HCL Whitepaper: HCL's Sustainability Offering

GreenEdgeSustainability for Manufacturing-

An HCL Point of View

© 2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

Sustainability for Manufacturers – HCL Point of View

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1. Abstract..............................................................................................3

2. Sustainability – What it is and why it Matters for Industrial

Manufacturers?..................................................................................3

2.1 Background........................................................................................3

2.2 Sustainability: What It Is and Why It Matters..................................3

2.3 The State of Sustainability for Industrial Manufacturing..............4

3. Challenges for Manufacturers to implement Sustainability

Initiatives.............................................................................................5

4. Sustainability Business Drivers for Manufacturers........................6

4.1 Corporate Drivers..............................................................................6

4.2 Manufacturing Drivers......................................................................7

5. Strategies to Create Sustainability for Industrial Manufacturers..8

5.1 Sustainability at the plant floor.........................................................8

5.2 Sustainability at the enterprise and value chain level......................8

6. HCL’s Sustainability Framework for Manufacturing

Companies..........................................................................................9

7. Business Benefits of Sustainability...............................................12

8. Conclusion.......................................................................................13

9. References........................................................................................13

10. Profiles..............................................................................................14

Table of Contents



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1. AbstractSustainability is an increasingly common theme in the business and trade press, at conferences, and in everyday conversation. This white paper encourages manufacturers to integrate sustainability into their corporate strategy to drive economic value add. It reviews the top environmental issues affecting the manufacturing sector and explains how taking action on sustainability can help mitigate perennial business challenges.

HCL Technologies, (HCL) has designed and developed a comprehensive sustainability framework that caters to the specific needs of manufacturing industries. Our vision is to transform organizations through compliance into economic value add for sustainability. This approach focuses on building carbon footprints of all GHG emissions across the entire manufacturing value chain, energy, waste and water management which will help build better internal control, make reporting easier, accurate and timely, thus, enabling the organizations to achieve their business goals.

2. Sustainability – What it is and why it Matters for Industrial Manufacturers?2.1 Background

In recent decades, the expansion of economic activity has been accompanied by growing global environmental concerns, such as climate change, energy security and increasing scarcity of resources. In response, manufacturing industries have recently shown more interest in sustainable production and have adopted certain corporate social responsibility (CSR) initiatives. Nevertheless, such efforts fall far short of meeting these pressing challenges. Moreover, improved efficiency in some regions has been offset by increases in consumption and growth in others.

The reduction of greenhouse gas (GHG) emissions has been a top priority for governments, and many have adopted long-term frameworks and targets alongside the Kyoto Protocol to tackle global warming. Interestingly, the current economic crisis facing countries has raised public expectations for greater industry efforts to achieve sustainable development.

2.2 Sustainability: What It Is and Why It Matters

Traditionally sustainability is understood 'Triple Bottom Line' approach encompassing economic, social and environmental dimensions.

Figure 1: The Triple Bottom Line

The economic dimension of the Sustainability challenge lies in enhancing profitability, increasing shareholder value and creating wealth wh i l s t a g g re s s ive l y pu r su ing opportunities for growth.

The social dimension of the Sustainability challenge is in achieving high rates of economic growth in order to enable all sections of society enhance their quality of life and live with dignity.

The environmental dimension of the Sustainability challenge lies in pursuing economic growth whilst preserving and enhancing our natural resources.

Economic

Social Environmental

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The sustainability of a manufacturer is measured by the effect of its operations and its products throughout their lifecycle.

"Sustainable manufacturing processes deploy the optimal use of material and human resources for the long term to produce the desired product."

This would imply designing products that:

?consume a minimum of energy in their manufacture and end-use?have minimal carbon footprints in their manufacture and end-use?have prolonged useful lives, and modular parts to extend the useful lives of

components?are composed of parts that are recyclable and reusable to the greatest extent possible?consume a minimum of water in their manufacture?are composed of materials that have minimum possible impact on biodiversity?produce minimal, air, water and other pollutants in their manufacture and end-use

IT's role in addressing sustainability objectives is limited to Green IT, or reducing the use of energy in data centers. While the savings can be substantial, the fact is that only 2% of all carbon emissions can be traced to this source. The use of IT lies in addressing the remaining 98% of carbon emissions!

One idea in particular the “triple bottom line” shown in Fig. 1 emerged as the business case for sustainability. This philosophy suggests a more holistic approach that relies on the principles of economic prosperity, environmental stewardship and corporate responsibility. Without metrics to define the achievement of sustainability, success in this arena cannot be measured.

2.3 The State of Sustainability for Industrial Manufacturing

The industrial sector (including mining, agriculture, fishing, and manufacturing) accounts for 31 percent of total U.S. energy consumption, the largest share of any sector including transportation (28 percent), residential (22 percent), and commercial (19 percent). 33 Manufacturing accounts for two-thirds of the industrial sector’s energy consumption. Natural gas and traditional electricity accounts for most of the manufacturing sector’s energy sources. While 47 percent of manufacturers reported average progress or better towards world-class green and sustainability measurement benchmarks in a recent survey, only 13 percent described their green measurement systems reviews as including regular monitoring or transparency. Only one-third of the manufacturers surveyed report having more than three-quarters of their sales volume from products that are recyclable and/or reusable.

Likewise, they are responsible for 36% of global carbon dioxide (CO2) emissions (IEA, 2007). Manufacturing industries nevertheless have the potential to become a driving force for the creation of a sustainable society. They can design and implement integrated sustainable practices and develop products and services that contribute to better environmental performance. This requires a shift in the perception and understanding of industrial production and the adoption of a more holistic approach to conducting business.

The environmental impact of industrial production has historically been dealt with by dispersing pollution in less harmful or less apparent ways. Driven in part by stricter environmental regulations, industry has used various control and treatment measures toreduce the amount of emissions and effluents. More recently, its efforts to improve environmental performance have moved towards thinking in terms of lifecycles and integrated environmental strategies and management systems, and companies have also begun to accept larger environmental responsibilities throughout their value chains.

The adoption of more integrated and systematic methods to improve sustainability performance has laid the foundation for new business models or modes of provision which can potentially lead to significant environmental benefits. Efforts to create closed-loop, circular production systems have particularly focused on revitalizing disposed products into new resources for production, for example by establishing eco-industrial parks where economic and environmental synergies between traditionally unrelated industrial producers can be harnessed.

3. Challenges for Manufacturers to implement Sustainability Initiatives

One of the more disturbing findings of Gartner’s recent survey is that 93% of respondents are either tracking and reporting carbon with some difficulty, or not tracking emissions at all. Even though carbon is being internalized as a cost of doing business, corporations aren't finding the transition easy. To better understand why this aspect of sustainable action remains so immature and lacking traction, Gartner sought to identify the largest obstacles associated with developing GHG inventories. Overall responses are provided in Figure 3.

Challenges with collecting data and the cost control associated with the economic downturn emerge as the two most significant obstacles. This is followed closely by issues relating to the choice of methodology to employ, difficulties with product life cycle analysis and a perceived lack of government incentives. Although there are real but resolvable or transient challenges in relation to data collection and cost control during the recession, many of the other major obstacles mentioned are perceived more than actual roadblocks to GHG management specifically or enterprise sustainability generally.



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Figure 2: The evolution of Sustainable Manufacturing Concepts (Source: Sustainable Manufacturing and Eco-Innovation, OECD)

Implementation of non-essential technologies; End-of-pipe solutionsPollution Control

Modify products and production methods;Process optimization; Lower resource input & outputSubstitution of materials: non-toxic and renewable

Cleaner Production

Systematic environmental management; Environmental strategies and monitoring; Environmental management systemsEco-efficiency

Extending environmental responsibility; Green supply chain management; Corporate social responsibilityLife-cycle thinking

Restructuring of production methods; Minimising or eliminating virgin materialsClosed-loop production

Integrate systems of production; Environmental partnerships; Eco-industrial parksIndustrial ecology

Prevent

Manage

Expand

Revitalze

Synergise

Treat



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Fig 3. Obstacles Identified as Challenging the Development of Corporate GHG Inventories (Source: Sustainable Business Systems, Part 1: Enterprise Sustainability for

the Low-Carbon Economy, Gartner, Oct 2010)

4.1 Corporate Drivers

Businesses define Sustainability as “Increasing short term and long term profitability by holistically managing economic, environmental and social risks and opportunities”. Sustainability and Climate change both are emerging to be the boardroom topics. Today, there are compelling reasons for businesses to become aware, plan and act on sustainability and climate change.

4. Sustainability Business Drivers for Manufacturers

Fig 4. Sustainability Drivers in Manufacturing (Source: Sustainable Business Systems, Part 1: Enterprise Sustainability for the Low-Carbon Economy, Gartner, Oct 2010



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?

Buyers/customers are looking for sustainability credentials of suppliers in the supply chain. Sustainability and Climate change both are emerging to be the boardroom topics. The key trend being an increasing scrunitization of corporate sustainability credentials by investors. Globally large investors have come together with platforms like Carbon Disclosure Project and ask for sustainability and climate change information from corporates. It is becoming clear that access to funds for business growth and expansion will become difficult if corporates do not act transparently on the issues of sustainability and climate change

Another trend is – customers and consumers evaluating vendors and suppliers on how sustainable are they and their products and services. For example, Wal-mart has begun evaluating suppliers on their sustainability scorecard and this will adversely impact suppliers who are not demonstrating tangible action on sustainability. This will limit access to the markets for such suppliers.

?Regulatory Compliance - The second trend is that regulatory landscape is evolving fast – there are various mandatory sustainability and carbon reporting regulations being enacted world over e.g., EU ETS Carbon Reporting or EPA Mandatory Reporting. This trend is catching up with both developed and developing economies. In India, Ministry of Corporate Affairs has come up with guidelines for sustainability reporting and companies will be able to e-file their reports.

?Competitive Positioning - The third trend is on impact of sustainability on competitive profile of the company. Suppliers and customers increasingly want to do business with companies with strong sustainability credentials both from a corporate and products and services perspective. Companies who continue to ignore the sustainability and carbon management have the risk of losing the competitive advantage.

?Social Responsibility - There is no denying of the fact that a greener company, with greener products and services, is more desirable to a growing segment of consumers and business customers. Because of the prominence of global warming concerns,going green has become part of any Corporate Social Responsibility (CSR) agenda to enhance customer and public perception. Some companies are led by “true believers” who simply want to do the right thing for the environment.

4.2 Manufacturing Drivers

?Design for Effectiveness – Design for environment is the systematic consideration during design, of issues associated with environmental safety and health over the product lifecycle. 80% of a products carbon footprint is decided in the design phase itself. DFE can be thought of as the migration of traditional pollution prevention concepts to into the development phase of the products before production and use. The goal of DFE is to enable design teams to create eco-efficient products without compromising their cost, quality and schedule constraints.

?Responsible Supply – Utilize environment friendly materials, Cost reduction benefits from suppliers’ improved efficiency.

?Responsible Manufacturing – Manufacturers in their quest to reduce cost and improve efficiency have been trying to find ways to reduce the demand on critical resources energy and water. As global demand for energy increases and the impacts of carbon-based energy sources continue to increase, managing energy consumption becomes more than a public relations goal. Managing energy consumption is now critical to the bottom line.

These trends directly impact and create a burden on any company’s bottom line. Energy Management and sustainability programs are required activities for any company that wishes to stay competitive moving forward. Until now, companies did not have viable Solutions to manage IT energy consumption in a manner that allowed for automated and centralized control.

Access to Funds & Markets – Investors are paying attention to triple bottom line.



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5.1 Sustainability at the plant floor

Increased productivity, reduced plant operating costs, reduction in work effort and enforced compliance to government regulation have always been drivers that justify investments in plant optimizations. Taken on its own, each business directive can be related back to more efficient use of necessary resources – energy, raw materials, human resources, information, and equipment – which relates back to a measure of Manufacturing Execution Systems for Sustainable Production efficiency. Taken together as an optimization strategy, a solution’s capability to meet the immediate needs of the plant has a positive impact on business in the future – not only for the company, but for future generations as well.

For example, the act of automating a manufacturing process to increase efficiency reduces cycle times, reduces human error and potential re-work, increases visibility of material flow and optimizes scheduling – all driven by economics. At the same time, these changes reduce energy expenditures, reduce labor – by reducing the use of gasoline consumption and capital expenditures such as office space and the energy required to power and heat them – and minimize scrap material, all facets of environmental stewardship. The data from these automation efforts has been traditionally used to make decisions on what to produce and when to produce it. But that data can also be used to make further cost reduction decisions, such as shifting production schedules to accommodate running in off-peak hours and potentially selling surplus energy back to the grid, forwarding the latest trend: corporate responsibility.

5.2 Sustainability at the enterprise and value chain level

The figure below give an indication as to what could be the individual business units goals for meeting sustainability in manufacturing companies and how those can be achieved

5. Strategies to Create Sustainability for Industrial Manufacturers

Fig 5. Sustainability Business Initiatives for manufacturing companies



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The HCL Manufacturing Sustainability Framework helps manufacturing organizations to achieve some of these sustainability business objectives through automation led approach. The vision and strategy that we follow are –

Vision - To transform organizations through compliance into economic value add for sustainability.

Mission – Help manufacturing companies to design, manufacture and deliver innovative products & services with reduced environmental impact through effective business processes.

Our solution footprint touches across the different functional areas of a manufacturer which are important from sustainability perspective. Our solutions in this space are classified into two categories - Measurement solutions (those which help in the measurement and reporting of carbon, waste, water, energy) and abatement solutions (those which help in the improvement of business processes from a sustainability perspective.

6. HCL’s Sustainability Framework for Manufacturing Companies



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Fig 6. HCL Sustainability Solution Footprint on Manufacturing Process Map

Sustainability Business Consulting

?

?Designing organization specific metrics & benchmarks

GreenEdge Automated Assessment Framework

?Questionnaire driven Assessment for different standards (GRI, LEED, RoHS…)?Dashboard, Analytics and Reporting

Green Design Workbench (GDW)

?Design For Green (DFG) – HCL services in PLM & Manufacturing

Standards Driven Emissions Reporting and Compliance

TM?Green Logistics Terminal for Travel Fleet operators?Green Manufacturing Terminal for Manufacturing Enterprises

TM?manageCarbon for GHG emissions management

Reman Solution

?Automate core collection process for remanufacturing

Green DC Service

?DGQ framework for DC assessment, DC Consolidation?Asset Consolidation?DC structural changes?Facility non-Structural changes

Sustainability organization design and management process



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A brief overview of our different measurement solutions is given below.

?Readiness assessment – HCL GreenEdge framework for sustainability assessment and reporting

?Carbon Accounting – HCL’s manageCarbon tool to measure, monitor and manage carbon

?Sustainability Metrics and GRI Reporting – Tool for capturing and reporting of sustainability metrics relevant to various compliance standards like GRI.

Fig 7. First step “Value Discovery” results in feasibility and roadmap

Seva

?Reduce carbon footprint of service process ?Collect equipment performance and emission data real time through HCL AGORA

platform

EAD

?Visibility into profit & Loss, business flow and OEE (performance , availability & quality)

We believe that any company will be falling in one of the following stages in its sustainability journey. We help customers in –

Do value discovery to understand

?Understanding which stage they are in currently?Identify and prioritize the sustainability initiatives ?Create feasibility and roadmap of each initiative

• Q uesti onnaire ba sed a ssess ment for determin ing t he m ater ialit y.

• Dete rm in ing the are as of im me diate foc us a nd ac t ion .

• M ea sures orga niz at ion’s sustainability polic y agai ns t it s c r iti cal ity & sa tis fac tion l ev el.

• Supports in se tti ng targe ts for ac hie ving sustainable busine ss.

• Q u estio nn a ir e b a sed rep o rtin g fra m ew or k fo r rep or tin g u nd er

GR I.• Co v ers a ll 79 g en eral p er fo rm an ce

in dic ato rs a s w ell a s sec tor sp ec ific in dic a to rs ( a s pe r t he G R I

se cto r su p ple m en ts)• As sists in ach ie vin g A ran k in G R I

rep o rtin g ca teg o ry.

•S u st a in a b ilit y B a la n ce S co re C a rd for a lig ni ng su sta in a b ility m ea sur es w ith o rg a n iza tio na l g oa l s.• M ea su re s o rga niz a tio n ’s en v iro nm en ta l a n d soc ia l im pa cts a g a in st

f iv e p erspe ctiv es o f a su sta ina bl e b u si ne ss i .e . cu sto m er, f in a n cia l, in ter na l o p era ti on s , le a rn in g a n d g ro w th a n d n on - m a rket.

AN ALYT ICS

R E PO R TIN GA S SE SS M EN T

Figure 8. HCL’s GreenEdge Framework for Sustainability Assessment and Reporting



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The increasing importance of environmental issues to manufacturers poses risks and offers opportunities. The following section briefly connects the opportunities to the business challenges commonly faced by producers.

Profitability

?Using less energy in the production process lowers overhead and product costs. Companies that lower their cost of goods and operations have more money to invest in R&D, upgrading plant or equipment or capital improvements, all of which can contribute to greater competitiveness and long-term success.

?Using fewer materials also cuts costs. Switching to more sustainable materials may or may not reduce costs at the front end, but will likely reduce waste, emissions and pollution, and perhaps avoid shortages or price increases for the less-sustainable material.

?Companies that use natural resources wisely and take positive steps to lower their environmental impact are more successful in attracting and retaining loyal customers and staff.

?Manufacturers that take responsibility for their products after point of sale can sometimes create an annuity-based service business.13

Competition

?Sustainability is still a differentiator, but not for long–it is quickly becoming an expected part of doing business in the global economy.

?Customers claim in surveys that they are willing to pay more for a safe, healthy, green product. Recent concerns about the presence of dangerous chemicals and materials in imported goods give domestic manufacturers a chance to regain market share for some types of consumer goods.

?Products that use minimal energy and water during their useful life will cost less to own and operate than less resource-efficient alternatives.

Compliance and Managing Risk

?Regulatory pressures will continue to increase and expand to cover materials and products whose cumulative environmental impact is deemed unacceptable (such as non-biodegradable plastic).

?Pro-actively reducing the carbon and chemical footprint of a business now can avert or minimize negative regulatory impacts later.

?A sustainable approach reduces risks at every stage of business, leaving businesses less exposed to the possibility of materials shortages, energy price increases, higher fees for waste disposal and pollution abatement, liability and unwelcome shareholder actions.

7. Business Benefits of SustainabilityFig 9. HCL’s Measurement Solutions Functionality Overview



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Sustainability is here to stay. The business world is undergoing a permanent change, and smart business leaders will build sustainability into their business model. In addition to the environmental benefits, sustainability offers great financial, competitive and other business rewards that give manufacturers a competitive edge in a global design market.

?Reduce material and energy costs?Limit waste?Limit potential liability?Meet regulatory and certification requirements

Manufacturers are increasingly choosing to improve the sustainability of their business operations, production processes and product designs to drive profitability and growth. HCL’s Sustainability Approach for Manufacturing will help the Manufacturing Industry align their IT vision with their Organizational Vision. Thus, helping them achieve their sustainability goals.

By improving the IT infrastructure and carbon emissions that affect people and processes across the organization, HCL helps our clients use IT to reduce their carbon footprint while increasing efficiency and productivity. The result is immediate environmental and business benefits, reduced costs and maximized value. A technology driven transformation of the Manufacturing Industry will shape a powerful and positive future – a future that ensures a competitive, a secure supply of industrial products and a sustainable environment.

8. Conclusion

Market Opportunities / Growth

?Major corporations and public agencies are increasingly demanding emissions reporting and mitigation plans from their supply chain partners.14 Suppliers who can show an understanding of the issues and progress toward goals will win business away from those that do not.

?Earning a valued third party certification designation puts products on the short list for businesses and government agencies that have implemented an environmentally preferable purchasing policy.

?Sustainability challenges are spurring the need for new solutions. Manufacturers that can add or extend an existing product line to meet the challenges have huge market opportunity.

1. Stephen Stokes, Karen Carter(June 2010), “Sustainable Manufacturing During and After Economic Recovery: Increased, Diversified and More Strategic Corporate Actions”, Gartner

2. Tomoo Machiba, (2009), “Sustainable Manufacturing and Eco-Innovation – Synthesis Report”, OECD

9. References

Authors : [email protected], [email protected]



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Sudipta Mukherjee has over 7.5 years experience across Manufacturing & IT Industry spanning across procurement, material requirement planning, supply chain planning, equipment installation & commissioning functions in manufacturing industry. He has 4 years experience in manufacturing vertical of IT industry on supply chain solutions – development, presales and marketing. He has been involved in multiple projects for the Discrete Manufacturing customer base of HCL.

Sudipta’s e-mail id is

Sudipta’s educational background includes a Bachelor’s Degree in Metallurgical Engineering followed by MBA from SPJain Institute of Management & Research, Mumbai.

[email protected]

10. Profiles

Sudipta Mukherjee

13+ years of successful Consulting and Sales experience across Business Transformation, IT consulting and Outsourcing industry.

Leadership positions with IT consulting and Outsourcing majors across varied business functions such as Key Account Planning and Management, Ownership of Services Strategy, forecasting and planning of demand, demand fulfillment, client relationship & portfolio management, P&L for global IT Services

At HCL Sanjay has worked in the areas of Strategic Advisory, Carbon Accounting and enabling Technology initiatives and Business case in areas related to Green and Sustainability. He also partnered with other organizations in the service and Software providers to provide comprehensive solutions to clients.

Sanjay Mukherjee



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HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. Since its inception into the global landscape after its IPO in 1999, HCL focuses on ‘transformational outsourcing’, underlined by innovation and value creation, and offers an integrated portfolio of services including software led IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL leverages its extensive global offshore infrastructure and network of offices in 31 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare. HCL takes pride in its philosophy of ‘Employees First’ which empowers our 72,267 transformers to create real value for customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 3.1 billion (Rs. 14,101 crores), as on 31st December 2010 (on LTM basis). For more information, please visit www.hcltech.com

ABOUT HCLHCL Technologies

HCL is a $5.7 billion leading global technology and IT enterprise comprising two companies listed in India - HCL Technologies and HCL Infosystems. Founded in 1976, HCL is one of India's original IT garage start-ups. A pioneer of modern computing, HCL is a global transformational enterprise today. Its range of offerings includes product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of information and communications technology (ICT) products across a wide range of focused industry verticals. The HCL team consists of over 79,000 professionals of diverse nationalities, who operate from 31 countries including over 500 points of presence in India. HCL has partnerships with several leading Global 1000 firms, including leading IT and Technology firms. For more information, please visit www.hcl.com

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