How can businesses develop products that are both environmentally and economically sustainable? Many company executives see green initiatives as a financial burden that are only pursued out of good will. Some environmental projects require large initial investments or involve changing the structure of an operation. However, many initiatives that reduce the environmental impacts of products also reduce costs for businesses and improve their bottom line. At the Wharton Initiative for Global Environmental Leadership (IGEL) conference titled “Greening the Supply Chain: Best Business Practices and Future Trends” on Thursday, April 26, many strategies were presented by various companies that have improved both their environmental and economic sustainability.
Successes in Improving Environmental and Economic Sustainability
One of the first speakers at the conference was Rajat Kapur, the Ecomagination Project Manager at GE. According to the ecomagination website, “ecomagination is GE’s commitment to imagine and build innovative solutions to today’s environmental challenges while driving economic growth.” He explained at the conference how GE uses innovation so the company does not need to choose between economics and the environment. One strategy that they use is Life Cycle Assessment. It focuses on measuring the environmental impacts of a product over its entire lifecycle. This information is then used to incorporate sustainability into the design of products at the research and development stage. This strategy benefits environmental and economic sustainability because it incorporates these ideas at the start of the process.
Later, Edwin Keh, a lecturer at Wharton and former COO of WalMart Global Procurement, gave examples from WalMart. Keh’s team researched product returns at WalMart. Although returned items may not seem like a focus for improving sustainability, fewer returns could lead to significant benefits because returned products represent a waste of materials, transportation fuel, and shelf space. WalMart found that some of the most common reasons for returns were that the product was too complicated or the product did not function correctly as the result of a miscommunication. For example, many consumers returned one product that converted videos from VHS to DVD format because there were too many connector cords to figure out. A simpler design for this product would have made it easier for the consumer to use and resulted in fewer returns. Miscommunication was a problem for an inflatable pool toy that consumers returned when it did not float correctly. This occurred because the product was made at a location that classified it as a toy and did not test for floatation. Problems such as this can be improved by implementing changes at the research and development stage (to design user-friendly products) and then communicating with those down the supply chain (to ensure proper quality testing procedures). Solving these types of problems reduces costs, reduces waste, and ultimately makes the company more environmentally and economically sustainable.
Another speaker was Tom Carpenter from International Paper, who spoke about strategies used by his company to make transportation more efficient. Many people first think of improved fuel efficiency to improve transportation, but the more effective strategies are to decrease the number of miles traveled, alter the modes of transportation used, and increase the utilization of capacity (by volume and weight). International Paper, for example, fills their trucks to the maximum capacity allowed by law and uses rail over truck whenever possible because of increased efficiency. Increasing the transportation efficiency in a business reduces fuel costs and emits fewer carbon emissions into the atmosphere, making it a strategy that benefits both environmental and economic sustainability.
Challenges and Future Outlook
There are various strategies for businesses to become more environmentally sustainable and support their bottom line by focusing on the supply chain. However, it was said several times throughout the conference that current actions primarily focus on “low-hanging fruit.” What does this mean for the future? When the more easily improved aspects of a supply chain are already addressed, greening the supply chain may become more difficult. I suspect that many of these changes will require greater structural changes, greater amounts of initial investment, and ideas that may not seem as obviously beneficial and will face more resistance to become implemented.
At the same time, however, green businesses are becoming more of a mainstream concept that is desired by both businesses and consumers. As a result, greening businesses will become easier in some ways. Alice Henley of the NRDC explained how greening sports events is an important way to spread sustainability because it infiltrates sustainable ideas into mainstream American culture. Although there will be challenges to make businesses more environmentally and economically sustainable, I believe that it will continue to be done in many sectors, especially as consumers demand it more. Have you heard of particularly interesting ways that businesses have become more sustainable? What are the biggest challenges for businesses? Post your comments below!
IGEL @ Wharton 