16.4 Lean Six Sigma and Sustainability

If you have paid attention to how products are being labeled in stores lately, one thing you might have noticed is that an increasing number of logos on a product are associated with not only the product’s brand but also its certifications. Consider the following:

• Rainforest Alliance – A popular label that is especially prevalent among coffee brands. It indicates that the product is sourced from suppliers that are committed to protecting rainforests and combatting deforestation.

• Better Cotton Initiative – Popular among apparel and other softline products using cotton. This label certifies that the product is made with cotton sourced from farms that are committed to fair and ethical labor practices.

• Fair Trade Certified – This label is most commonly associated with the agricultural industry but is also found in certain manufacturing industries. It certifies that a product is sourced from companies that pay a living wage based on the local economy.

Of course, there is also an abundance of other labels out there. The increasing adoption of these labels indicates one thing: consumers are increasingly paying attention to the overall impact of their choices on the environment and the community as a whole. In turn, the sustainability of a business is also becoming dependent on the business of sustainability. Just what does sustainability have to do with Lean Six Sigma?

First, the above three certifications capture three different dimensions: environment (e.g., Rainforest Alliance), social (e.g., Better Cotton Alliance), and economic (e.g., Fair Trade). All of these dimensions are part of the Triple Bottom Line of a business (Figure XX). Within the Triple Bottom Line, true corporate social responsibility resides when a company can balance all three. Lean Six Sigma can help.

Economic Sustainability

Among the three dimensions, perhaps the most prominent one is economic sustainability. It’s easy to see why: a company that struggles to make money cannot be sustained for long. Lean Six Sigma is thus far most commonly applied to improve economic sustainability. After all, everything you have learned in this course so far relates to some elements of being able to increase quality and decrease cost. With increased quality, you hope to reduce defects and command a higher market price. With decreased cost, well, that is self-explanatory.

What is important, however, is to remember that “lean” does not simply mean “do more with less.” For instance, immediate profitability may not always translate into long-term profitability. Joseph Schlitz Brewing Company serves as a stark reminder of this caution, as its continuous drive for lower cost and efficient production came at the expense of using cheaper and inferior substitute raw materials and production processes, ultimately resulting in customers abandoning their products in droves. Schlitz and Budweiser went head-to-head for years during the mid-20th century for the crown of beer king of America. By using corn syrup instead of malted barley and hop pellets instead of fresh hops, and by cutting brewing time from 25 days down to 15 days, the precipitous drop in its quality—along with sales—resulted in Schlitz losing approximately 90 percent of its brand value between 1974 and 1999.

It’s not that cost-cutting is undesirable. In many instances, cost-cutting frees a company to commit resources to other potentially more profitable areas of business.

Environmental Sustainability

According to the Intergovernmental Panel on Climate Change (IPCC), the global temperature will continue to rise by 2.5 to 10 degrees Fahrenheit over the next century. While the numbers appear to be somewhat small, they carry significant impact on our daily lives. The main cause? Greenhouse gas (GHG) emissions coupled with natural climate variations not only increase global temperature but also drive changes in weather patterns around the world. In response to the mounting scientific evidence of climate change, 195 governments in the world signed the Paris Agreement in 2015 to focus on climate change mitigation, adaptation, and finance.

There is a natural alignment between environmental responsibility and Lean Six Sigma. As you have learned before, a foundational principle of Lean Six Sigma is waste reduction. By eliminating waste, we can increase our process efficiency. For instance, by improving our process reliability, we can drive out defects to minimize material waste and the need to rework defective products. In doing so, we reduce not only the overall amount of input material needed to achieve a given level of output but also the secondary wasted labor and additional material necessary to repair and refurbish defective products.

How do you ensure that environmental factors are adequately considered as a part of your Lean Six Sigma process? One approach could be that as you develop desired outcomes as a part of any project, environmental impact should be one of the factors you evaluate. Metrics such as carbon footprint, GHG emissions, plastic reduction, energy efficiency, and even carbon offsets through initiatives such as planting trees can all be incorporated as a part of your process improvement plan. If you are looking for a place to start, there are different environmental management certifications out there that can assist your company in exploring different ways to become more sustainable. In turn, these certifications can also serve as a starting point for environmentally friendly sourcing approaches. To further assist companies in adopting an “environmental sustainability at the source” approach, the Environmental Protection Agency created a basic formula of Environment + Price + Performance.

However, one thing you will need to be careful with is “greenwashing.” Being green is not easy. As you learned throughout this course, continuous improvement is a journey that is rife with impediments requiring passion and perseverance to overcome. It is very easy for a company to speak the language but not do the work. For instance, Volkswagen cheated on emissions tests by fitting different models with a device that would artificially alter emissions performance when it detected that a vehicle was undergoing an emissions test. Even as its vehicles touted low emissions and eco-conscious features, in reality they were emitting up to 40 times the regulatory limit for pollutants. Employing a Lean Six Sigma approach for implementing environmental sustainability initiatives can help companies to overcome many of the biggest obstacles in their way.

Social Sustainability

If you bought a shirt or a pair of shoes in the 1990s, there was a good chance that it was produced in a poorly lit and ventilated, run-down factory where workers toiled for long hours in exchange for little pay. While sweatshops are most commonly associated with Nike and its ’90s debacle, they unfortunately continue to the current day. That is because the apparel and textile industry is often considered an entry point for developing countries in the world for economic growth. Unfortunately, developing countries also tend to lack the regulatory framework to minimize labor exploitation.

The challenge, then, is to bring not only economic development to foreign suppliers but also an ethical approach to managing their labor standards. You probably wouldn’t be surprised to learn that companies in developing countries often lack managerial expertise. Often, suppliers in developing countries are simply doing what is legally required of them, which really isn’t much. At the same time, sweatshop critics have often characterized the global sourcing approach as “a race to the bottom.” Unfortunately, the pursuit of lowest cost is often entangled with waste reduction, as companies sometimes mistakenly view “lean” as maximizing the immediate returns on every dollar invested.

The hidden cost of such a myopic approach to Lean Six Sigma can be dramatic when events take place such as the highly publicized worker suicides at Foxconn in 2010 and the 2013 Rana Plaza collapse in Bangladesh. In both instances, loss of human life—over 1,100 deaths in the case of Rana Plaza collapse—is not only incalculable but also severely damaged household brands associated with companies that purchase from these suppliers. These concerns extend to the current day, as allegations of forced labor, child labor, prison labor, and sweatshop labor continue to surface. In response, non-governmental organizations are increasingly publicizing labor violations; government organizations such as the Forced Labor Enforcement Task Force are also raising stakes for those companies with lax supplier labor oversight.

Altogether, Lean Six Sigma can be either used for promoting ethical labor practices and social sustainability or misapplied as myopic profit maximization to erode social sustainability. Consequences of not paying attention to social sustainability can be severe.

Conclusion

Of all the tools and knowledge you have gained in this course so far, one important question to ask is what is the impact on your company’s long-term success? After all, if a change you are trying to implement is only going to have limited impact in the near future, then is it really worth investing a significant amount of resources in it? On the other hand, if a change you are trying to implement is going to have an ongoing impact on your company far into the future, then you will need to make sure that it is going to be around for a long time.