PART III
CURRENT STATUS AND FUTURE DIRECTIONS



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--> 9 Observations, Trends, and Challenges Following a careful review of the information and data available from the four industry sectors, several meetings that included presentations from outside experts, and a review of recent literature, the committee set about the process of analysis. The committee first assessed the current status of industry use of environmental metrics. Next, the committee used this information to identify trends likely to encourage the future development of metrics, as well as those that are currently having little effect. Finally, the committee sought to characterize the challenges that will have to be overcome for metrics to reach their full potential as an instrument for positive change. What follows is a summary of the committee's collective rendering of observations, trends, and challenges in the area of industrial environmental performance metrics. Observations As the four industry studies demonstrate, U.S. companies have made significant progress over the past three decades in the development and application of environmental metrics. These metrics have proved instrumental in both documenting and driving progress toward environmental performance goals. As improvements in environmental performance are increasingly shaped by forces other than regulation, questions have arisen about what constitutes a goal and about the drivers associated with these goals. Experience has shown that quantitative goals are a much more effective means of encouraging improvement than more vaguely defined statements, such as can often be found in corporate mission statements. Broad policy statements

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--> provide some framework for corporate action but are often insufficient to catalyze continual and substantive improvement. Employees and managers derive greater understanding and motivation from explicit performance standards. Clear, unambiguous metrics that can be used to monitor progress are an integral part of any effort to improve environmental performance. This is not meant to imply that concerns that are difficult to quantify (e.g., ecosystem health, biodiversity, and sustainability) should be disregarded, only that continuing efforts should be made to develop quantitative assessment criteria in these areas. Observations from this study and the results of other relevant analyses (Delphi Group, 1998; KPMG, 1997; White and Zinkl, 1997) identify three general drivers for setting industrial environmental performance goals and developing associated metrics: the need to comply with regulatory mandates, the desire to achieve or strengthen competitive advantage, and the desire to improve corporate stewardship practices and reputation. Effectively managing the environmental aspects of a major manufacturing operation with respect to all three drivers requires a broad range of metrics and a commitment to acquire what can sometimes be very specialized data. Compliance The high degree of regulatory compliance achieved by U.S. industry over the past 30 years is laudable. Compliance is not only an accomplishment, it is also a prerequisite for moving toward the use of environmental performance as a tool to enhance competitiveness. All companies interested in long-term success readily acknowledge the squandering of money, time, and corporate image that results from continued violation of environmental regulations. Consequently, most organizations track their performance in areas such as accidents, spills, permit violations, and regulatory fines (KPMG, 1997; White and Zinkl, 1997). Many companies also make use of the information collected as part of government reporting requirements (e.g., related to emissions, waste generation) to assess their environmental performance. The Toxic Release Inventory (TRI), which obligates companies to report on the emission of over 700 different compounds, forms the basis of many environmental metrics used by industry. Regulatory schemes such as TRI are not without their problems but have provided a useful first step in the evolution of environmental metrics. Although some companies have recently begun to move beyond these types of measures to assess environmental performance, for most companies they are still the only metrics in use. Despite their limitations, compliance-based metrics have thus far provided the most consistent and useful industrial environmental performance information.

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--> Competitive Advantage If industry is to continue expanding the frontiers of corporate environmental stewardship, the committee believes performance improvements must be linked to the profit-maximizing role of the firm. An increasing body of evidence supports the view that improved environmental performance and superior financial performance can go hand in hand (Blumberg et al., 1996; Cohen et al., 1995; Deutsch, 1998; Hart and Ahuja, 1996; White, 1995). However, there remains considerable debate over how strong this link is (Jaffe at al., 1995; Walley and Whitehead, 1994). Although an ever-increasing number of firms claim to have enhanced their competitiveness through improvements in environmental performance, adherence to ecoefficiency principles is still far from the industry norm. Companies that have tried to improve the measurement and performance of their environmental stewardship efforts cite a number of benefits. Some of these are described below. Improved Process and Manufacturing Efficiency Making more efficient use of materials and energy can significantly lower production costs in many industries (Allenby and Richards, 1994; Australian Environmental Protection Authority, 1997; Denison and Rushton, 1997; Frosch, 1995). As the price of scarce input materials rises and the cost of hazardous and nonhazardous waste disposal increases, better process metrics allow managers to analyze the cost-benefit trade-offs of improving overall materials efficiency. Energy is another industrial input for which costs are rarely trivial. Metrics that disaggregate energy use allow organizations to identify feasible cost savings options and protect against the volatility of the energy market. Increased Market Access The committee notes that high-volume customers are increasingly using their market power to change the practices of their suppliers. Just as in the past these customers have pushed for higher levels of quality and reliability from their supply chain, some are now beginning to require environmentally friendly practices. German magazine publishers recently began to demand paper bleached by total-chlorine-free processes, while McDonalds and the U.S. government require specific levels of postconsumer recycled material in the paper products they buy. Commitment to environmental standards as a precondition to market access is becoming more common nationally and internationally. Before a firm can compete for a market, it must have access to it, a reality that may increasingly limit the potential customer base of companies whose environmental performance lags.

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--> Regulatory Advantage Whether environmental regulations evolve toward ever-stricter command-and-control approaches or shift to more market- or risk-oriented schemes, companies that measure and manage their operations in an environmentally efficient manner will enjoy a distinct advantage. However, the committee believes that decisions to improve environmental performance, whether to meet a new regulatory standard or to free up emissions credits for resale in the future, require better information than is presently maintained by most companies. Impact on Shareholder Value Analysts and shareholders both seem to agree that a discounting of corporate value is justified in the case of environmental laggards, although currently few seem willing to pay a premium for companies with a proven record of superior environmental performance (Gentry and Fernandez, 1996). The committee finds some evidence that this situation may change as metrics are devised that can reliably quantify certain financial risks (e.g., fines, cleanup, liability) incurred by conscientious organizations. Corporate Stewardship and Reputation Maintenance and enhancement of corporate image together are another area in which environmental performance plays a significant and growing role (Robinson et al., 1998). While some voluntary environmental initiatives are prompted by competitive motivations (e.g., entering new markets, improving products), the committee observes that a significant portion are driven by the desire to improve a company's reputation. Growing societal awareness of environmental issues has placed increasing pressure on business to ''do the right thing.'' In today's business environment no company wants to be seen as falling behind, especially in an area with perceived ethical implications, such as the environment. The institution of a credible environmental performance ranking system, scored according to agreed-upon metrics, will generally promote competition between comparable firms. One need look no further than TRI to see the motivation it provided firms to lower targeted emissions. The pressure to reduce emissions was particularly keen among those with large quantities of TRI emissions, despite the fact that no regulatory intervention was imminent (Magretta, 1997). Another less quantitative ranking is Fortune magazine's list of "America's Most Admired Companies" (Robinson et al., 1998). This survey rates companies based on responses from over 10,000 top executives, outside directors, and securities analysts. Companies are ranked in eight basic categories, one of which is "Corporate and Environmental Responsibility," and the eight scores are summed

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--> to provide an overall ranking. Of the 50 companies scoring highest in the environmental category in 1998, 32 ranked first overall within their respective industries, and only 2 companies ranked below the top third. Most executives sense that, while such information may not carry the same weight with stockholders or analysts as profit and loss data, corporate reputation is almost always a strong consideration in investment decisions. Superior environmental performance can also have internal benefits in terms of enhanced corporate morale. Sensitivity to the environment among the general public has grown considerably in the last generation, and employees do not check their values at the door. Employees working for corporate environmental leaders often take great pride in their organization's accomplishments and are likely to make greater efforts to ensure that those feelings continue to be justified. Organizational pride and job satisfaction can help to attract and retain highly skilled personnel in today's competitive employment market. Finally, the committee believes that more substantive environmental reporting can lead to improved relations with regulators and local communities, an advantage that may yield particular value by lowering the number of costly (in terms of both dollars and image) legal battles a company might face. Regulators continually state that they are much more likely to work toward cooperative solutions with companies that have demonstrated commitment to improving their environmental performance. Trends The current trend in industry is toward greater public disclosure of information about waste generation and pollutant release (KPMG, 1997). While these and most other industrial environmental performance measures are responses to government reporting requirements, the committee finds evidence that some companies are beginning to move beyond compliance to report metrics associated with ecoefficiency. Most such efforts to date have understandably focused on meeting internal needs, but the increasing information demands of different external stakeholder groups have begun to influence the nature and format of environmental reporting. Many metrics, particularly those related to compliance, have come to serve multiple purposes. Public stakeholders (e.g., local communities, environmental groups, regulatory agencies) use these measures as a proxy for assessing impact on public health and, to a lesser extent, on ecosystem health. Some commercial stakeholders (e.g., banks, insurers, investors) are also beginning to make use of environmental metrics. In the past these institutions and individuals were primarily interested in "negative" measures, such as those related to environmental accidents, violations, and liability. Recently, however, some stakeholders have begun to take notice of the more positive aspects of environmental performance (e.g., improved efficiency, lower risks; Deutsch, 1998).

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--> Society's growing awareness of the environment is likely to continue to drive industry toward greater levels of disclosure. As public reporting has increased, there has been some movement toward more-standardized metrics (much of this facilitated by government requirements), but lack of comparability among companies is still a barrier to progress. Industry and nongovernmental organizations (NGOs) have both led recent efforts to establish standardized metrics. These attempts have focused principally on areas of broad application such as material-and energy-use efficiency; however, no consensus has yet emerged. (See Appendixes A–C for examples of metrics used across industry, within an industry sector, and within an individual company, respectively.) The lack of accepted metrics may contribute to the lack of interest and slow diffusion of best practices among small and medium-sized companies. At present, larger corporations are much more likely to investigate, develop, and use measures of environmental performance (Ehrenfeld and Howard, 1996; KPMG Denmark, 1997). While larger companies have been at the forefront of implementing environmental metrics, in some industries the portion of the product life cycle under the direct influence of the firm contributes only a fraction of the overall environmental impact. Some companies are now beginning to think about the degree of influence they could reasonably exert over the supply chain, product use, and end-of-life disposition (Brown, 1998; Institute of Electrical and Electronics Engineers, 1997). One example is the program of product recycling and product reuse networks (somewhat akin to those in the auto sector) that some domestic electronics companies have begun to develop. (See Chapter 6.) Many of these efforts have begun to investigate final product disposition in both the United States and foreign markets (e.g., Japan, European Union), where product take-back legislation is now proliferating. The expansion of producer accountability over more of the life cycle amounts to a first step beyond ecoefficiency toward sustainability. Although industry attempts to assess the sustainability of their products and operations are still at an early stage and currently involve only a few companies, public attention to the concept is likely to spur greater efforts in the future. One of the major challenges to the development of sustainability metrics is the vastness and complexity of the topic. Recent attempts to begin addressing global climate change, for example, highlight some of the difficulties in confronting such broad issues. Society has shown growing interest in monitoring climate change, biodiversity, ecosystem health, and other indicators of sustainability, but the tools to do so are still crude. This problem is illustrated by attempts to enhance the utility of emissions data based solely on mass. Several efforts have recently been undertaken by industry, NGOs, and government (e.g., Imperial Chemical Industries' [ICI] Environmental Burden Approach, the Environmental Defense Fund's [EDF] Scorecard website, and the United States Environmental Protection Agency's [EPA] Hazard Ranking System, respectively) to rank the potential effects of environmental releases, not just tally the amount of material released.

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--> These attempts to better quantify risk represent a useful step, but a great deal of concern exists over the level of uncertainty inherent in such ranking systems. Uncertainty is a serious obstacle to moving metrics into the realm of sustainability and comprehensive assessment of ecosystem impact. Challenges Despite the potential benefits of better metrics, there are some very real challenges standing in the way of efforts to improve the measurement, interpretation, and disclosure of environmental performance information. These barriers will have to be overcome by companies committed to continual improvement. The limited availability and high cost of technology must be weighed early on when considering improved environmental metrics. Unless the technology exists to accurately and reliably quantify the desired parameter and at a reasonable cost, the acquisition of any data other than those required for compliance is unlikely. Other hurdles commonly present when implementing any new initiative, such as overcoming organizational inertia and developing corporate buy-in, will likewise need to be addressed if improved metrics are to realize their full potential. While most of these industry-specific challenges will be dealt with by individual firms or facilities, the committee has identified a number of broader obstacles to the development and widespread use of improved industrial environmental metrics. Companies and industry associations are becoming increasingly interested in and capable of contributing solutions to national environmental problems. As the private sector continues to demonstrate a greater capacity to drive environmental improvement, the government's role must shift from that of a regulator to that of a facilitator. Nonetheless, because environmental quality is a "public good," a substantial, if declining, government role will still be required to effect change in these key areas. Improving Comparability The four industry-sector studies underscore how the ability to compare performance, over time and across facilities, is key to improving the value of environmental metrics. To be useful as a management tool or as an element of public accountability, measures of environmental performance must be reliable, stable, and relevant. Unfortunately, many of the metrics in use by industry are not broadly comparable. Instead, they reflect the patchwork of disparate objectives from which they arose. For those metrics dictated by mandatory reporting requirements, the underlying definitions and protocols have created some comparability. TRI provides one useful model, in this case of a governmental reporting system. Under TRI, over 20,000 U.S. manufacturing facilities must report in standardized fashion on

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--> their generation, release, and transfer of approximately 700 potentially toxic chemicals. Unlike other federal environmental databases, TRI uses consistent definitions of pollutants and facilities. This greatly simplifies the comparison of waste generation and pollutant release data over time as well as across plants, companies, and whole industries. This is not to say that TRI is an ideal cross-industry metric. Recent studies show that TRI may be tracking only 12 percent of emissions of hazardous substances under its purview (Axelrad, 1997), with the remaining fraction released from mobile or otherwise unregulated sources. Nevertheless, TRI is one of the only cross-industry metrics available. In contrast to pollutant release data, measures of materials and energy use have not been guided by standardized reporting requirements. Instead, individual companies have developed their own metrics, usually as a element of cost control. For example, firms that purchase energy from off-site utilities can often rely on billing records to track electricity consumption. Materials-use efficiency is a metric that has proven quite useful to a number of companies for cost control, particularly those that use significant quantities of scarce or hazardous materials. Water is another resource that some companies have chosen to monitor. Attempts have been made to develop consensus on a set of core principles and procedures for reporting environmental performance information. The Coalition for Environmentally Responsible Economies, for example, is assembling a broad-based group of companies, environmental organizations, social investors, and others in a global reporting initiative (White and Zinkl, 1997). Efforts like this, which increase the comparability of environmental metrics across industries, companies, and governments, have provided some benefit, but there is no widespread acceptance of any standardization scheme. Another challenge to improving the comparability of metrics is that it is much easier to quantify an environmental burden than it is to assess the consequence of that burden. For example, a facility can tally the quantity of pollutants it releases to a water body relatively easily, but it is much more difficult to determine the impact of these pollutants on human, animal, or plant health. Equivalent burdens pose widely varying risks depending on many factors (e.g., the conditions of the receiving environment, its area, proximity to people, and the number of people exposed). The ecological impact of water discharges at the mouth of the Columbia River, for example, is quite different than the effect of the same discharges 100 miles upstream in critical salmon-spawning areas. Similarly, the health impacts of toxic air emissions in an urban area are quite different from the same releases occurring in unpopulated locations. Currently, environmental metrics do not reflect these differences. As we move toward metrics that are more closely calibrated to health and ecological impacts, it will be necessary to report releases in ways that reflect local conditions in a meaningful way. Devising data-reporting systems that are able to reflect local conditions while still maintaining a reasonable degree of comparability poses a significant challenge to standardization.

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--> Wider Dissemination of Best Practices The environmental metrics used by the four industries examined by the committee reflect some of the best in U.S. manufacturing practice. The time is right to begin extending these successes to other parts of the U.S. economy, particularly small and medium-sized firms, to broaden the use of metrics across the product life cycle, and to promote the use of metrics beyond U.S. borders. This diffusion of environmental measurement practices has several key dimensions. Over the past several years the largest manufacturers have been providing more detailed quantitative information on the environmental dimensions of their operations. As noted earlier, this trend in voluntary reporting has helped to boost the comparability of environmental metrics and win recognition for hard-earned improvements. Yet most small and many medium-sized companies have not felt the same pressures for public disclosure. As a result, their environmental metrics and goals rarely reach beyond regulatory compliance. One challenge will be to extend current best practices to the rest of industry. Another concern frequently expressed is that as the environment comes to be seen as an avenue through which to seek competitive advantage, some companies will be reluctant to release publicly the details of their environmental operations. The need to protect privileged information will have to be addressed as corporate environmental reporting becomes more transparent and widespread. The risk that proprietary information can be extracted from strictly numerical data may be quite low. Both New Jersey and Massachusetts require the reporting of materials accounting data, including the amounts of hazardous chemicals brought on-site, generated on-site, and shipped off-site as either product or waste (Dorfman and Wise, 1997). Such reporting would seem to provide ample opportunity to reverse engineer processes and products. To guard against this possibility, both states provide relatively simple procedures for companies to protect their proprietary information. Yet only about 2 percent of companies have sought such protection (Hearne, 1996; New Jersey Department of Environmental Protection, 1995) indicating that in many cases even detailed data are of limited use without the expertise to correctly interpret them. Increasing Supply Chain and Life-Cycle Coverage Supply chain relationships provide a valuable mechanism for spreading the use of environmental metrics beyond the largest firms. Through explicit requests for environmental performance information (and possibly through preferential contracting arrangements with firms that have better environmental measurement practices), some large firms and government procurement programs have encouraged suppliers to track and communicate environmental metrics. Companies with less purchasing power, of course, hold far less sway over their suppliers.

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--> As long as the use of environmental metrics is restricted to company-owned facilities, vertically integrated companies will appear less environmentally responsible than competitors who outsource components. Yet apparent differences in corporate environmental performance speak to the differing boundaries of the life-cycle analysis, not the overall environmental burden associated with the full manufacturing process. This is especially problematic in industries where upstream suppliers operate in very different regulatory environments than the manufacturer of interest. Broadening the boundaries of analysis raises a number of questions. By what methods is an organization capable of influencing behavior up and down its supply chain? To what extent can it do so? And what are the reasons for doing so? At present, organizations undertaking such efforts are generally characterized by strong executive commitment to environmental improvement. The U.S. Department of Defense (DOD) is one example. For many years DOD has maintained a sufficiently large procurement budget to allow it to impose a number of conditions on its suppliers, and some of these stipulations have related to environmental performance. Another example is the outdoor clothing company, Patagonia. Although not a manufacturer (it primarily assembles materials into finished products), Patagonia nonetheless insists that its suppliers purchase cotton raw materials only from businesses engaging in organic farming practices (Chouinard and Brown, 1997). Patagonia is an interesting case, since the company exerts considerable influence on not only its direct suppliers but also those vendors that do business with these suppliers. These examples (as well as several cited earlier) demonstrate the potential of organizations to begin leveraging their market power for environmental improvement. If such actions are to become more commonplace, however, suppliers will need much clearer definitions of what constitutes superior environmental performance. At the other end of the life cycle, there are still relatively few environmental metrics describing the use and final disposition of products. The automobile, one of the most heavily regulated products from an environmental standpoint, offers some of the most familiar examples of product-oriented metrics. Fuel economy standards, tailpipe emissions limits, and gasoline specifications all center around the environmental burden of using, not making, cars. Given recent attention to climate change, it is particularly interesting to note that automobile use produces roughly four times more greenhouse gas emissions than automobile manufacturing. Energy efficiency standards and labels on consumer items help people buy products with lower energy costs and fewer environmental impacts. The concepts of extended producer responsibility, product take-back, and ecolabeling are further examples of approaches that push environmental performance far past the point of sale. Extended producer responsibility is beginning to take on greater importance for global industries, particularly those that serve European markets. Sectors that have or may soon be impacted include the appliance, consumer electronics, and

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--> automotive industries. Considerations stemming from requirements such as product take-back add a new dimension to product design and manufacture, in both expected and unexpected ways. A semiconductor device manufacturer's environmental metrics, for instance, are not often related to the environmental issues facing downstream customers who incorporate the devices into finished electronic products. (See Chapter 6.) Producers of the finished goods, on the other hand, are experiencing significant pressures to provide for take-back of postconsumer products. The electronics industry, while still grappling with appropriate metrics, has responded with a number of new design practices. It is ironic that the quick turnover in computer technology that fuels the short lifespan of personal computers is driven by advances in semiconductors (and software), yet the burden of take-back, including reverse logistics, design for disassembly, and so on falls predominantly on the designers, developers, and assemblers of the finished products. Such inconsistencies are obstacles to the pursuit of improved metrics. Developing New Analytic Tools Metrics epitomize the purposeful distillation of data into smaller, more manageable bits of information, thereby focusing attention on key issues. The danger is that pertinent facts may be lost or obscured in the process. As more industries assemble information on environmental performance, interest in tools to guide analysis and interpretation is growing. Unlike many business metrics, measures of environmental performance are not readily translated into a single currency. Capital investments, projected revenues, labor costs, and even potential liabilities are routinely accounted for in the common language of dollars. Environmental metrics, however, are typically recorded in a hodgepodge of dissimilar units: pounds of hazardous wastes, parts per million of a chemical, number of oil spills, kilowatt-hours of electricity, and so on. The multiplicity of environmental metrics has led several companies and other stakeholders to propose weighting schemes useful for scoring across diverse dimensions of performance. (See Chapter 10 for an example of such a framework.) So far, no single approach to weighting environmental metrics has received widespread support. Instead, some firms have begun developing customized tools for internal evaluation, while several nonindustrial organizations have begun applying their own criteria to publicly disclosed information. As noted earlier (Chapter 5), ICI, the U.K.-based multinational, has developed an Environmental Burden System combining different types of pollutants to evaluate potential environmental impacts in a handful of categories (e.g., ecotoxicity, aquatic oxygen demand, acidity, and hazardous air emissions). These customized approaches may be useful for companies that endeavor to sharpen the focus of their environmental management. Unfortunately, because of

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--> the subjective (and often opaque) weightings applied, the composite indicators are not very meaningful to regulators, researchers, environmental groups, or customers. In addition to the disconnect with external stakeholders, most companies are reluctant to bear the expense of inventing a complex scoring scheme and then selling it to skeptical business units. While companies, regulators, and activists agree that focusing on the total quantity of a suite of chemicals (e.g., TRI) can be misleading, most fall back on such numbers as a readily available aggregate metric. As a result, companies that achieve large reductions in low-hazard chemicals appear to have had more success than companies that target more hazardous chemicals for reduction. Community right-to-know initiatives and low-cost access to information via electronic media are opening up new ways to analyze and communicate environmental metrics globally. The new website created by the EDF links existing information on the generation and release of TRI chemicals from roughly 17,000 U.S. manufacturing facilities with a wealth of supplemental information (Environmental Defense Fund, 1999). A geographical interface puts selected facilities on maps at a national, regional, or neighborhood scale. With the click of a button, users of the site can rank these emissions by relative carcinogenicity, a quick means of weighting emissions of widely varying hazards. Normalization is another issue that arises with virtually all environmental metrics. Take the example of a company whose production increases from one year to the next. All things being equal, the firm's environmental burden, in terms of energy and materials consumed, wastes generated, and pollutants released might rise proportionately. Which is the better metric, burdens per unit production or total burden per year? One would have held steady; the other increased. The answer is that it depends. To someone interested in ecoefficiency, the production-weighted metric is consistent with an overriding goal of less environmental impact per product. To a local community, total environmental loading may well be more important. There is no analytic solution to this basic divergence of goals. The development of tools for evaluating environmental metrics, while in an early stage, will accelerate as businesses and stakeholders seek greater value from the information they already generate. For now, those who report and those who attempt to interpret environmental metrics must take great care to distinguish qualitative differences underlying quantitative metrics. That is, they must separate what is "big" from what is "important." The links between emissions and environmental impacts are complicated by the difficulty of distinguishing individual from aggregate contributions (e.g., the effect of one more car on Los Angeles's smog problem). More profound is the fundamental difficulty tying cause to effect (e.g., higher concentrations of particulates in the air to increased incidence of lung disease). As a result, what firms measure is, at best, a proxy for what the public cares about. Further complicating

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--> matters is the considerable gap in the perceptions of environmental risk held by industry and the public (National Research Council, 1996). Addressing Emerging Environmental Issues The four industry studies in this report demonstrate that many U.S. firms are using environmental metrics as an important management tool, especially in the continuing search for cost savings. Some have gone farther, articulating ecoefficiency goals to reduce the company's "environmental footprint" while also increasing its value. Several state and federal agencies are experimenting with alternative regulatory approaches for firms that pledge to improve and demonstrate their environmental stewardship. In addition, a full spectrum of organizations, community groups, and others is analyzing the utility of existing environmental metrics. The industry studies also reveal an evolution in the use of environmental metrics as companies adopt environmental objectives in response to regulations, customer preferences, community pressures, and other forces. Since these external expectations change over time, companies must continue to update their internal metrics if they intend to meet future demands. Several emerging concerns are likely to influence the future choice and application of environmnental metrics. International attention to human effects on the global climate is a good illustration of the ways in which environmental concerns have motivated the development of goals and metrics for countries as well as companies. At present, no national legislation exists, and there is no consensus on how the 1997 Kyoto Protocol on climate change will affect U.S. industry. Nonetheless, each of the four industrial sectors has begun to estimate its emissions of greenhouse gases. For many manufacturing sectors, such as chemicals, this is primarily a question of energy use and CO2 releases. The automobile and electronics industries share these concerns but focus even more on the effects of core products whose resource consumption during their use is greater than during their manufacture. The forest products industry, with relatively less dependence on fossil fuels but a much greater interest in the management of natural resources, will be influenced in even more complex and subtle ways. The forestry management side of the industry has begun work on metrics that quantify the moderating effect (i.e., carbon sequestration) of forest management on global climate change. Other environmental issues on the radar screen of U.S. industry are likely to pose different types of measurement challenges. Concerns about the effects of chemicals on human health and development could significantly change the importance of whole classes of chemicals (e.g., endocrine disrupters) and modes of exposure. Efforts to gauge impacts on ecosystem health resulting from habitat changes, land management practices, changes in biodiversity, and other factors make the quantification of emissions to air and water look simple by comparison.

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--> Even more challenging questions lay ahead as the public's demand for environmental protection broadens to encompass the economic and social dimensions of sustainable development. One example of this trend is the effort to assess traditional measures of pollution according to the race and economic status of those affected (a topic labeled ''environmental justice''). Sustainability also has important implications for how industry views environmental metrics. Through the lens of sustainability, simply causing less environmental harm is not good enough. Goals are instead defined in environmental, economic, and social terms. Clearly, these concerns cannot be addressed solely with the environmental information at hand or by corporations alone. As with many emerging issues, sustainability creates new challenges for which existing environmental metrics fall short. Just as the shift from pollution control to ecoefficiency is forcing new definitions and measures of environmental performance, greater interest in climate change, ecosystem health, and sustainability are leading companies and their stakeholders to search for new yardsticks to track progress. Beyond Manufacturing As we gain a better understanding of the environmental performance of industry, attention is turning to other contributors to environmental load. The committee notes that public-sector enterprises such as federal laboratories and defense facilities, while contributing significantly to environmental burdens, are only now beginning to come under the same sort of scrutiny that industry has become accustomed to. One example of this environmental double standard is the legacy of contamination present at some U.S. Department of Energy laboratories and military bases. The activities of large municipalities also have broad environmental implications. For cities and towns that operate major wastewater facilities, manage large vehicle fleets, and care for important public lands, environmental metrics will be as critical to their effective management as they are to corporations. In short, environmental metrics will be needed to meet increasing expectations for environmental quality across the entire spectrum of public and private institutions in the United States and internationally. Finally, it should be pointed out that within industry environmental metrics are beginning to expand beyond the manufacturing sector. While outside the scope of this study, the activities of the service sector, including such disparate industries as retail sales, distribution services, airlines, energy services, and health care, have environmental implications that are just now being recognized (Graedel, 1997; Rejeski, 1997). Because the environmental impacts of service-sector firms result from activities dispersed across many locations, these companies generally escape the level of public or regulatory scrutiny that a major power plant or factory might receive. These impacts arise primarily through the logistics of deliveries to and from suppliers rather than from on-site activities. Ironically, such businesses often have tremendous opportunities to leverage environmental

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--> improvements through their purchasing power and direct link to customers. Nonetheless, it can be difficult to quantify either the environmental impacts of the operations of these companies or the potential to improve their environmental performance, largely because of the absence of useful environmental metrics. Looking Ahead Progress in devising and using industrial environmental performance metrics continues to be made. Many companies are in the process of experimenting with and developing new metrics. As these efforts proceed, near-term challenges will include improving the comparability and dissemination of best practices and developing methods for increasing the utility of current measures with techniques such as normalization and weighting. (See Chapter 10.) In the longer term, society's increasing interest in improving the environmental sustainability of human activities will require closer study of a host of poorly understood concepts and interactions. (See Chapter 11.) Better methods for reducing the impact of industrial activities on the environment will require better measures by which to gauge performance. Developing metrics that industry can use to improve its environmental performance will be a critical step in society's drive toward more sustainable practices. References Allenby, B.R., and D.J. Richards. 1994. The Greening of Industrial Ecosystems. Washington, D.C.: National Academy Press. Australian Environmental Protection Authority (AEPA). 1997. Cleaner Production Case Studies. Publication 536. Melbourne, Victoria: AEPA. Axelrad, D. 1997. How can TRI be used to provide environmental impact and health assessments? Paper presented at the Toxics Release Inventory and Right-to-Know Conference, September 8–10, Washington, D.C. Washington, D.C.: United States Environmental Protection Agency, Office of Policy, Planning, and Evaluation. Blumberg, J., A. Korsvold, and G. Blum. 1996. Environmental Performance and Shareholder Value. Conches-Geneva, Switzerland: World Business Council for Sustainable Development. Brown, M. 1998. Working with suppliers to improve environmental performance. Paper presented at National Academy of Engineering International Conference on Industrial Environmental Performance Metrics, November 1–4, 1998, Irvine, Calif. Chouinard, Y., and M.S. Brown. 1997. Going organic: Converting Patagonia's cotton product line. Journal of Industrial Ecology 1(1): 117–129. Cohen, M., S. Fenn, and J. Naimon. 1995. Environmental and Financial Performance: Are They Related? Nashville, Tenn.: Investor Responsibility Research Center. Delphi Group. 1998. A Business Guide: Environmental Performance and Competitive Advantage. Ontario: Queen's Printer for Ontario. Denison, R., and J. Ruston. 1997. Recycling is not garbage. Technology Review 100(5):55–60. Deutsch, C.H. 1998. Increasing evidence that green begets green. New York Times, July 19, Business Section, p. 7. Dorfman, M.H., and M. Wise. 1997. Tracking Toxic Chemicals: The Value of Materials Accounting Data. New York: INFORM.

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