Chemical Industry Implements News Standards to Assure Sustainability

For companies that use chemicals as part of their operational processes and are interested in practicing product stewardship, chances are those organizations will measure their performance against standards that have been established by the American Chemistry Council (ACA).

Responsible Care® is a chemical industry performance initiative that is implemented in the United States through the ACA. U.S. companies that have implemented the Responsible Care protocol have reduced environmental releases by 78 percent, achieved an employee safety record that is significantly better than the U.S. manufacturing sector, generated improvements in reportable distribution accidents involving transportation of chemicals and reduced process safety incidents. Responsible Care is also a global initiative that is currently practiced in 52 countries.

Responsible Care helps America’s leading chemical companies go above and beyond government requirements for Environmental, Health and Safety (EHS) risk management by implementing world-class management systems, verified through independent auditors; tracking performance through established EHS and Crisis Management measures; and extending these best practices to business partners through supply chain and vendor relations management.

For example, railroads are an integral part of the supply chain for chemical companies because they transport many of the chemicals used in manufacturing processes. So it’s significant that Burlington Northern Santa Fe Railway Co. recently earned certification to implement the ACC’s Responsible Care continuous-improvement process for transporting chemicals. As a result, the company has implemented policies to enhance its processes for safe transporting of products, preventing in-transit spills and providing timely notification to local communities under right-to-know provisions.

It’s another outstanding example of industry taking the lead to assure a sustainable environment for everyone.

Add comment February 8th, 2008

Manufacturers Making Changes for REACH Compliance

In June 2007, the Registration, Evaluation, and Authorization of Chemicals (REACH) directive, the European Union’s (EU) environmental testing law, went into effect.

REACH will change entire product lines and pricing scenarios. It will also change how companies monitor the chemicals they use at their facilities and in their supply chains. Most directly, chemical companies must now inform customers whether or not certain downstream uses should be approved or not. This places adjacent industries such as automotive, high-tech and consumer products—all of which rely on products from the chemicals industry to manufacture their products—at risk under REACH.

ESS has been tracking this initiative over the past couple of years. Our solutions enable our customers to address REACH requirements as a normal course of business.

According to an AMR Research report called “The Hidden Backbone of U.S. Manufacturing,” in the United States alone, “55 percent of the companies
surveyed indicated direct dependence on the chemicals industry for inputs to their products. Within the food, medicine and other process industries, the percentage is even higher; nearly 75 percent of firms in the process industries have a direct dependency on chemicals as manufacturing inputs. Now imagine the impact on a company’s productivity if a critical supplier discontinues a certain product. Not only must alternate supply routes be identified, but ongoing product innovation and the ability to fulfill customer demand are also put at risk.”

The AMR study indicated that 90 percent of U.S. manufacturers said replacing their current chemical supplies with alternative materials would be either too expensive or technically infeasible.

As a result, the report says, REACH will have far-reaching consequences for manufacturers, which must now account for the directive’s mandates if they want to do business in affected European markets.

Add comment February 6th, 2008

More Companies Responding to Demands for Transparency of Risk Reporting

Unless you are involved in corporate governance, you probably aren’t aware that there is an organization called The Corporate Library, that provides reports that assess corporate governance reporting on behalf of investors and insurance companies. The Corporate Library is a repository of reports and information such as corporate policies, SEC filings, and executive compensation. This information, available for purchase, provides corporate reporting and evaluates whether a company’s documentation offers sufficient detail to prevent shareholder lawsuits and satisfy investors’ and insurers’ requirements for transparency. In addition to selling information to the financial community, the Library also provides reports to the enterprises themselves to help them benchmark their performance against other companies.

In a recent report, The Corporate Library found that some well-known companies are not reporting enough detail about their CO2 emissions and the costs involved in cleaning up those operations. Toy company Hasbro (HAS); fiber-optic maker Corning (GLW, Fortune 500); railroad company Burlington Northern Santa Fe (BNI, Fortune 500), Royal Caribbean (RCL) cruise line; and lawn and garden company Scotts (SMG) all scored below average in the report. Meanwhile most utilities and other companies that are known for emitting significant amounts of carbon dioxide have long detailed their emissions and potential costs in financial filings. Those organizations scored much better.

Companies that expect to maintain industry leadership in a market environment that demands more transparency need to invest in monitoring and reporting platforms that will help them satisfy these new investor requirements for reporting risk management data. The Corporate Library sells a product called the “Board Analyst,” that analyzes whether a company’s governing board is proactive and effective in demanding transparency from executives. If I were a corporate board member in these times, I’d be asking my company’s executives to invest in integrated monitoring platforms that can efficiently collect and report this data to improve their transparency rating.

Add comment January 14th, 2008

Russians Call for Stronger Regulation of Ships After Major Oil Spill

Although Russia will likely become wealthy over the long-term because of its oil reserves, the Russian government is going to slow that process to make sure no more oil spills happen like the one that caused $267 million in damages to the Kerch Strait earlier this month. A major oil spill in the Baltic Sea polluted a 30-mile stretch of water, killing birds and fish.

As a result, Russian officials will limit oil products shipped by river in 2008 by disallowing barges that are more than 25 years old. Because Russia has an industrial economy dating back to the Soviet Union, much of the oil industry’s equipment is aging.
“The fleet must be young. We will subject ship owners to such conditions that it will become unprofitable to use barges older than 25 years,” Alexander Davidenko, head of RosRechMorFlot, the river navigation agency, told Reuters.

According to oil industry spokespersons, this move will cut shipments by 70-80 percent below the customary 5-million ton level. The oil industry is not happy, suggesting that the government may be overreacting to the spill by over regulating the industry without doing sufficient research. They believe that there may be other ways to deal with the fallout without requiring major investment in new equipment.

Many of the oil companies we deal with have already put in place an integrated EHS software platform that enables managers to monitor and report such spills and correct problems with equipment before those problems erupt into crises.

Even though major oil spills are rare, organizations still need to be prepared to provide rapid and robust emergency response in order to minimize the potential ecological impact from these kinds of incidents. There’s plenty of motivation to do so, as investors are always closely examining companies’ ability to prevent or mitigate operational risks. Having a proactive crisis response plan, supported by a crisis management technology, can go a long way to protect the interests of the company and the community.

There are also rumors of a coming ban on floating storage facilities. When Russian rivers freeze in the winter, oil is stored in floating facilities until the spring thaw when it can be transported again. These facilities, if they are monitored correctly with crisis management reporting systems that support measures to prevent spills, could have their useful life extended without endangering rivers and seas.

If oil company barges would use the right kind of reporting and monitoring systems, it would be good news to the developed world, because we need the oil and the Russians need to sell it.

Add comment November 26th, 2007

ESS Crisis™ Enables Teams to Streamline Response at Major Terrorism Exercise

Several months before OPERATION TOPOFF 4, an incredibly complex terrorism preparedness exercise, the Tempe, Arizona Fire Department selected the on-demand version of ESS Crisis™ to manage its daily planning and emergency event mitigation at the city’s emergency operations center. Tempe Fire Department was an important customer win for us, not only because our own headquarters is located in Tempe, but because it gave us a chance to try out our SaaS product in a very important context.

TOPOFF 4, which took place October 15-24 at several venues in Arizona and Oregon, was designed to strengthen the nation’s capacity to prevent, protect against, respond to and recover from terrorist attacks involving weapons of mass destruction (WMD). The exercise provided an opportunity for local, state and federal agencies to coordinate emergency preparedness efforts among 10,000 participants, including officials from Arizona and Oregon; overseas support from the United Kingdom, Canada, Australia and Guam; and with the full-scale tests of collective preparedness and interoperability.

During last month’s exercise, imaginary radiological incidents occurred in Tempe/Phoenix, Portland and Guam. Local officials were tasked with coordinating and executing proper responses to the incidents using effective communication and coordination among various levels of government agencies and private responders. Federal, state and municipal agencies had to work together in this test. Once the exercise was complete, the Department of Homeland Security evaluated the Tempe responder team’s performance and gave them a report card in an effort to improve the City’s preparedness and incident management.

A growing number of local first responders like those in Tempe and Gilbert, another Phoenix-area suburb, have automated their pre-event preparedness and onsite coordination. Exercises like TOPOFF 4 are a powerful reminder that interagency coordination and system interoperability will be key factors to ensure that future terrorism response efforts are to be successful. Departments both large and small will need automated tools like Crisis to ensure they will be ready when a major incident occurs. In a real crisis, it could turn out to be a lifesaver.

Add comment November 15th, 2007

Think Tank Report Provides Best Practices for Business GHG Strategy

Last year, the Pew Center on Global Climate Change released a very interesting report called “Getting Ahead of the Curve: Corporate Strategies That Address Climate Change,” which shows how large corporations are getting ahead of the regulatory curve and developing their own strategies to deal with climate change.

About a year old now, the report shows just how far ahead some of these companies have been in calculating their response to GHG emissions and shifting from reactive to proactive. When you realize that this study was released before Al Gore won the Oscar, the Emmy or the Nobel Peace Prize, you have to understand that what I’ve been trying to say about innovation in the enterprise dated from long before Gore’s film, An Inconvenient Truth bludgeoned unwary consumers with melting polar ice caps.

Of course the large multinationals were aware of the conditions before the average guy: they operate globally in the forests, rivers, skies and oceans, and they see the effects of climate change firsthand. And far from being cold and uncaring, large corporations with strategic plans know that if they don’t do something, their businesses will not be sustainable.

So they have sought to get out ahead of public policy, not for their financial gain, but for their very survival.

The report describes eight steps to a climate strategy: assessing emissions and exposure
to climate-related risks, gauging risks and opportunities, evaluating action options, setting goals and targets, developing financial mechanisms, engaging the organization, formulating policy strategy and managing external relationships. These steps are not always taken in the same order.

There are four main lessons from this study. The first is the importance of strategic timing. Though some companies thought they started too early, most feel they can’t afford to start too late. The second, related lesson is developing an appropriate level of commitment. Committing too fast to a strategy might position a company poorly if the regulatory environment develops in a different direction. As an enterprise, you have to do the things YOU think are right, and still have resources remaining to do what the government may require.

The last two conclusions are obvious. They are to become involved in policy formation and try to exert some influence over it, since the marketplace knows where the biggest risks are – it’s our job to keep our businesses alive by assessing risk correctly. And then to create business opportunities from these risks and policies; I talked about the last time.

Add comment November 2nd, 2007

Service-Oriented Architecture Goes Corporate Mainstream

Web 2.0 (user-generated content) has come to the enterprise in a big way. Far from merely looking the other way while employees spend time on Facebook, Web 2.0 for the enterprise means companies are creating internal social networks for employees, customers, and vendors and customers are taking a larger and larger role in product development.

The buzzword for all this is SOA (service-oriented architecture), which actually has little to do with software design, and everything to do with listening to the customer and involving customers in how applications are developed.

For now, the ideal application architecture is SOA. All corporate application developers want Web 2.0 and business process management (BPM), along with SOA in order to satisfy the short-term and long-term needs of their clients.

Thus, it’s critical to understand that SOA is a term of art that applies not only to software development, but to customer relations as well. It involves making the entire enterprise aware of the customer at every moment.

ESS has a long history of asking its customers to participate in the design of its products. In the early days of the company, we actually sent our customers faxes on a weekly basis, asking for their input! We then moved our efforts to the quickly-emerging Internet. So it isn’t surprising that we are now a leader in rolling out SOA and creating a platform that takes advantage of the insights and needs of our customers.

We are implementing SOA now and are on a five-year plan to continue rolling it out in the technology development of our software. SOA enables us to take information from our customers about emerging issues and problems in their businesses and produce the right solution. This is our strategy to maintain industry leadership and our commitment to enable our customers to solve their real world GRC and EHS problems.

1 comment October 25th, 2007

Key Elements of Change Management: Standardize, Centralize, Simplify

I just read an interview featuring Bob Otto, the retiring CIO and CTO of the U.S. Postal Service in CIO Insight, and it excited me because I just know he is right on the money. If you want people to accept new technology it must be standardized, centralized and simplified.

After a discussion of the pace of change in technology during Otto’s tenure, interviewer Brian Watson asks him how he gets his people to accept change:

“I have three guiding principles—principles I’ve used since I was young. First, standardize everything. If you find a process you like, standardize it. Second, centralize everything you can. If you have services in five different places and you can centralize them, you will have reliability, predictability. Third, simplify. The computer has taken over your life, so I want it to be intuitive [for people to operate and manage]. I also test my own dog food. Everything we build has to pass the “Bob” factor. I put myself in the place of the lowest common denominator, of someone who might not have a high school degree. I look at how people could be intimidated by technology, and I don’t want them to have a hard time.”

I like the part about testing his own dog food; I’ve always tried to do that as well. Those are the same guidelines we use when we develop our enterprise software. We are aiming for a centralized information repository that enables our customers to look at a global enterprise from one dashboard.

Meanwhile other organizations are learning to standardize, centralize simplify when managing change based on new technology. Last year, ESS went into a Fortune 500 company and replaced 67 separate applications that were being used to monitor environmental health and safety, crisis management, waste and emissions. Replacing all those disparate applications with our integrated GRC platform, thereby standardizing and centralizing the operation, saved the company $1.5 million in support costs, upgrade costs and other direct costs associated with deploying those applications.

In addition, the company was able to redeploy 200 people who had previously been engaged merely in supporting those applications.

It goes without saying that the company was thrilled, but as I was driving home from the office yesterday it occurred to me that we had also minimized their risk.

How? It’s simple. All those applications prevent a company from having a holistic view of its business risk. Every silo of data is viewed separately, without the strategic overall perspective the company really needs.

What’s more, every separate application actually increases the risk involved in data integrity. When all that data is imported into a tool that does give an overall view, how do C-level managers know whether the data has become corrupt on its journey through the applications to the dashboard?

So I’ve come to the conclusion that our unified platform is itself a risk manager — preventing the corruption of data by giving the enterprise a way to look at all its data through the same lens.

So standardize, centralize and simplify works.

Although I am technical, much of our software is deployed at the plant level by people who do not have time to struggle with new technology and would rather ignore change if it doesn’t simplify their lives. They are busy. Ease-of-use is a must. What good is an all-in-one dashboard if the relevant information can’t be accessed by the guy in the plant as well?

2 comments October 8th, 2007

Savvy CEOs Respond Quickly to Corporate Crises

Lately the headlines seem to be full of corporate crises. Mattel and Graco have been forced to recall products, pharmaceuticals have been withdrawn from the market. CEOs seem to be constantly apologizing to customers for potential product liability issues. Or even for untimely price cuts, as Steve Jobs did when angry customers protested on the Internet about price cuts on the iPhone.

Some of these crises could have been averted, but most could not. However, they can all be monitored and responded to in a timely fashion that lowers the risk for the company and preserves its image with stakeholders.

Notice how fast CEOs have to respond these days. Years ago, when Johnson & Johnson found that some bottles of its product Tylenol had been tampered with, the company made its crisis a case study through the swiftness of its response. The company responded within days, recalling the product and getting out information to its customers.

But that was before the widespread emergence of online communities. Companies no longer have days to respond to a health and safety crisis, whether inside their own companies or externally for their products. A crisis plan must be in place. It must allow for immediate response, and it must respond within the new parameters of sustainability and stewardship.

For this reason, it’s a good idea to have integrated software systems with the ability to monitor, predict, and communicate potential problems. In our own company, we are working hard to make our products more predictive, proactive, and analytic rather than merely responsive.

It’s imperative that we control risk as best we can, and when we can’t, we must have the quickest, most effective response.

Add comment September 28th, 2007

Industry Should Lead, Not Follow Regulations

There were three mine disasters in 2006 before the latest disaster at the Crandall mine in Utah. At the Crandall mine, a seismic event equivalent to a 3.9 magnitude earthquake trapped six miners. Days later, during the rescue effort, another collapse killed three rescuers, including a member of the Mine Safety and Health Administration. Weeks later, the company is still boring holes into the mine, trying to recover the bodies.

This has led the governor of Utah to investigate whether state mine safety regulations need to be tightened because federal regulations aren’t stringent enough. More significantly, OMB Watch has said “The Aug. 13 issue of Mine Safety and Health News reported that Dr. R. Larry Grayson, who heads the Pennsylvania State University mining and engineering program, agreed
…the mining company may have been following the MSHA-approved mining plan, but that does not mean that it was safe.”

This is a worrisome trend. Professors are second-guessing regulators, who are second-guessing the people in the industry itself.

What is really needed here is some thought about good incident management systems and real-time emergency response systems in the mining industry overall. There is actually a global need for stronger health and safety protection for the mining industry, including these incidents as well as the ones in China. Would a better emergency response or incident management
system have helped the rescue workers respond more efficiently? I think so. Good systems can be proactive, rather than reactive, even in situations that can’t be predicted, like seismic shifts.

OMB Watch goes on to point out that perhaps it is wrong to allow industry to comply voluntarily with regulations. A promotional email I got from them this morning said “Two recent stories exhibit the problems associated with
voluntary industry compliance with federal rules. In New York, Governor Elliot Spitzer is using state law to enforce a mandatory recall of children’s toys contaminated by lead paint. Spitzer cites the federal government’s weak voluntary recall system as reason for pursuing action at the state level.”

The writer goes on to discuss the use of “compliance assistance” in the Occupational Safety and Health Administration and the Mine Safety and Health Administration in the Crandall disaster.

What is the takeaway from this? Industry should lead, not follow, the regulations. I don’t know one client of ours (or non-client for that matter), who would like to experience a disaster like Crandall if it could be anticipated. That’s what GRC initiatives are designed to address.

Add comment August 30th, 2007