Category Archives: Going Green

Is China Starting to Clean Up its Act?

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

There’s an interesting discussion going on over on Spend Matters about whether or not China is manipulating its currency. Well, I think it’s interesting because I’m participating. I don’t believe pegging a currency to the US dollar meets a normal definition of “currency manipulation.” Your mileage may vary, of course. The discussion can be found in last Friday’s Rant on Spend Matters (Should We Rethink Free Trade).

One of the other participants brought up the issue of China’s poor environmental standards. That’s true, as has been true of all developing countries. Back in the late 60s, Tokyo was one of the more polluted cities on earth. Traffic police wore oxygen masks. Electronic signs in Ueno and other places posted the CO and CO2 levels in the air. By the mid 80s the place was pristine. No outside pressure was brought to bear. The Japanese just got fed up and fixed the problem. It usually takes some degree of economic development before this starts to happen.

I’ve always hoped the same thing would happen in China. It looks like it’s starting to happen. I’m glad, because China is too big for the environment to continue to accept their volume of pollution. Most importantly, it’s happening because of internal Chinese policies, not foreign pressure. Thomas Friedman has a column in today’s New York Times titled “The New Sputnik“. It’s about Red China becoming Green China. (You can read the opinion for yourself.) Friedman is less than totally optimistic, saying pollution is going to continue in parallel with development with solar and wind industries. He also points out that the US seems to be missing this market and most solar cells are coming from China already.

Dick Locke, Global Procurement Group and Global Supply Training.

Another DUH! Report … but I Like It!

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A recent article in Industry Week pointed out that a recent “report blames petroleum industry for 25% of toxic pollutants”. More specifically, the Commission for Environmental Cooperation (CEC) reported that 90% of toxic pollutants in North America came from fifteen industries, with over 25% coming from the U.S. Petroleum Industry. We need to extract cleaner, refine cleaner, and burn cleaner.

Because, when you combine this with the fact that global shipping is responsible for almost 4% of all climate change emissions worldwide, things get scary. So next time you get to choose a power source, choose a clean one. Once carbon credits take effect, it will be cheaper in the long run.

Rub The Red From Your Bottom Line By Going Green

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Industry Week recently ran a great article on why “going green can mean less red for your bottom line”. The article quoted some great statistics from a recent Economist Intelligence Unit study that found that companies undertaking green initiatives as part of a strategy to cut costs and increase profits are

  • much stronger than their closest competitors in their ability to find and exploit new opportunities (20% compared to 11%),
  • much more profitable (24% compared to 13%), and
  • ahead in revenue growth (23% compared 11%).

In other words, green-based initiatives are twice as likely to increase your revenue, increase your profit, and increase the new opportunities available to you. In other words, going green yields more green in your pocket.

The article also pointed out a recent WSJ article that detailed an academic group’s independent confirmation that a Subaru auto plant in Indiana not only decreased solid waste by 99% but saved millions in the process by undertaking appropriately chosen green initiatives.

And the article pointed out that you don’t need to undertake massive efforts to get massive results. You can start with a series of small efforts and the collective results will yield big savings, which you can then put towards bigger efforts down the road. For example, regular maintenance on the right equipment will cut energy costs 20% to 30%. Compressed air systems are a prime example. Small part failures and minor leaks alone can increase energy utilization requirements up to 30%.

For more great ideas, see previous green category posts.

A Few More Ways to Go Green and Save Cost and Energy

Last fall, Industry Week ran a good article on “getting the green light” that outlined some good ways to go green and save green at the end of the article that I haven’t covered yet, and in one case, even thought about before. Cutting right to the chase:

  • Install Alternate Power Units (APUs) in Private fleetsfor heaters, air conditioners, etc. in sleeper units. This can cut engine idling time by up to 80%.
  • Efficiently Route and Load Transportation
    Reduce out of route and empty miles, increase cube utilization, and emphasize multi-stop shipments.
  • Near-Source Air-Intensive Components
    If you receive plastic bottles or packaging in un-blown, test-tube format, blow them into shape on-site, reducing the number of truckloads required to deliver the bottles or packing to the plant by up to 90%.

For more ideas, see the article.

The Total Cost of Ownership Equation in a Green Economy

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A recent article on building an actionable framework for “Green Purchasing” did a great job of outlining the the true total cost of ownership calculation for any purchase when sustainability is taken into account. Simply put:
TCO = Purchase Cost + Overhead + Environmental Costs + Social Consequences where

  • Overhead Costs and operating costs include:
    • labor requirements
    • utility costs
    • maintenance costs
    • rent
    • depreciation
    • production/utilization costs
  • Environmental Costs include:
    • regulatory reporting costs
    • remediation
    • pollution control costs
    • waste management costs
    • unused inventory disposal costs
    • labeling
    • environmental insurance
    • accident cleanup costs
    • future compliance costs
  • Social Consequence Costs include:
    • customer relationship costs
    • regulator relationship costs
    • lender relationship costs
    • worker health and safety costs
    • corporate image and brand costs
    • litigation costs

In other words, the best price is not the best price if:

  • the product costs more to use, maintain, and own
  • the product costs more to insure, dispose of, and clean-up after
  • the product could damage your reputation with customers, lenders, and regulators.