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In 1999, Frito-Lay began its environmental program in earnest, and its engineers proposed modest 10% to 15% reductions in energy and water use. Operations executives, however, wanted transformative change and raised the goals to saving 50% of the water, 30% of the natural gas and 25% of the electricity per pound of product.“This really got us fundamentally looking at our business, the environmental program, and our efforts in a dramatically different way,” said Al Halvorsen, director of environmental sustainability at Frito-Lay, Plano, TX. Nine years later, in the fall of 2008, Mr. Halvorsen reported to a standing-room-only crowd at the University of Michigan that savings from sustainability programs at Frito-Lay were saving $55 million per year.
Today, Frito-Lay and its parent, PepsiCo, Purchase, NY, have integrated resource and technological innovation into the company’s vision of “performance with a purpose.” “Sustainability is not just driving the bottom line, but we are seeing if we can potentially help improve the top line as well,” Mr. Halvorsen said. “It’s not only a subsection of the engineering department here, but it’s also about how marketing looks at sustainability. We ask ourselves, ‘How do we get our R&D department to produce products differently and have a positive environmental impact everywhere we can?’”
Traditionally, the catch with sustainability was that it costs too much money, ties up capital, and impact on customers and consumers is uncertain. When it comes to impact on the market, PepsiCo and Frito-Lay have been widely recognized for their efforts. Regarding cost and use of capital, the US Environmental Protection Agency's Energy Star program has an effective tool to support the value proposition that energy efficiency projects are great investments. The tool is called the Cash Flow Opportunity Calculator (CFOC) and can be found at no cost onEPA's website.
The calculator is written for managers who are not financial specialists, but is also rigorous enough to satisfy financial decision makers. The calculator clearly shows the cost of delay through money wasted unnecessarily in utility bills, and provides a financial scenario to document how projects can be paid for over time through utility savings and that cash flow is actually improved. In today’s business climate, where cash is king, it is useful to become an expert in tools and techniques that show positive benefit to an organization’s cash flow.
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