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 / Winter 2008 /Issue 53(originally published by Booz & Company)


The Eco IT Solution

Even choosing a soft drink can be fraught with environmentally sensitive questions. For instance, brand A comes in aluminum cans from a plant that is 20 miles away, whereas brand B comes in plastic bottles from a plant 50 miles away. Are the cans more environmen­tally harmful to manufacture than the bottles? Are they cheaper to recycle, or more likely to be recycled? How do the environmental costs of transporting the soft drink over longer or shorter distances enter into the equation? And how do these two factors balance out? Only when con­sumers can see the total environmental cost of the goods and ser­vices they buy, not just the cash cost, will they be able to make truly informed decisions.

For IT to help us understand that total environmental cost, it must be able to deliver a complete overview of a product’s environmental impact across the entire value chain — from the sourcing of the materials and components that go into the product, to the product’s actual manufacture, its delivery to the consumer, and finally, to the disposal of the product and its pack­aging. Today, we can measure a great number of inputs and outputs at various points along that value chain. We already use technologies such as smart metering, heat sensors, and input sensors to calculate con­sumption and output on our production lines. Those same sensors can also be used to gauge degrees of environmental effi­ciency — the heat that is currently wasted in the production line, for instance, or the production line’s overall en­ergy efficiency.

Unfortunately, the measurements of the production cycle that we typically make are incomplete and static. We need to assess efficiency on a continuous basis if we want to develop true environmen­tal impact pricing. Was the energy used in smelting the aluminum for that soda can generated from sustainable sources or was it from fossil fuel sources? How much energy was needed to produce the batch of aluminum at the point of manu­facture? How much energy was wasted during manufacture? And what other environmental by-products have resulted from the process — the water used, the heat and noise generated, the nonrecyclable waste created? By answering these types of questions, we can begin to understand the true environmental impact.

Today’s enterprise resource planning (ERP) systems capture product information, pricing, and stock levels dynamically. But they provide no information about the environmental impact of our business activities. We need information systems that can add up the environmental cost of the product. And we need to do this inside and outside the company, gathering data upstream from suppliers and downstream from customers.

Call it an “environmental im­pact planning” (EIP) system, which goes beyond just monitoring and measuring. Much as ERP and business performance management networks attempt to keep track of numerous aspects of the financial lives of companies, an EIP system would gauge both the inputs and the outputs that make up a company’s environmental footprint. That would require it to partake of some aspects of supply chain management, tracking not just the location of the materials and components that go into a finished product, but their environmental costs as well. Even procurement systems could play a part, offering pricing information on the supplies and materials that companies use and, alongside it, data on the environmental price of one supplier’s materials versus another’s.

Similar to many cutting-edge supply chain and performance management systems, an EIP system might present the information that it collects in the form of a dashboard, showing the current impact and costs of a particular product line, and how supply and distribution alternatives might affect those criteria. The more complete that information is, the better the EIP system would be at recommending realistic trade-offs in production that would help the corporation to reduce its environmental footprint. We are starting to see early forms of such systems today, but only in limited applications — power com­panies, for in­stance, are beginning to install environmental impact monitoring equipment at their power plants, which help them to balance the trade-offs between fuel sources, energy production, and CO2 output.

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