A-B-C-Design: Engaging the Whole Company in Developing Sustainable Products

Given the sheer number of items we purchase, use and throw away every year, it’s no surprise that consumer products are the ultimate drivers of carbon emissions. In that context, product design is critical for addressing climate change. As the concentration point for a large set of decisions about human and material resource flows, product design can influence emissions throughout the value chain, with the potential to yield significant results: According to the U.K.-based Climate Group, during the next decade, developments to information and communication technology products alone could reduce global GHG emissions by 15 percent, while saving the industry more than $900 billion. 

Ironically, the shortest path to better products is often found not inside the design team, but throughout the rest of the company.

At Business for Social Responsibility (BSR), we worked with the design and innovation firm IDEO to produce the report “Aligned for Sustainable Design: An A-B-C-D Approach to Making Better Products,” [PDF] which shows that sustainability introduces a range of factors into organizations that require the engagement of people throughout the company. Indeed, the real bottleneck to design problems is often low organizational capacity. Rather than looking to the designer to lead product sustainability strategies, managers need to coordinate conventionally unconnected parts of the organization and promote dynamic organizational learning.

The four main ways to do this can be described as the A-B-C-Ds of sustainable design:

A: Assess the climate impacts of your company’s projects and evaluate your organization’s capacity to address these impacts. Some companies, like Sony and Philips, do this by pursuing formal lifecycle analyses and materials assessments of their products in order to ensure that they understand where impacts really come from. Others, like Intel, also focus on understanding the impacts of first-tier suppliers. Still other companies are experimenting with new methodologies entirely: BT, for example, has developed a “Climate Stability Intensity” method that conveys the company’s global emissions normalized by expected atmospheric levels needed for climate stability.

B: Bridge functions and people needed for making valuable, tractable product redesigns. Often, this means making unconventional cases for commitments and resources. For example, Procter & Gamble, recognizing that energy-efficiency projects have important benefits that outweigh traditional return-on-investment hurdles, has bridged sustainability and finance by earmarking 5 percent of its budget ($5 million) for energy-saving projects. Hewlett-Packard has developed an energy supply chain function, which creates a formal, cross-functional bridge between traditional procurement and environmental responsibility teams.

Three Approaches to Sustainable Design
Given the demand for greener products, many companies are incorporating sustainable design into everything from cars to computers. They are employing three main approaches to designing low-emissions products:
• Reducing lifecycle emissions in existing products through new design specifications and features: Toyota has started equipping its hybrid electric car, the Prius, with rooftop solar panels that power the air-conditioner, and companies with energy-using products like HP and Dell are developing better power-saving and idle modes. Even companies with products that don’t use energy are designing specifications for lower-impact maintenance and disposal. Apparel companies, for example, are providing cold-water wash instructions for clothing.
• Linking existing products to restoration: Tyson is eliminating emissions from waste by turning animal byproducts into biofuel. Other companies, like Nissan, are linking products with restoration by automatically buying carbon offsets with automobile purchases.
• Deploying new product and service concepts: With videoconferencing, companies such as Cisco and Skype are fulfilling the need for live communication with an alternative to emissions-intensive air travel. Other companies have focused their business plans around products aimed at saving emissions: One such business is Liftshare.org which uses a simple database platform to bring people and organizations together to carpool.

C: Create internal and external learning projects that enhance knowledge of product sustainability and support necessary changes in the design process. Nike, for example, has launched a number of projects, such as one that reduces production scrap and diverts worn-out shoes from disposal, and another that phases out industrial greenhouse gases from the bladders of shoes’ air soles. It also remotely monitors the energy efficiency of its suppliers. Marks and Spencer has launched a range of projects, including one aimed at in-store energy reduction, another to source food regionally and label food transported by air freight. Another program targets consumers with educational and inspirational messages.

D: Diffuse lessons and accountability mechanisms that build sustainability literacy and affect better decision-making throughout the organization. This puts information in the hands of the right people at the right time, and creates accountability for product outcomes. Wal-Mart, North America’s largest private user of electricity, has developed a comprehensive, companywide sustainability mandate with six broad priorities and 14 cross-functional teams. As part of the effort, Wal-Mart uses what it calls “Personal Sustainability Projects” to train employees on ways to incorporate sustainability into their lives. Toyota has a number of initiatives to diffuse sustainability lessons: It formally mandates environmental action in its “Earth Charter,” it is developing local systems that streamline complex ISO 14001 and OHSAS 18001 methods in North American facilities, and the company uses green supplier guidelines that emphasize collaboration.

To enhance product sustainability, more consumers and policymakers are pushing companies to reduce carbon emissions throughout their value chains. Remember the cardinal rule: The crux of sustainable product design is generally not found within the design team, but rather in the information flow throughout the rest of the company.

First posted at GreenBiz.

The Difference Between Product and Supply Chain Footprinting

As more companies gain carbon management experience, they are expanding work from their scope of direct operations to a broader sphere of influence. Expansion is happening through two main efforts — product footprinting and supply chain footprinting, both of which are based on broadening from the organization to the inter-organizational value chain system. Each has interrelated issues and drivers, but they represent two different movements with distinct activities and tradeoffs. As standards emerge, understanding their common denominators is important for guarding against greenwashing and making the right investments. The question for companies taking the lead on carbon footprinting now is: What is the relationship between product footprinting and supply chain footprinting, and what should your company be doing?

Product Carbon Footprinting

According to London-based Carbon Trust, a company founded in 2001 in partnership with the U.K. government, consumer purchasing is the ultimate driver of all carbon emissions, and because of this, policymakers in Europe and North America are paying more attention to carbon footprints of products.

In 2007, the E.U. Parliament called for companies to begin placing carbon labels on products. In part because of this effort, Carbon Trust, along with England’s Department of Environment, Food and Rural Affairs (Defra) and BSI, the U.K.’s National Standards Body, are developing the product standard PAS 2050, which will measure the embodied emissions from products.

In the United States, economists recently testified to Congress that product carbon content should be regulated through border tax adjustments, and this year, California Assemblyman Ira Ruskin, D-Los Altos, advanced the Carbon Labeling Act known as AB2538. In Japan, the Economy, Trade and Industry Ministry is working on rules for carbon labeling, which it aims to have ready for next spring.

Corporate product pilot programs are already hitting the shelves. The most prominent one, created by Carbon Trust, is led by 20 companies, including the U.K. retailer Tesco, which has begun placing carbon labels on detergents and light bulbs. In addition to working with industry to develop standards, Timberland, an outdoor shoe and clothing manufacturing based in Stratham, New Hampshire, is disclosing product metrics as part of its Green Index product rating system.

So far, product carbon labels make three types of promises:

1. Carbon embodied: This is based on a lifecycle analysis (LCA) of the cumulative carbon produced throughout the life of a product, which includes production, distribution, consumer use and disposal. The PAS 2050 and Timberland’s Green Index are both embodied carbon frameworks. Currently, these frameworks are most developed in the Europe, and are slowly spreading to the United States.

2. Carbon reduced: This framework covers embodied carbon avoided from “business as usual,” or the likely emissions trajectory if the emissions reduction program hadn’t intervened. The only significant program in development is one by Carbon Trust called the Product-Related Emissions Reduction Framework (PERF), which is based on PAS 2050.

3. Carbon neutral: Products that fall under this category promise net zero emissions, made possible with carbon offsets. The Washington, D.C.-based offset provider Carbon Fund, a Washington, D.C.-based offset provider offers its CarbonFree certification, which covers carbon-neutral products. Many multinational companies make carbon-neutral product claims, and this framework is probably the most widespread of the three types of promises.

In order for these labels to be meaningful to consumers, data need to be objective, comparable and prudent. But many companies are running into challenges, such as how to define “boundary conditions,” or which carbon to include. For example, should shampoo include the energy associated with hot water during use of the product?

Jay Celorie, program manager for supply chain energy at HP, points out that for some product sectors, such as electronics, which may have thousands of parts and hundreds of suppliers, the boundary problem is extremely complex. In those cases, it’s impractical to aggregate primary data.

In addition to making data collection expensive, this sort of complexity leads to ambiguous results. According to Mark Newton, environmental policy manager for the computer manufacturer Dell, product footprinting may seem simple but statistical errors related to each incremental greenhouse gas (GHG) impact in the product lifecycle must be considered cumulatively, and variation of these can easily supersede apparent differences between products or features, making legitimate comparisons or claims difficult. 

Finally, communicating meaningful results is thorny. Edgar Blanco, executive director of the MIT Center for Latin-American Logistics Innovation, explains that it’s misleading to boil down footprints into a single figure without qualifying the depth, breadth and precision of data. Nonetheless, few companies are acknowledging the statistical context of their data, and therefore many companies may face questions they have a hard time answering.

Supply Chain Carbon Footprinting

Supply chain carbon footprinting, the practice of accounting for the carbon emissions of suppliers, is intended to increase the transparency of energy use and the efficiency of suppliers, and also to eliminate waste and help managers make responsible purchases. Like product footprinting, supply chain footprinting addresses emissions outside of a given company’s ownership and control, by accounting for other organizations — potentially multiple tiers of them — among common value chain systems. Unlike with product footprinting, this requires tracking primary data from specific companies, generally starting at the enterprise level. While product footprinting has been evolving since LCA emerged in the 1970s, supplier footprinting is much younger and less standardized.

The most prominent effort in this arena is London-based Carbon Disclosure Project’s Supply Chain Leadership Collaboration (SCLC), a group of 29 multinationals led by Wal-Mart that encourages suppliers to disclose their emissions publicly. Another initiative — the Electronics Industry Citizenship Coalition (EICC), an effort in which BSR is assisting — is developing a supplier reporting protocol for the information and communication technology (ICT) industry. These efforts are focused primarily on direct supplier relationships, with the aim of establishing robust systems for pushing emissions reporting carefully but firmly up the supply chain.

Not surprisingly, there are challenges with these initiatives. Despite media attention to the issue, few companies — even those that disclose their own product carbon footprints — are directly engaging suppliers about carbon emissions. And those who are engaging suppliers rarely go beyond the first tier.

The challenges are multifold: Many suppliers, citing that they are small, private and/or exclusively business-to-business, don’t see a business case for disclosure. Others aren’t familiar with common emissions measurement practices. And in addition to technological and data transparency and assurance challenges, there are often language and/or cultural gaps between suppliers and customers. In some cases, suppliers feel they lack the authority to disclose, or they fear that if they do offer disclosure, they’ll be barraged with multiple questionnaires in varying formats.

The Wisdom to Know the Difference

As it turns out, product and supply chain footprinting have interrelated drivers and issues, but they represent different movements with distinct activities and tradeoffs. Many companies are committed to supply chain footprinting, which they expect to increase efficiency and reduce waste, yet they are reticent to advocate product footprinting because data complexity and virtually no standards mean high costs and uncertain results. At the same time, some companies advertise product carbon footprints in an effort to deliver more customer value, but they don’t engage suppliers directly because they lack the systems and know-how. Yet despite their differences, “bottom-up” supply chain footprinting and “top-down” product footprinting are both important, and contrasting them can provide useful insight for companies aiming to achieve a lower carbon footprint.

Companies seeking to reduce emissions from the value chain should keep in mind the opportunities and costs of both product and supply chain footprinting. Product footprinting frameworks such as PAS 2050 start with a product’s boundary conditions (e.g. which carbon to include), and then model the cumulative impacts of processes at various stages along the value chain. While this provides a conceptual overview of the value chain’s hotspots, it does not take into account operations changes inside individual companies, which is why supply chain footprinting is also essential. In looking at the supply chain, this framework identifies the most important suppliers and observes their actual data. (For SCLC, this means suppliers of the largest public companies, like Unilever and Procter & Gamble; for EICC, it is first-tier suppliers. HP has recently disclosed [PDF] its list of key suppliers. Unlike with product footprinting, the data can be used to define operational baselines and set process performance targets. The tradeoff is that it doesn’t prioritize areas where value chain carbon emissions are highest. 

Product footprinting extrapolates secondary data from manufacturing processes and makes assumptions regarding use and disposal, while supply chain footprinting measures data from real companies directly. The former gives substantial information with high variance, while the latter provides high confidence, but for one company at a time.Each has its own standardization problems. Product footprinting must merge hundreds of processes across multiple companies yet there are scant norms for making these massive summaries meaningful to the customer, whose aim is to make simple product-to-product comparisons. Supply chain footprinting, on the other hand, struggles with how to allocate and normalize emissions by revenue, production unit, facility or another other figure.

Although both product and supply chain footprint frameworks are still emerging, it is wise for businesses to invest in the building blocks for both while legislation, pilot programs and technologies develop. In doing so, consider the following recommendations:

  • Watch for meaningful standards to emerge, particularly the GHG Protocol, which is developing guidance for product and “scope 3” emissions, and the SCLC, which is establishing reporting norms.
  • Get involved in industry-focused forums to make sure that the right incentives are being created and your efforts are being counted. As economy-wide frameworks develop, there is an increasing need for industries to play a part in informing situational guidance and the rules for boundary-setting, normalization and allocation.
  • Work with your peers on standardized content for industry supplier questionnaires to ensure that the process is also the same, with a single entry point for suppliers and buyers. In doing so, develop tools that invite entry-level and experienced users alike, and that produce standardized data that potentially support both product and supply chain footprints.
  • In making carbon claims and wider promises (see BSR’s recent report, “Eco-Promising: Communicating the Environmental Credentials of your Products and Services”), watch for advice from authorities like the Federal Trade Commission, which plans to update its guidance on green marketing claims toward the end of 2008 for the first time in 10 years.
  • Keep it simple. Companies naturally want systems that best describe their situations. However, when aggregating footprints among many companies, data grow unwieldy so there’s a premium on accessibility and common denominators. To keep it simple, focus on materiality, deferring when possible to primary data (e.g. electricity use) and public data (e.g. financial statements), and encourage your peers to communicate analyses in straightforward, comparable equations.

Originally published at Greenbiz.