12/12/2013 05:31 pm ET | Updated Feb 11, 2014

Creating a Lean and Green Enterprise

The international governments' inaction and lack of leadership on environmental issues is clearly worrying. But, at the same time, one is encouraged by the proactive approaches of a few leading-edge companies such as Toyota, Sainsbury's, WalMart, DuPont, Tesco, Unilever, Marks & Spencer and General Electric, for whom tackling the environmental wastes has become a key economic driver. As Jonathon Porritt, Advisor to Prince of Wales, observed a "governance shift" is occurring in the field of sustainability, with governments stepping back and businesses stepping forward to lead the change.

DuPont, one of the early adopters, committed itself to a 65 percent reduction in greenhouse gas emissions in the 10 years prior to 2010. By 2007, DuPont was saving $2.2 billion a year through energy efficiency, the same as its total declared profits that year.

Tesco has announced that it will reduce emissions from stores and distribution centres by half by 2020 and that it will become a zero-carbon enterprise altogether by 2050.

Toyota, already in its fifth five-year Environmental Action Plan, announced that it will improve the average fuel efficiency of its vehicles by 25 percent in all regions by 2015 compared to that of 2005. In manufacturing, Toyota has already reduced emissions per vehicle by 47 per cent between 2001 and 2013.

These companies are not committing to environmental goals out of the goodness of their hearts, and neither should they. The reason for their actions is in a simple yet powerful realisation that environmental and economic footprints are most often aligned. For example, when M&S launched its "Plan A" sustainability programme in 2007, it was believed that it would cost more than £200 million in the first five years. However, the initiative had generated in excess of £50 million by 2009-10. In 2011/2012 this was up to £135 million and benefits have continued to rise. When we prevent physical waste, increase energy efficiency or improve resource productivity, we save money, improve profitability and enhance competitiveness. In fact, there are often huge "quick win" opportunities, thanks to years of neglect.

However, there is a considerable gap between leading edge companies and the rest of the pack when it comes to the adoption of lean and green ideas. There are far too many companies still delaying creating a lean and green business system, arguing that it will require hefty investments. They remain stuck in the 'environment is cost' mentality, when, in fact, 'environment is free' and going beyond compliance often cuts costs.

Lean means doing more with less. That's why lean management supports green thinking and vice versa. Nonetheless, in most companies, continuous economic and environmental improvement are separate organisational silos and sometimes even come into conflict with each other. This is one of the biggest opportunities missed across most industries. In a recent book, "Creating a Lean and Green Business System: Techniques for Increasing Profits and Sustainability", my co-authors and I discussed companies which are using lean and green as simultaneous sources of improvement in various sectors of industry--from automotive and retail to textile and brewing.

Here is an example. A couple of months ago I worked with a team at one of the largest sandwich factories in the world engaged in a programme to reduce waste. The results were staggering, preventing nearly 1000 tonnes of waste in just a few weeks, and cutting annual water use by 9 million litres.

The size of the 'lean and green' opportunity is enormous. The "3 Percent Report" recently published by World Wildlife Fund and Carbon Disclosure Project shows that the economic prize for curbing carbon emissions in the U.S. economy will rise $190 billion a year to $780 billion by 2020. It suggests that one of the biggest levers for delivering this opportunity is "increased efficiency through management and behavioural change" -- or in other words lean and green management. The report puts the Return on Investment (ROI) for lean and green interventions at 233 percent. In my experience, this is conservative: most organisations can achieve ROI of 1000 percent or even higher when adopting the right behavioural and managerial changes.

Some forty-seven studies from the Economist Intelligence unit, Goldman Sachs, AT Kearney, Deloitte, MIT Sloan, Harvard and others show that companies that commit to such aspirational goals as zero waste, zero harmful emissions, and zero use of non-renewable resources are financially outperforming their competitors. You will be pleasantly surprised when you put lean and green together.

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