Can an Energy Company Achieve Sustainability Objectives?

The stereotyped view of large energy companies includes nothing about sustainability, corporate social responsibility, or concern for the environment. But actually, when you do business with as many energy companies as we do, the stereotype quickly disappears. Many of these companies have led the charge to deploy EH&S information management platforms like ours. And what we sell is a product that helps companies achieve operational excellence.

Operational excellence is a goal well beyond mere compliance. It’s proactive, where compliance is merely reactive.

While on the road in Asia and Australia this month, I’ve read a unique document: Chevron’s Operational Excellence Manual. Yes, Chevron has at least one manual for its Operational Excellence Management System (OEMS). This system is shared with employees to set the company culture. Chevron’s operations are spread across the globe, and the OEMS allows the company to identify and close performance gaps quickly.

In the words of Chevron’s CEO, operational excellence is not something separate from its business. It is the way they run their business to provide value to the shareholders. To me, this view is the wave of the future, as you know from previous posts here.

Chevron has developed an entire systems approach to operational excellence, which they try to integrate into their daily operations to protect people and the environment today and in the future.

The system begins with operational excellence objectives:

• Achieve an injury-free work place.
• Eliminate spills and environmental incidents.
• Identify and mitigate key environmental risks.
• Promote a healthy workplace and mitigate significant health risks.
• Operate incident-free with industry-leading asset reliability.
• Maximize the efficient use of resources and assets.

Chevron’s vision is “to be recognized and admired by industry and the communities in which we operate as world-class in safety, health, environment, reliability and efficiency.”

To achieve this, Chevron counts on its leadership to set the pace. And here’s what the company says a leader can do to build a culture of operational excellence.

1. Engage in dialogue with members of the workforce (employees and contractors); inquire about their work and working conditions. Understand and recognize the value of each individual’s contribution to incident-free operations.
2. Positively reinforce safe behaviors on the spot. Act immediately to mitigate unsafe or environmentally unsound conditions. Share personal examples of safety learnings and observations from both on and off-the-job.
3. Never ignore a suggestion to improve operations.
4. Devote required resources, including your time, to operational excellence. Know your OE network representatives and participate in OE network activities.
5. Sponsor and participate in critical OE processes; make safety observations, participate in a Job Safety Analysis (JSA) or an incident investigation to determine root causes.
6. Set clear, specific, measurable objectives for operational excellence. Communicate frequently with all members of the workforce on the objectives, measures, plans and progress. Regularly recognize progress on indicators and achievement of results.
7. Role model Tenets of Operation by always following tenets, holding others accountable for following tenets and recognizing those that do.
8. Conduct field visits, ask questions about safety, environmental and reliability conditions and provide immediate pin-pointed feedback (both positive and constructive).
9. Hold yourself and others accountable for operational excellence performance. Include OE performance in ranking, salary and job selections.
10. Set high, specific standards for continuous improvement of critical OE processes. Share lessons learned and seek out and adopt processes that could improve performance.

There is much to admire in Chevron’s commitment. Expect to hear more about this from me in the future.

Add comment April 26th, 2007

Rasmussen Relates Corporate Social Responsibility to GRC

Michael Rasmussen is an analyst I follow, because he seems to have the most similar view on GRC to my own. I especially like the following letter in which he relates corporate social responsibility to GRC and how the merging of all these corporate initiatives produces fear of change. At ESS, we like to embrace change, although we, too, know how difficult it can be for our growing company.

“The acronym GRC (governance, risk, and compliance) is causing quite a stir…. organizations are changing the way they focus on and manage governance, risk, and compliance. This is causing insecurity in some and ambition in others. Risk managers and compliance officers are both in a state of confusion - do we embrace GRC and lead this charge for our organization? Or do we fight against this change?

I have been on three continents already this year and have had numerous conversations spanning vertical industries - the truth is organizations are strongly evaluating the silos of risk and compliance management of the past and looking at what they need for the future. There is discussion as well as debate on what the individual terms ‘governance,’ ‘risk,’ and ‘compliance’ mean as well as what they mean together as ‘GRC.’ Further, many are considering the role of corporate social responsibility and how it aligns with GRC.

The corporate secretary is the aggregation point for a holistic view of GRC. It is the Corporate Secretary’s role to consolidate corporate performance, compliance, and risk information that gets communicated to the board and goes into the financial statements and reports. Consider the fact that this past year, Corporate Secretary magazine added the tagline “The Governance, Risk and Compliance Monthly.”

Risk management. Risk management has been buried in discrete silos often focused on financial and treasury risk, or was a function looking at project risk. Now many organizations, across industries, are trying to define and understand what Enterprise Risk Management (ERM) is all about. Rating agencies, like Standards and Poor, are using ERM as a factor in rating corporations. When companies begin to explore ERM, they quickly see that it is expansive and includes the world of operational risk as well as legal, regulatory, and compliance risk - thus converging the world on GRC.

Compliance management. Compliance has often been managed across many silos focused on different issues. HR might be focused on employment/labor compliance issues, such as harassment and discrimination, manufacturing might focus on product quality and safety compliance, while legal is focused on things like ethics and U.S. Sentencing Commission Organizational Sentencing Practices. The trend is for organizations to establish a Chief Compliance Officer, but often this role is quickly getting involved in risk management. The move toward principle-based regulation is further converging the worlds of risk and compliance. Several organizations I have visited this past three months have recently moved compliance under ERM - either reporting parallel to operational risk or as a function of operational risk itself.

Internal audit. Audit is one of the most challenging roles to define around GRC. A purist/idealist perspective states that audit has an important role, but it is one of risk and control review - to validate that the organization is managed according to its regulatory requirements and corporate policies. Audit does not have a role in day-to-day management of risk and compliance.

Information technology. The IT department is getting heavily involved in GRC in two areas. There are parts of risk and compliance that affect IT directly - where IT has to manage its own risk and implement controls within the IT environment, and where IT can be used to drive sustainability, consistency, efficiency, and transparency across business GRC functions that are not focused on IT risk and control.

Security. Within both corporate/physical security as well as IT, there are increased regulations as well as risk to the organization that are driving this function to be part of the discussion on enterprise GRC strategies.

The list does not stop there - you have others such as investigations, fraud, legal, lines of business and reputation issues that involve public relations and marketing, as well as the increasing awareness of corporate social responsibility.

However, many risk and compliance professionals feel threatened by this change and are entrenched at seeing that their job does not change. My perspective - change is afoot. Individuals involved in risk and compliance can step forward and be the leaders of this initiative in their organization or they can sit back and let another role lead it, and they will have to fall in line.”

Add comment April 25th, 2007

Sustainability to Spark Future Business Growth

I thought I might have been writing a little too much about greenhouse gases and global warming because they are always very much on my mind, but then I read Tom Friedman’s piece in last Sunday’s New York Times called The Power of Being Green. In it, Friedman talks about how hard China is trying to become green, and how much of a geopolitical advantage can be gained by dedicating ourselves to a sustainable culture here in America. I bet this is Friedman’s next book, since there is already a Discovery Channel documentary by him on the same subject premiering this tomorrow night, April 21.

One of the things he talks most about in the article is how “green,” which has often been associated with tree-hugging, can be renamed. He says, “I want to rename it geostrategic, geoeconomic, capitalistic and patriotic. I want to do that because I think that living, working, designing, manufacturing and projecting America in a green way can be the basis of a new unifying political movement for the 21st century. A redefined, broader and more muscular green ideology is not meant to trump the traditional Republican and Democratic agendas but rather to bridge them when it comes to addressing the three major issues facing every American today: jobs, temperature and terrorism.”

In the body of this fairly deep article, Friedman talks about how the enterprise has already begun to monitor its carbon footprint and produce changes. This is one of the things of which I’m most proud: we first introduced the tools to do this in 1993, and have been tuning, expanding, and perfecting them ever since, to the point where we have a unified suite of products that can help any company, big or small, control its carbon footprint.

Friedman sees the “green” initiative not only as a business imperative, but as a way to combat terrorism throughout the world. He sees it as something we, around the world, owe our children and grandchildren.

Take a minute to read this fine article and tell me what you think.

Add comment April 23rd, 2007

Chevron’s Change Management Efforts Enhanced with IT Systems

There’s a great videocast floating around the Internet, courtesy of HP, by Chevron CTO Don Paul. He is the corporate officer responsible for Chevron’s three technology companies: Energy Technology, Information Technology and Technology Ventures. In this role, he coordinates their work to accelerate the development and integrated application of technology throughout the company’s worldwide business activities.

Paul’s podcast is about how companies the size of Chevron manage change. The energy industry is so big, and incorporates almost every part of business – from geology to accounting.—that Chevron must take a long view, and develop people.

Paul says as CTO of Chevron, that he is the ultimate integrator.

“The rate of growth of data is astronomical, and will grow faster as people deploy more sensors. For Chevron, it is now practical to add millions of sensors at a plant to collect data and put it into the system. Businesses evolve. We now use acoustic images to find drilling locations. It’s like CAT scans of the earth.”

So the issue becomes one of data management: what does Chevron do with the data it collects?

Paul believes that to get ready for the world of the future, we have to fix the data management paradigm, because the current system will fail under these pressures.

Paul believes we have to have standards, which make it possible to take on one of the key challenges for any organization dependent on digital data, which is data security or management. For Chevron, the future will be a hybrid of centralized management and distributed management.

We need to be able to evolve a system that will take advantage of the scale we have to make things efficient,” Paul says. At Chevron, he uses technology to take on challenges that could become opportunities or limitations. He believes that for his company, the challenges will be opportunities.

We understand and agree with Paul’s comments about the increasing complexity of data management and the need to manage data more efficiently. This is the main reason we decided to integrate our enterprise software into a single common database in 2001. Like Microsoft Office, this plug and play model allows for the highest efficiency and flexibility.

With the ability to address one EHS issue such as air emissions now, other issues like water, waste, or chemical management can be added later with out-of-the-box data integration. This provides high data integrity and a “single version of the truth” for all environmental data within an organization. It also gives the lowest cost of operation, because it eliminates the ongoing support required with multiple integration points.

One of our challenges at ESS is to continually evaluate how our software tools are managing the data and ensuring that we continually find ways to make the process more efficient for our customers.

Add comment April 5th, 2007

Supreme Court Decision Affirms EPA’s Responsibility to Regulate Carbon Dioxide

The Supreme Court’s 5-4 decision that the matter of regulating carbon dioxide emissions does fall to the Environmental Protection Agency under the Clean Air Act is an example of how the issue of global warming has gone beyond political parties. According to an article in the Times, the Court, composed largely of conservative justices, was still able to produce a majority in favor of the science behind global warming and the need to do something about it. So it decided in favor of the states that wish greenhouse gasses to be regulated under the Act.

The EPA argued that it does not consider carbon dioxide and other heat-trapping gasses pollutants, and thus doesn’t include them among the chemicals it regulates under the Clean Air Act. The Agency also feels that most greenhouse gas emissions are due to automobiles, and don’t make enough of a contribution to global warming to require regulation.

Chief Justice John G. Roberts Jr., along with Justices Antonin Scalia and Samuel A. Alito Jr., expressed doubts that the group of states suing the EPA to be allowed to regulate greenhouse gas emissions could show that global climate change presented a sufficiently tangible and imminent danger that could be addressed best by regulating emissions from new cars and trucks.

Add comment April 5th, 2007