GEMI Survey EHS Metrics and Processes

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GEMI SurveyEHS Metrics and Processes

• January 2003

Carl Wirdak Occidental Petroleum Corporation
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Outline

• Survey Recap
• EHS Metrics
• Metrics Process and Practice

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Survey Overview

• Survey addresses the management of environment,
  health or safety (EHS) metrics and metrics
  processes that apply to a companys business
  activities
• Survey response rate 60
• 21 companies responded to the survey
• Not all companies completed all questions
• Broad industry coverage
• Thank you to all participants!

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Metrics Overview

• Over 475 EHS metrics listed (about 23 per company)

• Heavily weighted to environmental
• Balance among internal measures

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Metrics Usage

• Metrics used most often to assess organizational
  performance Are we doing what we set out to
  do?
• Influencing key stakeholders (external) is
  important

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Topical Coverage

• Focus is on the basics
• Communicating environmental performance to
  external audience is key
• More balanced message to internal audiences

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Leading / Lagging Indicators
Most firms rely on lagging indicators for EHS
metrics
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Quantitative Targets

• Widespread use of quantitative targets
• Nine GEMI companies have numeric targets on all
  internal EHS metrics

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Normalization

• Almost all firms use normalized metrics
• Greater use in communication of EHS metrics to
  external audiences
• Man-hours, production units and revenue are the
  most common bases

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Update Frequency
Internal EHS metrics updated more frequently than
those reported externally
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Overview of Metrics Processes

• Most companies do not have a problem with
  management support of the EHS metrics program

• Most companies have documented their procedures
  for metrics practices
• Few have calculated the costs associated with
  developing, collecting and reporting on EHS
  metrics, but
• Most expect to spend about the same as last year

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New Metrics - Practical Considerations
What steps do companies perform when developing
new EHS metrics?
Very Important
Not Important
Considered
Compare new metrics with existing or developing standards 62 38 0
Account for off-shore facility considerations / applicability 58 42 0
Involve key business unit, operational and line managers 52 33 14
Define internal measurement techniques and performance goals 48 52 0
Define reporting levels and responsibilities 48 43 10
Identify external benchmarks 29 67 5
Conduct pilot testing to confirm / validate data measurement 29 52 19
Conduct a cost / benefit analysis for rationalizing new metric 19 57 24
Perform a formalized stakeholder needs evaluation 19 52 29
Incorporate into personnel evaluations and compensation systems 5 55 40
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New Metrics Value-Added Factors
Top 10 value-added factors companies consider
when assessing an EHS metric
Very Important
Not Important
Considered
Can be used to demonstrate progress towards goals and objectives 76 24 0
Can be used to motivate a desired behavior or change 71 29 0
Easy to measure / data collection is at a reasonable cost 71 29 0
Can be clearly stated / is easily understood by management 67 33 0
Shows strengths and weaknesses of business or EHS processes 48 43 10
Reflects risk associated with operational / EHS activities 48 43 10
Has strong linkage to strategy and objectives 43 52 5
Can be benchmarked 33 62 5
Potential for improving companys financial return 29 62 10
Shows tie between EHS, operational, and management performance 29 62 10
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New Metrics Value-Added Factors
Less popular factors companies consider when
assessing the value-added by an EHS metric
Very Important
Not Important
Considered
Required anyway for legal / regulatory reporting 29 48 24
Ability to improve the "balance" with the existing set of metrics 24 52 24
Value as a prediction of future trends 24 48 29
Incorporated in existing or developing standards (e.g., GRI) 24 43 33
Can show economic value-added across the value/supply chain 24 38 38
To track record of resolving stakeholder requirements or issues 14 67 19
Can be normalized on a meaningful basis 10 67 24
Concern that data can be artificially "manipulated to hide true performance 10 57 33
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Data Sources

• Regulatory reports
• Audit results / findings
• Computerized MIS

Common

• Monitoring / measuring equipment
• Management systems reviews
• Inventory and production records
• External reports and studies
• Interviews / discussions

• Quality management systems
• Financial and accounting systems

Uncommon
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Data Capture Validation
Capture
Essentially a manual process 0
Some automation but more of a manual process 10
A combination of electronic and manual processes 40
More electronic and automated than manual 40
Fully integrated and on-line MIS process 10
Validation
Via audit programs 71
Formal internal data checking processes 71
Searches of regulatory agency or 3rd-party databases 38
Via an independent, 3rd-party consultant 10
No validation practices implemented 5
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Metrics Reporting and Analysis

• EHS metrics are reported to management in a
  variety of ways

• Fewer than half (40) of the survey respondents
  reported use of a Balanced Scorecard approach
  to managing overall business goals, but all
  companies that use it include EHS metrics in the
  mix

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Performance Evaluation
Not Important
Considered
Important
Against defined performance goals and objectives 67 24 10
Determine effectiveness of EHS management systems 57 38 5
To better manage business costs / risks 57 33 10
Business unit / division / facility performance ranking 40 40 20
To support initiatives for performance improvement 38 57 5
Individual manager's job performance 24 48 29
Evaluating resource (budget and staffing) needs 14 76 10
To determine economic value-added of EHS activities 5 45 50
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EHS Performance Feedback

• EHS metrics are used by all companies as a tool
  to improve company performance
• When a metric indicates sub-par performance, gt80
  of companies do further analysis
• Further analysis leads to performance improvement
  about 67 of the time

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Continuous Improvement of Metrics
What factors do companies consider when assessing
how to improve EHS metrics?
Importance
High Mid Low
Ability to improve company performance 86 10 5 0 0
Quality, consistency or accuracy of metric 57 33 10 0 0
Linkage with corporate objectives 52 33 10 0 5
Relevance to management needs 29 57 5 0 10
Relevance to stakeholders 29 29 33 5 5
Timeliness of information reported 24 38 24 14 0
Ease of interpretation 14 48 29 10 0
Promotes cooperation between business units or departments 5 24 33 19 19
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Metrics Turnover
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Conclusions

• There are many different metrics in use
• Differences exist between metrics that are used
  internally and those that are communicated
  externally
• EHS metrics are linked to the business
• The use of lagging indicators far outweighs the
  use of leading indicators
• Applying quantitative targets to metrics is
  common practice
• Generally, metrics processes are sophisticated
  and mature
• Companies continue to search for better metrics
• Questions /comments?

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Future Benchmarking Study Ideas

• Development of goals and their relation to the
  metrics
• The use of cost accounting practices (ABC, TCA)
  within EHS and how it relates in the various
  business aspects, operations, product
  development, etc
• The use of the Balanced Scorecard for EHS and how
  it is aligned with the business's use of the
  scorecard
• International regulatory tracking influence
• Climate change approaches
• Audit process and management
• Management systems implementation
• How, by whom and when companies conduct
  independent verifications of their metrics
  systems
• A study on GRI reporting, such as to what extent
  are member companies complying