Every year, roughly 50 billion tons of global greenhouse gas emissions (GHG) are released into the atmosphere, with the US accounting for 5.6 billion tons. The US Industrial Sector is responsible for 24% of those GHG emissions, Transportation sector is responsible for 27%, and Electrical sector 25%. Without aggressive action in these three business sectors, the US will not be able to meet Paris Agreement commitments to achieve Net Zero emissions by 2050.

Even as companies are pledging to reach net zero in 15, 20, or 25 years, environmental teams are spending most of their time gathering data and looking backwards at historical performance. While this is critical for compliance and understanding your baseline, it doesn’t close the gaps. To make a true impact, to be truly accountable to Environmental Sustainability goals and promises, it’s time to look forward.

Many companies have massive carbon and waste footprints that have been designed into the core aspects of how their business operates, within procurement choices, facility and machinery expenses, waste from production, packaging, and transportation. How could these fundamental processes be changed to become green?

Companies have also made commitments to achieve net zero or zero waste generation within the next 10-20 years, but how many of these companies actually have a defined specific roadmap that is financially viable?

It is an intractable problem that must be solved – how to meet the environmental challenges while maintaining a profitable business.

There is a well-tested path that can help address the challenge: the discipline of S&OP. 

Adding Environmental Impact to Your Sales & Operations Planning

Sales & Operations Planning (S&OP) is a monthly discipline that many businesses use to align executive leadership around long-term financial and operating performance. It covers details such as product demand forecasts, new product initiatives, material needs, and operating schedules for equipment. The S&OP process typically looks out 1-3 years, and a key component is the understanding of risks, opportunities, and potential scenarios based on demonstrated business performance data.

Forecasting your future environmental sustainability profile, whether it is GHG emissions or waste generation, requires understanding of the exact same factors as S&OP – what you are going to sell, what new products are being developed, what raw materials you need, and how you will operate to deliver it.

Understanding the impacts and financial feasibility of proposed environmental initiatives must also be done within the context of the overall business plan. Your Environmental Sustainability improvement plan must be a balanced solve against both Environmental and Financial targets, with buy-in from executive leadership.

Do you see the connection? By adding the Environmental dimension into the existing S&OP process, you create a new framework for sustainability planning that is jumpstarted with access to fully vetted business assumptions and the decision-makers that are required to make the big strategy decisions.

Bring Environmental planning more directly to your executive team by changing your S&OP to SE&OP!

Engage Environmental With the Rest of Your Business

Why wasn’t the Environmental Team already present in S&OP? They’ve historically not been a part of S&OP because the connections to financials and business performance seemed weak. Environmental compliance, sustainability, and capital planning efforts were recognized as important and sponsored by leadership but could still be managed by small groups of specialists working in isolation and disconnected from the rest of the business.

It’s obvious in 2022 that delivering both long-term financial performance and environmental sustainability are an unavoidable and tightly connected reality for every company. Face that reality head-on by engaging your environmental leaders at the big table through the implementation of SE&OP.

Engage the Rest of Your Business with Environmental

The goal is straight forward: create a detailed plan for improvements that achieves your environmental targets, such as Net Zero, and is net neutral or positive from a financial perspective. Yes, sustainability can have a positive effect on financials.

Sustainability is ultimately about reducing waste, and successful reductions can often lead to cost savings. Let’s consider an example from supply chain. Companies like Toyota recognized early that inventory was the physical manifestation of waste, meaning that every time they saw inventory, they should think about the underlying process design problem that created it. Eliminating the root cause of the inventory waste allowed the inventory to be reduced with positive impacts on the business. The business brought focus to inventory because of this benefit.

Do you see the connection? Pollution is no different than inventory. It is a sign of process waste, and often new environmental ideas will save money – less electricity, higher process yield, less purchased packaging material, or reduced waste disposal costs.

Like supply chain, there are operators on the floor and experts from other disciplines that are experts at waste reduction, and many also have a personal passion to protect the environment. Leverage that discretionary effort and bring these people to your Environmental strategy sessions, connecting them with SE&OP insights and increasing the size of the idea pool. Your environmental team just got a lot bigger.

Executing the Process

There’s a lot of work ahead and a lot of factors to consider to successfully execute this vision. The remaining challenge will be creating a technical framework for attaching the environmental attributes and calculations to the rest of the S&OP business data.

You will need the capability to map process changes, capital investment plans, and cost impacts directly into the business forecast. Version management and automated data checking will save you time and reduce errors. A robust “what-if” capability will allow you to combine risks, opportunities, and changes into scenarios that help drive decisions with the full SE&OP leadership team.

Manual approaches using tools like Excel could get you started but may become impractical due to the volume of data, connections, and complexity needed to tie into your business plans. For governance, error-reduction, and time-savings you’ll eventually need to consider scalable platforms that are highly adaptable and configurable to your exact modeling needs. These systems must accommodate different ERP’s and other platforms to create a unified, connected view for your total business.

Final Thoughts

The urgency has never been greater for companies to create actionable plans that meet long-term sustainability and financial targets. The key to your success is creating a repeatable business process that fully integrates environmental decision-making into your core business processes while engaging every one of your employees.

This will not be easy, but there is a path to successful SE&OP, and ultimately to a more sustainable world.