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Food & Beverage Industry Demonstrates How “Business Success” Can’t be Achieved Without Sustainability

The SSC Team January 14, 2016 Tags: , , , , , , , , Strategic Sustainability Consulting No comments

The connections between increased revenue and investment in sustainability programs are complicated.

Even today, sustainability professionals continue to “make the business case” for sustainability.

It’s true that sustainability programs require an investment—in staff, in reporting, in communications, in change management—and the case for making smart investments for maximum results must continue to be made.

However, as we enter 2016, we should no longer need to make the case for sustainability itself.

Although directly linked financial benefits are sometimes difficult to identify, research suggests companies that fully integrate sustainability principles and practices into their strategic operations do outperform peers financially.

The counterargument is that these same companies are just more strategic overall, sustainability or not, so they will perform well simply because of a culture of innovation, risk mitigation, long-term planning, and thought-leadership.

Wrong.

The fact is, as we enter 2016, a company can’t even be considered a strong, strategic player without sustainability being one of its core principles. Sustainability has made it into the short list of core principles of true strategic leadership. In other words, you can’t have one without the other.

Case in Point: The Food & Beverage Industry

Pure Strategies, a sustainability consulting firm focused on the food and beverage industry, recently published results of a survey of major global food and beverage companies.

In the 2015 report, 18% more food and beverage companies, 100% of companies surveyed, are developing or implementing sustainability programs (from 82% in 2013), and 46% of the companies reported increased sales (up from 19% in 2013).

What the report tells us is:

  • More than ever before, food and beverage companies are implementing sustainability programs based on best practices of the companies that have already implemented sustainability programs
  • As the best-practice modeling increases throughout the industry, more food and beverage companies are reporting increased sales
  • The leaders of these food and beverage companies are tying industry-wide sustainability best practices directly to their increased sales

The food and beverage survey shows how sustainability, as a core strategic focus, is permeating the very operating principles of an entire industry – and a significant percentage of companies are making more money in the process.

Using food and beverage as an example, any company looking to become a long-term leader in any sector should look seriously at its approach to sustainability.

Sustainability must truly be integrated into a company’s core strategic plans, or it will likely get left behind.

If your company looking to integrate industry best practice planning into its sustainability strategy, a great place to start is with a sustainability assessment and peer benchmarking report.

 

 

 

Parent company of Puma provides detailed look at its Environmental Profit & Loss methodology

The SSC Team December 17, 2015 Tags: , , , , , , , , , , , Strategic Sustainability Consulting No comments

This summer, Kering, the parent company of the clothing and footwear manufacturer, Puma, not only published its EP&L, the environmental footprint of the company’s operations translated into monetary values, it published the entire methodology as an open-source tool for others to use.

The EP&L analyses the impact of Kering’s supply chain from raw materials to retail outlets and reports the impact in monetary terms.

In an article about Kering’s decision to open-source the methodology, the company’s CEO said, “Our EP&L has already served as an effective internal catalyst to drive us towards a more sustainable business model. I am convinced that an EP&L, and corporate natural capital accounting more broadly, are essential to enable companies to acknowledge the true cost on nature of doing business.”

From making the business case for sustainability to assessing carbon asset risk in monetary terms, and finally to reporting environmental results using natural capital accounting, more and more companies are moving toward currency as a way to plan, assess, and evaluate environmental performance.

This move makes sense, considering we live in the age of global capitalism.

Kering’s EP&L, along with World Bank’s WAVES initiative, the World Business Council for Sustainable Development’s Valuation Guide, the Natural Capital Coalition, and others, provide strategies to implement natural capital accounting into the sustainability reporting process.

If your company is interested in producing a sustainability report using principles of natural capital accounting, let us know! And check out our analysis of how Puma stacks up to other athletic apparel companies.

Will the UK Modern Slavery Act do any good?

The SSC Team November 5, 2015 Tags: , , , , , , , , , Strategic Sustainability Consulting No comments

Late last week, the UK Parliament passed the Modern Slavery Act, a bill designed to require UK companies to report any steps they are taking to address and prevent human trafficking and modern slavery in their supply chains.

According to the Global Slavery Index, modern slavery is estimated to include more than 36 million people who work in conditions completely controlled by others. Most of these people are found deep in the supply chains of global corporations.

To comply with the Modern Slavery Act, it doesn’t mean a company will have to actually address human trafficking and modern slavery. A company simply has to report whether it has taken any steps to do so.

Therefore, if a corporation files a report indicating that it has taken no steps, it will still be in compliance with the law.

So, does this do us any good?

Overall, yes.

This act pushes corporations one step closer to connecting the process of reporting to the concrete steps of taking action.

We've seen this cause/effect hundreds of times as external pressure – supplier scorecards, stakeholder pressure, or legislation – pushes companies to report. The first report can be humbling, but the process of reporting opens up action steps, focus areas, and progress.

As companies file their first reports, some saying “no action taken.” We believe that their stakeholders will ask “why?” It is then that they will realize it is time to do an initial Social Audit, Supply Chain Analysis and/or Life Cycle Analysis.

A recent article in Huffington Post written by two CEOs speak to the effect of data:

"The vulnerability in our supply chains was in labour hire, specifically the recruitment of migrant workers from disadvantaged backgrounds. Social audits revealed that recruiters were stealing wages from workers through excessive recruitment fees and high interest loans, creating a situation of debt bondage. Upon learning of these terrible conditions, we took immediate action so that workers were paid back the fees they were owed, allowing them to earn a proper wage.”

The companies and the CEOs in question were performing social audits prior to the UK Modern Slavery Act, and were able to take action.

We believe that more companies will engage with auditors, and decisive action will be taken because of this new law.

So, yes, the Modern Slavery Act is going to do some good.  

Would stronger legislation and adoption in other countries, like the U.S., do even more good? Likely.

However, corporations can and should begin on this important work now. There is no need to wait for legislation to become a more socially and environmentally responsible organization.

Learn more about supply chain assessments and audits and how they can help your company create a system to uncover risks lurking in the supply chain. How have supply chain audits helped your organization uncover risk? Let us know in the comments!

 

Sustainable Supply Chains in Chinese Factories, Pt. 2

The SSC Team May 21, 2015 Tags: , , , , , , , , , , , Strategic Sustainability Consulting No comments
This is Part 2 of a two-part interview with Nate Sullivan of Efficiency Exchange, provider of sustainability software and services to manufacturers.  He highlights some of the challenges faced by Chinese factories in implementing their sustainable supply chain programs. On Tuesday, we posted a Part 1 of this interview from the SSC archives  - enjoy: SSC: How much time and effort should a supplier factory reasonably expect to spend on tracking and reporting sustainability information to their customers? Nate Sullivan: Given how hard customers are going to push them on price, we think the focus really needs to be on driving that time and effort down to zero. One of the things that really drove us to build Charge the way we did was seeing how all this compliance data was not being used to provide any value to factories -- all the time they theoretically spent gathering and vetting that information was essentially spent checking a box that didn't create any value for them. That's not the way it has to be, or should be. When factories meet sustainability requirements through Charge, they're doing it without spending any time solely on compliance -- they are spending that time figuring out how to run their factory more cost-effectively, and then as a secondary benefit that data is helping them show that they meet compliance standards. Everybody still gets what they want, but nobody is sitting there trying to figure out whether the time is well spent, because the benefits of spending it are much more direct. SSC: When done correctly, what are the bottom-line benefits that a supplier factory should see when implementing sustainability initiatives? (feel free to use EEX-specific examples!) NS: From the factory perspective, sustainability initiatives can have several possible benefits, if done right. First of all, there's reduced cost in the form of energy, water use, steam, natural gas, or whatever resource is being used less. There are some big benefits there, but obviously the "doing it right" part here is important, because factories need to be targeting the sustainability projects that make economic sense first and foremost. That's why Charge starts with energy -- we found energy costs and consumption to be something that factories could attack aggressively, reducing cost without slowing business growth. But there are opportunities in other fields, and Charge is going to add all of those to it's core capabilities. Other than cost reduction, the biggest benefit to any sustainability project is becoming more appealing to customers, and that's a big part of where we see Charge going in terms of it's relationship to buyers and brands. It's a top line benefit instead of bottom line, but the idea behind Charge's connection to retailers is ultimately to match the best suppliers to the best retailers. Charge looks at your operational data, and tells you "hey, you are currently meeting the requirements for the following potential customers", and vice versa. That introduces you to new customers who are excited to work with you, and it ties successful sustainability projects to new business and more revenue, which really changes the motivational calculus for factories. Instead of seeing sustainability as this horrible paperwork/audit driven obstacle, it becomes something factories actively seek out, because the better they operate, the more customers they can find, and the better those customers will be for the business. I think that's already the somewhat cartoonishly-optimistic perception of sustainability, especially in the west, but until EEx came around, I don't think anyone was out there building the tools and relationships necessary for that to become reality at the factory level. That's something that we are really, really excited to do for them. How is sustainability saving Chinese textile mills money? Read about it here!

Sustainable Supply Chains in Chinese Factories

The SSC Team May 19, 2015 Tags: , , , , , , , , , Strategic Sustainability Consulting No comments
Enjoy this 2013 interview from the SSC archives: An increasing number of companies are implementing sustainable supply chain programs. These programs usually include requests to suppliers to fill out long surveys, track and report data, and develop internal management systems to improve factory-level sustainability performance. At Strategic Sustainability Consulting, we believe that effective supply chain engagement on sustainability is critical to manage risk and leverage opportunities, but we also know that suppliers are often overwhelmed at the requests they are getting from their customers. To get some insight into the challenges facing suppliers, we recently interviewed Nate Sullivan of Efficiency Exchange (EEx). We've worked with EEx, a provider of sustainability software and services to Chinese factories, for many years, and believe they have their finger on the pulse of the Chinese supply chain. SSC: You specialize in working with Chinese factories. What are you seeing in these factories with regard to supplier questionnaires? Nate Sullivan: Supplier questionnaires and worksheets are not a new thing -- factories have seen them for decades.  They've always had to fill out spreadsheets and word documents with tons of information about their facility -- from general company information, to detailed labor practices and customized quote sheets.  However, they complain that the only ones that seem to have a real impact are the quote sheets, because they're about price, and that's ultimately what customers care about in practice.  Now they are being asked to fill out sustainability questionnaires full of data, which requires a full time job to compile and document (around 40 hours a month).  Most of the time they don't even know why the customer is asking for the data, and they say that they rarely hear much back after submitting the information.  So basically it's another hoop to jump through that doesn't appear to influence purchasing decisions, and keeps factories from focusing on what they do well -- which is making stuff. SSC: What are the biggest obstacles to effectively measuring and managing sustainability impacts (like energy, waste, and water) at the supplier factory level? NS: The biggest problem, by far, is accuracy. People really need to realize that there's a tremendous amount of bad, inaccurate data out there that is useless no matter how you look at it, because it simply doesn't reflect reality. That's almost entirely due to how and why it's collected, which is usually through required self-reporting, without any incentive for suppliers that what they provide is true. Unless you're going to sit there in every facility, forever, and actively track what's happening -- which isn't practical for any retailer we've met, no matter how big -- you simply have to find a better reason for suppliers to track and truthfully report what's going on than "because I say so." And that doesn't even address the fact that suppliers have lots of customers who all have their own elaborate set of disclosure requirements, or that factories have no idea how to measure many of the things they're asked to report. SSC: Your company, Efficiency Exchange, has developed software and services that aim to overcome these challenges. Can you explain the 3-4 most important elements that supplier factories should be looking for in sustainability programs and tools? NS: The number one thing factories should be looking for is something that helps their business. Manufacturing is a tough gig; it's not like these guys have huge margins they can afford to cut into an order to look good for potential customers. So the most important characteristic of any kind of factory facing tool is that it provides direct business value to that factory. Any investment that is going to provide that kind of value to a factory needs to be easy to use, and inexpensive not only to buy, but to operate, understand, implement, etc. In our experience, what's missing from every tool we've looked at is simplicity and clarity. There are lots of systems that are really powerful and complex, but they're usually designed to be all things to all people -- utilities, retailers, manufacturers- and anybody who could conceivably buy it, really. With any kind of typical enterprise software, you end up buying this incredibly expensive, super-capable system, and then a bunch of consulting services, training, and support on top of that.  (Then you have to) whittle it down and customize it into something that's actually useful to you. Factories don't have the time or money or expertise to deal with any of that. So any tool that's going to make sense at the factory level has to strip away all of that extra nonsense, and focus on being something that's lightweight, useful, and solves a problem right out of the box. That means it can't necessarily be all things to all people -- it has to be built specifically for factories that need help with this kind of stuff, and it has to provide that help in a really direct way. If you're a factory looking at any kind of sustainability or operational improvement tool, just stop and think about how the tool is going to affect what you do all day. Are you going to get a dashboard or a weekly report? What are you actually going to do with that? Are you going to print it out once a month and put it in a file cabinet? If so, that tool doesn't make sense for you. Anything that's going to be useful needs to go from login, all the way to the part where you're saving money, or getting new business, or removing some obstacle that slows down your growth. Everyone talks about intelligence versus just data, but "actionable intelligence" versus just intelligence is just as important of a distinction, especially for factories. Whatever tool you're investing in needs to take you from software to actually doing something inside your facility that helps your business. How is sustainability saving Chinese textile mills money? Read about it here!

Workplace Movement Toward Environmental Sustainability – Pt. 2

The SSC Team May 7, 2015 Tags: , , , , , , , , , , , , , Strategic Sustainability Consulting No comments
By: Alexandra Kueller Two weeks ago, we introduced the Retail Industry Leaders Association’s (RILA) brand new Retail Sustainability Management Maturity Matrix. The Matrix hopes to be a tool that will be used by sustainability executives, individual companies, and industry-wide. We also noted that while the Matrix is designed with the retail industry in mind, we think that is has a wide applicability beyond just the retail sector. Last week, we discussed the first three sectors that are featured in the Matrix. Today we are focusing on the final four of the seven sectors. Hoping to provide a more in-depth look at how RILA hopes to benchmark across the industry in terms of environmental sustainability, we are going to look at what it would take for a company to become a leader in that sector.

Retail Operations

Environmental sustainability extends to all aspects of a company, including their retail operations. Whether it is a store or corporate offices, a company should be putting in effort to make these areas as sustainable as possible, such as having facilities be LEED certified. Other ways to make your retail operations more "green" can include incorporating green standards for all new warehousing and participating in the ENERGY STAR program. The Retail Operations sector has three different dimensions:
  • Store/Corporate Offices
  • Warehouses/DCs
  • Data Center & Applications

Supply Chain

Supply chain sustainability might not be the first aspect of a company's sustainability plan to come to mind, but it is no less important than any other aspect. To be a leader in the retail industry when it comes to supply chain sustainability, a company must demonstrate the reduction of environmental impact through the optimization of transportation, work closely with suppliers to help improve their sustainability metrics, and be more transparent when it comes to audit statistics (e.g., percent of non-compliant factories). The Supply Chain sector has three different dimensions:
  • Transportation/Logistics
  • Supplier Engagement
  • Supply Chain Transparency & Traceability

Products

When someone thinks of a retail organization and sustainability, often times their first thought is "how sustainable is the product?" RILA recognizes that product sustainability is a key component in a company's overall environmental sustainability and offers some suggestions on how to be a leader when it comes to making a company's product more sustainable. Some examples are using renewable energy sources during manufacturing, offering take-back services, and designing products with a "cradle to cradle" outlook. The Products sector has three different dimensions:
  • Product & Packaging Design and Development
  • Owned Manufacturing/Production
  • Product & Packaging End-Of-Life Stewardship

Environmental Issues

And finally, true environmental sustainability cannot happen if a company does not focus on the environmental issues at hand. How a company addresses these issues - energy, waste, recycling, etc. - in the context of the retail sector is telling, and some industry leaders are already paving the way. Some of these companies are implementing leading waste technologies and policies, establishing green chemistry programs that helps reduce toxins, recycling and reusing water, using alternative energies, and more. The Environmental Issues sector has four different dimensions:
  • Energy & GHG Emissions
  • Water & Wastewater
  • Waste & Recycling
  • Chemical & Toxics
Last fall we attended the annual RILA Sustainability Conference. Read about some of our thoughts on the conference here.

How Sustainability is Saving Chinese Textile Mills Money

The SSC Team April 16, 2015 Tags: , , , , , , , , Strategic Sustainability Consulting No comments

By: Alexandra Kueller

It’s no secret that China is not an environmentally progressive country. Beijing is plagued by air pollution, over 100 cities are facing water scarcity issues, almost a third of China’s rivers are too polluted for human contact, and to top it all off, as a nation China is one of the highest emitters of carbon dioxide. 

One of China’s largest polluters are their textile producers. Responsible for roughly 50% of the world’s fabrics, textile manufacturing is a very environmentally un-friendly process that results in high energy and water use. The industry is responsible for the being the third largest dischargers of wastewater and the second largest user of chemicals in China. 

All hope is not lost, though. With the help of the National Resources Defense Council’s (NRDC) Clean By Design program, Chinese textile manufacturing facilities are using green tactics to not only reduce energy and water consumption, but also help them save money as well.

The NRDC recently released a report stating that the 33 textile mills that are using the Clean By Design program are saving an estimated $14.7 million annually. By going after the “low-hanging fruit” – the low-cost, easy to implement projects – the textile manufacturers are helping to make a strong business case for sustainability.

Here are some of the ways the Chinese textile mills have not only reduced their environmental impact, but also saved money along the way:

Electricity Reductions

10 of the 33 textile mills went after projects that helped reduce electricity consumption. While the average reduction was only 4%, some of the more impactful projects yielded a 9% reduction with over $21,000 in annual savings. As a bonus, this project paid for itself in only a month!

Water Reuse

31 mills implemented 53 projects that resulted in an average of 9% water savings, with some of the top mills reducing water consumption by 20%. A lot of the reuse efforts focused on targeting process water and grey water, because those tended to yield the largest and most cost-effected reductions. Some mills installed a water treatment process, and that initial investment of $7,600 paid for itself in three months.

Energy Recovery

Through 173 projects that focused on electricity reduction, every participating mill saw an average reduction of 6%, with the top mills seeing a 10% reduction in energy. A majority of the projects saw efforts to recover heat from exhaust gas, water, and oil due to the fact that they produced that largest, most cost-effective reductions: a $500,000 investment yielded roughly $650,000 in annual returns.

Looking for ways to reduce your company's carbon footprint? Learn more by checking out our white paper!