Tuesday, November 1, 2011

Opportunity Knocks for Sustainability-focused Industrial Organisations

The current uncertainty in the economic environment sees many industrial organisations with a significant amount of cash on their balance sheets. Bearish on growth, organisations seem paralysed as to decision-making regarding investments. Organisations which do not have cash  but have access to funding at favourable rates are also loath to invest in the current climate. Building a new factory right now would no doubt be a brave move, but in my view there is an enormous investment opportunity right under the noses of owners of industrial concerns which is largely going untapped: investments in organisational sustainability.  
Projects which save an organisation money while also benefiting the environment are highly desirable, since they have direct relevance to two of the three “pillars” of sustainability. Of course, should these savings be invested in growth, there could be further social benefits through job creation, thereby completing the picture. Sustainability aside however, make no mistake that what we are talking about here is simply good for business, and should be on the radar of any industrial organisation seeking to compete in what is a very trying economic climate.
For clarity, here are a few examples of the types of projects I am talking about:
Ø  Projects which save electrical energy, such as lighting retrofits, installation of energy-efficient induction motors, improvements in refrigeration and heating performance or the appropriate use of variable speed drives;
Ø  Projects which save thermal energy (ultimately fuel-saving projects) such as boiler optimisation and other steam system projects;
Ø  Projects which reduce raw material consumption – these typically have enormous financial benefits as well as very significant life cycle benefits;
Ø  Projects which reduce water consumption and effluent discharges;
Ø  Projects which reduce emissions – most if not all of those above do this too!
Ø  Projects which generate energy from waste streams;
Ø  Projects which reduce solid waste disposal costs and wastes to landfill through for example, recycling or processing of wastes;
Ø  ......you get the picture, the opportunities are endless....

Most of the organisations I work with do not have rigorous processes in place to identify, develop and implement these opportunities, simply because they are not really considered to be the core business of the organisations concerned. The thing is, as the operator of an industrial concern, you are privy to a wonderland of investment opportunities, some of which are unique to your organisation, but many of which are simply best practice. How then do industrial concerns go about finding, developing and implementing these opportunities? In my view this can only be achieved through a rigorous process which has to be continuous.

Have an entrepreneurial mindset
Your organisation can be viewed as the source of prime investment opportunities. Projects which conserve water, energy and materials, add value to waste and by-product streams and reduce regulatory penalties through improved compliance are everywhere. Your aim should be to establish a comprehensive portfolio of these opportunities which can become a live record of every possible conservation opportunity available. In much the same way as you would develop a pipeline of projects for business growth, you should be developing a pipeline of sustainability projects. Sustainability is both a moral imperative as well as a tremendous business opportunity!

Use a standard process to define and measure opportunities
Define the basic steps each project should follow and how you would like your sustainability projects to be measured. Measurement is not just about feasibility, but also about post-implementation performance.  Installing a common process and measurement system allows sustainability projects to be compared and prioritised. Align these processes as far as possible to other change control processes already in place within your organisation – the more integrated you can make sustainability projects, the more likely they are to be accepted and implemented. Note that we are not only talking about technology here, but also projects which involve skill development, changes in management systems/work practices, product and raw material modifications and other drivers of enhanced environmental performance.

Take a Systems Approach
Individual technologies are definitely useful, but analysing systems always yields far larger opportunity than a piecemeal approach. I once conducted a project for an organisation that was far into the process of designing a new effluent treatment plant. The capital and operating costs were going to be significant, but these needed to be incurred in order to meet regulatory requirements. Over the course of the project, we discovered a number of opportunities to conserve raw materials, which ultimately led to large reductions in effluent loading, and ultimately a far smaller effluent treatment plant. By taking an integrated view that considered the manufacturing process together with effluent treatment, costs were saved in both areas. A failure to do this could have resulted in a grossly over-sized treatment plant.

Scan the environment
What is your industry doing as far as sustainability is concerned? What new developments do your OEM’s have to offer? Are there new regulations on the horizon which could impose additional costs on your business? Are there specialist skills your organisation needs which are available in the marketplace? Are there financial incentives available from your government? By knowing what is out there you have a head start in terms of opportunities and threats.  

Develop a network of sustainability partners
Your organisation should build internal capacity as far as possible in terms of the skills necessary to pursue initiatives in resource efficiency and pollution prevention, but it is unlikely that all of the skills required will be available internally. Partner with others in achieving your sustainability objectives. These partners could be your raw material suppliers, OEM’s, suppliers of specialist measuring equipment, research institutions, consulting companies, sister sites within your organisation, financiers and others. If necessary put the requisite confidentiality agreements in place, but by working with leaders in the field you save yourself from reinventing the wheel and also reduce the lead time required to advance along your sustainability journey.

Review continuously
The issues which impact on these projects change continuously. Energy prices fluctuate. Water and waste management costs do too. Technology is evolving continuously. A solution which may not have been feasible a year ago could well be feasible today purely on the basis of the economics, or a new technological innovation could help break a hitherto impenetrable performance barrier. Once you have your portfolio of projects in place, keep going back to individual projects to reassess their viability.

These are just some of my preliminary thoughts on what for me is a fascinating subject. Think about it, your organisation could be sitting on a wealth of improvement opportunities, but may not be realising the benefits. The risks involved are typically lower than traditional financial investments, since in many instances tried and tested approaches can be employed. It is in any event possible to determine the risks of individual projects fairly comprehensively – something that can’t be said about investments in financial markets. And best of all, these projects benefit society, enhance reputation and are in essence the right thing to do.