GEMI March 2002 Benchmarking Survey Choosing HSE Priorities in a Time of Economic Difficulties

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GEMI March 2002 Benchmarking SurveyChoosing HSE
Priorities in a Time of Economic Difficulties

• George Nagle
• Bristol-Myers Squibb Company
• March 14, 2002

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1. Which of the following best describes the
overall change to your companys employee
population over the last 2 years?
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2. If it has decreased, by how much?
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3. Which of the following best describes the
overall change to your companys HSE staff over
the last 2 years?
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4. If it has decreased, by how much?
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5. Compared with 2 years ago, has your current
companywide HSE operating (non-capital)
budget..?

• Overall average change in operating budget -2
• Average operating budget increase 20
• Range of responses 5 - 70
• Average operating budget decrease 20
• Range of responses 5 - 50

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6. Compared with 2 years ago, has your current
companywide HSE capital budget..?

• Overall average change in capital budget -7
• Average capital budget increase 34
• Range of responses 5 - 100
• Average capital budget decrease 21
• Range of responses 10 - 50

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7. If there have been decreases in HSE staff, in
which of the following areas have they occurred?
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8. If downsizing has occurred, how has the HSE
staff been impacted as opposed to other groups?
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9. Have you discontinued certain HSE activities
over the past 2 years due to decreased resources?
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10. If the answer to Q-9 was Yes, in which areas
were activities decreased?

• Participation in industry trade associations (10)
• Participation in professional associations (9)
• External Affairs (8)
• Regulator/Legislative Affairs (7)
• Internal Communications (5)
• External HSE Reporting (4)

• Safety (4)
• Environmental (4)
• Training (4)
• Medical (3)
• Industrial Hygiene (2)
• HSE-related Engineering (2)
• Analytical Testing (1)
• Process Safety (0)

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11. If the answer to Q-9 was Yes, in which areas
were activities outsourced?

• Medical (4)
• Analytical Testing (4)
• Training (4)
• HSE-related Engineering (4)
• Environmental (3)
• Industrial Hygiene (3)
• Regulatory/Legislative Affairs (3)

• External HSE Reporting (3)
• Safety (2)
• External Affairs (1)
• Internal Communication (1)
• Participation in industry trade associations (0)
• Participation in professional associations (0)
• Process Safety (0)

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12. Are there any areas in which activities has
increased?
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12. Areas in which activities has increased
(continued)

• Staff at facility and business group level has
  been increased to address program enhancements
• Internal governance programs
• Supply chain environmental management
• OSHA Star Program
• Technical support to sites compliance efforts
• Title 5 and MACT requirements (US only)
• Regulatory Monitoring
• Stakeholder relations
• Six Sigma

• Environmental (2)
• Training (2)
• External/Internal Relations (2)
• Participation in Industry/ Professional
  Organizations (2)
• Environmental air issues (2), environmental due
  diligence
• Ext. Environmental Reporting (2)
• Increased focus on Product Stewardship and
  Product Safety (2)
• ISO Certification/Verification Process
• Corporate Citizenship activities

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13. How would you rate the breakdown of your HSE
activities at this time?

• Average of current proactive HSE activities
  45
• Range of responses 5 - 90

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14. How would you rate the breakdown of your HSE
activities 2 years ago?

• Average of proactive HSE activities 2 years
  ago 44
• Range of responses 5 - 90

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15. Which of the following actions have you
undertaken in response to changes in resources?

• Reorganized HSE functions (18)
• Changing auditing frequency (13)
• Delegated more responsibilities to line
  management (13)
• Implemented new HSE information management
  systems (12)
• Installed more management systems (9)
• Rewriting standards (7)
• Hired more consultants (7)
• Outsourced activities (6)
• Changing subject matters areas audited (5)

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15. Continued.

• Others
• Undertaken Worldwide EMS Review
• Instituted Corporate OpCo Compliance Functions
• Priorities setting, managing
• Time management
• Reduce redundancy
• Better pair skills, synergies, staff development

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16. In decision-making on changing priorities,
which of the following have you utilized?

• Multi-disciplinary team (18)
• Survey of customers (16)
• Benchmarking peer companies (16)
• HSE staff decision (14)
• Other
• Review assessment of internal needs

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17. What issues are you expecting to take
increasing amounts of your resources in the next
year?

• Public reporting/ transparency (16)
• Product stewardship (15)
• Air (12)
• Sustainability (11)
• Water (11)
• Corporate Citizenship or Social Responsibility
  (10)
• Safety (8)

• Pollution Prevention (7)
• Regulatory reporting (7)
• Complying with voluntary standards (4)
• Health (3)
• Stormwater (3)
• Others
• Supply Chain EHS Management
• Investor Relations

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18. What is your current HSE strategic planning
time horizon?
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19. Do you believe that a companys HSE
performance can coast for a period of time
after resources are cut until performance begins
to noticeably deteriorate?

• 1-2 years (11)
• 9-18 months (2)
• Variable, but no more than 2-3 years
• Very dependent upon how advanced the current
  performance is
• Depends on condition of the EHS management system
  when cut took place

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20. Based on your experience, what are the first
signs or symptoms that a companys HSE program
may be suffering from lack of resources?

• Responses were grouped into the following
  categories
• Compliance Issues (14)
• Internal Audit Performance (6)
• Increased Accident Rates (5)
• Poorer Employee Opinion Surveys (3)
• Lack of Progress on Company Goals (3)

(Specific comments are listed on the following 3
pages.)
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20. Based on your experience, what are the first
signs or symptoms that a companys HSE program
may be suffering from lack of resources?

• Increase in accident rates and increase in
  compliance issues
• Compliance problems, increases in emissions,
  unhappy colleagues leaving the company
• Performance metrics on EHS, employee opinion
  survey, customer survey decrease
• Poorer audit performance
• NOVs, bad audits
• Beyond compliance program accomplishments
  diminish
• Surprise issues appear, regulatory recordkeeping
  and compliance issues appear for routine type
  items. Regulatory deadlines are missed.
  Organization is constantly in a reactive mode.
• Ignoring issues until they blow up in your face.

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20. Continued.

• Increase in accident rates.
• Relative increase in Notices of Violations from
  government regulatory inspections.
• Decrease in employees perception of companys EHS
  performance in periodic employee opinion surveys.
• Increased incident rates.
• Basic compliance performance start to suffer
  (e.g. recordkeeping)
• Program execution problems (training,
  recordkeeping, audit frequency slippage, etc.)
• Short term decrease in effort directed to
  proactive activities. More outside
  contracting/consulting of required activities and
  less outside contracting/consulting on proactive
  activities.
• Noncompliance - fines
• Near miss and recordables increase

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20. Continued.

• Increased audit findings, more frequent permit
  exceedances.
• Poor results on company ES assessments.
• Lack of progress toward established goals and
  regulatory non-compliance.
• Personnel (staff issues)
• Increased variety and quantity of minor issues
  in compliance, training, staff utilization and
  competence.
• Employees lose focus of their role in ESH and
  improvements began to slow down. Something needs
  fixing but may not involve more personnel or
  resources.
• The nature and number of audit findings and
  increased safety and environmental incidents.
• Things fall through the cracks compliance
  problems.
• Lack of timeliness, no progress on strategic
  plan.

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21. Do you consider your company an HSE leader?
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22. Do you feel that your company is currently
adequately covering all HSE compliance issues?
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23. What are your major concerns for the future
related to HSE staffing and resources?

• Lack of specialized HSE knowledge, loss of
  institutional knowledge, no depth on the HSE
  bench, lack of career development opportunities
  in HSE
• We are less concerned than we were since senior
  management is clearly focusing on the whole area
  of Social Responsibility far more than ever
  before
• Development of colleagues across the organization
  to anticipate EHS opportunity as a regular part
  of their overall decision making. Integrating
  EHS into the regular mindset of all colleagues.
  Developing EHS professional to be the
  facilitators, expert advisors, and communications
  specialists. They are not necessarily prepared
  for these new roles.
• That we take a SMART approach to compliance and
  continuous improvement and dont fall into the
  trap that simply throwing more people at the
  issues will fix them.

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23. Continued.

• Expectations of flat budget will continually
  pressure means to reduce costs including staff.
  We are trying to focus on transitioning the
  perspective of the group from a necessary
  overhead to one of value added to businesses
  where they desire stronger support with more
  resources. You have to try.
• Potential continued reductions unless economics
  improve soon.
• Inadequate attention to detail will result in
  releases, fines/penalties, reorganization.
• Concerned that management may decide to outsource
  the function.
• Employee motivation and the resources will
  continue to decline while the EHS issues will
  increase in complexity.
• We have not seen the bottom.
• Need to continue to invest in EHS teams
  professional training and development.
• Delegation of EHS functions to line management is
  easier said than done, especially when line
  managements resources are also being reduced.
• Maintaining a proactive/leadership position.

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23. Continued.

• Competition for resources in a rapidly expanding
  organization.
• Changing regulations, changing regulatory
  enforcement emphasis.
• An aging demographic with no new hires.
• International technical support.
• Meeting the sustainable issues.
• Change in basic company structure.
• Inability to comply with exponentially increasing
  air requirements (especially MACT standards).
• We would like to eventually be considered an HSE
  leader and are now trying to sell and implement
  sustainability. Will we have the staff to do
  this?
• Unintended consequences.
• Having enough qualified professionals to meet
  challenges and inability due to many HR laws
  about replacing inadequate personnel.
• Transferring knowledge base to new, younger
  employees as the workforce transitions having
  enough resources to deal with new regulations.

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24. If you could anonymously deliver one message
to the CEOs of the Fortune 500 on this topic,
what would it be?

• HSE protects the reputation of a company in many
  ways and a good reputation built over a long time
  can be lost in a very short time.
• Investors will judge companies on how they manage
  their Social and Environmental performance in
  both good and bad times, but, you will be
  sanctioned more heavily over a longer period if
  you let up in these areas because of temporary
  economic difficulties.
• EHS must remain a key priority of the business.
• Effective EHS program management is not just a
  compliance requirement, but is a competitive
  advantage if managed correctly.
• Dont through the baby out with the bathwater.
• Strong EHS programs help achieve business
  objectives.
• Dont be short-sighted. Look to long-term
  sustainability and how HSE contributes to that.

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24. Continued.

• Evaluation and validation of resources is good
  for the organization, but make sure you clearly
  understand the difference between leadership,
  compliance, and inadequacy and the resource
  levels needed for each.
• Take the long view in terms of corporate
  reputation.
• Would you put a family member on a plane where
  the preventative maintenance and flight crew
  training just barely meet minimum government
  requirements? Wouldnt you want them on an
  airline with programs that were reasonable and
  necessary? Then why not strive for the same in
  the level of EHS performance within your own
  company?
• Dont sacrifice HSE for the short term.
• Make sustainability a priority if you do it
  right, it will pay for itself.
• Ask questions within your organization concerning
  the HSE governance capabilities and look closely
  at the results.
• Cut HSE budgets as an extreme last resort. Be
  flexible and allow HSE professionals to adjust
  priorities with changing business challenges.

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24. Continued.

• Pay for people or pay fines!
• Todays improvement efforts will bring about next
  years rewards or punishments.
• Be a leader in Sustainable Development.
• If resources are cut to an extent that our
  ability to perform our job effectively is
  seriously curtailed, the ultimate cost to the
  corporation in increased fines and loss of
  corporate image will be several times the money
  saved.
• ES (if done correctly) is value added, not
  something that is required to be done and that
  detracts from the main business. It must be
  implemented and viewed as adding value to the
  companys core business.
• Do not allow a perception in y our senior
  managers that you are less committed to EHS while
  you expect improved efficiencies and productivity
  in the company. The assurance process should be
  emphasized, top-line opportunity processes
  vigorously managed, staff developed, and maintain
  appropriate proactive programming that you not
  fail to meet your underlying core values or
  future business opportunities.

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24. Continued.

• The CEOs personal leadership is vital to
  maintaining good HSE performance.
• The public and non-governmental organizations
  (NGOs) are better educated and focused and are
  putting more pressure on companies. The
  competition is funded by the charitable trusts
  and they have an extensive amount of funding. We
  need resources to address these issues.
• HSE requirements do not change with the economy.

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25. If you could anonymously deliver one message
to HSE government regulators on this topic, what
would it be?

• Consider offering incentives for those companies
  that go beyond compliance
• EHS must remain a key priority of the business.
• EHS can focus on the correct solutions without
  all the burdensome regulatory requirements if
  they would accept transparent performance
  reporting.
• Allow for more innovative approaches but expect
  good performance from companies.
• Allow more flexibility to meet targets/objectives.
  
• Focus government resources on the important
  stuff. Continue to use market (emissions trading)
  to drive improvements.
• The lack of enforcement for the last 10 years
  encourages companies to take risks and under-fund
  the resources. Government requirements and
  enforcement assist in bringing visibility to the
  issues at hand.

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25. Continued.

• Eliminate the paperwork nightmare.
• Support research which demonstrates the business
  benefits of good EHS performance.
• Use more voluntary programs with incentives.
• Focus regulations on performance/outcome, not
  nitty-gritty how-to details.
• Understand the real costs of regulation and make
  sure these requirements result in improvements to
  human health.
• Consider long term effect to business, economy,
  and environment when evaluating regulatory
  modifications.
• Everyone must win for anyone to win.
• Regulations need to support all legs of
  Sustainable Development.
• The same message that should be delivered at any
  time Concentrate on regulations that have an
  impact on the environment -- dont burden us with
  excessive recordkeeping and reporting that do
  nothing except increase our costs.

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25. Continued.

• Regulators must have enough resources to review
  and act upon permit applications and remediations
  proposals. Re otherwise business activities
  are unnecessarily slowed down.
• Add real incentives to encourage improvements
  versus following shallow comments by NGOs. Also,
  regulatory agencies are employing many
  non-qualified individuals that should not be in
  the job. Believe they would do better if they
  outsourced entire function to private industry
  with certain checks and balances in place.
• Take a long vacation - you deserve it.
• We need to make our processes work to deliver
  sound public policy by balancing the
  environmental, energy, and economic policies.
  This would help us focus on risk and good
  science.
• Focus on regulations that have a real impact on
  HSE improvement.

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26. Is there any advice or tips that you have
found are particularly effective in managing HSE
priorities in times of economic difficulties that
you would like to share?

• We have to learn to better communicate the value
  being created through HSE activities in financial
  terms to the CEO, CFO and to the investors.
• The most important is not to lose (and indeed to
  transfer) the skills of the middle managers who
  manage these issues and see it as their
  calling. Once youve lost the institutional
  knowledge that these people have, it is very
  difficult and costly to restore it.
• Get EHS integrated into the mainstream of the
  business put in fully integrated EHS management
  systems.
• If the EHS function focuses more on their
  company business practices along the supply
  chain, they can evolve into a more effective
  position in their organizations.
• Be sure and be very up front when discussing what
  types of support you will no longer be providing
  as a result of staff cuts. Senior Management
  depends on you to tell the whole story,
  regardless of how much they dont like it.

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26. Continued.

• Continue to look for efficiencies where possible.
  Make sure that you are part of the solution in
  efforts to reduce costs.
• Make sure you have good cost justifications for
  as many activities as possible to ensure that you
  can show good value for the company.
• Look for corporate initiatives that you can
  piggyback to improve EHS.
• Try to get a high-level supporter or champion.
• A clear understanding of the business priorities
  is a must and how EHS contributes to the key
  business goals and strategies is exceedingly
  important when engaging in dialogue with various
  management teams.
• Be clear on who makes the decisions.
• Even with diminished resources, maintain
  visibility, dont hunker down. Go out of your
  way to make friends with your finance and
  accounting people.
• Eliminate the unnecessary reporting - work on
  value-added items versus self gratification
  items.

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26. Continued.

• Continue to focus presentations to management on
  the financial benefits of high level of EHS
  performance - e.g. reduced injuries lead to
  reduced workers compensation and insurance costs,
  certain health and wellness programs translate
  into direct bottom line savings in medical
  benefits costs, certain pollution prevention
  projects have translated into significant savings
  in raw material and disposal costs as well as
  risk avoidance, etc.
• Make sure senior management understand how the
  HSE processes impact the overall corporate
  business priorities and that HSE resources are
  being efficiently applied to accomplish these
  priorities.
• Focus on goal setting and priorities. Train your
  employees in HSE issues, both regulatory and
  proactive, and instill in them the attitude to
  take responsibility for their HSE actions.
• Keep the NEED TO DO on the table and let go of
  the NICE TO DO. It can come back when economy
  improves.
• It must stay as the number one items and not
  second.

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26. Continued.

• We must get the businesses to understand that ES
  is not just the responsibility of the ES
  professionals, but of the businesses as well.
  ES professionals must really focus on
  value-added activities. We must look at the
  activities we are currently performing and
  determine if we really need to perform them, and
  if so, we must determine if there is a more
  effective way to perform that activity.
• Look for cost-effective ways to get the job
  accomplished and rack-stack priorities if crunch
  severe.
• Dont give upCOMMUNICATE in advance with upper
  executives what an issue is and why it is
  important before decisions are made. This is
  key.
• Improve your management systems, drive HSE
  accountability to the line management.

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27. Would you like to see a GEMI workgroup
formed to investigate the issues around doing
more with less?