Once Upon A Time, Last Year
We’ve been sneaking up on the green question for a while, now. In the long term – and we stand by our long-term view – going green is getting easier. The very fine book, Fundamentals of Supply Chain Management – An Essential Guide for 21st-Century Managers, concedes – even encourages – the necessity of green initiatives in getting the most out of the resources this wonderfully habitable rock (third from the sun!) provides us.
There are loads of reasons for cynics to sneer; the booming business in “green” conferences, books, webinars, etc., is a tribute to highly responsive entrepreneurship. Not to mention to the gullibility of those who can’t stand not to be on the bandwagon.
But, green initiatives are for real, and can deliver real benefits, including, believe it or not, long-term cost savings. Re-use, recycling, reduction, and renewability will ultimately all pay off some day. Pegging “some day” on the calendar is a bit of a challenge, but looking past tomorrow – or next quarter’s earnings imperative – can help develop confidence in the economic, as well as moral, correctness of doing smart green things.
On a side note, no less a personage than retired pugilist George Foreman has been promoting a line of green cleaning products (Let George Clean It!) for about five years, with a portion of profits going to green causes. Deirdre Imus, long-suffering but independent-minded wife of the unpredictable radio personality, has also been active in that space. But when a human being large enough to block out the sun speaks, we listen intently. We can’t say that George’s work forced us to buy hybrid automobiles, but we both did, and are now borderline passionate about extending green innovation into meaningful logistics/supply chain advances.
2008’s Global Supply Chain Program at Georgia Tech included a module that solicited audience contributions to real-world green initiatives, and the input was gratifyingly sizable and on-point. We don’t know what to expect from the 2009 attendees, though. The business environment has changed radically in a year’s time, and we suspect – fear – that the momentum of green initiatives may suffer as a result.
More Recently . . .
While the US economy is not in the free fall the chattering classes would have you believe, things aren’t good at the moment. Businesses are shutting their doors. Cutting back is deemed to be a successful outcome. The home real estate market is in a shambles. People are losing their jobs, followed closely by their homes.
Businesses are curtailing even essential expenditures – travel, training, inventory investment, new graduate hiring, and more. For those with too much inventory, there is a demonstrated willingness to do anything to convert the inventory into cash, even at the risk of killing consumers with salmonellosis.
Systems investments are being curtailed, deferred, and reduced to points at which installation success is being jeopardized. Consultants – even those who can help save money and reduce costs simply aren’t being hired in the numbers they once were.
Executives, understandably, don’t have the stomach for initiatives – of any kind – with long payback periods. Any project lengthy enough to warrant talking about net present value or discounted cash flow isn’t worth talking about in these trying times.
Guess what – green initiatives tend not to be quick fixes, and frequently take years and years to deliver payback.
And quantum leaps are in short supply. Here’s an example: high cost is admittedly solar power’s dark side. Recent advances in technology have developed a thin-film panel that costs 40% less than the popular silicon panels. Unfortunately, they generate only half as much energy, so the net gain is not yet exactly a breakthrough, and won’t change the long-term payback equation by all that much.
Maybe volume and some level of critical mass could change the cost equation a bit more. But, it seems to us that the efficiency of panels of any type ought to be a focus area for improvement. The newer thin-film products convert anywhere from 10% to 14% of sunlight into electricity; that compares with 19% for silicon.
Some, an ARC Advisory Group executive (self-admittedly “greened out”) among them, believe that green initiatives have reached a plateau, independent of financial pressures. An Aberdeen Group leader, at the same time, has focused on the strategic importance of corporate responsibility, without recognizing the prevailing economic climate.
Is Anybody Else Seeing This?
A February 2009 DC Velocity feature showed a clear bias toward short-term, tried-and-true measures that deliver nearly immediate savings – notably in energy costs. Bigger, longer-horizon efforts, especially with less-certain paybacks/and/or feasibility were apparently being avoided.
A recent Wall Street Journal energy feature, while tilted toward individual consumer efforts, stressed under-a-year and immediate paybacks for simple (also time-tested) actions in considering how to go green in difficult economic times.
We can scarcely wait to hear from our latest Georgia Tech group. Our suspicion is that they’ll be closer to the ground – and closer to reality – than a panel of executives, or a handful of staff writers in New York.
What Does This Mean?
We wish that companies and their leaders would stop making knee-jerk reactions in periods of transient difficulty. Somebody’s going to break a jaw that way. We wish that every business leader had the courage and the vision to take the long view and do the right thing(s).
But, sadly, only a few do. And, the pressure to make a profit – and make it now – is immense. Not to mention how important it is in publicly-held companies to not disappoint The Street. So, with a little luck, enough organizations will pursue the simple, short-term things that look like they’ll keep the boss out of trouble in enough cases to make a bit of a difference.
And, as economic conditions improve, maybe there’s a fighting chance of getting the really important green infrastructure bits back on the table.
Here’s a harsh reality, and we can look to Europe for a preview of coming attractions. The dad-gum gummint isn’ t going to care that 2008/2009 were tough years. Our dedicated public servants are likely to become enthralled by the promise of green and mandate what we, as organizations, have got to do, and when. Think the government won’t be here soon? Surprise! The new administration’s Secretary of Labor considers her high priority to be the creation of “green” jobs.
AMR Research study reinforces Europe’s leadership position in governmentally-directed green policies and practices, and raises the Kyoto protocol bogeyman – all the while maintaining that green and sustainability initiatives are recession-proof. We are not so sure about that, absent hands-on experience with current thinking at the operating level.
Seems to us that the prudent management tactic for today is pre-emption. Doing everything we can – now – to make/save real money. Setting the wheels in motion for the big, but longer-term, payback projects that will make life both greener and more profitable into the coming decades. Our guess is that those who set strong and positive green agendas now are going to be way ahead of those who close their eyes and hope that the mandates are never issued. Current word from MIT seems to buttress our position that, despite diminished focus in a difficult economy, those who maintain a green commitment are positioning themselves for long-term competitive advantage.
When Washington sets the agenda and timeline, the relevance and payback for specific companies are typically not in the equation. But, there’ll be no forgiveness – maybe even crippling penalties – for those who don’t comply.
So, it’s not as easy being green as it might have been when companies were more profitable, but the stakes in being – or not being – green have grown. And, those are the stakes we’ve got to deal with if we’re going to be in the game.
Even if you’re not quite ready to reconfigure your distribution network, or build a new green DC from scratch, or explore bio fuels and fuel cell technology, or wait for newer technology to make solar panels slightly less expensive per unit of delivered energy, there are things you can do – or plan for. Remember, though, simply swapping out light bulbs – while a good thing – won’t come remotely close to where you need to go in a new green world.
Like it or not, we’ve got to get real about all of the elements of green and sustainability, including those that take a long time – and can radically change the resource consumption equation. Using alternative fuel sources – and less of them – comes to mind. Extending preliminary advances into arenas with potentially huge payoffs, e.g., over–the-road trucking, does, as well.
Before we are overcome with giddiness at prospects for hybrid automobiles, consider that the overwhelming majority of increasing highway mileage over the past ten years has been generated by long-haul trucking – and we are not only not making hybrid inroads in that arena, we are continuing to pay premium prices for diesel fuel. We understand the importance of regenerative braking in conventional hybrid approaches – all the more reason to get creative in the science applied to big trucks.
Bruce Strahan is a Partners in The Progress Group, Inc., an international supply chain and logistics consulting firm headquartered in Atlanta. He lead the Supply Chain and Manufacturing practice groups for TPG. Bruce did his graduate work at Georgia Tech, and was previously a Manager in Coopers & Lybrand’s SysteCon division. He may be reached at
770-804-9920 or bstrahan@theprogressgroup.com
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