State Program Helps Manufacturers Find the Intersection of Sustainability and Profitability
April 24, 2013
It's probably the first question people like Randy Bertram hear every time they talk to a business about sustainability.
Bertram is the director of the sustainability program at the Wisconsin Manufacturing Extension Partnership (WMEP). When he tells the CEO or business manager about all the different ways the company can ensure their sustainability and help the environment, he inevitably hears the same question thrown back at him.
"Sounds great. If we invest in all that, are we going to get our money back?"
In the past, some Wisconsin businesses said they had been burned on that question, losing money while trying to be environmentally aware.
But in the last two years a terrific new partnership has developed in Wisconsin between the state government, the WMEP and the Northwest Wisconsin Manufacturing Outreach Center, resulting in more than 150 businesses getting business advice, diagnostic help, and financial backing to upgrade their equipment and facilities to be more sustainable.
The program is called the Profitable Sustainability Initiative (PSI), and thanks to strong leadership and backing from the Wisconsin Economic Development Council (WEDC), it has become a big hit in the state.
"The big thing is, if you sit down with these folks and show them projects that will pay back within 10 months, it's not a long conversation," Bertram said. "But I have been pleasantly surprised that the interest in sustainability has exploded. We're excited about how many companies are taking this seriously."
Here's how the Wisconsin project got started: In 2008, a state-sponsored survey was released indicating that sustainability was growing in importance, but that it was on a small percentage of Wisconsin manufacturers' radar screen. Less than half of them felt they had the tools and expertise to deal with it.
With those results in hand, the Wisconsin Economic Development Corp. came to Bertram and WMEP and said something needed to be done to help the state's companies become more sustainable, and just as important, make sure those businesses stayed strong as a revenue producer and employer.
After initial discussions, the WEDC provided $1.75 million worth of funds and asked WMEP to put a program together and find 50 companies willing to take part in a pilot program.
"The surprising thing was that when I think back to that first group of companies, a lot of them were pretty mature," Bertram added. "They were pulling out KPI's that they had started a long time ago, where they were tracking residual intensity; a small percentage got involved with us because they wanted a push in the right direction."
In coordination with the Northwest Wisconsin Manufacturing Outreach Center, a three-tiered program was quickly drawn up, called the Profitable Sustainability Initiative (PSI).
First, companies would receive a diagnostic "exam" from the PSI team, with a full once-over of the company's electricity, gas and other energy usage.
"Our motto was 'where's the most likely aspect of sustainability they could tackle that would have a significant sustainability impact?'" Bertram said. "Energy was a big portion of our efforts, but a directive I was given when we started was to not have such a narrow focus; we wanted to look at energy differently, and look at utilization of different materials, re-work, reduction in scrap, whatever we could do."
After the diagnostic was done, step two was the "solutions" phase, where PSI and the companies brainstormed on possible realistic options to become more sustainable in certain areas. Finally, step three was the implementation of the recommendations. The entire process took about two months.
Dozens of Wisconsin companies took the plunge and followed PSI's recommendations.
A.J. Gordon is the president of Gordon Aluminum, an aluminum extrusion and fabrication shop based in Schofield, Wisc. He said he was pretty skeptical about PSI at the start, having some non-profitable experiences with sustainability in the past.
"In general we're a very energy-intensive company, so I wasn't sure how much we could do sustainability-wise that would really have an impact," Gordon said.
But PSI was able to convince Gordon that there were two areas he could significantly affect both the company's environmental impact and its bottom line. First, PSI recommended Gordon swap out his old die-heating oven used for the extrusion process, with single-cell ovens.
Gordon Aluminum used several die-heating ovens per day for extrusion, and they ate up a lot of energy and time.With the single-cell ovens, the extrusion process was quicker, more concentrated, and the ovens functioned more efficiently.
The cost of the new ovens were steep ($250,000). But $30,000 of that was subsidized by PSI. Gordon was told it would be a 10-month payback estimate, "but we already think it's going to be faster than that, based on what we've seen in the first few months of their use."
Gordon said its extrusion efficiency has improved by 5 to 6 percent "which may not sound like a lot, but in our industry, that's a huge number."
The other area Gordon Aluminum was able to improve sustainability was in scrap usage. PSI helped Gordon modify the die in its scrap reduction process, which also saves energy. With the new die modification, Gordon has cut its usage of the extrusion press for scrap reduction by about half.
A.J. Gordon was so pleased with PSI's results that he recently accompanied some of PSI's representatives to Washington, D.C. to help lobby for more funding for the program, and to encourage other states to adopt similar programs.
"This is something that's absolutely vital to the future of manufacturing, and I'd love to see other states have programs like PSI," Gordon said.
After the initial start-up with 50 companies, the PSI program has now gone through three phases, with more than 150 companies involved. Bertram thinks the program will continue to expand. "The marketplace hasn't yet pushed big businesses to focus on sustainability, but we feel like it's getting closer," he said.
He said there's no reason that other states couldn't use their economic development teams to do what Wisconsin has done, especially when they see that the return to the states is about a 40 or 50-1 return on investment.
"When states see a $25,000 investment in a company leading to $100,000 improvements in the company, that gets people excited. That goes right back into the industry," Bertram said. "This can have an effect on so many industries that it just seems smart to make that investment now."