Environmental Strategies
Chapter 4
Overview
• Business Relevance of Environment
• Types of Environmental Issues Facing Service
Companies
• Role of the Service company in Environmental
Issue Mitigation
• Environmental Impacts of a Service Company
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Services and the environment are two
separate issues
• Environmental impacts of Service
Companies
– Companies that offer environmental services
• Waste disposal, cleaning services, environmental
lawyers and consultants
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Financial Performance
Environmental
Management
ROI,
ROE, ROA,
EPS, etc.
• Many companies
measure against
the triple bottom line
as developed by
John Elkington
– Financial,
environmental and
social performance
“The Triple
Bottom Line”
Minority % of workforce,
family-friendly policies, living
wage for international labor
Social Performance
Chapter 4 - Environmental Strategies
Hazardous chemical
emissions, energy use, solid
waste recycled
Environmental Performance
3
Environmental Management
• Research has demonstrated the link between
financial success and the ability to manage
the environment
• Financial implications of poor environmental
management
–
–
–
–
State and Federal fines
Cost of litigation
Cost of environmental clean-up
Damage to the company brand
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Environmental Management
• Financial implications of high-performance
environmental management
–
–
–
–
–
Cost Reductions
Improved quality and yield
Improved relationships with regulators
Reduced insurance costs
Enhanced company brands
• Examples include Home Depot and UPS
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Environmental Management
• There is a positive correlation between
environmental events and stock market
performance
– Positive environmental events = higher share price
• Examples include Alcan Aluminum whose share price
increased 80% faster than the DJIA after receiving a
prestigious environmental award
– Negative environmental events = lower share price
• Examples include Tyson Foods who lost 8% of market
capitalization when a subsidiary was fined for illegal
dumping
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• Service Process
matrix
Low
Degree of Labor Intensity
Service Shop
Traditional:
Hospitals and auto repair
Environmental:
Solid waste management and
facilities management
Environmental:
Hospital environmental
services and hazardous waste
management
Mass Service
High
– Environmental
Services
Service Factory
Traditional:
Airlines and hotels
Professional Service
Traditional:
Retailing and schools
Traditional:
Lawyers and doctors
Environmental:
Environmental standards
organizations like Southface or
ISO 14000
Environmental:
Environmental consultants,
architects, and auditors
Low
High
Degree of Interaction and Customization
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• Service Process
matrix
Low
Degree of Labor Intensity
Service Shop
Airlines:
Solid waste from cabin service,
“blue water,” fuel use, engine
emissions, hazardous
chemicals from aircraft
maintenance
Hospitals:
Solid waste from rooms,
biohazards, energy use from
lighting and climate control,
water use from laundry,
cleaning chemicals
Hotels:
Solid waste from restaurant
and room operations, energy
use from lighting and climate
control, water use from laundry
Auto Repair Shops:
Hazardous chemicals to clean
parts, waste oil, solid waste of
replaced parts, hazardous
chemical-soaked rags
Mass Service
High
– Environmental
Issues for Service
Companies
Service Factory
Professional Service
Retailing Operations:
Fuel and emissions from
product distribution, urban
sprawl from location decisions,
solid waste from packaging
Consultants:
Fuel and emissions from
travel, paper use, carbon
dioxide emitted during client
meetings
Schools:
Energy use from lighting and
climate control, food waste,
hazardous cleaning products,
paper use from copies and
printing
Dentists:
Biohazard waste, toner
cartridges, paper, and other
office waste
Low
High
Degree of Interaction and Customization
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Services and Their Environmental Impacts
• Professional services - doctors, lawyers,
consultants, etc.
– Medical waste, paper, toner
• Service shops - hospitals, hotels, auto repair,
etc.
– Infectious waste, laundry soap, used motor oil
• Service factories - UPS, Royal Caribbean,
Delta, etc.
– Fleet maintenance, fuel, waste water
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Environmental Strategies for Service
Operations
• Process Opportunities
– Process Improvement
• Total Quality Environmental Management (TQEM), Six
Sigma
• Process Certification
– ISO 14000, CERES Principles, Codes of Conduct
• E-commerce
– Migrate paper based processes, process automation, reverse
logistics
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Environmental Strategies for Service
Operations
• Product Opportunities
– Product redesign
• Design for the Environment (DFE), lifecycle analysis
– Value added services
• Include value added services along environmental
dimensions
– Dematerialize
• Vertical or horizontal integration effectively eliminates
the supplier’s incentive to sell additional hazardous
material
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Summary
• Advanced economies have migrated from a
manufacturing to a service environment
– Understanding environmental issues is critical
– Services impact the environment directly, hence,
mitigation of environmental risk can result in
significant gains
– Service companies can mitigate risk by
improving both the process and the product
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Chemical Management at Delta Air Lines
• Prior to 1994, Delta utilized centralized
purchasing for the decentralized use of
hazardous chemicals
– In 1994, Delta was fined $1 million by the
Georgia EPA alleging that Delta’s chemical
management system was inadequate
• Delta began to develop an integrated chemical
management system based on three main goals
– (1) Manage the chemical process more effectively, (2)
Capture all required data concerning use and disposal and
(3) Perform these functions at an overall lower cost to the
company.
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Chemical Management at Delta Air Lines
• A Delta employee along with a former
Delta supplier form Interface LLC
– 1995 agreement with Delta stated that
Interface LLC would act as the gatekeeper
between chemical suppliers and Delta
• Would honor all purchaser orders, freed up 30,000
feet of warehouse space at Delta, minimized Delta’s
supplier base
• Agreed to deliver routine orders in three hours and
expedited orders in two hours (Opened a facility 1.5
miles from Delta)
• Agreed to a 95% fill rate
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Chemical Management at Delta Air Lines
• Benefits of using Interface LLC
– Streamlined MSDS management
– Now tracked chemicals throughout the operation
– Interface negotiated with chemical suppliers and
manufacturers
– Extended scope by including safety equipment
– Contract specified joint cost savings
• Incents Interface LLC to find innovative ways for Delta
to save money
– Provided Interface LLC the ability to demonstrate
the success of the model to other customers
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