Environmental Sustainability

&
Operations Management

Will O’Brien
Graduate School of Management
October 2010
"What we take for granted may not be here for our children." - Al Gore
 Topics
• Definitions & Systems
• Business Challenges & Opportunities
• Strategy & Environmental Stewardship
• Operations Management
• Sustainability & Innovation
• Examples of Business Leadership
• Sustainability Reporting
• Students & Sustainability Planning
• Additional Information
Definitions & Systems
Definition: Sustainable Development

Sustainable development seeks to meet the needs and aspirations of

the present without compromising the ability to meet those of the
future. Far from requiring the cessation of economic growth, it recognizes
that the problems of poverty and underdevelopment cannot be solved
unless we have a new era of growth in which the developing countries play
a large role and reap large benefits.

Our Common Future, 1987

The Brundtland Commission
(UN World Commission on Environment & Development)
 Environmental Footprint
An environmental footprint is a measure of the amount of
resources consumed and the amount of pollution; e.g., green
house gas and waste created by an entity and by the firms that
serve the entity, usually summarized by the equivalent are of land
needed to assimilate these impacts.
Source: “Measuring Environmental Footprint: A Financial Services Industry Case Study”, 2008, UNC

Examples:

Starbucks http://www.starbucks.com/aboutus/beantocup.asp

Xerox’ Sustainability Calculator

http://www.betanews.com/article/How_big_is_your_environmental_footprint_asks_Xerox/1206561464

Weyerhaeuser
http://www.betanews.com/article/How_big_is_your_environmental_footprint_asks_Xerox/1206561464
 Earth’s Systems
Complexity, Cycles & Interconnections
• A system is a collection of interdependent parts (with flows and stores)
enclosed within a defined boundary.

• The earth has four major systems

– Lithosphere – soil, rock
– Hydrosphere - water
– Biosphere – living organisms
– Atmosphere – air

• Human activity is disrupting

these systems in complex,
ways

Dave McKay, 2009

Business & Environmental
Sustainability
 Business Has Traditionally Assumed
an Infinite Capacity Planet

• Business principles based on assumption of infinite

natural resources and waste absorption capacity
• “The concept of multiple industries collaborating on a
‘whole systems’ approach, recycling each other’s
outputs into inputs is completely antithetical to the cult
of the individual and the pioneer myth that so deeply
characterizes American corporate culture.”*
• US antitrust legislation has not allowed “collaboration”

*Oliver Kellhammer, MBA Student, Bainbridge Graduate Institute

Industrial Pollution
What is in a Landfill?

• 22 billion disposal diapers in

landfill/year
• 100 million cell phone put out of
service/year
• 2 million tons of e-products
disposed/year
• 63 million computers in the U.
S. became obsolete in 2005
• Circuit boards - lead &
cadmium
• Flat screen & switches -
mercury
 80% of Toxic Wastes are from Electronics Products

• The electrical and electronic waste (WEEE) law, in 2005,

EU authorities introduce legislation for free take back of
waste goods by final owners and ensure that equipment
producers are responsible for financing the collection,
treatment, recovery and disposal of all waste.
– 30% of Fortune 500 companies’ business are in Europe
• Silicon Valley Toxics Coalition
– http://www.svtc.org/ecomaps/svtc_ecomaps/index.html
• Oregon Natural Step
• Zero-waste Coalition
• Green IT
Business is Providing Leadership
Why is Business Part of the Solution?
• Business is focused on learning and change.
change
– Change can and does happen relatively quickly

• Business is a global institution.

– The challenges are fundamentally global in nature

• Business is the source of technological innovation.

innovation
– Technology is the proximate cause of environmental
impact

Dr. John Ehrenfeld, Director Emeritus, MIT Technology, Business and Environment
Program
 Triple Bottom Line

The triple bottom line (abbreviated as "TBL" or "3BL", and also known as "people,
planet, profit" or "the three pillars"[1]) captures an expanded spectrum of values
and criteria for measuring organizational (and societal) success: economic,
ecological and social. (Wikipedia)
 Leadership Challenges
• Enrolling/aligning stakeholders
• Managing an environmentally responsible enterprise:
– Business strategy
– Investment decisions
– Change management of staff
– Energy management
– Innovation
– Product design/ life-cycle management
– Supply chain management
– Waste management
– Reporting: internally and externally
– Marketing
Stakeholders
 Engaging Stakeholders
• While executive support is a critical key component to business success, it
is not the only form of leadership present in an organization. Business
sustainability leaders understand the value in leveraging their internal
resources as well as their key business relationships.
• Whether led by a sustainability executive or traditional management, the
pursuit of long-term business sustainability enables:

– Employees: Create incentives to lower costs, initiate process

improvements, and stimulate innovation.
– Customers: Establish expectations that are defining products and
service attributes.
– Suppliers: Align supply chain expectations to drive sustainable material
requirements and efficiencies.
– Local Community: Defined framework for initiatives carried out at the
local level through partnership with community groups, local businesses,
and governing bodies.
– Investors: By comprehensive and accurate reporting; e.g., CDP, DJSI.
– Others?

Source: http://news.socialyell.com/878/csr-advice/engaging-stakeholders-as-a-path-to-business-sustainability/
 Sustainable Development for
Business
• Sustainable development for business means
“adopting business strategies and activities that meet the needs of the enterprise and
its stakeholders today while protecting, sustaining, and enhancing the human and
natural resources that will be needed in the future” (International Institute for
Sustainable Development 1994: 4).

• Sustainable business has interdependent economic,

environmental, and social objectives (Triple Bottom Line)

• Long-term viability depends on integrating all three

objectives in decision-making
Operations Management
 Operations
• Business & Operations Strategy
• Energy Management
• Environmental Management System (ISO 14001)
• Facilities Management
• Information Technology (“Green IT”)
• Leadership in Energy & Environmental Design (LEED)
• Lean Manufacturing (JIT)
• Product Life Cycle Management – Industrial Ecology
• Project Management
• Quality & Environmental Management
• Supply Chain Management
 Timeline of Competitive Priorities

Cost

Quality

Delivery

Flexibility/Customization

Service
Sustainability

1950s 1990s 2000s

© Collins Family Foundation
 Operations Strategy
• Company will only do what makes economic sense
– Given its concern for environment, company still to
consider competition and bottom line

• Early-mover advantage
– Look for better solution

• Service-based business model

– chemical management services (Nortel)
– floor-covering service (Interface)
– leasing (Xerox)
– printing service (HP)
 Quality Management
Projects per environmental concerns

Environmental concerns Percentage of projects

Resource depletion
Global warming
Ozone depletion
Human toxicity
Exotoxicity (water and soil)
Ground level ozone
Acidification
Nutrification
Waste heat
Odor
Noise
Others
End-of life Product Management
 Industrial Ecology

Industrial ecology focuses on the redesign of manufacturing.

The design idea is to mirror production in nature. Nothing in a
production process is "waste" and everything that comes out
of the process is either a product for sale or an input for
another manufacturing process. Another term for this
is cradle-to-cradle manufacturing.
 Energy Management
• Will become the most important operational
considerations for businesses:
– Energy Efficiency
– Renewable Energy
– Energy Management Systems
– Green Jobs; e.g., weatherization

• Excellent resources:
– www.energystar.gov/
– www.energy.gov/
Environmental Management System
ISO 14000- 14001

http://www.innovating-canada.com/iso14000.htm
http://www.youtube.com/watch?v=uCjK3lQhPDc
 Facilities Management

• Energy & Greenhouse management

• Water Management
• Waste Management & Recycling
• Biodiversity
• Pollution Prevention & Environmental Risk Management
• Transport
• Community Awareness
• Environmental Management
 Green Information Technology

• “Going green — or the ability to be green — is definitely

increasing in importance, not just from a power
perspective but also from how we, as good corporate
citizens, dispose of all this equipment and our electronic
waste. We are all waking up to the realization that
nothing, from electricity to the quality of the
environment, is free or infinite.”

John Humphreys, IDC Enterprise Platform Group

 Lean Manufacturing
Look at the “waste” and impact in the overall system

• Production process
• Inventory
• Material choice (recycled vs. virgin)
• Energy usage of the product
• Product impact on the local community

“Waste” is defined as anything more than absolutely necessary so

any environmental residual is bad.
Facilities Design/Energy Utilization

Cooper and Omron takes the LEED™ in "green" design/build

 LEED

The Leadership in Energy and Environmental Design (LEED)

Green Building Rating System™ encourages and accelerates
global adoption of sustainable green building and development
practices through the creation and implementation of universally
understood and accepted tools and performance criteria.

http://www.usgbc.org/
 Project Management
Project Management Institute (PMI) Code of Ethics & Professional
Conduct:

“We make decisions and take actions based on the best

interests of society, public safety, and the environment.”

“Respect is our duty to show a high regard for ourselves,

others, and the resources entrusted to us. Resources entrusted
to us may include people, money, reputation, the safety of
others, and natural or environmental resources.”

www.pmi.org
Supply Chain

• Integrated international networks

of companies process, produce
and distribute products.
Green Supply Chain Management

Plan P1 Plan Supply Chain

P2 Plan Source P3 Plan Make P4 Plan Deliver P5 Plan Returns

Source Make Deliver

Suppliers

Customers
S1 Source Stocked Products M1 Make-to-Stock D1 Deliver Stocked Products

S2 Source MTO Products D2 Deliver MTO Products

M2 Make-to-Order

S3 Source ETO Products M3 Engineer-to-Order D3 Deliver ETO Products

Return
Source
Return
Deliver Supply Chain
Environmental Enable Management
Management Green Supply Chain Management

“Wal-Mart to Assign Green Ratings”

http://online.wsj.com/article/SB124766892562645475.html
Benefits of Sustainable Operations

The application of sustainable operations can result in

significant business benefits including:

• Greater operational efficiencies

• Cost reduction
• Quality image
• Opportunities for new and growing markets
• Conservation of the environment
• Positive publicity
• Respect from the local community
• Staff loyalty
Sustainability Drives Innovation
Sustainability Drives Innovation
Stages:

#1 Viewing compliance as an opportunity

#2 Making value chains sustainable
#3 Designing sustainable products and services
#4 Creating “next-practice “platforms

“ Why Sustainability is Now a Key Driver of Innovation”, Harvard Business Review, 2009
 Sustainable Entrepreneurship

Businesses that are “Green”

– Solar, Wind, Hydro, Geo-Thermal
Power
– Recycling/Reprocessing
– Eco-Friendly Products
– Organic Agriculture
– “Green” Non-Profits
• e.g., Sustainable Methods Institute
Examples of Sustainability
Driving Innovation
Audi e-Tron

• Electric – 4 motors; 1 battery

•313 horsepower
• All wheel drive
• 0 to 62 in 4.8 seconds
• Estimated range = 154 miles
 Nokia “Green Phone”

Feb. 12, 2008 , Mobile World Congress , Barcelona

“Called ‘remade’, the new phone, unveiled in a short video, is actually
made of no new parts. Made entirely of recyclable materials like cans
and tires, it clearly targets planet-conscious customers.”
http://www.marketwatch.com/news/story/reporters-notebook-android-based-phones-draw/story.aspx?guid=%7B2AA5FC69%2D24DE%2D418F%2DB26C%2D2808FD456E60%7D
 Apple “ Green Computer”

The casing is 100% recyclable. It features Apple's first mercury-free, arsenic-free

display. The circuit boards are PVC and BFR free. The box will also include about half
the packaging of the current Macbook line.
HP Ink-jet Printer Cartridge
modular design

Steelcase's 'Think' chair

99% recyclable. It's made without

benzene, lead, mercury or solvents.
The $900 chair can be disassembled
with basic hand tools in about 5 minutes.
 Ready for Carbon Labeling?
Jan. 23, 2007 Tesco, the largest supermarket chain in Britain, has
announced that it will begin labeling all 70,000 products on its
shelves with the amount of carbon generated from the production,
transport and consumption of those items.

http://www.terrapass.com/blog/posts/british-superma
Examples of Leadership
 Triple Bottom Line
Social policy
dialogue Social responsibility

Products
Environmental Environmental Product Declarations,
management Life Cycle Assessments

“Baseline Sites
management” Implementation of ISO 14001

ABB’s
organizational Local Regional Global Customer
structure centric

1990 1994 2000 2002

ABB’s first triple
bottom line
ABB’s first ABB’s first Sustainability Report
Environmental Sustainability
Report Report

Transforming Sustainability into Customer Value

 Bayerische Motoren Werke AG,
• Sustainability is an integral part of BMW business principles and practices,
which has led to a confirmation of its leadership position in the automotive
industry. The company has been able to surpass its peers by exhibiting
unparallel commitment to environmental issues.
• BMW strives to conserve environmental resources throughout its value
chain from production systems to materials used in-bound and out-bound
logistics, and recycling and disposal of used vehicles.
• The company has implemented efficient environmental management
systems, and undertakes regular external and internal audits for its
operations as well as for its suppliers.
• BMW has also included a package of multiple emission reduction measures
in large parts of the car fleet (called Efficient Dynamics) in order to meet the
challenges of global warming and fossil fuel reserves, which is illustrated by
25 percent decline in car fleet emissions in 2008 as compared with 1995
levels.
• Along with various initiatives undertaken to achieve environmental
efficiency, the company also takes measures, such as 360 degree feedback
and benchmarking of brands against that of peers, to strengthen its brand
image and gain competitive advantage.

Source: DJSI World

 Kingfisher
• Kingfisher Plc is a London-based international home improvement
retailer. The company's main retail brands run on the do-it-yourself
(DIY) concept and include products such as complete kitchens,
bathrooms and bedrooms.
• The company sets sustainability targets and regularly measures its
progress through a social and environmental management system
called 'STEPS'.
• Its "Future Homes" strategy for instance is designed to integrate
sustainability into commercial operations, bringing innovative products
to the market to help its customers adopt more sustainable lifestyles.
• In Kingfisher's specialized DIY home improvements stores (e.g. B&Q
in the UK and Castorama in France) customers are increasingly
enticed to choose from a wide range of green products.
• In 2008 this accounted for 7% of total sales.

Source: DJSI World

 Panasonic Electric Works
• Panasonic ‘s concentrated efforts to develop environment-friendly
operations has resulted in operational excellence, which is evident
from a sharp decline in greenhouse gas and dust emissions; and
reduced electricity, water and waste consumption.
• The concept of restoring bio-diversity is also adopted at a strategic
level in the company; e.g., the company constructed a 'Prosperous
Park' including biotope in a building premise in Osaka in March
2009.
• In the social dimension, the promotion of labor practices within the
organisation differentiates it from other companies. The company
has established 'Diversity Promotion Office', and has been awarded
Diversity Award Semi Grand prize.

Source: DJSI World

 Starbucks
In 2004, with support from CH2M HILL, Starbucks voluntarily conducted an inventory of its
greenhouse gas emissions in an effort to understand and evaluate its contribution to climate
change. Using the WRI Greenhouse Gas Protocol, Starbucks limited the inventory to areas with
the biggest environmental impact: retail, coffee roasting, administration operations and its
distribution network. Based on the results, Starbucks committed to reducing emissions by:

• Purchasing renewable energy—annually, five percent of the energy needed by its North
America retail stores, generated by 11 large-scale windmills, and estimated to reduce CO2
emissions by two percent;
• Addressing the impact of its transportation operations—working with Business for Social
Responsibility’s (BSR) Clean Cargo Group on ocean transportation and using the Clean Cargo tool
to engage freight vendors;

• Monitoring roasting plant operations— an environmental team at each of the company’s four
roasting plants are creating measures for reducing emissions and conserving energy;

• Taking leadership and raising awareness—by encouraging others to take action.

• Setting a reduction target—in fiscal 2005, the company established a gas emissions reduction
target.

Sources: Starbucks http://www.starbucks.com/aboutus/beantocup.asp

http://www.greenatworkmag.com/gwsubaccess/05julaug/starbucks.html
 The Unilever Group
• Unilever is one of the world's leading food producers, and household and
personal care product manufacturer. The company owns 270 manufacturing
plants across six continents. It employs around 174,000 people in more than
100 countries worldwide.
• The company has out-performed others in the environmental and economic
dimensions by strategically focusing on achieving a long-term sustainable
business model. This is reflected through a decline in the ecological
footprint of the company.
• The company has initiated the Sustainable Agricultural Initiative (SAI) and
the Lead Agricultural Program to promote the adoption of a responsible
approach towards farming practices and has also published guidelines for
sustainable farming practices.
• Unilever has developed the 'Greenhouse Gas Profiling Tool' in order to
assess the environmental impact of its new products. It also creates
nutritional awareness among consumers by labeling the nutritional value of
ingredients on packets.

Source: DJSI World

Examples of “Profitable Sustainability”
Wal-Mart
 Sustainability Reporting

• Carbon Disclosure Project (CDP)

• Dow Jones Sustainability Index (DJSI)
• Global Reporting Initiative (GRI)
• UN Global Compact – Communications on
Progress (COP)
 Carbon Disclosure Project

The Carbon Disclosure Project is an independent not-for-profit

organization holding the largest database of primary corporate climate
change information in the world.

Thousands of organizations from across the world’s major economies

measure and disclose their greenhouse gas emissions and climate
change strategies through CDP. We put this information at the heart of
financial and policy decision-making.

http://en.wikipedia.org/wiki/Carbon_Disclosure_Project

www.cdproject.net/en-US/Pages/HomePage.aspx
 Carbon Disclosure Project

Carbon Disclosure Project (CDP) results and reports

Find out how organizations and public sector bodies around

the world are responding to climate change by taking a look
at the individual corporate responses to CDP or by reading
our reports. Our reports provide detailed analysis of the
information supplied each year to CDP and indicate
important trends and developments.

Read our reports

 Dow Jones Sustainability Indexes
Launched in 1999, the Dow Jones Sustainability Indexes are the first global indexes
tracking the financial performance of the leading sustainability-driven companies
worldwide.

The identification of sustainability leaders for the Dow Jones Sustainability Indexes is
based on the Corporate Sustainability Assessment of SAM Research.
A defined set of criteria and weightings is used to assess the opportunities and risks
deriving from economic, environmental and social developments for the eligible
companies.
A major source of information is the SAM questionnaire which is completed by
companies participating in the annual review.

The external assurance report by Deloitte ensures that the corporate sustainability
assessments are completed in accordance with the defined rules.

Based on SAM Research's corporate sustainability assessment companies are ranked

within their industry group and selected for the Dow Jones Sustainability Indexes, if they
are among the sustainability leaders in their field.

For a detailed description of this selection process you can download the guidebook for
the Dow Jones Sustainability World Indexes and the guidebook for the Dow Jones
STOXX Sustainability Indexes. www.sustainability-index.com/
 Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) has pioneered the

development of the world’s most widely used sustainability reporting
framework and is committed to its continuous improvement and
application worldwide. This framework sets out the principles and
indicators that organizations can use to measure and report their
economic, environmental, and social performance.

www.globalreporting.org/

2007 Global Reporting Initiative (GRI) Matrix

 UN Global Compact COP

One of the explicit commitments that a company makes when it

joins the UN Global Compact is to produce an annual
Communication on Progress (COP). This is a requirement of
participation which serves several important purposes:

• to instill accountability;
• to drive continuous improvement;
• to safeguard the integrity of the UN Global Compact as a
whole;
• and to contribute to the development of a repository of
corporate practices.

www.unglobalcompact.org/cop/index.html
Students & Sustainability Planning
 Background & Output
• Since 2008, a course called “Business
Sustainability” or “Greening the Corporation” has
been delivered to 150 graduate students at:
– Bentley University
– Clark University
– MA Maritime Academy
• Student teams has developed and delivered
Sustainability Plans to 40+ organizations
including:
– Corporations
– Municipalities
– Non-Profits
 Areas of Focus
• Organizational Mission
• Integrated into Operational Strategy
• Foster Sustainable Behavior
• Specific Initiatives:
– Energy Use
– Water Use
– Waste & Recycling
– Travel & Transportation
– Supply Chain Management & Purchasing
– Information Technology > “Green IT”
– Building Design
– Product & Service Design
 Fostering Sustainable Behavior
• “Leading Change….” by John P. Kotter

• “Fostering Sustainable Behavior” by Douglas

McKenzie-Mohr:
1. Set goals
2. Identify barriers
3. Plan and Implement
4. Evaluate
5. Revise and refine
 Community Impact
Partnerships – Communities

 Northbridge
 Sherborn
 Sutton
 Stow
 Worcester
 Woodstock, CT
Sustainability Plan
Examples of Sustainability Plans

www.greenprof.org
Additional Information
 Information Sources
Student Projects / Sustainability Plans & More:
www.greenprof.org

Books:
• Anderson (1998), Mid-Course Correction
• Brown, Christopher Stephen. (2005). Sustainable Enterprise
• Cunningham, William P. (2007), Environmental Science
• Doppelt, Bob (2003) Leading Change Toward Sustainability
• Elkington (1997), Cannibals with forks (The “Triple Bottom Line”)
• Epstein, Marc (2008), Making Sustainability Work
• Esty, Daniel C and Winston, Andrew S. (2006), Green to Gold
• Fitzgerald, Joan (2010), Emerald Cities
• Galea, Chris (August 2004). Teaching Business Sustainability
• Graedel, T.E.(2003), Industrial Ecology
• Hawken, Paul (1999) Natural Capitalism
• Hawken, Paul (1993), The Ecology of Capitalism.
• Holiday et al, (2002), Walking the Talk
• McDonough/ Braungart (2002), Cradle to Cradle
• Meadows, Donella H. (1992), Beyond the Limits
• Savitz, Andrew W. & Weber, Karl (2006) Triple Bottom Line
• Sitarz, Daniel, (2008), Greening Your Business
• Willard, Bob (2002), The Sustainability Advantage
Strategic Sustainability Consulting

http://www.sustainabilityconsulting.com/