Benchmarking for environmental excellence.

American corporations are facing constantly changing competitive challenges. Low cost was the competitive challenge of the 1960s. Flexibility, the ability to respond to changing customer demands and specifications, became the strategic weapon of the 1970s. Quality was the name of the game in the eighties. The world is now entering an era of environmentalism and "zero discharge" and "total pollution management" are some of its goals. Increasing public pressures, skyrocketing cleanup costs, rising criminal and civil liabilities, and stringent laws and regulations are making environmental excellence a number one priority of corporate management. Corporations are not only spending billions of dollars to cleanup wastes, but they are also paying for materials, labor, equipment and other resources used in the generation of these wastes. According to a conservative estimate, only 6 percent of the 20,000 lbs. per person of active materials - including food, fuel, forest products and ores extracted in the U.S. - is included in durable products and the other 94 percent are wasted within a few months of their extraction. Therefore, pollution reduction can eliminate waste disposal costs as well as substantially reduce labor, material and equipment costs that go into the production of these large amounts of wastes. According to the recent data, the U.S. generates almost 230 times as much hazardous waste per capita as Japan, and 23 times as much as Germany. So, it is essential for U.S. companies to significantly reduce pollution to remain competitive. Benchmarking is one of the techniques that can help them to reduce pollution significantly.

Benchmarking

Benchmarking is a systematic adaptation of products, processes, methods and practices of companies that are considered to be state-of-the-art. Benchmarking is broader than competitive intelligence gathering. Benchmarking evaluates competitors and organizations even from other industries that excel in a particular function. Reverse engineering focuses on the finished product. However, benchmarking reviews all aspects of a product including materials, processes, methods and organizations. The purpose of benchmarking is to identify performance shortfalls and take actions to fill the gaps. The aim is to compare and copy operations, products and services both within and outside a company's primary industry. The steps in benchmarking process are outlined in Table 1.

Identifying functions to benchmark

Scarcity of resources makes the selection of benchmarking function a critical one. Increasing variety of materials, efficient processes and a plethora of laws and regulations have made the selection a long and expensive one. Regulatory requirements such as fuel efficiency, building codes, temper-proof packaging and safety guidelines hamper efficient operations of an organization. Some factors to be considered for choosing functions to benchmark include:

* Need to comply with current and future environmental laws, regulations and licenses;

* Waste treatment and disposal costs;

* Potential environmental and safety liability;

* Quantities of wastes generated;

* Toxicity, corrosivity, reactivity and flammability of the wastes generated;

* Effects of waste on the employees and surrounding communities;

* Cost reduction potential;

* Recyclability of materials;

* Low yield process; and

* Bottleneck process.

Training

For the benchmarking process to be successful requires well-trained personnel. The type and nature of training will depend on the qualifications and experience of individuals. Every one must have elementary knowledge about benchmarking process. The books suggested at the end of this article could be used to train personnel in benchmarking. In addition, they should have knowledge about waste reduction strategies. The team members should be technically trained and should have skills to conduct interviews with personnel with a variety technical and employment backgrounds.

Selecting benchmarking partners

The benchmarking partner need not be an outside organization. A department can benchmark against another department of a company. 3M, Dow Chemical and Ben & Jerry are considered to be worldclass partners for environmental benchmarking. However, these companies may not be suitable partners for benchmarking for all organizations. Therefore, companies need to conduct extensive searches to identify potential partners. There are a variety of approaches to select potential partners. The first step is to identify information resources. There are several databases that can provide information on pollution indicators. The U.S. Environmental Protection Agency (EPA) maintains a comprehensive database with plant-level information about hazardous wastes generated by various companies. This database is updated every two year. However, be careful not to be misled by quantities of waste generated by these companies. For example, chemical companies typically generate huge amounts of wastes. Consequently, companies like DuPont, Monsanto, American Cyanamid lead among top industrial waste generators in the U.S. However, these companies have outstanding environmental practices in the world. Companies that have received awards and citations are other potential partners. Consultants represent a valuable source to select partners. Special reports published by industry trade groups and analysts are other sources.

TABLE 3
Green Evaluation of Alternatives

Category                Alternative 1       Alternative 2 ....

Energy Used

Solid Wastes

Weight
Volume

Air Emissions

Particulates
Carbon Dioxide
Nitrogen Oxide

Water Pollution

Dissolved Solids
Suspended Solids
Hazardous Chemicals

Resources Consumed

Water
Minerals
Raw Materials

Potential Liability

Personal Injury
Property Damage

Potential Recycling

Public Relations

Safety

Productivity

Regulatory Compliance

Cost

Data collection and analysis

Collecting data involves a partner's time. Consequently, data collection should be well planned. The amounts of waste generated, processes responsible for these wastes, physical properties of wastes and efficiencies of these processes are some of the data that need to be collected. A list of data items to be collected is given in Table 2. When it is possible to generate data using material and energy balance principles, then it may not be necessary to resort to benchmarking. However, companies may need to benchmark when they want to reduce spills and accidents, prevent underground leakages, enhance safety and improve employee involvement in pollution reduction. If waste generation is affected by human involvement, the operations should be observed during different shifts. Talking with employees involved in the operations can provide valuable information. If the benchmarking partner is agreeable, photographing the plant should be considered. Particular attention should be paid to the housekeeping aspects of operations. Administrative controls such as accounting and organizational structure of the plant should be studied. The data collected needs to be analyzed. It can be analyzed using tools from total quality management literature such as histograms, cause-and, effect diagrams, run sheets, Pareto analysis and so on.

[ILLUSTRATION OMITTED]

A histogram is simply a bar chart in which the height of each bar represents the frequency of each class. Histograms can easily be generated using Lotus 1-2-3.

A cause-and-effect diagram is a graphical approach to represent "causes and effects." The effect is the desired outcome and causes are the spines. Desired environmental outcomes include elimination of spills, accidents while transporting hazardous wastes, accidental release into the air, and so on. Causes can be classified into materials, labor, processes and equipment. For example, reasons for accidents involving hazardous substances include ship collision, explosion, leakage, reactor failure, collision and fire, derailment, and so on.

Pareto analysis is based on the pareto principle, which states that few causes account for much of the problems. This is also called 20/80 rule. In environmental bench marking, the pareto principle may be modified to read that 20 percent of processes (materials, products, etc.) account for 80 percent of the pollution.

The purpose of data analysis is to generate goals and options. Every time a company is studied, practices followed by that company should be critically reviewed. Benefits gained by adapting a particular practice should be reviewed in terms of costs, compliance, reduction in liability and workplace safety. The focus of analysis should be every stage of a product rather than one function. A product's life cycle is typically categorized into material acquisition, material processing, product distribution, product use and product disposal. It is also useful to assess the impact of different pollutants. Such an evaluation is useful to conduct an objective methodology known as "life cycle analysis." The purpose of the life cycle analysis is to sum up environmental risks arising from input resources and output wastes generated during material extraction, processing, manufacturing, distribution, use and disposal stages. Such an analysis is considered as the ultimate yardstick of the "greenness" of a product. However, life cycle analysis is hard to perform in practice. It is difficult to quantify health and environmental effects of different environmental consequences. For example, how do you compare consequences of emission of 1 lb. of nitrogen dioxide into the air against destruction of one tree from a forest? Lack of data also hampers life cycle analysis. However, presentation of data as in Table 3, comparing different alternatives, can significantly help a company make trade-offs and choose an optimal alternative. While choosing alternatives, a company should consider its ability to implement the practice. In addition to costs, risks involved in the implementation should be evaluated.

Essential components

A champion to initiate and follow through the benchmarking program is essential. Wastes that need to be reduced should be well defined. Benchmarking expeditions without clear goals should be avoided. People who will implement changes should be involved from the beginning. A company planning to implement benchmarking should be willing to share information. A good accounting system is essential for evaluating objectives and performances. In addition, environmental characteristics should be treated as objectives rather than constraints.

Top management commitment is essential for successful benchmarking. If a company wants to win a Malcolm Baldridge National Quality Award for excellence in quality, it should benchmark. This fact has made benchmarking extremely popular among large companies. Competitive pressures around the world and the rising tide against pollution are forcing companies to improve their environmental track record. Eliminating pollution is becoming synonymous to reducing costs and becoming competitive. And benchmarking provides an effective method to attain environmental excellence.

References

Ayers, Robert A., Industrial Metabolism, Technology and Environment, National Academy Press, Washington D.C., 1989.

Camp, Robert, Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance, ASQC Quality Press, Milwaukee, Minnesota, 1989.

Hirschhorn, Joel S., Prosperity Without Pollution: The prevention Strategy for Industry and Consumers, Van Nostrand Reinhold, New York, 1991.

Spendolini, Michael J., The Benchmarking Book, AMACOM, 1992.

N. Bhat, Vasanthakumar, Strategic Planning for Pollution Reduction, Long Range Planning, Vol. 25, No. 4, 1992.

RELATED ARTICLE: TABLE 1

Steps in Benchmarking Process

* Obtain top management commitment for benchmarking

* Form a top management committee for benchmarking

* Identify functions to benchmark

* Form a mini-team to benchmark that function

* Train team members in the benchmarking methodology

* Identify the best-in-the-class company in that function

* Select key performance measures for that function and establish current levels of performance

* Collect data

* Compare the performances and set goals to achieve

* Discuss the findings with the top management committee

* Develop action plans

* Implement the plan

* Audit the implementation

RELATED ARTICLE: TABLE 2

Data Items to be Collected

* Design information such as process flow diagrams, etc.;

* Environmental information such as hazardous wastes generated, environmental audit reports, spill prevention plans and so on;

* Material information;

* Economic information such as treatment and disposal costs, product yields, maintenance costs and so on; and

* Organizational information such as environmental policy, standard operating procedures, organizational charts, accounting systems, reward and recognition processes, training programs, etc.

Vasanthakumar N. Bhat, Ph.D. received his Ph.D. in management science from Yale University, and is currently an associate professor at Pace University in New York City.