Sustainability in Manufacturing - Part 1

Welcome to the brand new Trend Detection podcast, powered by Senseye, an industry leader in using AI to drive scalable and sustainable asset performance and reliability. This is a new publication designed to help you go away with ideas on how to achieve maintenance efficiencies.

Today we launch the podcast with the first part of our series around sustainability and manufacturing. To help us dig into this really interesting topic, we welcomed Tom Permatteo (CEO) and Bill Zujewski (CMO and COO) from the Green Business Bureau, which helps organizations demonstrate their commitment to sustainability.

In this episode, we discussed what sustainable manufacturing actually is and how it creates value for a manufacturing businesses. Hope you enjoy it!

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You can listen to Part 2 of this series here.

 

 

Transcript

Niall Sullivan, Senseye: So, first of all, I'd like to welcome Tom and Bill to the Trend Detection Podcast. First of all, really, how are you both during these strange times we're still living in?

Tom Permatteo, GBB: Pretty well, actually. It's been a certainly interesting 18 to 24 months that we've all been living through, but very well, actually. Thank you for asking.

Bill Zujewski, GBB: Yeah. Last year was a little tough for I'm sure most businesses, ours was no different, but things are slowly getting back to normal and we're excited about what we're seeing out there around commitment to sustainability.

Niall Sullivan, Senseye: Yeah. And I guess it's been particularly hard for manufacturers as well, especially, I mean, we're talking beginning of last year now seems to have flown by, but they're obviously having a lot shutdowns and a lot of factories shutting down and all that kind of thing. So yeah, really challenging time for everyone. But maybe, I think it'd be a good place to start for you guys to introduce yourselves and your organization, the Green Business Bureau to our audience.

Tom Permatteo, GBB: Sure. My pleasure. I'll introduce myself first and I'll let Bill introduce himself. My name is Tom Permatteo. I'm the President CEO of the Green Business Bureau. And our organization has a very simple mission, which is to help every company become a greener and more sustainable company. And we've done that and are doing that by creating a online software solution where people can come in and kind of measure where they currently stand by using a self-assessment tool. And then moving forward into a more general framework of once you kind of measure where people are, you want to give them the ability then to achieve new things. And so we create a framework for people to use online on their own time, and then we have help them kind of promote all the great activities they're doing to both their consumers and to their employees, their core constituencies.

Bill Zujewski, GBB: Sure. Thanks, Tom. I'm Bill Zujewski, aka Bill Z to most people. I am the Chief Marketing Officer and Chief Operating Officer. So from a marketing standpoint, we'll talk about it later, but being a sustainable business is a chance to communicate that to your employees and your customers who all care these days, whether your company is sustainable or not. So we take pride, the Green Business Bureau does in providing a certification process so that we can verify how green your business is. And then you can basically demonstrate that commitment to your customers and employees. And we also provide a Scorecard and an EcoProfile, again, so that you can verify and show in a credible way what you've done around sustainability. And that's our core business. It's a combination of certification and software to help businesses be more sustainable.

Niall Sullivan, Senseye: Now are you seeing a lot of demand, particularly for manufacturers in that area? Has it grown, I guess, over the past sort of 18 months or so, or has it been the same?

Tom Permatteo, GBB: Yeah, so I think generally speaking, the great thing about working in the sustainability industry is that it affects all industries. So kind of the rising tide lifts all boats sort of analogy. So yes, there are many manufacturers who are working with GBB, but the great news is across the board. This is a business issue that affects every single business. So whether you're a manufacturer, whether you're a hotel operator, whether you're, I mean choose your industry. But yes, we have many manufacturers that do work with us and they work with us in sometimes varied ways. Sometimes it's all about waste reduction and recycling, or sometimes it's all about the processes within the plants, but the great thing about the way we approach things is we look at the business holistically and I think we can get into a little bit more of that later, but we look at the business, not just from the manufacturing process, we'll look at it from everything that you do within your business. And again, we can talk a little bit more about how that really is an effective way for businesses to look at what they're doing.

Niall Sullivan, Senseye: Yeah. No, absolutely. I think, like I said, we'll talk a lot more and go into a lot more depth about that later, but maybe a good place to actually start would be to actually define what sustainable manufacturing is, if we can, in such a short period. I'm sure it's a very wide subject, but maybe Bill or Tom, you could give it a go.

Tom Permatteo, GBB: Bill, do you want to answer?

Bill Zujewski, GBB: Sure. Sure. I mean, like Tom said, we take a holistic view. So if you're a manufacturer, we're going to look not only at your manufacturing operations, but all your departments, sales, logistics and delivery, finance and accounting, your cafeteria, your headquarters. So our Scorecard looks at a holistic view. So every manufacturer should involve every department and every employee. This is not just about what you're doing on your manufacturing floor. But sustainable manufacturing specifically, you get into things like waste management, zero waste initiatives. Usually manufacturers are heavy users of energy, so how can we reduce a manufacturer's carbon footprint and maybe rely more on green energy versus fossil fuel? So there's very specific things you can do within the manufacturing process and what manufacturers can do across every function.

Niall Sullivan, Senseye: So when you originally start talking to manufacturers, when one approaches you or you get an initial discussion, and really dive into what steps they've already taken towards sustainability, are they sort of an entry level or are some more mature in terms of sustainability? I'm just trying to gauge, at what point do they come to you when they're at ground zero with no experience in sustainability and they really need help in that area?

Tom Permatteo, GBB: I think that that's a great question by the way. And again, I know we're focused on manufacturing, but I think this is just a general business practice because every company is at a different stage in their sustainability journey. And we view this as a journey and a marathon, right? That there's a continual improvement process for every business when they're doing something like Green Business Bureau and using our framework or that there is, again, a continuous improvement element to this.

But to your point, we have people coming in that are kind of just starting and saying, we need to be better at this. We know that this is important to us, whether it's for our financial reporting, be it our customers are demanding it, or in many cases, the people that they're trying to hire. Millennials are the most attractive, the largest workforce segment right now in the marketplace. This is where most people are trying to draw their employees from. This is a really important issue for them.

So when we kind of look at everything, some people are coming in and saying, hey, we're at an end of a process. We think we've done a great job. And we really want to just make sure that A, we've done a great job to kind of certify all the things that we've done so that we can incredibly tell people the great story that we're doing. Or we've got people coming into the process earlier saying, we're being driven by our consumers. We're being driven by our financial reporting. We're being driven by whatever reason, and we think we've done some good things, but we're really just at the beginning. So how can you help us provide a framework? How can you help us get us from A to B? So again, it runs across the gamut. There's no one answer, but I think it generally falls into those two buckets. We've done a lot, we want to tell the world about it in a credible way, in a transparent way, or we think we're doing some things, but we know we can be better, but we don't have an internal process to do it. And we don't want to go out and hire a bunch of consultants, et cetera, to come in and do this. We want to do it in a different way. Bill, anything you want to add or...

Bill Zujewski, GBB: Yeah. No, that's the way I think about it too. I would actually split one of those into two, which is, there's definitely the people who are super mature, sophisticated, and are ready for certification, right, to tell the world. But then there are people who are just getting started and have started a little bit. So those people who are just getting started, we help them. They still become members. We have an eco library of initiatives that help them create a mission statement, a green team, and a process for becoming more sustainable. So again, in summary, our members run the gamut of getting started, well underway, and very sophisticated.

Niall Sullivan, Senseye: Yeah, no. Perfect. Yes. The whole journey really, different points. But I mean, another interesting way to look at this, actually, so we've got the people who know they need to look at sustainability, whatever sort of stage to the journey they're on, but there'll be manufacturing businesses out there, surprising there'll be some out there who'll be, what does that have to do with my business? And I know we've probably talked a little bit about that already, but could we dive into that a little bit more, about how you'd answer that question if someone, a skeptic, I guess you'd say of sustainability and the benefits of that?

Bill Zujewski, GBB: Go ahead, Tom. I'll take the first pass.

Tom Permatteo, GBB: Yeah. From the skeptic's perspective of what does it have to do with my business, right? If you're thinking like that, A, you're ignoring your customers because over 80% of consumers will tell you that they want to buy from companies that are socially or environmentally responsible. So you're not listening. Number two, you're not listening to the people who want to work for you. And when you look at statistics, I think Hewlett-Packard did a survey recently where 61% of their employees said that working for a company that had a sustainable mission and were doing tangible things around that was important to them in terms of working there and retention. So if you're a skeptic, you're missing the boat.

Now, maybe you make a product that the world can't live without, and perhaps you can get away with it, but I would say that the likelihood is that someone is going to compete with you in that area. If that product does exist, that you need to create and manufacture, obviously you're going to have competition. And the people who are skeptical about it are going to lose market share. Statistics actually say, more than just buying, more than just retention and hiring, it also talks about, if you look at the S&P 500, 90% of them now are doing some sort of environmental and social governance reporting. When you look at the performance of companies, they're more profitable. So if you're skeptical about it, then you're missing the major points about why it's important to your business. And one of those underlying things is you're going to be more operationally efficient. It goes right to your bottom line, right? So I think that skeptics, they need to adjust is what I would say.

Niall Sullivan, Senseye: Yeah. Or I guess, be at risk of being left behind. That's essentially what you're saying.

Tom Permatteo, GBB: I think so.

Niall Sullivan, Senseye: Yeah.

Tom Permatteo, GBB: I think so. Yeah.

Niall Sullivan, Senseye: Yeah. And actually my next question, I think you might have actually answered this already, Tom, by your wonderful answer. Just saying, because I was actually going to ask about how does sustainable manufacturing create value for business, but I think a lot of those themes were in your answer, unless either you are Bill have anything to add to that at all specifically.

Bill Zujewski, GBB: Yeah. No, I'll put it into the two big ROI buckets. It can be being more sustainable can increase sales and being more sustainable can lower your costs. So in both ways you're going to be more profitable. And Tom mentioned how it can drive sales, right? It's going to attract customers who care about the environment and sustainability and retain those customers. Same way your workforce. You're going to attract the right people to come work for you. And then on the cost side, there's money to be saved around energy efficiency, reducing waste. A lot of the sustainable processes that are put in to reduce your carbon footprint will also save you money. There are both hard dollars and soft dollars. And when I say soft dollars, there's also your brand. I think it makes a lot of sense if you're a marketing person representing your company, I think it helps if your company is viewed as not as a pollutant, but actually a company that cares about people and the environment.

Tom Permatteo, GBB: And if I could add one other thing and maybe this... Sometimes I think the word skepticism, that there are people who are clearly skeptical of it, right? Some people who are skeptical of the basic premise of why sustainability is important. But I think that from a business perspective, I think a lot of manufacturing businesses in particular, if you have had to make investments in equipment and material over a period of time to create the products that they get to market, right? But some businesses or manufacturing may have been around for 25, 50, 100 years, and when you make investments in materials that run your business, there's a long amortization process that you have to go through to get the value back on the equipment that you buy.

Tom Permatteo, GBB: So I think some people look at it and are fearful that they're looking just at that process of how they do it. And that's why an holistic approach is really good for business because there are so many areas in your business that you can talk about the things that you're doing, whether it's, Bill mentioned, maybe you're doing carbon offsets for travel. Maybe you've replaced all the lighting in your building. Maybe you've done things that reduce water waste. Maybe you've done zero waste initiatives. There are so many things that make your business sustainable and socially responsible while those core parts of your business, ultimately when the next time to buy machinery to do something, when that amortization is over that you now have an opportunity to do something that is modern and cleaner. So I think some of the skepticism may become because there's a defensiveness about that initial investment in materials that maybe you made 10, 15 years ago, that you're still using. We've seen that on a number of occasions.

Bill Zujewski, GBB: Yeah. And Tom, I think what you're pointing to without saying is climate change, right?

Tom Permatteo, GBB: Right.

Bill Zujewski, GBB: That we're 10 minutes in, we haven't even brought it up because that's just a small part of it, but that's where there's probably going to be the most friction is those non-believers in the science that we are in fact in a planetary kind of desperate situation. And I wouldn't say desperate, but in a situation where we need to start paying attention to what's going on in terms of our carbon footprint and climate change. But even if you're not a believer now, and you're a skeptic, all those other things around customers caring, employees caring, operational efficiency, they're still great drivers, even if you don't believe in climate change.

Niall Sullivan, Senseye: Is that a key concern of manufacturers that you talk to or who approach you? Climate change, is that a key driver for them or is it more sort of business focused and that? Which I can understand, the-

Bill Zujewski, GBB: Yeah. Most who come to us, the topic of climate change doesn't even come up. They've already moved beyond that. They want to either figure out how they can become more sustainable as fast as possible and as cheap as possible or how they can get the credit they deserve for being a sustainable business. They don't come to us if they're still skeptical. So, we don't see a lot of that.

Niall Sullivan, Senseye: No. And you actually, I think it's you, Tom, who mentioned about the costs involved and obviously cost for a business, the bottom line is the bottom line. And I guess it's an interesting conversation upon return on investments. So if you're speaking to someone about sustainability, it's like, what's going to be my return on investment? I think every functioning business in history thinks about that. And especially in the area which we're in, I am in Senseye and predicting maintenance, it's key. So is there any ways to how you answer those questions, when will be my return on investment?

Tom Permatteo, GBB: Sure. Again, that's a great question because I think that... And here's where the opportunity is around sustainability, when you look at it from a business perspective, as you're looking at it and asking that question, right? Why I believe that the journey that we're on, that more companies will become sustainable and they'll ultimately have... And one of the reasons we're here and why we want to make every company a greener company is because I do believe it's critical. We do believe it's critical that the change is being made. We do believe that if we don't, then what we're going to leave our children and our children's children is going to be a big mess to clean up. Right?

But the great thing about capitalism is that if you can show people that you make more money by doing something and you're becoming a more efficient business, and this is where I think sustainability is now in terms of entering the manufacturing process. So that return on investment, there's been enough that's been done by large companies that you can look and say, if you do these things, this will be the result. So the good news is from a capitalist and a business perspective, people can actually go and look what someone else has done and say, here has been some great results by replacing this, by reducing the flow of water in our business. By doing this, here are the impacts of that. So the return on investment stories are there.

But the other point though, which we all talked about, again, on the capitalistic side and capitalism is all about competition, is if you're getting more sales. And we have numerous examples of our members telling us, we were bidding on contracts and I've won $5 million plus contracts because of our sustainability story and the ability for us to show what we've done, won us contracts at a higher margin than our competitors. So the ROI is varied. It will go from everything from your reduction of your energy costs. If you reduce your carbon footprint and your energy consumption, you're reducing your cost. I mean, it's simple math. And if you're driving more sales, it's simple math. And if you're able to hold your margins up, it's simple math. So the ROI actually is usually quite easy to peg. And it's usually quite significant as well.

Niall Sullivan, Senseye: No. Absolutely.

Bill Zujewski, GBB: Yeah. Well, I'll add to that. If you drill down, Niall, on your company, what Senseye does around maintenance and predictive maintenance, two use cases just jump out at me that are win-wins, win for the environment and win for the business. The first one is around the service process, right? If you can reduce the truck rolls that have to come out to service your equipment or fix something that's broken, then you're reducing your carbon footprint, because there's less fossil fuel burned for all those service people coming on site for their routine checkups when they're not needed. Right? So I definitely think anything we can do about being smarter around how we service those manufacturing facilities and reducing the need to be physically on site was going to help reduce the carbon footprint. And by the way, it's probably going to reduce your maintenance cost because you're going to have to pay less for that service.

The other use case is around the parts and the machines themselves. If you can get them to last longer, both the entire machines and the part replacements and not replace parts prematurely, you're saving scarce resources. You're not sending those to the dump and creating pollution and waste. You're getting more reuse out of your machines. So again, another win-win with less waste in the world and less use of resources, saving the planet and at the same time saving you on the expensive parts of machines that you may need to replace. So two obvious use cases in manufacturing that are both sustainable and efficient.

Niall Sullivan, Senseye: Yeah. I think you summed it up nicely there, Bill, with the win-win situation. So it's not about saying, we're just doing this for the environment, or we're just doing this for our business to make us more profitable, it's actually a win-win for both. It's a really nice way to look at it, actually.