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The Bold Look of Kohler
And
Commitment to Sustainability
By
Daniel Heibel
University of Wisconsin - Stout
Strategic Management and Business Policy
BUMGT-490
Date: December 17, 2009
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Executive Summary
Waste not, want not is a centuries old idiom that reminds us that the
wise use of ones resources will keep one from poverty. But in the business
world, business stakeholders demand that the wise use of resources will lead
to profitability. This is the basis of corporate sustainability and can be
described by the three elements of environmental, social and economic
responsibility.
Why has corporate sustainability become such a concern? Executives have
come to recognize that long-term economic growth is not possible unless
that growth is socially and environmentally sustainable. A balance between
economic progress, social responsibility and environmental protection,
sometimes referred to as the triple bottom line, can lead to competitive
advantage.
Developing sustainability strategies is often an important challenge for
senior executives, but implementation is usually the larger challenge. Senior
managers often find it difficult to simultaneously improve all three elements
of sustainability.
This analysis describes the Kohler Companys commitment to
sustainability, compares it to other corporate strategies currently being
implemented, and presents possible alternatives that will improve their
implementation and strategy.
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Opportunity Statement
Identify Kohlers sustainability strategy and its implementation, and based
upon comparison with best-in-class organizations, recommend alternatives
or additions to its strategy.
Company History and Profile
The year was 1873, an unlikely time to start a new business in America.
Despite the economic uncertainties of the day, John Michael Kohler
purchased the Sheboygan Union Iron and Steel Foundry, never anticipating
the growth of the company that would eventually bear his name. The firm
produced cast iron and steel implements for farmers in the area, castings for
the citys furniture factories, and ornamental iron pieces that include hitching
posts, cemetery crosses, urns and settees.
In 1883, Kohler took a product in his line, heated it to 1700F and
sprinkled it with enamel powder. Placing a picture of it in the center of his
one-page catalog, he called it a horse trough/hog scalder when furnished
with four legs will serve as a bathtub. Kohler was in the plumbing business.
Legend has it that the first bathtub was sold on barter arrangement for one
cow and 14 chickens.
Like Kohler himself, many of the early employees were immigrants. Their
dedication to excellence helped forge one of the oldest and largest privately
held companies in the United States. Kohler ideas craftsmanship and
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production to torpedo tubes, artillery shells and other military components,
producing only the plumbing products and generators needed for WWII.
Following victory in WWII, Kohler converted back to peacetime production
of plumbing fixtures and begins marketing its line of small engines. This
begins another period of rapid expansion that is curtailed by a bitter six-year
strike by the United Auto Workers union from 1954-1960. Despite the strike,
a new 400,000 square foot small engine manufacturing facility is opened.
The company also makes its first expansion outside of Wisconsin by building
a vitreous china and reinforced fiberglass facility in Spartanburg, South
Carolina.
Kohler goes international by building a plant in Mexico City, to produce
small engines for the Mexican market and for export, in 1964. 1967 saw the
development of boldly colored products and the companyscurrent tagline,
THE BOLD LOOK OF KOHLER.
In 1974 we see the introduction of the first innovative, environmentally-
conscious products, as low consumption toilets, faucets and showerheads
are introduced to reduce the strain on municipal and private sewage
systems, and to lower sewage and water treatment costs. The Wellworth
Water-Guard toilet uses only 3.5 gallons of water per flush, a reduction of
30% from conventional toilets.
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Kohler again expands in 1975 with another production facility for vitreous
china and fiberglass reinforced plumbing products, this time in Brownwood,
Texas. This same year, the production of generators is moved to a
manufacturing facility in the Town of Mosel, just north of Sheboygan,
Wisconsin. In 1977, the second 50-year master plan for the Village of Kohler
is developed by the Frank Lloyd Wright Foundation. Another product
innovation milestone is reached in 1978, when Kohler engineers receive a
U.S. patent for a timed flushing system that increases the efficiency of
Kohlers one-piece, low-flow toilets.
The Kohler Company really takes off in the 1980s. Hospitality and Real
Estate, forms as a Business Group, with the American Club, River Wildlife
and the Sports Core. 1984 sees the first acquisition in the companys 111
year history, as Sterling Faucet Co. is purchased, significantly increasing
market share and allowing greater access to retail markets. In 1986, Kohler
enters the furniture business with the acquisition of Baker Knapp & Tubbs,
Incorporated. Kohler establishes itself in Europe, by joint-venture with Jacob
Delafon, a major full-line plumbing products manufacturer. To strengthen its
position in fiberglass and acrylic products, Kohler acquires a Canadian
company; Hytec Manufacturing Ltd. Kohler then acquires the FRP
Components Division of Owens-Corning Fiberglas Corporation, allowing it to
produce sheet molded bathtubs and enclosures. Not stopping there, Kohler
goes on to acquire the Kinkead Division of USG Corp, the countys largest
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manufacturer of tub and shower enclosures. Finally in 1989, Kohler adds two
more businesses to its family; Ann Sacks Tile and Stone, which produces
hand-made tile and marble, and Kallista, which produces high-end plumbing
products that appeal to the interior design market. Another product
innovation milestone is reached in 1989, as the 1.5 gallon Wentworth Lite
toilet (which many of us have had the honor of plunging) is introduced.
Kohler continues their rapid expansion in the 1990s by six more
acquisitions: McGuire Furniture Company, Sanijura S.A., Robern, Inc.,
Holdiam, Inc., Canac Kitchens Ltd., Lumatech International Inc. They also
expand by opening two plants in China, two in Indonesia; one in Mexico, as
well as two in the U.S. Kohler also enters a joint-venture with a Beijing
faucet manufacturer. A new business group is added, Kohler Rental Power.
Since 1998, Kohler expansion has continued, primarily through the
strategies of horizontal and forward-gaining integration, concentric
diversification, and through product differentiation. This has resulted in a
doubling of size, with more than 50 manufacturing locations worldwide,
32,000 Kohler Co. associates working on six continents, and 39 brands
comprised within four major business units; Kitchen & Bath, Global Power,
Interiors, and Hospitality. Being a privately held company, financial numbers
are hard to come by, but best estimates indicate revenue of $6 billion for
2008.
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The mission of the Kohler Co., in its higher level of gracious living concept,
is all about improving the quality life. They accomplish this through the
design and engineering of their products, and by capitalizing on the historic
and environmental nature of their services. For sustainability, the
enhancement of nature shows their commitment to improving the quality of
our environment.
Mission Statement
Kohler Co. and each of our more than 32,000 associates have the mission of contributing to a
higher level of gracious living for those who are touched by our products and services.
Gracious living is marked by qualities of charm, good taste and generosity of spirit. It is further
characterized by self-fulfillment and the enhancement of nature.
We reflect this mission in our work, in our team approach to meeting objectives, and in each ofthe products and services we provide.
Because their products are found in many public areas, homes and offices,
one can be touched by Kohlers products without being an actual
purchaser. The same can be said about their services; one can be a visitor
or guest without being an actual paying customer. For sustainability, the
world is touched by Kohlers sustainability initiatives in: waste
management, energy efficiency, water conservation, incorporating green
building principles into their facilities, and developing more environmentally
friendly packaging.
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Sustainability
The framework of Kohlers commitment to sustainability is the
Sustainability Strategic Plan, launched in 2007 to institutionalize
sustainability within Kohler. It is a triple-faceted strategy consisting of:
education, attaining a net zero environmental footprint by 2035, and driving
growth and competitive advantage with innovative sustainable products and
services.
It is more than a project as it sets forth to embed a culture of
sustainability throughout the company. 49 champions have been named for
the North American campaign, with a global network of champions soon to
be announced. We need respected, passionate associates to help bring the
plan to life in the workplace, says Jeff Plass, Manager Global Environment,
Health & Safety, and a member of the Kohler Environmental Leadership
Team (KELT). KELT is a cross-functional group of company leaders who have
designed the Sustainability Strategic Plan with an ambitious implementation
plan.
The champions of KohlersSustainability Strategic Plan have adopted an
informal mission statement of their own. It is a 1934 quote from then
company president Walter J. Kohler, which exemplifies the companys long
standing tradition of environmental stewardship,So-called free goods such
as sunshine and fresh air may be of more real wealth than most economic
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goods. This may be the first known mention of environmental stewardship
in the corporate world. Current President and COO, David Kohler, also has
an inspiring quote for commitment to sustainability, Business success
doesn't matter much if we can't say we left the world a better place than we
found it.
In phase 1 of the education facet of the Sustainability Strategic Plan, the
champions have been tasked to help create a culture where associates think
about sustainability in their day-to-day work. This is reflected in their vision
statement, Think green, and be green. For them, every little thing that
promotes sustainability counts. They believe that every associate can
contribute in some way.
In phase 2 of the education facet of the Sustainability Strategic Plan, as
champions have been involved in different business activities, they identify
and emphasize areas that can be used to promote sustainability gains. For
example, at a recent pottery division workshop that involved mapping value
stream inputs and outputs, excesses and wastes were found in water usage.
A sustainability project was subsequently launched and completed with the
Environmental, Health and Safety (EHS) team, resulting in a water savings
potential of 6.5 million gallons per year.
Kohlers educational strategy extends beyond the walls of its own
businesses and into the world with its Save Water America program, which
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holds events across the country and can be accessed online at
SaveWaterAmerica.com. These events partner with local water utilities and
plumbing distributors across the country to help consumers and businesses
save water. They demonstrate ways to save water at home through working
displays and offer event discounts on toilets, showerheads, and faucets.
Kohler Co. has used this program to raise water-conservation awareness and
help people take action to save water at home.
The key metric and focal point of the net zero footprint component to the
Sustainability Strategic Plan, is a 4% yearly reduction in energy
consumption, water usage, landfill usage and carbon emissions. Using the
year 2008 as their baseline, the 4% per year objective will allow them to
achieve their net zero footprint goal in 2035.
As with any sustainability strategy, the basic beginning is the reduction of
wasted energy, which also adds unnecessary carbon emissions. At Kohler,
the KELT team works closely with the Kohler Energy Management Group
(KEMG). KEMG is a group of engineers and technicians who are constantly
scrutinizing energy usage, looking for cost savings anywhere it might help
with the 4% plan for a net zero footprint. Many of these cost savings are
called the low hanging fruit of sustainability because they seem so obvious
and easy to correct, but with careful effort, implementation can be made to
further the sustainability effort.
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One of the main areas that KEMG is involved with is lighting systems, both
for offices and factories. An energy efficient lighting system includes bulbs,
ballasts, motion sensors, task-specific lighting, and integrated natural light.
KEMG specializes in retrofitting energy-efficient lighting systems through the
use of fluorescent lighting with low power factor ballasts, incorporating
motion sensors that turn off unused fixtures after a period of inactivity. By
adding these motion switches, an energy savings of 15 25% can be
realized, depending on the size of the area. Their favorite myth buster is to
disprove the idea that it uses more energy to shut off and start-up
fluorescent lights, than to leave them on all the time.
A recent sustainability project success of the KEMG team was realized at
the Brownwood, Texas plant, which installed more efficient lighting and kilns
to save 7,555,000 kW hours of energy, enough to power over 100,000
laptops for a year.
Another area of focus for KEMG is the lesser known area of energy waste
in compressed air systems. It turns out that air compressors can be a source
of electrical energy waste due to air leaks and the matching of demand to air
availability. Their team seeks out the air leaks and implements a timed-
sequence strategy of different compressors to match compressed air
demand. The team has also explored this approach as it applies to dust
collector systems, and has realized cost savings there as well.
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The third main area of focus for KEMG has been the retrofit of standard
efficiency motors, with premium or ultra-premium efficiency motors. A
standard electric motor has an efficiency rating of 88%, a premium has a
93.5%, and an ultra-premium carries a 95% rating. KEMG has specified the
use of premium and ultra-premium in all replacement situations, as well as a
minimum standard in OEM equipment purchases. Kohler participates in the
Wisconsin Focus on Energy program and receives rebates from $2 to$5 per
horsepower, depending on the type of motor.
KEMG recently applied for and just last week received a $1.7 million grant
from economic stimulus funds through the American Recovery and
Reinvestment Act. This grant was a part of a $14.5 million dollar fund, aimed
at cutting energy costs and creating and retaining jobs, administered
through the Wisconsin Focus On Energy Program. The money will be used to
remove and upgrade more than 800 light fixtures in the company's foundry
building. The company will also replace steam-powered hotwater systems in
two buildings with natural-gas-fired equipment. A third project will replace a
steam-powered clay dryer in the pottery division with a new system that
uses waste heat from pottery kilns.
The second part of the net zero footprint strategy involves water usage in
the manufacturing processes. The pottery division has completed several
water reduction projects in 2009, resulting in an overall consumption
http://www.sheboyganpress.com/article/20091211/SHE0101/912110389/Kohler-Co.-to-get-1.7M-for-upgradeshttp://www.sheboyganpress.com/article/20091211/SHE0101/912110389/Kohler-Co.-to-get-1.7M-for-upgrades -
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decrease of 17%, compared to 2008. One of those projects involved the
elimination of a cooling tower. Cooling towers are major water consumers,
losing water mostly through bleed-off, and to a lesser extent, evaporation.
This particular cooling tower was found to use 1.5 million gallons per year.
Besides eliminating water in a process, another way to reduce water usage
in a process is simply to replace it with a substitute. This is exactly what an
EHS project accomplished when it converted the glaze filter magnet system,
from an open water-cooled system to a closed coolant system, resulting in a
water savings potential of 240,000 gallons per year.
Still another way to think about water usage is what can be done with the
wastewater from a production process. Kohler Co. operates a wastewater
pre-treatment plant and has a project slated for 2010 where recycled water
will be piped back into the plant and used for toilet and urinal flushing
systems. Other manufacturing processes are also being considered as uses
for this recycled (although not potable) water.
The third part of the net zero footprint strategy involves landfill use. The
Kohler Co. private landfill in Sheboygan County is approaching its capacity.
Kohler has made attempts to open a new landfill, but has been met with
opposition from residents who live near to the proposed locations. Kohler
has decided to abandon the idea of opening a new landfill, and incorporate
landfill use into the 4% plan. This dovetails quite nicely since a 4% reduction
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Climate Registry (http://www.theclimateregistry.org). CO2accounts for the
majority of carbon emissions, especially where fossil fuels are burned.
Kohler takes a production-specific approach to minimize or eliminate
carbon emissions through reductions in: electrical energy use,
manufacturing processes, packaging, transportation, space heating, water
heating, and disposal requirements. In most of Kohlers worldwide
manufacturing locations there are already strict controls on air emissions,
while other locations will likely see a substantial tightening of their standards
and enforcement.
The third facet of the Sustainability Strategic Plan, driving growth and
competitive advantage with innovative sustainable products and services,
has been a stalwart of the overall Kohler business strategy for decades.
Kohler Co. has the worlds largest portfolio of water-saving plumbing
products.
The Kohler and Sterling brands market 27 different models of High-
Efficiency Toilets (HET) that use only 1.28 gallons of water per flush (gpf).
The Kohler brand HETs can be had with five different proprietary flushing
technologies, Class Five, Class Six, Pressure Lite, Power Lite or Dual
Flush technology, while the Sterling brand features the Dual Force
technology.
http://www.theclimateregistry.org/):http://www.theclimateregistry.org/):http://www.theclimateregistry.org/): -
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The Kohler brand markets six different styles of 1.75 gallon per minute
(gpm) showerheads and handshowers. For an average family of four taking
approximately seven-minute showers, using a 1.75 gpm showerhead equals
a 35% water savings over a less efficient 2.75 gpm showerhead. In other
words, you save over 7,700 gallons of water per year. Ironically, these 1.75
gpm showerheads have yet to be installed in employee showering facilities,
although projects to do just this are on the docket for 2010.
Kohler offers over a hundred different styles of bathroom faucets, most
carry the WaterSense label, which signifies that it has a 1.5 gpm water-
saving aerator. A 1.5 gpm faucet offers a 45% water savings over less
efficient 2.75 gpm faucets. For the average household, this can equal over
14,700 gallons of water saved each year.
On the commercial side of Kohlers environmentallyfriendly products is
the waterless urinal, and the .5 gallon gpf urinal. Kohler states that each
waterless urinal can typically save 40,000 gallons of water per year. The .5
gpf models use half of the industry normal 1.0 gpf urinals. Flushometers are
devices that control water flow in tankless commercial urinals and toilets,
and Kohler uses proprietary technologies such as; WAVE technology, which
puts control back in the hands of the user, and Tripoint technology,
suitable for challenging environments. Both technologies save water by
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activating only when needed and delivering outstanding performance with
minimal water use.
A project that exemplifies all three facets of the Sustainability Strategic
Plan was the transformation of the companys Environmental, Health and
Safety building into a more environmentally efficient structure, which
resulted in Kohler Co. being awarded Silver LEED Status from the U.S.
Green Building Council. The U.S. Green Building Council is a nonprofit
membership organization whose vision is a sustainable built environment
within a generation, and sponsors the Leadership in Energy and
Environmental Design (LEED) Green Building Rating System, which is a
feature-oriented rating system that awards buildings points for satisfying
specified green building criteria.
To earn Silver LEED status, Kohler made several enhancements to the
buildings interior and exterior, along with installing several upgrades and
monitoring devices for energy and water usage. A 50 percent reduction in
water usage was achieved by installing new faucets and fixtures in the
bathrooms, including the KOHLER Steward waterless urinal. High Efficiency
Toilets such as the KOHLER Highline 1.1 gpf were also installed, and .5 gpm
faucets with KOHLER Tripoint Touchless Technology all contributed to the
significant water savings. New landscaping around the building includes
native Wisconsin plant life, all of which is easy to maintain and are able to
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grow without the use of herbicides and extra potable water. A green cleaning
program was developed for the building, for which environmentally-friendly
cleaning products are used exclusively to maintain the building. Natural
lighting is utilized where possible, and in the areas extra light is needed, low
energy, long-lasting compact fluorescent bulbs are used.
KELT presents this Silver LEED accomplishment as an educational
centerpiece for sustainability because its incorporation of sustainable design
and practices, reminds employees and visitors alike that sustainability is a
part of the Kohler culture.
Sustainability Partnerships
The U.S. Green Building Council is one of four partnerships for
sustainability that Kohler has entered into. The other three are the Alliance
for Sustainable Built Environments (ASBE), the Alliance for Water Efficiency,
and the WaterSense program of the U.S. Environmental Protection Agency.
The Alliance for Sustainable Built Environments (ASBE) was formed in
2003, as an exclusive group of international building industry manufacturers
with a similar approach to business, who banded together and committed to
an aggressive, coordinated campaign to inform decision-makers that the
choices they make with regard to their facilities can be economically and
environmentally sustainable. They believe as catalysts for change,
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manufacturers have a unique place in the sustainability movement as they
are the ones producing the products and developing the services that deliver
high performance green buildings.
The Alliance for Water Efficiency is a stakeholder-based 501(c)(3) non-
profit organization dedicated to the efficient and sustainable use of water.
Located in Chicago, the Alliance serves as a North American advocate for
water efficient products and programs, and provides information and
assistance on water conservation efforts. A diverseBoard of
Directors governs the organization and has adopted a set ofguiding
principles and astrategic plan.
The WaterSense program of the U.S. Environmental Protection Agency is a
partnership program that seeks to protect the future of our nation's water
supply by promoting water efficiency and enhancing the market for water-
efficient products, programs, and practices. WaterSense helps consumers
identify water-efficient products and programs. TheWaterSense label
indicates that these products and programs meet water efficiency and
performance criteria. WaterSense labeled products will perform well, help
save money, and encourage innovation in manufacturing.
http://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76http://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76http://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=1758http://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=1758http://www.allianceforwaterefficiency.org/about/default.aspx#Strategichttp://www.epa.gov/watersense/pubs/label.htmhttp://www.epa.gov/watersense/pubs/label.htmhttp://www.allianceforwaterefficiency.org/about/default.aspx#Strategichttp://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=1758http://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=1758http://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76http://www.allianceforwaterefficiency.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76 -
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Environmental Compliance
The sheer size and the global nature of Kohler present a challenge in
compliance with all the different environmental laws and government
agencies as they vary from state to state, and country to country.
Environmental compliance is only a precursor in achieving sustainability, but
represents an opportunity to work with the various government agencies.
Kohler Co. typically treats environmental compliance as a separate issue
from sustainability.
Recent legislation from the state of California brings up a case in point
where environmental compliance can be a driver for sustainability initiatives.
The California law calls for all water fixtures and fittings that are intended to
carry drinking water to contain less than 0.25% lead (typical lead content 2-
3%) starting in 2010. The law would only be applicable to newly installed
and replacement fixtures. The law doesn't take into account the
technological ramifications of using essentially lead-free copper alloys in
these applications, but Kohler Co. has developed their own secret formula
for a no-lead alloy brass used in their drinking water faucets.
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Analyses
I have discovered that the Kohler Co. actually employs three types of
sustainability strategies market-driven, process-driven, and cultural-
driven. Since becoming a full-line plumbing manufacturer in the 1920s, this
family-run, privately held company has been manufacturing plumbing
products which have a designedemphasis on environmental stewardship.
This has been their market-driven sustainability strategy. It is only in the
last 20 years that the manufacturing processesthemselves have been
developed to become more environmentally-conscious. This has been their
process-driven sustainability strategy; making products in a way that
minimizes the consumption of energy, water and other natural resources.
Importantly, a formal sustainability strategy has only been developed within
the last two years and only recently has its implementation begun. This has
been the genesis of their cultural-driven strategy.
The major strength of Kohlers market-driven strategy is their brand,
which can be represented by the companys tagline,THE BOLD LOOK OF
KOHLER. In our world of information overload, brands matter. As
customers are bombarded with product options and configurations, brands
provide a shortcut for customers to identify their favorite products and for
talented workers to pick their employers. The better a company does at
protecting its reputation and building brand trust; the more successful it will
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be at gaining and maintaining competitive differentiation. A strong brand
with a full trust bank is a valuable asset.(Esty, 2009) A tremendous brand
strengthening in regards to sustainability has been achieved through its
Save Water America Program,http://www.savewateramerica.com,and its
sustainability partnerships. For the customer, this means that choosing a
plumbing product with a high environmental performance also means long-
term savings. For Kohler Co. it means making consumers aware of this
connection.
Kohlers brand positioning as the world leaderin water saving plumbing
products has created exposure in a world where sustainability matters.
Marketing the companys greenness has worked extremely well, but does
company have the commitment to sustainability to maintain that image in
everything it does? Kohlers passionate focus on green products has allowed
it to adopt a process-driven sustainability strategy as a natural extension of
its existing business mind-set.
It is a steep challenge for any old-line, industrial business to transform
itself into a low-carbon and eventually a zero-carbon player. (Dumaine,
2008) Yet a company like Kohler has to start somewhere. Given the
resources that David Kohler is directing toward the Sustainability Strategic
Plan, the company so far seems to be laying a solid groundwork for the
implementation of a culture-driven strategy. Getting CEO leadership and
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Recommendations
There is no one-size-all approach to sustainability. Strategies need to take
many different shapes and forms, depending on the unique interrelationship
between a specific organization and society, and the unique social,
environmental, and economic opportunities that result from that
interrelationship. (Wirtenberg, 2009) I have conducted research to identify
current examples of sustainability practices implemented by best-in-class
organizations and have included this research inAppendix A.
According to the Dow Jones Sustainability Index (2009), leading
sustainability companies display high levels of competence in addressing
global and industry challenges in a variety of areas:
Strategy: Integrating long-term economic, environmental and socialaspects in their business strategies while maintaining global
competitiveness and brand reputation.
Financial: Meeting shareholders' demands for sound financial returns,long-term economic growth, open communication and transparent
financial accounting.
Customer & Product: Fostering loyalty by investing in customerrelationship management and product and service innovation that
focuses on technologies and systems, which use financial, natural and
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social resources in an efficient, effective and economic manner over
the long-term.
Governance and Stakeholder: Setting the highest standards ofcorporate governance and stakeholder engagement, including
corporate codes of conduct and public reporting.
Human: Managing human resources to maintain workforce capabilitiesand employee satisfaction through best-in-class organizational learning
and knowledge management practices and remuneration and benefit
programs.
Kohler appears to be meeting these challenges head-on. An area which
could be improved upon in order to enhance their cultural-driven strategy is
stakeholder engagement. Stakeholder engagement can be achieved with
effective communication and providing access to information, focusing on
desired outcomes and frequently reporting progress. I propose that this can
be achieved at minimum with an article about sustainability in each weekly
Kohler Capsule, the companys news publication for Wisconsin associates, as
well as similar publications in Kohlers varied business locations. Kohler does
include a Green Tip section in the Capsule; it is usually a two sentence
concept that points out what people can do in their day-to-day living to
become more sustainable. Here is a recent example of the Green Tip.
Snow Removal: Whenever possible, chose to shovel snow rather than use
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the snowblower. Youll prevent emissions and get exercise at the same
time. The irony is that Kohler does indeed manufacture small engines used
in snowblowers, and they have worked very hard to feature those engines
with low-level emissions. So the Green Tip is just a tiny baby step in the
education process. An even better alternative would be a monthly world-
wide sustainability newsletter.
Ideally stakeholder engagement through communication should evolve to
what Procter & Gamble has been doing annually for 11 years now, as
illustrated inAppendix A, in the Strategic Focus on Data section. Kohlers
strategy and implementation have been similar to Procter & Gambles,
therefore I propose that Kohler prepare an annual sustainability report that
will build credibility and encourage stakeholder engagement.
Further development for stakeholder engagement through communication
would include an overview of sustainability similar to the methodology used
by Bristol Myers-Squibb as illustrated inAppendix A, in the Defining
Sustainable Development section. This method would be most effective if
globally implemented. Parts of this method can be found on the Kohler
intranet and on Kohlers various websites. I propose this overview of
sustainability be built into a dedicated website. Due to the private nature of
Kohler Co., there could be one site for the internet and one for the intranet.
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Finally, my recommendation for developing stakeholder engagement
through communication would include stakeholder relationship performance
indicators. I propose a tracking survey which measures the performance of
Kohlers sustainability efforts in comparison with its main competitors. This
will help Kohler to respond to new needs and to improve the quality of its
products and services.
An Alternative Recommendation
One idea for implementation that could be a home-run for all three of
Kohlers strategies, involves the use of lead in Kohlers products. One of the
most challenging materials to reduce and eventually eliminate is lead, which
poisons water and soil to the detriment of sea life and humans alike.
(Gordon, 2001) Kohler has successfully eliminated lead in all of its products
except in die-cast brass products. While the amount of lead that can be
leached from brass plumbing components is generally low, it has been found
that the amount of lead that can be leached from plumbing components may
exceed either current or future planned standards. The previously mentioned
California No-Lead law has been a driver for eliminating lead in water
carrying faucets and fittings. Kohlers response has been excellent, as they
have achieved a competitive advantage with its secret no-lead alloy brass.
But several technical obstacles still remain; it is still more costly to machine,
polish and plate the secret no-lead alloy brass. Although this might border
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on alchemy, I propose Kohler continue its research and development efforts
to eliminate lead from all alloy brasses, thus allowing Kohler to proudly claim
all its products to be lead-free. The key factor is decision criteria number 3;
is a 100% no-lead brass alloy a win for profitability? Right now its not, but if
it could, then it should be exhorted as a major breakthrough and definitely
as a way of sticking it to the competition.
Conclusion
The company has realized that the worlds perception of environmental
protection has been changing, and has adjusted their environmental strategy
with the times, realizing that sustainability is a long-term, ongoing process
that will continue for years to come. Ultimately for any business, the key
strategy will be financial sustainability. Making an environmental
sustainability strategy work with a financially sustainable strategy, will
enhance the strength and viability of the company and the world. At the
recent news conference where Kohler was awarded a $1.7 million grant for
sustainability projects, COO and President David Kohler said, We firmly
believe that (when) properly conceived, a sustainability strategy, one that
fully integrates business principles and environmental principles, is the only
strategy for the road ahead.
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Company Response
Daniel,
Thank you for the opportunity to review your analysis paper. You have
demonstrated a great deal of understanding of the company history, of
sustainability drivers and the Kohler Co. response. Your analysis did not
change our sustainability direction, as we are already working on closely
related ideas. However, I do appreciate the confirmation that we are
proceeding in the right direction. I hope for your personal good fortune as
you pursue your education.
Warmest regards,
Nathan Nissen
Kohler Co.
Environment, Health and Safety
Office 920.453.6312 | Cell 920.207.7565
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Appendix A
Current Examples of Sustainability Practices from Best-in-Class
Organizations
Type of
Practice
Current Example
A
Comprehensive
Reporting
Structure
Rio Tintos reporting structure is illustrated by this graphic. They used this
to prepare the companys Social and Environmental Report. This makes it
apparent that Rio Tinto PLC understands the importance of bringing
corporate policy makers together with operational managers to produce a
report that has meaning inside and outside of organization.
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Strategic Focus
on Data
Procter and Gamble builds credibility and uses resources most effectively
by providing detailed data on five sustainable strategies listed in their
2009 sustainability report,
http://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainabi
lity_Overview.pdf,
Strategy 1: Products
Delight the consumer with sustainable innovations that improve the
environmental profile of our products.
Strategy 2: Operations
Improve the environmental profile of P&Gs own operations.
Strategy 3: Social Responsibility
Improve childrens lives through P&Gs social responsibility programs.
Strategy 4: Employees
Engage and equip all P&Gers to build sustainability thinking and practices
into their everyday work.
Strategy 5: Stakeholders
Shape the future by working transparently with our stakeholders to
enable continued freedom to innovate in a responsible way.
http://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdf -
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Connecting Life
Cycle
Assessment
(LCA) to
Financial
Performance
Norsk Hydro has applied life cycle assessment to the workings of the
entire company. The aggregated data allows for a striking overview of
company consumption of natural resources and pollutant emissions in
light of annual profits. A LCA has also been completed for each major
company division.
Electrolux has also reported on the life cycle analysis of a number of their
products. A strong impetus for the appliance industry to offer products
with reduced environmental impact is the fact that the main
environmental impact is usually greater in product use than during
production, and furthermore is closely connected to the individual
household economy.
A life cycle assessment of a washing machine for example shows that
about 80 percent of the total environmental impact during the life of the
machine consists of water, energy and detergent consumption. A similar
analysis of the total cost of the entire life cycle of the machine shows that
the cost of water, energy and detergent consumption exceeds the initial
purchase price.
For the customer, this means that choosing an appliance with a high
environmental performance also means long-term savings. For the
appliance industry it means making consumers aware of this connection.
Replacing old, inefficient white-goods with a new generation, resource-
efficient appliance is beneficial for the environment.
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Defining
Sustainable
Development
In reporting on its definition of sustainable development, Bristol-Myers
Squibb goes beyond the traditional one-line statement to include a
comprehensive look at the all the issues that have an impact on
operations and stakeholders (both local and global).
BMS' overview of sustainability includes policy statements on external
evaluation of EHS policies and procedures, supplier compliance,
technology transfer, charitable contributions, transportation impacts, local
noise and odor issues, new acquisition and divestiture processes, animal
testing, pharmaceutical residuals in the environment, genomics,
biosafety, and bioprospecting.
Measuring
Social and
Environmental
Impacts
In 2001, UK-based The Co-operative Bank developed a methodology to
measure how its sustainability practices affect revenue and growth. The
methodology uses several calculations and survey questions. From the
survey, the bank determined that 53% of personal current account
customers state that sustainability is one of a number of important factorsin why they opened or maintained an account at the bank, while 31% cite
sustainability as the most important factor. The bank has estimated the
profitability of each product, including all direct costs and indirect costs
attributable to the product. The profitability is then multiplied by the
sustainability factor, and then aggregated to produce a sustainability
profitability contribution range (which ranges from those customers for
whom sustainability is the most important determining factor to those
customers for whom sustainability is one of a number of factors). The
bank concluded that 26% of profits could be assigned to customers who
cite sustainability as an important factor, and 14% to customers who cite
sustainability as the most important factor.
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Integrating
Long-Term
Economic,
Environmental,
and Social
Aspects inBusiness
Strategies
Unilevers group CEO, Patrick Cesau, is a strong advocate of assisting
developing nations, and he embraces the notion that this is tied to the
companys strength in the marketplace and fiscal well-being. According to
Engardio, Cesau sees the importance of helping such nations wrestle with
poverty, water scarcity, and the effects of climate change as vital to
staying competitive in the coming decades.
The company promotes its soap and detergent in an impoverished are of
Sao Paolo, Brazil, by running a free community laundry. In that same
country, Unilever supports tomato growers efforts to adopt
environmentally friendly irrigation systems by contributing financially to
the program. In addition, at a toothpaste factory, it focuses on recycling
waster.
In Ghana, Unilever brings potable water to communities in need and
teaches people how to reuse waste.
In response to green activists, the company discloses how much
hazardous waste and carbon dioxide its factories release worldwide. Asenvironmental regulations grow tighter around the world, Unilever
believes it must invest in green technologies or its leadership in packaged
foods, soaps, and other goods could be imperiled.
Unilevers efforts in these areas have profited not only the people in
developing nations but the company itself. About 40% of the companys
revenue now comes from developing countries, as does much of its
growth.
Shareholder
Value Analysis
Georgia-Pacific, the large forest products company, used shareholder
value analysis to align the companys goals of creating shareholder value
and environmental responsibility. The EH&S department at Georgia-Pacific, as well as individual environmental projects, has been evaluated
using shareholder value analysis, Included in each environmental project
evaluation is an assessment of the projects impact on revenues,
operating costs, such as consulting fees, fines and administrative costs,
and capital costs. Using shareholder value analysis, Georgia Pacific has
been able to identify environmental investments that create financial and
shareholder value for the company. For example:
-A project to use boiler fly ash generated at the plants reduced landfill
and transportation costs, generating a shareholder value analysis of
$800,000
- An aerator optimization project reduced energy usage, generating an
shareholder value analysis of $102,000
-By re-engineering the process for complex environmental permitting, the
cycle time for new permits and construction projects was reduced, as well
as external consulting fees, generating increased shareholder value of
$2.1 million.
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Incentives and
Rewards for
Sustainability
Performance
Swedish-based Scandic Hotels initiated a program called Resource Hunt,
which rewards employees for improving resource efficiency. The program
encourages employees to reduce consumption of energy, water, and
waste. The hotel invested $150,000 to train employees on the specific
objectives and issues of the program. Employees at each hotel receive a
percentage of the savings. From 1996 to 2001, 35 hotels saved $1.5million through Resource Hunt. This program saved money for the
company and motivated employees to consider sustainability in their day-
to-day decisions.
Stakeholder
Relationship
Performance
Indicators
BP Amoco reports on the objective research, carried out both in the UK
and internationally, which seeks the views of the public, business leaders,
opinion-formers and NGOs. A 12-country study confirmed the importance
of social and environmental responsibility as a factor in determining
opinions about companies.
BP Amoco's Global Image Tracking Survey measures the performance ofBP's brand in comparison with its main competitors, which helps BP to
respond to new needs and to improve the quality of its products and
services.
Benchmarking
Corporate
Environmental
Management
Practices
In its Towards Sustainable Development report, Ontario Power Generation
includes a description of the benchmarking study conducted by a
consultant to compare OPG's corporate environmental management
practices and processes to those of best-in-class organizations.
The consultant's report affords OPG a third-party evaluation of both
strengths and weaknesses in its corporate environmental practices and
processes, and an essential baseline for measuring its progress. A
synopsis of the findings is provided and OPG also outlines its response.
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Organizing for
Sustainability
DuPonts organizational structure has undergone changes over several
years. It was one of the first companies to create an officer-level VP (vice
president) of EH&S in 1989. At that time it used a decentralized EH&S
structure consisting of managers for medical, safety, occupational health,
and environment. These managers were supported by a small staff with
specialists in each facility. In the early 1990s, DuPont created theCorporate Safety. Health and Environment Excellence Center. The groups
services were contracted by the strategic business units as needed.
In 2004, DuPont was reorganized. Previously, the Excellence Center
reported to the VP of engineering, under the direction of VP of EH&s.
DuPont has now created a VP of safety, health, environment, and
engineering who is responsible for the strategic direction and
administration of the group. An additional position of VP and chief
sustainability officer was created to be responsible for product
stewardship, sustainable growth, and long-term strategy and goals.
DuPont also uses a combination of centralized and decentralized
structures. This includes a corporate group, leaders in each business unit,
and also leaders at each site.
Green building
Designs
The Oceano Community Center, in San Luis Obispo, CA, opened a 15,380
square foot facility that incorporated a variety of green building and
pollution prevention strategies in its design. The gym has a photovoltaic
system to generate on-site electricity and several energy saving features
to reduce energy demand, including clerestory windows that open to
provide efficient cooling; the use of light shelves to reflect and enhance
natural daylight; occupancy sensors for lighting control; a roof designed
to minimize solar heat gain; and north-facing glazing to provide light
without adding solar heat gain. In addition, recycled and environmentallyfriendly construction materials were used wherever possible; automatic
controls on the lavatories were installed to reduce water usage; and the
landscape plantings are drought resistant. Building maintenance practices
include the use of nontoxic cleaning supplies and recycling of waste
materials. Recognizing that 30% of the 7,250 resident users are below
the age of 18, bike racks were conspicuously placed to encourage travel
to the facility by means other than a car.
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Integrating
Collaboration
With Non-
Governmental
Organizations
Timberland Company, a U.S.-based clothing and footwear company, has
focused much of its sustainability strategy on a partnership with City
Year, a national youth corps. The partnership began in the late 1980s
when Timberland donated boots to City Year corps members. After this
initial donation, Timberland established its Path of Service community
service program, entitling employees to 32 paid service hours per year, toencourage employees to participate in volunteer activities, particularly
with City Year. Over the years, Timberlands relationship with City Year
has evolved. Timberlands CEO joined the City Year Timberland
headquarters. Timberland executives also realized that it needed to alter
its organizational structure to integrate sustainability into the
organization. It started the reorganization by hiring a director of social
enterprise, who happened to be a City Year employee. Then the question
arose as to where to house the Social Enterprise Department. Some
members of senior management argued that members of the Social
Enterprise Department could be located in an existing department such as
human resources. However, the decision was made for it to be its ownfour-person division within the marketing department. By separating the
department, Timberland management could signal to the other members
of the organization the importance of sustainability.
Product
Performance
Indicators
General Electrics Ecomagination program seeks to leverage the brand
value in green business. This program started because GE senior
leadership saw that there were major trends creating increasingly intense
environmental and growth challenges for customers across a majority of
GEs businesses. Ecomagination was created as a business strategy in
response to these challenges.
To measure some of these intended outcomes, GE uses a rigorous, third-party-audited certification process to determine whether individual
products and services deliver sufficiently differentiated financial and
environmental performance to be Ecomagination-certified.
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References
Jeff Plass, Manager Global Environment, Health and Safety
Steve Oliver, EHS Project Safety Specialist
Jeff Edge, Electrical Design AnalystKohler Energy Management Group
Wendy Johnson, EHS Project Safety Specialist
Preston Radant, HR Generalist - Operations Support
Nathan Nissen, Program Supervisor, Global Energy Management
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Selected Readings
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Callenbach, Ernest, EcoManagement: the Elmwood guide to ecological
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Epstein, Marc J., Making sustainability work: best practices in managing and
measuring corporate social, environmental and economic impacts, Sheffield,
UK: Greenleaf Pub. ; San Francisco: Barrett-Koehler Publishers, 2008.
Jensen, Derrick, and, McBay, Aric, What we leave behind, New York: SevenStories Press, c2009
Lockwood, Charles, The green quotient: insights from leading experts on
sustainability, Washington, D.C.: Urban Land Institute, c2009
Schendler, Auden, Getting green done: hard truths from the front lines of
the sustainability revolution, New York: PublicAffairs, c2009.
Swallow, Lisa, Green business practices for dummies, Hoboken, N.J.: Wiley,
2009