When Sustainability Syncs With Cost Savings

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Resource efficiency in industrial processes is a key part of corporate social responsibility policies in developed countries. For almost 20 years, institutions have been promoting the same behavior in developing countries, arguing that investing in sustainable industrial processes is cost-effective, whatever the scale. How well does the Guatemala National Cleaner Production Centre’s work illustrate this point?

ISTANBUL, Turkey – “If you think the cost of knowledge is too high, then just think of the cost of ignorance.” That is how Karen Rosales, echoing calls from the likes of Benjamin Franklin, Baron Moser and Barack Obama, closed her remarks at a workshop on capacity building and corporate communications at this year’s International Business Forum on sustainable and inclusive business, in Istanbul, Turkey.

For Rosales, deputy director of the Guatemala National Cleaner Production Centre, or CGP+L, reducing the “cost of ignorance” is one of the main missions when it comes to improving industrial processes’ sustainability and lessening their environmental damage.

An assembly line worker at an industrial factory in Guangzhou, China.

flickr / aaronw79 under Creative Commons

An assembly line worker at an industrial factory in Guangzhou, China.

CGP+L is a consulting firm that works with Guatemalan industrial companies. It does an on-field diagnosis of their current production process and develops strategies based on benchmarked best practices to optimize water and energy consumption as well as waste management.

Consulting firms working on resource efficiency generally deal with big national or multinational companies, and the impact of their corporate social responsibility efforts and up-to-date, resource-efficient industrial processes can be huge. But the World Bank’s International Finance Corp.’s 2012 Small and Medium Enterprises fact sheet points out that “SMEs account for about 90 percent of business and more than 50 percent of employment worldwide.”

“In Guatemala, 80 percent of the companies are either microenterprises or SMEs,” said Rosales, which is why CGP+L targets them—not just the big local or multinational firms—and has worked so far with companies staffing anywhere from five to more than 500 employees. Most Guatemalan businesses in the beverage, coffee, sugarcane or other food processing industries operate small factories with few workers. Altogether, their impact may be equivalent to that of many large companies: Many drops can make up an ocean.

And yet the lack of experienced or dedicated people to design and maintain a clean, lean and up-to-date industrial process that may induce the small scale leaves room for improvement. What’s more, Rosales said, the wasting of resources is due not only to process design issues but also to how the process is executed. As a result, negligence caused by ignorance among a factory’s staff is a common and significant point to address with specialized training.

Since CGP+L is an independent institution, the services package it provides—which includes audits, technical assistance and training—and the investments it requires have to be financed. These services are typically not cheap, especially for small enterprises. But thanks to public-private partnerships with the United Nations Industrial Development Organization, the United Nations Environment Programme and foreign cooperation agencies, the companies CGP+L works with have to pay for only 20 to 30 percent of the services package. Implementation costs—technology changes, facilities modernization, etc.—are borne by the benefiting companie . Once they get the recommendations, they are likely to follow at least part of them, given that they now know precisely what they can save in the future.

Speaking about corporate social responsibility, Amine Chouaieb, founder of Chifco, a Tunisian energy-saving consulting firm, put into perspective a consulting experience he had in the banking sector. “They don’t care about being green or not,” he said. “In the end, it’s [about] reducing the companies’ costs.”

Indeed, for any company, no matter its size, improved resource efficiency and waste management can lead to very substantial savings.

Expected savings based on CGP+L’s recommendations*

Resource Dedicated investments (US$) Annual saving (US$)
Water 695 1,014
Energy efficiency 1,934 2,801
Waste management 6,470 51,122
Total 9,099 54,937

CECARSA (meat processing), 25 employees. Source: the CGP+L’s datasheet (not available to public)

Resource Dedicated investments (US$) Annual saving (US$)
Chemicals 330 6,528
Fuel and thermal energy 30,533 779,168
Total 30,863 785,696

REMERSA (stoves & tinware items manufacturing), 92 employees. Source: CGP+L’s datasheet (not available to public)
*Follow-up studies led by CGP+L 4 to 6 months after the implementation phase has shown that in average savings objectives were reached at 70-80%. The gap is explained by the fact customers are not bound legally to apply the recommendations, and can invest to put into practice only the ones they consider most significant.

This year, CGP+L’s first nonsubsidized packages were introduced in the form of annual memberships. Companies that are not eligible for public-private partnership funding, or previous recipients that now know the advantage of, and want to keep, their regular resource efficiency diagnosis, will pay CGP+L for its services, which is expected to put the latter on a more commercially independent and viable path.

Whether this cost-saving approach is the main driver for companies to optimize resource consumption, instead of the old environment-friendly PR strategy, remains debatable. But for Rosales, the return on investment is obvious. In fact, CGP+L is busying itself with the opening of a new office in rural Guatemala.

“We have estimated that annually the companies which we work with [280 between 2004 and 2012, according to Rosales] are saving altogether about $20 million” when they invested only “around $16 million,” she said.

With more than 44 National Cleaner Production Centres worldwide, it’s clear that sustainability does pay off.

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