Resource efficiency – a golden opportunity for FMs
I was privileged to be invited to address delegates at the recent European FM Summit in Prague on the subject of waste management. The theme of the presentation, titled ‘Less is more’, was to invite the audience to consider how a really well thought-through approach to waste management and resource efficiency could contribute to improved performance, and what a great position facilities managers were in to influence key outcomes.
One of the constant refrains I hear from facilities managers is the need to gain more traction in the boardroom: to have influence at both operational and strategic levels; to contribute not just to financial performance but to quality of service, productivity and corporate responsibility goals. Resource efficiency gives them such an opportunity.
Waste is a significant problem. On average, each of the 500m people living in the EU throws away around half a tonne of household rubbish every year. This is on top of huge amounts of waste generated from activities such as manufacturing (360mt) and construction (900mt), while water supply and energy production generate another 95mt. Altogether, the European Union produces up to three billion tonnes of waste every year.
The actual cost of waste to an organisation is typically equivalent to between 4% and 5% of turnover, but it can be as high as 10%, depending on the nature of the business.
I believe the effective management of waste and efficient use of resources presents FMs with a golden opportunity to make a telling contribution to their business. But while that’s an easy concept to put across, the trick (and therefore the skill) comes in how you make the business case – and that’s a lot harder.
You can download a separate paper produced to accompany my European FM Summit presentation here. It contains links to a range of useful statistics, some of which I’ve reproduced below.
At the summit, I gave reasons why facilities managers must, should, and should want to, better manage waste and resources.
The ‘must’ is the easy part: it’s the law. The European Framework Directive has been transposed into national law in all EU member states, and its scope requires us to apply the waste hierarchy: what that means in practice is that we must first consider how we can prevent waste before we go on to think about how we can reuse or recycle materials, let alone dispose of them. More of which, later.
There are countless rules and regulations that FMs must comply with, not least the provisions of the Companies Act 2006 that require larger businesses to report on environmental performance, and policy considerations such as the impact of proposed changes to ISO 14001 expected to come into effect from January 2015.
The ‘should’ is trickier. While there has been much hand-wringing over the climate changed debate (as recently as last week a report suggested that global warming was not increasing as rapidly as some forecasts were predicting http://www.bbc.co.uk/news/science-environment-22567023) there is little disagreement that the world’s natural resources are running out.
Environmental impacts pose a security threat, according to the US National Intelligence Council's Global Trends 2030 report: demand for food, water, and energy will grow by approximately 35, 40 and 50% respectively in the next 17 years. An international study by the Carbon Trust found that, when resource shortages do become a reality, 60% of organisations think the cost of their products and services will need to increase, 55% think they will need to engage in fewer markets, and 43% think they will deliver a less varied service or product offering.
And yet that same study suggests businesses are sleepwalking into a crisis. Only 39% have either made changes, or are planning to make changes in the next three years, to the way they do business in order to combat resource scarcity. Nearly half (46%) don’t plan to take action for at least the next five years. 43% do not monitor the risks to their business of environmentally-related shocks such as energy price rises and environmental disasters, and over 50% have not developed goals to reduce their company's consumption of water, waste production or carbon emissions. Only 13% reward senior management based on sustainability performance criteria.
These are sobering statistics, and all the more worrying when nearly half (47%) of executives surveyed believe that acting on sustainability issues decreases profits. There is significant evidence to the contrary, if you can make the business case.
That’s one good reason why FMs should focus on resource efficiency – because resources are running out. Cost savings, and corporate responsibility, are two others.
On cost reduction, WRAP (the Waste and Resources Action Programme) has produced a useful study highlighting what it has identified as ‘hotspots’ where FMs can make the greatest gains in resource efficiency. Catering (food waste), furniture and fittings, HVAC, waste electrical and electronic equipment (WEEE), and water all provide significant opportunities not just for reducing CO2 but also for cutting costs.
WEEE is the fastest growing waste stream in the EU, and is expected to reach 12mt by 2020. Food waste is also significant: on average 40% of biodegradable waste in the EU still goes into landfill. England alone produces around 7mt of non-domestic food waste each year, enough to fill Wembley stadium nine times over.
On corporate responsibility, enlightened FMs should be making their voices heard. Facilities managers do more than just support operations: they help to create and reinforce the culture and values of an organisation. From tax-dodging practices to the employment of slum workers in Bangladesh, no employer can afford to be so out of touch with its community, its workers or its customers.
To me, all of these factors add up to why facilities managers should ‘want to’ win the argument on waste and resource management, not just because they have to. It’s a moral leadership position: doing the right thing because it’s the right thing to do.
To return to my earlier point: the difficulty of making the business case.
The waste hierarchy requires that we prevent waste before we even begin to create it, for example by designing it out, by creating products from a smaller number of re-usable parts, or by extending the life of existing products. The financial gains of this approach are massive, but the calculations require a leap of faith.
Government policy is set on diverting waste from landfill (with the Landfill Tax now at £72pt), but almost half of all waste in the UK (46%) nevertheless still goes there.
Compare that with the savings that can be made by not producing waste in the first place and you have a compelling argument.
Some 80% of the environmental impact of today’s products, services and infrastructures are determined at the design stage, according to the UK Design Council. So, early influence can have a major impact on reducing waste downstream. It helps to try and put some numbers on that.
Metrics from WRAP try to do just that. According to their study, it costs £70 pt to divert food waste from landfill. Yet preventing creation of that food waste to start with would save £500 pt in manufacturing costs, £1,088 pt in distribution cost, and £1,676 pt in the retail sector. Not producing that waste to start with could therefore create ‘savings’ almost 50 times greater than the cost of disposing to landfill.
FMs should devote more time to preventing waste, and should not be afraid to ask for help in how to make the business case for resource efficiency: ‘invisible’ savings can be hard to calculate. If you have any comments or if you would like to discuss how to make the business case for preventing waste in your organisation, please do get in touch.