BUSINESS ASSURANCE VIEWPOINT REPORT. Do companies care about the environment? JUNE 2017 SAFER, SMARTER, GREENER

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1 BUSINESS ASSURANCE Do companies care about the environment? JUNE 2017 SAFER, SMARTER, GREENER

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3 CONTENTS FOREWORD MAIN RESULTS OUR FINAL THOUGHTS APPENDIX INTRODUCTION METHODOLOGY AND SAMPLE NOTES TO THE READER External factors drive environmental management Main risks related to the environment Actions undertaken to evaluate and mitigate risks Profiling the LEADERS LEADERS approach to environmental management How do companies meet the new ISO requirements? Credits 12 Benefits achieved 14 Environmental management relevance for overall business strategy 19 United Nations Sustainable Development Goals: How we will achieve them 21 International standards and third party certification 27 Environmental management system: Where do companies fail most frequently?

4 FOREWORD INTRODUCTION Environmental concern used to be a green option, but today environmental management is becoming central to a company s success. Managing environmental issues is becoming a strategic asset for companies. Organizations that consider their environmental risks and opportunities, that install systems to manage and create a positive impact, benefit not only the environment but their business as well. From improving compliance with legal requirements to financial benefits, from improving their ability to satisfying customer and other stakeholder s demands to reputational benefit, companies integrating environmental care into their business strategy can gain a competitive edge. The leading certification body DNV GL Business Assurance investigated environmental management awareness and practices among its customers in Now, 3 years later, we are circling back to understand if there has been considerable change and to keep contributing to creating awareness and advancing action. The analysis by DNV GL Business Assurance, supported by the international research institute GFK Eurisko, highlights that the relevance of external stakeholders and external factors in general (public concerns and brand reputation, for example) are rising among drivers pushing companies to manage and integrate environmental aspects. The perceived level of related risks, on the other hand, is decreasing compared to the survey conducted 3 years ago, indicating that companies are more in control. Companies surveyed are aware of the benefits of environmental management and seem to recognize the positive contribution of the new ISO 14001:2015 standard coupled with independent certification toward reaching their business goals. There seems to be a willingness to commit and continue investing into environmental management. The United Nations Sustainable Development Goals (SDGs) are already influencing corporate agendas and strategies, driving developments and actions that positively impact business performance and contributes to our planet s sustainability. Within this context, a select number of companies, hereinafter called LEADERS, are already approaching environmental management in a mature manner. 1 1 The LEADERS characteristics are reported in text boxes throughout the report and summarized in the final section Profiling the LEADERS. 4

5 METHODOLOGY AND SURVEY SAMPLE The survey was conducted in March It involved 1,709 professionals in companies in the primary, secondary and tertiary sectors across different industries in Europe, North, Central & South and Asia. The sample consists of customers of DNV GL Business Assurance and does not claim to be statistically representative of companies worldwide. The questionnaire was administered using the CAWI (Computer Assisted Web Interviewing) methodology. The sample includes 274 companies defined as LEADERS. The classification of a company as a LEADER is based on a list of attributes defined by DNV GL Business Assurance. ATTRIBUTES OF COMPANIES IN THE LEADERS GROUP The company has undertaken at least one action to evaluate or mitigate environmental risks The company is able to rate the overall cost/benefit ratio of the environmental management initiatives implemented Environmental issues are very relevant to the company s overall business strategy When self-assessing maturity, the company claims to be a leading or building business in environmental management Europe Asia North Central and South Others 45% 40% 5% 6% 4% Figure 1: Geographical breakdown of companies in the sample. 5

6 INDUSTRY COMPANY SIZE PRIMARY 4,7% <50 23,1% Agriculture Fishing Mining and quarrying 2,0% 0,6% 2,1% ,6% 21,2% SECONDARY 59,0% ,4% food chemicals 6,2% 3,9% ,6% plastic 5,1% metals 13,8% machinery 7,4% electrical 5,2% other secondary 17,4% TERTIARY 36,4% Electricity, gas and water 3,4% construction 7,4% Wholesale and retail trade 4,7% Transport, storage, 10,3% Health and social work 2,5% other tertiary 8,0% Figure 2: Companies in the sample. Sectors and size (n of employees) NOTES TO THE READER In the report, when figures are annotated with the format (X%; +Y%), it means comparing 2017 results (X%) with 2014 results (Y%). In the graphs in this report, green circles highlight data significantly above average. Red circles highlight data significantly below average. DK/DA represents don t know and/or didn t answer. The graphs report scores obtained by the total of respondents, by respondents in different regions and by LEADERS. Some graphs include the group MS or prevention program, i.e. companies with a management system or prevention program in place. For the reader s convenience, the word average has been used throughout the text to indicate mean scores obtained by all respondents. 6

7 MAIN RESULTS 7

8 EXTERNAL FACTORS DRIVE ENVIRONMENTAL MANAGEMENT Laws and regulations (77%) together with requests coming from customers (50%) are the main drivers pushing companies to engage in environmental management. The push from customers increased significantly (+15%) compared to the first edition of the survey in 2014 and other external factors also intensified their relevance. Nowadays, brand reputation (42%; +7% 2 ), public concerns (35%; +10%) and relations with other stakeholders (25%; +10%) play an increasingly important role. Three years ago, environmental management was perceived as an internal issue, similarly to compliance with laws and internal policies (now decreasing in importance by 11%). Today, in a more and more globalized world, reputational factors are the driving forces. We see that companies saying they have an environmental management system or prevention program in place seem to indicate higher values for external factors such as brand reputation and competitive advantage. THERE ARE MANY POSSIBLE REASONS TO APPLY ENVIRONMENTAL MANAGEMENT IN AN ORGANIZATION. WHAT ARE THE DRIVERS FOR YOUR COMPANY TO APPLY ENVIRONMENTAL MANAGEMENT? Laws and regulations Needs/requests from customers Internal policy Brand reputation Competition or competitive advantage Public concern Economic Business continuity Relations with other stakeholders Safeguarding the company assets Safeguarding property Minimizing personal liability for your top management Requested from private/public insurance companies Relations with sub-contractors TOTAL Central 1, North Europe Asia South Leaders vs ,3% 46,9% 42,4% 40,5% 34,9% 34,1% 28,7% 24,6% 22,1% 17,2% 15,0% 7,7% 7,1% 77,0% -1,2% +14,7% -10,6% +7,3% +5,8% +10,3% +11,3% +1,4% +10,4% +1,5% +1,5% +5,3% +1,5% +2,2% n=745 n=666 n=91 n=95 77,7% 72,8% 85,7% 82,1% 50,9% 53,0% 46,2% 32,6% 52,1% 35,6% 49,5% 61,1% 44,0% 36,0% 50,6% 50,5% 42,0% 40,2% 29,7% 39,0% 31,8% 35,1% 36,3% 37,9% 35,4% 27,3% 41,8% 47,4% 22,8% 32,7% 23,1% 45,3% 24,7% 23,1% 14,3% 33,7% 18,7% 20,7% 38,5% 26,3% 16,2% 14,4% 25,3% 21,1% 12,9% 14,7% 22,0% 15,8% 7,8% 5,6% 8,8% 9,5% 7,5% 6,3% 7,7% 5,3% n=274 87,6% 53,3% 67,5% 62,4% 54,7% 50,7% 45,6% 41,6% 35,0% 32,9% 27,0% 20,4% 11,3% 12,4% Figure 3: Reasons and drivers for applying environmental management Needs/requests from customers are equally relevant to LEADERS as to the average, while reputational aspects matter more than the average, for example public concern (51%; +16% vs. average) and brand reputation (62%; +20% vs. average). LEADERS score higher than average overall, underscoring environmental management as an important prerequisite for their business. 2 +7% means an increase by 7% when comparing 2017 results (42%) with 2014 results (35%). This applies to all (x%; +y%) throughout the report. 8

9 MAIN RISKS RELATED TO THE ENVIRONMENT Waste remains a concern. Across geographies and sectors, the main environmental risks are related to waste disposal (55%), to the handling of hazardous materials and waste (44%) and to the discharge of waste water (36%). These are the same risks that topped the ranking 3 years ago, when the survey was conducted for the first time. However, they have decreased in intensity. Companies are working on these issues and seem to be more in control of these aspects. It is worth noticing that concern over physical hazards seems somewhat reduced. PLEASE SELECT THE MAIN RISK AREAS IN YOUR COMPANY RELATED TO THE ENVIRONMENT TOTAL 1, vs 2014 Europe Asia North Central South Leaders n=745 n=666 n=91 n=95 n=274 Disposal of waste 54,5% -5,9% 56,0% 46,6% 65,9% 67,4% 65,0% Handling hazardous materials and wastes 43,9% -0,4% 39,5% 45,1% 55,0% 50,5% 54,4% Discharge of waste water 35,6% +1,7% 29,8% 37,2% 40,7% 52,6% 48,2% Presence of physical hazards 27,9% -5,3% 27,5% 27,2% 23,1% 28,4% 33,2% Release of carbon dioxide and other greenhouse gases 27,6% -2,8% 30,6% 24,3% 17,6% 30,5% 38,3% Use of non-renewable energy resources 27,0% -3,6% 34,8% 16,2% 35,2% 26,3% 38,0% Use of non-renewable raw materials 19,8% -0,6% 21,9% 15,8% 18,7% 29,5% 25,6% Release of other atmospheric emissions 19,4% -2,5% 21,9% 15,6% 24,2% 20,0% 35,8% Particularly sensitive locations/stakeholders 12,9% +0,3% 13,3% 9,9% 9,9% 20,0% 21,5% Use of scarce water resources 12,6% +0,2% 10,3% 10,5% 14,3% 29,5% 21,9% Structural deficiencies of infrastructures and equipment 11,6% -2,0% 9,0% 14,3% 8,8% 9,5% 10,6% Risks associated with inappropriate land use 8,6% +0,7% 9,1% 7,7% 7,7% 9,5% 11,7% Figure 4: Main environmental risks The risk ranking is not different for LEADERS, but they record above average values on most entries, showing higher levels of awareness. 9

10 ACTIONS UNDERTAKEN TO EVALUATE AND MITIGATE RISKS Worldwide, 96% of companies carried out at least one action to evaluate or mitigate environmental risks. Monitoring the process for checking compliance with legal requirements, regular maintenance to minimize environmental impacts and their ongoing assessment are a reality for 2 of 3 for the companies surveyed. Companies working to minimize environmental impacts rather than concentrating on preventing them are fewer. Training people (57%) and establishing processes to minimize the impacts of products/services (54%) are fundamental to prevention, but as of today they are implemented only by half of the respondents. The range of initiatives implemented has not changed from 3 years ago. The ranking of most implemented actions is the same, except for emergency measures to face environmental accidents, rising from position 8 to position 4, which highlights the fact that this is a fundamental aspect. Companies with an environmental management system or prevention program in place seem to undertake more actions than the average. Values are higher, by 20% points or more, for all initiatives. They stand out when it comes to their capability to monitor trends of particular environmental indicators (85%; +30% vs. average) and for training employees on environmental issues (85%; +28% vs. average). Only 1 out of 3 businesses has a supplier environmental management program, a number lower than expected since the focus on suppliers is a crucial aspect for external stakeholders. 10

11 PLEASE SELECT THE ACTIONS UNDERTAKEN SO FAR TO EVALUATE OR MITIGATE THE ABOVE IDENTIFIED RISKS AND RATE THEIR EFFECTIVENESS % Top 2 Boxes Highly effective + Effective TOTAL 1,639 Europe Asia North Central South n=717 n=633 n=85 n=94 Leaders n=274 MS or prevention program* n=386 A monitoring process for compliance with legal 72,8% 77,3% 65,3% 80,0% 77,7% 93,1% 93,5% Regular maintenance to minimize environmental impacts 69,7% 75,3% 60,5% 77,7% 69,2% 86,9% 89,1% Assessment of all impacts to the environment 65,3% 71,3% 56,7% 68,2% 73,4% 91,6% 89,4% Emergency measures in case of environmental accidents 64,0% 68,2% 56,9% 76,5% 66,0% 87,6% 89,6% A management system or a prevention program 62,9% 66,5% 57,0% 72,9% 63,8% 89,1% 100,0% Training for employees about environmental issues 56,9% 56,9% 55,0% 64,7% 56,4% 82,1% 85,0% Monitoring trends of particular environmental indicators 55,2% 56,5% 51,5% 60,0% 66,0% 85,4% 85,2% A design process to minimize the impact of product/service 53,5% 55,0% 50,4% 67,1% 51,1% 79,2% 77,7% Communication about company's environmental performance 41,9% 36,0% 47,9% 36,5% 41,5% 71,2% 68,1% The transfer of responsibility for specific environmental impacts 35,2% 31,2% 37,9% 41,2% 40,4% 47,8% 54,9% A supplier environmental management programme 32,3% 28,3% 36,7% 31,8% 41,5% 53,7% 54,2% Figure 5: Actions to evaluate and mitigate risks and rating their effectiveness Communication plays a central role for LEADERS. Communication of environmental performance scores much higher than the average (71%; +29% vs. average). Stakeholders are key and keeping them informed is essential. Monitoring trends of particular environmental indicators is higher than average (85%; + 30% vs. average). Supplier environmental management programs (32%; +22% vs. average) outperforms the average, too. LEADERS seem to place a high importance on supplier environmental management programs, which can support reduced environmental impact. * The group MS or prevention program includes those respondents who answered that they have an effective management system or prevention program in place. 11

12 BENEFITS ACHIEVED Top benefits achieved from the mitigation actions undertaken are related to main drivers. The decrease in environmental accidents (52%) and improvement of relations with authorities (48%) top the list, and this picture is in line with the compliance and reputational drivers. Actions implemented can provide savings and other advantages, such as an improved financial rating or a lever for differentiation from competitors. Financial savings (40%; +8%) and competitive advantage (36%) are scored fairly high. When it comes to stakeholders, 31% of the respondents indicate improved relations as a benefit. Companies adopting an environmental management system or prevention program seem to benefit more than others when it comes to improvement in relations with authorities (62%; +15% vs. average) and employees (46%; +14% vs. average), but also when it comes to financial savings (52%; +12% vs. average), competitive advantage (49%; +13% vs average) and shareholder satisfaction (36%; +13% vs. average). WHAT BENEFITS DID YOUR COMPANY ACHIEVE FROM THE MITIGATION ACTIONS UNDERTAKEN? TOTAL TOTAL 1,629 1, Europe Asia vs 2014 North Central South Leaders MS or prevention program* n=714 n=626 n=85 n=94 n=274 n=386 Decrease of environmental accidents 52,1% +1,9% 38,8% 67,3% 38,8% 54,3% 64,2% 58,0% Improved relations with authorities (e.g. regulatory bodies) 47,7% +2,7% 49,6% 42,8% 52,9% 50,0% 70,8% 62,4% Financial savings 40,0% +7,7% 40,2% 37,9% 47,1% 42,6% 49,6% 52,3% Competitive advantage 36,2% -2,6% 33,2% 44,1% 18,8% 30,9% 52,2% 48,7% Improved relations with employees 32,5% +3,2% 31,8% 29,7% 44,7% 36,2% 50,4% 46,1% Increased brand equity 32,1% -1,1% 27,0% 44,3% 14,1% 14,9% 47,5% 40,7% Improved relations with other stakeholders 30,9% +4,6% 29,0% 30,4% 27,1% 41,5% 46,7% 37,6% Shareholder satisfaction 23,3% +3,4% 23,1% 17,9% 36,5% 38,3% 40,2% 35,8% Value creation (e.g. increase in market share) 14,4% -1,1% 11,2% 19,5% 12,9% 9,6% 25,9% 21,8% Figure 6: Benefits achieved LEADERS benefit much more than the average when it comes to improved relations with authorities (71%), improved relations with employees (50%) and shareholder satisfaction (40%). For LEADERS, competitive advantage (52%) is rated more important than financial savings (50%). 12

13 Benefits from actions undertaken are worth the investment for 8 companies out of 10. Out of those 1 in 2 report that benefits are greater than the costs. Companies that have adopted an environmental management system or prevention program once again indicate higher rates. Benefits are perceived as greater than costs for 57% (+12% vs. average). HOW WOULD YOU RATE THE OVERALL COST/BENEFIT RATIO OF THE MITIGATION ACTIONS UNDERTAKEN? TOTAL 1,175 Europe Asia North Central South Leaders MS or prevention program* n=538 n=432 n=59 n=68 n=274 n=386 Benefits greater than costs 44,7% 44,2% 42,1% 44,1% 52,9% 62,0% 56,7% Benefits equal to costs 33,7% 36,4% 31,3% 37,3% 26,5% 25,6% 30,8% Benefits lower than costs 21,6% 19,3% 26,6% 18,6% 20,6% 12,4% 12,5% Figure 7: Cost benefit ratio For LEADERS, a higher number reports that benefits from actions are worth the investment and 62% indicate that benefits are greater than costs. * The group MS or prevention program includes those respondents who answered that they have an effective management system or prevention program in place. 13

14 ENVIRONMENTAL MANAGEMENT RELEVANCE FOR OVERALL BUSINESS STRATEGY Asked about the relative importance of environmental issues for their overall business strategy, companies indicate a clear direction and they are aware of its importance (74%). Projecting the question 3 years from now, numbers reveal an increasing trend (+3%) on top of the relatively high numbers already. TO WHAT EXTENT ARE ENVIRONMENTAL ISSUES RELEVANT TO YOUR COMPANY S OVERALL BUSINESS STRATEGY? TODAY TOTAL 1,709 74,1% (DK/DA 8,7%) Europe % Top 2 Boxes Great extent + Some Extent Asia North Central South n=745 n=666 n=91 n=95 76,6% 67,9% 80,2% 80,0% (6,4%) (11,7%) (6,6%) (8,4%) 3 YEARS FROM NOW TOTAL 1,709 % Top 2 Boxes Great extent + Some Extent 76,8% Europe Asia North Central South n=745 n=666 n=91 n=95 81,4% 70,1% 79,1% 81,1% (DK/DA 13,6%) (11,1%) (16,7%) (9,9%) (16,8%) Figure 8. Relevance of environmental issues. Future vs. present 14

15 While companies recognize the importance of environmental issues in relation to the business strategy, companies seem to be divided in terms of how familiar they are with the United Nations Sustainable Development Goals (SDGs). In 2015, the United Nations defined 17 goals to end poverty, protect the planet and ensure prosperity for all by A total of 40% of the respondents indicate that their environmental strategy is influenced by the SDGs. Companies that seem not to be influenced by the SDGs number in total 60% of which 34% report they are unaware of the goals or did not answer and 26% find that the SDGs are not relevant to their company. When asked about the future, 48% of the companies expect their environmental strategy to be influenced by the SDGs, a slight increase only. THE UNITED NATIONS RECENTLY (2015) RELEASED 17 SUSTAINABILITY DEVELOPMENT GOALS FOR THE YEAR 2030 WHICH ALSO COVER ENVIRONMENTAL GOALS. TO WHAT EXTENT DO THESE GOALS INFLUENCE YOUR OWN COMPANY S ENVIRONMENTAL STRATEGIC DIRECTION AND GOALS? TODAY 34,1% TOTAL 1,709 25,9% 40,1% % Top 2 Boxes Great extent + Some Extent Leaders n=274 63,1% (23,7%) Top 2 Boxes Bottom 2 Boxes DK/DA 3 YEARS FROM NOW 3 YEARS FROM NOW TOTAL 1,709 33,4% % Top 2 Boxes Great extent + Some Extent 47,8% Leaders n=274 67,2% 18,8% (22,3%) Top 2 Boxes Bottom 2 Boxes DK/DA Figure 9. Influence of United Nations Goals on company s strategic direction and goals. A higher percentage of LEADERS indicate that the UN Sustainability Development Goals (63%) impact their environmental strategy and goals. The future picture does not change significantly for LEADERS. 15

16 Questioned on their environmental management maturity level, 1 in 3 assess themselves as belonging in the leading or building categories (around 35%). When looking 3 years ahead, companies expect to mature even further with 57% predicting that they will be in the leading or building categories, thus demonstrating their willingness to further integrate environmental management. FROM AN ENVIRONMENTAL MANAGEMENT MATURITY POINT OF VIEW, WHERE WOULD YOU POSITION YOUR COMPANY ON A 5-POINT DEVELOPMENT SCALE? Leading Building Developing 9,8% TOTAL 1,709 24,8% 31,6% Europe Asia North Central South n=745 n=666 n=91 n=95 10,9% 6,3% 16,5% 15,8% 29,4% 18,2% 36,3% 27,4% 30,2% 34,4% 23,1% 28,4% Starting 17,0% 16,2% 20,1% 7,7% 13,7% Discovering 7,3% 7,4% 6,9% 8,8% 8,4% DK/DA 9,6% 5,9% 14,1% 7,7% 6,3% Figure 10. Environmental management maturity FROM AN ENVIRONMENTAL MANAGEMENT MATURITY POINT OF VIEW, WHERE WOULD YOU POSITION YOUR COMPANY ON A 5-POINT DEVELOPMENT SCALE? Leading Building Developing TOTAL 1,709 23,6% 21,1% 33,7% Europe Asia North Central South n=745 n=666 n=91 n=95 25,0% 17,7% 35,2% 36,8% 37,2% 29,1% 37,4% 29,5% 20,9% 25,4% 8,8% 13,7% Starting 6,4% 5,9% 7,8% 5,5% 5,3% Discovering 1,7% 1,7% 1,8% 3,3% 1,1% DK/DA 13,4% 9,3% 18,2% 9,9% 13,7% Figure 11. Environmental management maturity 3 years from now 16

17 The attention on environmental management is mirrored by the intention to invest more or the same as today over the next 3 years. Almost 1 in 2 plan to invest more than today. Close to none is forecasting a reduction of their investment. When comparing to the study conducted 3 years ago, we see an increase of 10% points for companies indicating that they plan to increase their investments. IS YOUR COMPANY GOING TO INVEST IN THE ENVIRONMENT IN THE NEXT 3 YEARS? TOTAL 1, vs 2014 Europe Asia North Central South Leaders n=68 n=621 n=495 n=67 n=76 n=274 More than today 44,6% +9,5% 41,4% 43,0% 40,3% 65,8% 48,7% Same as today 51,3% - 5,6% 54,0% 52,7% 56,7% 32,9% 51,0% Less than today 2,0% - 0,7% 2,3% 2,4% 0,0% 1,3% 0,4% o investments at all 2,2% - 3,1% 2,4% 1,8% 3,0% 0,0% 0,0% Figure 12. Investments in the next 3 Years All LEADERS invest in environmental management and 1 in 2 plan to invest even more than today. 17

18 UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS: HOW WE WILL ACHIEVE THEM During a historic UN Summit in New York, September 2015, world leaders adopted the 17 UN Sustainable Development Goals (SDGs). With the aim to end all forms of poverty, fight inequality and tackle climate change, the SDGs are an extension of the 8 Millennium Development Goals (MDGs) launched in The MDGs set targets saving the lives of millions of people, improving the conditions for many more. While contributing positively, the awareness of what remains to be done and actions required led the United Nations to launch a new program. The SDGs have 169 targets compared to 21 in the MDGs. The complexity of the challenges existing in today s world demands a wide range of issues to be covered, addressing the problems root causes and not only the symptoms. The 17 SDGs represent an unprecedented global framework for action and governments, organizations and individuals everywhere are required to act. While the MDGs focused primarily on the social agenda, the 17 goals are broad in scope as they address the interconnected elements of sustainable development: economic growth, social inclusion and environmental protection. The term spaceship earth was coined 100 years ago, referring to our planet as a spaceship hurdling through time and space on a long mission to sustain life as we know it. In the The Future of Spaceship Earth report by DNV GL, we took the opportunity to compare our forecast with the future envisioned by the SDGs. Are we on the right path? Looking 34 years ahead, we found both good and bad news. 18

19 LIKELIHOOD OF MEETING THE 17 SUSTAINABLE DEVELOPMENT GOALS IN FIVE WORLD REGIONS: Likelihood of meeting the 17 Sustainable Development Goals in five world regions: Likelihood of meeting the 17 Sustainable Development Goals in five world regions: Future of Spaceship Earth 9 Goal likely to be reached (i.e target fulfilment of more than 95%) Goal not likely to be reached, but more than 50% of gap between today's status and the goal is likely closed Goal not likely to be reached, and less than 50% of gap between today's status and the goal is likely closed ROW ROW BRISE BRISE CHINA CHINA OECD OECD USA USA No No poverty 2. Zero hunger 2. Zero hunger 3. Good health and well-being 3. Good health and well-being 4. Quality education 4. Quality education 5. Gender equality 5. Gender equality 6. Clean water and sanitation Affordable Clean water and clean and energy sanitation Decent Affordable work and and economic clean energy growth 9. Industry, innovation and infrastructure 8. Decent work and economic growth 10. Reduced inequality 9. Industry, innovation and infrastructure 11. Sustainable cities and communities 10. Reduced inequality 12. Responsible consumption and production Climate Sustainable action cities and communities Life Responsible below waterconsumption and production 15. Life on land 13. Climate action 16. Peace, justice and strong institutions 14. Life below water 17. Partnerships for the goals 15. Life on land Not enough data to assess 16. Peace, justice and strong institutions 17. Partnerships for the goals Not enough data to assess Five regions: USA ROW = Rest of the World BRISE = Brazil, Russia, India, South Africa and ten other emerging economies OECD (excl. USA) CHINA BRISE (Brazil, Russia, India, Future of Spaceship Earth Report, published September 2016 by DNV GL, available at: dnvgl.com/technology-innovation/spaceship-earth/ South Africa and ten other Five regions: Emerging economies) USA ROW (Rest of the World) OECD (excl. USA) CHINA BRISE (Brazil, Russia, India, South Africa and ten other 19

20 What, then, is to be done? When launched, the goals were presented with a practical list of actions we as individuals can implement, changing our daily habits, from saving electricity to participating in election days. However, the biggest contribution must come from companies. Of the global GDP, 60% is generated by the private sector, so this will only work if they are part of the solution. What became evident from our investigation was that that extraordinary action is needed to advance the SDGs. If we proceed at this rate, none of the world s regions will fulfill the 17 goals, and only the OECD countries will even come close to hitting the targets. So, in dialogue with UN Global Compact we asked ourselves what actions can be taken by business? We started contacting companies to investigate what they are actually doing. In the 17 companies, all UN Global Compact members, participating in the report, we found companies pioneering one or more of the 17 SDGs in their sector, reshaping their strategies accordingly. Companies contributing to the Spaceship Earth report demonstrate that there is a culture of optimism emerging. Businesses are remarkably positive about their ability to contribute meaningfully, despite the size of the challenge. We also see business leveraging the power of connectivity and digitalization to advance the goals. Pioneering with the SDGs does not mean doing business and separately addressing the SDG targets. It means addressing them head on as an integral part of a company s business model and how they do business. Examples range from successfully opting to grow service markets that work for the poor from actively developing and recruiting from the ranks of marginalized groups; from saving lives with advanced technology to providing affordable and clean energy. Traveling on spaceship earth, we have one thing in common. Failure is not an option. We need to act with urgency without panicking, and acting now is more important than thinking you will do something later. Much can be done. For the most part, businesses have the technology, people and procedures to make a substantial contribution. What we need is not new smarts but new trailblazers, showing how business can work innovatively for the goals and telling the story to scale their efforts. Companies participating in the Future of Spaceship Earth report: Tata, Danone, HiTechnologies, ARM, Symantec, Grundfos, SolarWorld, NYK, Hydro, Safaricom, Siemens, Marks & Spencer, Iberdrola, Cermaq, APP, Calvert Investments, Unilever. 20

21 INTERNATIONAL STANDARDS AND THIRD PARTY CERTIFICATION About 80% of the companies surveyed believe that an environmental management system based on the international ISO standard and third party certification adds value to the organization and their stakeholders. TO WHAT EXTENT DO YOU AGREE WITH THE FOLLOWING STATEMENTS Strongly agree TOTAL 1,709 % Top 2 Boxes Strongly agree + Fairly agree Top 2 Boxes (Strongly + Fairly agree) Environmental management based on an ISO14001 management system adds value to our organization and our stakeholders. 36,1% 80,7% Europe Asia North Central South n=745 n=666 n=91 n=95 82,3% 80,2% 65,9% 84,2% Leaders n=274 95,3% Environmental management system certified by an external independent party adds value to our organization and our stakeholders. 37,0% 80,1% 82,2% 79,3% 65,9% 84,2% 95,3% Figure 13. Value of ISO and of third party certification For LEADERS, 95% believe that international standards and certification add value to the organization and stakeholders. 21

22 When asked to rate the relevance of the certification benefits, the ability to meet legal requirements scores 77% and performance improvement scores 72%. Certification is also perceived to be highly relevant in securing the commitment from management (70%) and meeting stakeholder requirements (69%). BASED ON YOUR EXPERIENCE AND PERCEPTION, PLEASE RATE THE RELEVANCE OF BENEFITS ACHIEVED FROM CERTIFICATION OF YOUR COMPANY S ENVIRONMENTAL MANAGEMENT SYSTEM: TOTAL Highly relevant 1,709 Top 2 Boxes (Highly + Somewhat relevant) 43,1% 34,8% 32,7% 30,3% 29,4% 26,9% 25,0% 24,8% 19,9% 20,7% 17,5% 15,5% 17,5% 9,0% 8,9% 32,0% 31,5% 76,8% 71,5% 69,8% 69,0% 66,5% 66,4% 66,2% 64,4% 59,5% 55,2% 52,8% 50,1% 48,1% Europe % Top 2 Boxes Highly relevant + Somewhat relevant Asia North Central South n=745 n=666 n=91 n=95 78,1% 75,8% 71,4% 76,9% 72,9% 68,9% 69,2% 76,8% 69,0% 69,5% 72,5% 75,8% 68,5% 69,8% 58,3% 77,9% 65,1% 68,6% 53,8% 71,6% 65,6% 66,5% 63,7% 65,3% 65,1% 64,9% 67,0% 74,7% 62,7% 64,0% 64,8% 72,6% 57,5% 60,7% 55,0% 69,5% 52,8% 56,2% 52,7% 67,4% 52,1% 50,9% 56,0% 67,4% 46,5% 53,0% 42,9% 63,2% 44,6% 51,4% 39,6% 56,8% 27,5% 33,2% 39,6% 44,2% 26,7% 35,3% 31,9% 42,1% Leaders n=274 93,4% 94,2% 92,0% 89,1% 88,3% 86,9% 88,0% 90,5% 84,3% 73,4% 75,9% 67,5% 65,0% 46,7% 46,7% Figure 14. Certification benefits relevance LEADERS score above average for all categories, following the same ranking. When analyzing individual benefits beyond compliance and reputation, LEADERS score higher on financially related aspects: financial benefits (76%; +23% vs. average), advantages with banks and insurance companies (47%; +15% vs. average) and fiscal advantages (47%; +15% vs. average). 22

23 When clustering the benefits into four categories performance, stakeholder, compliance and reputation we see that respondents rate compliance (77%) as the highest perceived group of benefits. For improving reputation 67% respond favorably, stakeholders score 59% and performance 53%. BASED ON YOUR EXPERIENCE AND PERCEPTION, PLEASE RATE THE RELEVANCE OF BENEFITS ACHIEVED FROM CERTIFICATION OF YOUR COMPANY S ENVIRONMENTAL MANAGEMENT SYSTEM: PERFORMANCE STAKEHOLDER COMPLIANCE REPUTATION Environmental performance improvement Ability to meet stakeholder s requirements Ability to meet legal requirements Improving public image Achievement of strategic objectives Better relations with relevant authorities Improvement in supplier environmental performance Employees engagement Creation of new market opportunities Communication with stakeholders Providing a competitive advantage Advantages with banks and insurance companies Financial benefits through reduced costs (e.g. more economic use of resources etc.) Fiscal/Tax advantages =53,4%* =58,6%* =76,8%* =66,5%* * Calculated as the average of Top 2 Boxes values for the indicators considered in the definition of each group Figure 15. Certification benefits relevance group of benefits * Calculated as the average of Top 2 Boxes values for the indicators considered in the definition of each group 23

24 When asked about the effectiveness of the new requirements introduced by the ISO 14001:2015 standard, 61% answer favorably that this has helped the environmental management system become more effective in supporting achievement of their goals. THE NEW ISO STANDARDS INTRODUCED SOME NEW CONCEPTS/ REQUIREMENTS. PLEASE RATE TO WHICH DEGREE THE NEW REQUIREMENTS FROM THE NEW ISO 14001:2015 HAVE HELPED THE ENVIRONMENTAL MANAGEMENT SYSTEM BECOME MORE EFFECTIVE IN ACHIEVING ITS GOALS. TOTAL 1,709 60,7% (Average TOP BOX 23,2%) Top 2 Boxes average To a high degree + To some degree Leaders n=274 78,9% Figure 16. Effectiveness of new ISO requirements. Average scores 24

25 Analyzing individual requirements, risks and opportunity management tops the ranking (66%). Strengthened emphasis on leadership and management commitment ranks second (64%), underscoring the importance of integrated involvement from top to bottom and accountability. Consideration of the life cycle perspective when determining the environmental aspects of activities, products and services is rated lowest (56%). This requirement addresses a concept that may be less familiar to companies and may require more changes to processes and competence, thus requiring more time to mature before they can benefit. DETAILS To a high degree TOTAL 1,709 Top 2 Boxes (To a high degree + To some degree) Europe % Top 2 Boxes To a high degree + To some degree Asia North Central South n=745 n=666 n=91 n=95 Leaders n=274 Risks and opportunity management 31,2% 66,4% 67,5% 68,5% 46,2% 62,1% 82,5% Strengthened emphasis on leadership and management commitment 28,9% 63,8% 61,3% 68,8% 46,2% 64,2% 80,7% Understanding of the context of the organization, including internal and external influencing factors 22,9% 62,2% 60,8% 66,4% 44,0% 63,2% 81,0% Determination and monitoring of relevant interested parties and their needs and expectations 21,1% 59,9% 58,8% 63,5% 36,3% 62,1% 79,6% Reinforced requirements related to performance evaluation 19,5% 58,7% 56,0% 63,5% 39,6% 62,1% 78,8% Extended requirements related to communications, including internal and external communication Consideration of the life cycle perspective when determining the environmental aspects of activities, products and services 18,7% 20,4% 57,8% 55,9% 53,2% 65,3% 37,4% 63,2% 51,1% 62,9% 37,4% 60,0% 75,2% 74,5% Figure 17. Effectiveness of new ISO requirements. Average scores Among the LEADERS, almost 80% believe the new requirements improve the effectiveness of their environmental management system with scores higher for all requirements. 25

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27 ENVIRONMENTAL MANAGEMENT SYSTEM: WHERE DO COMPANIES FAIL MOST FREQUENTLY? Lumina *, a set of performance benchmarking tools developed and delivered by DNV GL, structures and analyzes the audit data collected from thousands of our customers across the globe. Through advanced analytics, we can provide relevant information and insight that companies can use toward their own implementation and/or improvement efforts, helping to provide support for more confident decision making. Companies can also benchmark the performance of their management system internally, against peers or the total sample. Using Lumina, we analyzed the audit data of 15,000 companies worldwide with a certified environmental management system audited to ISO (2008 and 2015 versions) from January 2016 to April To give an idea of the amount of data processed, we analyzed approximately 90,000 findings collected by our DNV GL auditors. The objective was to identify and highlight the most common pitfalls detected during the audits, their severity, frequency and the processes affected. The analysis allows for comparison of all audits, irrespective of company-size, audit type and duration, and industry, for example. This results in a simple and intuitive metric Findings per day of audit (F/d) which reflects the average number of findings (e.g. non-conformities and observations) identified during one single day of auditing. The table below shows the findings per day (F/d) in the different macro processes (chapters of the standard) of the management system. On average an environmental management system audit ends with 2.6 findings per day of audit. Out of these, approximately 1 finding per day is identified in operation, followed by the planning process and performance evaluation. Findings/day 0,90 0,80 0,70 0,60 0,50 0,40 0,30 0,20 0,10 0,00 0,08 0,08 4. Context 5. Leadership 0,68 6. Planning 0,36 7. Support Areas of the EMS 0,81 8. Operation 0,52 9. Performance evaluation 0, Improvement * Lumina is a trademark of DNV GL. 27

28 PROCESSES MOST SUBJECT TO ISSUES The table below shows, the F/d based on the detailed processes (sub-clauses of the standard) in the environmental management system that are most often subject to issues. To indicate the degree of severity, we distinguish severe findings from all findings. PROCESS SEVERE FINDINGS ALL FINDNGS DESCRIPTION 6.1 0,17 0,48 Actions to address risks and opportunities 8.1 0,16 0,58 Operational planning and control 9.1 0,10 0,30 Monitoring, measurement, analysis and evaluation 8.2 0,06 0,22 Emergency preparedness and response 6.2 0,05 0,18 Environmental objectives and planning to achieve them 9.3 0,04 0,11 Management review 9.2 0,04 0,11 Internal audit ,03 0,10 Nonconformity and corrective action 7.2 0,03 0,14 Competence 7.5 0,03 0,15 Documented information COMMENTS ON THE TOP 3: 6.1 Actions to address risks and opportunities is the area most frequently subjected to severe findings (F/d=0.17). For all findings (F/d=0.48), one will on average find 1 finding every 2 days. This clause requires the organization to determine the risks and opportunities to be handled through the environmental management system. It takes into account the scope of the system and other issues and requirements identified in the analysis of the context and the needs and expectations of interested parties. The determination of environmental aspects, compliance obligations and potential emergency situations are key inputs into the risk and opportunity process. As already required in ISO 14001:2004, the range of environmental aspects and impacts need to be determined, including evaluation of their significance to the organization as well as determination of applicable compliance obligations and what risks or opportunities these may present (6.1.3). The organization then needs to consider appropriate actions to address the significant aspects/impacts, compliance obligations (6.1.3) and risks and opportunities identified. The ISO standard also introduces the concept of considering a life cycle perspective for its products, services and activities. It clarifies the previous concepts of the upstream and downstream aspects and establishes a common language across the management system standards as well as Corporate Social Responsibility (CSR) and product assessment standards. 28

29 8.1. Operational planning and control intends to ensure that processes are in place to meet the environmental management system requirements and to implement actions identified in 6.1 and 6.2. There are clearer and stronger requirements relating to outsourced processes and control of changes. In addition, requirements around the life cycle perspective are defined in greater detail. The organization needs to determine and evaluate the level of control and influence over the different life cycle elements, based on the context of the organization and the consideration of significant environmental aspects, compliance obligations and risks associated with threats and opportunities. There is no specific requirement for documented procedures in ISO 14001:2015, but there is a clear requirement to ensure that information is documented to prove that the processes are in place and implemented effectively. Documentation could for example be in the form of process maps, procedures, specifications, forms, records and data. 9.1 Monitoring, measurement, analysis and evaluation covers two key areas: Monitoring, measurement, analysis and evaluation of environmental performance and the effectiveness of the system. Evaluation of compliance with all legal and other obligations. Output from monitoring and measurement provides key input for several other areas of the environmental management system, including management review and determination of internal and external communication required on the environmental management system and its performance. Organization will need to demonstrate how it evaluates compliance with legal and other obligations. Most organizations fulfill this part of the clause via their internal audit processes, but other compliance audits, checks and reviews can be used. The organization should define its processes for evaluating compliance with legal and other obligations and must document these activities. The top 3 areas most subject to findings fall within the first 3 steps of the PDCA cycle Plan -Do - Check. The fourth step in the model Act relates more to the ability of leadership to monitor and capitalize on the management system s results and performance. The relevance of this area is expected to increase with the new requirements in the 2015 edition which emphasizes leadership and the ability of top management to use the system as one of their tools to increase business sustainability and continuity. 29

30 OUR FINAL THOUGHTS Just 3 years ago, environmental management was more an internal issue, often relating to compliance with laws and corporate policies. Today, we see that stakeholders and reputational aspects are increasingly important to how companies deal with environmental issues. Our survey shows that environmental management is high on the agenda and we know that the same is applicable to a wider range of stakeholders who tend to place greater demands on companies performance and transparency. The trend is that environmental management is increasingly integrated into the running business and part of the overall business strategy. Companies derive benefits from their investments and actions, ranging from compliance and performance to reputation and stakeholder relationships. We definitely see progress from 3 years ago and that companies are more in control. Levels of risk seems to be decreasing and they are improving their ability to prevent rather than just minimizing impacts. An environmental management system compliant to ISO is seen by companies to add considerable value into this picture. The intention of the International Organization of Standardization (ISO) when developing new versions of the standards was to integrate sustainability better into the management system standards and manage risks in the external context of the organization. The survey indicates that companies find the new ISO 14001:2015 standard requirements to be more effective in improving the ability to achieve their business goals. With a more external perspective comes the need for communication and transparency. A large number of companies indicate that certification of their environmental management system creates value for them. Independent third party certification supports companies in building trust toward stakeholders and help companies continually improve their management system in a sustainable way. Companies stand to benefit a lot from effective environmental management and should continue their positive trend. This is important in the bigger picture, as well, where companies play a critical role. In 2015, the UN launched its 17 Sustainable Development Goals (SDGs). To succeed, companies must be part of the solution. Almost half of the survey respondents said the SDGs influence their operational goals today, which is very promising. At the same time, about one-third are unaware of the SDGs or did not answer. To create a sustainable future, companies must incorporate the SDGs in their business strategies. Environmental management plays a crucial role toward many of the 17 goals. While a daunting task, for companies, this is very much about identifying business opportunities, from improving performance to innovation, finding viable, commercial ways to contribute, benefitting your company and our planet. 30

31 PROFILING THE LEADERS LEADERS are aware of the importance of environmental management in maintaining the best possible relations with stakeholders and as a kind of prerequisite for business continuity and for safeguarding company assets. Their approach is mature. They not only implement actions to minimize impacts but also preventive ones: for instance, they arrange for training and invest in communication to maintain an open relationship with stakeholders. Moreover, they recognize the value of international standards and of certification for their management systems. Environmental issues are a key part of their overall business strategy and the topic will continue to be a priority for them. They are willing to maintain and increase their investments. LEADERS APPROACH TO ENVIRONMENTAL MANAGEMENT 01. LEADERS deal with environmental management because of its relevance for their reputation with stakeholders. 02. Environmental management is a kind of prerequisite for business continuity for LEADERS. 03. LEADERS are more aware of risks than others. 04. Communication plays an essential role for LEADERS, because it is essential for maintaining a good relationship with stakeholders. 05. LEADERS benefit from environmental management actions either in terms of relationship, or in terms of value creation for themselves and for shareholders. 06. LEADERS are aware of the relevance of environmental management issues to their company s overall business strategy. 07. LEADERS take UN Sustainability Goals into consideration when defining their business strategy. 08. LEADERS clearly recognize the value of basing their environmental management systems on international standards and of having them certified. 09. Certification provides economic benefits to LEADERS. 10. LEADERS will keep investing in environmental management in the coming years. 31

32 APPENDIX 32

33 HOW DO COMPANIES MEET THE NEW ISO REQUIREMENTS? ISO was first launched in 1996 and is today the most recognized international standard for environmental management systems. Recent surveys, including one by ISO as input to the development of the new edition and the DNV GL ViewPoint survey which this report is based on, confirm that the standard has been very valuable to organizations in terms of helping them meet legal requirements and improve environmental performance. The standard is periodically reviewed and updated to stay relevant in a changing business context. The third edition was launched 15 September 2015, with a transition period of 3 years, giving companies until 2018 to transition from ISO 14001:2004 to ISO 14001:2015. ISO 14001:2015 was developed using ISO s common framework for management system standards, containing a unified High Level Structure (HLS) and common text and terminology. This to ensure better alignment and compatibility with other ISO standards such as ISO 9001 and the upcoming ISO The clause structure of ISO 14001:2015 contains, in addition to clauses common with the other standards, also additional ones specific for ISO The clause structure is shown below. Clauses written in black are those included through the common HLS, while clauses in blue are the clauses specific for ISO Scope 2 Normative references 3 Terms and definitions 4 Context of the organization 4.1 Understanding the organization and its context 4.2 Understanding the needs and expectations of interested parties 4.3 Determining the scope of the environmental management system 4.4 Environmental management system 5 Leadership 5.1 Leadership and commitment 5.2 Environmental policy 5.3 Organizational roles, responsibilities and authorities 6 Planning 6.1 Actions to address risks and opportunities General Environmental aspects Compliance obligations Planning action 6.2 Environmental objectives and planning to achieve them Environmental objectives Planning actions to achieve environmental objectives 7 Support 7.1 Resources 7.2 Competence 7.3 Awareness 7.4 Communication General Internal communication External communication 7.5 Documented information General Creating and updating Control of documented information 8 Operation 8.1 Operational planning and control 8.2 Emergency preparedness and response 9 Performance evaluation 9.1 Monitoring, measurement, analysis and performance evaluation General Evaluation of compliance 9.2 Internal audit General Internal audit programme 9.3 Management review 10 Improvement 10.1 General 10.2 Nonconformity and corrective action 10.3 Continual improvement 33

34 The new version of the ISO standard aims to help the environmental management system become more effective in achieving its goals. The big question for certified companies and organizations has been how they will meet the new requirements and how they can draw benefits from transitioning to the 2015 edition. DNV GL has conducted a series of Viewpoint Espresso surveys investigating how our customers are approaching the new 2015-edition requirements. Through these surveys customers share their view on hot topics and valuable lessons and benefits. Below you can find some interesting highlights from our new-iso series. Clause 4.1 The need to understand the organization and its context in the High-Level Structure (HLS) is intended to drive a relatively high level understanding of internal and external issues that influence or can influence the organization. The top 3 initiatives that companies say they have implemented or will implement to satisfy the requirement in clause 4.1 are: 0% 10% 20% 30% 40% 50% 60% 70% By discussing the context during the management review meeting 64% By running a risk assessment on external and internal issues 52% Through meetings with the proper functions (e.g. marketing, purchase, sales) 39% Clause 4.2 Understanding the needs and expectations of interested parties is intended to drive an increased understanding of the needs and expectations of interested parties, both internal and external. The top 3 initiatives that companies say they have implemented or will implement to satisfy the requirement in clause 4.2 are: 0% 10% 20% 30% 40% 50% 60% By determining external and internal interested parties (including e.g. employees, shareholders, etc.) 53% By determining all relevant requirements from interested parties (including implicit needs or expectations) By reviewing interested parties and their requirements on a regular basis 41% 41% 34

35 Clause 5.1 Leadership & Commitment is intended to drive accountability. It requires top management to demonstrate leadership and commitment with respect to the management system. This represents an intentional shift in thinking from management towards leadership. The top 3 most challenging behaviors or activities to implement for the top management in the organization, are reported by companies to be: 0% 10% 20% 30% 40% 50% Ensuring the integration of the MS requirements into the organization s business processes 44% Taking accountability of the effectiveness of the MS Communicating the importance of effective MS and of conforming to its requirements 34% 33% Clause 6.1 Actions to address risks and opportunities requires that a company determines risks and opportunities. For the quality management system standard, it was more explicitly inserted as a new requirement than for the environmental management system. The survey on clause 6.1 was therefore addressed to ISO 9001 certified companies only. But results should be relevant for ISO certified companies as well. The top 3 initiatives that companies in the survey say they will implement to satisfy the requirement in clause 6.1 are: 0% 10% 20% 30% 40% 50% Raising awareness and competence of the management team in the area of risk/opportunity determination 41% Promoting a risk based thinking in the entire organisation Focusing both on operational (e.g. related to its processes) as well as more strategic risks (high level risks) 40% 38% Clause 7.4 Communication requires the organization to determine the internal and external communications relevant to the company s management system, including what, when, how, with whom and who will communicate. For ISO clause 7.4 Communication includes new requirements in the 2015 version compared to the previous version. The top 3 external communication topics that companies report their management system to include are: 0% 20% 40% 60% 80% 100% Company policy and objectives Mandatory communications towards authorities (e.g. in case of product recalls, environmental accidents, human injuries, periodic reporting of performance) Environmental performance (e.g related to emissions to air, effluents to water, waste generation) 57% 71% 69% For more information about these and other ViewPoint results, the full set of ViewPoint Espresso reports can be found here: dnvgl.com/viewpoint 35

36 CREDITS PROJECT TEAM Sille Sjobakk Allum, DNV GL Business Assurance Zeno Beltrami, DNV GL Business Assurance Marco Brambilla, DNV GL Business Assurance Mauro Crippa, DNV GL Business Assurance Cecilie Løne, DNV GL Business Assurance Tollefsen, Tor Gunnar, DNV GL Business Assurance EXTERNAL EXPERTS Silvia Colleoni, Cohn & Wolfe Daniele Novello, GFK Eurisko 36

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