Profits with honour
MARGARET G. KERR
describes, from
her own experience, how
environmental responsibility is good business
For a good part of the 1980s most of those in industry who thought about environmental issues at all tended to have an
image of costly problems that would have to be 'fixed' when they became too pressing. 'Environmental management' was
seen as pollution control - putting scrubbers on smokestacks, treating polluted waste water, and ensuring that
hazardous waste was managed and disposed of as safely as possible. These activities were a bottom-line cost to
companies - things that were forced on industry by increasingly heightened public awareness and increasingly stringent
government regulations - but definitely detrimental to profitability.
During the same period, North American industry was gradually recognizing that 'quality control' did not have to
equate to the costly practice of weeding out and scrapping defective products before they were shipped to customers.
Doing things right the first time, it was realized, could lead to better products at lower cost. Companies started
considering the manufacturing process as a system and looking for opportunities to reduce errors, scrap, reworking and
costs. From this starting point, notions of quality have gradually evolved to a broader concern with understanding
what factors impact current and potential customer's perceptions of the value the company delivers, and with
determining how best to align people and processes to deliver superior value.
There has been a roughly parallel progression in thinking about environmental management, although it has lagged
behind quality
evolution by some years. This has, in general, been a movement toward understanding that environmental management is a
key contributor to customer and shareholder value, rather than a discrete 'clean-up' activity.
The very phrase 'environmental management' indicates a change in mindset. In the early days, we talked of pollution
control, and then gradually came to realize that we really should be thinking about pollution prevention. From
quality management, we learned that 'prevention' required a more sophisticated understanding of systems. We started to
look at our manufacturing processes as a system and work out where there was waste, inefficiency or unnecessary
pollution.
Waste and inefficiency are expensive. The fact that pollution prevention can save money was brought home to us at
Northern Telecom (Nortel) in the late 1980s and early 1990s by our project to eliminate the use of chlorofluorocarbons
(CFCs). We began by thinking that the challenge was to find a less harmful alternative to the CFC-113 cleaning
solvents that we used to remove flux residue from printed circuit boards. But instead of switching to a different
solvent, we redesigned our technology and processes to eliminate the need for cleaning altogether - and showed that
environmental protection could actually save money.
In January 1992, Nortel became the first multinational company in the electronics industry to eliminate CFCs from
operations worldwide. We both eliminated the use of these ozone-depleting solvents years ahead of the deadline set by
the Montreal Protocol, and realized a return on investment that considerably heightened senior management's interest
in pursuing environmental initiatives. We spent $1 million on research and development, but saved about $4 million in
the three-year period of the project alone. The savings were generated from decreasing purchases of solvents,
eliminating cleaners and their associated operating and maintenance costs, and reducing solvent waste for disposal.
An on-going process
As we became further influenced by the new thinking on quality management, we realized that our Environmental
Protection Plan - our collection of minimum corporate standards and best practices in pollution prevention - was too
finite and compartmentalized. It looked too much like a checklist, and could leave people with the impression that the
matter was closed once a prescribed task was complete. We were not thinking about environmental management as an
on-going system of continuous improvement. We realized that we needed to develop a 'system view' not only of our
manufacturing processes, but also of the way we managed our environmental activities.
Now, the cornerstone of environmental management at Nortel is our Environmental Management System (EMS), which is
based on the requirements of the international ISO 14001 EMS standard. We have been learning that it is not easy to
implement such a comprehensive system: it requires dedication, support from senior site management and a lot of hard
work. But it is worth the effort. It is helping managers at the location level systematically and continually to
improve programmes and performance, minimizing both environmental impact and cost.
In the initial stages of implementing our EMS, we focused on setting and achieving measurable targets for reducing the
environmental impacts of our manufacturing processes. We have now become more conscious of the impacts made by our
products themselves. We have been incorporating the concept of product stewardship into our thinking over several
years, and in 1995 started to put a major emphasis on plans to minimize the environmental impacts of our products
throughout their life cycle - from design through to the end of their useful lives.
Integrated arrangements
This work has made us start to rethink our work with suppliers. We have recently launched a pilot project with our
main chemical supplier under which we are purchasing its services for a fixed fee rather than just buying the
chemicals themselves. The fee covers such services as chemical management, storage and disposal, and process expertise
- as well as the cost of the chemicals. Under traditional supply arrangements, it is in the supplier's interest to
encourage us to use more chemicals. Instead, the new arrangement provides the supplier with an incentive to help us
minimize chemical use, to develop more efficient processes, and to find alternatives to hazardous chemicals.
Our product life-cycle work has also made us more conscious of the impact of our environmental work on our customer
relationships. Minimizing the cost and environmental impact of packaging, for example, is a key concern of our
customers. Such innovations as collapsible carts, aluminium carriers, plastic 'clamshell' packages and standardized
pallets and boxes - all re-usable - are helping us reduce the volume of packaging and costs. Just one change in our
distribution practices - assembling switching products before they are shipped, rather than packaging and shipping
components separately for assembly on site - is saving an estimated $5 million annually. This practice requires less
packaging and allows for faster installation.
Our willingness to work with customers to solve shared environmental problems is helping us build customer
satisfaction and loyalty. For example, we have long been taking back obsolete equipment from Bell Canada and disposing
of it through a Nortel materials recycling facility. We are now finding that such customers as British Telecom,
Mercury Communications and Telia are actively seeking suppliers who will take on the responsibility of disposing of
the equipment they sell at the end of its useful life. Several European countries already have product take-back
legislation (also called 'extended producer responsibility' legislation), and the European Union is considering
enacting uniform standards.
Our environmental work is also helping build brand equity for the company, as Nortel gradually earns an international
reputation as a company committed to environmental protection. We have been deeply engaged in sharing what we have
learned with other countries, especially the developing countries of the South that are committed under the Montreal
Protocol to eliminate CFCs by the year 2010. Between 1992 and 1995, Nortel played a lead role in technology
cooperation projects in Mexico, India, China, Turkey, and Viet Nam. These projects were supported by World Bank
funding, and involved close collaboration with local government and our partners in the International Cooperative for
Ozone Layer Protection (now the International Cooperative for Environmental Leadership).
Corporate citizenship
We have come to believe strongly that international cooperation between governments and industry is a highly practical
way of resolving shared environmental problems. We have been devoting substantial time and energy to this, partly
because we believe that it is part of our responsibility as a global corporate citizen. But our reasons are not just
altruistic. Technology cooperation is a marketing tool, building goodwill and strong relationships with customers in
emerging markets. Our willingness to bring first-tier technology and experience with environmental management systems
to developing countries - helping them to avoid some of the costly mistakes we have made - is a key driver in many of
our joint ventures. Our commitment to the environment is a value we bring to potential customers, a key attribute of
the Nortel brand.
Establishing links
To ensure that environmental responsibility continues to contribute to business results, it needs to be integrated
into the central strategic processes of the corporation. We are certainly a long way from having environmental
considerations take a front seat whenever a decision is made or an activity undertaken with Nortel. But that is our
long-term vision. We are making a start by seeing how closely quality management and environmental management are
linked. With each success we achieve, the business case for environmental management grows stronger.
I have concentrated on our experience in Nortel, not because I think that what we are doing is so far in advance of
other corporations, but because I want to explain how we have gradually come to see that environmental leadership can
help us provide superior customer value. Environmental programmes that have been put in place because it is the 'right
thing to do', or because governments require them, are vulnerable. They are subject to the whim of legislators,
swaying public priorities, and financial cycles. If environmental activities are to have long-term sustainability and
impact, decision makers at all levels of the organization must see that they clearly support business objectives and
contribute to competitive advantage in the marketplace.
Dr. Margaret G. Kerr is Senior Vice-President, Human Resources and Environment, Nortel, Canada.
