ArcelorMittal FCE roll out Organisational Risk Management software to unify maintenance processes

Organisational risk management (ORM) is the new hotness in the sustainability field. It is receiving increasing attention, as SAP’s Jeremiah Stone mentioned when I talked to him at SAP’s Sapphire/TechEd event last week. One assumes that it is receiving this increasing attention at least partly because that’s where the customer dollar is focussed right now.

What exactly is ORM? Organizational risk management is “risk management at the strategic level” according to the Software Engineering Institute – think of it as kind an amalgam of the traditional Environment, Health and Safety (EH&S) and Governance, Risk and Compliance (GRC) sectors.

How do these fit into the sustainability agenda? Well, risk mitigation is all about reducing the risks of an adverse event occurring – one that either hurts people or the company reputation (or often both!). It does this by mandating procedures and processes with verifiable sign-offs. It also does this by scheduling maintenance and raising alerts when equipment goes out of tolerance. This properly scheduled maintenance of machinery will ensure it not only runs safer, but often will also mean it stays more fuel efficient. This can mean significant energy savings in organisations which use a lot of power.

While at SAP’s TechEd/Sapphire last week I spoke with Edwin Heene, who works with ArcelorMittal and is responsible for the rollout of their ORM software solution. I had a quick chat with him to camera about the project and why ArcelorMittal embarked on it.

Here’s a transcript of our conversation:

Tom Raftery: Hi, everyone welcome to GreenMonk TV. We are at the SAP Sapphire event in Madrid, and with me I have Edwin Heene from ArcelorMittal. Edwin you have been involved in the organizational risk management project rollout or are involved in at the moment for ArcelorMittal. Can you tell us a little bit about that?

Edwin Heene: So in ArcelorMittal Flat Carbon Europe we are doing a global organizational standardization project in maintenance, that including also the safety processes and this is something that we do in several countries namely eight countries in Flat Carbon Europe.

Tom Raftery: So maybe we should give it a bit of context first. Who are ArcelorMittal? You are a large steel company, but could you just give us a little bit of background about the company first?

Edwin Heene: ArcelorMittal is the largest steel producing company in the world doing — covering about 6% of the annual year production. Has a number of employees about 260,000 in 2010. And presence in Flat Carbon Europe because that?s the sector where — segment where I work in. It is covering eight different countries, and we have about 35 locations in Flat Carbon Europe.

Tom Raftery: Okay, so as I mentioned in the start you are in the middle of this organizational risk management software rollout, can you talk to us a little bit about that?

Edwin Heene: So this system we — in 2008 we selected the fact the solution has update to the support us with this harmonization and there we found out that there was a good supporting tool for operational risk management and safety processes namely the solution was PWCM –Work Clearance Management solution.

Tom Raftery: Okay, and you brought SAP in to help you in a kind of collaborative role in developing the application for yourselves.

Edwin Heene: Yeah, because in Flat Carbon Europe we had already a number of plans that are on good level of safety and managing the safety risks and so on in the operational part with some legacy systems, with a decision to go to one common system, the SAP system, we have to convince the other people with, which have already a good supporting IT tool to move over to SAP.

And therefore we found out that there were some lags still in the supporting SAP PWCM solution. So we had a number of meetings with Jeremiah Stone from SAP who is leading co-innovation programs in SAP and there we decided to, in order to close these gaps to provide these functionalities in standard SAP environment to step in a co-innovation program with SAP.

Tom Raftery: Okay and why roll it out — what was the reason behind the rollout of the application?

Edwin Heene: The reason behind the harmonization and standardization program in Flat Carbon Europe is first of all to improve the maintenance processes in effect implementing all the best practices that we have in several plants and you have a best practice in every single plant to absorb that in one common model, one common business model and implement that in all different plants. Throughout this implementation of best practices you have business results, operational results in every single plant. Benefiting of being in a large group and learning from each other, learning from the best practice from another group.

Tom Raftery: Excellent, Edwin that?s been great, thanks a million.

Edwin Heene: Thank you.


Investors, the EPA and now the SEC are making pollution an increasingly unattractive option


Photo credit Neubie

A perfect storm consisting of the EPA, the Securities and Exchange Commission (SEC) and investors is pressuring companies to come clean on their environmental risks and performance.

I wrote a post a couple of weeks ago about FaceBook’s decision to use a primarily coal-burning utility to power its new data center where I asked should FaceBook’s investors be worried about the decision.

Now the SEC has started taking an interest in this area as well and recently clarified that companies’ have responsibilities [PDF] to report on:

  1. the direct effects of existing and pending environmental regulation, legislation, and international treaties on the company’s business, its operations, risk factors, and in Management’s Discussion and Analysis of Financial Condition and Results of Operations
  2. the indirect effects of such legislation and regulation on a company’s business, such as changes in demand for products that create or reduce greenhouse gas emissions and
  3. the effect on a company’s business and operations related to the physical changes to our planet caused by climate change ? such as rising seas, stronger storms, and increased drought. These changes to the environment could have a number of material effects on corporations, such as impairing the distribution and production of goods and damaging property, plant, and equipment

In announcing the clarification SEC Commissioner Luis A. Aguilar stated that the SEC will begin to be far more proactive on environmental reporting:

The Commission’s action today is a first step in an area where the Commission will begin to play a more proactive role, consistent with our mandate under the National Environmental Policy Act of 1969, to consider the environment in our regulatory action. The National Environmental Policy Act charged the Federal Government “to use all practicable means” to, among other things, “fulfill the responsibilities of each generation as trustee of the environment for succeeding generations.”

Noting the interest of the SEC and their clarification around companies’ environmental risk reporting requirements, investors are now becoming more vocal and are increasingly asking companies to report more information about their environmental risks and responsibilities. These investors need to look after the long term interests of their funds and the last thing they want is to have their monies disappear in some environment-related mishap like the Kingston Fossil Plant coal fly ash slurry spill or a class action litigation.

Ceres, the non-profit network, reported recently that investors filed a record 95 climate change resolutions, a 40% increase over the 2009 proxy season! And these are serious investors. Jack Ehnes, CEO of CalSTRS for example, manages $131 billion dollars in assets. That’s billion, with a b!

As Ceres notes:

Many of the investors are part of the Investor Network on Climate Risk (INCR), an alliance of more than 80 institutional investors with collective assets totaling more than $8 trillion.

$8 trillion! Investors with a war chest of $8 trillion wield a lot of clout.

Combine this with the fact that on Dec 29th 2009 the EPA’s Mandatory Reporting of Greenhouse Gases Rule came into effect and it states:

suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions are required to submit annual reports to EPA. The gases covered by the proposed rule are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), and other fluorinated gases including nitrogen trifluoride (NF3) and hydrofluorinated ethers (HFE).

So, the EPA is requiring the reporting of Greenhouse Gas Emissions from the top 10,000 emitters in the US, the SEC now has environmental risk reporting and transparency in its sights and investors with considerable resources are looking for more details on possible environmental risks from companies they invest in. You have to think that this is not a good time to be in the pollution business!

UPDATE – A reader on the Energy Collective reminded me that I forgot to include reputational risks:

Another climate-related risk called out in SEC’s Interpretive Guidance is reputational risk: “Another example of a potential indirect risk from climate change that would need to be considered for risk factor disclosure is the impact on a registrant?s reputation. Depending on the nature of a registrant?s business and its sensitivity to public opinion, a registrant may have to consider whether the public?s perception of any publicly available data relating to its greenhouse gas emissions could expose it to potential adverse consequences to its business operations or financial condition resulting from reputational damage.”

I had read this but somehow neglected to include it in this post, thanks for the reminder.


GreenMonk Energy and Sustainability post for 22nd Feb

greenmonktv on Broadcast Live Free

We had a great Energy and Sustainability show today – in case you were unable to make it, I recorded the video (above) and the chatstream (below):

Tom Raftery :
Kicking off the show in a sec

cgarvey :

Cheers Tom .. I’m still stuck back at the smart meters link .. loads of links to digest. Ta!

raphael :

thanks tom

Tom Raftery :

Thanks everyone, as always, Tom