Using Integrated Sustainability ManagementSystems to Leverage Supply Chain Management & Environmental Performance Champagne Sports Resort, Central Drakensberg, KwaZulu-Natal, South Africa Dave R. Meyer Founder/Principal ValueStream Performance Advisors
ValueStream Performance Advisors– Sustainability Best Practices Helping companies maximize the value of– Integrated Management Systems sustainability - improving environmental Planning/Development performance, implement creative thinking,– Sustainable Supply Chain realize corporate responsibility, and achieve Alignment profitable growth.– 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
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 Important Questions # 1 – What position should we assume on “sustainability” ? # 2 – What initial steps should we take?
THE ORBIT OF SUSTAINABILITYFinancial Environmental Social • Revenues • Beyond compliance - ”green” • Community values and • Rates • Restorative to nature culture • Reserves • Cradle-to-grave management • Civic pride • EstheticsEconomic and Social and Ethical Financial Health, Safety, and Environmental
SUSTAINABILITY IS AN IDEAL. 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 threeelements. Environment Society Financial Equal levels of Performance Sustainability Triple Bottom Line
FOCUS ON ONE ELEMENT CREATES INSTABILITY •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 “Over protection” Philanthropy is profits only drains the business not business’ sole function
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 EHSMANAGEMENT SYSTEMS DEFINEDA collection of EHS and organizationalbest practices that increase long-termbusiness value manage your EHS“footprint”, improve organizationalefficiency, recognize social values andenhance sustained competitiveadvantage.
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 Important Questions # 1 – Is all this really relevant? # 2 – Will it affect my company?
“WE ALREADY HAVE AN ENVIRONMENTAL MANAGEMENT SYSTEM”Compliance Assurance Most organizations have some type Systems of environmental compliance management system in place…. Pollution Control & …the “Silo” Effect Loss Prevention Systems Emergency Response System
EHS AND SUSTAINABLITY PROGRAM DESIGN ALTERNATIVES Model 1: Regulatory Compliance Model 5: ISO Conformity, Model 2: Compliance Assurance, ISO 14001/OHSAS 18001Environmental Performance, How Does Your Conformity Sustainability EHS/SMS Program Stack Up? Model 4: ISO Conformity, Model 3: Compliance Assurance, ISO 14001/OHSAS Conformity Environmental Performance & Compliance Assurance
CORE OF THE SEMS ID Significant Impacts/Risks Exploration The SMS Fence Project Design line Review Legal and Other Regulated Requirements Mine Development The Four Scale & Walls Severity Extraction Interested Party Suppliers Concerns Processing Neighbors Probability & Closure Duration A B C Significant or Not Activities Significant Legal Requirements Aspects Significant Environmental Aspects/Hazards(Routine/Non-Routine) Economic Social
CROSSWALK BETWEEN EMS & SUSTAINABILITY EMS FEATURES SUSTAINABILITY FEATURES• Regulatory Compliance • Governance & Assurance Management• Waste Management & • Stakeholder Engagement. Minimization • Environmental Process• Air Emissions Management Improvement• Chemical & Natural • Environmental Resources Utilization Products/Services• Energy • Local Economic Growth Utilization/Management • Community Development• Maintenance Optimization • Human Resource• Water Conservation Management & Development
ENVIRONMENTAL-FOCUSED RESOURCE FLOW OUTPUTS •Finished goods •Emission to air •Emission to water INPUTS •Noise generated•Water use •Disposal to land•Energy use •Hazardous waste•Raw material use PROCESS •Abnormal situation•Vehicles use FLOW (e.g. start-up &•Chemicals shut-down conditions) (Activity, •Emergency Product conditions or •Leaks and spills Service) •Illness/injury
SUSTAINABILITY-FOCUSED RESOURCE FLOW OUTPUTS INPUTS •Public Perception•Investor Issues •Return on Investment•Employment •Staff Retention Rates•Training/education •Social Diversity•Labor demographics CHANGE •Training•Capital Investment (Activity, •Stock Value Process) •Community Based Metrics
ISO 14001/OHSAS 18001 BASED OBJECTIVES/TARGETS TYPICALLY CONSIDER: Significant Legal and OperationalEnvironmental /OHS Other Requirements Requirements Aspects/Hazards Integrated Sustainability Views of Objectives Management Interested Parties and System Targets Technology Financial Business Considerations Considerations Considerations
CORE OF THE SEMS Categorize Develop Management Programs Develop Objectives and “Project Plan” Procedures and Targets Work Practices Significant EMP’s Aspects l Tasks, Responsible Procedures Parties, Time Frames Control/ Study l Operational Maintain Work Prt.1(e.g., Regulatory Improvement (e.g., Controls Compliance) Feasibility (e.g., Chemical Study) Work Prt.2 Reduction and l Monitoring and Maintenance Measurement Work Prt.3 Planning) Procedures/Work SEMS Programs Practices Objectives and Targets
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 • Aggregate/Cement – ASARCO (Consent Order) – Boston Sand & Gravel – Newmont (gold) (Consent Decree) – Freeman United (coal) – Aggregate Industries – BHP (coal) – Hanson Aggregate – CEMEX – Resolution Copper (copper) – CPCC – Kennecott (silver, copper) – Holcim – Freeport-McMoran (copper & gold) – St. Lawrence – Unocal-Molycorp (Moly) – Lucky Stone – U.S. Borax (borax) – Doe Run (metals smelting)
MINING COMPANIES MAKING A DIFFERENCEUnocal 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 improvementsU.S. Borax- Boron Operations 40% reduction in process water 30 % reduction in hazardous solid wasteHanson Building Materials Portable Rock Crusher units Concrete/aggregate collection and reclaiming Over 5 Million Tons of materials reused/recycled in 2002
RIO TINTO“Develop common tools through asustainable development leadershippanel and to encourage different parts ofthe Group to apply these tools and theconcept of sustainable developmentwithin their specific social,environmental, economic andgovernance circumstances, and toimplement the policy in a manner that isconsistent with local priorities in thelocal context.”
NEWMONT MINING COMPANYFive Star Integrated Management System (IMS)
• Implement and maintain ethical business • Seek continual improvement of our practices and sound systems of corporate environmental performance. governance. • Contribute to conservation of biodiversity• Integrate sustainable development and integrated approaches to land use considerations within the corporate planning. decision-making process. • Facilitate and encourage responsible• Uphold fundamental human rights and product design, use, re-use, recycling and respect cultures, customs and values in disposal of our products. dealings with employees and others who are affected by our activities. • Contribute to the social, economic and institutional development of the• Implement risk management strategies communities in which we operate. based on valid data and sound science. • Implement effective and transparent• Seek continual improvement of our health engagement, communication and and safety performance. 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 ManagementSystem 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) DefinedGSCM is ‘integrating environmental thinking into supply-chainmanagement, including product design, material sourcing andselection, manufacturing processes, delivery of the finalproduct to the consumers as well as end-of-life managementof 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
Green Supply Chain Framework ISO 14001 , OSHAS 18001 FoundationSource- Diamond Management & Technology Consultants
News FlashThursday, April 15, 2010“IBM said on Wednesday that it will require its 28,000 suppliers inmore than 90 countries to install management systems to gatherdata on their energy use, greenhouse gas emissions and waste andrecycling. Those companies must ask their subcontractors to do thesame 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 andsustainability across our global supply chain so it helps our suppliersbuild their own capacity in a way that’s not only good for theenvironment but their business” - Wayne Balta, IBM VP of CorporateEnvironmental Affairs and Product Safety 38
Supply chain gets its ‘sustainability groove’ onContext• 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 servicesSupply Chain/Logistics professionals responding• More environmental specs in contracts• “Greener” specs for conventional products• Use of eco-labels• Looking at supplier environmental practices
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 ManagementStrongly advocates for traceability and accountingsystems for both upstream and downstream supplychain 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 PracticesPrequalification 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 teamsSupply base environmental performance management• Supplier environmental questionnaires• Supplier environmental audits and assessments
More Supply Chain PracticesBuild 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 chainCooperate 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 PracticesWork with industry peers to standardize requirements• Create internal procurement group to collaborate on environmental issues• Standardize supplier questionnairesInform suppliers of corporate environmental concerns• Issue statements of ISO 14001 EMS priorities to suppliers• Draft and distribute comprehensive GSCM policyPromote exchange of information and ideas• Sponsor events to facilitate discussions between customers and suppliers on environmental issues• Host training and mentoring programs.
ISO 14001 Inventory and Order Management StrategiesSupply Chain Strategies: Eco-Strategies:• Flow through distribution • Reduces warehouse activities• Inventory re-routing from required to distribute product transload facilities • Reduces space requirements• Single sourcing of direct order in warehouse fulfillmentBusiness Benefits: Eco-Benefits:• Reduces warehouse labor cost • Reduction of fuel/energy used• Increases revenue by fork trucks and delivery vehicles• Reduces transportation cost • 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 Communication & Collaboration Sustainability Value Chain Consumer ValueSuppliers Customers Supplier CustomerSupplier Customer Product Flow Stakeholders Interests Source: Adapted from GEMI, Forging New Links
Value Mapping Identifies Reciprocal ValueValue Chain: A series of linked steps organizations use toidentify value opportunities. At each step in the value chainthere is a sustainability value proposition or “filter”. Supply Operations Customer E S F E S F E S F• E: Renewable Resources • E: Carbon Footprint • E: Low Impact Goods• S: Local Sourcing • S: Community Outreach • S: Responsible Brand• F: Stable Cost Structure • F: Lower Costs • F: Competitive Pricing
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 56
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 Q1 Q2 Q3 Q4Year 1 Commence supply chain Tier 1 notification Test approach on a small approach Finalize approach number of existing Tier 1 suppliersYear 2 Use experiences from • Tier 1 Finalize roll out Commencement for new • Tier 2 Finalize roll out test suppliers to improve • Tier 2 Notifications suppliers, engage using • Tier 1 Assess approach/process sustainable approach performance regardless of Tier Tier 2 roll outYear 3 • Use experiences to Tier 3 Rollout Assess the performance improve approach of all suppliers engaged • Tier 3 notifications under the sustainability framework 59
An Orderly Methodology To Keep On Track • Strengths • Weaknesses Where are we today? • Opportunities • Threats/ obstacles Supply Chain ISO 14001 • Vision Environmental Where do we want • Goals Management to be tomorrow? • Objectives System • Issues Planning • Initial strategies • Critical success factors How do we get there? • Tactics • Refined strategies • Refined vision • Mission
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
TYPICAL SEMS STRATEGY AND PROGRAM DEVELOPMENT Select Assess Map the Benchmark issues to Select Drive PerformanceStakeholder current metrics & issues impacts create change assessmentinventory state of TBL objectives “new TBL” Critical Strategy for Foundation Change How do we “rate”?Why change? Resources and Tools Relevant? Inventory Dimensions Mapping “Standards” KPIs • Energy •customers • Social • Value Chain • GRI • Work-force • community •Environment • Alignment • GEMI diversity • suppliers • Financial • KPIs • DJSI • ROI • financial • Other ? • Other • Benchmark Where does change make sense?
Sustainability Strategy & Program Development Customer Visioning Performance Assessment Assess Issues CriticalActions for Foundation Change Drive Change Continual Map impacts Improvement Select Metrics Select issues to & Objectives create “new TTL” Benchmark current state of TBL Strategy for TTL= Triple Top Line Change