More and more customers now are looking for companies to be transparent, but it’s kind of hard to be competitive and sustainable at the same time.  Companies are now using value chain processes to get the job done fast.  They are not only focusing on suppliers but also taking into account By-Product-Synergy, which is “taking waste from one part of the production process and using that waste in order to generate a new product.” But how can companies become more sustainable if only “80 percent of management uses just 20% of the available opportunities?!”  The remaining 80 percent is where management needs to focus the rest of their energy.

It’s crucial for management to set goals and assess their risks, thereafter they can easily seek out opportunities for future improvement.  The first step to become a transparent company is to implement a sustainability program, and of course to develop a strategy.  The next step is to identify the companies “main processes and map data throughout the value chain.”  By using life-cycle-assessment software, the companies will have a more clear idea of how to lower their costs.

A similar approach was taken by ThyssenKrupp (FWB: TKA), a German elevator company.  Since ThyssenKrupp uses a considerable amount of steel in the manufacturing process, they thought the operational aspect had the greatest environmental impact. To their surprise,  the “company’s elevators themselves left a greater carbon footprint then their manufacture or any of the company’s other operations.”

As a result, ThyssenKrupp dramatically changed their product line after implementing a sustainability program.  They made the following changes to their products and services:

  • Elevators use LED lights which reduce energy consumption by 80%, and automatic fan and light shutoff which reduces CO2 emissions by 193,000 tons per year.
  • Getting rid of harmful chemicals used to manufacture the elevator.
  • Using petroleum based biodegradable fluid, with a vegetable-based option called “enviromax.”
  • Elevators are equipped with regenerative technology, meaning that the energy generated from the braking system is put back into the building.

In a way the article gives motivation to other companies who are taking their first steps towards becoming a transparent company.  It gives them few ideas and pointers on “unlocking supply-chain opportunities.” It’s important for different industries to decipher various ways to be more environmental friendly.  After all, there is more to being sustainable than just showing off your environmental initiatives.

Do you think ThyssenKrupp can take additional measures to make their company more sustainable?  Or better yet, are there any companies that you want to see become transparent in the near future? How would they need to change there operations?



Transforming Waste into Profit

Deishin Lee, a professor at Harvard Business School, is conducting a research paper on the way manufacturing companies can turn their waste into by-products.  By-product synergy (BPS) is basically taking waste from one part of the production process and using that waste in order to generate a new product.  The idea of BPS in not a new, as it is most often used in the agriculture industry.   Furthermore, she explains that in order for a manufacturing company to implement such an idea, it is important for the managers to “stop thinking of yourself as a company that creates a certain product and instead think about how you can use them to produce as much value possible.”

Since Lee is researching about recycling, she talked with Gordon Forward, CEO of Chaparral Steel.  His company use wastes from producing steel to make cement.  After an interview with Forward, she concluded that the main challenge as mentioned above is thinking outside the box, to produce an innovative product that companies/consumers will be able to purchase.

As a result of her research, Lee was able to come up with three scenarios for BPS.

1)      In a case where the by-product is a low value, a company may choose to maximize profits by using only a partial amount of the waste to produce a new product.

2)      In the second case, if the value of the new product/by-product increases, then the company might choose to actually increase the production of the primary product in order to create more “waste.”

3)      Lastly, Lee proposes a scenario in which the by-product ends up being more profitable then the primary product.  She suggests it would be wise for a company to find virgin material to make more of the secondary product.

Although using the wastes of a particular product can be beneficial to the company, it may not end up being so good for the environment.  Lee points out that sometimes using by-product to make new products can lead to more pollution.  Do you think companies should push manager into thinking “outside the box,” in order to find ways to use the waste?