Sustainability 1 Another form of waste The coolest thing I learned in graduate school – and my job at OSU Why do we care? If the goal of the organization is to make money why do we care ? Examples

Sustainability 2 Linkages Marketing - do we care? –Maytag Neptune washer reverses a trend ? –Negative effects the three eyed fish Valdeez Accounting / Finance / Law: –there are serious cost and liability issues involved with environmental regulation, spills, and the like. Louisiana Pacific Human resources - people generally do not want to work in unsafe environments All managers – proactive organizations make more money than opportunistic and reactive.

Sustainability 3 Green Production – Sustainability Green Production: A system which integrates product and process design issues with issues of production in such a way as to minimize environmental impacts. Note that environmental impacts are generally waste. –and waste is –Therefore the goal of ERM is waste elimination which is very similar to TQM and JIT

Sustainability 4 Key assumption If the elimination of waste is good than green production must be good as well. Note: –we have already accepted that other forms of waste are bad. –pollution is really a form of scrap –JIT defines waste as anything more than absolutely necessary so any environmental residual is bad

Sustainability 5 Why are firms starting to care ? Government pressure Pressure from customers Growth in environmental regulation –Worldwide – “How green is your market” Liability implications TQM and JIT Publicity Disposal costs They can make money - Xerox / The Military/ Green Chemistry / LP Note growth in GDP verses growth in energy use

Sustainability 6 How do companies make money on this? They can save on their costs – reduce use of assets They need to create new and novel products and processes

Sustainability 7 An environmental success Herman Miller Inc. Zeeland MI.: makers of wood office furniture. –This company has undertaken many environmental initiatives –Recently built a transparent factory –however the best example of a competitive advantage through ERM is the power plant. –On site generation from burning scrap wood (burns at very high temps to limit emissions) avoid landfill and energy costs competition pays to give them wood

Sustainability 8 Some other recent initiatives Herman Miller tends to focus on finding uses for what would have been deemed waste in the past – others are focusing on never creating waste – which is the true path to long term competitive advantage Ford’ river rouge plant Nike- biodegradable shoes Truly recyclable nylon – note aluminum is an exception BASF- Savant Carpet- infinitely reusable –Ice cube analogy Louisiana Pacific - EMS saving 25 million a year

Sustainability 9

Sustainability 10 Cost Savings

Sustainability 11 Cost Savings 2003

Sustainability 12 What can companies do to reduce waste Product redesign to use less: –Parts –concentrated detergent –Energy -lighting / Military Substitution –Coastwide cleaning products Reduce – CD packaging Recycle – Harley and Hallmark Rebuild - Xerox Remanufacture Reuse Prolong use Work with suppliers!!! Work with customers –GM’s electric car and electric truck

Sustainability 13 Companies then can Reduce the impact of their products Reduce the impact of their processes Most of these efforts are very different from traditional efforts at being “environmentally” safe –Most companies have a knee-jerk reaction to environmental issues because they have traditionally taken a “clean-up” approach –True leaders in this stuff take a prevention approach – for instance 3M

Sustainability 14 Prevention results in general There have been numerous studies on the linkage between environmental and economic performance. They tell us that in general: –As environmental performance improves economic performance improves –JIT companies do poorly when measured by the end of pipe but do very well on prevention –Innovation is the key – Investing in reducing the impact of operational processes leads to higher plant performance In other words prevention can make more money through the elimination of waste

Sustainability 15 Conclusions Most mangers view regulation and the environment as a cost - and it can be a major cost However, a few firms have realized that waste is waste - and that rather than fighting regulation they avoid the need for it. –They may also get to set the legislative agenda which is another way to create a competitive advantage Like all forms of waste elimination this tends to improve firm performance