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Sustainability

A Product Life-Cycle Approach


Turning corporate sustainability pledges into real business targets

A new approach to sustainability is emerging as consumer goods


companies move beyond a traditional inward focus on sustainability
to consider their total impact on the environmentfrom growing
raw materials to the consumers disposal of their product. It is a total
end-to-end life-cycle approach to sustainability that is more than
developing basic programs to fulfill their corporate responsibilities
and creating selling points for consumers. Sustainability is becoming
a cradle-to-grave process and a powerful growth engine.

Every time we use a productwhether


shampoo to wash our hair, detergent
to clean our dishes, or soda to quench
our thirstgreenhouse gases are generated throughout the value chain. Do
consumer products companies consider consumers emissions due to the
product when they tally their greenhouse gases? Count their carbon credits? Or calculate their sustainability
pledges? Not likely.

An A.T. Kearney assessment of
the top consumer goods companies
finds that while almost all companies
worldwide (96 percent) evaluate ways
to reduce their greenhouse gas emissions, only 63 percent work within
their entire supply chains to do so, and
only 21 percent embark on programs
to lower the environmental impact
associated with the consumers use of
their products. Rather than evaluating
sustainability in terms of the entire life
cycle of their products, companies
generally stay within their traditional
approaches, which focus mainly on

internal processes such as manufacturing and logistics. Yet, we also found


that in some categories less than
5 percent of the total impact of greenhouse gas emissions arise from these
internal processes.

Today, it is becoming clear that
companies must go beyond their
traditional internal approaches and
consider the entire product life cycle
when measuring environmental impact.
Future growth will depend on aligning
with consumers priorities. Companies
are under pressure to create sustainable
products, not only from consumers
but also from governments, retailers
and suppliers. As natural resources
become scarce, companies must consider the long-term sustainability of
their business models and broaden
their approach to consider their total
impact on the environment (see sidebar: Total Impact on the Environment).

As sustainability becomes a
company-wide issue, leading consumerfocused companies are using it as

A product life-cycle
approach to sustainability measures
a companys total
environmental
impactfrom raw
materials, to production, distribution, consumer use,
and disposal of the
product by the
consumer.

a driver of change to mobilize all


functions around a topic that has the
power to transform the business model
and be a key pillar of future growth.

environmentally friendly while still


fulfilling product specifications?

Retailer distribution. Many companies consider outbound logistics,
but there is a next step in the life cycle

A New Approach
to Sustainability

Products that
require electricity
will have a larger
CO2 footprint when
used in coal-heavy
China than when
used in nuclearfriendly France.

A traditional approach to sustainability


concentrates mainly on manufacturing
and logisticsreducing a companys
environmental impact by improving
production efficiency and optimizing
truck loads. The end-to-end approach
to sustainability considers a wider range
of activities and makes cross-functional
cooperation compulsory (see figure).

Supply. Within supply, the company examines how inputs are created.
Were the agricultural products grown
in a sustainable way, using water
appropriately, and on land appropriate
for the crop? Were animals raised in
a way that minimizes their impact
on the environment? Were chemicals
processed in energy-efficient plants?
Are materials used for the product

to improve upon: distribution and the


retailers impact on the environment
in terms of energy and refrigeration.
Pressure can be exerted on the major

retailers all the way down to the momand-pop shops to ensure a minimal
environmental impact.

Consumer use. Depending on the
product type, the vast majority of environmental impact is incurred as the
consumer uses the product. Food products are chilled and cooked, grooming
products use heated water, and cleaning products use machines and hot
water. While it may seem out of the
companys control, how consumers
interact with a product depends largely
on product design and marketing.

Disposal. Influencing the consumer toward environmentally sound
disposal practices can be done through
choices in packaging types, weight,
size, labeling and even external initiatives to increase recycling and reuse.

Thinking End-to-End:
The Rewards
Considering a wider range of activities requires a larger investment of
resources than a traditional approach

FIGURE: A product life-cycle approach to sustainability


Traditional approach

Scope

Supply

Retailer
distribution

Consumer
use

Disposal

Growing

Processing

Transportation

Refrigeration

Efficiency

Reuse

Harvesting

Manufacturing
footprint

Refrigeration

Energy
efficiency

Habits

Recycle

Equipment

Recovery

Processing
Sourcing

Rationale

Outbound
logistics

Manufacturing

Efficiency

More government
regulations around
producers responsibilities and CO2 emissions
Scarcity of natural
resources

Source: A.T. Kearney analysis

Capture quick wins


Ease implementation
Control scope

Landfill

More pressure from retailers, with Wal-Mart leading


the way
More government regulations around producers
responsibilities and CO2 emissions
Scarcity of natural resources

Total Impact on the Environment


There is increased pressurefrom retailers, governments, consumers and competitors to move to a product life-cycle approach to sustainability. Besides the obvious
reasons that we have a corporate social responsibility, there are financial reasons as
more countries are enforcing extended producer responsibility legislation. The EU has
led the way in this area, and now other countries are following suit, particularly in
electronics disposal and packaging waste. Companies will be able to reduce the impact
they are responsible for not only internally through product innovation, but also externally through increased consumer awareness and campaigns for recycling.

Already talks abound of additional CO2 and equivalent (CO2e) emissions regulations and costs for those using more than their fair share. Companies that move now
to get a comprehensive view of the total impact will be prepared for future legislation
as it is introduced. Programs to reduce CO2 emissions will take time to develop and
implementstarting now may be a huge cost-saver.

As more retailers focus on sustainability, they are asking producers for help in
meeting targets. For example, in February 2010, Wal-Mart announced that by 2015 it
would remove 20 million metric tons of greenhouse gas emissions from its supply
chainand is expecting producers to be responsible for a large portion of that reduction.1 Companies need to understand their overall impact and determine where and
how reductions can be made in order to meet the standards of leading retailers such
as Wal-Mart.

Going forward, as natural resources become limited, companies will have to react
and adjustforeseeing how this will affect customers. Those that create products to
help them deal with this will have a distinct advantage over competitors. For example,
in many countries, water is already scarce, but with population and wealth growth, this
key resource will grow even scarcer. Any products that allow the consumer to save water
(and thus money) will be welcomed by the market. Governments are already intervening in personal water usage across the globe, from Australia to Venezuela.

to sustainability. Although there is


more money involved, there are also
more rewards. For one thing, the company now has a unique opportunity to
examine its global impact across all
categories and geographic regions.
This can be powerful in standardizing
a sustainability approachnot only
can targets be set to maximize firmwide efforts, but also functions have to
work together to develop mutually
beneficial initiatives.

The following offers a brief discussion of the main advantages of the endto-end product life-cycle approach:
1

Identify drivers of environmental


impact. Establishing a baseline is key

to understanding what drives environmental impact, which will vary


by category and geography. For example, products that require electricity
will have a larger CO2 footprint when
used in coal-heavy China than when
used in nuclear-friendly France. It
also helps to refine the options the
company has in reducing its impact
on the environment. It is a good idea
to identify drivers that are within
or outside of the companys direct
control. For example, products that

Wal-Mart Unveils Plan to Make Supply Chain Greener, The New York Times, February 25, 2010.

must be refrigerated throughout the


value chain, such as yogurt, will incur
a large portion of greenhouse gas
emissions in the consumer-use phase,
but the product could be stored
in more energy-efficient refrigerators.
Knowing this helps the company focus
its efforts.

Understand environmental interactions. A product life-cycle approach
increases awareness of the interactions
of different environmental metrics.
For example, a change in product formulation to reduce the amount of
water in a product could increase processing and thus greenhouse gas emissions. Or a formulation change, such
as making a quick-rinsing laundry
detergent, could reduce both the
amount of water needed and the
greenhouse gas emissions created by
wash cycles. A thorough examination
allows a deeper understanding of the
full implications of every decision.

Identify the future impact of consumer behavior. The product life-cycle
approach identifies not only todays
environmental impact but also the
potential future impact, which means
decisions can be more far-reaching.
As portfolios change over time, both
in terms of products and geographies, the major impact areas will shift.
For example, as wealth increases in
developing countries, more consumers
may begin using disposable diapers,
with a resulting increase in landfill
waste. It is important to forecast where
the future impact might be so that
plans can be made to preempt the
environmental impact.

Forecast external shifts. Companies that anticipate external market
shifts will have time to refocus their

environmental initiatives. For example,


as the EU unites around higher
rates of recycling through legislative
changes, fewer company resources will
be focused on recycling initiatives.
However, other countries with less
government intervention will need
more private intervention to encourage
higher levels of recycling. By understanding future trends, companies can
avoid duplicating efforts and also locate

areas where programs could have disproportionately large effects.

Turning Pledges into Targets


By using an end-to-end product lifecycle approach, companies get a clearer
understanding of the actual impact
they have on the environment. They
can turn their sustainability pledges
into business targets that can be
implemented across the company

ensuring that they can identify the


drivers of sustainability and prioritize
initiatives across the entire value chain
all the way down to the consumers use
of the product. This way, internally,
sustainability becomes a transformation driver, aligning the organization
behind a single highly mobilizing
goal. Externally, companies can move
beyond the rhetoric to address their
total impact on the environment.

Authors
Daniel Mahler is a partner and head of the firms sustainability practice. Based in the Zurich office, he can be reached at
daniel.mahler@atkearney.com.
Johan Aurik is a partner based in the firms Brussels office. He can be reached at johan.aurik@atkearney.com.
Emmanuel Hembert is a principal based in the firms London office. He can be reached at emmanuel.hembert@atkearney.com.
Kristen Schrieber is a consultant based in the firms London office. She can be reached at kristen.schrieber@atkearney.com.

A.T. Kearney is a global management consulting firm that uses strategic insight,
tailored solutions and a collaborative working style to help clients achieve sustainable
results. Since 1926, we have been trusted advisors on CEO-agenda issues to the
worlds leading corporations across all major industries. A.T. Kearneys offices are
located in major business centers in 37 countries.

A.T. Kearney, Inc.


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