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Stewardship starts at the board level.

Clearly, the time for the creation of a Safety, Health and Environmental Affairs Committee of the board had come.

In both of our businesses -- construction aggregates and industrial chemicals -- we make products that are essential or highly important to the standard of living all of us have come to enjoy. But, in each case, our operations or our products, or both, give concern to people. With regard to our quarries, people, especially neighbors, are concerned about appearance, blasting, noise, dust, surface and subsurface water, and truck traffic. With respect to our chemical operations, people worry about safety of both our plants and our products and about air emissions, groundwater contamination, and how we handle and dispose of our wastes.

These concerns have resulted in various impacts on Vulcan -- sometimes on the demand for our products, almost always on our costs of doing business, and frequently on our ability to start new, or maintain current, operations.

The significance of these concerns has been magnified tremendously by the growth of environmentalism, by changes in regulatory and tort law, and by advances in technology. Most business executives are intimately acquainted with the first two of these trends. But many may not realize the extent to which those trends have been influenced by developments in technology.

For me, this third trend is epitomized by the dramatic technological developments that have resulted in analytic instruments that can detect chemicals in food or the environment in extremely minute quantities. For example, it was little more than two decades ago that the ability of instruments to measure trace quantifies of a substance was typically limited to one part per million. That's equivalent to identifying one second in a period of 12 days. The next major advance was to instruments that can detect one part per billion. That is equivalent to finding one second in a period of 32 years. Today, we have instruments that can measure one part per trillion. This is analogous to locating one second in 32,000 years!

The impact of science and technology has been to raise dramatically society's ability to detect both real and trivial environmental risks. But our ability or willingness to distinguish between what is real and what is trivial lags far behind our ability to detect such risks. Meanwhile, politicians and regulators react to fears of the moment and our legal system struggles to mete out environmental justice in extraordinarily challenging circumstances.

In the face of all of this, the challenge for corporate directors and executives with respect to environmental stewardship is to decide what steps are the right ones to take and then to take them in the right way whether required by today's law or not. What we do surely must be driven not only by what is legally required but also by what is morally right. For, as pointed out by Tom Stephens, CEO of Manville Corp., our "corporate actions today will be judged in the context of tomorrow's law, not today's."

A New Committee

At Vulcan Materials Co., our commitment to environmental stewardship starts at the board level. This commitment was formalized in May 1990 by the establishment of a new board committee -- the Safety, Health and Environmental Affairs Committee -- composed of six uniquely qualified directors. Included were a medical doctor, a former U.S. Secretary of Labor, and manufacturing executives who have had major environmental management responsibilities in their own companies. The committee's responsibilities include reviewing the company's policies, practices, and programs with respect to the management of safety, health, and environmental (SHE) affairs and monitoring compliance with safety, health, and environmental laws, regulations, and company policies. It reports regularly on its work to the full board.

The committee also maintains a strong "dotted-line" relationship with the chairman of a counterpart management SHE committee, not unlike the relationship existing between Vulcan's Audit Review Committee and our Director of Internal Audit. Our board SHE committee carries out a vitally important oversight role for the full board and is an extremely valuable source of advice and counsel for our management group. Clearly, the time for creation of the committee had come in 1990, and its contributions to both the board and management assure that it is here to stay. In order to signify the importance of environmental stewardship to our entire organization, several years ago our management group agreed that it should receive "front and center" prominence in Vulcan's Mission Statement. Accordingly, our corporate mission is defined as follows:

To provide quality products and services that consistently meet our customers' expectations; to be responsible stewards with respect to the safety and environmental impact of our operations and products; and to earn superior returns for our shareholders.

As a business organization in American society, we believe that our most important social responsibility is to create shareholder value. But we think that this goal can be achieved only by first satisfying our customers with respect to products and services, and by satisfying society's legitimate safety, health, and environmental concerns.

Environmental stewardship also receives recognition in Vulcan's compensation programs. A portion of the awards made under our annual management incentive plan is determined by divisional performance with respect to safety, health, and environmental affairs. As you might expect, this has helped to drive our commitment to environmental stewardship deeply into our corporate culture.

Detailed Multi-Year Goals

In each of our business segments, we have adopted detailed multi-year performance goals for our stewardship programs. For example, we have committed publicly to reduce overall emissions by our chemical plants more than 90% by 1995 from 1988 levels. We are on track in pursuit of that goal. In 1990, our Sanders quarry, near Warrenton, Va., became the first site in the nation to be certified by the Wildlife Habitat Enhancement Council as a sanctioned, enhanced habitat for indigenous wildlife on corporate lands. Today 20 of our quarries are so certified and others soon will be.

Tom Stephens of Manville has said that the effectiveness of a company's commitment to a strong environmental stewardship program is directly proportional to how well everyone in the organization, from the board on down, "walks the talk." That's an instructive observation for all of us in the corporate community -- directors and management alike.

Herbert A. Sklenar is Chairman and Chief Executive Officer of Vulcan Materials Co., Birmingham, Ala. He joined the company in 1972 as Vice President-Finance, was named CEO in 1986 and Chairman in 1992. He serves as a Director on the boards of Amsouth Bancorp., Protective Life Corp., and Temple-Inland Inc.
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Title Annotation:Leadership in Environmental Initiatives
Author:Sklenar, Herbert A.
Publication:Directors & Boards
Date:Sep 22, 1993
Previous Article:Bolstering the board's environmental focus.
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