In the age of financial meltdown, does sustainability matter?

I was in the UK at a CIO workshop last week (post coming up), and missed a lot of the on -going maneuvering on the part of both political parties here in the US. It made me think about sustainability market drivers (again; yes, I need a life...), and whether we have turned the corner from sustainability as a 'vitamin' (nice to have), or an 'aspirin' (critical need).

Right now, I would guess that most people (consumers) and many corporations are focusing on very tactical and survival -based activities, such as cost control and risk / exposure management. Where sustainability programs are already established, there is probably little impact from the financial crisis, in terms of potential termination, cancellation, etc.

But where sustainability initiatives are being considered or reviewed, I would venture that many will be put on hold for the time being, as corporations sort through on - going programs and rank and prioritize those that are truly 'mission critical' for short term goals.

But there may be a silver lining.

One could say that the current populism will engender more awareness of social impacts associated with current and projected modes of doing business. That could feed into more interest in sustainability as the template of conducting business: doing what is right (do no evil?), taking care of your employees and those who are affected / involved in your business, and developing strategy & inititiaves for promoting long term viability.

Another potential benefit: whoever becomes president, there is no doubt (in my mind) that we are entering a new age of regulatory oversight. I believe that the 'wave' of rule - making for the financial markets will spill over to other industries / sectors, and will include new environmental and social metrics.

Some may see additional regulation as anathema to the overall concept of sustainability, but as I have posted before on crisis management (link), sustainability will not be adopted by the majority of corporations until such time that: they have to incorporate programs to be competitive; or, they have to comply with new regulations. Indeed, if you view the UK and Europe, sustainability adoption is due to stringent new rules in building design & construction, consumer product design, and waste recycling; all driving much more awareness (and acceptance) in the local populations.

There. Anybody feel better about the current mess we are in? Read more!

When Compliance is not enough...

Recent industrial accidents have been in the news: an International Paper plant explosion in Mississippi, and in February, another explosion at the Imperial Sugar plant in Port Wentworth GA (link).

When thinking about 'sustainability', it would seem that governmental compliance needs to be adhered to, first and foremost. Compliance in most cases is performed as result of required regulations by EPA, OSHA, and state government groups, for these two cases. But what happens when a facility (or warehouse or distributor) is in compliance, but an accident of this magnitude still occurs?

As reported by the Wall Street Journal earlier this week in their article "Dust Cloud Settles Over Industries", there was a significant dust problem at the Imperial Sugar plant, and questions were raised by outside experts as well as those in OSHA as to how effective cleaning procedures were. In this case, the plant had been cited for numerous violations in the past, but as one inspector put it, they probably did not know the severity of their own dust problems:

"They don't see it, they don't clean it, because they don't realize the hazard is there," says John Vorderbrueggen, lead investigator for the blast at the U.S. Chemical Safety Board, a federal agency that probes chemical accidents. "I wouldn't call it negligence. I'm sure any company, if they had an awareness that a hazard existed, they would take corrective action. So it's really an ignorance issue." (Wall St. Journal)

OSHA regulations may not have been sufficient, according to a member of their own safety board:

"OSHA has a 'gotcha' approach," says Stephen Selk, investigations manager for the safety board. "They look hard and creatively to identify sometimes arcane interpretations of rules that were broken. We're suggesting to OSHA that they don't offer clear guidance. They don't tell industry the things to do to prevent a disaster like this." (Wall St. Journal)

And this is where I started thinking about 'sustainability' versus compliance.

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It remains to be seen whether Imperial Sugar and International Paper were in compliance with relevant environmental health & safety regulations. But assuming that they were, they still have incurred very high costs (financial, loss of human lives, diminished brand) as a result of these accidents. Could the implementation of a risk management or sustainability program avoided these accidents?

I think the issue here is that instead of just meeting compliance, or even adhering to a sustainability program, there is a need to monitor and optimize the processes and associated metrics of any compliance, risk management, and even sustainability program. You might be in 'compliance' with a governmental or NGO regulation, or even in compliance with your own sustainability program, but if your processes are faulty, or if you are not measuring the correct metrics, or you don't have a standard to measure the metrics.....then compliance is all for naught.

We have seen this type of problem in the supply chain, with the crisis that Mattel went through recently when it was discovered that toys were being produced by second and third tier suppliers with hazardous metals. Mattel did not have a process that was applicable for evaluating and managing this risk; they essentially had zero transparency into that part of their supply chain. Their financial 'hit' was close to $40MM, along with massive disruption of their supply chain.

These events provide ample evidence that key to any program is the accuracy of data and consistent processes to measure it; selection of appropriate metrics and ones that can be measured; and a validation process to constantly review and amend, in light of business changes, technology advances, etc. 'Sustainability' in its most basic form is then a result.
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