Return to home pageEnvironmental Management
in the Energy Sector
Four corporate case studies
Submitted to: Professor Sonia Labatt
Submitted by: Rory O'Brien
Date: November 27, 1997
CASE STUDY ASSIGNMENT
"You will be required to interview several firms in one industry,
focusing on corporate environmental issues, policies, process
and product modifications, which have been undertaken in response
to pressures external to the firm. You will ascertain what problems
are being encountered, and whether the initiatives are being effective
or not."
Introduction
The four case studies, two energy companies (Petro-Canada and
Granger Energy), a pipeline company (Trans-Canada Pipelines) and
an electrical utility (Ontario Hydro) were chosen to represent
the spectrum of energy production, transmission and utilization.
Three of the interviews were conducted over the telephone, and
one in-person, and ranged from 15 minutes to 2 hours. While a
standard set of questions (see Appendix B) provided a guideline
for the conversations, the interviews were loosely structured,
allowing the respondents to discuss their situations in their
own way, and at their own speed.
The key findings of the four case studies are presented below,
followed by a brief analysis.
Ontario Hydro
Ontario Hydro's current mission is "to make Ontario Hydro
a leader in energy efficiency and sustainable development, and
to provide its customers with safe and reliable energy services
at competitive prices". Its sustainable energy development
policy states: "Ontario Hydro will apply the principles of
sustainable development throughout its business...We will implement
this policy through an environmental management system, consistent
with the International Organization for Standardization (ISO)
14001 Environmental Management System Specification".
Ten years ago Ontario Hydro was a 'compliance' organization -
it complied with the letter of the law, and only spent money on
environmental matters when charges were laid. Things have changed
since then.
As public environmental concerns percolated throughout industry,
several major polluting sectors of the economy began to be more
proactive in their efforts to curtail pollution. Dow and Dupont
began initiating programs voluntarily, and their chemical sector
followed this lead with the industry-wide Responsible Care program.
The upper management and Board of Hydro, responding to this 'peer
pressure', wanted to be seen as leaders in their own sector, and
introduced a number of corporate environmental initiatives, beyond
what was required by law.
In 1991, a taskforce developed an environmental strategy and advised
Hydro to be "leading edge, but not too far ahead - or you
will become a target for criticism among your peers", and
that change should be implemented gradually or the managers would
become recalcitrant.
Maurice Strong, past convenor of two UN World Summits on the Environment,
and one of the world's foremost business-oriented environmentalists,
upon his appointment as CEO of Hydro, commissioned the Taskforce
on Sustainable Energy Development, whose report in 1993 led to
a number of innovations, most of which are now in place.
Full-cost accounting was recommended, but the Board felt it would
be too costly, and that there would be an increased danger of
liability. Some efforts in this area have resulted in the recycling
or selling of waste byproducts.
It did establish a 'buy green' policy, in which preference is
given to suppliers who incorporate sustainable development principles
into their operations, and which involves consideration of life-cycle
assessment of purchased products. This policy has had difficulty
in being implemented due to lukewarm reception by managers, who
are not convinced it is cost-effective for all the work it entails.
Although created upon a taskforce recommendation, the Renewable
Energy Technologies (RET) division has just been dissolved. Since
the recent decision to split Hydro into three separate corporations
(generation, transmission, and marketing/sales), it was felt that
the RET field was outside of the generation corporation's core
competency.
Over the past few years, Hydro's Corporate Business Group has
instituted an Environmental Management System, providing a model
for the rest of the enterprise. It is 'equivalent to' ISO14001
(except for weaknesses in the area of documentation) Targets are
set, responsibilities assigned, and support given to implement
initiatives, as part of this system. Achieving targets is now
put into managers' performance contracts. Darlington Nuclear is
the only part of the company that is ISO14001 certified, but all
divisions are now establishing plans for ISO14001 equivalency.
The Environmental Audit Group within Hydro is "very strong",
with each business unit being audited every 2-3 years. An outside
auditing firm (Arthur D. Little) does an "audit of the audits".
Every unit prepares a yearly report to the Board on environment,
health and safety.
A Director of Environment position was established, but this function
has now been incorporated into the V.P. of Environmental and Corporate
Affairs. Each business unit has its own Environment Manager.
There is a policy to subject all proposed capital projects over
$100,000 to an internal environmental review. An Environmental
Assessment department exists, but has been scaled back considerably
since Hydro is no longer considering new sites.
Annual environmental reports are made available to the public.
Regarding nuclear waste, there are no plans to dispose of it at
present. Hydro stores its waste on-site, in full compliance with
the law. There are no studies estimating the disposal costs of
this waste, or the costs of decommissioning the out-of-service
reactors.
Overall, Hydro has become a leader in environmental management,
even earning consulting revenues on selling this expertise to
its peers.
Trans-Canada Pipelines
Trans-Canada Pipelines has long been an industry leader where
the environment is concerned, having had an Environment Department
since 1974, well before most other corporations.
Being consistently proactive with respect to environmental issues
had meant that the only pressures they have had to respond to
have been those of the government regulators: the National Energy
Board, the Alberta Energy Utility Board, the Ontario Energy Board,
and the Federal Energy Review Commission in the U.S. Seven years
ago, they were charged with non-compliance, but the charge, which
was contested by TCP, was thrown out of court, ostensibly for
being unwarranted.
They favour self-regulation wherever possible, and are strong
supporters of the Voluntary Challenge and Registry (VCR), tying
for first place for best performance in a recent study.
An environment, health and safety system is in place that is 'close'
to ISO14001 standards, but TCP isn't seeking certification as
it is required for each compressing station and that would be
too expensive. They don't use the term 'sustainable development'
as their industry is in non-renewable resources.
Life-cycle analysis is done "to the degree necessary",
e.g., solvents are bought only from vendors that will recycle
them. A buy-green policy states that a seller has to have an environmental
policy in place.
Environmental assessments are done, externally to comply with
legal requirements, and internally to perform due diligence when
considering the purchase of another company.
Each business unit has a yearly action plan, as do each of five
regional operations. There is strong commitment from management,
with full financial support, and a "strong, positive approach"
to training. Accountability is written into job descriptions.
The President's Award and cash bonuses are examples of employee
incentives for environmental excellence. Contractors have been
"run off the site" for environmental infractions.
An internal unit performs an eco-audit every 3 years. Managers
on each shift go through a formal checklist evaluation, and submit
a report, on environment, health and safety conditions. Environmental
accounting methods are used.
Automated monitoring technology alerts them of any breaches in
the pipeline, and emergency corrective actions are performed according
to severity of problem, e.g., 'spill kits', installed on trucks,
allow for spills to be cleaned up often within hours.
Public consultation is a forte. They have over 7,000 landowners
they must keep happy. New construction projects are monitored
for two years, with reports going to government, stakeholders,
and local clubs. In particular, they work with community groups
to allow access to the right-of-way for hunting, ski-dooing, and
archaeology.
They have always had a section on environment in their annual
report, and while their corporate environmental report has only
been for their Board, they are now going to start releasing it
to the public.
Petro-Canada
Petro-Canada has had an environment department since it began
in 1976. Over the years, it has moved gradually along with the
tide of public pressure, and subsequent government regulations,
to improve on environmental performance. The petroleum industry
is the most visible in society, with gas stations in every neighbourhood,
so public opinion must be followed closely.
In the late 1980s, in the wake of the Exxon Valdez, upper management
became aware of the importance of the environment on the bottom
line and moved to integrate environmental concerns into all aspects
of corporate decision-making. "In every meeting, the first
question is regarding the environment."
Petro-Canada has an Environment, Health and Safety system in place.
Although it is considered ISO14001 compatible, certification has
not been sought due to the 'over-emphasis' on paperwork, i.e.,
documentation.
Life-cycle analysis is part of their system, and the focus is
primarily on toxic wastes. Packaging is not a big concern, except
for ensuring that their lubrication products are in recyclable
containers.
They are conscientious about obeying the law, and staff found
not complying with regulations are fired. Though proponents of
self-regulation, they are not averse to government regulation
"if it is practical". They work with government and
peers to set standards, especially to keep competition on a 'level
playing field'. "Many small entrepreneurs can buy gas cheap
in the States and influence the pricing system here in Canada."
Refineries liaise with local communities on an ongoing basis.
Local government and civic leaders sit on Petro-Canada committees
and meet once a month to keep abreast of issues. Open houses are
held once a year.
Action plans are part of each business units' quarterly environmental
reports to the Board, with measurable outcomes and responsibilities
assigned to the appropriate managers. Repeated failure to perform
is noted and corrective measures instituted.
Eco-audits are performed both internally by an ad hoc group, and
by external auditors. These take place about every 4 years for
large operations, and every 2 years for small ones. Environmental
accounting methods are used.
A public corporate environment report is made part of the company's
annual report, but not issued separately.
Petro-Canada has won several awards, including accolades from
the Recycling Council of Ontario and the Canadian Wildlife Federation.
Granger Energy Corporation
Granger Energy is a small oil company, with 15 wells and only
$2.5 million in yearly revenues. It has no distinct management
system for dealing with the environment, yet considers itself
to be an environmentally responsible company.
In its three years of operation, it has had no specific environmental
initiatives, and feels there has been no pressure to implement
any.
They have received environmental guidelines from the Canadian
Association of Petroleum Producers (CAPP), of which they are a
member, and this suffices for their environmental policy.
On-site operations are under the purview of individual well operators,
who are primarily concerned with health and safety. The Alberta
Energy Utility Board conducts random site inspections, and point
out any deficiencies, though to date they have not had any infractions
of the law.
They are registered with the Voluntary Challenge and Registry
(VCR) and have drafted a plan to minimize flaring and to give
priority to purchasing equipment that reduces emissions.
They do not have any kind of environmental reporting.
Their senior management is concerned about the environment, but
they do not have the resources to invest in operational changes
to accommodate those concerns, nor do they feel they have the
need at present.
Analysis
There did not seem to be specific instances of outside pressure
catalyzing organizational changes. Rather, most of the impetus
has come from enlightened upper management, with an eye to 'keeping
ahead of the Joneses' in their industry, as well as to improve
the bottom line.
Since the large companies have extensive environmental management
systems in place, while the small one does not, it could be inferred
that, since formal environmental management systems require a
certain amount of organizational resources to implement, only
firms of a certain size feel they are cost-justifiable.
Managerial responsibility for the environment generally includes
health and safety as well.
Management in each instance is very supportive, and, except for
Granger Energy, has allocated sufficient resources to maintain
the systems, including personnel dedicated to the task.
With the exception of one business unit in Ontario Hydro, none
of the companies is IS014001 certified, though all three of the
larger ones feel they are compliant. It appears that one of the
more difficult aspects of full compliance with ISO14001 is the
documentation requirement, and the cost of certifying several
operational units individually seems to be another factor.
Consistent with advanced environmental management systems, the
larger companies all have instituted action plans, environmental
auditing, and reporting procedures. Life-cycle analysis and 'buy
green' policies seem to be difficult to implement well. Stakeholder
and public liaison is also important and extensive.
The respondents, except for Granger Energy, were all senior managers
responsible for environmental matters, and were likely to have
been very biased toward the positive in their responses. However,
the end result is that the companies who have embraced environmental
management practices are receiving accolades, and consulting contracts,
for their efforts.
Appendix A -CORPORATE CONTACTS
Ontario Hydro
Contact:
John Grieve (in-person interview)
Senior Environmental Advisor
Environmental and Sustainable Development Division
Energy Services and Environment
Tel: (416) 592-6809
Trans-Canada Pipelines
Contact:
Al Glassco (telephone interview)
Director Corporate for Environmental Affairs
Tel: (403) 267-8756
Petro-Canada
Contact:
Fared Saif (telephone interview)
Manager of Environment, Health and Safety
Tel: (416) 730-2000
Granger Energy Corporation
Contact:
Rick Shultz (telephone interview)
VP Production and Operations
Tel: (403) 237-0083
Appendix B - INTERVIEW QUESTIONNAIRE
1. What can you tell me about the following aspects of the company's environmental management?
a) environmental management system in place
i) codes and standards (e.g., CERES, ISO14000)
ii) life cycle analysis
iii) industrial ecology
iv) design for disassembly
b) policy
i) policy instruments (legal compliance, industry self-regulation)
ii) buy-in from top management
iii) sustainable development a part of the corporate culture
c) assessment of impacts
i) environmental assessments
d) action plans
i) setting goals and objectives
ii) buy-in from middle managers and other employees
e) procedures
i) change in company organization, or production procedures
ii) community/stakeholder consultations
f) assign responsibilities
i) someone accountable for each action
g) support given to enable actions to be implemented
i) training
ii) resources (e.g., budget)
iii) recognition
h) performance measures and assessment
i) targets established
ii) rewards and/or penalties in place
iii) assessment procedures and frequency
iv) awards (internal and/or external)
i) audit systems
i) eco-audits
ii) internal and/or external
iii) environmental accounting
j) corrective action and follow-up
i) beyond the letter of the law
ii) usual timeframe
k) reporting
i) internally and externally
ii) in annual report
iii) corporate environmental report
iv) toxic releases
2. What are the major environmental initiatives undertaken in response to external pressures? Which pressures?
3. To what extent have these initiatives been successful? Why?
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