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Sustainable Development ~ Manufacturing

Author: Tony Phillips ~ CEO of Barloworld

( Article Type: Sustainable Development )

While a populist view of the corporate leader is of a person whose sole purpose is to further his or her own wealth, many may be surprised at the number of leaders who are fast-tracking sustainable development strategies within their corporations. Their motives may range from personal conviction to a reaction to external pressures. Whatever the motive, there are a growing number of leaders who believe that the path of sustainable development makes sense for the future of the environment and society and presents exciting new opportunities for their businesses. Sustainable development is not a new concept. Disturbed by the profligate use of synthetic chemical pesticides after World War II, Rachel Carson wrote Silent Spring in 1962 and, in so doing, set us on the path to sustainable development. She challenged the practices of agricultural scientists and the US government, and called for a change in the way humankind viewed the natural world. It is interesting to see how far we have moved on from the days when Carson was attacked by the chemical industry and some in government dubbed her as an alarmist. She spoke out to remind us that we are a vulnerable part of the natural world, subject to the same damage as the rest of the ecosystem.

The concepts of sustainable development slowly entered the public domain in reports and international meetings in the 1970s and 1980s. The subject entered the mainstream of the global political agenda after the Rio Earth Summit in 1992. However, while government and NGO groups actively took up the debate, business was absent. But the role business could play could not be ignored and a decade after the Rio Earth Summit, over 700 leaders of the world’s corporations made the trek to the foot of Africa, for the Johannesburg Earth Summit, actively taking up the case of sustainability.

Sustainable development makes sound commercial sense: Companies in South Africa are increasingly embracing sustainable development, integrating its principles into their organisations. In this transformation, the manufacturing sector has been active with initiatives ranging from small businesses founded on recycled materials to large-scale commitment to generic principles among some large companies. Such commitments include integrating sustainability into governance structures and becoming signatories to United Nations Global Compact in support of universal environmental and social principles.

In many ways, the challenges of implementing sustainable development are similar to the early days of risk management. There is an up-front cost of new systems for measuring social and environmental impact but invariably it becomes possible to identify opportunities for improvements that have financial benefit. Thus, for example, measuring energy consumption creates the opportunity to set targets to lower energy usage and consequently save costs. Similarly, from a social perspective, implementing HIV/Aids programmes that include free treatment and antiretrovirals for employees will not only extend and increase the quality of infected employees’ lives but also increase the period sufferers are able to remain effective in the workforce.

Businesses need to be accountable:  A key element in sustainable development is the engagement of, and reporting to, stakeholders. The speed at which many manufacturing companies are adopting the Global Reporting Initiative (GRI) framework for reporting is indicative of the extent to which companies have accepted the need to be transparent and accept stakeholder scrutiny of all their activities. The GRI enables the stakeholders to assess companies across all the dimensions of the triple bottom line in a framework that is increasingly being recognised worldwide as the reference framework. The GRI is an excellent checklist for companies, which often brings to light aspects of sustainability that they may not have previously considered.

Environmental initiatives:  There is a growing understanding amongst industry leaders that the environment is an absolute constraining resource, not just another factor in the business landscape.

It is this understanding that has lead over 30 companies and industry associations in South Africa to sign a voluntary Energy Efficiency Accord with the Department of Minerals and Energy (DME) to reduce their energy consumption. This accord targets a 15% reduction in ‘final energy demand’ for the industrial sector by 2015, and a 12% improvement in energy efficiency in all sectors by 2015.

It should, however, be self-evident that companies need customer support in many areas to make significant progress. The signs are encouraging, with, for example, in the motor industry, a growing number of manufacturers are producing or developing hybrid cars that drastically reduce carbon dioxide emissions. New engine technologies such as Caterpillar’s ACERT Tier-3 engine emissions technology are also reducing emissions.

An interesting measure of the extent to which companies take environmental issues seriously is the number of companies that have been awarded the ISO 14001 standard for environmental management systems. The ISO 14000 standards look at what an organisation does to minimise harmful effects on the environment caused by its activities, and to achieve continual improvement of its environmental performance. Over 90 500 ISO 14000 certificates were awarded in 2004, an increase of 37% over the previous year.

An interesting development is the growing market for trading carbon credits between greenhouse gas reducers and polluters. At the Johannesburg Earth Summit in 2002 this concept was a novel idea. Now it is increasingly being built into investment decisions by manufacturers. The premiums paid in many parts of the world for green energy are also creating new business opportunities in which companies such as ours are actively engaged.  

Sustainability is the key to future success: Sustainable development must become an inherent part of the culture of any company if it is to thrive over the long term. In our organisation we have our own language to describe it – ‘Value-Based Management‘. Within this we set our goals to create value simultaneously for all our stakeholders, our shareholders, employees, customers and social and environmental communities in which we operate. It is not just a question of how much profit we make. It is a case of how much value we add to all our stakeholders – that is sustainability. Overall I believe manufacturing companies are generally moving in the right direction. Our challenge is to move faster and to garner the societal support to do so

(May 2007)