Executive Briefings

Sustainability Efforts Can Yield Multiple Benefits

Business is going green because of pressure from government and consumers. But the push for sustainability can also aid in controlling costs at a time of economic crisis, says Joe Martha, vice president of Booz-Allen Hamilton.

In the age of globalization, the task of measuring an organization's carbon footprint can be a daunting one indeed. The calculation must account, not only for the operations of the company itself, but for its suppliers, customers and "all the energy that's consumed throughout the lifecycle of a product," says Martha.

Several trends have combined to place sustainability high on the list of executive priorities. U.S. legislators are considering a measure that could result in an emissions cap-and-trade program, similar to that developed in the United Kingdom, by 2010. Big retailers such as Wal-Mart Stores are pushing their armies of suppliers to adopt greener policies. And businesses of all sizes are struggling to reduce energy costs.

Carbon footprint calculations must be carried out on a product-by-product basis, covering the acquisition and movement of raw materials, the manufacturing and processing of finished goods, outbound transportation, distribution to the end consumer and disposal.

The exercise can result in some surprises, says Martha. One study compared the emissions of two newspapers, one using 50-percent recycled paper and the other virgin pulp. The latter ended up having a lower carbon footprint because its production took place in an area served by hydroelectric power.

Green awareness can lead to major changes in the relations between buyer and supplier. In the U.K., Martha says, the maker of Walkers crisps had been paying for raw materials on the basis of weight. To boost their income, farmers were adding water to their potatoes, a process that greatly increased energy use. So the buyer's compensation formula was changed to eliminate the need for that step.

In tough economic times, business has a tendency to emphasize cost-cutting at the expense of all other efforts. Indeed, says Martha, chief executives today appear to be showing less of an interest in sustainability than they were three or four years ago. Still, the effort can be of great value in controlling overall cost. By reducing the amount of packaging, for example, a manufacturer can slash transportation expense.

"Green" awareness won't be going away anytime soon, in Martha's view. "When cap and trade goes in next year," he says, "we will see people pay a lot more attention to that."

To view this video interview in its entirety, Click Here.

In the age of globalization, the task of measuring an organization's carbon footprint can be a daunting one indeed. The calculation must account, not only for the operations of the company itself, but for its suppliers, customers and "all the energy that's consumed throughout the lifecycle of a product," says Martha.

Several trends have combined to place sustainability high on the list of executive priorities. U.S. legislators are considering a measure that could result in an emissions cap-and-trade program, similar to that developed in the United Kingdom, by 2010. Big retailers such as Wal-Mart Stores are pushing their armies of suppliers to adopt greener policies. And businesses of all sizes are struggling to reduce energy costs.

Carbon footprint calculations must be carried out on a product-by-product basis, covering the acquisition and movement of raw materials, the manufacturing and processing of finished goods, outbound transportation, distribution to the end consumer and disposal.

The exercise can result in some surprises, says Martha. One study compared the emissions of two newspapers, one using 50-percent recycled paper and the other virgin pulp. The latter ended up having a lower carbon footprint because its production took place in an area served by hydroelectric power.

Green awareness can lead to major changes in the relations between buyer and supplier. In the U.K., Martha says, the maker of Walkers crisps had been paying for raw materials on the basis of weight. To boost their income, farmers were adding water to their potatoes, a process that greatly increased energy use. So the buyer's compensation formula was changed to eliminate the need for that step.

In tough economic times, business has a tendency to emphasize cost-cutting at the expense of all other efforts. Indeed, says Martha, chief executives today appear to be showing less of an interest in sustainability than they were three or four years ago. Still, the effort can be of great value in controlling overall cost. By reducing the amount of packaging, for example, a manufacturer can slash transportation expense.

"Green" awareness won't be going away anytime soon, in Martha's view. "When cap and trade goes in next year," he says, "we will see people pay a lot more attention to that."

To view this video interview in its entirety, Click Here.