Supply Chain Environmental Management Systems and Environmental Health and Safety Systems

Supply Chain Environmental Management systems have become popular among companies over the past decade as a means for monitoring, improving, and reporting on the environmental performance of their supply chain operations, including those of its (usually domestic) suppliers. Often based on the same reporting requirements as company-wide EHS systems (except that they focus specifically on the supply chain), most of these systems have gone well beyond being just a tool for gauging and recording environmental performance. Moreover, responding to the need for companies to provide social as well as environmental performance information, these systems have recently begun to build in a broader range of features encompassing other economic and social criteria.

SCEM is gaining attention for a number of reasons, says BSR ( Business for Social Responsibility), the U.S. consultancy and research group . A growing number of companies realize that to achieve their environmental goals and satisfy stakeholders expectations, they need to look beyond their own facilities and to involve their suppliers in environmental initiatives. Leading companies also understand that customers and other stakeholders do not always differentiate between a company and its suppliers and may hold companies accountable for suppliers environmental and labor practices. In addition, many companies are working to streamline their supply base and develop more cooperative, long- term relationships with key suppliers, a practice that has fostered greater opportunities to work together on environmental issues. ^{[1 ]}

It is fundamentally irresponsible, says Nicholas Eisenberger, CEO of Ecos Technologies, a sustainability software and consulting company, . . . for a company to talk about how important [corporate social responsibility and sustainability] is, and then when you lift the covers you see that they are managing sustainability by Powerpoint and spreadsheet.

That is not acceptable. he says. Not acceptable from a shareholder perspective. . . . From a shareholder s point of view, it [what an organization is doing with regard to sustainability] matters to a company s reputation, it matters to cost structure, and it matters to efficiency. I want to know what [a company] is doing in this area and how they compare with their competitors . And they can t give me an effective answer to the question if they only know the answer to that question 15 months later, and are managing [the process] through a spreadsheet. ^{[2 ]}

In fact, there is more and more software for managing sustainability available to companies. Multifunction software platforms are rapidly overtaking the manual, paper-based survey and strategic sourcing process, with systems that allow data submitted from suppliers to be compared relationally, so that a company can complete searches based on criteria for high levels of employee health and safety or strong environmental policies, or compare social and environmental performance among potential suppliers. In fact, as with most SCM and procurement systems, the entire contract procedure, from submitting an RFI (Request for Information) through completion and payment, can be done electronically . And, of course, the information can be accessed by organizational leaders , the CERO, or supplier management team members , whenever needed, and additional information from third-parties and the media can be entered as accompanying notes.

Typically, SCEM and EHS platforms provide a wide variety of support functions, including guidance for companies on how to develop a supplier certification program, how to educate and train suppliers on pollution control polices such as the safe handling and disposal of materials, and how to monitor and audit compliance. These platforms also usually include:

• Environmental Information Management. These systems provide information concerning regulations and safety requirements for materials and chemicals, including information on government regulations and safety requirements. They also provide electronic access to continuously updated data sheets on toxicity, safe handling, labeling, and disposal of dangerous materials and chemicals.

• Materials Management. Apart from providing information, SCEM systems also help to actively track, maintain, and report on the use of regulated or dangerous materials and chemicals as they move through the supply chain. The software provides information on materials origin and groups that have been in contact with the materials, and provides names of responsible persons for hand-offs at each stage of the supply chain. The software also provides electronic alerts for storing or handling hazardous materials.

• Waste Management. These systems also provide information on waste production and disposal, including all information necessary for documentation for U.S. government compliance and reporting. As with the materials management systems, waste management modules usually provide information on waste material handling and storage safety and regulatory requirements for shipping and disposal. This type of information can be used to manage recycling and reuse of materials as well as the disposal of waste. The waste management modules also help a company track costs and savings associated with the process, and alert the company to infringements or regulatory violations.

• Energy Efficiency. Most systems will also help a company track energy usage by plant or location, help management create energy-saving plans, and monitor the results in terms of costs and savings.

• Employee Safety. These systems also help a company manage all the information associated with employee health and safety, including incident and accident information, environmental spills, and the materials or chemicals involved in any injury or exposure. Most platforms have a report generator that automatically provides accident and incident reporting as required by OSHA and other regulatory agencies. These systems also help management provide employees ” and supplier employees ” with safety training and certification requirements.

• Report Generation. These systems also usually provide easy report generation tools so that companies can extract relevant information for annual reports or government or NGO requests for information or compliance reporting. They also tie directly into ERP, SCM, or Procurement systems, and often provide a direct link into supplier and vendor EMS (Environmental Management Systems) or other performance reporting systems.

• Situation and Risk Analysis. Increasingly, these systems also direct a company through an environmental impact analysis, which involves examining potential risks concerning materials being used, supplier behavior, or other supply chain activities that may have environmental risks. This type of environmental risk scanning helps a company anticipate potential areas of risk or exposure.

• Policy Development. Many of these systems today also provide tools for policy development, including assistance with creating policy statements and specific standards, targets and objectives that reflect the organization s environmental goals concerning monitoring and enforcement, supplier certification requirements, and employee health and safety standards.

• Implementation Planning. These systems not only provide a process for communicating, training, and educating employees and suppliers, but also provide a management review process, flagging calendars and providing company leaders with access to relevant documents and updates.

• Communication Tools. SCEM software can also provide an effective tool for communicating company ethical policy and environmental and safety standards to suppliers and to stakeholders via the Internet. With suppliers, this communication can be ongoing, both as part of the qualifi-cation process and as part of the RFP process, automatically building into tender documents the necessary guidelines and requirements. The software can develop standardized contract documents and compliance questionnaires for suppliers, based on local laws or standards, and prompt managers to ask for specific safety or environmental performance statistics, recording the response for audit purposes.

• Document Retention. These systems also provide document retention-capabilities for capturing and storing supplier documents, governmentalrequirements, e- mails and correspondence, certification documents, and survey results. The system automatically flags missing, invalid, or overdue items, and makes certain the necessary documents are secure and accessible and are kept for the right period of time.

Equally important, from an operational point of view, these systems provide broader management guidance by systematically leading the company through management processes and procedures, such as risk identifi-cation, resource allocation, assignment of responsibilities, and periodic verification of compliance. And there is good evidence that the combination of international standards and this formal management system approach is starting to be adopted by companies.

EHS performance management systems . . . help a company convert its strategy into effective execution at every level of the company, says Nicholas Eisenberger. What you need in order to be able to do that is to have tight coordination between the strategy and measures that are being looked at, and the processes that are operating and managing the business. So we help companies collect the data for the KPIs and safety incidents ” or if you are at the facility level focused on energy consumption, or at the division level focused on greenhouse gasses. Whatever level that you are in the company, [you need to know] ˜what are the key indicators that effect whether you are supporting the company s strategy?

Because all metrics ultimately are the result of business processes, he explains, we also help to automate business processes, so we can help automate greenhouse gas tracking and management processes, we can automate a GRI process for reporting, automate an incident management process . . . [we] make [the process] as flexible as possible, yet repeatable enough that companies can link up the things that they are doing every day with the strategies they are trying to achieve. ^{[3 ]}

Those that implement global standards such as SA 8000 or the Ethical Trading Initiative code are seeing substantial improvements in productivity, substantial reductions in turnover, substantial improvements in motivation and skill levels in the workforce, says Alice Tepper Marlin from Social Accountability International. Some because of the labor standards specifically, and some because SA 8000 has a management system, and you get these results from any management system. An operation that has a good management system is going to be more productive, more efficient, and is likely to have lower turnover than one without a management system. On top of that, because it is focused on your workforce, you get other benefits as well. ^{[4 ]}

A good example of this evolution beyond domestic environmental operations and toward a combined social and environmental management system approach to the company s global supply chain can be seen with the Entropy System suite of software from Entropy International.

The Entropy System is moving into total risk management, says Entropy International s Chief Executive, Hewitt Roberts. Although the foothold is environmental health and safety monitoring, there is a natural, built-in transition into any of the other risk disciplines ” whether it be ethical sourcing and SA 8000 or information security and 7799 or beyond and down the chain that would be covered by the umbrella of corporate governance and risk management.

The Entropy System platform, like other SCEM and EHS systems, is not a monitoring system itself; it does not attach to output pipes or chimneys. Instead, the system provides a framework for a corporate-wide environmental, health and safety management system, based on any of the Deming-like standards: ISO 14000 on the environmental side, for example, or SA 8000 for social compliance monitoring. The software provides for processing and capturing all documents necessary to improve policies and procedures, and using an executive-level risk management dashboard, helps companies set objective targets and build action plans, as well as audit performance and rectify nonconformity problems once they are identified. The system can be used by individual factory sites as an operational compliance tool, or more broadly by the corporation to monitor performance across various sites.

All these disciplines [health, employment standards, and environmental] do cross, explains Hewitt Roberts, and in the future it is going to have to be a one-stop -shop for the corporate risk manager. ^{[5 ]}

Nicholas Eisenberger agrees. Whatever your performance is that you are trying to manage, our system can help you to do that by giving you greater clarity about what is actually happening, and by helping to automate [and optimize] the processes involving all these people, systems and databases. ^{[6 ]}

^{[1 ]} Supplier Environmental Management, BSR White Papers at www.bsr.org/BSRResources/WhitePaperDetail.cfm?DocumentID _ 527 .

^{[2 ]} Interview, August 25, 2003.

^{[3 ]} Interview with Nicholas Eisenberger, August 25, 2003.

^{[4 ]} Interview with Hewitt Roberts, February 13, 2003.

^{[5 ]} Interview with Hewitt Roberts, February 13, 2003.

^{[6 ]} Interview with Nicholas Eisenberger, August 25, 2003.