the business case for environmental excellence is real

THE BUSINESS CASE FOR ENVIRONMENTALEXCELLENCE IS REAL

THE BUSINESS CASE FOR ENVIRONMENTAL EXCELLENCE IS REAL

2 ENVIRONMENTAL EXCELLENCE

ENVIRONMENTAL EXCELLENCE 3

TABLE OF CONTENTS

FOREWORD - IDC 7

FOREWORD - ATOS ORIGIN 9

EXECUTIVE SUMMARY - ATOS ORIGIN 11

DEFINING ENVIRONMENTAL EXCELLENCE 15

The Business Case for Environmental Excellence 15

The Impact of the Economic Downturn on Environmental Excellence Programs 17

ACHIEVING ENVIRONMENTAL EXCELLENCE IS A JOURNEY 19

The Environmental Excellence Maturity Model 19

Compliance - Establishing the Foundation 23

Communication - Articulating the Environmental Strategy 25

Internal Operations - Opportunities for Lower Costs, Increased Revenue 27

External Operations - Magnifying the Value 31

Environmental Excellence - Fulfilling Potential 32

THE ELEMENTS OF ENVIRONMENTAL EXCELLENCE 35

Organizing for Excellence 35

Process Transformation - Lean/Six Sigma Sustainability 38Product and Packaging Design 38

Materials Sourcing and Supply Chain 42

Manufacturing and Energy Consumption 44

Transportation 47

Consumer Demand and Consumption 49

End of Useful Life 50

The Role of Information Technology 51Taking a Conservative Approach 52

Applying Software to Environmental Excellence 54


OppORTUNITIES bY INDUSTRY SEGMENT 57

Automotive 57

High-Tech 59

Chemical 60

Consumer Goods 62

Retailing 62

ESSENTIAL GUIDANCE 65

Recognize that the Business Case for Environmental Excellence is Real 65

Devise a Strategy 65

Organize Your Environmental Excellence Efforts 66

Execute on Process Transformation 66

Develop New Capabilities 67

Communicate Openly 67

Use Internal and External Experts 68

AppENDIX 71

Methodology 71

Supplemental Table of Environmental Regulations 77

Abbreviations and Glossary 82

ACKNOWLEDGEMENTS 87

Interviewees 87

About the Authors 88

Atos Origin Participants 90


LIST OF TABLES1 Ford of Europe PSI Indicators 40

M1 Survey: Vertical Market Quotas 73

M2 Survey: Company Size Quotas 74

M3 Survey: Number of Completes by Country 74

M4 Survey: Respondent Profile by Job Title and Sub-Vertical Market 75

2 Most Significant EU Regulations and Initiatives Affecting Manufacturing 77

3 Abbreviations list 82

LIST OF FIGURES1 Comparison of Profit Margin Performance 16

2 Environmental Excellence Maturity Model 19

3 Transformation Path 20

4 Top 3 Reasons for Environmental Initiatives 23

5 Top 3 Challenges Companies Have with Regard to Environmental Sustainability 24

6 Expected Payback Period for Environmental Initiatives 27

7 Revenue Growth, 2002-2007 28

8 Environmental Compliance - Collaboration Levels With Suppliers 31

9 Organizational Responsibility for Environmental Sustainability Initiatives 35

10 Product Life-Cycle and Environmental Considerations 38

11 Reduction of Energy Consumption at Volvo Europa Truck Plant 46

12 IT’s Role in Environmental Sustainability 51

13 IT’s Role in Environmental Sustainability (2) 52

14 IT Applications for Environmental Sustainability Deployment 53


FOREWORD - IDC

There is growing pressure for companies to incorporate sustainable practices into their business

strategies, but they would like to move beyond simply responding to external pressure and move

forward. IDC, in collaboration with and sponsored by Atos Origin, conducted detailed research to gauge

current thinking. Our key findings include:

There is a strong business case for environmental excellence. Companies with more mature »sustainability programs enjoy higher profit;

A maturity model can be used to evaluate the existing progress of efforts. Most companies are »anchored in a state of responding to external requirements such as regulatory compliance. However,

the result of this study clearly shows that leading companies are now moving from reactive

approaches to proactive environmental excellence strategies;

Companies wishing to take a greater level of control and capture the business benefits will move »through substantial operational transformation that will cover the full product life cycle, from product

design to end of life;

Effectively implementing operational transformation requires consideration of the people, process, » and technology needed.

Our specific recommendations include:

Devise a strategy that communicates a mission and sets specific goals, measurements and control; »Organize your environmental excellence efforts similar to a continuous improvement program like »Lean or Six Sigma;

Use the effort to transform processes to eliminate waste in both a business and environmental »context, always leverage “lean thinking” in your approach;

Use internal and external expertise to guide you through the transformation; »Avoid the negative consequences of doing nothing. The risk and consequence of inaction can be »dire including forgone opportunities for new revenue and significant loss of competitive advantage in

terms of cost and market responsiveness.

Robert ParkerGroup Vice President Research, IDC Industry Insights


Atos Origin believes that environmental sustainability is not a matter of fashion. Respect for the

environment, the world in which we all live and work, is essential for our collective future and has

become a strategic axis of corporate management. Environmental sustainability is here to stay, as a

priority for individuals, governments and corporations.

For manufacturing companies, environmental strategies and initiatives are not new. From its beginnings

in the 18th century and as main driver of economic development in the 19th and 20th centuries, the

manufacturing sector has had a considerable impact on the environment, the movement of populations

and globalization. In the last decade, the threat of climate change and the finite character of natural

resources, has accelerated “green’s” move into the boardroom. Scientists, activists, consumer

perception and the spectacle of the financial markets have pushed the environmental agenda into the

realm of corporate strategy. Although initially, the primary aim of most companies has been to safeguard

their reputation, progressively, more companies are realizing the necessity and business benefits of

achieving environmental sustainability.

Atos Origin is committed to moving toward environmental excellence, in our own company and in how

we serve our customers. We are pleased to have sponsored and collaborated with IDC on this research

to contribute to the collective understanding of current market dynamics and to share real-life examples

of how multinational companies are tackling the challenges of becoming environmentally excellent,

dealing with regulations and international protocols, balancing varying interests of key stakeholders,

defining strategies and implementing operational transformation across the entire value chain and

reducing their environmental impact while reducing costs and generating new revenues.

Atos Origin is focused on helping our clients maximize the opportunities environmental excellence

provides them. As this report confirms, we believe that it is good business. Organizations, which embed

environmental sustainability at the core of their strategy and operations, future-proof their organization

in these uncertain times.

We hope you will enjoy reading this report and being inspired by how certain companies are progressing

toward environmental excellence and how their journey is impacting not only the environment but

their financial results and competitive positioning. And, of course, we look forward to the opportunity of

accompanying you and your company on your journey toward environmental excellence.

Thierry BretonCEO, Atos Origin

FOREWORD - ATOS ORIGIN


Atos Origin and IDC embarked on this study in the spring of 2008, to examine the hypothesis that the business case for environmental excellence is real. In this study, we have focused on the manufacturing and retail sectors, as we believe they present extraordinary opportunities for environmental and business benefit. Our research and analysis, which included a survey of senior managers and executives of 165 European companies and in-depth interviews with 12 European companies and industry associations, have validated our hypothesis.

In this paper, the evidence and conclusions are presented in text, tables, graphs and real-life examples from companies such as Rhodia, Ford, Saint-Gobain Glass U.K., Carrefour, philips Lighting, Inditex, Volvo, Conforama, Fairchild Semiconductor and key European industry associations. The document in its entirety, brings to life the business potential sustainability offers manufacturing and retail companies. It also challenges you to consider the “executive questions” about your company’s ambitions and progress with regard to our biggest collective priority, the environment.

Companies with more mature environmental sustainability programs have a profitability advantage over the industry in general. These companies have set up initiatives to apply business intelligence to operational data that reveals areas where raw materials can be saved and energy conserved, which delivers immediate business impact through lower costs while, at the same time, reducing the company’s environmental impact. While the primary driver in European companies is still compliance, 46% are running or plan to run environmental projects aimed at cost reduction. There are also some pioneers. These companies are developing new environmentally oriented products and product features, services and business models which deliver new revenues and higher profitability. Even in the face of the current economic climate, the companies interviewed in this study confirm that they are staying the course. This is because they believe that their environmental initiatives not only contribute to environmental sustainability but also deliver additional profits and competitive advantage.

Executive Question: How does your company benchmark against others in your ➡

industry?

Environmental excellence, a cohesive organizational policy and culture that embeds sustainable thinking into all of the activities of the company, is a journey. It is characterized

EXECUTIVE SUMMARY - ATOS ORIGIN


by continuous consideration of opportunities for recycling, reuse, reduction, and new revenue which deliver tangible benefits such as lower costs and profitable revenue growth as well as intangible benefits such as increased brand equity, enhanced corporate reputation, and new intellectual property. An organization’s progress on this journey can be mapped and tracked against the stages of an Environmental Excellence Maturity Model, beginning with compliance and maturing toward environmental excellence, when the concept of sustainability becomes embedded in the DNA of an organization.

Executive Question: Where is your company today, in the Environmental Excellence ➡

Maturity Model? Where does it need to be?

Within the Maturity Model, there is a crucial “zone of transformation”, where companies focus on operational transformation as they transition toward an optimized environmental strategy. Those not making an effort to move through this stage of maturity risk putting themselves in a position of competitive disadvantage. Successfully navigating the “transformation zone” requires commitment. This effort begins with a strategy that articulates a mission, identifies how success will be measured, and sets specific goals for the organization.

Executive Question: Is your company ready to tackle the “zone of transformation”? Has ➡

a strategy been articulated?

The key elements to delivering on the strategy include people, process, and technology. Over 70% of survey respondents believe information technology will play a role in reducing their environmental impact, especially in the areas of supply network modeling and optimization, procurement and supplier relationship management and product life-cycle management. Companies’ investment strategies are, however, centered on improving the organization and visibility of existing data rather than wholesale replacement of existing process automation and IT systems.

Executive Question: What elements and process areas will be key to your company’s ➡

progress toward improved sustainability?

An informed understanding of customer needs, wants and buying behavior is critical to a company’s success with environmental initiatives focused on new revenues. Despite


growing awareness and concern about climate change, consumer buying behavior is not changing so rapidly. Though consumers are proving savvy in understanding total cost of product ownership and use, they are still resistant to paying a premium for more environmentally friendly products.

Executive Question: How well does your company know its customers? Well enough to ➡

identify feasible, environmentally friendly, new product and service ideas?

Collaboration and external expertise are key to greater returns on the environmental excellence journey. The momentum of successful internal initiatives can be accelerated by collaborating with suppliers, partners, and customers and key stakeholders. Sharing information will serve to enhance the competitive position of the entire value chain. Similarly, companies moving beyond a focus on cost savings, leverage external expertise to standardize measurements, prioritize projects, and assist in execution.

Executive Question: What is the potential value of collaborating with suppliers, partners ➡

and customers? Who are the external experts you would consider to support your company in planning and executing your company’s environmental excellence journey?

All of us, at Atos Origin and IDC, look forward to the opportunity to accompany you and your organization on this important and fruitful journey.

Anne FitzsimmonsSenior Vice President, Global Markets Manufacturing, Atos Origin

THE ATTRIBUTES OF ENVIRONMENTAL EXCELLENCE

Top-down organizational commitment to environmental-related activities is readily apparent and continuously ·reinforced

Environmental-related activities are integrated into all organizational processes and are not treated as separate ·initiatives

Governance mechanisms and organizational structures for environmental excellence mirror those of continuous ·improvement programs such as Lean or Six Sigma

Employees at all level are involved in the continuous implementation of environmental-related improvements and ·are encouraged to think innovatively when suggesting changes

Intangible benefits such as increased brand equity, enhanced corporate reputation and new intellectual property are ·realized from environmental excellence related activities

Tangible benefits such as new revenue, lower operational costs and higher asset utilization are directly attributable ·to environmental excellence related activities


consideration of opportunities for recycling, reuse, reduction, and new revenue which deliver tangible benefits such as lower costs and profitable revenue growth as well as intangible benefits such as increased brand equity, enhanced corporate reputation, and new intellectual property. These policies and cultures extend outside the company to relevant stakeholders such as suppliers, partners, customers, investors, and other interested parties.

The Business Case for Environmental Excellence

The definition of sustainability offered by non-profit entities is simple because, for those groups, it is a zero sum game of offsetting consumption with renewal. Enterprise environmental excellence becomes more involved because, for corporations to contribute to simple sustainability, they must satisfy a wide range of stakeholder interests that aren’t always aligned. Our detailed interviews demonstrate that leading companies recognize the importance of having a clearly defined strategy in order to get these stakeholders on the same page. The stakeholders then become empowered to prioritize efforts to maximize the tangible and intangible benefits that can be harvested from sustainability initiatives as outlined in our definition of environmental excellence.

For some time companies, particularly those in manufacturing and in Europe, have had to deal with aggressive regulatory oversight when it comes to environmental protection. The volatile cost of natural resources and energy as well as growing market sensitivity to climate change issues are quickly changing the focus and investment character of corporate environmental initiatives. The effort is not just about compliance with regulations or public relations, but about creating competitive cost advantages through sustainable practices and growing revenues by offering products that are preferred by customers because they minimize environmental impact.

There are many definitions for sustainability devised by both governmental regulatory bodies and Non-Governmental Organizations (NGOs). Most take the tone of the UN World Commission on Environment and Development, which defines sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” However, manufacturing and retail enterprises must go beyond this simple construct and drive toward becoming an organization immersed in environmental excellence, which we define as a cohesive organizational policy and culture that embeds sustainable thinking into all of the activities of the company. Environmental Excellence is characterized by continuous

DEFINING ENVIRONMENTAL EXCELLENCE

Cohesive organizational policy and culture that embeds sustainable thinking into all of the activities of the company


Figure 1 shows the results for median profit margins over a five-year period. particularly noteworthy is that the superior margin performance of companies in the Dow Jones Sustainability Index improved over time. The measured timeframe corresponds with a timeframe during which environmental practices were advancing generally, indicating a strong connection between better profits and environmental excellence. The business case for environmental excellence is real.

Fortunately, there is compelling evidence that movement toward environmental excellence brings associated business benefits. IDC maintains a global performance index of over 850 publicly traded companies. To test the premise that more environmentally aware companies perform better, we cross-referenced our performance database with the Dow Jones Sustainability Index, which is populated by companies identified as having more mature environmental practices.

FIGURE 1

Comparison of Profit Margin Performance

9876543210

Margins of manufacturing companies covered in the IDC Performance Database (850)

Margins of manufacturing companies in the Dow Jones Sustainability Index

Prof

it M

argi

n (%

)

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

Source: IDC, 2008


development and powertrain technology to achieve independence from fossil-based fuel and to cut emissions. The industry will continue this product strategy despite the economic situation, especially in Europe. Ford of Europe, for instance, will launch two brand-new small and fuel-efficient cars. Additionally, the company will add a frugal new model with best-in-class fuel consumption and low CO2 emissions. “This shows that our commitment to sustainable mobility has not changed because of the economic situation,” says Dr Wulf-peter Schmidt, Sustainability Manager at Ford of Europe in Cologne (Germany).

Major adjustments in the environmental strategy are not coming in the process manufacturing industry either. Certainly, industry sectors such as Chemicals and plastics will have to adjust the way they allocate resources and be more focused on near-term priorities. Overall, however, the industry will remain committed to improving their environmental performances despite the difficult economic context.

As Dr Alan McLenaghan, Managing Director of Saint-Gobain Glass U.K. put it:

”The current economic downturn in the UK, European and indeed global marketplace does not modify in any way our objective of being an environmental leader not just within the flat glass industry but within manufacturing in general.”

The Impact of the Economic Downturn on Environmental Excellence Programs

What are the effects of the current economic recession on environmental excellence programs in the manufacturing industry? Is environmental excellence going to be sacrificed in the interest of some near term cash flow savings? We do not think so. On the contrary, when we re-interviewed the environmentally aware companies (i.e. companies which have already initiated their journey towards environmental excellence) that were part of this study, they universally stated that they will not divert from this path. In fact, the difficult economic situation places an even greater importance on operating efficiency through the reduction of operating costs and the lowering of energy and resource consumption that can be achieved through these efforts.

Carmakers, for example, are facing increasingly reluctant consumers and are suffering heavy setbacks from volatile fuel and raw material prices. The industry is asking for government support and market incentives in order to fight the current difficulties and meet the tight government-set CO2 regulation targets. However, automakers - especially in Europe - have made substantial increases in capital spending over the past decade related to product

The difficult economic situation places an even greater importance on operating efficiency


Evidence of positive business results is affirming, but the path to achieving environmental excellence is transformative and incremental. As such, it is important for companies to understand the stages of progress toward environmental excellence, self-assess their current state, and understand the effort and reward for driving maturity.

ACHIEVING ENVIRONMENTAL EXCELLENCE IS A JOURNEY

The Environmental Excellence Maturity Model

Figure 2 illustrates a maturity model for how companies will move toward environmental excellence. The model begins with initial motivations, which are usually centered on complying with regulatory requirements. process

FIGURE 2

Environmental Excellence Maturity Model

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Time

Excellence

OptimizedStrategy

ManagedStrategy

DefinedStrategy

Process Development

InitialMotivations

Compliance

Corporate SocialResponsibility

ProcessChange

ContinuousImprovement

EnvironmentalExcellence

<1%

<5%

20%

30%

45%

Today’s level of maturity

Source: IDC, 2008


transformation program to being immersed in all corporate activities.

IDC estimates that a majority, approximately 75% of companies, are still between the first and second phases of maturity. About 20% are in phase three (the process change stage) and a small minority is further. Even the more mature companies in the Dow Jones Sustainability Index or those that were selected for our detailed interviews are likely still to be working through process changes.

development begins to streamline those requirements by incorporating specific environmental reporting considerations into operating procedures. At phase three, a cohesive strategy for environmental excellence is articulated and, at phase four, the strategy is supported by a portfolio of projects geared to improvement. The end state is one where the strategy is optimized because environmental considerations have moved from being a separate

FIGURE 3

Transformation Path

RegulatoryCompliance

PublicRelations

OperationalProcesses

ProductManagement

Full ValueChain

Six SigmaSustainability

EnvironmentalContinuousImprovement

React toExternalChallenges

CoordinateInternallyDrivenExcellence

Transformation Zone

Phase 1InitialMotivations

Phase 2ProcessDevelopment

Phase 3DefinedStrategy

Phase 4ManagedStrategy

Phase 5OptimizedStrategy

Source: IDC, 2008


putting themselves in a position of severe competitive disadvantage.

The rest of this section looks at each of these transformation milestones to provide a clearer overview of required internal and external communication, required capabilities and expected business value.

The process change stage is a critical one as it marks the beginning of real transformation with initiatives based on an articulated strategy instead of reactive activity driven by external regulatory requirements. Figure 3 breaks the maturity model into more detail and highlights a “zone of transformation” where companies make the transition toward an optimized environmental strategy. Companies not making an effort to move toward this stage of maturity risk

Penalty avoidance: · By being compliant with statutory regulations, companies avoid penalties, keep the firm out of the media, and executives out of jail

Creation of additional revenue: · A growing customer preference for sustainable products represents opportunities to grow market share. Also, several markets are growing rapidly (e.g. wind turbines) and brand new ones are emerging which magnifies the revenue opportunity

Product differentiation: · Design for sustainability methods allow companies to realize product cost savings and differentiate products to satisfy customer expectations for minimizing environmental impact

A more effective supply chain: · Collaborating with suppliers on green initiatives helps mitigate the overall regulatory risk, increase control on supply chains, generate cost reduction opportunities, and become more responsive to market changes

Transport costs optimization: · Benefits from optimizing transportation come from reducing fuel consumption through integrated consideration for energy use when tendering and dispatching loads

Supply risk mitigation: · Reductions of energy and raw material consumption bring costs down and assure a higher resiliency to energy and raw material price volatility

· Cost savings: The application of Reduce, Reuse, Recycle considerations drives reductions in material, transportation, manufacturing, and disposal costs

THE PRIMARY BENEFITS OF ENVIRONMENTAL EXCELLENCE


Compliance - Establishing the Foundation

European manufacturers and retailers must satisfy a particularly heavy environmental regulatory burden. According to the United Nations, the cost of environmental regulatory compliance consumes nearly 1% of gross domestic product. While the costs are great, efforts in this area also serve to create the foundation for capabilities that are essential to achieving environmental excellence. According to the European Commission, “Three to four years ago the debate was concentrated on the Lisbon agenda

and the environment had a low priority. Now business is starting to recognize the economic aspects of CO2 emission reductions.”

Compliance remains the largest influencer of environmental policy at companies. Figure 4 shows a preponderance of companies that see compliance as the reason they are active in environmental sustainability. More than 62% of survey respondents ranked compliance as the number 1 reason, easily outstripping the second most popular choice, customer mandate.

FIGURE 4

Top 3 Reasons for Environmental Initiatives

What are the top 3 reasons for your organization being active in environmental sustainability?

62,4 11,5 9,7

9,7

9,1

9,7 23,0

20,6 16,4

26,1 10,9

Comply with government and/or otherregulations

Respond to mandate and/or pressure fromcustomers/consumers

Reduce costs

Improve the image or reputation

Reduce carbon emissions

0 20 40 60 80 100(%)

Top 1 Top 2 Top 3

n = 165

Source: IDC, 2008


Fairchild Semiconductor, a global provider of semiconductor technology, offers a good example of a company that responds well to regulatory requirements. Fairchild Semiconductor is committed to compliance with all environmental regulatory requirements in the countries where it does business. The company often

“To measure the success of our

green practices, we track electricity and water consumption, global warming gas

emissions and waste generation. These

KpIs measure impact on the environment and on our bottom

line.”

Mr Karl Albrecht, Fairchild

Semiconductor

exceeds those requirements through the implementation of more rigorous company environmental standards, as a way to differentiate with respect to its competitors.

Compliance is also viewed as a key challenge to keeping up with environmental sustainability (see Figure 5).

FIGURE 5

Top 3 Challenges Companies Have with Regard to Environmental Sustainability

What are the top 3 challenges or issues your organization faces with respect to environmental sustainability?

0 2010 40 5030 60

(%)

Top 1 Top 2 Top 3

35,8 12,7 6,1

7,9 11,5 16,4

10,34,8

11,5

16,4

12,7 6,1

9,18,510,3

10,9 10,3 4,8

13,96,7

5,5 12,1

9,7 6,1

7,9

New or more stringent government regulations

Changing our manufacturing processes

Getting suppliers and trading partners to actwith a similar commitment

Lack of standards regarding measurement

Balancing green/sustainability efforts withcustomer expectations for low prices

Obtaining chemical composition data fromsuppliers

Training employees

Implement design for environment

Obtaining carbon-emissions data from suppliers

Redesigning the Supply Chain

n = 165

Source: IDC, 2008


Our ongoing research leads us to the conclusion that it is very rare that companies are disingenuous in their declarations. Instead, often an enterprise uses the public stage to articulate its environmental mission and principles and to create a set of expectations for employees, partners, and external stakeholders that they then have to live up to. Many companies commit to public disclosure, similar to financial disclosure, to report not only their intentions but also their accomplishments.

Airbus, for example, has assigned the tag line to its new A380 platform - “A better environment, inside and out.” Given the rather unfriendly carbon footprint of air travel, the company opened itself up to some snide commentary, but environmental organizations aren’t going to shame it out of the aircraft business. The statement was important in setting design goals for its own engineers and those in its large supplier community. The aim is for the plane to set new standards for travel comfort (the inside environment) while being as environmentally friendly as possible (the outside environment).

The Airbus example is one of many that demonstrate the value of the communication stage. Communicating a mission is an important element in setting a goal, articulating a strategy, and

However, the overall percentage was slightly more than half and secondary challenges such as changing manufacturing processes, including suppliers in the process, and standardizing measurements all exceeded 30%. This smaller gap between compliance and other considerations (when comparing challenges to initiatives) is evidence that companies are beginning to move beyond simple compliance activities.

There are immediate benefits to regulatory compliance such as avoiding penalties, keeping the company out of the media, and keeping executives out of jail.

These motivations aside, regulatory compliance activities also serve as an important foundation for rationalizing measurements, organizational structure, and processes in order to capture the benefits of environmental excellence.

Communication - Articulating the Environmental Strategy

publicly asserting the company’s commitment to environmental sustainability can open it up to criticism from NGOs and the press. Typically the company is accused of “greenwashing” - publicly declaring a commitment but doing little in practice.

Typically the company is accused of “greenwashing” - publicly declaring a commitment but doing little in practice

MATURITY MODEL LEVELS: DRIVERS AND CHARACTERISTICS

Maturity phases Characteristics of the phase Drivers to move up

Initial motivations

Regulatory compliance - Regulations make being green a business imperative rather than a choice, with severe fines for companies not in compliance:

Organizations are geared to satisfying regulations at minimum cost, usually ·managed by an EH&S department.

Leverage mandatory compliance projects ·as a way to improve company image and reputation;Continuous reduction in compliance cost ·burden;

Process development

Corporate social responsibility & branding - Although compliance is still seen as a cost center, companies begin to:

Streamline compliance requirements by incorporating specific environmental ·reporting considerations and environmental measurement into operating procedures;Marketing their compliance as a corporate differentiator. Companies support a ·wide range of initiatives internally and externally that promote the company’s brand;Create the Principles for Environmental-Related Capabilities. While costs are ·still high, efforts in this area also serve to set the foundation for capabilities that are essential to achieving environmental excellence;From the organizational perspective, create a CSR office, typically as part of ·Marketing or Corporate Communication. The CSR group does not typically have budget to run environmental programs.

Avoid the risks of pure greenwashing on ·branding;Move from disconnected point projects, ·either driven by regulatory compliance or by marketing goals, towards a defined strategy with a clear target and expected measurable benefits;Undertake cost containment initiatives ·based on environmental considerations (e.g. focus on utility bills reductions).

Defined strategy

Business processes change - Executive management starts committing to a cohesive set of tactics for environmental excellence based on business processes changes and short-term projects:

Companies can achieve short-term benefits by assessing how to reduce the ·carbon footprint of existing business practices;Often the focus is on utility bills as a guideline: Energy, Water, Waste/Landfill; ·Normally the focus is on internal operations to make standard business practices ·greener;Companies start to focus on product management and implement design for ·sustainability;New revenue starts being generated from launching greener products that meet ·customers’ and consumers’ expectations;From the organizational perspective, a small central team is created with the ·objective to foster environmental excellence initiatives among selected areas of the organization. However, they typically do not have a substantial budget and each individual environmental excellence initiative is funded by the business function realizing the benefit.

Need to converge a number of separate ·environmental initiatives and objectives set by different business functions into a broader and unique corporate strategy;Move from short-term point projects ·towards the benefits of an overall managed strategy;Understanding that going outside the ·four walls of the company can bring incremental benefits;Optimized project funding and efforts ·towards a unique corporate goal.

Managed strategy

Continuous improvement strategy - Executive management commits to an overall managed strategy for environmental excellence that is undertaken as a continuous improvement process:

Overall corporate goals and values are identified and grassroots initiatives are ·encouraged; The strategy is supported by a portfolio of projects geared to meet the overall ·corporate goals;Environmental excellence initiatives are organized and managed as continuous ·improvement programs like Lean Six Sigma and are following a “lean thinking”-like approach;The focus typically extends externally, including trading partners, suppliers, ·and others;A meaningful portion of revenue and profit margin is generated from the ·environmental strategy;Organizationally, a central team coordinates the various initiatives and make ·sure they are aligned to the overall corporate goals. Project funding is a shared effort of the central environmental group and the business function where the initiative takes place.

Environmental considerations start to be ·entirely incorporated into all corporate activities;Employees at all levels are contributing to ·environmental excellence activities;Central environmental excellence team is ·effective at bridging strategy and execution through standardized methods and consistent measurements.

Optimized strategy

Environmental excellence - The strategy is optimized because environmental considerations have moved from being a separate transformation program to being immersed in all corporate activities:

This is the desired end state although the commitment and progress toward ·increasing environmental excellence is ongoing.


focusing on internal operations, begins to bridge strategy and execution, the essential element of transformation when strategy becomes real. This stage also begins to deliver real business benefits - both in terms of reduced operating costs and new revenue.

Immediate Impact comes from Lowering Costs Figure 1 shows that companies with more mature environmental sustainability programs have a profitability advantage over the industry in general. These companies have set up initiatives to apply business intelligence to operational data that reveals areas where raw materials can be saved and energy conserved, which delivers immediate business impact through lower costs while, at the same time, reducing the company’s environmental impact.

Figure 6 shows the expected payback period for environmental initiatives. The distribution of answers is relatively even, but the initiatives with a payback period of between one and three years (over 40% combined) are believed to be related to efforts which reduce consumption and lower costs. As we learned from the Swedish automotive manufacturer Volvo Europa Truck - “Volvo is optimistic about future improvements on environmental impact by manufacturing enterprises, because today it is easy to demonstrate

getting an organization moving away from compliance-centric thinking and on a path to environmental excellence. A critical element to the communication is that it comes from the highest levels of the organization so that the message is taken seriously. The strategy is important in guiding execution efforts, just as execution efforts are important in realizing the strategy.

Internal Operations - Opportunities for Lower Costs, Increased Revenue

Compliance creates a foundation for new capabilities. Communication then articulates a strategy for a common understanding of the corporate environmental mission. The next stage,

Focusing on internal operations, begins to bridge strategy and execution, the essential element of transformation when strategy becomes real

FIGURE 6

Expected Payback Period for Environmental Initiatives

What is the expected payback period of your organization’s investments in environmental initiatives?

1 year toless than 3 years

3 years or more

Don’t know

We do not expectto recover these costs

Less than a year

0 10 20 30 40 50(%)

n = 165

Source: IDC, 2008


New Revenue from Greener ProductsComparing companies in the Dow Jones Sustainability Index to a broader sample of manufacturing companies showed a distinct profitability advantage. However, performance relative to revenue growth showed no difference (see Figure 7), which indicates that the profitability advantage was almost entirely the result of cost reduction. Additionally, several of the companies in our detailed interviews stated that consumers were not yet willing to pay a premium for a more environmentally friendly product.

that most environmental initiatives are bringing rapid business results.”

This initial cost reduction effort is the most critical to a company’s long-term success. Not only does it begin to link environmental strategy with execution, it also delivers real financial benefits that create momentum for future transformation. Companies that have already generated positive results in this stage have shown a propensity for using external expertise to standardize measurements, prioritize projects, and assist in execution.

FIGURE 7

Revenue Index Growth, 2002-2007

140

160

120

100

80

60

40

20

0

Revenues of manufacturing companies covered in the IDC Performance Database (850)

Revenues of manufacturing companies in the Dow Jones Sustainability Index

Q102

Q302

Q103

Q303

Q104

Q304

Q105

Q305

Q106

Q306

Q107

Q307

Reve

nue

Inde

x(In

dex,

bas

e ye

ar 2

002

= 1

00)

Source: IDC, 2008


energy consumption are one of the key drivers for ensuring profitable growth at philips which, at that same time, deliver a positive result for the environment and improved lighting solutions.”

The philips design initiative illustrates the sophistication of the consumer. These new lighting products aren’t purchased for some altruistic motive, but rather because the products save energy and, by extension, costs to the consumer. Like cost reduction initiatives, new products can deliver a lot of momentum but they must be carefully considered, as most customers are not yet willing to pay more to do the right thing for the environment. However, customers are becoming savvier in their understanding of the economic implications and will pay more for good overall ownership and usage value.

This doesn’t mean that there aren’t opportunities for new revenue through the incorporation of environmental thinking in the product development processes. In fact, IDC believes that the majority of initiatives that have a payback period shorter than one year (see Figure 6) are driven by profits realized on new products and product features developed as a result of customer environmental preferences.

As seen by the percentage of projects in this payback period category (less than 10%), these opportunities are less broad based than cost reduction opportunities and must be carefully vetted to real buying intentions of target customers and markets. For example, philips Lighting, the lighting business unit of Royal philips Electronics of the Netherlands, told us that “New lighting products with lower

The majority of initiatives that have a payback period shorter than one year are driven by profits realized on new products and product features developed as a result of customer environmental preferences

ESSENTIAL CAPABILITIES

Innovative mindset · in meeting stringent CO2 emissions or energy consumption targets such as the UN Framework Convention on Climate Change (UNFCCC - “The Kyoto Protocol”), EURO 5, EU regulations, and RoHS legislation

Culture of respect for the environment · and waste elimination

Closer collaboration · with internal and external stakeholders:

Employees ·Suppliers ·Trading partners ·Customers ·Regulatory bodies, governments, industry associations, consumers, and environmental ·groups

Proper organization and quality procedures in place · (e.g. ISO 14001)


External Operations - Magnifying the Value

The momentum of the internal operations stage can be accelerated by collaborating with suppliers, partners, and customers. Sharing information about and collaborating around

successful projects will serve to enhance the competitive position of the entire value chain.

Fortunately, companies have already been working with external constituents on environmental matters, particularly compliance. Figure 8 shows that a large

FIGURE 8

Environmental Compliance - Collaboration Levels With Suppliers

Does your organization require suppliers to follow any of the following environmental compliance requirements?

0 2010 40 5030 60 70

(%)

ISO 14001

REACH (Registration, Evaluation, and Authorization of Chemicals)

WEEE (Waste Electrical and ElectronicEquipment Directive)

RoHS (Restriction of HazardousSubstances)

ELV (End-of-Life Vehicle)

Others

None of the above/don’t know

Own company must comply

Requires suppliers to comply

n = 165

Multiple responses allowed.

Source: IDC, 2008


percentage of companies that must comply with specific initiatives also include their suppliers in the process. These existing working relationships around compliance will make it easier to work with these partners in efforts to extend cost savings and coordinate new product introductions.

Extending compliance requirements to suppliers and collaborating on satisfying those mandates helps mitigate risk. For example, if a foreign supplier has a particularly heavy carbon footprint at its manufacturing plant, it is often the company that contracted work with the supplier that is subjected to public scrutiny, not the foreign supplier. Using a common understanding of environmental challenges, companies can share cost reduction benefits. beyond cost reduction, collaboration of this nature also allows the participating companies to share information more effectively, harmonize processes, and become more responsive to market changes.

Environmental Excellence - Fulfilling Potential

The transformative stages of the maturity model will produce positive business results from changing processes, reshaping products and services, and, in conjunction

with external participants, redefining business models. The end state can be described as one where environmental excellence is not an independent strategic initiative but is imbedded in all of the company’s corporate, commercial, manufacturing, and distribution activities. A culture of immersed environmental improvement and market opportunity will be present. For example, the Spanish fashion distributor Inditex SA identified three strategic long-term goals for environmental excellence at its company:

Continuous improvement in all activities; »Embedding environmental aspects in all »Inditex business areas and processes;

Commitment to the customer and »employees.

As mentioned previously, there will be significant cumulative benefits captured throughout the transformation. Once at the excellence stage, the culture of waste elimination and responsiveness to new revenue opportunities is akin to advanced “lean thinking,” which will result in lower costs and a more profitable organization. Ongoing revenue growth, improved asset management, and increased profitability will be the lasting reward.

Extending compliance requirements to

suppliers and collaborating on satisfying those mandates helps

mitigate risk


Organizing for Excellence

Our survey showed that organizational structures related to environmental initiatives align with the stages of maturity (see Figure 9). Many companies are still at the compliance stage and, as our survey revealed, still manage environmental projects as part of the Environment, Health, and Safety (EH&S) department.

Successfully navigating the “transformation zone” and achieving environmental excellence requires a considerable commitment of resources. This effort begins with a strategy that articulates a mission, identifies how success will be measured, and sets specific goals for the organization. The key elements to delivering on that strategy include people, process, and technology.

THE ELEMENTS OF ENVIRONMENTAL EXCELLENCE

FIGURE 9

Organizational Responsibility for Environmental Sustainability Initiatives

How are environmental sustainability projects defined and managed within your organization?

0 5 10 15 20 25 30 35 40

As part of our environmental, health, andsafety department

We have a “corporate sustainability”department with dedicated resources and

management

As a cross-functional team managed by anexecutive fully allocated resources and

management

As part of our supply chain department’sresponsabilities

As part of our regulatory compliancedepartment’s responsabilities

(%)

n = 165

Source: IDC, 2008


A similar proportion of companies have a corporate sustainability department with staff dedicated to managing environmental and social initiatives. These companies are indicative of those in the communication stage as described in the maturity model. A smaller number of companies have a cross-functional team managed by an executive dedicated to sustainability projects, which would support a focus on internal operations. An even smaller percentage of companies manage initiatives from their supply chain organization, which would indicate an external operations perspective.

Among the companies we interviewed, the organizational responsibility varied greatly by company. Today, French chemical producer Rhodia International SA typifies an organization in transition from compliance to communication. There is a corporate sustainability department, but it has only three people; these personnel interact with business unit staff but those business unit staff are not dedicated to environmental efforts. Lastly, there are environmental measures included in evaluating business unit performance, but

not specific budgets for initiatives within those units.

The French retailer and distribution group Carrefour SA has a more mature governance structure. policies are created by the corporate sustainability group, which are approved by senior management and then implemented by country level management. This structure accommodates a closed loop system where information makes its way up to senior management who can then adjust policy, which recalibrates operating procedures.

We are seeing the beginning of a necessary shift from EH&S or regulatory compliance leadership focused on mandatory point initiatives and typically driven by regulatory compliance and employee safety to an independent, cross-functional organization which can manage environmental initiatives across various functional groups. What is needed is a fully funded and staffed organization, supported by external expertise that can drive transformation much like a Lean or Six Sigma effort.

“One of our 2007 targets: reduce energy consumption by 20%

by 2020.”

Mr paul Rowsome, Carrefour

ORGANIZATIONAL ELEMENTS OF LEAN/SIX SIGMA

“Six Sigma” is a continuous statistical quality control method, which identifies and removes errors and defects in manufacturing and business processes, thus eliminating anything that could lead to customer dissatisfaction. It is based on various quality management methods including statistical process control and is often connected with lean manufacturing methods. As this approach requires a disciplined organizational commitment to be deployed with efficacy, different roles are defined to implement it:

Executive Leadership · , typically the CEO or top management, is responsible for creating the vision. They foster and empower employees to explore new ideas for continuous improvement

Champions · are accountable for Six Sigma implementation across business functions and are responsible for training employees on the methodology

Master Black Belts · , exclusively dedicated to the continuous improvement program, they ensure consistent application of Six Sigma across all projects

Black Belts · are exclusively dedicated resources and are focused on individual Six Sigma project execution

Green Belts · participate in Six Sigma implementations along with their other job responsibilities


Product and Packaging Designproduct design impacts both cost savings and new revenue opportunities. Depending on the industry segment, as much as 85% of the material cost is locked in at the design phase. In parallel to cost, a similar percentage of the environmental impact of producing the product is also locked in at this stage.

Process Transformation - Lean/Six Sigma Sustainability

There are environmental implications at all stages in the product life cycle, from the point when it is merely a designer’s idea to the point when it has reached the end of its useful life (see Figure 10). Along the way there are considerations for reuse, recycling, reduction, and revenue.

FIGURE 10

Product Life-Cycle and Environmental Considerations

Design Products Source Materials

Endof Life

RecycleReuseReduceRevenue

Make/Produce

Products

Move

Products

Sell

Products

Use/Consume

Source: IDC, 2008


In the spirit of embedding environmental thinking into all processes, many companies have begun to launch initiatives commonly referred to as “design for sustainability.” The premise is straightforward - designers should be considering the impact of material choices, sourcing, and packaging on a company’s ability to recycle, reuse, and reduce. Of course, this must be balanced with ongoing concerns about the performance of the product, as well as the cost to make and move the product. building competency around striking an optimal balance is the goal for design.

The other characteristic of design for sustainability is consideration of customer needs, wants, and perceptions. If products can be developed that are more environmentally friendly and lower a customer’s consumption profile, new revenue opportunities may present themselves. We have included some examples from our detailed interviews to illustrate this.

Ford of Europe - Design for Sustainability and a Life-Cycle perspectiveGermany-based automotive manufacturer Ford of Europe sees sustainability as a path to innovation, differentiation, and competitive advantage. Ford uses design for sustainability as a key element in its overall sustainability approach. Other

“Designing greener products is not enough: new products need to be embraced by the market and our customers, as this is a prerequisite for any environmental excellence program.”

Dr Wulf-peter Schmidt, Ford of Europe

elements include safety, mobility, costs, and Total Cost of Ownership (TCO).

Launched in 2002, design for sustainability at Ford is the result of an evolution that began in the early 1990s and included:

Design for Disassembly: Aimed at »simplifying the process of taking the vehicle apart at end of life and identifying the components;

Design for Recycling: Encourages the »use of recyclable components and the reduction of material complexity;

Design for Environment: Full product life- »cycle thinking.

To implement design for sustainability, Ford of Europe created the product Sustainability Index (pSI) tool, which enables sustainability goals to be fully integrated into mainstream product development and shared among different functional groups within Ford’s product development organization.

pSI is based on a comprehensive range of vehicle-related sustainability criteria during the entire product development process, which typically lasts five years in the automotive industry. With pSI, both Ford’s product development organization and executive management can analyze a


preproduction planning and environmental goal setting.

philips Lighting - Making Green products Even Greenerphilips Lighting is another company that applies design for sustainability and is active in designing and launching greener products. As with Ford, philips sees the development of this capability as a key competitive differentiator.

philips Lighting sees environmental excellence from two perspectives: a company perspective where it reduces its

“product innovation and mandatory

compliance can be synergic: cooperation with regulatory bodies plays an essential role

in guiding consumer purchasing behaviour

towards a lower environmental impact.”

Mr Maarten ten Houten, philips Lighting

product’s ability to satisfy the company’s environmental targets and make decisions at critical stages of the development process to satisfy those targets. The model also facilitates the trading off of certain environmental impacts so that overall goals can be met without putting rigid individual constraints on engineers.

Although there is no agreed international standard for measuring product sustainability, the pSI indicators (see Table 1) are partially based on the ISO 14040 standard, which is focused on Life-Cycle Assessment (LCA) and addresses

TABLE 1

Ford of Europe PSI Indicators

Indicator Metric/Method Driver for Inclusion

Environmental

and Health

Life Cycle Global

Warming

Greenhouse emissions along the life cycle

(CO2 and equivalent emissions from raw

materials extraction through production, use

to recovery) - part of an LCA according to

ISO 14040

Carbon intensity is the

main strategic issue in

automotive industry

Life Cycle Air

Quality

Emissions related to summer smog along the

life cycle (ethane and equivalent emissions) -

part of an LCA according to ISO 14040

Potential trade-offs

between CO2 and non-CO2

emissions

Sustainable

Materials

Recycled and natural materials related to all

polymers

Resource scarcity

Substance

Management

Vehicle Interior Air Quality (VIAQ)/allergy

tested interior, management of substances

along the supply chain

Substance risk

management is key

Drive-by-Noise Drive-by-Exterior Noise = dB(A) Main societal concern

Source: Ford of Europe, 2008


neurotoxin that cannot be disposed of in landfills or incinerators. These lamps must be recognized as a special type of waste, the disposal of which must be managed responsibly.

This situation demonstrates that environmental excellence is ongoing. The amount of mercury in today’s energy-saving lamps is around 2mg per lamp on average, a decline of about 50% in the last 10 years. Light-Emitting Diode (LED) technology, which is mercury-free, may be the next generation; however, production costs are still prohibitive.

Rhodia brings Green Into Innovation More environmentally friendly products are growing in importance at international chemical companies such as Rhodia, where products that have a lower impact on the environment generate more than 30% of total revenue. These products are primarily related to the automotive value chain and are designed to support the reduction of emissions and energy consumption, such as:

plastic products that reduce vehicle »weight;

Materials for gasoline catalysis, enabling »catalytic converters to reduce the toxicity of emissions from the internal combustion engine;

“Rhodia’s key business drivers include: supply chain reliability, cost control and total carbon footprint.”

Mr Laurent Sapet, Rhodia

own environmental impact and a customer perspective where it reduces the impact of using its products. both provide concrete targets for new product development along the entire life cycle. These programs also assume that the vast majority of energy consumption associated with a traditional incandescent lamp is consumed during product use (95%), while only 5% is related to the other phases of the product life cycle.

Innovative lighting products that reduce the consumption of energy are the primary objective of its design program. Today, a wide range of energy-saving light bulbs that represent a better environmental choice than incandescent light bulbs is available on the market. Despite a higher purchase price, there is a clearer understanding of the TCO among businesses and consumers. As a result, philips estimates the potential energy savings in replacing incandescent light bulbs with energy-saving light bulbs at approximately 40%, equivalent to 530 power plants or 592 million units of CO2 emission a year, or €106 billion in electricity cost a year.

The compact fluorescent lamps in energy-saving light bulbs, however, are an environmental paradox - they use a fraction of the energy of incandescent lamps to produce light, but they contain a small amount of mercury, a harmful


Long and uncertain sourcing lead times; »Increased risk of supply chain disruption. »

Given the complexity in supply chain and sourcing strategies, many material flows in an extended supply chain are not optimized at all, which leads to unnecessary movement that results in higher than necessary fuel consumption. It is not rare to find cases of products initially built in Europe and subsequently shipped to the Far East for the most labor-intensive production phases and then moved back to Europe again for production finalization and market distribution. Also, it is common for a food retailer to source vegetables from the other side of the globe, although the same produce is available, at a slightly higher price, in its home country. Therefore, there is the need for a better coordination across the supply chain, which ensures that is not only optimized in terms of material cash flow but also in terms of environmental footprint.

This situation is far from being environmentally excellent, and a structured and systematic assessment of the supply chain practices used at a company should be part of process transformation efforts. Increasingly, manufacturers are seeking to improve their own environmental sustainability while extending their efforts across the supply chain, both upstream to

High-performance silica, which is »the basis of low-resistance tires that improve fuel consumption. Over a billion tires have been produced using this technology and Rhodia estimates that it has already contributed to fuel savings of around 20 billion liters.

Rhodia works closely with its customers to identify opportunities for improving the environmental impact of its products. Rhodia is finding that many customers are even willing to pay a premium for these materials. An adequate balance between cost and environmental impact, combined with collaboration with its customers and suppliers, is at the heart of Rhodia’s approach to designing for sustainability.

Materials Sourcing and Supply ChainIn the last 20 years, global competition has led many manufacturing enterprises to launch large cost-cutting initiatives. This trend has led to an extreme shift in how products are sourced, produced, and delivered so that today most non-strategic manufacturing processes have been outsourced to third-party contractors or the manufacturing operations themselves have been moved to offshore locations. This has led to:

Multi-tiered and complex supply »networks;

better coordination across the supply

chain, which ensures that is not only

optimized in terms of material cash flow

but also in terms of environmental footprint


their operations. Using this evaluation, suppliers then develop action plans to improve their performance. The deployment of this tool is accompanied by an on-site supplier visit, where an environmental expert reviews their self-evaluation and visits their production facilities to assess the level of risk control and environmental management.

Right-Sourcing at Volvo Europa TruckEffective environmental supply chain initiatives are also at work at Volvo Europa Truck in belgium. The company recently implemented a series of “right-sourcing” initiatives, which entail the reconfiguration of its supply chain aimed at reducing costs while improving its carbon footprint.

One recent example of an in-sourcing initiative resulted in cost and environmental impact reduction. The initiative is related to vehicle wheel pre-assembly, specifically the matching of the tire and the rim prior to being delivered to the final assembly facility. This activity was originally performed by Volvo’s tire supplier in France, which was outsourcing the matching to a third-party fitting center in the Netherlands, just 50km from Volvo’s assembly plant. The resulting supply chain was particularly wasteful, with tires, rims, and fitted tires moving back and forth across Europe

engage their suppliers and downstream to involve distributors and consumers. This often means establishing collaborative environmental management programs focused on joint environmental goal setting, shared technical information, common environmental planning, and coordinated efforts to reduce pollution or other negative environmental impacts.

Our detailed interviews uncovered several examples of companies looking to improve the environmental impact of their supply chain operations.

Collaborative Supply Chain Initiatives Implemented at Carrefour GroupThe Carrefour Group has implemented a series of initiatives aimed at reducing carbon emissions throughout its supply chain. Carrefour participated in the Carbon Disclosure project, which brought more than 500 own-brand suppliers to raise their awareness on climate change, energy consumption and greenhouse gas emissions. Carrefour also conceived many actions to assist its own-brand suppliers in developing a sustainable development program through the development of a self-evaluation online web tool. This tool enables suppliers to evaluate their activities on using 50 criteria, elaborated in collaboration with WWF France, relating to social and environmental management of


segments and production processes, the manufacturing footprint is associated with energy and water consumption, greenhouse gas emissions, and hazardous waste generation. As a result, the industry is not new to implementing environmental, health, and safety initiatives at the factory level. A number of governmental rules, aimed at improving safety and health conditions for employees and the community, strictly regulate environmentally harsh or hazardous manufacturing processes especially in segments such as base chemicals, primary metals, glass, and pulp and paper.

In recent years, volatile energy costs have become one of the key drivers for making manufacturing operations more sustainable. The consumption of energy at the manufacturing plant not only accounts for a significant part of a company’s carbon footprint, it can also be the largest component of a company’s overhead cost structure. Together with the principles of lean manufacturing, which bring the concept of waste reduction to production processes, sustainable manufacturing becomes a fundamental tool to foster continuous improvement and lessen a company’s environmental impact, such as:

Reducing the consumption of resources »such as fuel and water. The application

unnecessarily. Volvo took greater control of the process by coordinating the movement directly, which resulted in a 20% cost savings, mainly from lower transportation costs and CO2 emission reduction.

Conforama Looks to Suppliers for More Sustainable MaterialsConforama SA is a French furniture retailer that promotes its choice of sustainable materials to customers. The company requires its suppliers to use certified recycled wood, which must conform to a series of environmental conditions before being used in the making of furniture. This procurement practice is not without consequence, considering that the company’s traditional customer base is unwilling to pay a premium for environmentally friendly products. The company is careful to assure that cost savings from a streamlined procurement process and rigorous material selection keep the final retail price competitive. Given an equal price, the company finds that consumers prefer more environmentally friendly products and are more loyal to the Conforama brand.

Manufacturing and Energy ConsumptionManufacturing processes have a huge impact on the environment and have been a target for regulatory bodies. Although varying among different industry

The manufacturing footprint is associated

with energy and water consumption,

greenhouse gas emissions, and

hazardous waste generation


of electricity and heating produced by renewable CO2-free sources. In particular the project entailed the following key elements:

Renewable sources. priority was given »to energy that came from renewable generation methods including:

Renewable electricity sources: The ·company built three wind turbines on the manufacturing plant property capable of producing 6MW of power or 50% of plant needs. The remaining 50% of energy needed to supply the manufacturing plant was bought from Electrabel, as certified green energy from hydroelectric sources.

Renewable heating sources: The ·company built a biomass boiler plant, burning wood pellets and producing 5MW of power or about 70% of the total plant requirement. To cover the remaining 30%, the existing boiler was converted to burn bio-oil.

Reduce energy consumption. A number »of initiatives and actions were taken to reduce the use of energy, including:

Re-lighting project: A greater use of ·natural light through the installation of more windows, lighter wall colors, and intelligent lighting and curtains

of both more efficient methods and alternative sources contribute to the efforts;

Increasing the level of recycled »materials used in products and the manufacturing process;

Reclamation (e.g., energy cogeneration »or waste water reclaim) to reduce waste.

All of these activities lower a company’s environmental impact and improve its cost position. Some examples from our detailed interviews follow.

Reducing Energy Consumption at Volvo Europa TruckEnergy efficiency and the use of renewable energy are the key factors in reducing CO2 emissions at Volvo Europa Truck in belgium. The company implemented a vast transformation program for its truck vehicle assembly plant, which resulted in the first CO2-free automotive factory in the world. Volvo started investigating energy efficient methods and renewable energy sources in 2003, gaining inspiration from a Nike initiative called “green electricity” that aimed to reduce greenhouse gas emissions at Nike’s distribution center in belgium through the use of renewable energy sources.

Volvo extended the concept to an integrated approach centered on the sourcing

“In September 2007, Volvo’s plant in Ghent became the first automotive CO2-free factory worldwide .“

Mr patrick Collignon, Volvo Europa Truck


specific need, resulting in less wasted energy.

The overall business benefit of this initiative is impressive (see Figure 11). Volvo was able to reduce energy consumption by 23% from 2001 to 2006, and at the same time truck production increased from 26,228 to 35,035 units (an increase of 33%).

The company experienced an impressive ROI for this project as well. When the most recent project was started, the expected payback period was 36 months. With escalating energy prices, however, the

that keep light at the optimal level. This resulted in more than 3.5MWh in energy savings each year and a decrease of 2.7 tons in annual CO2 emissions.

Saving unused energy from ·compressor equipment: Volvo realized that the amount of energy consumed by large continuously operating compressors was significant and largely unused. Volvo reconfigured the equipment so that massive centralized compressors were replaced with smaller units that were calibrated to a

FIGURE 11

Reduction of Energy Consumption at Volvo Europa Truck Plant

Total energy

Energy per unit

36,000

31,000

26,000

21,000

16,000

2001 2002 2003 2004 2005 2006

1,2

1,0

0,8

0,6

0,4

0,2

0,0

Tota

l ene

rgy,

MW

h

Ener

gy p

er u

nit M

Vh/tr

uck

Source: Volvo Europa Truck, 2008


new company, Rhodia Energy, as a joint venture with Société Générale.

Companywide Effort at Saint-Gobain Glass U.K.Another good example of sustainable manufacturing principles at work is Saint-Gobain Glass U.K., the global producer, distributor, and processor of glass, ceramics, plastic, and other material. Management and staff of Saint-Gobain Glass U.K. are involved in suggesting and implementing process improvements on a daily basis. Employee awareness, commitment, and involvement in the company’s environmental excellence initiatives have been a critical success factor. Effective communication is also at the heart of employee participation. Saint-Gobain Glass U.K. regularly prints booklets dedicated to the company’s environmental policies and posts weekly news about its environmental objectives, achievements, and future opportunities.

TransportationActivity involved in the movement of goods, both inbound raw material and outbound finished goods, has a substantial impact on the carbon footprint of a company. Transportation also constitutes a significant element of overall supply chain costs. Monitoring company-owned fleets and working

payback period could be reduced to 25 months.

Rhodia Expands on Clean Development MechanismIn 2005, Rhodia took part in the Clean Development Mechanism (CDM) system agreed to under the umbrella of the Kyoto protocol and supervised by the United Nations Framework Convention on Climate Change (UNFCCC). The system allows greenhouse emission reduction projects in developing countries to earn Certified Emission Reduction (CER) credits, each equivalent to one ton of CO

2. These CERs can be traded, sold, and used by industrialized countries to meet part of their emission reduction targets under the Kyoto protocol. The mechanism stimulates sustainable development and emission reductions while giving industrialized countries some flexibility in how they meet their emission reduction targets.

Thanks to a series of energy-saving projects in emerging countries such as brazil and Korea, Rhodia gained the right to sell a number of emission certificates, creating a new business opportunity. So far, the company has sold a total of 13,4 million tons of CO2 certificates, worth €200 million, or 5% of the company’s total revenue. Given the importance of this revenue stream, Rhodia created a

Rhodia has sold a total of 13,4 million tons of CO2 certificates, worth €200 million, or 5% of the company’s total revenue


saved in 2007 by routing approximately 35% of goods via water transport. In 2008 the bar was raised to an objective of 40% of goods to be transported via water or rail.

Conforama and Volvo Leverage Alternative Modalities Conforama also makes significant use of water transport, thanks to a central depot located close to Lyon on the Rhone River. Conforama has calculated that the use of water transport reduces the total use of road transport by 15% or the equivalent of 14,000 fewer trucks per year.

Volvo is in the business of selling trucks so its focus is on improving the performance of road-based transportation. The company is active in promoting a higher degree of standardization of truck systems (the truck cab and trailers) across Europe. In Sweden and Finland Volvo applies and supports the 25.5m length standard or European Modular System (EMS). According to Volvo, existing studies and ongoing tests in the Netherlands demonstrate that the EMS can reduce the number of vehicles on the road by about 25%, significantly reducing fuel consumption and emissions. The company expects sales of vehicles based on this standard to be a robust new market.

Inditex or Fuel Efficiency Inditex, the owner of the fashion retail brand Zara, makes use of a modern vehicle

“We aim to lead by example.”

Mr Antonio Alvarez Sanchez, Inditex

closely with logistics providers can lead to optimal loading and routing, significantly reducing energy use. benefits can come from long-term planning of logistic activity, greater use of alternative modes of transportation (e.g., rail or water), and from simple execution considerations such as limiting truck idling during loading and unloading as well as assuring optimal tire pressure.

Carrefour Delivers Efficiency through Transportation Innovations in its Supply ChainCarrefour has a leading practice transportation policy. The company requires its transport service providers to load merchandise directly at supplier sites or at consolidation warehouses strategically located to minimize unnecessary movement. This initiative, which consolidates merchandise as far upstream as possible from its usual warehouses, has delivered increased truck utilization and extends existing practices of encouraging suppliers to collaborate and pool their shipments to create full truckload shipments to Carrefour warehouses.

Always looking to optimize and drive efficiency, Carrefour deploys backhauling - the practice of using trucks, which have delivered to its stores to pick up merchandise on the way back to the warehouse. Moreover, Carrefour also gives priority to waterways and rail transport. In France, 250 tons of CO

2 were


to incorporate ecological materials in some of its products and recently Zara launched the first available sustainable t-shirt, made of cotton grown with a limited amount of fertilizers and water. The t-shirt has been a great success, as the value derived from the green materials has been successfully articulated to consumers, who in turn have shown a willingness to pay more for the item.

This principle is not applicable to all apparel products. In fact, a fully sustainable approach to garment design and production might prevent meeting consumer expectations for fashion and function. For example, a sustainable clothing line could have unattractive aesthetic aspects and could be impractical to use and wash. In light of these difficulties, fully sustainable garments, such as organic cotton shirts, will continue to be launched by Inditex/Zara as a separate product line while traditional collections will not bear extensive sustainable features until consumer demand warrants it. In the interim, Inditex will continue to attempt to raise awareness and stimulate that demand.

Similarly, Conforama, which sells furniture to consumers with modest purchasing power, needs to carefully select sustainable initiatives and assure that they do not affect the price of its products.

fleet and organizes training courses on fuel-efficient driving. This project is the result of a work plan carried out in conjunction with the company’s logistic suppliers so that all vehicles must comply with the European Commission’s EURO 5 regulation (the most demanding regulation which limits the emission of nitrogen oxides, hydrocarbons, carbon monoxide, particles, and fumes), which will come into full effect in 2009, putting Inditex ahead of the rest of the industry.

Consumer Demand and ConsumptionConsumers can play a significant role in improving environmental impact with some relatively simple lifestyle changes. Despite growing awareness and concern about climate change, consumer behavior isn’t changing at a rapid pace. Further, consumers are resistant to paying a premium for more sustainable products, making companies less likely to undertake efforts to produce them. Many companies are quickly realizing that it is not as simple as responding to customer demand for sustainable products, but about helping to create that demand to begin with.

Educating and Shifting Consumer Demand at Inditex and ConforamaAs part of its holistic view on sustainability, Inditex is working on effectively communicating the value of its practices to its customers. The company is starting

“Our products are fully composed of certified recycled wood.”

Mr Thibaut Derville, Conforama


then refined to produce alumina, which is then smelted to produce aluminum. The production phase is very power-intensive and requires an uninterrupted supply of electricity.

The use of recycled aluminum has grown significantly in recent years. This has not only lowered the environmental impact, but it costs a fraction of the cost of producing primary aluminum - producing one ton of aluminum from scrap consumes only 5% of the amount of electricity it takes to produce one ton of primary aluminum. This demonstrates that efficient use of raw materials is an important strategy for businesses that want to reduce their overall environmental footprint.

Saint-Gobain Glass U.K. - Incorporating Recycled Materials into the Manufacturing processSaint-Gobain Glass U.K.’s industrial operations in the U.K. boast particularly strong performance in the areas of waste reduction, the minimization of CO2 emissions, and the use of recycled glass in the manufacturing process. The U.K. operation that produces flat glasses, whose manufacturing process requires sand and other raw materials to be heated in a furnace at 1,500°C, has set objectives for reducing energy consumption, minimizing greenhouse gas emissions, and optimizing the use of raw materials.

“Our recycling service has notably increased

the loyalty of our customers.”

Dr Alan McLenaghan, Saint-Gobain Glass

U.K.

However, despite the limits of its price-sensitive market segment, Conforama has recently undertaken a series of very focused environmental initiatives with a particular emphasis on children’s furniture. These products go to market without formaldehyde, protecting both the health of the children as well as the environment. The environmental orientation creates a non-environmental (child safety) related benefit and improves the attractiveness of the product to customers who have been willing to pay a 6% premium for this product line.

End of Useful LifeConsumer expectations about the disposability of products at the end of their useful life are changing. There is a growing expectation that, instead of sending products to a landfill, they can be sent to facilities that will disassemble the products and recover a relatively high percentage of the materials for re-use. Fortunately, rising costs of natural resources are making this activity economically feasible for an increasing number of products.

Natural resources are limited and the manufacturing of base materials from those resources is associated with high energy consumption and high emission levels. For instance, the production of primary aluminum starts with the mining of bauxite, extracted by opencast mining. bauxite is


shipped to the factory. Moreover, each ton of cullet used prevents some 300 to 500 kilograms of CO2 emissions. These results not only benefit the environment, but also improve profitability as re-melted cullet from recycled glass use less energy than manufacturing glass from sand, lime, and soda.

The Role of Information Technology

IDC asked European enterprises how important IT’s role would be in supporting their environmental excellence efforts. The results show that

The initiative is part of its operations-related environmental policy.

Saint-Gobain Glass U.K. has set up a recycling program that has resulted in the company producing 28% of its products from recycled cullet (glass). The firm uses 3,000 tons of waste glass every month, where every ton of recycled glass heated in the furnaces saves 1.2 tons of raw materials. In other words, each year Saint-Gobain Glass U.K. achieves the equivalent of saving 43,200 tons of sand, soda, and other raw materials from being quarried and

FIGURE 12

IT’s Role in Environmental Sustainability

How important a role will IT play in your organization’s overall environmental sustainability effort?

0 5 10 15 20 25 30 35(%)

Relevant role

Some role

Leading role

Little role

No role

Don’t know

n = 165

Source: IDC, 2008


while more than 40% will modify existing applications.

These results are indicative of an investment strategy centered on improving the organization and visibility of existing data rather than wholesale replacement of existing process automation systems. This approach is well aligned with an emphasis on factoring in environmental considerations when making product, supply, operation, or revenue decisions. It also points to a

more than 70% of respondents (see Figure 12) think IT will play a role in reducing their environmental impact.

Taking a Conservative Approach When looking at only those companies that see a role for IT in supporting environmental initiatives (see Figure 13), more than 70% felt that they had the data they needed to manage and measure their environmental efforts. Less than a third intend to buy new applications,

FIGURE 13

IT’s Role in Environmental Sustainability (2)

Considering IT and its role in your organization’s sustainability efforts, which of the following statements would you agree with (i.e., which best apply to your organization)?

0 10 20 30 40 50 60

(%)

We are confident we have the data we need toeffectively track and measure our green programs

We do not expect to use IT investments (software,services, hardware) to support our green practices

We will use IT consulting services to help us implementour green programs

We will influence our existing software vendors tochange the functionality in our existing applications to

support our green programs

We will buy new applications (software) to helpimplement our green programs

n = 165

Multiple responses allowed

Source: IDC, 2008


need for outside advice in constructing these decision support systems, which is supported by the fact that nearly 43% of survey respondents said they intend to use these services.

IDC believes that investing in the reengineering of decision-making

processes is the right priority for using IT to enable environmental excellence. This will lead to better organization of information and, using analytic and business intelligence tools, an improved capability to make informed decisions.

FIGURE 14

IT Applications for Environmental Sustainability Deployment

Which of the following business applications can best support your organization’s sustainability initiatives?

0 5 10 15 20 25 30 35

(%)

Supply network design/optimization

Procurement and supplier relationshipmanagement

Product life-cycle management

Enterprise resource planning (ERP)

Lean manufacturing solutions

Transportation management

Manufacturing execution systems/plantoperations

Virtual product simulation and testing

n = 165

Multiple responses allowed

Source: IDC, 2008


manufacturing processes and the gathering and harmonization of relevant data, including environmental related information about, for instance, hazardous substances, unused energy, waste and others. This capability is an essential element of creating accurate performance metrics - including environmental related ones - and setting priorities for environmental excellence programs within the production process.

These application priorities are consistent with overall attitudes toward IT. Support for environmental excellence will come through modifications of existing applications and a focus on improved decision making.

Applying Software to Environmental ExcellenceLooking at specific software applications, our survey participants validated what we are seeing in our ongoing research (see Figure 14). The top 3 choices all align with key elements of supporting environmental excellence:

Supply network modeling and »optimization. These applications allow companies to visualize material flows through the value chain. Adding values to calculate the carbon footprint of those movements allow companies to turn their attention to the improvements with the highest potential impact;

procurement and supplier relationship »management. A company’s environmental impact extends to the activities of its suppliers. These applications can be easily extended to collect and organize information about suppliers’ operating characteristics;

product life-cycle management. The »emphasis on design for sustainability discussed in this paper can be managed through existing systems that support product design, launch, and service.

One application that scored relatively low, Manufacturing Execution Systems (MES), deserves more attention. MES software enables the standardization of


on the ideas of its own employees. The company also adapted its production output performance metrics to incorporate not just safety and quality, but also the environmental impact.

Pressures to Go Green: Compliance, Customers, and CostThis is an industry in transition. With a long history and certain future of regulation regarding the fuel efficiency and emissions of its products, automotive companies have experienced the compliance phase of maturity. The survey showed the leading reason for these companies to initiate environmental programs is compliance (84.6%). The automotive respondents indicated compliance with RoHS (53.8%), REACH (61.5%), and ISO 14001 (73.1%).

The power of consumer preference for smaller, more fuel-efficient vehicles is causing automotive companies to rationalize their product line portfolios. At the same time, the increasingly competitive nature of the industry is forcing many automotive companies to look for any productivity and efficiency improvements possible in their own operations and the operations of their suppliers, and environmental excellence is a means to delivering those improvements. This industry is challenged by a need to respond faster to consumer demand and competition on a global level while they

The opportunity for business benefit varies by industry segment. Looking at initiatives across the product life cycle that was shown in Figure 10, distinct patterns emerge within the segments, and leaders and followers have emerged.

Automotive

Our earlier examples of environmental excellence highlighted the work being done at Ford of Europe and Volvo Europa Truck in sustainable product design, sourcing, and energy efficiencies in the manufacturing process. Two additional examples include Toyota and Subaru and focus on resource consumption and emission. Toyota has implemented a series of energy programs throughout its own operations and into its suppliers’ operations as well. The projects included a range of evaluations - energy reduction through efficiencies, switching to alternative, renewable energy sources, and carbon offsets.

The design group at Toyota is dedicating resources to further developing hybrid and alternative fuel vehicles which, despite only representing 1% of sales today, is a rapidly growing segment.

Subaru has focused on environmental initiatives from a reduce, reuse, and recycle perspective, and points out that many of its environmental initiatives were built

“We established a partnership with Electrabel, our renewable energy supplier.”

Mr patrick Collignon, Volvo Europa Truck

OppORTUNITIES BY INDUSTRY SEGMENT


Using Waste Reduction to Extend Vehicle Life and Support Demand for Less Expensive ProductsMost of our respondents in the automotive industry (92.3%) indicated they have waste reduction initiatives in place. This is closely related to the industry’s pressure to satisfy an increasing demand for used vehicles and lower prices in many regions globally. An example of a company in a closely related industry that has been successful in reducing waste while creating an entirely new product line from used products is Caterpillar, a manufacturer of farm, construction, and industrial machinery. Caterpillar has dedicated 15 facilities and nearly 6,000 employees to create “certified rebuilt” products from those that would have been considered at their end of life and scrapped. Customers can purchase this rebuilt equipment at 50% of the price of a comparable new one and Caterpillar enjoys a significantly better margin, although it won’t disclose the specifics. There is even a safety advantage as there is less foundry and heavy machine time (which are more dangerous processes) in each remanufactured product. The initiative has required new processes and investment, but the financial benefits more than justify the changes.

simultaneously reduce their costs and make their supply chains more sustainable. Our survey confirms this as pressure from customers (50%) and reducing costs (42.3%) follow the aforementioned compliance as the leading drivers for sustainability initiatives.

Coordinating Design, Transportation, and Vehicle AssemblyAutomotive Original Equipment Manufacturers (OEMs) designing new environmentally friendly products will have to invest in better collaboration with suppliers. To that end, information technology support for this segment will come primarily from product Life-cycle Management (pLM) applications. There is also an opportunity for Transportation Management Systems (TMS) and real-time supply chain visibility to manage the high level of supply complexity, supporting initiatives such as transportation and distribution efficiency improvements. Making existing factories more flexible by supporting the assembly of various models at a single facility will also help automotive companies reduce their energy consumption. Investments in digital manufacturing tools for process design and Manufacturing Execution Systems (MES) for more effective scheduling and control will help achieve this objective.

Investments in digital manufacturing tools for process design and Manufacturing Execution Systems

(MES) for more effective scheduling and control will help

achieve this objective


Keeping Initiatives Visible and Valuable to Customers Many high-tech companies have invested in efforts to redesign packaging, balancing a goal of reducing the use of materials while maintaining the efficacy of protecting the product in shipment. The industry has also worked diligently at making products as energy efficient as possible, assisting both consumers and industrial customers in lowering their power use. The industry has also been active in recycling consumables (e.g., print cartridges, batteries) during useful life and the products themselves at end of useful life.

These efforts are all intended to build differentiation for the brand owners. perhaps more than any other industry, the high-tech segment makes a concerted effort to boast publicly about its initiatives in the hope of winning customer loyalty. However, the visibility of its initiatives is much more than empty promises - the programs are delivering real value to customers, the high-tech companies, and the environment.

Reaching Out to the Supplier BaseHigh-tech manufacturers are demonstrating leadership in defining how companies should move ahead by providing significantly more transparency into their supply chains, setting expectations that with transparency comes accountability. An example of this

High-Tech

The high-technology industry is becoming increasingly regulated and 84.6% of high-tech respondents selected compliance as a primary driver for environmental initiatives. As one might expect, regulations such as RoHS (70.4%) and WEEE (74.1%) were cited most frequently. Customer pressure is growing in influence as 51.9% selected this driver.

The influence of compliance and customers drive the most common initiatives for high-tech companies:

packaging and/or direct material »recycling (92.6%);

Commodities consumption and/or »recycling (81.5%);

Waste reduction in manufacturing »(70.4%);

packaging redesign (70.4%); »Supplier reevaluation (59.3%). »


applications (33.3%). Transportation management with a particular emphasis on global trade will also be an important area of technology investment to support environmental initiatives. Although product redesign isn’t referenced as a top initiative among high-tech companies in the survey, satisfying customer pressure and the growing popularity of energy efficiency standards are driving interest in pLM tools (29.6%).

Chemical

As an industry segment, chemical manufacturers are highly regulated, the most recent example being the EU REACH legislation (84.6% of surveyed firms must comply with REACH). The industry is making a concerted effort to “stay ahead” of regulations and change its image as a big contributor to greenhouse gas emissions. This is confirmed by our survey, which identified the top 3 reasons for going green as compliance (92.3%), improving image and reputation (61.5%), and pressure from customers (42.3%), followed by cost reduction (26.9%).

Thinking Beyond Regulations to Efficiency...This segment deserves more credit for its highly innovative nature, but its challenge is the sheer volume of investment in existing assets, many of which are not as energy efficient or emission-friendly as newer technologies. For example, a

is Hewlett-packard’s recently published worldwide supplier list. Due to the global nature of the supplier base in high-tech, many of the strongest examples of environmental excellence are in how electronics brand owners handle their external operations and supply chain, reviewing material selection and sourcing policies with contract manufacturers. Consider consumer electronics manufacturer Sharp’s participation in the U.S. Environmental protection Agency’s SmartWay program designed to certify environmentally conscious carriers and educate shippers to sustainable practices. Sharp used the SmartWay program to train its carriers, and then enabled the carriers to benefit from any resulting cost savings. New procedures included enforcing strict pickup times, no truck idling at docks, using intermodal transport when possible, putting light sensors in warehouses, using recycled paper, employee training, renting hybrids on business trips, and implementing ISO 14001. The company is even asking retailers to rethink their push for more frequent, smaller shipments.

Using Supply Network Optimization to Add EfficiencyInformation technology support in this segment is going to start with Supply Network Optimization (SNO) and design, to help companies configure supply chains and evaluate the impact of proposed changes. The high-tech industry prioritizes supply network design/optimization

Information technology support in this

segment is going to start with Supply

Network Optimization (SNO) and design


processes. Earlier we discussed Rhodia’s efforts around sustainable products and praxair expects two-thirds of its annual revenue to come from technologies that can reduce its customers’ environmental footprints, such as transitioning from chlorine bleach to oxygen bleach.

Role of IT in Supporting Procurement and Supplier Relationship Management The chemical industry is heavily impacted by the increasing cost of feedstock and the need to optimize the use of these scarce resources. procurement and supplier relationship management applications are chemical manufacturers’ most frequently selected applications to help with sustainability initiatives (34.6%). This will support chemical companies as they incorporate environmental policies into their supplier expectations. ERp software also ranked high (30.8%), which is due to the use of the enterprise asset management capabilities found in these suites. IDC also expects supply chain planning (26.9%) and execution applications to play a role in designing more efficient supply chains and managing distribution. One area that will gain more attention over time is IT’s role in promoting the energy efficiency of their assets via advanced manufacturing control systems to optimize production processes.

company such as Dow Chemical may follow the same environmental standards in its operations worldwide, yet worldwide standards can’t make up for the fact that older technologies won’t be as environmentally friendly as new. And in a challenging economy with increasing global competition, it is difficult for companies to justify decommissioning older equipment, unless it is government mandated. The chemical industry will add incremental production capacity in local markets to better serve local demand, improve overall efficiency, and reduce transportation costs simultaneously. Following our efficiency theme, we find the most common sustainability initiatives are waste reduction (80.8%), energy consumption/efficiency (73.1%), and water consumption and/or treatment (73.1%).

... And on to InnovationSustainable development has been a long-term driver of the chemical industry, as it copes with greenhouse gasses and the need to manage emissions. Chemical companies are well aware that they can demonstrate significant value in designing newer, greener alternative products and safer manufacturing processes as part of their substantial expenditures on R&D. In 2007, Dow Chemical spent $1.3 billion on R&D (2.4% of FY07 revenue) with a significant portion dedicated to more environmentally sustainable products and


Retailing

Retail organizations are increasingly associating themselves with environmental awareness and action on behalf of their shoppers. This underpinning influence is driving their supplier, transportation, and store operation policies. Large retailers are setting the pace by mandating specific requirements on suppliers, and smaller retailers will enjoy the effects of supplier efforts.

There is also an emphasis on the retail organization’s own operations. Reevaluating transportation policies and incorporating good environmental practices in transportation are an area of immediate benefit. Energy use in the stores is also under examination. For example, 50% of a food retailer’s energy costs is in refrigeration and several retailers are implementing energy management systems to reduce costs and environmental impact.

Investing in Supply Chain ApplicationsRetail companies put an IT emphasis on the supply chain, choosing procurement and supplier relationship management applications (53.8%) as the most valuable to supporting sustainability, followed by supply network optimization (46.4%). Interestingly, the retail industry indicates a significant willingness toward new investments over the next couple of

Consumer Goods

Consumer product manufacturers face some level of regulatory oversight as well as mandates from high-profile retailers such as Wal-Mart and Tesco. The reputation of their brand has also influenced their work toward achieving environmental excellence. This matches our survey results, where these manufacturers indicated their motivation for sustainability initiatives is first in compliance (96.0%), followed by pressure from customers (60.0%), and then by reducing costs (52.0%). This segment’s overall goal is to respond quickly to expressed consumer demand for green products. As such, consumer goods manufacturers’ initiatives span the breadth of the product life cycle.

IT Support for Environmental Initiatives in the Consumer Products SegmentMost consumer goods manufacturers expect to use supply network optimization and design (28.0%) to create an environmentally optimal supply chain, followed by manufacturing execution systems (24.0%) to improve performance at factories. This emphasis on the supply chain and the manufacturing process will be supplemented by new investment in packaging design to support the needs of retailers and the preferences of consumers.


years, perhaps as a way to compensate for its relatively low current spending on environmental initiatives.

Reevaluating the Store and its Employees at ZaraInditex is implementing a “Sustainable Store” project aimed at reducing the environmental footprint of its store operations by 20%. The project is an essential part of the company’s Strategic Environmental plan 2007-2010 and is geared around three areas of improvement:

Designing an eco-efficient store »model that changes the lighting to a preference for high-efficiency and low-energy consumption as well as intelligent lighting adaptable to available natural illumination sources. Inditex will also take advantage of more efficient heating systems and use sustainable construction materials when renovating existing stores or building new ones;

Sustainability of containers and »wrapping, which includes the ecological certification of bags and the use of biodegradable materials in all plastic bags. It also covers all store waste management and the reuse and recycling of materials such as cardboard boxes, hangers, and computer-generated waste;

“Our Eco-efficient store concept will soon be real.”

Mr Antonio Alvarez Sanchez, Inditex

Store personnel are trained to be »aware of the environmental impact of everyday activities. The aim of the training is especially focused on making better use of energy.

Carrefour Drives a Group-Wide Energy Efficiency Program through Staff TrainingCarrefour committed to reduce its group’s energy consumption per square metre of sales space by 20% between 2004 and 2020. In order to reach this goal, Carrefour implemented a series of measures focused on in-store operations (e.g., automatic management of store lighting, automatic regulation of air-conditioning, reducing refrigerant emissions). These initiatives have delivered measurable reductions in energy consumption per square meter (20% less energy consumption in France from 2004 to 2007, and less 9.2% in the group). Moreover, by increasing customer and employee awareness of customers, the group distributed 475 million fewer disposable checkout bags in 2007. The company thus avoided the production and transportation of indirect materials and achieved a CO2 savings of 8,000 tons. Finally, in the first half of 2008 Carrefour launched an import training program, which entailed managers from all business units being trained on sustainability indicators and best practices including energy efficiency.


Recognizing this opportunity is the critical first step to getting a company beyond basic compliance. Executives must realize that the opportunity is substantial and proven; and that there is significant risk in delaying action. That realization, however, must come with the recognition that realizing that potential requires an investment of time, capital, and resources.

Devise a Strategy That Communicates a Mission, Identifies Metrics, and Sets Specific Goals

Efforts around building environmental considerations into processes and decisions will be wasted unless there is a clearly articulated mission and a set of guiding principles. Having a cogent strategy is critical to properly setting priorities and making appropriate choices while transforming processes. The strategy should come from executive leadership after careful vetting with all relevant stakeholders.

The pivotal objective of the strategy should be to create a culture that allows for confronting common business problems and systematically eliminating obstacles that may impede progress toward environmental excellence, much like successful strategies for lean thinking or Six Sigma improvements have done. The strategy must also connect to important

The journey toward environmental excellence brings tremendous benefits - lower costs, higher revenues, more efficient assets, and the reputation of a socially responsible organization. based on the findings from our research, IDC recommends some specific actions to consider.

Recognize that the Business Case for Environmental Excellence is Real

Examining the financial results of companies with mature sustainability programs reveals superior performance. These companies have moved beyond compliance and understand that evaluating the reuse, recycle, and reduce elements within a business process yields not only a more sustainable business environmentally, but financially as well. Expanding that process examination across the entire value chain of a company magnifies the savings further.

A larger opportunity for many industry segments stems from realizing new revenue. Having a more environmentally friendly product may result in taking market share away from the competition. Additionally, emerging markets related to entirely new opportunities can translate into even faster revenue growth.

ESSENTIAL GUIDANCE


sources of business benefits including lower costs, new revenue, corporate reputation, and asset efficiency. A clear expectation for real benefit must be established.

With an understanding of the end state vision and benefits, companies should then assess their current state of maturity. This exercise will highlight the gaps that must be addressed. We would further recommend that the company benchmarks itself against its competitors and the companies it would like to emulate. Combining the gap analysis and benchmark analysis will provide a reasonable sense of the pace of execution and level of investment required.

Organize Your Environmental Excellence Efforts Similar to a Continuous Improvement Program Such as Lean or Six Sigma

Once executive commitment is established with a well-devised strategy and implementation framework, organizations should create an organizational structure that is aligned with executing on that strategy. IDC recommends that companies look at other improvement/transformation methodologies such as Lean or Six Sigma for a model of how to organize

an environmental excellence program. One of our interview subjects is making environmental excellence a pillar of its important operating excellence initiative and is training existing Six Sigma black belts on incorporating sustainability into their projects.

The most important element of this approach is to have a staffed corporate function to provide governance and oversight. The journey toward environmental excellence will be much smoother if your organization takes a programmatic approach where sustainability is embedded in the thinking rather than a project-by-project, isolated view of the efforts.

Execute on Process Transformation for the Realization of Cost Benefits and New Revenue Opportunities

One of the first objectives for the environmental excellence team will be to create a roadmap for transforming the whole life cycle of product related activity and to establish a governance mechanism for prioritizing individual efforts. The mechanism should revolve around the parameters of recycle, reuse, reduce, and revenue, but the direct calculation of potential new profit (from either new sales or lower costs) should be the final guiding principle.

A programmatic approach where sustainability is

embedded in the thinking rather than

a project-by-project, isolated view of the

efforts


Technology can be an important enabler to the transformation efforts. For example, a well-designed inter-organizational information system will improve supply chain visibility and monitor inter-enterprise material flows. Through visibility, enterprises can identify unnecessary or sub-optimal transportation routes and reconfigure those networks to eliminate the waste.

Completely new software is probably not required. Rather, companies should focus on applying analytic tools in an environmental excellence context to available data. Further, existing software tools that automate the relevant operational processes can be modified to incorporate sustainability. This approach to applying technology will not only help to drive transformation, but should be designed to create automated, closed loop control of activity.

Develop New Capabilities in the Organization and Gain Employee Commitment to Capture New Business Value

Employee training, awareness, commitment and early involvement in the organizations’ environmental excellence initiatives are a critical success factor. The primary research conducted for this study highlights that the creation of ad-hoc committees, where ideas for improvements and issues

are continuously and openly discussed, promote employee participation and contribute to the success of corporate environmental policies.

To be successful, employee commitment and early involvement needs to be accompanied by the appropriate organizational structure. When a company’s activities involve a large number of employees and span several countries, a hierarchical/functional matrix is required to support employee commitment and awareness. For example, the use of a Central Sustainable Development Department, which devises sustainability and environmental-related strategies at a corporate level and then develops national/business unit objectives, has proven to be a viable organizational model.

Communicate Openly with all Stakeholders, Internally and Externally

Early successes can fail to generate momentum if they are not communicated well. Companies must allocate sufficient resources to promotion of the program. Companies must not confuse communication with “spin doctoring” or greenwashing. The communication must be open and genuine. While successes should be celebrated loudly, failures should not be buried, but rather shared as part of the organizational learning process.


This open communication should be extended to external stakeholders as well. Openness with these constituents is also important as anything that is disingenuous will be quickly exposed and the communication will have the opposite of the desired effect. Committing to public reporting standards, even a willingness to share more information, is highly recommended.

Use Internal and External Experts to Guide You Through the “Transformation Zone”

Figure 3 shows a set of maturity steps companies will go through on their way to environmental excellence. We identify several steps in the center of the path as the “transformation zone.” The speed and effectiveness of your movement through this critical juncture can be substantially enhanced by using an experienced consulting firm. Look for a firm that can offer:

Domain expertise in the area of »environmental excellence;

Vertical industry knowledge that can put »efforts in the context of your regulatory and operating realities;

process knowledge across the full life »cycle, from design to end of life;

Understanding of the information »requirements, technology and systems that will enable your efforts.

You will need a firm that demonstrates competency in all four of these areas. The relative weighting of the four dimensions will vary based on your circumstance and you may also have to consider geographic coverage if you are launching a global initiative. A well-reasoned selection of a consulting partner will be a critical success factor.

A well-reasoned selection of a

consulting partner will be a critical success

factor


need a consulting supplier that can advise them on how to achieve environmental excellence and assist them with the requisite transformations to reach that goal.

Secondary ResearchIDC leveraged its existing research on environmental sustainability with specific reference to the “sustainability/IT for green” research program. This program covers a number of themes around environmental sustainability, from long-term environmental sound practices, to the use of IT to help manufacturing companies to successfully “go green”.

Among other publications, IDC recently published a number of research documents on the benefits of sustainability (Sustainability: Using IT to Support and Benefit From Going Green, by Kimberly Knickle, June 2007, Manufacturing Insights #MI207635) and on the challenges of gaining the necessary visibility in order to build a sustainable supply chain (Aravo Intends to Provide Supply Chain Visibility for Sustainability Efforts, by Kimberly Knickle, October 2007, Manufacturing Insights, #MI2089178).

The research also drew on IDC’s Global performance Index (GpI), which tracks the financial performance of over 850 manufacturing and retail companies. A sub-index was built of companies also included

This appendix includes our methodology for the research that supports this document, case studies, an analysis of challenges by industry segment, and a set of supplemental figures and charts.

Methodology

The information presented in this document comes from research by IDC in collaboration with and sponsored by Atos Origin. The document is the result of IDC’s gathering and analysis of quantitative and qualitative information from several primary and secondary sources.

Secondary and Primary ResearchTo produce this document IDC adopted a multifaceted approach based on both secondary and primary research. The research was intended to test the following hypothesis:

There is growing pressure for companies to incorporate sustainable considerations into their business strategies. Companies will mature in stages, ultimately achieving a capability of environmental excellence, which comes with significant business benefits. In particular, companies in the manufacturing and retail markets are motivated to demonstrate their commitment to environmentally friendly processes. Customers in the manufacturing, logistics, and retail market

AppENDIX


manufacturing companies in order to investigate issues such as:

The importance of reducing the »organization’s environmental impact, as well as the importance of sustainability driven change for the organization; the existence of green practices/initiatives within the organization, including:

Energy consumption and the increased ·use of renewable energy sources;

Recycling programs; ·

Design for sustainability; ·

packaging redesign for reduced ·environmental impact;

Developing new supplier criteria. ·

Improved efficiency and energy »consumption in the logistics areas of transportation, distribution, and warehousing;

Requirement to follow environmental »compliance (e.g., WEEE, RoHS, ELV (End of Life Vehicle), REACH);

Expected investments on sustainability »initiatives and expected business benefits;

in the Dow Jones Sustainability Index for the purpose of comparing the financial performance of those companies to the overall index.

Other subject areas investigated by IDC include the following issues related to sustainability:

Design for sustainability; design supply »chain; design for recycling;

Supplier management criteria and »performance;

Lean manufacturing practices; »Supply chain optimization, including »transportation, distribution, and warehousing practices;

Sustainable product packaging and »product components;

End-of-life postponement and »management;

Regulatory or industry mandated »compliance.

Primary Research Global SurveyIDC carried out a global survey, which targeted senior management of


Key performance indicators used to »measure success of sustainability efforts;

The role of IT in an organization’s »efforts to reduce its environmental impact.

European SurveyTo complement the existing primary and secondary research sources IDC carried out a supplemental survey in April-May 2008. The survey was based on 165 interviews with manufacturing, retail, and transportation firms in Germany, France, the U.K., Italy, Spain, Czech Republic, and poland.

Interviews were addressed only to companies with more than 100

employees. The specific quotas for market segments, company size, and country are shown in Tables M1 through M3.

Given the nature of the survey, interviews were addressed to the most qualified people to answer questions about the organization’s overall environmental improvement activities. To get a broad picture of the structure of the companies in European markets, it is interesting to analyze the functional area and the job title of respondents. Results in Table M4 reveal that a high percentage of the respondents have a job title connected to quality, environment, and health (28.5%), corporate responsibility (26.1%), or compliance (15.8%) departments.

TABLE M1

Survey: Vertical Market Quotas

Completes %

Automotive 26 15.8

High-tech/electronics 27 16.4

Chemicals 26 15.8

Food, beverage, tobacco 25 15.2

Other manufacturing, transportation 35 21.2

Retail 26 15.8

Total 165 100.0

Source: IDC, 2008


Face-to-Face InterviewsThe research was further supplemented by face-to-face interviews with selected market leaders and regulatory bodies in the manufacturing, retail, and transportation industries. In particular, IDC and Atos Origin carried out a total of 12 interviews with leaders who spoke about the environmental

sustainability issues and initiatives within their company.

The interviews focused on the organizational strategies for moving their organization toward environmental excellence. Main interview topics included:

TABLE M2

Survey: Company Size Quotas

Completes %

100 to 249 47 28.5

250 to 499 45 27.3

500 to 999 38 23.0

1000 or more 35 21.2

Total 165 100.0

Source: IDC, 2008

TABLE M3

Survey: Number of Completes by Country

Completes %

Germany 33 20.0

France 33 20.0

U.K. 23 13.9

Italy 18 10.9

Spain 30 18.2

Czech 12 7.3

Poland 16 9.7

Total 165 100.0

Source: IDC, 2008


How is environmental excellence »successfully achieved, what are the business models for environmental success within manufacturing, retail, and logistics organizations; what is the “path to environmental excellence” that your company is following or is prepared to follow in the future; how does IT play a role?.

What does environmental excellence »mean to you? How would you define it?;

What are the main drivers and inhibitors »of environmental excellence and what areas are you targeting for environmental improvement within your own company/organization and with which partners? How are you prioritizing your initiatives?;

TABLE M4

Survey: Respondent Profile by Job Title and Sub-Vertical Market

Which of the following best describes your job title?

Qual

ity, E

nviro

nmen

t Hea

lth

and

Safe

ty M

anag

er

Corp

orat

e Re

spon

sibi

lity

Offic

er/C

hief

Sus

tain

abilit

y

Offic

er

Chie

f Com

plia

nce

Offic

er/V

P

for E

nviro

nmen

tal C

ompl

ianc

e

Corp

orat

e Sa

fety

Offi

cer

Chie

f Ope

ratin

g Of

ficer

(COO

)

Othe

r

VP fo

r Sup

ply

Chai

n

Top

Man

ager

VP/ M

anag

er P

rodu

ct D

esig

n

Automotive 26.9 26.9 11.5 19.2 11.5 3.8

High-tech/electronics 29.6 29.6 14.8 7.4 7.4 3.7 3.7 3.7

Chemicals 38.5 26.9 15.4 11.5 3.8 3.8

Food, beverage,

tobacco

28.0 24.0 12.0 8.0 12.0 8.0 8.0

Other manufacturing,

transportation

25.7 28.6 17.1 11.4 8.6 5.7 2.9

Retail 23.1 19.2 23.1 7.7 7.7 3.8 11.5 3.8

Total 28.5 26.1 15.8 10.9 8.5 4.2 2.4 1.8 1.8

Base: All sampleNumber of valid respondents: 165 Source: IDC, 2008


EU Commission - DG V - The European »Commission’s Environment Directorate-General (DG).

The research compiled from these activities was analyzed by a group of industry experts that are part of the IDC research team, many of whom conduct independent research and share insights with large companies looking to initiate or accelerate sustainability programs.

Current Economic DownturnThe face-to-face interviews were carried out in the spring/summer 2008 timeframe. In light of the deepening global economic slowdown, which accelerated during the autumn of 2008, IDC and Atos Origin re-contacted the interviewees by mail in order to obtain clarifications and updates on any adjustments they may have made as a result of the worsening economic situation.

The results of this second wave of interviews are summarized under the paragraph “The impact of the economic downturn on environmental excellence programs”.

Interviews were conducted with the following companies/organizations:

Volvo Europa Truck; »Ford of Europe; »Saint-Gobain Glass U.K.; »Fairchild Semiconductor; »philips Lighting; »Rhodia International SA; »Inditex SA; »Conforama SA; »Carrefour SA; »ACEA - The European Automobile »Manufacturers’ Association;

CEFIC - The European Chemical »Industry Council;


Supplemental Table of Environmental Regulations

TABLE 2

Most Significant EU Regulations and Initiatives Affecting Manufacturing

EU Regulations Key Date IT Solution Needs Impact on Industry

Air quality

European framework

Since the early 1970s, Europe has been

working on trying to improve air quality to

minimize the level of harmful substances

in the air.

The Clean Air for Europe (CAFE) initiative

was established in 2001 to define a

long-term strategic initiative to tackle air

pollution.

This produced the current EU framework,

the Sixth Environment Action Program of

the European Community 2002-2012.

The Sixth Environment Action Program of

the European Community 2002-2012 was

adopted on July 22, 2002 (the mid-term

review was carried out on April 30, 2007).

Manufacturing

Air quality legislation

Over the years a substantial amount of

legislation has been introduced to improve

air quality in European skies, and a new

Directive (2008/50/EC) of the European

Parliament merges the former directives,

including new air quality objectives for

PM2.5 (fine particles) and the possibility to

discount natural sources of pollution when

assessing compliance against limit values.

Directive 2008/50/EC took effect in May

2008 and merges Directives 96/62/EC,

1999/30/EC, 2000/69/EC, and 2002/3/EC.

Manufacturing


TABLE 2



EU ETS

The most innovative measure pursued

by the EU has been the Emission Trading

Scheme (EU ETS). This is a measure

designed to help EU Member States meet

their Kyoto protocol commitments.

Each EU country has reduction targets in

the protocol and can allocate, in a National

Allocation Plan (NAP), permits to industrial

plants, allowing companies to trade carbon

credits, thus providing financial incentives

to lower emissions.

The U.K. has committed to reduce its

emissions by 12.5% compared to 1990

levels, whereas France has agreed to

stabilize emissions at 1990 levels. The EU

must achieve an overall cut of 8% by the

compliance deadline (2008-2012).

EU ETS took effect on January 1, 2005,

obliging companies to be more aware of

their emission levels. The ETS timeline sets

out a first and second compliance target

period (2005-2007 and 2008-2012). First

2006 results (published in February 2008)

show that 19 of the 25 Member States

experienced a surplus of allowances in

2006.

In absolute terms, Poland had the highest

surplus, followed by France, Germany,

Czech Republic, and the Netherlands. In

percentage terms the highest surplus

came from Lithuania, Estonia, Latvia, and

France. The U.K., Italy, Spain, Denmark,

Ireland, and Slovenia all had deficits of

allowances.

Risk management,

emissions inventory

management,

scenario planning

tools, data retrieval,

reporting, auditing,

and management

tools.

Oil and gas, utility,

transport, and several

manufacturing

industries: pulp and

paper,

petrochemicals,

cement and glass,

iron and steel, among

others.

Air pollution by emissions from motor

vehicles - from EURO 4 to EURO 5 and 6

Motor vehicle emissions are regulated by

Directive 98/70/EC, one of the directives

amending Directive 70/220/EEC (light

vehicles), Directive 2005/55/EC (agreed

in co-decision), and Directive 2005/78/EC

(implementing provisions, heavy vehicles).

The program focused on the emission of

carbon monoxide (CO), Volatile Organic

Compounds (VOCs), Nitrogen Oxides (NOx),

and particles. Following the Thematic

Strategy of the CAFE Program, new

standards have already been agreed.

EURO 4 - The program’s stricter limit values

were implemented for light vehicles from

2005 (Directive 98/69/EC) and for heavy-

duty vehicles from 2005 and 2008 (Directive

1999/96/EC). EURO 5 - The EURO 5 standards

for cars will further restrict emissions and

will apply as of September 2009 for new

models of cars and in January 2011 for all

new cars, aimed at reducing the emission

of particulate matter from diesel cars from

25mg/km to 5mg/km. EURO 6, which is

scheduled for 2014, will mainly reduce diesel

cars’ NOx emissions from 180mg/km to

80mg/km.

PLM, Product Data

Management (PDM),

emissions inventory

management, data

retrieval, reporting,

auditing, and

management tools.

Automotive,

farm equipment,

construction

equipment.


TABLE 2



REACH

Under the Registration, Evaluation, and

Authorization of Chemicals (REACH)

regulations (EC1907/2006), enterprises that

manufacture or import more than 1 ton of a

chemical substance per year are required

to register the properties of their chemical

substances in a central database run by

the European Chemicals Agency (ECHA) in

Helsinki. The proposed new regulation aims

to improve the protection of human health

and the environment while maintaining the

competitiveness and enhancing the innovative

capability of the EU chemicals industry

REACH entered into force on June 1,

2007. Registration of existing substances

manufactured or imported in quantities

larger than 1 ton/year, and substances of

particular concern, will be required within

three years. Registration of the rest of the

approximately 30,000 existing substances

covered will be phased in over 11 years

(2018).

Manufacturing

software, advanced

warehouse

management,

advanced inventory

management,

Supply Chain

Management (SCM),

PLM, knowledge

management, and

business intelligence.

Chemicals

Energy consumption

A very important target for the European

Commission is to foster energy consumption

efficiency. Among the many initiatives, it

has recently promulgated a directive on the

promotion of end-use efficiency and energy

services (2006/32/EC). This is expected to

decrease energy consumption by 9% in the

nine-year application time.

This law entered into force in April 2006.

First National Energy Efficiency Action

Plans (NEEAPs) were submitted to the

Commission by June 30, 2007. In their

NEEAPs, Member States show how they

intend to reach the 9% indicative energy

savings target by 2016.

Manufacturing

WEEE

The Waste Electrical and Electronic

Equipment (WEEE) directive, which is

related to Directive 2005/32/EC (amended

by 2008734/EC) on the eco-design of

Energy-using Products (EuP), requires

manufacturers to pay for the recovery of

used products. The EU strictly limits the use

of toxic chemicals in electronic products

and requires high-tech manufacturers to

pay to collect and recycle used goods.

Directive 2002/96/EC entered into force on

February 13, 2003. By August 2005, one

year after the official deadline, all Member

States (except Malta and the U.K.) had

transposed their provision into national

laws. Manufacturing producers will be

required to achieve a series of demanding

recycling and recovery targets for different

categories of appliances.

Supply relationship

management,

PDM, PLM, SCM,

reverse supply chain

management, logistics

management.

Electric, electronic,

and electrical

manufacturing.


TABLE 2



RoHS

The Reduction of Hazardous Substances

(RoHS) Directive 2002/96/EC (amended by

2008/35/EC) bans the use of six chemicals

in almost all electronics products, with the

exception of military and medical systems

as well as some big telecommunications

products.

RoHS could have the strongest effect on

the electronics industry since virtually

every product on the market now uses

lead-based solder to secure chips to

printed circuit boards.

Taking effect from July 2006, the rule bans

the use of six chemicals including lead,

cadmium, mercury, and chromium-6 in

almost all electronics products.

Inventory

management, SCM,

supply relationship

management.

Electronic

manufacturing

Food Track and Trace

The introduction of the new EU food

regulation No. 178/2002 relates to all

stages of production, processing, and

distribution. The law aims to prevent

fraudulent or deceptive practices in

the food trade that result in misleading

information to the final consumer.

The new regulation EC (R) 178/2002 took

effect in January 2005 and requires all

food and feed business operators to have

in place systems and procedures that

allow complete tracking and traceability of

products through the supply chain.

Manufacturing

software, advanced

warehouse

management, logistics

management, SCM,

PLM, inventory

management.

CPG

European Sustainable Consumption and

Production Policies

On July 16, 2008, the European

Commission presented a series of

proposals on sustainable consumption

and production that will help improve

the environmental performance of

products and increase the demand for

more sustainable goods and production

technologies. The proposals also seek to

encourage EU industry to take advantage

of opportunities to innovate.


TABLE 2



ISO 14001

ISO 14001 is often seen as the cornerstone

standard of the ISO 14000 series. However,

it is not only the most well known, it is also

the only ISO 14000 standard against which

it is currently possible to be certified by an

external certification authority.

ISO 14001 was first published in 1996

and specifies the requirements for an

environmental management system.

ISO 14001 applies to

those environmental

aspects over which

the organization has

control and over which

it can be expected to

have an influence.

Source: IDC, on EU Commission, 2008


Abbreviations and Glossary

TABLE 3

Abbreviations list

Acronym Explanation

NGO Non-governmental organization

EH&S Environment, health and safety

TCO Total cost of ownership

PSI Product sustainability index

LCA Life-cycle assessment

CDM Clean development mechanism

UNFCCC United Nations framework convention on climate change

CER Certified emission reduction

EMS European modular system

MES Manufacturing execution system

ROHS Reduction of hazardous substances

REACH Registration, evaluation, and authorization of chemicals

OEM Original equipment manufacturer

PLM Product life-cycle management

TMS Transportation management system

WEEE Waste electrical and electronic equipment

SNO Supply network optimization

GHG Greenhouse gas

ELV End of live vehicle

Source: IDC, 2008


Green ITThe study and practice of using computing resources efficiently including economic viability, environmental impact, and social responsibility. Typically, green IT systems or products take into account the so-called triple bottom line of people, planet, and profit. This differs somewhat from traditional or standard business practices that focus mainly on the economic viability of a computing or IT solution. In practical terms, Green IT consists in the designing, manufacturing, implementing and recycling of IT products and related materials in an environmentally responsible manner.

Green Manufacturing; Green Logistics; Green RetailGreen Manufacturing refers to the reduction of the use of hazardous materials such as lead at the manufacturing and recycling stages, the optimization of the energy efficiency during all the product’s lifetime phases, and the recyclability or biodegradability of both a defunct product and of any factory/production waste.

Green Logistics refers to the integrated management of all the activities required to move products through the supply chain (freight transport, storage, inventory

Glossary and DefinitionsEnvironmental ExcellenceEnvironmental Excellence is characterized by continuous consideration of opportunities for recycling, reuse, reduction, and new revenue which deliver tangible benefits such as lower costs and profitable revenue growth as well as intangible benefits such as increased brand equity, enhanced corporate reputation, and new intellectual property. These policies and cultures extend outside the company to relevant stakeholders such as suppliers, partners, customers, investors, and other interested parties.

Sustainability and Environmental SustainabilityThe concept of sustainability indicates the capability of meeting the needs of the present without compromising the ability of future generations to meet their own needs. Environmental Sustainability applies this long-term perspective to caring for the environment and refers to the potential longevity of vital human ecological support systems (such as the planet’s climatic system, systems of agriculture, industry, forestry, and fisheries) through the appropriate design and implementation of technical and economical practices.


management, materials handling and all the related information processing) in an efficient way that is no longer defined in purely monetary terms. As concern for the environment rises, Green Logistics deals with how companies account of the external costs of logistics activities associated mainly with climate change, air pollution, noise, vibration and accidents.

Green Retail refers to the use of a wide range of activities designed to reduce the environmental impact of the retail sector. Such activities can span from reducing the amount of packaging, to labeling the packaging according to whether it can be re-used, recycled or composted, from reducing the energy consumption in retail buildings and sales areas, to encouraging consumers to make a difference by making green products more affordable.


Interviewees

Atos Origin and IDC would like to give a special thanks to the following individuals and companies that contributed to this study:

Mr Herbert Aichinger · , Adviser to the Director for Sustainable Development and Integration, EU Commission - DG V - The European Commission’s Environment Directorate-General (DG)

Mr Antonio Alvarez Sanchez · , Head of Environment Dept. Member of the Sustainability Committee, Inditex SA (one of the worlds largest fashion distributors with eight chains)

Mr Patrick Collignon · , former Managing Director, Volvo Europa Truck (part of the Swedish automotive manufacturer Volvo)

Mr Thibaut Derville · , Director of Purchasing Strategy, Conforama SA (one of France’s largest furniture retailers)

Mr Maarten ten Houten · , Senior Sustainability Manager; Mr Frank Altena, Sustainability Officer, Philips Lighting (global manufacturer of lighting and lighting equipment)

Dr Alan McLenaghan · , Managing Director, Saint-Gobain Glass U.K. (global producer, processor and distributor of various materials)

Mr Roman Meininghaus · , Environmental Policy Director, ACEA - The European Automobile Manufacturers’ Association

Mrs Andrea Mirenda · , VP Corporate Marketing; Mr Karl Albrecht, Director, Corporate EHS, Fairchild Semiconductor (global provider of semiconductor technology)

Mr Paul Rowsome · , Environmental Manager, Sustainability Department, Carrefour SA (largest retailer and distribution group in Europe)

Mr Laurent Sapet · , Rhodia Way Project Manager, Rhodia International SA (international chemical company)

Dr Wulf-Peter Schmidt · , Manager Sustainability/CO2 and Technical Specialist Vehicle Recycling, Ford of Europe (one of the largest automotive manufacturers in Europe)

Mr Daniel Verbist · , Executive Director, Build Trust and Communications CEFIC - The European

Chemical Industry Council

ACKNOWLEDGEMENTS


About the Authors

pierfrancesco Manenti » , EMEA Research Director:

Pierfrancesco Manenti is the EMEA research director for Manufacturing Insights. In this role he provides

insight into the key issues and trends affecting the manufacturing industry verticals in Western Europe,

including discrete manufacturing, process manufacturing, automotive, CPG, and supply chains. Manenti

has developed strong market experience in understanding industry-specific process challenges and

vertical-specific technology trends in order to provide strategies on IT demand from both the end-

user and vendor perspectives. He analyzes and anticipates key trends in industry-specific business

process challenges, forecasts IT strategies and spending in specific sub-verticals in Western Europe,

and provides consulting and advisory support to end-user organizations as well as IT vendors. Manenti

comes to Manufacturing Insights with 15 years’ business experience spanning the functional disciplines

of business development, business unit management, supply chain and demand management strategies

and implementation, customer support, and accounting processes. Prior to joining IDC, Manenti

spent more than 10 years with TXT e-solution, a Europe-based SCM software vendor, where he held

increasing roles and responsibilities, including industry business unit manager for automotive, business

development manager for manufacturing industries, and U.K. operations director. Manenti has a degree

in computer science from Pisa University (Italy).

Robert parker » , Group Vice President, Industry Insights:

As Group Vice President of Industry Insights, Mr Parker is responsible for the research direction at

both Manufacturing Insights and Global Retail Insights, two of IDC’s industry research companies

that provides global, fact based research and analysis on best practices and the use of information

technology that assists clients in improving their capabilities in key process areas. Robert has extensive

experience in the retail industry throughout his career in management, as a consultant, and in research.

Prior to joining IDC to start these industry practices, Robert spent over six years at AMR Research where

he launched the E-commerce Strategies service, the most successful program launch in the history

of that company. He also ran the Retail Advisory practice for AMR. As a turnaround consultant, Robert

served as acting CIO of two multi-store retailers including an apparel chain and a New England based

confectionary retailer. As a principal at Internet Service Provider, TDI, he lead E-commerce projects for

several media companies and oversaw the overhaul of the store systems and network at a specialty

food store. While in IT management, Robert worked for consumer products companies and was deeply


involved in automating the reconciliation of market development funds with retail channel partners.

Mr Parker holds an MBA, with a concentration in decision support systems, from New Hampshire

College. His undergraduate work was done at Rivier College where he received a Bachelor of Science

in Computer Science and Accounting. Robert is a frequent speaker at industry and technology vendor

events and is regularly quoted in the business, technology, and trade press.

Giorgio Micheletti » , Consulting Manager, European Vertical Markets:

Giorgio Micheletti joined IDC EMEA in March 2005 as consulting manager for the European Vertical

Market business unit. His task in the group is to strengthen and expand IDC’s advisory and consultancy

offering by participating directly in engagement management and engagement assignment activities, as

well as coordinating business development and solution selling activities in collaboration with the sales

team. Prior to IDC, Micheletti worked as a project manager in the manufacturing and telecommunications

sectors in Germany. He then moved to the consultancy business, where he worked with a number

of consultancy companies in Italy and France. Micheletti has a degree in political sciences with

specialization in macroeconomics from the Bologna University and master’s in European studies from

the Catholic University of Louvain in Belgium. Micheletti completed his MBA from the Open University

Business School in Milton Keynes (London, UK) in December 2006 and is a certified Project Management

Professional (PMP) from the Project Management Institute.


Atos Origin Participants

Management and Collaboration with IDC:

Anne Fitzsimmons, · Global Markets Manufacturing;

Pilar Barea · , Atos Consulting, Spain.

publishing:

Cindy De Smedt · , Global Marketing.

Validation:

Patrick Adiba · , Global Sales;

Gilles Arditti · , Global Investor Relations and Financial Communications;

Luc Barbier · , Global Consulting and Systems Integration;

Jerome Brun · , Global Managed Operations;

Sophie Chambon · , Atos Consulting, France;

Marie-Tatiana Collombert · , Global Communications;

Johannes Diebig · , Global Marketing;

Giles Hutchins · , Atos Consulting, United Kingdom;

Robert-Jan Streng · , Atos Consulting, Netherlands;

Irene Veldstra · , Global Consulting and Systems Integration;

Marc Aurele Vermersch · , PPR Group Global Account Manager.


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www.atosorigin.com

About Atos OriginAtos Origin is an international information technology services company. Its business is turning client vision into results through the application of consulting, systems integration and managed operations. The company’s annual revenues are EUR 5,5 billion and it employs over 50,000 people in 40 countries. Atos Origin is the Worldwide Information Technology Partner for the Olympic Games and has a client base of international blue-chip companies across all sectors. Atos Origin is quoted on the Paris Eurolist Market and trades as Atos Origin, Atos Worldline and Atos Consulting.For more information: www.atosorigin.com

Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish symbol itself areregistered trademarks of Atos Origin SA. Global Marketing, March, 2009.

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