Friday, January 20, 2012

Key Sustainability Considerations for Industrial Organisations

Sustainability is a goal rather than an outcome, the pursuit of which requires the careful integration of economic, environmental and social considerations. No organisation can truly call itself sustainable, and hence we are talking here about something aspirational. Implementing sustainability within your organisation should not be viewed as a project, but rather as a journey.

Organisations operate within complex ecosystems comprising their customers, suppliers, competitors, the natural environment, the regulatory environment and every aspect of society, all of which are in a state of flux. It is ultimately the sustainability of the system, not the organisation, that is the goal. Organisations therefore need to ask the question: " What is our contribution to the sustainability of the system?". The formulation of concrete actions at all levels of an organisation in response to this question is at the heart of sustainability strategy.

Industrial organisations generally have significant environmental footprints, generate significant economic value and have large social impacts, both in terms of job creation and the health and safety of local communities. The geographic reach of their operations extends not only through their supply chains, but also into the marketplace. For organisations serving consumer markets this reach can be long and diffuse, and is often global in scale. Industrial organisations seeking to become more sustainable clearly have a wide range of issues to confront, but what are the key considerations for an industrial player starting the sustainability journey? The following are my views on the key elements of industrial sustainability:

A Life Cycle approach
The sustainability focus of many manufacturers is on the manufacturing site itself, but sustainability is about product life cycles. Sustainability should already be a consideration at the product design stage, and must extend from the extraction of raw materials, through to manufacturing, use and disposal of the product. The economic, environmental and social impacts of every stage of the product life cycle must be incorporated into sustainability strategy.

Pollution Prevention
In evaluating this life cycle, pollution of the air, land and water resources is something to be avoided, preferably through addressing problems at source. Risk assessment is a useful methodology for the determination of potential impacts and the incorporation of mitigation measures. Greenhouse gas emissions may be considered to be a part of this pollution.

Resource Efficiency 
The conservation of energy, water and materials has a multiplier effect in terms of benefits for the environment. For businesses there are significant short and long term cost benefits arising from resource efficiency projects, particularly considering that for manufacturers, raw materials and work in process costs far outweigh fixed costs such as manning. 

Operational Excellence
Waste is the enemy of sustainable business practice, and here we refer not only to physical waste but the squandering of any resources which contribute to organisational success. Industrial organisations need to produce products reliably, at low cost and according to strict quality standards. In doing so, capital assets need to be efficiently utilised, new technology needs to be seamlessly introduced and existing processes need to be improved continuously.

Skill Development
It is necessary to build capacity at all levels of an organisation in order to apply sustainability principles. The sustainability-focused organisation is necessarily a learning organisation, able to adapt to its environment, incorporate past lessons into future actions and most of all, willing and able to turn all aspects of operations into learning opportunities. This has implications for how knowledge is managed.

Employee and Community Health and Safety
The health and safety of employees and local communities impacted upon by an organisation's operations are of vital importance, both from a moral point of view as well as from the perspective of productivity. Individual organisations should be well-versed with industry-specific threats such as PVC fumes in the plastics extrusion business, or mercury pollution associated with coal-fired power generation, as examples. Product safety is a further area of critical importance. The food industry has developed formalised processes such as HACCP, but other consumer products also pose threats to consumers/users and these risks need to be evaluated and mitigated. 

Social Responsibility
Contributions to social causes should begin with a focus on employees and then extend to local communities and the wider customer base of the organisation. The approach should be one of investment, not charity, and it is eminently possible to align CSR initiatives to organisational goals in a manner which generates tangible returns. For example, investments in education in local communities, such as bursary schemes at tertiary institutions for disadvantaged youth, can generate a pipeline of quality human resources for employment in the organisation's operations.

Economics
The financial health of an enterprise is its primary concern as regards economic sustainability. Without this aspect of sustainability being on target, the other aspects of sustainability soon won't matter much, since there may not be a business to make more sustainable. This will rely on growth in revenues and the control of costs. Sustainability strategy and business strategy clearly need to be aligned. There are invariably opportunities for organisations to impact on the local economic policy environment and in making investment decisions, impacts on other economic actors should be carefully considered.

I have focused on environmental aspects of sustainability since this is my area of specialisation. The environment, economy and society should never be seen as discrete elements to be tackled individually but as part of a singular system. Paying slave wages to cut operating costs is not sustainable. Neither is cutting corners regarding the provision of personal protective equipment to staff, or polluting the environment in order to avoid treatment costs. Sustainability is however not only about constraints. Increasing raw material yields is a powerful way to boost margins. Raising environmental standards in the manufacturing process can provide access to new markets, and is gaining currency with consumers. Recycling of wastes can generate new revenue streams. These are just some of the opportunities available to those pursuing sustainability as a way of doing business. And this is what makes this growing field so exciting! Sustainability as a philosophy has deep moral roots, but the business opportunities presented by this approach should not be underestimated.