'ntarj A BUSINESS GUIDE Environmental Performance and Competitive Advantage Ministry of the Environment ISBN0-7778-7538-1 k BUSINESS GUIDE Environmental Performance and Competitive Advantage May 1998 Prepared for: Ministry of tine Environment by: The Delphi Group Copyright: Queen's PrinterforOntario, 1998 Thispublication maybereproducedfornon-commercialpurposeswith appropriateattribution. Cettepublicationtechnique n'estdisponiblequ'enanglais. PIBS3648E © Pnntedonrecycledpaper 1000-05-98 DISCLAIMER Information presented in this guide is derived from publicly availablesources.The views and ideas expressed in this guide are thoseoftheauthorsand do notnecessarilyreflecttheview/sand policies ofthe Ontario Ministryofthe Environment. Mention of trade names, commercial products or supplier names do not constitute endorsements or recommendations for use by the Ministry. The Ministry encourages the distribution of information and strongly supports the concurrent promotion of resource conservation, pollution prevention and industrial competitiveness in Ontario. Resource conservation includesthe efficientuse of energy, waterand otherinputraw materials, aswell asthe reduction ofwaste residuals. Similarly,thegenericopportunities presented bytheauthorsofthisguidedo notrepresentrecommendationsforimplementation atspecificsites.Theauthorsoftheguide are notresponsibleforanysuch implementation withoutpriorconsultation andfurther detailed siteevaluation. COPYRIGHT Queen'sPrinterforOntario, 1998.This publication maybe reproduced fornon-commercial purposeswith appropriateattribution. Any person whowishesto republish partorall ofthis reportshould applyforpermission to do so to the Ontario Ministryofthe Environment, Communications Branch, 135 St. ClairAvenueWest,Toronto, Ontario, M4V 1P5, Canada. ACKNOWLEDGEMENTS Thisguide was prepared forthe Ontario Ministry ofthe Environment (MOE), Industry Conservation Branch byThe Delphi Group, aspartofa Ministryfunded project.The Delphi Groupisan environmental consultingcompanyspecializinginthestrategic man- agementofenvironmental issues and marketanalysisofenvironmental technologies. Thefollowingpeople provided valuable inputand assistance intothe project; John Woodruffe, WoodruffeAssociates Inc. George Stuetz, Consultant John Phyper, Phyper&Associates Ltd. Dave McLeod, Phyper&Associates Ltd. The Delphi Groupwould lii<etothankthosemanagerswho respondedtoa surveyconducted on environmental performanceindi- cators, as well as the following individuals who provided valuable comments: Peter Corbyn, Automotive Parts Manufacturers' Association; Rob Milne, ConsumersGas; LarryOnisto, Ontario Hydro; Brad Earhardt,JM SchneiderInc.; and Gil Friend, Gil Friend &Associates. The Ministryofthe Environment has a numberofprograms in placethatworkto assist business become more competitive and address environmental issues in a cost-effective manner. The Industry Conservation Branch can further advise you on the pro- grams and workshops availableto assistyou. Please contact; Abdi Hussein 2 St. ClairAvenueWest, 14th Floor Toronto, Ontario M4V 1L5 Fax; (416) 327-1261 Telephone; (416) 327-1456 Table of PREFACE i Contents ABOUTTHISGUIDE ii-v PARTA I. AddValuethroughtheUseofPerformanceIndicators Increased MarketShare Improved Productivity/NetProfit ReducingtheCostofCompliance EnhancedShareValue ImprovedCorporate Imageand Reputation II. StepstoDevelopandReportEnvironmental PerformanceIndicators 1. IdentifytheCore BusmessObjectives jj 2. TheBigPicture: IdentifyEnvironmental RisksandOpportunitiesto 12 MeetBusinessObjectives 3. IdentifyOperational Impactsonthe Environment 14 4. DetermineEnvironmentalObjectivesandTargetstoSupportCore 16 BusinessObjectives 5. DevelopanAction Planto Reach Environmental Objectives 17 6. Developthe EPIsSupportingCoreBusinessObjectives 21 7. Collectthe DataforEPIsand MeasurePerformanceOutcomes 23 8. Communicateand ReportEffectively 25 PARTB EPIsused byVariousCompanies: Examples 29 RelationshipofEPIsto Environmental ManagementSystem Policies, 37 ObjectivesandTargets SummaryofBestPractices: Europe, USA, Canada 39 Noranda Forest'sEffective UseofEPIs 45 PublicEnvironmental ReportingInitiative(PERI) Guidelines 47 Additional Resources en LISTOFTABLES Table 1: ExamplesofUsingEnvironmental Indicatorsto Meet 2 BusinessObjectives Table2: UsingEPIstoAddressExternal StakeholderIssues 26 LISTOFRGURES FigureOne: Stepsto Developand ReportEnvironmental 10 Performance Indicators RgureTwo: Relationship Diagram: Policy, Objectives,Targets, 33 EPIsand Reporting Preface CompetitiveOntariobusinessesarecritical toourfutureeconomicsustainability. Atthesametime, aJlthepeopleofOntariohavetheunquestionablerighttoa healthyenvironment.Today, thereisagrowingunderstandingthattheseare compatiblegoals; noonehastotradeonefortheother. Moreandmore,Ontariocompanies recognizethatgoodenvironmental performanceisgoodbusiness.ThisguidebookEnvironmentalPerformanceand CompetitiveAdvantage:ABusinessGuide,isanaid.Itdemonstrateshowaddressing environmental issuesinasystematicwaycan providenewopportunitiestofocus oncorebusinessobjectivessuchasimprovedproductivity,increasedmarket share,enhancedcorporateimage,highersharevalueandreducedcostof environmentalcompliance. Ihopethisguidewillbeusefultoyouandyourcompany.Thisisone methodbywhichtheMinistryoftheEnvironmentissupponingfuturebusiness competitivenessthroughinnovativeapproaches. Bysharingourknow-howand expertise,wecansolveoldproblems in newways.Webelieveindustry,business andindividualsmustbegiven flexibilityandoptionsasweworktowards solutionstothechallengeofachievingadynamiceconomysetinahealthy, safeenvironment. I^^T Iv. TheHonourableNormanW. Sterling MinisteroftheEnvironment The Focus of this Guide Thisguideprovidesadviceon whyandhowbusinessshouldmeasureandreport About environmentalperformance. Itfocuseson theprocessofselectingindicators basedonacompany'scorebusinessobjectiveswhichmayinclude this Guide • Increased marketshare • Improvedproductivity/netprofit • Reducingthecostofcompliance • Enhancedsharevalue • Positivecorporateimage. To thosewho have an Environmental Management PartA,Section Idiscusseshowtoaddvaluetobusinessobjectivesfromimple- mentingenvironmentalinitiatives.Integraltothisprocessistheuseofindicatorsto System in place: measureandreportperformanceagainstyourcompany'ssetobjectivesandtargets. Congratulations! You have taken an important step in Thisguidecanprovidebenefits ifyouanswer'yes' toanyofthefollowing addressingenvironmental issuesthatyour questions. companyfaces. In initiatingan Environmen- tal Management System (EMS) you may J Areyoutryingtotrackenvironmental performance? havealreadydevelopedsomeEnvironmental G Areyoutryingtoreduceyourcostofcompliance? tPoerifnodircmaatnecheoIwndtihceateonrvsir(oEnPmIse)n,taalsobajemcetiavness 3 DoyouhaveanEnvironmental ManagementSystem,butneedtobench- and targets are meetingthe International markperformance? (seeNotes) Organization for Standardization (ISO) Doyouhaveanupcomingplantexpansionorwishtobuildanewplantthat 14001EMSStandard. willrequireregulatoryapprovals? This guide, however, takes a different i_l Doesthelocalcommunityhaveconcernsaboutyouroperation'semissions orimpactontheenvironment? approach in selectingEPIs. It basestheir selection on yourcompany'score business Doyouwanttoensurethatenvironmental liabilityisminimized? objectives. Assuch, itwill be easierforall 3 Doyouwanttoensurethatyourenvironmentalprofiledoesnotnegatively levelsofseniormanagementto understand affectyourcorporateimage? therelevanceofEPIstothecompany'sbusi- nessstrategy. Althoughtheapproach isdif- Doyouwanttodemonstrateenvironmentalresponsibilitytoyourcustomers? ferent,inanumberofcases,theactualEPIs —I Areyoulookingforamarketingadvantage? selectedanddevelopedwill bethesameas withintheEMSframework. Key Environmental Issues that Demand a Business Response PartB containsfurtherdetailsand a chart KeyenvironmentalissuesandtrendswillaffectOntariocompaniesandwilldrive illustratingthe relationship of EPIsto an thedemandforbusinesstorespond. Newsolutions, improvedperformance, new Environmental Management System. For andsustainabletechnologies,productsandserviceswillbetheresult. additional information ontypesofEPIsand theirrole in an EMS, readers maywishto CostsofWaterand Energy obtain acopyofISO 14031-Environmental PerformanceEvaluation. Thecostofwaterisprojectedtoincreaseasthedemandsoftheaging infrastructureandcostsofnewinfrastructurewillforcemunicipalities tomovetofull-cost,user-paysystems. Inaddition, manyjurisdictionsare anticipatingpotential increasedenergycosts. PublicConcernaboutHealth Polldatashowsagrowingconcern inOntarioandaroundtheworldaboutthe effectsofpollutionandchemicalsonhumanhealth. Studieshaveshownthat hospitaladmittancesforrespiratoryproblemsincreaseduringperiodswhen thereareelevatedlevelsofgroundlevelozone,andinhaledparticulatescanbe linkedtoincreaseddeath rates. (OntarioSmogPlan) 11 EnvironmentalPerformanceandCompetitiveAdvantage:ABusinessGuide IncreasingPopulation TheOntario populationbaseisprojectedtogrowby35%inthenext25years, puttingmoredemandonagricultural land,waterresourcesandenerg)'.Asa resultincreasedairpollution (relatedtobothindustr}'andtraffic), impairment towaterqualit)-andquantit}',andscarcit}'ofavailablelandfillswilloccurifnot addressed. Sixtyoftheworld'slargestinsurancecompa- nieshavesignedastatementurginggoverrv ClimateChange mentsto reduce carbon emissions, asthey TheglobalconcernaboutthepotentialeffectsofCO^ andotherairemissions haveseenweather-related insuranceclaims ontheworldsclimatepatternswill increasinglyhavean impactonbusiness, climbtoS66 billion inthefirstsixyearsof especiallyhigh-energ}'consumingcompanies. Pressuretoreduceemissionswill the 1990s, from S17 billion in the entire comefromvariousstakeholdersandresultinstrongerinternationalpressureand decadeofthe1980s. agreements, governmentlegislationandvoluntaryagreements. TipsforSuccess Resource Use Step2(page12)listsmorepotentialtrends Increasedeconomicgrowthandanimprovedstandardoflivingaroundthe andissuesthatmayaffectyourbusiness. worldwillcreatemuchgreaterdemandforland,water,energv'andrawmaterials. Thesefactorswillcontributetothecontinuingdamageoftheecologicalhealth oftheplanet,asdemonstratedin issuessuchasozonedepletion;climatechange; thedegradationofrenewableresources; theacceleratingrateofspeciesloss;and theaccumulationofemissionsandwastesintheatmosphere,watersystems andland. The Benefits of Measuring and Reporting Environmental Performance Bymeasuring, reportingandcommunicatingyourcompany'senvironmental performance,youcanaddresspublicconcernsaboutyourenvironmentalper- formance; meetstakeholderdemandsforaccountabilit}';driveinternal change inyourcompanyanddevelopacompetitiveadvantagethroughenvironmental leadership.Thisguidewillassistyoutounderstandbetterhowto achievethese benefits. AddressPublicConcern Publicconcernabouttheenvironmentisheretostayandaccordingtopublic opinionresearch, anxietyisincreasingparticularlyinrelationtohealthissues. EnvironicsInternationalstudiessuggestthata'greenwave'willagainemerge. Theypredictthatin thenextfewyearswewillseeconsumersdemandthat governmentandindustn,'takefurtherenvironmentalmeasures. Inaddition, consumerswillexpresstheirdesiretospenddollarsonenvironmentally credibleproductsandser\'ices. MeetStakeholderDemand Businessisfrequendycalledupontobeaccountableforitsenvironmental performance. Stakeholders(government,thepublic,consumers, insurance companies, financialinstitutions,corporatepurchasers,andboardsofdirectors) wantmorethanwarmandfiizz}'greenplatitudes;theywanttoknowexactly howacompanyisaddressingenvironmen—talopportunitiesandconcerns;and the)'wanttoknowhowitisperforming supportedbyspecificperformance dataandtrends. Thelocalcommunityisanotherimportantstakeholdergroup.Whilesupportive oftheimportanteconomicrolethatyourbusinessplays,communitymembers alsowanttobeassuredthatyourcompanyisnotcreatinganyhealthorenvi- ronmentalproblems. "What gets measured and reported reallygets done." Drive InternalChange Itisacommon businessaxiom, that"whatgetsmeasuredgetsdone." WoodruffeAssociatesInc. WoodruffeAssociatesInc. hastaken thisonestep further,statingthat"what gets measuredand reported reallygetsdone." Bymeasuring, reportingand communicatingEPIsacompanywillensuretangibleandmeasurableresults from itsenvironmentalinitiatives. CreateCompetitiveAdvantage Somecompaniesarereluctanttobeopenwiththeirperformance.Yet, othersareeager. Afterexaminingtheenvironmentaltrendssomecompanies haveconcludedthatratherthan ignoretheenvironmental issues,theywillbe thefirstto findacompetitiveadvantagefrom implementingand marketing environmentallysuperiorproducts. Measuringandreponingtheirenvironmental performancethroughtheuseofEnvironmentalPerformanceIndicators (EPIs) isonetool todriveinternalchange,andcommunicatetheirmessage. What are Environmental Performance Indicators? EnvironmentalPerformanceIndicators (EPIs) measureand indicatesomeaspect ofenerg)'and/orenvironmental performance.An EPI isaveryimportanttool forusein reportingacompany'sperformance. Forexample,anEPI mayprovide informationon • Howefficientlyanorganizationorproductusesenergy,water, rawmaterials orotherresources • Howquicklyacompanyisreducingairorwateremissions • Whattypesofwastearebeingreduced. ThetypesofEPIsusedaroundtheworldaretremendouslyvariedanddepend onthetypeofbusiness,goalsoftheorganization,impactsontheenvironment andtheconcernsofvariousstakeholders. Iv EnvironmentalPerformanceandCompetitiveAdvantage:ABusinessGuide