New Zealand Establishing Sustainable Manufacturing Practices in SMEs

New Zealand Establishing Sustainable Manufacturing Practices in SMEs The University of Auckland Rainer Seidel, Manuel Seidel, Mehdi Shahbazpour DEPARTMENT OF MECHANICALENGINEERING

21 February 2007 Presentation Contents Sustainable Manufacturing in New Zealand The University of Auckland New Zealand Case Study Background Project Strategy and Approach Tools and Methods Applied Achievement and Outcomes Conclusions DEPARTMENT OF MECHANICAL ENGINEERING

The University of Auckland New Zealand 21 February 2007 Sustainability in New Zealand DEPARTMENT OF MECHANICAL ENGINEERING A clear emphasis on environmental aspects is essential for New Zealand companies as well as for its people: “New Zealand has an image overseas of a clean, green country with products and services to match. With food and drinks export sales alone in the region of NZ$14 billion (about € 7. 8 billion), New Zealand stands to lose a lot if it can not demonstrate to our customers around the world that it practices what it preaches” New Zealand Business Council for Sustainable Development, November 2003 However, implementing sustainable manufacturing practices is a challenge for New Zealand SMEs; and at this stage there are still relatively few public resources, no major funding mechanisms, and little experience to support the development of sustainability in manufacturing enterprises in this country

The University of Auckland New Zealand 21 February 2007 Project Background – CML Ltd. DEPARTMENT OF MECHANICAL ENGINEERING Medium–sized, family-owned New Zealand manufacturing company Largest panel furniture manufacturer in Australia & New Zealand Capacity: ½ million pieces of furniture per year 70% of production exported: Australia, USA Growth achieved through good cost/quality mix, and flexibility and variety of products Very competitive market, high pressure of low cost imports Profitability and cash flow a major problem No prior experience with sustainable manufacturing

The University of Auckland New Zealand 21 February 2007 Origin of Sustainability Programme DEPARTMENT OF MECHANICAL ENGINEERING The establishment of the sustainability programme at CML in 2004 was based on the serendipitous synergy of a range of factors: The CFO of CML developed a personal relationship with a potential European customer, who informed him about environmental legislation and trends in the EU, and raised his interest in sustainability. University staff and project students associated with CML expressed interest in ‘green manufacturing’ work’, which provided an external drive and low cost development resources First signals were emerging from Australian government agencies that sustainability would become a factor in government projects Sustainability was identified as an emerging competitive factor to ensure CML’s future competitiveness

The University of Auckland New Zealand 21 February 2007 Project Strategy and Approach DEPARTMENT OF MECHANICAL ENGINEERING Building a strong foundation for the strategic integration of sustainability in CML’s management processes, in order to make optimum progress and to gain the maximum benefit from the project developments: Develop an in-depth understanding of sustainability in general, and of its benefits, risks and opportunities for CML in particular Evaluate CML’s current situation, and identify the factors in its business environment and its existing and prospective markets with a potential impact on or benefit from sustainable production Identify tools, methods and mechanisms, as well as support programmes and best practice examples, that could be used to make progress

The University of Auckland New Zealand 21 February 2007 Business Tools Applied DEPARTMENT OF MECHANICAL ENGINEERING SWOT Analysis Framework for achieving insights into the situation and formulating development goals in line with the requirements of the organisation and other stakeholders Covering both macro- and microeconomic (business) levels Consideration of the salient parameters of the existing and future external environment Stakeholder Analysis Identification of the roles and views of stakeholders affected by the integration of sustainability Considering the three dimensions that determine the salience of stakeholders: Power, Legitimacy and Urgency Categories of stakeholders covered: internal stakeholders, stakeholders along the value chain, stakeholders in the local community, and societal stakeholders Causal Loop Analysis Identification of the effects, interrelationships and dynamics of implementing sustainability

The University of Auckland New Zealand 21 February 2007 SWOT Analysis DEPARTMENT OF MECHANICAL ENGINEERING Strengths Weaknesses Opportunities Threats High standard of production and information technology, quality management and health and safety management Lack of experience and resources Cost reduction (energy, waste disposal, raw materials, etc. ) Growing low cost competition from Asia reducing margins and resources for sustainable production High degree of support from stakeholders No strong drivers for sustainability outside the project Increased market shares in New Zealand, Australia and USA Loss of market share if no progress on sustainability Availability of internationally accepted and locally proven cleaner production methodology Short and long term benefits not quantified as yet Proven financial and environmental benefits of cleaner production and waste minimisation New market opportunities in Europe and Asia New product ranges for environmentally conscious customers Early alignment with future environmental legislation, avoiding costly ad hoc initiatives Powerful branding and marketing tool Competitors faster in development of sustainable brand Global economic crisis could stifle demand for sustainable products Upcoming local legislation with unforeseen impacts, e. g. New Zealand Packaging Accord, etc New international trade boundaries based on new environmental legislation

The University of Auckland New Zealand 21 February 2007 Conclusions from SWOT DEPARTMENT OF MECHANICAL ENGINEERING Products qualify for entry into markets with more stringent environmental legislation such as Europe and Japan. The company will gain the image of being the forerunner in the furniture market in Australasia. Sustainability can be added as a new order-winning criterion to CML’s mix of capabilities, to further differentiate its products in the local market which is heavily under competition from Chinese manufacturers. Significant reductions in energy usage and savings in waste disposal are achievable. Risks due to up and coming environmental legislation in New Zealand will be significantly reduced.

Causal Loop Analysis: DEPARTMENT OF MECHANICAL ENGINEERING The University of Auckland New Zealand 21 February 2007 Understanding the Relationships Important conclusions: - Reinforcing effects are strong, but acting mostly long term - Balancing effects are dangerous for short term profitability

The University of Auckland New Zealand 21 February 2007 Refined Project Strategy DEPARTMENT OF MECHANICAL ENGINEERING Develop a long term work plan for all sustainability activities Use a step-by-step approach and low cost resources Establish a life cycle inventory of furniture production to quantify potentials and impacts Identify opportunities to increase the sustainability of CML’s manufacturing processes and set targets Integrate sustainability in CML’s management processes.

The University of Auckland New Zealand 21 February 2007 Further Tools DEPARTMENT OF MECHANICAL ENGINEERING Life Cycle Inventory Main objective: To identify the environmental impact of the used resources and of the produced waste Initial focus on internal processes to achieve immediate improvements, visibility and credibility Foresighting and scenario building Understanding of alternatives and their impacts Eco-labels and -programmes Alignment with standards Communication of achievement to markets – branding Guidelines and milestones for sustainability project

New Zealand 21 February 2007 Results from Life Cycle Inventory The University of Auckland Ranked waste types Ranking criteria DEPARTMENT OF MECHANICAL ENGINEERING

The University of Auckland New Zealand 21 February 2007 Enviro-Mark® NZ Programme DEPARTMENT OF MECHANICAL ENGINEERING Five step, structured approach to achieving ISO 14001 Adopted as the main tool to create focus and a project plan with milestones and measurable outcomes Used communicate CML’s commitment to sustainability and the project achievements to its customers (through packaging, marketing material and company website) Since project start in 2004, four levels have been successfully achieved; Platinum Level in December 2006 A range of individual improvement activities (e. g. the sustainable packaging project) have been integrated in the overall programme The audit for the final Diamond Level will be organised in the next few months

The University of Auckland New Zealand 21 February 2007 Conclusions DEPARTMENT OF MECHANICAL ENGINEERING The implementation of sustainable manufacturing practices in SMEs requires a strategic and wellstructured approach The application of a broad range of business analysis tools such as SWOT, Stakeholder and Causal Loop Analysis, and environmental analysis tools such as Life Cycle Inventory and Foresighting is essential for success SA structured programme such as the Enviro. Mark NZ scheme creates a solid framework that gives the sustainability project direction and helps motivate staff and stay on track