The dangers of environmental indices

There is this axiom that says: “If you can’t measure it, you cannot manage it”. That is true to a certain extent. But the flip side of this axiom is that if you measure the wrong thing, you can end up with a disaster.

There is a big refinery in the U.S. that offers a classic case in point. After its corporate office acquired another major refinery in the 1990s, senior management ordered a significant budget cuts across the board. This impacted the maintenance budgets in all of its refineries. At the same time, the CEO instituted personal safety measures throughout the company. One well known example was that all employees must carry their hot beverages in closed cups. This was to avoid scalding of employees from spilled hot liquid.

The company also instituted a “Getting Health, Safety and the Environment Right” policy – known as GHSER.

The company started tracking OSHA incident rates as a key safety metric at its refineries. However it did not track Process Safety Management key performance indicators such as closure of action items, equipment inspections, and relief valve testing. These were not incorporated into the GHSER.  At one of its refineries, the OSHA incident rate was very low in the years leading to 2005. At the same time, equipments were in a continuing state of deterioration due to the reduction in maintenance budget. Personnel working with the equipment at the refinery sensed that a major accident was about to happen any time. In 2005, a production unit at the refinery exploded and killed 15 persons and injured hundreds.

Management thought plant safety was doing fine based on the personnel injury rate. It was measuring the wrong metric.

Many companies track performance using metrics such as kilowatt-hour, water consumption and wastes generated per unit of production. These indices can be very helpful as a trend line within a specific production unit over time. They can provide managers valuable information on how well the unit is working over time. Any deviation from the normal trend line will alert operational staff to look for underlying problems.

Unfortunately, these indices are not very useful when they are applied across the board to different productions at different locations.

Yet some some managers make the mistake of grouping all these indices and distilling them into one single number and try to rank a company’s overall environmental performance based on such singular index. They call them “green index” or “compliance index” with the notion that a company with a higher green index is performing better than others based on some hypothetical and arbitrary environmental ranking scale.

Such practice is misleading and can be downright dangerous. A company’s environmental performance comprises many varying factors. To assign a single value or index to represent a company’s environmental performance would be akin to the three blind men describing an elephant by touching different parts of the beast. One describes the elephant as a long thick hose; another describes it as a solid stump and the third describes as a piece of large flapping fan.

They are all correct in parts and all wrong with the complete picture.

The impetus of condensing environmental performance into a single index comes from consultants who are trying to sell services to customers in the guise of “making life easier” for their clients. So they concocted these numbers which are misleading and not very useful.

There was one young consultant in Canada who suggested that these single digit indices would help an environmental auditor. The auditor could just review these indices instead of having to review reams of raw data and reports. That was one consultant who has no idea on how to perform an environmental audit.

There are also software vendors out there who promote complicated programs that purport to provide environmental indices in the guise of “efficiency”. Very often, we find the purchasers of these software programs being reduced to data entry slaves or they are tied into long term data maintenance contracts. This is a clear case of “Caveat Emptor”.

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