The discussion around sustainability is increasing in urgency based on a variety of factors – the observance of environmental necessity, regulatory pressures to force progress toward a more sustainable future, and the impact on certain business models and processes that don’t align with sustainable standards. It’s a conversation about more than just the environment, though – it’s also a conversation about good business.
According to Accenture, Companies with stronger Sustainability DNA are more likely to deliver financial value and a lasting positive impact on society and the environment. Recent research shows that the EBITDA margin of top quartile companies on the index is 21% higher (+3.4 percentage points) compared with the bottom quartile. Their sustainability performance is also 21% higher (+9.2 index points). This means that whether your priorities are positively impacting our environment or growing your business or both, the conversation will only become more important.
On last week’s podcast, I had a discussion around this topic with Jason Pelz, VP of Sustainability Americas and Sasha Ilyukhin, VP of Service Solutions for the Americas, both at Tetra Pak. Tetra Pak, the world’s leading food processing and packaging solutions company, is a recognized leader for its sustainability initiatives and continues to work on accountability for its own progress. An area of the conversation that was especially interesting, though, was around the service potential sustainability holds for Tetra Pak and this potential begins with a holistic view of what impacts sustainability.
“People are looking for products as consumers that are circular products, and as such sourcing becomes extremely important and recycling becomes extremely important. And I would argue that if you just go out in the street and stop the first 20 people and you ask them, they will say that it’s important to them where the product is coming from, that it’s sourced properly, and how it is then recycled,” explains Sasha. “What is interesting about this is that there is one piece in the middle there in that circular value chain that is called manufacturing. You source the materials, you start putting them together, that typically happens in a manufacturing plant. Then there may be multiple manufacturing nodes, if you will, on that value chain because then it goes further. We manufacture, for example, equipment. We manufacture packaging material. Our customers manufacture consumer products using what we had manufactured previously. So, if you take that whole manufacturing piece, our data suggests that the whole impact on the carbon footprint of the entire value chain, 48% of that footprint is actually caused by manufacturing. So, you think about, again, sourcing, extremely important, recycling is extremely important, but half of this entire impact comes from manufacturing.”
Tetra Pak’s Sustainability Services
This knowledge has led Tetra Pak to explore its ability to provide services to its customers to help them in reducing the carbon footprint of their own manufacturing operations. “What we see lately is a clear need from our customers in improving sustainability, so we are aligning our services portfolio into what it can do to help our customer reduce their carbon footprint to enable them to be more competitive versus other producers out there,” says Sasha. “When we do cost reduction projects with our customers, when we help our customers reduce their operational costs, we do it using the methodology of TPM or total productive maintenance. With sustainability, it’s a very, very similar process. We’ve learned how to do a mass balance, but using the energy, using the water consumption, using the VODs, CODs, using the waste. Recently, we’ve managed to reduce in one of our customers over 1,000 tons of CO2 per year. This is a confirmed equivalent that we have reduced. If you convert that back to the efficiency of the plant, so overall equipment protectiveness, that increases 19.4%. So, 19.4% efficiency increase plant-wide is equivalent in that case to just over 1,000 tons of CO2.”
Sasha shares more on the podcast related to the details of how Tetra Pak is approaching this new services potential with its customers, and it is well worth a listen. But the goal of this article is simply to get you thinking about the opportunity that may exist in your industry, for your company, to provide services that help your customers progress their own sustainability goals. The discussion is important in terms of examining your own business’ progress and actions, but there may be a wave of service growth tied to the overall increase in focus on sustainability.
“It makes absolute sense that businesses are starting to pay more and more attention and put more and more effort into sustainability goals. It’s not at the bottom of the balanced scorecard anymore, it goes to the top,” says Sasha. “And I have examples in our business where in talks with our customers, some customers are starting to place these goals as equivalent to their business goals. They not only want to achieve their net sales and profitability, but they also want to achieve their goals on carbon reduction and being carbon neutral. Sustainability is becoming, has become, a license to operate.”