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Published in Spring 2006
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Greening the supply chain: small business, big environmental gains
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By Tara FitzGerald
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Can a company simultaneously become more eco-efficient and more competitive, or does caring for the environment come at the cost of productivity? These were just some of the questions that went through the heads of Mexican suppliers several months ago when they were invited to participate in a project aimed at “greening the supply chain.”
“We were given information about the project and, to be honest, at first we felt an obligation from our client to participate, i.e., ‘you join this or we don’t buy from you,’” says Raul Luna, a director of pharma-chemicals supplier Pharm Yeast de México and a participant at a February session of the project’s working group in Mexico City. “But later we said, if they are going to bring us here anyway we might as well take advantage and learn while we are here.”
Greening the supply chain: project profile
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Goal – Support larger companies in influencing and mentoring their supply chain companies to improve business and environmental performance.
Objectives – Pollution prevention, improved on-site chemicals management, implementation of waste exchange schemes, adoption of best practices, reducing the use of toxic and/or non-renewable materials, enhancing energy efficiency, and promoting consistent work practices and procedures to reduce environmental impacts.
Partners – Bristol-Myers Squibb, Colgate-Palmolive, Janssen-Cilag and Clarion
SMEs – 28 small and medium-size businesses in the Mexico City area stand to reap business and environmental benefits including: lower transaction costs, enhanced market agility, decreased product obsolescence, reduction of inventory, improved business relationships, and improved management of environmental risks.
Method – With a “learning by doing” approach, the project aims to develop capacities in supplier companies to identify, evaluate and develop competitiveness and eco-efficiency projects on their own. This is reached applying two elements: training and practice in developing projects in which technical and financial assistance is provided.
Results – Measured in terms of economic,
raw material, water and energy savings, as well as emissions reductions. It is expected that large companies will assimilate the model into their own operations and that suppliers will continue to work together, taking advantage of a team approach.
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“And the big surprise was… it was worth it!” Luna adds.
This pilot project was launched in October 2005 with the participation of such major multinationals as Colgate-Palmolive, Janssen-Cilag, Bristol-Myers Squibb and Clarion, under the sponsorship of the CEC and the Iniciativa GEMI de México.
Each of the multinationals involved went through a process of identifying a group of small and medium-size suppliers (up to 500 employees) with whom they believed they could work to achieve economic and environmental efficiencies. Through training and technical and financial assistance, the project—now at its halfway stage—aims to help small and medium-size suppliers to improve both their competitiveness and their environmental performance through reducing operating costs in a sustained and long-term manner.
At the working group session in Mexico City, enthusiastic suppliers were eager to share their success stories and explain their ideas for eco-efficiency. Many suppliers present at the meeting say the pilot project had opened their eyes to possibilities and changes they had never contemplated before. It gave them the chance to see what was possible and also showed them that being environmentally conscious does not need to damage productivity and competitiveness. In fact, it was quite the opposite.
Pharm Yeast is one such success story.
The Mexico City-based firm is part of the pharma-chemicals industry, producing yeast for pharmaceutical applications and hydrolyzed chemicals for the livestock industry. It was founded in 1965 and has just 60 employees and three production plants. One of their main clients is Bristol-Myers Squibb.
“We are a small company, in fact we could almost qualify as a family business,” says company director Luna.
“The training course gave us a lot of interesting information and we also found articles from US universities on the Internet about eco-efficiency,” he explains. “Then, thanks to systematic analysis that the project backers helped us with, we came up with our idea.”
The project undertaken by Pharm Yeast was a re-design of the interior of their condenser to reduce the generation of waste oils in the trapdoor being caused by the high velocity of passing vapors.
“The analysis allowed us to identify areas where we could start work. Sometimes these things are right in front of you and you just need help to see them,” says Luna.
The re-design they came up with increased the area of heat transference and reduced the velocity of the vapors, thereby cutting down oil wastage. In his presentation to the working group, Luna says the project’s implementation cost totaled US$45,477, and with savings per month of US$4,040 this cost would be recovered in just over five months. In addition to this economic benefit, the company is producing less waste and thus reducing the burden on the environment.
Luna also listed some further benefits to come out of the re-design: an increase in the quality of their final product (from 96 percent purity to 99 percent), an increase in the quality of their sub-product (from 72 percent to 99 percent purity), a renegotiation of their current contract, and the chance to secure a contract to produce new products. He estimates total savings per year will reach US$104,790.
“We have done all the work ourselves and it is going very well so far. On the one side we have lower costs and on the other we have boosted productivity,” says Luna. “We are now analyzing what to do next. We would like to finish this and maybe patent it, as commercially
it could also be very useful.”
The pilot project’s main aim is for supplier companies to develop projects that display competitiveness and prevent pollution in their production processes. The training and development stage lasts about four months, and after that it depends on the individual
company and the projects they want to put in place.
The project does not require that companies comply with certain norms, but rather that they identify opportunities to improve productivity from an environmentally-conscious standpoint.
“I am very satisfied with the work that has developed so far, and I feel that we are on our way now. It is also worth noting that practically all of these projects allow the participating companies to qualify for Industria Limpia [Clean Industry] certification, or at least give them the tools to be able to do so afterwards,” says Hernando Guerrero, director of the CEC’s Mexican office.
“This is exactly what we were aiming to do—create this capacity within the companies themselves,” Guerrero adds. “Above all, such projects are creating a climate, an attitude from the top down throughout companies of an awareness of environmental concerns.”
Once a supplier establishes a commitment with one of the client companies to take part in the project, they then have to name one or more employees to take on responsibility for identifying and developing environmentally competitive changes within the company. There is no monetary charge, but the supplier company must be prepared to allow employees time off to attend training and take part in online courses. Supplier companies are also offered technical and financial assistance to get their projects off the ground if necessary.
Benefits for suppliers include: cost reductions, increased productivity, and a more environmentally friendly image. Potential benefits for “client’ firms include: a more competitive supply chain, reduced costs passed on, better communication with suppliers.
“Mexico is a country made up of small companies.
Over 90 percent of all enterprises have fewer than 250 employees... We have created a project with huge potential for growth,” says Alejandro Sosa of Iniciativa GEMI.
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