/ Governance /
Eight members serve on the Waste Management Board of Directors, seven of whom, including the Chairman of our Board, are independent as defined by the New York Stock Exchange. The role of Board Chairman has been performed by a non-executive, independent director since 2004. Waste Management’s President & CEO is the eighth director. Board members are each elected annually. There are three standing committees: The Audit Committee, the Management Development and Compensation Committee, and the Nominating and Governance Committee. Our Board of Directors does not delegate responsibility for sustainability and corporate responsibility to a committee. Rather, such issues that are integral to our business, including recycling, fleet optimization and energy, and aspects of these issues, are discussed by the full Board of Directors at every meeting. Our Board of Directors’ biographies, committee charters, and our governance guidelines are posted on our website.
The Nominating and Governance Committee seeks Board candidates who bring a variety of perspectives and industry knowledge relevant to Waste Management’s business. Candidates are evaluated for personal and professional integrity and sound judgment, business and professional skills and experience, independence, potential conflicts of interest, diversity and potential for effectiveness in serving the long-term interests of shareholders. A matrix of experience, skills and expertise is considered to develop criteria to select candidates. While there is no formal policy regarding weighing diversity in identifying director nominees, the Nominating and Governance Committee considers diversity in business and professional expertise, as well as gender and ethnic background, when evaluating director nominees. The Nominating and Governance Committee has considered the gender and racial/ethnic composition of our Board, including the presence of two women, two Board members who self-identify as African American/Black and one who self-identifies as Hispanic. The Committee believes that these factors, among numerous others, contribute to a valuable diversity of background, thoughts and opinions.
Before being nominated, director candidates are interviewed by the CEO and a minimum of two members of the Nominating and Governance Committee, including the Non-Executive Chairman of the Board. Additional interviews typically include other members of the Board, representatives from senior levels of management and an outside consultant.
Waste Management’s sustainability service offerings are discussed at most Board meetings because these services are linked so closely with company strategy. Topics discussed include recycling goals, market conditions and operations, generation of renewable energy and innovations in operations to increase efficiency and provide environmentally superior service. Customers’ sustainability goals, such as waste reduction, recycling and materials reuse, and expansion of renewable energy capacity, are discussed annually during the Waste Management senior leadership team’s (SLT) strategic planning meeting.
The Audit Committee of our Board is responsible for assisting the Board in monitoring the company’s compliance with legal and regulatory requirements. Accordingly, the Audit Committee and the Board regularly receive Environmental, Health and Safety compliance reports from management. Our Compliance Audit Services department supports these efforts and oversees compliance audits at all company-owned, -operated and -controlled facilities and operations.
In early 2018, a multi-disciplinary task force of Waste Management executives met with the SLT to report on opportunities to grow the sustainability-oriented aspects of our business, including not only our public and private sector customers, but environmental, social and governance (ESG)-focused investors as well. The task force’s report reflected detailed interviews and document reviews from employees, customers, NGOs focused on sustainability and investors. From this task force, Waste Management created a dedicated Sustainability Team whose responsibilities include tracking sustainability issues, developing and advising on corporate sustainability goals, and reporting to internal and external stakeholders on Waste Management’s sustainability progress.
The Senior Vice President and Chief Legal Officer oversees the work of our carbon footprint and climate risk analysis department, reporting to our Board of Directors at least twice a year on various issues related to our service offerings that address customer goals related to climate change. The Board, in turn, provides them with strategic advice for the business. Waste Management’s annual strategic planning initiative includes benchmarking national accounts and municipal customers to determine the scope and nature of our customers’ sustainability goals. Our formal materiality review for this report has been incorporated into this benchmarking. The SLT reviews this data to ensure that new developments in sustainability are an integral part of our business strategies. This strategic planning process has proven valuable over time, helping to identify trends that were a key factor in our decision to acquire new recycling assets in 2011 and 2012, to shift our focus in 2014 and 2015 to the efficiency and productivity of our recycling network, and to concentrate during 2016–2020 on contamination in recycling — how to avoid it and how to accommodate contaminants within a sustainable recycling financial model. In 2019 and 2020, we further evolved our messaging to encourage an emphasis on end-market development for recyclables, as well as support for multiple sources of renewable natural gas in our compressed natural gas collection fleet to meet our customers’ demand for increasing use of low-carbon fuel. The company’s strategic planning process also led to a focus and commitment to a People First culture, which took on a formal role at the company in early 2019. This effort led to an increased focus on diversity throughout the organization and in our hiring process.
Our sustainability-related incentives include financial performance, safety, recycling, sale of green energy and sustainability consulting services. The Waste Management LTIP is intended to motivate and sustain high performance levels from our employees. A direct relationship is created between employee compensation and company performance by aligning the company's and employee’s long-term strategic objectives. These incentives reflect corporate financial performance, which in turn is impacted by the success of safety and sustainability platforms like recycling and sale of green energy and sustainability consulting services. In addition, individual performance is considered, which for many employees will include a sustainability component. Participation in the LTIP below the senior management level is a small percentage of our overall workforce because hourly employees make up over 80 percent of our total workforce.
Strategy and Management Processes
Additional information on our governance strategies is posted on our website.
Environmental excellence and compliance are hallmarks of sustainability and core elements of our management framework. Waste Management’s strategic business framework has been an important tool for integrating sustainability into our business for over a decade. It establishes the pillars of our organizational strategy and is reviewed and refreshed each year. Senior leadership updated the framework in 2019 to reflect current business and market conditions, establishing our strategy for the year.
Our strategic business framework is developed and used for:
- Leadership alignment and prioritization. Drafting the strategic framework drives alignment and forces choices.
- Engagement. Iterative development builds clarity and ownership.
- Project work. Charters key cross-functional projects that need special focus and structure.
- Accountability. Monthly reviews by the leadership team track progress against key metrics and short-term actions.
- Communication of progress. Shows progress and accountability.
- Evergreen process. Annual (or more frequent) assessment of performance keeps strategic framework relevant and identifies new areas of focus.
The strategic business framework includes a “scorecard” of key metrics to reinforce alignment with key objectives.
Performance Evaluation Process
Using this performance framework, we align stakeholder perspectives and market opportunities that will guide the entire organization for the year and beyond. Compensation is affected by alignment with company goals (including, as applicable to a business unit, sustainability goals). Compliance and sustainability are part of our performance review structure.
Our SLT uses this performance process to ensure that our entire organization (field operations and staff functions) focuses on strategic objectives. The measures also assist with legal and regulatory compliance and support environmental performance, stewardship goals and the promotion of our values.
- When establishing our strategic objectives, we take into account the perspectives of our customers, shareholders, employees, community members, regulators and other stakeholders; our performance against key internal metrics and our reputation as measured with key audiences. We often employ heat maps that identify the geographic scope and intensity of risks and opportunities.
- We align our major financial, operational, environmental, community, people, safety, compliance and customer objectives with specific company-wide programs and initiatives that have been approved and funded as critical to achieving our strategic objectives. Performance expectations are communicated throughout the organization, and the SLT assigns quarterly and annual targets to which our field operations are held accountable.
- An ongoing initiative focuses on all employees knowing our customers better, optimizing assets, innovating in technologies, creating more efficient systems and extracting maximum value from the waste stream. Notably, this initiative closely aligns with our 2025 and 2038 sustainability goals.
We set targets as part of our annual budgeting process. The targets represent commitments we have made to our stakeholders and include improvements and metrics that are factored into employee evaluations. For example, targets have been created on the following topics:
- Financial. Traditional financial measures that our investors have found to be important to our success.
- Customer/Community. Customer engagement, improving customer interactions and service, and our community relations programs.
- Process. Efficiency and cost-per-unit measures across our collection, disposal, recycling and waste-to-energy operations.
- Compliance. Our primary safety measures and overall environmental scores.
- Learning and People. Employee engagement, recruitment, development, retention and training.
- Our operations at all levels report progress in reaching the targets. At the corporate level, monthly and quarterly reports are prepared and presented to the Board of Directors at each of its meetings. There are Monthly Business Review and Quarterly Business Review meetings to continually engage layers of management on progress toward company goals. This format and target-setting process (using specific key performance indicators) were integrated into our annual performance planning process to ensure consistency among strategy, performance planning and performance measurement and accountability.
Waste Management’s executive officers have primary responsibility for risk management. The Board of Directors oversees risk management to ensure that the processes designed, implemented and maintained by our executives are functioning as intended and adapted, when necessary, to respond to changes in our strategy as well as emerging risks. The primary means by which the Board oversees our risk management processes is through its regular communications with management and by regularly reviewing our enterprise risk management (ERM) framework. We believe that our leadership team’s engagement and communication methods support comprehensive risk management practices and that the Board’s involvement is appropriate to ensure effective oversight.
At the company level, Waste Management uses an ERM process involving senior leaders and subject matter experts from all major divisions to assess the materiality of all risks across the enterprise. Facilitated by our Treasury & Risk Management department, a standardized risk profile created for each headline risk is submitted to the SLT and the Board of Directors. If a risk is identified as a priority risk, it receives a more granular assessment, including additional risk quantification and elevation for further discussion with the SLT and the Board of Directors.
Risks and opportunities are prioritized according to financial impact, likelihood of event, outlook of risk exposure and confidence in risk management. The executive team that manages our ERM reporting to the Board reviews all submissions for consistency in determining scope of impacts; comprehensiveness in determining the adequacy of current support by internal staff; the sufficiency of financial support for contractors; or mitigation measures needed to manage and reduce risk, sufficiency of legal support, and the extent and sufficiency of third-party consulting support. All headline risks have a standardized scorecard which includes individual ratings for sub-risks, identification of whether any sub-risk is a priority risk, forward-looking action plans with measurable indicators and progress updates on action plans from previous assessments.
The staff working on the ERM documentation coordinate with those drafting the risk factor description for the Annual Report on Form 10K to assure thoroughness in response.
The recycling industry provides a clear example of transitional risk. The potential adoption of extended producer responsibility legislation puts Waste Management’s recycling programs at risk, and China’s policy decision to halt imports of recyclables has had an impact on commodity pricing. Both impact life cycle GHG reduction benefits associated with recycling and meeting sustainability goals for Waste Management and our customers. This complex risk and opportunity was analyzed and discussed by the SLT and the Board who determined Waste Management should be a sector leader, engage customers and educate customers and consumers on these policy issues.
Therefore, Waste Management created a focused campaign to help municipal, commercial and industrial customers understand how to maximize greenhouse gas reductions through contamination-free recycling of the commodities providing the greatest life cycle benefits. We estimate that our educational campaigns reach almost all of our recycling customers, either directly or through our municipal partners and other stakeholders.
The ERM process is supported by regular inquiries of our SLT and additional members of management, including operations leadership, as to the risks, including emerging risks, that may affect the execution of our strategic priorities or achievement of our long-term outlook. We identify a number of risks we believe could affect our business and financial statements for 2019 and beyond in our Annual Report. Key areas of assessment include:
Technology. Waste Management’s Digital and Corporate Development and Innovation (CDI) departments provide risk mitigation regarding new technologies that would affect our business model. The SLT is formally updated quarterly and on an ad hoc basis in between. The SLT then sets priority areas. The Board of Directors is briefed at least once a year, with an emphasis on identification and strategic planning regarding technologies potentially disruptive to our business model.
Waste Management has direct investments in third-party companies that possess promising technologies and business models that could change the competitive landscape in the markets in which we compete. These investments match our current expertise, particularly in current sorting and waste conversion technologies, as well as complex logistics and local market analysis, with the developers of new and potentially disruptive technologies.
Additionally, Waste Management is invested in three venture capital funds in North America and Europe that provide us with visibility into emerging “cleantech” technologies. Waste Management, through its CDI department, reviews approximately 180 companies annually, looking for technologies and business models that could improve our cost competitiveness and help us, our customers and communities achieve sustainability goals regarding waste reduction, upcycling, recycling, waste conversion, fleet emissions reductions and green energy production.
As Waste Management seeks to expand its business and modify its traditional business model to address local, state or federal policies and requirements, CDI maintains a large database, derived from global sources, that routinely provides information to key Waste Management line managers about the efficacies of an array of technologies offered by competitors. Subject to nondisclosure agreements, this information can be used by officials and regulators to help shape public policy on the environment by providing real-time data on testing, performance, verification and economics of environmental technologies.
Legislative/regulatory risk and opportunity. Corporate and Market Area Government Affairs staff report biweekly, and confer monthly, on key legislative and regulatory developments affecting Waste Management’s business. In an annual strategic planning meeting, in-depth discussion of priority issues helps identify strategic legislative and regulatory risks and opportunities that we plan to address. A central Public Policy risk management team is charged with identifying and managing risk on priority issues affecting the company entity-wide. Public Affairs and Area Government Affairs staff survey risks and opportunities in terms of likelihood, severity and financial impact, and specific risk-management goals are set and tracked through our formal performance management system. Key risks addressed in 2019 included the economics of recycling; potential emergence of disruptive technologies or materials management frameworks; federal, state and regional climate change programs with the potential to impact Waste Management service offerings; and federal and state initiatives to regulate per- and poly-fluoroalkyl substances as emerging contaminants of concern. In 2019, the Board of Directors was briefed on Waste Management’s extended producer responsibility strategy along with a government affairs update.
Operational risk. Continual assessment of potential risk associated with current technologies and structures is provided by engineering and environmental management specialists. Waste Management is a founder and current Research Council member of the Environmental Research and Education Foundation (EREF), which focuses on sustainability performance, environmental stewardship and higher-process knowledge within the environmental service industry. We have committed to communicating our programmatic goals and progress to the Board periodically.
Employee safety and health. Our safety personnel employ risk matrices to review and create mitigation plans for identified health and safety risks, continually updating based upon new information. Depending upon the severity of the consequence of the risk and its likelihood, the department manages according to a hierarchy of controls, eliminating the highest risk and utilizing interventions to limit exposure to risk where appropriate.
Reputation and reporting accuracy. As a service organization, Waste Management relies upon its reputation for reliable service, compliance, safety and sustainable innovation. Managers receive emails reporting the reputational footprint of Waste Management and our competitors, which will also be available on our new internal app, WM Now. These insights are supplemented by field staff focused on gauging reputation and accurate representation of the company in all major markets. Communications on sustainability topics are coordinated centrally with the Sustainability team, including response to RFPs and supply chain sustainability questionnaires with consistency and accuracy. Trends identified in customer and stakeholder questions and feedback are then inputted into the risk management process.
New acquisitions evaluation for environment, health, safety and social indicators. Waste Management’s acquisitions are almost exclusively in North America, and our risk assessment procedures reflect our ability to rely upon the rigor of national environment, safety and human rights law. We have developed an in-depth due diligence process to evaluate all aspects of a target business, including environmental condition, regulatory compliance, financial viability and legal status to identify and quantify risk areas prior to acquisition. Most acquisitions are subsumed into existing Waste Management operations and management and become fully subject to Waste Management standards and policies, including our Code of Conduct and its monitoring. Employees of acquired companies are onboarded as new Waste Management employees, subject to our mandatory enforcement of immigration laws and company background checks and drug screening. In the less frequent event of a stock acquisition, we look closely at the seller’s employment, labor, safety and working conditions (including working hours, overtime, benefits, compensation), both in terms of meeting Waste Management’s standards and practices and in terms of potential liabilities for past practices. The Legal and People departments are active members of the due diligence team. With regard to safety metrics, Waste Management senior staff are active in engaging with ANSI Z245 standards for our industry. ANSI Z245 standards are voluntary, but many — including those that are the basis for Waste Management policy and procedures — have been adopted into federal OSHA regulations.
Recycling market risks. Waste Management has invested in the assets to meet customer demand for recycling and waste reduction, with costs of processing and recovery through commodity sales as part of our economic model. As a result, our exposure to commodity prices has created a risk that can impact revenues by hundreds of millions of dollars. Waste Management is acting to mitigate the commodity risk through sales practices and contract terms. The recycling export team moves material to customers in China, Southeast Asia, India, Europe, North America and South America to diversify the price risk and ensure that markets remain balanced. We have undergone a multi-year process of changing contracts to prioritize increased transparency and cost sharing in our contract language to ensure movement of material, utilize market pricing on inbound material and mitigate our commodity risk. Customers are now asked to pay processing fees for recycling their material with the remaining value split by both parties. These new terms protect Waste Management from the risk of volatile commodity prices. Moreover, this more transparent pricing policy strengthens our ability to withstand sustained down markets in commodities and retain core recycling capacity.
Municipal contracts. Waste Management’s Finance department conducts ongoing, in-depth audits on large contracts annually. A separate audit team manages SOX Contract 7 compliance on all new or renewal contracts with over $1 million in annual revenue. We have contract compliance teams in franchise markets who proactively audit all contractual requirements, reporting, fee payments, billing, etc. Our Public Sector Services department employs a financial model going through multiple levels of approval up to the SLT. That model includes risk characterization factors such as market conditions and regulatory risks.
Training Employees on Risk Identification
Risk identification and reduction is considered a core element of every employee’s responsibilities. Our Safety, Internal Audit, Internal Controls, Compliance and Enterprise Risk Management departments perform tailored trainings and information sessions for employees, focused on building a culture of risk awareness and response.
Our Safety and Operations departments have integrated tools to support a culture of zero tolerance for unsafe behaviors and conditions. The objective is to conduct operations in a manner that engages our employees to be safe, operate efficiently, protect the environment and respect our neighbors. There are specific meetings by discipline area (Safety, Internal Audit, Internal Controls, Compliance and Enterprise Risk Management) and reporting tools (such as Safety’s Incident Reporting Tool) to identify and report risks throughout the organization, and employees are encouraged to do so.