There is one process we know very well after one year of recession, and that's cost reduction. Most companies have scrutinized their costs and tried to take every waste out of the system. Many were quick to point out that, although the sustainability agenda was still on the radar screen, it has been taking a back seat for quite a while now. I cannot judge whether it has or not, but would like to argue it should not have. Becoming greener is an excellent way to reduce cost if you look at it in the right way. In this entry, I want to take a minute to explain you what I mean.
It all started about one year ago, when I heard a radio interview from Jean-Pascal van Ypersele Vice-Chair of the Intergovernmental Panel on Climate Change (IPCC). He pointed out something extremely simple: "The best energy is the energy that is not used". Just think about this. There is a lot of focus on using green energy, and I do not mean that to be wrong at all, but what he says is that before turning to green energy, take a hard look at the energy you consume and see how you can reduce your consumption. Whether green or not, consumed energy costs money, avoiding consuming it helps you reduce cost, isn't it?
Well, that is exactly the point I want to make. Let's now look at our Supply Chain. We consume energy in a variety of forms throughout the ecosystem. Electricity, gas, oil, petrol and you name it. How can we get a consistent view of the energy we consume? All above fuels have one thing in common: they generate CO2. You can argue that electricity may come from non-fossil sources and as such do not generate greenhouse gasses. Let's put that thought aside for a minute.
If I can develop a CO2 emission profile across my supply chain, I get to understand very quickly where energy is consumed. I can now focus on reducing the consumption at that step in the process. Doing this may imply I have to change the design of the product, use a new manufacturing approach or change something somewhere in the supply chain. It may happen that a slight increase in energy consumption in one place may result in large savings somewhere else. It is important to include design and engineering in the process to ensure we go back to the root cause of why so much energy is consumed. Root cause analysis is nothing new; we have been doing this for quite a while.
But how do we gain that CO2 view of our supply chain. Quite a while ago, I wrote an entry focused on two new acronyms, BOC and BOS. BOC, bill of carbon, gives the answer to our question here. What do we need to calculate the BOC? Fundamentally two things, first the complete bill of material of the end product, and second the amount of CO2 generated at each step in the manufacturing process for one unit of product/component/ingredient. The latter is mainly based on the full bill of process. Each partner in the supply chain should calculate all emissions related to the operations under his control. This includes manufacturing, transportation, warehousing etc. Whether those activities are performed by him or by a subcontractor, do not matter.
As stated elsewhere in this blog, gaining such information from suppliers requires the existing of a trust relationship between the partners. Once we have the information, we can start the review, leading to improving the energy consumption. However, to maintain the trust relationship, we should never forget to ensure the partner also benefits from the exercise, otherwise he will not be motivated to continue collaborate in the future.
Now, let me come back on the use of non-fossil energy. From a cost reduction perspective, there is no difference where the energy comes from, but from a sustainability perspective, there obviously is a huge difference. However, I would dare to argue that reducing the consumption all together, leaves the non-fossil energy for other companies, reducing the CO2 emissions in the same way.
Looking at CO2 is a great way to analyse the energy consumption throughout the supply chain, looking for wasted energy and related costs. It is an interesting way to reduce costs, improving the bottom line. What are we waiting for?
Building greener products requires putting the environment right in the middle of the product design process. Indeed, that's where 80+% of the impact of the product on the environment are defined. Many companies seem to forget this. Design for the Environment looks at all aspects of the product that may influence the environmental footprint of the product throughout its lifecycle. In our industry this includes:
- Materials included in the product
- Manufacturing Process
- Supply Chain design
- Energy consumption of the product in use
- Reverse logistics routes
- Ease of dismantling for recycling
- Recycling process itself
I will not go through all 8 aspects in detail as this would lead us too far, but I would like to comment on some. Materials is a real interesting one, and as a manufacturer of electronic products we need to constantly justify the decision of using specific products. There is a push for products with lower environmental footprint, and that is the right thing to do. However, this should not be at the detriment of quality, and in some case, substitution products just do not ensure the same quality as the others.
Packaging can affect the environment in two ways. First the size of the packaging and the amount of empty space implies fewer products are transported per pallet, increasing the carbon footprint of each product item. Carefully designing packaging is critical for maximum environmental efficiency. But secondly, the packaging needs to be disposed off, recycled in the best case, so limiting the amount of packaging required helps the environment. And here the only limit is one's imagination as demonstrated by HP winning the Walmart Design Challenge last year.
The third aspect is the manufacturing process itself and although HP manufactures very little product themselves, they establish stringent guidelines on how their contract manufacturers are required to report their Greenhouse Gas emissions amongst others.
The actual use of energy by the finished product is defined at product design time. Ensuring we use low energy consuming components, we develop appropriate cooling to exclude the consumption increase from heating chips. Over their lifetime, our products may be switched on for long periods of time, so any reduction in energy consumption has large implications of the lifecycle of the product. This is the reason why so much attention is placed on this.
One element people often do not think about is making it easy for the product to be taken apart, facilitating recycling. We all look at the ease of mounting the product in the first place, but why would we think about taking it apart? Right at the design of the product it is important to look at its end of life, marking the components to facilitate recognition of the material, avoiding composite pieces with multiple plastics for example, and not coating the products with difficult to recycle paints. Recycling can be a break-even or profitable operation, if products are designed with this step in mind.
Design for the environment is a large subject where many things come to play. It includes concepts such as Design for Supply Chain and Design for Recycling. Yes, taking the environment into account during design makes the process more complex and difficult, but it results in lower manufacturing and supply chain costs as typically less energy is used. It also improves sales as we have an increasing amount of green conscious buyers out there, who, at similar cost, opt for the more environmental friendly product. So, what are you waiting for?
On Monday, Newsweek released their inaugural Green Rankings, and interestingly, HP finished at the top. In an article, titled "The Greenest Big Companies in America" they explain they decided to publicize this list to recognize the efforts of companies, and how they ranked companies in industries as diverse as high-tech and mining.
Some are critical about the way this was done, Rose Gordon in PRWeek for example, points out that "ranks are fraught with subjectivity, or incomplete and self-reported data", but recognizes this is "a best first effort".
HP's position is due to its long term commitment to reducing the environmental footprint of all its operations, and not based on carbon offset or any other substitution program. The environmental subject is an emotional one, but reading through some of the blog comments, I realize many HP programs are not known and not visible to most. Indeed, our objective has not been to market green, but rather to become greener. HP is mainly working in three spaces:
- Reducing the environmental impact of a product throughout its whole lifecycle, from design to recycling
- Reducing the environmental impact of HP's own operations and facilities
- Helping HP employees reduce their own environmental impact
Each of those subjects is worth a whole dissertation, and it is not my plan in this entry to review all measures taken and describe every internal policy, this would take us way too far. However, I would like to highlight some very practical examples that may help you understand what we are trying to do.
Let me first highlight a program, called Design for Environment, we embarked on several years ago. The objective of this program is to include the environmental aspects right from the early design stages of the product. It addresses the impact of the product during manufacturing, during usage and at recycling, so, all the way through the lifecycle of the product. Aspects such as packaging, materials, energy consumption, supply chain impacts, ease of reuse/recycling are all taken into account. Obviously tradeoffs have to be made to ensure quality and ease of use of the product, as our customers do not expect HP to lower their standards.
Let me give you some examples. About one year ago, HP designed a notebook for Walmart, shipped in a stylish bag made out of 100% recycled material, reducing packaging with 97%, and winning Walmart's Design Challenge along the way. Another example is the increased use of recycled material in the production of Inkjet Cartridges. These are just two examples in a series. I will come back to the DfE program in a future entry.
And let me take a minute to urge you to recycle your cartridges and HP products. You can find information on the program in your country here.
To reduce its environmental impact, HP is addressing multiple aspects at the same time. And here is where, a partial view does not allow a real understanding of what is happening. For example, when HP announced the doubling of Green Energy Use in late 2008, we received negative comments from some of our competitors, and that's fine. In the mean time, we are well on the way to reduce our total Greenhouse Gas (GHG) emissions from our facilities to 16 percent below 2005 levels, by the end of 2010. Our current performance can be found here. We are consolidating buildings; increase the use of renewable energy, decrease emissions per unit of floor space etc. But we are also ensuring our company car fleet uses more efficient cars (reduction of 8% of GHG emissions from 205 level, and 24% from 2006 level in Europe alone) , we are reducing travel and have implemented Halo telepresence studio's in all major facilities. We have also consolidated our IT datacenters resulting in drastic reductions in energy consumption, and are working at consolidating our printing environments.
In many countries programs exist to help employees reduce their environmental impact. In my own country for example, a program for acquiring rooftop solar panels has been implemented. Environmental tricks and tips are available on the intranet to give another example. And HP goes even further, trying to incent its customers to reduce their carbon footprint. The "Power to Change" program, launched last June, is one of the examples. To address the widest possible audience, the program is on facebook and twitter.
Becoming "greener", and I use this term rather than the term "green", as I strongly believe companies can always reduce their environmental impact, is not a big bang announcement, but an orchestration of many small steps that each add to a common goal. Caring for the environment has been in HP's DNA for a long time. Our first recycling program was started in 1966, to recycle punched cards. Most of you probably do not even remember how they look.
We are committed to continue our efforts to reduce our environmental impact. If you are interested in reviewing how we progress, check our environment pages.
Green, sustainability and SER, are terms that appear increasingly in our publications and conversations. They draw our attention on the fact our products interact with their environment and potentially harm it. That impact needs to be evaluated from the development of the product onwards, and obviously, diminished as much as possible. This is what is being called DfE, design for the environment.
But this is easier said than done. Indeed, in today's environment, suppliers do not have the information at hand for each of their components, ingredients or substances. Actually, as mentioned in my previous post, the way to calculate the impact is not standardized, so even if the values exist, what do they mean?
During the development of a product, a Bill of Materials (BOM) and Bill of Process (BOP) are created. These will be used at a later stage in the operational systems. I would like to argue that we need to add two new bills to the series. These are first, the Bill of Substances (BOS), which would contain all the substances contained in the product and their quantities, and second, the Bill of Carbon (BOC), containing the amount of carbon emissions for the product at all stages in the manufacturing. There should be a close link between the BOM and the BOS, and between the BOP and the BOC. Operational systems should include modules to report on those two bills.
But now, how do we get the data to populate them. Obviously, the base information related to the components, ingredients and substances needs to come from the suppliers and be augmented with the data associated with the company's operations. The easiest way to do this would be for each company to report both the BOC and BOS for their own products. For the BOS, the information should be the sum of the information of each of the components, ingredients and substances included in the product, potentially reduced by the substances subtracted during the process. For the BOC, we should start from the sum of the information coming from the suppliers and add the quantities generated during manufacturing and transportation.
For the Bill of Carbon, we should agree on a standard way of calculation to ensure the numbers are meaningful and reflect reality. Obviously averages may have to be used, as not all manufacturing facilities generate the same amount of CO2 to make the same product, and that transportation can depend on the warehouse/distribution center used, on the distance to the customer etc. Let's stay pragmatic. Gaining visibility of the amount of CO2 generated, even if it is an average, would already go a long way to focus the attention on reducing it.
So, are we ready to increase our usage of three letter acronyms?
Two weeks ago at the green Supply Chain conference in London, Carbon Footprint was at the center of the discussions. And one of the topics referred to extensively was how to calculate carbon footprint. It’s actually a very good question and numerous efforts are being undertaken to find a standard way of doing so. Unfortunately, standards will take time and if some scientists, who predict the absence of ice on the North Pole in September, are correct, we may not have such time available. So, what do we do about it?
One of the speakers was very pragmatic. Regardless of the method used, he said, keep doing the same things; all what counts is that you improve. It really made me think. Are we not too often trying to find the ultimate, scientifically correct, method, rather than getting things going? Occasionally we need a pragmatist to tell us what really matters, isn’t it?
The second topic was how high to go in the Supply Chain. Should we go all the way to the raw material extraction company? And in that case, how do we get people cooperating all along. The above comment about the pragmatist made me think. What if each company calculates its own carbon emissions and how they relate to their products. If we all to that, the carbon footprint from my product is the sum of the carbon footprint from each of the components comprising the product, complemented with the emissions generated to transport and manufacture the product itself. By developing an IT infrastructure that allows the propagation of this information, an easy and pragmatic way of estimating carbon emissions could be found.
On the carbon topic, carbon labeling was discussed. As you may know Tesco in the UK is putting emphasis on adding carbon emissions on the packaging. In the example described, the Carbon Trust was used to calculate the actual emission, but what was interesting, beyond the number, was that printing the number on the package got as side effect that the manufacturer immediately started to look at how they could reduce that number. And the good news is that they already know how to do so.
The WWF just issued a report on how information technology can help reduce carbon emissions. The report titled “The potential global CO2 reductions from ICT use” not only addresses the energy reductions that can be achieved in the use of IT equipment, but also how IT equipment can help reduce energy consumptions from buildings, vehicles and manufacturing facilities through optimizing operations. The goal, reducing emissions by 1 billion tonnes. Let’s hope our industry can help achieve this ambitious objective.
How do you feel about your carbon footprint?