Management by Objectives Reply

By Bob Pojasek, PhD, Senior Program Director, Capaccio Environmental Engineering, Inc.

Most sustainability programs are operated by using a “management by objectives” approach.  Here’s how it works:  companies select sustainability indicators from a list of measures (e.g., the Global Reporting Initiative or GRI list) and then implement a bunch of initiatives to create results.  This seems to satisfy the stakeholders desire to have the company set goals and then measure sustainability progress, however, there is another way to measure sustainability progress. 

By using a sustainability management system (SMS), a company can look at how each of its three responsibilities impacts the stakeholders.  Then, by using a risk assessments method (e.g., ISO 31000), the company can prioritize the most important impacts.  Sustainability goals are set as part of the risk management process and a program is put in place to help the company meet these goals.  In this case, projects have action plans and the effort is coordinated to meet the goals and not just produce results as in the management by objective approach.  Corrective actions and preventive actions are also addressed in a manner that is consistent with the SMS. 

We point out this fundamental difference in how sustainability programs are operated to make a point about continual improvement.  While it is reasonable to start a sustainability effort using a familiar approach such as management by objectives, it is important to move to an approach that makes sustainability part of the way the organization is operated, day-in and day-out. 

There is a SMS in the United Kingdom (BS 8900) that requires the company to create a maturity grid.  A company starts working on sustainability by making sure that it meets all environmental, health and safety, social, and financial regulations.  Once the SMS is in place, the company becomes more proactive and seeks to change its processes in such a way that they avoid the very need for the regulatory activities.  In other words, the process no longer triggers the regulatory requirement.  Some people call this “going beyond compliance.”  By using risk management to minimize regulatory, operational and reputational risks, the company is well on its way to sustainability.

If you already have some management systems in place (e.g., ISO 9001, ISO 14001, or OHSAS 18001), you may be able to add some components to shift your sustainability program from a “management by objectives” program to a program that moves you along the maturity grid associated with your continually improving sustainability program.  It is not sufficient to let the metrics drive the program.  Rather, the metrics should help decide just how well the program is operating and improving.

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Regulated by Your Customers Reply

The words environment, health and safety can bring thoughts of “compliance” to one’s mind.  The regulatory agencies MassDEP, EPA and OSHA are a reminder to us that compliance requirements are being enforced and must be met to avoid penalties or fines. This was true until companies that you sell your products to (i.e., your customers) began getting serious about something they call “supply chain management.”  Supply chain management is when your customers try to manage their risks by becoming regulators themselves.

The biggest company in the world, Wal-Mart, is one of the companies that have been pushing the envelope by “greening” their supply chain.  The company has developed a rigid 15-point sustainability index that must be met by more than 61,000 suppliers and all the factories that they use.  Failure to meet these environmental and social requirements and maintain or lower the price of your products, could result in termination of your Wal-Mart contract.

CAPACCIO recently became involved in helping a Wal-Mart customer, a leading snack food industry manufacturer, prepare for a Wal-Mart audit. Utilizing Walmart’s 15-point sustainability framework, CAPACCIO helped the client prepare for the audit by assessing the company’s current sustainability state against Wal-Mart’s index.

As part of the 15-point framework, Wal-Mart grades companies on four broad categories: energy and climate; material efficiency; nature and resources; and people and community. CAPACCIO found that the company’s current state was already quite “green.” As a family-owned business, the company opted not to promote their environmental and social successes. Wal-Mart, however, was very happy to hear their stories and learn that the snack food company was exploring a number of opportunities to further improve their operations.

CAPACCIO provided the client with an analysis of how they would be scored based on Wal-Mart’s 15-point sustainability framework at the current time. CAPACCIO also provided a number of specific action items that could be considered to help improve the score. Some recommendations were to prepare water and carbon footprint reports and disclose the results to the Carbon Disclosure Project and the newly formed Water Disclosure Project.  CAPACCIO also recommended that the client reach out to its supply chain to learn more about energy and water use in order to complete the disclosures.  We also advised the client to consider creating documentation to present the completed sustainability initiatives and post this information on the company web site or include it in a sustainability report.

CAPACCIO helped this client make an internal business case for these sustainability initiatives.  By going through this process, the business has prospered, and all of the client’s retail customers, not just Wal-Mart, have reaped the benefits.