Examining corporate management books from ten or twenty years ago, topics include unlocking the power of profitability, the capitalist manifesto and the fifth discipline, built to last, but there is minimal reference to corporate social responsibility (CSR) or sustainability. It’s not that business leaders were unaware or only cared about profits, and that protecting our environment was determined only by regulations and compliance – at the time it wasn’t a dominant social driving force. Today we accept that corporations are in the business of making money, but the expectations on how they make money have changed. We are far more sensitized to CSR and how companies approach sustainability. Today, we recognize that long-term company success arrives only with direct support of monetary, ecological and community factors to create added value for the company, its employees and society.
CSR can be defined as the broader term that encompasses sustainability, but the differentiation is for scholars and not practitioners. Both relate to a company’s accountability to the corporate entity, the stakeholders and the public. CSR is not purely about emphasizing sustainability for better operational efficiency and lower production costs. CSR accountability manifests in three major initiatives that support the CSR directive:
- Social impact – take care of the people inside and outside of the business
- Environmental – do no damage and pursue reduced environmental impact
- Financial – align stakeholder values with sustainable business practices for long- term profitability
All three are important; each equally weighted to assure that shortcuts do not present unethical means for quick profits at the expense of the long-term implications. Social impact increasingly affects companies, and customers of consumer-facing businesses may readily change buying habits based on a company’s public behavior. Customers are increasingly aware of garment manufacturers, coffee roasters, et al exploiting workers for profit, and they will willingly buy fair trade sourced products. However, the separation between industries that provide intermediate products to such customers is increasingly difficult to hide. For example, an environmental release from a petrochemical company may result in significant alternative consumer buying decisions that harm a company’s business.
Rather than cover all aspects of CSR, AspenTech primarily influences those activities that contribute to overall equipment effectiveness (OEE). OEE is more than just availability alone but includes how the equipment supports the integrity of CSR. To do so, we offer two complementary strategies incorporating the leading and lagging indicators that combine to manage best practices in any performance stewardship.
A lagging indicator is the most common mechanism employed for CSR control and is a key metric that calculates the past and current assessment of specific performance attributes – often mislabeled a Key Performance Indicator (KPI), but KPIs are reserved for the top level measures that affect the overall business health, constituting little over a handful of metrics. For CSR, such metrics can include:
- Recordable environmental and safety incidents
- Days since last incidents
- EPA recorded incidents (Environmental Protection Agency)
- Minor and major safety incidents
- Number of safety incident near misses
Such indicators relay only what has happened and reinforce the mantra provided by Peter Drucker, the author of 39 books on business management, “If you can’t measure it, you can’t improve it.” Such indicators, presented on historical scorecards, do not directly influence what will happen and that’s why they’re labeled ‘lagging.’
In contrast, leading indicators measure the performance of the activities that influence the future metrics – the actions to take in advance to avoid incidents. Such indicators for CSR might include:
- Monitors of reliability and inspections on equipment that can cause environmental discharges and safety concerns, including risk-based inspections (RBI), instrument protective functions (IPF) and reliability-centered maintenance procedures, etc.
- Assessments of staff training on CSR functions
- Staff certification observations
- Work requests for corrections more than five days old
- Work requests open for longer than three days
The objective of leading indicators (the measurement of appropriate activity) is to encourage behaviors that will improve lagging indicators and thereby bring continuous improvement in CSR response – the measure of achievement. However, care is necessary in selecting the appropriate leading indicators because they will affect people’s response, even though they may not always stimulate the intended behavior. For example, an Operations Manager once requested a dashboard metric indicating how many safety work orders were in the maintenance system at any point in time. Given the importance of safety, reducing the number of safety work orders might seem important. However, there are two ways to achieve a lower number. The preferred behavior is to expedite them but failing to report them also results in a lower number but does not promote the desired behavior. Consequently, monitoring the number of safety work orders might not be the best metric.
The flagship rests in the Asset Performance Management (APM) Portfolio with its application capabilities. For lagging indicators, the portfolio provides APM Insights, a superior dashboarding solution for simply and rapidly gathering, contextualizing and presenting real-time or near real-time views of any CSR metrics from any source. But APM Insights can also combine leading and lagging indicators in maintenance and operational control dashboards. The usability assures users can implement APM dashboards themselves. Furthermore, APM Insights offers a first-class toolkit for rapidly creating and executing work processes that manage precisely how personnel respond to alarm/alert situations with clear and consistent actions.
Stay tuned for Part Two of this blog: The AspenTech APM Applications Portfolio takes the reader from a high-level introduction to the pragmatics of solutions that assure consistent and sustainable APM outcomes. In the meantime, we suggest you consider registering for our upcoming virtual, free bi-annual event, OPTIMIZE 2021 – there are a wide variety of APM customer-focused sessions that should provide valuable best practices and insights.