subject: risk management

Implementation at the Plants

The role of Jon Plaut and other corporate EH&S employees in waste reduction, though vital, was limited to oversight and provision of an internal environment that fostered waste reduction. The execution of the waste reduction mandate fell to Allied-Signal's various divisions and plants, in keeping with the company's philosophy of decentralized management. They proceeded with varying speed and manner. An early respondent was Fibers, one of four divisions in EMS. Fibers plants were among the company's largest and most complex, and greatest generators of hazardous waste. Although geographically removed, in reality the plants formed a single huge chain in the production of a type of nylon used for carpeting. Thus one plant's waste stream depended upon another's production rate.

Hopewell The Fibers plant in Hopewell, Virginia, accounted for more than four-fifths of the division's waste generation. Hopewell, a sprawling maze of tubing punctuated with more than two hundred vents and towers, sat on 350 acres fronting the James River. Its major product was caprolactam, an antecedent of nylon. Hopewell produced 9% of the world's supply. Several other chemicals, all precursors or byproducts of caprolactam, were also manufactured in large quantity at the same site. With 1,024 employees and between 100,000 and 130,000 emission points (including leaks) at the plant, Hopewell was big enough to warrant its own sizable HS&ES staff. They tracked emissions with extreme care (see Exhibit 8). They also served as the plant's Environmental Committee a set-up that was effective, but departed from the company's suggested policy which recommended the inclusion of manufacturing supervisors and plant engineers on environmental committees.

The propinquity of Hopewell's HS&ES employees to the plant enabled them to fully understand the required list of waste reduction projects, according to L. Evans Drake, the plant's Superintendent of Environmental Control and Industrial Hygiene. Waste reduction at Hopewell got off to a quick start: generation of RCRA wastes dropped 72% in 1990 (as measured against the 1988 baseline), of TRI substances 47% (see Exhibit 7 for more data). Both percentages exceeded goals. One of Hopewell's most notable successes came with ammonium sulfate, a course-grained crystal used in fertilizer. Although good for vegetation in small amounts, in large quantities the substance qualified for the TRI. In 1988 Hopewell had spilled or leaked 43 million pounds a significant amount, but less than 2% of the 2.4 billion pounds manufactured. By 1991, however, ammonium sulfate discharge had dropped to 12 million pounds, a 72% decrease, against constant volume. "About 18 million pounds of that [reduction] came through the application of money," Drake said. Engineers installed demister pads, recycling systems, recovery sump systems, and anti-foaming agents

all the engineering solutions. The rest of [the reduction] came through the commitment of people. We got employees involved. We had a series of meetings and we told them how it was their pollution, not the Environmental Control group's. We looked them right in the eye and said `You are the owner of this pollution.'. . . In the old days you'd have a sulfate overflow [from a vessel]. Well, we'd have so much sulfate in inventory that operators would shut down the overflow only when they got around to it. It was low on their priority list because the sulfate was so plentiful and cheap. Now they have a reason to shut off the overflow immediately a reason to put it higher on their priorities. [See Exhibit 9 for examples of projects for reducing ammonium sulfate.]

But disadvantages also existed with the Hopewell plant's system of originating waste reduction projects. Although Drake and his cohorts were familiar enough with the plant's operation to be able to offer suggestions, their lack of intimate knowledge of the technical processes meant that some of their ideas were infeasible. "The suggestions from [the operating] level tend to have a lot higher success rate in getting acted upon, for obvious reasons," Drake said. But "even now, just about 5% of suggestions come from operating units." Drake's department begat the rest. Efforts to form a plant environmental committee that included representatives from operating units progressed slowly.

Hopewell used awards to try to motivate line employees to think about waste reduction. Supervisors of units that excelled in reduction received stock certificates. In 1991 common stock awards ranging from $1,000 to $2,000 in value went to 15 employees. The maximum prize was 50 shares. Hourly workers' participation was encouraged with certificates, articles in company publications (including Allied-Signal's 1991 annual report), and other forms of recognition. Accompanying these proverbial carrots was a stick. "Previously all disposal costs came out of our [HS&ES] budget," explained Raymond J. Galliard, Manager of Environmental Control and Technical. "Now it's coming out of their [operating units'] maintenance budgets." Monthly meetings with the plant manager on spending gave unit supervisors an incentive to keep maintenance costs low.

Although Galliard and Drake reported waste data to Fischer and other managers up the HS&ES hierarchy, they answered directly to the Hopewell plant manager (see organizational chart in Exhibit 10). Drake considered this corporate structure an asset rather than a detriment; "[the plant manager] is committed to do the real thing, as far as the environment goes," he said. The support of the plant manager, whose authority in the operation of the plant was near-complete, was crucial in making the waste reduction endeavor a sincere one, Drake said.

Waste reduction ideas that passed the test of technical feasibility were ranked. Preference went first to projects actually reducing or eliminating hazardous waste, second to those recycling or reusing waste, and last to plans for waste treatment. This hierarchy followed guidelines from corporate HS&ES. Galliard and Drake then requested appropriations from the plant operating and capital budgets. Approval was almost guaranteed for the most promising projects, such as those with quick pay-backs. By 1992, however, few such "low-hanging fruits" remained. HS&ES nevertheless was able to go ahead with many projects that had longer pay-back periods. An account in the operating budget reserved $1 million per year for environmental spending at the discretion of the HS&ES department. Drake explained the logic behind the discretionary fund: "Projects with marginal returns will be implemented because we cannot completely compute the value of long-term liability reduction."

Projects eliminating very large amounts of emissions were favored, of course, but many others that promised only small or unknown improvements were also approved (see Exhibit 9). The rationale that Drake presented to the financial analysts guarding the plant's operating and capital budgets was reduction of toxicity. Many substances on the TRI were far more toxic than ammonium sulfate, for instance, and thereby greater health risks to the populace and the environment. Cutting emissions of such substances, even in small increments, reduced Hopewell's liability risks in a disproportionate manner.

Environmental laws trended toward expanding scope, making computation of liability risk difficult and boosting the value of toxicity reduction. Galliard worried that regulatory limits on waste would increase to extremes. "There's a common perception among legislatures that all waste minimization programs are cost-effective. That's not true," he said. "I think the public and the EPA want us to get to zero [emissions]. I don't think we'll ever get to zero. All regulations have a significant capital expense on us."

Other sectors: Automotive's Aftermarket Group Although the lower emissions of toxic substances from Aerospace and Automotive plants made environmental controls less urgent in those sectors, their plants were scarcely exempt from environmental laws. HS&ES employees were hired to coordinate compliance with RCRA, the Clean Air Act, and the Clean Water Act.

The Aftermarket Group was one of Automotive's six divisions. Its environmental control efforts were headed by Senior Environmental Administrator Paul E. Manning, who worked out of the divisional headquarters in East Providence, Rhode Island. Manning, a professional engineer, coordinated work for HS&ES employees located at all seven of the division's geographically dispersed plants. The workload dictated that some of those employees work on environmental controls only part-time. Consequently, Manning said, "where we differ from the Engineered Materials Sector [on hazardous waste staffing] is the required degree of technical specialization." The plant-level HS&ES employees handled all environmental activities air emissions, waste-water discharges, and waste management in addition to health and safety duties.

The Aftermarket Group and the whole of the Automotive Sector had attained considerable success in waste reduction after a program was implemented in 1985. The waste reduction committees at Aftermarket plants then turned to the difficult task of reducing air emissions from solvents, which would require fundamental changes in production processes and the products themselves.

In the Aftermarket Group, as elsewhere in the company, HS&ES was a nontraditional source for suggestions for product changes. "For us to tell them to change their product sometimes [product engineers] have a hard time with that. Usually changes come from Marketing. We're a marketing-driven company," Manning said. The marketers, too, were sometimes wary of HS&ES. "Their thought of `environmental' is what they see on TV, and that's an activist. They have a little trouble seeing me as an advocate for the company. When I say we should change this or that, it's not because I'm an activist and I like trees, it's because of our hazardous waste risks and the policies we have to deal with [those risks]. We [HS&ES] have to establish our credibility" with Marketing, Manning said.

The HS&ES organizational structure in Automotive paralleled the one at Hopewell. HS&ES managers worked in two organizational structures simultaneously. Manning and his boss, who headed HS&ES for the Aftermarket Group (Manning's responsibilities ending with the environmental component), answered directly to the line manager in charge of the Aftermarket Group. They reported health, safety, and environmental data to the sector's top HS&ES managers in Michigan.

An incredible amount of documentation accompanied Manning in his duties. His office contained a library of bulky company environmental primers: Community Right-to-Know Compliance Manual, Hazardous Waste Generator's Manual, Industrial Pretreatment Manual, Pollution Control Manual, Risk Assessment Manual, and a small roomful of others. The need for the manuals stemmed from EPA's lengthy "commmand-and-control"-style regulations. Each of the several laws regulating hazardous waste erected a set of intricate procedures. Indeed, expert consultants had written most of the manuals. New laws and regulations kept the consultants busy. "You have a manual, it's good for about nine months, and then the rules change," Manning said. (By the end of the 1980s, EPA had acknowledged that its own procedures needed changing.25)

HS&ES employees, sometimes with help from consultants, wrote required Contingency Plans, emergency procedures, and Preparedness and Prevention procedures. They trained teams in Emergency Response and conducted Medical Surveillance Training. In addition to the manifest forms mandated by RCRA for each movement of hazardous waste, there were labeling, placarding, and packaging guidelines decreed by the federal Department of Transportation. Allied-Signal's internal documentation for waste followed EPA requirements for extensive record-keeping. HS&ES managers kept Action Plans, a computerized Action Plan Tracking System, a Corporate Record System, a Permanent Working Paper File, and other records.

The Action Plan Tracking System was one of three HS&ES computer databases. It listed all outstanding HS&ES issues waste not properly listed, meetings not held, etc. at all plants. Entries stayed on the database for at least a year after compliance was verified. A second database, the Hazardous Waste Tracking System, contained full records of all inspections occurring at company plants and off-site disposal locations, and all hazardous waste manifests filled out by each Allied- Signal plant. For the Aftermarket Group, plant inspections included not only the HS&ES Surveillance Program audits, but also visits by EPA and state regulators, Manning's own annual reviews of the division's plants, and occasional "peer review" audits by HS&ES staff from other divisions. In mid- 1992 the Hazardous Waste database contained 153 items for the Aftermarket Group, 125 of which were completed actions. (Entries for the Automotive Sector as a whole totalled 1,280.) The third database was the SARA Tracking System. HS&ES employees used it to tally Allied-Signal's emissions for the TRI.

Questions: 1. What are the organizational capabilities necessary to implement such strategy?