Years ago, I attended a small sustainability conference. Most of the exhibitors were large corporations and industry associations that extolled their environmental initiatives in speeches and panel discussions, and in graphically pleasing brochures and slide presentations.

The company that stood out, however, was a small furniture manufacturer that was applying lean principles. The slides were very plain, but unlike the others, they had real numbers. The presenter described the company’s admirable record in reducing scrap, saving energy, and cutting pollution, and its goals for further reductions in the coming years.

I asked other presenters if they had any targets or results to share, but they were evasive. "Well," they would say, "that depends on the situation…," and then go on to reiterate how committed their leadership was to saving the planet.

For most organizations, saving the environment is about having a dedicated sustainability program that’s superimposed on normal operations. The lean furniture company had a completely different approach – sustainability was a natural outcome of the way the company operated.

"I suspect the reason we have ESG programs is that companies weren’t being run that way in the first place," says Kelly Allan, Deming Practitioner and Principal, Kelly Allan Associates, Ltd.

This siloed approach is similar to the way most companies manage quality. Instead of making it a foundational element that influences all aspects of its operation, as Deming advocated, companies set up separate quality departments with limited scope. "Deming wasn’t a fan of siloed quality departments because he wanted quality thinking and practices to be interwoven in the fabric of organizations," notes Allan.

When ESG is merely a set of regulations or guidelines imposed on the business, it is reduced to a zero-sum game where any initiative comes at the expense of the bottom line. The approach precludes efforts to actually improve the way the company operates. "Consider: if we use fewer resources, we’re helping the environment," says Allan, "and if we adopt Deming’s approach, we’re also going to be reducing our costs."

If a company dumps sulfur dioxide into the atmosphere, for example, it is harming the environment, but also wasting the resources that it took to make that sulfur dioxide. That loss, however, is seldom reported because of the siloed way that waste is accounted for. "In essence companies pay people to create these toxic by-products, and then pay people to get rid of them," says Allan.

Bruce Taylor, whose environmental engineering firm Enviro-Stewards does sustainability projects all over the world, has frequently shown that sustainability initiatives, when designed properly, can pay for themselves. Often these initiatives take a turn that the customer was not expecting. One example is a project his firm completed with a large wine producer.

The winery had grown rapidly, and the volume of waste going into the town’s sewerage system was straining the town’s capacity. In response, the town had ordered the winery to put in a waste treatment plant. The expected cost was $3M, and the winery had engaged Taylor to design it.

Enviro-Stewards began with its usual practice of conducting a waste audit, and this revealed that water consumption could be significantly decreased and that a significant amount of wine was literally being lost down the drain. By correcting process defects identified in the audit, the winery was able to cut the volume of water needing treatment in half and wine losses by two-thirds. This resulted in hundreds of cases of wine being sold instead of being wasted. In addition, the required waste treatment plant had to be only half the size, reducing its cost from $3M to $1.5 M.

Unfortunately, such audits rarely take place – instead, companies just go ahead and build their over-sized treatment plants, and the waste continues. Similar thinking in food processing results in a shocking amount going into landfill – Taylor notes that if food waste were a nation, it would have the largest carbon footprint after the U.S. and China.

The Power of Inclusion

Human talent is another vital resource that is wasted on a massive scale. A major cause is a phenomenon known as ableism – workplace marginalization or exclusion of people with physical disabilities.

Ableism stems from a narrow definition of the value of work that accelerated during the industrial revolution. "Those who couldn’t meet that physical demand of production went by the wayside," says Nora Genster, Senior Director at Employment Transformation Collective at Northwest Center. "So, we have built a workplace landscape that demands a particular neuro-physical type of person with little variation."

According to a 2023 Boston Consulting Group study, 25% of respondents revealed that they have a disability, but many of these don’t disclose this to their employers. "Essentially, we’ve built a workplace that is antagonistic to perhaps 25% of our population," says Genster.

As the case is with sustainability, ceasing against this harmful practice is also good for the bottom line. Accenture reported in a 2018 study that companies identified as leaders in disability inclusion have 28% higher revenue, 30% higher economic profit margins, and double the net income compared with other companies surveyed.

Northwest Center also operates companies set up to provide employment for people with disabilities. With the help of lean principles, these companies are both inclusive and profitable. Recently, one of the Center’s businesses ranked 4th out of 56 vendors for quality with Amazon. It was the only not-for-profit amongst the companies surveyed, clearly demonstrating the power of inclusive work environments.

Diversity of cultural and ethnic backgrounds can also help make workforces more productive. When such diversity informs decision-making, it can help companies break groupthink patterns and apply a wider perspective on solving problems.

O.C. Tanner, one of the acknowledged leaders of the lean approach, provides an excellent example. "We have a lot of ethnic diversity in our factory – every team looks like a mini–United Nations," says Gary Peterson, executive vice president of supply chain and production. "When we get any 20 people in a room, they have different backgrounds, different experience, different ways of learning, and different ways of seeing the world. So, with all those perspectives, if you can get everybody to engage in the conversation, you’re going to get phenomenal results."

Building Around Purpose

Making sustainability and inclusion integral to a company’s operations gets right to the core of Deming’s philosophy that every organization must have an aim that benefits all stakeholders. "Deming was very clear that everybody has to win," says Allan, "and that includes employees, customers, suppliers, shareholders, the community, and the environment."

Unfortunately, few companies have such an aim. Instead, perhaps in response to regulations or pressure from shareholders, sustainability and inclusion become compliance items that people resent and often try to get around.

"Too often it’s about checking that box and avoiding hassles," says Allan. "When that happens, we miss the Deming-inspired much larger question: ‘How can we do ESG in a way that reduces our cost, increases joy in work, increases productivity, and increases profits?’ If we’re asking that question, we’re much more likely to come up with a solution that creates those by-products."