The Opinion Page
News and comments about the issues facing today's SCM and Inventory Management professionals.
Businesses, governments, and households are painting themselves green.
Sustainable development (SD) was once the exclusive territory of activists and altruists. Today, businesses of all configurations must face the fact that SD has evolved into a virtue that is both a competitive requirement and a regulatory necessity. SD has evolved from being a philanthropic “nice to have” to an asset critical for organizational success.
The United Nations defines sustainability as “the management of environmental, social, and economic impacts, and the encouragement of good governance practices”. With a sizeable proportion of many firms’ environmental footprint being attributed to the supply chain, operations management presents special opportunities.
Successful firms surfing the SD wave toward improved profits routinely export socially responsible culture beyond the supply chain through the corporate strategic plan. SD transcends environmentalism: it expounds the Triple Bottom Line: social responsibility, environmental stewardship, and enduring economic prosperity - “people, planet, and profit”.
In a competitive arena characterized by rapidly increasing energy prices, targeted regulatory measures, and broad social awareness, SD has become a “go to” concept for firms looking to concurrently reduce costs and improve image.
SD is now a “best practice.” The best companies consider sustainable supply chain management to be a top strategic priority. Studies show that top-performers have incorporated sustainability criteria into some or all of their supply chain management processes. Four key drivers attract winners to SD:
× The desire to achieve competitive advantage in the marketplace
× The need to ensure compliance with current and future regulations
× The urgency to improve bottom line financial performance
× The requirement to fulfil customers’ demand for eco-friendly products and services
Successful integration of SD principles must start with top management. Executives should enable education of the workforce, build SD considerations into the Strategic Plan, and champion its incorporation in operational objectives. Best practices that align with SD include Lean, eco-design, optimized packaging, and green building enhanced by LEED.
While manufacturing practitioners were the first to become familiar with Lean Thinking, the idea has been found to be beneficial in numerous functional areas throughout the typical company.
Lean is green. Its purpose is to reduce use of resources, to reduce waste, to reduce space and handling (energy) and to increase output per unit of resource used. Further, it can be easily extended to non-production areas. Lean recognizes that there is no positive side to waste and that reducing energy usage and emissions can have a positive impact on cash flow.
New Product Development
Design for the Environment (DFE), or “eco-design” is a process that enables users to consider the potential environmental impact of a product and the processes employed to make that product. A facet of product life cycle management, DFE uses practices that recognize environmental responsibility while reducing costs, promoting competitiveness, and encouraging innovation. Impact assessments include the selection of low-impact input materials, reduction of energy use, optimization of production techniques, design of the distribution system, and end-of-life planning. Green inputs are transformed into green outputs. At the end-of-life, those green outputs become raw material for future creations.
Smart packaging concepts support SD. Optimized packaging design avoids damage, thereby reducing loss of product value, minimizing second shipment costs, curtailing refurbishing effort, lessening return handling, and improving customer satisfaction. Benefits are cumulative, as products progress through the value chain, and downstream into customers’ facilities. Reductions in input materials, transportation, storage, handling, and disposal costs can be realized.
LEED (Leadership in Energy and Environmental Design) has emerged as the definitive standard for determining the “greenness” of a building. LEED certification applies to existing buildings (EB) and new construction (NC). The program presents an array of criteria, ranging from the design of HVAC, lighting, and water systems, to cleaning and maintenance processes. Many corporations insist upon LEED certification from third party logistics providers. Green buildings can mitigate variable costs and have a direct bearing on the productivity and well-being of the people who occupy them.
Best-in-Class companies define sustainable development broadly, beyond just environmentalism. SD is seen as a matter of ethics while acting as an agent of improved financial results and corporate image. While the Triple Bottom Line of people, planet and profit implies some trade-offs, appropriate balance can be found.
Profitability and sustainability are not mutually exclusive pursuits. With creativity and a stakeholder-focused sense of responsibility, the best of both worlds can be enjoyed.
John Skelton is the Principal Consultant and founder of Strategic Inventory Management.