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Two interesting articles, from the same author (Andrew Winston) take a useful angle at sustainability, making two key points:

1) Carbon management does more than managing carbon – it helps uncovering efficiency and effectiveness throughout the company

2) Exposing data collected throughout the enterprise immediately impacts how things are done.

 

The first shows that carbon is a good proxy for management, helping companies doing a few important things. He takes a US-centric view, but the learnings are portable. I quote:

  1. Save money now. Energy costs money. Leaner, more efficient companies and countries are more profitable. Companies are finding amazing, head-slappingly easy ways to cut back in areas like facilities (heating/cooling, lighting), fleet, and IT…all with paybacks in terms of months not years

  2. Save money later. One of the beefs with “going green” is that some of the high profile actions, particularly using renewable energy, cost more money (not the initiatives I mentioned above — those save money fast). But on the macro level, consider this…renewable energy is a business model with effectively zero variable cost — your feedstock is free. While the payback periods in some regions seem long, they do pay back, and then your operating costs are permanently lower.

  3. Reduce risk. The availability of resources such as water and oil is a serious concern. As demand grows in the developing world, supply will not easily keep pace. Expect expensive, unpredictable, oil prices in particular. So why have your value chain depend on volatilely-priced resources?

  4. Answer pressing customer questions. If anyone thinks the “greening of the supply chain” movement is slowing down, they’re kidding themselves. Wal-Mart is the lead dog, but many other big companies in other value chains are asking tough questions as well, in particular about carbon. And the best answer wins — more shelf space, more mind space, more money.

  5. Attract and retain the best people. Even though unemployment is high right now, over the long term, the battle for good talent is still waging and will get worse. The next generation of workers cares about green and sees no trade-off between financial success and corporate social responsibility.

  6. Drive innovation. Constraints are the mother of invention. Need to deliver your product or service with drastically less energy, toxicity, water, and other resource use? Then you better get thinking.

  7. Keep us safe. The U.S. sends over half a trillion dollars annually to parts of the world that fund extremism and terror. We put our troops at risk defending oil, and more will be at risk as climate change destabilizes regions and creates climate refugees. (Okay, so this point does have something to do with climate change.) See the American Security Project reports — from a group of distinguished former admirals and generals — which describe how climate change is a “threat multiplier.”

  8. Make the U.S. more competitive. We’re losing the race to the clean energy future to China, Germany, and others. The pursuit of new technologies, a new grid, massive installations of new energy will create new jobs and invigorate the country. [Gianni: this works for everyone…]”

There is obviously a big business case with all of this. Interestingly, the SAP Sustainability team was analyzing some data from the Smart2020 report and realized that for every euro of carbon costs (assuming 20 EUR per CO2 ton) there are typically between 3 and 7 euro-worth of energy costs. As a consequence, identifying where that cost originates can help companies find solutions and big savings.

Here is where the second article comes in handy. While it is ultimately another version of “what can be measured can be managed”, tt labors a point the SAP sustainability group find pivotal: that by collecting and showing data properly, even in the absence of IT-enabled micro-management of processes, organizations trigger changes that lead to lower footprint. I quote him again

“Some are calling this phenomenon the “Prius effect,” referring to how people respond when they see real-time fuel-efficiency data while driving the popular Toyota hybrid. As the described it, the Prius effect “can change driving in startling ways, making drivers conscious of their driving habits, then adjusting them to compete for better mileage.” Similarly, making footprint data more accessible to those managers that can do something about it can create real value. As they say, you can’t manage what you don’t measure. It’s amazing how often I hear that phrase – and how often people need to hear it. Tech leaders will tell you that one of the best possible solutions to the rapid increase in energy use and cost in data centers is simple: Add the power bill to the CIO’s budget!

You can put your green data to use in five ways that will help your bottom line:

  1. Saving money – a lot of it. As we’ve seen, if you give your operational people information on resource use, they will be inspired to find ways to cut back.

  2. Driving internal competition. Share footprint data broadly and transparently and you’ll see how badly people like to win. When PepsiCo Chicago ran a floor-by-floor energy reduction competition, the results were staggering. In one three-month period, electricity use dropped 17% (and paper use 22%). Energy use on the winning floor plummeted 31%. Factory heads at a number of companies have told me that they’d rather miss their financial targets than their green or energy goals – it’s just too embarrassing to be at the bottom of the list.

  3. Answering your customers’ pressing questions. Wal-Mart, along with many other companies, is asking suppliers and vendors very tough questions about their environmental and social impacts. Those that can gather their data and tell the best story will get the most shelf space and mind space (see my previous post on Wal-Mart’s eco-ratings for more on this point).

  4. Prioritizing initiatives. Resources remain very tight – you don’t want to spend money on the wrong things. With all the pressure to go green, it’s easy to get lost in the weeds and pursue avenues that may not yield the most benefit. When companies really look at their full value-chain impacts, they’re very often surprised at the results. Green leader Stonyfield Farm discovered that 95% of the ecological damage from its packaging occurred during production and distribution. So the company has made light-weighting (which is what it sounds like) the top priority – use less stuff and the footprint goes down. Stonyfield has made the deliberate choice to not use a recyclable, yet heavier, plastic; this counterintuitive and seemingly non-green choice makes the most environmental and fiscal sense given the real data.

  5. Finding new market openings and focusing innovation. Procter & Gamble went through a similar lifecycle exercise and made a similar discovery about its laundry products. The vast majority of energy use was not in sourcing, production, or distribution, but in the use of the detergent in homes. And the majority of that was not the washing machine turning, but heating the water. This insight led to Tide Coldwater, a reformulated product to help customers wash in cool water, using less energy and saving money. Coldwater is one of P&G’s seven original “sustainable innovation products” that generated $2 billion in sales in the first year.”

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