Management: The Green Advantage
Automakers know that environmentally sound, efficient manufacturing practices will please customers- and help business.
When you think of green manufacturing, you might not think of the early 1900s. But according to some experts, Henry Ford was doing this before there was a name for it.
“If you eliminate waste, you make money,” says William Levinson, author of “Henry Ford’s Lean Vision.” “That was Ford’s own success secret.”
When the first Model T appeared, the 1899 Rivers and Harbors Appropriation Act had been passed almost ten years before. The Environmental Protection Agency wouldn’t be founded for another 62 years, and along with it the Clean Air Act. And yet, Henry Ford tried to eliminate waste wherever possible. Rather than throw waste materials away, he aimed to reuse, reduce and recycle. Today, automotive companies continue to embrace sustainable, green manufacturing practices-and they’ve gotten results.
Ford cut carbon dioxide emissions 49% from its global operations between 2000 and 2010. GM recently added its 100th landfill-free facility. Volkswagen has been using new materials in its manufacturing, from solar panels to carbon dioxide-neutral biomass. The BMW Group topped the Dow Jones Sustainability Index in the automotive sector again this year, and has appeared on the list every year since it was established in 1999.
It seems unanimous: sustainable, green practices work. According to a 2010 United Nations Global Compact-Accenture CEO study, 100% of automotive CEOs believe that sustainability issues will be critical to the future of their business.
Though the idea makes sense, sustainable manufacturing can be difficult to achieve, and slippery to define. In its Sustainability Initiative, the Commerce Department defines it as “the creation of manufactured products that use processes that minimize negative environmental impacts, conserve energy and natural resources, are safe for employees, communities, and consumers and are economically sound.”
So although hybrid cars may receive a lot of attention, it’s also important to consider the way the cars are made. The idea is to be efficient. As Luke Contos of TRW says, “A process that isn’t efficient really isn’t sustainable.”
Throughout the lifecycle of a car, the greatest environmental impact comes once it leaves the plant and hits the road. Automakers are addressing this in two ways. First, they are eliminating as much waste and pollution from the manufacturing process, and second, creating more environmentally friendly products. With an average of 8.6 million passenger vehicles produced in the United States between from 2006 to 2010, the impact of changing automotive practices is huge.
In his blog on green manufacturing, David Dornfeld, professor of mechanical engineering at the University of California-Berkeley and director of the Lab for Manufacturing and Sustainability, writes, “As a green or sustainable manufacturer you usually have three basic “levers” you can adjust to optimize the production of a product or component-process technology, energy source and material. That is, you can improve the efficiency of the process in terms of energy or material consumption, you can reduce the embedded energy in the materials or use cleaner sources of energy, or you can introduce processing technologies…that are better suited to converting materials into product.”
And automotive and other resource-intensive industries have led the way, according to Martin Reeves, managing director of the New York office of The Boston Consulting Group, director of the strategic institute at BCG and one of the authors of the MIT Sloan Sustainability study: “Sustainability Nears a Tipping Point.” At first, companies become interested because of their reputation, Reeves says. Then they consider costs, saving money and resources. Eventually, it becomes about innovation and growth. Reducing waste and saving money have always been attractive ideas, but now they have been receiving more attention, both from consumers and the manufacturers.
“Often a new concept in management rebrands a previous reality,” Reeves says. But, “the idea that consumers would pay for a sustainability benefit is new. The idea that companies would compete on a sustainability benefit is somewhat new. The idea of supply chain standards, and standards more generally, is somewhat new. Undoubtedly, there is something new here.”
One of the most lauded projects is zero waste to landfill. Landfill-free facilities, a term used for locations where almost all waste is recycled or used for energy, are on the rise.
In 2004, a Subaru plant in Indiana became the first automotive assembly plant to reach zero-landfill. Since then, many automakers have achieved this status. But it does require a lot of effort, namely, avoiding waste in the first place.
“In its very DNA, Toyota has been doing sustainability before it was a word,” says Kevin Butt, Toyota’s chief environmental officer. “We’re trying to design plants, facilities and processes that eliminate waste before you make it.” In 1999, Toyota went towards zero landfill, a difficult process, but one that saves money. Though he was too young to be involved in Toyota’s first environmental committee, formed in 1963 (he was four at the time), he continues to pursue these goals.
And he’s not alone. Companies have been creative about cutting waste. Honda has achieved its zero waste to landfill goals-in 2011, 10 of 14 plants were zero-landfill-by reducing steel waste, recycling and reusing sand, and managing wastewater. Chrysler and Fiat Group changed their paint process and eliminated emissions from volatile organic compounds (VOCs) 62% from 2004 to 2011.
From 2010 to 2011, Ford reduced its waste sent to landfills by 11.3%. And in the past five years, the company has reduced its waste by 100 million pounds. “Our philosophy and strategic direction have been consistent,” says Sue Rokosz, manager of Ford’s environmental quality department. “We’re always looking at new technologies and where we can implement them.”
John Bradburn, GM’s manager of waste-reduction efforts, says managing scrap inside a manufacturing operation closely relates to quality. “Waste is really a resource that’s out of place,” Bradburn says.
In the future, Bradburn says more companies will be interested in “byproduct synergies,” where junk from one company can become treasure at another. The idea is to keep materials in use for as long as possible. Though this has already been taking place from one plant to the next, the future might allow for more of this in automotive and across industries.
Supply Chain Demand
Companies don’t suddenly stop producing waste on their own. Instead, they have to tell suppliers, “Here’s how you can help.”
UL released a standard in June to cover the zero waste to landfill topic, and says interest will continue to grow. “At first glance, you just think about that person at the plant, not throwing something in the trash,” says Libby Bernick, UL vice president of consulting, “but that piece of waste had to come from somewhere, maybe something that came in the door from a supplier.”
TRW (Livonia, MI), supplies more than 40 major vehicle manufacturers. Luke Contos, TRW’s director, health, safety and environment for Asia Pacific operations, says the company has been following rules to minimize waste and prevent pollution for thirty years. “Nothing motivates you more though, than a customer asking you to reduce your waste,” Contos says. “It’s important to us that you show continuous improvement in that area. It’s a way to do your business.”
And for some companies, it’s a requirement. For example, BMW, a company noted for its sustainable practices, has required its suppliers to fulfill the BMW Group sustainability requirements for the environment since 2001.
Like BMW, Fiat s.p.A. has appeared on the Dow Jones Sustainability World Index. The 267-page 2011 sustainability report (the Fiat Group’s 8th sustainability report) indicates that suppliers are a part of the process, whether they are sending less packaging to help an OEM with zero landfill, or part of the Chrysler Group’s monthly Supplier Town Hall meetings attended by about 400 suppliers in person or online.
Regulations and Reward
When John Mequio, the business unit manager - environmental/safety services, at NSF-ISR (Ann Arbor, MI), received his bachelor’s degree in environmental health in the 1980s, it didn’t seem like a stable career path. “I remember my father saying back then, ‘Are you crazy? Who cares about this? You’ll never get a job.’”
But since then, the movement has caught on. Mequio spent almost six years with GM and helped the company implement ISO 14001, and he’s seen a surge in environmentally friendly practices across industries. “Companies have realized that you just can’t be wasteful, it’s just not good business,” he says. “If you are a more responsible one, you’re probably going to put the irresponsible ones out of business.”
So with that in mind, what role do regulations play in the automotive sector? For a successful company, not much. Or rather, the company should be proactive in reducing waste and not simply react to regulations.
The MIT Sloan Boston Consulting Group study found, “Only 9% of survey respondents who said they adopted sustainability strategies as a result of legislation reported that their sustainability strategies added to their profitability.”
Though a lot has changed in the past ten years in terms of sustainability, the EPA has been working with the automotive industry for much longer. Recently the agency has been working with automakers on programs like the Suppliers Partnership.
In 1922, Henry Ford explained his vision for the future on the last page of “My Life and Work.” He writes: “A great many things are going to change. We shall learn to be masters rather than servants of Nature. With all our fancied skill we still depend largely on natural resources and think that they cannot be displaced. We dig coal and ore and cut down trees. We use the coal and the ore and they are gone; the trees cannot be replaced within a lifetime. We shall someday harness the heat that is all about us and no longer depend on coal-we may now create heat through electricity generated by water power. We shall improve on that method. As chemistry advances I feel quite certain that a method will be found to transform growing things into substances that will endure better than the metals-we have scarcely touched the uses of cotton. Better wood can be made than is grown. The spirit of true service will create for us. We have only each of us to do our parts sincerely.”
Though ninety years have passed since he wrote those words, the industry has continued to examine new technologies to minimize environmental damage, regardless of whether they were making a Tin Lizzie or a Prius.
Automakers are eliminating as much waste from manufacturing as possible with programs such as zero-landfill.
Adopting sustainability strategies before they are required by legislation may increase profitability.
Managing scrap inside a manufacturing operation is closely tied to quality.