Banking on Green

You may think the timing couldn't be worse with tight budgets and economic woes, but going green can help your company save more than a few greenbacks. Kimberly Lord Stewart looks at how sustainability is more than just green washing

The healthy ingredients sector is no stranger to sustainable practices such as sourcing ingredients from waste stream products and organic agriculture. But if you really want to be green through and through, there are many things you can do to reduce use of resources like electricity, water and materials. This is where the sustainable practices can turn your company's bottom line from red to black, or should we say green.

According to case studies evaluated by the Environmental Protection Agency, some companies have seen a 58 per cent internal rate of return by simply looking at ways to reduce emissions and material costs, better yet the payback took only 18 months. "There is no single solution to all your energy woes, but there are 100 little things that you haven't even thought about to boost efficiency, lower energy usage, save money and give a little back to the world," said Kyle Stewart, CEO of nuMeridian, a newly launched energy solutions company in the fuel-cell industry.

At its inception, greening seemed like just another ploy to gain customers, hence the term greenwashing. But today it's a necessary business practice. "The world's largest brands now report on sustainable energy policies as a source of competitive positioning to prospective employees, customers and investors," according to a report by Lanner, a simulation software company that optimises business processes.

There is no shortage of small changes and new technologies available to help your company reduce costs and resource usage. A common thread for all companies delving into sustainable practices is that all employees play a role in finding solutions including the simplest changes such as recycling materials, changing accounting procedures and finding the optimum use of machinery. For instance, Interface, a leading interior-supply company, reduced the horsepower needed to pump liquid through its factory in China by 92 per cent by redesigning a plumbing loop using larger-diameter pipes with shorter and straighter runs, according to Material Handling Industry magazine. It cost less to build, was easier to maintain and saved energy. Like Stewart says, 100 little changes.

One company that has looked at sustainability from the inside out is Danisco. "The environmental and social impacts and benefits of a product are not limited to their manufacture, use or disposal," said Jeffrey Hogue, vice president of corporate sustainability for Danisco. "Instead, the impacts occur throughout a product's life cycle, encompassing each element in the value chain, from material sourcing, energy generation, production, and use, to end-of-life disposal or recovery."

Danisco recently hired Dr. Mikkel Thrane, a Life Cycle Assessment (LCA) strategist to drive the company toward an even more sustainable operation. "This (LCA) will involve documentation of the products' environmental profiles (such as the 'carbon footprint'), and entail the use of LCA knowledge for decision support in product development, production planning, purchasing, marketing and collaboration with customers to reduce their impacts," Hogue said. "We hope to build robust capabilities in this area to increase performance in our value chain and to help our customers drive sustainability performance in their products/processes, hopefully allowing the consumer to in turn choose to reduce their impacts in their product choices," he said.

Other companies started small and worked their way toward a broader based plan. For instance, in 2008 Alkemists Labs, a third-party analytical service company for the dietary-supplements sector, began purchasing renewable energy credits to offset its carbon emissions (the equivalent of 11 metric tonnes of carbon dioxide). Since then the company has doubled in size, which means it also doubled its carbon footprint, according to Elan Sudberg, CEO of Alkemists. They continued to purchase Renewable Energy Credits, but also made internal changes to various processes. Other than recycling paper and botanicals, and switching a print newsletter to digital, Alkemist sconverted to electronic reporting techniques and a proprietary Library Information Management System. In 2011, the company will incorporate a fully digital tracking and reporting system that will allow clients to integrate their own systems with Alkemists Labs when seeking cGMP compliance.

As is the case with Alkemists Labs, the benefits of sustainability are contagious. The Lanner company reports that when companies go green they often expect their clients to do the same because of increased efficiencies and cost reduction down the entire supply chain. "You could call 'going green' a fad, if saving money is going out of style in this century. The only barriers to the widespread adoption of alternative energy are in the minds of those too reluctant to change. The benefits are real for the user and the environment," Stewart said.

Ingredient green teams
Here are a few examples from ingredient companies to inspire your inner green.

Stevia: "Stevia is 300 times sweeter than sugar is a significant fact for the environment in itself. It means that stevia has a much lower land impact than other sweeteners," said Jason Hecker, PureCircle's director of marketing for North and South America. The company is taking a step in the green direction by using the biomass from Reb-A extraction to fuel the factory. Hecker hopes to expand this to other facilities within the company.

Fish oil: One ingredient that is always under the environmental microscope is fish oil. The science supports consumption, but there are concerns about overfishing. EPAX recently gained Friends of the Sea (FOS) certification for its sustainable fishing operations. EPAX fish oil sources the lion's share of its raw material, pelagic fish (anchovy), from all-wild sources within its own fisheries in Peru. "Our fishing grounds are strictly regulated by the Peruvian authorities," explained CEO Bjorn Refsum in the January, 2010 issue of FI. "Quotas are established based on historical Peruvian data over the last 20 years and it has proved that our fishery is sustainable with no decrease in mass."

Cranberry: Decas Cranberry Products embarked on a project in 2008 to study the feasibility of using wind turbine power. In addition, Decas converted 250,000 cubic feet of its warehouse and manufacturing facility to high-efficiency lighting, built a closed-loop water supply system and reduced water use by 50 per cent while increasing manufacturing capacity, set up a methane-capture system to fuel the boiler and focused on integrated pest management and organic methods to support sustainable farmers and cut chemical use.

Cocoa: Cargill embarked on an extensive programme to train cocoa farmers in Western Africa about sustainable farming practices. All totaled, it has trained 1,590 farmers with the assistance of Solidaridad, an international development organization, and IDH, a Dutch sustainable-trade initiative. The programme is UTZ certified, which ensures that cocoa, coffee, tea and palm oil are grown in a sustainable and transparent manner.

Personal care/Cleaning ingredients: Cognis has developed a Care Chemicals programme that allows manufacturers of personal-care, home-care and industrial-cleaning sectors to see what portion of natural and renewable raw material can be found in any Care Chemical Product. Cognis' Green Chemical Solutions allows manufacturers to decide how 'green' they want to be with three guides, the 'Portfolio Easy Guide,' the 'Formulation Easy Guide' and the 'Regulation Easy Guide.'

Accounting for environmental costs
Despite the potential for significant financial gains when switching to more sustainable practices, most supply-chain managers currently do not focus on environmental concerns. According to the EPA, one reason is that cost accounting systems typically hide "environmental costs."

While raw-material and labor costs are directly allocated to the appropriate product or process, other costs are accumulated into overhead accounts. This approach can lead to inaccurate costing and ineffective decisions when significant costs — waste disposal, training expenses, environmental permitting fees and other environmental costs — are not allocated to the responsible products and processes.

Many companies have tackled this issue by using environmental accounting techniques to substantially reduce supply chain costs. With these costing methods, companies can systematically identify environmental costs throughout the supply chain, eg, costs associated with management of hazardous materials, which typically are not captured through conventional accounting methods. Once the costs (or potential benefits) have been identified, companies can analyse the cost drivers and evaluate alternative cost-reduction opportunities.

Source: EPA

Let's get it started
Where to start? A systematic review of your facility and operations can guide your company toward where to start and how to implement sustainable solutions for your company. Here is a guide to get started:

Step 1. Identify costs. A systematic review of the facility or process is conducted to determine if and where significant environmental costs occur. This analysis enables the team to later focus where the probability for significant improvement is greatest.

Step 2. Determine opportunities. The identified functional areas and processes are evaluated to determine which changes will likely yield significant cost savings and reduce environmental impacts. Potential changes are evaluated with criteria that can include the magnitude of potential cost improvement, the types of environmental burdens, and the barriers to change. This yields a set of possible alternatives with significant potential for improving costs savings and reducing environmental impacts.

Step 3. Calculate benefits. Quantitative, and sometimes qualitative, analyses of the costs and benefits of a selected group of projects are conducted. Some of the analytical tools and methods used during this step are activity-based costing approaches, net present value (NPV) calculations, and risk evaluations. The result is a summary of the merits of the current process and any proposed alternatives.

Step 4. Decide, implement and monitor. The team shifts from evaluation to implementation. First, a decision is made to continue with the status quo or to pursue a new approach. Financial benefits and/or environmental improvements then occur as changes are put into action. The new practices are institutionalized as information collection processes are integrated into the company's materials resource planning (MRP II), enterprise resource planning (ERP) systems, and other information systems. After implementation, a periodic review and continuous improvement effort allows decision makers to evaluate their progress and pursue additional opportunities. The best practices and implementation guidelines of Step 4 can enable companies to integrate key concepts into their routine materials management practices.

Source: Environmental Protection Agency, Lean and Green Guide. Available online at

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