The Use of Chemical Management Services as a Strategy to Measure Chemical Use, Develop Assessments and Utilize Decision Making Tools Joe Sprangel - Mary Baldwin College Jill Kauffman Johnson - Chemical Strategies Partnership May 3, 2011

Agenda Our Chemical Future Chemical Management Services (CMS) Research Case Study Limitations of Research Research & Practitioner Implications Concluding Remarks

Our Chemical Future The next generation of environmental management systems will require: More sophisticated environmental data More business information More resources

REACH Most pressing regulatory issues is the new chemicals regulatory framework being implemented in the European Union, the Registration, Evaluation, and Authorization of Chemicals (REACH) The regulation requires more detailed information about chemicals embodied in products and used in processes, as well as banning and restricting numerous chemicals

Article Questions How will environmental managers increase the effectiveness and sophistication of their programs without increasing costs to their company? How will they satisfy the increasing demands by supply chain managers, business unit managers, regulators, and customers for better information, reduced emissions, and less toxic alternatives?

CMS Model Kauffman Johnson (2009) Figure 1

CMS Shift in Supplier Relationships

CMS Benefits Reduced chemical use, toxic use, and associated energy, waste and water impacts Utilizes the expertise and capacity of that CMS providers can provide the environmental manager with decision making tools and the resources to: Decrease costs Reduce chemical-related environmental impacts

Chemical Lifecycle Kauffman Johnson & Cole (2005) Figure 3

The Business Reality Environmental managers often need to help make the business case for chemical initiatives Understanding the gaps in program performance and the true “enterprise” cost of chemical management is an important first step in making the case for improving chemical management

Visible vs. Hidden Costs Bierma & Waterstraat (2000) Figure 4

Centralized Chemical Information Increasing US and international regulatory requirements raise the need for accurate information for: Chemical sourcing Product use Costs Quantity Location Constituents

CMS Use By Sector SectorAverage Market Penetration 2009 (%) Estimated Market Penetration 2004 (%) Automotive Automotive Suppliers Heavy Equipment Aerospace Electronics Air Transport Steel Manufacturing Chemical Strategies Partnership (2009) Table 1

Research Case Study CMS provider Haas TCM Group Largest independent CMS provider in North America Surveyed on-site program managers & their key company contacts

Quantitative Survey Research Haas TCM Group is an independent CMS supplier operating around the globe Studied customer sites in the United States & Canada with an onsite program manager Participant Type SamplePopulationResponse Rate Program Managers % Customers306248% Total %

Data Collection Survey The survey was a self-report format administered via the web The scale of measurement for the variables was a 5-level Likert rating scale: 1 = Strongly Disagree, 2 = Disagree, 3 = Don’t Know, 4 = Agree, 5 = Strongly Agree An overall score for each of the study factors was developed

Data Collection Survey Perspective Item 11b (Appendix H) from the program manager survey instrument reads “Our onsite manager training emphasizes treating our customer fairly (e.g. provides us tools to do so)” The same Item 11b (Appendix I) from the customer survey instrument reads “Their onsite manager training emphasizes treating us fairly (e.g. provides them tools to do so)”

Demographic Variables TotalPMsCustomers Gender****, +-- Age***,+** Country** Industry Type** Site Employees*** Total Employees ** Years w/ CMS** Note. * p <.05 ** p <.01 difference within variable. + p <.05 difference between groups for nominal and dichotomous variables, and t test for the continuous variable (i.e., age). All Participants N=71, Program Managers n=41, and Customers n=30.

Descriptive Statistics CMS Mean (SD) SupPer Mean (SD) All Participants 3.56 (0.53)4.01 (0.43) Program Managers 3.71 (0.51) ** 4.12 (0.43) ** Customers3.36 (0.51)3.85 (0.39 Age--* Note. p <.05 ** p <.01 General Linear Model test for difference between PM and customers, and difference between five age categories. All Participants N=71, Program Managers n=41, and Customers n=30.

Reliability – Cronbach’s Alpha Participant Group CMSSupplier Performance # of Items1613 All Program Managers Customers Note. All Participants N=71, Program Managers n=41, and Customers n=30.

Linear Regression Result HypothesisDVIVBStd. Error tp H1H1 Sup Perf CMS ** Note. ** Regression coefficient significant at p < 0.01 level N=71

Intercorrelation Measure1 1. SupPerf-- 2.CMS.471** Note. ** Correlation coefficient significant at p < N=71

Limitations of Research Sample size Program manager & customer survey versions Haas TCM Group program managers & customers in United States & Canada Lack of full representation of all industry types

Research Implications This research provides a better understanding of CMS and other similar green supply chain management practices This research adds the supplier’s perceptions element to this body of knowledge in the CMS industry sector

Practitioner Implications CMS can lead to improved supplier performance ratings of your chemical providers & triple bottom-line success “Sustainability is doing things efficiently to preserve resources and minimize environmental impacts” - George David, the Chairman and CEO of United Technologies Corporation “It requires a whole different kind of thinking” - Bob Conrad of Chrysler Corporation

Conclusion The element of a green supply chain management is becoming increasingly important in the business world CMS use helps to realize accurate measurement of chemical use across their value chain The CMS model is an example of how to gain additional help from the supply chain in assessing environmental challenges CMS companies are able use this as a decision making tool to allocate increasingly scarce resources to the right initiatives to help realize business and sustainability goals

Additional Information on CMS Chemical Strategies Partnership 423 Washington Street, 4th Floor San Francisco, CA ph: (415) fax: (415)

Questions? Thank you for your time!! I now welcome questions or comments!!