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November 4, 2009
Sustainability in Manufacturing Operations
The concept of sustainability is not new for organizations today.
But there is wide disparity on how companies think about and implement sustainability programs. While some manufacturers have clearly gained tangible business benefits through a long-term focus on sustainability—through improved financial results as well as increased competitiveness—some manufacturers are still considering the potential benefits of investing in sustainability programs.
When asked about the top pressure driving companies to focus on sustainability, the results of the latest Aberdeen report, “Sustainable Production: Good for the Planet,” revealed interesting trends.
First, there is no one pressure that was selected by a majority of responding companies as a driver for sustainability. The top four drivers highlight how sustainability can impact four different but all-important stakeholders: customers, regulators, competitors and shareholders. While two of the top drivers—staying competitive and impacting bottom-line financials—are critical, companies are also focusing on sustainability to ensure compliance to current and future regulations, and lastly, to satisfy the customer demand for eco-friendly products. These top four pressures together show the trend of how the focus on sustainability has changed from being a philanthropic “nice-to-have” initiative, to the one that is core to the success of an organization. This trend is further strengthened by the fact that only 10 percent of the responding companies are focusing on sustainability in support of the “me too” mentality—“I have to because my competitors are focusing on sustainability.”
One of the other pressures in the list was the elevated economic uncertainty, which was only selected by 9 percent of the total respondents. In fact, 85 percent of the responding companies revealed that they have either increased or had no change in their sustainability programs due to the current economic downturn. If anything, the current economic scenario has forced companies to streamline their operations and make long-term strategic decisions that will enable them to be more sustainable.
The vice president of a chemical company, when asked about its sustainability programs, commented, “Our goal is to improve the company’s overall use of resources, resulting in lower cost of product and distribution to improve competitiveness. Standard practices will be challenged, and revised through input from a large group of employees. The ideas foster innovative solutions, resulting in improvements to the corporation as a whole. This all clearly ties to acceptance within the local community and the government, and attracts new customers.”
This research initiative reached out to the “C” suite (chief executive officer, or CEO; chief information officer, or CIO; chief financial officer, or CFO; and chief strategy officer, or CSO) of 33 companies to understand their expectations from their organizations’ sustainability programs. The results uncovered two interesting trends.
The first trend is around the primary driver for focusing on sustainability. While we did not see a dominant market pressure, 55 percent of C-level executives are found to be focusing on sustainability to impact the organization’s bottom-line financials. When asked about the change in the investment in sustainability programs in the future, 45 percent of the C-level executives indicated that they are increasing budgets to support the overall sustainability program, and 24 percent revealed that budgets are remaining the same.
Given these responses, one thing becomes particularly clear. While the financial investment from the C-suite around sustainability is not likely to decrease, it is very critical for sustainability managers to present a compelling business case to get access to budget for investing in any initiative around sustainability. This is especially true, considering that many companies are in an environment in which projects are competing for budget dollars.
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