In March, I'll be presenting at our IDC Directions 2011 conferences in Boston and San Jose. The topic of my presentation is "The Impact of Sustainability Compliance on IT". As much as I'd like to think that companies readily acknowledge the (business) benefits of sustainability, I've also noted many times that compliance is a strong motivating factor for sustainability improvements among manufacturers.
This is especially true when compliance is a moving target placing new demands on the business, coming from legislation and regulating bodies such as the EPA, and increasingly from customers, industry groups and associations, NGOs, and value chain partners.
Basically, I'm thinking of sustainability compliance as the minimum threshold for operating in a market or the barrier to entry. Unfortunately for some companies, it's not so much a barrier to entry as a push to exit a market.
Hopefully, manufacturers will push back and make the improvements necessary. I'm still surprised (maybe naively so) to find that many don't, or at least that many appear to be waiting for some unknown point in time.
I have a real example of a manufacturer that I'd define as playing the waiting game - a US-based consumer packaged goods (CPG) manufacturer, with a well-known brand name.
This manufacturer has been criticized very publicly for some of its sourcing policies, relying on farms that may use child labor and other unfair labor practices. The company also published its first corporate social responsibility report in September of 2010 for the year 2009, but the report only merits (based on the manufacturer's self-rating) a GRI C rating, indicating the report is relatively light on current data and full of goals and wishful thinking.
What really stops me in my tracks is that this is a company that has substantial IT investments - brand-name ERP and supply chain applications, and probably many more brand-name IT investments. To me, this is the perfect storm - a company that has the foundational IT resources, customer/NGO pressure, the financial and market standing to direct the supply chain, and a high dependency on the continued strength of an international, competitive brand.
(I've added a graphic I found in a PwC report entitled Green Products: Using sustainable attributes to drive growth and value. I think it's a good depiction of the many directions of sustainability pressures for CPG manufacturers. You can find the report online.)
Yet based on the recent CSR report, they don't have the ability or the desire to fully calculate their current environmental footprint. I'm not sure which, though I suspect there's some internal rationalization built upon competitive/confidential data and immature sustainability regulations. I do note they don't address the GRI performance indicator related to "Financial implications and other risks and opportunities for the organization's activities due to climate change".
Here's what I'd like to tell this manufacturer:
Sustainability compliance is not an option for your business. You can and should calculate your environmental footprint, with more detail and granularity than a C rating. You have the IT resources you need to get started, though you may need more IT investments to collect missing data and improve these processes and decision-making. You should be the value chain captain.
Here's a short list of what this CPG manufacturer is going to need immediately:
The ability to collect data from its own manufacturing plants around the world related to raw materials and their quantities consumed, direct and indirect energy consumption, water consumption, the environmental impact of transporting their goods and materials, total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and service, as well as quantities of waste by type and disposal method, and more related to the labor practices and safe working conditions.
It should be obvious - IT is how this manufacturer is going to become compliant with the market's definition of sustainability, with the ability to more easily collect data internally and externally, compare plants and suppliers, and identify opportunities for improvement and cost-savings. From there, they can go on to track their performance over time against their sustainability and/or financial goals.
For our IDC Manufacturing Insights Top 10 2011 Emerging Agenda Predictions (Doc # MI226389), we've included two sustainability-related predictions, both of which are related to the context of this blog:
1. Sustainability initiatives converge with other business improvement initiatives
- Including lean, employee safety, and others, with an underlying theme of weaving decision making processes across regions, departments, and business units.
- The connection advances the integration of sustainability deeper into the organization
- Efficiency, productivity, and cost savings remain the foundation of the sustainability business case for many manufacturers
- More forward thinking companies consider improvements with long-term benefits, such as assuring future supply of materials and/or limited resources
2. Manufacturers persist with environmental sustainability efforts, and in the process, adopt more technology to make greater progress.
- Manufacturers look to IT for assistance in transitioning from talk to execution
- Sustainability tools are more readily available and the transition extends from leaders into fast followers
- Transitioning to analytics that can be used to make necessary tradeoffs, review what-if scenarios, and improve environmental footprint
All in all, IT is going to play a major role in helping manufacturers green their products and processes, whether they are motivated by compliance, by opportunities, or by any other reason.
And my final request and comments for our CPG manufacturer:
Don't wait until 2011 is almost done to publish your 2010 report. If you update your IT resources and how you use those resources to make smarter sustainability decisions and investments, the next report will be even easier to produce. And this next report will be something you can use throughout the year to drive even better performance, from a sustainability perspective as well as a financial one.
I know you're doing good things, but you can do more. Please.