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En ny model1 for mil jorevisioner pa Ericsson Anew model for environmental audits at Ericsson

Nordin, Erik and Skarin, Johannes A-

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Telefonaktiebolaget LM Ericsson AB

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At Ericsson, Total Quality Environmental Management (TQEM) seemed appropriate i n overcoming existing "over-auditing" at the factories. The purposes of this thesis are thus to investigate the prerequisites of rationalizing environmental audits by integrating them with quality audits and other inspection procedures at Ericsson's factories, and to investigate how one can apply TQM in such an inte- grated audit, to analyze the effects of such an audit, and to give recommenda- tions for Ericsson's further auditing work. We found that integration possibilities largely depend on whether the environmental audit should be conducted at systems or technical level. For the most-hazardous plants, traditional environmental audits seem most appropriate. For the less-hazardous majority of plants, however, we suggest that the internal quality system audit (QSA) audit systems-related issues, and that the internal risk management function audit issues requiring technical competence. The main drawback is a loss in overview, and a risk that the procedure will not be approved by the Eco-Management and Audit Scheme (EMS).

J y c U d (Wgst 8): kywonh(8): Environmental audit, Total Quality Management (TQM), Total Quality

Environment Management (TQEM) , EMS, quality system audit, risk management

Abstract The introduction of quality strategies such as Total Quality Management (TQM) and IS0 9000 means no less than a cultural revolution in the industrial world today. A few companies, mainly in the USA, have also noted similarities between TQM and environmental management systems, and therefore created Total Quality Environ- mental Management (TQEM) systems for their environmental work For Telefonaktie- bolaget L M Ericsson, this idea happened to be potentially applicable for a concrete problem: In the manufacturing departments, quality audits, environmental audits and a series of internal and extemal inspections are conducted regularly. These audits are time consuming, and it would be a relief if it were possible to integrate them, to some degree, into one audit procedure. Therefore, the purposes of this thesis are:

to investigate the prerequisites of rationalizing the environmental audits by integrating them with quality audits and other inspection procedures at the Ericsson factories

to investigate the possibilities of using progressive quality methodology in such an integrated auditing process

to analyze the effects of an integrated audit

to give recommendations for Ericssonk further auditing work

The main directive for this thesis concerns the evolution of standards for environmental management, mainly the forthcoming EEC so-called Em-Management and Audit Scheme (EMAS), since Ericsson's ambition is to comply with the standard. We were also urged to investigate a project concerning the integration of work environment issues into the internal quality system audits (QSA). Further, Ericsson wished us to investigate the possibilities of utilizing the extemal inspections performed for insurance purposes within the risk management program.

Ericsson focuses strongly on TQM today, and the main tool for implementing TQM is the Ericsson Quality Manual (EQMJ. It contains directives and recommendations for quality work for the whole company, and covers all requirements of IS0 9000. Compliance with the EQM is controlled within the internal Quality System Audit (QSA) program. The QSA focuses on system related issues, i e the existence and structure of routines and documentation for work tasks are checked, not the actual routines themselves.

Ericssonk environmental work has, until now, been determined by govemment legislation. Today, an environmental department has been established, and the ambition is to be proactive in environmental matters. Ericsson has, for example, decided to work according to the 16 principles of ICC's Business Charter for Sustainable Development. Environmental audits are being conducted regularly at all production units, a program that has increased awareness and attention at the audited

plants. The production is not regarded as the most critical environmental problem, however, since most of the factories are relatively non-hazardous.

In the analysis of the data, we have fist discussed a few implications of working according to EMAS and the Business Charter. Both these programs contain parts strongly influenced by TQM principles, and the utilization of suallty tools is therefore most valuable. In connection to this, we have suggested some other benefits of a TQEM approach to environmental problems.

The possibilities of integrating the environmental audits with eg. the Quality System Audits (QSA) largely depends on whether the audit should be system-based, or if it should focus on technical issues. We believe that a traditional environmental audit still is the best alternative for the truly hazardous Ericsson plants. A system-based audit would, however, probably be sufficient for the relatively non-hazardous majority of the Ericsson factories. The technical aspects that require special competence could be audited by the insurance inspectors within the risk management program. By designing checklists in a wise way, the audits could both be rationalized and improved The most appealing model is therefore that the environmental audit in the future should be divided between the QSA and risk management. The main drawback is a loss of overview, since a larger number of inspectors would be involved. There is also a risk that such a procedure would not be approved by EMAS.

Our suggestion is that this model be tested at a suitable Ericsson factory. If the results are satisfactory, and approved by EMAS, it could be implemented as a new model for environmental audits at Ericsson.

Table of contents

1 . Introduction ....................................................................................................... 1 1.1. problem ................................................................................................ 1 1.2. Purpose ................................................................................................ 2 1.3. Directives ............................................................................................. 2 1.4. Reader's guide ...................................................................................... 3

2.1. Industrial organization in general .......................................................... 5

2.1.2. Company-wide management approaches .................................. 6 2.2. Total Quality Management ................................................................... 6

2.2.1. What is Quality ? ..................................................................... 7

2.2.3. Customer focus ........................................................................ 8 2.2.4. Continuous improvement ......................................................... 8 2.2.5. Everyone's involvement ........................................................... 11 2.2.6. Process orientation ................................................................... 12 2.2.7. Decisions based on facts .......................................................... 12 2.2.8. Top management commitment ................................................. 13

2.3. The IS0 9000 Quality Systems series ................................................... 14 2.3.1. What is a Quality System ? ...................................................... 14 2.3.2. The structure ofIS0 9000 ........................................................ 14 2.3.3. Critique against IS0 9000 ......................................................... 15 2.3.4. In defense of IS0 9000 ............................................................ 16

2.4. Philosophies in environmental management ......................................... 16 2.4.1. The background to today's philosophies ................................... 16 2.4.2. The Precautionary principle ..................................................... 17 2.4.3. Sustainable development .......................................................... 18 2.4.4. The cradle-to-grave view ofproducts ....................................... 19 2.4.5. Pollution Prevention ................................................................ 19 2.4.6. The Clean Production concept ................................................. 21 2.4.7. The ICC Business charter ........................................................ 24 2.4.8. Development stages of corporate environmental programs ....... 25 2.4.9. Elements of an environmental management system .................. 26

2.5. Environmental auditing ........................................................................ 27 2.5.1. Definition and purpose ............................................................. 27 2.5.2. The environmental review ........................................................ 29 2.5.3. Prerequisites for an effective environmental auditing

process ..................................................................................... 29 2.5.4. Conducting an audit ................................................................. 31 2.5.5. Examples of other guidelines ................................................... 34

2 . nmretical framework ....................................................................................... 5

2.1.1. Decisions facing an industrial company ................................... 5

2.2.2. What is TQM ? ........................................................................ 7

2.6. Corporate environmental management systems ..................................... 34 2.6.1. The Eco-Management and Audit Scheme ................................. 34 2.6.2. British Standard 7750 .............................................................. 38 2.6.3. The forthcoming standard from IS0 ......................................... 39

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5.6. External demands ................................................................................. 73

standards ... : .............................................................................. 74

6 . Analysis ............................................................................................................. 77 6.1. General ideas about environmental work .............................................. 77

5.6.1. Demands fiom state legislation ................................................ 73 5.6.2. Customer demands on environmental management

5.6.3. Direct customer demands: The case of British Telecom ........... 75

6.1.1. Development of environmental strategies ................................. 77 6.1.2. Why environmental audits? ...................................................... 79 6.1.3. Improvement work and projects ............................................... 81

6.2. Environmental audits ............................................................................ 85 6.2.1. Future audit strategy ................................................................ 85 6.2.2. Ensuring d c i e n t audit quality .............................................. 87 6.2.3. How to minimize auditing efforts ............................................. 90 6.2.4. Important variables to consider ................................................ 90 6.2.5. Possible alternatives ................................................................. 91 6.2.6. A comparison between the various inspection procedures ........ 93

6.3. Analysis of the alternative environmental audit procedures .................. 94 6.3.1. Separate environmental audits .................................................. 94 6.3.2. Coordination with Quality System Au dits ................................ 95 6.3.3. Coordination with Risk Management ....................................... 97 6.3.4. Integration with Quality System Audits .................................... 98 6.3.5. Integration with Risk Management ........................................... 101 6.3.6. Integration with Quality System Audits and Risk

Management ............................................................................ 103 6.3.7. Different audits at different sites? ............................................ 104 6.3.8. What are the next steps? .......................................................... 105

7 . Conclusions and recommendations .................................................................... 107 7.1. Prerequisites for rationalizing the environmental audit ......................... 107 7.2. Possibilities ofusing progressive quality methodology ......................... 107 7.3. Effects of an integrated audit ................................................................ 107 7.4. A proposed plan of actions ................................................................... 108

References .............................................................................................................. 111

Appendices:

8 . Acknowledgements ............................................................................................ 109

Appendix 1: The Business Charter for Sustainable Development: Principles for Environmental Management

Appendix 2: Development stages of Corporate Environmental Management Programs

. . . '* . . . . . . . . . . . . . . . ................ . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 1: Introduction

1. Introduction This introductory chapter describes the situation that initiated this thesis, and the purpose of the thesis. The chapter also contains a list of directives given by the commissioner.

1.1. Problem

Dunng the last years, increasing attention has been given to the world's environmental problems. As a result, the industrial sector is facing demands from governments, the public, customers, shareholders and other stakeholders to contribute to the development towards a sustainable society. Many corporations have realized that a well-established environmental strategy is necessary for success in business today, and that environmental work can be profitable.

Simultaneously, industry has also gone through another revolution: the introduction of quality strategies such as Total Quality Management (TQM) and IS0 9000. While IS0 9000 certification has become a survival necessity, TQM is perceived as the next step in achieving corporate excellence and future competitiveness.

A few companies, mainly in the USA, have also noted similarities in structure between TQM and environmental management systems, and therefore established integrated Total Quality Environmental Management (TQEM) systems for their environmental work, instead of forming a pardell environmental management system. These companies simply regard environmental deterioration as a quality deficiency that has to be taken into account when striving for customer satisfaction, since many customers demand ecologically adapted products and services. Some companies go even further, reahrig that both "society" and "nature" may be perceived as their "customers".

Telefonaktiebolaget L M Ericsson has experienced a similar development during the last years. Most Ericsson companies are now IS0 certified, a company-wide TQM program is in progress, and customer demands together with government regulations have forced the company to work more actively with environmental issues. Although the concept of TQEM is interesting for Ericsson in the future, there are no plans of implementing such a system at the moment.

However, some Ericsson managers have lately faced a specific problem that turned out suitable for a thesis study. In the manufacturing departments, quality audits, environmental audits and a series of internal and external

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Chapter I: Introduction

Furthermore, Ericsson specifically requested a survey of the demands put on the auditing work by the following factors:

Encsson's TQM program

Quality systems standards, such as IS0 9000

Ericsson' s present environmental management system

Encsson's general auditing policy

Other future environmental management standards, such as the British Standard 7750

The factories are also being inspected mually by extemal experts for insurance purposes. These inspections are similar to the environmental audits, so we were urged to investigate if and how we could take advantage of this.

Finally, Ericsson also wished that the thesis contained a minor outlook at other companies' experiences in integrating quality and environmental work.

1.4. Reader's guide

As indicated in our table of contents, we have structured our report as follows. In the next chapter we have summarized theories and models intended as references in our analysis. Chapter 3 describes our research problem and outlines specific research questions. The method used to collect data is described in chapter 4, and the actual data collected is summarized in chapter 5. Chapter 6 analyzes these data, using theories and models from the theoretical framework, and chapter 7 summarizes our conclusions.

When we are refening to sources in chapters 2 and 5, the reader might want to know directly the kind of source used, without repeatedly having to turn to the back pages of the report, and without reading too much bracketed text. We have thus coded the sources as follows: EQ = Book, @J = Journal article, I = Publication, document, conference paper, or other literature source, 0 = Interviewee, 8 = Own idea. Since all interviews have been made in 1994, we have only written down the interviewee's name by the 0 symbol. We use footnotes when we are referring to text from other parts of the report, to avoid too much bracketed text.

3

Chapter 2: Theore t ica l~am~rk

2. Theoretical framework In this chapter, we introduce the theoretical models and thoughts within quality management and environmental management, which we later will refer to in our analysis. To easier understand these concepts, and how they relate to an industrial company such as Ericsson, we will &-st discuss some general aspects of industrial organization.

2.1. Industrial organization in general

Today, industrial companies are experiencing ever-increasing demands fiom many stakeholders eg customer demands for quality, and stricter environmental legislation fiom the government. Simultaneously, new stakeholder groups, eg. environmentalists, have emerged, posing even more demands. Progressive companies have learned that change is the rule and not the exception, and try to adapt to the changes.

2.1.1. Decisions facing an industrial company

To satisfy stakeholders' demands, the company must continuously make decisions at many managerial levels. The types of decisions can be broken down into three broad categories: strategic, operational and technical/organizational (figure 2.1). Each type requires a different management approach.

-Scope for discretionary response---+

I I I operational j Strategic

on value

ium

TechnicaVOrganizational 1 lowi

Figure 2.1 Decision categories (Source: @ Walley & Whitehead, 1994)

5

fiordin-Skarin: A new model for environmental audits at Ericsson

Strategic are issues in which the potential impact may jeopardize core elements of the company. However, managers have considerable discretion about how to respond In strategic issues, company objectives are often unclear and need to be set, and there is considerable uncertainty about the future.

Operational issues are those in which the potential impact ranges fiom medium to high, but managers' scope for discretionary response is generally low. Objectives and requirements are clear, and there is limited uncertainty about the future. Substantial value depends on the quality with which a solution is implemented. Management's task with these issues is to ensure that minimum expenditures achieve maximum impact.

Finally, many issues are largely technical or ormnizational, where the degree of managerial discretion varies fiom low to high. The challenge here is to structure the organization so that it can manage many different issues without top management involvement. Relatively little value is tied up with any individual issue. However, the cumulative weight of many of these decisions may tie up very much value. (I Walley & Whitehead, 1994)

2.1.2. Company-wide management approaches

To cope with turbulent business environments, and to make efficient decisions requires more flexible and learning organizational structures and ways of working. Such structures are currently being developed by means of management approaches such as Time Based Management (TBM), Business Process Re-engineering (BPR) and Total Quality Management (TQh!l). These approaches are similar in many ways, eg. they all attempt to view the company from a holistic point of view. However, they differ in the basic bodies of knowledge that underlie them; i e TBM is based on logistics theories such as Just-in-time (JIT), BPR on information systems, and TQM on quality. The approach that has achieved by far the most influence and application in industry today is TQM.

2.2. Total Quality Management

In the pre-industrial society, qualified products were handmade by craftsmen who could control the quality of their work fiom beginning to end. With mass production, the quality responsibility was left to inspectors, which seems to have bereaved the worker of workmanship pride. Inspectors were eventually aided by statistical methods and tools known as Qual~ty Control to minimize defects, lower production costs and increase production rates. (68 Wadsworth et al, 1986, pg 3-4)

6

Chapter 2: Theoretical~ammrk

2.2.1. What is Quality ?

These days, the concept of quality embraces much more than the defect rate of products. Maybe that is why there is so much confusion within a company or between companies of what quality actuaLly is. In order to work efficiently with qualit), however, it is important that everyone speak the same language. Many of today's organizations have now agreed on the following definition:

Quality is the ability of a product or service to satisfi the needs and expectations of one's customers (m Bergman & Klefsjii, 1991, pg 16)

Consequently, it is the customer that determines what quality is by means of his or her subiective taste or values. For many of today's companies, adopting such a customer-oriented attitude towards quality throughout their organizations has resulted in increased profitability and competitiveness.

2.2.2. What is TQM ?

TQM can be described both as a management philosophy and as a set of effective operational tools and methods. Although it may be succesfully implemented in different ways, a TQM program must always be strongly supported by top management, and rest on five comerstones as illustrated in figure 2.2.

Top management commitment , Decisions based on 1 - 1

customer focus

continuous improvements

Process orientation

Everyone's participation

Figure 2.2: The comerstones of TQM (Source: Bergman & KIeBjo, 1991, pg 20)

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Nordin-Shrin: A new model for environmental audits at Ericsson

2.2.3. Customer focus

As mentioned above, quality is defined in terms of the degree of satisfaction that a company's customers experience. Consequently, in order to be of high quality, a company must determine who its customers are, what these need and expect, then develop strategies and operational measures to meet these needs and expectations. All members of the company must have a mind set that is focused on the utmost aim of TQM: customer satisfaction.

Who are the customers ?

It is vital to clarify the meaning of "customer" in this context. Quality professionals namely make a distinction between external and internal customers. Extemal customers are those who use or benefit from the use of the final product or service. Bearing in mind that all products one day will become waste, it is important to include future generations, society and the environment as external customers, too. The intemal customers are those who use the results from different processes of the product or service. Meeting the needs of the intemal customer implies, for example, that the company creates a safe working environment for its workers. Another example may be that a worker group in one production process cooperates efficiently with the worker group in the following production process. (@ Klefsjo, 1993)

What do customers expect ?

Today, the needs and expectations fiom customers are constantly increasing. What is an attractive product offer today, might be tomorrow's standard Consequently, if a company wishes to stay in competition, it must aim towards "customer delight" rather than "customer satisfaction" ( IZJ Dahlquist, 1993). Again, today's growing demands from internal customers must not be neglected. For example, both blue- and white- collar employees are increasingly demanding that their psycho-social and intellectual needs be considered by management. If management neglects their demands, employees might move to other companies.

2.2.4. Continuous improvement

These ever-increasing customer demands force organizations to strive for continuous improvement (CI) of all their activities, no matter how excellent they are.

Focus on improvement rate

Companies can no longer just look at their levels of quality performance; instead, they must focus more on their rate of +ty improvement.

8

Chapter 2: Theoretical@amewrk

Industry abounds with examples of former low-qdty companies that have made substantial improvements, and thereby surpassed arrogant market leaders.

Belief in improvement feasibility

Some companies fail with their improvement work, not because they underestimate competitors, but because they simply do not believe that it is technically, economically, etc feasible to further improve a process. However, these companies must keep in mind that changes in technology, legislation etc. constantly redefine the feasibility framework A rule-of- thumb in improvement work is that

there is always a way to improve quality at a lower cost

(a Bergman & Klefsjo, 1991, pg 26)

This belief must be firmly etched in the core values of the company, and in the minds of all employees.

Kaizen

It is also important to point out that not all quality improvement successes are due to major campaigns and initiatives from higher-level management. Instead, they are often the result of many small improvements devised by individuals or small groups on a day-to-day basis at all levels of a company (@ Klefsjo, 1993). In Japan, this mode of improvement work prevails in many organizations and has been named kuizen. Why then is kaizen often so much more efficient ? First of all, it is much easier to implement a small change in a small group, than a big change in a bigger group, let alone an entire organization. Major changes and campaigns tend to fail because they are too cumbersome to follow, administrate and follow-up. Secondly, kaizen engages all employees in a more natural and respectful way.

The PDCA Cycle

The heart of any TQM program is the PDCA cycle (figure 2.3), also called the Deming cycle or Shewhart cycle. This is a simple model for how improvement work should be done. PDCA is an abbreviation for the four phases that are continuously repeated in the cycle: plan, do, check, act.

9

Nordin-Skarin: A new model for environmental audits at Ericsson

ACT PLAN

CHECK DO

Figure 2.3: T?w PEA-cycle (Source: DBergman & Kle$jo, 1991, pg. 165-1 67)

Most improvement work starts with the realization of a problem. The p&g phase involves problem identification and description, and the actual planning of how to solve the problem. Since it is vital to base the problem description and plan decision on facts, this phase includes information collection and analysis. Cause and effect relationships are studied, and the most vital causes are distinguished The most efficient and feasible actions to control these causes are then chosen. In this phase it is also important to determine measurements to validate that the actions render the sought results. Finally, a detailed plan is done of how and where the work should be implemente4 and how any upcoming problems should be dealt with.

The second phase is the &-phase, and is quite self-explanatory. The planned actions are implemented Often this is done in small scale in so- called pilot projects, before implementing it in other parts of the organization.

In the check-phase, the planned measurement methods are used to measure the results fkom the do-phase. These results are then compared with the "planned results. If the implemented results did not meet the planned results, it is necessary to check that all actions really have been implemented If actions have been taken and results are not satisfactory, a new plan must be made. If the implemented results meet the desired outcome, the improvement work has succeeded It may now be desirable to implement the improvement work in other parts of the organization.

Traditionally, organizations have had difficulties in sustaining newly implemented improvement in the long run; after a while they fall back to their previous levels. This may be due to the fact that it is much easier to continue in old patterns. Improvement work demands hard work and a change of habits from both individuals and organizations. The final phase in the PDCA-cycle, the &-phase, guarantees that improvements are firmly sustained in the long run. This is done by conscientiously documenting implemented improvements in order to implement the

10

Chapter 2: Theoretica1jm"rk

improvements as sta&r& in the organization. Other actions involved in the act-phase are informing, educating and motivating personnel, and reporting to top management the results and economic value of the improvements. (I Hedin, 1993)

2.2.5. Everyone's involvement

Inherent in the concepts of kaizen or continuous improvement is, namely, the belief that all people, thus also plant employees, are capable and creative beings that wish to develop bigher-level needs, such as needs of workmanship pride and respect, and needs of self realization. It appears as though Japanese workers have regained the responsibility for quality and workmanship pride that westem workers had prior to mass production. One of the most important contributors to quality philosophy, W. Edwards Deming, is perhaps the most zealous proponent for personnel empowennent and involvement. Deming concludes that failure to use the abilities of people is "the greatest waste in America". In his famous 14 points for quality management, Deming strongly stresses to management to "remove all baniers to pride in workmanship", "drive out fear, so that everyone can work efficiently", and "provide vigorous and ongoing education and training" (68 D u g , 1986). Plant personnel may often have ideas about quality improvements, and are willing to make a contribution to their company. However their ideas are seldom realized, and in most cases this is due to the company's management system. Either managers or supervisors are not willing to listen to workers' ideas, or the management system is so bureaucratic or complicated that workers are hindered or at least discouraged to express ideas to management. (a Deming, 1986). It is thus imperative that employees be empowered with the possibility to easily contact managers, technicians and other specialists and that these really take ideas from plant personnel seriously. If this does not occur, chances are big that employees feel little or no association with their company, and thereby no motivation to contribute with ideas.

It is quite unlikely that a manager or supervisor be as familiar with the details of a production operation as the operator in question. Consequently, management needs all the help it can get from employees in identifymg improvement opportunities, such as using resources more efficiently. By believing in the creativity of employees, and empowehg them with correct tools and responsibilities, a company may thus earn profits in the short term. Employee involvement will also make employees feel more proud about themselves, which probably will lower absenteeism and turnover rates and thus the company will profit in the long run, too. ( 68 Deming 1986)

11

Nordin-Skarin: A new model for environmental audits at Encsson

2.2.6. Process orientation

The word "process" is fiequently used nowadays in different contexts, and is an issue central to TQM

What is a process ?

In this report we define a process as:

an activity that has a distinct beginning and end, repeats itself in time, and transforms input variables (resources) into output variables (results).

(m Bergman & Klefsjo, 1991, pg 272)

Consequently, most of a company's activities, eg. production, purchasing, marketing and invoicing, are processes.

Eliminating sources of variation

By regarding activities as processes, a company will be more efficient in analyzing and improving its activities, and thus more prone to satisfy its customers. The results from processes always vary to a certain extent, due to a number of input and process factors. Since a customer often has well-. specified demands, variation is often undesirable. In process-focused improvement work, inputloutput relationships are collected and analyzed statistically by means of quality tools such as Statistical Process Control (SPC)' and Design of Experiments DOE)^ in order to learn more about the nature of the process. Gradually, sources of variation may thus be discerned and eliminated, and the process improved

Process ownership

To assure continuous improvement of processes, each process is assigned an owner. This person will be responsible for establishment, implementation and documentation of the process, and for continuously improving the output quality, in order to maximize customer satisfaction, using a minimum of resources. A process that involves several employees should be sub-divided into smaller processes, so that each employee becomes a process owner.

2.2.7. Decisions based on facts

TQM demands commitment to quality in all aspects of an organization, and thus also in one of the most crucial aspect of management: decision

For more information we refer to Wadworth et al, 1986 For more information we refer to Bergmas 1992

12

Chapter 2: Theoretical~amework

making, A recent study suggests that managers spend at least fifty per cent of their time dealing with the consequences of bad decision making. Many decision makers seem to rush to decisions by their own enthusiasm, spurs of "intuition", or by a wish to amear decisive and action-oriented (I Dnunmond, 1992). Needless to say, it ought to be less expensive to do the job properly in the first place.

Distinguishing facts from fiction

Information and facts are not the same thing People "reporting facts" are often stating assumptions or beliefs, often without realizing it themselves. Decision makers must be able to distinguish facts from fiction, when presented with information. Even information that has been known to be true before, must be reviewed fi-equatly, as hngs tend to change with time. (@ Drummond, 1992)

Many important decisions will have to be based on assumptions or intuition, due to lack of time to get hold of adequate facts. However, there is a big difference between knowing that an assumption is being made and believing that a decision rests on facts. If we believe that we know something, we tend to look no further. If we are aware of assumptions made, we may prepare ourselves for the consequences of assumptions that turn out false. (@ Drummond, 1992)

Within TQM there are specific tools to help managas in decision making For example, the seven management tools3, can help to define and clarify problems, and render suggestions for solutions. Statistical theory can later be used to examine the reliability of an assumption, and to sort out facts fiom fiction.

2.2.8. Top management commitment

Today there is a widespread miscontent with TQM in European and American companies, due to several TQM-implementation failures. Two- thirds of all attempts are given up, and often it is because the programs fail to deliver tangible performance improvements ( Krisbnan et al 1993). However, this does not necessady mean that there is something wrong with TQM, the failures are almost always due to lack of understanding and support fiom top management.

Dahlquist (I, 1993) stresses that top management must understand that TQM is not a short-term strategy or campaign, but a long-term philosophy which demands an attitude change throughout the organization; TQM requires a cultural revolution to take place! According to Dahlquist, a Chief Executive Officer that cannot persuade his board that eg. employee

For more idormation we refer to Bergman & Klefgo, 1991, pg 283-299

13

Nordin-Shn: A new model for environmentaal audits at Encsson

education is more important than the annual profit should not even consider implementing a TQM programme! (@ Dahlquist, 1993)

2.3. The IS0 9000 Quality Systems series

As indicated above, TQM has proven difficult to implement in Europe and the USA In Europe, companies have been focusing more on so-called @ty systems standards when evaluating the overall quality of themselves or companies in their business environment. In 1987, the Jntemational Organisation for Standardization (ISO) published a series of international standards for quality systems, the IS0 9000 series, based on the British Standards Institute's Quality Systems standard BS 5750.

The series has had a major impact world wide; in fact, it might be practically impossible to sell products in Europe without an IS0 9000 certificate (I Bothrick & Roth, 1992). Consequently, an increasing number of companies are subjecting themselves to certification, and the series has been adopted as national standard in more than fifty countries including all of the EEC and EFTA countries, Japan and the USA (I Eicher, 1992).

2.3. .What is a Quality System ?

A quality system may be defined as

the organizational structure, responsibilities, procedures, processes, and resources needed to implement quality management (l% I S 0 8402)

Thus, a quality system covers those activities that explicitly deal with quality, and is only a sub-set of a company's so-called operational system, which takes into account all the activities of a company (0 Palmquist).

2.3.2. The structure of IS0 9ooo

The IS0 9000 series consists of five standards, each covering different scopes of a company's quality system. How the actual auditing should be conducted is described in another IS0 standard: IS0 10 01 1.

The Srst standard, IS0 9000, clarifies some important quality concepts used in the underlying standards (IS0 9001-9003), and gives recommendations on which of the three standards should be selected, depending on the need and different situations (I Corrigan, 1994)

The three standards IS0 9001-9003 are to be used in contract situations, when a customer wants to be sure that a supplier's quality system meets

14

Chapter 2: Theoretical framework

certain requirements. IS0 9000’s standards do not measure a quality system’s efficiency, nor how good the product or service is. Moreover, a customer and supplier may agree to only apply certain parts of a standard, or that only certain products be subject to the standard. IS0 9001 is the most comprehensive of the three, covering the phases of design, development, production, installation and servicing. IS0 9002, though, only covers production and installation, and IS0 9003 only covers demands at final control and testing. To become certified according to any of these standards, the company must document its activities that relate to the requirements, and prove that it does what it has documented (@ Comgan, 1994)

Finally, IS0 9004 contains puidelines for quality management and quality systems for companies that voluntarily want to implement a quality system or improve its existing system. The standard is not intended for use in contract situations. This standard contains topics not treated in the above- mentioned three standards, eg. meeting customer demands, and the economic benefits of continuous improvements. Public responsibility and prevention are also highlighted (I Corrigan, 1994)

2.3.3. Critique against IS0 9OOO

Since IS0 9001 covers all elements of IS0 9002 and 9003, further discussion of IS0 9000 assumes the use of IS0 9001.

As we have seen, a quality system is only a subset of a company’s operational system; according to some specialists, IS0 9000 covers as little as 10-20 % of an operational system ( Lindstriim & Nordstrom, 1993). Consequently, it is dangerous to use IS0 9000 as a model for company- wide quality excellence. Unfortunately, many do that, and may thus get an unfair picture of a company’s real situation.

TQM, on the other hand, attempts to address all aspects of an organization, and is thus a much better model for a company’s operational system. Whereas TQM focuses on customer satisfaction and processes, IS0 9000 says little about customer satisfaction and is product focused. Furthermore, such a central TQM-issue as continuous improvement is barely treated, which implies that IS0 9000 is a defensive quality management approach. How improvement goals are set and implemented, to what degree different measures and systems are applied, and what results are attained, are not covered in IS0 9000 either ( Lindstriim & Nordstrom, 1993). Some quality experts argue that there are no grounds to state that ISO-certification causes long-term competitiveness or more satisfied customers (@ Bergman & Klefsjo, 1993).

15

Nordin-Skarin: A new model for environmental audits at Ericsson

The reader might now react, having just read that IS0 9004 covers such TQM issues. However, these must remember that today it is IS0 9001-9003 that measure quality systems, not IS0 9004. (I Comgan, 1994)

2.3.4. In defense of IS0 9ooo

However, properly understood and implemented, IS0 9000 can function as a first step in reaching company-wide quality excellence. There seems to be a general consent among quality professionals that a well-deserved ISO- certificate may correspond to roughly 250 (out of 1000) points on the Malcolm Baldridge National Quality Award4 score chart (0 Palmquist). "Properly implemented" implies implementation at a rate that is compatible with the quality maturity of the organization and that the main implementation parts be done by company employees (e Bergman & Klefsjo, 1993).

2.4. Philosophies in environmental management

The development of industrial strategies to solve the world's enormous environmental problems is one of today's most important issues. During the last years, much has been said and written on the topic. In this section, we will define and explain the most commonly used concepts in today's debates, then present some models of how corporations handle various aspects of the environmental issue based on those concepts, as well as a model that will help us classify Ericsson's environmental work in terms of the level of commitment.

2.4.1. The background to today's philosophies

The development of strategies to deal with pollution has always been based on verified relationships between cause and effect. The motives for industry to take action has generally been laws and regulations. Also, the known environmental damages have been local or regional, which has made it relatively easy to explain the damages in terms of cause and effect. Purification technologies have been successful in decreasing the amounts of dangerous substances polluting the environment . In some cases, emissions have decreased by 95 to 99 percent (a Ryding, 1992, pg 18). This kind of pollution control is often referred to as "end-of-pipe" technology.

4 American quality prize in memory d t h e late senator MaIcolm Baldridge

16

Chanter 2: 7?ieoretical fiam-k

End-of-pipe philosophy is based on the concept of msimilative capacig, which could be defined as:

"a property of the environment which measures its abiity to accomodate a particular activity or rate of activity without unacceptable impact" (m Jackson, 1993, pg 42).

A maximum level of pollution is calculated, and any level below the critical one is accepted This philosophy works when it can be proven not only that environmental damage does not occur where eg industrial waste is dumped, but also that it never will occur in the futwe. Further, this approach depends on the ability of science to establish cause-effect relationships between waste (and other products of human activities) and environmental damage.

In the latest years, however, a series of discoveries has shown the limitations of this school of thought. The damages to the ozone layer and the greenhouse effect are typical of today's situation. Both problems are global, and very complex. It is extremely difficult to determine all the relevant factors that affect these problems. Together with the fast-growing population of the world and the accelerating amount of waste produced by society, action has to be taken quickly. Public opinion and stronger regulations force industry to treat the environmental issue with the highest priority. Therefore, a whole new approach to industry's environmental problems is necessary.

2.4.2. The Precautionary principle

As a response to this problem, theprecautionaryprinciple was created, presented internationally for the first time at the First International Conference on the Protection of the North Sea in 1984. Jackson (m,1993) defines the principle of precautionary action as follows: "Anthropogenic inputs into the environment of unnatural substances or of natural substances in unnaturally large quantities should be avoided, to the extent that preventing a release into one compartment of the environment does not cause environmental damage elsewhere. Where necessary, substances should be prioritised for action in relation to their liability to cause harm" (E! Jackson, 1993, pg 57).

This can be interpreted as a reverse burden of evidence compared to the assimilative approach. A person who wants to release a substance into nature must prove that the substance is harmless, instead of the opposite. The precautionary principle implies that actions that ensure progressive and continued reductions in the use of a l l potentially hazardous materials must be taken. Since any substance probably would be dangerous to the environment if emitted in a sufficiently large amount, this interpretation of the principle calls for reduction of all human inputs to the environment.

17

Nordin-Skarin: A new model for environmental audits at Ericsson

However, this definition still has a few problems, namely that the meaning of "harm" is rather subjective. Also, the word "liability" implies that decisions have to be based on knowledge that is relative and not definite. The role of science will be to help in the process of prioritizing between different actions. Science is not sufKcient though; decisions must also be based on social, cultural, political, etc. aspects as well.

2.4.3. Sustainable development

In 1987, the World Commission on Environment and Development (WCED) published the report Our Common Future, often referred to as "the Brundtland Report". The basic philosophy of the report was the concept of sustainable development, which was defined as

"development that meets the needs of the present without compromising the abi ty of future generations to meet their own needs" (I22 Ryding 1992, pg 29).

Our Common Future also emphasizes the need for economic growth all over the world, together with a decrease in population growth as essential necessities for a sustainable development. (m Ryding, 1992, pg 29)

The concept of sustainable development can also be discussed in terms of "weak" and "strong" sustainability. The "weak" interpretation, represented by eg. the Brundtland report, means that the stock of human and natural capital must be maintained, assuming that one kind of capital can be substituted for the other. The earth is a closed economic system, and the solution to the problems is to ''economize ecology". Sustainability should be obtained by assigning the ?rue" cost to all resources, and thereby forcing users to act in the most cost-effective way. The main problem is that mankind is managing the available resources in a poor way.

The "strong" interpretation sees nature and mankind as equally important, and aims for mainkiimng both the natural and the human capital independently. The earth is a closed ecological system, and the challenge must be to "ecologize the economy". Nature has a value in itself, and the problem is that the current economic growth is inconsistent with human co- existence with nature. The precautionary principle is guiding all decisions. Renewable resources must be the basis of the economy, and non-renewable resources must be recycled and reused indefinitely. (m OTA, 1992)

18

Nordm-Skarin: A new model Tor environmental audits at Ericsson

produces the waste, trying to implement measures as early as possible in the chain.

One rather accepted way of describmg industry's options to solve their problems is with a waste management hierarchy (figure 2.4). The most preferred option is prevention; the least preferred is uncontrolled release.

Extemal waste recychg

/ Waste treatment \ / Controlled disposal \

/ Uncontrolled disposal \ Figure 2.4: A hierarchy of waste management options (Source: B1 Jackson, 1993, pg 130)

The waste management hierarchy contains a l l available options for an industrial corporation in dealing with environmental problems. The most interesting approach is, of course, prevention, which therefore will be evaluated further. Within this top level, a number of options are available which can be illustrated with a similar hierarchy of preventive options (figure 2.5).

Ultimately, all environmental hazards caused by human activities can be related to human behavioural factors such as consumption patterns, lifestyles etc, which therefore would be the first subject of analysis. Today, conscious consumers actually change their behaviour, due to environmental factors, forcing companies to adjust their policies. Consumers actively seek more environmentally adapted solutions to satisfy their needs, and to develop such products and services should be seen as business opportunities, not threats. This corresponds to both the fist and the second level of the hierarchy in figure 2.5.

20

i

Chapter 2: Theoreticaljatnework

Reduce material

less polluting activities

\ change composition, improve durabilhy etc.

Materials reduce materials muuts. change to less toxic materials

Processes improved efficiacv, better control, improved materials handling

Figure 2.5: Hierarchy ofpreventive options (Source: Q2 Jackson, 1993, pg 136)

If it has been decided that a certain product or service is to be produced, the use of material for this production should be analyzed Basically, it means to reduce the amount of matend used as much as possible and to change to using less toxic materials.

Once the above measures have been taken, the last step is to ensure an optimal manufacturing process. It is important to distinguish between pollutionprevention and wmte management in this context. Both approaches deal with the production processes, but prevention means tqmg to eliminate the production of waste, while waste management also means taking care of produced waste in a safe manner.

2.4.6. The Clean Production concept

One concept incorporating most of the above-mentioned philosophies is the Clean Production concept (for the same reasons as above, the term "cleaner production" is sometimes preferred, but we have chosen the more commonly used "clean production"). A possible dehition is:

... "an operational approach to the development of the system of production and consumption, which incorporates a preventive approach to environmental protection" (a Jackson, 1993, pg 144)

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Nordin-Skann: A new model for environmental audits at Encsson

The guiding principles of clean production are, according to Jackson (a, 1993), precaution, prevention and integration. Being the only principle not yet defined, "integration" means that measures for environmental protection should be considered across system boundaries. A measure which minimizes the production of a certain pollutant, could cause other waste to be produced elsewhere instead. This principle is closely related to the above-mentioned "cradle-to-grave"-approach, urging for a holistic view of the system in order to avoid sub-optimization.

Operational pathways

To be able to implement precaution, prevention and integration, Jackson defines two operational pathways. These are eficiency improvements and substitution. The basis is that environmental impact fiom product cycles, processes and economic activities can be minimized by reducing the materiaZJlow through those cycles, processes and activities. If a certain service is to be provided, a reduced material flow is obtained by improving the overall efficiency for the system that provides the service. This pathway corresponds partly to reducing or minimizing waste, but also implies more progressive actions:

In production process, improved efficiency means better material handling, closing the internal loops and process redesign for better material and energy utilization etc.

In product cycles, it means reusing, restoring, reconditioning and recycling products and raw materials.

Changed consumption patterns can increase the material efficiency by improving the utilization of products, designing products for longer life and changing the throw-away mentality of today.

Reducing the material needs for services provided by the entire economy improves the efficiency and reduces the material needs on which the welfare is based

Substitution, on the other hand, means to replace hazardous materials, products and activities with less hazardous ones. The difficulty of this pathway is to define "hazardous" and to prioritize among substances and activities found to be "hazardous". However, some substances are desnitely unhealthy, and the use of them should be minimized. Minimizing the use of eg toxic substances can be obtained both by efficiency improvements and by substitution, but generally substitution is to prefer, due to preventive reasons (there is always a risk of leakage fiom a process, even if the cycle is totally closed). (68 Jackson, ch 8, 1993)

22

Chapter 2: TheweticaI$z"rk

The Problem of Clean Production

"The goal of clean production is zero pollution. But all wastes are potential pollutants. And some waste is inevitable." (m Jackson, 1993 after Schumacher, 1974)

If it were possible to eliminate all waste, or if there existed a limited set of hazardous substances, then the goal of clean production could be reached That is, however, not the fact, as stated in the quotation above. The consequence seems to be, that the only guaranteed sustainable solution to the world's environmental problems would mean a halt to all human activities! The problem with this reasoning according to Jackson, is that one has to realize that apotentiaz pollutant not necessarily is an actual pollutant. Under certain conditions, a certain level of an emission is harmless, but the aim must be to reduce emissions for all substances, even for those for which we think that a safe level exists. For substances that we believe to be dangerous, we accept that a safe emission level does not exist, and therefore aim at zero emissions. (m Jackson, ch 8,1993)

Economic consequences of Clean Production

There are other motives for implementing a clean production program in a company than the ethical ones described above, namely economic consequenses. Some of these are difficult to quantify, but nevertheless substantial. The following main reasons fiom a strictly business point of view exist:

Efficiency improvements. Since preventive actions often consist of reduced energy consumption, more effective material utilization etc, there is much money to be saved In their 3-P ("Pollution Prevention Pays") program, 3M claims that the accumulated fist-year savings fiom 1975 through 1989 exceeded $506 million ( B h u s k , 1993).

improvements. With better processes, companies will not only save material inputs to the process, but also decrease useless oufputs, which cost money to get rid of (fa Jackson, 1993, pg 190).

Substitution. Using less toxic materials instead of toxic ones reduces the need for extensive safety and management systems, together with the need of Sgict routines for materials handling (E4 Jackson, 1993, pg

Less costs for waste disposal. This is related to the efficiency

190).

Improved company image. The amount of environmental reports and brochures is itself an evidence of this. The customers' focus on environmental issues has increased the latest years, which makes a

23

Nordin-Shin: A new model for environmental auditrr at Ericsson

good environmental image important for almost any company (@I Jackson, 1993, pg 190).

Decreased risk for clean-up costs and lawsuits. Should the catastrophe take place, the costs for cleaning up wi l l be enormous. A pollution prevention program decreases the risk for catastrophes, and can therefore be motivated as a part of a risk management program ( U J a c h n , 1993, pg 190 and ch 5).

These economic motives have received tremendous attention in the USA, and an increasing number of such so-called win-win projects have been initiated However, it may be dangerous to let win-win solutions be the foundation of a company's strategy, because the win-win attitude sometimes denies the necessity of trade-offs. Some initiatives will never generate a positive financial return to share holders once all environmental costs have been calculated Texaco, for example, plans to invest over $7 billion on environmental projects, which is an amount twice as large as Texaco's asset base. Experts are sceptical that this investment ever will yield a positive financial return. The challenge for managers today is knowing how to pick the solutions that will have the greatest impact. To achieve truly sustainable environmental solutions, managers must concentrate on finding smarter trade-offs between business and environmental concerns, acknowledging that, in almost all cases, it is impossible to get something for nothing. Instead of focusing on win-win solutions, companies should focus on the "trade-off zone", where environmental benefit is weighed judiciously against value destruction. (@ Walley & Whitehead, 1994)

2.4.7. The ICC Business charter

In April 199 1, inspired by the Brundtland Report5, the International Chamber of Commerce (ICC) presented fh Business Charterfor Sustainable Development, which consists of sixteen principles (see appendix 1) for environmental management. The basis for these principles is the ideas and philosophies presented earlier in this chapter. The objective of the charter is that

"the widest range of enterprises commit themselves to improving their environmental performance in accordance with these Principles, to having in place management practices to effect such improvement, to measuring their progress, and to reporting this progress as appropriate internally and externally".

It should be noted that the term environment'^ also incorporates health, d e t y and product stewardship matters. The Business Charter is not the

see 2.4.3

24

\ Chapter 2: i%eoreticaI$-amwrk

only attempt to build a framework for a single company's environmental strategy, but it is one of the mpst widespread.

(El ICC, 1991)

2.48. Development stages of corporate environmental programs

In order to be able to classify a corporation's environmmtal program, we wil l also present a model that describes different development stages in t e m of commitment. Hunt and Auster (I, 1990) describe five stages which range fiom "Beginner" to "Proactivist". The demands facing a certain company will depend on the type of business the company is involved in, the size and complexity of the company and the range of potential environmental problems. Most companies will also be impossible to characterize within one single step of this model.

A "Begmner" tends to ignore the environmental problems, or to pay as little attention to them as possible. Companies belonpjng to this group are usually small companies, companies older than the creation of environmental regulations and companies in which an environmental program doesn't seem to be applicable (eg, banks).

"Fire Fighters'' probably have a group of people that work with environmental matters, but lack adequate resources to be progressive. Top management doesn't think that environmental issues are worth spending more time on than absolutely necessary, and the environmental staff members are forced to deal only with the most urgent problems. Many small and medium-sized companies with potentidy dangerous businesses belong to this group, as well as some large companies in which top management fails to understand the importance of environmental programs.

"Concerned Citizens" are expressing a commitment which isn't reflected in actual actions. There is an environmental department, although it is either too low in the hierarchy, or too small to be able to have any real effect. The environmental matters are handled by a group of specialists, and have not been allowed to change the organizational structure. Many types of companies fit into this category. When environmental issues received media attention, many corporate leaders expressed a commitment that was not always reflected in the company's actions. Especially, many large companies can be described as "Concerned Citizens".

The second highest level is "Pragmatist*'. Companies in this group have realized that a well-established environmental program is the best way to minimize environmental risks. The environmental department is large enough and has sufficient resources to effectively handle the problems. Education and training is organized and the environmental work is

25

Nordin-Skarin: A new model for environmental audits at Encsson

formalized within the organization. Few corporations belong to this group. Those who do are mostly large and successful chemical and manufacturing companies.

For a "Proactivzst" the environmental matters are top priority. The companies in this group work constantly, at all levels, to minimize their environmental impacts. Bad habits in other industries are looked on as something that ultimately damages oneself, too. Therefore, a proactivist takes part in roundtables and committees, and is willing to spread its knowledge and experience to other companies. Education and awareness programs at all levels in the company are given top priority.

This model is further illustrated in appendix 2. (B Hunt & Auster, 1990)

2.4.9. Elements of an environmental management system

The organization of a corporation's environmental work builds up a complete environmental management system (EMS). To illustrate such an EMS, we will use the British Standard 7750 for environmental management systems. This standard is further explained in section 2.6.1. An EMS consists of a number of separate elements, connected in a cyclical scheme, as illustrated in figure 2.6.

Commitment

Initial review

Policy

Organization and Reviews

Audits w [ Records 1

Operational control G Evaluation and

Objectives and [ %E?; 1 Management Management

manual programme

Figure 2.6: Schematic diagram of the stages in the implementation of an environmental management system (Source: I BSI, 1992)

26

i I I

~ I

~

i i

~

i i 1

i

Chauter 2: Theoretical fiamaoork

The purpose of the initial review is to gain knowledge of the companyk overall environmental performance, and to form the basis for the whole EMS. By formulating an environmental policy, the company declares its ambition internally and externally. Creating an organization, a register of laws and regulations and a list of all the effects on the environment that the company is causing, specific operative goals and targets are set. These form a basis for the management program, that describe how the CompSuL" should reach the goals. The detailed procedures for implementing the program are documented in the manual, and the progress of the program is ensured via operational control, and documented in a system of records. The purpose of the environmental audit is to check the effectiveness of the management program in fulfilling the environmental policy, and to check whether activities conform to the program, and are implemented effectively. The whole EMS is regularly reviewed, in order to evaluate the effectiveness and relevance of the system. (B BSI, 1992)

2.5. Environmental auditing

In section 2.4.9 we briefly described the various parts of a total environmental management system. Since this thesis is focused on the environmental auditing process, we will now describe the common practices more thoroughly, based on the guidelines developed by the International Chamber of Commerce (ICC), and the Swedish revised version produced by the Federation of Swedish Industries (Industrifdrbundet).

2.5.1. Definition and purpose

In 1989, ICC published the so-called "Position Paper on Environmental Auditing" (titled "Environmental Auditing"), in order to establish a practice on how to conduct an audit and to emphasize the importance of environmental auditing. In the Position Paper, the following definition of an environmental audit is given:

"A management tool comprising a systematic, documented, periodic and objective evaluation of how well environmental organisation, management and equipment are performing with the aim of helping to safeguard the environment by:

(i) facilitating management control of environmental practices; (i) assessing compliance with company policies, which would include meeting regulatory requirements." (El ICC, 1989)

This definition is widely accepted and frequently quoted whenever a definition is needed As described above, an environmental audit is a part of

27

Nordin-Skarin: A new model for environmental audits at Ericsson

an environmental management system6. Since many companies and organizations have developed systems for environmental management, many different tems describing the same thing as an "audit" can be found, for example "review", "surveillance", "survey", "appraisal", "evaluation" and "assessment".

To conduct an environmental audit should be a voluntary and internal task for an organization, for the following reasons (m Ryding, 1992, pg 417):

To ensure a relationship of trust between the auditor and the auditee.

0 To make it possible to have an open debate of relevant company information (which could be confidential) and business strategies.

0 Because the audit is a part of the environmental management system, which constantly develops, and therefore, in order to ensure a dynamic development, not should be subject to extemal regulations.

The aims for the audit itself varies, but the main reason is to check and document compliance with a specific set of demands for an operating facility (usually a production plant). A number of other possible objectives are listed in table 2.1 below

Table 2.1: Range of environmental audit programme objectives (Source: ICC. 1991).

Identify and document environmental compliance status

Provide assurance to senior management

Assist facility management in improving environmental performance

0 Increase the overall level of environmental awareness

Accelerate the overall development of environmental management control systems

0 Improve the environmental risk management system

0 Protect the copration fkom potential liabilities

0 Develop a basis for utilising environmental resources

see 2.4.3

28

1

Chapter 2: Theoreticalfiamouork

The audit procedure, like e g financial audits and quality audits, is best suited to verz& compliance with specific demands and regulations. It is of limited value when it comes to discovering environmental hazards not thought of before. The audit can also be regarded as the follow-up procedure to environmental programs implemented The procedure of assessing and evaluating a site's environmental status and hazards for the first time is sometimes called an "environmental review", to distinguish it fiom an "audit". The nomenclature is somewhat confbsing. A "review" in this sense should be conducted before an environmental management system is established, or whenever a major change in the operations or practices is undertaken. (I McLean et al, 1993)

2.5.2. The environmental review

The iirst step in implementing an environmental audit program is to perform an inventory of the companyk environmental status. This is done by conducting an environmental review. It is of vital importance that this review is properly and comprehensively conducted to guarantee that no important aspect is forgotten. Usually, the review is designed to analyze the company from three points of view

Scientific and technical

Legal

Managerial

The methodologies between a review and an audit are very different, since the review aims to find all problems that exist, and the audit "only" to verify compliance with certain demands. (B Welford, 1992)

2.5.3. Prerequisites for an effective environmental auditing process

For the implementation of a new management system to succeed, literature specifies a number of prerequisites that need to be fulfilled We will not discuss management systems in general, but it could be useful to consider a few points. The following list is presented in the ICC guide to Effective Environmental Auditing, concerning management systems in general:

0 A solid base of support throughout management, and particularly by upper management

Agreement by all levels of management that the program is a valuable function that enhances management effectiveness

0 Useful information provided to many levels of management and many levels of management sharing that information

29

Nordin-Skarin: A new model for environmental audits at Ericsson

Making changes only after comments from each level are considered

Clearly defined roles and responsibilities

Systems in place for managing and following up on results

Clear operational systems and rules in place

Competent and trustworthy participants

Programs that are natural outgrowths of other company systems

When it comes to environmental auditing programs, especially the following conditions are emphasized:

Management commitment and support. Top management must, somehow, communicate their wish for an environmental auditing programme to be conducted Also, sufficient resources need to be allocated and the auditors must have full authority to gain access to all relevant documents.

Defining program scope and coverage. It is necessary to define first the objectives of the program, and then the scope. Important questions are: "What information do we want?", "Who is supposed to read the report?", "Which parts of our business operations do we need to cover?", "What subjects do we want to incorporate?" and "How often do we need to conduct an audit?".

Organizing and staffing. The audit program must be organized according to the objectives of the program, regarding both the auditors and the auditees. The site being audited must be able to allocate time and space for the audit. Further, the education of the auditors must be sufficient for their task.

Achieving independence and objectivity. The auditors must be independent of the facility they are auditing. They should also report to a management function that is independent of the site. It is vital for the quality of the program that the audit is conducted freely and objectively.

Managing audit quality. The program must be designed and managed with high quahty standards. Some ways of assuring this are: Formal procedures for the entire program, detailed supervision of the audit activities, regular reviews of the complete program and the occasional use of external consultants.

30

ChaDter 2: Theoretical fiamework

2.5.4. Conducting an audit

The audit procedure consists of a series of activities aimed at achieving reliable information about the audited site. ICC summarizes the sequence of activities in a model according to figure 2.7.

Pre-visit activities

The objective of the pre-visit activities is to maximize the efficiency of the on-site activities. Time spent on-site is costly both for the auditors and the auditee. It is therefore important to design the audit according to the purpose of the program. The overall purpose determines, for example, the facilities that should be included in the program, which topics to audit etc. Examples of topics are:

The company's environmental policy in everyday activities

Risk management and security

Environmental management systems

Waste treatment and waste minimization

How dangerous substances are handled at the site

Choice of suppliers

The purpose is also crucial when it comes to selecting audit team members, since it determines the competence that is needed to conduct the audit. Usually, necessary qualifications include knowledge about the site's production processes, the company's environmental policy and guidelines, environmental management systems, ecology, toxicology, environmental laws, environmental engineering, common practice in environmental engineering, economy and auditing techniques. One possibility is to combine the methodology of other internal auditors with the skills of an environmental engineer. Some elementary parts of the environmental audit can be performed by a financial auditor, although American experiences indicate that it is easier to educate an environmental engineer in auditing techniques, than to teach a financial auditor environmental engineering. It can also be helpful to obtain whatever written material there is about the site's environmental work, eg permissions from authorities and environmental reports. (Q Almgren, ch 8-9,1990)

31

Nordin-Skarin: A new model for environmental audits at Ericmon

step 5 Report audit Gndiugs *Exit meeting

Re-Visit Activities Key activities a t site

Understand management 1 Select and schedule !facility audit

L Select team members and confirm their availability

*Define scope *Ident@ priority topic(s) *Modifjrlannotate protocols

information *Discuss programme *Advance visit if appropriate

*Interviewing *Working papers

Step 2 Assess strengths and weaknesses *Internal risks *Internal controls

Step 3 Gather audit evidence *Assessment *Verification *sampling

Post-Audit Activities

Prepare draft report Draft report reviewed *Environmental af&rs *Legal *Facility management

Figure 2.7: Basic steps in the Typical Audit Process (Source: Q ICC, 1991, pg 26-27)

32

Chapter 2: Theoretical~amework

Key activities at site

It is important to clarify the roles and authorities of the auditors to the factory staff, so that the audit can be conducted in an open-minded and communicative spirit. If shop-floor workers perceive the auditors as some kind of topmanagement police, instead of as an intemal competence resource, there are small chances of getting the necessary information during the audit. The site visit therefore usually begins with a meeting, in which the auditors clarify their roles and responsibilities.

Apart from talking to key persons at the site, the auditors also sample information about equipment and installations, control procedures and preparedness against unexpected events. Since time is a limited resource, it can be necessary to choose one or a few sources of information, eg manufactwing units. Generally speaking, units with a high level of environmental risk and low level of internal control should be prioritized, according to table 2.2.

Table 2.2: Priority order (Source: El Almgren ch 9, 1990)

Internal control Environmental risk

Hi& Low

Weak 1 3

Strong 2 4

The site visit should lead to information that is as reliable as possible about the selected topics. The auditors usually work with interview guides and checklists when gathering the information. It is of utmost importance that the auditors be well-trained in matters such as interviewing techniques, in order to ensure reliable data from the audit.

The audit ends with a meeting in which the findings are discussed with facility personnel. Any misunderstandings are cleared, and possible actions to correct deficiencies are discussed This forms the basis for the more formal report that is to be written.

(Q Almgren ch 9,1990, €I2 ICC ch III, 1991)

Post-audit activities

The follow-up procedure of the audit consists of two parts: to produce an audit report and to correct the deficiencies. Usually, the audit team will

33

Nordm-Shit: A new model for environmental audits at Ericsson

first prepare a draft report and distribute it to the site personnel for feedback, in order to give the site personnel a chance to react before the final report is written. When the final report is prepared, it should only be distributed to involved managers, i e company management, the environmental department and the site personnel. Only if the report is internal is it possible to be totally honest without having to care about coniidentiality etc. The report might contain suggestions for corrective actions, but the responsibility for proposing an action plan should lie within the audited facility.

These actions are, of course, the main issue, even if the report itself has a value. Therefore, there is also, normally, a follow-up on the factory to check that they really take the actions they have committed themselves to. This check could be performed either by the auditors, or by the company management (or, in some cases, by site personnel). The follow-up could also be a part of the next audit. (Q Almgren, ch 10,1990)

2.5.5. Examples of other guidelines

Both the US Environmental Protection Agency (EPA) and its Canahan equivalent, Environment Canada, have published policy statements about enviromnental auditing. These statements are essentially the same as the ICC guidelines, and will therefore not be further discussed here. Various company programs have also been developed, especially in USA, but most of them also comply with the ICC guidelines.

2.6. Corporate environmental management systems

In June 1993, the EEC adopted a regulation called EMAS (Eco- Management and Audit Scheme). British Standards Institute released their BS 7750, specifications for Environmental management systems in 1992, and IS0 is currently working on their standard for EMS. In this section, we will first describe EMAS, emphasizing the requirements on environmental auditing, and then BS 7750. The IS0 standard is due for release in 1996, and w i l l therefore only be mentioned here.

2.6.1. The Eco-Management and Audit Scheme

In the EEC program "Towards Sustainability" the role and responsibilities of companies is emphasized, stating that companies should take a proactive approach in this field The objective of the scheme is

"to promote continuous improvements in the environmental performance of industrial activities". (B The Council of the European Communities, 1993)

34

Chapter 2: Theoreticalfi.a"rk

EMAS should, in the beginning, focus on the industrial sector, but in the future, the scheme might be extended to eg trade and service businesses. Participation in the scheme is voluntury. For companies, this is a way of restoring their somewhat damaged environmental credibility, and of creating a competitive advantage, by proving to the public that they are doing their part. EMAS is also intended to be compatible with a company's total quality programs, bringing continual improvements into the environmental management. (I The Council of the European Communities, 1993, and I Club de Bruxelles, 1993)

The Structure of EMAS

The EMAS regulation consists of 21 articles that contain requirements on a company's environmental work To participate in the scheme, a company has to

1. Establish an environmental policy that not only includes compliance with all environmental laws and regulations, but also contains a commitment for "continuous improvement of environmental performance, with a view to reducing environmental impacts to levels not exceeding those corresponding to economically viable application of best available technology".

2. Perform an environmental review, meaning an initial comprehensive analysis of the site's activities in order to evaluate the overall environmental performance of the site.

3. Implement an environmental programme and an environmental management system at the site, aimed at achieving the goals of the Policy-

4. Conduct environmental audits at the site.

5 . Set objectives (detailed goals) aimed at continuously improving the site's environmental performance according to the findings of the audit.

6. Prepare an environmental statement for each site.

7. Have the policy, progamme, management system, audit procedure and statement venfied and validated by an accredited verifier.

8. Forward the validated statement to the competent body of the member state where the site is located, and release it to the public after registration.

The structure of the scheme is illustrated in figure 2.8 below.

35

Nordin-Skmin: A new model for emtironmental audits at Ericsson

ACCRJZDITED 1 VERlFER COMPANY E"MENTAz, POLICY

.I I ENVIRONMENTALR REVIEW 4

c c 4

- EXAMJNATION

L

E"MENTALI?RoGRmfME

E"MENTAL AUDlT

ENVIRONMENTAL STATEMENT VALIDATION . c REGISTRATION

c PUBLIC

Figure 2.8: Schematic description of E M S (Source: 8 Our own model, aahptedfiom 0 Hedblom, and a WeIford, 1992)

The initial review is only conducted once, and that is before the management system is created One of the ideas of the scheme is to give industry a chance to improve its credibility by having the environmental work examined and the public statement validated by an independent verifier. A complete statement shall be released after each audit cycle, and a simplified statement annually (there are some exceptions fiom this requirement). (B The Council of the European Communities, 1993)

After registration to the competent body, the company is entitled to use the EMAS logo for the site on eg company brochures and publications, but neither in advertisements for products, nor on products or their packagmg. EMAS registration is not for a whole company, but for a @e site. If a company wishes to be totally registered, every site belonging to the company must perform the entire procedure. This might turn out rather costly; the certification fee per site amounts to more than 500,000 SEK! (0 Pettersson). EMAS was published on July 10,1993, entered into force three days later and shall apply fiom April 10,1995. (El The Council of the European Communities, 1993)

36

Chapter 2: Theoretical@amework

A company certified according to a standard for environmental management systems recognized by the Commission of the EEC, is also approved according to EMAS, if only the additional requirements regarding the environmental statement are fulfilled A company should not need to be certified twice for the same system. It is, however, still unclear which standards will be recognized. CEN, the standardisation organisation of the EEC, has been given the task to produce eco-audit standards, but CEN also has an agreement with IS0 not to duplicate any standardization work, and IS0 is currently working on a standard for environmental management7. The IS0 standard will, however, not be ready on time for the launching of EMAS, and it is presently unclear whether EMAS will be in function without a supporting standard, or if CEN will produce a standard of its own. (0 Hedblom)

Requirements concerning the environmental work in general

The EMAS document contains requirements concerning environmental policies, objectives, programs and management systems. These requirements often specify what the company/site has to do, but not how to do it. Many of the requirements are also written in such a way, that the verification is going to depend on the judgement of the verifier. For example, there is a requirement concerning environmental objectives stating that "the company shall specify its environmental objectives at all relevant levels within the company".

There is also a list of issues that the environmental policy, programs and audits shall cover. Beside the more obvious issues like reduction of the overall impact, energy management, raw materials management, waste avoidance etc, this list also mentions new production processes, product planuing, environmental performance of contractors, Subcontractors and suppliers, prevention of accidents, staff infomation and training and external information as issues that should be dealt with in the environmental work

(B The Council of the European Communities, 1993)

Requirements concerning environmental audits

The EMAS definition of environmental audits is almost word by word the same as ICC's8, and will not be quoted here. The specific requirements consist of references to relevant pmagraphs of the standard for quality audits, IS0 100119. The only changes are that the phrases "quality system" and "quality management system" should be replaced with ''environmental system" and "environmental management system",

see 2.6.3 see 2.5.1 see 2.3.2

37

Nordin-Skarin: A new model for environmental audits at Ericsson

respectively. Further, a set of additional requirements are included to clarify some items:

The objectives of the audit program shall include assessing the management system of the site and determining whether the site complies with laws and company policies and regulations.

The scope of the audit program shall be clearly defined

The auditors shall have sufficient knowledge about relevant environmental management, technical and environmental issues and laws and regulations, and also suf3icient training in auditing techniques. The auditors shall be independent of the site.

Top management shall support the program.

Each audit shall be planned and prepared to ensure that appropriate resources are allocated, and that all persons involved understand their role and responsibility. The auditors should study the site's environmental management system and its environmental history as part of the preparations for the audit.

The audit on-site activities shall include discussions with site personnel, inspection of operating conditions, equipment and all relevant documentation.

The steps described as "Key activities at site" in the ICC guide to effective environmental auditing'' (see figure 2.x) shall be included in the audit.

A written report shall be prepared and formally communicated to top company management.

The audit shall result in a plan of corrective action, and there must be mechanisms available to ensure that the findings are followed-up.

The interval between audits, or the time span of the audit cycle, shall be determined in accordance with the site's potential to cause environmental damage, but must not be longer than three years.

(I The Council of the European Communities, 1993)

2.6.2. British Standard 7750

In March 1992, the British Standards Institution published their BS 7750 standard for environmental management systems (EMS). It was based on their quality standard BS 5750, which was the foundation on which IS0

38

Chapter 2: Theoreticalfiamewrk

built IS0 9000. The ambition is that companies already working according to BS 5750 wil l be able to extend their management systems according to this EMS standard BS 7750 is also intended to function as a complement to EMAS. Whereas EMAS requires an EMS, BS 7750 specifies the elements of such an EMS.

The structure of the EMS has already been described in section 2.4.9, and will therefore not be repeated here. The standard does not put demands on any specific level of environmental performance, only on the system that the company establishes in order to protect the environment. However, BS 7750 demands that the policy contain a commitment to continuous improvements in environmental performance.

The specifications of BS 7750 concerning environmental audits are not very precise, and contain nothing extra compared to the ICC guidelines, or EMAS requirements. The standard refers to a standard for quality audits, BS 7229, and states that "its broad principles are relevant to auditing of environmental management systems".

(B BSI, 1992)

3. The forthcoming standard from IS0

IS0 began, in 1993, work on an international standard in environmental management by forming a technical committee, TC 207. The work is shared between six subcommittees responsible for Environmental management systems, Environmental auditing and related environmental investigations, Environmental labelling, Environmental perfomance evaluation, Life cycle assessment and Terms and definitions. TC 207 will cooperate with TC 176, which created the IS0 9000 standards, in order to take advantage of experiences made in the subject of quality management systems. The ambition is to have a standard ready by 1996, and presently nothing but preliminary drafts exist. ( is0 bulletin, 1994)

2.6.4. A comparison between the standards and programs

All standards/programs described above have much in common. The ICC Business Charterlo also shares the same \;iew of how a company should treat the environmental issue, even if the principles of the charter more declares a philosophy than specifying an EMS. A comparison between the commitment expressed in the ICC principles and EMAS and BS 7750 shows that a company that fulfils EMAS or BS 7750 almost also works according to the Business Charter. Both EMAS and BS 7750 have stronger requirements than ICC regarding the environmental policy, but on the other hand, weaker requirements concerning technology transfer and how to deal with contractors and suppliers. Neither EMAS nor BS 7750

lo see 2.4.7

39

Nordin-Skarin: A new model for environmental audits at Ericsson

contain requirements on research in the environmental field, which the Business Charter does. Since BS 7750 is the only one of the three dealing with the detailed implementation of an EMS, the requirements of that standard concerning management (ICC principle no. 2: Integrated management) is the strongest of the three. (I3 McLean et al, 1993)

2.7. Combining TQM and environmental management

One of the most interesting and attractive approaches to environmental problems is to handle them in the company's TQM program, by forming a so-called "Total Quality Environment Management" (TQEM) system. If one could "ride on the quality wave" and use the existing quality organization, instead of building an entirely new framework for environmental issues, everythmg would be much easier. In this section, we will describe the TQEM strategy in more detail, and give a few examples of TQEM programs in different corporations in the USA.

2.7.1. What do they have in common?

TQEM has evolved as a result of a more holistic view of the quality concept, and due to noted similarities in work methods between progressive quality management (TQh4) and progressive environmental management (clean production).

Environmental adaption is a quality parameter

Since quality may be defined as a product's ability to satis@ customer demands", and since many of today's customers demand environmentally adapted products, there is an obvious connection between quality and the environment. Environmental adaption may simply be regarded as a quality parameter, just as "lack of defects", safety, or on-time delivery. Working to improve environmental aspects of one's products and services may thus tum out to be profitable, in the same way as improved quality has increased profits and market shares for companies in the last decades.

Japanese quality expert Taguchi states that

lack of quality is the total cost that a product causes society during its life cycle

(m Bergman & Klefsjo, 1991, p 139)

According to this holistic definition of quality, the environment-quality connection becomes very clear. Quality is a function of costs caused by

~

11 see 2.2.1

40

Chapter 2: i%eoreticalpamework

the product throughout its life cycle, i e during raw material sourcing, transportation, production, use and disposal, and many of these costs can be directly related to environmental impacts such as emissions, waste treatment and disposal at landfills. Taguchi also explicitly broadens the concept of the (external) customer to embrace society as a whole. One must not only take into consideration the demands of the internal customers and the users of the product, but also the demands of people affected in the phases before production and after use.

Continuous improvements

As described earlier, working according to clean production principles often leads to efficiency improvements of processes, products and consumer patterns with respect to material and energy throughput, which largely corresponds to minimizing waste. Also, continuous efforts are undertaken to substitute hazardous materials, products and activities with less hazardous ones (m Jackson, 1993, ch 8).

Clearly, working with continuous improvements on a day-to-day basis in the spirit of TQM, seems to be an efficient mode of solving environmental problems. As long as a company has environmentally de-g activities it has the possibility to improve its processes, and thus the possibility to make financial profits by saving resources, exporting know-how, obtaining a "greener" image, or having a higher degree of employee pride and commitment.

Employee involvement

Perhaps the most important issue in TQM is to get everyone involved and interested in their jobs and in the company's goals. As mentioned earlier'z, the American company 3M has profited greatly from its proactive environmental programme 3P (Pollution Prevention Pays), and most of these have been initiated by front-line employees (0 Gransson). Employee involvement, education and teamwork are essential in improving environmental performance, especially questions regarding material efficiency and handling.

Preventive approach and process orientation

TQM's process focus and strife to eliminate sources of variation is a means of attacking the problem sources rather than correcting the effects of the problem, in the same way as clean production strives to prevent the causes of waste and pollution, rather than employing end-of-pipe measures.

l2 see 2.4.6

41

,~ _.. - .. ..*, - . ~ .. . . . . . . . - . _ I " . . *. =. -I ....,... . , I .. . . . ... , . , . . . . I I

I ' I 1

Nordin-Skarin: A new model for environmental audits at Ericsson

2.7.2. Using quality tools in environmental work

If one accepts that environmental problems are quality problems, it should also be possible to solve environmental problems with any of the effective and well-established quality methods and tools available. However, according to Isbell, an environmental engineering expert, the waste treatment community has been slow to respond to this. He states that most articles written on waste treatment are totally devoid of TQM principles, and that a whole new science on TQM applications to waste treatment is begging to be developed.

Isbell (I, 1991) especially recommends TQM tools such as Quality Function Deployment (QFD)13, Design of Experiments @oE)l4, and Statistical Process Control (SPC)lS. When using QFD, treating environmental demands as customer demands will allow evaluation and improvement in a concurrent manner of both types of demands. In DOE, any application should include the environmental consequence of the process in the ultimate quality characteristic examined. Finally, monitoring and controlling process environmental parameters by using SPC can often indicate potential process problems and inconsistencies before they become manifest in end product quality parameters.

For less complicated environmental issues, such as minimizing energy consumption and waste at factories, simpler TQM tools such as the PDCA-cycle16, and the Seven Quality Control Tools and the Seven Management Tools17 may be employed

2.7.3. Experiences from TQEM attempts

AT&T

At AT&T, the largest telecommunications company in the USA, environmental issues are part of the company's TQM program. In 1990, AT&T announced that it was building environmental protection into all its operations. Worldwide goals were set for 1991 and 1994 to improve environmental performance with the below percentages of 1987 levels. Progress toward these goals has been impressive:

l3 For more information we refer to Hauser & Clausin& 1988 l4 For more id om at^ 'on we refer to Bergman, 1992 Is For more information we refer to Wadsworth et ai, 1986

l7 For more infoxmation we refer to Bergman & Klefsja, 1991, pg 283-299 see 2.2.4

42

Chapter 2: Theoretical Ji-amouork

Goal (in order of wioritv) Obj 91 Obj 94 Results 91

1. Reduce CFC emissions 50% 100% 86% 2. Reduce Toxic air emissions 50% 95% 81% 3. Reduce man&, waste disposal 25% 49% 4. Increase paper recycling 60% 60%

(@ Thompson & Rauck, 1993)

To reduce CFCs, which were mostly used to clean printed circuit boards (PCBs), AT&T spent 25 MUSD in developing alternative techniques. AT&T has now succeeded in eliminating CFCs one and a half year before its planned date, and now earns money selling its alternative cleaning techniques to other PCB producers (@ Nordqvist, 1993).

In reaching these results, AT&T has consistently put the customer first, involved all employees, and had an attitude that quality improvements never end. They have perceived waste generation as part of the manufacturing process that must be addressed in the same way as other process elements. Top management has been committed, and their standpoints communicated to all employees. To involve all employees, AT&T has employed a TQM tool called Policy deployment'g, which is a systematic and democratic means of breaking down strategic goals to activities for each process owner. (I Thompson & Rauck, 1993)

Thompson & Rauck (I 1993) present an example of how AT&T has worked from their factory in Columbus, Ohio. When AT&T announced their world-wide goals in 1990, the Columbus plant was already at work in these areas. TQM principles were first applied to the reduction of perchlorethylene (PCE). A team of process engineers and researchers fiom Bell Laboratories was formed, and together with suppliers, were able to eliminate the process in which PCE was used, and thereby remove PCE fiom all operations at the factory in 1991. In 1988, a factoy-wide drive started to eliminate Freon 113. A team of engineers implemented alternative solutions to make the factory CFC fiee in 1992.

In 1992, the Columbus factory was chosen as one of eleven sites in a governmental project formed to demonstrate TQWs efficiency in solving environmental problems, and that team work among industry, the community and regulators was an alternative to regulatory control. In accordance with corporate AT&T goals, the substance selected for reduction was l,l,l-trichloroethane (TCA). A multi-disciplinary task team was formed consisting of AT&T engineers, quality specialists, and industrial hygienists, an expert fiom the government's Environmental Protection Agency (EPA), and a representative of a citizen's organization.

l8 For more information we refer to Wood & Munshi, 1991

43

Nordin-Shin: A new model for environmental audits at Encsson

The team used TQM tools and were able to either substitute or eliminate 75% of TCA use within a year. The team trained plant employees in all process andor material changes.

Dupont

Bemowski (I, 1991) has examined the American chemical giant Dupont, which strives to make proactive environmental pedormance everyonels job by assigning everyone a special role in its waste reduction program called the Resource Program. The program is broken into three phases. "Today" , "Tomonow", and "And Tomorrow".

In the Today phase, plant personnel help reduce waste. They receive training, conduct waste minimization audits, participate in workshops, and provide ideas on how to reduce waste. They are supplied with literature, videotapes, a computerized waste management data system, and empowered to easily contact management and company specialists.

In the Tomorrow phase, problems involving near-term (three to five years) changes in technology are tackled. Cooperation between plant personnel and those providing technical assistance, is a central issue in this phase. For example, an operator and engineer might work together to decrease the volume of input chemicals in a production process. Besides upgrading existing process technology, technical personnel work to prevent waste in new projects and reduce waste in maintenance work

In the And Tomonow phase, the research and development department creates innovative applied technology and new processes for the long term. (I Bemowski, 1991)

Xerox

According to Bhushan (I, 1993) Xerox has initiated a so-called Environmental Leadership Program which is to be integrated in all business functions. Customer satisfaction has been established as the number-one priority, and is applied to environmental matters. Products are designed for waste "ization, resource recovery and recyclability to meet customers' demands and to reduce customers' costs. A "cradle-to-grave" requirement is used in the design process that addresses environmental concerns throughout product life cycles.

Xerox also considers government agencies as important customers, and has established frequent and open communication with them, disclosing present and future activities of environmental interest. Environmental communication and marketing are part of Xerox's TQM approach. They focus on customer and employee education, and have published guides on

44

Chapter 3: Resewch problem

3. Research problem

This chapter describes how we have structured our research, and outlines the specific research questions that we have sought to answer, in order to fulfil the purpose of the thesis.

3.1. Research problem

Our research has proceeded as indicated in figure 3.1. The relationship between parts of the research structure and chapters of the report is indicated within brackets.

PURPOSE AND DIRECTIVES (1) i- ~

J THEOREmCAJ-4

' FRAMEWORK (2) \ \ \ \ \

\

?-l METHOD (4)

DATA ( 5 ) c CONCLUSIONS (7)

Figure 3.1: The structure of our research

Our first task was to find theories and practical experiences fkom other organizations on TQM, TQEM, clean production, and environmental auditing, that could form a frame of reference for how environmental audits ought to be conducted. Thereafter, we studied the existing

47

Nordin-Skarin: A new model for environmental audits at Ericsson

organizational framework at Ericsson relating to environmental auditing, and tried to identi% stakeholders of environmental auditing and their demands. Taking into consideration theories, practical experiences and demands posed by stakeholders and directives from the principal, our next step was to suggest suitable models for the environmental audit. These models, including the current model, would then be compared and analyzed with regard to variables that we would deem relevant, which would enable us to choose a "best" model. Provided that this model passed validation from relevant Ericsson employees, it would be our recommended model for future environmental auditing.

A possible alternative approach might have been to benchmark one or more leading companies in the field of progressive environmental auhting, and to see how their experiences could be applied to Ericsson.

3.2. Specific research questions

To fulfil the purposes of this thesis we concluded that the following questions needed to be answered.

How does Ericsson work with quality ?

What are Ericsson's environmental policy and goals ?

What are the environmental problems at the Ericsson factories ?

What future environmental standards does Ericsson plan to follow ?

How are environmental audits conducted at Ericsson ?

What demands do Ericsson's internal and external stakeholders put on Ericsson's quality and environmental work (especially the audits) ?

What are the demands on the environmental auditors ?

What is the purpose of the inspections within the risk management program, and how are they carried out ?

3.3. Delimitations

We narrowed down the scope of our study by introducing the following delimitations.

48

Chapter 3: Research problem

Although some ideas in our report might be useful for other companies, we have aimed to customize it to Ericsson.

We will restrict our study to the following stakeholders of environmental auditing:

Extemal customers: the end users, i e network operators govemments and regulators insurance companies

Internal customers: management auditors involved plant personnel quality management staff

0 environmental management staff

We will not present a world-wide coverage of trends in standardization and government legislation on environmental issues. Instead, we focus on two movements that well represent the current global trends, namely the EEC's Em-Management and Audit Scheme (EMAS), and the Swedish government's proposition on closed materials cycles. Another reason for focusing on these movements is that they affect Ericsson more than most other movements.

Several types of quality audits are conducted at Ericsson, however, we will concentrate on the intemd Quality System Audits (QSA). Although the QSA may be conducted differently at different Business Areas (BA) and Major Local Companies (MLC), we have limited our study to one factory and BA, namely TelecOm's main factory called HF (Hiigerstensfabriken).

At many factories abroad, questions concerning the external and internal environment often fall under the same routines and audit procedures. At Swedish factories, however, a clear distinction has been made, much due to the Swedish industry and government's relatively early interest in worker health and safety questions. Since we have only studied Swedsh conditions, our study is limited to issues concerning the external environment.

49

51

Chupter 4: Method

4. Method In this chapter we describe how we have proceeded when collecting the necessary data, and discuss possible altemative approaches and the reliability of our data

4.1. Our study approach

We have conducted a so-called qualitative study. That means that we have not used quantitative models to arrive at our results, nor are our results quantitative in nature. Our thesis is a case study, since we have collected data from a particular pre-specified domain (Ericsson's environmental audit procedure and its stakeholders), and our conclusions do not claim to apply beyond that domain. (Q Lekvall & Wahlbin, 1987, pg 143-144)

4.2. Types of data collected

We have collected both primary and secondary data, and both types of data have been collected internally and externally. Primary data are data that have been collected by the researchers themselves, whereas secondary data are data that have been collected by someone else. (a Lekvall & Wahlbin, 1987, pg 180)

4.2.1. Primary data

Most of the primary data have been collected internally by personally interviewing Ericsson employees involved in work related to our thesis. Two primary data sources were external. We personally interviewed STORA's environmental coordinator and most-experienced environmental auditor, who we h e w to be an expert on the integration of quality and environmental audits. Unfortunately we were neither able to attend an environmental audit nor a quality system audit (QSA). We also attended a seminar on 3Ms 3P-program.

4.2.2. Secondary data

Secondary data have also been collected both externally and internally. Extemal data sources have been books, journal articles, documents, coderence papers and other literature on end users and government legislation. Internal secondary data sources have been specific Ericsson articles and documents on Ericsson's quality and environmental work, as well as documents on their risk management program. The articles we have used were found using the international databases available at Linkoping University.

Chapter 5: Quality and environmental work at Ericsson

5. Quality and environmental work at Ericsson In this chapter, we will present the data collected internally at Ericsson concerning the company's quality and environmental work The chapter mainly concentrates on the quality and environmental audits conducted, but also contains a description of the insurance inspections conducted within the Risk Management program.

5.1. Ericsson's quality work

In this section we briefly outline Ericsson's quality efforts during the last decade.

5.1.1. Ericsson Quality

Ericsson was relatively quick to respond to the quality awakening in the early eighties, and implemented a program called Ericsson Quality. This program primarily focused on employee education and worker teams (quality circles) in the hardware production lines. Unfortunately, this initiative soon passed over; probably because it only involved certain employees, and because it lacked top management support (I Hedin, 1993).

5.1.2. IS0 9OOO

The first Business Area to receive an IS0 9001 certificate was Ericsson Telecom (ETX). When this took place in December 1990, it received much attention fiom customers, and spurred other Ericsson companies to work towards certification. Today, almost all of Ericsson's Europe-based companies are IS0 9001 certified(@ Hedm, 1993).

5.1.3. Total Quality Management (I'QM)

In 1990, the telecommunications industry was struck by the global economic recession, and Ericsson executives realized that harder efforts and more modem management approaches were needed to improve competitiveness and increase profits. TQM was at that time rather well established in the USA and some parts of the EEC, and Ericsson Fatme in Italy had already started to work according to TQM principles. Inspired by Fatme's initiative, Ericsson's top management decided in february 1992 that the entire company adopt TQM Business area and MLC executives were ordered to start TQM work within their own companies and to appoint so-called TQM champions, which were to be the executive's right hand in TQM issues. (I Hedin, 1993).

53

i

Nordin-Skmin: A new model for environmental audii3 at Ericsson

Today, Encsson has developed a TQM framework that well corresponds to the ideas presented in section 2.2 of this report. The TQM program is strongly supported by top management, and is spreading throughout the organization to include all processes and employees. In all Ericsson companies, customer satisfaction is the goal with highest priority. This has resulted in a number of successful improvement projects. Contrary to the campaign-like Ericsson Quality programme, TQM is viewed as a totally new way of funning the entire company, a cultural revolution. (I Hedin, 1993).

Ericsson's quality policy.

Ericsson's TQM focus is manifested in the Ericsson Quality Policy which is a specific requirement posed on all employees. It reads:

Ericsson stands for World-Class Quality

We are committed to exceeding customer ,expectations

We are continuously improving our products and processes

Quality and improvements are everyone's job

A small plastic card is distributed to all employees, on which the policy is written on one side, and the PDCA-cycle19 described on the other.

(B Ericsson Quality Manual, Q 2.4,1993)

5.1.4. The Ericsson Quality Manual

The main tool used to deploy TQM throughout the organization is the new version of the Encsson Quahty Manual (EQM), which focuses more on TQM than the older version. The new manual was signed by the Corporate Executive Committee, which is headed by CEO Lars Ramquist, and issued to all employees in March 1993. The manual specifies requirements and recommendations on how quality work should be done by all Ericsson employees. Each Ericsson company is responsible for adhering to the requirements, and must conform to the EQM in preparing its own control documents.

Apart fiom covering al l requirements needed for IS0 9001 certification, it gives the requirements and guidelines for adaption to TQM principles. For example, ensuring a better physical and psycho-social working environment are demands in the EQM which are not even mentioned in IS0 9001. Another of EQM's demands is that all employees strive to minimize the cost of products throughout their life cycle (I Ericsson

l9 see 2.2.4

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Chapter 5: Quality and environmental work at Ericsson

Quality Manual, tj 6.2,1993). Although the PDCA20 message is sent to all employees, actually applying the PDCA-cycle to improvement work, is still just a recommendation in the EQM. In IS0 9000, PDCA-thinking is not covered at all . Together with a few local management handbooks and procedures, the EQM could be said to reflect Ericssonk operational system, since it is intended that the EQM include a l l of Ericsson's activities.

Although it will take time before all aspects of the present EQM are fulfilled, Ericsson intends to aim even higher in the forthcoming EQM edition. For example, many of the present recommendations will then be requirements (0 Pahquist).

5.2. Quality Audits

At Ericsson four different types of quality audits are performed: quality system audits, process audits, project audits, and product audits. Due to customer demands, most focus has been placed on the quality system audits. These are done externally and internally.

5.2.1. External Quality System Audits : IS0 9001

To externally check compliance with IS0 900 1 , Ericsson has always hired the British Standards Institute (BSI). Ericsson's goal is to let BSI audit every site twice a year, but time usually limits the auditing frequency to once a year. An IS0 9001 certificate is given per BA or MLC and not per site, and is valid for one year. (0 Eriksson)

5.2.2. Internal Quality System Audits (QSA)

One of EQMs requirements is that internal, independent Quality System Audits (QSA) be performed to mure that all EQM requirements have been implemented throughout the organization. The QSA is conducted at "systems" or "management" level, i e auditors do not check how specific workers are performing their tasks, but instead eg. that routines and work descriptions are well documented and easy to retrieve, and that improvement work has proceeded satisfactorily. The audit process is to be based on IS0 10 011 "Guidelines for auditing quality systems" which is also the basis for auditing the IS0 9000 standards. Adaptations may, however, be done locally. (0 Eriksson)

2o see 2.2.4

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Nordin-Shin: A new model for environmental audits at Ericsson

Conducting a QSA

It is desirable that the QSA be performed in a decentralized manner, and thus auditing has been divided into two levels:

management and staffunits

business operations units

At the "higher" level, Elof Eriksson is the sole auditor. He audits the quality performance of managers and staff units of the mother company LIVE, and chief executives and quality departments of the Business Areas (BA) and Major Local Companies (MLC). (0 Enksson)

Auditing at business-operations-unit level is delegated to the BA or MLC to be audited It is up to the BA or MLC to decide on the degree of decentralization within their respective organizations, provided that they follow the directives of the EQM. At ETX, for example, the quality assurance function ETXNQ audits all ETX units, except the hardware production unit (EiTWS). This unit conducts the QSA differently from that of other Ericsson core units, due to the recent reorganization (see below). How the actual QSA auditing should be performed at all Ericsson units is described in directives from the Corporate Executive Committee (El Quality System Audit responsibility-Directive 1993-01-19). For . example, it is stated that audits should be done at least every 24 months. However, many companies attempt to shorten the cycle to 18 or 12 months. (0 Eriksson)

Traditionally, the QSA has followed a scheme in which each department, however small, is audited individually by one auditor during a day or two. ETXNQ, though, has for some time been conducting more comprehensive audits of entire units, which employ five or six auditors during roughly one week. The benefits of such an audit are:

Since more auditors are involved, and confer with each other every morning and evening, recurring problems within the unit can be identified more easily

The regularly conducted meetings also enable calibration of auditing methods, which leads to a higher degree of QSA standardization

It saves time for auditees. Quality managers no longer need to participate in many small intermittent audits, and busy unit managers may actually be able to participate.

(0 Khfelt & Kjellberg)

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ETWS's new structure and its effects on QSA

Ericsson's production units have hitherto been organized by site, regardless of the fact that certain sites have produced unrelated end products. During 1994, by means of a program named FOCUS For Our Customers), ETWS will become the first core unit to reorganize into product areas. Seven product areas will be formed, and each product area will consist of several product and service units. One natural consequence thereof is that product units belonging to the same product area will be located at different sites. For example, product area "Components" will have its relays produced at HF, its electro-mechanical components done in Kristianstad, and its connectors done in Katrineholm. Correspondingly, each site may house product units fiom different products areas. For example, the Katrineholm site will house product units fiom product areas APT and Components. (0 Alestam)

A consequence of the reorganization is that the QSA will be done per product area and not per site. This may lead to

0 ambiguities in site-specific responsibilities, such as worker safety and environmental protection.

problems in communication.

The QSA auditor must make sure that the auditee has safeguarded itself fiom such problems. (0 Alestam)

ETX/S have been directed to completely audit each site each 12 month interval. The two QSA auditors at ETWS/Q, will, however, not be able to audit all seventy-or-so product and service units belonging to ETWS within 12 months. Instead, a preliminary plan has been made up, by which they will audit one product unit and one service unit per site and year. The remaining product and service units will be audited by local auditors, who are independent of the unit. Employees at all levels will be audited in these audits, starting with extensive interviews with the manager of the product or service unit, and ending with sample check-ups with shopfloor workers. (0 Alestam)

A closer look at the different production units at shop-floor level is also undertaken. For example, Mr. Leif Ahmen audits more than thirty production groups within HF's five production units every year. (0 h e n )

Using the QSA to assure worker health and safety

Worker health and safety aspects such as noise, illumination, and hazardous emissions have been strictly regulated in Swedish laws since

57

Nordin-Skarin: A new model for environmental audits at Ericsson

the seventies. However, not until January 1993, did the Swedish authorities issue a law forcing organizations to implement a management system to assure compliance with the old laws. The gist of this so-called internal control law is to ensure that management prevent accidents and illnesses, rather than just inmect them after they have occurred Furthermore, the law emphasizes that neglecting the safety and health of one's employees is a (comparable with eg. battery) that can lead to imprisonment of managers. Work environment inspectors intend to make unannounced visits to companies such as Ericsson to control that internal control systems are installed. (0 Whitlock)

After the law was issued, Ericsson has worked hard on implementing such a management system. Wran Whitlock of the human resources fwaction at ETX (ETXNP) formulated needed to be done to fidfl the law, but not how this was to be done. This resulted in eight points that were to be implemented before January 1, 1994. To assure implementation internally, Whitlock persuaded ETXNQ to check compliance with these eight points when conducting their QSAs. ETXNQ only had one condition: that the checking did not add more than one hour to the normal QSA procedure. One of the QSA auditors at ETXNQ, Anders Klinfelt, reports that there have been no procedural difficulties in integrating the worker health and safety checkpoints into the quality system auditing process (QSA). Since the points deal with health and safety issues at system level, they do not demand thorough knowledge within the field. However, one QSA auditor, %ran Alestam, have stated that they do increase the burden of auditing.

Whitlock and HF's safety engineer Acbim Reisig both stress that worker health and safety problems have received more attention in the company, after they were integrated with the QSA. According to Reisig, the degree of employee commitment to instructions depends on how influential the person behind the signature is. If Reisig wants an instruction to be followed, he wiU ask an influential manager to sign it. Since the QSA is backed up by top management it has top priority among middle management and shopfloor workers.

Standardization of QSA procedures

As we have seen, the QSA may be performed differently at different Ericsson companies and at different levels within a company. To a large extent, it is up to the auditor how to conduct the QSA. It is of course desirable that all QSAs conducted at Ericsson follow certain standards. This "standardization" is assured in the introductory education of QSA auditors which is done centrally. At concentrated QSAs, audit procedures are continuously calibrated, as mentioned earlier. (0 Kihrfelt)

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Chapter 5: Qual@ and environmental work at Ericsson

5.2.3. Process audits

Before customers seriously started demanding quality system audits, Ericsson regularly conducted process audits. In a process audit, any of the company's processes is scrutinized, eg. the marketing process, design process, or a specific production process.

Demands for process audits

A process audit is usually ordered by the process owner on an ad-hoc basis, whenever the owner wants to control that the process is run efficiently, and producing satisfactory results. However, some years ago, two external customers, British Telecom and Bell Core, demanded process audits fiom all would-be suppliers. Bell Core, even visited Ericsson to control that software development, mechanical design, production and installation processes were managed according to Bell Core specifications (0 Eriksson). Nowadays, Bell Core are less demanding, and Ericsson's process audits are almost exclusively performed at overseas production sites to ensure that Ericsson requirements are met (0 Alestam).

Process Management

Process audits appear to have much in common with a currently much- bespoken Ericsson tool called Process Management (PM), which is a vital ingredient of Ericsson's TQM program. According to the Ericsson Quality Manual, PM is used to identie customer needs and find processes that sat is fy these needs, independent of departmental borders. A process owner21 is appointed to establish, run and document the process. It is the process owner's responsibility to continuously improve the process, by analyzing inputs, outputs, methods and tools. Our conclusion is that, in Process Management, processes are more regularly controlled and evaluated, and the process parameters are scrutinized in more detail than in process audits. According to the Ericsson Quallty Manual, Process Management should involve regular follow-up and evaluation of all processes (B Ericsson Quality Manual, 1993, 5.3.1).

5.2.4. Project audits

At Ericsson, audits are also performed to evaluate specific projects after they have been completed It is desirable to check if project goals have been met, if the project has proceeded efficiently, etc. It is sometimes hard to distinguish a project audit fiom a process audits. One could argue that a project audit is a process audit in which the project process is audited (0 Eriksson)

21 see 2.2.6

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Uordin-Skarin: A new model for environmental audits at Ericsson

Tollgates

To continuously control that project goals are being met during a project, five checkpoints called "tollgates" are determined before starting the project. When a tollgate is encountered, the project must not proceed until the tollgate requirements are met. It is the person who has ordered the project who determines whether the requirements are met or not. (0 Eriksson)

5.2.5. Product audits

Finally, Ericsson also conducts so-called product audits to ensure that their products meet specified requirements. This form of auditing resembles traditional Quality Control. (0 Eriksson)

5.3. Ericsson's environmental work

The development of an organized environmental strategy within Ericsson has only recently been initiated In 1990, due to customer demands, Sten Hebert was appointed speaker for environmental affairs. He was by then head of the standardization department, but was later appointed manager for the newly started (October 1,1993) environmental management department. In this section the current status of Ericsson's environmental work is described, as well as a brief description of Ericsson's future ambitions.

5.3.1. Driving forces

The main driving forces for Ericsson's environmental work are customer demands and business opportunities. Although ethical considerations exist, there is no true ethical conviction within top management. The process of organizing a thorough environmental strategy began when one of Ericsson's major customers, British Telecommunications plc, demanded a verification of the environmental work at Ericsson. BT's purchasing policy, their so-called "Environmental impact standard, will be further described in section 5.6.3. According to the directives for the support function LME/G (the environmental department), the environmental strategies are to be based on external demands and profitability. Before actions are taken, it shall be considered whether the actions are economically reasonable and technically feasible. (0 Hebert)

5.3.2. Organisation of Ericsson's environmental work

The environmental department, LMEYG (G stands for "Green"), is reporting directly to the Technical Director (head of the corporate function LMEDT, Corporate Systems and Technology), who in turn reports to the

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Chapter 5: Quality and emtironmmtal w r k at Ericsson

Board of Directors. Since the unit was formed as recently as October 1 , 1993, there has not been sufficient time to complete the structure of the environmental work within Ericsson . The purpose of the support function LME/G is to

Ensure compliance with laws and regulations and promote a proactive approach in environmental matters.

Build and maintain an "Environmental Management System", in which the level and scope is decided by the internal board.

(El Supportfddon - Direktiv, 1993)

LME/G is also responsible for external and internal idonnation concerning environmental matters, and for collecting data on external demands and translating the data into actions and improvements plans. The function should be the competence centre of Ericsson in environmental issues, and work as internal advisors and consultants. Competence networks within Ericsson are to be organized One network can be said to exist already: the environmental auditors22. (0 Hebert)

The responsibility for environmental affairs at the factories lies within every plant manager. Every factory has an environmental coordinator responsible for contacts with authorities etc, but the plant manager has the formal responsibility. The environmental coordinator is often also responsible for worker health and safety, and is usually very competent in environmental issues. (0 Hebert, Pettersson)

In Sweden, environmental matters are strongly regulated by the authorities. Among other things, every plant must write an environmental report and submit it to the local authorities every year. In this report, all use of material, energy, chemicals etc and all production of waste is declared. This report is usually written by the environmental coordinator at every plant. (0 Biirselius)

5.3.3. Environmental policy

The purpose of Ericsson's environmental protection policy is "TO secure the proper handling of environmental issues in all of Ericsson's activities" (I Environmental protection - Policy, 1994-02-07). The policy itself consists of four points:

Life-cycle point of view shall be applied to products and activities within Ericsson.

22 see 5.4.2

61

, I. . .., " . * I . . . I

I 1

I I ' 1

Nordin-Skarin: A new model for environmental audits at Ericsson

All known and suspected environmental threats in our business shall be followed-up and eliminated.

0 All employees must be conscious of the importance of environmental issues concerning the company in general and the employee's own activities in particular.

In our business, we shall consider te1e"munications solutions that can reduce consumption of resources in the society.

The policy also states that the responsibilities for environmental issues lies with every manager, and that LMEDT, Corporate Systems and Technology, is responsible for information about activities and progress. The policy is further clarified in a few comments. Among other things, the comments state that

Swedish regulations are guiding in countries where no applicable environmental protection laws exist.

Waste, energy and use of materials shall be minimized in a product's life cycle "fkom-cradle-to-g't.

0 "All production units will be subject to environmental audits. Planning, performing and monitoring of progress in every unit is necessary as well as keeping of awareness in other activities as installation, transportation, office work etc. Use of material, energy, waste and pollutive outlets shall be registered. "

0 Openness towards extemal stakeholders like media, authorities, suppliers and customers is recommended.

(I Environmental protection - Policy, 1994-02-07)

5.3.4. Ericsson's environmental manual and other documentation of the environmental work

An environmental manual for the entire Ericsson company is currently being produced, which will consist of the policy together with 18 documents that contain directives and information concerning environmental work Within Ericsson. Documents exist, or are currently being produced, concerning the following items:

General documents:

0 Directives for environmental work within Ericsson

0 Organization

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Chapter 5: Quality and environmental w r k at Ericsson

Listing of laws and standards

Product development:

Environmental demands in product development projects

Environmentally adapted production

Listing of restricted chemicals

Packages

ProductiodReal estate:

Listing of audited sites

Specification of intemal environmental audits

Specification of chemicals and chemical products

Purchasing and selling real estate

External environmental issues in offices

Energy

Waste:

Directives for care-taking of electronics waste

Suppliers: Directives for care-taking of chemical waste

0 Directives for evaluation of suppliers from an environmental point of view

Purchased products and systems

Installation:

Guidelines

The manual is intended to consist of everythtng that each Ericsson employee needs to know, in order to act properly in environmental matters. It will be completed during the second half of 1994, and will be implemented to 60 YO (for relevant Ericsson companies) during the first half of 1995, and to 90 % during the first half of 1996.

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Nordin-Skann: A new model for environmental audits at Ericsson

Other documentation of the environmental work include: List of contact persons, Targets and improvement programs, Directives for the committee for sustainable product development, List of participants, Questionnaire before an environmental audit, Questionnaire for environmental auditors, List of auditors and a Form for evaluation of suppliers. (0 Hebert)

5.3.5. Which are the environmental problems at the factones?

There are, fi-om an environmental point of view, two different kinds of factories in the Ericsson corporation:

1. Factories using a few auxiliary chemicals

2. Traditional risk factory

Group 1 consists of a cable factory and a number of factories that assemble components. They are of the same kind, environmentally, but the cable factory is a little more complex. In these factories, a few chemicals are used for soldering, cleaning, maintenance etc, but the- emission levels are low. From an environmental point of view, all factories belonging to this group are relatively simple.

The factories in group 2 are surface-treatment plants, printed circuit boards manufacturing and a few special factories (mainly Ericsson Components' Kista factory that produces electronical components). They are all traditional process industries that use a lot of different chemicals. These factories are all rather complicated from an environmental point of view.

Altogether there are 35 Ericsson factories all over the world. About 25 of them belong to group 1, and the rest to group 2. (0 Hebert)

5.3.6. What are Ericsson's plans for the future?

The main ambition for the future is to move the focus fi-om the production to the product development, in accordance with the "cradle-to-grave" view of products expressed in the policy. A major part of materials used in the manufacturing processes leaves the factory as products (i e will eventually end up as waste) and only a minor part as emissions and waste. Most of the production is relatively non-hazardous to the environment, so Sten Hebert feels that it is more worthwhile to put an effort in product development. (0 Hebert)

There are also a few other points worth mentioning. Ericsson has decided to sip the ICC program "Business Charter for Sustainable Development"23, but it is unclear whether Ericsson will join the European

23 see 2.4.7

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Chapter 5: Quality and environmental work at Ericsson

Community program "EMAS" described in 2.6.1. However, Hebert's ambition is that Ericsson should fulfil the reqyirements of EMAS even if they decide not to join. Perhaps Ericsson will have to join sooner or later due to customer demands, and it is better to be prepared in advance. (OHebext)

LME/G is also conducting a series of other activities in the environmental field:

Key figures are established for reporting environmental performance within the production departments. Future improvement plans are intended to be based on, among others, these key figures.

Test audits of a research centre and of a design and development department are being conducted

internal environmental courses are being developed, aimed at managers and managing groups, as well as R&D departments. The purpose is, among others, to teach LCA methods and sustainability thinking to the R&D departments.

The use of a numb of hazardous substances is being either decreased or eliminated.

It is also Hebeds ambition to remove himself from his current position until the year 2000; an ambition that expresses the idea that the environmental responsibility should lie within every employee and not within a top management support function. (B LME/G - Mil och verksamhet 1993-94,1993, I TQM-grid LME/G, 1993,O Hebert)

5.4. Environmental audits at Ericsson

Ericsson are regularly conducting environmental audits at their production plants (no such program exists for any other part of Ericsson). This section describes the purpose and organisation of these audits, and summarizes an attempt to conduct an audit at a product development unit.

5.4.1. Background and purpose

The first environmental audits at Ericsson were conducted in 1990. The purpose in the beginning was to get an overview of the environmental status at the factories, but the audits are nowadays focused on verifying compliance with laws and regulations, and on control of how hazardous substances are handled The whole procedure is based on the ICC

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Nordin-Skarin: A new model for environmental audits at Encsson

"Position Paper on Environmental Auditing"24. (0 Hebert, Pettersson, 1994)

5.4.2. How the audits are organized

The audits are planned and conducted with no involvement fiom outside Ericsson. There are currently seven active environmental auditors within the company, who are situated at different locations and belong to different Ericsson companies. None of them work full time as environmental auditors. Two to three times a year they meet to plan and discuss forthcoming audits. All the auditing work is coordinated by Barbro Pettersson of LME/G, who is one of the auditors herself (so is Sten Hebert). The auditors are not specialized in any particular kind of production process. The selection criteria were technical qualifications and personal traits. All auditors have been trained in order to fulfil the requirements for environmental auditors specified by the Swedish organization for environmental auditors ( M I S , Miljorevisorer i Sverige). (0 Pettersson)

5.4.3. Description of the auditing procedure

So far, all factories have been audited at least once, except for two of them that have been audited twice (the main factory in Heersten and the Norrkoping factory). The audits are intended to be held with three-year intervals. Every environmental audit is conducted by two auditors, of which one is responsible. First, Barbro Pettersson contacts the site that is to be audited, and then the responsible auditor sets a date for the audit together with the site's manager. (0 Pettersson)

Preparatory questionnaire

Before the audit, a questionnaire is sent to the site, which is to be filled out by the site manager and returned to the auditors. The purpose of this is to make the visit to the site shorter and more efficient. The questionnaire contains questions about government permissions, about the site's organisation of environmental matters and some general questions about how matters concerning waste, emissions, dangerous substances and suppliers are handled The questionnaire is returned to the auditors, usually together with copies of delegating documents, environmental reports, permissions fiom authorities etc. The auditors use these documents in the preparation for the site visit. (I3 Miljorevision - Frigelista, 1993,O Pettersson)

I

24 see 2.5

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4

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Nordin-Skarin: A new model for environmental audits at Ericsson

The site visit ends with a summary meeting where the auditors briefly present their findings. Usually the audit lasts between one and two days depending on the size of the site. (0 Pettersson)

Report and follow-up

After the audit, an environmental audit report is prepared and distributed to the site manager, to the Chief Executive Officer of the company that the audited site belongs to and to the technical director at LME/DT. The report is confidential. The factory is responsible for deciding the actions to be taken, since they best h o w their own processes and circumstances. The auditors do not check that the factories take the actions they committed themselves to until the next audit. Environmental auditor Barbro Pettersson agrees that more frequent follow-up procedures ought to be established In one case, at a factory abroad, the findings were so serious that management decided that a risk manager be sent six months later to verify that the necessary improvements had been made (0 Pettersson).

5.4.4. Results of the auditing program so far

The environmental performance is, according to Barbro Pettersson, overall good The emission levels are well below permitted levels, and in most cases the factories have good control of its environmental performance. The most common negative remarks concem routines for chemicals and .

general tidiness. Have the factories improved in these areas because of the audits? Since only two of the factories have been audited twice, it is a little difficult to draw any general conclusions, but in these two cases the audit results have actually got worse. According to Barbro Pettersson, this doesn't have to mean that the actual performance has got worse, it could also be because the auditors are more thorough today than three years ago. These two factories both belong to Ericsson Telecom AB (ETX), a company that is going through a major reorganization. During such times, environmental matters don't seem to have top priority. (0 Pettersson)

The environmental manager, Sten Hebert, feels that the audit program in its current form was valuable in getting the overall picture of the company's environmental status, and that the second audit round has given much less than the first. His opinion is that the audits in some ways "have had their time" as a valuable tool, and that the effort should be put in product development instead of in the production. (0 Hebert)

What do the factories think of the audits?

The factories seem to appreciate the audits; not so much because of the control function of the audits, but because the audits provide them with general information of the environmental work The factories are

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interested in taking care of the environment; they just don't know how to do it. At this moment, the audits are the only regular program for visits from LMEIG to the factories. (0 Samuelsson)

According to the safety engineer at the main factory, Achim Reisig, the first environmental audit was very valuable since it pointed at deficiencies concerning delegations and respnsibilities. The second audit did not give as much as the first, much because many of the deficiencies had, by then, been corrected A new document reporting system for chemicals had been implemented, in line with IS0 9000, and the factory had learnt much about how to handle environmental matters whenever a process was to be changed Reisig also believes that an external auditor would have been stricter. (0 Reisig)

Nevertheless, Reisig feels that the audits are valuable, since the environmental issues tend to be forgotten. Employee turnover and organizational changes make it necessary with a reminder once in a while. Further, the factories have a lot to think about, and if everydung is audited except the environment, it won't get the proper priority. There is a risk, however, that the deficiency. It could be more beneficial with a system that ensured that actions be initiated locally and immediately, and that the auditors only check that the system be effective. This idea is equivalent to the internal control of the work environment, described in section 5.2.2. It has to be guaranteed that there is no quality loss of the audits, if a quality system auditor performs it. (0 Reisig)

wait for the auditor before they correct a

Another point of view is represented by the environmental coordinator of the main factory, Kenneth Borselius. He doesn't think that the audits give anything at all, because they are conducted at the wrong level. He would like the audits to be much more comprehensive, in order to really penetrate the processes. There is potential for environmental performance improvements at all Ericsson factories, measures that not only would be beneficial for the environment, but also economically profitable. Actions for environmental protection are more focused on efficiency improvements today, which also means saving material and energy, and also decreasing the amount of waste. This kind of preventive actions should be built-into the design process, but today's products will, due to warranty reasons, be part of the production for up to twenty years from now on. (0 Borselius)

The problem is that the responsible process engineers seldom see the improvement potential, especially if they have been working at the same plant for a long time. Many of the possible improvements also require expertise to be evaluated. What is needed is external impulses, in the form of a comprehensive review, lasting maybe 1-2 months at each site. Today's audits are simply too short and superficial to really gain

69

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Nordin-Skarin: A new model for environmental audits at Ericsson

understanding of the manufacturing processes, but could serve as a follow-up function later. (0 Borselius)

Other improvements could be initiated from the factory floor, though. We have heard of one episode, in which factory employees knew that they were wasting an expensive resource. However, they did not feel urged to report the improvement possibility because they did not feel that it was their task (0 Almren)

According to Mr. Borselius, environmental issues are already being audited in the quality system audits. BSI has performed a certification audit for IS0 9000 only regarding the use of chemicals, which also is a part of the environmental auditing program. He also thinks that the internal quality system audits are valuable, since they check that detailed working instiuctions exist. The audits do not, however, check that the instructions are relevant to the working conditions. (0 Borselius)

5.4.5. Environmental audit conducted at a product development unit

In februaty 1994, an experiment was conducted to examine whether the environmental auditing technique could be used on a product development unit. The unit was Tel"teret at Ericsson A/S @TO) in Norway. The "audit" consisted of an introduction to environmental matters, mainly focused on marked demands and product responsibility, and a review of a current development project. The review commented aspects concerning materials, labelling of plastics and batteries, packaging etc.

The conclusions of the experiment were:

A formal auditing program was not recommended. Instead one recommended activities such as informative meetings, specification of requirements documented in the environmental manual, and forming of networks.

ET0 valued the introduction and found it important that LMEIG reach out with their message, especially to marketing managers.

ET0 would like the environmental issues to be integrated in the design process, and that environmental requirements would be included in the technical specifications.

(I3 Miljorevision av produktutvecklande d e t e r , 1994)

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5.5. Other on-site inspection procedures

Beside the quality and the environmental audits, the production plants are being inspected for other purposes. This section contains a brief description of two such inspection programs.

5.5.1. Insurance inspections within the Risk management programs

The risk management programs's aim is to " i z e the risks of unexpected loss due to accidents etc at all Ericsson facilities. Coordinator of the programs is currently Claes Mktenson, who belongs to the corporate function Corporate Treasury (LMEDR). The program is based on the "Risk Management Policy and Loss Control Guidelines" document. Ths document defines the purpose of the programs as "To ensure safe delivery of the Corporation's products and services to the customers, as well as to safeguard the Corporation's assets".

Risk management programs consist of four steps: identify hazarddpotential losses, reduce the probability of the potential losses occurring, reduce the size of the potential losses and protect assets by insurances. The loss control guidelines provide help for the first three steps. As a follow-up of the programs, inspections are carried out annually by loss control engineers. (I Risk Management Policy and Loss Control Guidelines, 1993)

Purpose of insurance inspections

The purpose of the inspections is to evaluate all installations and routines at a site from a property loss control point of view. These inspections are required by the insurance companies, and the cost is included in the insurance premiums. The desired protection level of each site is determined by Ericsson's top management, and the scope of the inspections are intended to be adapted to this level. (I3 Ericsson risk management - Instructions for technical service, 1994)

Organisation of the inspections

The inspections are conducted mually by qualified, independent loss control engineers, who are employed either by the insurance company or by the insurance broker. Although the inspections are the same for Ericsson world wide, the engineers are locally recruited All inspections are based on an Ericsson document, "Ericsson risk management - Instructions for technical service", i e Ericsson decides how the inspections should be conducted (0 Mirtenson)

71

i'iordin-Skai?n: A new model for environmental audits at Ericsson

An inspection usually lasts up to one day, and includes four parts:

A plant tour together with a local Ericsson representative, which should include an evaluation of risks and protection in all important areas of the plant. Random visits should be made to the rest of the plant.

A review of all available property loss control documentation, i e emergency plans, alarm testing, sprinkler valve inspections, cutting and welding permits, back-up copying of important information, local Fire Department inspections etc.

Training of local personnel and assisting local management in making their own risk analysis.

A brief meeting in which the findings of the inspection and recommendations should be discussed

After the inspection, two different reports are written and sent to the inspected company and to LME/DR respectively. These reports contain information about the inspection and the inspectors's recommendations for further action. The reports are produced according to the above-mentioned "Instructions for technical service". (B Ericsson risk management - Instructions for technical service)

To ensure that actions are taken, and to have a continuous contact with all plants, there is a representative appointed at each plant responsible for loss control matters. (0 Miirtenson)

Internal inspections

The plants do also carry out inspections by themselves, mainly for fire prevention. Every month a checklist is used to assure that all installations are in order, and that all current work is conducted in a safe way. For example, the inspection checks that smoking regulations are respected, that flammable chemicals are handled according to instructions, that cutting and welding work is arranged in a safe manner and that combustibles are stored in safe areas. Claes MZutenson feels that this procedure is powerful because the checks are very easy to perfom, although there always is a risk that something important is forgotten only because it is not included in the checklists. (0 W n s o n )

Extending the inspections with environmentally related questions?

According to Claes Mirtenson, there are many environmental issues that also have a significance for the risk management program. The environmental audits do also include many risk-management-related issues (see section 5.4.3), so the idea of integrating is not so far-fetched

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Chapter 5: Quality and environmental work at Ericsson

The loss control engineers are normally well educated, often in chemical or mechanical engineering, and very competent. Many of the companies who provide the loss control engineers also sell environmental auditing services, and have internal education of industrial environmental matters. It should therefore be relatively easy to obtain engineers with sufjicient training and experience. (0 W e n s o n )

5.5.2. Work-environment-related audits and inspections

Within the programs for the work environment, there are also inspection procedures performed On the factory floor, the work environment is checked by internal safety engineers, trade union representatives, safety ombudsmen etc.

Regular inspections

Work environment and safety inspections are conducted regularly, up to four times a year. The inspectors check the physical work environment aspects, such as noise levels, illumination and ergonomics, chemicals etc, and that safety instructions are followed There is no check for issues that affect the external environment, except for matters that also concern the work environment. The inspectors are internal Ericsson sM, sometimes with other functions within the line organisation. (0 Reisig)

Internal control

From January 1 , 1993, there is a law concerning internal control programs and audits of the work environment. At Ericsson Telecom AI3 (ETX) these audits have been integrated within the quality system audits (QSA). This has already been described in section 5.2.2.

5.6. External demands

One of the most important criteria for a future model for environmental auditing is that it meet the demands of Ericsson's stakeholders.

5.6.1. Demands from state legislation

In Sweden, as in most industrialized countries, the most p0werfi.d stakeholder has been the state. Up until the eighties, state laws and regulations were the only motivators for environmental initiatives for most companies. Today, the Swedish state does not wish to issue detailed rules on how companies should act in environmental questions, but rather provide them with goals, and guidelines and create a regulatory framework The state then hopes that the markets voluntarily wil l create

73

Nordin-Skarin: A new model for environmental audits at Encsson

and apply systems that lead to the provided goals. (I Regeringens proposition 1992/93 : 1 SO)

In 1993, the Swedish parliament accepted a government proposal on guidelines for adaption of the Swedish society to closed materials cycles. In effect, all political decisions on environmental issues will, in the future, be directed towards a society in which materials cycles can be closed. In practice, this means switching to renewable resources and less-hazardous chemicals, using processes that consume less energy, and reusing and recycling materials and products. Furthermore, an increasing number of products will be subject to producer responsibility laws. (BRegeringens proposition 1992/93: 180)

At present, producers are held responsible for waste resulting from paper, packagmg, glass and certain plastics that they produce, import or sell. But shortly, waste from products such as building materials, cars, electronical and electrical components and devices will be added to the list. (Wegeringens proposition 1992/93:180) The govement, or an agency appointed by the government, will make sure that the waste from the products, or from production of the products, be disposed, reused, or recycled in an environmentally sound way. (El Svensk Forfattningssamling 1993:416)

The government or appointed agency may also have the right to demand that the products in question be labelled by the company, and that the company provide idormation to the user on the degree of reuse or recycling, or mode of deposition. (I Svensk Forfattningssamling 1993:416)

5.6.2. Customer demands on environmental management standards

Today, however, initiatives from industry to improve environmental performance are increasingly being taken as a means of satisfvlng customers' increasing environmental awareness, and thus, safeguarding or increasing profits and market shares. It is difficult to predetermine to what extent customers will demand verifications of environmental responsibility, but most probably companies such as Ericsson will be forced to at least comply with the EMAS criteria, so Ericsson has decided to comply with EMAS. According to Sten Hebert, three customers have explicitly announced that they will demand EMAS-certification in the future: Kommdorbundet (The Swedish Municipal Association), Sjdhnds Tele6rvaltning (The Public Telecom Operator of Zealand, Denmark), and British Telecom (BT). (0 Hebert)

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5.6.3. Direct customer demands: The case of British Telecom

An increasing number of customers will probably be more active when evaluating potential suppliers' environmental responsibility, than merely demanding to see an EMAS logo. Over the last two years, British Telecom (BT) has emerged as one of the most environmentally progressive corporations in Europe. The reason behind their elaborate green efforts might be that they perceive telecommunications as an environmentally sounder alternative to means of information exchange that require physical travel by car, plane, etc, and thus see future business opportunities. BT-experts have calculated that a trans-Atlantic flight consumes as much energy per person as five weeks of uninterrupted trans- Atlantic telephoning. (@ Wright, 1994) Needless to say, such sales arguments will bear much more weight if BT themselves act responsibly in environmental issues.

Some of BT's internal efforts include substantial efficiency improvements in consumption of energy, water and paper, recycling of telephones, phone booths, directories, and work attire. They have also succeeded in eliminating hazardous chemicals such as ozone depleters. (I Wright, 1994)

Contrary to many other major purchasers, BT has also realized that its suppliers have a key impact on its own environmental performance, and thus environmental factors are considered when selecting suppliers. Since BT is one of UK's biggest companies with a turnover and purchasing value representing 2.3% and 1% of UK's GDP, respectively, it has a major impact on its stakeholders. Since 1992, BT has recognized suppliers' green efforts by means of its Environmental Supplier Award. BT has also developed an environmental purchasing policy, which is sent to all existing and potential suppliers to demonstrate BT's emphasis on environmental issues. (I Wright, 1994)

BT's Environmental Impact Standard (6513)

Actually, one might say that British Telecom is responsible for triggering Ericsson's current environmental efforts, and it all started when Ericsson, after having submitted a quote for a major tender, unexpectedly received a copy of BT's Environmental Impact Standard (0 Hebert). This standard, named Generic Standard 13 (GS13), is issued to all would-be suppliers of contracts surmounting E750,000, and seeks to determine:

suppliers' environmental policy and practices and progress towards the introduction of integrated environmental management systems

environmentally related information on the suppliers' goods and services from a life-cycle point of view

75

26 see 5.6.3 27 see 2.7.3 28 see 5.3.3 29 see 2.4.8 and appendix 2 30 see 2.4.6

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Chapter 6: Anaijwis

6. Analysis This chapter contains the actual analysis of the data we presented in the previous chapter. We will now use the theoretical framework in order to evaluate the questions raised in the purpose of the report.

6.1. General ideas about environmental work

In this section we will build a foundation for the discussion. We will discuss environmental strategies and develop some ideas about how to use quality tools in order to obtain continuous improvements of environmental performance in the factories.

6.1.1. Development of environmental strategies

Although this thesis does not focus on the overall environmental strategy of Ericsson, it can be worthwhile to discuss this matter briefly. We haven't investigated this deeply, so most of our thoughts will be based on Ericsson's standpoint, and ideas from other companies.

Appropriate level of commitment in environmental matters

In today's world, the question is not whether a company should bother about the environment or not, but how much the company should bother. It is interestmg that some of the companies that have emphasized the enviromnent the most are competitors to, or at least in the same business field as, Encsson. E a major customer like British Telecom publishes a standard for environmental purchasing26, and a major competitor like AT&T declares a strong commitment to environmental then Encsson has to take the challenge seriously. Also, if Ericsson declares in its environmental policy that telecommunications can be sold with the environment as an argument28, it can be necessary to "mind onek own business" first.

Using the terms from the Hunt & Auster mode129, we feel that this strongly calls for a "proactive", or at least "pragmatic" attitude towards the environment. We also, naturally, strongly believe in the preventive strategy expressed in the Clean Production con~ept3~. Comparing Ericsson's environmental policy and activities performed by the environmental department with the Hunt & Auster model implies an

Nordin-Skann: A new model for environmental ad i t s at Encsson

ambition somewhere between "pragmatic" and "proactive". Of course, it is one thing for top management to express an ambition, and another to implement it throughout the organization. To reach a general consciousness all over the company will surely require some effort, although most people today are interested in environmental issues.

What does a commitment to the Business Charter and to EMAS imply?

As mentioned earlier, it is Ericsson's ambition to work accordmg to the 16 principles in the Business charter and to the requirements of EMAS31. We have not analyzed this choice any further, but accepted it as a directive for our work We feel that both the Business Charter and EMAS can bring many good things to the company, although an EMAS certification could be very expensive. Since EMAS is a program designed for industry in general, it might not be optimal for Ericsson, but most of the requirements are probably flexible enough to allow customized implementations.

The overall aims of both the Business Charter and of EMAS are very relevant, though: to promote continuous improvemen& in environmental performance32. EMAS even requires companies to take a "proactive" approach to environmental matters33 (the meaning of "proactive" is, however, not defined in the EMAS document). This actually means that Ericsson is committing itself to actions that go further than the environmental policy implies.

It is interesting to note that the attitude towards the environmental audits is slightly different between common practice and EMAS. Industry's standpoint is that the audits should be an entirely internal t00P4, whereas one of the purposes with EMAS is to communicate the findings of the audit to the public by the so- called environmental statement35. However, we believe that publishing the findings of the audit not necessarily must lead to a decline in audit quality, at least not for Ericsson. Much of the Swedish factores' environmental performance is public already, because of the environmental reports produced annually36. Extending this to also publishing facts about the organization etc. should not worry Ericsson too much.

One more issue conce?ning EMAS is worth commenting. The implementation of an environmental program should be based on the results of an environmental review conducted at the site37. We are not

31 see 5.3.6 32 see 2.4.7 and 2.6.1 33 see 2.6.1 34 see 2.5.1 35 see 2.6.1 36 see 5.3.2 37 see 2.6.1

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totally convinced that the first round of environmental audits performed at Ericsson really can be considered as "initial comprehensive analyses of the sites' activities" etc. We interpret "review" as a much more thorough analysis than a one-to-two-day-long audit. The EMAS definition is slightly vague, but other references are very clear on this point. A review requires a completely different approach and much more time than an audit38. On the other hand, if the knowledge that the review is supposed to lead to already exists within the company, it might make EMAS a little more tolerant. One can only guess until a precedent exists.

Approaching the quality program?

The phrase "continuous improvements" referred to in the Business Charter and in EMAS certainly makes one associate to Total Quality Management39. Continuous improvements is also one of the foundations of the Total Quality Environmental Management (TQEM) philosophy? So, does this mean that Ericsson already is on its way to a TQEM program? Nobody really knows, but it seems like a good idea. The quality program includes all the methods and principles necessary, and should, according to the Ericsson Quality Manual, already incorporate all aspects of the company41. It could also be a short cut to employee consciousness - compare with "everyone's involvement"42. The most important possible drawback is that environmental work might lose attention within the organization if it is integrated into the qual~ty program. This should only be the fact for sites at which the environment is a major issue of the operation, and that is probably not the case for the majority of Ericsson's factories43. Some possible implementations of using quality tools in the environmental work will be discussed later in this chaptefl.

6.1.2. Why environmental audits?

According to the environmental policy, audits shall be conducted at all production units in order to plan, perform and monitor progress, as well as to ensure awareness in other activities45. If Ericsson's opinion is that the production no longer is the major problem when it comes to environmental issuesM, why continue performing environmental audits at the factories? One reason, of course, is that it is required by EMAS and by the Business Charter, but beside that, what motives exist for an audit program?

38 see 2.5.2 39 see 2.2.2

see 2.7.1 41 see 5.1.4 42 see 2.2.5 43 see 5.3.5 44 see 6.1.3 45 see 5.3.3 46 see 5.3.6

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Nordin-Skarin: A new model for environmental audits at Ericsson

Which are the benefits and drawbacks of the auditing program?

Even if the most important work in the environmental field in the future is related to product development, there will always be environmental aspects on the production itself. Performing regular audits at the factories do have a number of positive effects: They remind the factory staff that they must pay attention to environmental matters; they point out deficiencies in the factories; they give a chance to provide information about technological development and future legislations; they give Ericssonk top management an overview of the environmental status of the sites. Perhaps most important of all, they are the only formalized procedure in which the environmental department gives their opinion on the factories' performance, only considering the environmental consequences of the production47.

One drawback is that the audits are time consuming for the factories, even if the main auditing pressure comes f?om other directions. So far, environmental audits have been performed every three years, while eg various quality audits are conducted up to three times every year$8. External inspections fiom authorities and customers are also much more frequent, so the environmental audit program is not the main cause for "over-auditing" of the factories. A more relevant objection is that the audits are performed in vain, since the factories generally perform well. The opinion expressed by Borselius that a much more thorough audit is needed49 is difficult to judge, and has not been investigated in this thesis. That kind of audit he requests resembles an environmental "review" more than an audit5O. We raised the question concerning reviews earlier in this chapte~-51, but we are uncertain about this matter. We have a feeling though, that there still might exist potential improvements in the production, but that will be discussed later52.

Environmental audits as a tool for improvements?

As earlier established, audits are best suited for verifylng compliance to a certain set of demands, but not for finding deficiencies not thought of before. This means that they can point out deficiencies in the demands they deal with, and perhaps also propose corrective actions, but also that another approach is needed in order to work with continuous improvements in factory performance. Environmental audits can find obvious flaws, but not inadequacies related to non-optimalities of large systems and processes. To achieve that kind of improvements, another

47 see 5.4.4 48 see 5.2.1 and 5.2.2 49 see 5.4.4 50 see 2.5.2 51 see 6.1.1, "What does a commitment to the Business Charter and toEMAS imply?" 52 see 6.1.3 53 see 2.5.1

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approach is necessary, which will be discussed later54. This provides us with an answer to the second item of the purpose of the thesis55. The audit can be a part of a progressive quality approach to environmental problems, but only as a follow-up procedure. It is not so useful to discuss progressive quality methodology in the context of the audit procedure, since such methodology is relevant in other parts of the management system. Naturally, tools like the PDCA56 cycle can be used for improving the audit procedure, but it is more natural to use the PDCA cycle for improving the environmental performance, using the environmental audit as a part of the "Check" phase.

Apart from the fact that EMAS and the Business Charter require audits, and that auditing is one of the points in Ericsson's environmental policy, there are good reasons to perform the audits, at least at the more enviromentally complicated sites. We will continue discussing the audit procedure in section 6.2.

6.1.3. Improvement work and projects

Improvement of environmental performance must be done continuously at the factories in order to stay ahead of customer and regulatory demands. However, as just mentioned, the environmental audit might not be the preferred tool for this effort. A change in attitude toward improvement work and a higher degree of formalization of improvement work seems to be a better approach.

Positive attitude to improvements

As we have discussed earlier57, the EQM requires that all employees strive to minimize the cost of products throughout their life cycle. Today, an increasing part of a product's life cycle cost may be environmentally related Waste, for example, is not only wasted input material that has cost money to purchase, but also an unwanted output that will incur treatment or handling costs. Furthermore, if emission levels from the product's manufacturing processes do not comply with legislation, legal costs will be added that somehow will affect the product's cost. Environmentally related costs are also likely to increase in the future, since regulations will change in favour of ecological adaption. For example, producers will be held responsible for an increasing number of waste categories, eg electronics58.

54 see 6.1.3

56 see 2.2.4 57 see 5.1.4 58 see 5.6.1

55 see 1.2

Nordin-Skarin: A new model for environmental audits at Ericsson

Since there is a direct link between these environmental costs and products' life cycle costs, the above EQM requirement indirectly demands factories to continuously minimize waste and emissions, and in other ways ecologize their production, even if factories are complying with present legislation. External demands such as EMAS and ICC's Business Charter will reinforce these demands. Naturally, the forecasted cost savings and long-term revenues of an environment-improvement initiative must be weighed against the cost and forsaken revenue it causes in other parts of the company, before it is decided to implement an improvement. As indicated before, many of today's environmental expenditures will never generate a positive long-term financial return.59

We do not claim to have an exact picture of the factories' environmental improvement efforts, nor of what the improvement potential is. However, the environmental coordinator at ETX claims that "very much can be done at all factories". He recommends that thorough environmental reviews lasting several weeks be taken to determine flaws and improvement opportunities. From the factory floor, we have also heard episodes of plant personnel having ideas about resource efficiency improvements. However, they have not shared their ideas to supervisors, managers or process engineers, because they have not felt responsible for the product in questions. Apart from these intemal sources, we have learned that many companies work to continuously improve the environmental performance of their factories beyond compliance requirements, and earn money from iF1.

When discussing the environmental status at Ericsson factories with Ericsson employees, we have often encountered an attitude that the factories are "clean" and that improvements are either unnecessary or technically or economically unfeasible62.

We would like to argue against the former attitude by repeating that there is no such thing as "clean" production@. A company perceiving itself as "clean", often does so just because it is complying with present governmental regulations. However, regulations are always set according to what politicians agree to be current scientific %nowledge", and tend to become stricter with time, since scientists tend to discover that an increasing number of substances are harmful. Furthermore, substances classified as "harmless" may be harmful if emitted at a certain rate or quantity. As long as there is industrial activity, the environment will be affected in some known or unknown way, since the environment is so complex, nobody can predict the actual effects of a certain input

59 see WaUey & Whitehead, 1994 60 see 5.4.4

see 2.4.6 and 2.7.3 see 5.3.6 and 5.4.4

63 see 2.4.6

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Chapter 6: Analysis

(remember that CFCs' depletionary behaviour in the ozone layer was unknown until the eighties).

The only way to comply with the precautionary principle, is to continuously strive to minimize the use of energy, materials, and chemicals, and to substitute hazardous chemicals with less hazardous ones. Our recommendation is that Ericsson factories at least have the attitude that "there is always a way to improve environmental quality at a lower cost" (the rule-of-thumb of continuous improvement work). The framework of what is possible constantly changes. It is of course very advantageous to be prepared for these changes, and a good way of being prepared is to have an ongoing system for continuous improvements. We repeat that material and energy efficiency improvements not only lead to environmental improvements, but also often to financial profits.

Follow-up of environmental improvements

As mentioned in section 5.4.3, it is up to the factories to decide on actions to problems discovered at environmental audits. The auditors do not control that the promised actions have taken place until at the next audit, which may occur up to three years later. If the factoly does not correct the problem, disasters might occux in the meantime! Environmental auditor Barbro Pettersson agrees that more fiequent follow-up procedures ought to be established One can compare with quality improvement work which is followed up in the QSA, which is conducted at least every 24 months, and probably, in a near future, every 12 months. In addition, process audits are intermittently conducted for certain processesa, and according to the EQM65, it is intended that all processes be regularly followed-up and evaluated within the fiamework of Process Management.

At many factories there are programs aimed at minimizing resource consumption and waste, that have been initiated by programs independent of the environmental departments initiatives. At Ericsson, a cost-reduction program called TRIM has been going on for several years, and many of the quality programs aim at reducing resource waste for quality and cost purposes. Since such efficiency improvements directly improve a company's environmental performance, it is vital that the factories report their results from such programs to instances monitoring environmental performance, too.

Education and empowerment of plant personnel

The environmental policy clearly states that all employees must be conscious about environmental issues concerning the company in general

64 see 5.2.3 G5 see 5.1.4

83

Nordin-Skarin: A new model for environmental audits at Ericsson

and the employees own activities in particulaF. To become conscious demands formal education which is practically non-existent at present. We thus suggest that education of plant personnel in environmental matters and simple quality tools be more formalized. A simple introductory course in life-cycle thinking and ecological principles that clarifies connections between ecology, quality and economy could be very efficient. Hands-on instruction in simple quality tools such as the PDCA-~ycle6~, and the seven quality control tools and seven management tools68 is also recommended If employees already know how to use these tools, it is still necessary to highlight that the tools also can be applied to environmental problems.

In some cases, plant workers have already reached the phase of environmental consciousness. They may also be aware of the economic benefits of saving energy and materials, and have many ideas about improvements69. However, the management system might discourage or prevent them fiom expressing their ideas. If so, the system must be changed so that employees be empowered with information and the possibility to easily contact supervisors and other specialists, and that the workers' ideas be taken seriously. Otherwise, chances are that the workers' creativity will die out?

As mentioned in 2.1.1, many issues facing an organization are technicdorganizational. One good example is continuous improvement of energy and material consumption. The organization should be able to solve such problems without taking higher management's time. By delegating responsibility to lower-level management and workers, the company is also most probably increasing these employees' satisfaction with their work tasks71.

Cooperation between experts

Many environmental problems are more complicated, and may require changes in technology, upgrading of process equipment, or substitution of hazardous chemicals and material. These problems correspond to operational issues mentioned in 2.1.1. Naturally, such problems are most likely to be solved by technicians, scientists or other employees with higher educations or long practical experience. The complex nature of these problems also calls for cooperation between many different fields, eg. chemistry, biology, production engineering and economics, design,

66 see 5.3.3 67 see 2.2.4

69 see 5.4.4 For more information we refer to Bergman & Klef$go, 1991, pg 283-299

70 see 2.2.5 71 see 2.2.5

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Chapter 6: Analysis

and law. In line with contemporary thoughts in concurrent engineering72 multi-disciplinary project groups could be formed. This would also be in line with clean production since one would move "upstream" in the production process, and thus attack the source of the problem 74.

Our idea is to include the present environmental auditors in such project groups. Their knowledge would thus be better utilized Much of the checklists needed in environmental audits may be filled out by people with far less or no knowledge in environmental engineering and management.

Finally, there are environmental problems that are strategic in nature (according to 2.1.1). One such problem may be whether Ericsson should have its factories EMAS certified, another whether Ericsson should become more environmentally proactive75. Clearly, these decisions call for expertise fiom top management.

6.2. Environmental audits

In this section, we will analyze the environmental audit procedure and establish a set of variables that should be considered in the choice of a new model. It forms the basis for the analysis of the various alternatives that follows in section 6.3.

6.2.1. Future audit strategy

It is obvious that some of the benefits of the environmental audit program are not results of the actual audit, but positive side-effects that perhaps can be obtained some other way (after all, the audits are supposed to collect, not distribute idormation). So, what should the audits accomplish? It can be useful to spend some time answering the questions mentioned in the point "Defining program scope and coverage" in the theoretical fiamework76.

What information do we want?

The main reason for auditing is to verify that the factories comply with all relevant requirements, i e relevant parts of the environmental manualn. The manual must, of course, be updated frequently, in order to remain

72 A means of production which has been successfully applied in Japan, in which several operations, eg. design, production planning, and production are performed simultaneously, and not consecutively. 73 see 2.4.6 74 see 2.4.5 75 see 2.4.8 76 see 2.5.3 77 see 5.3.4

85

Nordin-Skarin: A new model for environmental audits at Ericsson

relevant (it should e g contain directives ensuring that the requirements of the Business Charter and of EMAS are fulfilled).

Who is supposed to read the report?

An audit that verifies compliance with the environmental manual should be of interest to the environmental department and to the factory people involved If Ericsson decides to make the hdings public, in line with EMAS78, it shouldn't be the actual audit report that is published, but an edited statement. It is important, since making the audit report public might hold the auditors' criticism back The report should also contain suggestions for actions.

Which parts of our business operations do we need to cover?

It is Ericsson's opinion that only production units should be subject to environmental audits79. Since audits verify compliance with requirements, this is true today, when only the production is subject to legislations and directives. In the future, when operational directives and tools have been developed also for products development departments etc, there might exist relevant auditable subjects even at such departments. We don't want to say that such audits should be conducted, only that the question will be more relevant than it is today.

What subjects do we want to incorporate?

The question of what the auditor should audit is another issue that we haven't investigated so very deeply, since it is closely related to which the environmental problems at the factories are. Generally, we feel that the subjects covered by today's audits are relevant, but that they ought to be extended to also auditing compliance with Ericsson's environmental policy etc. The ICC Business Charter states that the company should audit compliance with the sixteen principlesm, and EMAS requires the audits to assess the management system at the site*'. With the Business Charter and EMAS requirements integrated into the environmental manual, the manual could be the basis for answering this question, too. An environmental management system based on eg the environmental manual could be possible to audit with a system approach more than a technicallphysical approach, auditing that workers follow the instructions instead of auditmg the actual instructions. Implementing systems of internal control like the iire inspections carried out in the risk management program=, or the work

78 see 2.6.1 79 see 5.3.3 and 5.4.5

see appendix 1, principle no. 16 81 see 2.6.1

see 5.5.1

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i Chapter 6: Analysis

environment internal control programm would be examples of management systems enabling a system audit.

How often do we need to conduct an audit?

EMAS requires environmental audits to be performed at least every three years, or that an audit cycle is completed within a three years period. The audit fiequency shall be determined according to the site's potential to damage the environment.84. It is therefore difficult to say which formal requirements the Ericsson factories will have to meet, since no precedents of EMAS exist. We believe that the three years interval is supposed to be the normal, and that more frequent auditing will be required only for genuinely hazardous factories, a category to which only a few Ericsson factories belong, so most of the sites will probably not have to be audited more often than once every three years.

There might be other reasons for auditmg more often than what is required, however. Technological developments in environmental engineering and changes in laws and legislations can make it worthwhile to exercise a tighter surveillance of the factories.

6.2.2. Ensuring sufficient audit quality

Apart fiom the prerequisites mentioned in the theoretical framew0rk8~, we have found a few other interesting points that affect the quality of the audits.

The competence of auditors versus the level of the audit

The quality of the audits is largely dependent of the qualifications of the auditors, and the resources they are provided with. The whole audit program must be organized according to the aims of the program%. Of course, this has to do with the complexity of the site that is audited, but many of the audit subjects are possible to audit without any special technical training. As a comparison, the quality system auditors perform audits concerning work environment without being specially educated in this fieldm. This is possible (and successful) because the auditors audit a small management system, and the quality system auditors are specialized in auditing such systems. The conclusion is that the necessary training of the auditors not only depends on the technical circumstances of the audited site, but also on how the audit questions are written and how the management system is organized To audit a management system, the

see 5.2.2 see 2.6.1 see 2.5.3

86 see 2.5.3 87 see 5.2.2

87

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Chapter 6: Analysis

Objectivity of the auditors

Another important prerequisite for achieving a high audit quality is the objectivity of the auditors92. This is also specifically required by EMAS93. Among all the inspection procedures carried out at the factories, the internal work environment and safety inspections94 are therefore disqualified

The positive side-effects of the audits

It is interesting to notice that what the factories seem to appreciate the most is the information they receive fiom the auditors, and not the audit itselPs. If the audits could be performed in the way described above, this could be the only part of the audit in which environmental education is absolutely necessary. If this information were distributed some other way, there might be no actual need for the environmental audits to be performed by environmental specialists.

Action plans and follow-up procedures

The audit must result in some sort of action plan aimed at correcting the deficiencies discovered, otherwise most of the point of conducting audits at all is lost. Together with a mechanism for following-up on the findings, this is also a requirement of EMAS96. Up until now, the factories have been responsible for proposing actions, but there might be good reasons for letting the auditors at least come up with suggestions. After all, the auditors are experts on the subject they are auditing. Once again, it has to do with the level of the audits versus the competence of the auditors. If the audits concentrate on technical matters and the factories don't really h o w how to handle the environment, then the auditors can contribute a great deal with their knowledge. This has generally been the situation so far. On the other had, if the factories have a manual to work with, and the auditors check that they work according to the instructions in the manual, the findings of the audit wiU be more of the type "complied withhot complied with", and it will be much easier to propose corrective actions. For factories with few environmental hazards in the production and a good record of environmental audits in the history @e the majority of the Encsson factories97), it should be even simpler.

92 see 2.5.3 93 see 2.6.1 94 see 5.5.2 95 see 5.4.4 96 see 2.6.1 97 see 5.3.5 and 5.4.4

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6.2.3. How to minimize auditing efforts

The background for this thesis was that the factories are subject to "over- auditing", and that it would be valuable if the audit procedures could be rationalized somehow98. How could this be done? We can see two ways, basically. The first way is rather trivial: instead of performing a series of audits at different occasions, spending the factory management's time each time, two or more audits could be coordinated and performed simultaneously. The second way is more difficult to evaluate: to integrate two or more audits into one. Both these options decrease the number of audit occasions, but the time spent auditing ought to be almost as much as before.

A more interesting approach is to investigate if there occurs any "double- auditing". There is no point in auditing something that someone else already has audited. It must be optimal to coordinate or integrate the environmental audit with another procedure that audits the same, or at least the same kind of issues. Only in that case would it be possible to really rationalize the overall auditing.

6.2.4. Important variables to consider

In the previous sections, we have discussed various aspects of environmental auditing. Before defining and analyzing the alternatives, we will conclude this discussion into a set of variables that are important to consider. These variables will form the basis for a qualitative evaluation of the different models we have to choose between.

Correspondence with desired audit scope and coverage. A new audit model should be suitable for the a ims of the audit program.

Compliance with relevant EMAS requirements. This variable is closely related to the first one, but because it is a directive of the entire thesis, we have chosen to treat it separately.

0 Quality of the audit.

The aspect of rationality.

Implementation possibilities

The first two variables correspond to 6.2.1, the third to 6.2.2 and the last variable to 6.2.3. We will also discuss the possibility of implementing the various models.

98 see 1.1

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6.2.5. Possible alternatives

With the ideas above in mind, it is now suitable to establish the different alternatives of future environmental audit procedures to analyze. We have started with the auditdinspections carried out in the factories that are coordinated within Ericsson, and performed by auditorshispectors that meet the requirements of objectivity99. These are (beside the environmental audits) the quality system audits (QSA)l@J and the Risk Management insurance inspectionslol (see figure 6.1). The idea is to combine these procedures in all imaginable ways that could possible lead to a rationalization of the environmentd audit procedure.

y NEWMODEL?

Figure 6. I : Building blocks for creating a new model for environmental audits

We can imagine two ways of rationalizing the audits: coordination and integration (see figure 6.2).

99 see 6.2.2 loo see 5.2.2

see 5.5.1

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Nordin-Skarin: A new model for environmental audits at Ericsson

Coordmation between Quality System Audit and Environmental Audit:

Integration between Quality System Audit and Environmental Audit:

Figure 6.2: Examples of symbolic illustration of coordination and integration respectively

This gives us the following combinations:

1. Neither coordination nor integration, i e environmental audits as of today (perhaps with a revised checklist, though).

2. Coordination with QSA, i e performing the environmental audit and the QSA simultaneously at the site, in order to optimize the time spent with the factory SM.

3. Coordination with insurance inspections, i e the same as no. 2 but with the insurance inspections instead of the QSA.

4. Integration with QSA, i e letting the quality system auditors perform the environmental audit.

5. Integration with insurance inspections, i e letting the loss control engineers perform the environmental audit.

6. Integration with QSA and insurance inspections, i e dividmg the environmental audit between the quality system audit and the insurance inspection.

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6.2.6. A comparison between the various inspection procedures

Before analyzing the different alternatives, we will analyze the thee inspection procedures in question. Table 6.1 summarizes a number of key features of the three programs1m.

Table 6.1 Comparison between the various inspection procedures at the factories

Procedure: Environmental audit QSA Insurance inspection

Purpose: Ven@compliance Veri@ Evaluate all with environmental compliance installations and legislations and with the routines &om a assess environmental Ericsson loss-control management system Quality point of view

Manual

Subject: Routines, installations Management Routines, installations and organization for systems and and organization for protection of the organization loss control environment in general

Coordination: Centralised Decentralised Centralised

Auditors: Internal staff Internal staff External consultauts

Methodology: Site visit, centrm Site visit, Site visit, centrally designed individually designed questionnaires designed questionnaires

questionnaires

Frequency: Every thee years Mini” Annually every two years

Site coverage: Whole site per audit Depends on Whole site per audit business area

Duration: 1-2 days From 1 day About 1 day up to 1 week

Follow-up Written report Written report Written report routine:

lo2 see 5.2.2,5.4 and 5.5.1

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Nordin-Sen: A new modeI for environmental audits at Ericsson

The environmental audit and the risk management inspections resemble each other on most of the points. Environmental hazards are also often risks, so a number of installations are being audited both by the environmental auditors and by the loss control engineers. The main difference between the subject of these two programs and the quality system audits is that QSA only checks routines and systems etc, and no physical installations at all. The QSA program is also more decentralized in the planning of the audits, even if education of auditors standardizes the procedure.

6.3. Analysis of the alternative environmental audit procedures

This section contains an analysis of the various altemative models for environmental audits that were described in 6.2.5. The analysis will try to establish what the consequenses of the altematives might be, and under which circumstances they are possible to implement at all.

6.3.1. Separate environmental audits

The current procedure of environmental audits wil l be analyzed in order to be able to compare this altemative with the other ones. It might also be possible to improve this altemative compared with today's procedure.

Correspondence with desired audit scope and coverage

This hardly needs any analysis. Almost the only change that would be necessary is to adapt the audit check list slightly, in order to cover all relevant parts of the enviromental manual.

Compliance with relevant EMAS requirements

As far as we can see, the environmental audits conducted at Ericsson comply with most of EMAS requirements. What is missing is perhaps a little more focus on the management system of the site. The mechanisms for corrective action and*follow-up might also need to be refined There should be no problems of achieving compliance with all regulations, however, since the environmental audits are intended to be carried out in the same way as they are at Ericsson today.

Quality of the audit

Of course, there will be no loss of quality compared to today's procedure if today's procedure is maintained (!). If the audit would change in the

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direction described earlier103, with the manual as the basis and perhaps elements of internal control ("desktopaudit"), it is perhaps a little "overkill" to have experts on environmental engineering to perform the audits, but that is of course no real problem. There are potentials for improvements when it comes to the follow-up of the audits, however. We think that there are reasons for the auditors to at least s w e s t corrective actions. Further, there ought to exist a follow-up procedure other than the next audit (three years later), at least for more serious inadequacies. The opinion that the auditors should be more strict in their judgements104 is difficult for us to evaluate. It is a matter of personal opinion what is a serious flaw, but remarks in an audit should only concern items that really could damage the environment. This discussion belongs to the planning of audit scope, which we haven't investigated in detail.

The aspect of rationality

Since our approach to rationalizing the audits is to combine it with another similar procedure, this variable becomes rather meaningless. One little comment though: an audit that more than today had elements of a "desktopaudit" would of course spend less of the factory workers time. On the other hand, the plant personnel would be more busy carrying out the internal control.

Conclusion

This certainly is the easiest option. A few improvement possibilities exist, but only minor changes of the program should be relevant.

6.3.2. Coordination with Quality System Audits

This alternative means that the environmental auditor and the quality system auditor simply agree on a date, and perform their respective audits at the same time. The first two variables ("Correspondence with desired audit scope and coverage" and "Compliance with relevant EMAS requirements") would be the same as with a separate environmental auditlos, since it is a separate audit.

Quality of the audit

The aspects we discussed in the previous section concerning separate environmental audits are applicable here too, but there might be some additional (smaller) effects on the audit quality. Performing two audits at

lo3 see 6.2.2

lo5 see 6.3.1 104 see 5.4.4

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Nordin-Shin: A new model for environmental audiis at Ericsson

the same time can have two consequences: synergy effects and loss of attention.

First, the two auditors are specialists on their respective field, and could therefore have something to learn fiom each other. With the checklists being used today, there are few parts that are common with the QSA, so the auditors would probably perform their respective audits independently of each other. Still, since the two audits focus on different subjects, they could gain something from just meeting and discussing the sitels performance. They might also have slightly different approaches to the audit when it comes to audit methodology. If the environmental audit would focus more on management systems according to the earlier discussion106, the synergy effects should be greater.

On the other hand, walking around with a quality system auditor means that the undivided attention to environmental matters is lost (and the same for the QSA, of course). It is still an expert on environmental issues that per€orms the audit, but this person is not alone at the factory. The plant management's attention will be divided between the two audits. The point of giving the environmentalists' view of the production107 is therefore somewhat lost.

The new product area organisation at Ericsson Telecom108 also affects the evaluation. It will lead to only a minor part of the factory being audited at one occasion, and the audit of the plant management being separate fiom the audit of the production (the plant management is a service unit of its own, and the production is divided into a number of product units). It ought to be better to coordinate the environmental audit with a QSA performed at a product unit, to avoid competition of plant management attention. It depends on how the QSA program will be organized at the ETX factories.

It could also be possible to cooperate with QSA for follow-up of measures. Since QSA is performed more often than the environmental audit, it ought to be better to let the quality system auditor check that proper actions have been taken, unless of course another follow-up routine is implemented

The aspect of rationality

With an environmental audit as of today, there ought to exist only small time savings fiom this model. For the auditors, this procedure should be neither more nor less time consuming. There would be a small difference for the factories, though. One audit occasion every three years vanishes.

see 6.2.2 lO7 see 6.1.2 loS see 5.2.2

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On the other hand, housing two auditors at the same time may be more disturbing.

The more the scope of the environmental audit changes, the more of the audit moments would be similar between the two audits, and the more beneficial this model would be. Once again, it depends on the future strategy.

Implementation possibilities

This model ought to be simple to implement. All that is necessary is to determine an audit date together with the quality system auditor.

Conclusion

This model has a minor advantage and perhaps a minor disadvantage. The real value of implementing it depends on the scope and subject of the environmental audits in the future, whether it should focus on technical aspects or on management aspects.

6.3.3. Coordination with Risk Management

The idea is the same as the previous section, only that iQ.S.A.j the environmental audits are coordinated with the risk management insurance inspections instead The two first variables are omitted here, too.

Quality of the audit

Just like the previous model, the aspects of synergy and loss of attention are in question. The effects should be less important, though, since the insurance inspections and the environmental audit so much resemble each other. On the other hand, that is a good reason for letting the loss control engineers perform the follow-up of the environmental audit. They already check many similar items, and they do it every year. By performing the audits together, it ought to be easier for risk management to follow-up on measures from an environmental audit they took part of themselves. The discussion of management system auditsl@ is affecting the evaluation of this model, too. With more management focus on the environmental audit, some of the similarities vanishes, but some synergy effects might appear instead.

IO9 see 6.2.2

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Nordin-Skarin: A new model for environmental audits at Ericsson

The aspect of rationality

With an environmental audit as of today, there ought to be a lot of time to save. Without being absolutely sure, we believe that the similarities between the two programs would make it possible to share many of the moments of the audithspection, and thus save time for the factory. Site visits, information meetings, education and reporting should be possible to coordinate. Should the scope of the future environmental audit change, less possible gains ought to exist.

Implementation possibilities

Just like the previous model, it should be easy to implement. Cooperation between the environmental department and the corporate coordinator of the risk management program has also been proposed

Conclusion

This model is somewhat the opposite of the previous. The value of it depends on the future audit strategy. With today's procedure it seems like a good idea, but with another focus of the environmental audit, the number of benefits decrease.

6.3.4. Integration with Quality System Audits

To let the environmental audit be performed by the quality system auditor is the idea that actually was part of the background of this thesis. We will now analyze what we have found regarding this model.

Correspondence with desired audit scope and coverage

With today's environmental audit, the correspondence is not very high. The QSA does not focus on technical installations, only on management systems and organization. For a site with many technical aspects of the environment, i e a "group 2 factory'lllO, this would cause problems, but for a "group 1 factory" it would work better. Further, if the environmental audit were to focus more on system aspects111, the resemblance with QSA would increase.

110 see 5.3.5 see 6.2.1

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Chmter 6: Analusis

Compliance with relevant EMAS requirements

We can only repeat that it is impossible to say for sure what EMAS might think As far as we can see, the biggest problem is the qualification of the auditors. If it is possible to prove that it works, and that the quality is suflicient, then hopefully it is OK. Both EMAS and QSA refer to IS0 1001 1 for requirements on audit methodology, so that should be no problem. The product area organization of Ericsson Telecom and its effects on the QSA112 shouldn't cause any problems either, since EMAS approves auditing the site part by part, as long as the entire audit cycle is completed within a three-year period (that is how we interpret the demand accounted for earlier113).

Quality of the audit

This is mostly dependent on what the auditor is supposed to audit (the subject of the audit). With the technicaVphysical approach of today, the quality system auditor's training is definitely insufficient, at least for environmentally complicated sites. With a system approach, it is a completely different issue. In that case, the possible gain would be substantial. The quality system auditors are specially trained in auditing and assessing management systems, so there ought to be a great potential for synergy effects.

There is another positive effect that does not depend on the audit scope. The report system of the QSA program is very strong, and remarks in a QSA are taken very seriously. We don't imply that factories neglect remarks in an environmental audit, but the @ty system is more acknowledged in the organization. It has already been the case with the intemal environment program114, it could be the same with the external environment. The QSA is also performed more often. Therefore, the follow-up procedure would be improved Further, the quality system incorporates continuous improvements115, which is a very beneficial attitude for environmental matters as well. It could be a way of achieving a few of the benefits of the Total Quality Environmental Management (TQEM) approachl16.

On the other hand, environmental issues could also lose attention, due to the priority they are given by the auditor. It is no longer the only subject of the audit, and there is of course a risk that the quality system auditor more or less iguores that part of the audit. A skilled and interested auditor can make it a benefit, since he can perform an overview of the production,

112 see 5.2.2 see 2.6.1

114 see 5.2.2 115 see 5.1.4

see 2.7

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Nordin-Skarin: A new model for environmental audits at Ericsson

but another auditor can have the opposite effect. With a product area organization, the QSA is conducted at parts of the factory at each time, and the different parts are being audited by different auditors. There is a substantial risk that the standard of judgement would vary between different audits, and that the overview of a site is lost.

The aspect of rationality

The rationality aspect depends on how the environmental management system is designed (we assume that the audit is system-based). We have earlier described the idea of integrating the environmental management totally into the quality management117. With that approach, or with an environmental management system that resembles the quality system in structure, it should take little extra time to audit the environmental issues. With a totally different system, there would be no time savings, at least not for the auditor. The factories should experience a relief, by being audited less fkequently.

The situation could get worse for the environmental coordinator118, though. If this person must participate at every environmental audit, then he/she will have a multitude of audits to "look forward to". On the other hand, with a system audit, this person might not have to participate at all.

Implementation possibilities

This item is perhaps the one that is most dependent on the subject of the audit. An extensive techuicaVphysical audit will probably not be possible to implement, nor will a system audit that takes too much time. The quality system (as defined in the quality manual) incorporates all activities within Eficsson119 and should therefore be audited by the quality system auditors according to the Ericsson Quality Manual12O. However, quality system auditors have pointed out that the major problem of the integrating the work environment internal control into the QSA has been that it is time consuming121 to audit. To persuade them to perform an extended audit with environmental questions should be possible, if only that extension takes little time to perform.

This model could also be a little difficult to monitor, since it consists of a series of small audits conducted now and then It is difficult for us to determine if this is a problem or not, since we don't h o w the possibilities of using various information systems etc.

117 see 2.7 118 see 5.3.2

see 5.1.4 120 see 5.2.2

see 5.2.2

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Chapter 6: Analysis

Conclusion

With a system that enables a quality auditor to perform the audit quickly, by using eg. internal control procedures, this model has some benefits. We believe that it could be an alternative only for sites with few environmental hazards, because it will be difficult to design systems that totally make technidphysical audits unnecessary.

6.3.5. Integration with Risk Management

We have already seen that there are many similarities [Q.S.A.] ‘“41 [7] between the environmental audit and the insurance inspectionslzz. This section analyzes the idea of letting the loss control engineers perform the environmental audit.

Correspondence with desired audit scope and coverage

For this variable, we have a situation opposite to that of the previous model. With a technicdphysical environmental audit approach, there are many common issues, but with a system approach, the differences dominate. The insurance inspections are evaluating all safety-related aspects, and there are environmental issues that do not belong to them, so the insurance inspection would have to be extended The most important difference is that the insurance inspection hardly evaluates management systems at all, only safety-related routines.

Compliance with relevant EMAS requirements

The companies that supply Ericsson with the loss control engineers also offer environmental audit services, so it should be possible to obtain engineers that meet the required qualifications. Since the inspections are performed annually, they also qualify in that aspect. If it proves to be impossible to extend the inspections with the management system part, it will probably not be approved EMAS is quite clear on this point. Again, it’s impossible to say anyhng dejinitely.

Quality of the audit

If it is possible to have the insurance inspections performed by loss control engineers that also have environmental audit training, that aspect of quality should be satisfactory. Depending on the qualifications of the

122 see 6.2.6

101

Nordin-Skarin: A new model for environmental audits at Ericsson

engineers, there might be a potential for synergy effects. However, with engineers that lack special audit training, and an environmental audit dominated by system aspects, things are different. Further, the time the inspectors can spend on pure environmental aspects is crucial.

Our theoretical framework mentions external consultants as one way of achieving high audit quality123. On the other hand, the environmental auditors within Ericsson all come from different parts of the company, sharing the auditing work of all factories124, so the need for external impulses might not be so high. There is also a risk that external inspectors are worse received than intemal auditors.

Since the insurance inspections are canied out annually, there would be a tighter control of the factories. For a number of sites, this is probably in vain, but it could be valuable for the more complicated factories (belonging to group 1 125).

The aspect of rationality

The rationality of this model depends on the number of equalities of the environmental audit and the insurance inspections. If the inspections can be extended (motivated from a loss-control point of view) to incorporate all of the environmental audit subjects, the environmental audit could simply be replaced by the insurance inspections. It is rather pointless to audit something every three years that somebody else is auditing annually. If, on the other hand, there are items of the environmental audit that the insurance inspectors cannot audit (eg. environmental management systems), they have to be audited by someone else, and then the rationality is somewhat lost.

Another aspect of rationality is the cost of the inspection. If the insurance inspection has to be extended with extra time, they will be more expensive. This extra cost has to be weighed against the benefits of releasing the factories from one audit every three years.

Implementation possibilities

This depends, as usual, on the scope of the environmental audit. The insurance inspections are technically oriented, and should probably not audit any management systems. To have the loss control engineers auditing the technical parts of the environmental audit should be possible, according to the coordinator of the corporate risk management progra"26, but it might be expensive.

123 see 2.5.3 124 see 5.4.2

126 see 5.5.1 125 see 5.3.5

102

Conclusion

The tecbnicaVphysical aspects of the environmental audit could probably be integrated into the insurance inspections, but not the management system related parts. Insurance inspections could therefore not replace the entire environmental audit.

6.3.6. Integration with Quality System Audits and Risk Management

This kal model is in a way a

models that tries to take advantage of the benefits of them without dealing with the drawbacks. In this model, the quality system audits would s;udit thesystem aspects, and the insurance inspections the technical aspects of the environmental audit.

Correspondence with desired audit scope and coverage

We have earlier seen that the environmental audit can be replaced by either the quality system audit or the insurance inspections (or neither) depending on if the audit is either technically/physically or system based. With this model, it is possible to achieve all combinations in between, by simply dividing the environmental audit into two parts.

Compliance with relevant EMAS requirements

This is very difficult to say. There is no requirement in EMAS stating that the environmental audit cannot be divided into two parts, but there is on the other hand no statement of the opposite. We must once again refer to our belief that EMAS hopefully approves any model that works without being contradictory to the requirements.

Quality of the audit

For both of the two previous models, the most serious reservation was the possible mismatch between the qualification of the auditors and the scope of the environmental audit. With this model, that objection would be eliminated This model would incorporate all the possible synergy effects by letting the two audit programs involved audit subjects within their respective special fields.

There are some potential risks with this model, however. First, the overview of environmental performance is somewhat lost since nobody evaluates all environmental aspects of the site. The two parts of the

103

Nordin-Skarin: A new model for environmental audits at Ericsson

environmental audit are performed not only by different auditorshispectors, but also on different occasions. Second, the environmental matters might lose attention since no auditor would audit ody the environment. It could therefore be dangerous to implement this model at sites with many potential environmental hazards.

The aspect of rationality

As far as we can see, the QSA does already perform some parts of today's environmental audit, and the loss control engineers some other. Any possible rationalization therefore depends on how much of the environmental audit that is covered altogether, and if the rest easily can be included in the two programs. It should, of course, also mean more work to monitor the whole program, since there are so many more people involved on a much higher number of occasions than before.

Implementation possibilities

This is almost totally dependent on the possibilities of adapting the environmental audit checklist and dividing it into two parts in a wise way. The biggest problem ought to be to convince the quality system auditors that they should extend the audit. However, it is probably much easier to implement this model than one of the two previous ones.

Conclusion

It seems like a very good idea that the quality system auditors audit everything that is system related, includmg the environmental management system, and that the loss control engineers check all technical installations and routines that are related to some sort of risk, including installations and routines for protecting the external environment. It ought to be possible, and wise, to have the environmental audits of today replaced by this model, at least for sites with little potential for environmental hazards.

6.3.7. Different audits at different sites?

We have earlier described a classification of all Ericsson factories in two groups, environmentally simple factories (group 1) and environmentally complicated factories (group 2)127. We have also in the previous sections of this chapter encountered the thought that a revised model of environmental audits might be possible to implement at the group1 factories, but maybe not at the rest. In a factory with few potential environmental hazards, the environmental management system will be less extensive and the number of protection installations will be small. This

127 see 5.3.5

104

Chapter 6: Analysis

means that the quality system audit only needs to be complemented with a few questions, and that the insurance inspection perhaps is sufEcient for the technical part of the environmental audit. An environmental audit for a simple site consists of fewer questions than for a complicated site, leading to bigger possibilities to implement, for example, the model described in the previous section. The potential quality losses of that model will then be reduced or eliminated At the goup-2 factories, traditional environmental audits may be the only model that satisfies all requirements. The environmental audit would, in that case, be rationalized for about 25 of Ericsson's 35 factories.

It is, of course, possible to take this idea even further, by customizing the audit procedure for every single plant. We don't think that the potential gains in audit rationality will compensate for the extra burden of administrating such a program, however. It is also an advantage to have staudardized procedures, both regarding the quality of the audit and regarding the aspect of administration.

It is, however, in line with EMAS to customize the audits, since the EMAS certificate is given to a site, not a companylZ8.

6.3.8. What are the next steps?

The first thing to do must be to decide which, of all options regarding audit scope, should be the basis for the continuing work129. The organization of the environmental management system, the relationship between this system, and the environmental manual set the objectives and limits for the environmental audit program. With these questions answered, all the models described and analyzed in the previous sections will be much easier to evaluate.

To fiuther investigate the possibilities, it is necessary to have involved persons from the various progams, i e environmental auditors, quality system auditors and the internal risk management coordinator to discuss the matter, and to compare the actual procedures and checklists that are being used. In this thesis, there was no time for an investigation like that (which, by the way, would have taken a lot more time for us to perform than for the involved Ericsson staff). One possible way is to start by coordinating the environmental audit with a @ty system audit and with an insurance inspection respectively (i e conduct two test audits according to the models of 6.3.2 and 6.3.3), in order to study the various procedures.

lZ8 see 2.6.1 lZ9 see 6.2.1

105

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Nordin-Skarin: A new model for environmental audits at Ericsson

A first step to incorporating environmental management into the Total Quality Management program, i e towards Total Quality Environmental Management.

A loss in overview of the audits, since they will be performed by different people at different occasions.

7.4. A proposed plan of actions

Our recommendations concerning following actions are:

1. Decide the audit strategy to be followed, eg. by determining which parts of the environmental manual need to be audited and how that should be done.

2. Investigate the similarities between the check lists of the quality system auditors, the loss control engineers of the risk management program and the audit strategy determined

3. Perform test audits in order to evaluate the procedure. We recommend that the model in section 6.3.6 be used, concentrating on the group of environmentally simple assembly factories witbin Ericsson (i e the factories belonging to goup 1133).

4. Investigate the possibilities of having this model of environmental auditing approved by EMAS.

5. If the model proves to be in accordance with andit quality requirements and can be approved by EMAS, implement the program at all these factories.

133 see 5.3.5

108

Y (d

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Eicher, L. D. (1992) Quality Management in the '90s: The IS0 9000 phenomena, Quality Forum, Vol. 18, No. 2, June 1992, pg. 74-79

Hauser, J. R. & Clausing, D. (1988) The House of Quality, Hmard Business Review, May-June 1988, pg. 63-73

Hedin, L.-G. (1993) D%g kvalitet kan ta 1993, pg 9

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Klefsjo, B. (1993) The importance of statistical engineering in the TQM process, ESTEM Magazine, 1/93, pg. 26-28

Knsbbnan, R et al(1993) In search of quality improvement: Problems of design and implementation, Academy of Management Executive, Vol. 7, NO. 4, pg. 7-20

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Nordqvist, 0. (1993) TQEM 16ser miljoproblem i USAS tillverkningsindustri, Ny Teknilc/Teknisk Utblick, August 1993, pg. 6-7

112

Thompson, B. C. & Rauck, A. C. (1993) Applying TQEM practices to Pollution Prevention at AT&T's Columbus Works Plant, Total Quality Environmental Management, Summer 1993, pg. 3 73 -3 8 1

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I3 Publications

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ICC (1989) Environmental auditing, ICC Publishing S.A., Paris, France

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113

I

I Conference paDers

Bhushan, A K. (1993) Economic Incentives for Total Quality Environmental Management, EEE International Symposium on Electronics and the Environment 1993, IEEE Service Center, Piscataway, New Jersey, USA

Club de Bruxelles (1993) Eco-Auditing and Eco-labelling in Europe - Summaries of the debates, Club de Bruxelles, Bruxelles, Belgium

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I Ericsson documents

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The Ericsson Quality Manual - Policies and Directives, ENLZT 101 839 R2,1993

ERICSSON RISK MANAGEMENT - INSTRUCTIONS FOR TECHNICAL SERVICE, Instruction, LME/DRM 94:002

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Miljorevision av produklutvecklande enheter, Intem information (rapport), LJkWG-94: 0 1 7

Miljorevision - FrAgelista, LME/CM-92:001 Usv, 1993-05-04

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Quality System Audit Responsibility - Directive, Lh4EDTQ 034 01-103 Uen, 1993-01-19

Risk Management Policy and Loss Control Guidelines, EN/LZB 118 656 R1,1993

Supportfunktion - Direktiv, Environmental management, LME/G 1/0 120- LXE 109 02 USV, 1993-12-01

TQM-GRID LME/G, LME/G 170 05-LXE 109 02 Usv Rev A, 1993-11-29

114

I Other literature sources

Specification for Environmental management systems, British Standard 7750:1992, British Standards Institution, BSI Standard Publications, London

0 Personal Interviews

&ran Alestam, 1994-04-12, Quality system auditor of BA Telecom's factories at the Hiigersten factory (€€F)

Leif Alrnren, 1994-03 -23, Quality system auditor at shop-floor level at the Hiigersten factory (HF)

Kenneth Borselius, 1994-05-03, Environmental coordinator at the Hiigersten factory (HF)

Elof Eriksson, 1994-03-1 1, Quality system auditor of Ericsson's mother company

Sten Hebert, 1994-03-08,1994-03-15, Ericsson's executive of environmental affairs

Mats-Olov Hedblom, 1994-04-08, Environmental coordinator at STORA AB, Falun, Sweden

Anders KMelt and Monica Kjellberg, 1994-03-24, Quality system auditors of BA Telecom

Claes Mirtenson and Anders Henriksson, 1994-04-06, Coordinators of Ericsson's corporate risk management program

Barbro Pettersson, 1994-03-03 , Ericsson's environmental audit program coordinator

Achim Reisi& 1994-04-22, Safety engineer at at the Hiigersten factory OIF) Per Samuelsson, 1994-04-18, Manager for Service Unit Surface Treatment

&ran Whitlock, 1994-03-29, Coordinator of worker health and safety issues at BA Telecom

115

Appendix 1: The Business Charter for Sustainable Development: Principles for Environmental Management (Source: I ICC, 1990)

1.

2.

3.

4.

5.

6.

7.

8.

_ -

Corporate priority To recognise environmental management as among the highest corporate priontes and as a key determinant to sustainable development; to establish policies, programs and practices for conducting operations in an environmentally sound manner.

Integrated management To integrate these policies, programs and practices fully into each business as an essential element of management in al l its functions.

Process of improvement To continue to improve corporate policies, programs and environmental performance, taking into account technical developments, scientific understanding, consumer needs and community expectations, with legal regulations as a starting point; and to apply the same environmental criteria intemationally .

Employee education To educate, train and motivate employees to conduct their activities in an environmentally responsible manner.

Prior assessment To assess environmental impacts before starting a new activity or project and before decommissioning a facility or leaving a site.

Products and services To develop and provide products or services that have no undue environmental impact and are safe in their intended use, that are efficient in their consumtion of energy and natural resources, and that can be recycled, reused, or disposed of safely.

Customer advice To advise, and where relevant educate, customers, distributors and the public in the safe use, transportation, storage and disposal of products provided; and to apply similar considerations to the provision of services.

Facilities and operations To develop, design and operate facilities and conduct activities taking into consideration the efficient use of energy and materials, the sustainable use of renewable resources, the minimisation of adverse environmental impact and waste generation, and the safe and responsible disposal of residual wastes.

.,. . ._. . . . . - . . . , ..... - . , ~ . ,,.-. .. ~

9.

10.

11.

12.

13.

14.

15.

16.

Research To conduct or support research on the environmental impacts of raw materials, products, processes, emissions and wastes associated with the enterprise and on the means of minimizing such adverse impacts.

Precautionary approach To modify the manufacture, marketing or use of products or services or the conduct of activities, consistent with scientific and technical understanding, to prevent serious or irreversibel environmental degradation.

Contractors and suppliers To promote the adoption of these principles by contractors acting on behalf of the enterprise, encouraging and, where appropriate, requiring improvements in their practices to make them consistent with those of the enterprise; and to encourage the wider application of these principles by suppliers.

Emergency preparedness To develop and maintain, where significiant hazyds exist, emergency preparedness plans in conjunction with the emergency services, relevand authorities and the local community, recognizing potential transboundary impacts.

Transfer of technology To contribute to the transfer of environmentally sound technology and management methods throughout the industrial and public sector.

Contributing to the common effort To contribute to the development of public policy and to business, governmental and intergovemental programsand educational initiatives that will enhance the environmental awareness and protection.

Openness to concem To foster openness and dialogue with employees and the public, anticipating and responding to their concems about the potential hazards and impacts of operations, products, wastes or services, including those of transboundary of global significance.

Compliance and reporting To measure environmental performance; to conduct regular environmental audits and assessments of compliance with company requirements, legal requirements and these principles; and periodically to provide appropriate information to the Board of Directors, shareholders, employees, the authorities and the public.

Appendix 2: Development stages of Corporate Environmental Management Programs (Source: @I Hunt and Auster, 1990) Criteria Stage five Stage One stage Stage three Stage four

"Beginner" "Fire Fighter" "Concemed " U S t " "proactivist" Citizen"

Degreetowhich program reduces environmenal risk

Commitment of organization

General Mindset of Corporate Managers

Resource commitment

Support and involvement of Top Management

Noprotection Minimal Moderate Comprehensive Maximum protection prOteCtiOn protection protection

Environmental Environmental Environmental Environmental Environmental management is issues should be mauagement is a management is management is a unnecessary adressedonlyas worthwhile animportant priorityitem

necessary function business function

Minimalresource Budgetfor Consistent, yet Generally Open-ended commitment problems as they minimal budget suf6cient funding funding

occur

Involvement with:

Legal Counsel

Public relations

Commitment in Aware and Actively involved No involvement Piecemal involvement theory moderately

involved

None Moderate Moderate High Daily

None None Moderate High Daily

I

Program design

Performance objectives

Integration with company

Reporting to Top Management

Reporting Structures

None Resolve problems SatisQ corporate Minimize Actively manage astheyoccur responsibility negative environmental

environmental matters impacts

Notintegrated Involvedwith Minimal other interaction with departmentson other piecemalbasis departments

Generates reportingonly voluminous

reportsthatare rarely read

Noreporting Exceptions

Actively involved Moderate interaction with with other Other departments departments Consistent and Personal targeted meetings with reporting managers and

boardofdirectors

None Exceptions Internal reporting Mostly internal Formalized internal and reportingonly only with some

external external reporting reporting

mechanisms

Manufacturing/ Production

None None None Moderate Daily

I ProductDesign INone None None Minimal Daily

About the authors The authors of this Masters Thesi