- Buyer's Guide
We all know how integral lean has been in many organizations’ successes. In the future, economic survivability will require enterprises to combine both lean and green principles, and best practices. These actions will require businesses to retool their thinking about how they become more sustainable.
Sustainability is a relatively new term that describes how to make human economic systems last longer and have less impact on ecological systems, and it particularly relates to the concern over major global problems relating to the depletion of natural resources and increased carbon emissions. More important are ways to make some unit of economic production for an entity – a business firm, a family household, a farm – more sustainable.
Corporate Responsibility (CR) has driven improvements in corporate environmental and social performance. Traditional CR categories include corporate governance, human capital, environment, product safety and stakeholder relations.
This new form of CR is called Total Corporate Responsibility (TCR) as put forth by Frank Dixon. He is an adviser to Wal-Mart and other firms on sustainability. The TCR model is based on three concepts – interconnectedness, actualization and posterity. These encourage business to adopt a broader perspective. Rather than seeing itself as an isolated entity, business would see itself as part of a larger system (interconnectedness). It would work for the good of the overall system (actualization) over the long-term (posterity).
The TCR methodology was developed to address the systemic drivers of corporate decline and unsustainability in a practical and profit-enhancing manner. Economic competitiveness will require corporations to be actively engaged in sustainability initiatives. In so doing, business ensures its own success and profitability.
TCR represents the most difficult management challenge because no single company can change larger systems. Addressing environmental, social and other sustainability issues poses one of the most complex challenges facing management. Firms must work with peers and other stakeholders in a practical manner to achieve system change. Being the most difficult challenge facing management, TCR is probably the most accurate indicator of management quality and stock market potentialavailable.
Adopting the TCR model will drive an integrated systems approach and partnership using lean and green values and principles. These changes will redefine the next generation of enterprises, accounting systems, and a balanced enterprise “value stream” scorecards to drive “Lean$Green” sustainability.
What is a Lean$Green Enterprise?
A Lean$Green enterprise is an integrated entity that focuses on the elimination of waste by minimizing the consumption of resources (human and natural capital) to effectively maximize the creation of value for its customers, stakeholders and communities. Human capital pertains to business practices relating to labor and the community and region in which a corporation conducts its business. Natural capitalrefers to sustainable environmental practices a company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail the environmental impact.
What is Lean$Green Accounting?
A Lean$Green enterprise will adopt Lean$Green accounting principles and practices. Lean$Green accounting is an integrated systems approach for streamlining the accounting, controlling, measuring, reporting and managing the sustainability of an enterprise. In practical terms, Lean$Green accounting means expanding the traditional reporting framework to take into consideration the environmental and social performance in addition to financial or economic performance.
What is a Lean$Green Enterprise Scorecard?
A Lean$Green enterprise will develop and deploy a “balanced” value stream scorecard. It is an integrated scorecard for accounting, controlling, measuring, reporting and managing sustainability at all levels of the enterprise by focusing on key performance indicators (KPI) of the value streams to eliminate waste by minimizing the consumption of resources in order to effectively maximize the creation of value for its customers, stakeholders and communities.
It will require a mix of leading and lagging financial and non-financial indicators to drive the deployment and achievement of strategic objectives from the perspectives of the Customer, Financial, Operational, People and Sustainability of the economic, social and ecological performance of the enterprise, as shown in Figure 1.
Figure 1. Enterprise Value Stream Scorecard
Implementing a balanced enterprise value stream scorecard typically includes four processes:
1. Translating the vision into operational goals.
2. Communicating the vision and link it to individual performance.
3. Business planning.
4. Feedback and learning, and adjusting the strategy accordingly.
The balanced scorecard is used to select the right key performance indicators to “measure what matters,” which allows the vital signs and health of the value streams and enterprise to be effectively monitored and managed. Thus, the job of managing the Lean$Green enterprise changes from being reactive to being proactive. This approach addresses issues and deploys counter measures before they become a serious problem for sustaining the organizations economic and ecological performance.
Sustaining and growing a Lean$Green Enterprise
Sustaining and growing a Lean$Green enterprise in the future will require some significant changes in the way they do business. The days of rapid growth through expansion will need to be rethought. There will be a need for a new way of thinking called “Compression”, as put forth by Robert “Doc” Hall, co-founder of the Association for Manufacturing Excellence. Hall writes:
“Compression is almost the opposite of economic expansion. It turns old economic and business assumptions wrong side out. Most business thinking, indeed most daily thinking, presumes an expanding economy. We expect money invested in a bank or corporate stock to grow. We expect companies and cities to grow. So, we solve most problems by finding and using more resources – energy, materials, land.
“Five hundred years of global expansion are nearing an end. The physical resources to support it are limited, and we must closely heed the global environment that supports us. However, the financial and business systems developed during expansion goad us to continue physical expansion.
“The goal of Compression is to learn how to continue improving human quality of life while greatly reducing our consumption of energy and virgin raw material, while releasing no toxic chemicals into either air or water.”
Neither the economic or ecological systems can be sustained without a new emphasis on thinking how to “do more with less” of everything.
About the author:
Glenn Marshall is a director-at-large for the Association for Manufacturing Excellence and the benchmarking and sustainability champion at Northrop Grumman Shipbuilding, Newport News Operations. He is leading a lean accounting Community of Practice for Streamlining Government Procurement. Contact him at email@example.com or 757-688-2995.
This article was previously published in an issue of the Lean and Green News. For more information and to subscribe, visit www.leanandgreennews.com.