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.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.
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,
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.