GG414 Measuring to manage: the key to reducing waste costs contains more information about these and other topics that are important in a successful measuring to manage programme.
What are key performance indicators?
Measuring performance allows a company to determine objectively what is working and what is not. Key performance indicators (KPIs) are the set of measurements deemed essential to understanding an organisation's operational health.
By setting KPIs, companies are encouraged to monitor what they are doing and then establish targets to achieve improvement. KPIs can be used to establish base-line performance and to track changes. KPIs can also be used for external benchmarking, ie to measure the performance of a company or product against that of a similar company or product or against ‘best practice' data (if available).
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What are key environmental performance indicators?
Environmental KPIs (or KEPIs) are selected criteria covering issues such as water use, material use, generation of waste, etc.
Good environmental KPIs should:
- help a company to fully understand how changing resource inputs and production parameters can bring about efficiency improvements and deliver cost savings;
- provide the information a company needs to satisfy its various stakeholders, eg in terms of environmental reporting.
Commonly used environmental KPIs include:
- litres of water used per tonne of product manufactured;
- kg of waste disposed of per item manufactured.
These relative indicators attempt to eliminate the ‘natural' variation caused purely by production changes. The indicator thus measures only genuine changes in efficiency.
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What types of KPI are there?
There are three main types of performance indicators, all of which can be used to track environmental performance:
- management (MPI)
- financial (FPI)
- operational (OPI)
MPIs are not designed to help improve resource efficiency directly, but they are important, for example, in terms of meeting company objectives and in the context of environmental management systems. Because they combine resource efficiency and unit costs, FPIs can give misleading results, eg a fall in the value of an FPI may just reflect a drop in material costs. The KPIs suggested for the six sectors thus tend to be OPIs designed specifically to monitor the efficiency of resource use and pollution. These environmental OPIs are referred to simply as KPIs.
Examples of the different types of KPI
| Type |
Description |
Examples |
Used by |
| Management (MPI) |
Measures performance of management systems/targets relevant to environment |
- Number of environmental targets achieved
- Percentage of staff having environmental training
- Number of waste audits completed
|
Senior managers |
| Financial (FPI) |
Measures environmental effects in financial terms |
- Energy costs per unit of production
- Total waste disposal costs
- Raw material costs per tonne of product
|
Financial director, investors, etc |
| Operational (OPI) |
Measures environmental performance in practical operational terms |
- Total energy used per unit of production
- Waste produced per process line
- Percentage of wastewater re-used/recycled
|
Production managers, waste minimisation co-ordinator, etc |
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How do I take account of production variations?
The choice of KPIs depends on the type of operation/product, the company's priorities and those of key stakeholders. There are three main categories of KPI:
- absolute indicators
- relative indicators
- weighted indicators
Absolute indicators
These measure key resources without reference to any other factors, eg:
- litres of water used per year;
- tonnes of waste produced per month.
These indicators are inappropriate measures of production efficiency where the nature and/or ‘volume' of production varies during the period of interest.
Relative indicators
For most companies, the use of relative indicators (sometimes called ‘specific measures') is more appropriate. Examples include:
- litres of water used per tonne of product manufactured;
- kg of waste disposed of per item manufactured.
These indicators attempt to eliminate the ‘natural' variation caused purely by production changes and measure only genuine changes in efficiency.
Relative indicators can also be expressed as percentages. In this case, the production throughput becomes irrelevant, eg:
- percentage of raw material (input in tonnes) that becomes product (output in tonnes), ie a measure of raw material yield
- percentage of effluent re-used
Weighted indicators
Many companies produce a wide variety of products using a range of processes or process variations.
For example, a powder coating company might coat door handles one day and whole doors the next day. Measuring production throughput simply as the number of items coated would be meaningless in terms of judging how efficient the company is with regard to its use of powder coatings. In this case, what is important is the area of the object coated.
Another example is when a company wants to measure the efficiency of water use but some products are solvent-based and others are water-based (and thus use more water in their manufacture). In these circumstances, factors can be applied to give a weighted indicator.
Another approach is to use turnover or value added as the normalising factor, where value added is defined as the value of sales minus the cost of goods, materials, utilities and services used during production. However, this KPI may be affected purely by market fluctuations rather than physical changes in throughput.
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What coverage or scope should KPIs have?
Aggregated or headline indicators generally relate to the site as a whole, eg:
- kg of packaging used per tonne of product
- kg of waste generated per tonne of product
- kW of energy used per kg of goods produced
These site-level or company-level indicators are generally most useful for senior managers and external stakeholders, and are often used in environmental reports.
Disaggregated indicators apply to parts of the site or certain stages of the manufacturing process such as particular departments or production lines, eg:
- average grams of coating per item produced in spray booth 1, spray booth 2, etc;
- energy use (kW) per item entering oven 1, oven 2, etc.
Measuring key parameters by department/process allows production problems/inefficiencies to be pinpointed and action to be targeted effectively.
Disaggregated indicators can also be used to make departments accountable for raw material/utility use and waste generation.
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What measurement conditions are specified?
When considering emission-related indicators, it is important to take account of the measurement conditions specified in the relevant regulatory guidance.
Emission concentration limits are usually expressed as a mass (eg mg) of substance per normalised (N) volume (eg m3) of gas (ie corrected for standard conditions - see the table below). Averaging times vary, but concentration limits often have to be expressed as 15-minute or 30-minute means. Mass emission calculations are normally expressed in kg or tonne units and require knowledge of the gas flow rate (in Nm3/hour).
Standard reference conditions for volatile organic compound (VOC) monitoring
| Parameter |
Reference conditions |
| Temperature |
273 Kelvin (0C) |
| Pressure |
101.3 kPa (1 atmosphere) |
| Humidity |
Dry (no moisture correction normally required for non-combustion sources) |
| Oxygen content |
Depends on type of combustion process
No oxygen correction is normally necessary for non-combustion processes |
- Standard atmospheric temperature and pressure (STP) refers to a temperature of 0C and a pressure of 101.3 kPa.
- Correction for temperature is generally required as most measurements are taken at non-reference temperatures.
- Correction for pressure is not normally required as any change is usually insignificant. Correction for oxygen content is required when monitoring emissions from combustion processes, such as curing ovens and incineration-based abatement equipment.
- VOC emissions (from solvents) are usually expressed as equivalent carbon concentrations rather than as the compounds themselves.
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