The company of the Future is a Lean & Green Company
The “Pillars” of the Lean & Green Approach
ABSTRACT
Can a company be indifferent to the problems of environmental sustainability? Is environmental consciousness the source of additional costs? Does there exist a relationship between the “lean” and the “green” approach?
It is our opinion that the answer to the first two questions is definitely no! Environmental consciousness is not only a meritorious attitude toward society and future generations, but also a business opportunity . Contrary to what many people think it does not increase costs, but cuts some of them, those due to waste and emissions. Moreover, in a context ever more sensitive to environmental problems, it improves the company’s image and reputation with probable good effects on business results.
As for the third question we can affirm, on the basis of our experience, that a Lean and Green approach is possible and profitable. This approach has a major objective: to apply lean methods and techniques in order to eliminate all kind of waste including environmental waste.
It is our conviction that the Lean and Green approach is good for the single company and for society as a whole!
In this article we describe the “six pillars” of the Lean and Green approach and the benefits a company can get through it in terms of cost reduction, better reputation and increased competitiveness.
Why Lean & Green?
It is no use trying to hide our heads in the sand: one of the major problems mankind will have to face in the next decades is the environmental question which risks to jeopardize man’s very existence on earth. For this the international community is trying, although with great difficulty, to develop global strategies aimed at reducing the emissions of pollutants of the air, of the water and of the soil and at reducing the consumption of resources.
These strategies can be successful only through the cooperation of three actors: people, public institutions and enterprises. Our Lean and Green approach refers to one of these actors: enterprises. Its objective is twofold. The first goal is to make companies excellent increasing their efficiency, reducing waste, improving customer service, reducing inventory. But this goal goes hand in hand with a second one: to reduce environmental impact, reducing the consumption of all kind of resources and the emissions that can pollute the environment.
The war against the classic 7 wastes of the Lean Transformation produces very good results also in terms of lower environmental impact.. Our Lean and Green approach makes use of the same methods and techniques used by the classic Lean approach with the addition of specific techniques to measure and reduce environmental impact.. It is founded on six methods (the so called “six pillars”) each applicable to a specific area of a company: Marketing, Technical Design, Production, Supply Chain, Office Work and Management Accounting.
1. Lean & Green Marketing
A company that is environmentally virtuous must not keep this information to itself, but must “sell” it, that is make it known to a world that is becoming more and more conscious of environmental problems. In other words the fact that a company is lean and green must be turned into a great opportunity to improve competitiveness and increase sales and profits.
This is Lean & Green Marketing’s mission: to identify the right marketing strategies (in terms of the 4 P + 1: product, price, place, promotion, people ) to let the market know that the company is not only competitive, but also environmentally conscious.
But one cannot preach something and do something else. An effective L&G Marketing requires coherence: the company must itself work to become more and more green. That can be done by applying the six “pillars” of Lean and Green that are described in the following paragraphs.
Another way to show coherence is to get environmental certifications through which a third party certifies that the company is abiding by International Environmental Management Standards.
2. Lean & Green Design
It is well known that 90% of the costs of a new product are determined in the product development phase. That is also true for its environmental impact: 90% of that impact is decided when the product is designed. Lean and Green Design (also referred to as Eco Design) aims at drastically reducing the environmental impact of a product taking into account its whole life cycle: not only production, but also transportation, usage, and final disposal.
In order to reduce the environmental impact it concentrates on energy saving, resources and materials saving, elimination of dangerous emissions, product duration, recycle or reuse at life cycle’s end.
Eco Design tools are the same as Lean tools: for instance Oobeya (visual planning and control of projects) by which it is possible to manage projects more effectively and QFD (Quality Function Deployment) which permits to transform customers’ needs into product functions and characteristics coherent with those needs.
What is important is to use the same tools but taking into account since the very beginning environmental problems and needs.
3. Lean & Green Production
A Zero Emissions Factory is a factory which uses raw materials, indirect materials and energy without any wastes and minimizes its emissions (wastes, noise, vibrations, smoke, or any other solid, liquid or gaseous substances). Lean methods like 5 S, SMED, TPM, KANBAN, SUPERMARKETS are perfectly applicable because they reduce wastes, reworks and in general the use of resources.
To the usual lean approach it is necessary to add a specific analysis – we call it “environmental check up”- to measure and reduce consumption of energy, amount of scraps and waste, emissions into air, water and soil.
For each of these aspects the method to be used is always the same as in lean projects: current state map, definition of future state map and its objectives , launching project teams, measuring results through key performance indicators.
4. Lean & Green Supply Chain
Speaking of the environmental impact of the whole life cycle of a product we must not overlook another important aspect: inbound and outbound logistics, which often have a very negative impact in terms of consumption of resources and polluting emissions.
According to our experience a lean transportation management can have beneficial effects on the consumption of fuel, on pollution and waste.
We can and should design supply chains which are both lean and environmentally friendly.
We can think in terms of alternative routes, intermodal transports, use of eco- compatible vehicles etc.
We can think of a network of suppliers located as close to the factory as possible, and committed to reduce their environmental impact (what we could define a zero Km supply chain).
We can choose eco-friendly or reusable packaging products thus avoiding an often enormous problem of waste disposition.
5. Lean & Green Office
A Sustainable Office is an office that does not produce paper, that consumes as little energy, gas, water as possible and does not produce waste.
A few guidelines we have adopted at our own office are: sharing spaces and equipment with other firms, outsourcing services like information technology, use of telework whenever possible.
Sometimes it is possible to achieve significant results by very simple process changes or by educating office people to avoid waste..
6. Lean & Green Management Accounting
As we are strongly convinced that measuring is the first step toward improvement we think that Lean & Green Accounting is essential not only in a lean transformation process but also in a green transformation process. A basic tool we use and propose is a Box Score which adds to the traditional measures (profitability, capacity, performance) a fourth section (which we call green section) including environmental indicators. These indicators show the utilization of resources and the level of emissions.
In particular we have defined a special indicator called O.S.R. (Overall Sustainability Ratio), which provides a synthetic measure of the overall environmental impact of a company. This indicator is similar to OEE, a measure many companies use to control the overall efficiency of their equipment. As in the case of OEE the maximum value of OSR is 100% which is reached by an ideal company without any environmental impact.
The higher the value of OSR the lower the environmental impact of the company.
OSR = Sales / (Resources employed + Emissions) = Emissions * Resources employed * Quality
OSR is the ratio between the volume sold in a period to the sum of resources employed and emissions of the same period. Normally data are expressed in units of weight. The higher the OSR the more resources become part of the end product sold and are not wasted. Read all on the OSR
Conclusions
Environmental consciousness is not only a duty toward society and future generations, but also a great business opportunity. It does not cause an increase in costs, as many people think, but a significant cost reduction due to the elimination of waste and emissions.
But that is not the only effect. In a world in which public opinion is more and more sensitive to environmental problems, the image of the company can significantly improve with a more than probable impact on sales and profits.
It is our deep-seated conviction that the Lean and Green approach is of benefit both to the company and to society.