The Economist * recently referred to Sustainability as “a woolly term that refers partly to the welfare of employees but mainly to green strategies”. I’m not really sure what “woolly” means, which is exactly the point. There are broad definitions of Sustainability, such as “A sustainable organization fulfills its present functions and pursues its present objectives without compromising the ability of future generations to do likewise”. However, there is no operational definition that clearly distinguishes Sustainable firms from those that are not.
Many firms find that customers favor environmentally sensitive suppliers. Some customers express that preference informally, others (like the U.S. Government and Wal-mart) through specifications and preferred supplier programs. Further, in order for a manufacturer to be Sustainable, that manufacturer’s supply chain must be Sustainable.
So, who is sufficiently Sustainable and who isn’t is an important question. From this point of view, Sustainability resembles Quality – manufacturers need to identify suppliers that can be relied on to reliably provide high quality materials, parts or whatever. And they need suppliers that are organizationally Sustainable.
Within today’s global value streams, The ISO 9001 Quality Management System provides a common, verifiable international standard for identifying suppliers that have means in place to assure product quality. One way to define a Sustainable organization is through a corresponding standard for Sustainable Organizations.
Recognizing this need, UL Environment (a unit of Underwriters Laboratory) partnered with the GreenBiz Group (an on-line media company focused on Sustainability) to author such a standard — ULE 880: Sustainability for Manufacturing Organizations. The ULE 880 standard was drafted last year, offered for public comment (the comment period drew about 1,500 responses, including mine, representing about 30 nations), revised, reviewed and issued as an interim standard. The interim standard is being piloted (beta tested) this year by several manufacturing firms. Presumably, experience from the pilot implementations will be incorporated into a viable ULE 880 standard. As the interim standard is being piloted, procedures for third party audit and certification are also being developed.
Implementing the ULE 880 interim standard is a much bigger task than implementing ISO 9001. First, ULE 880 applies to an entire organization, not a specific facility, as ISO 9001 does. Even more important, the scope of ULE 880 is much broader than that of ISO 9001.
The structure of the ULE 880 interim standard owes precedence to the structure of the LEED standards for environmentally conscious building. It is based on an accumulation of points by demonstration of compliance on numerous topics, organized into five domains:
>> Sustainable Governance
>> Work Force
>> Customers and Suppliers
>> Community Engagement and Human Rights
Each of these domains includes a number of mandatory topics, on each of which some minimum number of points are required in order to be considered for certification. The total numbers of points scored in all five domains are summed. Certification can then be awarded on one of several levels, rather like bronze, silver and gold medals at a track meet. The levels of certification structure provides for demonstration of continuous improvement – certify at a lower level initially, then increase levels over time.
More information, especially regarding the topics covered in the five domains, is available at www.ulenvironment.com, tab Home > Services > Organizational > Sustainability >ULE 880 and at www.greenbiz.com/2011ForumNotes. Let me emphasize, however, that ULE 880 is still in pilot testing. It is subject to change and change is likely.
I’m not entirely comfortable with the ULE 880 standard as I currently understand it. First, implementation will be a really big project for most firms. Second, I think that a firm is either Sustainable, or it is not – I’m not sold on levels of certification. Third, in my view, for a firm to be Sustainable, it needs a durable competitive advantage which may well reside outside of the topics covered in the several domains this standard covers. Last, I would prefer a truly global standard: I would rather have an ISO standard than an American home brewed standard, even though ULE and GreenBiz have been responsibly diligent in the development of ULE 880.
The good news for smaller manufacturers is that ULE 880 has been specifically developed for larger manufacturers (using the U.S. Small Business Administration’s definitions). The bad news is that: (a) ULE 880 is an important precedent – future standards for smaller manufacturers are likely to follow the same general structure and sort of content. And (b) the ULE 880 standard encourages certified firms to require their suppliers to demonstrate their Sustainability – so, if your customers are bigger than you, and your customers become certified to ULE 880, then you can expect to be required to respond somehow or another. Perhaps this will be similar to the situation with quality management several years ago, when customers demanded ISO 9001 certification from their suppliers. ULE 880 or something much like ULE 880 is coming.
Thoughtful comments are always appreciated.
… Chuck Harrington
* See Schumpeter’s column, The Economist, 12 November 2011 issue, page 78. The column is entitled “Why firms go green”. The column answers the question its title poses by asserting that “more businesses see profits in greenery”. The column is well worth reading.