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9:00 AM Wednesday February 6, 2008
No company is an island and no company can go green on its own. Recent headlines about the presence of lead paint in children's toys prove the point. You are only as good or as green as your supply chain. In this commentary, Brian Walker, CEO of furniture maker Herman Miller, shares three critical steps his company has taken on the long road to being green. Read his commentary and then join the discussion: What do you think it means to be green, and how do you work with your suppliers to make it happen?
Years ago Herman Miller decided to become an advocate for the environment, both because we believed it was the right thing to do and because we saw the potential for a clear business benefit. Ever since, we've been refining our processes to put our aspirations into practice.
Our Perfect Vision campaign, launched in 2003, includes green goals such as no landfill waste, no hazardous waste, no air or water emissions from manufacturing, and the use of 100% green energy, all by the year 2020. These are stringent targets our company cannot reach without engaging over 200 materials and components suppliers in the ongoing task of greening our global supply chain.
As we've examined every aspect of our worldwide supply chain, we've learned one key lesson: A business, and the products it sells, can only be environmentally sustainable through a holistic approach to design, raw materials, production methods, packaging, shipping, recycling, and even marketing--across the entire value chain. It's far too large and complex a undertaking for any organization to go it alone and be truly effective. You know the saying, "It takes a village to raise a child." Well, it takes an entire supply chain to green a company.
Here are three things we recommend to companies working with their suppliers on the long-term goal of going green.
1. Design your products with sustainability as a core principal. At Herman Miller, we have a problem-solving, design-driven culture, so we spend a lot of time thinking about how to create our products. In 2001, when we were creating our Mirra chair, we had been working with architect Bill McDonough and chemist Michael Braungart, both leading-edge environmentalist thinkers, toward their vision of a "cradle-to-cradle" design that embraces sustainable materials in a closed-loop life cycle. As a result, we eliminated the use of a chemical called polyvinyl chloride in that chair. Now, PVC has advantages, including the fact that it is inexpensive and durable. However, PVC releases toxins during manufacturing and when it is burned. We decided not to use it and implemented that decision with the help of our suppliers. We embedded those cradle-to-cradle principals in our product development process for all new designs, beginning with Mirra.
2. Refine your goals and put them to paper. We aim to be fully sustainable by 2020, but we're holding ourselves accountable to interim goals along the way. For example, by 2010, 50% of our sales will come from products that conform to our own rigorous Design for the Environment standards, and we aim to reduce our environmental footprint by 80%. Achieving these goals requires paying attention not only to materials, including their chemical ingredients, but also to our sources of energy, to our manufacturing processes, and to our packaging. We don't want to reduce our impact in one area while ignoring it in another. Nor do we want to move our environmental impact upstream into our supply chain.
3. Embrace transparency and meaningful metrics. Our company, our customers, and our industry in general are moving inexorably toward more transparent reporting when it comes to the environment. And, like any other management issue, what gets measured gets managed. When it comes to our supply chain, several measures apply. We award points through our Supplier Quantification Process for formal environmental programs and active waste-reduction programs. We rate our suppliers according to how effectively they are working to help us reach our goals--from researching alternative materials to incorporating our measurable targets into their flow charts. And this is the crux of the issue: We're not only looking at our suppliers, but at our suppliers' suppliers.
We have 12 years and a long way to go before reaching our self-imposed deadline for our Perfect Vision mission. By looking--and forcing change--outside our company as well as inside, we believe we can achieve this goal. By following the three steps above, we believe other companies can reach their green goals as well.
How green is your supply chain? How much leverage do you have to improve it? What are your metrics for making it work? Does it take an entire supply chain to green a company or do you think you can go it alone?
You mentioned that you eliminated the use of PVC's in your products - what do you use instead? and how does that better meet your footprint? Thanks.
With the complicated web of suppliers that ultimately contributes to almost any product these days, it is virtually impossible to think about reducing the environmental footprint of any given company in isolation. Herman Miller's inclusion of its supply network is essential to its environmental strategy. Undoubtedly, a change in process or material at one point in the manufacture of a product will have ripple effects and it is critical to factor in the environmental impact of these effects. So it is, indeed, necessary to "green" the entire supply network.
However, the story doesn't end there. Making products recyclable is necessary but not sufficient. To "close the loop," the products actually have to be recycled. Here, things get messy. Once products get in the hands of consumers, companies usually lose control over their disposition. Even if a company attempts to establish a reverse supply chain to process discarded products, it must rely on consumers -- who are notoriously unreliable "suppliers." For some products, the reverse supply chain actually works pretty well. Take for example automobiles. When you're done with an automobile, you have every incentive to dispose of it somewhere other than your driveway. The car usually goes through several rounds of secondary markets, but eventually, when it serves no functional transportation purpose, a junkyard will happily take it because there is still intrinsic value left in the material of the car (primarily steel, which can be effectively and efficiently recycled). So in this case, everyone's incentives are aligned: consumers don't want eyesores in their driveway and junkyards and recyclers can make a decent buck recycling cars.
For other products, everything doesn't fall into place so nicely (think electronics, furniture, clothing, or just about any other durable good). This is why Herman Miller's Design for Environment criteria are so important. In order to make the reverse supply chain feasible, it is essential to make the product recyclable -- a process that involves the entire supply network. Once recycling becomes technically feasible, we have to make it economically attractive, both for consumers and players along the reverse supply chain.
We have found that cooperating with our suppliers to green the supply chain also requires cooperating with our competitors. Sun and its competitors often use the same suppliers. If we each impose differing "green" requirements relative to reporting carbon emissions, and waste disposal, etc, very little will get done, and what does get done will be very expensive. So we cooperate in these areas using standards - like the Electronics Industry Code of Conduct (www.eicc.info). If we are all asking our suppliers to do the same thing we have a huge amount on leverage and we reduce the costs involved in compliance. This is not very different than agreeing on standard screw sizes or memory designs.
Kurt Doelling
Vice President, Supply Chain Management, Sun Microsystems
I'm curious to know Brian's thoughts on to what extent Herman Miller's design-based background/culture has played a role in their embrace of DfE and sustainability. It seems that companies with a strong design and innovation focus (e.g. Patagonia) have been amongst the earliest adopters and biggest champions of sustainability.
I'm also curious to hear other's thoughts on what the SME's do to help move their supply chains. It's one thing if you're a Wal-Mart or even a Herman Miller; it's another if you're a 50 person company trying to be 'green'. Thoughts?
I have to second Kurt Doelling's remarks. We handle coffee, tea, chocolate, etc. and our single greatest green "achievement" has been to source about 95% of these crops from certified organic farms. That in turn is only possible because a whole world-wide network of farms, certifiers, exporters, manufacturers, trade groups, gov't agencies, etc more-or-less, eventually (after decades of insufficent coordination) established common standards.
Similarly - though with fewer players and easier coordination - we've benefited from, and contributed to, a common set of "Fair Trade" standards re: social issues and prices paid to farmers.
However, due to the popularity of such standards new, and often weaker, competing standards have been created. They're popular with manufacturers because the lower standards mean obtaining a green seal-of-approval at lower cost.
But, of course, this creates confusion in the marketplace and threatens to undermine the "higher bar" practices.
I appreciate the fact that Herman Miller is incorporating sustainability into its designs while maintaing such high aesthetics and functionality. My question would be how far does the company's supply chain extend into low-cost regions where environmental responsiblity poses so many challenges (lack of experience, poor data collection, lack of infrastructure, etc.)? Those kinds of issues can necessitate a great deal more capacity building and patience in some industries, however much leverage the OEM possesses (note: I think Wal-mart is probably experiencing this phenomenon).
My background is in agriculture. Through my position of CEO of The Organic Compound, I've been active in what I call purification of agribusiness supply chains originating in developing countries. The base of these supply chains consists of a myriad of small farmers and SME-sized to large traders and manufacturers.
In our work we organize small farmers and link them with big brands. We approach brands with what we think is a strong argument of how their involvement in the supply chain, can substantially improve on many aspects in the triple bottom line consistency of their supply chains.
To my knowledge we practice a novel way of working, which builds on standards set by organic agriculture and Fairtrade. The standards however are both our opportunity as well as our impediment. For a brand or an intermediary in their supply chains these product standards are the reference point, the main line of communication of green/ethical standards. However to us, the standards are the starting point for dialogue, a lot more needs to be achieved in order to achieve complete ethical/green supply chains, which benefit all in a meaningful way.
As I said, we believe and can prove that in our case, more can be gained on the bottom line issues through our proposal for more open, transparent, proactive, top-bottom-top supply chain cooperation. The thing is however, that we have a hard time communicating this to brands, even to brands who on the outset ventilate a willingness to participate in developing sustainable supply chains. In practice brands show reluctance in assuming a (in my opinion crucial) leadership position in their supply chain network to influence their supply chain partners and bring about change. The upshot is that everybody keeps to communicating through standards and no bridges are built.
As this discussion the perspective on greening supply chains is from top to bottom, I therefore am curious to know from that perspective:
1. If this pattern which I describe from my work is recognizable in other supply chains?
2. Whether you think that this pattern stifles innovation opportunities towards sustainably developing supply chains?
3. And if so, what could you then advise as a strategic approach in opening dialogue with brands and building the case for closer involvement?
Hoping to hear your thoughts
The goals you have taken for 2020 are indeed stretched and look impossible unless the "dirty" job is passed on to the supplier; in that context greening of the supply chain is indeed important. The same set of goals should apply to the suppliers and suppliers' supplier; then only your goal has a meaning. You cannot become a "green" organization without your suppliers being green.
By the way, if you are using thermoset plastics (e.g. table tops), rubber (e.g. bush), passivation (e.g. screws), pigments (e.g. in thermoplastics), anodizing (e.g. aluminium), gluing (e.g. threadlock), painting (e.g. anticorrosion), lacquering (e.g. scratch resistance)etc., unless there is a quantum leap in technology covernig all these areas, do you still think that your goals are achievable?
Another important issue - would you like your supply chain to be green or Sustainable ? My experience with supply chains is that green issues are manageable with training, audits and C&P actions - other sustainability issues, like health & safety, wages, labour issues, governance, corruption, human rights etc., are difficult to manage. Would you like to consider them too in your supply chain ? In other words,is it OK with you if your products are green even if they had been made by children through forced labour ?
Herman Miller has created a great model. If they can achieve the goals they've set over the next 12 years, they'll make a huge difference and they'll be a model for many of us. Now the question is how this kind of model can become almost universal. If we're really going to solve the problem we have to achieve something like this in the biggest value chains – for products like oil, food, automobiles, etc.
The biggest value chains may involve different challenges from those for things like furniture. Their very size often makes inertia much greater. And huge parts of the value chains are in remote locations where some people may not be as sensitive to environmental management as people in the developed world. Moreover, they often lack the tools to transform their work. Think of the supply chain for oil itself. The world will be using it in huge quantities for decades to come. And producing and transporting oil, and creating the infrastructure to do this, involve huge amounts of energy, creating much carbon and other waste. Much of the value chain for oil involves national oil companies of less developed countries and/or by consortia involving oil firms of developed and less developed countries in remote areas. Achieving energy efficiency in these places will require a lot.
Remarkably, all three of Brian's principles work well for huge value chains. The oil industry isn't going to be redesigning its core product any time soon, but it is designing production, refining, and distribution systems all the time, and the sustainability of our civilization can be a core consideration in each one. Similarly, clear goals and clear, transparent metrics can guide companies in the biggest value chains as in small ones.
However, in the largest value chains we have to think in terms of huge networks involving players we don't often consider and frequently assume will be enemies of sustainability. Fortunately, there is evidence that more of these players can be brought into the game and can accomplish a great deal if they get the right cooperation and help. I'm involved with a consortium called the Global Leadership and Technology Exchange (GLTE) that includes Gazprom in Russia, Tata Group in India and the World Trade Centers Association of Korea, amongst others. Many top executives in top companies from emerging markets recognize that effective energy and environmental management is where the world is going and has to go. Not all of them see this, but there are enough to allow huge progress on global supply chains to be made. But they need help.
For developed-country businesspeople, the first step is alertness to the huge opportunities in improving these value chains. The decisions of Deutsche Bank, DNV, and other developed-country firms to join the GLTE suggest that this step is to a significant extent accomplished.
But then we need to understand the enormous difficulties involved and develop solutions. For example, improving Gazprom's value chain within Russia – a big source of both waste and pollution – involves improving Gazprom's technology. Western watchdogs have legitimate concerns about what happens to Western high technology when it enters countries like Russia and China. But the world can't be said to be serious about its energy and environmental crisis until it is bringing the right technology to bear in the places where the biggest parts of the problem are likely to be generated. Companies with solid experience in technology transfer and in working responsibly with the West's regulations need to partner with key players in the big value chains to re-engineer big parts of the world economy.
Sustainable development, across the world economy, will grow with the accumulation of individual efforts in many sectors; climate change and other challenges have no magic solution. Herman Miller's initiative shows great leadership and will directly impact its suppliers and entire value chain. But it is also important to understand the indirect impacts of such work.
Suppliers that are now required to provide more environmentally friendly materials will seek to market those to other manufacturers whose products will also be improved. And while Kurt Doelling did not elaborate in his post, industry consortiums like the EICC provide a platform to address social as well as environmental issues (and will have the benefit of reducing overall supply chain costs).
At this point in time, the most important indirect benefit of Herman Miller's initiative is raising awareness about sustainability and how companies can make practical change that will have an impact. Herman Miller's commitment and communication to its customers and competitors is as important as its supply chain directives and internal efforts. By promoting the dialogue and displaying transparency in its actions, the company will create change within its industry and across other sectors.
Brian Walker is absolutely right that greening a supply chain takes a village. And, as goes the mantra, it is good business. Maybe surprisingly, the opportunity is particularly rich in greening an existing supply chain where there is often significant waste and inefficiency. This is caused by two key factors:
1. Unintended consequences: Consider the Christmas sales season. The manufacturer has to get its product specs to China by X date in order to hit the shelves in time. But invariable, last-minute design changes often lead to factory workers doing massive overtime. Overtime limits are breached and the factory has generated enormous waste, both in terms of time and materials.
2. Misaligned incentives: Look no further than the magazine on your coffee table. The publisher's focus is total circulation, since this determines advertising income. Wholesalers are concerned about the profitability of each magazine they sell. The result is a supply chain where more than 60% of single copy (non-subscription) magazines are never sold. While most are recycled, this still results in massive waste of energy, time, and materials.
How to fix these issues?
The most powerful approach we know of is based on putting the "System in a Room." All parts of the supply chain, as well as key experts and other stakeholders work together in the same room at the same time. The room is configured into round working tables of 6 to 10. Together, the group develops a common understanding of the situation, identifies strengths to be leveraged, creates a vision of a more sustainable and profitable supply chain, identifies and "rapid protypes" solutions and agrees on the actions needed to make these changes a reality.
It is through working with the whole system – whether it's the magazine industry working to reduce its waste or the Dairy or DVD industries aligning to reduce their greenhouse gas footprints for products sold to Wal-Mart that breakthrough sustainability improvements will be found. This approach works because sustainable solutions in today's supply chains requires coordinated action among multiple players. Through face-to-face interaction and focusing on common goals, such supply chain partners can achieve benefits collectively that none could achieve on their own. And it's highly efficient: activities that would take months with one-off conversation can produce results in 2-3 days when all the important player are together.
So, yes, you can try to go it alone, but even the biggest players realize that's a slow process. Time is money. And, face to face collaboration through a "System in the Room" approach is the fastest way to align interests, find breakthrough solutions, and embed lasting change.
Dave Sherman, Partner, Blu Skye Sustainability Consulting
Jib Ellison, CEO, Blu Skye Sustainability Consulting
Consumers today look for "green" products; which is a good thing. However, in the past, and even now, these green products have come with no supporting evidence or qualification.
For example, a product could be labeled "green" even if only one of the many components of the product is green.
Do consumers actively research or even care how much of the product is truly green?
Or as Thomas Stewart says, do consumers care about the "shade of green?"
Herman-Miller is to be commended on an exceptional sustainability program (disclaimer: I sit in an Aeron).
As Deishin Lee alluded to in her initial response, the reverse supply chain is the weakest link, and I think often the elephant in the room. Normalizing the human relationship with our ecosystem should be a key objective of any sustainability effort. Some things just cannot be sustainable enough - bottled water imported to the US, for example. The local solution will always be less energy-intensive, and therefore more efficient.
HM's long term objectives are that - long term. Consumers raised on a diet of instant gratification often do not have the patience for long-term efforts to come to fruition. We need a sea change in the demand and use cycle of our products to reach these objectives collectively.
This is the paradox, and our challenge. We are driven to differentiate our products for reasons of strategic advantage, but we all need the consumer to act in a sustainable way. We confuse with our message to the point where we are managing 'Green' vs. 'Sustainable'. And the consumer buys on feeling good. Kurt Doelling's example of Sun Microsystems demonstrates that a level of cooperation is essential to achieve sustainability within an industry supply chain.
What other examples are there of similar kinds of 'coopetitive' behavior from within the sustainability field? What about your supply chain cannot be made sustainable?
I think that Matthew Schupbach raises an important point. Educating consumers on the impact that products' supply chains have on the environment, and providing them with an easy way to make choices based on comparing environmental impact is key to achieve true sustainability in the long run.
In addition, such education and transparency will enable leading companies, such as Herman Miller, to be rewarded for their early investments in environmental sustainability.
Even though it might be hard for corporations to obtain full transparency on their supply chain and despite the fact that it is difficult to convey this information in a simple manner without compromising its scientific integrity, a few leading companies have started very valuable pedagogical efforts.
A good example is Patagonia, with their Footprint Chronicles. On a dedicated website (www.patagniafootprint.com), consumers can follow several of the company's products from cradle to cradle (by 2010, all Patagonia products will either be recyclable or compostable, with collection points at the stores which, to my knowledge, will make Patagonia the first truly cradle-to-cradle company). Supply chains are represented on an interactive map of the world, and their impact (both "the good" and "the bad") is assessed in terms of distance traveled, CO2 emissions, waste generated and energy consumption.
Another example is Timberland. With its Green Index, the company has started printing supply chain information on some footwear products boxes, with a simple 1-10 ranking that spans three categories: climate, chemicals, resources. All 30 million pairs of shoes that the company produces every year are supposed to be labeled by 2009.
As more and more companies start disclosing this kind of information, one issue will be standardization. Although international standards exist (ISO 14000 series) for collecting environmental impact information, it would be useful to agree on general guidelines for communicating results so consumer, as is the case, for example, with nutrition labels.
In answer to Mr Shupbach, we have been looking into ecolabels and found that you can map out the relative 'shades of green' of labels on the following dimensions:
- single environmental attribute (such as energy use) or multi-attribute (energy,water,toxic reduction, etc)
- focus on a single part of the product's life cycle (eg just use phase, or just raw materials) or covering the full life cycle.
Now that our team are becoming known as 'label geeks' we are fielding alot of questions along these lines, and not just from our family members (calling us while bewildered in the natural foods aisle). Companies and procurers are also trying to get their head around what all these different labels and standards mean.
As per Brian Walker's original point 3, designing measurement systems to understand what environmental qualities companies are receiving enhances the crediblity of the whole "greening" endeavor. Aside from legitimacy, the good thing about using a well constructed label is that all of those metrics can come directly from their criteria.
Anastasia O'Rourke
Yale U. Ph.D. Candidate
& Co-founder of www.ecolabelling.org
With respect to Anastasia O'Rourke's multi-attribute model outlined above, what happens when attributes are in contention? For example, your product might be carbon-neutral, but you use offsets purchased from a tree-farming operation that evicted local villagers from their land in order to plant trees. How do you manage these conflicts in your supply chain.
The carbon offset industry is under review by the Federal Trade Commission to ascertain whether claims made by offset and Renewable Energy Credit (REC) retailers are at all misleading. Our (disclaimer - I run an offset-related startup) industry has received considerable media attention, some pretty negative, and we have to respond. One way we have responded is with the Center for Resource Solutions Green-e for Climate program, due for launch in the next few days. No doubt we will learn much from the consumer response.
As a long-standing supporter and partner in Herman Miller's transformation, I completely agree with Brian's statement about the challenges and opportunities in pursuing ecologically-intelligent design. One of the most important steps for any company is to set goals for how it wants to excel and then define a clear trajectory and plan to get there. The intention and scope of a company's sustainability goals will ultimately determine the extent of a company's relationship with their suppliers in order to achieve those goals over time.
I think Herman Miller's Design for the Environment (DfE) program demonstrates what is possible. Herman Miller was not interested in focusing on the design of a single product or even a single line of products. Senior management understood that to move toward more ecologically conscious design, they must create sustainability criteria alongside their traditional product development measures and work with their supply chain to integrate them for achievement. MBDC worked with Herman Miller to create a Cradle to CradleSM design framework to benchmark and continuously improve all products through innovation and creativity. Herman Miller's goal of optimizing all products required the company to deepen and intensify its engagement with suppliers and enlist them as partners in the process.
The scale of the goal also can require more complex interactions among companies and their supply partners. For example, there must be much more trust, collaboration and education when asking your suppliers to evaluate their products against a broad set of toxicity criteria to fully characterize materials as opposed to a "free of" approach, representing a limited set of restricted substances taken from current government regulations.
Characterizing and screening materials requires companies to expand their communications efforts with their suppliers in ways that are new and unfamiliar, but necessary for eliminating the concept of waste, optimizing material health and maximizing the safe recyclability of products. For example, in addition to dealing with sales staff, companies will interact with senior management, design engineers, health and safety officers, and marketing and legal staff to explain the introduction of new material selection criteria. Most companies who are serious about embedding sustainability into the DNA of their operations discover that educating and vesting suppliers in the process is key to a successful implementation strategy. Herman Miller found it needed to dedicate staff for several years to visit suppliers, educate them about the material evaluation process, and engage their cooperation in helping to achieve the company's DfE goals.
Becoming a more sustainable company is hard work. It takes years for companies to find their compass, define their trajectory and gain operational momentum in implementing their strategies. Despite the apparent complexity of the issues, one thing that all companies can do tomorrow is to signal their interest in specifying healthier materials from their suppliers. Regardless of what a company's sustainability goals are--materials with greener chemistries, components designed to be easily disassembled and recycled, or products made with renewable energy--the fastest way to "green the supply chain" is to choose suppliers that help the company achieve its new design objectives. Such coalition building will change a supplier's mindset from "but this is the way it's always been done" to "what can we do tomorrow?"
I applaud Herman Miller for its leadership and tangible improvements. The company has taken on the mantle of ingenuity for the environment and created traction throughout the supply chain. It is rewarding to see long-term vision come to fruition.
I am another admirer of Herman Miller and its leadership example, which clearly demonstrates the value of having someone at the top to inspire and champion sustainability. Leadership like HM's stimulates employees to work together to find new ways of achieving sustainability without worrying about risk. On the other hand, many who are leading the change to sustainable development are not at the top of companies, and they need to find ways to overcome the risks involved so they can move ahead. This can mean taking smaller steps, which when successful, can lead to greater opportunities.
Collaborative efforts at the supply chain, community or regional level offer opportunities to engage a range of people from companies, city and county departments and community organizations in seeking solutions to common issues like energy, waste, water and climate change. The process – whether through supply chains or in communities – takes time and patience, as Bill McDonough says, but trust and comfort can be as important as mandates.
The business council's by-product synergy process is based on this kind of cross-industry collaborative approach. The process provides manufacturing facilities with opportunities to reduce pollution and save energy and money by working with other plants, companies, and communities to reuse and recycle wastes. The process brings clusters of facilities together to create closed-loop systems in which one facility's wastes become another's raw materials. Organizations involved in by-product synergies form a legally protected network of enterprises in which process-knowledgeable experts can safely explore reuse opportunities. Participants sign agreements that spell out deliverables and address barriers, such as confidentiality issues and intellectual property rights. The methodology introduces local public and private sector partners and enables them to take ownership of the network as an ongoing collaborative program.
In one recent example, a quality assurance leader at a Chicago bakery joined representatives from 11 other food-related companies and city departments to focus on long- term projects involving alternative fuels, composting, anaerobic digestion, and changing regulations. This collaboration resulted in a doubling of the baker's recycling numbers within a matter of months and led to a goal of 50% reduction in waste in 2008. The baker said his senior management approved, but got really excited when they received sustainability mandates from Wal-Mart, one of their top markets.
Another example is a Japanese industrial project led by the Mitsubishi Chemical Corporation, called the Mizushima Regional Cooperation Complex, which began in 2000. The initial project, supported by the Japanese government, involved development of synergies among several chemical companies, oil refineries, steel companies and a power company. All recognized that the aging industrial infrastructure required a dramatic increase in productivity if they were to remain competitive with newer plants coming on line. Motivated by the desire to cut costs, enhance revenues, and retain market share, these collaborations have expanded to include a growing number of industries and service firms within a geographic ring. They also have produced an increased appreciation for the related environmental and social benefits.
American industry consumes 22.5 trillion Btus of energy each year and generates around 7.6 billion tons of solid waste. All kinds of companies are becoming more interested in reducing their contributions to these numbers because they want to survive and prosper. In order to do so, they would benefit from collaborating across their fencelines with their neighbors as well as through their supply chains.
I applaud Herman Miller and their partners in their green quest. Indeed, the integration must necessarily be vertical and horizontal in order to achieve optimal benefit relative to cost (whether in terms of dollars or resource input or waste output).
I wish more data is available on a global comparative basis (eg, the energy consumption per unit of GDP). I suspect that my country, Singapore, is very brown despite all the professed governmental efforts at green initiatives.
Singapore has developed a Greenmark Scheme to rate buildings.
Example 1: Use of new technology glass panels would earn brownie points but as we are 1 degree north of the Equator and at an affluence level to afford air conditioners for most offices/homes, I fail to understand how glass as opposed to concrete could be rated more green.
Example 2: Design of private residential apartments invariably do not provide for drying yards and dryers are even included in some upmarket apartments. No matter how energy-efficient dryers are, they cannot be more green than using our blazing tropical sun!
Example 3: The trend in private residential estates is having (a) water features which consume 24/7 electricity to keep the water cascades, fountains or infinity pools in operation instead of tapping on the luxuriant growth of tropical foliage. And where we have estate trees, we don't let up with our ambient spotlighting 12/7 instead of limiting such ambient lighting to 4 prime hours!
Yet world environmental bodies laud Singapore's green initiatives. Am I the only one missing the picture? Can somebody tell me please?
M.K. Khoo's questions about Singapore's energy intensity have answers. Wikipedia has an article about energy efficiency that includes this revealing chart
http://en.wikipedia.org/wiki/Image:Gdp-energy-efficiency.jpg showing the energy intensity of the 40 largest economies in the world--Singapore's apparently falling just below the cutoff; but if you also look at a publication by Singapore's Ministry of Trade and Industry at http://app.mti.gov.sg/default.asp?id=148&articleID=5842 you can find Singapore just about on a par with the Netherlands and Australia.
The data on the second chart suggest that there's a typical energy use / GDP tradeoff. From a macroeconomic (or macroclimatic) point of view, breaking that trade-off is one of the most important challenges facing the world: If China and India develop with GDP / capita ratios that that follow the line on the MTI's chart, we're all cooked, literally, simply because there are so many people in those lands.
That creates a special opportunity and urgency around the topic of this thread, green supply chains. People in emerging economies rightly protest against being held to a standard of carbon-constraint that those of us in the US and EU didn't bother with during our development (and in the US aren't much bothering with now, from a policy viewpoint), so how dare we, the argument goes, hold BRIC and other emerging nations to a stricter standard?
Yet how can we not?
As Bill McDonough argued in a prescient HBR article in 2004, China can become a "green lab" for the world, and companies deriving supplies from China can help that happen, and in the process help to change the development = carbon arithmetic. There are two potential sources of value in that--three, actually: (1) a more efficient supply chain, protected against the (inevitably to be imposed) cost of carbon--there are likely to be terrific first-mover advantages from being first on this learning curve; (2) a benefit to the global commons; and (3) the development of technologies and processes that may prove to be of immense resale value in emerging economies that are 5, 10, or 15 years behind China, and also in developed economies, where economic value of carbon thrift can only grow.
I have a question, however, about a topic that was introduced early in this discussion by Kurt Doelling of Sun. He rightly points out the value of industry standards. Certainly if I were say, a contract manufacturer in Singapore, Malaysia, or Taiwan, I'd find it extraordinarily difficult to deal with separate demands from each of my customers, not to mention, perhaps, separate standards for, say, Sun products destined for the US vs. the same products destined for the EU. At the same time, however, the history of industry standards in this kind of area has not been one that fills the breast with confidence. You don't have to be a Naderite to realize that industry standards have often been determined by the lowest common denominator, and then been watered down from there.
What can companies, NGOs, and policy makers do to capture the obvious advantages of industry-wide standards while avoiding their equally obvious problems?
As a Green activist and business owner, the environment has never been a more pressing issue, particularly as human induced climate change has ensured that it remains high on the political agenda and in the instruction and constructive consciousness of the journalism core.
My opinion is divided on whether the influence of corporate America is being fully engaged as a change agent for good in the effort to save the planet, or if employees who have as their responsibility to provide leadership in the area of internal communication are more concerned with helping companies to create a voice that can be heard during this election cycle as an effort supporting a merging between sustainable communities, corporate responsibility and environmental legislation.
It's has been several years since my business partner and I began seeing green values moved into the mainstream of corporate best practice. In part, this shift was the green movement's way of gathering political space every since, helped by attracting high-profile, scientist and environmental engineers to research and forecast disasters such as Katrina and the noble scientific studies into global human induced climate change and a list of other issues facing tomorrows corporate leaders.
As a Green party activist it has become an integral part of my involvement in corporate communications, especially for large companies: To address the whole question of the environment and our responsibility to create a best practice that is more and more linked to the question of responsibility and sustainability. It is no longer just a concept for corporate culture, but is becoming part of companies' core competencies and values. Business must become agents of environmental change. Companies have the human, economical and political resources. They have access to the best talent in the country. And let's be honest here, they now have a real self interest in Global repair. Real change brings three non-negotiables to the board room. No agendas, No lies and a commitment to the country. Government can enforce legislation and corporate accountability, but we all have to individually do our part. We must focus on the right thing, while connecting what we are learning with what others are doing to enhance the reputation of leadership and the environment with a long-term view.
I'd like to thank Tom Stewart for pointing me to Wikipedia's chart (although I don't see "little red dot" Singapore in Wiki's chart unless the rest of the world thinks Singapore is part of Malaysia) and to the MTI article.
At the rate we are going, we will get Toasted, Roasted or Coasted to varying degrees, depending on each of our country's latitude and sea level!
As in the proverbial truth: It takes two hands to clap!
Indeed, China, India, Africa and other emerging economies are entitled to development and to a human standard of living with electric lights in every home that is no longer a mud house and have cars and central air-conditioners/heaters but only for the really affluent. Hence, pricing could be used effectively to curb excesses in our throwaway consumerism.
Indeed, the West can hold NIEs to account for carbon emissions. Indeed, too, the Western economies (particularly in the North American continent) can hold themselves to account by curbing their past excesses which are relentlessly continuing into the future.
Why the urban sprawl? Why not return some of the urban sprawl back to nature and quickly load the carbon credit into your own backyard. Isn't it more within your immediate control than some cross-border forest in Papua New Guinea which we should nonetheless continue to preserve/manage as part of our world citizenry?
Why does the wife drive a SUV to ferry two kids to school whilst hubby spends an hour each way in the family sedan to/from work and the happy family heads out of town for weekly megamart grocery shopping in the family truck? 3 vehicles for a family of 4? Even the not-super-rich need an extra summer home?
Can (and will) NIEs avoid the mistakes of urban sprawl and excesses of the developed world that perpetuate the Vicious Cycle already triggered by the West? Singapore has, in my opinion, already gone down the road of the Western excesses (eg, our property laws facilitate (even encourage) deconstruction of private apartments from the first day of occupation in the name of urban renewal) and residential blocks of 20 years' age (!) are ripe for demolition when my fridge made in Japan is still frightfully cold after 20 years.
As rightly pointed out by Tom Stewart, Kurt Doelling and Bill McDonough, China could be the green lab test-bed, carbon arithmetics are long overdue and industry standards are sadly incoherent.
Whilst waiting for rigorous and comprehensive carbon credit/tax structures to be developed and negotiated, ... whilst waiting for definitive industry standards and other certification benchmarks to be agreed upon, ... whilst waiting to be Toasted, Roasted or Coasted, can developed economies extend their green technologies to NIEs on an URGENT "grant" or "aid" basis?
Time and Tide wait for No Man.
Just Do It - for 6 billion humanity's sake.
Gross Domestic Production is NOT Gross Domestic Consumption. Who are NIEs growing/manufacturing/processing all that stuff for anyway?
Can we bottom line this discussion to increased revenues or lower costs? Have these efforts increased sales at HM? Or are they defensive and the primary benefit is in PR for early leadership?
While all these efforts are clearly laudable, HM is profit driven. Customers of Timberland, Patagonia, and, perhaps HM, are very green aware and would probably pay a price premium for products and understand merits of less recycled waste and carbon efficient operations and product transport.
But, how many customer purchase decisions will be made simply emotional, perhaps based on a minimal "green" effort? HM may lose sales in these situations to less green competitors deliver value with lower price or other services. Did truly "low fat" cookies sell more than "reduced fat cookies"?
For firms who sell into very green aware business (HM for architects perhaps), these efforts seem at, a minimum, an important marketing investment. But green product standards (like % of post-consumer recycle content for paper) seem essential if HM and others want to influence purchase decisions for competitive advantage.
This is a great article and Herman Miller is a refreshing company working in the right direction with realistic goals and time frames.
As a procurement professional responsible for Ethical and Sustainable purchasing searching for companies to source and develop partnerships with like Herman Miller was both challenging and rewarding.
One observation, these target goals and values need to filter down into the distribution chain for Herman Miller.
If the distribution chain is weak and unable to deliver on the service aspect of delivering the product the rest of the green efforts are lost.
Great start by Brian and great dialogue.
I like the Herman Miller approach for several reasons.
First, the thinking and the eventual goals aren't a product of linear extrapolations of the past. This is important for our poor planet because if we just try to take the regression line down a few degrees or get back to where we were a few years ago, we aren't going to make it. In addition, linear extrapolations leave far too much uncharted territory out of the equation. We have to imagine possibilities that don't currently exist to produce the best results - and imagining chairs with no PVC rather than reducing the intensity of PVC use is that kind of imagination that is needed.
Second, I like the use of Herman Miller's design capacity. Alexis Morgan speculated on its role in Brian's approach and I would conjecture from my experience with Herman Miller (many years ago during the launch of the Aeron chair) that design thinking has a lot to do with the possibility imagination referred to above. I have argued (and will be arguing in my next book) that design thinking is a key to competitive advantage in 21st century business and one reason is the need to solve the great mystery of how we are going to move forward economically, so that more poor are pulled out of poverty, without terminally wrecking the planet. This will take abductive reasoning, not just deductive and inductive reasoning; that is imagining what might be not just declaring what is (or is not).
Third I like the use of metrics. It creates the necessary tie between the expansiveness of imagining possibilities and nuts and bolts of making sure they actually transpire.
I have one suggestion and this links to the wonderful contribution of Bill McDonough and his cradle-to-cradle metaphor. And it links to the point above about the problem with the value chain going forward from the manufacturer (as opposed to the supply chain going back) being out of the control of the manufacturer. It begs the question: should HM only lease and rent furniture so it can get it back in order to complete the cradle to cradle cycle? I think the such cradle-to-cradle maintenance of ownership is going to be increasingly mandated by governments (and there are pieces of it in Europe already). HM is in a product category in which it could get ahead of the game and show how it can manage the sustainability of the whole experience of using its furniture.
The Herman Miller article is quite inspirational. I'm sure their competition have felt the heat get turned up.
Herman Miller is providing the leadership which is required to get an increased awareness. It is commendable of Brian Walker and his BOD to take on this challenge and still be responsive to its shareholders.
This is the long-term view which is necessary as the cradle-to-cradle model is not cost-justified in the short-term but is more than justified in the long-term. The ability of HM to adopt their strategy will benefit many related businesses. When the supply chain cleans up its act - it does it for all and not just for a few. This initiative will spread and I don't think we will see suppliers revert to previous lower standards once they also commit to the long-term benefits for all.
This all makes fascinating reading, if strongly reminiscent of much of Max Frisch in "Biedermann und die Brandtstifter". Quite possibly it is inspired all-round by the best of intentions in some direction or other; but the mail above from Paul Baier crystalises the problem. For as long as the economic bottom line comes first, then the environment - or any other interest - may (in simple terms) go to hell: that is to the point that the consumers are all dead - at which time a change in practice (rather than mere attitude) may occur.
May I recommend anyone in any doubt on this minority interpretation considers, in a sequence of their choice, the following:
- Chapter 14 of Lyotard, J.-F. (1979). "La Condition postmoderne: rapport sur le savoir". Paris: Les Editions de Minuit.
- Michael Jensen's article on the impossibilty of maximising more than one (economic) dimension (2002). "Value Maximization, Stakeholder Theory, and the Corporate Objective Function". Business Ethics Quarterly 12,ii, pages 235-256.
- Naomi Klein's recent intepretation of the disastrous effects on global economics by the absurd ideallism of the Chicago School lead by Milton Friedman. (2007). "The Shock Doctrine: the rise of disaster capitalism". London, UK: Penguin Allen Lane.) If all this reading is too time-consuming, interested parties may wish to view a recent documentary film on iberal capitalism entitled "There will be blood".
Otherwise it seems, there is nothing more to say practically until capitalism in its invariably destructive mode is changed or swept aside as previously feudalism was.
The vision of Herman Miller is laudable. While it is very easy to implement change at a product level, it is an arduous task to implement the same across the entire supply chain. The challenge for Herman Miller is to imbibe green thinking into its business model and implement the same across its entire supply chain.
Marutish Varanasi
Tom Stewart raises some concerns about standards that are similar to those raised by Rodney North earlier in the thread. That is, standards tend to get watered down and reach the lowest common denominator. He asks, what can NGOs, consumers and companies do?
Standards are driven from consumers. Consumers want to know that the products that they are buying were not built with forced labor and, increasingly, are not recklessly abusing the environment. Even companies like Sun Microsystems that are not consumer brands feel the pressure directly from our large corporate customers that are.
In our industry, companies often break away imposing a new requirement so that they can appear "greener" than everyone else. Then one of two things happens. (1) The standards body adopts the new requirement, or something similar so as not to become irrelevant or (2) the supply chain imposes excessive costs back on the breakaway company who quietly drops the new requirement.
This tension between companies trying to create green PR competitive advantage and standards bodies subsequently adapting that can move the standards forward in a positive way.
Herman Miller has gone a long way - perhaps furthest - in getting sustainable product design right. For those looking to the next horizon, it is Deishin Lee's point about actually getting the products recycled that exposes the next major challenge.
L. Ramakrishnan and others make the point that many companies are passing the recycling buck up the supply chain by asking for recycled content in purchasing requests. Like most companies, Herman Miller doesn't do recycling because it doesn't produce its own input materials. It relies on its suppliers to close the loop. But many suppliers, especially petrochemical manufacturers with perfectly balanced streams of multiple products on a continuous production line, will have no interest or incentive to recycle. Recycling actually threatens to throw their well tuned system out of whack. As Osvald Bijelland notes, the largest and most complex value chains face the greatest challenges.
So established value chains have substantial inertia that has to be overcome. What can companies do? Kurt Doelling and Andrew Mangan point to one strategy. Sun is helping to lead its industry towards collective sustainability solutions. For recycling this may mean standard design principles and materials shared across the industry. This would make Sun or HP's products equivalent from a recycling standpoint. While this may give their marketing departments the "hibbie jibbies", doing so would create scale economies that make the economics of recycling attractive for the industry's suppliers. It's eco-co-opetition, where ITC companies compete on computing power but cooperate on sustainability. David Sherman's putting a "system in the room" seems a good technique for collective approaches. Just steer clear of the antitrust bogeyman.
Tom Stewart and Kurt Doelling's most recent comments, however, highlight the difficult challenge of fostering successful industry standards. Success with eco-co-opetition would buck the historic trend. But there are other approaches. Patagonia's Common Threads program relies on a close partnership between Patagonia and its major fiber supplier to recycle their polyester fabrics. Shaw Industries, in contrast, has chosen to go it alone and vertically integrate the entire process. The company now has the capacity to completely recycle the nylon fiber in its carpet. In the coming years we will see diverse innovations as companies seek to close the "last mile" of their cradle-to-cradle loops.
Thunderbird School of Global Management
It is wonderful to see Herman Miller leading the charge in what Bruce Piasecki, author of "World Inc." terms 'social response product development' (see www.worldincbook.com if interested). Herman Miller is gaining access to new markets with environmentally and socially superior products that compete on price, performance and quality, but also on social need (as Piasecki defines as an advanced state of capitalism where products actually respond to environmental and social challenges throughout their life-cycle). Herman Miller's design for environment approach is gaining them competitive advantage and access to new market opportunities for their products. What will be interesting to see however is just how integrated they can align their supply and value chain over the long-term, particularly if recycled products become just as constrained as natural resources as demand for "greener products" increases in this rapidly growing world.
Recently, the heads of two of Japan's largest paper company's (Oji Paper and Nippon Paper Group) issued apologies after they claimed the recycled content of some of their paper lines were greater than they actually were. See the ENN story http://www.enn.com/pollution/article/29560. The stock performance of both Japanese companies declined after the news broke. And the potential impact on their customer loyalty, brand and the Japanese recycled paper industry is yet to be fully determined, but one could believe there will be some negative returns. From a supply chain point of view two large firms, Fuji and Xerox said they would no longer procure product from Nippon Paper. Now that's some serious bottom line backlash.
This gets me to my point, adding legitimacy to energy, environmental and sustainability claims by product manufacturers is a necessity in this 24-7 faster paced world where data and information is readily available on products and where corporate brand and reputation can literally erode overnight from false claims.
The swiftness of information has accelerated the pace of commerce and the severity of market conditions (price of energy, convergence of climate change and carbon on corporate reporting, availability of materials) is shaping the futures of firms like Herman Miller and hundreds of other corporations that seek to reduce the risk profile of their firm. To legitimize energy, environmental and sustainability claims there needs to be more education, awareness, transparency, reporting and accountability. The role of citizens, governments and corporations is equally important in creating this greatly needed "legitimacy" and it's in each stakeholder's best interest to ensure appropriate product claims and labeling can be disclosed and validated.
Gregory Unruh's discussion of Shaw Industries and Patagonia are great examples of two firms working through their challenges on product recycling respectively. In the case of Shaw Industries (http://www.shawfloors.com/About-Shaw/Carpet-Recycling) they are on the board of directors of the "Carpet America Recovery Effort (CARE)", a joint industry-government effort to increase the amount of recycling and reuse of post-consumer carpet and reduce the amount of waste carpet going to landfills. Shaw Industries is working with other CARE members including USEPA, Interface, Mohawk Group, Inc., Milliken & Company, The Carpet and Rug Institute, among others to alleviate any concerns over how carpet is recycled and how to measure and report. Shaw Industries is also working on defining a "sustainable carpet standard" known as ANSI Sustainable Carpet Assessment Standard (SCAS)- NSF 140 (see, http://www.sustainablefacility.com/CDA/Articles/Sustainable_Flooring/BNP_GUID_9-5-2006_A_10000000000000117283 and http://www.nsf.org/business/standards_and_publications/pdf/NSF_140-05-DS.pdf). The ANSI NSF 140 standard is looking into life cycle assessment, product labeling, use of biobased materials, and product reclamation (end-of-life product management) issues for carpets.
As corporations are constrained by natural resource availability (and carbon), its possible they will also be constrained by availability of recycled materials that can achieve their product quality, reliability and durability requirements as well. Thus it will be a strategic and essential requirement for firms to work with suppliers (not just require of them) to offer product innovations that keep pace with demand for "greener" products that achieve cradle-to-cradle status. We know that plastics for example can only be fully reused a couple of times before there grade deteriorates so much that they cannot be reincorporated into new products. Thus new products will require an infusion of new materials at some point in their life-cycle, and this places new demands for environmentally-benign materials (as well as continued demand for natural resources).
As this exciting area of 'social response product development' plays out it will be interesting to see how suppliers and OEMs collaborate on achieving win-win solutions. I believe however, that industry-wide partnerships and consortiums that include government, NGOs, consumer groups and corporations in the evaluation of complex product and supply chain issues (legitimacy of claims, labeling and reporting, life-cycle assessment) upfront, like the Shaw Industries example alluded to, will be lasting models for replication, even if they take courage, care and long term commitment to achieve success.
Mark Coleman
Senior Associate, AHC Group, Inc.
Herman Miller designs and makes furniture targeted at a niche of costumers that can actually afford a 1000+ dollar seat. A sceptic would say HM has gone green because he can afford the ride.
Now, in order to counter this sceptic, what arguments can we extract from the HM supply chains and apply to say Ikea's 20 dollar-a-seat case? Does it all boil down to the design of the product, or do we also need to take a broader perspective, like the way in which supply chain governance itself is designed?
My guess would be both. Well-tailored supply chain organization can often bring about huge cost savings that can (help) offset any extra costs incurred by suppliers to produce in a sustainable manner. Rewarding well-performing suppliers is one way, penalizing non-compliance another. But the most creative and effective results are brought about by dedicating resources to your suppliers in joint sustainable development of your supply chain. This can sometimes even entail rethinking the set-up of your value chain in order to match it with your desired supply chain (thanks for bringing this phrase to mind, Mark Coleman). My two-cents is that this would be the most cost-effective avenue for approaching such an endeavor and it is most likely to produce results and continuous improvement to any supply chain that would stifle any critic.
We want to respond to Tom Stewart's question about how the world can "capture the obvious benefits of standards while avoiding their equally obvious problems."
We feel that the right way to approach and utilize standards in a situation like this resembles the way East Asian countries like Japan and Korea used them when they were poor. With the possible exception of some European businesspeople who have dealt with high energy taxes for decades, we're all operating in an underdeveloped world when it comes to energy conservation. In poor countries dozens of opportunities to improve things are obvious, but there is a web of unwritten (and sometimes written) rules that discourage change. Similarly, our economies are built around wasteful practices, and changing the rules is a huge endeavor.
Standard-setting helped Japan and Korea overcome the inertia of poverty, but it was only a small part of the overall effort. Japan had lots of standard-setting bodies and 'visions' that showed how it might become more like the developed countries. Generally these helped give companies a sense of what was the minimum they had to do to survive.
But Japan succeeded only because companies competed by going way beyond the minimum.
Similarly, we need standards to tell people the minimum they need to do. So far, it seems likely that most of them should be voluntary. The Electronics Industry Code of Conduct that Kurt Doelling of Sun mentioned sounds great.
But we can imagine the bureaucracy and infighting that must occur as people try to make this code more stringent. The electronics industry supply chain is one of those huge supply chains whose efficiency will determine the survival of the planet. Standards will be important and their impact can be powerful. But if we think standards can do the whole task, we're not thinking straight.
So we need standards, but we need to recognize their limits. And we also need companies competing to take environmentalism beyond the standards. If the environmental crisis is going to be defeated, we'll see not only gentlemanly competition but messy kinds. Greenpeace has recently campaigned against Apple cell phones. In the future there will no doubt be times when activists campaign against manufacturers and products that conform to all the carefully developed formal standards that have been set by industry groups. More proactive companies will win sales as a result.
For suppliers and others, this will sometimes be unpleasant and unfair. But that's how effective capitalism works, unfortunately.
Osvald M. Bjelland, Executive Chairman, Xyntéo Ltd.
Robert Chapman Wood, San José State University
I have a question for anyone in here who feels they might be able to answer it. Is there a connection between culture and successful environmental work? Are there any distinguishable characteristics in a corporate culture which succeeds with its environmental work?
I agree that standards can only go so far and that competition is the key to real progress. In Sun Microsystems' business we do cooperate with competitors and an example of work in progress is in setting standards for reporting of greenhouse gas emissions in the supply chain. You would not want Dell, HP, IBM and Sun each going to our common suppliers and asking them to do this in different ways.
But the really exciting activity is driven by competition. A server will burn far more energy during its useful life than it will in its manufacture. The cost of powering and cooling equipment in a data center is close to the cost of acquiring the equipment. The energy efficiency of that equipment has become a critical factor in customer buying decisions. We have incredible innovation around energy efficiency in everything from chip design (those multi-core processors that you now see everywhere are much more power efficient than single core counterparts) to data center architecture. My prediction is that this competition around the energy efficiency of our products will do more to reduce greenhouse gases than anything being done in standards bodies -- totally agree with Bjelland and Wood on this point.
Kurt Doelling
Vice President of Supply Management, Sun Microsystems
Standardization is actually a key element in the sustainability of the biosphere (see The Biosphere Rules in this month's Harvard Business Review). Nature uses a few standard materials and solar energy to produce everything we see. With millions of different species in the world, nature's standardization obviously doesn't constrain innovation. Nor competition. Species compete constantly on innovation. Those most fit to obtain and utilize nature's resources flourish. It's the basis of Darwinian evolution. I expect the same thing will happen with business sustainability. Sustainability standards will emerge that ensure materials are recycled and energy efficiency is optimized, but also allow companies to compete on meeting the customer's needs in differentiated ways.
Thunderbird School of Global Management
I must disagree with Mr Bjeland's view that the Miller model can become almost universal. This is simply wishful thinking. Brian's principles work well for consumer goods but the value chains for oil, automobiles and capital goods are fundamentally different.
Achieving energy efficiency for consumer goods has little similarity with achieving energy efficiency for oil and gas exploration, extraction, transportation and distribution. Oil and gas products cannot be designed with 'sustainability' in mind as the raw materials involved are finite and new commercially viable sources must be continually sourced and developed.
While everyone agrees that effective energy and environmental management are essential for the future of our planet, the global supply chains in oil and gas are moving targets and increasingly costly to maintain.
As Mr Bjelland rightly points out, the oil industry isn't going to redesign its core product any time soon, nor will the gas industry. While both are continually attempting to develop production, refining, and distribution systems with lesser environmental impact, the task is costly and often like pushing water uphill.
Oil and gas are certainly big sources of both waste and pollution, not only in Russia but nearly everywhere, and improved more environmentally friendly technology throughout the entire supply chain must be developed and deployed to combat an advancing potential environmental crisis. However, contrary to Mr Bjelland's claim of an energy crisis, the world is not running short of oil and gas. Reserves are increasing and not decreasing. The real issues lie elsewhere, namely in protecting these assets, getting them to market and to points of distribution and consumption, continuously, efficiently and at affordable cost. To achieve that end, better and more commercially efficient technology is urgently needed, and that is where a global pooling and exchange of technology can have a major and beneficial impact.
Ricardo Cerdan
Senior International Advisor
Centrica Energy
A consumer wants two things; yield from the product and ease of disposal. The fact of our lives is that the consumer pays to buy and pays to dispose. If society can find a way to to make disposal even a little bit profitable for the consumer then sustainability has real potential.
Manufacturers are relying on consumer conscience which is fleeting; reward their bank account not their conscience and they too will willingly play a vital role.
The initiative of going green is the need of the hour and should be incorporated in every step( direct or indirect) of producing a product and delivering it to the customers.This initiative can be easily started by the big corporations but what about the small organizations (Small Medium Enterprises etc.)where it is seller who is in power and so these small organizations has to go with them as they have no other option because of low funds and low reach. What strategy should they adopt to make their supply chain green??
Azdel, Inc., a GE joint venture recently aquired by Hanwha, produces a composite material composed of recycled glass and polypropylene. I am curious whether H-M considered this material in their search for a PVC replacement.
Thanks to HBR and Herman Miller for this initiative.
In the world of concrete jungles that is being created by urbanisation due to globalisation there is also an element CSR for every organistion and responsible citizen across the globe and the respective Government to work on PPP model to save the green for the welfare of the future generation in wake of alarming climatic change that is being talked about and felt.
This concept of competitors working together is a critical one. Competitive differentiation can and should still be achieved through design, function, service, and quality. There is no need to compete on issues of human or ecological health.
The computer industry understood this when its top competitors – HP, IBM, and Dell – got together and formed standards around fair labor practices, specifically regarding children. Of course cheap labor allowed one company to pass along lower costs to its customers, but once the abuses became public, these companies banded together and formed a new standard.
Today we realize that sustainability can not only drive improved standards, but be an amplifier of business. It could be "the tide that raises all boats," moving industry far ahead of regulation and in a profitable way. Take the livestock business. It is unquestionably problematic environmentally, the most recent revelation being its large contribution to greenhouse gas. But what if the problem was the solution? There is an opportunity for the agriculture sector to unite and harness the power of poop (manure). What it would require: a more efficient and economical digester, an innovative business model, and the intermediaries to build, operate and maintain the digester. It would also require coordination with utility companies to establish a fair price for this energy being provided back to the grid. How? Again, by assembling representatives from the entire supply chain in the same room, in a creative way, to create a common vision and the collaborative systems to accomplish it. But for this effort, we sequester harmful gas, further reduce our dependency on oil, and our country's floundering farmers would have a much needed ancillary revenue stream
The greater, the more systemic the change, the more cooperation is required. And, to be sure, business has an advantage here. If we do not come together and create businesses out of these collaborative opportunities, government will begin to regulate, or, in the case of wild-caught seafood, we risk an ever diminishing supply. When that happens, new businesses may emerge to serve our compliance needs, but we will have lost the chance for a truly optimal solution. Reactive answers are never as interesting or compelling as proactive ones.
Dave Sherman, Partner
Jib Ellison, CEO
Blu Skye Sustainability Consulting
Taking forward from where Osvald Bjelland left. He mentions about Tata Group from India. The group has also developed some kind of tools that I thought should be brought to the notice of this forum. Called The Tata Index for Sustainable Human Development, it's a matrix through which Tata companies can implement, direct and measure the social development endeavors they are involved in. The index revolves around three main parameters- people, programmes and systems. Across all Tata group companies work is measured in the light of this elaborate index. The underlying theme was to have a link between the activity and the goal of improving in the quality of life of the communities we operate in.
If one can further align such initiatives with the suppliers and other entities in the value chain, things might be much easier especially with measurable objectives and clear purpose.
A lot has been happening in some other big Indian corporate houses as well. Reliance Capital Asset Management Limited came out with the first fund in the country by the name of Reliance Natural Resources Fund, a fund with a strong focus on alternative sources of energy as wind and water etc. With over 1.5 million investors and over US $ 1.4 bn it clearly shows that these many people had some faith in the concept. I strongly believe that whether it's a manufacturer or a service provider, the scope for designing of products and services with Green Goals is immense. And the way this product launch has succeeded clearly shows that what impact a corporate can have across the value chain. For not only it managed to garner Assets and over 1.5 mn investors but also in mobilizing the support of several thousand distribution channels who canvassed for this product.
However the challenge is to have these initiatives in a structured and ongoing basis rather than on sporadic basis. Only then some meaningful difference can be made to this world.
Gaurav Maleri
Can the Herman Miller model be replicated elsewhere?
It's my hypothesis that the critical variable that allows and motivates HM to make this commitment and to stick to it is not their unique industry, their fat margins, or the particular nature of their business model.
Brian Walker mentions that HM initiated the program "because we believed it was the right thing to do and because we saw the potential for a clear business benefit." This phrase indicates that HM leadership committed to their "Perfect Vision" campaign (or at least to the beginning of the project) before they knew what the payback would be.
This is a backwards step compared to most business decisions. Clear payback usually precedes approval, and every possible initiative must have a fairly certain return that exceeds the "hurdle rate" established by leadership before it can be implemented. This discipline provides a useful filter for most tactical initiatives in profit-oriented companies, but serves as a blocker for sustainability initiatives--even when those sustainability initiatives have great payback potential.
We all know that most industrial processes waste huge amounts of energy, and create unnecessary, expensive waste. In almost every case, it is much less expensive to save energy than to buy it.
But, if the benefits of sustainability are so obvious, why are the returns from sustainability initiatives so difficult to identify in advance?
First, most executives and managers understand their own businesses cold, but their expertise is focused on fine-tuning current processes. It's impossible for most of them to see a radically different way to get the job done. Even if they could see a better way, their compensation plans and management objectives keep them focused on other issues.
Second, radical energy efficiency attacks big, systemic issues that almost always stretch beyond functional organizational boundaries, and often beyond the boundaries of the company itself, to their suppliers and customers. How do you get those disparate parties, with different motivations, to work together? How do you even get them to commit the time to do so?
Third, different from most straightforward profit-making initiative, many sustainability initiatives require a fair amount of analysis and design up-front before the payback can even be estimated. And, since they are new approaches, they carry a fair amount of risk. It takes a lot of courage for an executive to risk getting fired in order to drive a pivotal project, even if it's "the right thing".
The critical variable that allowed HM to drive their Perfect Vision campaign was the moral leadership of senior management, their willingness to commit to "the right thing to do" when the "real business benefit" was still "potential". They took a leap of faith.
If senior management is committed to sustainability, then cross-functional and cross-corporate teams can spring up to pursue complex, high-payback opportunities. People have the right to fail, if they do so intelligently. No one has to bet their job in order to do the right thing. And the company might come up with innovations that give them significant competitive advantage.
Over and over, I see this pattern: companies that are successful with sustainability initiatives are lead by executives that have a personal passion for these issues, leaders that lead with a moral imperative. And, sometimes these executives make decisions to do the right thing even when the payback alone does not justify them.
Michael Potts
CEO, Rocky Mountain Institute
Great article. I have been working on various green supply chain initiatives and feel that this field will play a critical role in ensuring our practices change to meet the anticipated cap emissions. At the end of the day, 2 of the key carbon producing activities are T&T (transformation and Transportation) and these capture the essence of most supply chain processes. Our internal supply chain analysis as well as pilot projects with some of our clients have led us to conclude that a major paradigm shift is needed to make a positive impact. The typical business tendency to favor local metrics at the expense of trading partners wouldn't work in a green supply chain setup. In fact, while one can improve its inventory rotation by pushing inventory upstream or downstream, any such disruption that causes extra carbon emissions hurts everybody. In other words nobody can fool the environment! We all breathe the same air. That's why we preach a comprehensive green supply chain strategy, one that has to include a number of tiers of the chain to ensure that joint collaboration helps stabilize the system and hence minimize emissions. We also anticipate that as the value of carbon would increase as a result of stiffer regulatory environment, many supply chain practices will be revamped. For instance, a sourcing strategy would need to be revised with carbon as a new variable. A Chinese factory might not be as appealing as a Mexican plant for a US company if the former has a much higher carbon footprint than the latter.
Instituting a culture of environmental responsibility within the supplier community will also help encourage best practices in green supply chain management.
"No landfill waste, no hazardous waste, no air or water emissions from manufacturing, and the use of 100% green energy, all by the year 2020." These are some of the goals Herman Miller laid out in our sustainability plan for our supply chain. There have been a great many comments and questions, and in response, I'll try and address several questions on topics such as closing the loop with the reverse supply chain; the role of company culture in driving sustainability initiatives; how SMEs can influence supply chain vendors; cooperating with competitors on industry standards; and how to stay sustainable with a global supply chain.
Kurt asked what we use as a substitute for PVC and how it better meets our goals... From a design and engineering standpoint, PVC has tremendous breadth of potential physical properties, so there is no universal replacement for this polymer. We've chosen polypropylene, a common replacement for PVC, in an effort to reduce our footprint by decreasing the amount of toxic chemicals released into the environment throughout the material's lifecycle. Polypro is also recyclable, retaining performance characteristics through multiple uses. And of course we're constantly looking for other materials with equal or better attributes.
Alexis Morgan asked what influence Herman Miller's culture as a design-based business has had in our drive toward sustainability, and what SMEs can do to move their own supply chains...For our part, the values of our founding family, specifically DJ DePree and his sons, Max and Hugh, established our culture and commitment to social responsibility and environmental stewardship. I'd encourage you to read Max's bestseller, Leadership is an Art, for more than I can share here. But it is worth noting that our first, formal environmental statement dates back to DJ, in 1953, and many aspects of our current approach to products, manufacturing, and our buildings, can be clearly traced to the DePrees and the people they surrounded themselves with.
To the second question, and in agreement with the comments of John Davies and others, SMEs clearly don't have the same influence as a vendor's larger customer, which suggests big companies do have a leadership responsibility as we make the transition to a sustainable economy. But don't underestimate the potential speed of that change and the business opportunity that thousands of SME customers represent to suppliers who get on board. A growing number of reference sources is available for sustainable vendors through national, regional, and local business and environmental advocacy groups . For our part, we've brought together customers, suppliers, and our competitors in our own environmental conferences, creating opportunities for networking and shared learning.
Bruce Klafter asked how far we extend our efforts internationally, in regions and business cultures that may be less sensitive or sophisticated in environmental considerations...We have a global sourcing strategy and are dealing with the challenges that you mention, but the great majority of our suppliers, in both number and spend, are based in the United States. That said, the same rules, procedures, and policies apply to international suppliers. We use international assessments and agreements that are similar to those used in the U.S., but they add language on issues like child labor. The opportunity moving forward is engaging developing-world suppliers to work with us in working with their next tier. This may be a cultural issue or an issue of trust, so it takes time and a good deal of relationship building to get at this next level of opportunity, but we believe there is recognition and a desire to achieve sustainability among good companies worldwide. Meanwhile, we are committed to these metrics throughout our global supply chain.
Bart, Tom Stewart, and many others have raised several interesting issues surrounding the development and use of industry standards in materials, recycling, and elsewhere in the value chain, and their benefits and risks...Judging by the number of comments, this subject looks like it could be its own blog! For Herman Miller's part, we've taken an active role in the creation and promotion of several standards and related associations and programs (the U.S. Green Building Council, Cradle-to-Cradle, the Business and Institutional Furniture Manufacturer's Association (BIFMA), West Michigan Environmental Action Council's collaborative waste-to-energy, composting, and recycling programs, and others) that impact our industry and that we believe offer credible benefits to customers, society, and industry. It's true that industry competitors look to differentiate through their socially responsible practices, but as was noted, this is often primarily a first mover's advantage based on recognition as a founder/leader. If the programs are to be meaningful, they need critical mass to drive change. We and our competitors understand this and have generally been cooperative through our industry associations, or by independent decisions to adopt proven programs that have economic benefit.
As ours and other industries adopt programs, we need to keep in mind some key points: While the standards must be meaningful, some companies are earlier in their journey, so standards need to enable them to gain a foothold and then push them to move along the adoption curve--tiered certifications like the Cradle-to-Cradle program and the LEED standards. The standards and related metrics and testing protocols must also be transparent and enable multiple sources for accreditation, so that competition among the service providers can keep related costs manageable. This is particularly important for smaller companies and those new to the socially responsible movement. Great standards will be slow to have impact if the cost for participation in time and money is deemed too high. Likewise they can't be watered down to meaningless green-washing, but that becomes increasingly unlikely with the growing sophistication of media, customers, and watchdog organizations, as noted in Mark Coleman's example.
To the need for viable, closed loop recycling programs and industry collaboration, let me also mention an interesting pilot program we've had underway with some of our largest competitors, through BIFMA, our industry association. In the search for an economically viable way to separate and reclaim component materials, BIFMA approached the State of Michigan Department of Corrections to explore prison labor. These inmates are already employed in industry, often in competition with the private sector. The government and prisoners want employment opportunities, to teach basic work skills and provide a productive use of prisoners' time, but private industry and labor don't welcome low cost competition subsidized by their taxes. With a recycling operation, we believe there is potential for a cost-effective means for waste separation that performs a public good, meets the goals of the prisoners and the Corrections Department, and meets a private sector need rather than competing with industry. And given the number and geographic distribution of corrections facilities, there is a potential existing infrastructure to satisfy one of the most challenging points in the value chain.
There are many competing standards, though, and that is where non-profits, governments and NGOs come in. They need to collaborate to enable companies (and their supply chains) to work toward common criteria that can be used anywhere in the world. For example, the LEED program in the United States and the BREEAM standards in the United Kingdom both have merit, but having a unified standard would be ideal.
L. Ramakrishnan questioned the extent we work with our supply chain to achieve shared social responsibility (beyond green) and how dependent we are on technological advances to achieve our goals...I'm proud to say Herman Miller is committed to ensure that our suppliers, no matter where they are located, understand the value of being a sustainable business. This is an expectation of anyone doing business with Herman Miller and as such our Supplier Qualification Process includes social metrics beyond green that closely mirror those established by SA8000 (Social Accountability International).
Our Design for the Environment Standards review the chemical content of all materials down to 100 parts per million. This means that we are screening materials like pigments, additives, adhesives, and even residual monomers inside polymers. Technologically, we are dependent on advances in materials, transportation, and many other aspects of the supply chain. We need advancements that are both environmentally sound and cost effective. PVC is a good materials example. The truth is that PVC--with its durability, performance, and application range--is very difficult to replace at a price that customers are willing to pay for. We're doing it, but it's a costly and going slower than we'd like. We can all enhance the potential for technological advances by creating more market demand and by our willingness to share in R&D investments. Herman Miller has seen some success with that approach and I believe technological advances can accelerate as more companies embrace sustainability.
Note: For some of these points I've consulted Drew Schramm, senior vice president of supply, and Gabe Wing, manager of Design for the Environment and a chemical engineer by training.
The exchange of views about supply chain sustainability exposes an apparent gulf between business and environmental interest groups. Many of the business contributors, myself included, are embracing pro-environment measures because we recognise the very real challenges posed by climate change and energy scarcity. Some industry critics argue that companies are arriving too late and with too little to make a difference. Large parts of the business community are also accused of half measures and cosmetic gestures when it comes to sustainability. This is particularly true when those measures are espoused by companies whose products are part of the problem: oil, aviation, motoring and power generation, among others.
That may have been true in the past. Environmental business models were often confined to relatively small companies, such as Patagonia - mentioned earlier - or large enterprises such as IKEA of Sweden, a company that has invested in sustainable forestry and energy efficient production. Both those companies have something else in common: a long-term family inspired business culture that does not over-emphasise short-term shareholder returns.
But we are now observing an interesting phenomenon in business. Companies previously accused of being some of the worst environmental culprits, notably in energy, are formulating thorough and far-reaching environmental compliance policies. They are not doing so for philanthropic reasons or just to be good corporate citizens. They are doing so because there is now a clear bottom-line benefit from being pro-environment. More efficient energy management systems and lower emission production, while often requiring significant capital investment, leads to lower long term costs and net savings. This is about more than cleaner plants. It is, as Brian Walker said at the outset, about the "greening" of the supply chain. Better use of raw material extraction, supplies, transport, packaging, logistics and even customer relationship management can all benefit the environment.
Member companies of the Global Leadership and Technology Exchange, the business consortium I helped set up, have realised sizeable savings by running their business in an environmentally friendly way. This was not achieved by coercion, regulatory threats or additional fiscal burdens. It is achieved by a common realisation that being green is good for business, with the benefits measurable in terms of net margin as well as reputation. Our challenge is to explain that equation in a more compelling way, encouraging companies at every part of the supply chain to make business sense from operating in a more efficient and sustainable way.
As a former executive in charge of environmental health and safety (EHS) at several global industrial companies, I can appreciate the true nature of the "zero" goals set by Herman Miller in its "perfect vision" campaign. Such goals from senior management are not those that must be exactly met, they simply serve to push the organizational culture in the right direction. Since we don't live in a perfect world these goals will without a doubt not be met, but do effectively serve as a challenge to the organization to think differently, and as an effective disrupter of status quo thinking that change is not possible. The possibility of quantum leap change is the upside of such "zero" goals, but there are downsides to not setting more realistic, "continuous improvement" goals, so "zero" generally is not the right EHS goal for most organizations.
If one references back to the first books on Sustainability (Paul Hawken, The Ecology of Commerce, 1993; John Elkington, Cannibals With Forks, 1998) a major aspect is the notion that social costs and environmental costs and business economic costs all be considered; and equally in a perfect world. Neither author really suggests "zero" impact, but rather that all aspects be considered (ie; measured) and cared for. The total elimination of anything is rarely the best outcome. The business landscape is littered with the unintended consequences of such corporate initiatives. And when dealing with international suppliers, setting such "zero" goals becomes code words for not reporting such things. One should only effectively set a "zero" goal after the organization has a well established and audited metric tracking system in place.
At age 12, this corporate initiative at Herman Miller is old enough that I am sure its goals are good for its organization because its relevant EHS Management Systems are mature and its metrics have been tracked long enough to assure the data is robust. But it would be folly for other organizations to set "zero" goals just because Herman Miller did. Yes, everyone should focus on metrics; that's always a good idea. But regarding EHS metrics, care is needed in what is measured as you might get it to the detriment of what you don't measure.
There are a lot of options for goals that companies can consider in the green/sustainability arena other than "zero" anything. Some sustainability metrics might help prevent devastating injuries to people working for suppliers. One doesn't help the "social" side of Elkington's Triple Bottom Line by having excellent safety programs within the company but not measuring and auditing rigorously the human impact of international outsourcing. Others may help an organization in all three Triple Bottom Line areas, such as helping prepare for the new regulation REACH, that will effectively prevent the selling of products in the European Union 11 years from now if steps have not been taken protect human health and the environment by through the early detection of intrinsic health hazards of chemical substances.
When you really look at what are the best green/sustainability metric options, the answer for each industry/company will be a bit different. Responsible executives must conduct a realistic gap analysis of what the real Triple Bottom Line gap is for their organization. Adopting the metrics that are used by another organization, or the metrics that happen to be within the current agenda in Hollywood, is not a recipe for social, economic, nor environmental good. Take time to set the right goals. Such has more impact, at least in the EHS profession, than pretty much anything else.
Kyle Dotson, CIH, CSP, DEE
DOTSON Group, LLC
As a very late response to Mr. Morgan's question regarding whether a small company can be as effective in motivating the supply chain as a new one:
apparently they can be. my colleague Beatrice Kogg of IIIEE, Lund University has the proof where she found out that a small scale textiles company from Sweden has been equally, or perhaps even more, successful in motivating its supply chain that practically extends across the globe. Beatrice would have shared her views herself, but she is awfully busy finalising her Ph.D. The good news is that, in couple of months, you will be able to find a more useful answer to the question.
I have decided to Take Green supply chain as my Phd topic.There are many possibilities in india.Do help to concentrate at one field.If any work done previously on agriculture sector .do send me
I just attempted to grab an RSS Feed for your blog site and for some reason it ain't showing up in Google Chrome. Any ideas???
Brian Walker is the CEO of Herman Miller, the office and residential furniture company known for its classic designs--from the Eames Lounge chair to the modern office cubicle to the Aeron chair. The company's furniture appears in the New York Museum of Modern Art and in museum collections around the world, but it's the company's long-standing environmental goals and socially responsible reputation that has gained new currency in today's marketplace.
Paul Anastas, professor in the practice of green chemistry and director of the Center for Green Chemistry and Green Engineering, Yale University
Osvald M. Bjelland, executive chairman, Xyntéo
John Davies, vice president of sustainability forum, AMR Research
Kurt Doelling, vice president of supply management, Sun Microsystems
Jib Ellison, CEO, Blu Skye Sustainability
Deishin Lee, assistant professor, Harvard Business School
William McDonough, cofounder and principal, McDonough Braungart Design Chemistry (MBDC); president, William McDonough and Partners; ; coauthor of Cradle to Cradle: Remaking the Way We Make Things
Andrew Mangan, executive director, United States Business Council for Sustainable Development
Roger Martin, dean of the Rotman School of Management, University of Toronto
Cradle to Cradle: Remaking the Way We Make Things North Point Press, 2002 by William McDonough and Michael Braungart.
Building the Green Way, Harvard Business Review by Charles Lockwood
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