Profits with honour

OUR PLANET 9.1 - The Way Ahead



Profits with honour



MARGARET G. KERR

describes, from her own experience, how
environmental responsibility is good business





people in phone booth 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.



Complementary articles in other issues:
Claude Fussler: Clean = competitive (Hazardous Waste) 1999
Terrell J. Minger and Meredith Miller:
From hydrocarbons to bits and bytes (Looking Forward) 1999
Mark Moody-Stuart: Picking up the gauntlet (Climate & Action) 1998
John Browne: A new partnership to make a difference (Climate Change) 1997


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