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Environmental Strategies. Chapter 4. Overview. Business Relevance of Environment Types of Environmental Issues Facing Service Companies Role of the Service company in Environmental Issue Mitigation Environmental Impacts of a Service Company. Chapter 4 - Environmental Strategies. 1.
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Environmental Strategies Chapter 4
Overview • Business Relevance of Environment • Types of Environmental Issues Facing Service Companies • Role of the Service company in Environmental Issue Mitigation • Environmental Impacts of a Service Company Chapter 4 - Environmental Strategies 1
Services and the environment are two separate issues • Environmental impacts of Service Companies • Companies that offer environmental services • Waste disposal, cleaning services, environmental lawyers and consultants Chapter 4 - Environmental Strategies 2
Environmental Management • Many companies measure against the triple bottom line as developed by John Elkington • Financial, environmental and social performance Chapter 4 - Environmental Strategies 3
Environmental Management • Research has demonstrated the link between financial success and the ability to manage the environment • Financial implications of poor environmental management • State and Federal fines • Cost of litigation • Cost of environmental clean-up • Damage to the company brand Chapter 4 - Environmental Strategies 4
Environmental Management • Financial implications of high-performance environmental management • Cost Reductions • Improved quality and yield • Improved relationships with regulators • Reduced insurance costs • Enhanced company brands • Examples include Home Depot and UPS Chapter 4 - Environmental Strategies 5
Environmental Management • There is a positive correlation between environmental events and stock market performance • Positive environmental events = higher share price • Examples include Alcan Aluminum whose share price increased 80% faster than the DJIA after receiving a prestigious environmental award • Negative environmental events = lower share price • Examples include Tyson Foods who lost 8% of market capitalization when a subsidiary was fined for illegal dumping Chapter 4 - Environmental Strategies 6
Service Process matrix • Environmental Services Chapter 4 - Environmental Strategies 7
Service Process matrix • Environmental Issues for Service Companies Chapter 4 - Environmental Strategies 8
Services and Their Environmental Impacts • Professional services - doctors, lawyers, consultants, etc. • Medical waste, paper, toner • Service shops - hospitals, hotels, auto repair, etc. • Infectious waste, laundry soap, used motor oil • Service factories - UPS, Royal Caribbean, Delta, etc. • Fleet maintenance, fuel, waste water Chapter 4 - Environmental Strategies 9
Environmental Strategies for Service Operations • Process Opportunities • Process Improvement • Total Quality Environmental Management (TQEM), Six Sigma • Process Certification • ISO 14000, CERES Principles, Codes of Conduct • E-commerce • Migrate paper based processes, process automation, reverse logistics Chapter 4 - Environmental Strategies 10
Environmental Strategies for Service Operations • Product Opportunities • Product redesign • Design for the Environment (DFE), lifecycle analysis • Value added services • Include value added services along environmental dimensions • Dematerialize • Vertical or horizontal integration effectively eliminates the supplier’s incentive to sell additional hazardous material Chapter 4 - Environmental Strategies 11
Summary • Advanced economies have migrated from a manufacturing to a service environment • Understanding environmental issues is critical • Services impact the environment directly, hence, mitigation of environmental risk can result in significant gains • Service companies can mitigate risk by improving both the process and the product Chapter 4 - Environmental Strategies 12
Chemical Management at Delta Air Lines • Prior to 1994, Delta utilized centralized purchasing for the decentralized use of hazardous chemicals • In 1994, Delta was fined $1 million by the Georgia EPA alleging that Delta’s chemical management system was inadequate • Delta began to develop an integrated chemical management system based on three main goals • (1)Manage the chemical process more effectively, (2) Capture all required data concerning use and disposal and (3) Perform these functions at an overall lower cost to the company. Chapter 4 - Case Study 13
Chemical Management at Delta Air Lines • A Delta employee along with a former Delta supplier form Interface LLC • 1995 agreement with Delta stated that Interface LLC would act as the gatekeeper between chemical suppliers and Delta • Would honor all purchaser orders, freed up 30,000 feet of warehouse space at Delta, minimized Delta’s supplier base • Agreed to deliver routine orders in three hours and expedited orders in two hours (Opened a facility 1.5 miles from Delta) • Agreed to a 95% fill rate Chapter 4 - Case Study 14
Chemical Management at Delta Air Lines • Benefits of using Interface LLC • Streamlined MSDS management • Now tracked chemicals throughout the operation • Interface negotiated with chemical suppliers and manufacturers • Extended scope by including safety equipment • Contract specified joint cost savings • Incents Interface LLC to find innovative ways for Delta to save money • Provided Interface LLC the ability to demonstrate the success of the model to other customers Chapter 4 - Case Study 15
