carl wirdak occidental petroleum corporation gemi survey ehs / sr governance – a snapshot october...

Carl WirdakOccidental Petroleum Corporation

GEMI Survey

EHS / SR Governance – A Snapshot

October 2003

EHS Governance Benchmarking – October 2003 2

Outline

• Survey Recap• Framework for EHS / SR governance• Factors that influence EHS and SR• Role of the Board of Directors• Accountability systems• Performance assessment and feedback

processes• Next steps for the GEMI Governance work

group


Survey Overview

• Scope of EHS / SR Governance covered by survey was broadly defined

• Survey response rate was just above 50% – Not all companies completed all questions

• But there was good coverage across the sectors represented in GEMI

• Thank you to all participants!


EHS / SR Governance – What is covered?

• Almost all companies include the following:

– Conventional EHS performance– EHS costs (ongoing and liabilities)– EHS risk management– Legal compliance– Employee behavior / ethics– Internal and public EHS communication


Governance – What is on the fence?

A sizable fraction of companies do not consider or only partially include the following topics:

A. EHS value-added

B. Social Responsibility performance

C. Supply and distribution chain relationships

D. Stakeholder engagement

E. New product development

F. Product de-selection

0%

25%

50%

75%

100%

A B C D E F

Included Partially In Not Included


What frames company actions?

• Documents that frame EHS governance for companies include:– EHS policy– Code of Conduct– Compliance with law policy– Ethics policy– Company values & principles


Code of Conduct

• Every company maintains a code of conduct

• The code applies to all employees, not just top management

• The code always covers environment and health & safety

Does Code of Conduct Address Social Responsibility?

No29%

Yes71%

• Does the code of conduct address social responsibility?


What shapes EHS and SR expectations?

0 1 2 3 4 5

Current laws & regulations

Commitment to continuous improvement

Emerging laws & regulations

Performance of E, HS, SR "leaders"

Shareholder concerns

Community concerns

Employee concerns

Peer companies performance

External industry standards

NGO concerns

1998 2003 2008


Trends in EHS and SR expectations

0 1 2 3 4 5

Current laws & regulations

Commitment to continuous improvement

Emerging laws & regulations

Performance of E, HS, SR "leaders"

Shareholder concerns

Community concerns

Employee concerns

Peer companies performance

External industry standards

NGO concerns

1998 2003 2008


What goals are being pursued?

Current goals (identified by more than 50% of respondents)

• Minimize waste, discharge & emissions• Reduce natural resources and raw materials

usage• Manage EHS risk• Manage emerging EHS issues• Reach out to communities• Engage stakeholders• Participate in voluntary initiatives


What goals may be pursued?

2008 goals (identified by more than 50% of respondents)

All those on prior slide, plus:• Manage indirect or extended impacts• Maximize use of renewable energy• Maximize use of renewable raw materials• Conserve land• Protect biodiversity• Build EHS value into products and processes• Focus on the bottom of the economic pyramid• Enhance social structure in developing regions


Who considers EHS and SR matters?

3

2

10

5

7

2

7

4

0 4 8 12

No focal point at BOD level

A particular board member

A committee of the BOD

The full Board of Directors

Number of responses

SR

EHS


EHS / SR consideration by the Board

• Most companies have just one committee that deals with EHS & SR matters

• Typical size is 3 or 4 members

• Most members are outside directors

• Committees meet 2 to 4 times per year

1

3

9

2

1

4

2

0

3

6

9

<- 1980 1981-1990 1991-2000 2001 ->

Num

ber o

f res

pons

es

EHS

SR

Year that BOD began addressing EHS / SR


BOD involvement in setting expectations

No company has its Board involved in drafting language for goals

Informed after the fact

35%

Provides overall

direction18%

Formal review and

concurrence18%

Multistep participation

29%


Information sources for the BOD

How are BODs informed about emerging issues and/or the company’s activities, including its EHS or SR profile, its performance, etc.?

Number of responses

EHS

SRExternal Sources

Company M

anagement

Combination

4

2

7

3

0

1

0

1

2

3

4

5

6

7


What is on the BOD agenda?

0% 25% 50% 75% 100%

EHS financial management

Emerging issues

EHS risk management

Legal and regulatorycompliance

Management of past EHS liabilities

Ongoing EHSperformance


Reporting EHS and SR to the BOD

• Chief EHS / SR officer reports to the BODOthers include:– CEO– General Counsel

• Typically, the format is a presentation that covers– company performance– positions on issues

0

2

4

6

8

<1 1 2 3 4 >5

Reports per year

Num

ber

of r

espo

nses

SR EHS

Frequency of reporting to BOD


Organizational background

• In 70% of companies, EHS and SR does not report to one person

• In ~50% of companies, EHS or SR functional area reports to an Executive V.P. or a Senior V.P. Others include:– CEO– COO / President– General Counsel

Num

ber

of r

espo

nses

Organizational Model

Cen

tral

ized

Dec

entr

aliz

ed

Hyb

rid

0

4

8

12


EHS / SR performance targets

21 companies in sample E HS SR

Companies having targets 20 18 9

Average percent of targets that are quantitative

69% 87% 32%

Percent of companies where all targets are quantitative

45% 61% 0%


Who is accountable for performance?

Accountability rests with line management and staff

EHS SR

Corporate staff

executive30%

Operating company executive

62%

President4%

General Counsel

4%

Corporate staff

executive23%


61%

General Counsel

8%

President8%


Is compensation linked to EHS / SR?

EHS SR

All employees

14%

CEO11%

Corporate staff

executive39%


36%


38%

Corporate staff

executive54%

CEO8%

Line management and EHS / SR staff have strong links


EHS / SR Assurance & Sarbanes-Oxley

• For EHS (blue dots), compliance assurance mechanisms are mature, but… the link to Sarbanes-Oxley process certification is not complete

• For SR (red dots), there are no assurance mechanisms in place

No Yes

Assurance Mechanism

No

Yes

No. of companies = 21

Sa

rba

nes

Oxl

ey

link


Where do companies audit?

21 companies in sample E HS SR

Company operations 100% 95% 24%

Suppliers 62% 33% 5%

Customers 10% 5% 0%


What do companies audit?

21 companies in sample

Laws & Regs

Company Policy

Company Values

Industry Stds

External Codes

Company operations 100% 100% 76% 57% 48%

Suppliers 48% 38% 14% 29% 14%

Customers 10% 5% 0% 0% 0%


EHS / SR Governance “Wish List”

• Consistent definition of what is in SR

• An organized management system for SR

• Increased attention at the BOD level

• More routine reports to BOD

• Greater dialog with the BOD during presentations

• External verification of audit process and results

• Formal process to obtain stakeholder input


Closing Comments

• Questions / comments / discussion

• For further information contact GEMI Governance work group co-chairs:

– Robert Accarino (Abbott)

– David Lowy (Altria)