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Chandra Mouli Research Analyst
Beroe-Inc. Dialing in from:
India
Host
Anup Agrawal Engagement Manager
Beroe-Inc. Dialing in from:
India
Moderator
Environmental externalities- putting in perspective
USD 7 Trillion
38% GHG
25% Water use
7% Air Pollution
5% Other Pollution
5
1% Waste Generation
24% Land use
But… there is a hope..
Sustainability
Innovating around sustainability is the key to tactical to strategic transformation
6
But… there is a hope..
Business Sustainability
Evolution
Concerns
Organizational Thinking
Values Created
Business As Usual
Economic
Tactical
Shareholder value
Business Sustainability
1.0
Three Dimensional
Tactical
Refined Shareholder Value
Business Sustainability
2.0
Three Dimensional
Tactical
Triple Bottom Line
Business Sustainability
3.0
Starting with sustainability challenges
Strategic
Continuous value creation
7
What we’ll cover today
8
Innovating through Sustainability
Opportunity – What and Whom?
E P&L: The Tool
Case Studies & Take Away
Conclusion
What’s the push and pull
Opportunities
Threats
There is a substantial push and pull for the sustainability driven innovation 9
• 50% of the environmental costs attributed to the supply chain; huge potential to improve triple bottom line for procurement
• Several Environmental tools
• Enabling Innovation; moving from tactical to strategic; discrete to continuous
• Studies suggesting strong links of sustainability to innovation
• Companies unable to adapt quickly to gaining environmental policies and regulations
• Companies incurring large money drain due to heavy fines
• Close to 64 countries establishing significant climate & energy legislation; Estimated 17000 and more regulations
• Risks increase as we move down the supply chain
• Huge financial savings; more benefitted from their supplier carbon reduction activity
Opportunity for whom??
It is an opportunity for all those who
Set sustainability
targets
Set a commitment
time
Located in those
regions where there is a policy
push
Matured supply chain
Organizational structure in
place
10
Focus Screen and develop
See Generate Rank and Execute
Sustainability…Innovation : Connecting the dots
Improved Bottom Line
Creating Differentiation
Innovation Sustainability
Measures
Environmental Profit and Loss
Account
?
Through E P&L
11
Process explained through PUMA case study
Offices, Warehouses, Logistics, Shops, Business travel, IT
Shoe manufacturing, Apparel manufacturing , Accessory manufacturing
Outsole and insole production, textile embroidery and cutting , adhesive and paint production
Leather tanning, cotton weaving and dyeing, petroleum refining
Cattle rearing, cotton farming, rubber plantation, petroleum production, others
12
Company operations 1 Tier-1 2 Tier-2 3 Tier-3 4 Tier-4 5
Mapping footprint throughout supply chain
PUMA Operations
Manufacturing
Production
Processing
Raw Materials
13
Quantify cost of environmental impact
83.5 GHG Emissions
538 SOx , NOx emissions
2,00,000 Other Particulates
emissions
12000 Land use
12 Water use
44 Incineration
110 Landfill waste
Total Impact: USD 145 Million
14
Key takeaways for the companies
PUMA E P&L results by Regions PUMA E P&L results by PUMA operations & tiers of
supply chain
0
10
20
30
40
50
60
70
80
90
100
Pum
aO
pe
ratio
ns
Tie
r 1
Tie
r 2
Tie
r 3
Tie
r 4
Tota
l
Perc
en
tag
e
24%
10%
66%
15
Key takeaways for the companies
PUMA E P&L results by environmental indicator PUMA E P&L results by business line
Footwear
Apparel
Accessories
0 10 20 30 40
Water use
GHGs
Land use
Other air pollution
Waste
Analysis
Operations and tier-wise Region wise Business line wise Environmental indicator
wise
16
What next- Innovation ??
Innovation : PUMA developed compostable sneaker called “Incycle”
The sneaker has an 87% smaller impact if
composted at the end of use
-87% +97%
Compostable material, substantially cutting its
end-of-use impacts
-48%
Reduced energy for more energy efficient manufacturing
Environmental impact Materials Energy
17
What next- Innovation ??
Innovation : PUMA developed compostable sneaker called “Incycle”
Water
Reduction of water use; more efficient to make; with 21 liters per pair
Sustainability leader Reduced cost to human
well being
Enhanced PUMA’s reputation as a
sustainability leader. Saved 20 Million Pounds from P&L
Potentially increased environmental net benefit of USD 1.14 per pair of
shoes if 100% is recovered and composted
-51%
18
Measuring E P&L
Set the Boundary 1
Map impact categories to supply chain functions
3 Quantify cost of environmental impact
5
Determine drivers of environmental impact
2
Measure environment impact parameters
4
E P&L
19
Ford motors
What did Ford achieve?
Ford Motors Lear Corporation Bayer Material Science
Reduction in annual petroleum usage
Significant reduction in CO2 emissions
Supply security
Shielded against policy risks Better supplier selection
Supplier Y
Supplier X
Soy based Poly-urethane seat
20
McDonalds
What did McD achieve?
McDonalds Aria Diaries Crossland tankers &
Gray and Adams
Fuel savings Labor savings Less emissions
Shielded against policy risks Better supplier selection
Supplier Y
Supplier X
Combinational trailer
21
Why environmental profit and loss accounting?
Measure
the Impact
by monetizing
it
Better decision
making
Steering
business
efficiently
Manage
risks
Transparency
with
stakeholders
22
E P&L nevertheless…
Calculated guess work 01
Cradle to gate approach 02
Apple to orange comparison 03
Ignores less important environmental attributes 04
23
Sustainability: Beginning not the end
Sustainability Targets
START
24
Sustainability: Beginning not the end
Sustainability Targets
START
25
Change in approach
26
Change in approach
27
Conclusion
No low hanging fruits Shrinking supplier margin
28
E P&L
Conclusion
No low hanging fruits Shrinking supplier margin
29
E P&L
