)
– Freeman United (coal)
– BHP (coal)
– Resolution Copper (copper)
– Kennecott (silver, copper)
– Freeport-McMoran (copper & gold)
– Unocal-Molycorp (Moly)
– U.S. Borax (borax)
– Doe Run (metals smelting)
• Aggregate/Cement – Boston Sand & Gravel
(Consent Decree)
– Aggregate Industries
– Hanson Aggregate
– CEMEX
– CPCC
– Holcim
– St. Lawrence
– Lucky Stone
MINING COMPANIES
MAKING A DIFFERENCE
Unocal Molycorp
Decreased fuel oil use by 12 %...$0.20 per ton savings in ore produced and reduced air emissions
Nearly $80,000/yr from maintenance improvements
U.S. Borax- Boron Operations
40% reduction in process water
30 % reduction in hazardous solid waste
Hanson Building Materials
Portable Rock Crusher units
Concrete/aggregate collection and reclaiming
Over 5 Million Tons of materials reused/recycled in 2002
BHP BILLITON
RIO TINTO
“Develop common tools through a
sustainable development leadership
panel and to encourage different parts of
the Group to apply these tools and the
concept of sustainable development
within their specific social,
environmental, economic and
governance circumstances, and to
implement the policy in a manner that is
consistent with local priorities in the
local context.”
NEWMONT MINING COMPANY
Five Star Integrated Management System (IMS)
• Implement and maintain ethical business practices and sound systems of corporate governance.
• Integrate sustainable development considerations within the corporate decision-making process.
• Uphold fundamental human rights and respect cultures, customs and values in dealings with employees and others who are affected by our activities.
• Implement risk management strategies based on valid data and sound science.
• Seek continual improvement of our health and safety performance.
• Seek continual improvement of our environmental performance.
• Contribute to conservation of biodiversity and integrated approaches to land use planning.
• Facilitate and encourage responsible product design, use, re-use, recycling and disposal of our products.
• Contribute to the social, economic and institutional development of the communities in which we operate.
• Implement effective and transparent engagement, communication and independently verified reporting arrangements with our stakeholders.
GLOBAL REPORTING INITIATIVE-
MINING AND MINERALS SECTOR
SHARED TRAITS…UNLOCKING VALUE
Position Through:
Optimizing the linkage between sustainability, environmental and business objectives
Creating a performance measurement system
that demonstrates bottom line results
Identifying marketplace trends that reward innovation toward sustainability Building assurance systems for compliance and credible public reporting
Putting Your Integrated Management
System to Work Through the Supply Chain
International Supply Chain Challenges
• Companies account for and report environmental impacts
• Supply chain tracking and measurement of multimodal transportation emissions
• Estimation of emission reduction impacts of new technologies and strategies
• All Market Driven…Now Sustainability and ISO 14001 is a key supply chain driver
Green Supply Chain Management (GSCM)
Defined
GSCM is ‘integrating environmental thinking into supply-chain
management, including product design, material sourcing and
selection, manufacturing processes, delivery of the final
product to the consumers as well as end-of-life management
of the product after its useful life’ (Srivastava, 2007)
Supply Chain Management (SCM)
Drivers
• Logistics, Procurement have become strategic
• Organizations outsourcing, forming partnerships, alliances
• Product environment becoming more complex
• Time based competition requires time compression
• Managing suppliers and customer relationships necessary
• Competition shifting from company vs. company to Supply Chain vs. Supply Chain
Historically, GSC management focused
on the upstream supply chain
Source- Diamond Management & Technology Consultants
ISO 14001 ,
OSHAS 18001
Foundation
Green Supply Chain Framework
News Flash
Thursday, April 15, 2010
“IBM said on Wednesday that it will require its 28,000 suppliers in more than 90 countries to install management systems to gather data on their energy use, greenhouse gas emissions and waste and recycling. Those companies must ask their subcontractors to do the same if their products or services end up as a significant part of IBM’s $40 billion global supply chain.”
“Our overall interest is to systemize environmental management and sustainability across our global supply chain so it helps our suppliers build their own capacity in a way that’s not only good for the environment but their business” - Wayne Balta, IBM VP of Corporate Environmental Affairs and Product Safety
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Supply chain gets its
‘sustainability groove’ on Context
• Growing public concern- customer driven mandates/product preferences
• Increased Demand for Transparency
• Environmental mandates in regulations (restricted materials)
• Safe transport provisions
• Increasing availability of greener products and services
Supply Chain/Logistics professionals responding
• More environmental specs in contracts
• “Greener” specs for conventional products
• Use of eco-labels
• Looking at supplier environmental practices
The Green Procurement
Evolutionary Curve
The Issue of Conflict Minerals
Conflict Minerals Companies
Managing Conflict Free Mineral Life-Cycle
Source: KPMG LLP
Electronic Industry Citizenship Coalition (EICC) & Global
e-Sustainability Initiative (GeSI) Frameworks
• Targets the “pinch point” in the supply chain- the smelter:
• Business Process Review: Evaluate company policies and or codes of conduct relating to conflict minerals
• Material Analysis Review: – Conduct a complete material analysis to demonstrate that all
sources of materials procured by the smelting company are conflict-free;
– Evaluate whether source locations are consistent with known mining locations; and
– Establish whether material identified as “recycled” meets the definition of recycled materials.
OECD Due Diligence Framework to
Conflict Minerals Management
Strongly advocates for traceability and accounting systems for both upstream and downstream supply chain organizations:
– Step 1: Establish strong company management systems
– Step 2: Identify and assess risks in the supply chain
– Step 3: Design and implement a strategy to respond to identified risks
– Step 4: Carry out independent third-party audit of smelter/refiner’s due diligence practices
– Step 5: Report annually on supply chain due diligence
Supply Chain Practices
Prequalification of suppliers
• Require/encourage environmental criteria for approved suppliers
• Require/encourage suppliers to undertake independent environmental certification (ISO 14001)
Environmental requirements at the purchasing phase
• Build environmental criteria into supplier contract specs
• Incorporate 3BL staff on sourcing teams
Supply base environmental performance management
• Supplier environmental questionnaires
• Supplier environmental audits and assessments
More Supply Chain Practices
Build environmental considerations into product design w/ suppliers
• Design for environment (DFE) product innovation, life cycle analyses, clean tech
• Coordinate minimization of environmental impact in the extended supply chain
Cooperate w/ suppliers to manage end-of-pipe environmental issues
• Reduce packaging waste at the customer/supplier interface
• Reuse/recycle materials in cooperation with the supplier
• Launch reuse initiatives (including buy backs and leasing)
Reverse logistics
• Give supplier an incentive to reduce the customer’s environmental load
Some More Supply Chain Practices
Work with industry peers to standardize requirements
• Create internal procurement group to collaborate on environmental issues
• Standardize supplier questionnaires
Inform suppliers of corporate environmental concerns
• Issue statements of ISO 14001 EMS priorities to suppliers
• Draft and distribute comprehensive GSCM policy
Promote exchange of information and ideas
• Sponsor events to facilitate discussions between customers and suppliers on environmental issues
• Host training and mentoring programs.
Transportation Life Cycle Management
Prioritizing Shippers and Carriers
Distribution Management
ISO 14001 Inventory and Order
Management Strategies Supply Chain Strategies:
•Flow through distribution
• Inventory re-routing from
transload facilities
•Single sourcing of direct order
fulfillment
Business Benefits:
•Reduces warehouse labor cost
• Increases revenue
•Reduces transportation cost
Eco-Strategies:
•Reduces warehouse activities
required to distribute product
•Reduces space requirements
in warehouse
Eco-Benefits:
•Reduction of fuel/energy used
by fork trucks and delivery
vehicles
•Reduces CO₂ emissions
•Reduces energy consumption
by warehouse
Co-opetition Partners
• Producers, Customers, Consumers who drive
producer demand and determine product eco-footprint
• Shippers and Terminal Operators: who generate the
freight flows and provide the critical infrastructure for
product flow
• Logistic Service partners (3PLs): who can design
and implement optimized solutions and move the
freight
• Fourth Party Providers: who can facilitate
partnerships, referee blockages, find common ground
• Governments who can assure that legal and
regulatory arrangements are in place to support
seamless collaboration
Reciprocal Value Creation
Suppliers Supplier
Supplier Customer Customers Customer
Source: Adapted from GEMI, Forging New Links
Product Flow
Communication & Collaboration
Stakeholders Interests
Consumer
Value
Sustainability Value Chain
Supply Operations Customer
E S F E E
S S F
F
Value Chain: A series of linked steps organizations use to identify value opportunities. At each step in the value chain there is a sustainability value proposition or “filter”.
• E: Renewable Resources
• S: Local Sourcing
• F: Stable Cost Structure
• E: Carbon Footprint
• S: Community Outreach
• F: Lower Costs
• E: Low Impact Goods
• S: Responsible Brand
• F: Competitive Pricing
Value Mapping Identifies Reciprocal Value
Recent Study Results/Findings
• >75% of manufacturing executives had ISO 14001 certification or were in process in order to enhance their competitive supply chain position,
• ISO 14001 Companies are 40% more likely to assess their suppliers’ environmental performance; 50% more likely to require that their suppliers undertake specific environmental practices,
• Preference in market share is often given to suppliers that have attained ISO 14001-certification
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ISO 14001/OHSAS 18001 can be
a Supply Chain Enabler • Access key markets through ISO/OHSAS registration,
• Specialize and concentrate supply chain manufacturing efforts to manage environmental risk,
• Able to respond to “green economy” market drivers;
• Improve brand differentiation and customer loyalty,
• Respond and conform to ISO/OHSAS supply chain certification market drivers, and
• Improve product, process, and quality while sustaining global environment.
57
What ISO 14001 Certification Can Achieve:
• Identification and control of environmental impacts of suppliers activities, products or services,
• A systematic approach to supply chain environmental accountability,
• Supply chain continuous improvement in environmental performance,
• Reduced operating costs and improved quality performance in supply chain,
• Supply chain environmental sustainability communication process improvements,
• Competitive differentiation in your marketplace.
58
A Structured Approach to Tier-Based Supply
Chain Sustainability
59
Q1 Q2 Q3 Q4
Year 1 Commence supply chain
approach
Tier 1 notification
Finalize approach
Test approach on a small
number of existing Tier 1
suppliers
Year 2 Use experiences from
test suppliers to improve
approach/process
• Tier 1 Finalize roll out
• Tier 2 Notifications
Commencement for new
suppliers, engage using
sustainable approach
regardless of Tier
Tier 2 roll out
• Tier 2 Finalize roll out
• Tier 1 Assess
performance
Year 3 • Use experiences to
improve approach
• Tier 3 notifications
Tier 3 Rollout Assess the performance
of all suppliers engaged
under the sustainability
framework
An Orderly Methodology To Keep On Track
• Strengths
• Weaknesses
• Opportunities
• Threats/ obstacles
• Vision
• Goals
• Objectives
• Issues
• Initial strategies
• Critical success factors
• Tactics
• Refined strategies
• Refined vision
• Mission
Where are we today?
Where do we want
to be tomorrow?
How do we get there?
Supply Chain ISO 14001
Environmental Management
System Planning
Green Supply Chain Management
Summary
• Get started today, seek out high impact suppliers
and vendors- establish ISO 14001 mandates or
incentives
• Help suppliers find the low hanging fruit
• Look for the win-win and make the business
case
• Consider all aspects of your business & innovate
Steps to Sustainability
• Identify critical sustainability issues
• Select areas of focus- look outside the four walls
• Develop a compelling and clear vision of sustainability
• Develop and adopt goals and performance indicators for addressing critical sustainability issues
• Reflect sustainability in business processes and decisions
• Build a network of internal sustainability champions
• Strength relationships with key external sustainability partners
• Communicate Sustainability (corporate reports, websites, event sponsorships, publicity campaigns etc.)
General Design -Rules Of Thumb
• Any Environmental Management Program is only as good as what is designed into it
• Program Design is a Proactive, Integrated and Cross-Functional Process
• View the EMS Program as a Product
– deliver on budget, on time, be marketable (from a mission critical perspective)
– be useable
– constantly upgrade and nurture
Stakeholder
inventory
Assess
issues
Map the
impacts
Benchmark
current
state of TBL
Select
issues to
create
“new TBL”
Select
metrics &
objectives
Drive
change
Performance
assessment
Dimensions
• Social
•Environment
• Financial
• Other ?
Inventory
•customers
• community
• suppliers
• financial
Mapping
• Value Chain
• Alignment
• KPIs
• Other
“Standards”
• GRI
• GEMI
• DJSI
• Benchmark
KPIs
• Energy
• Work-force
diversity
• ROI
TYPICAL SEMS STRATEGY AND
PROGRAM DEVELOPMENT
Critical
Foundation
Strategy for
Change
Resources and Tools Why change?
Relevant?
Where does change make sense?
How do we “rate”?
Customer Visioning
Assess Issues
Map impacts
Select issues to create “new TTL”
Benchmark current state of TBL
Select Metrics & Objectives
Drive Change
Performance Assessment
Sustainability Strategy & Program Development
TTL= Triple Top Line
Critical
Foundation
Strategy for
Change
Actions for
Change Continual
Improvement
Sound Implementation Approach Yields Tangible Results
EMS Strategy Execute
Design & Pilot Implement
Evolve
Change Management
• Mgt. Participation • Cultural Alignment • Acceptance
Out of CHAOS, ORDER
Thank you
Dave R. Meyer
ValueStream Performance Advisors
+1-858-212-2020
http://www.linkedin.com/in/drmeyer
www.valuestream2009.wordpress.com
Twitter: @DRMeyer1