Toward a Sustainable Cement Industry a Sustainable Cement Industry ... represents an effort by ten...

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Toward a Sustainable Cement Industry Substudy 4: Company Promotion of SD Alignment March 2002

by Stephen Poltorzycki

The Boston Environmental Group

with contributions from Beth Tener, The Boston Environmental Group

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An Independent Study Commissioned by:

World Business Council for Sustainable Development This substudy is one of 13 research investigations conducted as part of a larger project entitled, "Toward a Sustainable Cement Industry". The project was commissioned by the World Business Council for Sustainable Development as one of a series of member-sponsored projects aimed at converting sustainable development concepts into action. The report represents the independent research efforts of Battelle Memorial Institute and their subcontractors to identify critical issues for the cement industry today, and pathways forward toward a more sustainable future. While there has been considerable interactive effort and exchange of ideas with many organizations within and outside the cement industry during this project, the opinions and views expressed here are those of Battelle and its subcontractors. Battelle Battelle endeavors to produce work of the highest quality, consistent with our contract commitments. However, because of the research nature of this work, the recipients of this report shall undertake the sole responsibility for the consequence of their use or misuse of, or inability to use, any information, data or recommendation contained in this report and understand that Battelle makes no warranty or guarantee, express or implied, including without limitation warranties of fitness for a particular purpose or merchantability, for the contents of this report. Battelle does not engage in research for advertising, sales promotion, or endorsement of our clients' interests including raising investment capital or recommending investments decisions, or other publicity purposes, or for any use in litigation. The recommendations and actions toward sustainable development contained herein are based on the results of research regarding the status and future opportunities for the cement industry as a whole. Battelle has consulted with a number of organizations and individuals within the cement industry to enhance the applicability of the results. Nothing in the recommendations or their potential supportive actions is intended to promote or lead to reduced competition within the industry.

( C O M P A N Y P R O M O T I O N O F S D A L I G N M E N T )

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Foreword Many companies around the globe are re-examining their business operations and relationships in a fundamental way. They are exploring the concept of Sustainable Development, seeking to integrate their pursuit of profitable growth with the assurance of environmental protection and quality of life for present and future generations. Based on this new perspective, some companies are beginning to make significant changes in their policies, commitments and business strategies. The study, of which this substudy is a part, represents an effort by ten major cement companies to explore how the cement industry as a whole can evolve over time to better meet the need for global sustainable development while enhancing shareholder value. The study findings include a variety of recommendations for the industry and its stakeholders to improve the sustainability of cement production. Undertaking this type of open, self-critical effort carries risks. The participating companies believe that an independent assessment of the cement industry’s current status and future opportunities will yield long-term benefits that justify the risks. The intent of the study is to share information that will help any cement company – regardless of its size, location, or current state of progress – to work constructively toward a sustainable future. The pursuit of a more sustainable cement industry requires that a number of technical, managerial, and operational issues be examined in depth. This substudy, one of 13 conducted as a part of the project, provides the basis for assessing the current status or performance and identifies areas for progress toward sustainability on a specific topic. The project report entitled Toward a Sustainable Cement Industry may be found on the project website: http://www.wbcsdcement.org.

Study Groundrules

This report was developed as part of a study managed by Battelle, and funded primarily by a group of ten cement companies designated for this collaboration as the Working Group Cement (WGC). By choice, the study boundaries were limited to activities primarily associated with cement production. Downstream activities, such as cement distribution, concrete production, and concrete products, were addressed only in a limited way. Battelle conducted this study as an independent research effort, drawing upon the knowledge and expertise of a large number of organizations and individuals both inside and outside the cement industry. The cement industry provided a large number of case studies to share practical experience. Battelle accepted the information in these case studies and in public information sources used.

The WGC companies provided supporting information and advice to assure that the report would be credible with industry audiences. To assure objectivity, a number of additional steps were taken to obtain external input and feedback. A series of six dialogues was held with stakeholder groups around the world (see Section 1.5). The World Business Council for Sustainable Development participated in all meetings and

monitored all communications between Battelle and the WGC. An Assurance Group, consisting of distinguished independent experts, reviewed both the quality

and objectivity of the study findings. External experts reviewed advanced drafts of technical substudy reports.

The geographic scope of the study was global, and the future time horizon considered was 20 years. Regional and local implementation of the study recommendations will need to be tailored to the differing states of socioeconomic and technological development.

( T O W A R D A S U S T A I N A B L E C E M E N T I N D U S T R Y )

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List of Acronyms KPI Key Performance Indicator SD Sustainable Development TQM Total Quality Management WGC Working Group Cement (ten core cement company sponsors)


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Glossary Alternative Fuels Energy containing wastes used to substitute for conventional thermal energy sources. Cement Within the cement industry, and especially the technical domain, this term is often understood as Ordinary Portland Cement.

Clinker Decarbonized, sintered, and rapidly-cooled limestone. Clinker is an intermediate product in cement manufacturing.

Concrete A material produced by mixing binder, water, and aggregate. The fluid mass undergoes hydration to produce concrete. (Average cement content in concrete is about 15%.).

Eco-efficiency Reduction in the resource intensity of production; i.e. the input of materials, natural resources and energy compared with the output; essentially, “doing more with less.”

Fly ash By-product with binding properties typically produced as a residue from coal-fired power plants.

Fossil fuel A general term for combustible geological deposits of carbon in reduced (organic) form and of biological origin, including coal, oil, natural gas, and oil shale.

Greenhouse gases Gases in the earth’s lower atmosphere that may contribute to global warming, including the major component CO2.

Hazardous waste A by-product material defined by regulation or legislation for special handling or disposition due to its characteristics as flammable, explosive, corrosive or which because of its quantity, concentration, or physical, chemical or infectious characteristics may cause or significantly contribute to an increase in serious irreversible, or incapacitating reversible illness or pose a substantial present or potential hazard to human health, safety, welfare or to the environment when improperly treated, stored, transported, used or disposed of, or otherwise managed.

Kiln Large industrial oven for producing clinker used in manufacture of cement.

Shareholder Value The economic market value that a shareholder would realize from liquidation of their equity.

Stakeholder A person or group that has an investment, share, or interest in something, as a business or industry.

Triple bottom line A business principle that measures corporate performance along three lines: economic prosperity, environmental stewardship, and social responsibility.

Waste A by-product material having no or minimal economic value derived from a process or activity.


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Executive Summary The purpose of this substudy is to provide a pathway for cement companies to fully integrate sustainable development (“SD”) thinking into all aspects of their operations by aligning their organizations in support of this goal. The challenge is that while the support of top management within companies is essential to achieving this goal, this by itself is not enough to create lasting change. Many change initiatives have been introduced into companies with high expectations and top management support, yet have withered away in the face of organizational resistance. What is needed is a pathway for alignment between SD goals and business values, objectives and processes that not only channels top management commitment throughout the organization, but also enables individuals to make a personal commitment to take action to bring about the needed changes. In order to best design such a pathway tailored to the needs of the cement industry, information was gathered from the companies comprising the Working Group Cement (“WGC”) for two purposes. The first purpose was to identify potential impediments to SD alignment that could create obstacles in the pathway and therefore needed to be addressed. The second was to identify organizational strengths that could be built upon to design an effective pathway. We found that while the cement industry has taken some steps to align environmental goals with business goals, it is still largely unaligned with regard to the broader and more recent concept of SD. Some of the reasons that account for this are as follows: Awareness of SD is limited to environmental specialists and top management There is a lack of understanding of how achieving SD can help meet business objectives It is not always clear what actions to take around SD There have not been many crisis events around SD to motivate action

At the same time, we found that the cement industry had a number of strengths that could provide a solid foundation upon which to gain organizational alignment around SD. These include: Top management awareness of the potential importance of SD Talented and motivated functional staff Experience with change initiatives, such as TQM (Total Quality Management) and SAP (a

kind of enterprise-wide software system) implementation, that provides companies familiarity with the change management process

Extensive internal training programs, creating the potential to integrate SD concepts into existing training

The experience of companies in other industries that have made considerable progress in SD alignment shows that: SD alignment begins with top management commitment It is important to develop a strategy as early as possible for addressing SD in a manner that

is tied to the business strategy and that makes the business value of SD clear A process needs to be in place to ensure that key managers make a personal commitment

to the success of SD initiatives


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It is essential to establish long-term SD goals and ensure that these goals become translated into intermediate-term objectives and then into short-term action plans

It is clear from these findings that the alignment process needs to begin with building awareness among key employees of the issue of SD, what it could mean for the business, and the value of taking action with regard to SD. The process needs to provide a basis for alignment between the personal motivations and visions of individual employees and the overall company vision of a sustainable cement company. It should build upon the top management commitment that already exists, the existence of functional staff members who understand the issue and want to help the company make progress, and the experience the cement industry has had with successful change initiatives. As shown in Figure ES-1, the recommended process was designed based on the effective change management idea that, before taking action, each individual must move through several stages of readiness to take action, from awareness of the general subject, to an understanding of its importance, to a personal commitment to take action. In addition, actions must be reinforced by mechanisms to maintain the momentum gained from taking the action.

Figure ES-1. Steps in the Alignment Process

Our recommended process also recognizes that different audiences in the company will require different levels of understanding, engagement, and participation to set and implement a SD strategy and goals. The companies interviewed for best practices emphasized the value of targeting activities to different audiences. The recommended process has three successive phases of activity, each focused on a different audience. The phased approach illustrated in Figure ES-2 is designed to build organizational commitment to SD goals first with individuals in top management, who have significant leverage to effect change. The second phase targets key business leaders. The third and final phase is concerned with getting the rest of the organization involved.

Develop anunderstandingof the need foraction aroundSD

Create acommitmentby individualsand teams totake action

Maintainmomentum ofthe changeinitiative

Turn thecommitmentinto action

Gainawareness ofSD context andpotentialimportance tothe company

Awareness Understanding Commitment Action MaintainingMomentum


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Figure ES-2. Phased Approach

To illustrate how the alignment process could work in practice, Appendix B sets forth a trial application of the process to a hypothetical cement company. [Note: The hypothetical company does not represent a particular cement company. Elements of the hypothetical company situation have been drawn from a number of different companies in different regions.] The trial application is presented in the sequence of actions a cement company would take to implement the recommended alignment process: Develop an understanding of the company’s business environment, SD activities, efforts at

internal awareness raising and communications, and external communications (“Hypothetical Cement Company Situation”)

Evaluate the extent of SD alignment progress achieved by the company (“SD Alignment Evaluation”)

Based on the evaluation and the overall situation of the company, develop a prioritized action plan to achieve greater SD alignment (“Action Plan”)

In applying the framework to the hypothetical cement company, we addressed one of the central SD implementation questions of concern to the industry—how best to balance short- and long-term concerns. Our key learning was that SD needs to be introduced to the organization gradually, but systematically, in a manner calculated to build organizational alignment around SD objectives.

1 - 2 years

2 - 3 years

3 - 5 years

Phase 1

Phase 2

Phase 3

Start at the top: Gain buy-in of top management team

Broaden Involvement: Involve larger group of key business leaders in translating strategy and policy into action

Involve the Whole Organization: Gain participation of whole organization to institutionalize and reinforce progress

Top Management

Key Business Leaders

Rest of the Organization

1 - 2 years

2 - 3 years

3 - 5 years

Phase 1

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Phase 3




Top Management




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Table of Contents 1. Introduction ......................................................................................................................... 1

1.1. Purpose ...................................................................................................................... 1 1.2. The Challenge ............................................................................................................ 1 1.3. Approach .................................................................................................................... 2 1.4. How to Use this Report ............................................................................................... 2

2. Baseline Assessment.......................................................................................................... 4 2.1. Findings ...................................................................................................................... 4

3. Best Practices ..................................................................................................................... 6 3.1. Findings ...................................................................................................................... 6

4. Framework Design.............................................................................................................. 7 4.1. Steps in the Alignment Process .................................................................................. 7 4.2. A Phased Approach to Targeting Different Audiences ................................................ 8

5. Framework Application...................................................................................................... 14 5.1. Framework Trial Application...................................................................................... 14 5.2. Framework Application Process................................................................................ 14

6. Metrics of Organizational Alignment.................................................................................. 16 6.1. Process Indicators .................................................................................................... 16 6.2. Results Indicators ..................................................................................................... 16

7. References ....................................................................................................................... 19 Appendix A Framework Guidance Manual ..............................................................................A-1 Appendix B: Framework Trial Application ................................................................................B-1 Appendix C: Baseline Assessment......................................................................................... C-1 Appendix D: Best Practices .................................................................................................... D-1 Appendix E: Supporting Materials ...........................................................................................E-1 List of Tables Table B-1: Example of Key Objectives ..................................................................................B-11 Table C-1. WGC Companies From Whom Information Was Obtained.................................... C-1 Table D-1. Best Practices Companies Surveyed .................................................................... D-1 Table D-2. Alignment of business processes with sustainable development principles......... D-17 List of Figures Figure ES-1. Steps in the Alignment Process .............................................................................vi Figure ES-2. Phased Approach.................................................................................................vii Figure 1-1. Organizational Alignment ......................................................................................... 2 Figure 4-1. Steps in the Alignment Process................................................................................ 7 Figure 4-2. Phased Approach..................................................................................................... 9 Figure 4-3. Phase 1: Start at the Top........................................................................................ 10 Figure 4-4. Phase 2: Broaden Involvement .............................................................................. 11 Figure 4-5. Phase 3: Involve the Whole Organization............................................................... 12 Figure A-1. Phase 1: Start at the Top ......................................................................................A-6 Figure A-2. Strategy Arises Out of Gap between Vision and Current Reality .........................A-10 Figure A-3. Phase 2: Broaden Involvement ...........................................................................A-20 Figure A-4. Phase 3: Involve the Whole Organization ...........................................................A-28


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1. Introduction 1.1. Purpose The purpose of this substudy is to provide a pathway for cement companies to fully integrate sustainable development (“SD”) thinking into all aspects of their operations by aligning their organizations in support of this goal. It provides a process for companies to change into organizations that manage SD with the drive, passion, and focus that they manage other important business goals. Organizations that have made progress towards achieving this goal have found that it requires some changes in their thought patterns and decision-making approaches. These changes can be manifested in several ways: From a focus on only financial and operational issues to a focus on optimizing

environmental, social, and financial performance simultaneously, while recognizing the interactions between these dimensions.

From a focus on only what can be quantified and produce short-term results to a focus on managing all aspects of SD, which often may have costs and benefits that are more difficult to quantify and require a longer time to see cause and effect.

From compartmentalized thinking and making decisions within organizational silos to seeing the enterprise as an interdependent system where close collaboration can create new opportunities for efficiency, such as designing new facilities with the input of facility operators from existing facilities.

From a linear view of industrial systems and the attendant goal of limiting environmental impacts of manufacturing to a view of the industrial system as analogous to an ecosystem, employing processes such as using other industries’ wastes as fuel.

From viewing interested external parties, such as the local community, in adversarial terms to obtaining a variety of perspectives from diverse stakeholders before crafting a solution.

1.2. The Challenge The support of top management within companies is essential to achieve the goal of full integration of SD thinking into all aspects of company operations. However, this by itself is not enough to create lasting change. Many change initiatives have been introduced into companies with high expectations and top management support, yet have withered away in the face of organizational resistance. Change is always a difficult process for individuals within organizations, and programs implemented to create change more often than not meet with stiff internal opposition or lose momentum before achieving their goals. The challenge is to develop a process that will not only help bring about top management support, but also enable individual employees to make a personal commitment to take action to bring about the needed changes. What is needed is a pathway for alignment between SD goals and business values, objectives and processes. A key part of this pathway is a process to provide a basis for alignment between the personal motivations and visions of individual employees and the overall company vision of a sustainable cement company. Figure 1-1 illustrates that a shared vision and purpose is needed to bring about such an alignment.


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Figure 1-1. Organizational Alignment

Alignment around a shared vision and purpose creates energy that motivates action. When people are personally committed to a shared vision, they bring their own creativity and initiative to bear, which improves and maintains the effectiveness of the change initiative and creates synergy with the efforts of others within the organization. In order to be effective, this commitment must be freely chosen by individuals based on a personal connection with the organizational vision. This, coupled with a sense of urgency provided by the sustained commitment of top management, which typically includes setting organizational goals and then ensuring that key business leaders meet these goals, provides the foundation for lasting change. The process also needs to be flexible enough to be applicable to the different management styles found among and within cement companies, from decentralized to centralized. It needs take into account the rich variety of cultural approaches inherent in companies with operations in all parts of the globe.

1.3. Approach There were four main steps associated with this substudy: Baseline Assessment: Information was gathered from the companies comprising the

Working Group Cement (“WGC”) to identify potential impediments to SD alignment and discover organizational strengths that can be built upon.

Best Practices: Information was gathered from a number of companies outside the cement industry that have made progress in SD alignment to identify successful practices that could be transferred to the cement industry.

Framework Design: A framework was developed that will be a blueprint or pathway for organizational alignment within the cement industry around SD.

Framework Trial Application: The framework was applied to a hypothetical cement company to illustrate how the framework might work in practice.

1.4. How to Use this Report There are several parts to this Report. The following summarizes the different parts and provides suggestions for how to best use each part.

UnalignedOrganization

AlignedOrganization

Today

SustainabilitySustainability

SharedVision andPurpose


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Report: Provides a summary of the substudy findings and an overview of the approach. Use the Report to become familiar with the approach and understand how the different parts fit together.

Appendix A: Framework Guidance Manual: Provides the detailed approach to SD Alignment. Use the Framework Guidance Manual section to design the steps in a company-specific alignment process.

Appendix B: Framework Trial Application: Provides an example of how the SD Alignment Approach would be used in a hypothetical cement company. Use the Framework Trial Application section to understand better how to implement the steps of the approach.

Appendix C: Baseline Assessment: Provides detailed findings on the information gathered from the WGC companies regarding potential impediments to SD alignment and organizational strengths that can be built upon. Use the Baseline Assessment section if the portion of the Report relating to the Baseline Assessment is insufficient to adequately portray what was learned from the WGC companies.

Appendix D: Best Practices: Provides information gathered from companies outside the cement industry on successful SD alignment practices. Use the Best Practices section to obtain additional ideas for the design of a company-specific alignment process.

Appendix E: Supporting Materials: Provides resource materials in Microsoft® Powerpoint format regarding subjects potentially relevant to a company’s internal communications efforts around SD. Use the Supporting Materials section to supplement the presentation materials created for the purpose company-specific internal communications, such as business unit alignment workshops and strategic planning workshops.


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2. Baseline Assessment Information about potential impediments to SD alignment and organizational strengths that could be built upon was gathered through written questions, interviews, and site visits with representatives of the WGC companies. The information gathered related to developing an understanding of the unique characteristics of cement industry organizations, current practices related to SD, and organizational strengths related to internal communication and change management. Examples of other successful change initiatives within the companies were also explored. See Appendix C for a brief report on the results of this “Baseline Assessment”. The highlights of the Baseline Assessment are presented below.

2.1. Findings Potential Impediments to SD Alignment Our assessment found that while the cement industry has taken some steps to align environmental goals with business goals, it is still largely unaligned with regard to the broader and more recent concept of SD. Awareness. Awareness of SD is limited in many companies to environmental specialists

and top management. Understanding. There is a lack of understanding in many companies of the business case

for SD—how achieving SD goals can help meet business objectives. Commitment. There is little personal commitment in many companies to take action related

to SD. It is not always clear what actions an individual (or company) can take around SD. Action. A commitment to SD in many companies does not always translate into action.

- There have not been many crisis events around SD to motivate action and communities in some parts of the world appear to be more interested in jobs than in environmental or social progress

- There is a perception among some that the industry culture is often reluctant to embrace change

Maintaining Momentum. There has been inconsistent attention in many companies to following up on change initiatives to maintain their momentum. - Some companies do not utilize internal communication channels, such as newsletters, e-

mail, and reports, to their fullest capabilities. - Very often, there is communication regarding a new initiative for a short period of time,

then very little additional communication.

Strengths Upon Which to Build SD Alignment Our assessment also found a number of strengths that could provide a solid foundation upon which to gain organizational alignment around SD. Top Management Awareness. In many of the companies, the CEO and other members of

top management are aware of the SD issue and its potential importance to the business. Talented and Motivated Functional Staff. Most of the companies have talented

environmental, human resources, and communications staff members who are familiar with the SD issue and are personally committed to improving their company’s SD performance.

Change Initiative Experience. A number of companies have had experience and success with company-wide change initiatives such as TQM (Total Quality Management) and SAP (a kind of enterprise-wide software system) implementation. The techniques used in successful change initiatives in the industry—such as senior management involvement through


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participation in steering groups, employee awareness campaigns, key manager training sessions, cross-functional implementation teams, creation of individual and team-specific action plans, use of measurable goals—have potential to be adapted for the integration of SD into company business activities.

Internal Training Programs. Many companies have extensive internal training programs in place, creating the potential to integrate SD into existing training.

It is clear from these findings that a process is needed to move from where companies are today to a state where employees are aligned around SD goals. This process needs to begin with building awareness among key employees of the issue of SD, what it could mean for the business, and the value of taking action with regard to SD. It then needs to address gaining the enrollment and personal commitment of the full range of internal stakeholders of a company, from plant employees to the Board of Directors. This enrollment cannot be legislated or driven by top management mandate. It comes from a result of free choice: a personal commitment to move towards sustainability. Achieving this can make it possible to implement the range of changes needed to pursue SD. The process should build upon the top management commitment that already exists, the existence of functional staff members who understand the issue and want to help the company make progress, and the experience with successful change initiatives.


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3. Best Practices Companies with global operations that have successfully made progress in SD alignment proved to be a valuable source of insight. Interviews were conducted with BHP, Dow Chemical, DuPont, Ford, Shell, Suncor, and TransAlta to identify alignment practices that could be transferred to the cement industry. The main findings of our investigation into best practices at these companies are presented below. See Appendix D for a full report on the alignment practices of each of these companies.

3.1. Findings Although most of the companies noted that gaining SD alignment continues to be a challenge, some common themes emerged. Top Management Commitment. Invariably there is strong commitment to SD from the top

of the organization, and in some cases (such as Ford), the Chairman is visibly leading the initiative. Often, opportunities are found for the top management team to be exposed to the views of external stakeholders to better understand the need for action around SD.

SD Strategy. A strategy for addressing SD is explicitly established and tied to the business strategy in a way that makes the business value of SD clear. For example, DuPont wants to move away from the commodity chemicals that have traditionally been its core business towards products and services that use less material, yet deliver higher value. It sees its emphasis on the low environmental and social “footprint” associated with SD as a way to help its businesses to focus on developing differentiated, high value added products.

Tangible Projects. High profile SD initiatives are an effective way to raise awareness, generate enthusiasm, and gain commitment. TransAlta’s CO2 emissions trading scheme helped business managers see the full costs of their decisions and encouraged more efficient operating practices.

Commitment of Key Managers. It is recognized that key managers need to make a personal commitment to the success of SD initiatives in order for there to be progress. Accordingly, many companies hold workshops and other training activities to raise the awareness of key managers and identify actions that they can pursue to address SD. Others, such as Suncor, hold sessions with external SD thought leaders to broaden the perspectives of key managers.

Goals and Objectives. Companies establish long-term SD goals and ensure that these goals become translated into short- and medium-term objectives for business units and key management individuals.

Communication. A variety of communication means are used to ensure employees are aware of the importance of SD. Communication mechanisms include newsletters, Intranet, e-mail, one-on-one discussions, periodic SD performance reports, speeches, and training sessions.

Tailored Approach. Different internal audiences require different alignment approaches. Most companies concentrate their alignment efforts on senior and middle management.

Staff Resources. Functional staff members are assigned to coordinate the SD initiative and help maintain momentum.

Total Employee Involvement. While most companies recognize that not all employees need to address SD to the same extent as key managers, some have found that suggestion programs are effective ways to involve and reward motivated, creative employees and at the same time generate valuable ideas for implementation.


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4. Framework Design This framework is designed to provide a road map or process for how companies can achieve organizational alignment. See Appendix A for a full SD Framework Guidance Manual. A summary of the main points of the Framework Design is set forth below.

4.1. Steps in the Alignment Process The framework proposes an alignment process that recognizes that companies in the cement industry differ in their management styles and cultures, and therefore have different needs. Accordingly, it is designed to be flexible so it can be adapted to suit these different needs. It also draws upon traditional marketing theory, organizational change theory, and experience for insight. The basic premise of the framework is that a change initiative will have longer lasting internal support if the organization’s employees see a personal connection between the goals of the initiative and what matters to them. As illustrated in Figure 4-1, the process is based on the idea that, before taking action, each individual must move through several stages of readiness to take action, from awareness of the general subject, to an understanding of its importance, to a personal commitment to take action. In addition, actions must be reinforced by mechanisms to maintain the momentum gained from taking the action.

Figure 4-1. Steps in the Alignment Process

The objective of each step is as follows: Awareness. The objective is for employees to develop an

awareness of what sustainable development means and its potential impact on the company. For example, this might include learning about the implications of environmental trends on the company’s operations, shifts in expectations of local communities, and emerging models of how business can respond to these trends. Examples of activities used to create awareness include bringing in external speakers to management meetings, stakeholder engagement, and internal communications of a broadcast nature, such as newsletters, brochures, e-mails and Internet or Intranet content.

Understanding. After building initial awareness, the next objective is to develop an understanding among employees of importance of taking action on SD. This requires making clear the business value of SD and establishing the link between external trends and drivers and how they impact the company. Examples of

Develop anunderstandingof the need foraction aroundSD

Create acommitmentby individualsand teams totake action

Maintainmomentum ofthe changeinitiative

Turn thecommitmentinto action

Gainawareness ofSD context andpotentialimportance tothe company

Awareness Understanding Commitment Action MaintainingMomentum

“We all too often jump to the solution and try to jam it down the throats of our organization. It’s better to first take stock of where everybody is in the stages of the model… we have to convince each key individual it is in their personal interest and in the corporate interest to realign themselves.”

WGC Member


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activities to deepen understanding include top management’s development of an SD strategy and goals, alignment workshops at the business unit (BU) level, and incorporation of SD concepts into existing employee training. Appendix E (“Supporting Materials”) provides presentation materials companies can draw from when developing the content of alignment workshops and employee training.

Commitment. The critical next step is for individuals and teams to make a commitment to take action in alignment with the company’s goals. Without a tangible commitment to take action, the investment in raising awareness and understanding will not be realized as other priorities take attention. Examples of activities that help establish commitment are individual and business unit short- and medium-term objectives, and development of action plans arising out of alignment workshops.

Action. Once actions are committed to, the alignment process then must ensure that the actions are implemented.

Maintain Momentum. The crucially important final step is to implement mechanisms to support and sustain the change initiative. Examples include establishing an organizational infrastructure with dedicated staff that promote and support progress, defining policies and guidelines, measuring and reporting progress, establishing team support networks, and communicating externally.

4.2. A Phased Approach to Targeting Different Audiences Our recommended process recognizes that different audiences in the company will require different levels of understanding, engagement, and participation to set and implement a SD strategy and goals. The companies interviewed for best practices emphasized the value of targeting activities to different audiences. For example, Suncor Corporation, a Canadian energy company, has consciously focused its training efforts on the top management level of the company. According to Gord Lambert, Director of Environment, Health, and Safety, “we don’t hold the view that all employees need to understand sustainable development in a complete way. We want operational employees to focus on what they have control over not what they don’t. Whereas at the top of house, where people have a need and mandate to look at issues more broadly, they should have a deeper understanding.” As illustrated in Figure 4-2, the framework has three successive phases of activity, each focused on a different audience. The phased approach presented here is designed to build organizational commitment to SD goals first with individuals in top management, who have significant leverage to effect change. The second phase targets key business leaders. The third and final phase is concerned with getting the rest of the organization involved.


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Figure 4-2. Phased Approach

Phase 1: Start at the Top Even in the most decentralized companies, people look to top management to provide leadership regarding issues that will affect the organization as a whole. Without the support of the handful of individuals who typically make up the top management group, the SD initiative will not succeed. One important aspect of leadership is to provide an example for others to follow. If top management demonstrates awareness and understanding of and commitment to SD, others will be inclined to follow. Another aspect of leadership is to identify new issues, such as SD,

1 - 2 years

2 - 3 years

3 - 5 years

Phase 1

Phase 2

Phase 3




Top Management



1 - 2 years

2 - 3 years

3 - 5 years

Phase 1

Phase 2

Phase 3




Top Management



Case Study: Targeting Different Audiences

Dow’s SD program has identified four target groups and plans different approaches for each:

1. Senior management team - Raising awareness at this level will be through one-on-one meetings with executives and the Director of Sustainable Development. In addition, SD is on agenda for regular senior management meetings and Dow is also looking at executive training programs, such as the Prince of Wales Business and Environment program, a one-week intensive course.

2. Business leaders in value sectors - SD workshops are offered to this level of managers, which address an overview of the concepts, assessment of their business in light of SD, and links to the strategy.

3. Leadership Development Network – Dow has a network of 3,000 high-level leaders, mostly people who have responsibility for many other people so they can bring ideas down into the organization. There is an established process to annually conduct two-day training sessions with these people to indoctrinate them in the company strategies. SD will be integrated into these training sessions.

4. All employees – To date, there has been limited attention focused on raising awareness of SD among the broader employee population. There are plans to add a SD component to the computer-based training programs.


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recognize their potential importance to the company, and translate the new idea into language understandable by the organization as a whole. Moreover, top management sets strategic direction for the company, which includes establishing long-term goals and how to think about balancing short- and long-term goals, an important aspect of managing SD effectively. Shareholders or owners are another key group that can significantly influence the success of the SD initiative. When the principal shareholders or owners of a company are a family or other small group, it is not uncommon to see them take a direct role in managing the strategic priorities of the company. Even in cases where shareholders are numerous, decision-making authority is often concentrated in a few individuals, such as pension or investment fund managers, who act on behalf of the shareholders as a whole. Given the key role that shareholders and owners can play in an organization, it is at least as important to ensure that shareholders and owners are supportive of the SD initiative as it is with top management. It is one of top management’s highest priorities to ensure that shareholders and owners are aligned with management’s strategic initiatives, including addressing SD. The activities involved in Phase 1 are graphically illustrated in Figure 4-3.

Awareness Understanding Commitment Action Maintain Momentum

Figure 4-3. Phase 1: Start at the Top

One of the key first steps in raising top management’s awareness of the importance of addressing SD is to engage in dialogue with external stakeholders. Through this process the company’s management team can develop a first-hand understanding of the extent and depth of stakeholder concerns and use this input to inform the company’s strategic response. Similarly, sessions in which external thought leaders meet with the top management team can stimulate an internal conversation about the issue of SD and expand the management team’s perspective. Once the basic awareness is in place, a strategic planning meeting or workshop is essential to develop the understanding of the management team of the need for action. Top management should use this occasion to analyze how the company can best respond to external trends and build agreement on a SD strategy. The output of the session should be a finalized SD strategy, clearly stating the business case for action, and the goals and action plans needed to implement the strategy. The process has value beyond the direction chosen and the decisions made. By virtue of working together to generate the goals and action plans, the top management team confirms its commitment to take action. Also, through the process of developing the business

1.6 Senior management actions

1.5 Formulate business case

1.4 Strategy and action

1.3 Strategic planning workshop

1.9 Pilot action implementation

1.10 Organizational infrastructure • Dedicated

staff • Policies/

guidelines• Measure/

report progress 1.8 Pilot

action plans

1.7 Business unit pilot workshop

1.1 Stakeholder engagement 1.2 External input session(s)


11

case, the top management team addresses and resolves the cost/benefit balance associated with taking action and can better communicate it to the rest of the organization. One of the key actions emerging from the strategic planning workshop will likely be the encouragement of a business unit to hold its own workshop to develop some tangible action steps to implement the strategy chosen. This workshop should be viewed as a pilot—a first step to “test the waters” and generate early successes to share with other business units and generate enthusiasm among them to hold their own workshops and generate their own action plans. A pilot workshop is a low risk way to learn how to move from strategy to implementation before broadening the initiative. Implementation of the actions emerging from the business workshop will provide tangible examples of what SD could mean in practice. To support the commitment to action on SD and maintain the momentum gained by the early efforts of top management and one or two business units, some form of organizational infrastructure would be helpful to put in place. For example, dedicated staff members could be assigned to coordinate activities, policies and guidelines could be developed, and mechanisms could be established to measure progress.

Phase 2: Broaden Involvement But the support of top management and the actions of one or two business units are not enough. The SD initiative will need the involvement of the next level of management as well—the key business leaders. These are the real “movers and shakers” within an organization. They have the power to make an initiative succeed or fail. They are the people who are well respected in the organization as role models, who have a network of influential relationships, who are responsible for managing others, and who have helped in the success of other change initiatives. The goal of Phase 2 is to ensure that SD thinking becomes integrated into business thinking. By far the greatest level of effort in alignment activities should take place in this Phase to gain the commitment of key business leaders. This reflects the overall design principle of the framework that SD alignment activities should be line management focused. The activities involved in Phase 2 are graphically illustrated in Figure 4-4.


Figure 4-4. Phase 2: Broaden Involvement

Top management’s first step in gaining the involvement of key business leaders is to use a variety of ways to communicate internally about the company’s SD strategy and the business

2.1 Broadcast internal communications

2.6 Business unitaction plan implementation

2.2 One-on-one discussions

2.3 Local stakeholder engagement

2.7 Accountability mechanisms

2.8 Measure/ report progress

2.9 Team support networks

2.10 Regular communication

2.5 Business unit action plans • Team • Individual

2.4 Business unit SD alignment workshops


12

case for addressing SD. In addition to broadcast internal communications, it is essential for top management to holds direct one-on-one conversations with key business leaders to build understanding and engagement. Another way to increase awareness and reinforce the rationale for the company’s SD strategy is for managers at all organizational levels to be involved in conversations with regional and local stakeholders. These conversations would be similar in purpose to the conversations engaged in by top management with stakeholders who have a more global or national sphere of activities. A key process for gaining commitment to the SD strategy is to have a targeted group of influential leaders from around the company participate in workshops designed to build alignment around SD. These would be along the lines of the pilot workshops engaged in by one or two business units in Phase 1, but now there should be much broader business unit participation. Emerging from the workshops will be individual and team action plans, short- and medium-term objectives, and tangible initiatives, which will then be implemented to bring to life the new awareness and commitment of the business units to the SD strategy. A number of processes will help maintain the momentum gained by the initial actions of the business units. For example, accountability mechanisms such as performance measures, rewards, and linking compensation to achievement of SD goals encourage continued behavior in support of the goals. In addition, progress towards achieving those goals should be tracked, measured and reported internally to reinforce accountability and help maintain the momentum of the SD initiative. Another helpful process is to make available discussion groups, coaching, and advanced training to key change leaders to maintain their motivation, support them in advancing change, and help them overcome the inevitable internal barriers to change. Finally, regular communication by top management to external audiences about SD progress supports and reinforces the importance of the initiative internally.

Phase 3: Involve the Whole Organization The participation of everyone in the organization will be necessary to implement the action plans developed by leadership. It will be helpful to gain the understanding and participation of the key parts of the organization that need to make the necessary changes happen. Although a broad based training initiative is not necessary to reach everyone in the organization, at a minimum there should be communications to create general awareness of SD, why it is important to the business, and what this means in practice. This creates the basis of understanding that reinforces the need to take action when specific initiatives arise. The steps involved in Phase 3 are graphically illustrated in Figure 4-5.


Figure 4-5. Phase 3: Involve the Whole Organization

3.1 Employee awareness communications

3.2 Incorporate into existing training

3.3 Suggestion programs

Support implementationof business unit action plans

3.4 Employees as links to community


13

An ongoing communication program using a variety of mechanisms such as speeches by management, newsletters, and discussion at staff meetings helps raise the general awareness of employees. Then, to move beyond awareness, established training programs can be expanded to incorporate training about the company’s SD strategy and goals and how this relates to employee’s job responsibilities. In addition, suggestion programs can provide an outlet for good ideas to surface and an incentive to employees to think creatively about how to take action in support of the goals. Finally, to keep employees involved over the long term, they can be asked to help externally communicate about the company’s SD initiatives by participation in local community events. Throughout the third phase the activities to maintain momentum started in earlier phases should continue, including: Regular top management communication about the business value of the activities Internal communication promoting successes Accountability mechanisms Measures/reporting of progress Regular external engagement Suggestion and/or award programs


14

5. Framework Application 5.1. Framework Trial Application The framework was applied to a hypothetical cement company to help illustrate how the framework might work in practice. [Note: The hypothetical company does not represent a particular cement company. Elements of the hypothetical company situation have been drawn from a number of different companies in different regions.] Like many cement companies, this hypothetical company was under pressure from its stakeholders regarding its approach to environmental and social issues. It already understood the adverse consequences of ignoring its stakeholders and therefore appreciated the importance of engaging its stakeholders more closely. It also faced increased pressure from its competitors, creating the need to lower operational costs, including by means of using AFR and implementing initiatives to improve energy and raw material efficiency. In addition to being confronted with these pressures, the hypothetical company also was embarking on a strategic imperative to acquire its way into new geographic markets. In support of these acquisitions in unfamiliar geographic markets, it needed to develop a more systematic process to review environmental and social risk, including the environmental and social impact of operations. Applying the framework to the hypothetical company involved addressing the central SD implementation questions of concern to the industry. While the hypothetical company had sound business reasons to want to deal more strategically with SD, it faced an inherent challenge in doing so—how to balance short and long term concerns. It had to be recognized that, left to itself, the organization would tend to focus on the short term, using only traditional approaches to deal with its problems. The organization did not easily recognize that SD could help it in both the short and the long term.

5.2. Framework Application Process SD needs to be introduced to the organization gradually, but systematically, in a manner calculated to build organizational alignment around SD objectives. It is important to ensure that the strong commitment to SD from the top is reinforced by the commitment of key business leaders to take action around SD. They do this because there is a good business case to take action and the benefits of addressing SD will be realized in the short term as well as the long term. However, in order to be lasting, this commitment by key business leaders must be freely chosen based on a personal connection with the organizational vision. A pathway needs to be followed to provide a basis for alignment between the personal motivations and visions of individual employees and the overall company SD vision. The alignment process is this pathway. The general process of implementing the framework is set forth in Appendix A: Framework Guidance Manual. An example of how the framework might be applied to a hypothetical cement company is set forth in Appendix B: Framework Trial Application. Application of the framework involves these steps: 1. Perform a SD Alignment Self-Evaluation. Develop an understanding of the hypothetical company’s business environment, SD activities, efforts at internal awareness raising and communications, and external communications. Then, perform an evaluation of the extent of SD alignment achieved by top management, key business leaders and the organization as a whole. It is to be expected that the self-evaluation will reveal that a company already has a number of framework elements in place. In many cases, these elements will relate to environmental management. It is important to recognize the value of these initiatives and to build upon them. Part of the value of the framework is to identify how best to integrate SD into initiatives already underway.


15

2. Develop a Prioritized Action Plan. The self-evaluation reveals those alignment elements requiring further attention. An action plan should be developed to implement each of those elements. The action plan should indicate the priority of the actions, the steps involved (including how to best leverage existing initiatives), who will be responsible for taking the steps, and the schedule. 3. Implement the Action Plan. The action plan should then be implemented.


16

6. Metrics of Organizational Alignment Provided below are some suggestions for measuring the extent of organizational alignment. The true measure of how well the organization is aligned around SD goals is the speed and effectiveness of the implementation of the goals and action plan. Each company will develop measures to gauge this based on what the goals are. The measures provided here are fairly general and are primarily focused on the process of gaining alignment.

6.1. Process Indicators These indicators measure progress towards completing the implementation steps. In addition, the qualitative assessment of alignment progress shown in Appendix B can also be used for this purpose.

6.2. Results Indicators These indicators measure the results of the alignment process, e.g., the extent of alignment with SD goals). Many of these results can be measured through use of surveys. Phase 1: Start at the Top

Step Process Indicators Results Indicators 1.1 Stakeholder engagement % of stakeholders deemed

“key” with whom meetings have been held

Level of senior management awareness of stakeholder concerns

Level of stakeholder satisfaction with the company

1.2 External input sessions % of senior managers who have participated in external input meetings

Level of senior managers’ awareness of emerging issues

1.3 Strategic planning workshop Whether workshop has been held on schedule

1.4 and 1.6 Strategy, senior management action plans and action plan implementation

Whether strategy and action plans have been developed on schedule

% of action plan items completed

1.5 Formulate the business case Whether the business case has been formulated on schedule

Level of senior managers’ awareness and understanding of and commitment to SD issues and the company strategy

1.7 Business Unit Pilot SD workshop

Whether the workshop has been held on schedule

1.9 Pilot action plans and implementation

Whether action plans have been developed on schedule

Level of business unit key business leaders’ awareness and understanding of and commitment to SD issues and the company strategy


1.10 Organizational infrastructure

Whether a team has been assigned to coordinate the SD initiative

Whether SD policies and guidelines have been developed on schedule

Whether a SD initiative progress tracking mechanism has been implemented on schedule

Senior management perception of sustained progress of SD initiative


17

Phase 2: Broaden Involvement Step Process Indicators Results Indicators


Number of documented “mentions” of SD in management communications (e.g., newsletters, speeches, memos)

2.2 One-on-one discussions Number of meetings to discuss SD with key business leaders

% of key business leaders met with

Level of key business leader understanding of SD issues and the company strategy


% of local stakeholders deemed “key” with whom meetings have been held

Level of key business leader awareness of stakeholder concerns

Level of local stakeholder satisfaction with the company

2.4 BU SD alignment workshops Number of BUs holding workshops

% workshops held on schedule

2.5 and 2.6 Business unit action plans and action plan implementation

% action plans developed on schedule

Level of key business leader awareness and understanding of and commitment to SD issues and the company strategy


2.7 Accountability mechanisms Whether KPIs and other accountability mechanisms have been established on schedule

% of key business leaders have SD-related performance objectives

2.8 Measure/report progress Whether a SD measurement and reporting mechanism has been implemented on schedule

2.9 Team support networks Whether team support networks have been established on schedule

Key business leaders’ perception of sustained progress of SD initiative

2.10 Regular communication Whether an external communication plan has been developed on schedule

Number of SD “mentions” in company external communications

Level of key business leader awareness of SD strategy and initiatives


18

Phase 3: Involve the Whole Organization

Step Process Indicators Results Indicators 3.1 Employee awareness communications

Number of SD “mentions” in internal communications

Level of employee awareness and understanding of SD


% of employees trained in SD

Level of employees understanding of and commitment to SD

3.3 Suggestion programs Number of suggestions received

% of suggestions implemented

% of employees submitting suggestions

Number of suggestions implemented

Business value (e.g., cost savings, revenue generation) of suggestions implemented


Hours spent by employees on community liaison activities

Level of local stakeholder satisfaction with the company


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7. References

General Organizational Change Laszio, Christopher and Laugel, Jean-Francois, Large Scale Organizational Change, New Horizons Press, 2000 Maira, Arun and Scott-Morgan, Peter, The Accelerating Organization, McGraw-Hill, 1997 Scott-Morgan, Peter, et al., The End of Change, McGraw-Hill, 2001 Senge, Peter, et al., The Dance of Change, Currency/Doubleday, 1999 Senge, Peter, The Fifth Discipline, Currency/Doubleday, 1990 Senge, Peter, et al., The Fifth Discipline Field Book, Currency/Doubleday, 1994

Sustainable Development Alignment Altomare, Mary and Natrass, Brian, The Natural Step for Business, New Society Publishers, 1999 Atkisson, Alan, Believing Cassandra, Chelsea Green Publishing, 1999 Cooke, Andrea Spencer, "Environmental Leadership Award 2000: Paul Tebo, Hero of Zero," Tomorrow Magazine, Nov./Dec. 2000, pp. 10-16 Hawken, Paul, Lovins, Amory and Hunter, Natural Capitalism, Little Brown & Company, 1999 Poltorzycki, Stephen, Creating Environmental Business Value, Crisp Publications, 1998 Rowledge, Lorinda R., Barton, Russell S. and Brady, Kevin S., Mapping the Journey: Case Studies in Strategy and Action towards Sustainable Development, Greenleaf Publishing, 1999 Schley, Sara and Laur, Joseph, Creating Sustainable Organizations, Pegasus Communications, 1998 Willums, Jan-Olaf, The Sustainable Business Challenge, Greenleaf Publishing, 1998


A-1

Appendix A Framework Guidance Manual As set forth in the SD Alignment Report, the SD Alignment Framework consists of a set of suggested elements within each of three phases designed to move individuals within companies from awareness to action. Given that different companies have different needs, each company should adapt these elements to address its unique situation. The following is a recommended process for using the Framework. 1. Perform a SD alignment self-evaluation. The first step in using the Framework is to determine one’s SD Alignment situation. Section

2 consists of a Self-Evaluation Checklist that provides a structured way for a company to review information about its business situation and SD activities.

Based on the responses to the questions in the Self-Evaluation Checklist, prepare a description of the company’s situation, including its business circumstances, culture, history with change initiatives, stakeholder impacts and relationships, extent of SD awareness and commitment, SD actions taken, and external communications. Appendix B: Framework Trial Application sets forth an example of such a description.

Evaluate the extent of SD alignment achieved by top management, key business leaders and the organization as a whole. A blank template setting forth the elements within each of the three phases is provided in Section III. Based on the understanding of the company’s situation developed earlier, and the description of the alignment elements set forth in Section IV, evaluate the organization with respect to the extent to which it has satisfied each alignment element. The evaluation can be recorded as “High”, “Medium” or “Low” in the template with the colors “Green”, “Yellow” or “Red”. The template also contains a space to record comments to allow a reader to better understand the rationale for each evaluation made. An example of a completed self-evaluation template is shown in Appendix B: Framework Trial Application.

2. Develop a prioritized action plan. An action plan should be developed to achieve greater SD alignment. The self-evaluation

will reveal those alignment elements that may require further attention. Depending on a company’s situation and needs, certain elements may be more relevant than others. For example, a company that relies heavily on training and skill building may wish to emphasize the element that involves building SD into existing training. A company that has a centralized management style may wish to emphasize the elements that involve establishing policies, measuring and reporting progress, and accountability mechanisms, whereas a company with a more decentralized management style may wish to emphasize the elements that involve conducting alignment workshops in the business units aimed at building commitment from the bottom up.

If an element has been determined to be relevant to the organization’s situation and needs, priority for developing actions should be given to those elements for which the self-evaluation has shown a “low” degree of activity. The next priority should be given to those elements evaluated as “medium”.

Develop an action plan to implement each element, including responsibilities, schedule, metrics, and resources required. Ideas for actions can be found in Section IV. Also, Appendix B: Framework Trial Application has an example of a completed action plan for a hypothetical cement company.

3. Implement the action plan.


A-2

SD Framework Self-Evaluation Checklist This checklist is designed to help a company describe its situation so as to better perform a self-evaluation against the elements of the SD Alignment Framework.

Basic Company Information 1. What are the company’s core values? 2. In which regions of the world does the company operate? 3. To what extent is the company vertically integrated? 4. What is the competitive situation in the regions in which the company operates? 5. What is the company’s basic business strategy? 6. What is the company’s organizational model (e.g., centralized or decentralized? top down or

team driven?)

Change Initiatives 7. What kind of major change initiatives has the company undertaken in the last five years? 8. What were the lessons learned in implementing these change initiatives?

Stakeholder Impacts and Relationships 9. What are the company’s environmental and social impacts on its stakeholders? 10. What is the nature of the company’s relationships with its neighbors and other stakeholders? 11. What processes has the company put in place to deal with its stakeholders? 12. To what extent had the interaction with stakeholders influenced company policy and

decisions?

Sustainable Development Awareness 13. To what extent has top management gained awareness and understanding of sustainable

development (SD) issues? Has management gained exposure to a variety of perspectives on SD and concerns of stakeholders?

14. What has the company done to build awareness of SD among its key business leaders? 15. What has the company done to promote general employee awareness of SD?

Sustainable Development Commitment 16. Has the company set a strategy for how it will address SD? 17. Has top management communicated to key business leaders about the company’s SD

strategy, the business case for addressing SD, and the goals? 18. Has the company established an organizational infrastructure to support its commitment to

action on SD? a) Are dedicated staff members assigned to coordinate activities? b) Are formal environmental management systems in place? c) Have policies and guidelines been established that address SD? d) Are systems in place to measure and report progress?

19. Has accountability been established for meeting the SD goals? a) Are performance measures related to SD in place? b) Is the compensation of operations and other line managers related to performance on

SD? 20. Has the company trained employees on how their job responsibilities support the SD

strategy and goals? 21. Is SD performance and progress tracked, measured, and reported internally?


A-3

Sustainable Development Actions 22. Have commitments and goals for SD been translated into action? 23. What kinds of tangible environmental and social initiatives are underway? 24. What kinds of economic, environmental and social results has the company experienced

from its SD initiatives?

External Communication 25. In what manner has management communicated externally about its SD performance and

initiatives? 26. Does the company encourage its employees to serve as ambassadors to the local

community?

SD Framework Self-Evaluation Template This template can be used to record and display the results of the SD alignment self-evaluation. For each element, such as 1.1 Stakeholder engagement, the result of the self-evaluation can be recorded by coloring the corresponding box with the appropriate color: red for “low”, yellow for “medium”, and green for “high”. The table also provides a location for entering comments with regard to each element. Typically, the comment entered would relate to the basis of the self-evaluation. An example completed template for a hypothetical cement company is shown in Appendix B: Framework Trial Application.

Phase 1: Start at the Top = Low Implementation = Medium Implementation = High Implementation


1.1 [Comments]

1.3 [Comments]

1.4 [Comments]

1.6 [Comments]

1.10 [Comments]

1.2 [Comments]

1.7 [Comments] .

1.5 [Comments] . 1.8 [Comments] .

1.9 [Comments]



1.1 Stakeholder engagement



staff • Policies/

guidelines • Measure/


action plans

1.7 Pilot business unit workshop

1.2 External input session(s)

1.4 Strategy and action plans



A-4

Phase 2: Broaden Involvement = Low Implementation = Medium Implementation = High Implementation


2.1 [Comments]

2.7 [Comments]

2.2 [Comments] . 2.3 [Comments] .

2.4 [Comments] .

2.5 [Comments]

2.6 [Comments]

2.8 [Comments] 2.9 [Comments] 2.10 [Comments]

2.6 Business unit action planimplementation











A-5

Phase 3: Involve the Whole Organization = Low Implementation = Medium Implementation = High Implementation


3.1 [Comments]

3.2 [Comments]

3.3 [Comments]

3.4 [Comments]

Description of Framework Phases and Elements Phase 1 – Start at the Top Even in the most decentralized companies, people look to top management to provide leadership regarding issues that will affect the organization as a whole. Without the support of the handful of individuals who typically make up the top management group, the SD initiative will not succeed. One important aspect of leadership is to provide an example for others to follow. If top management demonstrates awareness and understanding of and commitment to SD, others will be inclined to follow. Another aspect of leadership is to identify new issues, such as SD, recognize their potential importance to the company, and translate the new idea into language understandable by the organization as a whole. Moreover, top management sets strategic direction for the company, which includes establishing long-term goals and how to think about balancing short- and long-term goals, an important aspect of managing SD effectively. Shareholders or owners are another key group that can significantly influence the success of the SD initiative. When the principal shareholders or owners of a company are a family or other small group, it is not uncommon to see them take a direct role in managing the strategic priorities of the company. Even in cases where shareholders are numerous, decision-making authority is often concentrated in a few individuals, such as pension or investment fund managers, who act on behalf of the shareholders as a whole. Given the key role that shareholders and owners can play in an organization, it is at least as important to ensure that shareholders and owners are supportive of the SD initiative as it is with top management. It is one of top management’s highest priorities to ensure that shareholders and owners are aligned with management’s strategic initiatives, including addressing SD.




Support implementation of business unit action plans



A-6

The steps involved in Phase 1 are graphically illustrated in Figure A-1 and include: 1.1 Stakeholder Engagement. By convening dialogue with external stakeholders, the

company’s management team can understand their concerns first-hand and use this to shape the company’s strategic response.

1.2 External Input Session(s). External thought leaders are invited for a discussion with the top management team to stimulate an internal conversation about the issue of SD and expand the management team’s perspective.

1.3 Strategic Planning Workshop. A strategic planning workshop convenes the management team to analyze how the company can best respond to external trends and build agreement on a SD strategy.

1.4 and 1.6 Strategy, Action Plans and Actions. The SD strategy is formalized, and goals and action plans are created to implement the strategy.

1.5 Formulate the Business Case. The SD strategy is put into a business context that defines how it supports the business’ goals in a compelling way, and provides a favorable balance of benefit versus cost.

1.7 Business Unit Pilot SD workshop. A pilot SD workshop is conducted in a business unit, providing a low risk way to learn how to move from strategy to implementation of tangible actions steps before broadening the initiative.

1.8 and 1.9 Pilot Action Plans and Implementation. Pilot actions are implemented so as to provide tangible examples of what SD could mean in practice. This builds a critical mass of skills that will be useful to guide further efforts and provides an early success story that can be communicated to the rest of the organization to build awareness.

1.10 Organizational Infrastructure. To support the commitment to action on SD, dedicated staff members are assigned to coordinate activities, policies and guidelines developed, and mechanisms are established to measure progress.

For most companies, this phase will last about one to two years.


Figure A-1. Phase 1: Start at the Top

Phase 1.1—Stakeholder Engagement By convening dialogue with external stakeholders, the company’s management team can understand their concerns first-hand and use this to inform the company’s strategic response.




1.2 Stakeholder engagement 1.2 External input session(s)




1.8 Action plans


staff • Policies/


report progress


A-7

“Stakeholder dialogue sessions would show people inside the company what the concerns are on the outside, and what kind of pressure might be brought to bear on them.”

Objectives Through direct engagement with people outside the company who feel strongly about SD

issues, have top management become aware that it is important to pay attention to and manage these issues

Inform the thinking, strategy and plans of top management by engaging in dialogue with people who have alternative ways of seeing the world.

The stakeholder dialogue sessions conducted during the WBCSD study were very useful in helping top management from WGC member companies better understand stakeholder concerns, which included: Societal impacts, such as health effects, worker safety, degradation of aesthetics and

natural resources, noise, dust, road damage, landslides. Environmental impacts, such as depletion of resources (limestone, fuel, other minerals), air

and water pollution, natural habitat destruction, loss of green spaces, climate change, and issues associated with AFR, including dioxin releases and accumulation of heavy metals.

Cement company responsibility issues, including ongoing communication and engagement. While the dialogue sessions revealed a number of stakeholder concerns, the stakeholders also expressed appreciation for the jobs created by the cement industry, its investment in community infrastructure, and its efforts to engage with stakeholders, as evidenced by the dialogue sessions themselves. Process Companies who have used this technique have set up a series of workshops or forums where they invite in a range of stakeholder representatives, for example from non-governmental organizations (NGOs), universities, investors, customers, the media, labor groups, and churches. The outcome can be used in the development of the company’s strategy, as illustrated in the examples of stakeholder engagement below. The Stakeholder Communication and Involvement substudy (Substudy 2) provides guidance and a detailed process for how to handle communication and stakeholder involvement. The following are guidelines to consider in this context, which are excerpted from that report: Stakeholders can be defined as all the individuals and groups who see themselves as

potentially affected by the operations of a company, whether on a local, national, or international scale. The actions and beliefs of stakeholders can have a direct impact on operations of the company.

Communication and/or stakeholder involvement should be an on-going process that can be intensified when a major decision or change is being considered.

To ensure that continued communication and/or stakeholder involvement is successful, the company must commit to carefully consider feedback received when making decisions and communicate how the input was considered. If stakeholders feel that their suggestions were ignored or dismissed, the process will be undermined and it will be difficult to have two-way communications with stakeholders again in the future.

http://www.wbcsdcement.org/final/reports.asp


A-8

The goal of engaging stakeholders is to build relationships with them and understand their issues and concerns with the company. The more solid these relationships are the more confidence the management team has that they will know about an issue before it reaches a crisis stage or is exposed in the press.

The following is a brief summary of a process for stakeholder communication and engagement, drawn from the same report: 1. Establish a communications team and plan which includes the following steps: identify a

lead for communications, form a communications team, develop a communications plan, identify a senior management champion, and implement the plan.

2. Define the intent of the communication activity: what is the purpose? What are you willing to do with the feedback? Is this a one-time event? Also, pretest the message for its clarity and credibility with a friendly audience before taking it to the intended outside audience.

3. Inform staff of the SD issues and keep them aware of communication/ stakeholder involvement activities. Staff at all levels should be encouraged to interact with stakeholders.

4. Identify the potential stakeholders. The concerns of these stakeholders should be mapped to understand how the company affects their interests and how they affect the company.

5. Engage selected stakeholders by providing regular opportunities: For unstructured information sharing (e.g., open houses) To listen to stakeholder concerns/interests (e.g., surveys, interviews, focus groups) To share information with stakeholders (e.g., public meetings, workshops, site tours)

6. The “final” step to continuous communication and stakeholder involvement is the response step – demonstrating to stakeholders that their suggestions were heard and considered.

Phase 1.2—External Input Session(s) External thought leaders are invited for a discussion with the top management team to stimulate an internal conversation about the issue of SD and expand the management team’s perspective.

Case Studies: Stakeholder Engagement

Ford held a Thought Leader Forum in August 2000 to provide an opportunity for Ford executives and NGOs to meet for discussions. This two-day off site meeting brought together about 20 senior executives from Ford with representatives of a variety of non-profits who are traditional adversaries, such as Greenpeace, Sierra Club and Oxfam. Based on the input received at this meeting, Ford has decided to focus on three critical issues: climate change, human rights especially in suppliers operating in developing countries, and proving to Wall Street that a company like Ford can demonstrate that these practices have value. After controversies surrounding oilrig disposal and operations in Nigeria in 1995, Shell organized a series of roundtables entitled “society’s changing expectations workshops” in 20 countries. These events included representatives from Shell, labor groups, church leaders, NGO’s, the media, and academics. This stakeholder engagement process also included worldwide opinion polling, focus groups with young people, and a survey of the experiences of similar companies. BHP has established a Forum on Corporate Responsibility (FCR) where members of the senior management team meet each quarter with leaders of key NGO’s and other leaders involved in environmental and community sectors to discuss issues of mutual interest. These meetings have been effective in helping managers to see that these groups are not radicals. Although there may not always be alignment of opinion, the exchange provides valuable input into the Company’s policy positions and overall strategy.


A-9

Objective Have the top management team broaden its awareness of SD, hear new perspectives on the issue, and have time to reflect and talk about what the implications could be for the company, the industry and its customers Process External thought leaders, such as senior executives from other industries, industry associations, universities, and non-governmental organizations (NGOs), such as the World Resources Institute or WBCSD are invited to meet with top management. This way a neutral party brings in new information to start the conversation. In contrast, if an internal staff person presents the information, their position in the company, past interactions with people in the room, and so on, can bias how the message is received. The content of these external input management meetings can include: Background information that describes the long-term environmental and social trends that

are relevant to the business and how these may create barriers to future growth and potential opportunities

How SD compares to traditional management approaches Industry-specific scenarios (being developed as part of this project) Case studies of how other companies inside and outside the industry are responding to

these trends Open-ended strategic questions that create

discussion, such as: - What could be the implications of SD for

our industry? - What could we gain by taking action now? - How could our company respond to these

trends in a way that increases our competitiveness and creates future options and flexibility?

- What additional data do we need to assist us in defining our strategy?

Useful references and content for how to frame this discussion are included in the Supporting Materials that supplement this report.

Phase 1.3—Strategic Planning Workshop A strategic planning workshop convenes the management team to analyze how the company can best respond to external trends and build agreement on a SD strategy.

Objectives Move from building awareness to developing the understanding of the management team

about the need for action around SD Agreement on the basic strategic direction of the company related to SD Outline of the business case for moving forward with the strategy

Case Study: External Input

For the last two years, Suncor has made SD a central theme of its annual senior management retreat of the top 40 people in the company. The first year, Paul Gilding of Ecos Corporation attended and last year Amory Lovins of the Rocky Mountain Institute spoke.


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Process A strategic planning workshop starts by creating a vision of where top management wants the company to go, defines the current reality to better understand the gap between where the company wants to go and where things are today, and then creates a SD strategy, as illustrated in Figure A-2.

Figure A-2. Strategy Arises Out of Gap between Vision and Current Reality

This workshop should involve the top management team. The activities involved in planning and conducting the workshop are described below. Prework. Prior to the workshop, information should be collected, analyzed, and summarized for participants to allow the workshop time to be used effectively. While the workshop itself will involve just the senior team, a broader group of managers should be involved in pulling together the information for this workshop. This will serve to increase awareness of the issues among more people in the organization. The information collected should address: External drivers for sustainable development Analysis of stakeholder expectations Identification and evaluation of key emerging issues, e.g., climate change, biodiversity,

social equity issues Analysis of regulatory trends in key markets Analysis of industry trends, including among competitors and customers Environmental and social performance measures Graphic of how the company fits into supply chain and biosphere/lithosphere, e.g., Ford is

creating a map that defines its connection to and impacts on the environment and society to provide a shared mental picture.

Members of management participating in the workshop should review and be familiar with the pre-work so they can draw on the information during the workshop. Workshop Format. Finding the right direction and strategy requires a common understanding of where you are and where you want to go. A sample process for how to structure this workshop is described below. This approach is based on the assumption that workshop participants will review the background materials before the meeting and be thoroughly familiar with their content.

Define Vision. This step will result in an aspirational and inspirational view of what the organization will strive to achieve based on a sustainable growth thrust. This should focus on

Vision

CurrentReality

SustainableDevelopment

Strategy


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what the organization would look like and the results it would be achieving versus exactly how. The aim is to envision with an open mind, not limiting the vision to what feels possible today. Define Current Reality. The next step is to define today’s situation so that there is a shared understanding of the gap between the vision and the current reality. When the gap is defined, a tension is created, which becomes a positive and creative force that draws everyone toward the vision. The better we understand our current reality, the more we can be positively influenced by the gap. The elements of the current reality will also provide highly focused inputs into the development of strategic options. Review the external drivers and trends that will shape the future

- External drivers for sustainable development • Stakeholder expectations • Regulatory trends

- Industry responses (competitors, customers) • What are competitors doing • What are customers doing • The business case rationale that others in industry have for taking action on SD,

e.g., the correlation between eco-efficiency and saving money, the business opportunities presented by industrial ecology business models, such as helping others deal with their waste (alternative fuels) and recycling other waste materials in their products (fly ash)

- Scenarios of the future (drawn from WBCSD). Considering alternative plausible futures in this workshop allows the management team to prepare for and prevail in a future shaped by sustainability factors.

Analyze the current situation in light of the trends discussed - Measures of current environmental and social performance - Current business objectives - Organizational strengths, such as ties to the community, global presence, technology

expertise - Barriers, such as slow to innovate, decentralized organization, lack of experience in

community outreach at the local level Identify the threats and opportunities

Define a SD Strategy. This step will result in the selection of a strategy around SD, as well as the associated goals and measures that will help make it a reality. Define Strategic Options. The group defines three to five possible strategic options. These typically include a range of possible responses, e.g., from incremental change to bold redesign. For example, related to strategies for alternative fuels, one cement company wants to control the production of waste to be used as fuel to the kiln. Another cement company is looking for partnerships with waste companies. Screen the Options. Then the group uses a screening process to decide which option to pursue. The steps include: Develop criteria to judge the advantages and disadvantages of the various options.

Examples of criteria could include appeal to various stakeholders (owners, regulators, communities, etc.), consistency with business strategy, short-term payoff, long-term payoff, level of fit with WBCSD scenarios, likelihood of successful implementation.

Create a screening process to rank the options based on the criteria selected. For example, a qualitative 1-5 scale rating can be developed for each criteria and each option can be


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rated accordingly. Consideration should also be given to how to weight the various criteria used.

The options are then screened to arrive at the most robust and competitive strategy. Select the Strategy. Once the strategic option is selected, the group should discuss this to confirm this feels right. In some cases, certain elements of the other options may be included in the final strategy. Then the group can brainstorm the key action items for implementation of the selected option.

Phases 1.4 and 1.6 SD—Strategy, Action Plans, and Actions The SD strategy is formalized, and goals and action plans are created to implement the strategy. Objectives Develop a clear, documented SD strategy Develop action plans and objectives to address the strategy Have the management team implement the actions

Process The SD strategic direction is defined in a documented form, which sets forth how SD will fit into the company’s strategy in a way that leverages its strengths. Examples of what this might look like for various types of companies include: A company with a

particular strength in operational effectiveness may select a strategy focused on making its operations as resource efficient as possible up and down the supply chain.

A company with a particular strength in product innovation may focus on developing products that capture market share while at the same time reduce adverse environmental and social impacts.

A company with a particular strength in customer service may focus on involving customers and other stakeholders in its business decision-making and being as transparent and inclusive as possible.

The next step is to develop a set of four or five key objectives based on the strategy. An action plan is then developed to implement the key objectives.

Case Study: SD Strategy Development

In 1999, the CEO of Ford Motor Company asked a group of senior executives to develop a corporate citizenship or SD strategy. The company views SD as a way to connect with customers. “Connection” is defined as respect and reciprocity and acknowledgement of the company’s interdependence with its customers.

William Ford, Board Chairman, says Ford has three obligations: “to provide superior returns to shareholders, to give customers exactly what they’re looking for, and to do it in a way that has the least impacts – or most benefit – for the environment and for society in general.”

The strategy has four primary commitments: Developing a clear set of business principles that allow each employee to consistently align his or her actions with Ford’s value of corporate citizenship. Engaging in dialogue with its stakeholders to deepen its understanding of corporate citizenship and sustainability. Setting transformational goals for its performance in corporate citizenship and sustainability. Sharing progress with stakeholders through vehicles such as a Corporate Citizenship Report.


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Case Study: Communicating About SD in the Business Context

Many companies position their internal communications about SD in the context of other business objectives: Volvo integrated sustainability into its business strategy by redefining its mission to create sustainable mobility for society: “to fulfill the transport requirements of people and goods through transportation systems that are simultaneously safe, secure, environmentally acceptable, cost-efficient, and user-focused”.* DuPont defined SD as “sustainable growth” and communicated internally that the long term survival and success of DuPont was based on increasing shareholder and societal value while reducing its environmental “footprint” throughout the value chain. TransAlta identified climate change as a key business issue and concluded that by being proactive, it could gain flexibility and reduce risk as it shifted to deregulated electricity markets. Cement Company B: “The way to make environmental progress is to tie it in to making the plants work efficiently. The plant that runs well technically is probably doing a good job environmentally. There is a lot of leverage to be found in efficiency (use of slag, fly ash, etc.).”

Examples of actions could include: Coordinating a pilot workshop and project in one business unit (BU). Establishing the internal infrastructure needed to implement the strategy (see section 1.10). Communicating the new strategy to employees and external interested parties. Establishing a formal process to identify emerging issues that could motivate action, such as

proposed legislation, a high profile incident in the industry. The senior management team then takes responsibility for implementing the actions agreed to.

Phase 1.5—Business Case Formulation The SD strategy is put into a business context that defines how it supports the business’ goals in a compelling way. Objective Develop a powerful, convincing business case that will serve as the basis for enrolling the

company’s business units down the path of SD Refine the output of the workshop and other discussions into a persuasive, influential set of

communications around business value of SD, tailored to the intended audiences Process The business case consists of the rationale why addressing SD is important for the business. An important element of the business case is the value to the business of taking action on SD, expressed in terms people in the organization will relate to. Formulation of the business case should begin in the strategic planning workshop. Following the workshop, there may be additional work required to collect data and analyze the soundness of the business case outline developed. The business case should then be refined and set forth in a set of communications tailored to the different audiences within the organization. The content of these communications could include the business rationale for action, including how the existing business goals and strategy will be furthered, the proposed SD strategy, the action plan for achieving the strategy, the results expected, and the goals and measures that will help make it all a reality. The Business Case substudy (Substudy 3) also found that most successful initiatives that demonstrate SD commitment are clearly aligned with the strategies and goals of the company.

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Examples include: Eco-efficient supply chain management – optimization of supply chain logistics to maximize

efficiency, thereby minimizing both costs and environmental impacts (e.g., Stora Enso transportation system from mill to market).

Responsible closure – consideration of social and environmental impacts in decisions about timing and approach toward closure of mature mineral extraction sites, which have an important bearing on company reputation in future engagements (e.g., Rio Tinto).

Industrial ecology – identification of innovative opportunities to re-use consumer or industrial wastes as feedstocks for manufacturing processes, thus promoting cyclical flows that conserve resource value (e.g., Taiheiyo Eco-Cement factory).

Value chain partnerships – deliberate engagement with downstream customers and/or upstream suppliers to enhance product sustainability across the total life cycle (e.g., Dow Chemical).

Phase 1.7—Business Unit Pi lot SD Workshop A pilot SD workshop is conducted in a business unit, providing a low risk way to learn how to move from strategy to implementation of tangible actions steps before broadening the initiative. Objective Extend awareness of SD beyond the top management group by holding a pilot workshop in

one business unit (BU) around SD The outcome of these workshops will be an action plan for the BU, including one to three

major activities that could be pilot projects Analyze the lessons learned in the pilot to better formulate strategy, design future business

unit workshops and tailor internal communications on SD Process After a business unit organization is selected to be the pilot, a business unit workshop will be held to build awareness and develop a business unit plan for how to align with the company SD strategy. It is important to organize this workshop with participants who work together so they can build a common understanding of the situation and work together to develop an action plans that they will implement together. This session can include 15-30 selected people from various parts of the business unit organization, including the management team, representatives of facilities and other staff functions that serve the BU. Prework. A key purpose of this exercise to raise awareness and deepen understanding of SD, why it is important to the company, and senior management’s strategy and commitments. Therefore, participants should be provided with background material before the workshop to begin this learning. These background materials can be similar to those used in the strategic planning workshop (Element 1.3), tailored to the situation of the BU. Workshop Format. The workshop addresses the following key areas: Context setting

- Describing environmental, societal, and industry trends - Overview of sustainable development concepts - Using scenarios to envision possible future reality - Review of the Business Case the company has defined for taking action

Exploring current reality - Creating a map to define how the company fits in to this larger picture


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Case Study: Business Unit Workshop Format

Dow has organized several one-day workshops for business unit leaders. The workshop content is carefully tailored to provide data and statistics on 21 performance measures for that business. The format addresses three key objectives:

1. Educating and raising awareness - background reading, WBSCD scenarios, and quizzes with instant electronic voting--the latter serves to heighten people’s awareness about their lack of knowledge. The focus is on the products of the business.

2. Assessment of the current business – this provides participants with a picture of how their business currently performs on 21 metrics including: - Environment- based on Dow’s EHS 2005 goals and a few others (CO2 emissions,

renewable/non-renewable resources, extent of life cycle assessment for product line) - Economic - conventional measures and a controversial one: how much of your

business is to customers in OECD countries versus non-OECD. - Social dimension – results from global community surveys.

3. Link to business and strategy – this is briefly addressed in the one-day workshop.

- Identifying barriers and strengths Formulating a vision

- Brainstorming an individual vision of the ideal future - Developing a shared vision of the organization’s future

Developing action plans, in light of the gap between the vision and the current reality, with both individual and team commitments (high leverage initiatives) - Individual actions - Team actions

As this is a pilot workshop, there should be a comprehensive evaluation of the effectiveness of the content and format, e.g., ask for participants to provide feedback on how effective it was, test participants knowledge before and after, etc. This review should be used to refine and improve the workshop format for future offerings.

Phases 1.8 and 1.9—Action Plans and Pilot Actions Pilot actions are implemented so as to provide tangible examples of what SD could mean in practice. This builds a critical mass of skills that will be useful to guide further efforts and provides an early success story that can be communicated to the rest of the organization to build awareness. Objective Implementation of pilot actions could serve as a tangible example of the value of the SD strategy and will help in raising internal awareness of what it means in practice (see the sidebar on Ford’s renovation of its Rouge complex as an example of how a project can have a symbolic value in addition to its tangible results). Process Examples of pilot projects in the cement industry could include: Quarry: saving natural resources by using secondary materials Combustion: saving coal by using alternative fuels Grinding: saving clinker by using slag and fly ash.


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Case Study: Symbolic Pilot Action

Ford has committed to renovating its Rouge Complex into a model of 21st century manufacturing, called the Heritage Project. This high-profile project serves as a symbol of sustainability, particularly to employees in Michigan, and a metaphor for corporate social responsibility.

This complex has a long history as the birthplace of mass production and the $5 a day wage, which contributed to the creation of the middle class in the US. In the mid-1990’s, GM shut down its similar large old plant in Flint, Michigan amid much controversy. In 1997, Ford committed to keep the Rouge complex open and renovate it to allow lean and flexible manufacturing processes. The company acknowledges the close relationship between the plant and the community’s health. Ford plans to restore the site, clean up the waterfront, and renovate the plant to enable just in time manufacturing processes.

These pilot actions are then implemented by the BU, perhaps with support from the dedicated SD staff function. The mechanisms to track and report progress, described in section 1.10, are important to maintain to ensure that the action plan is completed. Following the workshop and the pilot action initial implementation, there should be an assessment of lessons learned before advancing to the next phase of broadening involvement in the organization. Questions to consider include: Is the message of why SD important

for the company clear and compelling?

What could we do differently to improve the business unit workshop format and content?

What lessons can we learn from the implementation of the pilot projects? Are the mechanisms in place to measure and report progress working? Are the

commitments being implemented according to plan? Are there any changes in the external environment or stakeholder interests that we should

consider before we proceed with this strategy? The results of this evaluation can be used to develop the plans for more extensive employee communication and workshops in the next phase.

Phase 1.10—Organizational Infrastructure To support the commitment to action on SD, dedicated staff members are assigned to coordinate activities, policies and guidelines developed, and mechanisms are established to measure progress. Dedicated Staff

Objective. Dedicate sufficient staff resources to ensure that the strategy is implemented. Process. A team of dedicated managers should be assigned to have an overall coordination role for the sustainable development initiative. Care should be taken to select well-respected, experienced, internal people for this team, preferably with experience in line management and organizational change. Their role will involve: Serving as the internal champions to promote attention to and action in this area Ensuring that the actions being pursued in various parts of the company are coordinated

and reinforce each other Sharing best practices and lessons learned and promoting internal communication


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Identifying needs for skill building and providing technical expertise as appropriate Tracking and reporting progress Facilitating workshops

Where these staff are located within the organization can also create additional synergy and integration of SD considerations into business decision-making. For example, several leading companies have located a Sustainability Integration team in the same organization at the corporate level that includes functions for strategic planning, external affairs, and/or EHS. Many SD issues require coordination across departments and functional areas, which should also be considered in how this team is established and its authority.

Case Studies: Organizational Responsibilities Suncor formed a Sustainability Integration team consisting of senior people from each business and the corporate functions. It is chaired by two members of the Corporate Committee and reports to the Committee. The Integration team’s mandate is chart the path forward. The Team’s high-level reporting to the Corporate Committee makes it easier to make the case for resource commitments to goals that cut across organizational boundaries. Another important organizational decision at Suncor has been to locate the EHS department within the Chief Financial Officer’s (CFO) organization, where the strategic planning and business development functions are also housed. In practice, this arrangement has tremendous benefits according to Gord Lambert, Director of Sustainable Development. By reporting to the CFO, he gets a “front line view of big strategic issues facing the company over the short and long term”. Sustainability and the triple bottom line can be integrated at most fundamental levels of business decision-making. Shell created a Sustainable Development Group at the corporate level to help operationalize SD and devolve responsibility for management as fast as possible. This group champions the SD framework, develops tools, puts on training programs, and develops the Shell external report. The group is located in the division of Strategy, Environment and External Affairs. This allows cross-fertilization between staff in areas such as scenario planning, strategy development, HSE management, policy development and communication.

A SD Committee provides the mandate to the SD Group and hears proposals and steers actions. This Committee is chaired by the Chairman of the Committee of Managing Director and comprises senior executives from the main businesses and heads of functional departments. An SD Panel supports the SD Group. This has the same broad representation but members are at a senior, but more operational level. They represent the businesses and functions in the development of common approaches and tools including the exchange of best practice. Each of the businesses has their own SD focal points and networks for driving the SD approach into their activities.

TransAlta created a Sustainable Development department to centrally coordinate the initiative.

This department consolidated traditional EHS roles with responsibility for more strategic and proactive initiatives in one department. The group includes people with strategic planning and economic backgrounds as well as EHS expertise. Selected operations-level engineers are chosen to work in the department for four months before they begin their operations jobs. This serves to disseminate learning and environmental perspectives more broadly into the organization. Cement Company D established a small project team to help implement its company-wide

maintenance process initiative. A senior operations manager was assigned on a full time basis to head the five-person project team. The team had one-on-one meetings with plant managers to raise awareness of the initiative, conducted training, served as staff to the senior management steering committee, provided tools to support implementation at the plants, and audited implementation.


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Case Study: Policies and Guidelines

BHP has issued a new Company policy, Working Responsibly that addresses its position on health, safety, environment and community relations. It includes new commitments such as support for fundamental human rights, a high standard of business conduct and sustainable community development. The policy is supported by Company-wide management standards for safety and environment and community. Audits are used to check implementation of the requirements of BHP standards, as well as verify compliance and management system effectiveness.

Case Study: Goals and Targets BHP has set environmental and community and social goals and targets. These serve as the basis for reporting progress and performance on a five-year cycle. Dow In 1995, as a way to “hardwire sustainability concepts into the fabric of the global business” Dow established 10-year EHS goals. These 2005 goals were committed to by the Corporate Operating Board (COB), which consists of the eight business group presidents, six functional heads, and the CEO. Examples of goals include cutting air and water emissions 50% globally. DuPont has set the following sustainable growth goals to be achieved by 2010: - GHG emissions reduction to 65% of 1990 baseline - Hold energy use flat at 1990 levels - Obtain 10% of energy from renewable resources

Policies and Guidelines Objective. Establish policies and guidelines that translate the company’s expectations for performance related to SD into an easily understood, well defined format.

Process. The policy is issued by senior management and clearly defines the company’s commitments regarding SD. It is then widely distributed. For example, Shell revised its business principles to reflect SD commitments. These principles define the ethics the company applies to all its operations worldwide. Shell translated its principles into 51 native languages so that over 99% of Shell employees can read them in their own language. The high-level policy commitments should be supported by more detailed guidelines, which provide practical expectations that

can be audited against, if the company so chooses. The internal SD group can take the lead on developing the guidelines with involvement and support from representative parts of the company. The process of developing the guidelines can also serve as a way to raise awareness among those drafting them about what SD means in practice. For example, BHP has found that having representatives from the business units involved in developing the policy has been an effective way to gain organizational alignment around its SD goals. Mechanisms to Measure/Report Progress Objective. Once the strategy is set and action plans defined, the policy issued, and guidelines established it is critical to ensure there are mechanisms to confirm that all these commitments are being acted upon. These mechanisms could include a defined set of measures to track progress and an established process to collect, analyze, and report this information to key decision makers. Process. The mechanisms used will vary by company. Examples include: Written status reports

on progress on action plan commitments and/or updates at management meetings

Objectives and targets defined in business plans and annual performance objectives of key managers

Integration of SD related objectives into performance appraisal and compensation process External promotion of the policy and action plan commitments with subsequent public

reporting on progress in external reports or meetings with stakeholders


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Case Study: SD Report

To develop its SD report, Lafarge actively involved both senior management and external stakeholders to shape the issues discussed and the expectations for action. Lafarge found a number of alignment-related benefits to undertaking this process: Focused the attention of the organization on SD, particularly once it became understood that the report would be distributed outside the organization Because some of the issues dealt with were new to people in the organization, a significant amount of dialogue was needed to arrive at a common point of view. This raised people’s understanding of the issues and commitment to what needed to be done. Raising and discussing controversial issues helped move the organization forward.

Defined SD performance measures followed by regular collection of information and internal reporting on progress

Phase 2 – Broaden Involvement The support of top management is not enough. The SD initiative will need the involvement of the next level of management as well—the key business leaders. These are the real “movers and shakers” within an organization. They have the power to make an initiative succeed or fail. They are the people who are well respected in the organization as role models, who have a network of influential relationships, who are responsible for managing others, and who have helped in the success of other change initiatives. The goal of Phase 2 is to ensure that SD thinking becomes integrated into business thinking. By far the greatest level of effort in alignment activities should take place in this Phase to gain the commitment of key business leaders. This reflects the overall design principle of the framework that SD alignment activities should be line management focused. Phase 2 can take from two to three years. The steps involved in Phase 2 are graphically illustrated in Figure A-3 and include: 2.1 Broadcast Internal Communications. Top management uses a variety of ways to

internally communicate to key business leaders about the company’s SD strategy and the business case for addressing SD.

2.2 One-On-One Discussions. Top management holds direct one-on-one conversations with key business leaders to build understanding and engagement.

2.3 Local Stakeholder Engagement. Managers at all organizational levels are involved in conversations with stakeholders to build awareness and reinforce the rationale for the company’s SD strategy.

2.4 Business Unit SD Alignment Workshops. A targeted group of influential leaders from around the company participate in workshops designed to build awareness of SD and commitment to the SD strategy.

2.5 and 2.6 Business Unit Action Plans and Implementation. Individual and team action plans, short and medium term objectives, and tangible initiatives are developed and implemented to bring to life the new awareness and commitment to the SD strategy.

2.7 Accountability Mechanisms. Internal mechanisms such as performance measures, rewards, and linking compensation to achievement of SD goals encourage behavior in support of the goals.

2.8 Measure/Report Progress. Progress towards achieving SD goals is tracked, measured

and reported internally to help maintain the momentum of the SD initiative and reinforce accountability.


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2.9 Team Support Networks. Discussion groups, coaching, and advanced training are made available to key change leaders to maintain their motivation, support them in advancing change, and help them overcome the inevitable internal barriers to change.

2.10 External Communication. Regular communication by top management to external audiences about SD progress supports and reinforces the importance of the initiative internally.

Awareness Understanding Commitment Action Maintain

Momentum

Figure A-3. Phase 2: Broaden Involvement

Phase 2.1—Broadcast Internal Communications Top management uses a variety of ways to internally communicate to key business leaders about the company’s SD strategy and the business case for addressing SD. Objective Raise awareness of key business leaders about SD, the company’s SD strategy, and the business case for action. Develop an understanding by key business leaders of the importance of taking action. Process Internal communication is most effective when it is reinforced through several types of channels, such as: Speeches Internal written communications, such as newsletters, reports, e-mail, and Intranet

communications Discussion that is integrated into existing management meetings and training sessions

The content of these communications could address: What is SD? (or the company’s terminology and definitions of these concepts, such as

“corporate citizenship” or “sustainable growth”) What actions are leading companies taking to respond? (Including stories of successes--

what was done and the results)


2.6 Business unit action plan implementation


2.3 Local stakeholder engagement dialogue








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Senior management’s view of why this is important; statement of the business case for taking action

Successes and learning from pilot actions. Particularly early on in the change initiative, it is important to widely communicate positive examples of internal progress SD. This provides strong positive reinforcement to those who have taken the proactive step to change and reinforces to the rest of the organization that change is possible and can have tangible positive results. For example, success stories can be published on the company web site or in newsletters or memos from senior management.

Phase 2.2—One-On-One Discussions Top management holds direct one-on-one conversations with key business leaders to build understanding and engagement. Objective Reinforce to key business leaders that SD is a subject of importance to top management. Process Top management, supported by senior staff, conduct individuals meetings with key business leaders to discuss the importance of SD, the actions the company is taking, expectations of them, and how they will be tracked. This provides people with an opportunity to understand more fully the importance of the subject and what is expected of them. For example, at DuPont, the Vice President of Safety, Health, and Environment, often joined by the CEO, conducts face-to-face meetings with each business unit annually to acknowledge the work they have done in SD and discuss where the company is heading.

Phase 2.3—Local Stakeholder Engagement Dialogue Managers at all organizational levels are involved in conversations with stakeholders to build awareness and reinforce the rationale for the company’s SD strategy. Objective Raise the awareness of key business leaders of the importance of SD to their stakeholders and therefore their business units Process The company should establish a process to engage with stakeholders at the local level. The Stakeholder Communication and Involvement substudy (Substudy 2) provides guidance and a detailed process for how to handle communication and stakeholder involvement at the local level. The information learned at the local level can be collected and analyzed at the business unit or geographic level to identify trends. This information can then be integrated into ongoing internal communication and training activities. (See section 1.2 in Phase 1 for details on a process for stakeholder engagement.)

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Case Study: Business Leader Training Ford plans to conduct an intensive education and training program for critical leadership positions. The aim is to build the competency of a select group of leaders from around the company who have leverage to affect change. Dow has a network of 3,000 high-level leaders, mostly people who have responsibility for many other people so they can bring ideas down into the organization. There is an established process to annually conduct 2-day training sessions with these people to educate them in the company strategies. SD will be integrated into these training sessions.

Case Study: Stakeholder Dialogue

Cement Company C’s President and COO initiated a stakeholder dialogue and communication program, which has been implemented at all the company’s plants. It consists of:

Basic information tools, including plant tours, publications and brochures (cement process, alternative fuels use, environmental policy, environmental report, image surveys), media relations (two or three media events per year at each plant), and an opinion leaders relationship program (a list of 15 people for each plant who should be met with once per year, and an additional list of 300 people) Stakeholder dialogue committees Image survey

The stakeholder dialogue process was entered into with a policy of openness. It has been in place at all plants, with a total of about 50 meetings held since 1995. Participants include village representatives, local environmental groups, regional administrators, employees, local institutions (such as parks).

Phase 2.4—Business Unit Level SD Alignment Workshops A targeted group of influential leaders from around the company participate in workshops designed to build awareness of SD and commitment to the SD strategy. Objectives Gain the individual commitment of key business leaders to support and take action on SD Build competency in SD of key business leaders who have the leverage and the internal

influence to effect change

Process Many companies have established leadership development networks where they provide promising middle managers with targeted training and skill building. This is the key audience for the activities described in this step. These workshops should be organized by business unit and the participants should be selected according to criteria, such as: Representatives from various

business functions and levels in the organization who could most help or hinder this initiative People who have responsibility for many other people so they can bring ideas down into the

organization Rising stars in the organization Individuals who have demonstrated a personal interest in environmental, social, or strategic

issues People who have led successful change initiatives in the past Individuals who are well connected within the organization, for example, have worked in

various departments or locations and have influence


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Case Study: Key Performance Indicators

Cement Company D successfully instituted a rigorous maintenance program that involved installing a standard core of systems, techniques, tools and practices. This program was mandatory and included identification of nine key performance indicators (KPIs) on production and maintenance. These were tracked across the company. The company set standards and systems that were replicable across the company and held people accountable. In addition, a yearly audit was conducted.

Individuals who are well respected in the organization and viewed as role models, and who would bring others along if they commit to an initiative

It is important to organize these workshops with participants who work together so they can build a common understanding of the situation and the goals and work together to agree action plans. The workshop prework and format will be based on the outline used for the pilot business unit workshop (described in Section 1.7), modified as needed based on the outcome of the pilot. It can be quite valuable to tailor the content of each workshop to the particular business. For example, at Dow, the SD staff invest a couple weeks of time to collect specific data about the business unit operations so that the content of the workshop can be tailored to the BU.

Phases 2.5 and 2.6—Business Unit Action Plans, Ini tiative Teams, and Implementation Individual and team action plans, short and medium term objectives, and tangible initiatives are developed and implemented to bring to life the new awareness and commitment to the SD strategy. Objective Within each BU, action plans will be in place, teams will be formed, and actions taken to implement the plans. Process See the discussion of action plans in Sections 1.8 and 1.9. As part the action plans, it is expected that teams will be formed in the business unit with responsibility for implementing the actions.

Phase 2.7—Accountabil i ty Mechanisms Internal mechanisms such as performance measures, rewards, and linking compensation to achievement of SD goals encourage behavior in support of the goals. Objective Put mechanisms are in place that positively and/or negatively reinforce accountability for taking the actions necessary to implement the SD strategy and action plans. Process The following are examples of internal accountability mechanisms designed to encourage desired behavior around SD. Performance Measures: Once people and teams have made commitments, it is important to establish mechanisms to hold them accountable for performance against the goals set. The action plans developed in the workshop should be translated into metrics. These metrics should include a mix of both project metrics (such as percent of people trained) and results metrics (such as reduction


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in waste per kg of product). The Key Performance Indicators substudy (Substudy 5) report provides more detailed guidance on how to develop appropriate performance measures. For example, it sets forth eight principles that should be used as performance measure selection criteria. Indicators should: Be relevant to enhancing the environment, human health, or quality of life Support decision-making about how to improve performance Recognize the inherent diversity of business Support benchmarking and monitoring over time Be clearly defined, measurable, transparent and verifiable Be understandable and meaningful to identified stakeholders Be based on an overall evaluation of a company’s products and services, focusing on areas

directly under management control Recognize relevant issues related to upstream and downstream activities

In addition, practical experience has shown that there are several other useful criteria for selecting a set of SD performance indicators: The indicators should be: Relevant to the business goals and strategies of the enterprise Implementable in a cost-effective manner (e.g., use existing data when possible) Consistent across different sites or facilities (use appropriate normalization) Sensitive to regional, cultural and socio-economic factors Few in number (focus on the critical KPIs)

The Key Performance Indicators substudy report also has recommendations for the process companies should follow in KPI selection. The steps include: Step 1. Consider Stakeholder Needs. This step examines the needs and expectations of various stakeholder groups, which is essential to any SD improvement program. It provides a useful starting point for identifying important SD aspects and worthwhile objectives. Step 2. Identify Important Aspects. This step addresses the question, “What aspects of our enterprise are most important in fulfilling our commitment to sustainability?” Step 3. Establish Company Objectives. This step involves choosing a high-priority subset of those aspects identified in Step 2, and establishing broad objectives for performance improvement. Step 4. Select Operational Indicators & Metrics. This step takes the company objectives established in Step 3 and determines how they will be implemented throughout the company’s operations. Step 5. Set Targets and Measure Performance. This step is actually an ongoing continuous improvement process. Managers periodically establish specific, measurable targets that represent milestones for short- and long-term SD improvements. Then they monitor performance relative to these targets, and update the targets or performance indicators as needed. Rewards: The aim is to provide ways to positively reinforce the types of behavior and action the company wants to encourage, such as by: Integrating SD commitments into individual performance objectives, which are tied to

performance appraisal and compensation



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Case Study: Performance Incentives

To operationalize the SD vision with operations, TransAlta set a goal for improvement that required action by all business units. In 1994, the company set a goal to return greenhouse gas emissions to 1990 levels by 2000. This clear measurable goal was instrumental in translating the commitment to SD into an actionable target. The goal was tied to incentives and implemented through the creation of an internal CO2 emission costing and trading scheme. This scheme helped shift people’s thinking to realize that CO2 emissions have value and translated SD into practical business terms.

Other incentives to encourage buy-in and commitment to the SD initiative included pay performance incentives primarily focused on the Generation business. There was a quantitative/qualitative incorporation of sustainable development objectives into performance review and individual’s annual objectives. The inclusion in objectives rolled down to directors and managers. One example of a performance incentive was Generation unit employees could earn up to 3% of their salaries if they reduced "heat rate" by 0.5%. (Heat rate relates to the plant's efficiency, which relates to emissions.)

Establishing friendly internal competition among facilities, regions, or business units related to key SD measures

Using suggestion programs where the employee whose suggestion is implemented receives recognition and even a percentage of the cost savings

Creating a high profile award program to widely recognize leadership and positive examples of change

Management should also ensure that other existing incentive or reward schemes do not conflict with the objectives of the SD strategy.

Negative Reinforcement: While positive reinforcement mechanisms are preferred, it is often necessary to establish clear negative consequences for those who do not make this a priority or subvert the process. Examples could include: One on one discussions by senior managers with individuals who are not cooperating

Case Study: High Profile Award Program

DuPont has had an environmental award program in place for 11 years, which is now called The DuPont Sustainable Growth Excellence Awards. The objective is to lift up heroes and show them to the organization. The award selection committee is chaired by a senior business leader and includes 8 – 10 external judges from around the world. The aim is to get respected, well known people, like Katie McGinty (former Chair of the White House Council on Environmental Quality), in addition to about the same number of internal people.

There is an impressive ceremony to present the award. People are brought in from around the world to an attractive location. The Chairman is there and the winners sit at table with the leaders of their BUs and gain recognition.

The categories of DuPont’s SHE Commitment, which includes triple bottom line criteria, are used as the award categories. Each team or individual is given $5,000 to give to an external organization. 12 finalists are selected from 70 nominated, from several hundred submitted. A booklet is published with the description of the winner’s achievements and this is distributed to all employees. An additional benefit of the program is that it identifies where the success stories are in the company.


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Communication of progress on goals broadly so there will be peer pressure on who are falling short

Effect on compensation or promotion

Phase 2.8—Measure/Report Progress Progress towards achieving SD goals is tracked, measured and reported internally to help maintain the momentum of the SD initiative and reinforce accountability. See discussion of Mechanisms to Measure/Report Progress in Section 1.10.

Phase 2.9—Team Support Networks Discussion groups, coaching, and advanced training are made available to key change leaders to maintain their motivation, support them in advancing change, and help them overcome the inevitable internal barriers to change. Objective Create ways for people who are motivated to act to be supported by their peers and deepen their learning. Without this, these motivated individuals may get frustrated when barriers are encountered and their intention and willingness to invest time and energy is dissipated. Process Examples of support mechanisms could include: Small discussion groups: These groups meet regularly and can have several objectives: To conduct problem-solving brainstorming sessions to address particular challenges of

participants To share best practices and lessons learned to spread this valuable knowledge more widely

throughout the company To discuss articles, books, and other concepts to deepen their understanding of the

concepts and how to apply them

Leadership networks: Leaders from around the company are selected to participate in periodic meetings. The content can be similar to the first two items above. In addition, skills training can be provided, such as techniques for promoting organizational change or life cycle analysis Coaching: The company arranges for internal or external facilitators to provide one-on-one coaching to key internal leaders who are closely involved with the SD initiatives More in-depth training: A range of skills will be required to advance change towards SD and a familiarity with using new tools such as life cycle assessment, stakeholder dialogue processes. Beyond the initial workshops, there will be a need for more in-depth training for key leaders, those with specialized roles, and the broader employee base.

Phase 2.10—Regular Communication Communication by top management to external audiences about SD progress supports and reinforces the importance of the initiative internally. Objective Maintains momentum of the SD initiative as people hear about positive examples of change and see that top management continues to communicate its importance.


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Process Examples of internal and external communications by top management include: Participation in and endorsement of business unit SD alignment workshops Communication of business case in speeches, internal meetings, intranet, videos, and

written communications. For example, at the more local level, making the case that to obtain approval for a quarry expansion, the plant’s environmental practices need to be flawless, particularly regarding the existing quarry. In addition, it is necessary to develop an outstanding public relations policy, involving image, communications, and consensus building.

Public communication of the company’s commitments, for example, in speeches or external reports

Tracking progress and asking for updates, reports Making progress on the action plans a regular agenda item at management meetings Supporting the SD Integration Team and designated staff with resources, time, etc.

Positive examples of progress towards the goals should be widely communicated. This provides strong positive reinforcement to those who have taken the proactive step to change and reinforces to the rest of the organization that change is possible and can have tangible positive results. Examples of how to do this include: Create an award program to recognize and celebrate particularly noteworthy actions Publicize success stories on the company web site and in internal communications such as

newsletters and memos from senior management Organize internal celebrations to mark occasions when milestones are completed Integrate discussion and status reports on progress into public reporting as a driver of

internal progress Another key way to maintain interest and momentum is to continue regular external stakeholder engagement and communication activities. Suncor reports that the process of external reporting, such as speeches and external reports, have been a useful vehicle to promote dialogue on SD. Preparing these communications provides an opportunity to focus people's attention and capture the most recent thinking.

Phase 3 – Involve the Whole Organization The participation of everyone in the organization will be necessary to implement the action plans developed by leadership. It will be helpful to gain the understanding and participation of the key parts of the organization that need to make the necessary changes happen. Although a broad based training initiative is not necessary to reach everyone in the organization, at a minimum there should be communications to create general awareness of SD, why it is important to the business, and what this means in practice. This creates the basis of understanding that reinforces the need to take action when specific initiatives arise. This phase can take three to five years. The steps involved in Phase 3 are graphically illustrated in Figure A-4 and include: 3.1 Employee Awareness Communications. An ongoing communication program using a

variety of mechanisms such as speeches by management, newsletters, and discussion at staff meetings helps raise the general awareness of employees.


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3.2 Incorporate into Existing Training. Established training programs are being expanded to incorporate training about the company’s SD strategy and goals and how this relates to employee’s job responsibilities.

3.3 Suggestion Programs. Suggestion programs provide an outlet for good ideas to surface and an incentive to employees to think creatively about how to take action in support of the goals.

3.4 Employees as Links to Community. Employees help externally communicate about the company’s SD initiatives by participation in local community events.


Figure A-4. Phase 3: Involve the Whole Organization

Phase 3.1—Employee Awareness Communications An ongoing communication program using a variety of mechanisms such as speeches by management, newsletters, and discussion at staff meetings helps raise the general awareness of employees. Objective Employees throughout the company understand the company’s SD strategy and why action on SD is important to the success of the business. Process A plan should be designed to provide regular and reinforcing communication about these issues over time. These communications may start early in the entire process, for example, soon after Phase 1 when the company has established its strategy. As the initiative is taken on more broadly by the organization in Phase 2, the nature and scale of internal communications should expand. The key messages to be communicated include: The business case for taking action What the company will need to be doing differently, with practical examples Internal or external success stories, for example, what does it look like in practice, stories of

tangible initiatives







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The mechanisms for this internal communication are similar to those suggested in the earlier phases including: Newsletters, internal publications, intranet, videos Posters with simple messages Speeches by senior management Discussion at staff meetings External public reports/brochures that are also disseminated to employees

Phase 3.2—Incorporate into Existing Training Established training programs are being expanded to incorporate training about the company’s SD strategy and goals and how this relates to employee’s job responsibilities. Objective All employees understand what action is expected of them as it relates to the company’s SD strategy and programs. They have the awareness and understanding to appreciate why it is important to take actions to support this business initiative. Process The information conveyed in broad employee communication should also be integrated into existing training programs, such as new employee orientation, operational training, and environmental refresher training programs.

Case Study: Internal Communication

TransAlta routinely includes stories and information about SD in its various communication mechanisms, for example: The company publishes a monthly progress newsletter called the Sustainable Development Dashboard. An annual technical excellence conference features some presentations related to sustainable development. The employee news network, a web based news distribution, includes regular news updates of SD initiatives and results. Business units continually update the site with new information. Examples of information communicated here include achieving safety milestones, winning awards for EHS performance. Internal management systems ensure regular reporting and communication. CEO updates – this weekly note, sent to everyone in the company, describes recent events, and SD is often featured. Celebrations are held when major milestones are reached, e.g., a videoconference among plants. The progress on the company’s CO2 reduction goal is an agenda item at the regular meetings of TransAlta's Board of Directors.

Cement Company A uses several mechanisms to communicate internally on sustainability: The monthly corporate magazine has a regular topic on sustainability. This is published 2-3 times per year and is distributed to all employees. Annual President’s message – addresses “companies and customers and mass communication to employees because it shows his strong will and target of our company for the year. Everyone listens to what he says” because this is where the president conveys the policy for the year so this is a very important method of communication”. The Intranet is also used, to which most employees have access.


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Case Study: Award Program

BHP has found that its internal award program related to environmental, safety, and community has been a successful way to increase awareness and reward people who have demonstrated practical leadership on the ground. This program is open to all employees and contractors. The award winners receive a trophy and are invited to headquarters to receive their award from the Managing Director. The award is $10,000 that they can contribute to the charity of their choice.

There are alternative views on how broad and inclusive stand-alone SD training needs to be. For example, Dow and Ford both reported that they do not plan to train everyone. How to respond to SD key implications are often a matter of high-level corporate strategy so some question why it is necessary to train a shop floor worker in these issues. In contrast, TransAlta and Volvo trained everyone in the company and found it led to greater understanding so there was more buy-in when the new initiatives were proposed. The format and style of the training will likely vary by country. For example, Cement Company E found when implementing company-wide training for a software system that cultural differences between countries made different training approaches more effective. In one country, training typically takes two days while in another country it takes one hour. In a third country, the training was tactical (how to use the software) while in the first country, they defined what people did every day, and trained them in how the software fit with this (did this mostly through train the trainer, and the spending was mostly on materials).

Phase 3.3—Suggestion Programs Suggestion programs provide an outlet for good ideas to surface and an incentive to employees to think creatively about how to take action in support of the goals. Objective Establish a suggestion or award program that motivates employees to think creatively about how to make improvements and raise these suggestions. A good program will generate many ideas from employees and implement the most promising ones. Process This avenue to take action should be closely tied to the training programs so employees have an outlet for their motivation. For example, when discussing lessons learned from their experience, the Manager of Business Integration at TransAlta said if it were to be done again, he would make sure the training was more pointed in

Case Study: Employee Training

TransAlta worked in collaboration with a major environmental group headquartered in Alberta, Pembina Institute for Appropriate Development, to train all of its employees in SD through a program called the Environmental Citizenship Initiative (ECI). Pembina is a consulting and advocacy organization, which is perceived within Canada as a leading environmental group on climate change. TransAlta contracted with them to deliver training to every employee on the value and opportunities of SD thinking for the company.

Each employee was in training for a 1-2 day session at first followed by two more 1-day sessions. These were organized by business so participants were all in the same operation. The material was tailored to the business, e.g., generation vs. marketing. This training emphasized that SD was the right thing to do and that pursuing this initiative was good for business. Today, all new employees go through a 90-minute CD Rom training module.


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getting employees to make specific commitments. The process did not formalize implementation of the ideas. He would like to see commitments to specific actions followed by formalized reporting and review. If suggestion programs are tied to some personal reward for an employee or team it can engage people’s participation and creativity in developing new ideas. The Scandic Hotel chain launched a sustainability initiative where it trained employees across the company and encouraged them to make suggestions. In the first year of the program, 1,500 individual suggestions were received from workers all over the company. Many of these were implemented and led to direct cost savings from waste, energy, and water use reduction.

Phase 3.4—Employees as Links to Community Employees help externally communicate about the company’s SD initiatives by participation in local community events. Objective Encourage and support employees at the company’s facilities in their role as ambassadors to the local community. Their involvement in SD initiatives can provide a positive workplace experience that they then can share with others in the community. These unofficial interactions between plant staff and the local community can provide valuable opportunities for promoting the company’s activities. Process The Stakeholder Engagement substudy (SS2) provides additional details on how employees can be involved in the following local activities: Staff participate in community events as employees of the plant - Encourage staff to

participate in community events or organizations as employees and representatives of the facility.

Community events held on or near the plant - The facility can host its own events on site, inviting the public to attend, and have employees organize and participate in the events.

Community events sponsored by the plant - The facility can also sponsor events in the community, providing financial support as well as staff support.

Continue Actions to Maintain Momentum Throughout the third phase the activities to maintain momentum, described in earlier phases, should continue, including: Regular top management communication about the business value of the activities Internal communication promoting successes Accountability mechanisms Measures/reporting of progress Regular external engagement Suggestion and/or award program, recognize friendly internal competition


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Appendix B: Framework Trial Application 1. Hypothetical Cement Company Situation Note: This hypothetical company does not represent any particular company. Elements of the hypothetical company situation have been drawn from a number of different companies in different regions.

1.1 Business Environment The company is a regional subsidiary of a global cement firm. Although its core business is cement production, the company is highly vertically integrated. In addition to its cement production facilities, the company operates cement grinding facilities and cement distribution facilities. The company operates in a large market area, some portions of which are mature, and others are more dynamic. Although the company experienced only moderate competition for much of its history, in the last several years a number of the company's local markets have been affected by the introduction of cheap, imported cement. When both margins and volumes suffered, the company developed a strategy to fight back. One element of the strategy was to invest in technology to achieve low operating costs. The other element was to grow through selective acquisitions to achieve greater geographic diversification, particularly in the more dynamic portions of its market area. The company’s mission is to provide high quality cement in its geographic market through innovative processes and world-class operational effectiveness. Its core fundamentals include: Dedication to engage in the cement business over the long term Management expertise Low operating costs Use of state of the art production technology Dynamic market focus Commitment to act as a responsible corporate citizen

Strategy is set from the top, but the company’s organizational structure is decentralized and its management style involves a high degree of internal consultation and team decision-making. The culture is accustomed to team building meetings and workshops.

1.2 Change Initiatives In pursuit of its strategy of investing in technology to achieve low operating costs, the company undertook its “Cement Company of the Future” initiative. The first activity associated with this initiative was the rationalization and upgrading of the company’s cement production facilities, which involved closing several inefficient sites, and replacing its wet process kilns with state-of-the-art dry process kilns. . The company's approach to job redundancies in connection with its facility rationalizations has been generally regarded as a model practice, resulting in re-employment of a significant proportion of the redundant workforce in other industries within a couple of months of site closure.


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Another outgrowth of the “Cement Company of the Future” initiative was a major business re-engineering project throughout the organization to allow for more efficient order processing, logistics, and accounting. The rollout of this project was achieved through intensive training sessions, constant top management communication, and linking senior and middle management compensation to achieving business re-engineering objectives. Many middle managers were heard to complain of “change overload” or “change burnout”, and it took concerted top management attention to ensure that internal resistance was kept to a minimum.

1.3 Stakeholder Impacts and Relationships There have been considerable cost savings and improvements in environmental performance associated with the “Cement Company of the Future” initiative, but they have not been entirely uncontroversial. At the closed facilities, site remediation and re-use have undergone extensive review by both local authorities and local communities, and the company has been required to amend its plans accordingly. The upgrade of one of the production sites has created an on-going dispute with some local farmers over environmental issues, but stakeholder relations with the broader community (and government) are regarded as positive. All production facilities engage in formal dialogue with local stakeholders through established stakeholder advisory panels, and seek opportunities for frequent informal dialogue as well. At some sites, nearby neighbors have voiced concern about noise and vibration occurring during quarry blasting. While expressing sympathy for these concerns, management at the sites concerned has yet to develop a plan for taking action. As a large local employer in the communities in which it operates, the company has always contributed to the local communities in some way, but generally in an ad hoc manner. Contributions have varied from providing T-shirts to local sporting teams, donating cement for school building projects, to financial support for arts companies touring regional areas.

1.4 SD Awareness In recent years, the Executive Committee (ExCo) participated in private workshops with external SD thought leaders, including a representative from the WBCSD and a highly respected international SD consultant. The first workshop was primarily an awareness-raising exercise to inform ExCo about key SD issues. The focus of the second workshop was to provide further information to the ExCo on global and industry SD trends, and trends in stakeholder expectations. One of the main issues discussed at these workshops was the impact of the cement industry on global warming. The SD thought leaders made it clear that many NGOs, governments, and other influential stakeholders took the threat of global warming seriously and would expect companies in the cement industry to respond to these concerns. Participants valued the experiences and said they better understood the need to take action on SD, including global warming. Although a strategy for dealing with SD is yet to emerge from senior management, the ExCo has recently stated that it continues to believe that SD is an important issue to manage and that it intends to develop company wide SD objectives in the near future. Two years ago, senior and middle management participated in a workshop to raise awareness about SD issues and to generate ideas about how the company could improve its SD performance. A leader of a prominent national environmental NGO helped in the preparation of the workshop and participated during the day. The ideas generated have not been followed through into formalized action plans, mainly due to changes in the company's business environment diverting management’s attention and lack of additional staff resources brought about by investments in the “Cement Company of the Future” initiative. A number of managers have stated that, while they understood that the company needed to be socially and environmentally responsible, any new initiatives in this area would need to have a particularly strong business case associated with them to warrant the expenditure of any significant


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financial or time resources on their part. A smaller, yet equally vocal, number of managers stated that social and environmental responsibility was a survival issue for the industry and they would be doing what needed to be done at their sites to make progress on these issues. Environmental performance and OH&S performance are reported to all employees via the internal newsletter. Occasionally, an environmental, health, and safety success story is reported in the newsletter. In the last newsletter, for example, there was an article about how one site had dramatically improved the visual impact of its limestone quarry by creating a wetland habitat in the low lying areas and an orchard in the higher elevations. However, there is no system in place to broadly share good practice examples. All employees receive "Environmental Awareness " training, which introduces concepts of SD.

1.5 Company SD Commitment and Actions Although senior management has not developed a SD strategy as such, there is growing recognition of the importance of properly managing environmental, health, and safety matters. A few years ago the company appointed a Corporate Environmental Director (CED). This was the first position of its type in the company. The role of the Director is to establish corporate environmental management systems, ensure their implementation and to communicate the results to a variety of stakeholders. This role has gradually broadened to incorporate a SD focus, mostly as a result of the personal commitment of the incumbent Director and other senior individuals in the organization. While most of the Director’s time has been spent on ensuring that a basic environmental management program is put in place, he has managed to convene a SD Work Group, composed of senior environmental staff members from the sites, external communications staff, and human resources specialists, to develop an approach to providing SD support to the organization and to share information. A corporate environmental policy was promulgated and distributed to all operating locations, along with a videotape from the company CEO stating his personal commitment to ensuring that the policy became integrated into all business decisions. The CEO also endorsed several environmental goals involving emissions reductions, waste recycling, and energy efficiency improvements. He explained that achieving these goals would likely to result in direct cost savings as well as address important stakeholder concerns. However, because the company did not have a great deal of experience with realizing the business value of environmental initiatives, and he knew the organization was more focused than ever on traditional short term operational issues, the CEO stated that business manager compensation would be linked to achieving the new environmental goals. The CED was charged with the task of ensuring that a measurement system was put in place to track progress against these goals. A number of senior business managers voiced their dismay at the mushrooming number of new objectives now linked to their compensation, including business re-engineering, maintenance management improvement, and environmental goals. The cross-functional team the CED convened to work with him to develop the measurement system has not made any progress due to the inability of its members to reach consensus. As a result, most business managers have not paid much attention to the new environmental goals. Each site in the company now has an Environmental Management System (EMS), which incorporates an environmental improvement plan and also a community plan. These plans are at different stages of implementation at different sites. There is a schedule of internal and external audits of the EMS.


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Recently, a Corporate Occupational Health and Safety Director was appointed to establish corporate OH&S systems. Each site has a Health and Safety Officer, but previously there was no formal coordination of activities. Data are now being collected systematically, an OH&S manual is being developed and an audit process is being developed. The CED and OH&S Director are working to develop a combined incident management system. A quarterly risk management report is submitted to senior management for review.

1.6 External Communications In the past, the company published an annual public environment report. This year’s report will incorporate sections on occupational health and safety and social and community initiatives, and will be called a “sustainability report”. These reports are available on the company's website, hard copies are sent to all employees and to a wide variety of external stakeholders, and presentations about the reports have been made to a variety of stakeholder organizations, such as environmental law and environmental engineering groups. The company made a commitment to continue to publish the reports, but does not have a formal SD communications plan. Communications strategies are more project-specific, such as preparation for introduction of alternative fuels. Stakeholder opinions have been surveyed and reported in these public reports. All sites have a community liaison group (which can be issue-specific) and a range of employees can be involved in stakeholder meetings.

1.7 Summary and Analysis This company appears to have a number of barriers to SD progress. While there is some awareness of SD at the top management ranks, commitment to SD is mostly related to the more traditional field of environmental, health, and safety risk management. The company is facing pressure from its stakeholders around environmental and social issues. It already understands the adverse consequences of ignoring its stakeholders and has implemented a process for engaging in dialogue with local stakeholders. However, their concerns are not always acted upon. The company also faces the need to deal more aggressively with local environmental issues of concern to the communities in which its plants operate and with global environmental issues, such as climate change, of concern to its more national and globally oriented stakeholders. However, despite the CEO’s stated commitment to ensuring the new environmental policy would become integrated into all business decisions, SD considerations have not been internalized into mainstream business decisions, and the link of SD to overall business strategy appears to be weak. The company appears to be acting as if there are no great external threats creating the need for immediate action around SD. Indeed, the company is now experiencing another kind of threat—that of competitors eroding its market position. This threat absorbs management’s attention to the detriment of other important issues, such as SD. The competitive situation has also created a cash squeeze, resulting in the need to develop a particularly strong business case to justify any resource allocation not directly related to supporting the business strategy. In addition, the company has just undergone several change initiatives, creating the potential for organizational resistance to any further disruption of people’s normal daily activities.


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However, there are also a number of strengths upon which to build a successful SD initiative. Top management, while understandably distracted by a difficult competitive environment, still finds the time to develop its awareness and understanding of SD, and has renewed its desire to have the company make progress in this area. There is also a core group of middle managers that understand the need to take action on SD and are keen to do so in their business units. In fact, there has already been some progress associated with quarry restoration, energy efficiency, and other related projects. There is a professional and dedicated team of functional specialists who are seeking a way to have a greater role in supporting the company’s SD activities. And even though site management does not always address the concerns of local stakeholders, the process to engage stakeholders in dialogue has raised the awareness of management of their concerns, and has created the basis for a sound relationship with stakeholders. This is also emerging at the national and international levels. In short, this is a company that is at a key decision point. It can focus all its attention on its pressing short-term business problems and defer attention to SD to a time when it believes it can better devote organizational resources to the issue. Or, recognizing that properly addressing SD will take a number of years, it can begin to take the steps needed now to create the kind of organizational climate that will be needed over the next few years to effectively manage an issue that already threatens to become vital to the business. The CEO believes there are sound business reasons to deal more strategically with SD. He also recognizes the inherent challenge in dealing strategically with SD—how to balance short and long term concerns. His analysis reveals that addressing SD could not only position the company well for the future, but also could result in short term business benefits. For example, given that the company is facing unprecedented pressure to lower operational costs, it is becoming more important to find a way to implement SD-related solutions such as AFR and initiatives to improve energy and raw material efficiency. The company also faces the need to acquire its way into new geographic markets. It does not have much experience with this course of action and needs a more systematic process to review environmental and social risk, including the environmental and social impact of operations, associated with acquisitions in unfamiliar geographic markets. The CEO also recognizes that, left to itself, the organization will tend to focus on the short term, using only traditional approaches to deal with its problems. SD can help the organization in both the short and the long term, but the organization will not easily recognize this. The CEO intends to introduce SD to the organization gradually, but systematically, in a manner calculated to build organizational alignment around SD objectives. The key will be to ensure that the strong commitment to SD from the top is reinforced by the commitment of key business leaders to take action around SD. In order to be lasting, this commitment must be freely chosen based on a personal connection with the organizational vision. The CEO, therefore, believes a pathway needs to be followed to provide a basis for alignment between the personal motivations and visions of individual employees and the overall company SD vision. The alignment process is this pathway. Set forth below are the results of the SD alignment evaluation requested by the CEO of this hypothetical cement company, and the action plan created to address the results of the self-evaluation.


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2. SD Alignment Evaluation 2.1 Phase 1: Start at the Top = Low Implementation = Medium Implementation = High Implementation


1.2 Medium Dialogue has been established with stakeholders only on certain issues, but not across the spectrum of SD issues.

1.3 Low A SD strategy has not been developed. Management workshops were focused on awareness raising, not on strategic planning.

1.4 Low The management workshops generated ideas for SD progress, but these were not embodied in an action plan and have not been implemented.

1.6 Low Ideas generated in the management workshops were not implemented. Actions taken by senior management tend to relate solely to environmental, health, and safety improvement.

1.10 Medium Fairly mature infrastructure for dealing with environmental, health, and safety issues could be extended to support SD.

1.2 High Senior and middle management have participated in workshops with external thought leaders.

1.7 Low Not implemented.

1.5 Low No overall business case for addressing SD has been developed. Business case formulation occurs on a case-by-case basis for projects. 1.8 Low Not implemented.




1.1 Stakeholder engagement



staff • Policies/



action plans


1.2 External input session(s)




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2.2 Phase 2: Broaden Involvement = Low Implementation = Medium Implementation = High Implementation


2.1 Medium Periodic project-specific internal communications have taken place, but there is no overall internal SD communications strategy or plan.

2.7 Medium Accountability mechanisms are well established for environmental, health, and safety matters, but not yet for SD.

2.2 Low Not implemented. 2.3 High Frequent formal and informal dialogue with local stakeholders.


2.5 Low Not implemented. Action plans have been created to address environmental, health, and safety improvement, but not SD.


2.8 Medium Quarterly risk management reports; audit process being implemented. 2.9 Low Support networks, if they exist, are highly informal. 2.10 Medium About to publish Sustainability Report. No formal SD communications plan; communications are project-specific.


2.6 Business unit action planimplementation










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2.3 Phase 3: Involve the Whole Organization = Low Implementation = Medium Implementation = High Implementation


3.1 Low No overall awareness communications on SD. Environmental, health, and safety performance is reported internally in newsletters.

3.2 Medium SD is integrated into employee environmental awareness training.


3.4 Low Employees are underutilized as ambassadors to the community.







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3. Action Plan The following action plan for the hypothetical company is based on the results of the SD alignment evaluation and the needs of the company, based on its overall situation. Despite its decentralized nature, the company’s top management is still looked to for leadership in dealing with strategic issues. Therefore, the highest priority is raising awareness of top management and having the top management team set the SD strategy and the objectives needed to implement the strategy. Given the current short-term focus of the organization, top management needs to set forth a strong business case for pursuing the SD strategy. Of course, to the extent the business case can show examples from within the organization of how taking action on SD has delivered business value, it will be all the more convincing. For this reason, it is important to generate actions around SD as soon as possible in some parts of the organization so that successes can be shared more broadly as early as possible. There is a good chance that these successes will come about because there are already some key business leaders already personally committed to integrating SD thinking into business decisions. The business units of one or two of these key business leaders should be chosen to engage in pilot SD alignment workshops and then to implement the action plans developed in these workshops. Also, given that one of the reasons that the actions from the first awareness session were not implemented was the lack of staff resources, it is important to dedicate some staff resources to the SD initiative. Despite the difficult business climate, this is a necessary investment to ensure that the SD initiative takes root. Given the decentralized nature of the company and its inclination to team decision-making, the bulk of the SD alignment effort should be directed at influencing key individuals in the business units to take action. The effort should begin with one-on-one discussions between top management and key business leaders. Then business unit alignment workshops similar to the pilot workshops should be held in each business unit to gain the commitment of key business leaders and set the stage for taking action. The success of these workshops is central to the success of the alignment process. At the same time, top management should communicate broadly internally about the business value of taking action on SD, and consider steps to communicate its efforts and progress externally. To maintain the momentum generated by the initial actions that come out of the workshops, the business units should establish accountability mechanisms, develop team support mechanisms, and measure and report their progress. Finally, the company will want to put in place actions to involve the whole organization in supporting the SD initiative. Employee awareness communications, suggestion programs, incorporation of SD concepts into existing training, and having employees act as the links to their communities will all help make SD part of daily life within the company. In setting priorities for action, attention is first given to Phase 1, then to Phase 2, and lastly to Phase 3. Within each Phase, in general, the activities in which progress has been deemed “low” are addressed first, and within those, the actions that need to precede others are given higher priority. Note that the activities in which progress has been deemed “high”, such as external input sessions, and local stakeholder engagement, do not have recommended actions associated with them. Certain recommended actions, indicated by bold italics, have additional detail provided in sidebars.


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Stakeholder Expectations

Engaging in dialogue with stakeholders has proved valuable for the company in the past. A controversy over environmental issues that arose at one of the company’s facilities made it clear how valuable it is to understand stakeholder expectations before such issues become problems.

Information on stakeholder expectations that has been collected around the company should be analyzed to provide valuable insights for the strategy development process. This includes information from the ExCo workshops with SD thought leaders, production facilities’ regular dialogues with stakeholders through the advisory panels and other informal discussions, stakeholder opinion surveys conducted in conjunction with public environmental reports, and discussions with external sustainability experts.

Potential Barriers to Organizational Change

The company has a number of potential barriers to organizational change. For example: The focus on cost-cutting has resulted in a lack of resources for new initiatives Recent change initiatives have created internal resistance to more change

Identification of these potential barriers prior to development of the SD strategy will enable the strategy, and its associated action plan, to be designed in a manner to minimize the difficulties posed by these barriers.

Develop Key Objectives Based on the Strategy

The objectives should be tied to stakeholder needs or concerns and be specific and measurable enough that they can form the basis for an action plan. Stakeholders of the company have indicated their concerns about global warming and the noise and vibrations caused during blasting.

Table B-1 below shows how these stakeholder concerns can be translated into long and medium term objectives, which in turn, can be translated into a short-term action plan. Different levels of management are responsible for ensuring that the objectives are met, depending on the time period of the objective and the seniority of the manager.

3.1 Phase 1: Start at the Top 1. Hold a strategic planning workshop

Purpose: Strategy in this organization is set from the top. The strategic planning workshop will advance the understanding of the top management team about the need for action around SD, develop an SD strategy tied to the overall business strategy, and outline the business case for moving forward with the strategy.

Collect information regarding:

- Stakeholder expectations - External drivers for SD (e.g., market, regulatory,

NGO) - Key emerging issues (e.g., climate change,

biodiversity, social equity) - Industry trends related to SD (competitors and

customers) Develop scenarios of a future shaped by SD factors Identify potential internal barriers to

organizational change Identify organizational strengths that might support a

SD strategy Plan for and hold a workshop with top management

to develop a SD strategy

2. Develop a strategy and action plan Purpose: The organization needs something to align to. It is important to develop a clear, documented SD strategy and action plans and objectives to realize the strategy.

Document the strategy arising from the strategic

planning workshop Develop key objectives based on the strategy

(see the Key Performance Indicators substudy (Substudy 5) Report for detailed guidance on how to develop appropriate key performance indicators

associated with objectives.




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Develop an action plan to implement the key objectives Table B-1: Example of Key Objectives

Stakeholder Needs/Concerns

Long Term Objectives

Medium Term Objectives

Short Term Action Plan

Responsibility Stakeholders Top management Key business leaders

Day-to-day managers

Global warming example

Concern about cement industry impact on global warming

The company achieves Kyoto Protocol targets

Reduction of CO2 emissions by 10% until 2005

Gradually introduce alternative fuels to replace fossil fuels

Quarry blasting example

Concern about noise and vibration from rock fragmentation activities

Company operating locations are considered model neighbors by local stakeholders

Reduce noise and vibration during rock fragmentation

Adopt sequential blasting techniques at the quarry by 2002 to keep noise below __dB(A) at the nearest residential location

3. Formulate the business case for SD

Purpose: The organization is particularly short term focused at the moment. A powerful, convincing business case is needed that will help key business leaders appreciate the importance for action around SD.

During the strategic planning workshop, begin formulating the business case for taking

action on SD, including how benefit relates to cost Refine and communicate the business case in a manner tailored to the intended audiences

within the organization

4. Implement the action plan

Purpose: Implementation of the action plan will demonstrate to the organization that top management is committed to taking action with regard to SD.

Implement the actions set forth in the action plan

5. Hold a business unit pilot SD workshop

Formulating the Business Case

Due to the current business environment, with increasing competition and emphasis on cost-cutting, a compelling case for how SD relates to the business goals is necessary to obtain ExCo approval for expenditures and to gain commitment to action from managers and employees within the organization.

Examples of components of a business case for action include: Regulations related to climate change could significantly affect the company's costs and flexibility for expanding operations and growth. Therefore, we must be proactive developing an approach to climate change that addresses stakeholder concerns, yet in a manner that is cost effective. To maintain license to operate or expand in locations adjacent to large population centers, we must maintain a positive environmental image. Increasingly to have a credible image requires tangible evidence of improved environmental performance, such as minimization of noise associated with blasting.


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Dedicate Staff Resources

One reason the ideas from the initial awareness session on SD were not implemented was a lack of staff resources. Therefore, it is important to ensure that specialist resources are assigned to coordinate and oversee implementation of this initiative.

To implement the strategy, there should be an assessment of what resources are required. Then staff should be formally assigned to handle these responsibilities. Currently, the role of the CE Director has informally expanded to address SD, and an ad hoc group of functional specialists has been meeting to develop an approach to providing SD support to the organization. Beyond these efforts, it is likely that full time resources will be required to support the SD strategy. Some companies have found it effective to assign a highly respected operations manager to this role.

Purpose: Several key business unit leaders are keen to take action on SD and this is a strength that needs to be leveraged. Also, the organization needs to see some early successes to convince them that paying attention to SD can deliver business value. A business unit pilot SD workshop will extend the understanding of the importance of SD beyond the top management group and gain early momentum within the organization for the SD initiative.

Collect business unit-specific information regarding:

- Stakeholder expectations - External drivers for SD (e.g., market, regulatory, NGO) - Key emerging issues (e.g., climate change, biodiversity, social equity) - Industry trends related to sustainability (competitors and customers)

Plan the business unit pilot SD workshop (including selection of the participants, who should include key business unit leaders)

Hold the business unit SD workshop 6. Develop business unit pilot action plans

Purpose: Action plans need to come out of the pilot workshops to serve as tangible examples of the business value of the SD strategy.

Develop an action plan to pursue pilot actions that will show what SD could mean in practice

7. Implement the business unit pilot actions

Purpose: Implementing the business unit action plans will develop early successes in implementing the SD strategy that can be communicated internally for the purpose of raising SD awareness and understanding.

Form a team with responsibility for implementing the actions set forth in the action plan

Implement the actions Assess the lessons learned from the pilot

activity 8. Develop the organizational infrastructure

Purpose: It has already been shown in this organization that without some infrastructure, new initiatives will not make progress. Attention must be paid to developing the infrastructure that will be essential to maintain the momentum of the SD initiative.

Dedicate sufficient staff resources to

ensure that the SD strategy will be implemented

Establish policies and procedures that translate the SD strategy and associated objectives into an easily understood format

Develop KPIs to track progress towards realizing SD objectives


B-13

Establish a process to collect, analyze and report information regarding progress towards realizing SD objectives

9. Engage stakeholders

Purpose: Stakeholders are becoming increasing more vocal and influential to the company’s operations. Through direct engagement with people outside the company who feel strongly about SD issues, top management will become more aware that it is important to pay attention to and manage these issues; stakeholder engagement will also inform the thinking, strategy and plans of top management by engaging in dialogue with people who have alternative ways of seeing the world.

Establish a communications team and plan Determine the purpose of stakeholder engagement Identify stakeholders Engage stakeholders by providing opportunities for information sharing and listening to

stakeholder concerns and interests

3.2 Phase 2: Broaden Involvement 1. Have top management hold one-on-one discussions with key business leaders

Purpose: One-on-one discussions will reinforce with key business leaders that SD is a subject of importance to top management.

Members of top management, supported by senior staff, conduct individual meetings with

key business leaders to discuss the SD strategy and the importance of SD 2. Hold business unit level SD alignment workshops

Purpose: This is an organization in which the business units need to be directly involved and buy into new initiatives for them to have any hope of success. Business unit SD alignment workshops are central to the alignment process in that they are the main tools for gaining the individual commitment of key business leaders to support and take action on SD.

Collect business unit-specific information regarding: - Stakeholder expectations - External drivers for SD (e.g., market, regulatory, NGO) - Key emerging issues (e.g., climate change, biodiversity, social equity) - Industry trends related to sustainability (competitors and customers)

Plan the business unit pilot SD workshop - Select participants, who should include key business unit leaders and others who are

viewed as role models in the organization - Review the lessons learned in the pilot workshop and adjust the workshop design

accordingly Hold the business unit SD workshops

3. Develop business unit action plans

Purpose: Action plans provide the basis for taking action.

Develop an action plan at the business unit SD workshop 4. Implement the business unit action plans


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Develop an Internal SD Communications Plan

While the company has conducted a few workshops on SD for the ExCo and senior and middle managers, experience has shown that the overall level of awareness and understanding of the importance of SD to the business is low.

An internal communications plan should identify the target audience of key business leaders and plan a combination of methods to communicate about SD, including workshops, newsletters, meetings, etc.

Purpose: Implementation of action plans will make SD a reality within the organization. Form a team with responsibility for implementing the actions set forth in the action plan Implement the actions

5. Communicate internally

Purpose: Overall, awareness of the importance of SD to the business is low. Internal communications will help raise the awareness of key business leaders about SD, the company’s SD strategy, and the business case for action; develop an understanding by key business leaders of the importance of taking action.

Develop an internal SD communications plan Develop communications content Implement the communications plan

6. Develop team support mechanisms

Purpose: Team support mechanisms will create ways for people who are motivated to act to be supported by their peers and deepen their learning.

Develop support mechanisms, such as small discussion groups, leadership networks, and

coaching, that will help build more effective teams to address SD 7. Establish accountability mechanisms

Purpose: This is an organization that needs infrastructure for progress to be made. Accountability mechanisms will create the means to positively and negatively reinforce accountability for taking the actions necessary to implement the SD strategy and action plans.

Establish business unit-specific performance measures to track progress towards

implementation of the business unit action plans Develop positive reinforcement mechanisms (such as recognition programs, suggestion

programs, and linking progress towards meeting SD commitments into individual compensation decisions)

Develop negative reinforcement mechanisms 8. Measure and report progress

Purpose: This is an organization that needs infrastructure for progress to be made. Measurement and reporting of progress will ensure that commitments to take action on SD are being implemented.

Establish short and medium term objectives based on strategic goals and business unit

action plans


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Internal Success Stories

Learning about actual examples of how SD practices have been successfully implemented can inspire employees, as was evident in the widespread internal communication about the project to improve the visual impact of a limestone quarry. Currently, there is not broad sharing of good practice examples.

The content of internal communication on success stories should include: Narrative description of what was accomplished Positive measurable and indirect benefits How it was done and lessons learned Who to contact for more information

Develop System to Collect Performance Data

Tracking progress on commitments requires measurable performance data. The company tracks environmental and OH&S performance data but my need to track a broader range of measures once an SD strategy is defined.

A system to collect performance data should include: Identified measures of performance, including progress on improvement objectives Procedures and defined responsibilities for collecting, analyzing, and reporting the data internally

Establish performance measures to track progress towards achievement of the objectives (see the Key Performance Indicators substudy (Substudy 5) Report for more detailed guidance on how to develop appropriate performance measures associated with objectives)

Develop system to collect performance data Develop system to analyze the performance

data and feed this back to those who are responsible for meeting the objectives

Report progress internally 9. Communicate externally

Purpose: The organization’s stakeholders are pressing for greater information. External communications will also maintain the momentum of the SD initiative and demonstrate to key internal audiences that top management takes SD seriously.

Establish an internal and external SD communications plan Develop communications content Implement the communications plan

3.3 Phase 3: Involve the Whole Organization 1. Employee Awareness Communications

Purpose: The whole organization will need to be involved to support the SD initiative. Employee awareness communications will create an understanding by employees throughout the organization of the company’s SD strategy and why action on SD is important to the success of the business.

Establish an internal communications plan Develop communications content (including the

business case for action, what the company will need to be doing differently and internal success stories)

Implement the communications plan 2. Suggestion Programs

Purpose: Suggestion programs will motivate employees to think creatively about how to make improvements in the organization’s approach to SD and generate ideas that will encourage others to take action on SD.

Establish a suggestion program that motivates employees to develop suggestions for how to

more efficiently and effectively implement the action plans




B-16

3. Employees as Links to Community Purpose: The organization’s employees are well regarded in their communities. Asking employees to act as a link to their communities will help foster employee commitment to SD through local action.

Encourage and support employees at the company’s facilities in their roles as ambassadors

to the local community 4. Incorporate Into Existing Training

Purpose: The organization has a number of training programs in place. Incorporation of SD concepts into these existing training programs will help ensure that all employees understand what action is expected of them as it relates to the organization’s SD strategy and programs.

Identify how each employee can support company, business unit, and location SD actions Integrate into existing training the kinds of information conveyed in broad employee

communications and information about how each employee can support company, business unit, and location SD actions

3.4 Observations on Action Plans for “Top Down” Companies The hypothetical company discussed represents a fairly typical decentralized organization and the action plan is tailored to the kinds of activities most calculated to achieve progress in SD alignment in that type of organization. However, many companies in the cement industry employ a more “top down” management style effectively. An organization with a similar SD alignment profile to the decentralized company, yet whose management style and culture is more “top down”, would choose to prioritize the actions in its plan in a different way, as summarized in the table below. Instead of emphasizing the business unit workshops that are designed to build personal buy-in, which are essential to success in a decentralized context, the “top down” company would focus on building top management awareness, defining goals, then rolling out management’s direction to the rest of the organization by communications, training staff in management expectations, and measuring progress. Internal and external communications on SD would be used to reinforce the top-down management message and expectations. Action Plan for “Top Down” Management Culture

Phase 1: Start at the Top 1. Build top management awareness through holding external input sessions and through stakeholder engagement 2. Hold a strategic planning workshop and agree among top managers what the business case is for SD 3. Develop a strategy and action plan with key SD goals 4. Implement the action plan using existing mechanisms to communicate to employees and gain their participation in pursuit of the goals 5. Develop organizational infrastructure, including staff resources, policies and procedures, KPI’s to track performance, and mechanisms to track progress


B-17

Phases 2 and 3: Broaden Involvement and Involve the Whole Organization 1. Hold training for key business leaders who will be responsible for implementing the action plan 2. Communicate internally to raise awareness about SD, the business case for action, and the key SD goals 3. Establish accountability mechanisms to reinforce top management’s expectations of key business leaders, including linking compensation to meeting SD goals 4. Measure and report progress 5. Communicate externally 6. Incorporate into existing employee training


C-1

Appendix C: Baseline Assessment 1. Baseline Assessment Information about potential impediments to SD alignment and organizational strengths that could be built upon was gathered through written questions, interviews, and site visits with representatives of the following WGC companies: Table C-1. WGC Companies From Whom Information Was Obtained

Company How Information Obtained CEMEX Interviews and site visit to Monterrey, Mexico plant Cimpor Telephone interview Heidelberger Mini interview Holcim Information request response and interviews at and site visit to Holnam in Dundee,

Michigan Italcementi Interviews at and site visit to Ciments Calcia in Guerville, France Lafarge Interviews RMC Telephone interview Siam Cement Information request response Taiheiyo Information request response and telephone interview Votorantim Mini interview The information gathered related to developing an understanding of the unique characteristics of cement industry organizations, current practices related to SD, and organizational strengths related to internal communication and change management. Examples of other successful change initiatives within the companies were also explored.

1.1 Findings Potential Impediments to SD Alignment Our assessment found that while the cement industry has taken some steps to align environmental goals with business goals, it is still largely unaligned with regard to the broader and more recent concept of SD. There is limited awareness of SD, a lack of understanding of the value of SD, and little personal commitment to take action related to SD. In cases where there is commitment to SD, this does not always translate into action. Where actions have been taken in connection with SD and certain other change initiatives, there has been inconsistent attention to following up to maintain the momentum of the change initiatives. Awareness of SD is limited in many companies to environmental specialists and top management. One company became a member of the WBCSD because of the CEO’s particular interest in

SD, but this interest has not been emulated by members of the Board or the majority of the Directors in the company.


C-2

“Most people in the company know very little about sustainable development, except in special cases where there is a problem. Almost nothing has been done to educate people about this concept.”

One company had a representative of the WBCSD address a group of Director level managers in the company about SD, the “virtual university”, and knowledge management. Copies of the presentation materials were offered to anyone who wished to request them. Out of over 100 managers attending, only three asked for copies.

It should be noted that in some companies with a high degree of “top down” management style, middle management is seen as closely following the lead of top management in SD awareness.

There is a lack of understanding in many companies of the business case for SD—how achieving SD goals can help meet business objectives. The organizational culture of about half of the WGC companies is described as

decentralized. Business unit leaders have a high degree of autonomy in making decisions, and it is not yet clear to most of these leaders how achieving SD goals can help meet business objectives. Top management is expected to make the business case for addressing SD.

Even when there is awareness of SD, there is a perceived tension between profit and SD. For example, in one company, the business unit leaders are aware of SD as an issue, but want proof that the business case exists. They say they need to be convinced that it would cost more to implement something relating to SD later than it would today.

“The culture of our company is resistant to any concept which is not based on purely financial, economic, and technical considerations. The concepts which have been introduced for environmental and social concerns are viewed as strange ideas and not fitting the culture of the company.”

“Sustainability is not a natural concept for our managers. They think it is only for ‘Greens’.” In addition, managers in some companies observe that sustainable development concepts

are difficult to understand because of the social culture in which the companies exist. The view expressed is that SD involves a democratic approach to social relations. Some of the basic concepts of SD, such as dialogue and transparency are democratic concepts. But the culture of some countries, and therefore of companies operating in those countries, is still new to democracy. This unfamiliarity with democracy pervades the government, management, workers, and even NGOs, making it even more difficult for SD to take root than it would be in some other countries more steeped in a democratic tradition.

There is little personal commitment in many companies to take action related to SD. It is not always clear what actions an individual (or company) can take around SD. One business unit leader said: “Our employees are confused about sustainable

development, and I am too. I don’t know how to put it into action.” “Our industry has a cost-efficiency mania. Managers can understand why SD is important,

but if no cost reduction potential is seen in an SD initiative, it won’t get looked at.” In one company, younger management-level employees “have heard about SD and want to

be proud of what the company is doing, but it is not clear to them what actions they can personally take around SD.”

“Often, the reward and recognition system for individuals and teams is diametrically opposed to SD objectives.”


C-3

“Some feel it is not worth their energy to promote SD vigorously, so it gets watered down as it cascades down the organization.”

“Middle management is generally not yet fully committed to SD.” A commitment to SD in many companies does not always translate into action. There have not been many crisis events around SD to motivate action and communities in some parts of the world appear to be more interested in jobs than in environmental or social progress. Also, there is a perception among some that the industry culture is often reluctant to embrace change. A perception exists that there is little stimulus to action right now: “Without a crisis, it is

difficult to explain the need to act now, with everything else people have to do.” In some countries, there is little pressure from stakeholders on companies to address

ecological and social related issues. “This is an old company with old people in charge. You have to count on resistance to

change.” There has been inconsistent attention in many companies to following up on change initiatives to maintain their momentum. Some companies do not utilize internal communication channels, such as newsletters, e-

mail, and reports, to their fullest capabilities. “Communication is not done professionally or effectively.” Also, very often there is communication regarding a new initiative for a short period of time,

then very little additional communication. “Communication only works if the boss is involved, but senior managers think if it has been

communicated once, it is enough.” “Internal communications are not managed well. There is only occasional communication

about environmental issues.”

Strengths Upon Which to Build SD Alignment Our assessment also found a number of strengths that could provide a solid foundation upon which to gain organizational alignment around SD. These include awareness by top management of SD, talented and motivated functional staff, experience with change initiatives, and extensive internal training programs.

In many of the companies, the CEO and other members of top management are aware of the SD issue and its potential importance to the business.

The CEOs of some of the companies were instrumental in launching the WBCSD cement

study. “Our owners are aware of SD, and many of the younger managers.” In some cases, there are strong external forces, such as local opposition to coincineration,

driving top management awareness of SD issues. Most of the companies have talented environmental, human resources, and communications staff members who are familiar with the SD issue and are personally committed to improving their company’s SD performance.

It was our observation in carrying out the interviews that the functional staff we interacted

with had a high level of professional credentials, command of the subject of SD, and commitment to help create a culture of alignment with SD within their organizations.


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A number of companies have had experience and success with company-wide change initiatives such as TQM and SAP implementation. The techniques used in successful change initiatives in the industry—such as senior

management involvement through participation in steering groups, employee awareness campaigns, key manager training sessions, cross-functional implementation teams, creation of individual and team-specific action plans, use of measurable goals—have potential to be adapted for the integration of SD into company business activities.

One company has been engaged in a change initiative for the last seven years involving streamlining processes and becoming more efficient. There has been extensive use of teams in implementing this change initiative.

“Our company has experience with using cross-functional or cross-business unit teams or task forces to move new ideas or projects forward. We try to bring everyone into the process, to be inclusive.”

“Our strength is transferring best practices across the organization.” Another company has special teams that continuously study best practices in various areas

(such as operations, accounting, and management) across industry. They rank themselves against best practices, create tools to implement best practices, and then audit the business units to ensure that the best practices have been implemented.

At yet another company, implementation of ISO 14001 created cost reduction results, which helped create an environmental culture within the company.

“We try to have a culture of continuous change, giving employees opportunities to be creative and innovative.”

Many companies have extensive internal training programs in place, creating the potential to integrate SD into existing training. Most of the companies have extensive skills training directed at helping employees

understand how to do their jobs better, training to support new initiatives, such as SAP implementation, and awareness training, aimed to making employees more aware of subjects such as environmental responsibility.

“We invest a great deal in training and skill building.” “Most of our business units have internal training programs.” In one business unit, 100% of the staff received environmental training. Implementation of SAP was accompanied by extensive training, tailored to the country

culture.

1.2 Conclusion It is clear from these findings that a process is needed to move from where companies are today to a state where employees are aligned around SD goals. This process needs to begin with building awareness among key employees of the issue of SD, what it could mean for the business, and the value of taking action with regard to SD. It then needs to address gaining the enrollment and personal commitment of the full range of internal stakeholders of a company, from plant employees to the Board of Directors. This enrollment cannot be legislated or driven by top management mandate. It comes from a result of free choice: a personal commitment to move towards sustainability. Achieving this can make it possible to implement the range of changes needed to pursue SD. The process should build upon the top management commitment that already exists, the existence of functional staff members who understand the issue and want to help the company make progress, and the experience with successful change initiatives.


D-1

Appendix D: Best Practices Table D-1. Best Practices Companies Surveyed

Company Industry Nature of Operations BHP Natural

Resources Australian-based global natural resources $13 billion company focused on discovery, development, production and marketing of iron ore, coal, copper, oil and gas, diamonds, silver, lead, zinc, and various other natural resources with 35,000 employees. Note that after BHP was interviewed for this study it merged with Billiton to become BHP Billiton. The findings refer only to the situation of BHP before the merger.

Dow Chemicals US-based $30 billion company with 50,000 employees in 32 countries DuPont Chemicals,

Life Sciences US-based $28 billion company with 93,000 employees worldwide in 70 countries

Ford Motor Company

Automotive US-based $162 billion automotive company with 364,000 employees and operations worldwide

Royal Dutch/Shell

Energy European energy $149 billion company with over 100,000 employees and operations in 130 countries in oil, chemicals, and renewable energy

Suncor Energy Canadian-based integrated energy $2.3 billion company with 2,600 employees. Operations include oil sands, exploration and production, a refinery, and 500 retail gas outlets, and an oil shale development project

TransAlta Utility Canadian-based $7 billion utility that owns and operates thermal and hydroelectric power stations and transmission operations in Alberta, Canada, Australia, the US, and Mexico and has 2.500 employees.

1. BHP Best Practices BHP is an Australian-based global natural resources company with a regional steel business in Australia. Its business involves discovery, development, production and marketing of iron ore, coal, copper, oil and gas, diamonds, silver, lead, zinc, and various other natural resources. BHP divides it business into three lines: Minerals, Petroleum and Steel. These businesses are supported by a Transport and Logistics business, a Corporate Services group, and functional groups in such areas as finance, strategy, health, safety, environment, community relations and legal. BHP's headquarters are in Melbourne, Australia, and it has operations in Australasia, North and South America, Asia, the United Kingdom and Africa. Note that after BHP was interviewed for this study it merged with Billiton to become BHP Billiton. The findings refer only to the situation of BHP before the merger.

1.1 Drivers Several drivers have led BHP to pursue sustainable development. One was a major and ongoing environmental issue at it Ok Tedi copper mine (BHP 52%) in Papa New Guinea where mine tailings have drained into a river for 15 years. This has led to class action legal claims and has focused management’s attention on environmental and social issues. Another key driver is that BHP’s businesses (gas, coal, oil) account for a large part of the carbon cycle. This has raised the profile of the climate change issue for the company. BHP just went through a major restructuring and has new management at the top who are able to look at things more objectively and are more sensitive to external issues. They are providing more top down leadership.


D-2

In terms of moving towards a long-term sustainable business model, BHP recognizes the need for a transition; by 2030 the company will be in different businesses. The short-term reality is that BHP is heavily weighted in coal/oil/gas and the company sees no business driver to change now. As the business case is developed, the company will start to move but the current debate is over at what point that transition should start. As a company that sells commodities to refineries and power stations, BHP does not have consumer/brand image as a driver, compared to a company such as BP, which is a leader in investing in solar, but has the driver of a consumer brand name. (Note: Most other regional companies are in same place as BHP. The contact interviewed, who is a member of the regional business council on sustainable development stated that the leading companies have “put their toe in the water and reporting publicly on their values and where they want to go. None have made great strides in shifting to more sustainable base. It’s all incremental improvement, in terms of eco-efficiency, no one broken out of pack.”) BHP’s public report states, “We are committed to sustainable development. We believe that successful companies can achieve outstanding financial performance without compromising safety, environmental or social performance. We are also committed to ensuring that the communities in which we work share in our success. In addition to the traditional benefits that flow from our activities, such as royalties, taxes, and business and employment opportunities, we have set ourselves a target to spend one per cent of our pre-tax profits on community development programs, calculated on a three-year rolling average.”

1.2 Process Used Policy/Standards BHP has issued a new Company policy, Working Responsibly, that addresses its position on health, safety, environment and community relations. It includes new commitments such as support for fundamental human rights, a high standard of business conduct and sustainable community development. The policy is supported by Company-wide management standards for safety and environment and community. Audits are used to check implementation of the requirements of BHP standards, as well as verify compliance and management system effectiveness. BHP has set environmental and community and social goals and targets. These serve as the basis for reporting progress and performance on a three-year cycle.

Organization Organizationally, there are two departments that cover the sustainable development (SD) agenda. The External Affairs department has coordinating responsibility particularly relating to social and community issues and public reporting. The HSE function is responsible for the environmental, health and safety area. There are two Councils that develop policy, which is then ratified by the Policy Committee, consisting of the Managing Director and his direct reports. The two Councils are: External Council, which is comprised of all the external relations and community affairs

professionals from the business units (petroleum, steel, minerals) HSE Council, which is comprised of the corporate and business unit HSE senior managers.

The Manager of Environment and Community Affairs is a member of both councils. BHP is considering involving more line managers in these Councils. The Councils are responsible to implement the policy once the Policy Committee approves them.


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The organizational changes required in focusing on SD relate to the community/social side increasing in prominence. The environmental side has a well-established organizational structure with 100 environmental professionals at the sites. When a new environmental standard is issued, it goes out to this established network to be implemented. On the community side, there is a gap in the management structure. There is not a designated person at each site who has the responsibility to implement the community standards. Another area that may need to change is the fundamental research necessary to progress towards more a sustainable business model. BHP does not have much research in this area now, such as research on eco-efficient processes. The level of current investment is not enough to see breakthroughs.

Gaining Al ignment The best way BHP uses to get organizational alignment around its SD goals is by having representatives from the business units involved in developing the policy. A working group that developed the recent revised policy included business unit representatives who were responsible for getting feedback from their organization on the drafts. The contact interviewed said this approach is “still somewhat top down.”

Gaining Management Support and Buy-in One effective way BHP has used to involve management in sustainable development issues is its Forum on Corporate Responsibility (FCR). Members of the senior management team spend a day each quarter talking with leaders of key NGO leaders and other leaders involved in environmental and community issues, such as the ex ambassador for environment in Australia. These meetings have been effective in helping managers to see that these groups are not radicals and that they have legitimate concerns. In the past, BHP’s model was to do its own thing and if NGO’s complained the company would often ignore them. When the BHP and NGO leaders come together in the same room during these meetings, they have found areas of common ground and have been working actively to resolve issues. In several instances, BHP has gone in to a meeting with one preferred position and left with another. The company is not bound by the advice and the group does not endorse particular actions or policies of the company. The message of communications on SD to management is that this relates to business opportunities. Given the nature of BHP’s business, unless it maintains a reputation of sound environmental and community performance it will not get access to land for new projects. BHP is competing with other companies on the financial, environmental, and social dimensions. The rapid growth of ethical investment funds is also seen as a potentially significant trend.

Creating Employee Awareness BHP has found that its internal award program related to environmental, safety, and community has been a successful way to increase awareness and reward people who have demonstrated practical leadership on the ground. This program is open to all employees and contractors. The award winners receive a trophy and are invited to headquarters to receive their award from the Managing Director. The award is $10,000 that they can contribute to the charity of their choice. BHP has not implemented company-wide SD training. There are training programs on risk management and the environmental management standards. There will be training on the community standards at the site level.


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1.3 Lessons Learned One of the key challenges faced is financial pressure due to globalization. After a few difficult years of reorganizing and making internal changes to adapt to financial situations, there is a sense of “initiative overload”. Implementation of SD efforts needs to be managed at a pace that people can handle without leading to push back. The view of the Manager of Environment and Community Affairs is: “these issues are a matter of time. There is an understanding that we are not going to change overnight. We are trying to manage internally through incremental progressive improvement. Quantum leaps are unlikely.” There are models such as The Natural Step that are seeking a transformational approach. “In the abstract this is okay but it is not a useful concept in practical terms for the resources sector.” In his experience, The Natural Step model is too far “out there” for mainstream management. The problem is it is often presented with no acknowledgement of the time frame to get there and people feel it is impossible to achieve. He sees this model as one of a number of potentially useful academic frameworks for testing business models for going forward. One lesson learned is the need to invest effort up front in building a strong network of people with interest in the agenda. BHP is now trying to build up its network for the social side. In BHP, many of the external affairs staff have a public relations/journalism background rather than expertise in community relations and people, such as a social science and/or environmental science background. To date, it is mainly the environmental and community affairs staff who are interested in the link. The value of a strong internal network has been demonstrated in BHP’s experience with The Environmental Council, which provides leadership and links into the businesses. “It is key to have the support of the CEO and to get senior management on board. If you don’t have that in place, you’ll struggle.”

1.4 Results Benefits to date relate to reduced fines and complaints. Also, the trends in energy efficiency and greenhouse gas emissions are moving in the right direction. The benefits on the social side are hard to quantify.

1.5 Sources BHP Environment and Community Report 2000 Interview with Ian Wood, External Affairs (he has responsibility for SD with respect to

external expectations), March 13, 2001

2. Dow Best Practices 2.1 Drivers Dow, a $30 billion company with 50,000 employees in 32 countries, has set an intention to be a global leader in corporate sustainability. There are several drivers for Dow’s commitment: Earning the respect of owners and investors, customers, employees, and communities is

necessary to be able to grow, as well as to maintain the ability to operate and sell


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Sustainability is a global issue; with the rise of the Internet, practices in one corner of the world can be exposed by groups elsewhere so standard global practices and transparency are a necessity

Sustainability represents a natural evolution of Dow’s leadership role in the creation of the Responsible Care® initiative

Seeking out opinions of external stakeholders from all sectors of society keeps the company tuned in to other perspectives and this openness to dialogue and public scrutiny led to a need to demonstrate action.

2.2 Process Used Setting aggressive goals and targets and then openly reporting progress on them is the core of Dow’s sustainability strategy. In 1995, as a way to “hardwire sustainability concepts into the fabric of the global business” Dow established 10-year EHS goals. These 2005 goals were committed to by the Corporate Operating Board (COB), which consists of the eight business group presidents, six functional heads, and the CEO—Mike Parker. Examples of goals include cutting air and water emissions 50% globally. Dow publishes annual public reports that report progress on the goals and provides quarterly updates on its web site. There are several mechanisms used to maintain accountability for meeting the goals. The EHS goals are implemented at the business unit level. Dow has 8 major businesses, which consist of about 100 value centers. Each business leader has a variable amount of pay tied to performance on EHS goals. When business leaders meet with the COB for business strategy review they must report on their unit’s progress on EHS goals and how much will it cost to achieve the 2005 goals. The EHS group is working with the COB this year to more clearly define the economic consequences of meeting the goals. Dow is currently considering a broader set of sustainable development (SD) goals that include social and economic metrics. To date Dow has not set specific measures and goals in these areas but it plans to develop these. This requires organizational coordination among a broader set of functions that address the various activities associated with SD. Dow is currently identifying elements that the company is already addressing through various programs such as the corporate balanced scorecard, which addresses most stakeholder groups (employees, shareholders, society, and communities). Other examples include community goals, such as a goal to achieve 80% acceptance rate in all communities where they operate, and goals associated with employee satisfaction measured by global employee surveys administered by Human Resources.

Organization Dow has decided not to create a sustainable development department. Instead the strategy is to integrate the commitment to SD into existing processes, such as new product development. Scott Noesen, whose title is Director of Sustainable Development, works with a few colleagues to play a facilitation and coaching role to the business units. This includes offering Sustainable Development Workshops on a voluntary basis (these are described in more detail below).

Training Plans Education and awareness is the first objective within Dow’s emerging strategy on SD. There are four target groups and different approaches are planned for each: Senior executives, COB. Raising awareness at this level will be done through one-on-one

meetings with executives and the Director of Sustainable Development. These meetings will address where the company has been and where it is heading on SD. Dow is also looking at executive training programs, such as the Prince of Wales – Business and Environment program, a one-week intensive course and the Sustainable Enterprise Academy at York


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University. Lastly, the COB is meeting for a full week each month and SD will be on the agenda 3-4 times this year. It is expected it will take a full year of immersion to raise awareness.

The positioning of the message on why SD is important for Dow is still being developed. The view of the Director of Sustainable Development was that the message will likely focus on using SD as linkage to growth. Using visioning of where Dow will be in 10 years to emphasize the opportunity presented by SD, how can they create innovative products? The emphasis will be on how to take issues like climate change, which many have seen as a negative threat to the company, and convert it into business opportunity—through product innovation and market mechanisms.

Business leaders in value sectors. SD workshops are offered to this level of managers. About 200 people have participated in about 15 workshops. These workshops have three objectives: 1. Education and awareness raising 2. Assessment of the current business – this provides participants with a picture of where

their business currently performs on 21 metrics including: - Environment- based on EHS 2005 goals and few others (CO2 emissions,

renewable/non-renewable resources, extent of LCA for product line) - Economic - conventional measures and a controversial one: how much of your

business is to customers in OECD countries versus non-OECD. (93.5% of business in OECD now)

- Social dimension - global community surveys. 3. Link to business and strategy – this is just touched on in the one-day workshop.

The format uses background reading, WBSCD scenarios, and quizzes with instant electronic voting, the latter serves to slightly embarrass people about their lack of knowledge. The focus is on the products of the business. Dow also offers an eco-innovation workshop. Trends and their existing business are reviewed to look for radically different alternatives, such as factor 4 or 10 improvements.

Leadership Development Network. Dow has a network of 3,000 high-level leaders, mostly people who have responsibility for many other people so they can bring ideas down into the organization. (Note: the number is likely to rise after the merger with Union Carbide). There is an established process to annually conduct 2-day training sessions with these people to indoctrinate them in the company strategies. SD will be integrated into these training sessions. This year’s training is delayed because of the Carbide integration. The training process used in these workshops is mind mapping, which has an aim of creating a picture of the strategy, not just reviewing the words. Participants create colorful learning maps and participate in games and review case studies. The benefit of using mind mapping is that all participants share a common memorable mental picture and it uses art and creativity. The training is conducted in small workshops with the mind mapping process provided by a consultant, Root Learning. There is an internal train-the-trainer 2-day session to help disseminate the process internally.

All employees in general. So far there has been limited attention focused on raising awareness of SD among the broader employee population. As Dow has integrated Carbide, messages about SD have been incorporated into the corporate brand positioning as the company works to define “what Dow is about”. There is no commitment for everyone to go through a program at this point in time.


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Dow uses a lot of computer based on-line training ([email protected]), such as modules on safety training, history of Dow, etc. The Director of Sustainable Development will be adding three modules on SD into this computer-based training. Dow has made a donation to the WBSCD foundation to create these modules. The likely themes of these modules will be: - SD goes back to the Dow principles. - Consistent with our heritage. - Can’t afford to not do it. - Dow has always been good at multi-stakeholder dialogue, which is what SD is largely

about – links to overall corporate brand and core values. - “Living. Improved Daily” is Dow’s current slogan. We create products to improve human

welfare.

2.3 Lessons Learned Noesen had the following reflections on his experience in offering about 15 Sustainable Development workshops: “There is a bell curve of receptivity. On one end there are the early adopters who are very receptive and on the other end are a few non-believers. The general reaction is to realize how insulated Dow managers are in terms of understanding what is happening in the outside world. Some react saying ‘great information’. Almost none believe they have enough time to do the workshop but those who go through it say it was worth their time.” “The managers are “all scared to death of the social dimension – they don’t know what the social dimension commits us to – it sounds like social welfare, which should be role of the government. We get questions like ‘is that going to be costly for us?’ Many don’t realize how much we’re doing already (community work, philanthropy, employee satisfaction).” The workshops started with 1.5 days but were scaled back to one day. Noesen has found it is quite valuable to invest in preparation to tailor the content. They spend a couple weeks collecting metrics about that business so the message can be tailored. Dow has found that the WBCSD scenarios and the Sustainable Business Challenge book to be very helpful – each participant is mailed these materials prior to the workshop. Another lesson learned within Dow is that the message can be brought in top down or bottom up but it is critical that wherever you start, you go to other place quickly. In Dow’s past experience, the previous version of the EHS goals were endorsed by the senior management team of the executive committee – none of whom ran a business. They endorsed these as business goals. The businesses reacted saying “these have been foisted upon us, not endorsed by us”. The risks of a bottom-up approach are that by working at a lower level you are not a getting consistent message from management. Also, there is a risk of public policy positions being taken without coordination.

2.4 Sources Dow Public Report 2000 Update – The Power of Integration Company Quest: Sustainability Mind Mapping, Company Advertorial in Tomorrow Magazine Phone interview with Scott Noesen, EH&S and Business Integration, February 26, 2001


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3. DuPont Best Practices 3.1 Drivers There were a number of important drivers in DuPont’s commitment to environmental leadership and sustainability. Among them include: Public pressure and criticism. In the past, DuPont had been criticized for taking a long

time to acknowledge the problems associated with ozone-depleting chlorofluorocarbons. Strong senior leadership. In 1989, the new CEO, Ed Woolard, said he was going to be the

Chief Environmental Officer. He established aggressive goals for TRI reductions and went public with them. He enlisted Bill Reilly (former US EPA Administrator) to be on the Board.

Board influence and involvement. With Bill Reilly, former head of the US EPA, and the Bronfmans, major shareholders in DuPont, on the Board, there was a big push for DuPont to do more. They encouraged DuPont to update its commitment to safety, health, and environment (SHE) and to create an Environmental Leadership Council (made up of senior management who met monthly to review SHE goals and strategies).

Revolutionary environmental chief. For the past eight years, Paul Tebo, Vice President of SHE, has been reaching out to Dupont’s sites worldwide to ensure the values of environmental and social leadership are integrated into the business units. He has provided leadership in facilitating the company’s commitment to impressive stretch goals and he has pioneered the development of cutting edge metrics.

Employee activism. DuPont found they had a lot of closet environmentalists. DuPont’s renewed SHE commitment helped to unleash them. For example, one operator in a plant in Nashville had the idea of an excellence/recognition program to lift up heroes and show them to the organization. Now in place over 11 years, the “DuPont Sustainable Growth Excellence Awards” uses categories of DuPont’s SHE Commitment as award categories.

3.2 Process Used Management Commitment and Leadership From the Board of Directors and the CEO, to the heads of the business units, there is a strong internal commitment within DuPont to SHE excellence and sustainable growth. Business leaders annually review what they are doing in the environmental area. Current Chairman (Chad Holliday) realized that Sustainable Growth needed to be "operationalized" which meant coming up with a meaningful definition, outlining a path forward, and coming up with goals. Holliday served in 2000 and 2001 as Chair of the World Business Council for Sustainable Development. Paul Tebo received the 2000 Environmental Leadership Award from Tomorrow magazine.

Principles/Core Values DuPont defines its mission as “sustainable growth”—the creation of shareholder and societal value while decreasing its environmental footprint throughout the value chain. DuPont takes the highest standards of safety, environmental stewardship, ethics, and treatment of people as core values wherever it operates. DuPont upgraded its SHE commitment using a broad process. A number of external people, such as Jane Hutterly (SC Johnson & Son), Andy Smith (ICCR), and Mike McClosky (Sierra Club), were influential in helping Dupont develop a holistic SHE commitment. All the senior leadership signed the new commitment and signed copies were sent around the company as posters.


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Goals Progress towards sustainable growth begins with DuPont’s commitment to zero injuries and illnesses for all employees. Since its inception in 1802, safety and health have been core values within DuPont. The goal is zero as well for emissions and wastes. Goals drive behavior. While they are nowhere near achieving the elimination of all wastes and emissions, concrete targets have been established to get there. For example, company-wide goals for 2010 include: 65% reduction in greenhouse gas emissions from global operations, using 1990 as the

baseline Flat total energy use, at 1990 levels Sourcing of 10% of global energy needs from renewable energy sources Achieving 25% of revenues from non-depletable resources

Each business unit develops action plans and objectives based on these goals.

Strategy/Plan The path forward for sustainable growth involves three things: use of integrated science, knowledge intensity, and productivity (Six Sigma). Where: Integrated Science is the integration of different areas of scientific expertise, such as

expertise in fermentation and expertise in polymers to create a polymer made from renewable resources (such as corn).

Knowledge intensity is adding value to the product offerings through service, design, branding or information, such as by applying the science of safety and the science of materials to yield Tyvek protective materials, Tychem chemical protective fabrics, and Kevlar fiber.

Productivity improvement is the use of Six Sigma as a driver for growth, by achieving cost savings, customer satisfaction improvement, or revenue increase.

Metr ics Metrics for sustainable growth are very important and are in place. Sessions were held with outsiders to develop a model for integrating environmental and shareholder value. Using kgs of depletable resources as a surrogate for environmental footprint, DuPont’s businesses can see how much shareholder value added (SVA) they extract per kg of materials used. Some goals and metrics are corporate-driven: Economic = earnings growth; SVA/kg SHE = zero injuries and waste; hold energy use flat versus base year 1990 Societal = zero incidents; people equity in hiring and promotion

Some goals and metrics are business-specific. For example, the Advanced Fibers Systems (AFS) has set a goal of doubling the number of workers protected (from bullets, fire, knives, cuts) by 2005 and reducing water usage by 25% by 2005. In emerging economies, the goal is to increase the number fivefold. And there is also a goal to increase sustainability in the value chain. For example, Kevlar gloves for workers in automotive industry are usually thrown away after several uses. DuPont is working with the automotive industry to improve the appearance of the gloves in order to encourage workers to use them longer.


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Stakeholder Engagement DuPont has established community advisory panels and/or regular community interactions with all its global manufacturing sites. In 2000, DuPont formed a Biotechnology Advisory Panel at the corporate/business level with the goal of advising DuPont in its development and commercialization of biotechnology-based products. In addition, a dialogue has been held with environmental, government, and business leaders in Mexico focused on the cultural, ethical, and moral implications of introducing new technology into society. Finally, as part of DuPont’s Sustainable Growth Excellence Awards, half of the award selection committee members are outsiders from academia, government, NGOs, and customers/suppliers.

Incentives/Awards There are a number of awards and recognition programs in place, like the previously mentioned Sustainable Growth Excellence Awards. These awards are chaired every year by a senior business leader (the 2000 award program was chaired by the Vice President/General Manager of the Advanced Fiber Systems business). It involves a big ceremony and winners are brought from around the world to a nice location. The DuPont Chairman is there. Each team or individual is given a $5,000 grant to give to an external organization. Winners sit at a table with the leaders of their business. There is a lot of recognition, and booklets are published with the description of the winners’ achievements and distributed to all employees.

Training/Communications The product stewardship training within DuPont has been modified to include sustainability. All product stewards go through this training, as well as others in the business like R&D and marketing. Customers are also invited to attend. The training includes what does sustainability mean for us, what can be done, what we are doing, etc. There is also a six-week Leadership for Growth course. Sustainable Growth was integrated into the course--how to think about projects. The top 400 leaders were targeted to attend this course. DuPont is a member of the Business Environmental Leadership Council of the Pew Center on Climate Change, a founding member of “Partners for Climate Action” launched by Environmental Defense, and it helped the Keystone Center initiate a national Dialogue on Climate Change. In Canada, DuPont has participated in a government-led program to establish an emissions trading system.

3.3 Lessons Learned With the renewed internal commitment to sustainable development, DuPont employees became reinvigorated toward SHE excellence. Seeing the principles and core values in action and the goals leading to tangible and quantifiable results, employees are motivated to come up with new ideas for sustainable growth. Key factors in DuPont’s progress include having its business units take ownership of the sustainable growth initiative by developing their own business unit-specific action plans and objectives to achieve corporate goals, and DuPont’s emphasis on providing an extensive system of rewards and recognition for individuals, which fosters a climate of creativity and results in having all levels of the organization actively involved in the sustainable growth initiative.


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3.4 Results One of DuPont’s older, larger plants in Mexico City is almost at zero in waste and emissions.

And, when air quality alerts occur and the local industry is shut down, DuPont’s plant stays open. Thus, there is less pollution, better community relations, and more productive uptime, going straight to the bottom line.

The Advanced Fibers Systems business has achieved a 37% increase in SVA/kg in 1999 versus 1998.

DuPont had only one distribution incident and zero process and environmental incidents in 2000 (from a level of over 100 significant incidents annually in the early 1990s).

Global air toxics are down 72% and air carcinogens are down 85% (from 1987 levels). Hazardous waste is down 40% (from 1990 levels). Emissions of greenhouse gases, on a CO2 equivalent basis, are down almost 50% (from 1990 levels).

Reported TRI releases are down 78% since 1987, and 9% since last year. DuPont also has been involved in a number of high-profile projects. For example, Tyvek was recognized by the National Recycling Coalition as the first application where the secondary use of the polymer was more valuable than the primary use. Tyvek is polyethylene spun into a fiber web that produces a sheet product. DuPont realized that there could be a significant market to providing envelopes to FedEx that were strong, yet had the kind of light weight that would reduce transportation costs. It also realized that since the primary competition was paper, DuPont needed to develop of recycled content offering to be competitive. DuPont approached FedEx with a 25% post consumer recycled material envelope and captured the entire FedEx market. DuPont Canada developed a partnership with its customer, Ford Motor, to get paid for the number of automobiles painted rather than gallons of paint. As a result, costs to Ford have been reduced and waste volumes cut. Ford realized a savings of 35-40% while emissions of VOCs were reduced 50%. For DuPont Canada, the lower volume of paint supplied was offset by improved efficiencies.

3.5 Sources Hero of Zero, Tomorrow, November/December 2000 Advanced Fibers Systems Sustainable Growth Report DuPont Sustainable Growth 2000 Progress Report Interviews with:

- Dawn Rittenhouse, Business Sustainability & Product Stewardship Leader - Paul Tebo, VP, SHE - Gregg Martin, SHE Manager, White Pigments & Mineral Products - Bob Dunn, HSE Manager, Advanced Fibers & Non-Wovens - Norm Bell, HSE Manager, DuPont Nylon

4. Ford Best Practices 4.1 Drivers In Ford’s case the vision and commitment for its corporate citizenship strategy is coming from its senior management team, including William Ford (Board Chairman) and Jacques Nasser, CEO.


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External drivers for this strategy include climate change, congestion particularly in large third-world cities, and rising social activism accompanied by increasing calls for corporate transparency, such as the WTO demonstrations in Seattle. There is a personal commitment to these issues from William Ford, who has an interest in the longevity of this family business. William Ford’s remarks at the 2000 CERES conference illustrate his position: “The expectations for multi-national corporations are rising rapidly. External stakeholder groups, including our own customers and shareholders, are demanding that we acknowledge their concerns and take leadership in addressing them. At the same time, our own understanding of what we need to do to grow our business has become much more sophisticated. We understand the triple bottom lines of sustainability - environmental, social, and economic - must all be addressed in order for us to be successful…I personally believe that sustainability is the most important issue facing the automotive industry and industry in general in the 21st century. We look at it not just as a requirement, but as an incredible opportunity.” The vision of these senior managers is to shift Ford from being the world’s leading automotive company to being world’s leading “consumer company that provides automotive products and services”. They see achieving this vision as critical to long-term financial success. They have positioned the sustainability initiative under a banner of Corporate Citizenship. The company views sustainability as a way to connect with customers. “Connection” is defined to mean respect and reciprocity and acknowledging the companies’ interdependence with its customers. William Ford, Board Chairman, describes Ford as having three obligations: “to provide superior returns to shareholders, to give customers exactly what they’re looking for, and to do it in a way that has the least impacts – or most benefit – for the environment and for society in general.” He says “keeping our eye on all three is our recipe for future success.” The strategic objective is for Ford to become a leader in corporate citizenship. The strategy has four primary commitments: Developing a clear set of business principles that allow each employee to consistently align

his or her actions with Ford’s value of corporate citizenship Engaging in dialogue with its stakeholders to deepen its understanding of corporate

citizenship and sustainability Setting transformational goals for its performance in corporate citizenship and sustainability Sharing progress with stakeholders through vehicles such as a Corporate Citizenship

Report

4.2 Process Used In 1999, Jacques Nasser, CEO, assigned responsibility for designing and implementing a corporate citizenship strategy to a group of senior executives from the President’s Strategy Council. This Council is led by Nasser and is accountable for short- and long-term performance of the company and implementation of the business strategy, including corporate citizenship. This new role assignment was communicated in an email from Nasser to all employees on company email (this is a weekly company-wide email he sends). A Corporate Governance group was created to support implementation of the corporate citizenship strategy. The members of this team have experience in Ford’s business functions, community relations, and organizational learning. Governmental Affairs staff also provide support. They are responsible for overseeing the company’s public policy and corporate economics activities, and identifying emerging environmental and social issues. Environmental


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& Safety Engineering is responsible for implementing the company’s environmental and safety strategy and directing day-to-day environmental and safety activities. The Environmental and Public Policy Committee of the Board of Directors provides oversight and review of the Company’s performance in corporate citizenship. This Committee is chaired by William Ford and was established in 1997. It monitors social, environmental and ethical strategies and corporate performance. It reviews policy decisions of corporate management to ensure they are aligned with the values of corporate citizenship. Ford has revised its vision and mission statement to reflect the new strategy. There are four main points to the strategy: Developing Business Principles A set of business principles is being developed that defines corporate citizenship. Various internal staff will be involved in developing the principles and they will be widely tested internally and with external stakeholders. The aim is to develop business principles that will be used when making decisions, from choosing a product raw material to deciding which countries to do business in. The plan is to build processes around the business principles to integrate them into decision-making. They will also be the focus of Ford’s 2002 Corporate Citizenship report.

Engaging Stakeholders Ford is implementing a systematic process for identifying and building relationships with individuals and organizations that have expertise in corporate citizenship. It has reached out to non-profits, academics, government, and businesses to inform its thinking. A Thought Leader Forum was held in August 2000 to provide a forum for Ford executives and leading experts in corporate citizenship to meet for discussions. This two-day off site meeting brought together about 20 senior executives from Ford with representatives of a variety of non-profits who are traditional adversaries, such as Greenpeace, Sierra Club and Oxfam. Based on the input received at this meeting, Ford has decided to focus on three critical issues: climate change, human rights especially in suppliers operating in developing countries, and proving to Wall Street that a company like Ford can demonstrate that these practices have value. These three areas of focus allow Ford to move from a theoretical strategy of corporate citizenship to three tangible action areas. Focusing the strategy this way will make it easier to communicate and clarify what needs to be done.

Setting Transformational Goals and Managing Performance Ford will create a map that defines its connection to and impacts on the environment and society. This will involve stakeholder input and will be used as a basis for setting goals. Long-term goals for corporate citizenship will be defined. Then Ford will evaluate and potentially modify its short-term goals within the context of these longer-term goals. Existing management systems and business processes will be used to make progress on the goals. Other business processes will be developed or refined to achieve progress on corporate citizenship, including goal setting, performance reviews and incentives and development of key performance indicators. Ford has endorsed the CERES principles and at the end of 1998, it became the first automaker to certify all its plants around the world under ISO 14001, which includes 140 factories in 26 countries. The Corporate Citizenship report, written in the format of the Global Reporting Initiative, set objectives. These public commitments served to “put people’s feet to the fire”. Examples of these commitments include improving fuel economy and reducing emissions, setting up a human rights policy that will address Tier 1 and Tier 2 suppliers, essentially taking responsibility


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for labor rights within the entire value chain. These commitments have caused some short-term pain but are anticipated to motivate improvement efforts.

Increasing Transparency Ford issued a Corporate Citizenship report in 2000 that defined its strategy, plans, its stakeholders, and provided an overview of 1999 performance. The company is exploring how to integrate external verification into the report and plans a similar report in 2001.

Internal Training Internal training efforts are planned to build corporate citizenship into the culture and integrate the business principles into everyday actions throughout the company. Ford plans to conduct an intensive education and training program for critical leadership positions. The aim is to build the competency of a select group of leaders from around the company who have leverage to affect change. Raising employees’ general awareness and reinforcement of the citizenship strategy will be done using multi-media approaches, such as the Ford TV station or intranet. There are no immediate plans for a “sheep dipping training course”. The key theme of this internal communication will be that the company is doing this to make the world better for our grandchildren. William Ford has stated: “Good companies deliver excellent products and services. Excellent companies do that and try to make the world a better place.” William Ford is strongly behind this initiative, and has a legacy interest in the company’s future. He is widely respected by employees. The plan is to strike a balance in the emphasis between the social side of sustainability (workers, communities) and the environmental side. If the message sounds too environmentally focused, they anticipate a negative reaction, e.g., being defined as “tree huggers” when in the automotive business.

High Profi le Projects One high-profile element of Ford’s activities is the renovation of the Rouge Complex into a model of 21st century manufacturing, called the Heritage Project. This complex has an impressive history as the birthplace of mass production and the $5 a day wage, which contributed to the creation of the middle class. In the mid-1990’s GM shut down it’s similar large old plant in Flint, Michigan amid much controversy. In 1997, as a peace offering to the union, Ford committed to keep the Rouge complex open and renovate it to allow lean and flexible manufacturing processes. In 1999, a plan was instituted with the leadership of William Ford, the Ford family, and the Board of Directors to create the “second industrial revolution” at the Rouge complex. This action is a symbol of sustainability, particularly to employees in Michigan, and a metaphor of corporate social responsibility. The company acknowledges the tight relationship between the plant and the community’s health. William McDonough, a green architect, has been hired to restore the site, clean up the waterfront, and renovate the plan to enable just in time manufacturing processes. The aim is to make this site a net positive contributor to the environment. Sustainability has led Ford to rethink its products. In early 2000, the company launched the TH!NK brand focused on how the company can provide customers with personal mobility without significant environmental impact. Focusing on mobility rather than cars per se Ford sees as a way to innovate to tap into markets in the developing world. The recent controversy associated with Firestone tires on Ford vehicles was a test case for Ford. Ironically, the initial media stories of the problems hit the same week that Ford was holding its Thought Leaders Forum. The company informed the non-profit representatives immediately. The contact interviewed from the Corporate Governance group believes this openness, as well as other previous dialogue with groups such as the Coalition on Responsible


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Economics (CERES) led to Ford being treated more fairly by the non-profit community. Ford had gained credibility with these groups through its outreach efforts. The Firestone situation has made it clearer to people at Ford that the company has corporate citizenship issues. This situation can now be used as a way to communicate the need for business principles, e.g., suggesting the Firestone situation may not have happened if the business principles had been used in making decisions. William Ford said at a speech to a Greenpeace business conference: “This terrible situation—which goes against everything that I stand for—has made us more determined than ever to operate in an open, transparent, and accountable manner at all times.”

4.3 Lessons Learned While it is still too early to gather insights into lessons learned, the contact interviewed said that so far the challenge is getting people to take time to think about these issues, particularly with pressures to get costs down. His sense is with this initiative there is a tangible lack of resistance up front compared to other change initiatives. He has experienced a response of “I know it is important but I don’t have time” rather than outright resistance. People inherently understand this is important.

4.4 Results Ford’s initiative is still in its early stages, so it is somewhat premature to identify specific results.

4.5 Sources Connecting with Society – Ford’s 2000 Corporate Citizenship Report Ford’s Environmental Report Bill Ford’s Speech at the CERES 2000 Environmental Conference Bill Ford’s Speech at the Greenpeace Business Conference Phone Interview with David Berdish, Ford Corporate Governance Group, Feb. 9, 2001

5. Royal Dutch/Shell Best Practices 5.1 Drivers The Royal Dutch/Shell Group of Companies (hereafter referred to as Shell) initiated a change process in 1994 focused on how to improve competitiveness. This process examined the organization and structure, business portfolio, leadership, and relationships with the outside world with the aim of equipping the Group for the 21st century. While this process was underway, several significant events occurred in 1995 including controversy about economic and political grievances of Niger Delta communities and consumer and NGO outrage at the plans for disposing of the Brent Spar oil storage buoy by sinking it in deep water in the North Atlantic. These incidents were an emotional shock to managers, particularly to realize that the Group was perceived by many to have fallen far short of society’s expectations regarding human rights and the environment, and its own business principles. One of Shell’s reports states, “The common characteristic was a change in the way society views companies - indeed all


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institutions - partly as a result of the communications revolution. We have to learn to do business in a global goldfish bowl. We needed a thinking framework to guide our response.” Shell responded quickly by organizing a series of roundtables, entitled “society changing expectations workshops”, in 20 or so countries to get a better idea of what society expected of multinational companies, and Shell in particular. These events included representatives from Shell, labor groups, church leaders, NGO’s, individual free thinkers, the media, and academics. Out of these sessions it became clear that society is being increasingly less trusting of what authorities say—a move from a “Trust me” to a “Show me” world. In the absence of trust there is also a call for independent verification so people can believe what is being presented. This engagement process was followed up by a worldwide opinion polling, focus groups with young people, and a survey of the experiences of similar companies.

5.2 Process Used Management Commitment Senior management of Shell came to a belief that the Group must take action. The workshops on society’s expectations formed a backdrop of learning. The contact interviewed said there was “genuine top level leadership and the Committee of Managing Directors was at the forefront of that effort”.

Business Principles Shell has had Business Principles in place since 1976. These define the standards of behavior expected of all Shell people in their business dealings large or small anywhere in the world. These were updated in 1997 in the light of the learning from the stakeholder engagement sessions to include specific commitments to support fundamental human rights and contribute to sustainable development. The HSE policy and procedures were strengthened and strict governance processes were put in place to ensure that the Business Principles and HSE remained high on management’s agenda. These developments were rolled out in March 1997 and the boards of all Shell companies adopted the new measures. The Business Principles have been translated into 51 languages so that over 99% of Shell employees can read them in their native language. Training courses, workshops and ‘primers’ on subjects like human rights (see below) also reinforce the Principles.

Public Report ing While stakeholders gave Shell good marks for what it was saying they still wanted to see evidence of actual performance. Shell issued the Shell Report, which was designed to be a two-way window to project what Shell stood for, its commitments, and the lessons learned, and for people to look in at the evidence to judge for themselves whether Shell was serious about living up to its commitments. This public report has gone through four annual cycles so far.

Road Map After laying the groundwork with the stakeholder discussions, Business Principles and public reporting, Shell then needed a strategy for how to make SD a part of the way it does business (incorporating this thinking into strategy, planning and daily operations). In the first Shell Report, a ‘road map’ (see below) was developed for how Shell viewed the important elements of SD, how these were to be integrated, and the time frame. This ‘road map’ played an important role and still serves as the master plan.

Tools to Implement Shell next developed a SD Management Framework as a tool to help people understand the principles and give them a mental framework to challenge how they currently do things. This

could be used to see how existing systems match up and identify the gaps. The framework is


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based on a classic business improvement cycle – but at each stage the framework encourages engagement internally and externally to seek out views and to integrate economic, environmental, and social considerations into decisions. The tool also encourages the reporting of progress with appropriate verification. The tool format is a manual with a tool kit with process maps, etc., that describe how to implement it. It is designed to apply across all of Shell’s business activities. The Framework was distributed to 3,500 business managers across Shell in the summer of 1999. It was distributed under the covering letter of the Chief Executives from the main businesses in Shell and was tailored to each business area. For examples, Shell’s business units for Chemicals and Exploration & Production are quite different in their activities, governance structures, and competitive position. The Management Framework represents a common mental model that can be tailored. It is generic, not prescriptive. Also, according to Mark Wade of Shell “because people were learning what SD means to them in their part of the business and finding the most effective ways of applying this thinking, it would have been wrong to prescribe too much. We wanted to encourage learning and experimentation to deepen peoples’ understanding through doing”. Shell also developed management primers to provide more detailed advice and guidance on the new high-level commitments in the revised Business Principles, e.g., human rights, child labor, and dealing with bribery and corruption. These documents were developed through engagement with external groups such as Transparency International and Amnesty International. They are distributed actively to all operating companies.

Measuring Shell is currently developing a set of key performance indicators consistent with its strategy of making sustainable development part of the way it does business. The purpose of this effort is to identify and track important parameters not just in the financial area but also in environmental, social and the underlying values areas. Shell is developing a self-assessment tool (see Table 2) to evaluate how well the organization’s business processes such as strategy and planning align with the principles of sustainable development. It has been pilot tested at the corporate level and in 23 units in Shell’s five main businesses. A later version is now being applied to cover other processes in its SD Management Framework and is being seen as helpful in raising awareness and identifying action plans for improvement including training needs.

Table D-2. Alignment of business processes with sustainable development principles

Chart Breakdown

Level 1 Minimal Alignment Level 2 Level 3 Level 4 Full alignment

Degree of integration

Decision-making is based overridingly on financial or economical considerations

Decision-making takes account of wider economic and environmental considerations

Decision-making incorporates economic, environmental and social considerations, but each element is managed independently

Decision-making is based on a systematic process that manages the inter-relationships between economic, environmental and social issues

Scope of engagement

Local, internal focus Some internal engagement and use of special external advisors

Well-developed engagement program

Advanced engagement activity integrated into cross-functional decision- making processes

Time horizon

Predominantly short-term

Short-term with some recognition of longer-term needs

Short-term priorities managed with context of longer-term needs

Short-term priorities managed as enablers of long-term value growth


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Organization A Sustainable Development Group was established in the Corporate Center of Shell International to help develop tools, report progress and devolve responsibility for integrating SD into the businesses as fast as possible. The corporate group helps develop the business case, develops tools, and provides advice into training courses, and continues to develop the Shell Report. This group is located in the division of Strategy, Environment and External Affairs. This allows cross-fertilization between staff in areas such as scenario planning, strategy development, HSE management, policy development and communication. A SD Committee provides the mandate to the SD Group. The Committee is chaired by the Chairman of the Committee of Managing Directors and comprises senior executives from the five main businesses and the heads of Human Resources, Legal and Finance. Early on, this group met four to six times per year while now it meets twice per year. It provides guidance, hears proposals and mandates actions. The SD Panel supports the SD Group. This has the same broad representation but members are at a senior but more operational level. They represent the businesses and functions in the development of common approaches and tools including the exchange of best practice. Each of the businesses has their own SD focal points and networks for driving the SD approach into their activities.

Training/Communication Employee awareness and training in Business Principles and sustainable development is done by a combination of approaches. These include training courses and workshops, the use of the primers and the distribution of a summary version of the Shell Report to all staff. This is supported by material on the Shell Intranet and Shell TV, speeches and presentations. Shell admits that much more still needs to be done in this area to not only continue to raise awareness but also to tailor the business case to different business models and to provide practical guidance suitable to them. In Shell’s Management Primer, entitled Contributing to Sustainable Development, SD is characterized as different from traditional approaches in several ways. Each of these summarizes a way of thinking and encompasses related processes: Integration. Systematically taking the three elements of SD into account at all levels Balance. Balancing short term priorities with longer term needs Engagement. Taking account of messages from society, e.g., when starting new projects,

building relationships with NGO’s based on mutual trust, respect and confidence, Shell reports that invite debate about Shell’s policies and performance

The business case advantages are defined as: It is essential to maintain the license to operate that Shell is seen to be helping provide

solutions to societal expectations SD, including integration and engagement, can provide a huge stimulus to innovation SD and new needs can create options and new ways to create business value Reducing the impact of Shell operations on the environment and communities aligns with

public expectations and can bring greater efficiency and hence lower costs There are commercial opportunities in creating environmentally friendly products, services,

and solutions


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Integration and engagement lower risk by staying attuned to societies’ expectations and trends, Shell can better develop short and long term responses

Changes in the business model Shell has made a deliberate attempt to work through its existing business processes. The current processes have proven value and the approach is to build on these strengths. For example, expanding the process for approving investments for project proposals to ensure that there is also an environmental and social impact assessment. A further example is the discipline of including the possible financial cost of greenhouse gas emissions ($5 per ton carbon to 2010 and $20 thereafter) in investment decisions for new large projects. This is part of a strategy to ensure that investments will be robust in a future where there is a financial penalty associated with carbon use.

5.3 Lessons Learned According to Mark Wade in the Sustainable Development Group, the key lessons learned for Shell so far have been: It helps to have a clear statement of what the organization stands for and its value systems.

In our case the Statement of General Business Principles has been an important bedrock for our thinking and actions.

It is vital to have top-level leadership. This can be usefully supported by a dedicated resource attuned internally to business strategy and needs and externally to society’s changing expectations.

This dedicated resource should aim to do itself out of job as soon as possible. Its success will be measured by how effectively it achieves integration of SD thinking into the line and devolving the responsibility for making it work in practice.

It is important to encourage the business sectors to experiment with how to apply SD thinking in their areas to achieve this.

“You need to be able to talk to people in different ways. Some people’s imagination is captured by the values discussion. This is sufficient justification for them to get interested. For others they need to be convinced of the business value. In each case, you need to understand their priorities. You start where is appropriate for each and expand from there. If you talk about SD in all its scope and possibilities all at once, you risk turning people off””.

“You need to provide people with awareness and enthusiasm on the one hand and practical tools on the other. If you just raise enthusiasm without the tools the enthusiasm will evaporate. If you just give them the manual it will sit on the shelf. The trick is to do both – and that is not easy!”

“Making the business case for SD is easier in big green-field projects where environmental and social considerations feature highly. It is more difficult in other business models (business to consumer and business to e-consumer). The challenge is to construct the business case in ways that are relevant by addressing the priorities.”

5.4 Results Wade reports that Shell has experienced a “huge turnaround in public standing – there is broad acceptance that we’re serious about this”. Shell had built many bridges with people outside the organization and has gotten a seat at the table as policy is being set, e.g., Global Reporting Initiative, Sullivan Principles. The business benefits are more qualitative, such as gains in eco-efficiency and more opportunities to explore and operate in new areas.


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5.5 Sources Interview with Sustainable Development Group, Shell International, April 2001 Contributing to Sustainable Development, A Management Primer The Shell Report 2000, 1999, 1998

6. Suncor Best Practices 6.1 Drivers Suncor is a Canadian-based integrated energy company with 2,600 employees. The company’s operations include oil sands, exploration and production, a refinery, and 500 retail gas outlets, and an oil shale development project. In the late 1980’s and early 1990’s, Suncor’s business was struggling – morale was low, income was barely covering costs, and the company was experiencing repeated environmental regulatory violations. At this time as well, the company had to reframe its mandate and strategic direction when Sun Oil, the former parent company, decided to divest its interest. Suncor had to transition from being a majority owned subsidiary to a publicly traded company. A new management team in the early 1990’s set the company on new course. The decision was made to pursue growth and expansion, particularly in the oil sands operation. To gain regulator and community support, this meant the company had to improve its environmental performance. Environmental issues began to be considered in a more integrated way in business decisions rather than as an afterthought. The company’s perspective shifted from a compliance focus to a beyond compliance focus, where being an environmental leader could provide competitive advantage. Suncor created a core purpose statement that articulated a vision of being a sustainable energy company. The Corporate Committee of the company (chaired by the CEO and his direct reports) led the initiative with board support. This shift in emphasis occurred as part of the larger turnaround instituted by the new management team. Management put emphasis on a core set of business value drivers, which included safety, environmental care, productivity, product value, customer relations, and shareholder return. These values were documented in a ‘core purpose’ statement that included a set of values and beliefs. Other complementary changes in the business included a decentralizing decision-making authority and increasing stakeholder dialogue.

6.2 Process Used Suncor began addressing sustainability issues using a core team of experts. A small team was formed in the 1990’s to deal with stakeholder relations. A company-wide training program in Steven Covey’s ‘Seven Habits of Highly Effective People’ (Covey, 1989) provided a theoretical grounding in ideas such as viewing situations from the perspective of others and win-win situations that supported this new dialogue and openness with stakeholders. The results of the stakeholder engagement were that new questions were asked that led to new approaches, cost savings, and better solutions. This led Suncor to see value in solving problems using a more integrated approach that draws on input from various parts of the company.

Organization and Responsibil i t ies Suncor recently formed a Sustainability Integration team consisting of senior people from each business and the corporate functions. The team is chaired by two members of the Corporate Committee and reports to the Committee. The Integration team’s mandate is to chart the path forward. The team meets quarterly and lately it has been conducting conference calls about


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every three weeks to advance active projects. Gord Lambert, Corporate Director of Sustainable Development, plays a facilitation and support role for that team. An example of an initiative led by the Sustainability Integration (SI) team relates to greenhouse gas reductions. The company is growing so its greenhouse gas emission profile is rising, which is a strategic issue for the company. The SI team set goals for greenhouse gas reductions from current operations and future growth plans. The team’s role is to drive the changes necessary to meet these goals. There is a renewed focus on energy efficiency and Suncor is making a step change in its aggressiveness in that area. The Team’s high-level reporting to the Corporate Committee makes it easier to make the case for resource commitments to goals that cut across organizational boundaries. The SI team also looks over longer time frames. For example, the team is looking at new technologies for CO2 capture and sequestration, acknowledging that these are years in the future. This team is working on corporate social responsibility and EHS management issues as well. Suncor has positioned its Sustainable Development department within the Chief Financial Officer’s (CFO) organization. The Director of Sustainable Development reports to the CFO, who is also Executive Vice President of business development. Within this organization is also housed the strategic planning function. In practice, this arrangement has tremendous benefits according to Lambert, whose EHS organization previously reported to the General Counsel. By reporting to the CFO, he gets a “front line view of big strategic issues facing the company over the short and long term”. Sustainability and the triple bottom line are able to be integrated at most fundamental levels of business decision-making.

Management Framework Suncor developed a management framework, in 1998, to guide progress toward the triple bottom line of sustainability. The framework was developed jointly by the senior management team and the EHS staff to provide a more structured approach to achieve its goals. This framework includes six strategic priorities: Operational excellence. Best in class EHS management systems Integrating environmental, social and financial considerations into core business

decision making. Utilize tools such as eco-efficiency, life cycle analysis, and environmental and social impact assessments

Products and services for the future. Pursue improvements to current products such as fuel reformulation, increase sales of cleaner fuels, incorporate renewable energy into the product portfolio, and expand energy services on the demand management side

Issue management. Identify trends early, participate in business and government sustainability forums, support public policy in key areas and apply the precautionary principle

Corporate social responsibility. Partnerships with NGO’s, proactive stakeholder relations, community engagement, and regular public reporting on goals

Organizational capabilities and commitments. Employee training on sustainability and integration of sustainable development issues into succession planning

Training and Awareness Suncor has consciously focused its initial training efforts at the top management level of the company. Sustainable development has been treated more from a strategic perspective with the priority being to develop “top down” understanding and commitment. According to Lambert, “we don’t hold the view that all employees need to understand all aspects of sustainable development in a complete way. We want operational employees to focus on what they have


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control over and to understand why it is important and how they can make a difference. Whereas at the top of house, where people have a need and mandate to look at issues more broadly they should have a deeper understanding.” Currently, the depth of knowledge is high at among top management but as you move lower down into the organization the level of awareness is lower. According to Lambert “so far, not providing in-depth training from the bottom up has not been a barrier to us.” One key event where Suncor has trained senior management is an annual retreat of the top 40 people in the company. For the last two years, sustainable development has been central theme. The first year, Paul Gilding of Ecos Corporation attended and last year Amory Lovins of the Rocky Mountain Institute spoke. Now Suncor is moving to expand the level of training throughout the company as part of a change effort. A key part of that this training initiative will focus on actionable plans. The energy efficiency program will be communicated to employees as part of Suncor’s sustainable development initiative. Lambert said “we want to have enough awareness at the plant floor level to get people thinking creatively and to understand why sustainable development is important in order to build commitment towards the goals.” In practice, several other sustainable development-related processes also serve to increase awareness and build organizational alignment, including: Involving senior managers in discussions with stakeholders, e.g., Suncor has invited

environmental NGO's to speak to its corporate committee and the Board. By exposing senior managers to a diversity of perspectives, they can more fully understand stakeholder expectations and positions.

Using the process of external reporting as a vehicle to promote dialogue on SD - speeches, external reports, etc., provide an opportunity to focus people's attention and capture the most recent thinking.

6.3 Lessons Learned There have not been significant obstacles in gaining organizational alignment so far. Suncor has had good and bad experiences as a company that allow people to see what it looks like when one gets sustainable development initiatives right and when one gets them wrong. At the last two senior management conferences the two positive and negative case studies were discussed. The Oil Sands project was reviewed as an example of where Suncor “got it right”. Stakeholder support helped in obtaining approvals and people saw the value of that dialogue. The company conducted extensive consultation with stakeholders throughout the planning stages and sought to balance environmental and development issues. Stakeholders wrote to the regulatory agency to support the project or chose not to object to the project. As a result, the company was able to obtain regulatory approval without the need for a public hearing and the speed of the approval put the project ahead of schedule by eighteen months. Another lesson learned is the challenge of changing how people make decisions. According to Lambert “it has been a little difficult to get people to grasp the notion of triple bottom line thinking – it doesn’t come naturally to people, particularly to operational people. In strategic planning, individuals are pulled into broader societal issues, so they take to it more easily.”


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Suncor has found that it is important to bring the entire senior management team along the learning curve and gain alignment at the top before moving to lower levels in the organization. In Lambert’s opinion you can’t short cut this process: “it is important to take the time that managers need to develop their own understanding. They can’t act as change agents without a good grasp of concepts”. A powerful technique in the education effort has been to use real life circumstances.

6.4 Results One dramatic example of the value gained by these initiatives was in Suncor’s start-up of the Steepbank Mine at Oil Sands, a $219 million project. As mentioned above, the speed of approvals was increased, which, in turn, decreased construction costs and led to quicker increases in production and environmental improvements. The same faster approval process was obtained in another large development, a $3 billion expansion of the oil sands facility that will be started up in early 2002. The direct benefits are hard to quantify but relate to the value of thinking more broadly and longer term strategically and avoiding blind spots. Suncor was selected to be part of the Dow Jones Sustainability Index, which been an effective way to broaden its shareholder base. Institutional and ethical funds are investigating Suncor, particularly those in Europe.

6.5 Sources Mapping the Journey: Case Studies and Action toward Sustainable Development, Lorinda

Rowledge, Russel Barton, and Kevin Brady, Greenleaf Publishing, 1999 Suncor Energy, We Care, 1999 Progress Report Phone Interview with Gord Lambert, Director of Sustainable Development, March 5, 2001

7. TransAlta Corporation Best Practices 7.1 Drivers TransAlta is an electric utility that owns and operates thermal and hydroelectric power stations and transmission operations in Alberta, Canada, Australia, the US, and Mexico. The company also provides energy marketing and retailing. TransAlta is Canada’s second largest point source emitter of greenhouse gas emissions, with major investments in coal-fired generation. Key drivers for the sustainable development initiative were: Early identification of climate change as a critical business issue. (TransAlta is responsible

for 6% of Canada's total CO2 emissions and is Canada’s largest single emitter.) Customer demand for low prices and environmental protection A need to maintain flexibility for the business through participation in policy formulation

locally and nationally Shifting marketplace due to deregulation, with increasing interest in buying green power An aggressive corporate growth strategy including coal and gas fired generation

The company’s ‘Quality of Service’ program in the late 1980’s shifted the corporate focus from internal to external: identifying and meeting customers needs. This external focus led the company to be more interested in the broader range of stakeholder concerns. Environment was


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increasingly seen as a key concern among Canadians. The CEO brought together customers and NGO’s in 1992 and learned that customers wanted both low prices and environmental protection. In the late 1980’s and early 1990’s, the company recognized that it needed to be proactive on sustainable development, particularly on the issue of climate change. By positioning itself as proactive on these issues, TransAlta could gain flexibility and reduce risks. TransAlta’s early initiatives involved executive participation in various national and international activities related to sustainable development, such as the Alberta Roundtable on Environment and Economy. These multi-stakeholder processes gave TransAlta experience in this type of approach to these issues. The company is moving to a more preventive stance by trying to solve 80% of issues before they lead to potential conflict with various stakeholder groups.

7.2 Process Used TransAlta’s CEO was totally committed to the belief that sustainable development performance was good business. He demonstrated strong leadership is carrying this vision, despite limited proof at the time, starting in 1993. His leadership was the key early driver to gain the support of the Vice Presidents and get executive action in terms of targets and other improvements. This senior level commitment was what drove the initiative early on. A corporate-level sustainable development department was created to centrally coordinate the initiative. This department consolidated traditional EHS roles with responsibility for more strategic and proactive initiatives in one department. The size of the group was up to 20 staff at one time and included people with strategic planning and economic backgrounds as well as EHS expertise. The Sustainable Development department addressed emerging environmental issues, such climate change, emissions trading, and renewable energy policies. It focused on taking proactive initiatives, such as getting heavily engaged in environmental policy development and stakeholder outreach. Selected operations-level engineers are chosen to work in the department for four months before they begin their operations jobs. This serves to disseminate learning and environmental perspectives more broadly into the organization. To operationalize the SD vision with operations, TransAlta set a concrete goal for improvement that required action by all business units. In 1994, the company set a goal to return greenhouse gas emissions to 1990 levels by 2000. This clear measurable goal was instrumental in translating the commitment to sustainable development into an actionable target. In 1995, as part of the Canadian Climate Change Voluntary Challenge and Registry Program, TransAlta submitted a greenhouse gas management action plan to the Minister of Natural Resources, which committed the company to the voluntary goal above. This performance goal was tied to incentives and implemented through the creation of an internal CO2 emission costing and trading scheme. This scheme helped shift people’s thinking to realize that CO2 emissions have value and translated sustainable development into practical business terms. The scheme was also established to learn how such a scheme might work on a larger scale. Plant CO2 emissions were charged $2/ton. Employees were encouraged to find internal efficiencies or identify offset projects elsewhere in the company, such as in Transmission and Distribution business units. Business managers found creative, innovative ways to reduce CO2, often at less cost than anticipated, which helped change the mindset that environmental improvements are difficult and costly. From 1993 to 1996, these measures were effective in raising awareness and marshalling effort. The program was phased out in 1997, in part because it had achieved its aim of getting


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people motivated and educating TransAlta about how participating in a trading scheme would work. In addition, employees were complaining about the “bureaucratic overhead” associated with administering the scheme, e.g., establishing formal trading contracts with other managers. Lastly, TransAlta was identifying more cost-competitive external offset opportunities than internal offsets. Other incentives to encourage buy-in and commitment to the sustainable development initiative included pay performance incentives primarily focused on the Generation business. There was a quantitative/qualitative incorporation of sustainable development objectives into performance review and individual’s annual objectives. This demonstrated the corporate commitment to the goals. The inclusion in objectives rolled down to directors and managers. One example of a performance incentive was Generation unit employees could earn up to 3% of their salaries if they reduced "heat rate" by 0.5%. (Heat rate relates to the plant's efficiency, which relates to emissions.) TransAlta also established an internal carbon tax, also with an aim of raising awareness among managers of the environmental costs of emissions. The engineers and plant managers figure a potential project’s costs both with and without the tax of $2/ton of CO2, an estimate of the cost to buy emission offset credits. This carbon tax is used in making capital expenditure decisions, particularly when comparing projects, and is not tied to “real” money.

Training TransAlta worked in collaboration with a major environmental group headquartered in Alberta, Pembina Institute for Appropriate Development, to train all of its employees in SD through a program called the Environmental Citizenship Initiative (ECI). Pembina is a consulting and advocacy, which is perceived within Canada as leading environmental group on climate change. TransAlta has a good working relationship with them and contracted with them to be the delivery arm for a mass training of every employee on the value and opportunities of SD thinking for the company. Each employee was in training for a 1-2 day session at first followed by two more 1-day sessions. These were organized by business so participants were all in the same operation. The material was tailored to the business, e.g., generation vs. marketing. TransAlta’s SD Department was involved in the logistics, facilitation, curriculum development, and part of the delivery. The Pembina Institute did most of the delivery. This training emphasized that sustainable development was the right thing to do and that pursuing this initiative was good for business. Today, all new employees go through a 90-minute CD Rom training module. The sustainable development strategy was presented as an integral part of the company’s transition from a regulated electric generation and transmission company to a growing competitive transnational company competing in deregulated markets. The initiative was clearly supported by the CEO and the training focused on raising awareness of this corporate commitment and motivating employees to identify places in their job where they could take action. Training was an attempt to operationalize the practices – shift from theory to practice. There was not an attempt to position a theme or message to gain buy-in from the bottom up. The sustainable development was part of a larger cultural and business mindset shift. This transition was stressful for many employees. To some, sustainable development was threatening, while others ‘embraced it as a great new way of viewing world’. Today commitment to sustainable development has become more ingrained in the mindset: people quote the company’s beliefs related to sustainable development in conversation.


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Communications TransAlta routinely includes stories and information about sustainable development in its various communication mechanisms: The company publishes a quarterly progress newsletter called the Sustainable Development

Dashboard An annual technical excellence conference features some presentations related to

sustainable development The employee news network, a web based news distribution, includes regular news updates

of sustainable development initiatives and results. Business units continually update the site with new information. Examples of information communicated here include achieving safety milestones, winning awards for EHS performance

Internal management systems ensure regular reporting and communication CEO updates – this weekly note, sent to everyone in the company, describes recent events,

and sustainable development is often featured Celebrations are held when major milestones are reached, e.g., a videoconference among

plants The progress on the CO2 reduction goal is an agenda item at the regular meetings of

TransAlta's Board of Directors A necessary precursor to achieve CO2 emissions reductions, was communicating the company's environmental and sustainable development goals. Jim Leslie, as the first VP of Sustainable Development, recalls the difficulty in this task. "In general," he says, "it takes 2-3 years to shake-up the internal communications system to get reaction from frontline employees."*

Sustainable Development Strategy TransAlta developed a strategy for sustainable development that was based on a framework of “Strategic Cornerstones”. In each area below, the company set objectives: EHS management. Implementing ISO 14001/BSI 18001 conformant management systems Sustainable business initiatives. Focusing on eco-efficiency, such as creating a

Composting Center to process Edmonton’s municipal solid waste, wastewater treatment sludge and mine sludge to use in reclaiming TransAlta’s mine sites near the city

External issues, relationships, and opportunities. Engaging with communities and stakeholder groups

Sustainable development infrastructure. Using employee incentives, education, and standards to promote more sustainable business practices

In 1997, the sustainable development initiative shifted to more of a business focus - from commitment to environment to making money by being good at managing environmental performance well. There were already internal drivers pushing the initiative this way and when a new CEO came on board it allowed the company to change direction more quickly. The aim was to spot more business opportunities and gain competitive advantage by being ahead of curve and anticipating regulations. The initiative faced an interesting test when new CEO came in. He was more focused on business and growth and more pragmatic. He has said, “we’re not a

* Can Voluntary Initiatives Play a Role as an Environmental Management Tool? TransAlta’s Sustainable Development Efforts, Successes, and Challenges - 1988-2000, Draft v. 5, Case Study prepared by the International Academy of the Environment, Aug 20, 1998, p. 23


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green company”; however, he has also said that SD in practice is highly important as a risk management tool and to shareholders. He has also seen how it opens doors for new business opportunities. The Sustainable Development department’s role now involves helping bring forward new business initiatives, such as moving into renewable energy and wind power. TransAlta is purchasing 100MW of green power output to gain the carbon offsets but also to learn more about the renewable energy business. A new group has been spun out of the Sustainable Development department called New Ventures: this group consolidated Corporate Development (green power and alternative power acquisitions, new plants) and e-commerce and is staffed by top people in company. That group is pursuing various kinds of new technologies, components for distributed generation, solar, wind by acquiring or partnering with other companies.

7.3 Lessons Learned The sustainable development initiative initially ran into quite a bit of resistance. The greatest barrier faced was skepticism about the value – the skeptics saw it as “green washing” and did not see its effect on day-to-day operations. The “old guard” liked to do it their way, with a mindset of “we just produce power.” The resistance also related to the transition to a competitive market. Questions were raised such as “is this window dressing, is it going pay off, what does it cost.” TransAlta has a culture of a strong engineering company so activities such as external stakeholder engagement appeared to some internal skeptics as “soft activities” and a waste of time. These obstacles were overcome in the early days through the force of the CEO’s commitment. TransAlta did not give employees discretion about whether to participate – it was a requirement. There still is strong CEO support but now the business benefits of sustainable development have been more clearly demonstrated through experience. For example, the company’s reputation is critical to gaining bids for new facilities. TransAlta has developed a strong reputation as an environmental leader and this makes employees proud to work for the company. With the changing nature of the business, there has also been significant turnover in the company. The company is finding that young people are attracted to work there because of its reputation. If it were to be done again, the Manager of Business Integration said he would make sure the training was more pointed in getting employees to make specific commitments. The process did not formalize implementation of the ideas. He would like to see commitments to specific actions followed by formalized reporting and review. TransAlta has faced challenges in keeping momentum, particularly as it moves away from being a regulated utility towards a highly competitive market. There is tension to keep costs low and keep the sustainable development initiatives in place. Pursuit of ISO 14001 systems and regular audits have kept attention to these issues. The corporation gave each plant the option of being ISO certified or self-declaring conformance to ISO 14001 and receiving annual internal audits. Most plants have pursued certification.

7.4 Results TransAlta has achieved significant progress related to CO2 emissions. The company stabilized CO2 levels at 1990 levels in 1997 through a combination of internal projects, customer efficiency programs, renewable energy purchases and offsets. By 1999, the company had achieved a


D-28

13% reduction over 1990 levels for its Canadian emissions, despite an 8.7% increase in generation.

There is a financial benefit from implementing energy efficiency improvements in the Generation, and Transmission and Distribution business units. The vast majority of internal efficiency projects have passed TransAlta's requirements for return on investment.† Anecdotal evidence suggests the initiative has provided tangible business advantages. TransAlta bids to operate cogeneration plants with first-rate companies. They have found that their reputation has given them an edge when competing to operate ‘inside the fence’ because these companies want an operator with solid EHS performance they can trust. In practice, the results associated with the massive employee training initiative were more powerful than anticipated: Short term – It worked well to bring in an outside perspective and expertise. The idea was to

challenge the individuals with new thinking and have them challenge the concepts and apply them to their every day activities. The discussions were very interactive and lively.

Long term – The results have been more interesting. The training can now be viewed as the kick-off for the ongoing development of employees in terms of understanding of SD and its value to business. Years later, the SD department has found it easier to implement SD initiatives because there is a broad understanding of the value. The training was effective in developing buy-in and widespread understanding early on that this was not just green washing but a path to long term business value.

7.5 Sources Mapping the Journey: Case Studies and Action toward Sustainable Development, Lorinda

Rowledge, Russel Barton, and Kevin Brady, Greenleaf Publishing, 1999 TransAlta Sustainable Development Annual Report 1999 Can Voluntary Initiatives Play a Role as an Environmental Management Tool? TransAlta’s

Sustainable Development Efforts, Successes, and Challenges - 1988-2000, Draft v. 5, Case Study prepared by the International Academy of the Environment, Aug 20, 1998

Phone Interview with Mike Kelly, Director of Sustainable Development, February

† ibid, p. 24


E-1

Appendix E: Supporting Materials

Sustainable Development Sustainable Development AlignmentAlignment

Appendix E:Appendix E:

Supporting MaterialsSupporting Materials

1

Supporting materials were developed to aid in internal communications.

Supporting Materials

Cement IndustryImplications

StrategicQuestions

Sustainable Development

The Business Case for Action

Strategiesand Tools

Global Trends

• Population increases

• Natural systems decline

• Constraints and opportunities

• Stakeholder expectations

• Scenarios

• Questions raised by trends

• SD definitions• New

approaches needed

• Why act now?

• Eco-efficiency• Industrial

ecology• Design for

environment• Natural Step• Stakeholder

engagement/ dialogue

• Key performance indicators

Sections can be used individually or in combination and tailored as appropriate to your company’s situation. However, please note that these sections are intended as a resource to supplement internal presentations, rather than as the sole basis for the creation of such presentations.

2

Outline

Global Trends

Cement Industry Implications

Strategic Questions



Sustainable Business Strategies and Tools

3

CEOs of major corporations recognize the importance of sustainable development to business.

I think it’s fair to state the case in rather stark terms that in the future, companies that are not sustainable—in the fullest sense of that term—will not be operationally or financially successful. It is doubtful they will even survive.

William S. Stavropoulos, President & CEO, Dow Chemical

The challenge of sustainable growth is not a philosophical issue. It is a nuts-and-bolts business reality. We made it the primary objective of our company, because we believe sustainable growth will be the common denominator of successful global companies in the 21st century.

Chad Holliday, Chairman and CEO, DuPont

Sustainability – or the capacity for continuance – is a concept of critical importance to all of us... Business has the skills, resources and knowledge to make a difference. The challenge is to grasp the opportunities it presents, openly and responsibly.

Paul Drechsler, Executive Director of ICI PLC & Chairman and Chief Executive of Quest International

Global Trends

4

The challenge of sustainable development arises from these two major converging trends.

Decline in resource availability and ecosystems

Impact = Population x Consumption x Technology

Diminishing margin for action

Sustainability

Global Trends

5

World population is increasing to unprecedented levels.

Global Trends

6

Massive flows of material and energy are used to meet the needs of this expanding population.

Source: USGS

1900 19601920 1940 1980 19950

500

1,000

1,500

2,000

2,500

3,000

Millions of Metric Short Tons

Raw Materials Consumed in the US -More than all previous societies combined

Global Trends

Graph of population growth

7

These trends are leading to a decline in the health and capacity of natural systems worldwide.

Biologists: greatest extinction rate in 63 million years

Global 50% drop in freshwater available per person

13 out of 17 fisheries collapsed or endangered

Forest losses equal to area of UK/year, plus reduced diversity, acid rain etc.

30-80% topsoil losses significantly reduce diversity, absorptive capacity, and agricultural productivity

Global Trends

8

Carbon Emissions from Fossil Fuel and Cement

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

Mill

ion

Met

ric T

ons

of C

arbo

n

Central and South AmericaAfricaFar EastCentrally Planned AsiaMiddle EastCentrally Planned EuropeOceaniaWestern EuropeGermanyNorth America

Source: CDIAC

Atmospheric carbon dioxide (CO2) emissions are rising.

9

Surface temperatures have warmed over the past century.

WORLDWORLDRESOURCESRESOURCES

INSTITUTEINSTITUTE

Global Trends

10

At the same time, millions of people worldwide are struggling to meet their basic needs.

1.3 billion people live in absolute poverty, with incomes less than $1/day (World Bank)

841 million people in developing countries suffer from basic protein-energy malnutrition (UN Food and Agriculture Organization)

Nearly 1 billion people either cannot work or are employed in jobs where they cannot support their family (International Labor Organization)

11.7%

2.3%

1.9%

1.4%

Richest Fifth

Poorest Fifth

(UNDP, Human Development Report 1992)

82.7%

Distribution of Total World Income

Global Trends

11

Outline

Global Trends


Strategic Questions




12

These trends can create strategic business opportunities.

Emissiontrading

Workforcetraining

CommunitydevelopmentEnvironmental

stewardship

SocietySociety

MaterialrecyclingBy-product

synergy

Wasteincineration

Industrialecology markets

Alternativefuels

Novelmaterialresearch

Buildings& Roads

ConcretePlant

CementMill

ClinkerKiln

RockQuarry

Supply Chain

Energy AggregatesGypsum

IndustryIndustry


13

But these trends can also create business constraints.

Environmental & Environmental & Social ImpactsSocial Impacts

Legal/Market Legal/Market ConstraintsConstraints

Business Business ImplicationsImplications

Actual Actual ConstraintsConstraints

• Water shortages

• Increasing toxicity

• Deforestation

• Water contamination

• Landfill shortage

• Lack of employment

• Lack of housing

• Income disparity

• Regulation• Insurance/banks• Consumer/NGO

pressure

• Water shortages• Waste disposal

overloaded• Political unrest• Economic recession

• Cost increases

• New compliance requirements

• Unpredictable energy/ raw material supply

• Reduced consumer demand

• Volatile markets


14

Like other extractive, energy-intensive industries, the cement industry is not on a sustainable path.

Major industry aspects are arguably unsustainable:- Quarrying impacts- Depletion of minerals- Energy use (quarrying and production)- Carbon dioxide emissions

The market for cement could be influenced by emergence of “preferred” alternative construction methods and materials.

The large energy requirements of cement production will become untenable in the face of rising costs and global warming concerns.

Vast emerging markets in Asia may not follow the same consumption patterns as the developed nations.

Cement plant expansion initiatives face increasing resistance from local communities as well as NGOs and other stakeholders, so that maintaining “right to operate” is more costly and time-consuming.


15

Societal expectations are changing regarding how global business affects these trends and its responsibilities to address them.

Poll of 25,000 adults in 23 countries in 1999 found:

90% want companies to focus on more than profitability

73% say companies should be responsible for protecting the environment

56% judge companies on 'social responsibilities'

Over 60% in Europe and America consider punishing companies who are not socially responsible

We cannot wait for governments to do it all...you, in business, labor and civil society organizations, have skills and resources that are vital in helping to build a more robust global community.

Kofi Annan, UN Secretary General

Poll conducted by Environics


16

Each company is embedded in a web of relationships that can create pressure for action.

Government Agencies

OrganizationOrganizationSuppliers

Universities/Schools

Banks Investors Insurance Companies Consultants Trade

Assoc.The

Courts NGOs The Press

The Community

EmployeesEmployees

Financial Financial ResourcesResources

Industry Industry NormsNorms

LegitimacyLegitimacy

ProductsBuyers

Customers

Competitors

Material Inputs

Source: Hoffman, Competitive Environmental Strategy


17

The cement industry has stakeholders at each facility and as an industry.Facility focus

Community residents and local businesses

Local, regional, and federal government officials

Public interest groups

Labor unions

Local, regional and national media

Employees

Industry-wide scope

Suppliers

Related industries

Customers and specification authorities

Cement and other industry associations

Lenders and investors

Global NGOs

Shareholders


18

Stakeholders interests are becoming increasingly important to address to ensure a license to operate.

Local communities are gaining sense of empowerment.

In response, companies are seeking open engagement and dialogue to better manage environmental and social impacts.

Stakeholder engagement involving risk perception arouses deep emotions, but can provide valuable insights.

Events that trigger engagement of stakeholders include facility siting, expansion, modification, or release of regulatory information.

Public meetings are keyopportunities to build trust.

Likelihood of opposition depends on both community and plant characteristics.

Example of Successful EngagementA Lafarge plant in British Columbia, Canada initiated an extensive public involvement campaign related to building a new plant in an existing location. Lafarge was able to proactively address their concerns, winning approval from regulators and the public.

Example of Successful EngagementExample of Successful EngagementA Lafarge plant in British Columbia, Canada A Lafarge plant in British Columbia, Canada initiated an extensive public involvement initiated an extensive public involvement campaign related to building a new plant in an campaign related to building a new plant in an existing location. Lafarge was able to existing location. Lafarge was able to proactively address their concerns, winning proactively address their concerns, winning approval from regulators and the public. approval from regulators and the public.


19

Stakeholder dialogue sessions conducted during the WBCSD study identified stakeholder expectations of our industry.

BrazilBrazil

Portugal/SpainPortugal/Spain

ThailandThailand

EgyptEgypt

Public and media are unaware of industry efforts to clean up its operations and support nearby communities

Cement industry has a ‘dirty’ image

Citizens want to preserve Thailand’s natural beauty, reduce emissions and avoid degradation of natural resources. Acknowledge there is constant trade off between economic growth and natural preservation.Stakeholders appreciate jobs provided by cement plant.

Participants expressed strong, divergent views about co-incineration of wastes in cement plants:

Public is concerned about health effects Industry feels safety is well documented

This illustrates unfortunate lack of early stakeholder engagement in regulatory decisions.

Stakeholders feel major challenges confronting the industry are not being addressed:

Environmental regulations are not enforcedCement plants not all held to same standards

Because trust is weak, stakeholders want industrial plants to be isolated from populated areas and monitored by an independent organization


20

Stakeholders raised concerns about a variety of issues. On Societal Issues

Concerned about health effects, worker safety, degradation of aesthetics and natural resources, noise, dust, road damage, landslides.Appreciate jobs, tax revenue, and improved infrastructures

On Environmental ImpactsConcerned about depletion of limestone, fuel, and other mineralsAFR raises concerns about dioxin releases and accumulation of heavy metalsConcerned about air pollution, water contamination, natural habitat destruction, loss of green spaces, and climate change

On TransparencyConcerned about lack of ongoing communication and engagementChanging demographics have weakened community relationships

On CommitmentResponsible companies should set an example, led by CEO; should consider the whole supply chain and reduce lifecycle impactsGovernments, banks, and lenders should play stronger role in fostering sustainability by providing incentives and reducing barriersEfforts to educate consumers and foster innovation are inadequate


21

How might these trends affect the cement industry and our company and how can we react strategically?

Climate change/global warming

More environmental activists

Growth in international trade

Raw material depletion

Interest in “green” buildings

Fuel costs

Legislation/regulations

Waste

Global Trends

“Not in my back yard”

Local impacts from dust, noise, traffic

Community concerns regarding investment, jobs, quarry restoration

Transportation impacts

Local Issues

Business Trends

Others?


Photo of cement plant

22

Considering alternative scenarios of the future is an effective way to address trends and develop a viable strategy.

Scenarios:

Provide alternative and plausible stories about the future

Recognize limitations in forecasting the unpredictable

Are concerned more with strategic thinking than strategic planning

Are tools for long-term strategy development

WBCSD has created three scenarios for 2000 - 2050 that can be used to develop flexible and robust strategies


23

Outline

Global Trends


Strategic Questions




24

These trends raise some important strategic questions.

How can we make decisions that are strategic in the face of uncertainty about environmental risks?

How can we make investment and other decisions that reduce our risk of hitting environmental and societal barriers?

How can we find new business opportunities?

Are we listening to the right signals from the market, customers, and other stakeholders (regulators, communities, and investors)?

Are we asking the right questions?

Strategic Questions

25

Outline

Global Trends


Strategic Questions




26

This discussion is framed under the term Sustainable Development, which can be defined several ways.

Meeting the needs of the present without compromising the ability of future generations to meet their own needs

The simultaneous pursuit of a triple bottom line:

Economic prosperityEnvironmental quality Social equity

A better quality of life for everyone now and for generations to come


27

Companies evolve in how they manage environmental and related issues.

Environmental Compliance

Risk Management


“End-of-pipe”

Limit impact of current activities

Pollution prevention;Management systems

Redesign to eliminate impacts of activities

Strategic integration

Change activities and design of industrial system


28

Given the scale and nature of environmental problems, we need new mental models and ways of thinking to solve them.

Problems cannot be solved within the mindset that created them.

Albert Einstein


29

Developing strategies to pursue sustainable development requires new approaches.

Compartmentalized thinking -focused on parts in isolation

Traditional Approach Sustainable Approach

Systems thinking - focused on interdependence of parts and optimizing whole system

Environment/social implications addressed by staff specialist after strategic decisions made

Environmental/social implications considered by decision-makers in designing strategy

Forecasting: where are we today-how do we improve 5%

Backcasting: what would sustainable world look like in 30 years – how do we get there?

Company’s position is the way Stakeholder engagement to understand diverse points of view to find better solution


30

Redesigning our industrial system to be sustainable requires a shared framework to understand how nature works.

What are the root causes of why our industrial systems create environmental degradation?

Where might these environmental trends create a barrier or problem for our business in the future?

Understanding these issues can contribute to creating a strategy that avoids these

problems and finds the growth opportunity.


31

An organism’s survival depends on two critical functions from its environment: provision of resources and absorption of wastes.

Organism Organism

Source Sink

Provide resources:• Water • Clean air• Nutrients

Absorb wastes and by products

The same principle applies at larger scales, e.g., to an company, industry, or economy.

EnvironmentEnvironment


32

To maintain the integrity of these valuable services, we need to understand how nature works.

No Waste

• Nature works in cycles

• There is no waste - what is unused by one species becomes nutrients for the next

• The sun’s energy drives the process:

Green celled plants using photosynthesis create net concentration and structure


33

In contrast, our industrial system functions primarily in a linear fashion.

Take Make Waste

Only 6% of material flow in ends up in products

Source: Hawken, Lovins, Natural Capitalism

Take “natural capital,” structured valuable material, and process it into unusable waste


34

This industrial system, operating on an ever larger scale, is embedded in and affecting nature’s cycle.


35

The impact of our expanding industrial system on the environment affects both sources and sinks.

Sources

Key resource bases are being exploited at rates faster than their ability to regenerate.

SinksThe available land area where nature can break down and recycle wastes is shrinking.

The quantity and types of wastes created by industrial societies cannot be fully absorbed and recycled by nature.

ForestsFisheriesTopsoilGroundwaterFreshwater

CO2NOxSynthetic compounds (CFC’s, DDT)

Urban developmentDeforestationDesertification

Economy Economy



36

These impacts can create unexpected barriers for business.

3M decided to phase out production of Scotchguard (2% of annual sales) after finding trace amounts in blood samples of people and wildlife worldwide, even in countries where the product was never sold or manufactured. ($1 million charge against earnings in 2000)

An activist group has convinced 250 major companies to commit to phasing out all purchases of old growth forest products.

At BHP’s large copper mine in Papa New Guinea, mine tailings have drained into a river for 15 years. This has led to class action legal claims and public scrutiny.

Shell faced NGO outrage and consumer boycotts of its gas stations over its decision to dispose the Brent Spar oil platform at sea.


37

Where is our company potentially vulnerable when considering these impacts?

Sources Sinks

Are we dependent on a threatened or sensitive natural resource?

What “sinks” are we dependent on that may reach capacity, for example:• Global atmosphere?• Local air quality?• Human/wildlife capacity to absorb toxic substances?

Economy Economy



38

How can our company find the opportunity for business growth by reacting proactively to these impacts?

• How can we help customers who may be facing a “sink” or waste limit, e.g., using waste as alternative fuels?

• How can we use more closed-loop production processes to save energy, water, or materials?

• How can we collaborate with other industrial partners to operateour industrial system in a cyclic way?

• How can we increase productive land area and improve biodiversity?

• How can we be strategic about using emission trading schemes to gain business advantage?


39

Other barriers for business can arise when people feel their needs are not met or they are being treated unfairly.

Global human rights groups and labor organizations are focusing increased attention on corporate practices.

The Internet can be used to quickly disseminate information about corporate practices worldwide.

Shell was the subject of condemnation and boycotts by NGOs associated with its operations in Nigeria. It was viewed as having complicit involvement in the violations of human rights by state security forces and the lack of economic benefits of oil production for local communities.


40

Redesigning our industrial system to be sustainable also requires consideration of business’ role in meeting human and societal needs.

How does our company contribute to the health of the communities it operates in?

What are the social responsibilities of our business and how effectively are we fulfilling these?

How can our business find opportunity in serving markets where basic human needs are not met?

How can our company differentiate itself in how it treats it workers to attract and retain talented employees?


41

Outline

Global Trends


Strategic Questions




42

The strategic response a company develops based on these trends needs to be based on a compelling business case.

Improve asset utilization

Increase revenues

Maintain right to operate and expand

Increase worker productivity/morale

Decrease operating costs

Avoid liability, unplanned expenses

Balance Sheet

Revenue

Expense

Net Income ###

Strategic BenefitsCreate flexibility and options for future

Maintain positive corporate image


43

Business value creation can include several types of value.

Quantifiable value (financial)

Strategic enterprise value (e.g., image) measurable in non-financial terms

Future potential value (e.g., option value) over a long time horizon

ExamplesReduce costs through more efficient resource utilization (e.g., AFR).

Increase revenue through developing new products or new markets.

Reduce cost of capital through effective leveraging of capital assets.

Customer loyalty, employee satisfaction, right to operate

Reducing energy needs allows better control of costs if future regulation on CO2

Use of alternative fuels creates options - less dependent on one fuel source

Type of Value

44

StakeholderValue

Another perspective is to identify where there can be value creation for stakeholders that creates enterprise value.

EnterpriseValue

Access to education & health care

Social equity and justice

Cultural preservation

Ecosystem protection

Natural resource

conservation

Biological diversity

Poverty alleviation

Business opportunity

Economic growth and prosperity

Employee well-being

Right to operate

Eco-efficiency

Resource productivity

ROI

EVA

etc.

SocietalEcologicalEconomic


45

Business Case Example: Quarry Restoration

Community satisfaction

Ecosystem preservation

Productive use of land

Stakeholder value

Enhanced corporate

imageEnterprise

value

SocietyEcologyEconomy


Avoidance of potential environmental litigation

46

Business Case Example: Alternate Fuels & Raw Materials

Reduced solid waste burden

Decreased resource depletion

Stakeholder value

Increased eco-efficiency

Increased revenue

Increased worker productivity

Reduced cost of inputs

Enterprise value



47

Business Case Example: Worker Education

Improved community relationship

Increased community prosperity

Stakeholder value

Increased workforce

productivity and loyalty

Enterprise value



48

Outline

Global Trends


Strategic Questions




49

New business models and tools are emerging that will help companies shift to sustainable practices.

Eco-efficiency

Industrial Ecology

Design for Environment

The Natural Step principles of sustainability

Stakeholder Engagement/Dialogue

Key Performance Indicators


50

Leading companies are using eco-efficiency to integrate sustainability considerations into their business.Definition

Delivering competitively priced goods and services that satisfy human needs and bring quality of life…

while progressively reducing environmental impacts and resource intensity throughout the life cycle…

to a level at least in line with the earth’s estimated carrying capacity.

Key Dimensions

Reduce material intensity of goods and services

Reduce energy intensity of goods and services

Reduce toxic dispersion

Enhance material recyclability

Maximize sustainable use of resources

Extend product durability

Increase the service intensity of products, e.g., shared use, easily upgradedSource: DeSimone, Popoff: Eco-Efficiency


51

The original design of the clinker cooler at kiln no. 3 was optimized.

BenefitsIncreased clinker production by 6%, from 3,300 to 3,500 metric tons per dayReduction of specific thermal consumption at the kiln by 30 kcal/Kg clinker, representing 34,492 Gcal/yearReduction of maintenance costsSavings of US$ 350,000 per year for investment of US $430,000 for the projectReduction of 33,000 metric tons of CO2 per year

CEMEX Phillipines optimized the design of the clinker cooler resulting in higher operating performance, lower emissions from the system, and cost savings.


CEMEX Colombia installed roller press technology and dryer system for natural cement additives that resulted in higher operating performance and lower emissions from the system

Roller press technology with a dryer system was installed to allow the use of residual hot air, increase production, and reduce energy consumption at the cement grinding system and atmospheric emissions at the clinker cooler system

BenefitsIncreased cement production by 20%Reduced energy consumption by 12.5% -from 40 to 35 Kw-h/metric ton of cement, representing 5,400 Mw-h/yearReduced dust emissions by 15%Increased use of natural additives (puzzolane) which allows CEMEX to produce ecoefficient cement

Reduction of 53,000 metric tons of CO2 per yearSavings of US$ 700,000 per year based on investment of US$ 2.5 million for the project


53

Conserve – Case Studies Contribution to a Zero Emissions Society

Taiheiyo sees an opportunity for the cement industry to become the nucleus of a network of industries that use each other’s wastes as raw materials, supporting a “Zero Emissions” concept aimed at eliminating waste emissions from human society. Successful examples at Taiheiyo include the exchange of calcium carbonate and gypsum with power stations, the use of incinerated household wastes to make Eco-Cement, and the destruction of CFCs in cement kilns.

Contribution to a Zero Emissions Society

Taiheiyo sees an opportunity for the cement industry to become the nucleus of a network of industries that use each other’s wastes as raw materials, supporting a “Zero Emissions” concept aimed at eliminating waste emissions from human society. Successful examples at Taiheiyo include the exchange of calcium carbonate and gypsum with power stations, the use of incinerated household wastes to make Eco-Cement, and the destruction of CFCs in cement kilns.

Horomill® Grinding InnovationGrinding machinery is very important in the cement industry, and it typically has very poor efficiency. Working withFratelli Buzzi (an Italian cement company) and LaFarge, FCB Cement Department (an equipment supplier to the cement industry) developed and commercialized a new type of grinding mill that increases energy efficiency by 30-50% and at the same time increases the fineness of the finished product. The electricity saved at the cement plant decreases emissions of CO2 and pollutants at the upstream electric utility power plant.

Horomill® Grinding InnovationGrinding machinery is very important in the cement industry, and it typically has very poor efficiency. Working withFratelli Buzzi (an Italian cement company) and LaFarge, FCB Cement Department (an equipment supplier to the cement industry) developed and commercialized a new type of grinding mill that increases energy efficiency by 30-50% and at the same time increases the fineness of the finished product. The electricity saved at the cement plant decreases emissions of CO2 and pollutants at the upstream electric utility power plant.

Research on Using Solar Energy for Calcination

Research at the Paul Scherrer Institute in Switzerland indicates that the incorporation of solar energy into the cement production process is technically feasible. Although the economics of this process make it infeasible under current circumstances, carbon taxes or other financial incentives could increase interest in use of renewable energy forms in cement production.

Research on Using Solar Energy for Calcination

Research at the Paul Scherrer Institute in Switzerland indicates that the incorporation of solar energy into the cement production process is technically feasible. Although the economics of this process make it infeasible under current circumstances, carbon taxes or other financial incentives could increase interest in use of renewable energy forms in cement production.


54

DuPont’s sustainable growth strategy is focused on how to provide more customer value with less environmental impact.

Mexico City Plant

• Almost at zero waste and emissions

• When local air quality alerts occur and industry shut down, they stay open

DuPont Canada

• Struck deal with Ford customer to get paid for number of cars painted vs. gallons of paint

• Ford realized cost savings of 35-40% while VOC emissions decreased 50%

• For DuPont, lower volume of paint sales was offset by improved efficiencies

Source: Tomorrow Magazine, Nov. 2000


55

Industrial ecology looks at the industrial system like a biological system, where “waste” from one process is input for another.

DefinitionTaking a systems view of an industrial system in which one seeks to optimize the total materials cycle…

from virgin material, to finished material, to component, to product, to obsolete product, to ultimate disposal.

Factors to be optimized include resources, energy, and capital.

Source: Allenby, Industrial Ecology

Industrial Ecosystem at Kalundborg, Denmark

Asnaes PowerStation

StatoilRefinery

NovoNordiskFertilizer

Lake Tisso

Kemira Greenhouses

Gyproc

District heating

Fish farming

Cement:roads

Sludge

Water

Water

Water

Stea

m

Gas

Coo

ling

Wat

erW

aste

Wat

er

Stea

m

Fly Ash

Heat

Gypsum

Gas

Heat

Heat


56

Chaparral Steel realized greater profits by developing synergiesbetween its steel recycling operations and an adjacent cement plant.

Chaparral, a division of TXI, generated a slag by-product, which was sold to the road construction industry

Plant staff collaborated with a neighboring TXI cement plant to develop a patented process that adds slag to the cement raw material mix

Lower-grade iron slag is fed into kilns as a limestone substitute

BenefitsReduces energy requirements 10-15% and overall CO2 emissions

Value of slag is increased 20x compared to road construction value

Cement plant realized several million dollars of pretax income in 1995 on an investment of less than $1m

TXI is working to license the process to other producers

Source: IISD web site


CEMEX Mexico invested US $1.6m to burn 100% alternative fuels inits calcination process, saving the company $2.3 million annually.

CEMEX decided to burn 100% petcoke, a by-product of the refining process with a lower sale price than fuel oil, at kiln no. 4 in the company’s Torreon Plant

BenefitsIncreased clinker production by 15.7% -from 2,550 to 2,950 metric tons per day-without expanding plant capacityReduction of specific thermal consumption at the kiln by 11.3% -from 885 to 785 kcal/Kg clinker- representing 96,907 Gcal/yearReduction of specific power consumption at the kiln by 13.7% -from 46 to 39 Kw-h/Kg clinker- representing 6,105,172 Mw-h/year

Reduction of emissions: CO2 6%; CO, 96%; NOx, 35.7%; HCl, 70%; SO2, 87.5%; Hydrocarbon (HC), 61.1%Operational stability and 50% reduction in time to reach the maximum productionSavings of $ 2.3 million per yearReduction of 15,000 metric tons of CO2per year


58

Design for environment (DfE) integrates decisions about how to minimize environmental impacts into early design stages.

DefinitionDfE = An engineering perspective in which the environmentally related characteristics of product, process, or facility design are optimized.

Source: Allenby, Industrial Ecology

Concept Schematic Design Design Pilot Operations

Environmental Considerations


59

A basin with a capacity of 15.8 million of gallons was constructed to allow for the capture and reuse of storm-water in the industrial process.

Benefits

Reduction in the company’s consumption of municipally supplied potable waterAn assured supply of water for the company’s production processesSavings of 132 million of gallons of potable water available for community use per year (community had water shortage)

By investing US$ 300,000 to use storm-water instead of potable water in its production processes, CEMEX has improved optimization of a nature resource, saving US$ 860,000

CEMEX Spain constructed a basin to collect and treat storm-water for use in the process’s cooling system, which provided additional potable water for the community.


60

The Natural Step principles define the end point of what is sustainable, which can be used to develop action plans.

Improve energy efficiency Limit transportation impactsRecycle metals

How might we systematically decrease our economic dependence on...

Undermining the physical basis for the earth’s productive cycles and biological diversity?

Using fossil fuels and metals?

Using persistent synthetics produced by society?

How can we meet human needs efficiently and fairly?

Eliminate/minimize toxic substancesUse biodegradable substitutesMaintain synthetics in closed loop systems

Redevelop quarries - promote biodiversityMinimize resource useReuse materials

Invest in communitiesWork with customers to identify ways to help ultimate customer be environmentally sound


61

Collins Pine, a forestry company, used The Natural Step (TNS) principles in training employees and creating action plans.

Company had achieved sustainable forestry certification for its forests; wanted strong environmental performance at its mills

Conducted 1-day TNS training for 30 executives and staff; then implemented a train-the-trainer program to train all mill employees

Developed goals in focus areas, such as point source emissions, purchasing, renewable energy, and community support

Used a decision-making matrix for capital projects that incorporated TNS principles

BenefitsEnergy efficiency measures resulted in $152,000 in annual energy savings

Replaced six generators with one, saving $118,000 annually and allowing removal of hazardous chemicals

Conservation contest at one site resulted in water savings 525,000 gal./year; another site reduced by 2m gal./year

Eliminated a landfill

New product offering with certified forest products


62

Stakeholder engagement is an effective way to understand stakeholders’ concerns and use this to inform the company’s response.

The goal of engaging stakeholders is to build relationships withthem and understand their issues and concerns with the company.

Companies organize workshops or forums where they invite a range of stakeholder representatives, for example from:

Non-governmental organizations (NGOs)UniversitiesInvestorsCustomersThe mediaLabor groupsChurches


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Suncor’s extensive stakeholder dialogue process led to faster regulatory approvals.

Company planned to expand its Oil Sands mine operation in Alberta

Government and community demanding environmental improvements

Suncor had open dialogue with key stakeholders, including local aboriginal groups

Incorporated ideas and concerns into planning

Benefits

Stakeholders wrote regulators in support of project

Consultation effort led to approval of the mine without need for a public hearing

The speed of approvals put the project ahead by 2 years, helped reduce construction costs, and allowed quicker increase in production


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Lafarge has entered a partnership with the World Wildlife Fund (WWF) to promote biodiversity worldwide.

Through the partnership, they will:

Develop a strategy for ecological restoration of quarries, emphasizing restoration and increased biodiversity

Reinforce Lafarge’s environmental policy

Encourage ecological reinstatement of forest ecosystems through WWF’s “Forests Reborn” program

Use communication drives to heighten environmental awareness. Lafarge can use a Conservation Partner logo in its communications.


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Traditional business performance indicators need to be supplemented to measure progress on the triple bottom line.

Organizational effectiveness

Products and services

Energy consumption

Material consumption

Impacts on water

Atmospheric impacts

Waste generation

Land use/biodiversity

Suppliers and transportation

Workforce

Community development

Workplace conditions

Human rights

Categories of Indicators of Sustainable Development Performance

Source: WBCSD cement industry substudy 5


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A recent survey of best practices in sustainability performance measurement identified four key principles.

Address both resource consumption (e.g., materials, energy, land) and value created (e.g., profitability, reduced pollution)

Include economic, environmental, and social aspects

Systematically consider each stage of the facility life cycle (construction, operation, upgrade, closure) and the product life cycle (quarrying, manufacturing, distribution, use, disposition, recovery)

Develop both leading (measure internal management practices) and lagging (results/outcomes) indicators

Source: Fiksel, 2000


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DuPont’s key performance indicator for sustainable growth is shareholder value added per “environmental footprint”.

Shareholder Value Added

Environmental Footprint (pounds of depletable resources consumed)

Accomplish through:• Creating high-value offerings based

on new technology• Providing knowledge and service with

the offerings• Driving productivity of operations


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TransAlta, a Canadian utility, used an internal emissions trading scheme tied to individual performance incentives to decrease CO2 emissions.

Committed to the voluntary goal of returning greenhouse gas emissions to 1990 levels by 2000 in action plan submitted to the government

Created internal CO2 emission costing and trading scheme, tied to individual performance incentives

Business managers found creative, innovative ways to reduce CO2, often at less cost than anticipated

Benefits

By 1999, TransAlta achieved a 13% reduction over 1990 levels for its Canadian CO2 emissions, despite an 8.7% increase in generation.

The vast majority of internal efficiency projects passed TransAlta's requirements for return on investment


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