Sustainability and the Supply Chain
Bringing together MBA students and industry partners, Krannert’s Global Supply Chain Management Initiative (GSCMI) spring conference focused on energy use across the supply chain and approaches to measure, reduce and change energy sources to enhance sustainable manufacturing.
The tone was set by keynote speaker Pete Walters, vice president of purchasing and distribution at Saint-Gobain Containers, who urged procurement managers to take the lead in making sustainability a focus for the supply chain while simultaneously lowering overall costs.
Using a fictitious study based on the challenges faced by Saint- Gobain, student teams in the MBA case competition were equally passionate about the topic, while other speakers echoed the need to use a broader brush to understand the implications and drivers of supply-chain sustainability.
In addition to speakers and the case competition, Net Impact members screened the movie “Garbage Dreams” for a lively audience of students, faculty members, and conference attendees.
Set in Cairo, Egypt, the documentary focuses on a century-old garbage collecting community that has a recycling rate of more than 80 percent, and its friction with the city, which is moving to automated garbage-picking trucks with single-stream collection and a recycling rate of only 20 percent.
For more information on the conference and future GSCMI events, visit www.krannert.purdue.edu/centers/dcmme_gscmi.
At the southeast corner of Purdue’s West Lafayette campus, a green pasture in front of the University’s largest power station serves as a safe playground for horses receiving treatment at the adjacent School of Veterinary Medicine.
A thousand miles farther south along the Gulf Coast, another dichotomy takes focus as the worst oil spill in U.S. history continues its devastating impact on a much larger ecosystem, economy and culture.
Somewhere in between is sustainability.
Sustainability is an inherently slippery concept. And if reaching consensus on its meaning weren’t tricky enough, making it work can be an even greater challenge.
Although officially defined by the United Nations in 1987 as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs,” the debate over sustainability’s greater connotations and goals continues.
The subsequent 2005 U.N. declaration that sustainability efforts should also address the world’s overlapping “three pillars” of environmental, social and economic demands clarified the semantics for many, but muddied the waters for others.
Among the best companies and organizations, it became a cause beyond a simple mission statement, but for some, only a buzzword and marketing ploy.
When BP’s Deepwater Horizon offshore oil-drilling rig in the Gulf of Mexico exploded in April near the Louisiana coast, the waters became even muddier, both literally and figuratively, filled with untold destruction to the ecological, cultural and financial foundation of a region still recovering from the devastation left by Hurricane Katrina.
Krannert economics professor David Hummels says such events often become conflicts between competing interests.
“There is a kind of business ecosystem in the same way that there is a biological ecosystem,” explains Hummels. “The BP spill isn’t just bad for corporations engaged in oil extraction — it’s killing fishing and tourism in the Gulf, too, and that bleeds over into housing and all the little subsidiary industries that feed into one another.
“Put another way, the inexorably spreading oil slick is not just the obvious manifestation of environmental damage, but also a useful metaphor for the effect on a regional economy.”
As the dark tide of fallout from the spill keeps washing ashore, however, so does a fresh current of hope from current and future business leaders who see no competing interests. Net Impact, a student group committed to the concept of a “triple bottom line,” embodies the movement at Krannert.
“It’s not only about profits, but also about the impact you’re making on the environment and the impact you’re making on the people who inhabit that environment,” says former co-president Stephanie Williams (MBA ’10). “We believe that it’s possible for business to create value while still functioning in an environmentally and socially responsible fashion.”
Founded by Krannert master’s students in 2005, the Purdue chapter of Net Impact devoted many of its initial efforts to building awareness of sustainability by hosting speakers and contributing to smaller initiatives across campus, including the University’s now-annual “Green Week.”
The organization continued to grow during the 2008-09 academic year. It contributed to the Purdue Sustainability Council’s ongoing effort to incorporate carbon-neutral, biomass-based alternative fuel sources into the production regimen at Wade Utility Plant, which provides about 60 percent of the University’s electricity needs.
The plant, a combined heat and power facility, houses the state’s only clean-coal technology boiler with circulating fluidized bed (CFB) combustion technology, says Robin Ridgway, Purdue’s director of sustainability and environmental stewardship. Known as Boiler No. 5, it uses Indiana-mined coal with very low emissions relative to more conventional boilers.
“The CFB boiler is also very fuel-flexible,” adds Ridgway. “That makes it a prime candidate to examine for the addition of renewable fuels into Purdue’s energy generation portfolio. The biggest challenge is finding a way to fund a second fuel-feed system so that a dual firing of coal and biomass could be easily controlled in the furnace of the boiler.
“The University, like any business, cannot economically justify such an investment without looking at a reasonable payback,” she says. “That’s where Net Impact came in.”
With the guidance of Ridgway and Wade Utility Plant’s technical staff, Krannert students — including team leader Daniel Lefco (MBA ’09), Mayu Matsumoto (MBA ’09), Williams, and former co-president Samir Sahoo (MBA ’10) — completed a feasibility study to determine the project’s financial goals, capital expenditures and incremental payback, among other deliverables.
“Net Impact developed a business model that showed a reasonable payback for several potential fuels, laying the foundation for the possible addition of a second fuel-feed system for Boiler No. 5,” says Ridgway. “The students were enthusiastic, capable and professional, and their contributions to the project were invaluable. We look forward to working with them in the future.”
Another early success was Net Impact’s contribution to a 2009 campus-wide recycling project team led by Bob Morman through Purdue’s Council for Manager Development. Then co-presidents Jimmy Cruse (MBA ’09) and Scott Donald (MBA ’09), along with other Net Impact members, conducted an impact analysis of the project’s central premise.
“With Net Impact’s assistance, we completed the project on time and were able to provide details and models supporting our recommendations,” says Morman, Purdue’s general manager for Building Services. “They helped us to identify a fundamental, although not obvious, flaw in our projections that if left undetected and uncorrected likely would have doomed implementation.
“It’s safe to say our proposal would have been significantly weaker and less likely to be accepted were it not for the input we received from Net Impact. The group rightly deserves credit for their support of our team’s efforts at a critical juncture.”
Implementation of the plan began last fall and could ultimately increase the University’s recycling yield by as much as 60 percent, says Morman.
“The benefits of our collaboration with Net Impact can be seen firsthand through improved recycling efforts on campus and a reduced ecological footprint for Purdue off campus,” he says. “This is exactly the type of achievement we can point to proudly as bringing long-term value to our community and our University.”
“It is inspiring to see what a group of student volunteers has been able to accomplish,” adds Net Impact faculty advisor and strategic management professor Joan Allatta. “The students have many demands on their time, yet their passion for what they are doing has driven them to achieve great things. Every year I continue to be more impressed.”
During the 2008-09 academic year, a group of Net Impact members led by Cruse and strategic management professor Matthew Lynall also formed FORTRIG, a sibling organization of budding entrepreneurs devoted to bringing sustainable technologies to the marketplace.
“The goal was to give students the opportunity to apply concepts learned in class to create business plans targeting the triple bottom line of profitability, environmental sustainability, and social responsibility,” explains Sahoo.
Net Impact member Carlos Kemeny (MBA ’09) found himself in a unique position to bring FORTRIG’s ideas into action. Kemeny led a team including Cruse, Sahoo and engineering doctoral student Isaac Wildeson into business plan competitions for SiMetal, a startup company created through research by Purdue engineering professor Timothy Sands, former director of the Birck Nanotechnology Center in Discovery Park and now the University’s executive vice president for academic affairs and provost.
“I was fortunate to be working as a graduate assistant to Julie Goonewardene, who was helping faculty, students and staff start businesses at Purdue through the Office of Technology Commercialization,” says Kemeny. “We had an inside track on knowing who was researching cutting-edge technologies that would be targeted for investment across the venture capital community.”
FORTRIG’s 2009 business plan for Sands’ technology, which enables the production of gallium nitride on silicon- based wafers for use in sustainable LED chip fabrication, won first place at the University of Tennessee’s Global Venture Challenge, and third place at Purdue’s Burton D. Morgan Competition, and advanced to the semifinal round of competitions at Rice University and the Massachusetts Institute of Technology (MIT).
A more recent victory came at the prestigious Oak Ridge National Laboratory (ORNL) 2010 Global Venture Challenge, which brings together students developing sustainable technology with venture investors possessing marketplace expertise. Led by Net Impact member Hitesh Goel (MBA ’10), Purdue’s team for EconoSun took home first runner-up honors in the highly competitive energy division.
“The students have been able to make connections across campus and leverage what they’re learning at Krannert to help Purdue meet its larger sustainability needs,” says Allatta. “It’s been a real success story and best practice for us. They exemplify the University’s focus on experiential learning and cross-disciplinary collaboration.”
Moving forward, Net Impact will continue to build partnerships across campus, says current president Giselle Montenegro (MBA ’11).
“The concept of Net Impact and its focus on sustainability need not be limited to graduate students in business,” she says. “We have great resources here with all the students in engineering, technology, science and other technical fields. Involving them more directly would set us apart from other Net Impact chapters that don’t have access to such expertise, and would help us make even greater contributions to Purdue’s sustainability initiatives.”
Companies also are investing in employees with backgrounds in sustainability, says Montenegro. “Recruiters are showing a lot of interest in people with a social conscience,” she explains. “You can differentiate yourself if you have experience with sustainability, whether it’s economic or environmental.”
Toward that end, Net Impact hopes to give students more exposure to sustainability-related issues through pro bono consulting projects like those offered through Krannert’s Experiential Learning Initiative (ELI). This fall, for example, Net Impact will work with an ELI project team to help Allison Transmission Inc. quantitatively and qualitatively measure the “greenness” of its supply chain.
Supply-chain sustainability was also the focus of a spring conference at Krannert (see sidebar), and related topics are under discussion in corporate boardrooms and MBA classrooms across the globe.
Ironically, the tragedy in the Gulf offers managers and managers-to-be numerous lessons about sustainability, from economics and ethics to marketing and organizational behavior. And though case studies related to the incident likely will become a part of many business school courses, what can be learned remains debatable, says Hummels.
“At a basic level, the most obvious manifestation of sustainability is the idea that firms should be thinking about long-run profitability rather than maximizing short-run gains,” says the Krannert professor. “But it can get much more interesting and subtle in cases like the BP spill.”
Sadly, for now — at least among those living and working on the Gulf Coast — what sustainability truly is can best be understood by what it isn’t.
By Eric Nelson