Does it Pay to be Green?


Now that sustainability as a strategy is coming into fashion, the push
is on to expand and intensify the opportunities to save our planet and
to publicize these efforts as a demonstration of good corporate
citizenship. But is this just a public relations ploy, or can the
tactic actually improve profitability? The case for jumping on

As part of Corporate America’s eternal quest to improve the bottom
line, companies have long sought and implemented strategies and
technologies that are now labeled “green.” Efforts to reduce energy
consumption, minimize waste and improve performance tend to have
environmental benefits. Now that “sustainability” as a strategy is
coming into fashion, the push is on to expand and intensify the
opportunities to save our planet and to publicize these efforts as a
demonstration of good corporate citizenship. But is this just a public
relations ploy, or can the tactic actually improve profitability?

Sustainability is about carefully managing Earth’s finite natural
resources to sustain a quality of life for ourselves and future
generations. Rapid population growth is one of the most compelling
arguments for it. The global population, presently about 6.6 billion,
is expected to increase by 50% within 43 years.

In manufacturing terms, exponential population growth means more
factories taking up more land, using more raw materials, and allowing
more emissions and waste into the environment. Demand for products and
services will grow, but the availability of supplies isn’t guaranteed.
Competition for Earth’s finite resources will heat up and it’s easy,
yet unsettling, to imagine the socio-economic and political

“To achieve and maintain world-class sustainable manufacturing, you
need continuous improvement – not just of your capital assets but the
utilization and return on your raw materials, utilities and human
resource assets as well,” says John Blanchard, principal analyst for
CPG industries at ARC Advisory Group. “Manufacturing companies should
recognize that it will become increasingly difficult for manufacturing
operations to drive new growth and margin without considering
manufacturing ‘sustainability’ in their business decisions.”

The benefits are practical as well as financial. Blanchard explains,
“Maximizing the utilization of assets always brings a return on
investment. If you can bring a packaging line from 50% efficiency to
80% efficiency without buying new equipment or using more energy, then
you have reduced the cost per unit of product and demonstrated one of
many approaches toward achieving world-class sustainable manufacturing.”

Here’s how some popular green strategies are paying for themselves.

Improve air quality

We’ve seen a 21% reduction in ozone levels nationwide since 1980,
and federal, state and local governments are working together to
continue this trend. EPA is proposing to revise and strengthen U.S. air
quality standards for ground-level ozone based on the most recent
scientific evidence about its health effects. What’s not improving is
the concentration of greenhouse gases in the atmosphere – mostly CO2
from combustion of coal, oil and gas.

Regardless of where one stands on its relationship to global
warming, resistance may be futile. Nearly a third of ExxonMobil
shareholders voted in May for a resolution calling on the company to
reduce CO2 emissions. Although the resolution didn’t pass, the effort,
along with the fact that that ExxonMobil’s primary competitors — BP,
Conoco and Shell — belong to USCAP, may inspire the company to target
its products and operations for reductions.

DuPont cut its greenhouse gas emissions by 72% from 1990 levels.
Part of this success comes from using landfill gas as fuel in
industrial boilers. DuPont’s total savings from these projects exceed
$8 million per year.

Frito-Lay’s corporate-wide dedication to energy management has helped
the company prevent 1.6 billion pounds of CO2 emissions since 1999 and
avoid an estimated $35 million in energy costs. This Climate Leaders
Partner set a goal of reducing its greenhouse gas emissions per pound
of product by 14% between 2002 and 2010, and is using strategies such
as variable-speed compressors, improved leak management, heat recovery
projects, and oven draft control to achieve the targeted reductions.
It’s also testing hybrid electric delivery trucks to reduce air
pollution and fuel consumption, and an on-board GPS tracking system to
provide more efficient routing and reduce total system mileage,
emissions and fuel consumption.

Conserve energy

Energy conservation has long been a selling point in operations
technology, primarily for its often sizable cost benefits. Now, easing
our demand on the power grid and limiting our consumption of fossil
fuels is becoming a corporate responsibility – not only for the good of
the community but also our energy security.

Improved process controls, optimized energy generation and
distribution, and improved yields from manufacturing processes helped
DuPont to use 7% less energy than it did in 1990, despite producing 30%
more goods, saving the company $2 billion.

Supplementing nonrenewable energy sources with renewable strategies
such as solar or wind power and daylighting is another approach to
going green. Pfister Energy predicts that, depending on the size of the
solar photovoltaic system and your demand for electricity, you can cut
your energy cost from 15% to 80%. Mercotac is the proud owner of a
45-kW solar photovoltaic electrical generation system at its Carlsbad,
Calif. facility. Real-time output information is on display at

La Union sugar mill in Guatemala uses waste energy to produce
electricity, and excess power is sold to the local utility. It replaced
low-efficiency steam turbine drives with motors and variable-frequency
drives from Rockwell Automation and local distributor Intek. The drives
and motors use 66% less steam to generate the equivalent power,
resulting in a 30% to 35% improvement in energy efficiency. The mill
achieved payback in the first six-month season of operation, and now is
benefiting from $158,480 in additional annual revenue as well as
reduced downtime.Plantservices3

“Variable-speed drives can save energy and improve process control,”
says George Seggewiss, a senior projects solutions engineer at
Rockwell. “In most cases, the focus is on energy savings and the
payback period is generally one to three years. With good maintenance,
the equipment can last 10 years to 15 years. Because the technology can
be added on the front end of existing motors, companies can save the
cost of a new machine while getting the benefits of variable speed.”

Micro 100 Tool Corp. harnessed GE lighting to save energy. It
selected 210 long-life 23-watt Genura reflector compact fluorescent
lamps for production machines, plus 900 F96T8 lamps, 578 32-watt T8
lamps, 56 F96 high-output T8 lamps, and more than 400 electronic
ballasts. The complete lighting conversion earned the manufacturer a
$13,246 rebate from their local utility, Idaho Power. Combined with the
expected energy savings, Micro 100 Tool projects an ROI of 18 months.

Preserve water

Drought, pollution, a burgeoning global population and mounting
industrial and agricultural demand are putting pressure on our fresh
water supply. Around the world, communities are faced with water
restrictions. The world is running out of water and needs a radical
plan to tackle shortages that threaten the ability of humanity to feed
itself, says Jeffrey Sachs, director of the UN’s Millennium Project.

“During the past three years, we moved from a typical liquid
painting process in our assembly line to a powder coating system from
A.B. Myr that uses less water, generates lower emissions, and decreases
energy costs in the manufacturing process,” explains Kathryn Lovik,
director of corporate communications, Tennant Company. “As a result,
we’ve reduced our water usage by 3.7 million gallons annually, which is
pretty significant for a small plant.” The conversion has generated
annual savings for the company of roughly $33,000 per year and reduced
water pollutants by nearly 36,000 pounds.

Water conservation is reflected in Tennant’s products as well. “Our
FaST foam scrubbing technology for hard floor surfaces uses 70% less
water in the cleaning process, 90% less detergent, and leaves less
residue on the cleaned surface than traditional automatic
floor-scrubbing methods,” says Lovik. FaST injects air into a highly
concentrated chemical and water mix to create foam, generating savings
in both water and wastewater costs.

Another incentive to conserve water is to become classified as a
non-significant industrial user (Non-SIU) by the local wastewater
treatment facility. Tyson Foods in Sanford, N.C., reduced its
wastewater discharge volume below 25,000 gallons per day to qualify for
this classification. The manufacturer improved its dry cleanup
procedures, and reduced cleaning requirements by modifying production
equipment to reduce spillage and covering production lines not in use.
Conserving 20,000 gallons of water per day gave a payback period was
six months and calculated annual savings in water and sewer costs of

For Precise Products in Paramus, N.J., releasing wastewater into the
local sewer system required an annual discharge permit and monthly
wastewater testing. The spring pin manufacturer reduced water use and
eliminated wastewater discharge completely by modifying its wastewater
holding tank to recycle process water. The payback for the new system
was six months, and the company is saving more than $5,000 per year,
primarily by eliminating monthly laboratory analysis.

Leaner landfills

Solid waste became front-page news in 1987 when we followed the
saga of the garbage barge from New York City that traveled 6,000 miles
to find a dumping ground. After being rejected by North Carolina,
Louisiana, Texas, Florida, Cuba, Belize and Mexico, it finally found
its final resting place back in Brooklyn. We have since seen an
increase in waste-to-energy plants, recycling, and incineration as
alternatives to depositing solid waste at landfills.

The zero-landfill-waste policy at the Toyota Industrial Equipment
Manufacturing (TIEM) plant in Columbus, Ind., is a holistic approach to
the problem. Rather than dumping its general trash at local landfills,
the waste is now transported to a Covanta fuel-to-energy facility where
it’s used to produce steam and help power the downtown Indianapolis
heating loop. “Initially, when we moved to a zero-landfill facility, it
included transportation costs to Covanta, but the decision was based on
what was best for the environment and the investment was moderate,”
says Dixon Churchill, environmental, health and safety manager at TIEM.

The increased expense led TIEM to seek more and better recycling
alternatives, including reducing wood, metals and cardboard, and adding
paper recycling. “We’re currently working to remove and recycle
plastics from the general trash. Also, a corporate decision to use
monies generated from these new recycling efforts to support local
charities inspires associates to recycle larger quantities,” Churchill
adds. “We’ve cut our total volume of materials going to Covanta by
about 65% to 70% and are getting much closer to pre-Covanta disposal
costs,” despite increased production.

Ford Motor Company’s 2008 Escape has 100% recycled fabric seating
surfaces produced from post-industrial waste. InterfaceFABRIC estimates
that Ford’s use of recycled plastics and polyester fibers will conserve
up to 600,000 gallons of water, 1.8 million pounds of CO2 equivalents,
and the energy in 7 million kWh of electricity.

Auctioning rather than dumping unwanted equipment, vehicles, tools,
inventory or other unwanted assets is a revenue-generating landfill
alternative. An on-site and online auction conducted by Hilco
Industrial for Calpine Corp., a power generation company undergoing
bankruptcy restructuring, brought $48 million in sales.

Increase green space

Green roofs transform traditionally bland and unattractive surfaces
into lush green space, while protecting the roof membrane, reducing
heating and cooling requirements, and reducing insulation and roof
drain requirements. Roof gardens also absorb rainwater and carbon
dioxide, produce oxygen, are quieter, and can be expected to last twice
as long as a conventional roof.

Green Roofs for Healthy Cities, the North American green roof
industry association, calculates that 3 million sq. ft. of green roofs
were installed in 2006 and the growth rate is increasing. Perhaps the
world’s largest green roof is at the Ford Rouge truck plant in
Dearborn, Mich. Ford Motor Company had the 10.4 acre “living” roof
installed at the assembly plant with drought-resistant perennial
groundcover that is virtually maintenance-free.

The EPA estimates the up-front cost of an extensive green roof in
the U.S. starts at about $8 per sq. ft., including materials,
preparation work, and installation. In contrast, traditional built-up
roof costs start at about $1.25 and cool roof membranes start at
approximately $1.50 per sq. ft. Green roof costs are lower in countries
like Germany that have more experience, less customization and a
greater supply of contractors.

Although upfront costs might be high, green roofs generate ROI. Matt
Carr, product manager at American Hydrotech says, “Most buildings will
realize a one-third savings in heating and cooling costs after a green
roof is installed. In energy cost savings alone, they should pay for
themselves in six or seven years.” The roofs last much longer than
typical black asphalt and, depending on the vegetation used, require
minimal maintenance. To help quantify the benefits, Green Roofs for
Healthy Cities offers a Life-Cycle Cost Benefit Calculator.

Remove toxins

Products that contain or emit toxins necessitate specific handling
with costly maintenance and disposal requirements. For instance,
hexavalent chromium coatings and lead-acid batteries can be hazardous
to human health and the environment. The potential to alleviate risks
to employee, community, consumer and ecological health must be
considered in the overall financial equation, even when the upfront
investment is no lower than the more hazardous formulations.

Sermatech is among the companies that have developed chromium-free
coatings with similar application and performance properties as the
original formulations. The new coatings comply with regulations
restricting the use of materials with this compound, and alleviate the
need to implement government-mandated worker exposure controls.

“Worker exposure controls include individual employee monitoring
that could cost as much as $2,000 per year per employee,” says Kevin
Eddinger, Sermatech’s materials division manager. “Additional personal
protective equipment [PPE] needs could add another $1,000 to $2,000 per
employee annually.”

Calculation of any cost savings on waste disposal depends on whether
wastes are treated. “The cost to dispose of solid chromium-contaminated
waste can be as much as $200 per drum,” says Eddinger. “Depending on
local regulations, the new formulations might not need to be considered
hazardous with respect to their disposal.”

PPE must be worn when handling lead-acid batteries, and spent batteries
should be taken to a recycling center. If disposed in a landfill or
illegally dumped, the batteries can pollute drinking water sources. If
burned in incinerators, lead remaining in the ash may be released into
the air.

One way to minimize exposure is to replace lead-acid batteries in
uninterruptible power supply (UPS) systems with clean energy storage
technology. A single Pentadyne Power flywheel can supplant 200 or more
large-scale lead-acid batteries along with their 15,000 pounds of lead,
hundreds of gallons of highly corrosive sulfuric acid, explosive
hydrogen and special disposal procedures.

Initially, “The Pentadyne flywheel does cost more. But because
battery maintenance and replacement costs run so high and so
frequently, the flywheel achieves ROI within two years to three years,”
says Frank DeLattre, senior vice president of sales for Pentadyne Power
Corp. “The flywheel has a 20-year design life between factory
maintenance, so the cost savings over that time against low-cost VRLA
[valve-regulated lead-acid] batteries will be in excess of $100,000.”
The more important cost difference is that of a power interruption.
“Even a sub-second power event can easily cost a plant well in excess
of the flywheel cost,” DeLattre says. “Flywheels are a much more
reliable source of energy storage.”

MasterBrand Cabinets sought to increase reliability when it replaced
one battery cabinet in its redundant power-protection system with a
flywheel unit. It’s protecting and extending the life of another
battery cabinet attached to the same UPS: new batteries for that
cabinet are needed less frequently, and maintenance-related downtime
and battery disposal costs are being saved.

Preclude NIMBY

The “not in my backyard” (NIMBY) principle reflects the resistance
of neighborhoods to industrial operations within their midst,
particularly for fear of environmental damage – air, noise and water
pollution, safety and the strain on local resources – despite the
economic benefits. Furthermore, consumers increasingly select companies
and products that help improve their health and safety. For this
reason, social responsibility is another key element of sustainability.

“If water availability, physical safety, noise, odor or emissions
aren’t adequately addressed, or the product quality or employee
relations are known to be poor, consumers will look elsewhere and the
NIMBY principle also will kick in,” says Blanchard. “This, in turn, can
lead to limited availability of vital products or services. We’ve seen
many examples where the consequences to our society and economy have
been enormous.”

The July 2007 Chemical Processing magazine article, “Sleep with the
Enemy,” recommends collaborating with environmentalist organizations,
rather than fighting them, to help appease the community and save
money. This works particularly well when handled proactively rather
than after controversies arise.

Offset the costs

To ensure that sustainability initiatives don’t present a financial
burden to the operation, particularly when the ROI isn’t timely or
clear, some companies may seek to offset the cost. One method is to
research the many tax incentives, grants, loans, rebates, bond programs
and production incentives that promote environmental causes. For
example, the DOE-funded Database of State Incentives for Renewables and
Efficiency summarizes financial incentives at the state, local, utility
and federal level.

Some companies offset costs by increasing the price of goods sold.
Georgia Power recently asked the state Public Service Commission for a
$406 million rate increase, in part to recover the cost of implementing
new environmental controls in its coal-fired power plants.

Ideally, vision and innovation will reduce the emphasis on
short-term costs and spotlight the long-term benefits of sustainable
technologies. As awareness grows of the consequences of our actions on
future generations, we can begin to recognize and take responsibility
for the small part each of us play in fostering sustainability.
Broadening the environmental mindset is bound to please your employees,
your customers, Wall Street and the public at large.

This article was originally posted at Click here.

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