Sustainable Production: Good for the Plant Good for the … · Sustainable Production Good for the Plant, ... the relationship between production technology and sustainability

Sustainable Production Good for the Plant, Good for the Planet

September 2009

Mehul Shah, Matthew Littlefield

Sustainable Production: Good for the Plant, Good for the Planet Page 2

© 2009 Aberdeen Group. Telephone: 617 854 5200

Executive Summary Research Benchmark

Aberdeen’s Research Benchmarks provide an in-depth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations

At the highest level, almost every manufacturing executive believes there is value in the intangibles of green and sustainability. However, few have the ability to quantify this value in real dollar terms and even fewer understand the relationship between production technology and sustainability. This new research will, for the first time, benchmark the value Best-in-Class manufacturers derive from their approach to sustainable production. Whether you are just implementing a sustainability program or have been on this journey for many years, this report will provide insight into the sustainability programs of the top performers in manufacturing.

Best-in-Class Performance Aberdeen used four Key Performance Indicators (KPIs) to identify Best-in-Class performance, with the Best-in-Class averaging:

• 89% Overall Equipment Effectiveness (OEE)

• 24% reduced energy consumption

• 30% reduced emissions

• 19% outperformance of corporate operating margin goals

Competitive Maturity Assessment "Our sustainability initiative has taken over our corporate business plan and informs our annual strategic planning process / goal setting."

~ Partner, North American General Manufacturer

Survey results show that the firms enjoying Best-in-Class performance shared several common characteristics:

• Best-in-Class companies are over three-times as likely as others to establish a role of Chief Sustainability Officer (CSO) to oversee the success of organizations sustainability programs

• Best-in-Class companies are over two-times as likely as Laggards to enable role-based visibility into emissions data

• Best-in-Class companies are four-times more likely than Laggards to provide executives with real time visibility into energy data

Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must:

• Enable visibility into energy and emissions data by investing in energy management and environmental management solutions

• Establish an enterprise-wide sustainability framework that provides a clear understanding of the organizations sustainability programs

• Invest in reporting, dashboards and analytics to provide role based visibility into sustainability related data

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Table of Contents Executive Summary....................................................................................................... 2

Best-in-Class Performance..................................................................................... 2 Competitive Maturity Assessment....................................................................... 2 Required Actions...................................................................................................... 2

Chapter One: Benchmarking the Best-in-Class.................................................... 4 Sustainability in Manufacturing Operations........................................................ 4 The Maturity Class Framework............................................................................ 6 The Best-in-Class PACE Model ............................................................................ 7 Best-in-Class Strategies........................................................................................... 8

Chapter Two: Benchmarking Requirements for Success.................................11 Competitive Assessment......................................................................................12 Capabilities and Enablers......................................................................................13

Chapter Three: Required Actions .........................................................................20 Laggard Steps to Success......................................................................................20 Industry Average Steps to Success ....................................................................20 Best-in-Class Steps to Success ............................................................................21

Appendix A: Research Methodology.....................................................................23 Appendix B: Related Aberdeen Research............................................................25

Figures Figure 1: Sustainable Production ............................................................................... 4 Figure 2: Top Pressures Driving Sustainable Production..................................... 5 Figure 3: Impact of the Economy on Sustainability Initiatives............................. 6 Figure 4: Strategic Action ............................................................................................ 8 Figure 5: Visibility into Manufacturing Operations................................................ 9 Figure 6: Positive Impact of Sustainability..............................................................10 Figure 7: Enterprise-wide Sustainability Framework...........................................14 Figure 8: Sustainability Initiative Decision Makers' ..............................................15 Figure 9: Enabling Visibility into Sustainability Initiatives....................................16 Figure 10: Technology Enablers ...............................................................................18

Tables Table 1: Top Performers Earn Best-in-Class Status.............................................. 7 Table 2: The Best-in-Class PACE Framework ....................................................... 8 Table 3: The Competitive Framework...................................................................13 Table 4: The PACE Framework Key ......................................................................24 Table 5: The Competitive Framework Key ..........................................................24 Table 6: The Relationship Between PACE and the Competitive Framework.........................................................................................................................................24



Chapter One: Benchmarking the Best-in-Class

Sustainability in Manufacturing Operations Fast Facts

Best-in-Class enterprises significantly out perform their competition in all four KPIs. These manufacturers enjoy:

√ 89% Overall Equipment Effectiveness (OEE)

√ 24% reduced energy consumption

√ 30% reduced emissions

√ 19% outperformance of corporate operating margin goals

The concept of sustainability is not new for organizations today. But there is wide disparity on how companies think about and implement sustainability programs. While some manufacturers have clearly gained tangible business benefits through a long term focus on sustainability – both through improved financial as well as increased competitiveness – even today there are manufacturers that are still considering the potential benefits of investing in sustainability programs. This report will be a roadmap for companies that are planning to implement an enterprise-wide sustainability program to drive tangible business gains.

Before we go into the details of this study, let us understand the initiatives that are rolled into a corporate sustainability agenda for a manufacturing organization (Figure 1). Note that respondents were asked to select all that apply to their sustainability programs.

Figure 1: Sustainable Production

54%

70%

72%

78%

78%

94%

0% 20% 40% 60% 80% 100%

Governance compliance and reporting

Employee Safety

Reuse and recycling

Environmental impact

Waste reduction

Energy efficiency

Percentage of Respondents, n=177

All Respondents54%

70%

72%

78%

78%

94%

0% 20% 40% 60% 80% 100%

Governance compliance and reporting

Employee Safety

Reuse and recycling

Environmental impact

Waste reduction

Energy efficiency


All Respondents

Source: Aberdeen Group, September 2009

"JSW Group is associated with Al Gore's 'The Climate Project.' We have one of the greenest steel plants and many of our manufacturing processes are inherently green. In addition, from an IT perspective, we are ensuring that all components, including the data center, are 'green.'"

~ Madhukar Rajagopal, CIO JSW Steel Ltd

Energy is the top focus selected by 94% of the responding companies. One of the reasons energy is on the top of the mind is because it directly impacts the company's bottom line. This is especially critical in an energy-intense plant where energy cost is a large percentage, often upwards of 25% of the total operational costs of the plant. In such a scenario the ability to cut even a small percentage of total energy consumption can result in significant savings for the organization.

The next initiatives that are core to an organizations sustainability agenda are related to environmental issues; waste reductions, environmental management (emissions, carbon footprint ,etc.), and recycling. Another important area of focus is safety. While employee safety is top the mind for




manufacturing executives, companies are also expanding their sustainability initiatives to holistically manage the safety of employee, process and product. An area that has been consistently growing in importance is governance. The emergence and evolution of regulatory mandates in a growing number of geographies related to the trade, reporting, and / or disclosure of emissions has compelled companies to make governance, compliance and reporting as an integral part of their sustainability strategy.

Market Pressures Aberdeen’s April 2009 research on Energy Management: Driving value in Industrial Environments revealed the top pressure driving companies to focus on energy management selected by more than 80% of respondents is to reduce cost in manufacturing operations. When we asked the same question for this study, the results of that question revealed an interesting trend.

Figure 2: Top Pressures Driving Sustainable Production

29%

38%

39%

40%

0% 10% 20% 30% 40% 50%

Customers demanding eco-friendly products

Need to impact organizations bottom linefinancials

Ensure compliance to current and futureregulations

Achieve competitive advantage in themarketplace

Percentage of Respondents, n=177All Respondents

29%

38%

39%

40%

0% 10% 20% 30% 40% 50%

Customers demanding eco-friendly products

Need to impact organizations bottom linefinancials

Ensure compliance to current and futureregulations

Achieve competitive advantage in themarketplace

Percentage of Respondents, n=177All Respondents


First, there is no one pressure that was selected by a majority of responding companies as a driver for sustainability. The top four drivers (Figure 1) highlights how sustainability can impact four different but all important stakeholders; customers, regulators, competitors and shareholders. While staying competitive and impacting bottom line financials are critical, companies are also focusing on sustainability to ensure compliance to current and future regulations and to satisfy the customer demand for eco-friendly products. The top four pressures, together, show the trend of how the focus on sustainability has changed from being a philanthropic “nice to have" initiative, to the one that is core to the success of organization. This trend is further strengthened by the fact that only 10% of the responding




"Sustainability initiatives reduce our costs and strengthen our company and brand image. Sustainability initiatives enable us to develop new products that better meet customer and societal needs and desires. Younger employees hold strong environmental values and are attracted to companies that share these values. Our sustainability strategy focuses on the Triple Bottom Line - so we have integrated our business sustainability goals with social and environmental stewardship goals. This has resonated tremendously with customers and our employees, as well."

~Chief Sustainability Officer, Large European Food and

Beverage Company

companies are focusing on sustainability in support of the "me too" mentality; I have to because my competitors are focusing on sustainability.

One of the other pressures in the list was the elevated economic uncertainty which was only selected by 9% of the total respondents. In fact, 85% of the responding companies revealed that they have either increased or had no change in their sustainability programs due to the current economic downturn (Figure 3). If nothing, the current economic scenario has forced companies to streamline their operation and make long term strategic decisions that will enable companies to be more sustainable. Companies that are still questioning if sustainability in manufacturing operations is hype or a reality should use this research as a testament to the fact that companies that have successfully implemented sustainability programs are gaining tangible business benefits as discussed in the next section.

Figure 3: Impact of the Economy on Sustainability Initiatives

4%

11%

40%

45%

0% 10% 20% 30% 40% 50%

Don’t know

Stay the same

Decrease

Increase


All Respondents4%

11%

40%

45%

0% 10% 20% 30% 40% 50%

Don’t know

Stay the same

Decrease

Increase


All Respondents


The Maturity Class Framework Aberdeen used four key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations:

• Reduction in energy consumption. Measured as the year-over-year change in energy consumption and controlled for year-over-year changes in production output and normalized by energy intensity of the production process

• Reduction in emissions. Measured as the year-over-year change in emissions and controlled for year-over-year changes in production output and normalized by energy intensity of the production process

• Overall Equipment Effectiveness (OEE). Composite metric accounting for availability, performance, and quality




• Operating margin versus corporate plan. Defined as the difference between actual operating margin and budgeted operating margin

Respondents were divided among three categories based on their aggregate performances in these five metrics. Table 1 displays the average performance of Best-in-Class, Industry Average, and Laggard organizations.

Table 1: Top Performers Earn Best-in-Class Status

Definition of Maturity Class Mean Class Performance

Best-in-Class: Top 20%

of aggregate performance scorers

30% Reduction in Emissions 24% Reduction in Energy Consumption 89% OEE 19% Operating Margin vs. Plan

Industry Average: Middle 50% of aggregate

performance scorers

5% Reduction in Emissions 7% Reduction in Energy Consumption 81% OEE 8% Operating Margin vs. Plan

Laggard: Bottom 30% of aggregate

performance scorers

1% Increase in Emissions 2% Increase in Energy Consumption 65% OEE -5% Operating Margin vs. Plan


Best-in-Class companies are able to directly impact the cost of manufacturing operations by reducing energy consumption by 24%. Best-in-Class companies have also established processes to reduce emissions by 30% from last year. These metrics not only provide a basis for measuring internal operations but also serve to ensure that manufacturing operations are optimized (89% OEE) while still satisfying the energy, environment and business needs to keep shareholders satisfied with exceeding corporate performance targets by over achieving their operating margin goal by 19%. By achieving the results above, Best-in-Class companies are truly following the sustainability definition of bringing together social, environmental, and economic goals.

The Best-in-Class PACE Model Impacting customers, shareholders, regulators and competitors through a sustainability strategy requires a combination of strategic actions, effective organizational structure, and technology that can be summarized as shown in Table 2.



Table 2: The Best-in-Class PACE Framework

Pressures Actions Capabilities Enablers Achieve competitive advantage in the marketplace

Redesign / optimize production processes to support organizations sustainability goals Provide real-time visibility into manufacturing operations

Standardized KPI established to measure the success of sustainability initiatives Executive-level leader is responsible for corporate sustainability initiatives Energy data is collected automatically and stored in a central location Role based visibility into plant emissions data

Energy management Environment, Health and, Safety (EHS) Enterprise Manufacturing Intelligence (EMI) Enterprise Asset Management (EAM) Manufacturing Operations Management (MOM) Business Intelligence (BI) Reporting Analytics Compliance management Dashboards Simulations and modeling


Best-in-Class Strategies Figure 4 shows the top strategies established by the responding companies to effectively address the pressures driving sustainability. There is a interesting correlation between the top two strategies that differentiates Best-in-Class performance.

Figure 4: Strategic Action

47%

34%

58%

30%

43%

65%

0% 10% 20% 30% 40% 50% 60% 70%

Implement performance standards forsustainability programs

Optimize processes to support sustainabilitygoals

Provide real-time visibility into operations

Percentage of Respondents, n=177All OthersBest-in-Class

47%

34%

58%

30%

43%

65%

0% 10% 20% 30% 40% 50% 60% 70%

Implement performance standards forsustainability programs

Optimize processes to support sustainabilitygoals

Provide real-time visibility into operations

Percentage of Respondents, n=177All OthersBest-in-Class


The top strategy companies are establishing is similar to the top strategy revealed in the April 2009 Energy Management: Driving Value in Industrial Environments report; optimize the current process to support sustainability goals. Sustainability programs cannot be managed independently in a siloed fashion. These initiatives need to be tightly integrated with programs such as operational excellence, Lean, and Asset Performance Management (APM) among others that manufacturing organizations establish on the plant floor. The Best-in-Class are taking into consideration information related to


http://www.aberdeen.com/summary/report/benchmark/5900-RA-energy-management-industrial.asp




energy, emissions, product, process and employee safety - while optimizing, production, maintenance, and engineering processes. A simple example of the optimization process would be taking energy cost into consideration while scheduling production or including energy as one of the factors in addition to asset condition while scheduling maintenance.

"Our goal is to improve the company's overall use of resources, resulting in lower cost of product and distribution to improve competitiveness. A side benefit is environmental stewardship which will be used in the sales and marketing process. Standard practices will be challenged, and revised thru input from a large group of employees. The ideas foster innovative solutions to improvements to the corporation as a whole. This all clearly ties to acceptance within the local community, the government, and attracts new customers."

~ Vice President, Large North American Chemical Company

The second strategy that differentiates Best-in-Class performance is enabling visibility into operations. Further drill down into what information companies are more likely to enable visibility into provided the following results (Figure 5).

Figure 5: Visibility into Manufacturing Operations

43%

51%

54%

63%

72%

83%

86%

0% 20% 40% 60% 80% 100%

Carbon Emissions

Waste water

Energy Efficiency

Compliance

Employee safety

Energy Costs

Energy Usage

All Respondents


43%

51%

54%

63%

72%

83%

86%

0% 20% 40% 60% 80% 100%

Carbon Emissions

Waste water

Energy Efficiency

Compliance

Employee safety

Energy Costs

Energy Usage

All Respondents

Percentage of Respondents, n=177 Source: Aberdeen Group, September 2009

The top two strategic actions work hand in hand. While providing visibility is a core to the top performer's sustainability strategy, the differentiation lies in how companies utilize that visibility to make decisions. Best-in-Class companies are providing their employees with visibility into the key aspects of energy, environment, safety, and compliance and using that information to optimize operations to achieve sustainability goals.

One final data point from Figure 4, worth analyzing, is that it turns out underperforming organizations are more likely than the Best-in-Class to be pursuing a strategy of implementing performance standards to measure the success of sustainability programs. At first glance this maybe counterintuitive, but it turns out that many Best-in-Class companies have already implemented such initiatives and are now at the maturity level of standardizing metrics across different plants and establishing initiatives to improve those metrics.

This also highlights the maturity of Best-in-Class organizations. The results of the survey revealed that nearly 60% of Best-in-Class companies have had a sustainability program in place for more than three years as compared to 25% of Laggards. Companies that are still in the early stages of implementing




a sustainability program should first establish performance based metrics and goals to effectively measure the Return on Investment (ROI) of such programs.

Aberdeen Insights — Strategy

In addition to the tangible operational and business benefits that companies can realize due to the successful implementation of a sustainability strategy, there are a host of intangible benefits that companies can expect as they embark on the journey towards being sustainable.

Figure 6: Positive Impact of Sustainability

75% 75% 73%

57%

43%

53%61%

67%

39%44%47%

62%

0%10%20%

30%40%50%60%

70%80%

Relations w ithexisting clients

Cost ofmanufacturing

operations

Competitiveadvantage

Relations w ithsuppliers

Perc

enta

ge o

f Res

pond

ents

, n=1

77

Best-in-Class Industry Average Laggard Source: Aberdeen Group, September 2009

The results shown in Figure 6 further reflected the example of Jones packaging in the next chapter. According to Larry Shortt, Manager, Compliance and Regulatory Affairs at Jones Packaging, “One of the biggest results from our sustainability programs is the fact that even in this recession we have been able to retain our existing customers while consistently attracting new customers because of the demand of sustainable products in our industry."

In the next chapter, we will see what the top performers are doing to achieve these gains.




Chapter Two: Benchmarking Requirements for Success

The way in which companies implement the business processes designed to successfully implement sustainability programs and support the strategic actions being taken is highly correlated to successfully responding to market pressures and the achievement of Best-in-Class performance.

Case Study — Del Monte Foods

Del Monte Foods (Del Monte) is a producer, distributor, and marketer of branded food and pet products for the US retail market, generating more than $3.6 billion in net sales in fiscal 2009. Del Monte products are found in eight out of ten US households. Del Monte markets packaged food products under the Del Monte® brand in the United States and South America.

Del Monte is currently in the early stages of establishing a formalized sustainability program, which is focused on three main areas:

• Effective resource utilization – natural gas, electricity, and water.

• Recycling of solid waste and packaging – design, selecting recycled material, and material optimization

• Social responsibility - community support, employee benefits, and safety

The major force driving Del Monte’s focus on sustainability is the changing expectation of stakeholders, where there is an increasing need for transparency / visibility into sustainability programs. According to Scott Butler, VP of Operations and Technical Services at Del Monte, “A lot of the focus around sustainability in the last six to 18 months has been to get better information more publicly available on what we have done until now, and what we plan to do in the area of sustainability. This falls under the umbrella of corporate responsibility that includes operational sustainability.”

Del Monte has established a corporate responsibility leadership team which consists of Vice President and Director level executives across functional teams to effectively execute the sustainability strategy. These groups meet frequently through meetings and conference calls, brainstorming about critical sustainability related issues. There has been a fair amount of focus on internal benchmarking and getting more robust data systems in place. Del Monte set 2007 as their base year for sustainability metrics.

continued

Fast Facts

As compared to Laggards, Best-in-Class companies are:

√ 2 times as likely to implement energy management solutions

√ 3 times as likely to implement emissions monitoring solutions

√ 2.5 times as likely to implement dashboards

√ 2 times as likely to implement reporting solutions




Case Study — Del Monte Foods

From a technology standpoint, Del Monte has invested in an Environment, Health and Safety (EH&S) solution to collect information regarding their sustainability programs on a monthly basis and comparing it to the baseline. One of the critical areas of focus for Del Monte has been setting up goals. They have been collaborating over the recent months in setting baseline criteria and are currently in the final stages of confirming sustainability goals for the next 10 years.

Del Monte’s corporate and factory engineering teams manage energy related projects. The energy projects are driven in part by the need for cost management, especially given the volatile nature of energy costs. Del Monte has also invested in solar at three different locations in US. Additionally, the environmental services group has been compliance-focused with initiatives around ensuring compliance with air and water permits, hazardous waste management etc.

Del Monte has an active Lean initiative with programs establishing synergies between the Lean and the operational sustainability group. The idea is to utilize the Lean tools and the continuous improvement culture to drive sustainability metrics. When asked about the future plans, Scott added that “we are planning to establish a plant green team so that plant floor employees have more opportunity to participate in the organization’s sustainability program.”

Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to execute daily operations); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders); (4) technology (the selection of the appropriate tools and the effective deployment of those tools); and (5) performance management (the ability of the organization to measure its results to improve its business). These characteristics (identified in Table 3) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics.



Table 3: The Competitive Framework

Best-in-Class Average Laggards Enterprise-wide framework established providing a clear understanding of organizations sustainability programs Process

50% 41% 27%

Established high level executive role solely responsible for driving sustainability initiatives across the enterprise

55% 35% 32%

Roles and responsibilities established with in departments to successfully execute sustainability initiatives

Organization

65% 51% 26%

Energy data is collected automatically and stored in a central location

52% 41% 32%

Role based visibility into plant emissions data Knowledge

43% 28% 21%

Technology adoption:

Technology

40% Enterprise Asset Management (EAM) 38% Enterprise Manufacturing Intelligence (EMI) 45% Business Intelligence 57% Supply Chain Management



Standardized KPIs are established to measure the success of sustainability initiatives

57% 48% 33%

Operational metrics are linked to financial metrics Performance

52% 47% 29%


Capabilities and Enablers As shown in Figure 1, there are different programs that roll into a sustainability initiative of any manufacturing organization. These initiatives include, but are not limited to, energy, environment, safety, governance and compliance. To achieve tangible business benefits, manufacturing organizations need to ensure that all the programs are managed holistically at a corporate level with business process established at the plant level to optimize processes and enable visibility into critical areas of plant operations. Based on the findings of the Competitive Framework and



interviews with executives, Aberdeen’s analysis reveals that Best-in-Class companies significantly differ in how they execute the top two strategic actions across a broad range of business capabilities and technology enablers.

Process "We have extensive plans and some of them are laid out in our first sustainability report. In general, we have been reporting emissions from our main US factory for years and are always trying to reduce our greenhouse gas emissions as well as to ensure the safety of the environment through the use of our products. Our products are used in animal agriculture and, when used properly, they reduce the environmental load generated by the animal livestock industry. We are a global company and make an effort to minimize transportation miles by combining loads and optimizing delivery routes. Board-level support for the ROI is required for major capital initiatives.”

~ Director, Mid-sized North American Agricultural Input

Provider

The results of the survey revealed that 30% of the survey respondents are challenged with defining the scope of sustainability programs. Best-in-Class companies are addressing this challenge – they are two-times more likely than Laggards to establish an enterprise-wide framework that provides a clear understanding of the organizations sustainability programs (Table 3).

Figure 7: Enterprise-wide Sustainability Framework

82%

57%

29%

81%

57%

27%

59%

39%

22%

0%10%20%30%40%50%60%70%80%90%

Standardized processesto monitor safety across

the enterprise

Standardized processesto monitor energy across

the enterprise

Process established tobenchmark emission level

w ith goals

Perc

enta

ge o

f Res

pond

ents

, n=1

77


Best-in-Class companies are establishing standardized business processes across three major initiatives - energy, environment, and safety. Establishing such a standardized process will ensure that employees have a clear understanding of the processes established and how those processes are connected to the success of corporate sustainability programs.

First, Best-in-Class companies are more likely to standardize monitoring of safety issues across plants. The adoption level of this capability is much higher than the other two capabilities listed in Figure 7 because of the impact of safety incidents. These incidents can result to an injury or sometimes even death depending on the severity of the accident. Best-in-Class companies are ensuring that such issues are closely monitored and recorded to ensure a safe environment for employees in the plant.

“We've trained employees on our sustainability goals and solicited their input on potential projects. We have also formed special committees to execute some of the initiatives, and posted our goals on plant bulletin boards.”

~ Director, Mid-size Chemical Company

Secondly, Best-in-Class companies are also more likely than Laggards to standardize processes to monitor energy across the enterprise. This aligns very well to one of the top Best-in-Class strategies of enabling visibility into operations. The Best-in-Class are able to understand which energy data to collect, where to collect from, how frequently to collect that data and how




to use all the data together to make effective decisions. This is one of the critical capabilities enabling Best-in-Class companies to reduce energy consumption by 30%.

Finally, Best-in-Class companies are setting up goals for greenhouse gas emissions and establishing processes to ensure that emissions levels are consistently benchmarked against those goals and industry standards. While the adoption level of this capability across the three categories is low, further analysis revealed that 43% of the total survey respondents have plans to implement such a capability in the next 12 to 24 months. For Industry Average and Laggard companies this is a good opportunity to get ahead of the curve and ensure that such processes are established to monitor and control emissions.

Organization An effective organization structure is a key to the success of any sustainability initiative. To enable real change in the culture, an organization needs to have a long term vision of energy, environment, and social stewardship and should appoint an executive to effectively execute the vision. Best-in-Class companies are 70% as likely as Laggards to have established high level executive role that is solely responsible for driving sustainability initiatives across the enterprise.

Figure 8: Sustainability Initiative Decision Makers'

32%

8%

48%

49%

22%

26%

26%

65%

0% 10% 20% 30% 40% 50% 60% 70%

Steering Committee

CSO (Chief Sustainability Officer)

VP of Operations / Supply Chain

C level executive (CEO, COO, CTO, CFO etc)


All OthersBest-in-Class

32%

8%

48%

49%

22%

26%

26%

65%

0% 10% 20% 30% 40% 50% 60% 70%

Steering Committee

CSO (Chief Sustainability Officer)

VP of Operations / Supply Chain

C level executive (CEO, COO, CTO, CFO etc)


All OthersBest-in-Class


This trend is further exemplified by the fact that Best-in-Class companies are more likely to have a C-level executive driving their vision of sustainable production. In fact, the Best-in-Class are three-times as likely as other companies to establish a role of Chief Sustainability Officer (CSO) that is solely responsible for the success of sustainability programs.

Another area that differentiates top performance highlights how Best-in-Class companies are able to bring the sustainability culture to the plant floor. For any manufacturing organization to realize long term business benefits, it is critical to get the buy-in from the employees on the plant




floor. Best-in-Class companies are more than two-times as likely as Laggards to establish roles and responsibilities with in departments to successfully execute sustainability initiatives. Best-in-Class companies are empowering their employees and giving them decision making authority to establish programs that will positively impact their long term sustainability goals.

Knowledge and Performance Management "We have established cross-functional team across multiple plants to ensure best practices are shared and implemented. We track energy usage by asset. Our focus is to create a culture of energy and sustainability."

~ Maintenance Manager, Food & Beverage Company

To reduce energy consumption, emissions, and safety issues in manufacturing operations, the first step is provide visibility into this information. Best-in-Class companies are 60% more likely than Laggards to automatically collect energy data and store it in a central location. While a lot of companies track utility bills, most of the companies do it in an error prone fashion and with a manual process. The Best-in-Class are not only more likely to collect that information automatically, but they are four-times as likely to provide real-time visibility into energy data to executives and more than two-times as likely as Laggards to make both real-time data and historical data easily accessible to decision makers.

Figure 9: Enabling Visibility into Sustainability Initiatives

73%

48% 43% 41%41%46%

28%22%

34%

18% 21%9%

0%10%20%30%40%50%60%70%80%

Adverse eventsare monitored in

real time

Real-time andhistorical energy

data easilyaccessible

Role based visibilityinto plant emissions

data

Executives havereal-time visibility

into data

Per

cent

age

of R

espo

nden

ts, n

=177

Best-in-Class Industry Average Laggard

73%

48% 43% 41%41%46%

28%22%

34%

18% 21%9%

0%10%20%30%40%50%60%70%80%

Adverse eventsare monitored in

real time

Real-time andhistorical energy

data easilyaccessible

Role based visibilityinto plant emissions

data

Executives havereal-time visibility

into data

Per

cent

age

of R

espo

nden

ts, n

=177


Best-in-Class companies are extending these capabilities to enable visibility into emissions. Best-in-Class companies are two-times more likely to provide role based visibility into emissions data. This capability is going to become more critical as future regulations come into effect, making the need for reporting and compliance absolutely critical for manufacturing plants to stay in business.

Another capability that differentiates Best-in-Class performance is their ability to monitor adverse events. These events can be related to employee safety issues, equipment downtime, environmental (waste, emissions etc.), compliance, among others. Seventy-three percent (73%) of Best-in-Class companies are able to monitor these events and escalate the information about the events in real time to appropriate decision makers as compared




to just 34% of Laggard organizations. Providing knowledge about the important events on the plant floor fosters a culture of cooperation and collaboration among cross functional teams and enables timely decisions, a foundation to any successful sustainability strategy.

Tightly coupled with how Best-in-Class organizations manage knowledge is how they manage performance. Best-in-Class companies are addressing the top challenge of measuring the ROI of sustainability by establishing standardized KPIs across plants. Large multinationals, especially with manufacturing operations across the world, have challenges to make sure that performance in all plants is measured in the same way so that the best business decisions can be made for the organization. When executives have the same understanding of how operations are performing in each location, they can take steps to address any shortcomings and ensure that Laggard plants improve performance to meet corporate goals. Finally, the Best-in-Class are better focused on bringing operational metrics and information to the executive level through real-time visibility, which puts these organizations in a good position to compare performance across a portfolio of plants.

Technology ”As part of our strategic plan, we decided to roll out one solution to all of our 52 manufacturing locations to combine product formulation, manufacturing and business systems. With one standard system, we expect to be able to provide much better customer service knowing we have full visibility into our financials and operations.”

~ Jeff Kadlec, Head of Information Technology,

Ridley Inc.

Investment in technology to gain access to critical information on the plant floor is one of the major differentiators for Best-in-Class performance. Best-in-Class companies are more likely to invest in enterprise wide solutions to ensure that information is collected in a central location and decisions are made from a single source of truth.

Aberdeen's prior research in manufacturing has consistently shown Best-in-Class performance has been differentiated by the adoption of Enterprise Asset Management (EAM), Enterprise Manufacturing Intelligence (EMI), Supply Chain Management (SCM), and Business Intelligence (BI) solutions. This current research in sustainable production revealed that the Best-in-Class are not only utilizing these solutions to manage information related to assets, production, suppliers and financials, but are utilizing these solutions to automate the knowledge management and performance management capabilities shown in Table 3. Utilizing these solutions for managing sustainability programs enables the Best-in-Class to effectively execute the top strategic action; optimizing manufacturing processes (maintenance, production, etc.) to support the organizations sustainability goals.




Figure 10: Technology Enablers

9%

20%

17%

23%

16%

26%

13%

28%

22%

29%

29%

38%

29%

35%

39%

40%

43%

52%

0% 10% 20% 30% 40% 50% 60%

Emissions Monitoring

ComplianceManagement

Energy Management

Analytics

Dashboards

Reporting


LaggardIndustry AverageBest-in-Class

9%

20%

17%

23%

16%

26%

13%

28%

22%

29%

29%

38%

29%

35%

39%

40%

43%

52%

0% 10% 20% 30% 40% 50% 60%

Emissions Monitoring

ComplianceManagement

Energy Management

Analytics

Dashboards

Reporting


LaggardIndustry AverageBest-in-Class


In addition to the technology adoption rates shown in Table 3, Best-in-Class performance is differentiated by the investments in the enablers highlighted in Figure 8. Sustainability reporting is top of mind for executives across different industries and Best-in-Class companies are ensuring the accuracy and timeliness of information by being two-times more likely than Laggards to invest in reporting solutions.

Further, Best-in-Class companies are also more likely to enable visibility, foster collaboration across functional groups, and consistently measure performance across various sustainability initiatives by investing in dashboards and analytics. These enablers ensure that information is provided at the right time, in the right form in front of the right decision makers to enable smarter decisions. Finally, the Best-in-Class are investing in automating energy, emissions and compliance management.

The overall adoption rate of all the technologies mentioned is not high even for Best-in-Class companies, even though they are more likely to invest in technology than others. However a big percentage of companies have plans to invest in these solutions in the near future to enable visibility into their sustainability initiatives. This only highlights the maturity of the overall industry around sustainable production. Companies should invest in these solutions to efficiently manage massive amounts of complex data related to energy, environment, safety, and compliance and provide employees and executives with the ability to make connections between day-to-day tactical operations and the strategic business goals.




Aberdeen Insights — Straight from the Corner Office

While the analysis in Chapter One and Chapter Two highlight trends around sustainable production, it is important to understand the expectation of C-level executives from sustainability programs. Through this research, Aberdeen reached out to the C suite (CEO, CIO, CFO and CSO) of 33 companies to understand their expectations from their organizations sustainability programs. The results uncovered two interesting trends.

The first trend is around the primary driver for focusing on sustainability. While we did not see a dominant market pressure in Chapter One, 55% of C-level executives are found to be focusing on sustainability to impact the organizations bottom line financials. So if you are responsible for sustainability programs in your organization, it is going to be absolutely necessary to establish a compelling business case of investing in any initiatives around sustainability. This is where the performance management capabilities discussed in Table 3 becomes critical, as it helps companies to correlate initiatives on the plant floor to direct bottom line benefits.

When asked about the change in the investment in sustainability programs in the future, 45% of the C-level executives indicated that they are increasing budgets to support the overall sustainability program and 24% reveled that the budgets are remaining the same. So while the financial investment from the C-suite around sustainability is not likely to decrease, it is very critical for sustainability managers to present a business case to get access to budget (especially considering many companies are in an environment where many projects are competing for budget dollars), which coincidentally is the top challenge companies face around sustainability programs.



Chapter Three: Required Actions

Fast Facts

Best-in-Class companies are:

√ 2-times as likely as Laggards to establish roles and responsibilities with in departments to successfully execute sustainability initiatives

√ 3-times more likely than Laggards to establish a role of Chief Sustainability Officer (CSO)

√ 2-times as likely as Laggards to provide role based visibility into emissions data

√ 4-times more likely than Laggards to provide executives with real time visibility into energy data

Whether a company is trying to move its sustainability performance from Laggard to Industry Average, or Industry Average to Best-in-Class, all maturity classes stand to benefit from enhanced focus on performance management. Results show that the following actions will help spur the necessary performance improvements:

Laggard Steps to Success • Establish a formalized sustainability program. Depending on

the industry your organization operates in, there might be issues that are more relevant to you than others. For example, environmental management and safety are critical for oil and gas companies, while energy management is a top focus for the cement industry, and managing waste is critical for some companies in the food and beverage industry. Executives need to thoroughly understand these key issues and establish a formalized sustainability agenda with initiatives planned around each of these critical areas.

• Establish executive leadership. The vision of sustainability needs to be developed at the top level. It is extremely difficult to implement changes in strategy, processes, and collaboration without the buy-in and support of true budget and authority holders. Best-in-Class companies are 70% as likely as Laggards to have established high level executive role solely responsible for driving sustainability initiatives across the enterprise.

• Begin automating data collection and use it as the basis of data driven decision making. Automated data collection is the basis for creating the real-time enterprise and significantly differentiates top performers. Invest in dashboards and analytics to ensure that the data is presented to relevant decision makers in the right form. The set of data collected should include both energy and emissions data, which are often left out of production and maintenance optimization calculations.

Industry Average Steps to Success • Establish metrics to measure the success of sustainability

programs. Establishing standardized KPIs is critical to ensure that performance in all plants is measured in the same way so that the best business decisions can be made for the organization. It will be very difficult for Industry Average companies to get access to sustainability budget if the performance of prior projects is not known. Over 67% of Industry Average companies have not established metrics to quantify the benefits of sustainability programs. The results are clear: Industry Average organizations must begin to gain visibility into and track the key performance




metrics that impact the most important aspects of their sustainability agenda.

"We have established a corporate energy team which links facilities engineering staffs, our corporate engineering group and our EHS staffs to work together to find ways to minimize energy use. We currently have pilot testing projects at specific sites to determine if we want to utilize a new technology across our global facilities."

~ Manager, Manufacturing Operations, Large Consumer

Packaged Goods Company

• Provide role based visibility. From a strategic perspective, visibility is critical for many higher level strategic actions and business capabilities that often presuppose visibility into operations. Industry Average companies are falling behind in providing role based visibility. For example, Industry Average companies are 55% less likely than Best-in-Class companies to provide role based visibility into emissions data. Proving visibility to decision makers will ensure that decisions are made intelligently and at the right time to prevent any adverse event that can result in a catastrophic failure.

• Invest in automation. The Best-in-Class have benefited from the early adoption of automation to support reporting and data management capabilities. But even today, the adoption level of sustainability solutions has been considerably low across the three performance categories. Industry Average companies should take advantage of this trend and invest in technology to automate a variety of business processes that are critical for the success of their sustainability initiatives. Special attention should be paid to investing in solutions that support reporting, compliance management, energy management and environmental management.

Best-in-Class Steps to Success • Focus on managing emissions. As mentioned throughout the

analysis in this report, the adoption rate of several of the capabilities discussed has been very low, especially around emissions management. Only 29% of Best-in-Class companies have established processes to benchmark emissions against goals and standards and similarly only 29% of Best-in-Class companies have invested in automating emissions monitoring capabilities. Best-in-Class companies need to increase the focus on managing emissions to gain deeper insight into the impact on regulatory, trading, and reputation-related purposes. Investing in emissions monitoring solutions will enable Best-in-Class companies to benefit from greater support, visibility and analytic capabilities related to the environmental impact of their manufacturing operations.

• Invest in enterprise-wide solutions. While investing in technology, Best-in-Class companies should focus on enterprise wide implementation rather creating islands of separate data sets through plant level implementation. Investing in Enterprise Asset Management (EAM), Enterprise Manufacturing Intelligence (EMI), Supply Chain Management (SCM) and Business Intelligence (BI) solutions to support sustainability goals will ensure that Best-in-Class companies are considering critical information about energy and the environment while optimizing production, maintenance, and maintenance processes.




Aberdeen Insights — Summary

Sustainability as a term has different meanings depending on the industry, geography, company size or even specific organization. However this research in Sustainable Production showed that for any manufacturing organization, sustainability programs should be developed with a focus on three major initiatives; energy, environment and safety. A successful sustainability strategy requires organizations to change and innovate in fundamental ways that support issues encompassing the business, the environment, and society. While the initial focus on sustainability was primarily philanthropic, Aberdeen research has repeatedly shown that a well-implemented and managed sustainability strategy strengthens a business ecosystem on multiple and concretely demonstrable levels.

Best-in-Class manufacturing organizations have differentiated themselves by establishing a formalized sustainability agenda, providing long term vision through executive leadership, and investing in technology to manage knowledge and performance in real time. This has enabled the top performers to reduce emissions by 30%, energy consumption by 24%, realize 89% overall equipment effectiveness and surpass operating margin goals by 29%. The key here is to be socially responsible while improving the effectiveness of manufacturing operations and achieving business objectives. Non Best-in-Class companies should look into the recommendations of this research to guide a long term sustainability strategy.



Appendix A: Research Methodology

Between August and September 2009, Aberdeen examined the use, the experiences, and the intentions of more than 230 enterprises with and without sustainable production initiatives in a diverse set of enterprises.

Study Focus

Responding executives completed an online survey that included questions designed to determine the following:

√ The maturity of sustainability initiatives and the performance improvement garnered from such initiatives

√ The structure and effectiveness of existing sustainability initiatives

√ Current and planned use of technology to effectively manage energy

The study aimed to identify emerging best practices in sustainable production initiatives, and to provide a framework by which readers could assess their own management capabilities.

Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on energy management strategies, experiences, and results.

Responding enterprises included the following:

• Job title: The research sample included respondents with the following job titles: senior management (CxO and President) (17%); Vice-President (11%); Director (23%); Manager (23%); Staff (7%); consultants (13%); and other (6%).

• Industry: The research sample included respondents from the following industries: Food and beverage (17%); high technology (16%); automotive (12%); consumer packaged goods (10%); industrial equipment mfg (9%); pharmaceutical manufacturing (8%); and metal and metal products (7%).

• Geography: The majority of respondents (61%) were from North America. Remaining respondents were from the Asia-Pacific region (14%) and Europe (19%).

• Company size: Thirty-five percent (35%) of respondents were from large enterprises (annual revenues above US $1 billion); 25% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 40% of respondents were from small businesses (annual revenues of $50 million or less).

• Headcount: Forty-eight percent (48%) of respondents were from large enterprises (headcount greater than 1,000 employees); 27% were from midsize enterprises (headcount between 100 and 999 employees); and 25% of respondents were from small businesses (headcount between 1 and 99 employees).




Table 4: The PACE Framework Key

Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)


Table 5: The Competitive Framework Key

Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance: Best-in-Class (20%) — Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) — Practices that represent the average or norm, and result in average industry performance. Laggards (30%) — Practices that are significantly behind the average of the industry, and result in below average performance.

In the following categories: Process — What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization — How is your company currently organized to manage and optimize this particular process? Knowledge — What visibility do you have into key data and intelligence required to manage this process? Technology — What level of automation have you used to support this process? How is this automation integrated and aligned? Performance — What do you measure? How frequently? What’s your actual performance?


Table 6: The Relationship Between PACE and the Competitive Framework

PACE and the Competitive Framework – How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.





Appendix B: Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report includes:

• Energy Management: Driving Value in Industrial Environment; April, 2009

• A Platform Approach to Manufacturing Operations Management; March 2009

• Managing Risks in Asset Intensive Operations; March 2009

• Sustainability Matters: The Corporate Executives Strategic Agenda; March 2009

• Manufacturing Operations Management: The Next Generation of Manufacturing System; January 2008

• Event Driven Manufacturing Intelligence: Creating Closed Loop Performance Management; May 2008

• Global Manufacturing Operations Management; August 2008

• Building a Green Supply Chain: Social Responsibility for Fun and Profit; March 2008

Information on these and any other Aberdeen publications can be found at www.aberdeen.com.

Authors: Mehul Shah, Research Analyst, Manufacturing Operations and Industrial Automation ([email protected]); Matthew Littlefield, Sr. Research Analyst, Manufacturing Operations and Industrial Automation ([email protected]); Nuris Ismail, Research Associate, Manufacturing Operations and Industrial Automation ([email protected])

Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500.

As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte-Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com.

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (071309b)


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