How effective chemical management enhances shareholder value
Improving shareholder value, growth and financial performance are prominent objectives of most publicly held companies. Yet, few executives recognize how environmental risks and threats affect business objectives, as well as create or erode value. Many market analysts consider these factors in evaluating the risk potential of companies and industry segments, and this information, in turn, is used in some cases by individual investors, institutions, and portfolio managers to shape investment decisions.
Financial performance is also affected when a company’s environmental costs are substantial and eat into profits. A major oil company found at are finery, for example, that nearly 22% of the site’s operating costs are due to environmental expenditures; overall costs for at least two other oil companies exceeded $1 Billion. One consumer and industrial products manufacturer discovered that its environmental costs, though substantially lower, exceeded the profit margin for some products. While some companies have been highly successful in reducing environmental costs, few have done so in a highly systematic way that addresses all aspects of operations, products, and services.
The Response of Industry to Chemical Management
Future growth clearly depends on maintaining a “clean and green” reputation, particularly in countries where public interest groups have used environmental incidents to rally public support against industrial expansion. Many companies are using chemical management to help increase the integration of environmental issues into strategic planning, by developing solutions that address business, technological, financial, human and environmental priorities in an integrated way. This approach helps minimizes business risks and maximizes return on investment. Customer and other stakeholder concerns can be integrated into the design of products, processes and services, thus helping to minimize cycle-time delays and costs.
Using Chemical Management to Improve Internal Performance
Companies can combine chemical management implementation with redesign or reengineering of their environmental, health and safety departments, and thus are often able to benefit from more efficient processes and systems. Compliance costs, for example, can be reduced through innovative use of technologies for both information management as well as documentation. Communications can also be facilitated through company “intranet” connections that provide access to common procedures, compliance data, spill and release data, or waste minimization program results.
Ecolink’s eChem Creates New Opportunities For Cost Reduction
Ecolink uses eChem to help companies enhance resource productivity by identifying the sources of environmental costs, assigning them to core processes and products, and prioritizing where costs should be reduced. Companies also use such information as an input to planning and strategy formulation, actively looking for opportunities to shift from reactive compliance-based management to opportunity-driven activities.
But technology is clearly not the only “change agent.” Improving the competency and motivation of the work force also requires more effective training and awareness programs as well as better feedback and reward/consequence system. Companies can also use eChem to help improve their ability to negotiate with regulators, as well as their outreach to communities and the general public.
Measuring Business Benefits
Using these quality-based and highly proactive approaches, a major pharmaceutical company, for example, recently reported more than $70 million in savings associated with redesigning its compliance functions, and by waste and energy reduction. Another pharmaceutical company invested $20,000 to optimize the lifecycle design of its products, and reaped an astounding average of $250,000 per product in return.
Another major company’s waste reduction savings over the past two decades are approaching $1 Billion. Although some of these initiatives preceded chemical management, they reflect both environmental and business benefits as the major out come of resource investments.
Balanced Performance Measurement
Today’s environmental manager must satisfy many masters, including the company’s customers, employees, regulators, the public, shareholders and the Board of Directors. To meet these often very different requirements, some companies have turned to strategic performance measurement to align the goals of support functions such as environmental, health and safety management with the goals and objectives of the organization, as well as to link environmental performance metrics with corporate goals and objectives.
The Balanced Scorecard approach consists of performance goals and measurements in four critical areas, Financial, Customer Satisfaction, Business Process, and Innovation and Learning. Some companies have added Environment as fifth perspective to the scorecard, while others have simply broadened the Customer Satisfaction category to include external stakeholders.
Why take a balanced approach? Because, balancing the scorecard helps guard against suboptimization. By forcing environmental, health and safety managers to consider these measures simultaneously, the scorecard helps them see whether improvements in one area were achieved at the expense of another. (This can take the look and feel of the pyramid of death where cost, environmental and cleaning performance is weighed against one another.) The process of developing the scorecard requires linking corporate strategy to environmental performance measures. It is clear that, if properly implemented, the scorecard approach can be a major driver of change and facilitate continuous improvement.
Tax Strategies That Yield Rewards
Many states provide tax incentives for corporate investments in environmental compliance and control. These tax incentives include exemptions or abatements for real and personal property tax, sales and use tax, and state income and franchise tax. Ecolink can work with a company’s cross functional team of tax professionals and environmental managers to evaluate specific facilities and equipment and file applications with the state agencies to obtain the tax savings and refunds.
With our experience in environmentally preferred chemical management improvement strategies, we provide recommendations that will reduce your environmental management costs, create valuable environmental assets and minimize the impact of your environmental. activities
Who Can Benefit from eChem?
- Your company can benefit if it faces a high level of public visibility in production operations,
- Environmental performance or perceptions affect your stock price,
- Your customers express significant concern for operating procedures,
- You participate in a highly regulated industry, or
- There are plans to expand or construct production facilities.
What Will Ecolink Do?
- Work with your environmental staff to define critical reporting areas,
- Develop and implement a detailed examination plan,
- Help develop report and footnote text to add validity to your environmental reports,
- Issue a formal opinion, which can be included in your report, on your company’s environmental performance progress. Ecolink’s independent verification in your environmental performance report will make the report significantly more credible to your corporate stakeholders.
In Conclusion – Create Future Opportunities with a Systems Approach
Today, environmental managers are increasingly being forced to compete for capital, funding and human resources. Using the highly refined and systems-based approach inherent in a quality-based chemical management program, the more business-minded of these managers may be able to provide information critical to decision-making at every point in the chemical life cycle. The decisions made at each point in a company’s operations affect financial performance, growth, reputation, and ultimately, shareholder value. Competitive firms that recognize the opportunities inherent in this approach may be well positioned for the next century.