A lean company makes their processes as efficient as possible to cut costs. A green company makes their processes as efficient as possible to be environmentally-friendly. So, while lean predominately cuts costs, going green can do the same and can also help drive revenue.
Green and lean go very much hand-in-hand, according to Dr. Daniel Mahler, Partner, Sustainability Practice, A.T. Kearney. The two ways of thinking share a few common avenues.
Think about your utilities. If you become more energy efficient, you’re greener. If you’re cutting costs by becoming more efficient, you’re leaner. Or maybe you’re a food and beverage producer. Water is a scarce resource that you can save if you become more efficient.
“Making your operations leaner cuts down on waste. Some of that waste could be toxic materials that you are keeping out of the environment,” Mahler says. “Moreover, if you can reuse some of your output as input materials, like an automaker reusing steel, then you’re recycling and keeping costs down. That’s a connection between lean and green.”
However, not all green initiatives lead to immediate cost reductions. Green and lean can cross paths in many areas, and while it may not be a direct conflict of interest, cost can be an issue.
“If you want to take going green to the maximum degree,” says Mahler. “The business case is not as attractive as traditional lean. It can be expensive.”
Although it may not always be an effective cost cutting tool, going green can produce additional revenue that can offset some of the incremental investment.
There is limited capital available in any organization, so there may still be a fight between initiatives as to which one will receive the funding. And because of the capital situation, the finance department will be the most likely to resist green, versus the middle managers who are most likely to resist lean.
When it comes time to place a value on a green initiative, the finance department is working with a new variable — corporate and brand image improvements — and how to measure it. Also, it’s a long-term benefit that is relatively intangible early on.
“With a strong consumer push to be green,” Mahler notes, “bean counting controllers won’t be able to ignore it.”
With all the potential pluses of the green revolution, Mahler cautions lean companies who may want to pass off their efforts as green.
“A company that has been lean for years and is trying to repackage that as environmentally-friendly isn’t credible,” he says. “But you can leverage green issues as a catalyst for lean initiatives that you’ve always wanted to do.”
Mahler believes that in the future, the majority of customers will be savvy enough to identify the truly green companies versus the pretenders and that could play a bigger role in purchasing decisions.
Moreover, the rapidly rising cost of oil is also pushing companies to go green.
“If you look at the extended supply chain — through the distributors — you have oil and carbon emissions with transportation. The transportation systems were designed when oil was $30 per barrel,” says Mahler.
In the future, to improve transportation, Mahler expects to see a shift away from companies having one large facility to them having several smaller plants across the country.
“You may have to pay more for raw materials and sources in some areas, but you will be creating a more efficient end-to-end supply chain that can help cut manufacturing and freight costs,” he adds.
In the end, whether you have one factory or a gaggle of smaller ones, the choice to go green can benefit your bottom line, as well as the lean initiatives you have in place. Combining the two can create a more efficient and more environmentally-conscious organization, benefiting everyone from the top down.