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Study: Dramatic Sustainability Gains Are Due to Process Improvement, Not Offshoring

Posted By Jeff Moad, February 09, 2015 at 3:54 PM, in Category:

U.S. manufacturers have made dramatic gains over the past few years in reducing polluting emissions, even as the industry as a whole has increased production. But have those gains been primarily the result of process improvements and new technologies? Or have U.S. manufacturers achieved those improvements mainly by offshoring their most pollution-generating products, seeking to sidestep stricter domestic regulation?

A new study out of Georgetown University claims to show, for the first time, that pollution reduction on the part of U.S. manufacturers since 1990 has resulted primarily from industry-initiated process change—what the report calls ‘technique changes’—rather than outsourcing.

The study , by Arik Levinson, an economics professor at Georgetown, covered  six types of pollution generated by manufacturers in more than 400 verticals comprising the U.S. manufacturing sector. Pollutants studied included sulfur dioxide, carbon monoxide, and volatile organic compounds (VOCs).

“From 1990 to 2008, pollution per dollar of output from U.S. manufacturing declined by 64% to 77% [depending on pollutant],” the study reports. “More than 90% of this cleanup can be attributed to technique changes directly,” rather than changes to product mix that might be affected by outsourcing and other factors, the report says.

The report, for example, says that, between 1990 and 2008, manufacturing emissions of sulfur dioxide per dollar value of manufacturing output decreased by 74%. And the study found that 88% of that reduction was due to manufacturing process improvement, while only 12% was a result of manufacturers switching to inherently less-polluting products in the U.S.

One conclusion that might be drawn from this finding, says the author, is that environmental regulation in the U.S., rather than simply driving the production of pollution-prone processes and products offshore, has stimulated manufacturers to make their products and processes more sustainable in the U.S.

“That finding should be welcomed by anybody concerned that U.S. regulations might appear to be succeeding, but only by reducing the menu of products available to American consumers or by shifting pollution from the U.S. to other countries,” the report states.

The report does not attempt to evaluate the costs associated with the techniques that U.S. manufacturers have employed to reduce regulated emissions or the direct benefits that those investments have delivered to individual companies.

The report relies on analysis of the National Emissions Inventory database and the National Bureau of Economic Research-CES Manufacturing Industry database.

The Georgetown report’s findings are consistent with the strategies and initiatives currently being pursued by many manufacturing leaders. Many manufacturers submitting nominations in the Manufacturing Leadership Awards’ Sustainability category, for example, are taking a strategic approach to pollution reduction, treating it as part of a broader, long-term corporate social responsibility strategy. Such manufacturers see these efforts—which include energy and water conservation, recycling and landfill reduction, and VOC reduction through the use of powder coatings—as a way to reduce costs while also stimulating employee engagement.

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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Posted on
Whether it be gains in polution reduction, reducing cost, increasing quality or being innovative, the best offshoring can do is be additive, process improvement is a multiplier. What I mean by this is companies often offshore to reduce labor costs, and especially in the past that was true. But the process stays the same. In fact if you've ever worked directly with offshore companies you know that the process is often LESS EFFICIENT than that used in the US. But labor WAS so cheap who cares. If it takes 2 forign employees to do the work of one US worker who cares, they're cheap. If there is additional scrap who cares, it's cheap. But as the labor and material costs get closer to parity companies are finding that a good Lean process improvement program can lead to substantially reduced costs to manufacture in the US, time to market can be MUCH less if your development processes are streamlined and you have much better control over quality and production.
Before offshoring, US companies should develop a good process improvement program and see how much can actually be done here with little or no cost penalty.
Posted on
Interesting article. When I read the title, I was think of sustainability in terms of growth an profitability, and in that way, consistent with the article we collaborated on a year ago: http://www.gilcommunity.com/blog/want-engaged-employees-try-opening-books/
It is interesting that process improvements, not outsourcing, led to environmental improvements, just as management process improvements we discussed led to profitability improvements. Keep up the great work.
Posted on
Thanks, Bill. Interesting parallel. Yes, I think the open communication that your article touched on can create a culture that also enhances continuous improvement which can effect positive environmental outcomes. These are synergistic and shouldn't be thought of in isolation.
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