gemi survey ehs / sr governance – a snapshot
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GEMI Survey EHS / SR Governance – A Snapshot. October 2003. Carl Wirdak Occidental Petroleum Corporation. Outline. Survey Recap Framework for EHS / SR governance Factors that influence EHS and SR Role of the Board of Directors Accountability systems - PowerPoint PPT PresentationTRANSCRIPT
Carl WirdakOccidental Petroleum Corporation
GEMI Survey
EHS / SR Governance – A Snapshot
October 2003
EHS Governance Benchmarking – October 2003 2
Outline
• Survey Recap• Framework for EHS / SR governance• Factors that influence EHS and SR• Role of the Board of Directors• Accountability systems• Performance assessment and feedback
processes• Next steps for the GEMI Governance work
group
EHS Governance Benchmarking – October 2003 3
Survey Overview
• Scope of EHS / SR Governance covered by survey was broadly defined
• Survey response rate was just above 50% – Not all companies completed all questions
• But there was good coverage across the sectors represented in GEMI
• Thank you to all participants!
EHS Governance Benchmarking – October 2003 4
EHS / SR Governance – What is covered?
• Almost all companies include the following:
– Conventional EHS performance– EHS costs (ongoing and liabilities)– EHS risk management– Legal compliance– Employee behavior / ethics– Internal and public EHS communication
EHS Governance Benchmarking – October 2003 5
Governance – What is on the fence?
A sizable fraction of companies do not consider or only partially include the following topics:
A. EHS value-added
B. Social Responsibility performance
C. Supply and distribution chain relationships
D. Stakeholder engagement
E. New product development
F. Product de-selection
0%
25%
50%
75%
100%
A B C D E F
Included Partially In Not Included
EHS Governance Benchmarking – October 2003 6
What frames company actions?
• Documents that frame EHS governance for companies include:– EHS policy– Code of Conduct– Compliance with law policy– Ethics policy– Company values & principles
EHS Governance Benchmarking – October 2003 7
Code of Conduct
• Every company maintains a code of conduct
• The code applies to all employees, not just top management
• The code always covers environment and health & safety
Does Code of Conduct Address Social Responsibility?
No29%
Yes71%
• Does the code of conduct address social responsibility?
EHS Governance Benchmarking – October 2003 8
What shapes EHS and SR expectations?
0 1 2 3 4 5
Current laws & regulations
Commitment to continuous improvement
Emerging laws & regulations
Performance of E, HS, SR "leaders"
Shareholder concerns
Community concerns
Employee concerns
Peer companies performance
External industry standards
NGO concerns
1998 2003 2008
EHS Governance Benchmarking – October 2003 9
Trends in EHS and SR expectations
0 1 2 3 4 5
Current laws & regulations
Commitment to continuous improvement
Emerging laws & regulations
Performance of E, HS, SR "leaders"
Shareholder concerns
Community concerns
Employee concerns
Peer companies performance
External industry standards
NGO concerns
1998 2003 2008
EHS Governance Benchmarking – October 2003 10
What goals are being pursued?
Current goals (identified by more than 50% of respondents)
• Minimize waste, discharge & emissions• Reduce natural resources and raw materials
usage• Manage EHS risk• Manage emerging EHS issues• Reach out to communities• Engage stakeholders• Participate in voluntary initiatives
EHS Governance Benchmarking – October 2003 11
What goals may be pursued?
2008 goals (identified by more than 50% of respondents)
All those on prior slide, plus:• Manage indirect or extended impacts• Maximize use of renewable energy• Maximize use of renewable raw materials• Conserve land• Protect biodiversity• Build EHS value into products and processes• Focus on the bottom of the economic pyramid• Enhance social structure in developing regions
EHS Governance Benchmarking – October 2003 12
Who considers EHS and SR matters?
3
2
10
5
7
2
7
4
0 4 8 12
No focal point at BOD level
A particular board member
A committee of the BOD
The full Board of Directors
Number of responses
SR
EHS
EHS Governance Benchmarking – October 2003 13
EHS / SR consideration by the Board
• Most companies have just one committee that deals with EHS & SR matters
• Typical size is 3 or 4 members
• Most members are outside directors
• Committees meet 2 to 4 times per year
1
3
9
2
1
4
2
0
3
6
9
<- 1980 1981-1990 1991-2000 2001 ->
Num
ber o
f res
pons
es
EHS
SR
Year that BOD began addressing EHS / SR
EHS Governance Benchmarking – October 2003 14
BOD involvement in setting expectations
No company has its Board involved in drafting language for goals
Informed after the fact
35%
Provides overall
direction18%
Formal review and
concurrence18%
Multistep participation
29%
EHS Governance Benchmarking – October 2003 15
Information sources for the BOD
How are BODs informed about emerging issues and/or the company’s activities, including its EHS or SR profile, its performance, etc.?
Number of responses
EHS
SRExternal Sources
Company M
anagement
Combination
4
2
7
3
0
1
0
1
2
3
4
5
6
7
EHS Governance Benchmarking – October 2003 16
What is on the BOD agenda?
0% 25% 50% 75% 100%
EHS financial management
Emerging issues
EHS risk management
Legal and regulatorycompliance
Management of past EHS liabilities
Ongoing EHSperformance
EHS Governance Benchmarking – October 2003 17
Reporting EHS and SR to the BOD
• Chief EHS / SR officer reports to the BODOthers include:– CEO– General Counsel
• Typically, the format is a presentation that covers– company performance– positions on issues
0
2
4
6
8
<1 1 2 3 4 >5
Reports per year
Num
ber
of r
espo
nses
SR EHS
Frequency of reporting to BOD
EHS Governance Benchmarking – October 2003 18
Organizational background
• In 70% of companies, EHS and SR does not report to one person
• In ~50% of companies, EHS or SR functional area reports to an Executive V.P. or a Senior V.P. Others include:– CEO– COO / President– General Counsel
Num
ber
of r
espo
nses
Organizational Model
Cen
tral
ized
Dec
entr
aliz
ed
Hyb
rid
0
4
8
12
EHS Governance Benchmarking – October 2003 19
EHS / SR performance targets
21 companies in sample E HS SR
Companies having targets 20 18 9
Average percent of targets that are quantitative
69% 87% 32%
Percent of companies where all targets are quantitative
45% 61% 0%
EHS Governance Benchmarking – October 2003 20
Who is accountable for performance?
Accountability rests with line management and staff
EHS SR
Corporate staff
executive30%
Operating company executive
62%
President4%
General Counsel
4%
Corporate staff
executive23%
Operating company executive
61%
General Counsel
8%
President8%
EHS Governance Benchmarking – October 2003 21
Is compensation linked to EHS / SR?
EHS SR
All employees
14%
CEO11%
Corporate staff
executive39%
Operating company executive
36%
Operating company executive
38%
Corporate staff
executive54%
CEO8%
Line management and EHS / SR staff have strong links
EHS Governance Benchmarking – October 2003 22
EHS / SR Assurance & Sarbanes-Oxley
• For EHS (blue dots), compliance assurance mechanisms are mature, but… the link to Sarbanes-Oxley process certification is not complete
• For SR (red dots), there are no assurance mechanisms in place
No Yes
Assurance Mechanism
No
Yes
No. of companies = 21
Sa
rba
nes
Oxl
ey
link
EHS Governance Benchmarking – October 2003 23
Where do companies audit?
21 companies in sample E HS SR
Company operations 100% 95% 24%
Suppliers 62% 33% 5%
Customers 10% 5% 0%
EHS Governance Benchmarking – October 2003 24
What do companies audit?
21 companies in sample
Laws & Regs
Company Policy
Company Values
Industry Stds
External Codes
Company operations 100% 100% 76% 57% 48%
Suppliers 48% 38% 14% 29% 14%
Customers 10% 5% 0% 0% 0%
EHS Governance Benchmarking – October 2003 25
EHS / SR Governance “Wish List”
• Consistent definition of what is in SR
• An organized management system for SR
• Increased attention at the BOD level
• More routine reports to BOD
• Greater dialog with the BOD during presentations
• External verification of audit process and results
• Formal process to obtain stakeholder input
EHS Governance Benchmarking – October 2003 26
Closing Comments
• Questions / comments / discussion
• For further information contact GEMI Governance work group co-chairs:
– Robert Accarino (Abbott)
– David Lowy (Altria)