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Marketing And Branding / Sales And Marketing
August 2013 Feature 8

Can You Afford Not To Be Sustainable?

Create value by enhancing your brand and reducing common operational costs.

August 12, 2013
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If a low energy light bulb costs $2.50 and a standard 100-watt tungsten filament bulb costs $1, which one would you buy?

If you chose the low energy bulb, congratulations; you are not only reducing your environmental footprint, but after about one month you are in profit, too.

When organizations say that they want to be “green” but do not want to pay more for it, they may be missing the point – sustainability is not about what you pay, it’s about the value you gain.

The value you gain by enhancing your brand value and growth with your customers and shareholders; the value you gain by reducing your water, energy and waste costs.

Organizational Challenges

One of the main barriers preventing an organization from being more sustainable and benefiting from top-line growth and operational cost reduction is the organization itself, particularly its purchasing processes.

This is not so much about a green procurement policy of what is bought, but who buys it.

Larger organizations will have a procurement team, each member of that team having their own range of products and services to procure and usually with individual targets to reduce the spending over that range.

Often, the person responsible for procuring cleaning products, equipment and tools is not the same person responsible for procuring water and energy, who may be a different person to the one for waste management, who in turn is not responsible for the costs associated with employee absenteeism through illness or injury.

This can be more fragmented when two organizations are involved.

For example, a facility services provider usually does not pay for the water and energy that they use on their client’s site.

Understandably, therefore, the procurement manager for cleaning products is unlikely to welcome an increase in spend of say, $1,000 per year, even if that additional spend could save his organisation, say $10,000 per year in water, energy, waste, productivity, injury rates, etc. and/or delivers a $10,000 per year growth through brand value, customer relationships and client satisfaction.

The persuasion is even harder if the cost saving is seen as an “insurance premium.”

Why spend extra on food hygiene when they haven’t had a problem in the past?

And even if they do have a food-poising problem, it is not the procurement manager’s problem.

This is not a criticism of procurement professionals or teams — how do they know that a product or service saves energy and water unless the manufacturer tells them?

Secondly, the buyer needs help and support to escalate the overall benefits to the organization or to get to higher levels within the organization without undermining the buyer.

Facility services providers need to realize that the potential savings in water, energy, waste, etc., possibly at a higher service cost, will undoubtedly address a number of their own needs such as client win and retention, differentiation and so on.

The following are three examples of the “hidden” costs of cleaning.

Productivity

A study of contract cleaning in the UK determined that the proportional costs of a facility services provider, on average, were:

Labor

70 percent

Overheads

14.5 percent

Profit

7 percent

Management

4 percent

Equipment

4 percent

Cleaning Materials

3.25 percent

Training

1.75 percent

Personal Protective Equipment

0.7 percent

Obviously, the numbers will vary from provider to provider, country to country, but what is true is the cost of labor is measured in the tens of percent while the costs for chemicals and machines are in single digits.

Assuming the above number to be a fair reflection of the proportional costs, then for every $1,000 spent, approximately $700 will be on labor, in the order of $17 on chemicals and around $30 on equipment.

Even doubling the chemical spend would be more than compensated for by a modest 2.5 percent improvement in productivity.

The main problem is capturing any productivity improvements.

Let’s say a new product improves productivity by 16.7 percent, how does the contractor save 16.7 percent of one person by introducing the product?

Unless the contractor can amend the hours worked, or move from say seven workers to six, they cannot readily capture the financial benefits directly.

However, this 16.7 percent gain in time (equivalent to 3½ hours for every 20 hours worked) can be used for detail work, extra tasks, deep cleaning, periodic tasks, etc., which would contribute to client win and retention, quality, etc.

Dishwasher Racks

As another example, an independent study of the costs of machine dishwashing identified that the proportional costs of washing one rack of dishware was:

Labor

50 percent

Mechanical

19 percent

Breakages

11 percent

Energy

11 percent

Chemicals

6 percent

Water

3 percent

Again, these proportions will vary from site to site and country to country, but directionally are the correct orders of magnitude. Assuming these numbers to be accurate, and the average cost of chemicals per rack to be 4 cents, then the total cost of washing one rack of dishware is:

Chemicals

4 cents

Labor

33 cents

Mechanical

13 cents

Breakages

7 cents

Energy

  7 cents

Water

2 cents

Total

66 cents

Consequently, every rack of dishware that is “needlessly” rewashed costs approximately 66 cents as well as the environmental impacts of energy, water and chemicals.

A buyer that wants to save 25 percent on chemical costs by reducing the amount of products dosed, reducing the quality of the products or using a supplier that does not offer training of employees or servicing of the dosing unit, will save 1 cent per rack, but put at risk 65 cents for chemicals, energy, water, breakages, etc.

While 65 cents may not seem like a lot, for every five racks that have to be rewashed per day, per facility across a chain of 50 facilities, open six days per week, 52 weeks per year will cost that chain every year approximately:

  • $50,700
  • Over 92,700 gallons of water
  • 24,500 kWh of electricity
  • 11,000 kg of CO2.

Hard Water Scale

Linked to the example above, but also appropriate to other applications, is the impact of hard water scale on heating.

Hard water scale significantly increases the amount of energy required to heat water to a given temperature.

Again, independent studies have shown that the increase in energy requirement varies depending on scale thickness as follows:

Scale Thickness

Increased Fuel

Requirement

1.5 mm

15 percent

3.0 mm

25 percent

6.0 mm

40 percent

9.5 mm

55 percent

13.0 mm

70 percent

The cost of fuel varies by type and from country to country, but assuming the water is heated by electricity and costs 10 cents per kWh, an organization with 100 sites heating approximately 53 gallons of water per day, five days per week, 50 weeks per year, at each site for, say a dishwasher, in boilers having an average scale thickness of 3 mm, they will incur additional costs of:

  • $8,723
  • 87,225 kWh of electricity
  • 39,251 kg CO2.

A buyer wishing to save money on water softening or dishwasher detergents through inferior products or lower concentrations that cannot adequately prevent the scale, puts at risk significant financial and environmental impacts.

Moreover, controlling the scale with suitable products will also have a number of additional economic and environmental benefits including:

  • Reduced need for rewashing
  • Improved productivity
  • Improved durability of the dishwasher
  • Fewer breakdowns
  • No requirement for descalers – chemicals, transportation, storage, packaging, training, risk assessments, downtime, water, energy, health and safety, etc.
  • Improved customer perception.

These are just three examples of where short-term gains on chemical prices can have a significant longer term impact on the environment, and economically on the organization as a whole.

There is always a cheaper product, but it’s the real and perceived value that a product or service brings to an organization that is the true measure of sustainability.

Remember, sustainability is a balance of planet, people and profit.

 

Ed Roberts, regional sustainability director – Europe, Sealed Air has been working in the commercial cleaning and hygiene products industry, supporting the institutional & laundry and food & beverage markets for 35 years. He has held various R&D, technical, marketing, sales, EHS and sustainability roles in Europe and the U.S. Roberts has been a member of the Cleaning and Support Services Association (CSSA) Sustainability Committee; the National Core Industry Committee, British Institute of Cleaning Science (BICSc); and the Cleaning Industry National Training Organization (CINTO) Committee.

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