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white paper | June 2007 Cradle to Cradle Design designing for eco-efficiency in the package goods industry
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Cradle to Cradle Design

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Designing for eco-efficiency in the package goods industry.
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Page 1: Cradle to Cradle Design

white paper | June 2007

Cradle to Cradle Design designing for eco-efficiency in the

package goods industry

Page 2: Cradle to Cradle Design

white paper | June 2007 | Cradle to Cradle Design | 1

The Ripple Effect of Sustainability

The alarming recent decline in bee populations across the United

States and Europe represents a potential environmental catastrophe that could collapse the food chain and eventually wipe out humanity. Many don't realize how vital the bee is in maintaining

a balanced eco-system. In fact, according to experts, if bees were to become extinct, humanity would perish in just four short years.

The plight of the bees is just one example of the negative impact

that humans are having on the environment. Another one is consumer-packaging waste.

We would like to share with you some very preliminary ideas and processes that can assist your organization in establishing a

sustainable advantage in the marketplace, ensuring, among other things, that bee populations continue to strive.

This information has been gathered from a wide range of resources and organizations that have led and embraced sustainable business

practices and environmentally driven change. Also included is information to help you sell the idea of developing a sustainable

platform within your organization. In the Process section, we have outlined a series of steps to help your organization evaluate its sustainability opportunities. We will provide further insights as our

firm conducts an international study on sustainable packaging.

"If the bee

disappeared off the

surface of the

globe, then man

would only have

four years of life

left. No more bees,

no more pollination,

no more plants, no

more animals, no

more man."

Albert Einstein

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Sustainability: The New Competitive, Meaningful Advantage The 21st-century packaging industry will be characterized by

increasing globalization, revolutions in information technology, rapid process and product innovations, and a skeptical, hard-to-target consumer base. There are also population and social factors

that are profoundly changing the marketplace. But the marketplace cannot survive for long on a planet already reaching ecological

limits with ozone depletion, loss of bio-diversity, poor water quality and management, and climate change. These changes are forcing

the consumer packaged goods industry to rethink business strategies and develop materials, products and industrial processes and services that are more eco-efficient.

Environmental concerns are evident in the increasingly

environmentally conscious marketplace, and are being felt in the packaged goods and manufacturing sectors, driven by retailers’ need to meet consumers’ demands. Over the years, a growing

percentage of consumers have become aware of the impact of their purchasing habits on the environment. They now evaluate the

environmental efficiency of a package as part of their buying decision, considering factors such as over-packaging,

biodegradability, and environmentally friendly manufacturing processes. Perhaps the strongest sign of the growing importance of sustainable packaging and products is consumers’ willingness to pay

a premium for environmentally friendly products.

In Cradle to Cradle, William McDonough and Michael Braungart argue that the conflict between industry and the environment is not an indictment of commerce, but an outgrowth of purely

opportunistic design. The design of products and manufacturing systems growing out of the Industrial Revolution reflected the spirit

of the day—and yielded a host of unintended, yet tragic

consequences. Today, with our growing knowledge of the living earth, package

design can reflect a new spirit of sustainability.

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Packaging Waste: a Growing Concern for the Environment Because of its large volume, packaging waste tends to be very

visible. Approximately 70% of primary packaging is used for food and drink. Once the product is used, the packaging is often discarded, covered in residues of the original contents.

A recent UK study identified that an estimated 9.3 million tons of waste packaging was generated in 2001. Of this, 5.1 million tons

came from households, and the remaining 4.2 million tons from commercial and industrial sources.

Waste has clearly become a problem in the developed countries. Landfill capacities are decreasing, and the average consumer

produces between 250 and 620 kilograms of household waste per year. About 25 to 30% of this is packaging waste. Although the

European community has initiated stringent targets, consumers are generating significantly higher levels of waste; so much so that recycling alone will not eliminate current environmental issues.

Packaging waste represents about 17% of municipal solid waste by

weight, and 3% of total waste in Europe (EC, Dec 2001). From 1997 to 2001, packaging waste increased by 7% across the EU. From

2000 to 2008, EU packaging waste is expected to increase by 18% (from 65 to 77 million tons) (EEA, 2004). Similar trends are evident in Australia and the UK.

With a growth in greenhouse gas emissions resulting from the

sourcing, manufacturing and distribution of packaging, recycling is no longer our primary concern. Packaging consumes resources during production (raw materials), increases transportation costs

(the larger the package, the fewer the units that make up a shipment) and must be disposed of (energy to dispose or recycle).

It also increases solid waste.

In addition to improved environmental performance, many ‘green’ products work as well or better than traditional products, and can even save money. Switching to safer cleaning products, for example,

can reduce incidents of allergic reactions, asthma, burns, eye

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white paper | June 2007 | Cradle to Cradle Design | 4

damage, major organ damage, and cancer connected with the hazardous chemicals used in many traditional cleaning products.

Buying 100% recycled-content paper can reduce energy use by

44%, decrease greenhouse gas emissions by 37%, cut solid waste emissions in half, decrease water use by 50%, and practically eliminate wood use. Similarly, energy-efficient vehicles and

renewable energy cut greenhouse gas emissions and harmful air pollutants while lessening our dependence on imported oil.

Organizations can benefit from similar ecological and economic

advantages by switching to environmentally friendly purchasing, processes and products. Overall, the implementation and integration of green purchasing concepts constitutes a system-wide

process reform that contributes to an organization’s reduction in ecological footprint (cumulative associated ownership to global

ecological damage, stemming from a demand for natural resources to sustain economic and social balance).

Sustainability Awareness and Action are Low Within the

Packaging Industry A 2006 study analyzed the levels of awareness and adoption of sustainability among Packaging Digest readers.

About 80% of total study participants expressed at least some familiarity with the topic of sustainability in the packaging industry.

However, only 8% mentioned being extremely familiar with the topic. Most respondents felt that emphasis on sustainable packaging

has increased within the last year, and about two-thirds mentioned that they have taken at least some action related to sustainability

within that same time frame. However, there was no significant percentage of participants taking any one action toward sustainability, suggesting that there is still no real consensus in the

packaging industry when it comes to sustainability activities.

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More respondents view sustainability as an environmental versus economic initiative at present. They also find it more important for

sustainability activities to meet market criteria for performance and cost, more so than environmental targets.

As a sign of its growing importance, sustainable design was seen as a very or somewhat important factor in packaging decisions. In fact,

87% of respondents mentioned at least some percentage of their current customers are asking for or requiring sustainable packaging.

Of all respondents, about two-thirds have some metric in place for measuring their success with sustainability. However, there was no

real unity among answers, as source reduction, the most common metric, is only used by 13% of participants.

On the topic of additional resources needed to help reach sustainability goals, the most common answer reflected the need

for more information (11%). Again, this suggests a very fragmented understanding of the definition of sustainability in the packaging industry.

There were no significant differences between responses from

manufacturers and end users in the study. Some noteworthy observations emerged in a few areas. First, slightly more end users

view sustainability as an economic initiative. Secondly, manufacturers have slightly more customers who ask for

or require sustainable packaging, versus customers who don’t. Lastly, end users viewed manufacturers, educational institutions,

and trade shows as moderately credible sources of information on sustainability.

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Sustainability, the Evolution of Recycling The recent increase in public awareness of sustainability issues has led to a shift in consumer thinking. Whereas in the past shoppers sought to protect the environment through recycling, their focus is

now on choosing products with packaging sourced, manufactured and distributed in environmentally friendly ways. Several

organizations, such as Wal-Mart, are making a priority of going green. Brands are finding a new opportunity to communicate the

ecological attributes of their packaging now that the retailer has introduced its Packaging Scorecard, ranking brands on greenhouse gas emissions, recycled content and other package development

factors.

Since launching the program last year, Wal-Mart reports “active use” of the scorecard, with more than 2,270 vendors already

logging on to its website, and at least 117 products entered into the system—numbers the retailer expects will increase in the coming year as brands gain a better understanding of the scorecard and

their own packaging capabilities.

037.5

75.0112.5

150.0

49

30

25

24

24

6

80

67

60

66

62

54

47

45

Meets market cr teria for performance and cost

Is benefcial, safe and healthy for indivduals and communties throughout its life cycle

Is made from materials in all probable end-of-life scenarios

Is physically designed to optimize materials and energy

Is manufactured using clean producton technologies and best practices

Maximizes the use of renewable or recycled source materials

Is effectively recoved and utilized in bological and/or industrial crade-to-cradel cycles

Is sourced, manufactured, transported and recycled using renewable energy

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Wal-Mart and other retailers are responding to the growing trend that has consumers demanding and willing to pay more for green

products. In a Canadian study conducted in 2001 at Concordia University by Michel Laroche, Jasmin Bergeron and Guido Barboro-

Forleo, 57% of females and 40% of males said they would pay a premium for green products. The study found females, the traditional shopper of the household, are more environmentally

concerned than males. It suggested that these individuals are more inclined to think of how a ruined environment may negatively

impact not only their partner, but also their children’s future. The study did not differentiate between participants’ education levels,

household incomes, home ownership and work status. The Concordia University study suggests a consumer’s degree of

eco-literacy is not an indicator of his or her intent to purchase green products. Consequently, shoppers with a high awareness of

ecological issues have the same levels of purchase intent as those with a lower awareness.

Consumers willing to pay more for green products feel that today’s ecological problems are severe, that corporations do not act

responsibly toward the environment, and that behaving in an ecologically favorable way is important. They place a high

importance on security and warm relationships with others, and often consider ecological issues when making a purchase.

Finally, the research reveals that 80% of consumers who are more likely to spend more for green products say they refuse to buy

products from companies that are accused of being polluters. However, respondents who claimed to recycle and buy environmentally friendly products were not always those willing to

pay more for green goods.

13.1% of the study’s

respondents are

willing to pay a higher

price for green

products.

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What are carbon footprints? Carbon footprints measures the amount of carbon emissions

produced by the things we do. From flying, to driving our cars, to the things we buy, every one of us leaves a carbon footprint on the environment.

In total, the Carbon Trust estimates that the UK emits 648 million

tons of carbon emissions every year. This means each person in the UK can be linked to an average of 11 tons of carbon emissions

annually.

Walkers Cheese & Onion Crisps feature carbon footprint on packaging Pepsi recently acquired the UK’s leading potato chip brand, Walkers.

The organization took a leadership role in environmental sustainability by featuring the carbon footprint of their product on its packaging.

Walkers' carbon footprint figure was calculated by drawing up a

map of the key stages in their supply chain—from sowing potato

and sunflower seeds, to getting the chips into stores, to finally disposing of the packaging. The carbon figure expresses the total

calculated output of carbon emissions connected with this lifecycle. Converting the energy consumption involved in each of the lifecycle stages into the resulting amount of carbon emissions, then adding

up each stage’s figures, leads to a final carbon footprint calculation of 75 g.

Walkers is one example of an organization that is not only environmentally conscious, but committed to raising awareness of

the importance of ecologically responsible business practices. The carbon footprint feature on their packaging suggests Walkers has

taken steps to minimize waste and emissions in all of their manufacturing and distribution stages. Consumers have taken note

of this.

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Moving from efficient to Eco-efficient Packaging: the key to sustainability The President’s Council on Sustainable Development defined eco-

efficiency as the production, delivery, and use of competitively priced goods and services, coupled with the achievement of

environmental and social goals. Key to the fundamentals of eco-efficiency is the strong alignment between environmental

performance and shareholder value, and the consideration of the full life cycle or cradle-to-cradle product cycle (raw materials, manufacturing, use, and end-of-life).

The definition of eco-efficiency coincides with the definition of sustainability, namely meeting your needs while not compromising

the ability of future generations to meet theirs (Bruntland Commission). The concept of eco-efficiency has been recognized by

the government of Canada as a key mechanism for industry to contribute to sustainable development.

Recently, the Canadian House of Commons Standing Committee on Industry noted that eco-efficiency is an important business

practice and management tool, whereby innovations in technology, production, processes, product design and business organizations

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and practices can lead to lower unit costs, improved product quality, lower environmental-related liability, less material usage and

a less adverse impact on the environment.

Organizations such as Walmart, BASF, Compaq Computer, DaimlerChrysler, Shell Canada, Canfor, Noranda, Airbus, 3M, GE, BP Amoco, Alcan and Weyerhaeuser have all embraced eco-efficiency

programs to improve their competitive advantage, and participated in a related study conducted by Five Winds International in 2000.

The study analyzed the practices of organizations that had

integrated eco-efficiency within their business as part of their competitive advantage.

The results indicated that companies which anticipate and implement eco-efficient practices do so to get ahead of the pack

with market and regulatory trends, to reduce costs, to gain competitive advantage, and to ensure long-term profitability and sustainability. In addition, these organizations had realized that

capital markets now factor in environmentally friendly and sustainable practices when evaluating a firm.

For example, the AMP Capital Sustainable Share Fund uses a

sustainable approach to investing, integrating financial analysis with environmental, social and governance factors shaping companies’ future growth prospects. The Fund invests primarily in companies

listed on the Australian Securities Exchange.

Green investors Socially responsible investing (SRI) has gained some visibility and

credibility in the eyes of individual and institutional investors, and stock portfolios managed following SRI principles are rapidly

growing in world markets. The “2003 Report on Socially Responsible Investing Trends in the United States” reveals that the value of socially screened portfolios now exceeds $2 trillion. This

represents a 240% growth since 1995, 40% faster than all

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professionally man-aged assets. The report identifies 200 ethical mutual funds in operation, compared to 55 in 1995.

In Canada, this ethical boom has been matched, according to a

survey conducted by the Social Investment Organization in 2002. The survey shows that more than $50 billion Canadian is now managed in a socially responsible fashion in Canadian stock markets.

The recent launch of several new SRI financial indexes, such as the Dow Jones Sustainability Indexes in the U.S., FTSE4 Good Indexes

in Europe, and the Jantzi Social Index in Canada, is an additional sign of the rise in popularity of ethical investing. Ethical or socially

responsible investing reflects a broader philosophical movement committed to sustainable development and the advancement of human rights. Promoters of socially responsible investing believe

that directing or reallocating money toward firms embracing this philosophy is an important step in the achievement of a better

society.

Wal-Mart’s Sustainability Program As part of its sustainability program, Wal-Mart plans to measure its

60,000 worldwide suppliers on their ability to develop packaging and conserve natural resources. This initiative, scheduled to begin in 2008, is projected to reduce overall packaging by 5%. In addition to

reducing and preventing millions of pounds of trash from reaching landfills, the initiative is projected to save 667,000 metric tons of

carbon dioxide from entering the atmosphere. This is equal to 213,000 trucks off the road annually, and saving 323,800 tons of

coal and 66.7 million gallons of diesel fuel from being burned. This initiative will also create $10.98 billion in savings, just from a 5% reduction in 10% of the global packaging industry.

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Wal-Mart alone is poised to save $3.4 billion. “Packaging is where consumers and suppliers come together and can have a real impact

on both business efficiency and environmental stewardship,” said Wal-Mart CEO H. Lee Scott. “Even small changes to packaging have

a significant ripple effect.

Improved packaging means less waste, fewer materials used, and savings on transportation, manufacturing, shipping and storage.” Wal-Mart’s Packaging Scorecard tool will allow buyers to have

information about packaging alternatives or more sustainable packaging materials in one location.

Key Drivers Motivating Adoption of Eco-efficiency

initiatives The aforementioned Five Winds study clearly shows that while eco-efficiency does not address all social, economic and environmental

considerations encompassed by sustainable development, it is an important and necessary step in moving toward more sustainable patterns of production and consumption. The practice of eco-

efficiency encompasses a range of approaches, from simple changes

The study identified a range of

supporting drivers that should

be taken into consideration

when developing an eco-

efficiency program:

1. Brand Image

2. Competitive Advantage

3. Cost Reduction

4. Customer Relations

5. Employee Relations

6. Regulatory Relations

7. Innovation

8. Legislation

9. Liability

10. Long-term Profitability and

Access to Capital

11. New Markets

12. Environmental Performance

13. Standards (ISO, etc.)

14. Supplier Relations

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to more innovative solutions. The companies studied fell into three categories of environmental management:

Market Driven The decision to become eco-efficient is either driven by regulatory requirements, or motivated by customer expectations and desires.

Competitive Advantage The company uses its eco-efficient capabilities to create markets

where it has sole or leadership market position.

Sustainable This is the pinnacle of eco-efficient achievement, where the organization proactively integrates economic growth, health and

safety, and environmental and social well being into its operations. The goal is to gain a competitive advantage and long-term viability.

Eco-efficiency Tools The study clearly identified eco-efficiency as a key enabling concept

and tool for companies to gain a competitive advantage. The success of a company’s eco-efficiency program depends on the chosen strategic approach, and on its degree of implementation,

which is affected by several factors: management commitment and support, internal capacity including management systems and tools,

financial resources, and customer requirements. Key tools used to implement eco-efficiency programs include the

following:

Management Systems All surveyed companies had adopted environmental management systems. These are either specific systems or hybrid approaches that

incorporate sustainable development and security.

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Life Cycle Tools The majority of companies went beyond their own operational

boundaries to examine the life cycle aspects of their products, and of the materials contained in those products.

Supplier Management Programs For some companies in the study, particularly manufacturers,

working with their suppliers is a key aspect of improving the overall environmental performance of their products, as well as managing

risks and reducing costs.

Design for Environment Several companies integrated environmental considerations into the product development process. This leads to improved

environmental performance, elimination of risk and liability, better choices with respect to selection of materials and processes, and in some cases enhanced quality and performance.

Corporate Environmental Reporting and Communication Implementation of an open communication program that provided transparency was seen by some as a key activity in building relationships with communities and regulators.

Other activities included training and awareness-raising, eco-

labeling, greenhouse gas trading pilots, forest certification programs such as the Forest Stewardship Council, auditing, and assurance programs.

Forest Stewardship Council The Forest Stewardship Council (FSC) is an international organization that brings people together to find solutions that

promote responsible stewardship of the world’s forests.

FSC is a stakeholder-owned system for promoting responsible management of forests.

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Through consultative processes, it sets international standards for responsible forest management.

It accredits independent third-party organizations that can certify

forest managers and forest product producers to FSC standards. Its trademark provides international recognition to organizations

that support the growth of responsible forest management.

Its product label allows consumers everywhere to recognize products that support the growth of responsible forest

management worldwide. Over the past 13 years, over 90 million hectares in more than 82

countries have been certified according to FSC standards, while several thousand products are produced using FSC-certified wood

and carrying the FSC trademark. FSC operates through its network of National Initiatives in 43 countries.

Critical Elements Impacting Eco-efficiency Changes With the help of various studies and pertinent market information, as well as our extensive expertise in branding and package design, we have identified eight key areas that impact the viability and

integration of a sustainable eco-efficiency program within consumer packaged goods organizations:

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Critical Elements impacting Eco-efficiency changes The diagram in the previous page presents the key elements that

should be taken into consideration to ensure a successful eco-efficient packaging initiative:

Supplier Network With today’s just-in-time manufacturing practices, companies rely

heavily on their vendors and supply chain partners. These entities can significantly impact a sustainability program in the ways they source, manufacture and distribute component products that

support the manufacturing process.

Product Sourcing Working with primary producers to ensure your company develops or sources environmentally friendly products is an expedient way to

create eco-efficiency. Initiatives can range from selecting fair-trade vendors, to sourcing products from accredited environment-

conscious suppliers, to collaborating with suppliers to establish standards for eco-efficient growing and sourcing of raw materials.

Manufacturing Companies can review current manufacturing processes to identify

short and long-term solutions for reducing waste, cutting energy usage, and optimizing plant efficiency.

Packaging While a product of manufacturing, packaging generates the most

landfill waste and should be the focus of its own eco-efficiency program. Waste reduction can be applied in a range of areas, from

the amount and type of materials used in the packaging process, to the inks used on the final label.

Distribution Identifying cost-effective distribution systems that allow for a

reduction in energy use can make a significant difference for the environment.

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Systems You can develop systems to track and benchmark the evolution of

your eco-efficiency program. Use them to evaluate progress, assess immediate needs and shape long-term goals.

HR The success of a program is directly linked to the buy-in and support of the organization’s staff. Identifying knowledge gaps and

educational opportunities is a crucial step in ensuring the program is properly implemented at all levels of the manufacturing process.

Communication Effectively sharing knowledge and accomplishments is vital in

maintaining interest and support, ultimately contributing to the success of your organization’s eco-efficiency program.

The Product Sustainable Life Cycle According to the Sustainable Packaging Coalition, design has a

huge impact on the entire packaging supply chain, from material sourcing to material recovery. The Coalition offers a set of steps

that apply to the sourcing and manufacturing of packaging as part of a sustainable eco-efficiency program.

Each step is an opportunity to identify potential improvements in the sustainability of the product’s life cycle. When used in

conjunction with the eight elements of an eco-efficient organization, these steps will maximize the success of your

sustainability program.

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The Process To help your organization implement a successful eco-efficiency program, consider a five-step process incorporating key milestones and deliverables:

Although the process is linear in approach, implementation is

circular—the program is repetitious and includes a re-assessment

upon completion of the first wave of changes.

The success of the program will depend on ensuring all participants have a clear understanding of the steps, deliverables and their

contribution to the process.

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The Goals

The goals consist of a range of opportunities:

• Reduce energy, waste and costs

• Increase value for shareholders and investors

• Differentiate your organization from competitors

• Anticipate future regulations

• Create innovative new products or processes

• Open new markets

• Attract and retain the best employees

• Improve your image for shareholders and the public

• Reduce legal risks and insurance costs

• Contribute to a higher quality of life

The Process Step One: Charter Development Assign divisional and functional members to a

sustainability leadership team. Establish a clearly defined charter for the team to follow:

• The charter should cover:

• Background/Case for Action

• Project Scope

• Project Objectives

• Team Structure (RASCI Chart)

• Project Structure/Governance

• Project Timelines

• Success Criteria

• Project Assumptions

• Constraints

• End Product Description

This process would culminate in a presentation to senior management for approval.

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TIMING: two to three weeks

Step Two: Assessment Confirm key consumer, trade, governmental, and competitive trends.

Identify industry best practices and their relevance to your

organization.

Review Pepsi international best practices and their relevance to Canada.

The assessment should be conducted via online research with the broader organization and key suppliers, as well as one-on-one

interviews with key stakeholders. Review the organization’s current sustainable capabilities as they

relate to:

• Supplier Network

• Product Sourcing

• Manufacturing

• Packaging

• Distribution

• Systems

• HR

• Communication

Develop strategic implications to lay the foundation for a sustainable program.

TIMING: four to eight weeks

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Step Three: Identifying Metrics Based on the assessment stage, identify sustainable metrics for:

• Short-term

• Long-term

• Internal capabilities

• External capabilities

Identify measurement tools.

Present recommendations and establish alignment.

TIMING: two to three weeks

Step Four: Programming Having identified key metrics, develop an implementation plan that

covers the following matrix:

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Identify short and long-term initiatives within the matrix, based on a five-year plan.

TIMING: two to three weeks

Step Five: Implementation Within the sustainability matrix, establish commitments for each of the key departments within your organization to ensure support

and alignment:

• Town hall meetings

• Workshops

• Clearly defined action plan with investment implications

• Cross-functional team structure

This phase is on going. The sustainability matrix needs to be updated as projects are completed and new opportunities emerge.

TIMING: four to eight weeks

Step Six: Evaluation This ‘sustainability tune-up’ will ensure strategies and action plans deliver on the key metrics.

Since new legislation and market dynamics impact the plan, conduct a yearly evaluation to ensure action plans meet stated

goals. TIMING: two to three weeks, yearly

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The Audit In order to clearly understand opportunities and potential gaps,

consumer packaged goods organizations need to initiate an audit of their current state within all facets of the company. What follows is a series of questions that will assist in identifying both short-term

and long-term opportunities.

Your first step toward eco-efficiency should be the formation of an eco-efficiency committee that would provide leadership and

direction to the organization. This group would be made up of a wide cross-section of organization members to ensure fair assessment of both challenges and opportunities.

This sample audit is a starting point in leveraging a sustainability

platform for your organization, and will need adjustments to meet your specific requirements.

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For more information, contact:

Jean-Pierre Lacroix, President Shikatani Lacroix 387 Richmond Street East

Toronto, Ontario M5A 1P6

Telephone: 416-367-1999 Email: [email protected]