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Clean Slate: Here's how Con Edison, New York City's utility company transformed itself from environmental wrongdoer to environmental leader.

By Minda Zetlin

What's the worst disaster that could ever happen to your company? 
If you're having trouble answering, imagine this: A deadly explosion at one of your facilities shoots boiling steam and asbestos into an elegant metropolitan neighborhood. Rather than face facts, your top executives assure neighborhood residents that it's safe to remain in their homes, thus exposing them to a known carcinogen.
As a result your company earns the dubious distinction of being one of the few corporate entities to be found guilty and sentenced in Federal criminal court. It is heavily fined and put on probation.
Meanwhile, your state's environmental regulators begin scrutinizing your operation. They soon discover that your company has been illegally discharging oil into local waterways for more than a decade. They levy the state's highest-ever environmental fine.

All of the above actually happened to Con Edison, New York City's 176-year-old utility company. In 1989, an explosion near New York's stately Gramercy Park killed two Con Ed employees and a neighborhood resident. An apartment building was contaminated with asbestos--but Con Ed executives insisted there was no hazard, until four days after the explosion, when angry residents confronted them with independent tests that showed their building was unsafe.

In 1994, after years of court battle, the company pled guilty to lying about the contamination. Con Ed accepted both a $2 million fine and a court-appointed monitor, an environmental activist and lawyer, who would spend the next two years scrutinizing the company's environmental performance.

Partly inspired by the Gramercy Park incident, New York State's Department of Environmental Conservation (DEC) launched an investigation of its own. It found, among other things, that Con Ed had dumped oil and other pollutants into New York City waterways more than 300 times, and fined the company a record $14 million. It also imposed a "consent order" demanding sweeping changes in Con Ed's practices.

But if this story has a dreadful beginning, it gets better as it goes along. Rather than fight on in court, the company determined to literally clean up its act, and create an environmental program of such excellence that it could stand as an example to other utilities. Four years later, it has done just that. By just about every measure the company's incidents of environmental noncompliance have dropped dramatically, and even its critics concede impressive improvement. 

"We believe they have made significant progress," says Robert McGuire, a former federal prosecutor on the Gramercy Park case who is now serving as Con Ed's environmental ombudsman, as the court mandated when it ended the company's probation in 1998.
"They committed a substantial amount of resources to improving environmental programs, and they have put their money where their mouth is."

'Operations Drives the Bus'

It's hard to imagine how a company's standing on environmental issues could be much worse than Con Ed's was in 1994. But it's not hard to see how the company got there. Con Ed delivers not only electricity, but also gas and steam to more than 3 million homes and businesses in New York City. Some of the infrastructure that carries these products dates back 50 years or more, to a time when the hazards of such materials as asbestos and polychlorinated biphenyls (PCBs) were not known. So Con Ed employees must work with hazardous materials on a daily basis.

Frequent exposure to environmental and safety issues was only half the problem. The other half was how Con Ed had been dealing with these issues. The company did have an Environmental Affairs Department, staffed with about 40 people who were, by all reports, both very dedicated to protecting the environment and very knowledgeable about how to do so. But they were completely isolated from the rest of the company. 

"That's not unlike a lot of companies that find themselves trying to get into the 20th century as far as environmental management is concerned," notes M. Peter Lanahan, Jr., Con Ed's vice president of Environment, Health & Safety. A former DEC executive Lanahan was brought in in the wake of the guilty plea to reform Con Ed's environmental program. 
"That's the traditional model," he explains. "Here, you guys are responsible for the environment. You make those guys do it. Forget it! It's not going to work. You can't ever has as many environmental people as operating people, so you can't watch them. You've got to get them to want to do it."

Particularly not at Con Ed, where the watchword had always been: "Operations drives the bus." In other words, operating the system that delivers services to New York's residents is the absolute number-one priority--and indeed, Con Ed claims to have the best reliability record of any utility in the country. 

"You can't let the lights go out in the city of New York without some pretty severe consequences," Lanahan notes. (That comment turned out to be prophetic: a few weeks after this interview the lights did go out in New York's Washington Heights neighborhood for 19 hours. The blackout resulted from an underground cable fire, brought on by an unprecedented heat wave. Nevertheless, the city promptly sued Con Ed.)

With its environmental experts isolated, and the company's attention firmly focused on keeping power flowing, environmental breaches were inevitable, explains Ed Schwarz, Department Manager Steam Operations, Environment Health & Safety. Isolation of Con Ed's environmental professionals may not have caused the problems at Gramercy Park, he notes, but they definitely did cause its troubles with the DEC.

"The fact is, we had hundreds and hundreds of oil leaks, some of which were reported, some of which weren't reported. They were just not addressed, there weren't preventive measures put in place to avoid this in the future. As a result, we ended up with a major consent order." 

"Double Matrix"

Armed with an absolute commitment from the company chairman, Eugene McGrath, to fix Con Ed's environmental problems, Lanahan began by restructuring the company's environmental staff so that environmental concerns could become part of every day operations. Environment, Health & Safety (EH&S) staff are now fanned out throughout the company in what Ed Schwarz ((??)) describes as a "double matrix."

"You have Pete [Lanahan] who's in one section of the company, and I'm in a completely different area of the company," he explains. "I'm a department manager, so there's a dotted line relationship between him and me. I work for a vice president, he is a vice president, but I don't report to Pete. And there's a group of people like me. So that's the first matrix.

"And then what happens within the various organizations like my own, there are eight power plants at Con Ed and each power plant has an environmental manager, environmental staff and a safety administrator. There's a dotted line relationship between me and them, just as there is between Pete and me. They don't report directly to me, they report to their own [EH&S] manager, but yet I run a program within fossil power, so there is some sort of responsibility. 

"And so you get the double matrix. And it's very effective."
Managing such an organization could be quite difficult, he adds, because the lines of accountability are multiple and unclear. What makes it work is that everyone involved is committed to reaching the same environmental goals, he says. "If you're all moving toward the same objectives, it's not that difficult."

Where there were once only 40, the Environment, Health & Safety department now has 126 members, fanned out throughout Con Ed. Some of these, Lanahan says, are former members of the previous Environmental Affairs Department, and others are environmental experts hired from outside. But many more are managers hired from within Con Ed, with no particular environmental background.

"We took people who knew the Con Ed system--it's a very complex system--and we trained them to be environmental managers," Lanahan says. The training, still in use today, takes the form of eight modules. There's a test at the end of each module, and Con Ed employees must pass each test before becoming environmental managers. Even so, Lanahan says, the environmental managers as a group have continued learning, so that what he calls their "literacy level" has risen dramatically.

"I remember the first meeting that I went to of the environmental managers we had trained, and I said to myself, 'This is sort of like a meeting of industry lobbyists,'" he recalls. "They were complaining: 'How are we going to do this? We can't do this!' You go to these meetings now, and I challenge you to find any group of people anywhere in the country who know more about this stuff than these people do. They have really taken it to heart."

CEPs, GEIs, Close Calls

Turning Con Ed toward environmental excellence meant profoundly changing how most people in the company set their priorities. "We've always had a great electrical system," Lanahan says. "Now we've said to people: 'You've got to keep the lights on, and you've got to protect the environment at the same time. Which puts a lot of pressure on first-line supervisors." To achieve this kind of realignment in the short period of time the company had set for itself would require a massive communication effort, EH&S executives knew, so they attacked the problem on many different fronts. 

First and foremost came a mass of documents literally thousands of pages long: the CEPs, or Corporate Environmental Procedures and the GEIs, or General Environmental Instructions. Stacking as high as several telephone books, the CEPs and GEIs take the morass of federal, state, county, municipal and Coast Guard environmental regulations that govern Con Ed's various operations and translate them into a form that management and union employees can both understand and actually use. These regulations change constantly (EH&S employs one attorney whose main job is to track all the changes) and so the documents are continually updated as well.

The CEPs are the "upper level," Schwarz explains. "They're the governing documents. Those are the things that I'm interested in and the environmental managers are interested in. They're really regulation-driven." The company's environmental managers, who are out in the field at various Con Ed facilities are required to stay current on the CEPs, and must pass regular tests, he adds.

The GEIs, on the other hand, are specific instructions for the work force on how to follow the rules set out in the CEPs. One reason that a book of them is so hefty is that they are intended to cover every task a Con Ed worker might ever perform. Each employee is only responsible for knowing the limited set of GEIs that applies to his or her job.
Because Con Ed is a traditional-style engineering company, where employees are accustomed to following formal procedures as they do their jobs, these documents have been an incredibly powerful tool for integrating sound environmental practices into the company's everyday workings. 

But they are only one of many ways the company gets the word out about environmental issues, and many of the new channels are designed to open communications from the bottom level of the company upwards, as well as from the top down. For instance, EH&S produces a monthly video, called "The eXcellence Files" (in a nod to a hugely popular television show of a similar name). One regular feature of these videos is "Close Calls," in which rank-and-file employees recount narrowly averted safety or environmental mishaps and the lessons they can share with their co-workers. (In one recent "Close Call," for example, an electrical worker recounts how he heard a tell-tale clicking sound, or "arcing" and quickly moved his head just before flames came shooting out the end of the pipe.)

But perhaps the most profoundly universal of these new communications channels is Con Ed's innovative Time Out program, which allows any worker, to stop any job at any time if he or she thinks it may be environmental unsound or unsafe. In fact, all it takes to stop a job is a little green laminated card. The card shows a silhouetted referee holding his arms in a "time out" signal and reads: "You can always call a time out if you have a safety question or an environmental concern."

This form of empowerment was important if the company was to meet its environmental goals. Orders traditionally have come from the top down at Con Ed, but workers needed to learn to form their own judgments about whether a job should proceed.
Unlike most Con Ed functions, the Time Out procedure is deliberately intended to be informal. Nothing is done in writing, and no records or statistics of time outs are kept. The basic idea, though, is that once a time out has been called, workers and their supervisors discuss the issue at hand. If they are unable to agree on a resolution, they can call in an expert from the EH&S department 24 hours a day.

"In any case, no work proceeds until the time out is resolved," Lanahan says. "This is more a device to get people to talk to each other and work out their concerns than it is anything else. But it's been enormously successful. In a sense, it has made every employee an EH&S manager."

'What Is This Stuff?'

If all of these sound like an attempt to change Con Ed's traditional top-down culture, they are, just that. "In 1997, we started to recognize that if we wanted the program to advance yet more, we had to work on cultural issues," Lanahan says. "There was a kind of military management structure: the top tells the bottom what to do so the bottom doesn't have to do extensive thinking on its own. Everything had to be in a procedure. And there was a perception in the organization that, if I make a mistake, I'm going to be blamed for it, so people were afraid to take risks by going outside the procedures and doing a lot of thinking on their own, particularly in the environmental area."

Lanahan believes it is critically important to change that style of thinking, and he gives an example of why: "In one case people were doing asbestos work. They were halfway finished with the job, when this guy picks up the can of stuff he was applying and says, 'Hey, it says on here we're supposed to be wearing respiratory protection. What is this stuff?'

"We got everybody together that was involved and said, 'How'd this happen?' And the answer came out: they thought they knew what they'd been told to do. They never stopped to talk among themselves. They didn't stop to plan the work out together. Instead, they pursued the ethic of: 'Hey, we've got to get to work here. We're action-oriented. We've got the procedure and we know what we're supposed to do.'

"We think that by getting people to think more of themselves as a team, with a responsibility to communicate with each other and to tell the boss that they think he's wrong, we can eliminate these kinds of mistakes."

Con Ed turned for help to Ed Schein, professor at the Massachusetts Institute of Technology's Sloan School of Management. Schein began consulting with Con Ed two years ago to change these cultural issues--something that he notes is very difficult and will take a long time. "The essence of what they want to do will take many, many years," he says. "You're asking employees to think differently about themselves."

But, he agrees that the change is a necessary one. "To make the environmental responsibility work--and to make it a more competitive company in the future--employees have to take more responsibility. They have to be more open in their communications both up and down the hierarchy, and they have to have much more of a sense of working in teams rather than as individual heroes."

And, he notes, the double whammy of probation and the consent order has had one positive effect: it's created a strong impetus for change. "People realize it's not just the program of the month," he says.

Getting People's Attention

In January of 1996, three Con Ed supervisors and a general manager were asked to resign, and two other executives, including a vice president, were given disciplinary transfers. The reason was their treatment of an electrical troubleshooter ("troubleman," in Con Ed terminology) who feared he had been exposed to significant PCB levels during an improperly handled spill. The troubleman had voiced increasingly insistent complaints and demands for information, at one point writing to the company chairman. Shortly thereafter his immediate supervisors suspended him (on a supposedly unrelated charge) and denied him an expected raise. They also took steps to conceal the problem. A subsequent investigation by senior management uncovered what it called a "nonfunctioning management system" in that operation.
Retaliatory tactics large and small toward environmental whistleblowers had traditionally been a fact of life at Con Edison, where employment typically lasts 20 years or more, and fierce loyalty is the norm. It was also a company where it was "pretty much impossible to get fired," according to a report by Mitchell Bernard, who served as Con Ed's court-appointed monitor during its probation. 

The day after the terminations were announced, Bernard visited the operation where the troubleman and his bosses had worked. "The people I talked to were shocked an angry," he writes. But they had also gotten the message. 

"One person who has been with the Company 35 years told me that for 34 years the message was 'get the lights back on' but now there is a definite shift," the report continues. "The shift represents 'a real culture shock to a lot of people here.'" 

Discipline isn't anybody's favorite part of the new environmental excellence program, but it is an important part. At the beginning, Lanahan says, "There was quite a bit of discipline, trying to get people's attention."

More recently, he adds, EH&S has tried to move away from using people who do wrong as negative examples to using people who do right as positive ones. A crop of awards programs, some with prizes as high as $1,000 cash, keep those who do good for the environment in the spotlight.

And the discipline itself is changing too. Though it did get people's attention very effectively, Bernard reported that disciplinary measures meted out in the early days of probation were sometimes equally harsh for an honest mistake as they were for deliberate concealment. Now, Lanahan says, the company is evolving toward more consistent--and more creative--forms of discipline.

In a recent case, for instance, a Con Ed plant manager who could have suspended an employee for a safety infraction instead dispatched the offender to find every hazard in the plant. "It's a different, more innovative form of getting at the same problem," Lanahan says.
Likewise, the environmental auditing program, created as part of the DEC consent order and overseen by the company's auditing department holds each department to extremely rigorous standards. "We were warned by consultants that our auditing program was going to create controversy," Lanahan says. "And it does do that. But we don't want to give up the rigor of the program."

Instead, he says, "We are trying to address it by reassuring people that one bad audit finding doesn't equal the end of your career."

Beyond Compliance

With probation over, and many of its compliance goals being met, what's next for EH&S? Lanahan feels the company should now broaden its environmental sights. "We have to get more sophisticated about the goals we set for ourselves," he says. What we really want to get to now is managing the risks that are not subject to regulation, but could get us into trouble at some point."

As for remaining in compliance, he says, it's no longer a worry: taking care of the environment is now part of Con Ed culture. "If the chairman, I, and a couple of key officers all said we're not doing this environmental program anymore, I think over time it might diminish. But then I also think we've got a bunch of employees who wouldn't let that happen.

"I think this is like any bureaucracy: Once you get the train on the track, it takes something awful, awful big to get it off the track," he continues. Concern for the environment is now in this company, he says. "And it's going to stay here."

Sidebar:  The Arthur Kill Incident

On September 7, 1998, an electrical short ruptured a transformer at the Arthur Kill Generating Station Unit #2 on Staten Island, New York. There was a small fire, and more than 2,000 gallons of oil inside were released into the ground. 

Con Edison had tested the oil inside the transformer on three separate occasions and found only low, safe levels of PCBs (polychlorinated biphenyls). When soil samples from the cleanup site were sent to an outside contractor, though, the results showed dangerously high PCBs. 

Baffled Con Ed execs guessed that the PCBs in the soil must have come from some earlier spill, and did not immediately report the new findings to regulatory agencies or the public. Instead, wanting definite answers first, they sent a new sample to their own labs for retesting and waited for the results.

The new tests confirmed the higher PCB readings. It turned out that the transformer (apparently one of only two of this kind in the world) had been built with internal box beams. These hollow beams had been filled with a dense, PCB-laden liquid called chlorextol, in an effort to dampen noise from the transformer. The liquid from these unknown beams had not been sampled in the original tests, but when the transformer caught fire, they had broken, spilling their contents.

Meanwhile, 10 days had gone by since the initial spill. Con Ed scrambled to report the higher levels, and adjust its cleanup procedures to account for high PCB levels. But the damage was already done. This was, after all, the company that had pleaded guilty to lying about asbestos contamination at Gramercy Park in 1989. Con Ed's failure to immediately publicize the higher PCB tests looked like more of the same type of behavior.

To make bad matters even worse, New York City firefighters who had put out the fire now had to be told that they'd been exposed to significant PCB levels, and their firefighting equipment, which had gone back to the firehouse had to be found and decontaminated. "We had to chase down all the pathways where this material could have gone," says M. Peter Lanahan, Jr., Con Ed's vice president of Environment, Health & Safety. "And we had to satisfy our employees as to why we didn't know about this, and why they were potentially exposed."

Con Ed officials were now as forthright as they could be. They told the firefighters straight out that they'd had significant exposure, and supplied detailed medical information to help them understand the risks. 

Even so, "in terms of perceptions, it set us back considerably," Lanahan says. "We'd gotten off probation in April. We thought we had terrific programs, things were going well. And then this happened. It became a big media event, and we're still recovering."

One lesson for Con Ed is that it's dangerous to hold back information just because you don't understand it, notes Robert McGuire, a former federal prosecutor and Con Ed's environmental ombudsman. "Instead of saying, 'I don't believe this new data, but I'm going to trumpet it to the world,' they made the decision to retest without publicizing it. Then you go down a road you can't get back from."

He also notes that a total risk assessment approach might have helped the company make a better decision. Still, he says, "It's an aberration in many ways. You have to be careful about what the implications are. There's an old saying that bad cases make bad law." And once the truth was known, he adds, Con Ed acted very professionally.

Within the company, Arthur Kill was a stunning blow to morale. "I felt, and everybody I work with felt that we had worked so hard and come so far," says Ed Schwarz, department manager, Steam Operations, Environment Health & Safety. "And then, to have something like that happen, and be looked at as if nothing had ever been done. We were being scrutinized as if nothing had ever improved in our environmental programs. That was hurtful."
But far from giving up, he says, Arthur Kill seemed to renew employees' commitment to getting the environmental part of their jobs right. "I've never seen anything like it," he says. "They're determined. The people got mad, and they just reacted by getting better and better and better." 

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