Using the systems approach for sustainable profitability
Read time: 12 minutes
What if you could help save the world and significantly improve your profitability at the same time? That’s the promise of a pioneering approach to sustainability called systems thinking. It offers the potential of turning green projects into lucrative business.
“What we argue is if you want to improve your sustainability, you should find the most lucrative way to get there,” says Bruce Taylor, a chemical engineer and CEO of Enviro-Stewards, a B Corp* that advises businesses on sustainability. “To do that, you will want to embed as much efficiency as possible in your company.”
Using the systems approach, Taylor says his clients have a 100% annual average return on sustainability investments. Those efforts led to avoidance of 245,000 tonnes of greenhouse gas emissions and 102,000 tonnes of waste.
Clients include Maple Leaf Foods, which Taylor helped become the world’s first major carbon-neutral food company while increasing their net profit.
If you look at the components, yes, the water heater is more efficient than the boiler. If you look at the whole system, it’s not.
Taylor says that conventional sustainability projects, such as switching to electric vehicles, building retrofits and solar power, can cost as much as $100 per tonne of greenhouse gas avoided.
What is the systems approach?
The systems approach uses principles of operational efficiency and lean production to help businesses get greener by becoming leaner. Sometimes called process integration, it is based on four key principles.
The four principles of the systems approach
1. Look at the whole company
Systems thinking involves looking at a company’s energy use as a whole, instead of only focusing on individual items of equipment or processes.
“The idea is that if you study any system, you can actually only learn about 60% of it,” Taylor says. “If you want to learn the other 40%, you have to study every other system it interacts with.”
Example of the systems approach
Think of a company that uses a boiler system to heat its water. It has a thermal efficiency of 80% (this means 80% of the energy gets transferred to the water, while the remaining 20% is lost to the environment). A conventional component-based assessment may suggest improving the efficiency by replacing the boiler with a direct fired hot water heater. This may offer thermal efficiency of 97%.
In contrast, the systems approach reviews all of the company’s systems. One of the goals is to look for what Taylor calls “match-making” opportunities. This includes finding all the heat sources and heat sinks in a facility, and redirecting the heat sources to the heat sinks.
“If we redirect the heat from the refrigeration system to preheat the water, we might get to 150% efficiency while keeping the old boiler. Plus, you’re going to reduce the money you’re already spending to get rid of the heat from the refrigeration system,” Taylor says.
“That’s the difference of looking at the system versus the components. If you look at the components, yes, the water heater is more efficient than the boiler. If you look at the whole system, it’s not.”
Everybody starts with the last mile. ‘Are we going to do solar panels or carbon credits?’ No, that’s the last mile. The first mile is reducing how much energy you need in the first place.
2. Prioritize conservation
The systems approach also prioritizes conservation-oriented solutions. This means reducing energy use and waste first, and only then focusing on greening the remaining energy and waste.
“Everybody starts with the last mile,” Taylor says. “‘Are we going to do solar panels or carbon credits?’ No, that’s the last mile. The first mile is reducing how much energy you need in the first place. Start with conservation first.”
He gives examples:
- An auto parts supplier wanted to become carbon neutral and was considering switching to geothermal energy. Taylor started with efficiency measures that allowed the company to cut its heat loss by half. “If you get that heat back, then you’ve cut your problem in half,” he says. “If you do geothermal then, it’s half as big and half as expensive to run.”
- A winery was emitting so much wastewater it was consuming most of the local community’s wastewater treatment capacity. The winery was ordered to treat its waste and called in Taylor to build a treatment plant. He started with finding ways to reduce the wastewater volume by half and wine losses by two-thirds. The reduced treatment need lowered the cost of the treatment plant from $3 million to $1.5 million.
People don’t think it’s a priority to do the work. They think, ‘My dumpster is my cheapest bill in my factory.’ But how much did it cost you to buy what’s in that dumpster?
3. Assess the real cost of waste
The systems approach prioritizes decisions based on the real cost of waste. Many businesses only consider the cost of disposing of waste, but not the cost of the discarded material.
Taylor gives the example of a food company that was disposing 13 tonnes of unused chicken meat per year. “They said, ‘It costs us $100 per tonne to send this to the waste energy plant, so that’s only $1,300 a year. Why are you wasting our time talking about this?’” Taylor says. “But it cost them $10,000 a tonne to buy that chicken, plus $100 to destroy that chicken. That’s $131,300.”
Businesses are often surprised when they realize the true cost of their waste. “People don’t think it’s a priority to do the work,” Taylor says. “They think, ‘My dumpster is my cheapest bill in my factory.’ But how much did it cost you to buy what’s in that dumpster?”
4. Use operational efficiency methods
The systems approach relies on operational efficiency, especially the three steps of lean:
- Go and seeDo a physical walk-through of your facility to observe how work is done. Efficiency experts call this a Gemba walk. The goal is to identify areas of wasted effort, resources and time.
- Ask whyAsk employees why processes or tasks are done in a certain way, breaking them down into component tasks.
- Involve your teamIt's crucial to involve employees in assessing your operations, planning change and implementation.
Taylor tells of a walk-through he did at a protein company. He noticed the company was pouring a large volume of boiling water down a drain. The company explained that a lard-processing machine was ejecting lard and some solids into the drain, and without the constant flow of boiling water, the lard would freeze in the drain.
“I understand why you’re pouring the boiling water, but why is the lard going down the drain?” Taylor asked. As a solution, he recommended that the facility reprocess the lard. “They got to sell that extra lard, they didn’t have to pay for chemicals to react with it, they didn’t need that water, they didn’t have to boil it, and they didn’t have to pay for someone to haul away their sludge.”
In another company, Taylor did a walk-through at a factory and found it was pouring hot water down a drain at a cost of $70,000 a year. When he asked why, no one initially knew. Additional inquiries finally led to an explanation. It had been a workaround for a pressure relief valve that had broken two years before. The valve had since been repaired, but no one had shut off the hot water pouring down the drain.
What are the steps of the systems approach?
Different experts apply the systems approach in various ways. Taylor follows a process based on answering five questions: who, what, where, when and how.
Who—Start by identifying all the stakeholders likely to be affected by any contemplated change.
“Change won’t get implemented without consensus and buy-in,” Taylor says. “Let’s say we’re going to change the sanitation practices or the boiler room. We want the sanitation supervisor or operator or the boiler on the team.”
Stakeholders should be involved from the kick-off meeting through to implementation and commissioning.
- What—Next, determine what should be done. This involves a walk-through (see above) and other efficiency processes, such as Pareto analysis (sometimes called the 80-20 rule). This is the idea that 80% of issues are caused by 20% of factors.
- Why—Determine the root causes of problems. “What job does the electricity do for us?” Taylor asks. “What job is the water doing? Can we solve that same job differently?” You can use root cause analysis or Ishikawa (fishbone) diagrams for this step.
Example of a 5M fishbone (Ishikawa) diagramEnlarge the image
- When—The assessment leads to ideas for change that are validated with the stakeholder team. Changes are evaluated based on how much return they’re likely to bring the business. Top ideas are put into an implementation plan, including a timeline and who is responsible for each initiative.
- How—Implementation requires regular follow-up and monitoring to gauge progress, celebrate successes and quickly address any shortcomings. An outside expert can support implementation with engineering design, funding applications, project management and post-implementation verification.
It’s common for experts to just look at the lighting or the ventilation, but never ask, ‘Why is this process like that?’
How do you find and evaluate a systems expert?
You may have to modify your procurement process to find an expert who uses the systems approach to sustainability. They aren’t likely to be the lowest bidder. That’s because the approach typically involves a far more thorough assessment and solution-finding process than a basic energy or waste audit.
This entails a higher upfront cost, though you’re likely to see a larger return and a fairly fast payback, Taylor says. He suggests:
- getting referrals from other businesses in your industry
- asking bidders for references and interviewing them about their experiences, including returns and payback timeframe
- finding out about the expert’s process (i.e. whether it focuses on the entire company’s processes, prioritizes energy and waste reduction, etc.)
Going with an inexpensive audit frequently leads to greater expenses down the line due to overlooking opportunities with significantly better business cases.
“You can end up with an expensive solution that’s wrong for your business,” Taylor says. “It’s common for experts to just look at the lighting or the ventilation, but never ask, ‘Why is this process like that?’”
*B Corp certification is a designation that a business is meeting high standards of verified performance, accountability and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.