Sustainability in Manufacturing - Part 2

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This episode is the second part of our series around sustainability in manufacturing (you can listen to episode one here.) Once again 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 discuss the action steps manufacturers must take to achieve sustainable manufacturing and the perils of greenwashing. I hope you enjoy it.

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Transcript

Niall Sullivan, Senseye: So at this point, I'd like to move the conversation slightly over to discussing the steps manufacturers can take to implement sustainable manufacturing best practices.

So I guess the first question would be how do manufacturers begin to understand environmental issues at their facilities? And what areas would you advise them to prioritize first, I guess?

Because you said it's such a wide thing. I think you said earlier, Tom, it's not just the plant itself, but it goes way, way beyond that. So I guess that could be quite an overwhelming thought as a starting point.

Tom Permatteo, GBB: Bill, do you want to tackle that or do you want me to tackle it?

Bill Zujewski, GBB: Yeah. No, sure. I'll tackle it. I just wrote a 10 step guide for executives of how to become a more sustainable business.

I think step one in that guide is you need to have your CEO, your management team, your executive team have a vision of how your company is involved in and interacts with the environment and what you want to do to become more sustainable. And then you create that green team, sustainability committee.

Then that first step is that eco assessment, which is understanding what you're doing and what you're not doing. Right? So in fact, that's one of the things Green Business Bureau provides is we have this online, it's about a hundred questions that anyone can go through. It asks about what you're doing in every function in the company.

Like we've said already, it's not just about your manufacturing plant. It's what you're doing in your cafeteria, in your bathrooms, in your lighting, in your warehouses, in your vehicles and communications, and then what you're also doing on the ground. So you answer all these questions about what you're doing in all those areas. And the Green Business Bureau spits out an eco score, an eco scorecard. And it will uncover initiatives that are available to you that you either didn't think of or didn't get to, for example, having  your delivery vehicles move to either hybrid or electric trucks and vans, right, or hydrogen-based trucks, or taking your materials and maybe turning them into a revenue stream for someone else to use in terms of the waste that comes off.

So that assessment that we provide is both a way to baseline where you are, but also have you learn through that assessment of what you're missing out on [00:03:30] doing.

Niall Sullivan, Senseye: Yeah. That was interesting what you were saying about it starts in the very top, so the CEO, CEO buy in. And I was just wondering, I'd imagine that's very challenging to get a CEO on board and enthused about the project. So what would you recommend? What steps would you recommend to get to really get them enthusiastic about it?

Tom Permatteo, GBB: Enthusiasm's a great word. As a CEO myself, I'm enthusiastic about building my business, right? So I have a passion for building my business. And I think that, generally speaking, to know if you're passionate about building your business, being sustainable should be part of your passion.

But what we see, I think there's an evolution of... Some CEOs will have passion for sustainability anyway. It'll just take them a general breakdown of population, right? That some CEOs are going to have a natural tilt toward this, and they're going to be passionate about it. They're going to want to implement this in their company.
In a lot of other cases, what we're seeing, by the way, so there's passion, then there might be just the understanding that, again, "If I'm doing financial reporting, I need to be talking about this."

Because we've seen, BlackRock will not invest in companies that don't have certain ESG reporting. So there's pressure from a financial perspective on a number of fronts, that CEOs will do this because they think it's good for their operations.

The other place where the pressure's coming from CEOs though, which is really interesting and we see this a lot, is coming internally. It's coming from their employees, and so a lot of the people who end up being the green leaders within the companies that we work with. And it's not just the sustainability office, by the way. It may be the head of HR, it may be the head of marketing, it may be the facilities manager. So it's a wide variation of people who lead these operations within a company.

But what is somewhat across the board and we see is that most of these people are younger tending millennial types. They're in the company and they're pushing up and saying, "I see we do some recycling, but what's our sustainability program here? What's our corporate sustainability mission here? What are we saying we're doing? Where is the thing for us to get involved with?" They're bringing this to the executives within the organization, and the executives are saying, "It's a great idea. You run it."

So some of the passion is actually coming up in the organization to the executives. There's definitely passion that executives have for being smart businessmen. There's definitely passion for people who just are naturally inclined to want to do this, but they're also getting pushed from their employees. And so they want to respond to those employees.

And they're smart enough to see that if their employees are pushing for this, it must be important. Bill, I don't know if you have anything to add to that.

Bill Zujewski, GBB: No. I mean, every CEO I've ever met in my lifetime wants to create a great company. I think great used to mean profitable and growing fast, and I think great now means also being green and sustainable, that you can't just focus on profit anymore.

I think most CEOs who are paying attention have probably seen the leaders of companies like Patagonia, and Marc Benioff at Salesforce, and Starbucks talking about balancing purpose and profit, right? And that we're moving, we're in a shift.

And we, and at least Tom and I, obviously we have vested interest, that we think this is a huge megashift of the last 50 years of this notion of shareholder capitalism all about, "Let's just take care of our shareholders and profit. Everything else will take care of itself," to this shift to stakeholder capitalism where you have to care about your workers, the environment, your shareholders, your partners, your customers, everyone, and that the role of a business is no longer just about pure profit, it's your role in society.

And so I think it might have been hard to sell CEOs on that concept 10 years ago, but it's getting pretty easy to sell them on that concept now.

Niall Sullivan, Senseye: Oh, that's really interesting. Actually, that was going to be my next question, you mentioned about stakeholders, and I know you mentioned, Bill, I think, about a committee as well. So it's just really who are the key stakeholders involved in the project? So we've talked about the CEO and that sort of level, C-level, but who are the other really key stakeholders to get things moving around sustainability?

Tom Permatteo, GBB: So in some businesses there is a sustainability officer or someone who has some sort of title of that in the organization. In many organizations it is, I'm interested in employee engagement, and I think it's a great way to engage employees on multiple different fronts, so it's the head of HR. Sometimes it's the head of operations or facilities management, as I mentioned. And sometimes it's the head of marketing, because people are saying, "I need to find a way to make sure my business is doing the right things because I want to promote this. I view this as a great promotional opportunity."

Going back to the last question, green business is good business now, and I think people, they know that now. And I think if you want to be a fast growing company with profits, green now is becoming a core part of it.

So there are different leaders within the organizations. And again, it is the interesting part of the growth of the business. I think over time, they will all function up into someone in an organization who has... This becomes such a role that every company will have some sort of green officer, right? And so the VP of HR might be the driving force behind it, but they will have someone under them that is responsible for it because this is a huge part of employee engagement.

What I mean by employee engagement, by the way, and how this fits into operations, is we have found that hypothetically if you're engaging with your employees and you're saying, "We want to save a million dollars on energy costs this year, so we want to encourage you to do these five things," the adoption rate is lower than if you say, "We are going to cut our carbon footprint and we're going to do these things that are great for the environment. And by the way, it will save us a million dollars." The adoption rate is much higher when you couch it in terms around sustainability. So again, it depends.

From engaging employees, it might be the head of HR. If it's facilities management, it might be the head of facilities. Right?

Bill Zujewski, GBB: Well, I think you hit the nail on the head. In most companies it's not a full-time role, right? I doubt Senseye has a chief sustainability officer. Most medium to large companies don't. Maybe only the mega corporations do, which is fine.

So sustainability almost has to become the fabric of the company, that every function, the head of HR, the head of marketing, the head of sales, the head of manufacturing, everyone plays a role. So it is basically a sustainability committee that we see more often than not that drives this.

Niall Sullivan, Senseye: Yeah. Because it touches all areas of the business. And I think you've explained very well from their point. It's like looking from the different point of views, basically, on it. And you mentioned the marketing as well. But the marketing view, I can say this as a marketer, it sounds quite a selfish view, because it's like, "How can we promote the company the best?" Whereas some of the other areas of the business have a lot more, I'll say, I don't know the word, not moral, but I don't know.

Bill Zujewski, GBB: Right. No. There's no doubt it's a grey area. There's a buzzword in our industry called greenwashing, like whitewashing, which is, right, saying you're green just for the sales and marketing benefits even though you truly aren't, which is what we try to basically combat, which is get rid of a lot of these greenwashers that are out there.

But most customers and employees are due their due diligence. And if you aren't truly sustainable, it eventually will come out, and it's a PR nightmare. So we're seeing less and less of that greenwashing and more and more of that transparent approach to sustainability.

Tom Permatteo, GBB: Well, no, but one of the things that is also key to what we do though, is we want to help people promote what they're doing, and clearly there's a benefit for people to say, "Hey, we're doing this. We are sustainable." And we do it in a way that is transparent, that if you're a member you get the ability to put a seal on your site which ultimately allows people to look at your company profile, allows your employees to transparently see everything you're doing, and you want to market that.

But more importantly, we want to focus... We view ourselves as an information portal as well. And so we publicize stories about what our customers, our members are doing partly because that can be instructive to somebody else. Right? So when you're promoting what you're doing, you're becoming part of this echo chamber, a very positive echo chamber. And if you do three things, and they're great business cases and there's a great ally behind it, we want to know about that because we want to promote that you've done something.

Because if someone else hadn't done that... And it's thinking about that. So there is, I'll use another cliche, a butterfly effect to it potentially, that everything you market about yourself, if you're doing it the right way and if you're telling the great business story about what you've done and the impact that it's had on your business, well, then maybe three other businesses do that. And if three other businesses do that, then maybe 10 others. And then when you want to talk about Paris Climate Accords, well, from the ground up maybe business is doing more than governments can possibly do anyway. Right?

Niall Sullivan, Senseye: Yeah, absolutely. Absolutely. So I just wanted to move on, actually, to get some more, I guess, actionable tips, I guess. So what I was wondering is what are the actual key steps that manufacturers should take to achieve sustainable manufacturing again?

Bill Zujewski, GBB: Well, I'll take the first part of this. I'll give it to you. The first part is become a member of the Green Business Bureau. Go ahead, Bill. You're next.

Niall Sullivan, Senseye: Hey, you got that. I knew you'd get that in somewhere.

Tom Permatteo, GBB: Not for fees, then. Self-effacing. I'm sorry.

Niall Sullivan, Senseye: Of course. We don't charge for that. Don't worry. It's fine.

Bill Zujewski, GBB: Well, for sure join the Green Business Bureau. That's our mission. We're trying to help create a green business world out there and a sustainable business world.

So what becomes actionable, it's no different than any project or program companies run, right? It probably starts with some sort of cross-functional committee. It starts with that assessment we've already talked about. And then you establish the priorities and goals, right? And then you create a cadence around meeting regularly to hold yourself accountable about meeting those goals.

So maybe it starts with several initiatives around maybe procurement or your policies around recycling. You can't do everything all at once, right? So we work with a lot of customers and create a sustainability roadmap. "Here's what we want to do over the next two years. And we're going to focus on manufacturing first and waste management first. Then we're going to move on to our logistics, transportation and vehicles. Then we're going to move on to our sourcing of the materials we use."

But you lay it out just like any other project with milestones, with metrics and you meet regularly and hold yourself accountable against those. As you get more sophisticated, you can even start measuring your carbon footprint. And there are calculators out there that take a look at your fossil fuel, the other various gases, pollution, etc.

One of your goals could be reducing your carbon footprint. For us, most of our customers is to improve their eco score. Right? We give you eco points for everything you complete. When you get to 200 eco points, you reach gold. When you get to 400 points, you reach platinum level of Green Business Bureau certification. So in a way, we're trying to gamify this whole notion of holding yourself accountable.

Niall Sullivan, Senseye: Yeah, absolutely. Actually, I'm going to be a little bit self-effacing again, in the sense, yeah, so we talked about the action steps and what you guys do on your side, which sounds like a very sensible way to do it, but more specifically, how can predictive maintenance contribute to this? And I know, Bill, you have some knowledge in that area, of course.

Bill Zujewski, GBB: Yeah. No, again, those are things you can benchmark. So first of all, go ahead and benchmark where you are, what your utilities bills are, right, and what you're using for energy and your manufacturing plan, and then think about how you can reduce that energy.

What are you spending on service and maintenance and what are those costs? And what are sustainable initiatives that can reduce the service and maintenance costs? And then your materials that are input into the manufacturing process, where are we sourcing those materials? How do they cost? Can we reuse them? Right?

So all three of those things can be baselined and measured. And then you start to put in new processes, like maybe you do start monitoring using a service like Senseye to analyze your data on your machine. If I get this right, I think your pressures, your temperatures, your vibrations, all those things could be early indicators of the need to fix something or they could be indicators that everything's fine and you can skip the next maintenance.

So a simple thing like just doing a better job of monitoring your machines is actually a sustainability initiative.

Niall Sullivan, Senseye: Another thing we talk about a lot as well, because, not to go on about our product too much, but in terms of with software and SaaS products, you can access them anyway, so someone doesn't have to necessarily be in the plant to look at the status of machinery.

So they could be at home, like us right now, doing that. I mean, how much of a contribution is that towards sustainability? So people, remote workers, I guess, and plant workers working from home, and they help to monitor all that.

Bill Zujewski, GBB: Huge, yeah. No, I'm glad you brought that up because that's one of the biggest macro trends we're excited about. We saw it firsthand with all the lockdowns around the world. You couldn't avoid the pictures on the news of China and India and places that were known for their smog and pollution. And what happens is when vehicles stop moving and we stop burning fossil fuels everywhere, what happens to our climate is amazing, right?

So the same thing you have to think about within just the manufacturing environment, that if service people can remotely troubleshoot, can remotely make decisions without driving around to every single facility, right? We are in this world of Internet of Things where you can, just like we're doing Zoom calls and avoiding having to go face-to-face in meetings, that same technology, the integration of digital data, can avoid those same meetings at manufacturing sites and drive a more remote work service type of business.

So I think that's going to be a huge driver and an easy driver that everyone should consider if you're a manufacturer, right? How could we integrate, collect data with our service providers so they don't have to? And even our own employees can provide service, so they don't have to be there all the time babysitting the equipment or monitoring that.

Niall Sullivan, Senseye: Yes that can only be a benefit.