Government regulators around the world are placing new and more stringent environmental monitoring demands on manufacturers. European directives on Registration, Evaluation, Authorization of Chemicals (REACH), Waste of Electronic and Electrical Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) affect any company doing business in Europe. Investors, with the encouragement of the U.S. Securities and Exchange Commission and similar bodies elsewhere in the world, are paying more attention to the environmental liabilities of the companies they fund.

Manufacturers are under pressure from all fronts to document their environmental impact. Regardless of how environmental impact is used, within the vast majority of manufacturing companies, data on how operations impact air, water and landfills is difficult if not impossible to get. Adequate information technology (IT) systems are not in place to collect the data. And data originates from virtually every activity and department of the company, making environmental management initiatives both a political and data logistics nightmare.

Many of the problems companies experience as they try to implement an environmental program of this type stem from the lack of clear ownership. Who within the company owns the issue — is it the production manager, is it a district or regional manager, the marketing department or someone else? Within many companies, this is not decided with sufficient clarity, and therefore questions and tasks with regard to environmental management can tend to fall between chairs.

Currently, manufacturers with any degree of environmental footprint measurement and management capabilities rely almost exclusively on either standalone software or on one-off integrations between ERP tools and either packaged or custom software. A more elegant, affordable and flexible solution involves the inclusion of environmental footprint management directly in the ERP package as a native piece of functionality. Determining if you have built-in environmental footprint in your in-housed ERP, you may ask few questions:

Question #1: Can you track environmental impacts like you can track cost?

Because that is exactly what environmental impacts are … a cost, and they are driven by the same types of activities that drive financial cost. Every manufacturer keeps track of the costs to some extent, including standard cost or actual cost, at varying levels of granularity. Remember, everything that is purchased, every time materials or products are moved, every manufacturing activity, every business process, drives cost and also carries an environmental impact. How does the environmental footprint management solution take advantage of the existing costing system to reduce complexity in measuring environmental impacts?

Question #2: How is the environmental management tool linked into supply chain and materials management?

One major contributor to the environmental footprint of a manufacturing company is its supply chain. Manufacturers need to understand what their products are made up of on a raw material level, the environmental impact of creating those materials, manufacturing them or mining them and the impact of transporting them to your plant.

Question #3: How is the environmental management tool linked to manufacturing operations functionality?

After all, once you understand the environmental impact of your supply chain, you need to keep track of your own operations and your manufacturing processes. How will a solution help you see how much energy these processes consume, what emissions are associated with them, what chemicals they consume and what potentially dangerous chemicals like lead, cadmium or mercury are involved?

Question #4: How will the environmental management tool track environmental impacts?

The environmental management tool will need to allow you to measure how your product is used, how much energy it consumes, does it emit any substances when in use, can substances like cadmium, lead or other substances leak from it, etc.

Question #5: How will the environmental management tool help us measure and plan for the end-of-life impacts of the product?

Particularly if some portions of a product can be poisonous, end-of-life disposal or decommissioning can be a major concern. But even under ideal circumstances, attention will need to be paid to how much of the product can be reclaimed or recycled, how product design impacts the ease or difficulty of recycling, and certainly how any potentially dangerous substances within the product are to be taken care of. This type of data must be on hand for each and every part across the product structure, and that means you need to keep a track of your product structures at a very granular level of detail.

Question #6: How much flexibility to change, expand and re-configure the environmental management tool will we have, and what is the cost of that flexibility?

Environmental measurement and management requirements are not static. New regulations will be promulgated. New reporting demands will be placed upon you by your customers and the market. New products will bring with them new challenges. So an environmental management solution that can measure only one impact, like carbon emissions, is of little value. Moreover, environmental management solutions that rely on extensive integrations that are limited in capability or expensive to change and expand are equally undesirable. Indeed, when it comes to environmental management, a manufacturer ought to start small and plan to expand their program over time as needed or as it becomes desirable to do so. An initial decision ought to be what should be measured first. There might be immediate environmental reporting demands that must be satisfied, or obvious environmental impacts that receive priority. For instance, a company that manufactures industrial chillers may want to measure impacts stemming from refrigerants like ammonia, Hydrogenated Fluorocarbon Refrigerants (HFCs) and Hydrogenated Chlorofluorocarbon Refrigerants (HCFCs). Eventually, for that industrial chiller company, an environmental footprint management program may be extended to manufacturing and installation operations, but measuring impacts stemming from these chemicals is the best place to start. It is obvious, though, that for any manufacturer, it makes little sense to invest heavily in a solution that will meet only immediate needs and will require additional major investments to expand and be reconfigured over time.

Conclusion

Manufacturers about to commit to an enterprise software solution that includes embedded environmental footprint management need to do extensive due diligence. They need to ensure that they are actually getting ERP with a native, built-in module that is pre-integrated with the rest of an enterprise suite. The degree to which other parts of an enterprise suite must be implemented in order to feed data into the environmental footprint solution will vary from one manufacturer to the next. But in the case of IFS Applications, the one additional module that is required in all cases is the inventory module, because IFS Eco-footprint Management is a parts-driven system that tracks environmental impact by component part. Most manufacturers would also want to implement manufacturing-related modules because that will deliver the requisite product structures, work centers and other manufacturing data. Other modules from the IFS Applications suite can drive additional data into the Eco Footprint Management module, ranging from project data, supply chain management data and even service management and product lifecycle data.

So once again, the phrase “caveat emptor” certainly applies.

- The author is MD, IFS Solutions India