What to measure and why? Environmental Manager Symposium Gábor Harangozó Corvinus University of Budapest, Hungary Rochester, 5th May 2008

5th May 2008 Gabor HARANGOZO - CUB Background of the topic Environmental issues are (getting) a big challenge for our society, including corporations as well Environmental issues are (getting) a big challenge for our society, including corporations as well In order to deal with them we need to measure environmental performance of companies („We cannot manage what we cannot measure properly”) In order to deal with them we need to measure environmental performance of companies („We cannot manage what we cannot measure properly”)

5th May 2008 Gabor HARANGOZO - CUB Desired outcome (long term) Provide in practice applicable support for environmental managers on the issue „What to measure and why?” „What to measure and why?”

5th May 2008 Gabor HARANGOZO - CUB Hypothesis (short term) H1: Measuring and improving environmental performance is in interest of corporations. H1: Measuring and improving environmental performance is in interest of corporations. H2: By measuring EP, environmental managers can help significantly in improving EP (and CP). H2: By measuring EP, environmental managers can help significantly in improving EP (and CP).

5th May 2008 Gabor HARANGOZO - CUB Aspects of the topic 1. What to measure? (How to measure?) 2. Why to measure? 3. Role of the environmental manager in performance measurement

5th May 2008 Gabor HARANGOZO - CUB Environmental performance of companies ???

5th May 2008 Gabor HARANGOZO - CUB Components of EP Environmental load Environmental load Environmental actions Environmental actions Environmental management tools Environmental management tools State of the environment

5th May 2008 Gabor HARANGOZO - CUB EPIs based on ISO Environmental Performance Indicators - EPIs Operational Performance Indicators OPIs Management Performance Indicators - MPIs Environmental Condition Inds - ECIs INPUT Materials Energy Services (supporting) Transport (supply) OUTPUT Products Services Wastes (toxic, reciclable etc.) Emissions (air, water, noise, etc.) Transport (delivery) Policies and programmes (e.g. EMS) Compliance (legally, internal goals etc.) Financial performance (environmental costs, saving) Community relations, communikation LOCAL Air Water Soil Flora Fauna Humans Aesthetics, heritage and culture GLOBAL FACILITIES AND EQUIPMENT Machinery Operation

5th May 2008 Gabor HARANGOZO - CUB What to measure? Outcomes vs. Drivers (OPIs vs. MPIs) Outcomes vs. Drivers (OPIs vs. MPIs) Absolute vs. Relative indicators Absolute vs. Relative indicators Industry specific vs. Company specific Industry specific vs. Company specific Improvement over time Improvement over time Optimal number of indicators: Optimal number of indicators: not the number, but relavancy what matters not the number, but relavancy what matters

5th May 2008 Gabor HARANGOZO - CUB Purposes of measurement Environmental quality Environmental quality Regulatory compliance Regulatory compliance Competitive advantage Competitive advantage Risk management (reduction of liabilities) Risk management (reduction of liabilities)

5th May 2008 Gabor HARANGOZO - CUB Role of EM in performance measurement Link targets between EP and CP Link targets between EP and CP Convince corporate managers on returns on EP measurement and improvement Convince corporate managers on returns on EP measurement and improvement Communicating the results of performance measurement to stakeholders Communicating the results of performance measurement to stakeholders Organizing the performance management process Organizing the performance management process Setting attractive targets Setting attractive targets Specifying indicators Specifying indicators Quantifying indicators Quantifying indicators Making a report for managers Making a report for managers Help to shift corporate culture (to accept environmental issues) Help to shift corporate culture (to accept environmental issues)

5th May 2008 Gabor HARANGOZO - CUB Steps in the future How exactly EM can link EP and CP? How exactly EM can link EP and CP? Limits in linking EP with CP Limits in linking EP with CP