Integration eases the stake holder burden

How do you prove to regulators, customers, government, the public and the stock market that you are complying with their demands and expectations on corporate performance? Principal consultant at AIG Consultants, Stephen McKay asserts that environmental control measures need to be integrated into core business and assurance processes.


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The arrival of the stakeholder community is placing great demands on business.

Stockholders want to know that business risks are under control and that the

company can demonstrate good governance; customers are demanding ever tighter

quality and performance standards; and the public (and pressure groups) are

demanding that organisations demonstrate responsible environmental and social

practices. This is to say nothing of legislative requirements and employee expectations

for cleaner and safer work environments. Some of these ‘stakeholder’ environmental

compliance requirements are illustrated in the table opposite.

Demonstrating compliance

Consequently the ‘environment’ now carries considerable strategic and fiscal

implications. Demonstrating compliance is no longer a simple task of monitoring

‘end of pipe’ performance. Instead environmental control measures need to be

integrated into core business and assurance processes. This will not only achieve

improved control but will bring efficiency gains.

We now know from experience that efficient environmental management systems

(EMS) can have a positive impact on the bottom line. Besides improved operational

control and reduced loss there are real financial savings to be made from reducing,

recycling or reclaiming waste.

Similarly, a move towards integration of environment into core business management

systems is not only necessary to ensure compliance with this new wave of legal

and stakeholder requirements, but it also will bring scope for further financial

gain through:

  • Efficiency gains by eliminating duplication of control measures and assurance

    processes and freeing management time.

  • Earlier consideration of environmental issues at product design stage or

    when addressing supply chain risks. Thus ensuring ‘a right first time’ approach

    and avoiding unnecessary retro work.

  • Consideration of strategic opportunities such as identification of new

    products and services, or, organisational differentiation through environmental

    performance.

In addition, a truly integrated company-wide management system will help engender

a management system culture and greater risk awareness within the organisation.

When there are a number of separate management systems then people tend to make

reference to these systems when they recognise a specific quality, environment,

health and safety or other risk. An integrated system would be referred to on

a continual basis thus bringing greater order and control to all business activities.

But what does integration mean in practice?

At a corporate level this means integrated assurance systems, with reporting

mechanisms and key performance indicators (KPIs) such as legal compliance, established

to reflect the full range of environmental risks that could have a material

impact on the business. The integration of environment into the established

business assurance systems enables the efficient flow of key information to

the Board allowing:

  • rapid response when performance deviates;
  • transparency of environmental cost and risk presented by all company activities;
  • assessment of adequacy of risk controls;
  • improved strategic planning;
  • confidence in environmental performance data prior to disclosure; and,
  • assurance that risks are being adequately managed and company exposure

    is minimised.

In short, the Board is better placed to demonstrate acceptable levels of environmental

governance.

At an operational level, the move has been toward integrated environment, health

and safety (and often quality) management systems. This is the correct thing

to do as there is clearly considerable overlap between these systems. There

are however pitfalls associated with integration such as the potential dilution

of control measures designed to address specific risks. But, provided the system

is intelligently designed these pitfalls can be avoided.

How does integration help improve compliance management?

Without integration we often have situations where each management system competes

for resources and management time. Worst still is the often-encountered conflicts

that arise when disparate systems are pulling in separate directions. For example

health and safety consideration may drive organisations toward smaller storage

volumes of raw materials (e.g. for easier manual handling or to reduce fire

risk), whilst an environmental view may suggest larger containers to minimise

packaging and product loss. The integrated view would force a more holistic

solution, perhaps looking at substitution of raw materials or just-in-time delivery

to minimise on-site inventories and at the same time reduce liability.

Integration also creates a greater sense of ownership of the ‘business’ management

system than would be achieved if systems were differentiated. For example, an

environmental management system rarely carries the same sense of recognition

in the marketing and finance departments as it does in the production department.

If the environmental management system becomes an intrinsic part of the overall

‘business’ management system then environmental compliance and control will

improve as all departments follow

the integrated procedures and policies.

Loss of control often occurs at operational or system interfaces. Roles and

responsibilities are generally blurred at the interface between departments,

production lines or functional groups. How often have we heard somebody say

‘that’s not my responsibility’. A good integrated system recognises these interfaces

and ensures that ambiguity is removed and roles clearly defined.

How do we achieve integration?

The approach taken by organisations when they attempt integration is often flawed.

Many approach integration by simply trying to create an amalgam of all existing

policies and procedures. What is required is a re-examination of core business

processes and where possible improvement of these processes to ‘design-out’

business risks. The focus here is not major restructuring but an examination

of the intent and the ‘value-added’ by the component stages of each process.

Applying this ‘process mapping’ approach enables a consistent and objective

evaluation of the business.

Once the processes have been mapped all activities can be assessed in terms

of the full range of applicable business risks. Integrated or common control

measures can then be established to control these risks and fulfil operational

compliance requirements. The system can then be documented and rolled-out across

the company.

The resulting integrated system provides unity of purpose across the organisation

and drives continuous improvement against defined performance standards. This

requires that the standards, including all relevant compliance requirements,

are defined

and incorporated into the management system. And, most importantly ownership

and accountability for all risks is not only allocated but is recognised by

all relevant personnel throughout the organisation.

© Faversham House Ltd 2022 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.

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