Author Archives: ilkeschaart

Finding Opportunity in Sustainable Supply Chains: Nate Morris of Rubicon Global

Meg Schneider is a junior at Penn majoring in Environmental Studies, with a concentration in Sustainability and Environmental Management. She is currently researching behavioral solutions to environmental problems with Professor Dana of Penn Psychology for her thesis.

It’s all about incentives, said Rubicon Global‘s founder Nate Morris at IGEL’s Greening the Supply Chain conference. He said his company’s incentives are aligned with their clients, as they own no landfills or trucks themselves. In Nate’s words, “we make money off the savings we find [in our clients’ waste streams], unlike other ‘big guys’”. When first getting into the end-of-lifecycle business, Morris described how archaic the garbage disposal infrastructure is, with fax machines and costly paper invoices. Rubicon has used technology to create a niche streamlining sustainable processes for companies, which has gained it operations in over 50 states in just under 5 years.

Critics may say that their business will only last until waste-processors catch up to 21st century technology. To that point, Morris discussed other unique opportunities his company has created. In one particular example, Wegmans’, a fine goods supermarket store, had thousands of old uniforms that it did not want to dispose of in a landfill, or be processed into other materials, due to branding. Rubicon was able to find a pet cushion supplier that was able to recycle and reuse the materials, creating a win/win/win scenario for Wegmans’, the supplier, and Rubicon. With its unique positioning without assets, Rubicon will be well poised to face the future.

Overall, Morris’ talk and the success of Rubicon have clearly demonstrated that there still exists a large amount of low-hanging fruit for sustainability professionals and investors. While consumer goods and energy suppliers are often, rightly, lauded for their contributions, Rubicon has shown sustainability can be incorporated in a wide range of industries.

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The Nature Conservancy Does Wonders Via Third Party Verifications

Kimihiko Takamatsu is a graduate student at the University of Pennsylvania in a Master of Environmental Studies (MES) program, with a concentration in Environmental Policy. He hails from Japan, and earned a Bachelor of Laws from Keio University in Tokyo in 2011. Prior to his graduate studies at Penn, Kimihiko worked as a secretary at the Tokyo Office of Skadden, Arps, Slate, Meagher & Flom LLP,  one of the largest law firms in the U.S. As an MES student at Penn, he focuses his studies on International Environmental Treaties and Sustainability Management. Kimihiko is currently working as a research assistant at the US-Japan Institute, which is a non-profit research organization, based in Philadelphia, PA.

I had the opportunity to listen to a speech presented by Ms. Sarene Marshall, the Managing Director at the Nature Conservancy. The Nature Conservancy is the largest environmental non-profit organization in the U.S., and Ms. Marshall has led many projects relating to sustainability management in developing countries throughout her career at the organization. A graduate from the Wharton School with fluency in Spanish, Ms. Marshall introduced two case studies in terms of deforestation for this occasion: the logging industry in Indonesia and the soybean business in Brazil.

On the regulation front, many laws are put in place in countries around the world to prohibit the sourcing of products that are contributing to the deforestation, especially timber, but also other agricultural products. Brazil has a far-reaching legislation that has been on the books for decades but little has been enforced until recently, known as the Forest Code. The law requires that private landowners in the Amazon retain 80% of their land near forest cover so companies won’t farm, ranch, or pare down the trees there.

The Forest Code had been the biggest tool in fighting deforestation in Brazil until a high-profile report of Greenpeace came up accusing the soybean business of eating up the Amazon. The report indicated that the deforestation occurring in Amazonia lead to the growth soy beans that were then fed to chicken and finally ended up in fast food chain restaurants like McDonald’s. This incident sparked a wave of outrage from environmentally minded consumers, and as a result, Cargill, an American multinational dealing in agricultural commodities, had to scale down their soybean business in Brazil.

Against this backdrop, Ms. Marshall and her team at the Nature Conservancy initiated a pilot program in Brazil to ensure that suppliers are in compliance with the law, and also consumers can know where the soybeans that they buy are coming from. What Ms. Marshall did with her team was to apply mapping technology to create graphical maps showing which properties are in compliance and which were not. In creating the maps, they used databases in state agencies and the ones Cargill produced, and combined the geo-referenced information and delivered it to a variety of stakeholders. This project ended up as a great success, and currently Ms. Marshall’s team has covered 128 million acres of forest using their program. Furthermore, their maps have provided vital market access for farmers as well as increased Cargill’s transparency, resulting in a mutually beneficial outcome.

The second case study on the logging industry in Indonesia is also a success story outlining how to make supply chain more sustainable. The Nature Conservancy has been committed to the timber business in Indonesia for decades with a program funded by the U.S. Agency for International Development (USAID). They have been working with local timber concessionaires, primarily in Borneo, to show how they can change their felling practices to more environmentally conscious ones, while trying to enhance community engagement with the local people living near timber concessions.

One of the things that the Nature Conservancy has been involved with is to advise local loggers to use the monocable winch system. The monocable winch allows loggers to drag one log at a time instead of, say, a powerful bulldozer carrying a bunch of logs while knocking down whatever plants or vegetation that come in its way. This saves a lot of innocent trees, reduces tons of carbon emissions annually, and keeps the timber concession viable for future use so that they can go back later and fell newly grown trees. At the same time, they also make efforts in engaging the local community and whereby they identify important areas that are culturally and spiritually rich, so that the certification process for timber concessions works smoothly and without much antagonism between loggers and locals.

“Each year, about 36 million acres, or roughly the size of New York State, of forest are lost,” warns Ms. Marshall. To the surprise of the audience, myself included, 80% of carbon emissions come from deforestation, according to her. Yet, many developing countries still rely on carbon-intensive fossil fuels for energy production, in pursuit of economic development comparable to the levels achieved by developed countries. While many multinational corporations try to exploit the so-called “bottom of the pyramid (BOP)” consumers, whose number is said to be somewhere around 4 billion today, it is essential that third-party organizations get involved in their supply chains, with a critical eye toward their long-term sustainability.

Notes on Edwin Keh: Keynote Speaker at The 5th Annual Conference of the Initiative for Global Environmental Leadership

Kimihiko Takamatsu is a graduate student at the University of Pennsylvania in a Master of Environmental Studies (MES) program, with a concentration in Environmental Policy. He hails from Japan, and earned a Bachelor of Laws from Keio University in Tokyo in 2011. Prior to his graduate studies at Penn, Kimihiko worked as a secretary at the Tokyo Office of Skadden, Arps, Slate, Meagher & Flom LLP, which is one of the largest law firms in the U.S. Kimihiko is currently working as a research assistant at the US-Japan Institute, which is a non-profit research organization, based in Philadelphia, PA.

The 5th Annual Conference of the Initiative for Global Environmental Leadership (IGEL), held on April 26, 2012 at the Wharton School, focused on sustainability and supply chain management with presentations and panel discussions attended by business leaders from a range of industries dedicated to sustainability issues.

This year’s conference welcomed Mr. Edwin Keh as a keynote speaker, who presented lessons from his experience as Chief Operating Officer and Senior Vice President at Wal-Mart.  Prior to Wal-Mart, Mr. Keh worked for various consulting and retail companies with a brief stint as an editor at the United Nations High Commissioner for Refugees before his graduate studies. A vibrant speaker, Mr. Keh talked about sustainability from the perspective of how to distribute products through the global supply chain while maintaining product quality and minimizing defects and delays.

Before discussing the main story, Mr. Keh started out by explaining his decision to step out of his nonprofit positions into major corporations. According to him, the biggest reason behind his major career change was the limited scope he felt of what nonprofits could engage in and the greater possibilities of leveraging the corporations’ large-scale networks in order to have greater impact on society. He believes corporations’ products could be supplied by 100% use of renewable energy.

With regards to the key agendas to sustainability in supply chain operations, Mr. Keh called the audience attention to four areas of improvement: (1) product quality; (2) waste & packaging; (3) legal compliance; and (4) energy reduction. For example, he mentioned as electronic devices get more and more advanced, chances are higher that a product won’t reach a customer without one of its components being damaged during its shipment. “Out of good intentions, bad products can be shipped,” explains Mr. Keh. Since such a situation happens as frequently as one can imagine in the global supply chain, he emphasizes the importance of coordinated communication between suppliers. During his speech, he repeated the phrase, “miscommunication creates a chain reaction of supply paralysis” several times.

Another issue that arises in large-scale supply chain operations is heaps of waste and packaging. As the world’s largest retailer, Wal-Mart particularly recognizes this problem. In fact, Wal-Mart aims to eliminate all waste by reducing, reusing or recycling by the year 2025. The retail giant has also been working with its suppliers to devise sustainable packaging solutions in the meantime, according to Mr. Keh.

The aforementioned attempt especially leads to the fourth agenda that Mr. Keh brought up to make the supply chain more sustainable. By reducing waste and packaging, the cost of disposing of them naturally decreases, so does energy use. As part of the initiative to get consumers to buy greener products, Wal-Mart launched a large national advertisement campaign advocating environmentally friendly products in 2007. Also, in its 2011 Global Responsibility Report, Wal-Mart showcased its ambitious goal to replace the types of energy currently used for shipping products with renewable ones.

Mr. Keh reiterated the perpetual difficulties involved in supplying products to inland cities of developing countries, since infrastructure are usually not fully developed in those areas, and so it costs a lot of time and energy to carry products there. In addition to the hindrance to transportation, developing countries tend to have legal systems that are fundamentally different from those of developed countries, or the U.S. in the case of Wall-Mart. Therefore, legal compliance is an inevitable issue when managing supply chain on a global scale, warns Mr. Keh.

Finally, Mr. Keh called for a change in consumer behavior to make a real impact, by introducing a funny anecdote about Wal-Mart’s logo. When he started work at Wal-Mart, its logo that came up under the company’s name showed the phrase, “Always Low Prices. Always (highlighted).” Now, the logo reads, “Save money. Live better.” Mr. Keh says, “people often blame others, but they don’t often notice that their own actions would solve the very problem that they’re blaming for.”

On a personal note, however, Mr. Keh’s presentation particularly reminded me of an economic model called the “Environmental Kuznets Curve (EKC),” which I had came across doing research for one of my classes at Penn. Proposed by Simon Kuznets, a Russian economist who won the Nobel Prize in Economic Science and taught at the Wharton School before he passed away in 1985, the EKC hypothesizes that as the income level rises so does inequality in society, but beyond a certain point inequality actually decreases with greater income because people start to recognize the importance of social justice and invest their capital in improving inequality. Put inequality on the vertical axis and the income level on the horizontal axis, and the graph follows an inverted U-shaped curve, according to the theory.

After having been known for its rather ubiquitous big-box chain stores and huge revenues, which might as well match the quintessential image of the American culture, Wal-Mart finally came to recognize the importance of environmental conservation and sustainability. Later it started to invest in making its supply chain as sustainable as possible. Funny as it may sound, now it tries to improve its image and strongly urge consumers to choose what they consider good for our well-being and avoid what they consider detrimental to the environment.

That said, after all, consumers choosing products with less environmental impact would actually create more significant and immediate effect in contributing to environmental well-being as well as corporate sustainability than companies racking their brains to come up with better solutions to the same cause. Therefore, the bottom line should be as follows: We want to live better, companies want to save energy and reduce waste: it’s in our mutual benefits.

The Supply Chains of Tomorrow; Rajat Kapur of GE

Meg Schneider is a junior at Penn majoring in Environmental Studies, with a concentration in Sustainability and Environmental Management. She is currently researching behavioral solutions to environmental problems with Professor Dana of Penn Psychology for her thesis.

Rajat “Raj” Kapur of General Electric brought a wide-angle lens on corporate sustainability to IGEL’s Greening the Supply Chain Conference, discussing how GE handles sustainability across its industries. Making products as diverse as jet engines to healthcare, the company has tens of thousands of individual suppliers and competitors. As customers and clients began asking for more environmental disclosure, data, and overall information in the 2000s, GE realized it needed answers about all of these suppliers and quickly.

Raj explained that they began with 2600 assessments of its suppliers in developing countries, including not only environmental issues but also of basic human rights and regulation adherence. This turned up over 16,000 issues, offering immense opportunity for improvement. Although Raj offered some basic advice about flexibility and data collection, he was most inspiring when speaking practically about business direction. “Improving current systems of supply and distribution are not enough”, he emphasized. One must also start with sustainability at the design and tech team level. The products designed today will be used in the supply chains of tomorrow, he continued.

Another novel point of Raj’s presentation was that suppliers must also have value added to their business as a result of sustainable processes. For example, they found that only 10% of suppliers currently monitor energy. By reducing energy use, both the supplier and company can win – suppliers save on cost and the supply chain becomes greener. Conversely, if GE is the sole company to reap value, suppliers will be less likely to adhere to changing processes and systems. Although many discuss the intersection of economic opportunity and sustainability, the supply chain’s value creation is often ignored in the conversation.

Indeed, it is easy for a large corporation to ignore any unflattering assessment rather than confront and take steps, as GE has with its Green is Green training programs. Consumers should continue to ask questions and demand information about the source of the goods they use everyday. Even the project manager of GE’s Ecoimagination team, admits that the process would have never gotten to this point without consumer pressure. Thus, consumers should feel empowered about their market influence in improving supply chains.

oikosPenn Student Reporter posts Coming Soon…!

Today, April 26th 2012, eight students from the University of Pennsylvania are reporting live from the Initiative for Global Environmental Leadership’s Fifth Annual Conference-Workshop entitled Greening the Supply Chain: Best Business Practices and Future Trends held at Huntsman Hall. The line-up of speakers includes representatives from the public and private sector. The students are part of the first accredited Oikos chapter in North America (just announced yesterday!).

Stay tuned as the student reporters publish posts that cover the discussions held at the Conference. They have also done in-depth interviews with keynote speakers and industry leaders that will be available shortly.

Follow the conversation on Twitter through #IGEL, @WhartonIGEL and @oikosPenn!