In Part 1 of this case history, we described how a small Nebraska landscape architecture firm controls its costs and in Part 2, we looked at how it keeps its staff motivated and productive through sustainable business practices.
Frequently overlooked in sustainability literature, amidst all the noise about renewable energy, energy efficiency, water conservation and other resource productivity improvement measures, is the fact that more and more large corporations have adopted business strategies to bring to market new products and services designed to address the world’s sustainability challenges and create new revenue streams. High visibility examples include GE’s Ecomagination and IBM’s Smarter Planet strategies.
Big Muddy Workshop, Inc. (BMW) is an unusual example of a small company that used changing local climate conditions and concerns about the adverse impact of stormwater runoff to expand its expertise and develop new, green infrastructure (GI) services for its clients.
Over the past 30 years the climate of eastern Nebraska, where the landscape architecture and green infrastructure design services firm does most of its business, has shifted into a warmer zone (as defined by the USDA). During this time, more frequent and severe periods of drought have occurred in the region. In recent years particularly, this shift has been accompanied by increasing constraints on local parks and recreation budgets.
Part 1 of this case history showed how this small landscape architecture firm in Nebraska employs sustainable business principles to reduce operating costs in its business.
From the beginning BMW adopted a highly disciplined approach to the financial management of its projects. The project manager for each project is involved in the process of establishing a project budget and all staff understand that they will be held accountable for performing to the standards, goals and objectives established for them. CEO John Royster is firmly convinced that a firm, but fair, system for measuring employee productivity is consistent with the firm’s philosophy to make the most efficient use of the professionals it employs, which are after all the firm’s primary assets.
To this end, Royster and his partner Katie Blesener have established an unusual system for evaluating the productivity of each individual staff member. The project budgeting and management system allows each person’s hours to be tracked to either individual projects (billable) or to marketing or administrative duties (unbillable). BMW understands very clearly the ratio of billable to unbillable hours it must achieve to maintain a satisfactory level of profitability. A well-tested formula, completely transparent to all staff, allows the firm to establish base salaries and raises on how well individuals perform to the budgeted billable hour percentages.
Big Muddy Workshop, Inc. is a landscape architecture and green infrastructure design services firm in Omaha, NE. This small but highly successful company has embraced the principles of sustainable business, not only in the way it uses resources, both natural and human, but also to shape the range of services it provides.
John Royster, CEO and majority owner, says he was “born into sustainability.” Educated in natural resource management, early in his career he worked in both a large international architecture firm and a smaller regional landscape architecture firm. He enjoyed the work but felt that neither had the systems in place to encourage staff to be fully engaged in sustainability. Accordingly he founded BMW in 1990.
BMW’s mission was established to protect our remaining significant natural areas, restore disturbed lands, and preserve historic and cultural resources, encouraging public awareness of and access to these special spaces. Royster recognized that this values-driven mission would require the firm to be very environmentally and socially responsible. But he also understood that this would be possible only if he established and maintained a financially sustainable business model for his young company. He has been zealous in eliminating every nickel of unproductive cost and makes no apology for squeezing every drop of benefit out of its assets, human resources included.
The result is a company which has successfully integrated the financial, environmental and social elements of sustainable practices into a resilient business model that has prospered for 23 years, establishing a strong competitive position in its regional market.
The United Nations Global Compact (UNGC) recently released its 2013 Global Corporate Sustainability Report on the state of corporate sustainability.
The UN Compact’s pool of respondents have committed to pursuing the UN’s defined goals associated with Human Rights, Labor, Environment and Anti-corruption. The study, using a Six Sigma-like continuous process improvement model, measures where companies are in their sustainability programs along the wheel of: commit, assess, define, implement, measure and communicate.
UNGC partnered with The Wharton School of the University of Pennsylvania to conduct the study. There were a total of 1712 responses to the survey, of which 753 (44 percent) were classified as SMEs, those firms with 249 employees or less. The remaining 56-percent of the responses were large enterprise sized firms. As an aside, the U.S. Small Business Administration defines SMEs as 499 employees or less.
The 2013 report identifies four key findings:
What drives small and mid-sized companies (SMEs) to incorporate sustainable practices into their business? Knowing the answers to this question will aid trade associations and other trusted advisors in developing their outreach and support programs aimed at the SME market. Sustainability4SMEs identified in a previous post that trade associations and a variety of other advisory organizations (e.g. chambers of commerce, economic development agencies) are the primary go-to sources of sustainable business information.
In the largest U.S.-based study to date on sustainability adoption and hurdles to implementation for SMEs, Sustainability4SMEs asked survey respondents to identify the drivers to implementing sustainability. Recognizing that there are myriad reasons influencing company decisions, the participants were allowed to check multiple responses.
The results of the question, shown in the figure below, were startling; inverse to what was expected.
Implementing sustainability practices in a smaller company is simple, right? No! According to the current findings of Sustainability4SMEs’ research - the largest SME-focused sustainability research effort to date in the United States – SMEs confront numerous barriers when it comes to sustainability.
A firm, or a group of people within it, may have heard about sustainable business as a way to drive cost reductions, innovation and improved financial performance. But once they start looking into it they often run into what seem to be insurmountable difficulties. Our survey queries respondents who have not embarked on a sustainability initiative in order to identify the hurdles and barriers that stymied their initial efforts.
Sustainability4SMEs asked about barriers for several reasons. First, there is an opportunity for sustainability information sources (like those discussed in a previous post) to do a better job of helping local businesses overcome these barriers if they understand precisely what barriers the SMEs are facing.
Second, the question permits these obstacles to be divided into internal and external barriers. Business leaders typically learn best from the experiences of peers and competitors. Industry-specific sustainability case studies and success stories are therefore a powerful way to show how other SMEs have overcome barriers and challenges inside their organization, and to demonstrate and quantify the economic value that makes the business case for adopting sustainable practices. Where the barriers are external, a collaborative effort from the SME community, the local chamber of commerce, a specific trade association or some other trusted advisor will generally be the best way to overcome them.
In the largest U.S.-based research study on SME attitudes towards business sustainability practices conducted to date, Sustainability4SMEs asked the question: where do small and mid-sized enterprises (SMEs) obtain sustainability information, methods for implementation, and measurable success metrics for their specific industry?
Our research shows that many SMEs are interested in developing sustainability-based initiatives but aren’t sure where to turn to find the information and resources they need to get started. The question was therefore aimed at identifying those trusted advisors, organizations and knowledge bases that businesses have found most useful as sources of sustainable business practices information. Our findings should encourage these trusted advisors, agencies and knowledge bases to be highly proactive, reaching out to their local business community and/or constituents with actionable sustainability information aimed at strengthening the economics of the businesses and contributing to overall economic growth. Our hope is that this will accelerate the process through which SMEs grasp the benefits of sustainable business practices and embark on industry-specific sustainability initiatives.
Part 1 and Part 2 of this case history have shown how a 70-person metal fabricator in Colorado began to realize significant financial benefits from applying the principles of sustainable business to improving the efficiency with which it used resource inputs in its manufacturing operations.
These types of energy and resource conservation efforts are often seen as the low hanging fruit that gets sustainability off the ground. That’s true in Qualtek’s case too, but CEO Tony Fagnant and his son Chris are both quite clear that the sustainability initiative’s biggest benefit to the company is the positive impact it has had on employee engagement and productivity. Can they measure this? No, not precisely. Do they see it? Absolutely. Says Tony, ”You KNOW there’s a response when employees step up without prompting, telling us we should do this or that, and telling us they’re taking some of these ideas home for personal implementation.” THAT means the company is well on its way to its making sustainability part of “the fabric of its business process.”
Part 1 of this case history described how Qualtek, a 70-person metal product manufacturing company based in Colorado, made a decision to adopt the principles of sustainable business as a key driver of its corporate strategy.
From the beginning of its journey, Qualtek’s leadership has worked towards the goal of making sustainability a part of what CEO Tony Fagnant calls “the fabric of the business process” and was determined to involve its staff in this effort. A so-called E-team was formed as a focal point for creating and evaluating sustainability ideas. It is kept “fresh” by having one person cycle out and a new member join the team every six months. The company was also adamant about initially addressing the low-hanging fruit areas that would have a significant impact on manufacturing costs.
The company decided to focus first on utilities, which accounted for about 12 percent of total operating expenses. Electricity costs represented nearly $20,000 per month, with water an additional $3,000. Aided by rebates from the local utility, an early initiative was to replace old metal halide lighting in much of the manufacturing area with T-5 fluorescents, which are nearly 40 percent more energy efficient. This change saves the company approximately $2,800 per year, or just over one percent of its total annual electricity expense.
Qualtek, a 70-person, Colorado-based manufacturing company, looks to sustainable business practices as a way to enhance its market competitiveness and financial performance. The sustainable business journey began with electric and water cost reduction programs, and has also addressed risk mitigation, waste management, corporate culture and employee well-being. This is the story of the company’s roadmap.
To hear pundits tell it, you’d think manufacturing is dying in the U.S. and, indeed, it is true that a significant number of manufacturers have gone out of business in the past 30 years in this country. So it’s no mean feat that Tony and Mary Fagnant and their team at Qualtek Manufacturing have not only survived, but continue to grow the company.
By Graham Russell and Martha Young
Most large corporations in the U.S. and around the world have recognized the imperative to transition to a more sustainable global economic model and are reaping the business benefits of sustainability-based strategies. However, the majority of small and mid-sized enterprises (SMEs) are not following suit, at least in the U.S.
SMEs, defined as those businesses with less than 500 employees, are the growth engine of the U.S. economy, traditionally accounting for most of its innovation and new job creation. An exaggeration you say? Well, consider these statistics regarding SMEs gleaned from the U.S. Small Business Administration, Office of Advocacy’s website: