Sustainable Furniture Case Study

Efficiency and best practice have always been fundamental to J T Ellis & Co., furniture manufacturers of Huddersfield in West Yorkshire.

“We never set out specifically to be a sustainable company. The fact is that the way we run the company lets us tick most of the sustainability boxes.”

Ellis Furniture supplies kitchens and bathrooms to the retail sector and kitchens, bathrooms, bedrooms and a whole range of specialised furniture to contract clients. These include care homes and hotels, and schools, universities and other buildings in the public sector.

 “PFI has not been universally popular, but it’s been good news for us.”

PFI operators frequently have an obligation to maintain a building and its facilities for decades. Ellis uses traditional glue and dowel construction with high quality timber, which means they offer a quality product that lasts for years - and at a competitive price. Every product from Ellis Furniture has a 10-year guarantee, but in practice it will last much longer than that. Indeed, in a corner of the company’s showroom there’s a suite of student furniture that was originally installed in Durham University in 1985. It’s clearly seen a lot of use but it’s still functional. In principle it could be refurbished and re-used.

What makes a sustainable business?

First of all, the fact that Ellis makes durable and long-lasting products clearly demonstrates sustainable use of resources. Unfortunately, at present no-one gets recognition for making durable products. In the UK, where we generate 117 million tonnes of waste each year, the longer a product lasts the greater effect it has on reducing that figure - a contribution to sustainability that really shouldn’t be ignored. Secondly, the company carefully controls its raw materials. Wherever possible, timber comes from FSC (Forest Stewardship Council) certified sources, which means that every tree harvested comes from managed forests, and every tree is recorded and replaced. Walnut and cherry from the US are managed in a similar way but certified by a different body. Other countries have their own schemes. What is noticeable on the Ellis factory floor is that every stack of timber is tagged with details of origin. For every product shipped, the company knows exactly where the raw materials came from.   

I raised the question of energy security. How sustainable is a manufacturing business when there are predictions of national electricity blackouts within the next two years? Like most businesses, their energy supply is in the hands of the government, the generators and the weather. It’s just not practical to have a complete back-up generation system, and it’s not as though the factory is producing anything perishable that needs refrigeration or chemical reactions that must be held at a critical temperature. Of course there are essential services that must be protected so there’s a UPS in the computer room which will permit a managed shutdown of IT without loss of data. There’s also one diesel back-up unit on site. It sits next to a massive water tank which feeds the sprinkler system. Every Monday it’s fired up to prove it’s ready and waiting should an emergency occur.

And renewable energy?

What about renewables? A 200,000 square foot factory has a lot of roof area and it’s no surprise that solar panels are under serious consideration. They will never supply all the factory’s needs, but the current subsidy regime means they will make a significant saving and certainly more than pay for themselves.

Another aspect of energy is more problematical. Ellis Furniture has to dispose of waste, and offcuts of timber and strip are collected by a company which remanufactures them into particle board. All very green, although Ellis still has to pay for the waste to be taken away. Enter the government with its subsidies for biomass boilers. The policy was set up to support electricity generators such as Drax Power - operators of the UK’s largest power station - to convert to more environmentally-friendly biomass. (Whether it is truly environmentally friendly is a debate for another day!) In view of the massive investment involved, some £700m, the government has confirmed that the scheme will stay in place at least until 2037. Back in Huddersfield the regulations mean there’s a choice between recycling the timber waste at a cost and saving money on energy by burning it in a biomass boiler. It's a simple choice. Burning it in a boiler is not as green as recycling it, but this is business.

Why ISO 14001?

Putting in an environmental management system (EMS) to ISO 14001 was in response to public sector clients. A lot of the implementation involved documenting practices and procedures which the company already had in place. The fact that the EMS has been installed means that clients immediately know that Ellis Furniture meets recognised standards. Indeed, having the standard is frequently a condition of tendering. Clients know that the EMS is revalidated each year, in this case by BSI, which is an added incentive to the company towards continuous improvement. With this in mind Ellis undertook a lean manufacturing project, which led them to a fundamental re-arrangement of the factory layout. They freed up enough space to allow them to give up off-site storage facilities and save the cost. The revised layout improves productivity as the work now comes to the operatives, following a logical flow, and they no longer have to follow the work.

What about packaging?

Most Ellis products are sent out without packaging. The majority of the business is with the public sector and contract customers. The company delivers these orders on its own transport, securing units to the sides of the van and separating them with blankets, which of course are used again and again. Units for the retail market are packaged in cardboard as the company does not handle delivery to the final consumer and needs to make sure they arrive safely. At least the cardboard can be recycled.

And finally…

I’ve often said that sustainable business is good business. It makes sense to get the standard and get the credit for it.  Ellis Furniture proves the point that good businesses are generally sustainable.

Thanks to Tom Ellis, Joint MD, JT Ellis & Co    

Flourishing in a Not-for-Profit World

This week Donnie Maclurcan presented his view of the future at Leeds University as part of the CASSE autumn programme.

Donnie’s thesis is that all organisations will be, or should be, Not-for-Profit (NfP) by the middle of the century. He started by explaining the difference between NfPs and the third sector, which used to be almost totally dependent on handouts. Now, 53% of NfP revenue is self-generated and used for the organisations’ social purpose. By contrast, in Donnie’s view the traditional capitalist for-Profit (fP) businesses are socially divisive and exacerbate economic inequality. This is not due to paying exorbitant salaries, but results from capital gains, dividends and inheritance. Apparently, just 85 individuals in this world control wealth equivalent to that owned by 3.5bn people. The constant growth of fPs brings ecological devastation.

Donnie challenges the accepted wisdom that states that competition and self-interest are what make society work. He believes that the centralisation of wealth and power creates social and economic stratification and a compulsion to consume. He challenges the myth (the American Dream) that anyone can be wealthy. In fact only 5% of Americans ever move from their original social/economic position. 

What should be done? Central market regulation? Concentrating power in the hands of the state is no better than concentrating it in the hands of the rich, and the line between the rich and the state can easily become blurred. Strong regulation can stifle innovation. Growth continues. Self-regulating capitalism? Donnie does not believe that we can rely on fPs to innovate the world out of ecological disaster. From his work on nanotechnology he does not even believe that fPs could achieve decarbonisation in time to avoid disaster. Self-regulating capitalism is still capitalism; still reliant on growth.

The Alternative Solution is the Not-for-Profit Enterprise, where the organisation socialises its profits. In other words it either uses its profits to further its social purpose or donates its profits to organisations benefiting the community. There are no shareholders demanding dividends and no owners who can turn a profit by selling of all or part of the business. 

NfPs are better because NfPs can outperform traditional businesses. The example of the credit unions versus the banks in the US was quoted, although Donnie did admit that in the US credit unions get special tax breaks. NfPs use freeware rather than expensive mainstream software. Employees are more motivated, empowered, working in organisations with a flatter structure. NfPs create open source research rather than licensing their intellectual property (IP) in order to make money from users as the traditional fP would. The motivation and commitment from working for an NfP can lead to remarkable productivity gains. The quoted example was that car manufacturer WIKISPEED could develop in 8 days what would take Toyota 30 years. (The politest thing I can say about that statistic is that I don’t believe it. Let’s not overstate the case now.) Examples of NfPs are Mozilla, creators of the Firefox browser, and Wikipedia.

“Working together is better” There’s more concern about the origin of products. NfPs are more ethical and they never plan for obsolescence. The wide availability of digital resources means that the barriers to entry to many businesses are very low. Capital costs are falling and crowd-funding, a completely new source of finance, is widely used by NfPs. For larger investments shares should be replaced with community bonds as has been tried in Canada. Holders receive a fixed return but have no part in the ownership of the enterprise and no right to a share of the profits, (although they can lose their total investment if things go wrong.)

Profits should be a means to an end, not an end in themselves. For this to happen, for the world’s wealth to be equitably distributed, NfPs are necessary, although not sufficient.

What do I think?

Undoubtedly global inequality needs to be tackled, and at first sight universal Not-for-Profit seems an ideal solution. I have a number of concerns. In the traditional model a company borrows money to set itself up. Service companies, ideas companies, software companies can be set up for pocket money. Manufacturing companies, retailers, farms, transport, power generators and heavy industry need significant investment. Some is borrowed as fixed interest bonds. Interest is paid whether profits are made or not. If it all goes wrong, bondholders get part of anything that’s left: shareholders get nothing. Nevertheless, shareholders invest. They support the company, they take the risk. If there’s no profit there’s no dividend. If it goes wrong shareholders can lose their whole investment. They invest in the knowledge that they are taking a risk and they expect to be rewarded for that risk with dividends in the good times and increasing value of their shares. They share in the growth in the value of a business that they have helped create. All businesses are risky, some more so than others. We need innovation, but innovating businesses can be the most risky of all. If we go to a total NfP model, who takes the risk? 

If we’re going to convert existing businesses to NfP who is going to buy out the existing shareholders, and what will they spend the money on? And if we nationalise everything are we ready for the backlash?

Can every enterprise be a social enterprise? Will we find people who will be motivated by every occupation? Even the dirtiest jobs?

I asked what would happen to pensions if there were no more shares for pension funds to buy. Buy bonds instead, but the increasing reach of the social sector and growing support for the elderly will mean a reducing requirement for pensions. Really? Sounds like David Cameron’s Big Society. (RIP) If I have foregone consumption throughout my life to assure a comfortable retirement I expect to enjoy it in proportion to the savings I’ve made, not rely on universal handouts!

I think climate change, resource depletion and the whole range of sustainability issues are the crucial priority of the moment. Not-for-Profit may be a useful context, but it's only one aspect of the big and threatening picture.

Donnie’s presentation was delivered with clarity and confidence without a single note or slide and kept our attention throughout. Lots to think about. After a struggle I’ve pre-ordered his book: How on Earth. I look forward to reading it and learning more.

EDF Energy shuts down four UK nuclear reactors

EDF has shut down four nuclear reactors, which means it has taken two power stations off line. The issue is not a nuclear problem; it relates to a defect discovered in one of the boilers related to the reactors. Although this problem has been found in only one boiler, all four reactors at Heysham-1 and Hartlepool, which share the design, have been shut down as a precautionary measure while further examination takes place. The outage is expected to last up to eight weeks.

For the moment the reduction in output is not a problem as electricity demand is always low in summer and there is currently plenty of wind. The reduction in output is not a significant proportion, although it would be critical if it occurred during peak winter demand. Energy bosses and OFGEM have all warned that the safety margin to prevent winter blackouts is vanishingly small. This is because many UK power stations of all types are coming to the end of their useful lives and being decommissioned. Renewables are not yet big enough to take up the slack and new nuclear power stations are still at least 10 years from coming into service, especially as legal disputes mean construction of the next new nuclear power stations is yet to start.

There’s no doubt that the UK has a serious problem with its energy policy and this is only one aspect. Reliance on imported fuels, especially from volatile areas like the Middle East and from Russia, is another factor threatening our energy security. The answer is increased renewables, and, even more important, we need to curb demand.

It’s in the hands of politicians, but generally they look five years ahead to the next election. Building a nuclear power station takes decades!

Sanctions on Russia - the best argument for renewable energy!

When the idea of a gas pipeline from Russia to Europe came up in the 1980s US president Ronald Reagan was strongly against it. At the time I couldn't see why, but the reason has become blindingly obvious in the last few weeks. Europe now gets up to a third of its natural gas from Russia and cannot afford to do anything that would cause Russia to turn it off. Of course loss of exports would hurt the Russian economy, but turning out the lights in Europe would have a devastating effect in only a few days. That's why Angela Merkel's response to Russia's involvement in Ukraine has been so low-key. David Cameron, on the other hand, has made much more fuss. He can afford to: the UK gets its gas elsewhere - from the British North Sea, from the Norwegian North Sea and from the Middle East. For the moment! Resources in the North Sea are running out, while Russian reserves are enormous. 

Britain, as much as the rest of Europe, needs to look at energy security, at energy that we can control within our own borders. That's why fracking is so attractive. It's exploiting British gas and oil. As commented elsewhere, fracking is no silver bullet. It's likely to be costly, there's no guarantee that the reserves can actually be recovered, there are pollution risks, there's strong public opposition and it produces fossil fuels which emit co2 when used. 

We need to explore all the options. Nuclear - under our control, but apart from all the arguments about pollution and waste disposal the plain fact is that it's no short-term solution. It will take a decade to bring a new nuclear station into production. Renewables. There's nowhere near enough capacity at present and it will take years of research and development to increase it significantly. Time to start now. Many people will complain that it can never be as cheap as coal, oil or gas. Probably true, but the age of cheap energy is over. Which would you rather have, expensive energy or none at all? 

The third step to securing our energy supplies is to minimise waste. Are you sitting in an office enjoying the sunshine with all the lights on as well? How many public buildings have the lights on 24/7? Lighting is only part of it. In a few weeks we'll have the heating on again. How hot is your home? What mpg do you get from your car? We need a government lead to encourage energy savings, otherwise we’re never going to do enough. Unfortunately the Green Deal didn't work so we need something else. Pushing energy prices up would do it, but it would make any government that did that unelectable. We need more public education, more investment in renewables, and a subsidised Green Deal ( the one that didn't work failed largely because it was too expensive, too inflexible and in many cases unlikely to yield the promised savings). Governments need to take action, because if they don't they'll be thrown out when the lights go out - and that will be the least of our troubles!

And when our energy supplies are truly secure we’ll never be held to ransom by foreign powers.

Fracking - no silver bullet

The government today invites applications for licences to frack for gas and oil across the country. We need an energy security policy, but fracking is not the answer.

We used to be self-sufficient in energy with limitless reserves of coal. Then we found North Sea oil and gas and the party went on. Now these reserves are running out and we are importing significant amounts of energy.

Although most people believe that much of our gas now comes from Russia that’s not true. About 70% comes in equal proportions from the British and Norwegian sectors of the North Sea and some 20% by ship from Qatar in the Persian Gulf. North Sea reserves are declining and although Qatar is a stable state that is certainly not true of the rest of the Middle East. The ISIS fundamentalists have already taken over large parts of Iraq, including a major oil refinery, and their aim is total domination. Supplies from the Middle East are at risk. If we can extract oil and gas from shale beneath our feet in Britain it’s surely the obvious way to control the supply and the cost of essential energy. In the USA fracking has revolutionised the energy industry. Energy prices have fallen with significant benefits to US industry. The increased use of gas has pushed down the world price of coal (which is one of the reasons why we are using more coal for electricity generation in Britain at present.) 

There have been protests against fracking in the US and the same arguments are now being made here. “Fracking pollutes the groundwater - people’s drinking water is at risk.” “Fracking causes earthquakes.” “Fracking uses vast amounts of water, some of which is recovered and is polluted.” Some of the  pollution arguments are difficult to support. Yes, in the US some people have turned on the tap and been able to light a stream of gas bubbling out of the water. The question is whether this is due to fracking or is naturally occurring. Fracking, which involves driving high-pressure water, chemicals and sand into shale beds to split them apart and release gas, takes place 650m - 800m below the level where drinking water is extracted [British Geological Survey], so it’s unlikely to affect it. There are certainly concerns about water in general. Yes, fracking does use vast amounts of water in the initial stages and this is usually trucked in. Constant lorry movements will be a major impact on local communities. About half the water injected into the shale bed is recovered and has to be treated. Among other things, it’s mildly radioactive. It cannot be sent to the normal sewage treatment works. And what about the water that is not recovered? Where does it go?

Earthquakes? Earth tremors were recorded after exploratory drilling near Blackpool, but they were very minor and about the same magnitude as natural tremors which occur all the time. They are not house-shaking events: they can only be detected with special equipment.

Apart from lorries carrying water to the wellheads, how will the gas or oil be carried out? Either by building pipelines or connections to the national gas grid, or by sending in yet more lorries. It has been suggested that unlike conventional wells, fracking wells can dry up in as little as four years. The only solution is to up sticks, move on and drill somewhere else - not necessarily very far away.

So is the inconvenience of fracking justified by the benefits of energy security, cost control and job creation for the nation? Maybe, if it works. The British Geological Survey has found that there is significant oil beneath the Weald in southeast England and significant gas in the north. It cannot say how much of this is commercially recoverable. It cannot at this stage say whether the geology is similar to the areas in the US where fracking is successfully established. It is possible that the shale beds are folded or uneven because of geological activity, making extraction difficult or impossible. 

Oil and gas from fracking will not be cheap. Extraction is an expensive process and the high level of popular opposition to fracking indicates that there will be policing and security costs as well. It won’t provide a new source of energy overnight. It won’t avoid the blackouts that have been predicted for Winter 2015 in reports since 2005. Oil and gas from fracking are still CO2-bearing fossil fuels, not helping our carbon-reduction targets.

Fracking is no silver bullet.