In our first installment we noted that while sustainability may have fallen out of favour in the current American political and regulatory environment to the point that we had to counter the Chief Sustainability Officer graphics going around earlier this year with a Chief Sustainability Officer: USA Edition, sustainability, at its core is becoming more and more important to corporate survival. In our second installment, we described how sustainability concerns permeate every department of the organization, and failing to adhere to them is not only unsustainable in the environmental sense, but also in the business sense. In our third instalment we dove into the stakeholder engagement that is required for true sustainability success.

Then, in our (forth) installment, we started outlining the key areas of focus to identify the key projects that will increase both environmental AND business sustainability, starting with energy. We followed this up in our fifth installment with (fresh)water reduction. In today’s, sixth, post we continue with key project identification in the areas of demand.

Non-Renewable Resource Reduction

Unlike the first two posts, where we could pinpoint specific situations where you had a lot of opportunity for sustainability improvements that would lead to significant cost reductions (which is the ultimate key to business sustainability), this depends on what you are buying, what options are at your disposal, and how much opportunity you have for substitution and/or re-design.

Let’s take a few examples to try and explain this:

• Packaging: you can use new packaging made from freshly cut trees, or you can use packaging with a high concentration of recycled material
• Fuel/Plastics: you can use petroleum-based fuel and plastics or you can use biofuel/bioplastics
• Electronics: you can use rare earth magnets with ferrite magnites or continue your research into iron-nitride and magnesium-based alloys for permanent magnets and focus on developing alternatives to lithium batteries such as sodium-ion, zinc, or solid-state batteries

There’s no magic formula for identifying which non-renewable resource-based products can be replaced with products that are based mostly, or solely, on renewable resources beyond examining every product you are purchasing for alternatives. Fortunately, that’s not as hard as it was twenty years ago with modern technology that has extensive built-in catalogs, pre-defined SKU similarity groupings, and custom-designed AI for identifying similar products that could be potential replacements that can recommend potentially more sustainable alternatives for consideration on every product selection.

One-Time/Short-Term Use Demand Reduction

As with non-renewable resource reduction, it’s not easy to identify one-time use demands that can be eliminated without careful consideration of why the demand is there and what the alternative is. However, all one-time use products should be evaluated for reduction and elimination opportunities.

For example, you should analyze:

• print catalogs, newsletters, (free) magazines and flyers: yes, there is still a generation that likes them, but that generation is shrinking fast as even that generation is hooked on the internet, which allows for faster, quicker, paper free delivery; if you have a small percentage of the customer base that wants paper, at least let them self-select into a subscription and then only print (on demand) what you need to; the per unit price may be a few cents more, but if you’re only printing ¹/_10^th of the volume, big savings in cost and resources
• printer paper similarly, how much do you really need to print — if your team needs reports on the go, consider supplying everyone with a large tablet (with a display optimized for reading) in addition to their laptop
• plastic cutlery and cups in the break room use real ceramic and stainless steel

Basically, look at anything that has a short life-span and see if you can reduce or substitute the demand with something with a longer lifespan that will lead to savings in the long term.

Equipment Reduction

Basically, how much equipment are you buying vs. how much equipment do you need? Consider the following:

• end-user electronics focus on selecting phones and tablets with long shelf-lives and extended warranties, and laptops that can be upgraded to extend their shelf-life
• IT servers and storage how many do you need to support your secure internal operations vs. how much demand can you shift to the cloud for on-demand computation
• fleet do you need as much as you have? is it hybrid/electric with a longer lifespan than traditional diesel?

Again, as per the past two situations, every organization is different, and it will take careful review of alternatives to determine where sustainability will bring savings and where it won’t. But, as per our section on non-renewable resources, modern technology can do a great job identifying when there are more sustainable cost-saving options to consider.

However, as with energy and water utilization, at the end of the day, there are many opportunities in a business to be truly sustainable …. and by that, we mean choose environmentally friendly options that save the business a considerable amount of money, especially in the mid-and-long term. That’s what sustainability is truly about.

In our first installment we noted that while sustainability may have fallen out of favour in the current American political and regulatory environment to the point that we had to counter the Chief Sustainability Officer graphics going around earlier this year with a Chief Sustainability Officer: USA Edition, sustainability, at its core is becoming more and more important to corporate survival. In our second installment, we described how sustainability concerns permeate every department of the organization, and failing to adhere to them is not only unsustainable in the environmental sense, but also in the business sense. In our third instalment we dove into the stakeholder engagement that is required for true sustainability success.

Then, in our last (forth) installment, we started outlining the key areas of focus to identify the key projects that will increase both environmental AND business sustainability, starting with energy. In today’s, fifth, post we continue with key project identification in the areas of (fresh)water and resources.

(Fresh)Water Reduction

Water shortages and scarcity is becoming all too common. More than 50% of the USA — the richest country in the world which, theoretically, could have the best infrastructure — has suffered droughts and water scarcity issues, with scarcity often getting so bad in parts of California that even the US President says they need to open a very large faucet (which doesn’t exist, but it is needed).

It’s so bad in California that they had to serve Nestlé a cease-and-desist order to stop it from taking millions of gallons of water it wasn’t entitled to. (Source: The Guardian). Thus, unless you want your taps to run dry (either due to lack of water availability or the local government agency literally turning your taps off), you need to minimize your water usage.

The major uses of water in most businesses, depending on the business type, are:

• Restrooms/Showers Old fashioned, high water usage toilets and urinals, and high-flow shower heads (instead of low-flow, high pressure) combined with poor maintenance with constant, unaddressed, slow leaks waste a considerable amount of water. Reductions of up to 50% water usage with proper equipment selection and installation are possible. (Proper selection is key, not all low-flow models actually meet the MaP test measure they advertise, and a high scoring model is key, because you don’t save water if you have to flush two or three times.)
• Water Cooling This is especially critical in power plants (which can consume millions of gallons of water daily) and IT data centers (which can also consume hundreds of thousands of gallons of water daily). Because contaminates like minerals, scale, and bacteria build up over time and evaporation occurs, water cannot be reused indefinitely, but with proper treatment and filtering and cooling systems (passing through high efficiency refrigerated zones), the amount of freshwater required can be greatly reduced, especially if there is a renewable energy source to power the refrigerant based cooling in the closed-loop system (and extremely good high-efficiency reverse osmosis systems). With today’s technology, except for regular top-up to deal with evaporation, it is possible to recycle water for years, whereas a decade or two ago the systems might have needed to be flushed every few months.
• Irrigation Many office buildings or facilities also include land with greenery that needs to be maintained, usually with fresh water, which, in peak heat periods, can consume thousands of gallons of water a day — if the facility installs a small wastewater filtration and management system, as well as an underground irrigation system, a lot of the wastewater that goes through its building sinks and showers can be automatically pumped through the irrigation system, minimizing the need for freshwater for irrigation

We’ll continue with the other areas in our next installment.

In our first installment we noted that while sustainability may have fallen out of favour in the current American political and regulatory environment to the point that we had to counter the Chief Sustainability Officer graphics going around earlier this year with a Chief Sustainability Officer: USA Edition, sustainability, at its core is becoming more and more important to corporate survival. In our second installment, we described how sustainability concerns permeate every department of the organization, and failing to adhere to them is not only unsustainable in the environmental sense, but also in the business sense. In our third instalment we dove into the stakeholder engagement that is required for true sustainability success.

In this, our forth installment, we are going to begin by outlining the key areas in which to focus to identify the key projects that will increase both environmental AND business sustainability.

If you review our second installment, the biggest lifts in sustainability come from:

• (Non-Renewable) Energy Reduction
• Freshwater Reduction
• Non-Renewable Resource Reduction
• Equipment Reduction
• (One-Time Use) Demand Reduction

We’ll take each of these one-by-one and outline some of the major areas where there is a lot of waste. In future posts we may dive into the details on how to tackle them (where it’s not obvious).

(Non-Renewable) Energy Reduction

Energy is pricey. You want to reduce your energy needs across the board, and where you can’t reduce any further, you want to ensure that 100% of your energy is coming from renewable sources like Solar, Wind, and Hydro because, in the long term, that is the cheaper energy source.

Most operations have major energy inefficiencies in one or more of the following areas:

• Lighting. Many office buildings have lights on over half the day, if not way longer, and are still running low efficiency flourescent vs. high efficiency LED, where the former will give off 40 to 80 lumens per watt and the latter will give off 75 to 150 lumens per watt, halving to quartering lighting energy requirements; it may not seem like a lot, but a 40 w T12 flurescent bulb running 12 hours a day for a year consumes 175 kWh; an LED equivalent bulb will consume about 15 watts, or 65 kWh over the course of the year for an almost 38% savings. Now consider that you will likely have at least 1500 of these lighting a 10,000 square meter office (10,000 m^2 x 400 lumens / 2,600 lumens), that’s a savings of 165,000 kwH or about $25,000 if you’re paying 15c/kwH. Now, rip and replace of all of your lighting isn’t cheap, but with a lifespan estimate of at least 50,000 hours for an LED outlet, that’s a 10 year plus lifespan. Estimate about $45/unit for a bulk purchase, or $67.5K plus $28.5K for electrical work, and for an upfront investment of $96K, you’re looking at a savings of at least 250K+ (since we aren’t factoring in WACC) for an ROI of at least 260% (while working towards a green building).
• Heating: Whether you are heating with oil or off the grid, heating adds up quickly, especially if you are in a climate that drops below 0 for much of the winter. In northern climates, space and water heating can be quite significant since the US Energy and Information Agency estimates these costs make up over 2/3 of energy consumption for home and general office buildings. When it comes to heating, it’s not just the space, it’s the energy efficiency of the space. Poor insulation, leaky windows, poor use of natural light (and heat) can double or triple costs. While you can’t do much about this if you rent, if you are buying a commercial building, before you move in, do an energy efficiency analysis, and if it’s not in the top quartile, gut and redo it. If energy hungry lighting can eat up 200K/year in a large office building, heating (or cooling in hot climates) can eat up 2 Million, with a Million of that being unnecessary. Over decades, you will save 10X your up-front investment.
• IT: After heating and cooling, the next biggest energy hog in most office buildings is the IT infrastructure and the internal server farm. Especially if the IT department is running older servers three or four generations behind, as older servers tend to be huge energy hogs for the relative computing power and output. It’s also critical to ensure that the IT infrastructure is appropriately sized and continually running at 80% utilization, with the ability to spin up and spin down computing resources as needed.

In addition, in manufacturing, you also have to consider:

• Production/Assembly Lines: these are huge energy consumers; and energy efficiency all comes down to utilization; if you’re not using the line at 90% efficiency or more, you’re wasting energy; many operations who aren’t using a modern Manufacturing Planning / Execution System (MPS/MES) who think they are efficient will only be operating at 60% or 70% efficiency, at best; talk to the leaders in MPS/MES and even Semiconductor Chip Manufacturing and you’ll be shocked at the efficiency gains (and thus energy conservation) these companies find daily

Finally, in distribution, you also have to consider:

• Fuel Efficiency, and especially if you are transporting over long distances; are you transporting by air when you could be using ocean; are you transporting by truck when you could be using rail; are you using ethanol or hybrid trucks instead of dirty diesel; are you maximizing for full containers/truckloads or sending half-empty trucks; and are you ensuring that return trips are utilized, or sending them back empty?

We’ll continue with the other areas in our next installment.

Furthermore, simply switching suppliers does not make you more sustainable no matter what you may think or what those overpriced third party ESG / Scope 3 reports may (or may not) say. Switching suppliers to a supplier approximated to be more sustainable is not increasing sustainability, because if you take someone else’s supplier, then they are just going to end up with yours. It may be a temporary net win for your company, but it’s a net loss for another company, and that doesn’t really help anyone as sustainability was not actually increased overall.

Sustainability only comes from net improvement. The reason it only comes from the supply chain is because the products you buy come from the supply chain. The energy you use comes from the supply chain. The water you use (and drink) comes from the supply chain. The services come from your partners (in the supply chain). The transport to you (and/or to your customers) is the supply chain. Everything comes from the supply chain. The only way you can increase your sustainability is to reduce the energy, water, and products you use and the travel you undertake. For most companies, this is a negligible part of the supply chain … sometimes so negligible it rounds to zero.

So how do you increase sustainability in your supply chain? You start by helping your suppliers be more sustainable, which, believe it or not, starts with you being a better buyer and a better partner. Sustainability requires investment, and when they are operating at slimmer margins than you, significantly smaller bank accounts than you, and a lot more uncertainty than you, it can be hard for them to invest in new technology or processes when they don’t even know if they can invest in next week’s payroll.

And it requires more than a piece of paper from you saying you’re going to award them two years of business after a multi-round RFP when you’re a first time buyer. Because they know that while you may have the wherewithal to enforce a contract in another country half a world away, they often don’t. And they know how many times they’ve been screwed in the past when they were told they’d get 100,000 units, but COVID hit, the market crashed, or the transport lanes (ports, borders, etc.) closed down and the orders never came.

You need to develop a true partnership, work with them, build up shared trust and commitment, stick to your promises, help them with their processes so they become more efficient, identify efforts they can make to significantly increase sustainability, and then make the long term commitment they need from you (and other major customers) to invest in better technology, build their own renewable energy grids, etc.

Why are we bringing this up? Because a recent article in VOGUE Business that asked if fashion’s buying practices are really improving had a very good point. While fashion brands make strong claims they are investing in longer-term strategic partnerships, and big consultancies like McKinsey quote impressive statistics (such as an increase from 26% to 43% over the last 4 years) on how the percentage of CPOs reporting longer-term strategic partnerships (which just translates into longer term contracts, but not necessarily guaranteed awards over the long term, as there are usually so many out clauses the contracts mean nothing), the reality is that when you ask the suppliers how things are going, it’s a completely different story. As the Vogue Business article point out, this year’s Better Buying Partnership Index saw just a one point increase in the garment industry’s buyer-supplier partnerships score. Just one point! That could be a rounding error.

Despite all the lip service, there has been no improvement in the fashion supply chain because, at the end of the day, as Lindsay Wright was quoted, simply claiming you have good partnerships with your suppliers isn’t going to cut it. If you want an honest picture of what’s really happening on the ground, you need to be asking suppliers, because they’re the only real arbiters of whether purchasing practices are improving.

And this holds true across supply chains. Partner with your suppliers on long term contracts and work on development initiatives with them if you want to increase sustainability. Otherwise, the best thing you can do is to just shut the f*ck up because you’re only contributing to the hot air.