Today I delivered our corporate presentation Green Business Is Good Business to 200 QUT professional staff at the Hyatt Sanctuary Cove. Sorry the video is not very attractive, but I will do better next time!
The feedback was that our passion for the topic really made us stand out. It made me think that passion and enthusiasm could actually be more important than content. Moreover, you could have the best content, but delivered without pep, wont have the same impact!
One of our Melbourne Associates Cliff Patrick commented that it is all about the singer, not the song.
Companies face increased stakeholder pressure and government regulation to reduce carbon dioxide and other greenhouse gas emissions. To address this issue, companies must take action within their supply chains, which account for the vast majority of their energy use and CO2 emissions.
But in a recent IBM survey of more than 400 supply chain executives, 89 percent of the respondents reported that cost reduction was either very important or critically important .
As companies struggle to address both concerns – particularly in the current economic climate – it’s important that they view them as complementary, not conflicting. By executing the right sustainable business strategy, they can successfully improve efficiency, reduce energy use and costs, and lower environmental impact.
Sustainability in the new economic environment
There are three key factors driving sustainable business practices up the corporate agenda:
1. Laws, regulations, and standards — governments worldwide are committing to key environmental targets and introducing climate change legislation, supported by taxation frameworks to drive improvements. For example, emissions “cap and trade” requirements go into effect in the UK next year, and legislation with similar provisions is currently making its way through the U.S. Congress.
2. Stakeholder pressures — increasingly, a company’s “green” credentials are being used as selection criteria by a range of key stakeholders, such as customers, investors, business partners, and potential employees. For example, the Carbon Disclosure Project identifies green-focused investors with assets of more than $41 trillion.
And in our 2009 global survey of c-level executives on green and sustainability issues, half of the respondents said they are being compelled to adopt new CO2 standards by their business partners.
3. Costs — With volatile energy prices and other rising supply chain costs, CO2 emissions reduction and cost containment are increasingly compatible – when you burn less, you pay less and emit less, and the benefits can ripple further. Within our own company’s experience, we estimate a $1 reduction in energy costs can lead to an additional $6-8 in operational savings.
Supply Chain Levers
As supply chain executives look at approaching these challenges, there are some common levers for reducing costs and CO2 emissions:
* Transportation and supply — increased local sourcing may well increase the costs of raw materials, but this could be more than offset by reducing the distance travelled. It will also reduce exposure to certain supply chain risks, including volatile fuel prices, long and unreliable lead times, currency exchange risks, etc. The introduction of enhanced vehicle technology and design can also improve fuel efficiency. Such measures can help to reduce both emissions and total supply chain cost.
* Product lifecycle management — How products are designed, assembled, labeled, packaged and recycled can have a profound effect on the carbon efficiency of the supply chain. For manufacturers, there may be product redesign opportunities that reduce energy consumption in manufacturing, distribution, or end use. Every conceivable change is an opportunity — from reducing the weight of the product to making it easier to disassemble. In some cases, innovation or new technologies may make it possible to eliminate some components or sub-components entirely and thereby eliminate discrete portions of the supply chain. Products that are recalled from the market, that must be upgraded or refurbished during their useful life, or must be recycled at the end of their life require some kind of reverse supply chain. By planning for these lifecycle events in the original design phase, it is possible to eliminate or reduce unacceptably high energy costs later and minimize the CO2 emissions of the reverse supply chain.
* Low-emissions manufacturing — there are various opportunities to reduce cost and GHG emissions simultaneously in the manufacturing process. Applying Lean Six Sigma principles to streamline production steps can reduce water, energy and waste. Maximizing asset utilization through predictive maintenance, which can be aided by smart asset monitoring technologies that provide real-time analysis to help predict when an asset is going to fail, can improve efficiency and lower costs. Moreover, as legislation is introduced that taxes pollutants, toxic materials, and harmful emissions, organizations that reduce such issues also will reduce potential punitive costs.
* Shipment — if service-level agreements with suppliers and customers contain unnecessary requirements, waste is the result. When agreements force small, expedited deliveries, energy use goes up dramatically. For example, our company recently worked with a major brewery to help redesign its trade terms with its customers. By incenting pubs and clubs to accept larger, less frequent deliveries, the brewery can increase full truck-loads, saving significant costs and simultaneously reducing GHG emissions. Furthermore, as the trend toward Internet shopping drives an increase in home deliveries, successful first-time deliveries will have a major effect, both on costs and carbon footprint. Organizations that take steps to improve first-time delivery success, will reduce both cost and carbon footprint, while improving the customer experience.
* Packaging — intuitively, reducing the amount of packaging on a product might seem to be the best way to reduce both the cost of a product and its environmental impact. But not if it results in safety, spoilage, damage and return issues. Grocery retailers are constantly under pressure to reduce plastic packaging, but many have pointed out that a significant proportion of packaging is there to protect food safety and prolong shelf life. This reduces waste in the supply chain, which consequently reduces cost and environmental impact. Also, for manufacturing companies, typically up to 25 percent of packaging waste might be generated by returned or damaged shipments . Once a shipment is damaged, it is returned and another product shipped out, doubling the costs of packaging and fuel. A major US computer manufacturer has introduced the use of logistics bars and air bags between pallets to stabilize the loads, thereby reducing the number of damaged shipments to less than 1 percent, while improving customer service and eliminating packaging waste . So the best way to address this issue is increased investment in new packaging designs and technologies that reduce waste and maintain product safety.
Turning green into gold
The real winners in the new economic environment will be those who recognize that developing sustainable business practices is fundamental to saving money now and preparing for the future.
These leaders will seek out cost-effective, sustainable business opportunities to reduce environmental impact and business costs while identifying new opportunities to increase market share. A survey by Aberdeen group showed that the top green supply chain organizations had on average reduced supply chain energy costs by six percent in one year. Other supply chain costs had reduced on average by two percent. At the other end of the scale, laggards saw overall increases in supply chain costs.
In addition, environmentally responsible and energy efficient products are one of the few market sectors currently recording growth. So businesses that focus on process improvement, cost control, product and service innovation and reducing environmental impact will position themselves for leadership now and in the future.
Keith Burgess and Simon Glass are management consultants for IBM Global Business Services. They work with clients across a wide range of industries to identify opportunities to promote sustainable business practices, particularly in supply-chain management, as a fundamental element of core business strategy.
Who would believe a simple burger could cost $28?
This weekend we visited Byron Bay – Australia’s Bali equivalent without the pollution. At dinner time we needed something fast and simple. We recoiled in horror when we noticed our hotel menu proudly displayed “The Byron Burger” for the princely sum of $28!
Normally I avoid meat because of the massive carbon footprint and deforestation associated with cattle production, but in the interest of consumer research I was curious as to how good a $28 burger could taste.
The ingredients boasted swiss cheese, roma tomato, beetroot, lettuce, twice cooked fat chips, homemade tomato sauce and aioli (whatever that is, even the spell-checker is confused). Call me cynical but unless all the ingredients are organic, hand-grown, hand-fed and delivered by three nubile dancing girls – how can a burger possibly cost this much?
Well, the big test is in the eating. How good did the burger taste? Was it so good that we would have paid $50? $40? or $15? Sadly you will be disappointed to hear that our expectations we very high and maybe $20 was a fairer price – especially since it wasn’t even organic. Don’t you just love how hotels are still charging boom-time prices even though the world economy has contracted by a good 30%! My home insurance company has actually raised its premiums for absolutely no reason, but that is another story…
I really don’t know why they are called Loyalty Programs.
Airlines, car rental companies, hotels, supermarkets and a few other usual suspects coddle together complex rewards schemes aimed at securing our loyalty but usually end up making us hate the company we didn’t mind supporting in the first place.
Take the airlines as a prime example. Even if you fly every week on the one airline, spending days on end away from your family, it takes about two years to generate enough points for anything more than a half hour flight to some place you do not want to go at a time that is completely inconvenient. It is so thoughtful of the airlines to only offer reward seats on the 6am and 1130pm flights. It doesn’t take much imagination to guess why the worst times are the only options on option. One airline offers reward seats on most of its flights but it would take a lifetime of flying every day of the week to accumulate enough points to ever afford those flights. How does 590,000 points from Sydney to Los Angeles sound to you? I assumed it must have been in their new space ship but no, just their regular flights that are now mostly half full at best. There is nothing more upsetting to a loyal frequent flier who tries to book ahead and is told their are no FF seats on a flight, only to find the plane is empty.
The only reason that a few of us can ever afford a FF flight is that our credit card points can be transferred to a selection of frequent accounts. Maybe that is why the number of points to fly anywhere has doubled over the past few years. It is really the credit card providers that benefit now, not the airlines.
Instead of treating us like valued and loyal customers, the airline reward programs like to charge us as many points as they can, on the the most inconvenient flights and often with partner airlines desperate for customers rather the airline we are allegedly loyal to. How often have you searched for a FF seat six months ahead of time only to find absolutely nothing available or at best a flight via Fiji on one of the world’s oldest aircraft.
If by some miracle you do have enough points to purchase a FF ticket don’t forget to budget for the hundreds of dollars of additional taxes that are not included.
What ever you do don’t try and make a change. This week I had to make a simple date change and was slugged $200 plus a $50 service fee (not specified anywhere in the terms) – $250 for one minute’s worth of button pushing at a cramped call centre in Malaysia. The change fee was almost a quarter of the original airfare and the terms of change are nowhere to be found on the airline’s outsourced rewards program website. Great move – outsource the job of looking after your best customers to another company in another country. That will work. Clearly the airlines only care about cost and not the very customers that fund the airlines ongoing success, or more likely failure. Loyal customers are treated like lepers as airlines clearly don’t want to make it convenient or cheap for their frequent fliers to redeem points.
Rewards programs are such a joke, my best advice it to keep your points on your credit card account until you are ready to fly, then pick the airline that offers the best deal at a the time your want to travel. Surely this defeats the purpose of a loyalty program. One airline got it right in the nineties – buy ten flights and get one free. Simple and motivating. Unfortunately the big guys temporarily dropped their prices to quickly put this well-meaning new comer out of business in a matter of months, then jacked their prices back up soon after.
What a surprise to read that airlines are the number one source of consumer complaints – canceled flights, misleading terms, lost luggage, running late, surly service, bad food and the list goes on. The people running airlines should take a good hard look at themselves and start behaving like a business that actually cares for the people they are trying to attract in the first place. Am I missing something in this business model?
A recent LinkedIn discussion prompted me to comment: You will probably agree that sales people are the hardest of all to recruit because their CV’s always look good, they speak well and their references are always glowing.
Only when I have hired, then trained them and sit next to them in meetings, do I really know what they are capable of. I need to really understand what will motivate someone to perform, especially in a tough market. The adage, Can Do, Will Do, Will Fit is critical and the recruitment process needs to cover all three areas. Psych testing helps the decision making process, as does behavioral interviewing – but nothing beats seeing them in action!
Another tactic that has helped my hiring success rate is to have current team members interview prospective staff without seeing a CV with any pre-conceived early judgments. In addition, I insist on gaining permission to speak with their immediate superiors at their past three jobs and have them physically demonstrate some of their professional business development skills. Rarely has a competitor’s former sales person worked out, because it is the same person, selling the same product for a different company.
Finally, for what my 2 cents is worth…some of my best hires have been people with great passion and attitude and not necessarily a track record in the industry they are now applying to join. My view is that the best salespeople are bred with the right attitude not simply born with a gift. I am keen to hear your views on this topic, so please comment!!!