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From the Desk of Jack Healy, MassMEP Lean Expert

The New Regulators: Corporate America Takes the Responsibility for Environmental Improvement

By: Jack Healy, Director of Operations, MassMEP

One of the more improbable business changes of our times, has been caused by a number of corporations , such as Walmart, General Motors, IBM and others , who have taken on the direct responsibility for improving the environment by ensuring that “ sustainability” is implemented throughout their respective supply chains.

Sustainability is a term that describes the goal that much of Corporate America is starting to take on that establishes the goal to increase share holder and social value through the reduction of the environmental impacts by the decreased use of materials and energy in both their operations and supply chains.  The seriousness of these efforts are reinforced in what are game changing goals which have been heralded very publicly in the press e.g. :

Walmart has announced that it will cut some 20 million metric tons of green house gas emissions from its supply chain by the year 2015 —- the equivalent of removing 3.8 million cars from the road for a year.  The company plans to achieve this goal by pressing suppliers to rethink how they source, manufacture, package, and transport their goods.  Essentially, suppliers are now being asked to examine the carbon life cycle of their products from raw materials used in manufacturing all the way through to the recycling phase.  Walmart, with its market strength, is very serious about this implementation and their  suppliers are reacting seriously as well.  In a survey reported in Forbes one of the Walmart suppliers responded that he “fears Walmart more than he fears the EPA “.

General Motors  (GM), automotive suppliers have joined the U.S. Environmental Protection Agency in formal  “Supplier Partnership for the Environment (SP) in order to increase the competitiveness of the companies while reducing environmental impacts.  SP is a forum for sharing environmental best practices throughout the automotive supply chain, especially for the benefit of the smaller manufacturing enterprises.  Unlike a number of past initiatives GM is actually practicing sustainability methods and not merely passing it on to their suppliers.  Sixty – two GM plants are now zero waste facilities by recycling or reusing more than 97 percent of the materials left from the manufacturing process that would otherwise be sent to landfills.  The roughly 3 percent of the remaining manufacturing waste is converted to energy at waste to energy facilities to help replace fossil fuels. GM’s sustainability commitment is world wide as they have joined and are active in the World Business Council for Sustainable Development, and is looking to have half of its major manufacturing facilities world wide to attain zero waste status by the end of this year.

Proctor and Gamble (P&G) has launched a sustainability scorecard and rating process to measure the environmental performance of its key suppliers.  The new scorecard will access P&G suppliers environmental footprint by measuring energy use, water use, waste disposal, and green house gas emissions on a year to year basis.  P&G says that the scorecard will be “open code” for use by any organization to help determine common supply chain evaluation processes across all industries.   Just as Walmart’s scorecard has had a large effect on its suppliers, P&G says its rating system has the ability to encourage environmental improvement across the global network of suppliers— which represents approximately 75,000 businesses and $42 billion in spending each year.  Suppliers are also being encouraged to use the scorecard with their own supply chains.
IBM has made a significant step in cleaning up their global operations and is now requiring suppliers in 90 different countries to install management systems to track environmental data like energy use, greenhouse gas emissions and waste and recycling levels.  All suppliers set their own environmental goals and publicly report their progress.  All suppliers will need to have these systems installed by early 2011 or IBM will cease to do business with them.

Given the near monopolistic clout that these and other large corporations now have on their reduced supply bases, there is little doubt that these environmental improvement requirements will be sustained for many years to come.  But unlike government regulations there will be much that the manufacturers will have to figure out for themselves as well as for their suppliers before they can start to implement their own sustainability programs

According to a recent Aberdeen Group survey sustainability has now become one of the top five market pressures facing today’s manufacturing operations, as noted in the chart below.   The report describes that many manufacturers today struggle with defining the scope of sustainability initiatives, i.e “ should such initiatives be facilities focused, product focused or operations focused —- or all of the above “

Top five.JPG
Despite the current lack of uniformity, there is little doubt that the Sustainability Movement, like the preceding “Quality” and “Lean Manufacturing” movements, will be changing the way we do  business.   Companies interested in meeting this change and who need in assistance to develop their own Green Supplier Networks can do so by contacting Mike Prior at 508-831-7020.

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