Fast Company: Smart Energy Management Takes More Than Technology

Knocking down a brick wall by yourself with your bare fists is next to impossible. But organize a team equipped with sledgehammers and a plan, and it gets a whole lot easier. In other words, when tackling tough problems, it’s not just about the tools you have, but how you marshal your assets to break through.

That’s the message to CFOs, sustainability czars, and energy managers in a new EDF report, “Breaking Down Barriers to Energy Efficiency.” The report offers effective ways to motivate employees, create accountability for success, identify investment opportunities, ensure funding for financially attractive projects, measure cost savings, and scale performance gains continuously over time. The findings were drawn from the EDF Climate Corps program, where specially trained MBA students work in corporate summer fellowships to develop customized plans for cutting energy costs and greenhouse gas emissions.

Whether a company is trying to get off the starting blocks, or taking its energy and climate initiatives to the next level, the report outlines proven strategies for getting beyond the low-hanging fruit to the really big savings that energy efficiency can deliver.

Continue reading on Fast Company.

Are you at Fortune Brainstorm Green?

One of the most popular conferences in the corporate sustainability space started yesterday: Fortune Brainstorm GREEN. If you are at the event, please introduce yourself to one of our EDF Business experts:

Jon Coifman, Marketing and Communications Director

Audrey Davenport, Project Manager

Jon Coifman

Audrey Davenport

Andrew Hutson

Andrew Hutson, Project Manager

Jasper Jung

Jasper Jung, Marketing and Communications Manager

Emily Reyna

Emily Reyna, Project Manager

Elizabeth Sturcken, Managing Director

Elizabeth Sturcken

You can also follow our live Twitter feed for updates from the conference: @EDFbiz

Moving Away from PR Focused Sustainability

By Lillias MacIntyre, Program Associate, Corporate Partnerships, EDF

Defining “sustainability” in general terms can be difficult, since definitions evolve over time with new ideas or trends.  Sustainability today encompasses contexts of natural resources and the environment, economics and social equity, but generally speaking,  to be sustainable is to use “methods, systems and materials that won’t deplete resources or harm natural cycles” (Rosenbaum, 1993) – and to “meet present needs without compromising the ability of future generations to meet their needs” (WECD, 1987).  In “Advancing Sustainability: From 1.0 to 3.0” – a white paper from GE and Wharton – experts discuss why the business case for sustainability is compelling, even in this tough economic climate.

Increasingly, companies are moving away from PR focused reputation management and reparation-based initiatives to innovative, forward thinking practices that engage stakeholders.  And, while their definitions of sustainability vary, executives agree on the reasons for undertaking such initiatives: to “create value for shareholders, customers and communities while recognizing constraints on natural resources.”  That said, many executives also feel that significant barriers exist to impede progress (i.e. high upfront capital costs and long payback periods).

Yet, value creation doesn’t have to come at a high price.  In fact, one of the easiest ways to find savings and increase employee engagement is to host Treasure Hunts – one to three day events that unite cross-functional teams of employees in an effort to identify energy savings throughout facilities.  In her blog, EDF’s Beth Trask talks about using Treasure Hunts to empower employees to find savings by tapping the diversity of their experiences and ideas.  These events are low-cost initiatives that can be replicated at companies of any size.

Embracing a proactive, future-focused sustainability effort requires a clear vision and employee engagement – driving change from the bottom with support from the top.  Ideally, companies would approach sustainability programs by setting absolute goals – tougher but more important than intensity targets, according to Gwen Ruta, VP of EDF’s Corporate Partnerships Program.  Absolute goals help maintain momentum and stimulate innovative thinking when the low hanging fruit has been picked, because to achieve an absolute goal, a company must “have the imagination to think about [its] business differently….”  Thus, we should “build into the definition of sustainability that as one natural resource is depleted, another [is] identified or developed to replace it” (Robert Giegengack, emeritus professor, U Penn).

Looking ahead, large, multi-national companies possessing leverage should work on supply chain influences, while smaller companies ought to start with in-house programs and eye supply chains to be able to keep up with regulatory requirements.  Further, consumers have the power to spur innovation, so companies would be wise to value customer feedback when evaluating their business models.  And, like financial reporting, CSR reporting should be formalized so commitments are visible and companies are held accountable.

In summary, when moving beyond PR motivated sustainability efforts to future-focused practices, companies will begin to:

  1. View compliance as an opportunity
  2. Make value chains sustainable
  3. Design sustainable products and services
  4. Develop new business models that will change the competitive landscape, and
  5. Create next-practice platforms by questioning the logic behind current business practices.

(Nidumola, Prahalad & Rangaswami)

Come Together: Collaboration Leads to Savings

When it comes to sustainability strategies, collaborative distribution is the total package: improved business value proposition, sizable cost reduction and promise of significant emissions reductions.  The potential of this strategy is why EDF listed it #2 on our Five Rules for a More Carbon-Efficient Freight Supply Chain.

Under a collaborative distribution arrangement, companies in the same or similar industries share warehouse and distribution assets. Because the products from participating companies are going to the same destinations, this arrangement enables more efficient loading of trucks, more frequent deliveries and fewer truck miles, which equals lower emissions. A third party logistics firm is typically involved in these arrangements and ensures the security of proprietary data and fair treatment of the products for all participating companies.

For a great, short introduction to the topic, see a video from Kane is Able.

Others agree with our high opinion of collaborative distribution too. Capgemini and the Global Commerce Initiative highlighted the strategy in their 2016: Future Supply Chain report. The report found that collaborative supply chain logistics have the potential to slash costs by more than 30 percent and increase carbon efficiency by 25 percent. A leading freight industry publication, Inbound Logistics, has noted that collaborative distribution “warrants serious consideration” from shippers.

It’s not all smooth sailing, though, for collaboration in the logistics space. As supply chain guru Art van Bodegraven recently noted, while supply chain managers understand that collaboration is vital for survival over the coming years, “we're not very good at it.”

Why not? Well, many shippers have concerns about possible information disclosure to competitors, but several direct competitors have been able to overcome this potential obstacle.  A leading provider of collaborative distribution services has suggested that “the barrier to broad adoption is really the inertia created by years and years of implementing the current distribution model.” I’m inclined to agree with this sentiment.

In a recent EDF report, Smart Moves, we highlighted the efforts of many companies, including Best Buy, Sun-Maid Growers, Just Born and The Topps Company, Inc, that are leveraging collaborative distribution. We also pointed to the Hershey’s and Ferrero announcement about plans to collaborate on warehousing, transportation and distribution in North America. When announcing the collaboration, the companies highlighted the cost and emissions-reduction benefits of the deal.

Collaboration, of course, is not limited to warehousing and distribution. Other examples highlighted in Smart Moves include:

Back-Haul Matching

  • Macy’s and trucking company Schneider National demonstrated the value of reducing empty backhauls through Empty Miles Service, an online service provided by the Voluntary Interindustry Commerce Solutions Association (VICS). This program helps participating companies expand their network of others wanting to identify matches for their empty backhauls. In the pilot project, Macy’s and Schneider found an average annual savings of $25,000 per lane (regular trucking routes) and were able to reduce per-lane carbon emissions by 150 tons. Given that Macy’s operates over eight hundred stores and likely even more lanes, the potential savings of this program are enormous.

 Co-Loading Freight

  • Dal-Tile Corporation, the largest U.S. manufacturer of ceramic tile, recently increased container utilization rates by finding freight from other companies that could be loaded atop their floor tiles. Because floor tiles are heavy, Dal-Tile previously was unable to use the full cubic space of the trailers they were shipping from Mexico to distribution centers in the U.S. Lighter freight from other companies enabled Dal-Tile and its partners to cut transportation costs up to 15 percent per load.

Companies have significant opportunities to reduce freight costs and associated emissions by working with other shippers. Those leaders showing the way have demonstrated solutions to the greatest concerns shippers have about data security and allocation of cost savings. It time for more companies to embrace collaborative distribution.

Green Jobs, Blue Jobs

The industrial sector accounts for roughly one-third of U.S. greenhouse gas emissions. The good news is that there are huge, untapped energy-efficiency opportunities that can save manufacturing companies money (see www.lesscarbonmoreinnovation.org). Unfortunately barriers—ranging from financial, organizational and cultural—hinder companies from implementing these solutions

That’s why EDF has teamed up with the labor union IUE-CWA on a project to overcome these barriers. IUE-CWA workers are being taught to conduct energy-efficiency “Treasure Hunts,” which leverages their first-hand expertise and knowledge to identify efficiency opportunities. We recently co-presented about the project at the Good Jobs, Green Jobs regional conference in Los Angeles —a gathering of labor unions and environment organizations.

In addition to myself (to see my presentation, click here), the speakers included:

  • Lauren Asplen, Assistant to the President, IUE-CWA.
  • Bruce Bremer, Bremer Energy Consulting Services.
  • Bill Draves, Treasure Hunt Team Leader, IUE-CWA Local 722
  • Ed Derr, Lean Coordinator, IUE-CWA Local 648

Lauren Asplen spoke about how training its members to conduct energy-efficiency Treasure Hunts complements its Lean High Performance Manufacturing program.  Lauren noted that the savings identified so far have been very impressive—regardless of type or age of the plant: “We’ve identified significant savings at every plant we’ve gone to so far—including new plants or plants that had already undertaken initiatives to cut their energy savings by 50 percent.” (To see Lauren’s presentation, click here).

Bruce Bremer, an energy management consultant with over 30 years of experience, is training IUE-CWA workers on conducting energy-efficiency Treasure Hunts. Bruce spoke about and clarified how Treasure Hunts fit into an overall energy management program. Bruce also clarified the difference between an energy audit and a Treasure Hunt. “A Treasure Hunt is a three day event that involves workers at the plant as well as external experts to identify energy-efficiency opportunities. The Treasure Hunt is also aimed at changing workplace culture so that the participants bring back the key concepts from the Treasure Hunt into their day-to-day work as part of a process of continual improvement. An energy audit is typically done by an outside expert and is not aimed at engaging workers or changing work place behaviors.” (To see Bruce’s presentation, click here).

Bill Draves, who hails from IUE-CWA Local 722 at a GE lighting plant in Warren, OH, talked about the types of energy-saving opportunities that IUE-CWA”s Treasure Hunt teams have been identifying. “The small opportunities can add up to big savings.” He mentioned an example of a small gap in the seal around an oven door. Pinching his fingers close together for added emphasis, he said: “The seal around the oven door had a very small gap, but this small gap was resulting in a lot of wasted energy. With a few hundred dollar fix of new insulation to seal the door, the company could start saving over $10,000/year!”

Ed Derr, who is a Lean Coordinator at IUE-CWA Local 648 at CCL Container, which makes aluminum containers, in Hermitage, PA,  spoke about the Treasure Hunt experience at his plant. Ed talked about the enthusiasm among the workers for the Treasure Hunt—some of the workers got so excited that they started implementing the savings opportunities before the Treasure Hunt was even over. Since CCL has basically been operating 24/7 for over 15 years, the “down-time” opportunities are few and far between. One of those opportunities occurred a few weeks after the Treasure Hunt during Thanksgiving.  CCL’s workers, who are basically going to work every day of the week, came in during Thanksgiving to implement one of the efficiency projects identified. That speaks volumes about the enthusiasm of the workers and their commitment to improving efficiency at their plants. Their motivation? “A lot of manufacturing jobs have been lost around where I live. I want to do everything I can to help make this plant as competitive as possible so that I still have a job.” Ed also added that the type of energy savings that he and his co-workers are identifying help the environment, which is “important for my kids.”

”Sustainability is also about sustaining jobs,” observed Bill. That’s a critical piece of the puzzle if we’re going to succeed in unlocking the full potential of industrial energy efficiency and moving towards a low-carbon economy.

Senior leader buy-in proves key to successful ESG programs in Private Equity

Lee Coker, Project Manager, Environmental Defense Fund's Corporate Partnerships Program

In our past few blog posts about our Green Returns project in the private equity industry, we’ve highlighted several environmental, social and governance (ESG) best practices that are emerging across the sector. One critical element of a successful ESG strategy that we have not yet discussed is the importance of senior level commitment and leadership. This sets the tone throughout the firm that the ESG program is a strategic priority that will be complemented with the necessary capital and resources to achieve meaningful financial and environmental results. It also empowers employees, both at the firm and portfolio companies, to spend some of their time capitalizing on ESG opportunities.

To build a robust ESG program that drives measurable results, a range of stakeholders must buy in to the value creation potential of ESG, including the employees at the firm, the management teams of the portfolio companies and the firm’s limited partners. Who better to close this sale than the firm's senior leaders by speaking publically about their firm’s ESG commitment to create a sense of urgency and signal the program is of long term strategic value?

In watching this recent Wall Street Journal interview with David Rubenstein, co-founder of The Carlyle Group, it’s clear that he understands how to navigate this sales process and is actively promoting the idea that “sustainability equals more cash flow.”  By integrating EcoValuScreen into its existing operational mindset, Carlyle has seen exactly these results at numerous portfolio companies.  In addition, Carlyle is working to improve its ESG metrics, incorporating sustainability considerations into its U.S. real estate investments and expanding efforts to focus on social impacts.  While Rubenstein indicates that limited partner pressure has helped, his commitment is also integral to the continued growth and success of this program.

Another prime example of senior leader buy-in is George Roberts’, co-founder of KKR, 2011 speech at Private Equity International's Responsible Investing Forum.  In addition to the quantitative results from the Green Portfolio program, Roberts highlights three additional reasons to incorporate environmental management into private equity; stronger business relationships, increasing limited partner demand and growing interest among top recruits of the firm in their ESG activity.

Carlyle’s recent Citizenship Report and KKR’s third year of results both highlight how adopting ESG best practices can lead to strong financial and environmental returns.

KKR and Carlyle are clearly the two U.S. leaders when it comes to integrating ESG into private equity and it’s no coincidence that founders of both firms are champions for their programs both internally and publically.  While dedicated top level buy-in is not always necessary to getting an ESG program started, we believe it is absolutely essential to ensuring the program is successful and long lasting.

Postponement: A logistics sustainability strategy worth NOT putting off

Timing is everything, and companies facing choices around freight transportation modes must consider transit times, inventory levels and demand forecasts when making decisions. Ease pressure on these variables and you enable companies to utilize cheaper and more carbon-efficient modes of transportation.

In many cases, companies can increase the flexibility of their supply chains by developing methods that reduce risk associated with poor demand forecasts.  One way of doing so is to delay product assembly – a process known simply as ”postponement.” This allows companies to maximize the value of their inventory, respond to changing tastes and meet consumer customization demands.  EDF included these two case examples of postponement in our recent report, Smart Moves:

Benetton was also recently highlighted for its postponement strategy by Dr. Edgar Blanco from MIT. The company delayed the final dyeing the sweaters in order to better respond to uncertainty about demand. As a result, the company was able to reduce unsold stock from 33% to 8%.

Expedited services from leading ocean and rail freight companies require nearly  three weeks to move goods from Asia to North America, so shippers must plan ahead and build flexibility into their systems to maximize the use of the most carbon-efficient modes of transportation. For many products, postponement can be an effective strategy to increase flexibility and enable the use of more efficient transport.