Sustainability Is Good Business

Sustainability is good business

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By Jason Patterson

Climate change was the name of the game at Huawei’s Fourth Annual Global Supplier Sustainability Conference, held on October 18th at the Huawei campus in Shenzhen. Roughly 170 Huawei suppliers and five major customers gathered together with Huawei leadership to hear each other’s thoughts and plans for sustainable industry, and most of those thoughts revolved around how to reduce waste, energy consumption, and overall carbon footprint.

Huawei used its Fourth Annual Global Supplier Sustainability Conference as an opportunity to voice its dedication to fighting climate change, and how it expects its suppliers to join in that fight. The company spoke about how stamping out excessive overtime, child labor, and toxins in the workplace is good, but not good enough for a supplier, or anybody else, to really be considered sustainable.

Huawei Executive Vice President Eric Xu explained that Huawei now defines sustainability as moving beyond mere passive risk management to actually embracing the active management of efficiency (Huawei would hammer this efficiency point repeatedly throughout the day). He outlined a four-pronged strategy that Huawei will follow regarding CSR – eliminating the digital divide, promoting green/sustainable development, becoming a trusted partner with stakeholders, and harmonizing the development of the entire value chain. The latter is particularly important as it indicates a shift from the “customer-oriented supplier CSR risk management” strategy that Huawei has been following for the last decade to an “overall sustainable development” approach that focuses more on efficiency than risk management.

Huawei Chief Operation & Delivery Officer Benjamin Peng elaborated on this somewhat by defining sustainability as the moving on from reactive risk management to proactive problem prevention. He then went into greater depth regarding Huawei’s ambitions for efficiency by stating that “sustainability requires zero waste.” This is reflected in Huawei’s efforts to recycle any & all components from retired equipment, as well as its efforts to reuse packaging whenever possible.

Peng would state unequivocally that “Huawei recognizes climate change and is taking unprecedented steps to cope with it… There is no reason not to do it… CSR/Sustainability is part of our DNA.” As to Huawei’s suppliers, Peng would add, “Compliance is okay but it does not demonstrate the spirit of sustainability.” However, it wasn’t all liberal piety from Mr. Peng. He would go on later to remind the audience that “sustainability is also a business imperative.”

This point would also be reflected by the distinguished customers who attended the conference, who often spoke about the preferences of potential clients for sustainable products & services. The first customer to speak was British Telecom (BT), represented by Kelly Ning (a BT supply chain manager & business improvement specialist), who master of ceremonies Alan Aicken (Huawei’s VP for supply chain CSR) referred to as Huawei’s mentor in helping the company enhance its knowledge of sustainability. She outlined how BT managed to cut its waste to landfill by half from 2009 to 2011 and plans for 25% of its energy consumption to stem from sustainable resources by 2016.

She was later joined by John Spear, Director of Energy Performance Index Ltd., (a British energy consultancy that works with BT), who outlined the carrier’s supplier sustainability framework, dubbed Better Future. This program is particularly interesting as it hands out bronze (meets the minimum), silver and gold awards to suppliers, as opposed to merely handing out a simple “attaboy” prize every year that fails to distinguish the degree of achievement. What’s interesting about BT’s ranking criteria is how rigorous it is. A bronze simply means that a supplier is up to BT’s minimum standards, but a supplier could be the best in class in all ten criteria and still not get a gold. However, these very strict criteria seem to get results. The telco stated that the average supplier who participates consumes 20% less electricity, 10% less raw materials, and utilizes 10% less water & effluent, while seeing a return on investment (ROI) in less than three years.

Philipp Wallis (a terminal procurement expert) spoke for Deutsche Telecom and laid out a picture of the carrots (loan approval) and sticks (LOHAS disregard) out there related to going green, followed by a nuts & bolts presentation on how a new supplier might be evaluated and later audited by the operator. He discussed the problems that have been encountered with cramped worker housing, excessive/forced overtime, and inadequate wages. The latter seemed to be a particular concern as it frequently ties into the overtime issue. Wallis clearly expressed a desire for suppliers to pay out a wage generous enough for workers not only to live, but also to save.

Bernardo Scammacca (a supplier performance monitoring manager) from France Telecom followed this up with some scary statistics about energy consumption and network operations, while detailing the telco’s efforts to achieve a 20% reduction (from 2006 levels) in carbon emissions by 2020. The operator noted that in 2008, energy cost hikes quadrupled other cost increases at the French incumbent, but something even more scary is the fact that 71% of Orange’s increases in energy expenditures from 2006 to 2008 were attributed to increased consumption as opposed to mere price hikes. Electricity consumption is a major concern at any telco, with the Orange group in particular consuming (in 2010) an annual total equal to what the entire country of France consumed in 3.7 days at that time. However, the operator is proving itself more than just another consumer. It has set targets for 15% energy usage reductions (from 2006 levels) by 2020, while planning to have 25% of its electricity consumed in Africa be solar-generated by 2015. What’s more, the operator also plans to achieve a large part of the aforementioned carbon emission reductions through terminal recycling, a sensible answer considering how quickly most get discarded.

Tony Yu (a senior sourcing manager) of Vodafone, which has named Huawei its Supplier of the Year for 2012, let the audience know that even though 86% of the company’s carbon emissions stemmed from its network, the company is making efforts in all areas to reduce its footprint. Teleworking/teleconferencing reduced its carbon emissions in the U.K. alone by 24,000 tons in fiscal 2010, while the Huawei PowerCube solution, a diesel-battery hybrid solution, has been installed in at least 3000 sites (as of the end of fiscal 2010), leading to an 80% reduction in diesel generation and a carbon emission reduction of approximately 100,000 tons. As a kicker, a Vodafone innovation center in South Africa has been given the first 6-star rating (as rated by the Green Building Council of South Africa) on the continent (a maximum score), indicating world leadership in ecological building practices.

Huawei itself would then go into detail about what it expects from its suppliers. Master of ceremonies Alan Aicken partially defined sustainability as the employment of lean manufacturing (elimination of the “seven deadly wastes”), but in far more imperative terms. “As individuals we all have personal choices to make, but as businesses, there is no choice. We either have to behave sustainably or our customers will choose other suppliers.”

This last statement, in particular, is far from the usual soundbyte fodder, at least in the eye of the Carbon Disclosure Project (CDP), an NGO dedicated to tabulating climate change data and other environmental statistics. According to its program director for China, Li Rusong, 56% of surveyed multinationals are now willing to dump suppliers if their carbon reduction efforts will not prove adequate within five years.

Clearly this message has filtered down to these suppliers, as Steven Chen, General Manager at COMPEQ (a Taiwanese-owned PCB manufacturer) illustrated to the conference attendees how the company is on track to reduce its carbon footprint by 35% this year from 2009 levels, which would represent a 25% improvement over its target levels and a third straight year of 10-15% reduction. It was also demonstrated by Hytems (a Chinese maker of heat exchangers, device cabinets, etc.) whose Executive Vice General Manager, Tong Huazhou, discussed how the company has reduced fuel consumption by 33% for its spraying process, and energy costs for its air compressors by 20% (with the trend still decreasing). Tong also discussed how the company has seen significant savings by replacing its wood containers with steel, as well as through lighting improvements at its facilities, referring to the latter as “low-hanging fruit.”

On the whole, the take-home message for this conference seemed to be that “greenwashing is not enough.” This sentiment was echoed by Alan Aicken, who stated, “Our vision for the supply chain is to work with self-sustaining sustainable suppliers based on your proactive, innovative, and innate commitment to sustainability, versus driving compliance by audit. You’ve seen that Huawei goes beyond compliance. We don’t just do what our customers want, we do more. We don’t just do what the government regulations require of us, we do more. We have significantly better air emissions than are required by law, and we have the data to prove it. Water treatment is significantly better than required by law. The wages that Huawei pays are significantly higher than minimum wage. Not because it is required by law. Not because the customer demands it, but because it’s the right thing to do.”

When asked later about the results of the conference, Aicken added, “I received a lot of positive feedback, from suppliers, customers and others, regarding how aligned Huawei is with our customers. The message was clear that the sustainability train is leaving the station – be on it, or be left behind.”

Editor: Julia

Quotations (not all will be used)

Benjamin Peng: At Huawei, we only want to do business with the best suppliers in the world. We expect that you will support us and our customers in behaving in a sustainable manner.

Kelly Ning (BT): “If our suppliers are not as sustainable as we are, then we are at significant risk of brand damage, and this is not alarmist talk because we have been seeing lots of brand damage issues happening across the world, not only in China but in other regions and other countries.”

John Spear (Energy Performance Index Ltd.): “Customers now are concerned. Customers are seeing, in the U.K., lots of floods this summer. They believe that global warming is real. They believe that global warming affects them in their house, in their life, in their job, and with their children.”

Philipp Wallis (DT): “What do you really know about your supply chain? Even if you know your first-tier suppliers, and you probably know your second-tier suppliers, but where do your resources come from? Where is the mining done? Where does the base material come from? This is one of the challenges for all of us.”

Alan Aicken: “We have to design a product such that at the end of the product’s life, there is zero waste. What that means is that each of the components that we have designed in can be reused or recycled. Now that is a very hard target – zero waste. So, if you cannot make zero waste, then make 95%.”

For the box

Huawei’s Green Initiatives

Huawei is fully committed to the fight against climate change. As a Fortune 500 company, this is particularly important as the vast majority of the increase in global carbon emissions since 1980 stems from Asia. As Huawei grows, it strives that much more to make certain that every element of its business is ecological, as can been seen in its three-pronged strategy for green initiatives – Green Communications, Green Huawei, Green World.

Green Initiatives

Huawei is fully committed to the fight against climate change. As a Fortune 500 company, this is particularly important as the vast majority of the increase in global carbon emissions since 1980 stems from Asia. As Huawei grows, it strives that much more to make certain that every element of its business is ecological, as can been seen in its three-pronged strategy for green initiatives – Green Communications, Green Huawei, Green World.

Green Communications

Huawei’s Green Star program for its own products evaluates energy consumption, carbon emissions, resource consumption, hazardous substances, waste generated, and health & safety; over 30 products have been certified since 2011.

Mini-shelter solutions reduce space by 60%, power by 40 to 80%.

MxU design reduces POTS power consumption by 50%.

Green Huawei

Green packaging (which accounts for 60% the packaging it ships to carriers) saves over 5000 square meters of woodlands annually, reducing carbon emission by 13,000 tons.

Huawei has decreased air shipments by 38% since 2010 and increased its percentage of direct shipments (direct shipments from supplier to customer) by 46%.

Huawei is projected to exceed its target for water consumption reduction at HQ by 25%.

Green World

Songshan Lake solar facility can generate 4.03MW of power annually, saving 516 tons of coal and 4000 tons of carbon emissions each year.

Green Partner program focuses on eliminating restricted chemicals from its products; 27 were awarded in 2011.

Huawei has contributed to environmental standards organizations on three continents, as well as to international bodies such as the IEC, ISO, and ITU.

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