The Importance of Internal Audits Reply

Environmental, Health and Safety (EH&S) auditing is about reducing risks. EH&S auditing, whether driven by external factors or internal, is an independent, objective review of activity designed to add value to an organization’s operations. Auditing brings a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, operational controls, and processes. Completing proactive EH&S audits can ensure the effectiveness and efficiency of operations, the reliability and integrity of operational information, and the safeguarding of assets and compliance with laws, regulations, and contracts…all of which have a direct relationship to the organizations financial performance.

For example, EH&S efficiencies and the organization’s public image can have a substantial impact from a direct and indirect cost standpoint. A proactive EH&S audit program can drive improved efficiencies which will reduce direct costs (e.g. using less material to create a product) and improve indirect costs (create more in a shorter period of time – energy savings). An EH&S audit program ensures regulatory obligations are being sustained, which, in turn, prevents a negative public image. In addition, an EH&S audit program provides recommendations for improvement in those areas where opportunities or deficiencies are identified.

The intent of EH&S auditing is to provide objective data that assures top management that internal controls are effective and working as intended. An EH&S audit program directly supports risk management by providing an organization with data and the ability to control and make decisions to prevent financial loss and reduce an organization’s EH&S risks.

Sustainability Reporting – “Focal Point USA” Reply

The Amsterdam-based Global Reporting Initiative (GRI) has initiated a drive to get more US-based companies to use their reporting guidelines when publishing sustainability reports.  This drive was initiated on February 1st and is dubbed, “Focal Point USA.”  Of the Standards & Poor (S&P) 500 companies, 230 filed sustainability or other non-financial reports in 2010.  Only 97 of these reports used the GRI “G3” reporting guidelines. 

GRI offers 79 suggested results for companies to report on.  Some are called “core” results and others are “additional” (suggested).  All of these results are lagging indicators – the moment they are measured the results are in the past. 

Many companies are beginning to see the need to look at “leading indicators.”  These indicators are used to drive performance of the sustainability program itself into the future.  Leading indicators come from a number of performance frameworks used around the world.  The most widely used performance frameworks are EFQM (Europe), and Baldrige (US).  Australia, India, China, Japan, and Brazil also have similar frameworks.  CAPACCIO has posted a white paper on leading indicators to provide you with more information. 

Companies really need to use both leading and lagging indicators to have a sustainability that will be around for the long term. It is interesting that many US firms use leading indicators in corporate business performance assessments but do not mention them in their sustainability reports.  The sustainability/corporate responsibility professionals are getting interested in leading indicators to associate their programs with other corporate performance programs.

Performance programs refer to the lagging indicators (results) as “merely the outcome of performance.”  Good performance, as measured by the leading indicators, should lead to better results in the future.

Now that ISO 26000 (social responsibility standard) recognizes the EFQM performance standard, GRI will need to reconsider its insistence on sticking with the lagging indicator-only stance.  Maybe they will hear this message in the Focal Point USA effort. 

Related Papers: “Using Leading Indicators to Drive Sustainability Performance” http://www.capaccio.com/sustainability

LINKS:

Focal Point USA:  http://www.globalreporting.org/AboutGRI/WhoWeAre/FocalPoints/FocalPointUnitedStatesLandingPage.htm

GRI:  http://www.globalreporting.org/Home

S&P 500: http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf–p-us-l–

EFQM: http://www.efqm.org/en/

Baldrige: http://www.nist.gov/baldrige/

New Stewardship Action Council Reply

There is a new association in the sustainability space. It is called the Stewardship Action Council (SAC). It is competing with the Corporate Responsibility Officers Association (CROA) and the GreenBiz Executive Network. SAC has an interesting mix of companies, state organizations, non-governmental organizations and universities. Participating members must set improvement goals and report progress against the goals. This looks similar to the now defunct Performance Track Program (US Environmental Protection Agency).

It is interesting to note that Level 3 members must have an environmental management system in place and it must be verified by a third party. These members must have independent audits conducted every three years and self assessments in interim years. These companies must also have no criminal violations in the past three years and no more than three notices of violation in any three-year period.

SAC has a “concept paper” that outlines the following goals:

• Create a sustainability standard that lays out the elements of and a path for achieving sustainable business practices

• Provide a mechanism to share company efforts to improve performance

• Create opportunity for collaborative efforts to address social and environmental issues that an organization cannot adequately address alone

• Provide a forum where different stakeholders can work together to accomplish common goals

There seems to be a decided focus on the environmental responsibility that is one of three responsibilities in a sustainability program. We’ll have to wait to see a glimpse of the sustainability standard that the members of this fledgling group are working on. With the recent release of ISO 26000 social responsibility standard, and the final voting on the ULE 880 (Sustainable Manufacturing Standard), we can look for some more choices in this very active area.

RELATED LINKS:

Stewardship Action Council:

http://www.stewardshipaction.org

Corporate Responsibility Officers Association:

http://www.croassociation.org

GreenBiz Executive Network: http://www.greenbiz.com/intelligence/

ExecutiveNetwork ISO 26000: http://www.iso.org/iso/iso_catalogue/management_standards/social_responsibility.htm

ULE 880:  http://www.ulenvironment.com/ulenvironment/eng/pages/offerings/services/organizational/ule880/

Energy Management System Standards Reply

For those of you who are still eagerly awaiting the release of  the ISO 50001 energy management system standard (due to be released early next year), there is a British Standard, BS EN 16001, that can be used now.  This British energy management system standard has been a key priority for European delegates contributing to the development of the ISO standard in the much slower international standards setting arena.  These delegates are working closely with ISO to make sure there will be no disincentive for the early adopters of EN 16001 when ISO 50001 is released.  The use of this standard is also providing some information to those writing the ISO 50001 standard. 

The aim of this European standard is to help organizations establish the systems and processes necessary to improve energy performance and make reductions in both cost and emissions of greenhouse gases.  Launched in July 2009, this standard effectively presents a business with a roadmap of the various steps to be taken to ensure it is viewed as being serious about energy management.  The promotion of the standard notes that the combination of energy reduction and risk management is more financially advantageous than merely buying additional carbon credits or offsets to lower the carbon emissions that are reported to the public. 

The standard helps businesses ask the right questions of themselves and adjust their internal processes and decision-making accordingly.  These businesses use the plan-do-check-act (PDCA) framework to establish objectives and processes, implement some changes, monitor their results and finally act again to deliver incremental improvements in performance over time.  Some companies in the UK are required to certify to this standard because of the “Carbon Reduction Commitment Energy Efficiency Scheme” that was launched in April 2010 to support attempts to reduce the greenhouse gas emissions in accordance with the Climate Change Act of 2008.  There are similar requirements in the European Union.

To keep up to the demand in the United States, the US Department of Energy is making draft copies of ISO 50001 available to certain technical assistance providers to use for their own energy conservation programs.  However, no climate change legislation has been enacted in the United States.  A company can purchase a draft of ISO 50001 and use it while the final standard is being subject to its final international ballot.  You do not need to be involved in these Department of Energy projects to do so.

It is important to note that the “aspects” determination in ISO 14001 was designed for looking at all resources:  water, energy and materials.  Energy is very important to all companies and their stakeholders.  Unless you find that you need to certify to an energy management standard, you may be better off looking at both the BS EN 16001 and the draft ISO 50001 and using the information to strengthen your existing ISO 14001 program.