The development of an Environmental Management System (EMS), as
described in the ISO 14000 standards, is a multi-step process. The
steps include identifying an organization's environmental aspects and
impacts, reviewing regulatory requirements for applicability, setting
environmental goals and objectives, and then prioritizing these
issues by their "significance."

In many organizations, the analysis process can be lengthy and
complicated, however, the goal is a simple one: identifying key
indicators that can be used to track the success of the EMS at
preventing pollution. The success, or lack thereof, is used as a
guide to the ongoing development and improvement of the EMS. Which
" key indicators" are chosen will vary from organization to
organization, but examples could include the amount of energy used
during the manufacture of a product; the amount of hazardous waste
disposed of by a particular facility; or the ability of the
organization's products to be recycled after they have been marketed.

One of the major criticisms of the ISO 14000 standard is that it
provides little guidance for ranking the significance of the various
environmental indicators, beyond the general assumption that
regulatory compliance is "required" and therefore any regulatory
indicators are of high significance. In most organizations, the
people developing an EMS will identify many potential environmental
indicators and careful thought about how to select and prioritize
these indicators is needed so that the EMS will meet the needs of the
many different stakeholders interested in its success.

Since the Environmental Management System approach is based on the
ideas of more general management concepts such as continuous
improvement and Total Quality Management, it makes sense to look to
current management theory to see how prioritization of indicators is
managed there. A new approach to managing indicators emerged in the
1990's called "the Balanced Scorecard." This column will discuss how
the Balanced Scorecard approach might be used in organizing
indicators within an environmental management system.

Traditional Methods

Environmental indicators are specific measurements identified as
strategically important to the success of the environmental program.
There is a strong preference in selecting numerical indicators, which
can measure more subtle changes in performance than qualitative
indicators. However, a numerical indicator is only meaningful when we
understand the significance of the measurement in context. For
example, the question "Is 5 tons per year of hazardous waste good
performance or poor?" can only be answered if there is some context
for the number.

In a closely related example, industrial hygienists might try to
identify the significance of a specific amount of gas vapor in a
worker's breathing zone. A finding of five parts per million of
chemical X means nothing unless there is a standard to compare the
reading to. In the case of airborne concentrations, industrial
hygienists often use external standards, such as the OSHA Permissible
Exposure Limit. However, the controversial nature of this standard
can be gauged by the number of competing standards established for
the same chemicals. For example, the American Conference of
Governmental Industrial Hygienist's Threshold Limit Values, NIOSH's
Recommended Exposure Levels, and the American Industrial Hygiene
Association's Workplace Environmental Exposure Levels are alternative
choices for standards to compare a breathing zone measurement to.
Which of these external standards is chosen will be based on the
professional judgment of the industrial hygienist(s) and the specific
goals of the sampling situation.

Because using external standards can be problematic, many
environmental managers turn to other approaches for working with
indicators. There are three traditional approaches to placing numbers
in context: normalization, trending and benchmarking. While these can
all be applied to environmental indicators, they each have
significant limits for this use.

Normalization

Normalization is the most common approach to assessing indicators and
is done by identifying a second number that can be used to establish
a ratio to an indicator. The most common way to normalize an
indicator is to establish a "per manufactured unit" or "per person"
basis for comparing the indicator before and after a change in the
process.

Normalization works best when the ratio is established between
indicators related by a cause and effect chain. That is, there is a
clear, direct link between a change in the normalization factor and a
subsequent change in the indicator. The problem for many
environmental indicators is establishing that link with data on
activities (number of employees, production rate, etc.). Because
environmental impacts are side effects of an organization's
activities, there is seldom a direct link between the indicator and
any factor the organization is measuring as part of its production
process.

For example, the amount of hazardous waste produced by a facility
will be influenced by many variables, including: the amount of
hazardous waste associated with the "baseline" operation of the
facility; the incremental increase in hazardous waste generated by
making additional products; changes in the process used in the
manufacturing process; and changes in the regulations determining
what is hazardous waste. In order to develop a reliable normalization
formula for the amount of hazardous waste, one would have to
determine the relative numerical importance of all these factors and
adjust the factors as this relative importance changes with time.

Similarly complicated stories can be told for almost all
environmental indicators because facilities and processes are not
designed and built around these "side effects" of their operation,
but rather with the focus on the efficient production of the goods
and services of the organization.

Trends

A second approach to putting indicators in context is to compare the
same number over time. This is often the simplest approach because it
avoids the problem of developing a complete explanation for how
environmental impacts are caused. A common example is a state's
requirement for the development of pollution prevention plans that
reduce the amount of hazardous waste produced each year.
Unfortunately, this "simple" approach also limits the usefulness of
trend data because it does not identify specific factors that drive
the indicators and so it is often unclear how these trends can be
changed in the future.

Benchmarking

A third traditional approach to putting indicators in context is to
compare indicators to the same numbers from other organizations. For
example, a competitor producing the same product may produce a
smaller amount of hazardous waste, indicating that they have a better
process. The challenge here is to identify situations that are
similar enough that the measurement of a specific indicator has the
same meaning for both organizations. As the industrial hygiene
example above shows, establishing meaning can be difficult with
reasonably simple indicators. Environmental indicators with multiple
causes present even larger problems in evaluating the similarities
and differences between organizations. It should be remembered that
these different approaches can be, and commonly are, combined. For
example, annual trends in normalized indicators can be used to
determine the success of an environmental program.

The Balanced Scorecard Approach

Because of the many challenges I've described above, many
environmental professionals are interested in going beyond the ISO
14,000 approach to indicators. One promising approach comes from more
general management thinking. Business management theorists have
recognized the hazards of working with a small set of simple
indicators, such as stock price, salary or profits in managing an
organization. In fact, some of the most notable business failures
have resulted from an over reliance on a single indicator for
assessing a business's health (for example, stock price for many of
the "dot com" companies). The challenge increases when multiple
indicators are included, as comprehensive Environmental Management
Systems envision.

In order to use indicators in a more effective way, a new approach to
strategic management was developed in the early 1990's by Drs. Robert
Kaplan and David Norton. Their approach is called the "balanced
scorecard." The "scorecard" aspect of their approach is establishing
a group of indicators of roughly equal priority and setting goals for
those indicators, rather than relying only on specific key
indicators. At its simplest, a Balanced Scorecard typically consists
of a collection of between 15 and 40 performance measures, clustered
into 4 groups with target values for each of these measures. The
" balanced" aspect involves sorting the selected indicators into
groups depending on what they mean.

At its most general level, the balanced scorecard approach suggests
that a management system view the organization and the indicators
established for it from four perspectives: Learning and Growth,
Business Process, Customer, and Financial. Others have described
these perspectives in more concrete terms as being related to
different stakeholder groups (respectively): employee indicators,
business efficiency indicators, customer indicators and shareholder
indicators.

The strength of the balanced scorecard approach is that it allows the
indicators to be explicitly organized in a way that provides "checks
and balances" between the organization's different constituencies. A
complete scorecard will include descriptions of why each measure was
chosen and the projects or initiatives underway to move the indicator
in the target direction.

The Balanced Scorecard Approach and Environmental Indicators

Can this management approach be used within an Environmental
Management System? While the groups interested in the indicators of
an EMS are probably different than those identified above, a similar
map of the environmental stakeholders can be developed. (The ISO EMS
development process specifically includes identification of
stakeholders as an important step.) For example, it is relatively
simple to identify four primary stakeholders interested in the
environmental aspects of a facility: management, employees, the
government and the surrounding community.

Each of these groups is likely to focus on different aspects of
environmental performance. Management is interested in satisfying
environmental requirements without hindering financial or operational
performance; employees are primarily concerned about environmental
conditions inside the facility; the government is interested in
assuring that its regulations are observed; and the surrounding
community is often interested in "beyond compliance" issues -
situations that affect the immediate neighborhood without violating
any regulations.

For example, in a fully developed EMS, management may choose to use
environmental indicators that provide insight as to the cost of
environmental protection; employees may be concerned with airborne
chemicals in the workplace; the government may be primarily concerned
with air pollutants which contribute to acid rain several states
downwind of the facility; and the surrounding community may be
concerned about noise levels near the facility's boundary. In the
balanced scorecard approach, no one of these factors dominates the
environmental program. Rather, the environmental manager sets goals
for each factor, and explains program priorities in terms of how each
factor affects the others.

The process of first identifying the stakeholders, and then the
indicators of interest for those stakeholders, is a significant
undertaking. Too long a list for either and confusion is likely to
reign. 10 to 12 indicators sorted into four groups seems a reasonable
goal in most balanced scorecard applications.

At UVM, we have had some experience with an approach similar to the
balanced scorecard. Development of the Tracking UVM report
(http://www.uvm.edu/greening/trackinguvm.html) involved an extensive
stakeholder process that included UVM's upper management, campus
staff involved in environmental programs, the campus community at
large, and the local community.

The report organized the resulting set of 12 indicators of interest
into 3 groups by related environmental aspects (land and water use;
energy use and air pollution; solid and hazardous waste). In
addition, qualitative indicators for "Academics and Culture" were
provided to reflect the organization's primary mission of education,
research and service and its relation to UVM's environmental impact.
In this specific situation, these groupings met the needs of various
stakeholders while maintaining a coherent framework for the
indicators. The step of identifying targets to complete the
" scorecard" part of the report was omitted due to resource and time
constraints. This work on setting institutional goals to complete the
scorecard is continuing.

In the case of Tracking UVM, the quantitative indicators are given
additional context by including data trends for the indicators over
the decade of the 1990's. This combination of trend data with
stakeholder input demonstrates the potential value of combining
traditional uses of indicators with the larger context provided by
the Balanced Scorecard approach.

Conclusion

The environmental performance of an organization is a complicated
thing to assess because 1) there are many different aspects to the
performance and 2) it is difficult to find the information needed to
place environmental measurements in an appropriate context. This
difficulty often results in simplistic approaches to assessing the
value of an environmental performance (how much does it cost? are all
government regulations being met?) that relies on one or two
indicators of success.

Full development of an Environmental Management System is likely to
produce a long list of indicators that must be carefully organized in
order to provide useful information. The Balanced Scorecard approach,
developed around financial management issues, is a promising paradigm
that can help an organization resolve many of the complications of
environmental indicators and develop clear priorities for an
environmental program.