The Solid Foundation of Ecoefficiency

The ability to produce cheap goods and ship them around the planet derived in part from abundant supplies of cheap energy. Using this inexpensive oil, gas, and coal has polluted the planet and dangerously warmed the climate. In a carbon-constrained world, survival depends on finding ways to produce goods and services in dramatically more energy-efficient ways.

The concept of making things using fewer resources is far from new, but it remains the cornerstone in producing goods and services more sustainably. Critics such as William McDonough disparage eco-efficiency as simply doing less bad, but therefore still bad. Greater resource productivity alone will not deliver a sustainable society, but the criticism misses the significance of using as few resources as possible. The foundation of a building is far from sufficient to house a family, but without a solid underpinning no structure can long stand. Without eco-effi-ciency, no system of production can be said to be sustainable.5

More important, however, given the challenges facing the world, is the fact that using less stuff buys the critical time necessary to solve such daunting problems as climate change and to develop and implement production methods that meet humanity's needs in ways that do not cause more problems.

Eco-efficiency is the easiest component of the transition to sustainability to implement. It is increasingly profitable, and psychologically it is far more familiar to industrial engineers than are such concepts as biomimicry or the human dimensions of implementing the changes necessary. It is therefore a great place to start.

It is now cost-effective to increase the efficiency with which the world's resources are

Rethinking Production used by at least fourfold—dubbed "Factor Four" in a 1997 book. The European Union has already adopted this as the basis for sustainable development policy and practice. Some countries like Australia have set this and even greater efficiency as a desirable national goal. The Environment Ministers of the Organisation for Economic Co-operation and Development, the government of Sweden, and various industrial and academic leaders in Europe, Japan, and elsewhere have gone even further, adopting Factor Ten improvements as their goal. The World Business Council for Sustainable Development (WBCSD) and the U.N. Environment Programme have called for Factor Twenty, which involves increasing efficiency 20-fold. There is growing evidence that even such ambitious goals are feasible and achievable in the marketplace. They may, in fact, offer even greater profits.6

One of the foremost proponents of eco-efficiency is the World Business Council for Sustainable Development, which introduced this term to the world right before the 1992 Earth Summit in Rio de Janeiro. WBCSD defines eco-efficiency as:

• reduction in the material intensity of goods or services,

• reduction in the energy intensity of goods or services,

• reduced dispersion of toxic materials,

• improved recyclability,

• maximum use of renewable resources,

• greater durability of products, and

• increased service intensity of goods and services.7

WBCSD is a CEO-led network of more than 200 companies promoting market-oriented sustainable development and greater resource productivity. It enables its members to share knowledge, experiences, and best practices on energy and climate, development, ecosystems, and the role of business in society. It maintains initiatives in sustainable value chains, capacity building, water, and energy use in buildings. WBCSD conducts sector-specific studies on how to reduce resource use in such areas as cement, electric utilities, mining and minerals, mobility, tires, and forestry. The group is led by an executive committee featuring leaders of such companies as Toyota, DuPont, Unilever, Lafarge, and Royal Dutch Shell.8

Member companies have implemented profitable resource productivity to lower their costs and reduce their environmental footprint. For example, AngloAmerican/ Mondi South Africa increased the production capacity of one of its pulp mills by 25 percent. This enabled it to accommodate a 40-percent increase in timber supply from more than 2,800 small growers, while increasing the efficiency of using waste wood to power the plant, decreasing the use of bleach chemicals, and reducing the use of coal from 562 to 234 tons per day—all while significantly cutting costs. The measures achieved reductions in:

• 2,177 tons of sulfur dioxide—a 50-percent reduction;

• 509 tons of nitrogen oxide (NOX)—a 35-percent reduction;

• 297,121 tons of carbon dioxide (CO2)—a 50-percent reduction; and

• total sulfur emissions—down approximately 60 percent.

Energy-efficient technologies also reduced water consumption and purchased energy. These enabled the pulp mill to use 44 percent less purchased energy in 2005 than in 2003. During 2005, one mill cut its energy and water costs by 27 percent.9

Increasingly, companies are implementing eco-efficiency to drive their innovation and enhance their competitiveness. STMicro-electronics (ST), a Swiss-based $8.7-billion semiconductor company, set a goal of zero net GHG emissions by 2010 while increasing

Rethinking Production production 40-fold. ST's GHG emissions were traced to facility energy use (45 percent), industrial process (perfluorocarbon and sulfur hexafluoride) emissions (35 percent), and transportation (15 percent). The company undertook to reduce on-site emissions by investing in cogeneration (efficient combined heat and electricity production) and fuel cells (efficient electricity production).10

By 2010 cogeneration sources should supply 55 percent of ST's electricity, with another 15 percent coming from fuel switching to renewable energy. ST will reduce the need for energy supply through improved efficiency and implement various projects to sequester carbon. This commitment has improved profitability. During the 1990s its energy efficiency projects averaged a two-year payback—a nearly 71 percent after-tax rate of return.11

Making and delivering on this promise has also driven ST's corporate innovation and increased its market share, taking the company from the twelfth to the sixth largest microchip maker by 2004. By the time ST meets its commitment, it expects to have saved almost $1 billion.12

What is true in microchip manufacturing holds true in consumer retailing as well: things can be done more efficiently. In October 2005, Wal-Mart, the world's largest retailer, announced a corporate commitment to cut greenhouse gas emissions and reduce waste, pledging to be supplied 100 percent by renewable energy, to create zero waste, and to sell products that sustain resources and the environment.13

To achieve this, Wal-Mart is working with its 60,000 plus suppliers to help them learn how to produce "affordable sustainability, and become more sustainable businesses in their own right." The company began by reducing waste, announcing a goal of a 5-percent reduction in overall packaging by

2013. It estimated that the impact would be the equivalent of removing 213,000 trucks from the road and saving about 324,000 tons of coal and 77 million gallons of diesel fuel a year.14

Reducing packaging in the company's Kid Connection line of toys let Wal-Mart use 427 fewer containers to ship the same number of items, saving $2.4 million in shipping costs, 3,800 trees, and 1,300 barrels of oil annually. The company estimates that a similar effort globally could save nearly $11 billion. Wal-Mart's supply chain alone could save $3.4 billon.15

Companies are implementing eco-efficiency to drive their innovation and enhance their competitiveness.

Wal-Mart has pledged to implement an "Ethical Supplier Initiative" and is seeking more long-term and sustainable partnerships with the factories that supply its stores. One such program in a candy factory in Brazil that lacked a system for processing, recycling, and disposing of waste enabled the factory to install a waste management program, which in turn let the supplier generate $6,500 a year in new profits.16

Wal-Mart is working with suppliers to design more-efficient products to offer to its customers. A partnership with the Eco-mag-ination program of General Electric (GE) will produce light-emitting diodes (LEDs). LED lights last longer, produce less heat, contain no mercury, and use significantly less energy than other bulbs. Lighting accounts for about one third of Wal-Mart's electricity use. Since 2004 Wal-Mart has invested about $17 million in developing LED lighting systems for its own refrigerator cases in more than 500 stores. It projects that this will save about $3.8 million a year and reduce the

Rethinking Production company's CO2 emissions by 65 million pounds. Wal-Mart's purchase will be sufficiently large that it will bring GE's production costs for LED lighting down to levels competitive with ordinary lamps.17

The company is also taking a closer look at how some of the products on its shelves are made, in line with WBCSD's emphasis on reducing the dispersion of toxic chemicals as one component of eco-efficiency. At the March 2007 quarterly meeting of senior management and major suppliers of Wal-Mart, CEO Lee Scott indicated that the company would begin phasing phthalates out of the plastics used in children's toys. By July, Wal-Mart announced that it would no longer ship infants' toys containing these endrocrine-dis-rupting compounds.18

A number of frameworks aim to help companies use resources more efficiently. Lean manufacturing arose from the Toyota Production System and was popularized in the 1996 book Lean Thinking by James Womack and Dan Jones. It emphasizes reduction in process variability as a way to identify and eliminate inefficiencies that reduce quality. Waste is eliminated as a byproduct of enhancing the smoothness of the process. Similarly, the Six Sigma system trademarked by Motorola and fanatically implemented by hundreds of companies seeks to cut waste by eliminating any variability in the production of items.19

These two systems are valuable approaches, but management needs to understand their limits. Manufacturers have found that both have the drawback of inhibiting creativity. The mental model that seeks to eliminate any defect or deviation from a given standard is inimical to the sort of intellectual curiosity, tolerance for ambiguity, spirit of experimentation, and appetite for risk that characterizes great invention. Many companies now insulate their creative staff from the salutary dis cipline of Six Sigma. But once the invention is conceived, lean manufacturing enables a company to deliver exceptional quality, squeeze out waste, and scale up production to efficiently deliver a predictable product.

Lean manufacturing, as implemented by Toyota, features an almost manic dedication to reducing the "seven wastes" as a way to enhance customer satisfaction. It identifies any part of an operation that does not contribute to customer satisfaction as waste, specifically targeting product design, supplier networks, and factory management. It seeks to eliminate the production of more items than are demanded by the customer, the movement of people or machines, any idle time of people or machines, the movement of material or product, inefficient processing (see Box 3-1), excess inventory of input or product, and the need to rework or throw out anything.20

As lean manufacturing caught on in the United States, it was logical that it would be combined with clean production, which is what the U.S. Environmental Protection Agency, the Chicago Manufacturing Center (CMC), and others did.

CMC sponsored the GreenPlants Sustainable Leadership Program to help a group of Chicago area manufacturers implement lean, clean, more-sustainable production, in order to enhance the competitiveness of manufacturing companies threatened by foreign companies. Working with Natural Capitalism Solutions, the program helps local manufacturers implement more-sustainable production techniques as the basis for retaining globally competitive manufacturers in the Chicago area. The 84 CMC clients surveyed in fiscal 2004 reported that they hired 194 people for newly created jobs, saved 527 jobs, and did not lay off anyone due to improvements.21

PortionPac Chemical Corporation is using

Box 3-1. The Robot Versus the Hair Dryer

A Wall Street Journal article exploring why Toyota was outcompeting Detroit and its suppliers stated that the Japanese manufacturer was able to "produce vehicles with one-third the defects of mass-produced cars using half the factory space, half the capital, and half the engineering time. Elements of lean production, such as 'just-in-time' shipments of supplies, are familiar to most U.S. manufacturers. But adapting the whole Toyota system, and the cultural changes that go with it, has proven difficult for many American companies."

The article tells one of the classic Toyota stories of an engineer making wasteful reliance on expensive high technology look silly. Painting processes are one of the auto industry's more polluting activities.

Armed with a $12 dryer from a discount store, Mr. Oba proved to engineers from Michigan's Summit Polymers Inc. that their $280,000 investment in sleek robots and a paint oven to bake the dashboard vents they produce actually was undermining quality and pushing up costs. The fancy equipment took up to 90 minutes to dry the paint and in the bargain caused quality flaws because parts gathered dust as they crept along a conveyor.

Mr. Oba's hair dryer did the job in less than three minutes. Chastened, Summit's engineers replaced their paint system with some $150 spray guns and a few light bulbs for drying and integrated the painting into the final assembly process. Family-owned Summit cut its defect rate to less than 60 per million parts from 3,000 per million.

Source: See endnote 20.

CMC's program to develop sustainable cleaning systems. The cleaning industry has traditionally wasted energy in manufacturing, shipping, and disposing of cleaning formulations that were 90 percent water; these were

Rethinking Production shipped in steel pails and multigallon drums that were then discarded. Many cleaning formulations being used were extremely hazardous, and few janitors understood how to apply the solutions correctly. To address these problems, PortionPac Chemical Corporation was founded in 1964 to eliminate the water and instead ship small plastic packets of concentrated, portion-controlled solutions. Por-tionPac helped Boeing reduce costs and simplify its cleaning process by reducing a thousand different brands of cleaning products to just 10, with PortionPac products as 3 of those 10.22

PortionPac has gained market share because of its sustainability campaign. It has also shifted its business model to sell customers the service of a cleaner facility, in addition to selling chemicals that others can use. In 1999, the company helped schools in Tacoma, Washington, save 627,000 hours of labor, including moving drums around, and $102,000 in chemical purchases by implementing this system. Now more than 7,000 schools have signed on to Portion-Pac's set cost fee, which includes the cleaning products the schools need plus proper education on how to clean, proper mixing, and safe usage. PortionPac works with correctional facilities, schools, hotels, hospitals, and industrial plants to limit the number of products and ensure proper usage.23

The company has also helped such clients as Cornell University earn Leadership in Environmental and Energy Design (LEED) certification from the U.S. Green Building Council by using PortionPac's Green Seal-certified products. Dale Walters, General Manager of Facilities Operations at Cornell, notes that "over time, Cornell saved costs by using the right amount of product and going from twenty cleaning products to four. It also reduced safety risks involved with handling chemicals. When we sought to

Rethinking Production create LEED certified buildings, we worked with PortionPac to establish a green housekeeping strategy." Walters reports that "Por-tionPac products reduced chemical waste through both the proper use of cleaning chemicals and the sheer reduction of packaging (small packets versus large jugs or plastic containers). PortionPac products are a main component of our sustainable cleaning strategy." By helping organizations find better ways to motivate their janitors and clean their facilities, while reducing the use of chemicals, PortionPac is winning contracts and expanding its business.24

Getting Started With Solar

Getting Started With Solar

Do we really want the one thing that gives us its resources unconditionally to suffer even more than it is suffering now? Nature, is a part of our being from the earliest human days. We respect Nature and it gives us its bounty, but in the recent past greedy money hungry corporations have made us all so destructive, so wasteful.

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