BA 302 Business Process Management - Sustainability

BA 302 Business Process Management - Sustainability

Learning outcomes:

Understand the notion of business process sustainability and the triple bottom line.

Recognize and apply examples of the tragedy of the commons.

Suggest methods for computing the environmental footprint of business processes.

Reconstruct environmental footprints backwards through the supply/value chain.

Conceptually separate financial reasons from good citizenship reasons for sustainability.

Suggest methods and opportunity for dematerialization.

Apply system theoretical concepts such as externalities and carrying capacity.

See the relationship between business process reengineering (BPR) and sustainability.

Recognize environmental muda.

Issues to Consider:

Problem (from Garett Hardin (1968) The Tragedy of the Commons: "Picture a pasture open to all (!!). It is to be expected that each herdsman will try to keep as many cattle as possible on the commons... Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?"

Economic: (My) marginal benefit / (my) marginal cost.

Benefit is all mine, but the cost is distributed over all --> negative externality.

Individual interest ≠ community interest.

Short-term interest ≠ long-term interest; interests cannot be 'sustained.

Overall result: 'common' resource disappears and the disappearance accelerates.

US example: Boston Common.

Problem: can you think of (other) real-world examples of this? What about other, nonenvironmental common resources?

Systems theory: Carrying capacity: maximum continuously supportable load (Catton, 1986):

Oregon Field Guide: Tualatin Riverkeepers.

Maximally sustained grazing yield of the commons.

Maximally sustained fishing harvests.

Maximally sustained throughput of cars at 55M/Hr. on a highway.

Problem: Do you know of other, nonenvironmental or business systems that have carrying capacity?

Web servers: denial of service attack.

Tragedy of the commons: rational (short-term, individual) behavior leads to rapid exceeding of a common (public) system's carrying capacity, harming the individual in the long run.

Not always easy to recognize: e.g., what about pumped-storage hydroelectricity?

Problem: How could we measure the impact of our business on the 'commons? Can we compute the marginal benefit / marginal cost?

Footprints:

Energy:

Metters et al. (p. 61):

Improperly disposed used oil US/year: 200M gallons (20 × Exxon Valdez).

Delta Airlines (2003): 2.37B gallons of fuel.

Etc.

Encyclopedia of Earth:

US manufacturing electricity inputs: 3,102 TBTU vs. 6,444 TBTU losses:

Switching off the light saves (the commons) three times as much as it uses.

95% of the power consumed by an incandescent light bulb is converted into heat ==> go figure...

Of 24,658 TBTU footprint, only 10,699 TBTU(43%) is used for actual processing (not counting processing losses).

Carbon: BP Carbon (CO₂) calculator.

Land.

Etc.

Sustainability in business: triple bottom line:

Financial sustainability.

Environmental sustainability.

Social sustainability:

Hitachi Consulting/Aspirity Corporate Social Responsibility (CSR) Information System: MIS 2006 BA370/371 project.

Ways to escape the Tragedy of the Commons: Privatization -- Government Control -- Hybrid solutions:

When does an environmentally friendly process or product change reduce cost?

When the environmental resource(s) is a commodity rather than a commons.

When not making that change leads to (costly) legal action.

Two ideal-typical ways of escaping the Tragedy of the Commons:

privatization ==> commodification ==> trade.

government control ==> taxation (quasi commodification) and legal constraints.

Hybrid: government sets (legal) constraints or boundaries but allows markets to flexibly meet these constraints; e.g., carbon (emission) trading.

Metters et al.: environmentally friendly measures often help the financial bottom line:

Delta Airlines' single-engine taxiing (environmental friendliness as a byproduct).

Royal Dutch Shell selling its CO₂ to carbonate soft drinks.

UPS redesigning its packaging making it lighter.

Home Depot offering certified lumber products.

Process redesign:

ISO 14000.

Rackspace Managed Hosting (San Antonio, TX) got its computer hardware vendor to stop including redundant cables, manuals, spare parts, etc. with its orders (or bundle them in a single package).

Reverse logistics (aka reverse supply chain): Radio Frequency IDentification (RFID).

Dematerialization: replacement of material (physical) goods and people-based (wetware) activities with immaterial ones:

Shrinking the world through information systems ==> cutting on transport:

E-commerce: buy on-line.

Call centers.

Personal: calling the store and ask if the item is in stock rather than driving out to go check.

Life-like video conferencing: HP-Halo, Cisco Telepresence, Teliris, Codian Tandberg, etc.

Replacing paper with electronics for storing information.

Computer virtualization:

Mitchell, R.L. FAQ About Going Green (ComputerWorld, Sep. 3, 2007):

"The cost of electricity over a three-year period now exceeds the acquisition cost of most servers."

"The biggest savings come from server consolidation using virtualization technology."

Metters et al. p. 65: DuPont automobile painting street:

Note: process remains virtually intact; dematerialization caused by change of ownership!

Problem: Think of examples where companies initiate environmentally friendly measures. Why do they do this? Does it lower their cost? Improve their products? Improve their processes? Improve their image? Do they just want to do good? Any other reasons you can think of?

Winco Foods (Corvallis): Paper or plastic? 5ct. discount for every paper grocery bag that you use again at checkout.

Coffee places that give you a small discount if you bring your own cup.

Problem: Try to think of all the advantages and disadvantages for businesses of being sustainability sensitive.

Problem: What are the advantages or disadvantages of each of the three methods to overcome the Tragedy of the Commons: privatization, government control and hybrid solutions?

Test questions:

Is there a relationship between environmental footprinting and simulation modeling? Explain your answer.

Explain the concepts of carrying capacity and externality. Provide examples of both.

Explain 'computer virtualization' and explain how it is a variation of capacity management.

Take the BP Carbon (CO₂) calculator test. See how you can modify your footprint by changing your answers.

(Answer this question after the lecture on outsourcing): How would you use the BP Carbon (CO₂) calculator to test the effect on footprinting from video conferencing systems such as HALO and Telepresence?

What is 'dematerialization?' Provide a few examples.