IMG_2012.JPGThis past weekend I went and finally did it.  I closed the loop on my  dream to play gritty, stripped down delta blues on a cigar box guitar  (CBG) in tandem with my harmonica.  At first I went to the local  Recycled Arts Fair thinking I’d buy a four string CBG.  But within a few  minutes of speaking with local Vancouver, WA luthier Alan Matta  at  Hammered Frets (www.hammeredfrets.com),  he’d convinced me to start with a 3 string and then think about a 4 (or  more) string later.  Why?  Well, it’s simple.  I don’t know how to play  the darn thing!  Fewer strings also means easier chords (with many  requiring just one or two fingers), and more harmonic simplicity to help  a newer player (like me) keep from getting overwhelmed. Plus, fewer  strings means less tension on the neck and risk of bowing.  (Sidebar: I do have a musical pedigree, having played brass instruments  and harmonica since I was 12), and I get music theory, but playing  stringed instruments...can an old dog learn a new trick?)


If  you are a small to mid-sized manufacturer for instance, getting started  with a company sustainability initiative, or in greening a supply chain  is a lot like learning a musical instrument.  Quite often if companies  try to bite off more than they can chew (three vs. four string chords),  there’s too much stress (like a guitar neck) and greater risk of failure  (bowing of the neck).  Simplicity often trumps complexity when getting  started down the sustainability path.  This is particularly true if  companies are starting from scratch, or lack deep financial or personnel  resources.  So before companies start to feel overwhelmed, there are  ways to “ease” into sustainability, without the stress.


Last year I wrote about how the “look”  and “feel” of sustainability depends on the level of enlightenment that  a company has, the desired “end state” and on the depth of its  resources to execute the change.  Also, I spoke about the importance  of adequate resources to make the leap and a systematic process to keep  on track.  I advocated systematic planning before moving  ahead.  This  involved:


  1. Building a system to plan, implement, measure and check progress of the initiative.
  2. Looking for the quick wins.
  3. Building an innovation-based culture and reward positive outcomes.
  4. Measuring, managing, reporting and building on the early wins.
  5. Building the initiative in manageable chunks.

 

 


 

A Systems Framework to Get the Ball Rolling

 


Picture2.pngLet’s accept for a moment that if you are reading this, you already understand that sustainability as a term means many things to many organizations.  An effective sustainability roadmap and the systematic framework to manage sustainability must consider four key focal areas: compliance, operations, product sustainability and supply chain sustainability.  Bearing in mind that “one size doesn’t fit all” there still needs to be a systematic way to get to the “desired goal”.  A systematic framework like an ISO 14001-based Environmental Management System (EMS), offers a set of processes and tools for effective accomplishment of sustainability objectives.  But in the event that a company isn’t quite ready to make the leap into the ISO world, there are alternatives.

 


“Plan- Do-Check-Act” Creates Shared, Sustainable Value



One such alternative comes from Organisation for Economic Co-operation and Development (OECD).  The OECD has produced a “ Sustainable Manufacturing Toolkit”, that as they say “provides a practical starting point for businesses around the world to improve the efficiency of their production processes and products in a way to contribute to sustainable development and green growth.” The OECD addresses the four key sustainability focal points that I mentioned previously.  As an aside, a collaborator with SEEDS Global Alliance (Sustainable Manufacturing Consulting) had a hand in contributing to this valuable project by providing detailed feedback on the toolkit.


According  to the newly launched site, it offers two parts: a step-by-step  Start-up Guide and a Web Portal where technical guidance on measurement  and relevant links are provided.  I tested out the site, and while parts  appear to still be under construction, the information there is pretty  intuitive and gives the novice some basic information that they can use  to get started.  For manufacturers in particular, the guidance offers 7 action steps to sustainable manufacturing:


Prepare [Plan]


1. Map your impact and set priorities: Bring together an internal “sustainability team” to set objectives, review your environmental impact and decide on priorities.

2. Select useful performance indicators:  Identify indicators that are important for your business and what data  should be collected to help drive continuous improvement.


Measure [Do]


3. Measure the inputs used in production: Identify how materials and components used into your production processes influence environmental performance.

4. Assess operations of your facility:  Consider the impact and efficiency of the operations in your facility  (e.g. energy intensity, greenhouse gas generation, emissions/discharges  to air and water [ and land]).

5. Evaluate your products:  Identify factors such as energy consumption in use, recyclability and  use of hazardous substances that help determine how sustainable your end  product is. (I’d also add water consumption and wastewater outputs).   It’s here that the upstream supply chain becomes a very important  consideration.


Improve [Check/Act]


6.Understand measured results: Read and interpret your indicators and understand trends in your performance.

7. Take action to improve performance: Choose opportunities to improve your performance and create action plans to implement them.


What  more can a small to mid-sized manufacturing company ask for if they are  seeking basic actionable steps for starting up the sustainability  ladder.  Remember folks, it’s better to start in small, incremental  steps, with a scalable internal (risk and process driven) and external  (supply network enabling) plan that provides “sustainable value”.


Implementing  a sustainability program is best done in stages, like learning that  cigar box guitar.  No organization has the resources (or appetite) to  tackle the “whole enchilada” at once.  That’s why I’m keeping it simple and sticking with the three-string…for now.

 

2192123409_694efd5f83_m.jpg“On your mark, get set”…BANG.  As a competitive swimmer in my youth, I learned the rhythm of a good start off the blocks, kept my head down and paced myself through to the finish line.  I never won the “big” race, but always went for my personal best.  It’s that way with sustainability initiatives. Having a good baseline and pushing the limits to improve to the next level.


Back in the late 1990’s I was working with one of my many semi-conductor clients on their ISO 14001 Environmental Management System.  A hallmark of ISO 14001 is “continual improvement”, focused primarily on going beyond compliance to reducing the overall environmental impacts and footprints of operations.  This particular company had identified hazardous waste generation as a “significant aspect” of its operations and developed some programs and targets intended to reduce generation. 


One of the facility engineers was very excited one day when I showed up at the facility, proudly telling me that the company had managed to reduce waste generation by 25% over the past several months since he’d started tracking metrics.  “That’s great!” I said. “How’d you do it?”  He responded, “Well I ‘m not sure exactly”.  So I prodded.  “How has production at the plant been the last quarter?” “Well, it’s down…um, about 25%”, he answered in a muted tone.  See a problem here?  The company didn’t “normalize” the data (pounds of waste generated per number of units produced, for instance).  So in effect, there was no “continual improvement.  Oh well, back to the drawing boards!


Setting the Sustainability Mark…and Missing It


So it was interesting to read a summary of Green Research’s latest report, “Setting and Managing Sustainability Goals: Trends and Best Practices for Sustainability Executives.  I had the pleasure of meeting Green Research’s founder, David Schatsky, at the recent Sustainable Brands ’11 Conference in Monterey California.  In this latest report, David seems to have touched on some issues which get to the core of a value-added sustainability initiative…that being, demonstrating “continual improvement”.


As  this week’s by Mr. Schatsky article in Environmental Leader notes, while a flood of public and private companies (across many sectors) are “increasingly using public goals to signal their commitment to sustainability and their superiority to rivals…many are unprepared to meet those targets.  What the report suggests that sustainability planning, implementation, and performance measurement are still in an early maturation phase compared to financial and other operational goals.  Some of the key findings were:

  1. A quarter of the 32 sustainability executives surveyed in Europe and North America for the study say their companies have set “aspirational” sustainability goals and lack a clear plan to achieve them.
  2. Over 40 percent said progress on sustainability goals is reported to senior management only semi-annually or annually.
  3. 57 percent of respondents characterized at least some of their sustainability goals as “stretch goals” – that is, challenging but probably achievable – and 54 percent said at least some of their goals are “realistic”.

 

“Despite the best of intentions, even some excellent companies are challenged to execute on the sustainability goals they announce,” - David Schatsky, principal at Green Research

 

 

As I noted back in August 2010 in a post on Environmental Leader, there are two old axioms:


  1. “You are what you measure”, and
  2. “What gets measured gets managed.”

 

 

So as Green Research’s study revealed, without an effective strategy to establish an internal benchmark for continual improvement, it becomes harder to innovate, advance and proactively respond to stakeholder expectations. Finally, good metrics if applied properly will foster innovation and growth. It’s vital that there be a systematic process in place that maintains focus on continuous improvement.  Continual improvement is the primary driver for monitoring and measuring performance. If metrics don’t add value, they will not support continual improvement and eventually will not be used.  It’s a vicious cycle that can be avoided if the proper system is firmly implanted in organizational strategy and operations.


Setting Goals That Matter


Many times over the past several months, I’ve been asked by colleagues and clients”what can I measure that means something”.  And I answer them usually by asking them “what matters to your organization and its stakeholders”?  “I see what your saying”, they say “but I can’t always see the payback”.  Well, sometimes the “payback” is hidden and can’t always be realized in tangible, hard dollar terms. Sometimes, especially if companies are not water, energy or resource intensive, or don’t produce a lot of waste byproducts, you need to peel off some layers.  What this often means is looking at other production, operational or worker activities that can’t be measured in hard dollars but in terms of “efficiency”.  Sometimes metrics can be measured in terms of avoided costs rather than actual expenditures.  Like when a client of mine “avoided” $2.4 million in accrued fines and violations (over a three year period) due to enhanced sewer infrastructure maintenance and reduced response times to effluent spills when they occurred.


2425782551_fda7d8ed0f_m.jpgAs the Green Research found, many companies initially establish said that “targets for realistic or stretch goals…through a bottom-up process, beginning with a baseline of current performance.”  I view this finding as similar to what I coach my clients to do in environmental management system or sustainability engagements- perform a risk-based evaluation of what poses the greatest environmental, social or governance risk and establish measurable (and achievable) objectives and targets.   Some of my clients like the Natural Step “back casting” process too , which attempts to envision a company’s “desired state”, measure a baseline “current state”, and fills in the gaps with programs and activities intended to reach the desired state.

 

When companies establish sustainability objectives (whether they are social, environmental, operational or financial) and define their targets, here are a few simple things to remember about metrics.  They must be:



  1. Representative
  2. Understandable
  3. Relevant
  4. Comparative
  5. Quantifiable
  6. Time-based and Normalized
  7. Unbiased and Validated
  8. Transferable


Staying on Track Within the Four Walls and in the Supply Chain



As I mentioned in last year’s post, once organizations decide what they need to measure to meet sustainability related objectives, they needed to assure that they actually track metrics, report, calibrate and keep on measuring.  It’s called keeping your eye on the ball.  And this applies to supply chain management as well.  As I have reported in this space many times before, supply chain sustainability and responsible sourcing are two key ingredients for an organization to consider itself to be “truly” sustainable.  Many of an organizations greatest product and operations related impacts (like carbon emissions, resource or toxic chemical inputs, etc.) actually come from within its upstream supply chain. 


A few tips to get your continual improvement process started:


  1. Measure things that add value  to organizational decisions.      Measuring for the sake of measuring is a waste of time.
  2. Make goal-setting a 360-degree exercise- Look inward through the organization rank and file for innovative ideas. Seek advice and input from external stakeholders too (your suppliers and customers matter too!)
  3. Build off of prior continual improvement initiatives to track perform over longer periods of time.  It’s not like you flicked on a switch      one day and became the sustainable organization that you aspire to      be.  It takes time.
  4. Commit to what you can control or influence.  Don't make broad declarations that you cannot achieve because you've no influence. Don't over commit ( although a few heretically goals here and there aren't too dangerous)
  5. Get some quick wins under your belt, scale performance incrementally in line with the financial and labor resources that you've budgeted
  6. Own the goal and be accountable.  It’s not likely that organizations will succeed in meeting their goals without someone keeping track.  Make sustainability performance part of personal or group performance evaluations.
  7. Measure, Report, Repeat.Don't stop at the first sign of success or trouble. Look for ways to press on, raise the bar and continually improve. Report progress regularly (sometimes monthly, sometimes quarterly. It all depends on what is being measured.
  8. Go Short, Go Long. Set some targets as short term goals, but think long term too (three to five years out), and in alignment with corporate strategies.Most large companies like my client (Johnson & Johnson), Unilever, Sony and many others usually set five to eight year planning horizons.
  9. Measure things that compare well but slightly differentiate yourselves from your competitors. Novel and unique metrics are just as important to differentiating you as your products.
  10. Seek out globally-recognized metrics (like the Global Reporting Initiative) to assure that multi-national companies who also measure sustainability metrics can apply the data to their own goals.
  11. If you are a large company with multiple department, divisions or sites, the metrics of the subordinate organizations must be able to be “rolled up” in a way that addresses the entire organization but still meets site or department specific needs.
  12. Report the Bad with the Good:  No one’s perfect and a little self deprecation, even in business can pay handsomely from a reputational point of view.  In this WikiLeaks era, information moves swiftly.  Stay ahead of “the story”, own up to the shortfalls, you'll be forgiven and given more credit for your successes.

 

On second thought, I did win a “big” race.  My freshman year in high school I placed first in a 100 yard Individual Medley event against an arch rival high school in the Chicago suburbs.  That was my greatest moment in the pool…for a race many said I wouldn't even finish.

In a recent article by Tracey de Morsella (editor of the Green Economy Post (GEP)), the Federal Acquisition Regulations Council (FARC) released an interim rule on green procurement at the end of May, 2011.  The draft rule specifically says that Federal agencies must:

“leverage agency acquisitions to foster markets for  sustainable technologies and materials, products, and services. The head  of each agency shall advance sustainable  acquisition by ensuring that  95 percent of new contract actions,  including task and delivery orders,  for products and services, with the  exception of acquisition of weapon  systems, are energy-efficient  (Energy Star or Federal Energy  Management Program (FEMP)-designated),  water-efficient, biobased,  environmentally preferable (e.g., Electronic  Product Environmental  Assessment Tool (EPEAT)-registered), non-ozone  depleting, contain  recycled content, or are non-toxic or less toxic  alternatives, where  such products and services meet agency performance  requirements.”

GreenGov.jpgAccording to the GEP article, the effort was “spearheaded by the  Defense Department, NASA and the General Services Administration, and  part of the Obama administration’s campaign to lead by example in sustainable purchasing.  The interim policy also requires all federal contractors to support the  government’s goals in environmental management, and includes new  requirements for electronic or other paper-saving methods for submitting  documents required by contracts.”

The interim rule on green procurement it is a follow-up to President Obama’s 2009 executive Order EO 13514 which requires agencies to meet a number of energy, water, and waste reduction targets, including:


  • 95% of all applicable contracts will meet sustainability requirements;
  • Leverage Federal purchasing power to promote  environmentally-responsible products and technologies to foster markets  in these sectors.
  • Advance sustainable acquisition


This is a great development for the Federal government.  Not only  does EO 13514 drive new markets but requires government agencies to 1)  define sustainable acquisition and 2) track sustainable contract actions  and …get this…3) educate the acquisition workforce.

The GEP article notes that “the effects of President Obama’s  Executive Order have been rippling through the federal government  purchasing community for a while.”  The article summarizes efforts by  the U.S. Federal Trade Commission (FTC) which issued its Guides for the Use of Environmental Marketing Claims,  Also the  U.S. EPA is evaluating its role in evaluating products  across their entire lifecycle, including “defining criteria for more  sustainable products, generating eco-labels and standards and verifying  products meet green standards “


The  U.S. General Services Administration (GSA) has also initiated its  GreenGov program, primarily focused on identifying products and  practices designed to reduce the governments environmental (specifically  carbon footprints).  As I noted in an article this past winter, according to Council on Environmental Quality Chair Nancy Sutley,  “The Federal Government purchases $500 billion in goods and services  annually, so you could say the Federal supply chain represents an  enormous opportunity to support a clean energy economy”.  Participating  companies will share their experiences to help GSA develop a phased,  incentive-based approach to developing contracting advantages to  companies that track and disclose their greenhouse gas emissions.   This  process appears to be glacial in its pace, compared to the light speed pace of technology development in countries like China.


As the GEP post noted,  GSA is developing and evaluating green technologies and practices in  several areas including: electronics stewardship, innovative building  technologies and greening the supply chain. These latest activities by  GSA are in addition to individual efforts that the Departments of Energy  and Defense, NASA, USDA and Department of Agriculture have been  implementing for many years.

On the surface this sounds all good, in fact, great.  But there are  some underlying systemic issues related to the timing of the FARC  interim ruling, and industry groups and procurement agencies are  scratching their heads.


Left Hand, Meet Right Hand.


In  response to the FARC interim draft rule , several industry associations  requested that  the government , specifically the FARC to stop issuing  rules that change federal procurement policy without first considering  public comment.


mixedmessagesblog.jpgEven though the “interim rule” is based on directives within  executive orders (like EO 13514) from 2007 and 2009, the organizations  (including members of the Council of Defense and Space Industry  Associations, the U.S. Chamber of Commerce (no surprise), Professional  Services Council and TechAmerica) came out and stated that increasing  reliance on “interim rules” is a misuse of the “urgent and compelling”  circumstances those rules are supposed to be issued under.  The groups  asked that the FARC withdraw the interim rule and republish it as a  “proposed rule”, allowing for public comment.

 

The FARC maintains that the interim rule only mandates what previous  executive orders, laws and sustainable programs have asked agencies to  do and should not impact the agencies economically.  But that may not be  the case.


While many of the agencies that I mentioned above are well on the way  to responding to the previously issued Executive Orders (and I applaud  them for their efforts!), they appear to be doing this in different  ways- which may inadvertently find some suppliers being able to respond  to one agencies tender processes and not to another. 

 

It only took me a  few moments to “Google” “government + green purchasing + requirements”  to find remarkably outdated and variably detailed documents from Federal  agency to Federal agency, some going as far back as the Year 2000!   Even a report from the Congressional Research Service from April 2010 indicated that “The federal approach to green procurement is arguably  largely piecemeal and fragmented.” Also, it would appear that agencies  may still lack consensus on product “green” performance standards, which  is clearly a part of the EO 13514 mandate

There is little in the way of specifics behind the statement that  they must be “energy-efficient, water-efficient, bio-based or non-ozone  depleting, and are certified as environmentally friendly, contain  recycled content, or are nontoxic or less toxic than alternative  products.”  And it’s this lack of specificity and consistency among  agencies that vexes small and large businesses alike.

“ there appears to be significant ambiguity about  which type of green product or service agencies should procure in  situations where multiple types could meet their needs. For example, the  FAR requires agencies to acquire recovered-content products instead of  biobased ones when both types would meet agency needs.  However, no  similar guidance exists for the other types of preferred products and  services discussed in this report. That leaves agencies without guidance  in determining whether, for example, they should procure Energy Star or  FEMP-designated products, or recovered-content or environmentally  preferable products.” Green Procurement: Overview and Issues for  Congress, Congressional Research Service 7-5700,  R41197 www.crs.gov

Why am I not surprised at the discontinuities that  exist within Federal government (he asked rhetorically)?  Even President  Obama alluded these redundancies and inefficiencies in his January  State of the Union address. According to a Government Accountability Office report released in January, the U.S. government has more than 100 programs  dealing with surface transportation issues, 80 for economic development,  47 for job training, and 17 different grant programs for disaster  preparedness, 15 agencies or offices handle food safety, and five  agencies are working to ensure the federal government uses less  gasoline.  Really?!  Inefficiencies are wasteful…plain and simple.  This  is no way to run a government let alone a business.  And let’s face it,  government is BIG business.


Training, Training, Training


What’s also concerning to me is that agencies may not have not  adequately trained procurement staff that are prepared to implement  detailed operational related to the “interim rule”.  I also am concerned  that federal acquisitions staff  lack the technical training on green  supply chain management to make informed choices beyond how to price and  negotiate a contract.  As a matter of fact the CRS report states that  “…certain requirements, most notably those involving environmentally  preferable products, may be difficult for the existing workforce to  implement because agencies must consider multiple attributes of products  when determining which product to purchase.”


According to Neal Couture, President of the National Contract  Management Association (which represents public and private contracting  officers), “Contracting people that I talk to have received very little  training in the area of sustainability”.  Additional cases in point, as  described in a recent Federal Times article:


  • The Federal Acquisition Institute, which provides training for the federal acquisition workforce, offers no courses specifically addressing green procurement.  The Defense Acquisition University (DAU) offers an optional, two-hour  course devoted to the Defense Department’s Green Procurement Program.
  • Leslie Deneault, program director for acquisition services at DAU,  said there are optional courses available that cover the many  legislative actions that affect acquisitions.
  • Professional Services Council executive vice president Alan Chvotkin  said contractors and government officials may find it hard to get  needed products and services that meet environmental standards, possibly  due in part to other contract specifications that often limit local  sourcing or small business participation.
  • Program managers who write the requirements will need to know to  which environmental standards certain products and services should be  held, according to Mr. Couture said.


And you think one interim rule is going to straighten the green  purchasing issue out?  There’s got to be a better way, and it may be  found within the private sector.


Collaborative Cleantech Partnerships Rising to Meet the EO 13514 Mandate


Header.pngOne organization that is taking the initiative in responding to the interim rule on green purchasing and EO 13514 is the Clean Technology Trade Alliance,  based in Bremerton, Washington.  According to Mark Frost, the Executive  Director of the organization, the CTTA provides the ultimate  partnership between business and environmentalists by creating a  market-based reason to become sustainable and operate with efficient,  environmentally responsible products and services. In addition, the  technologies and products associated with CTTA members fit nicely into  the Federal government’s EO 13514 vision for sustainable and  environmentally preferable products.


The  CTTA mission is to drive the expansion of global clean technology by  connecting buyers with sustainable solutions. One part of this mission  that fits squarely into the Federal government procurement model and  most recent FARC interim rule is identifying and verifying clean  technology solution providers for business and government. Since it’s  essential to validate the extent of sustainable practices of member  businesses, the CTTA is getting ready to roll out an independent review  process to validate clean tech solution providers.  In doing so, the  CTTA will reviewing each organizations operational processes and  products and giving them a score based on defined criteria, using life  cycle, product foot print, energy and multi-resource consumption and  efficiency factors, etc. This review effort has the opportunity to  become a market driver that moves companies to meet the highest “green  and clean” technology standards in order to be more profitable and  competitive. The CTTA also provides the means to discover clean  technology solutions that will enable these companies to improve their  score and profit from their efforts.


In addition the CTTA assists its members in 1) making  commercialization of products easier with a trained sales force, that  provide members qualified leads, and facilitating distribution lines for  both established and unseasoned products; and 2) developing synergies  between businesses that create new technologies, open new markets and  discover new efficiencies. Those who collaborate with the CTTA receive a  single point of contact to find clean technology business solutions,  and most importantly a market reference point for making clean  technology purchasing decisions.

The CTTA is uniquely positioned to provide the Federal government  with a single, unbiased, point of entry for identifying and vetting  clean technology solutions. First the basic identification and reporting  service is a no cost service. Second if the CTTA does not have a  member, or several members, that can provide the solution they will  conduct a search to identify potential solution providers and conduct a  basic survey to provide an initial vetting for the requestor. Third if  the solution exists they will find a provider, if it does not they can  work with companies to develop the solution if there is a sustainable  market. The CTTA is a membership-driven organization, recruiting new  members and servicing existing members- this is how the CTTA grows. Mr.  Frost states that providing services to customers like GSA, the DoD,  NASA, Boeing and others allows the CTTA to recruit small and mid-sized  business members and is another example of the business synergy the CTTA  pursues.


What Can Be Done to Harmonize Green Procurement?


The CRS report raised many of the questions about the efficacy of  legislative initiatives or federal rulings that came to my mind in the  months since I participated in a GSA GreenGov Summit in Portland, so I  figured I’d just repeat just a few of them here:


  1. What, if any, are the most useful and appropriate policy goals for green procurement?
  2. Are the means by which different green-procurement preferences,  programs, and other initiatives have been established the most  appropriate for meeting policy goals?
  3. How effectively are agency implementation and performance of green procurement being assessed?
  4. How successful are current programs and initiatives at meeting policy goals?
  5. Are policies on the acquisition of green services sufficient?
  6. Are the preferences and the methods of implementing them sufficiently harmonized and integrated?
  7. Are there significant gaps in the various federal preferences for types of green products and services?
  8. Are there implementation methods not currently used by the federal government that should be considered?
  9. Is training of procurement officials sufficient?

barcode_pzl.jpg

 

Until these questions are fully explored, I suggest the Federal  government hold off on finalizing its interim rule and consider the  collaborative private sector example being implemented by the CTTA.  In a  perfect scenario, the White House should instruct representatives from  the GSA, OMB, DoD, DoE, USDA, EPA, and Agriculture (and others) to come  together in one place, at one time.  Attendees should also be invited  from the private sector too- the best brains in the science, engineering  and design of clean technology, standards development, policy,  manufacturing and procurement/material acquisition.

 

In systematic and structured manner, they can hammer out a viable,  results driven framework for sustainable sourcing and procurement.  This  in turn (I am sure), will promote new technologies and drive the  creation of new “green economy” markets….without all the confusion and  lack of harmony.


dna_500.jpgIn a new report, sustainability in the supply chain is one of four key indicators covered.  The report is entitle The Chief Supply Chain Officer Report 2011 and is  co-authored by Dr. Hau Lee (from the Stanford Graduate School  of Business), and Kevin O’Marah (group vice president, supply chain  research for AMR Research).  Over 750 global executives completed the  survey, including SCM World members and non-members, with over 50% of  respondents at VP-level and above within their organizations.

The authors prioritized issues across four key areas:  value-driving  supply chain management, globalization, sustainability and talent  management. 


One of the key findings (and it’s no surprise in my mind  is that sustainability “ increasingly forms part of the DNA for high performing supply chains,  with 65% of respondents characterizing pressure from senior management  and the board as the source of sustainability efforts “.    The second  source of sustainability efforts is pressure (interesting enough) comes  from customers (46%), followed by pressure from government (35%).


The study also surveyed whether the use of the “carrot” or “stick”  had greater effectiveness in encouraging supplier collaboration. The  study found that companies appear to react to supplier breaches in  sustainability standards by warning i.e. the “stick” and then taking  punitive actions, while some act even more promptly without warning.   Most companies use reduced business as the “stick” (73% would reduce  business after warning and 56% would reduce business without warning),  while some act even more drastically, terminating the business  relationship with suppliers (36% after warning and 42% without warning).  On the “carrot” side of the study, enhancing  business relationships  through “ preferred supplier status” or increased business engagements  were found by most companies surveyed to be effective in supplier  collaboration  (66% and 48% respectively).  The study compared well with  some thoughts I shared in this space last year on the effectiveness of  the carrot and stick approaches in changing supplier behavior (using examples such as Walmart, GE and Hewlett-Packard).


The authors concluded that “Ultimately, customer relationships and  business opportunities with customers form the most important  cornerstone of all sustainability activities” and that that the survey  results positively indicate that “sustainability forms an integral part  of a company’s supply chain improvement journey”.  So besides working  within its own four walls, organizations continue to realize this year  (like the previous few years) that sustainable supply chain management  and responsible procurement has taken a solid place in business circles  to enhance the corporate brand and deliver further value.


Embedded, Baked or Bolt-on?


The Chief Supply Chain Officer report  finding  on supply chain  sustainability lends itself well with a key thought communicated at last  week’s Sustainable Brands ’11 conference by Dr. Chris Laszlo (I was  there and hopefully some of you found my Twitter stream).  Laszlo and Dr. Nadya Zhexembayeva have coauthored a new book, Embedded Sustainability: The Next Big Competitive Advantage,  which explores the operational advantages, cost efficiencies and  reputational gains that can be made from embedding sustainability,  rather than taking a “bolt-on” approach.  Being a fan of baked goods, I  have often referred to “baked in “sustainability practices, but it’s all  semantics when you get down to it and the outcomes remain the same.

“Embedded Sustainability is the incorporation of  environmental, health, and social value into the core business with no  trade-off in price or quality – in other words, with no social or green  premium.”- Laszlo and Zhexembayeva


 


 

 

table2.gifAs noted in the graphic, the goals, scope and outcomes associated with embedded sustainability (as compared to a “bolt-on” approach) drive deeper and farther . In their research, the authors noted some interesting “lessons learned” from the many leading, innovative global companies that have embraced an embedded sustainability perspective.  One of those takeaways was that “the pursuit of sustainability involves hidden choices – whether to reduce negatives or provide positive solutions, and whether to pursue incremental change or heretical innovation – which are proving crucial to business strategy.”  In other words, it’s not easy to make the types of change needed without making some tradeoffs along the way.


In a nice summary by Jen Boynton (@jenboynton) of Triple Pundit,   Dr. Laszlo deftly summarized “three ways that sustainability initiatives build value for a firm:

 

  1. Declining Resources-as energy and other inputs get more expensive, it makes financial sense to conserve them.
  2. Increasing Expectations- customers, investors, regulators  and employees expect more (as I mentioned above) and therefore a company  has to deliver more in order to remain competitive.
  3. Radical Transparency, often associated with CSR reporting,  puts NGOs, unions, and government officials on the outside looking in  with no secrets. A company has to do good things, otherwise their  reputation and brand value will quickly suffer.”


As both authors noted in a European Financial Review article, “the linear throw-away economy, in which products and services  follow a one-way trajectory from extraction to use and disposal, can no  longer be supported, as we are simply running out of things to unearth  and place to landfill. Consumers, employees, and investors are beginning  to demand socially and environmentally-savvy products without  compromise, while radical transparency is putting every company under a  microscope.”  Just as I stated in last week’s blog, which addressed the threats and impacts of increased consumerism on sustainability itself,  both businesses and consumers have an obligation to rethink the entire  “make-consume” model, and explore design and end of life product  management at both ends of the value chain.


The authors suggest that for companies to embrace the embedded  approach to sustainability, “four interdependent and interconnected  lines of action [can] help guide the journey:


  1. Getting the Right Start: mobilizing, educating, and acting  around specific low hanging fruits. Building momentum in the  organization for sustainability projects that support existing business  priorities and provide demonstrable pay-off.
  2. Building the Buy-In: aligning company, value chain, and all other stakeholders around the vision of embedded sustainability.
  3. Moving from Incremental to Breakthrough: developing clear but unorthodox goals, designing the strategy and capturing value through co-creation and innovation.
  4. Staying with It: managing learning and energy while making sustainability ubiquitous but largely invisible in the business practice.”


Alignment2.jpgSo before you leap, plan ahead.  Build a system to plan, implement, measure and check progress of your sustainability  initiative.  Look for the quick wins.  Build an innovation-based culture  and reward positive outcomes.  Bake the initiative into the governance,  operational, and communications of every corner of the four walls.   Expand your reach upstream to your key suppliers and spread the word to  your customers.  Measure, manage, report and build on the early wins.   But more than anything, keep on baking…

The past few weeks I have been wrapped up in some circle of life issues involving my aunt and mother, so writing has taken a back seat.  During this time,  I have been observing the dissolution and redistribution of my 91-year-old aunts’ household and supported the challenge of deciding which belongings should go temporarily with my 86-year-old mother to assisted living.   My current role as a duly appointed member of the ”sandwich generation” is fulfilled too when my teenage daughter asks to go on yet another trip to the mall to view the latest fashions.  All these events have brought to mind the material possessions that we accumulate over the course of our lives, the ingrained value we place on “things” and how they somehow give us more pleasure or worth.

 

Ironically, last week I also had the chance to participate in a number of one on one and group discussions revolving around the role(s) that we as consumers have in managing resources, waste generation and sustainable development.  I weighed in on the responsibility that consumers have in the 21st century supply chain (related to conflict minerals), just as I had mentioned in a keynote speech to the European Petrochemical Association this March.  Other participants reflected on how individuals bear a high degree of responsibility for the explosive growth in electronic and other consumer product waste.

 

What is abundantly clear is that we (as consumers) are all accountable for our own individuals actions in deciding what we buy, how much, how long we keep and maintain what we do have, and what we replace it with.  From cell phones, to cars, to clothes and home products, Western society has lost the passion for “thrift”.  I believe, like my parents generation did, that thrift is one of the key principles that built this great nation, but it has seemed to have gotten shoved aside in the name of consumerism and  growth,  which by the way is different than prosperity.  Of course Keynesian economists will take me to the woodshed about the meaning of  thrift in growing an economy. According to an article by the CATO Institute, ” The paradox of thrift refers to how–in the Keynesian model of the economy–an increase in saving reduces production and employment. This supposedly occurs because a decrease in spending leads to a decrease in employment, which leads to a further decrease in spending, which leads to a further decrease in employment, which leads to a yet further decrease in spending, and so on. Thus, if people try to increase their saving, there will supposedly be a decrease in spending, and a fall in employment and production.”

 

Prosperity versus Growth?

 

“Economic growth is supposed to deliver prosperity. Higher incomes should mean better choices, richer lives, an improved quality of life for us all. That at least is the conventional wisdom. But things haven’t always turned out that way.” 

 

chickenprosper.jpgSo states Professor Tim Jackson (Director of the Research group on Lifestyles, Values and Environment (RESOLVE) at the University of Surrey) in a very important and compelling work, Prosperity without Growth.  The research was commissioned in 2009 by the U.K. Sustainable Development Commission and puts in focus the rather serious nature of what “progress” really is in society and the norms on which its measured.

 

The economic slump of the last three years has also sharpened this debate over whether more is better, whether growth in consumer goods and spending really supports a sustainable economy and whether the environment and human rights are placed in harm’s way in the name of economic growth.  As Jackson notes, “The profit motive stimulates a continual search by producers for newer, better or cheaper products and services. This process of ‘creative destruction’, according to the economist Joseph Schumpeter, is what drives economic growth forwards.”   The past several years have prompted a series of key questions that I’ll throw out here for thought:

 

  1. Has quantity in life trumped quality in life?
  2. Does producing more and having more truly lead to a prosperous economy and long-term sustainability?
  3. Does producing more and having more truly lead to a prosperous economy and long-term sustainability? Can we still flourish?
  4. Does having more truly make us happier, lead more productive lives and allows us as a society to be the better social animals that we are wired to be?

 

All tough questions, and way more to ponder in the limits of this one post for sure.  But Professor Jackson’s commission report and follow-up book on the subject mirrored what was reflected the conversations that participated in last week.   Jackson himself admits that “Prosperity has undeniable material dimensions.  It’s perverse to talk about things going well where there is inadequate food and shelter (as is the case for billions in the developing world). But it is also plain to see that the simple equation of quantity with quality, of more with better, is false in general.”

 

I’ve no doubt that economic growth is vital for stimulating an economy that appears to be headed toward a dreaded “double dip” recession.  However, what is critical for policy makers, economists, the financial community and electorate to grapple with is what types of investments are best to lead us out of this morass and into a future that is stable and prosperous.  Jackson, among others has argued that “targeting that investment carefully towards energy security, low-carbon infrastructures and ecological protection offers multiple benefits [in other words a more sustainable, green economy]. These benefits include:

 

• freeing up resources for household spending and productive investment by reducing energy and material costs

• reducing our reliance on imports and our exposure to the fragile geopolitics of energy supply

• providing a much-needed boost to employment in the expanding ‘environmental industries’ sector

• making progress towards demanding global carbon reduction targets

• protecting valuable ecological assets and improving the quality of our living environment for generations to come.”

 

Producers vs. Consumers- Who Holds the Key?

 

So am I arguing in favor of a reaching a “steady state economy” with no growth?  To be honest, I’m not sure at this point.  There have been debates over this concept for generations, and I am no economist.  Jackson himself admits that no clear model exists for achieving economic stability without at least some measure of consumptive growth.  While goods producers have control over what they make, where they source their goods to make the things we buy, the “making” side of the economy is but one side of the debate that is in play here.  There is also the “using” side of the debate that drives deep in the social fabric and psyche of the consuming public. We as consumers can shape the debate around and effects that can have on the products that are made, mass-produced, sold and consumed.   This is perhaps the toughest nut to crack, because it’s the consumer that drives the demand that in turn drives production, which then drives consumption of resources, which of course determines the stresses on the environment.  You see, we hold the key…as the old Pogo cartoon says, “We have met the enemy and it’s us”.

 

spending.jpgIn a recent article in the Guardian Sustainable Business Blog, Tim Jackson again weighs in on the strong psychological attachment that humans by nature have to material things and their feelings about the environment.  “People do indeed hold deeply felt motivations to protect the environment. Occasionally they can even save money by doing so. But powerful psychological forces still hold them in thrall. The creeping evolution of social norms and the sheer force of habit conspire to lock us into expanding material aspirations.”

 

You see, letting go of things that make us feel good is hard.  But the instant gratification that comes with these choices has undoubtedly led us all down a slippery slope, which only we can muster the power to crawl back up.  But only if we make sound, greener choices that recognize a balance between consumption, thrift and ecological limits.

 

These questions and issues, among others will be reflected upon to some degree this week at Sustainable Brands ’11 in Monterey CA.  I’ll be there also with over 750 other sustainability, corporate social responsibility, consumer marketing/ branding and industry professionals to learn, communicate and exchange ideas.  Look for my occasional tweets (@DRMeyer1) and observations as the event rolls along.