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Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
Consumers, regulators, and shareholders are all clamoring for sustainability. With the publics growing environmental awareness, consumers are actively seeking greener options. Regulators and legislators are changing the landscape for environmental reporting, compliance, and transparency. Shareholders and investors have made environmental and social performance a top consideration. At the same time, many environmentalists claim that cutting greenhouse gases, reducing waste, increasing recycling, and broadly shrinking a companys impact footprint will reduce costs. Faced with the promise of reduced risk, increased sales, and lower costs, who wouldnt jump on board? Yet, as a growing number of companies work to become more environmentally sustainable, its become more apparent that such transformation is challenging. Deloittes experience working with clients has demonstrated that Lean Six Sigma can be a major part of the sustainability answer. Lean Six Sigma is predicated on removing waste materials, resources, manpower, energy, or time. Removing waste is central to sustainability. Therefore, it stands to reason that Lean Six Sigma can be an effective method in developing a road map for going green and can also help companies boost economic and environmental performance while they move down the path to sustainability. For companies that have an established Lean Six Sigma culture, the approach provides a well-understood and trusted way to explore, prioritize, and plan opportunities for value creation through enterprise sustainability. For companies that have not yet developed a Lean Six Sigma approach, the methodology offers a well-established framework for exploring sustainability initiatives and the necessary rigor to support development of the business case, priority-setting, and implementation planning and execution. For these organizations, the imperative to be more sustainable may be a meaningful opportunity to tackle the training necessary to build a Lean Six Sigma capability.
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Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
Ben Elgin, Little Green Lies, Business Week, October 29, 2007 2
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
At the same time, many projects that are already attractive from a financial perspective may have a green benefit as well. For example, consider a shop floor project aimed at reducing work-inprocess inventory. By traditional metrics, a company would count improvements achieved through Lean Six Sigma efforts as cost reduction or cash flow (working capital) improvement through inventory reduction. However, if the company were to evaluate the project from a sustainability perspective, it could add the solid waste effect of the effort, along with carbon and energy footprint associated with that raw material inventory reduction, to the economic and operational benefits. Furthermore, carbon-equivalent emissions have a dollar value in the marketplace today, especially with the emergence of carbon-offset programs and potential cap-and-trade legislation. When companies build into the business case of their Lean Six Sigma projects a quantifiable reduction of carbon emissions, they may be able to contribute more effectively to their own carbon reduction or offset through Lean Six Sigma initiatives.
Analyze Identify the key drivers and root causes of energy consumption. Using Lean Six Sigma cause and effect diagrams, five whys, and other analysis tools can help illuminate the root causes of energy waste. This detailed analysis will also help identify improvement opportunities. For example, Deloittes detailed analysis of office energy usage identified a number of key drivers and root causes of excess energy usage, such as poorly insulated windows and exterior walls, an inefficient HVAC system, and HVAC usage and lighting during the evenings and weekends. The analysis often highlights areas of exposure that require a rethinking of other taken for granted activities; for example, how leases are structured or how energy fits into equipment procurement. Improve Develop potential solutions to address the root causes of the identified energy consumption activities. The analysis helps the team prioritize improvement efforts by highlighting the solutions that could provide the greatest benefit with the fewest resources right away. A few solutions to reduce Deloittes office energy consumption include installing occupancy sensors to turn lights off in offices when not needed and reprogramming thermostats to avoid unnecessary HVAC usage. Important change management and communications considerations come into play since issues such as comfort, lighting levels, etc. are very personal in nature. Control Install measurements and controls to maintain the energy savings, and implement a process to enable identification of continuous improvement opportunities. To maintain improvements, the team should establish high-level energy consumption measures that cascade down to lower levels and hold people accountable to the metric performance.
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
D e sig n e r M a te ria ls M a n a g e r E n g in e e r
S u p p lie r - E n g in e e r
D e sig n E n g in e e r
S u p p lie r
S u p p lie r - Q u a lity M a n a g e r
In d u stria l D e sig n e r
S u p p lie r
D e sig n E n g in e e r3
D e sig n E n g in e e r3
S u p p lie r - In sp e cto r
D e sig n E n g in e e r2
D e sig n E n g in e e r2
Te ch n icia n
E n g in e e r3
Before
After
How Value Stream Mapping helps pinpoint areas of waste and possible opportunities for both environmental and financial improvement.
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
AREA ASSESSMENT
Categery
Area
1 Energy Sources
Stage of Maturity
2 3
Sustainable Workplace
1 2
Sustainable Workplace
Workplace Design Virtual Workplace Waste Management and Materials Usage Physical Location Footprint Technology Infrastructure Human Resource Policies
Sustainable Governance
Sustainable Workforce
ILLUSTRATIVE ONLY
Recruiting
ILLUSTRATIVE ONLY
A sustainability assessment model should provide both a general and detailed view of an organizations current and desired future state of sustainability.
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
Metrics. Integral to the governance process, appropriate metrics and measures are a powerful tool to identify and drive value from sustainability programs. One of the first steps in the Define phase of a Lean Six Sigma project is to identify the customer(s) and Criticalto-Quality factors (CTQs) that will serve as the focal point(s) for the project. The CTQs are referred to as project Ys (as in Y=f(x)). Companies that are effective at applying Lean Six Sigma have developed many means of cascading metrics from the top of the company with the purpose of aligning improvement efforts with company priorities. The example illustrated in Figure 3 shows how one metric is cascaded down three levels. Many companies with mature continuous improvement programs have gone through metrics definition and cascading exercises for the company as a whole. They have a good understanding of the leading and lagging indicators that drive the few highest level metrics. These indicators often appear on scorecards, and when an indicator is not
performing as expecting, it can trigger a Lean Six Sigma project to investigate the root cause and develop solutions to proactively address the problem. Similarly, companies can also determine which sustainability measures are the most important to the business at the highest level and drill down to understand the leading and lagging indicators that are most closely correlated. For example, a company may determine that energy consumption is a key high-level metric. Lighting efficiency might be a leading indicator of energy consumption, and electricity use as measured in kilowatt hours (kWh) might be a lagging indicator. The company might measure lighting efficiency by the percentage of its offices that have been upgraded to high-efficiency fluorescent lighting, with specific targets established by month. Likewise, it might establish monthly targets for kWh usage, and below-par performance could trigger a Lean Six Sigma improvement effort.
Little Ys
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
Perhaps most important among the sustainability measures is the establishment of a formal greenhouse gas (GHG) baseline. Setting this current-state baseline is important before embarking on sustainability improvements because it enables the management, measurement, and celebration of future improvements in environmental performance. It is also one of the more challenging measures as the science behind GHG calculation is still emerging, and the data required to develop the baseline is not readily available in most companies. Combined with the increased scrutiny and skepticism associated with market concerns about greenwashing,2 the GHG baseline may require more attention. Training. Because of the challenges of sustainability and going green, it is often difficult to list the many ways employees can be more sustainable and the various tools and concepts that are available to assist along the way. Lean Six Sigma offers a structured and robust training framework for improving quality and reducing waste. Lean Six Sigma Yellow, Green, and Black Belt training programs could incorporate a few additional tools and concepts to educate employees on the increasing importance of sustainability to business performance. Concepts might include awareness and understanding of greenhouse gases, greenhouse gas baseline and reporting, sustainability maturity models and assessment frameworks, sustainability metrics, energy consumption, paper consumption, and waste and recycling. Because Lean Six Sigma already contains a robust mechanism for governance, metrics, and training, companies should find that extending them to encompass sustainability is much like applying Lean Six Sigma to other areas of the enterprise, such as back-office services and marketing. Its not hard to imagine a time when environmental sustainability becomes important enough in the Lean Six Sigma world to warrant another level of training and performance something akin to a Master Black Belt with Green Stripe.
2
TerraChoice, http://www.terrachoice.com/Home/Six%20Sins%20of%20Greenwashing Deloitte and GMP/FPA, Sustainability: Balancing Opportunity and Risks in the Consumer Products Industry, 2007.
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
Next steps
To begin using Lean Six Sigma to improve environmental performance, companies should:
Gain support of C-suite executives. Sustainability efforts often derail without visible and sustained support from top leadership. Establish a baseline and metrics. Understanding and measuring the current-state environmental performance is critical. Having a baseline in place can help companies identify opportunities for improvements, measure those improvements, and celebrate those successes in the future. Include green in the governance. Once the baseline and metrics are established, rely on the governing processes to monitor sustainability performance, surface improvement opportunities and prioritize projects. Include green in the training. Lean and green are natural allies. Incorporating sustainability tools and concepts into existing Lean Six Sigma Yellow, Green, and Black Belt programs can arm employees with the awareness and tools necessary to identify and tackle sustainability issues.
Green Lean Six Sigma: Using Lean to help drive results in the wholly sustainable enterprise
Conclusion
The sustainability imperative is growing, but along with it comes the recognition that improving sustainability is more difficult than some companies hoped and many environmentalists would admit. However, by broadening Lean Six Sigma to include sustainability goals, companies can leverage a powerful and well-established performance improvement methodology to jump-start new sustainability programs or substantially boost existing ones. In this way, companies may well be able to marry together the critical goals of being good corporate citizens while improving their bottom line.
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Contacts
Chris Park Deloitte Consulting LLP 313-324-1258 chrpark@deloitte.com David Linich Deloitte Consulting LLP 513-723-4163 dlinich@deloitte.com
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