By: Rae Ann S. Johnson Attorney and Council Director, Manufacturing Alliance/MAPI
The facts are in
The statistics are clear. Old manufacturing processes and procedures are out. New less-water-wasting, lower-energy-using, conflict-and-child-labor-free manufacturing is in. What better time than now to proclaim 2012 as the year of the sustainable manufacturer?
The concept of sustainable manufacturing is not new. Many manufacturers have been diligently phasing sustainability into their business models for several years—largely because they already embrace an altruistic view or they are responding to negative shareholder activism. But two very recent global developments, in conjunction with mounting social and financial pressures, could catapult sustainability into the forefront of manufacturing efforts in 2012. This is particularly true for small and medium enterprises (SMEs), as well as B2B and industrial manufacturers, who have until recently only been tiptoeing in the sustainability tulips.
According to a July 2011 analysis by the UK Department for Business Innovation & Skills (BIS), the green marketplace is estimated to be worth $5 trillion and growing. Knowing good business when they see it, manufacturers will clamor for their fair share of this growing multitrillion dollar trend.
Corporate peer pressure is also mounting. An analysis by KPMG released in November 2011 showed that 95 percent of the world’s 250 biggest companies now report their sustainability performance—that’s up from 80 percent in 2008. As big companies go, so go the others. This is particularly true if the bigger companies demand it of their suppliers.
Which leads to the next major sustainability driver: big box retailers and large manufacturers such as Walmart and Procter & Gamble are requiring suppliers to report on their sustainability efforts as a whole and for individual products. Full implementation of the Walmart sustainability index alone will impact more than 100,000 companies and nudge them into the sustainability fold.
The financial implications for NOT being green can be huge, if not devastating. A 2010 study by Harvard and London Business Schools found that financial analysts rate companies with visible sustainability efforts higher than others. Moreover, those companies with significant environmental problems pay up to 0.64 percent more to service their debts and secure credit. In a time of global recession, when resources are tight, implementing sustainability projects to save money and access cheaper credit is a sound business decision.
4 • The Crucible January/February 2012
The aging of the manufacturing workforce also has an impact because younger employees want to work for environmentally conscious companies. A 2010 study by Johnson Controls Global WorkPlace Solutions showed that more than 96 percent of people ages 18 to 25 want their employer to be environmentally friendly. As younger employees replace older ones, the internal pressure on companies to become more sustainable will grow.
While all of these trends bode well for an increase in sustainable manufacturing, two new drivers could ultimately catapult sustainability from trendy tree-hugger trance to strategic CEO certainty starting in 2012.
First, in November 2011, the OECD released a free, five-years- in-the-making Sustainable Manufacturing Toolkit. This toolkit contains not only descriptions of sustainable manufacturing efforts, but also recommended metrics, case studies, and tools for designing, implementing, and measuring sustainable manufacturing programs. Such a “how-to” guide could become the missing link for manufacturers who intend to embrace sustainable manufacturing but do not know where to begin.
The second major development is that 2012 will be the first year that several industrialized nations begin implementing lower emissions regulations and carbon tax schemes. Under the Copenhagen Accord reached in December 2009, more than 90 countries (including the U.S. and China) have pledged to reduce emissions by 2020. On January 5, 2012, China’s Economic Information Daily reported that the Chinese carbon tax is expected to be in place before 2015. This new environmental taxation system has already been submitted to China’s Ministry of Finance for approval and is expected to be employed soon, possibly as early as sometime in 2012. The plan calls for a graduated tax on carbon emissions that increases based on a company’s emission levels. This tax follows on the heels of a recently implemented nationwide sales tax on oil and natural gas.
Social and financial pressures alone are not enough to generate a seismic shift toward sustainable manufacturing. Combining these pressures, however, with a free Sustainable Manufacturing Toolkit and the imposition of new emissions regulations such as the Chinese carbon tax could be enough to propel manufacturers into the next phase of sustainable development starting in 2012.
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