Environmental Strategies Chapter 4

1 Chapter 4 - Environmental Strategies Overview Business Relevance of Environment Types of Environmental Issues Facing Service Companies Role of the Service company in Environmental Issue Mitigation Environmental Impacts of a Service Company

Environmental impacts of Service Companies –Companies that offer environmental services Waste disposal, cleaning services, environmental lawyers and consultants 2 Chapter 4 - Environmental Strategies Services and the environment are two separate issues

Many companies measure against the triple bottom line as developed by John Elkington –Financial, environmental and social performance 3 Chapter 4 - Environmental Strategies Environmental Management

Research has demonstrated the link between financial success and the ability to manage the environment Financial implications of poor environmental management –State and Federal fines –Cost of litigation –Cost of environmental clean-up –Damage to the company brand Chapter 4 - Environmental Strategies 4

Environmental Management Financial implications of high-performance environmental management –Cost Reductions –Improved quality and yield –Improved relationships with regulators –Reduced insurance costs –Enhanced company brands Examples include Home Depot and UPS Chapter 4 - Environmental Strategies 5

Environmental Management There is a positive correlation between environmental events and stock market performance –Positive environmental events = higher share price Examples include Alcan Aluminum whose share price increased 80% faster than the DJIA after receiving a prestigious environmental award –Negative environmental events = lower share price Examples include Tyson Foods who lost 8% of market capitalization when a subsidiary was fined for illegal dumping Chapter 4 - Environmental Strategies 6

Service Process matrix –Environmental Services Chapter 4 - Environmental Strategies 7

Service Process matrix –Environmental Issues for Service Companies Chapter 4 - Environmental Strategies 8

Professional services - doctors, lawyers, consultants, etc. –Medical waste, paper, toner Service shops - hospitals, hotels, auto repair, etc. –Infectious waste, laundry soap, used motor oil Service factories - UPS, Royal Caribbean, Delta, etc. –Fleet maintenance, fuel, waste water Chapter 4 - Environmental Strategies 9 Services and Their Environmental Impacts

Process Opportunities –Process Improvement Total Quality Environmental Management (TQEM), Six Sigma Process Certification –ISO 14000, CERES Principles, Codes of Conduct E-commerce –Migrate paper based processes, process automation, reverse logistics Chapter 4 - Environmental Strategies 10 Environmental Strategies for Service Operations

Product Opportunities –Product redesign Design for the Environment (DFE), lifecycle analysis –Value added services Include value added services along environmental dimensions –Dematerialize Vertical or horizontal integration effectively eliminates the supplier’s incentive to sell additional hazardous material Chapter 4 - Environmental Strategies 11 Environmental Strategies for Service Operations

Advanced economies have migrated from a manufacturing to a service environment –Understanding environmental issues is critical –Services impact the environment directly, hence, mitigation of environmental risk can result in significant gains –Service companies can mitigate risk by improving both the process and the product Chapter 4 - Environmental Strategies 12 Summary

Prior to 1994, Delta utilized centralized purchasing for the decentralized use of hazardous chemicals –In 1994, Delta was fined $1 million by the Georgia EPA alleging that Delta’s chemical management system was inadequate Delta began to develop an integrated chemical management system based on three main goals –(1) Manage the chemical process more effectively, (2) Capture all required data concerning use and disposal and (3) Perform these functions at an overall lower cost to the company. Chapter 4 - Case Study 13 Chemical Management at Delta Air Lines

A Delta employee along with a former Delta supplier form Interface LLC –1995 agreement with Delta stated that Interface LLC would act as the gatekeeper between chemical suppliers and Delta Would honor all purchaser orders, freed up 30,000 feet of warehouse space at Delta, minimized Delta’s supplier base Agreed to deliver routine orders in three hours and expedited orders in two hours (Opened a facility 1.5 miles from Delta) Agreed to a 95% fill rate Chapter 4 - Case Study 14 Chemical Management at Delta Air Lines

Benefits of using Interface LLC –Streamlined MSDS management –Now tracked chemicals throughout the operation –Interface negotiated with chemical suppliers and manufacturers –Extended scope by including safety equipment –Contract specified joint cost savings Incents Interface LLC to find innovative ways for Delta to save money –Provided Interface LLC the ability to demonstrate the success of the model to other customers Chapter 4 - Case Study 15 Chemical Management at Delta Air Lines