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Sustainability Plan Sterling Plywood Industries Ltd

By

Clark Green Solutions Team

Brendan Golubjatnikov

Faisal Alyahya Himal Jayasekara

Yuexing Ming

Team Advisor

Professor Will O’Brien

Sterling

Plywood Industries (Pvt.) Ltd. Since 1935 know – how makes the differenc

CLARK GREEN SOLUTIONS TEAM

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Sustainability Plan

Sterling Plywood Industries Ltd.

This sustainability project is an act of social

responsibility by the CLARK GREEN SOLUTION

TEAM (CGST) and aims to create Triple Bottom line

(People, Profit and Plant) value and improve the

business practices at Sterling Plywood Industries.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY 4

GOALS 5

COMPANY BACKGROUND 6

SUSTAINABILITY DEFINITION 7

SOCIAL RESPONSIBILITY 8

STAKEHOLDERS 9

MANAGEMENT AND EMPLOYEES 10

ENVIRONMENT 12

ENERGY 13

RECOMMENDATIONS 14

RENEWABLE ENERGY 15

ENERGY EFFICIENCY 19

SUPPLY CHAIN 22

CURRENT STATE 22

RECOMMENDATIONS 23

ENVIRONMENTAL LAW AND POLICIES 29

RECOMMENDATIONS 32

PERFORMANCE MANAGEMENT 34

PATHWAY TO SUSTAINABILITY 36

LEADING THE CHANGE AT STERLING 36

TRANSFORMATION STEPS 36

THE ROADMAP 38

APPENDIX 41

REFERENCES 44

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This plan is a blueprint and a guide to enhanced sustainability at Sterling. By taking the first step of accepting our team as a consultant, you have demonstrated the desire and interest in sustainability; that is, you have shown that you want your company to be better and to be at the cutting edge in an increasingly challenging world. Going forward, embodying the triple bottom line is going to be the only way to do business, due to pressure from stakeholders and the environment. This plan can be used to create value for the organization among all stakeholders including the community and families, employees, customers, shareholders, and suppliers. Because sustainability has not yet taken a firm hold in Pakistan, the plan may also create value for the entire country as a whole.

We are offering an incredible opportunity and challenge to all stakeholders involved with the operations at Sterling, and all stand to benefit from Sterling’s future successes. The CGST strongly believes that companies have a responsibility to contribute not only to contribute to the profitability of the company but to a healthier environment, one that we all must live in. Global environmental problems are incredibly urgent and by benefiting the environment, Sterling can implement measures such as those related to energy efficiency, which can be cheap, easy, and save money. Another thing we strongly believe in is helping people. First, by helping local residents, customers, and the disadvantaged to be strong economically and educationally, Sterling can serve the social imperative and serve customers even better. Second, it is critical to strongly involve employees in the sustainability mission because without quality employees, what is a company? Offering employees a chance to be involved in the new sustainable mission will increase employee responsibility and productivity and help drive employees to increase product quality and level of customer service. The goal and challenge is to create a new image and reputation to attract the best employees and suppliers in order to gain a great competitive advantage, which will attract new customers and strengthen the loyalty of existing ones. By helping protect and responsibly serving the environment, and by supporting society, Sterling can be a truly sustainable business and continue on to larger successes.

The CGST would like to thank all parties whom helped to create this sustainability plan. We hope that stakeholders including the Pakistani Government and suppliers will support this plan in order to reduce operating costs, make a positive change and encourage a trend towards corporate social responsibility (CSR) in all industries in Pakistan and enhance the brand of Sterling. , By implementing the recommendations provided below, Sterling can become a true industry and sustainability leader. It all starts at Sterling. To achieve this dream and make this plan a true success, will require faith, hard work, time, and a leader who can transfer the

information provided in the following pages, to real practice. We believe Sterling can do it.

EXECUTIVE SUMMARY

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GOALS

In addition to using the Triple Bottom Line (People, Profit and Plant) to value and

improve the business practice at Sterling Plywood Industries, this sustainability plan aims to

achieve the following goals:

Extending to Global market resulting in growth rate

increase of 25%

Current Growth Sustainability Difference

Growth Rate 5% 25% 400%

EBIT 650,000$ 650,000$ 0%

FCFF 5,754,000$ 9,083,500$ 58%

FCFE 891,000$ 1,405,000$ 58%

Shares 100,000$ 100,000$ 0%

Value per Share 8.90$ 14.50$ 65%

Reducing costs and energy consumption by 25%

(Equivalent $20,000 per annum)

Increasing resource usage efficiency of all Sterling resources by

125%

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COMPANY BACKGROUND

STERLING BACKGROUND

Sterling Plywood Industries Ltd is one of the leaders in the door manufacturing

industry in Pakistan and has been in business since 1935. It is a private limited, third

generation firm. The company is looking forward to becoming a public limited firm in the

future.

Sterling creates the highest quality doors from scratch. The company possesses a

complete production line of wood machinery from Germany and Italy. All the technology is

based on BS-3444 (British standards). Sterling has supplied doors to many high profile

customers in Pakistan, including consulates and four and five star hotels. Sterling guarantees a

lifetime warranty for each product, very rare among manufacturers worldwide.

VISION AND MISSION AND OBJECTIVE

Sterling’s vision is to offer market wooden door products of unparalleled durability and

quality with a lifetime warranty. Sterling is a rapidly growing company with a variety of career

opportunities.

Sterling

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SUSTAINABILITY PLANNING

WHAT IS SUSTAINABILITY

Our goal in this section is to educate the Sterling management team and its stakeholders

about sustainability in the 21st century. Sustainability is a mindset and set of practices and

principles, that strongly considers and produces the best results for stakeholders, the economy,

society and environment.

“Sustainable development seeks to meet the needs and aspirations of the present

without compromising the ability to meet those of the future”. (1)

Our common future - Report of the World Commission on

Environment and Development, 1987

The field of sustainability can be divided into three constituent parts:

social, environmental and economic. Some terms and initiatives that are associated with

sustainability include:

Corporate Social Responsibility (CSR) convenience

Global Reporting Initiative (GRI)

UN Global Compact – Communications on Progress (COP)

Corporate Responsibility

Corporate Citizenship

Sustainable Development

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SOCIAL RESPONSIBILITY

SOCIAL RESPONSIBILITY AT STERLING

Social development is not just a government

responsibility. It is the responsibility of individuals,

organizations, government sectors and businesses.

In fact, entrepreneurs, businesses and households have the

greatest impact in social and community development. Also,

Social Responsibility includes the following:

Providing safe working conditions and reasonable wages and benefits for employees

Supporting schools and building good relationships with universities.

Addressing social problems in order to make a change that benefit society and your

business

Donating to charities, people and organizations in need.

Supporting women and children.

Providing training programs for employees and youth.

Contributing and participating in events that takes place in the local community, as well

as other events that involving and organized by employees, customers, suppliers and

partners.

Providing equal opportunities and enhancing ethical practices.

Other practices and measures that contribute to Sterling becoming a good corporate

citizen.

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STAKEHOLDERS

The Clark Green Solutions Team believes that a company is not only responsible to their

shareholders, but also to a broader set of stakeholders. Stakeholders include entire organizations

(profit or nonprofit); individuals and groups locally or globally that are directly or indirectly affected

by any actions, practices, objectives, successes failures at Sterling. The decisions taken by Sterling

therefore are of critical importance to all stakeholders. All stakeholders are included in Sterling’s

vision and mission, but they are not equal: each stakeholder has specific interest and prioritizes.

Gaining shareholders and improving management practices are in the interest of many stakeholders.

Producing increasingly high quality products is in the interest of customers and suppliers. The point

that CGST is trying to make here is that, to help the Sterling team to be successful in developing and

implement their sustainability initiatives, Sterling must identify all stakeholders that will be affected

by the company’s actions. Sterling’s stakeholders including the following:

Customers

Employees and their family

Suppliers and partners

Shareholders and investors

Community

Neighborhoods

Current and positional investors

Governments

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MANAGEMENT AND EMPLOYEES

People are the most important resources. Attracting the right people to work in the right

place will give your organization competitive advantages, which make your company growth

faster and easier.

Hiring good people, paying fair wage, and providing enough rewards will create a

healthy corporate culture that will ultimately change your company.

Passing on and communicating the new sustainability mission and goals to Sterling’s

employees will not be easy, but it is very critical. Without the employees fully behind and

understanding the new sustainability mission, the attempt at long-term sustainability will be

futile. It will be the management team’s goal to embody sustainability amongst them, and at the

same time communicate and ingrain the sustainability imperative in the mind and mission of the

employees. In the end, the most important stakeholders might be the ones working in the Sterling

factory.

Give your employees:

Treat them ethically with respect

Responsible wages and rewards

Provide a supportive and healthy workplace

Provide training and guide them to succeed

Open-door leadership, culture and

communication

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And they will give you:

Responsibility

Commitment

Various skills

High quality products and costumer services

And ultimately, high customer and stakeholder

satisfaction

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The environment is important to all stakeholders and is becoming increasingly degraded

globally. The environment is a “commons”, all organisms on the earth share it and because humans

have the most severe impact on the environment, we have the biggest responsibility to lessen our

impact on the environment. Environmental and ecological problems are not an externality -

environmental impacts are being increasingly worked into business bottom lines and considered

strongly in corporate sustainability indexes and assessment methods.

Greenhouse gases released into the atmosphere by humans are the main culprit in global climate

change. To reduce the effects of climate change, national governments and businesses around the world

are transitioning away from fossil fuels and putting legislation into place to reduce greenhouse gas

emissions and increase renewable energy and energy efficiency. It is very much in Sterling’s interest to

reduce greenhouse gas emissions, increase energy efficiency and consider renewable energy.

Importantly, by considering and lessening the company’s impact on the environment, Sterling can stand

to save a lot of money. By making the company’s management strategy more green, Sterling can stand

to preempt regulations on greenhouse gas emissions and energy. Taking aggressive environmental

sustainability steps will put Sterling miles ahead of competitors and other Pakistani industries and will

position Sterling very well going forward.

ENVIRONMENT

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ENERGY

The existing energy system at Sterling consists of variable electricity from the grid and a 60

kilowatt diesel generator. Not all machinery in the factory is working every day. The primary mechanical

equipment which produces the wooden doors contains kinetic systems to conserve energy. This means

that these systems use a large amount of energy to start up, but once running, operate efficiently and use

fairly low amounts of energy. In the context of sustainability, these systems designs are very good. The

Sterling building is a fairly simple factory building. This result in the other energy requirements in the

building being fairly minimal: lights in the warehouse and various electronics and office equipment in the

small office.

Energy from the grid in Karachi is unreliable and only available for part of the day. This results in

increased vulnerability and uncertainty, things that are not good for business. Energy efficiency and

renewable energy offer great opportunities at Sterling. These measures could benefit Sterling

economically and decrease vulnerability caused by the grid. The current electricity use at Sterling, while

fairly nominal, is in contrast to a very significant amount of diesel use. Efficiency combined with

renewable energy could also help insulate Sterling from fluctuating diesel prices.

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CURRENT STATE: ELECTRICITY AND DIESEL USE

ELECTRICITY USE

650 kWh / Per Month

(For reference, the average house in Massachusetts averages 1000-1500 kWh)

Current cost per kW $0.14

Annual use 7800 kW

Annual cost $1092

DIESEL GENERATOR

Diesel used per month @ $1.1/liter 3230 liters

Diesel cost per month $3287

Annual diesel cost $39,444

Annual maintenance cost $91

Total annual diesel operation cost $39,535

TOTALS

Overall Adjusted Electricity Demand (This takes into account electrical demand that is created as a result

of the total electric grid use and diesel generator use).

174,192 kW

Overall operating cost for energy related activities $40,627

Lifetime estimated system cost (based on 25 year operation lifetime). $532,000

Note: All values given in US dollars. Also, annual values have been calculated by considering an average of 19 work days per month

RECOMMENDATIONS

The diesel generator requires the continuous input of expensive diesel fuel, which is

very environmentally un-friendly some specific recommendations with regards to the

existing diesel generator include:

Simply keeping the diesel generator well maintained and using smart practices:

using the generator only when maximum load is needed.

It is recommended that when service is needed, environmentally friendly

lubricants and greases are used. It would be wise to assess the current energy

situation at Sterling, especially as it relates to renewable energy at Sterling.

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It is important to assess the lifetime of generator and consider purchasing an

energy efficient generator to replace the current one when the end of its

lifetime is reached. If energy efficiency is achieved and renewable energy is

installed our purchased, it could make it possible for Sterling to buy a smaller

generator.

Lastly, it would be wise to assess the possibility of using biofuel to power the

generator, at least partially. In the U.S., there has been a big trend to collect

and refine “fry oil” fuel from restaurants for use as biofuel in various contexts.

This could be a way to provide fuel to the generator at greatly reduced costs.

RENEWABLE ENERGY

Renewable energy has many benefits including eventual reduction of energy costs and a

positive impact on the environment through reduction of greenhouse gases. In many countries

around the world, business managers and people of all types are realizing what a valuable

investment renewable energy is. Additionally, national and regional policies in some countries

are prompting massive shifts away from fossil fuel generated energy, to renewable energy.

Pakistan has set a target of 5%, approximately 10,000 MW of electricity, generated from

renewable sources by 2030. Renewable energy at Sterling would help satisfy this national goal.

Solar Photovoltaic (PV) panels would be a great solution to provide power at times where there

is no grid power at Sterling. Running a diesel generator to make up for power shortages is a

costly alternative.

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BENEFITS OF INSTALLING SOLAR PV AT STERLING:

The factory building is very well suited for PV. With a roof size of 10,500 square feet

and the ability to produce one watt or greater of power per square foot, the building has

the potential to produce a lot of solar energy.

Karachi is very amenable to solar collection. The insolation, or power of the sun in

Karachi, is equal to that of the highest values found in the Southwestern United States.

According to NASA, the average solar insolation (intensity of sun light) in Karachi is

5.45 kWh/m squared/day.

To model the energy system at Sterling, our team used the HOMER software. HOMER is

used for modeling energy system. HOMER is very reputable, is easy to use, and is freely

available for download online. To run the model, the user must input information on currently

electricity use (total usage, power demand at specific times as well as specifications of the

components of the current electrical system (specifications of the diesel generator and

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information about the grid). Then, information on the renewable energy system can be input.

This includes specifications of the solar panels themselves, as well as necessary components of a

solar PV configuration including converters (to convert from DC power to usable AC power) and

battery storage. Information on cost and lifetimes of all components are considered. Many

different configurations can be inputted into the software. For example, we input many different

sized solar panel arrays, starting at 2 kW and going in small increments all the way up to 200

kW. HOMER decides which system(s) are the most economical based on many cost factors. It

calculates the initial cost; lifetime cost, and pay back periods for different energy systems,

among other things.

System Pricing (per kW) based on general assumptions of current prices

Solar PV panels $4000/KW

Converters $1000/kW

Battery

Storage

$1000/kW

HOMER indicates that the most cost effective way to produce energy at Sterling is using

the methods that Sterling currently does. The generator has been paid for and the grid power is

fairly cheap. Maintenance and operating costs are the only significant costs. Sterling will have

to make a large investment in order to have renewable energy. While there is a sizable capital

investment involved, there are benefits to be realized including long term financial savings.

HOMER indicated that the most economical PV systems were ones that were very small

(only a few kilowatts). We decided to recommend a system to Sterling which would be

significant in terms of its energy output. We just didn’t see the utility in recommending a system

which would only cover 2 or 3% of annual energy use.

In the end, we chose a 13 kW solar PV system without battery storage. This system

would have an initial cost of $61,000 but would reduce annual operating costs by generate

revenue from a small fraction of energy sold back to the grid, totaling $2800. This system

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would cover more than a quarter of electricity during peak operation. The payback time on

this project is 22 years.

This is display of financial information created by HOMER software for the 13 kW System.

Environmental Benefits: 13,210 kg/year Carbon Dioxide, 55 kg/year, 24 kg/year Nitrogen

Oxides.

Solar prices are dependent on many factors: cost of labor, dropping prices in solar PV,

and power storage. It may be that it’s best for Sterling to wait a few years until the price of solar

panels goes down. By this time, it is possible that the Pakistani government will put solar

rebates and incentives into place because currently there are none.

Batteries are costly, but could hold to key to making Sterling more energy independent. By

storing energy either from renewable energy sources or even the grid, energy could be used at

times when it is needed. Battery technology like solar panel technology, is quickly evolving and

cost is decreasing. Battery storage was excluded from the energy model due to added cost, but

Sterling should definitely consider such storage.

Bottom Line: Solar PV is not a wise investment for Sterling due to very high capital investment

cost.

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ACTIONABLE STEPS WITH REGARDS TO SOLAR PV:

Within three months, get a site assessment done from a local solar energy company.

Get cost estimate.

Consult local building regulations. The solar company might well take care of this.

Examine financing options. Based on the cost and pay back periods based on local

costs, it will be determined whether the project is feasible.

Solar panels are not different from other investments. That being said, environmental

benefits and marketing image do add more value to a solar panel system.

OTHER RENEWABLE ENERGY CHOICES:

Wind power - Installation of wind turbines is dependent on local regulations. It is

possible to buy wind power in the U.S. through what is called a power purchasing

agreement (PPA). See resources at bottom.

Biomass (energy produced from incinerating sawdust) - Sterling’s only waste product

is sawdust. There are methods available to compact sawdust into wood pellets which

can be burned. Please see the resources for more information.

The pricing for these systems could be compared with the cost of solar PV. Each

technology offers its own benefits and it is recommended that Sterling conduct a cost-

benefit analysis and research of each technology. The U.S. Department of Energy

(http://energy.gov/) is a good place to start for any such analysis.

ENERGY EFFICIENCY RECOMMENDATIONS

The current energy system has been outlined above. The manager has stated that he uses

“energy efficiency lighting”. Yet our team’s best guess is that Sterling is still not using the most

efficiency lighting technologies. For most commercial businesses, lighting is responsible for

30% of the electric bill. By reducing lighting load in half through implementing efficiency

practices, the electric bill can be cut by 15%.

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Assess current lighting needs: If the area is over lit, consider reducing the number of

lights to reduce energy use right off.

Compact Fluorescents: Replacing incandescent lights with Energy-Star-qualified

compact fluorescent lights can reduce lighting costs by up to 70 percent and last up to

eight times longer.

Install LED bulbs in the future. LEDs, or Light Emitting Diodes, are high efficiency

light bulb replacements. LEDs produce light with without generating heat, meaning

that they very efficiently convert electricity to light. LEDs right now cost much more

than CFLS (around 10x) but result in decreased electric costs over the lifetime of the

bulb. LEDs have a very long lifetime (about 5x that of a CFL and about 40x that of a

traditional incandescent bulb (see figure below).

T-12 lighting - By switching from a T12 to T8 lighting system, overall reduced energy

can be up to 50%

Lighting sensors - Turn on lights only if someone is in the area lit. When no one is

there, the lights go off to save energy. There are a variety of sensors available.

Consider emerging Smart Grid technologies: Install a real time electricity monitoring

system. This will help better manage power.

LIGHTING BEST PRACTICES

Practice general conservation: In general, turn off lights when they are not in

use.

Establish a group re-lamping schedule to replace lamps as they burn out,

usually done at 70 percent of rated lamp life

Establish a regular inspection and cleaning schedule for lamps and fixtures

every 6-12 months for improved lumen output

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Last a consultant should be hired to examine factory operations and machine

operations to search for efficiency upgrades. We are not professionals in regards to

factory operation sustainability.

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CURRENT TRANSPORTAIN SYSTEM

Looking at the entire supply chain, our team has determined which actions would improve

efficiency; reduce cost and the environmental footprint.

According to description given by Sterling, the whole transportation system for the company

consists of two systems:

IMPORTED WOODS FROM CHINA AND BURMA

IMPORTED FROM GERMANY

SUPPLY CHAIN

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SHORT-TERM RECOMMENDATIONS (1-2 YEARS)

For short-term suggestions, we primarily focus on ways to energy conservation and

choices of importers in term of raw materials and transportation methods in order to cut CO2

emission and become sustainable.

CHOICES OF IMPORTER FROM RAW MATERIALS PERSPECTIVE

In term of raw materials, woods from Germany are reusable and sustainable compared

with the woods from Burma, which are not. We believe the public praise and good reputation

brought by sustainable behavior can contribute to a booming business, since consumers are

increasingly paying attention to sustainability. We recommend that the client import wood from

Germany and none from Burma. In looking at the whole international transportation system, we

found some ways to do energy conservation.

I. COST BENEFIT ANALYSIS

According to Sterling’s costs and sales data we assume that the client consume wood at a

rate of 1000 m3 monthly. The payback period for choosing sustainable materials and

transportation is 4.8 years as showing in the figure below.

Figure 1: Cost Analysis

ROW MATERIAL

RESOURCES

COST

(US DOLLAR/ M3)

SALES

(MONTHLY)

WOOD FROM BURMA $700 $65,000

WOOD FROM GERMANY $900 $65,000+$3,500

(from reusable wood)

PAYBACK PERIOD = ((900-700)*1000)/3,500= 57.14 / Months (4.8/years )

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II. TRANSPORTATION STRATEGY FOR GERMANY

Based on what the relevant research, it has been shown that CO2 emissions and transportation

costs for rail, shipping, and trucking are increasing. Based on US data (similar trend to other

countries); the costs of railroad, ship and truck are $1.09, $1.12 and $1.73 per mile respectively. Thus,

combined transportation (rail road + ship) is a good combination for Sterling in terms of cost saving.

CHOICE OF IMPORTER FROM TRANSPORTATION METHOD PERSPECTIVE

We strongly encourage the Sterling management team to use transportation methods,

which take advantage of renewable energy and energy efficiency. Sterling can suggest suppliers

to ship cargo by electric rail if possible, because electric rail can reduce 26 percent of total CO2

emission (see Figure 2), compared with normal fright rail. Reduction of CO2 emission can mean

a decreased cost of transportation overall. Sterling could be at the forefront of sustainability by

promoting clean energy in collaboration with national and local governments. In some regions

such as China, there could be paybacks from carbon credits.

According to a survey of electric rail, the energy components that go into producing the

electricity consumed by the rail impacts CO2 emission a lot. China is working to diversify its

energy portfolio and is pursuing cleaner alternative energy sources to supply electricity. A higher

proportion from nuclear energy for example, can result in lower overall CO2 emission. In China,

nuclear power is supplying increasing amounts of electricity and there is a long-term nuclear power

plants plan being executed. In China in 2006, hydropower provided 15% of the electricity.

Importing wood from Burma by sea causes a great deal of air pollution and GHG emissions,

because ships are powered by some of the dirtiest fuel oils on earth. Though solar and electric

motors have the potential to power cargo ships, the technologies are still in early stages of

development. In Burma, nuclear energy and solar energy is in initial stages of development. Even

though Myanmar has abundant geothermal energy resources, it is not being exploited. And

hydroelectric power in Myanmar has only small capacity at this time (360.32 MW annually).

Based on the environmental influence resulting from transportation of raw materials, we

recommend that the client consider importing woods from China by electric rail, not Burma.

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Figure 2: CO2 emission comparison between rail road and electric rail

SHIPPING

FROM DISTANCE (KM)

CO2 EMISSION

(KG) BY RAIL

ROAD

CO2 EMISSION

(KG) BY

ELECTRIC RAIL

Burma(Sagang) 2968.34 43 31.82

China(Lanzhou) 3746.25 55 40.7

NORMAL FREIGHT RAIL ELECTRIC FREIGHT RAIL

TRANSPORTATION STRATEGY FOR PAKISTAN DOMESTIC SHIPPING SYSTEM

We strongly recommended that Sterling use one transportation system. Don‘t take combined

transportation (truck + rail) for domestic shipping system. Sometimes, people think combined

transportation is good at energy conservation. But, data shows that combined transportation has no big

advantage on energy consumption, compared with rail road transport. Oppositely, CO2 emission from

truck would greatly impact on environmental. Again, a high CO2 emission indicates large energy

consumption and implies big transportation cost in term of energy cost and GHG emission cost . (See

figure 3)

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Figure 3:CO2 emissions on truck, rail, and ship correspondingly

(G/TEU-mi; TEU means twenty-foot equivalent units)

Source: http://climate.dot.gov/documents/emissions_analysis_of_freight.pdf

ENERGY CONSERVATION FOR RAIL

Compared with air and road transportation, rail is more environmentally friendly. However, it is far

from perfect. Sterling can provide some recommendations to rail operating company to improve

energy conservation, such as through brake regeneration, usage of biofuels and more efficient

driving techniques. For example, if drivers can keep the speed at 60 mile per hour, it is possible to

save $7 per 60 mile.

MEDIUM TO LONG TERM SUGGESTIONS (3 – 5 YEARS)

In term of long-term suggestions, we expect that client can build their own purchasing

plan, offering suppliers networking opportunities, and supervising impact on the environment by

using real-time life-cycle assessment tools.

BUILDING PURCHASING PLAN

Client should start to establish sustainability perspective into purchasing plan which used

to supplier selection and ongoing evaluation of purchases qualities. Purchasing plan that

incorporates environmental issue into mix of purchasing decision emphasizes pollution

prevention, compares environmental impacts, and collects meaningful information about the

environmental performance.

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HOW TO ESTABLISH PURCHASING PLAN?

In the first step, the Supply Chain Process Map is a similar visual representation of the

entire process involved in creating a particular product, and used to illustrate flow of energy,

materials, or waste through your company. In the second step, Supply Chain and Purchasing

Action Worksheet can offer help (See Appendix 1, Example 1). In the third step, Supply Chain

Sheet can help. (See Appendix 1, Example 2)

OFFERING SUPPLIER NETWORKING

Through establishing supplier networking (physical meetings, online meetings or blogs),

firms can share their learned experience with suppliers. Also based on the great communication

opportunity, Sterling can cooperate with suppliers to open new markets. With an increasing

awareness on sustainability, Sterling, a successful sustainable wood door manufacturing

company, might be able to enter a new international market such as in Germany. The German

market has national regulation on sustainability. Under current conditions, Sterling likely

doesn’t qualify or would be unsuccessful in their German market. Another example, stakeholders

in the Chinese market are paying more attention to environmental sustainability due to increased

media attention. The suppliers (German and Chinese) could capture opportunities in Pakistan in

terms of raw material availability.

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REPLACING UNSUSTAINABLE RAW MATERIALS WITH SUSTAINABLE ONES

It is recommended that Sterling contact suppliers to work to replace unsustainable raw

materials with sustainable ones (including glue, wood, raw materials used to operate machine

and vehicles in shipping system). This step is in reducing environmental impacts in the life cycle

assessment. Reducing hazardous substances such as those in glue, is good for consumers and

employees. Also, replacing raw materials with sustainable ones can be cheaper and less

impactful on the environment (due to the fact that some materials and species are rare).

LIFE CYCLE ASSESSMENT (LCA)

LCA is a process to analyze the materials, energy, waste and environmental impact of a

product or service system during its whole lifetime. Primarily it includes goal definition and

scope, life cycle inventory analysis and life cycle impact assessment. Through mapping the

whole cycle of product or services, quantitative assessment of potential environmental impacts

can be reviewed easily; and it is possible to provide credible information, which can be used to

reduce the environmental footprint of the operation. Usually, clients can make use of free

analytical software (see Appendix) to produce the whole cycle and get quantitative assessment.

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IMPLICATIONS FOR STERLING

This section talks about the environmental laws currently in existence in the Islamic Republic of

Pakistan. Thereafter, the purpose is to analyze the extent to which Sterling Plywood can utilize such

laws to aid in growing a sustainable and profitable business. Therein, the main emphasis will be on

how Sterling can;

Act as a model for other businesses industry – wide to be able to develop their own sustainable

business plans

More efficiently use the precious resources it employs for its manufacturing processes

Identify stakeholders whose resources and expertise can be utilized to strengthen Sterling’s

market position as well as to create new avenues for growth in industry – wide sustainability measures.

Sterling operates in the nation of Pakistan which has been stated as having insufficient

commitment to sustainability according to an Asian Development Bank country report in 2008.

Ironically, it would be to the detriment of the company were it to ignore the fact that the Government

of Pakistan (GPak) does serve as an important stakeholder.

In spite of the lack of resources GPak has monetarily to implement and sustain strong

environmental policies, it remains the sole governing authority of the nation. As a result of that role,

GPak holds primary jurisdiction over the extent and the limits upon/within which Sterling can operate

in a sustainable and profitable manner. In this regard, since the primary objective of Sterling is to

become an industry leader at home and also be able to expand into markets abroad, the company must

set a higher standard than domestic law sets, and should also be willing to work with other

stakeholders to identify and implement such standards. The four main categories of stakeholders for

environment sector in Pakistan’s are:

Government

Private Sector

Civil Society

Household

ENVIRONMENTAL LAW AND POLICIES

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(Source: Ministry of Environment, Pakistan)

The most influential stakeholders within the government are finance, economic, and development

policy institutions, particularly economic coordination committees, and project approval forums, such as

central or provincial development working parties. Their decisions on resource allocation, pricing, and

mega-projects have an enormous impact on the environment”. (ADB Report, 2008).

The lack of resources available to GPak to effectively enforce its environmental policies has been

realized by the institution. As a result, the greatest success by way of sustainability will occur with those

companies/organizations that take the initiative to work towards greening their production processes.

The table below shows the different areas in which Non – Governmental Organizations (NGOs) –

that can aid SP in developing its sustainable business plan – operate. For Sterling, working together with

NGOs and the GPak will allow it to optimize its sustainability and profitability.

Apex Environmental NGOs in Pakistan and Areas of Focus Environmental Subsectors and Issues

No. of

NGOs

Sustainable forestry 8

Water supply and management 7

Energy efficiency and renewable energy 6

Environmental education 5

Biodiversity and wildlife conservation 4

Sustainable agriculture, marine and coastal resources, fisheries, climate change and ozone depletion,

urban environment and development, and environmental impact controls

3

Waste management and adaptation to climate change 2

Air quality and pollution, chemicals management, rangeland management, and desertification 1

Biosafety and quarantine, and noise management 0

(Source: United Nations)

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The different areas of focus that Sterling could primarily work on with the relevant NGOs are;

Water supply and management

Energy efficiency and renewable energy

Environmental education

In fact, GPak itself recognizes that it does not have the adequate resources to act alone in

making businesses more sustainable. As a result, the institution does have - via its Ministry of

Environment – the tools for businesses and NGOs to work together.

UTILIZING INTERNATIONAL LAWS AND POLICY INSTRUMENTS

Research suggests that in relation to Sterling’s main export goal of being able to sell its

products to manufacturers in the US, it is advisable for the company to engage in marketing itself

as a sustainable very early on. This is for two main reasons;

The economy of the United States is experiencing an upheaval in terms making its

economy more sustainable and robust. It is possible for international companies to meet

that need where companies in the US are reluctant – or unable due to cost restrictions –

to make the change to being sustainable.

Foreign relations with the US are at an all – time low for Pakistan. This would mean that

accessibility to the US market will become more and more difficult despite the fact that

the US constitutes the greatest export market overall for Pakistan.

Considering point (b), Sterling has little to no leverage in being able to affect the political

relations between the US and Pakistan. However, this position opens up two other avenues that

could positively affect its ability to export to the US;

With foreign trade with US being highest for Pakistan from all other nations, this means that

there is still a great possibility for Sterling to export to the nation. In other words, SP can do

this by adhering to the sustainability initiatives outlined in this plan thereby becoming a

market leader that is recognized nationally and globally.

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The implications of such recognition mean that many more export markets in lucrative

regions such as the European Union, Brazil, China and Russia would be available to

Sterling so long as it maintains a strong commitment to sustainability and markets itself

as such, regardless of the environmental laws that exist in those export markets

RECOMMENDATIONS

Main Issues Relating to Pakistani Environmental Law and Sterling’s Business Process

The nation does not have adequate system for dealing with water pollution,

deforestation, water shortages, as well as inefficient energy consumption.

All of the above elements are in some way linked to the methods used by Sterling to

machine – produce its wooden doors.

There is simply no impetus provided by the government for Sterling to find impetus to

become a sustainable enterprise.

POSSIBLE SOLUTIONS

Since one of Sterling’s main priorities is to be recognized internationally and to be able

to sell good internationally, working with an NGO or an INGO to develop best

sustainable practices is a good idea. The following is a listing of potential national

(NGO) and international (INGO) non – governmental organizations that Sterling could

work with (Source: WWF – Pak);

Global Change Impact Study Centre (http://www.gcisc.org.pk/) (NGO)

This Centre serve as a think tank in aid of the national planners and decision makers for strategic policy planning in consonance with the changing global environment in areas such as Climate, Water, Energy, Food, Agriculture, Health, Ecology, new technologies etc.

Global Environment Facility Program in Pakistan (http://www.gefpak.gov.pk/) (NGO)

GEF is a funding facility which was incepted in response to the growing need to counter four environmental threats man is facing; Bio diversity, Climate change, degradation of international waters, and ozone depletion.

LEAD Pakistan (http://www.lead.org.pk/) (NGO)

LEAD’s mission is to create, strengthen and support networks of people and institutions promoting change towards sustainable development – development that is economically sound, environmentally responsible and socially equitable.

Sustainable Development Policy Institute (SDPI) (http://www.sdpi.org/) (NGO)

SDPI works for sustainable development issues in Pakistan and is a source of a source of expertise for policy analysis and development, policy intervention, and policy and program advisory services.

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The National Energy Conservation Centre ENERCON) (http://www.enercon.gov.pk/) (NGO)

ENERCON serves as the national focal point for energy conservation/energy efficiency activities in all sectors of the economy, namely industry, agriculture, transport, building and domestic.

UNDP Pakistan (http://undp.org.pk/) (NGO)

UNDP works with the Government, civil society and development partners in four broad programmatic areas; Poverty Reduction and Gender, Democratic Governance, Energy and Environment and Crisis Prevention and Recovery.

Centre for International Forestry Research (http://www.cifor.org/) (INGO)

CIFOR advances human well-being, environmental conservation, and equity by conducting research to inform policies and practices that affect forests in developing countries.

International Institute for Environment and Development (http://www.iied.org/) (INGO)

The International Institute for Environment and Development is a global leader in sustainable development.

World Agroforestry Centre (http://www.worldagroforestry.org/) (INGO)

The Centre’s vision is a rural transformation in the developing world where smallholder households massively increase their use of trees in agricultural landscapes to improve their food security, nutrition, income, health, shelter, energy resources and environmental sustainability.

World Business Council for Sustainable Development (http://www.wbcsd.org/home.aspx)

(INGO)

The World Business Council for Sustainable Development (WBCSD) is global association of some 200 companies dealing exclusively with business and sustainable development.

World Resource Institute (http://www.wri.org/) (INGO)

The World Resources Institute (WRI) is an environmental think tank that goes beyond research to find practical ways to protect the earth and improve people’s lives.

Sterling must develop a plan through which it can attain various ISO Certifications

relating to sustainability that will aid further the company’s sustainable business

objectives. The International Organization for Standardization is a worldwide federation

of national standards bodies and 125 member countries. Specifically within the ISO is the

ISO 14000 certification that is more commonly known as a premier Environmental

Management System (EMS). EMS provides a system for monitoring, controlling, and

improving performance regarding any regulations, legislation, and codes of practice that

an organization has to comply with. It helps define targets and objectives for meeting and

exceeding mandatory and customer requirements. Its focus is on prevention and

continuous improvement. It also calls for companies to establish and follow a system.

(Source: Innovative Consulting Solutions)

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“Make it strategic, not just tactical”

STRATEGY

Sustainability is not something that be achieved and then disappear. If a company decides to be

sustainable then green has to be at the core of the company. It should continue growing and expanding

like an organism within the organization, all the time becoming more firmly established and

incorporated into management practices. Sustainability performance management should be strategic,

not just tactical.

Data, analysis, and reporting should drive sustainability at Sterling. In creating a circle of

sustainable performance management, Sterling should:

Apply a financial mindset - link sustainability to performance management. This can mean

seeing opportunity in sustainability management; opportunities that you didn’t see as existing

before. Also, it means creating goals that are not just financial in nature, but include

considerations of benefiting people and the planet.

Use the right metrics, consistently. The metrics that Sterling decides to use are up the decision

of the management team. In regards to sustainability metrics and reporting, there are many

different frameworks and standards. Some that have been mentioned are the Carbon Disclosure

Project, the Global Reporting Initiative, and DEFRA’s Environmental Reporting Guidelines. We

recommend that the sustainability management team consider just who the target audience the

reports are going to target If the team decides to report to the Carbon Disclosure Project, then

they will have to follow guidelines that are specific to that reporting method. It is unlikely that

Sterling will undertake such a form of international reporting, so Sterling must decide which

metrics will benefit the company and direct stakeholders the most.

Improve the process of data collection, analysis and reporting. Sustainability is not a short term

or temporary goal. Sterling must not settle for meeting the same goals and meeting the same

metrics each year. The company must strive to constantly be better. That means constantly

PERFORMANCE MANAGEMENT

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improving data collection, analysis, and reporting. The sustainability management team must

never be satisfied. There is always many more goals to pursue in terms of sustainability. Rarely

if ever is a company totally green. It takes a lot of work.

Integrate with business planning and reporting: Sustainability should in no way be separate

from the core management and core financial functions of the company. In fact, sustainability

should be integrated with business planning and reporting so that business or financial successes

mean sustainability successes as well. What is driving Sterling to be successful should fully

incorporate sustainability. For example, regulatory compliance and responding to customer

desire is very important to any company such as Sterling. These aspects are also important when

considering sustainability. In this way, regular business management and sustainability fall into

line. Lastly sustainability should drive financial decisions of all types. Investments that relate to

sustainability should hold equal weight to other types of investment.

REPORTING

We recommend that as mentioned above, Sterling decide on a reporting technique. We

recommend that reporting take place internally and externally. In this way, successes and

progress can be communicated internally to employees, and to outside stakeholders including

customers, suppliers, and the local community. After establishing sustainability performance

metrics and a reporting framework, Sterling should work to produce a regular sustainability

report that incorporates the metrics that Sterling decides upon. This report could be put on the

company’s website, distributed to employees, and distributed to other outside stakeholders. If

the company does decide to undertake reporting to one of the internationally recognized

reporting frameworks, then the report will be circulated and marketed in many different ways.

The reporting should be streamlined, that is, a team or a single employee should work on

gathering and quality checking data, and then producing reports. Reports should be consistent,

and should highlight achievements and additional goals. It is important to communicate that

Sterling is always “striving to do better”.

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PATHWAY TO SUSTAINABILITY

LEADING THE CHANGE AT STERLING

To provide the best leadership style that helps Sterling leading the

change. We believe that the change and creating new culture is not easy

job; it needs to be a transformative and combined effort. To be successful

in this transformation and lead the change towards sustainability, we

recommend using the next eight actions (see below) that have been written

by John Kotter. (2007)

TRANSFORMATION STEPS FOR STERLING

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KOTTER: EIGHT STEPS TO LEADING THE CHANGE

1 Establishing a Sense

of Urgency

• Examining market and competitive realities

• Identifying and discussing crises, potential crises, or major opportunities

2 Forming a Powerful

Guiding Coalition

• Assembling a group with enough power to lead the change effort

• Encouraging the group to work together as a team

3 Creating a Vision

• Creating a vision to help direct the change effort

• Developing strategies for achieving that vision

4 Communicating the

Vision

• Using every vehicle possible to communicate the new vision and

strategies

• Teaching new behaviors by the example of the guiding coalition

5 Empowering Others

to Act on the Vision

• Getting rid of obstacles to change

• Changing systems or structures that seriously undermine the vision

• Encouraging risk taking and nontraditional ideas, activities, and actions

6 Planning for and

Creating Short-Term

Wins

• Planning for visible performance improvements

• Creating those improvements

• Recognizing and rewarding employees involved in the improvements

7 Consolidating

Improvements and

Producing Still More

Change

• Using increased credibility to change systems, structures, and policies

that don’t fit the vision

• Hiring, promoting, and developing employees who can implement the

vision

• Reinvigorating the process with new projects, themes, and change agents

8 Institutionalizing

New Approaches

• Articulating the connections between the new behaviors and corporate

success

• Developing the means to ensure leadership development and succession

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THE ROADMAP

SUSTAINABILITY ROADMAP FOR STERLING

Action Timeline

Develop new vision, mission and objective that meet sustainability requirements.

Expand vision to include community, environment, stakeholders, potential partners

and investors

Identify sustainability adviser for consulting on the project

Start to develop the Sustainability Team includes educational program for the team.

Communicate the sustainability vision to the company as a whole

Encourage engagement from management and lower – level employees

January

Explore solar PV with local installers

Collect and analyze quantitative and qualitative data about company performance

for the last three years including financial performance, costs, and energy used

Search for additional energy efficiency, water saving, recycling, management waste

and cost reduction systems.

Search for new suppliers and green raw materials

February

Finalize PV installer

Analyze findings and provide final report about potential solutions

Develop SWOT analysis

Identify current and potential stakeholders

Establish meetings with stakeholders such as employees, customers, school board,

government representatives.

Start to develop questionnaire Survey and determine focus group

March

Our goal here is to provide the best timeline style that helps

Sterling implement their sustainability project. We recommend that

Sterling structure its roadmap to be successful in the implementation

phase. Also, we recommend the following approach that highlights the

steps that were outlined in the transformation section above

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Continue searching for new efficient resources and suppliers

Develop proposal and contact potential suppliers

Develop questionnaire and focus group to assess current progress

Ask for recommendations from stakeholders

Creating an organizational structure that supports sustainability

Communicate the new structure with stakeholders

Talk to stakeholders about how sustainability can benefit their interests.

Introduce the sustainability program to local media.

Collect data to evaluate sustainability measures in local and global industry

Continue improvement of sustainability team

Continue communicate with suppliers and stakeholders

April

Collect data to evaluate sustainability measures in local and global industry

Collect information and ideas community, schools, other agencies, faith

communities about who might share interests with the sustainability intensive.

Develop new work schedule to reflect the impact of sustainability measures taken

May

Develop sustainability partnerships with local communities

Develop new organizational structure in support of Sustainability that would bring

about new jobs, better wages and a safer work environment

Provide opportunities for community stakeholders to engage with Sterling through

regular meetings

Celebrate small successes with employees, suppliers and chosen representatives of

stakeholders.

June

Provide final sustainability plan including timeline

Continue communication with suppliers

Continue to search for and evaluate energy efficient and waste management systems

Assess and evaluate acquired green technology

July

Evaluate and choose green solution

Develop final implementation process

Celebrate small successes with employees, suppliers and chosen representatives of

stakeholders

Thank all stakeholders

August

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Sign final contract

Allocate resources and materials

September

Implementation process October

Continue implementation

Develop the company’s first sustainability report

Nov & Dec

Participate in community education regarding sustainability initiatives taken

Continue towards improving the current systems

Provide rewards and benefits for employees and other stakeholders

January

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APPENDIX

Exhibit 1 Supply Chain and Purchasing Action Worksheet

Already doing Should do Doesn’t apply

Do you have Supply Chain and Purchasing Process Map

Do you complete Supply Chain Worksheet?

Do you have a series of purchasing guidelines relating to quality?

Are you using recycled-content products?

Do you eliminate hazardous elements in raw material?

Do you establish green specifications into bid or quote requirement?

Do you add environmental safety requirement into contract?

Do you have supply chain questionnaire to supplier. Explained why their

products are sustainable.

Use EPA database to investigate products in your supply chain

Exhibit 2 Supply Chain Worksheet

Completed by: Date: Supplier:

Product Supplied Amount:

Are raw

materials

sustainable?

Contains

toxic

material?

Packed in

reusable or

recyclable

material?

Contains

recycled

content?

What %?

Produced with

fair labor

standards?

Traceable

with barcode

or labels?

Produced

with

renewable

energy?

Shipped

with energy

efficiency?

End of

product

life

Carbon

Footprint

Labeling?

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Exhibit 3: Steps to use the software

Firstly download the software at www.lumina.com/ana/player.htm

Secondly choose what you want to analyze: for example, now I want a SO2 emission

analysis under decision analysis.

And then, this is a diagram of control of SO2 emissions. You can take a look the whole

process of analysis.

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