Category Archives: Sustainability

Risk 2011: Environment

In our last post, we discussed the top three societal risks facing your Supply Management organization that were chronicled in the World Economic Forum‘s 6th annual Global Risks report. Chronicling thirty seven types of risk divided into five categories, this report did a tremendous job of covering the types of risk that an average Supply Management organization needs to prepare for. Today, SI is going to continue its coverage of the report by discussing what it believes are the top three risks from an environmental perspective.

03: Climate Change

Climate change may not seem like a big risk, but it can have drastic consequences on your operations. Not only can it increase the likelihood of (tropical) storms, floods, blizzards, and ice storms, which can destroy your factories, wash away your delivery trucks, trap your workers in the factory for a week, and take down entire power grids, but it can wreak havoc on your operations. For example, if you want to drill for oil in the oil sands, you need the ground partially frozen. If six months are required to extract a year’s worth of oil but by the time the ground freezes there will be less than four months of drilling time, problem. And if the risk of flooding is significantly increased, so are the chances of your supply chain being brought to a grinding halt.

02: Earthquakes & Volcanic Eruptions

The 9.0 magnitude earthquake in Japan back in March demonstrated the devastation that earthquakes could have on global supply chains. The earthquake and resulting tsunamis not only damaged or destroyed thousands of homes and hundreds of factories, which resulted in almost 20,000 deaths, but also resulted in the immediate declaration of a state of emergency at a nuclear power plant when dangerous levels of radiation escaped the Fukushima No. 1 (Daiichi) plant. In addition, it triggered the immediate shut down of 15 of Japan’s nuclear power stations and a crisis at the Tokai No. 2 Power station was narrowly averted.

However, this earthquake is nothing compared to what a well placed major volcanic eruption can accomplish. Not only can a major eruption near the edge of a tectonic plate trigger an earthquake, but it could launch enough ash into the air to make air travel through a region impossible for months. The recent volcanic explosions in Iceland are nothing compared to some of the eruptions that have happened in the last few thousands years. Not even the eruption of Mount St Helens in 1980 was very big. It only erupted 1 cubic km of lava. The largest eruption, in terms of java discharged, in the last 99 years was Pinatubo in the Phillipines in 1991. A whole 10 cubic kms of lava was released. The 1912 eruption of Katmai in Alaska released 12 cubic kms. And this is nothing compared to the 1815 eruption of Tambora in Indonesia that released 100 cubic kms of lava. And students of history are aware of how Mount Vesuvius buried Pompei under 4 to 6 m of ash and pumice. The eruption of Krakatoa in 1883, which was heard across the world, released so much ash into the air that it caused a volcanic winter. Temperatures worldwide dropped an average of 1.2° C for the next 5 years as a result of ash that was ejected 20,000 ft high. If this happened today, air travel would be interrupted for at least six months in the region. The interruptions in air travel as a result of the Icelandic explosions would be minor in comparison.

01: Flooding

The recent floods in Thailand are a perfect example of the significant impact that floods can have on global supply chains. With insurance losses expected to reach 20 Billion (Insurance Insight) with over 10,000 factories impacted to various extents, a single flood can cause so much damage that it could literally bankrupt an operation. The automotive sectors and electronic sectors were impacted the hardest — more than 400 Japanese companies in these sectors suspended operations or lowered output as a result of the floods.

And with global warming, which is causing many of the ice flows in the arctic to break up, the risk of flooding is greatly increasing. Many of the worst floods in history were ice-jam floods resulting from “breakup jams” which force ponding upstream and a rapid release of water when the ice dams breach. This is what happened in (April) 1952 on the Missouri River in (Bismarck) North Dakota where an eroding ice dam resulted in flow increasing from about 2,100 m3/s to more than 14,000 m3/s in less than 24 hours. The river rose 5 feet in less than 2 hours and submerged nearly everything south of US Highway 10. Fortunately, this was not a densely populated area, otherwise, instead of 200 houses being destroyed, there would have been 20,000 houses destroyed and likely thousands of deaths. If this happened near your factory, it would be wiped out almost instantaneously.

Remember, Energy Efficiency is the First Step in Energy Conservation!

If you’re a buyer of computers, electronics, machinery, automobiles, buildings, or anything else that requires power, the first thing that should still be on your mind these days, with petroleum and oil prices about to go through the roof again, is energy. It now costs more to power an average desktop workstation for its expected life-span than it does to buy it, just as it does to power and cool your average server. Getting 40% off MSRP on a pick-up truck that only gets 15 mpg isn’t a great deal anymore if it’s going to be driven 30,000 miles per year, because, at current fuel costs, you’ll be spending 45,000+ in fuel costs over 5 years … over two times what you’ll be paying for the truck!

That’s why it needs to be said again that energy-efficiency technologies can reduce energy consumption by 25% or more, as per the results of a McKinsey study from 2008 that also found that improved energy efficiency can cut energy requirements by 25% in many developed countries, as I noted in my post on Cutting Carbon Footprints on the Country Level.

And remember the 2008 The Industry Week article on “Growing the Energy Efficiency Market” that focussed on a 2008 ACEEE (American Council for an Energy-Efficient Economy) report on “The Size of the U.S. Energy Efficiency Market”: Generating a More Complete Picture. The report, which was supported by the Civil Society Institute, the Kendall Foundation, and the North American Insulation Manufacturer’s Association, found that:

  • The U.S. has the potential to reduce energy consumption by an additional 25% to 30% through strategic use of energy efficient technologies
  • Energy-Efficiency has met about three-fourths of the demand of new energy related services since 1970, proving that it works
  • Investments in more energy-efficient technologies could result in an efficiency market worth more than 700 Billion by 2030

So do what you can to drive for energy efficiency. The operating cost reductions to your Supply Management organization that will follow will be well worth it.

Editor’s Note: This is an edited reposting of a 2008 SI blog post on how Energy Efficiency is the First Step in Energy Conservation. It’s a good message to remember at this time of year when many people put up those energy-inefficient holiday lights and displays from ten and twenty years ago without thinking that can, when overdone, create quite a strain on the grid.

How Do You Embed Sustainability in Organizational Culture?

A recent article over on the ISM site in their eSide Supply Management publication on “Embedding Sustainability: A 5-Step Approach”, discussed a report by Simon Fraser University and the Network for Business Sustainability that recommended five tried-and-true strategies for making sustainability part of an organizational culture, where sustainability was defined as operating in ways that meet the needs of the present without compromising the ability of future generations to meet their own needs.

In brief, the five informal practices that were recommended were:

  1. Engage
  2. Signal
  3. Communicate
  4. Manage Talent
  5. Reinforce

For each of these practices, they recommended that actions, which included:

Engage

  • Foster Competition
    between teams and business units
  • Make It Easy
    for employees to make choices that favour sustainability
  • Support Grassroots Efforts
    that come from the workforce
  • Capture Quick Wins
    and use them to overcome resistance
  • Prioritize Recognition
    and reward employees who foster commitment and get results

Signal

  • Be a Role Model
    and walk the walk (don’t just talk the talk)
  • Support
    your subordinates when they make decisions to prioritize sustainability
  • Allocate Resources
    to back up your sustainability commitment

Communicate

  • Tell a Story
    that promotes sustainability behaviours through examples
  • Customize
    the message to be authentic and relevant for the organization

Manage Talent

  • Hire Appropriately
    and select individuals with a passion, attitude, and competence to deal with sustainability issues
  • Make Sustainability a Way of Life
    and make it part of the job descriptions, goals, and benefits review process

Reinforce

  • Inform and Repeat
    the message over and over and over

These are all good practices, but will they really embed sustainability? First of all, nothing takes hold in an organization if it does not support both the business goals and the individual goals of the people who need to carry it out. If the ultimate goal is to please Wall Street by increasing profitability by 10% by cutting costs 3%, then no effort will be approved unless costs are reduced. Furthermore, if most managers and decision makers are compensated through productivity increases, and the most effective way to increase productivity is the least sustainable option, guess what option is going to be picked?

As a result, unless the organizational goals have sustainability embedded in them, and unless those organizational goals are mapped to unit goals that have sustainability in them, and unless those unit goals are mapped to individual goals that have sustainability in them, the chances of sustainability truly taking hold for the long term are going to be low. Thus, the organizational culture must first be tuned to sustainability. However, as we all now, just creating the right environment isn’t enough. People need to change — and this requires creating an atmosphere that not only supports the change, but that will support the inevitable hiccups that will result when any process is changed. So a change management initiative will also be required. And then the people have to want to change to truly make a big change. And how do you make people want to change? Incentives and rewards often work well, but those are specific to the types of individuals in your organization. As a result, no roadmap or 5-step plan will work as is. And if you don’t have a set of leaders who want the change to happen, it could be difficult to figure out what you need to do and get it done. And therein lies the challenge. So while I applaud the effort summarized in the report, is it enough?

Has Your Product Been Greenwashed?

About a year ago SI published a post that asked if it was green, or just more greenwashing after Terrachoice released its annual “Sins of Greenwashing” study that found 95% of the 5,296 products that were reviewed were still committing at least one greenwashing sin.

In response to this post, a reader has directed me to an awesome graphic, “Green Marketing Exposed”, created by Marketing Degree (.net), embedded below (with permission), that breaks down the seven deadly greenwashing sins of

  • no proof
  • hidden trade-off
  • smoke and mirrors
  • vagueness
  • false labels
  • irrelevant
  • bold lies

and the top three ways consumers can avoid the greenwashing traps

  • shop at big box retailers (heavily scrutinized by media)
  • beware of the electronics, DIY construction product, toys & baby product, and household cleaning product industries in particular
  • look for trusted logos

This is very useful for your supply chain sustainability manager. Know what to look for before your customer finds it!

Green Marketing Exposed

The Growing Importance of Water Conservation

Chances are, somewhere along the line, your supply chain requires freshwater — and lots of it. If it’s not already costing your organization a lot of money, it will soon. Why? Consider these facts, as collected in “Greenhouse Gas and Energy Co-Benefits of Water Conservation” by Carol Maas and Water for Energy by the World Energy Council.

  • 70% of the planet may be covered in water, but only 3.0% of that is freshwater, and five sixths of that is frozen in glaciers
  • 60% of freshwater is found in nine countries: Brazil, Russia, China, Canada, Indonesia, United States, India, Columbia, and the Democratic Republic of Congo
  • one third of the Earth’s population does not have the necessary quantity of 100 to 200 litres/day of water available to them
  • the US estimates that by 2050, half of the world’s population will live in nations short of water
  • over the last 70 years, water withdrawals have increased at more than twice the rate of population expansion
  • on average, 70% of available freshwater is used for agriculture and 22% is used by industry
  • water is required to produce energy
  • municipalities in Ontario consume more electricity than any industrial sector outside Pulp and Paper
  • water and wastewater services in Ontario municipalities represent a third to a half of electricity consumption – double that of street lighting
  • global water requirements for energy production are expected to increase from approximately 1.8 Billion cubic meters in 2005 to almost 2 Billion cubic meters in 2020 to about 2.1 Billion cubic meters in 2035
  • the increased need for energy production combined with increased agricultural needs and industrial process needs (to produce goods for an increasing population) is going to add considerable strain to an already strained water supply

The cost of water is going to increase as freshwater becomes more scarce, just as the cost of energy has increased with the cost of oil, which is still a primary fuel for electricity generation. As a result, water conservation is quickly becoming just as important to your supply chain as energy conservation, and any measures taken today will pay off in spades tomorrow.