James Field was flying back to Toronto from Shanghai when he sensed something was terribly wrong.
The trip itself was routine. Field was part of the engineering services team at electronics manufacturing giant Celestica. Visiting customers and satellite facilities in other countries was part of the job, and he enjoyed it.
Yet on this day the journey home was anything but routine.
Field, 37 at the time, was mid-flight when he began to feel a sharp pain in his chest. His breathing became short and rapid and his heart rate spiked. He was in distress and trapped on an airplane, and all signs pointed to what doctors determined was a pulmonary embolism.
“It was scary,” he says.
The good news is that Field survived that 2012 experience, but his full recovery still required six months of sick leave. It gave him a lot of time to think about life, his wife and infant son, and his future. “With that 50-50 life and death moment, I came to the decision I wanted to do something very impactful in my work life,” he says. “I wanted to align my personal beliefs with my career trajectory.”
In what Field describes as a “serendipitous moment,” he learned upon returning to work that there was a job opening for a new sustainability manager, part of a renewed effort by Celestica to boost operational efficiency and turn waste streams into profit centres.
After 15 years at the company, it was the kind of role Field needed – and the role he ended up getting. He became, in essence, a sustainability change agent within a 25,000-employee company with operations in 14 countries.
Joined by a core team of five, led by Todd Melendy, vice-president of sustainability and compliance, his mission is to work with mid-level managers across Celestica’s operations – from engineering to logistics to packaging – and sell them on the idea that approaching day-to-day activities through the lens of sustainability is good for business.
“It’s all a reframing exercise,” Field explains. “I show through business cases and proof points that this will help them make their financial objectives, and at the same time they can go home and feel proud of it and talk to their families about it.”
Closing the loop
With $5.6 billion (U.S.) in annual revenue, Celestica is one of the world’s largest electronics manufacturing services (EMS) company. It designs and engineers electronics products for its customers, manufacturers those products, and can manage the supply chain from start to finish.
The company’s core business over the years has been making circuit boards and doing final assembly for a range of electronics products, from telecom switches and airplane cockpit equipment to smart phones and medical devices. Past and current customers include BlackBerry, Cisco Systems, Honeywell Aerospace and Nortel Networks.
“Solder is our life,” says Field as we walk past a training lab within Celestica’s sprawling Toronto campus, which serves as its global headquarters. The lab is used to teach college students how to properly solder, which sometimes requires the kind of delicate touch that automation doesn’t provide.
Just as those students are learning to put circuit boards together, a team in another area of the building is busily taking products apart. Field leads us down a hallway where to the right are big boxes used to collect product packaging for recycling. We then enter a restricted area and walk along another hallway lined with shelving that is stacked with an assortment of boxes and bins, each designated for a particular item – random chair legs, old office phones, used computer monitors, and worn in keyboards, etc.
Compared to the rest of the building, it’s not a pretty sight – an example of getting dirty to get clean.
Field says employees are encouraged to reuse the items internally. If there’s no opportunity for reuse, they gets tossed into one of several large bins in the adjoining room where a team of Celestica employees spend their days dismantling and separating each piece. It’s not just Celestica’s own waste, but also defective items and other e-waste from its customers.
Celestica used to treat this part of the business as a cost centre. Like most companies, it paid somebody else to take the material off its hands. But that also meant giving up control at a time when customers want assurances of proper disposal. Will the e-waste end up in a landfill in a developing country? Will local scrap yards strip out what’s valuable and dump the rest? Could either scenario be on the evening TV news, a potential PR crisis in the making?
Value in values
Homeowners like to think that the mystery people who pick up electronic waste from the curb are doing us all a favour by recycling these products responsibly. But there are many shades of recycling, and that e-waste often ends up in the hands of scrap dealers who don’t comply with environmental regulations.
To get at the copper in wiring, for example, some will burn off the plastic, rubber and insulation. To get after the valuable metals on a circuit board, they’ll pluck out what they want and send the rest to landfill – or worse, illegally dump it. It’s not a pretty business.
“The open burning and toxic dumping pollute the land, air and water and exposes men, women and children to poisonous emissions and effluents,” according to a 2013 e-waste report from the World Intellectual Property Organization (WIPO), pointing out that most of this e-waste ends up in developing countries. “The health and economic costs of this trade are neither borne by the developed countries nor by the waste brokers who benefit from the transaction.”
Celestica saw the importance of maintaining more control over the e-waste it handled, but after some research it also began to realize just how much value was there to extract. A tonne of high-grade e-waste typically carries 10 ounces of gold, 20 ounces of silver, an ounce of palladium and 200 kilograms of copper. Sometimes a small amount of platinum is present as well.
“All of these components and circuit boards have precious metals in them,” says Field, pointing out that the USB plug on a computer keyboard has gold on its tabs that most people just forget about. “If you break them apart down to their base elements, you might get 20 times the amount you would have otherwise gotten.”
The growing realization of the value within e-waste can be seen by the number of patents filed annually that are related to e-waste recovery and recycling. Global e-waste patents rose from less than 50 a year in 1980 to more than 650 a year in 2010, WIPO reported.
Rising market prices for various metals is a big part of the increase. This is particularly true for rare-earth metals, given concerns around resource scarcity as demand for such materials grow.
Tony McDermott, operations recycling manager at Celestica, has spent the past 10 years trying to show top management the business case for mining Celestica’s own e-waste. The company has since bought into the idea and is now working to expand it into every corner of its global operations network.
“They stopped viewing this stuff as waste and started viewing these waste streams as commodity streams,” Field explains. “As soon as you flip that equation for them, your garbage instantly becomes a profit centre.”
Broker of best practices
Celestica, like other large manufacturing services companies, is in a unique position as a company that makes products for others. It has about 100 customers worldwide, and they all fall somewhere along the sustainability learning curve – from laggard on one extreme to groundbreaker or early adopter on the other.
“With some of the more progressive ones you can learn tips and tricks,” says Field, pointing to Cisco as an example of a customer that has helped Celestica learn how to lower the carbon footprint of freight and logistics. This put Celestica in a position to share that wisdom with other customers who have fallen behind on the learning curve. “There’s a huge teaching opportunity.”
Some call this lateral innovation, or technology brokering. The idea is that a problem solved in one market or company can be repackaged to solve a problem in another. Field says it's “part of Celestica’s advantage.” The company, for example, now regularly shows off what it’s doing around equipment re-use and e-waste recycling, partly to impress customers but also in hopes the approach will inspire others to act in a similar way.
That the company takes sustainability seriously will, it hopes, prove a selling point for some current and future customers that face growing pressure from investors — and their own customers — to green up their game. Celestica was the only EMS company to make it onto the 2015 Corporate Knights Global 100 ranking, and it was one of only 12 Canadian companies on the international list. Domestically, it ranked 15th on the 2015 Corporate Knights Best 50 Corporate Citizens in Canada list.
It’s also one of eight founding members of the Electronics Industry Citizenship Coalition, which was established in 2004 “to create an industry-wide standard on social, environmental and ethical issues in the electronics industry supply chain.”
The company released its first corporate social responsibility and first environmental sustainability reports in 2010, though CEO Craig Muhlhauser has been a strong backer of sustainability initiatives since taking on the top job in 2006.
Sights on solar
When Ontario introduced its feed-in-tariff program for renewable electricity back in 2009, Celestica saw an opportunity for growth. A local content provision in the program rules meant that foreign companies wanting to sell into the Ontario market had to establish their own module and panel assembly facilities or hire someone local to do the assembly.
Celestica quickly positioned itself as the manufacturer of choice, not just for solar but also for the power electronics that connect panels to the grid. Customers included Recurrent Energy, at the time owned by Sharp (and acquired this year by Canadian Solar), and SolarBridge, a maker of microinverters now owned by SunPower. Other renewable energy customers include Lumos Solar and SMA Canada.
At peak operation, Celestica’s Toronto facility was churning out 235 megawatts of panels a year, roughly equivalent to the capacity of a small coal-fired power plant. The facility, established in 2011, produced its millionth module in November 2013. It’s an impressive finely tuned operation, but also flexible enough to adjust to customer demands.
While solar panel and inverter manufacturing represents today a small portion of the company’s total revenues, Field says there’s a commitment to grow it – possibly even moving into the energy storage manufacturing game, given rising battery demand for use in electric vehicles and grid storage.
The "smart energy" market, he says, "is a high-priority area for us."
Based on what Celestica has learned at its Ontario operation, the company is well positioned to expand its solar manufacturing capacity to markets in Asia, though it has not disclosed whether it plans to do so. The future of the Ontario operation is uncertain, however, given the province's gradual phaseout of its feed-in-tariff program and elimination of the local content requirement, which was declared anti-competitive by the World Trade Organization. "The market for solar panels is declining and manufacturing of solar panels on-site is expected to cease in 2016 with the end of the Ministry of Energy's Feed-In Tariff Program," according to a 2014 letter from Celestica's law firm, Stikeman Elliott, to a committee of Toronto city council.
Still, the solar operation remains active today, and the company’s waste diversion goals are having a direct impact. For example, it has already launched a program that reuses or recycles the heavy wooden pallets used to ship solar panels to customers.
Todd Melendy, Celestica’s vice-president of sustainability, explained in a corporate video promoting the initiative that the pallets get beat up, are dirty, and after being used once usually end up being sent to a landfill. “In one quarter alone we had 4,000 of these pallets,” he pointed out. “This is the equivalent of 2,000 fully mature trees. Sending 2,000 trees to landfill, and then cutting down another 2,000 trees to manufacture new pallets is not great for the environment.”
McDermott’s team took on the challenge. The cafeteria in the Toronto campus was going through a renovation. Instead of letting the old conveyor-based dishwasher system be scrapped, McDermott repurposed it as a high-pressure, semi-automated pallet washer that recycles the water it uses.
Once cleaned, the old pallets are inspected, repaired and reused to ship out newly manufactured solar panels. Those beyond repair are shredded and donated as animal bedding. "Giving it away for free is better than sending to landfill or paying to burn it," Field says.
McDermott estimated that in just three months the company avoided $140,000 in costs by using the new pallet-cleaning system. But his team is not stopping there. For the past two years, they have been researching the best way to recycle old or defective solar panels, a service expected to grow in demand once the first large wave of solar panels installed 10 years ago reach the end of their life.
Field says a chemical process has been explored as a way to delaminate the panels — one of the more challenging parts of the dismantling process, which requires separating the silicon from its backing and the glass — but there was concern about the volume of chemicals required. "We know it will work but Tony has been focusing his efforts on non-hazardous methods," he says.
To inspire new and creative approaches, Celestica sponsored a sustainability case competition earlier this year at the University of Toronto. One of the participating teams came up with a steam-based process for delaminating the panels, but it was too energy-intensive. McDermott is now working with community colleges around Ontario on different low-carbon methods for harnessing the required heat, such as using waste heat.
When Field talks about these initiatives you can tell he enjoys his job. You can also see that the wheels are always spinning in search of the next idea that will squeeze even more productivity out of the resources the company uses.
“To be able to work on something I’m passionate about in an industry I’m passionate about in a company that’s given me the permission to grow and change, it has been a triple win,” he says.
Does it Matter?
But is a focus on sustainability performance really giving Celestica an edge over competitors? Rob Young, a technology analyst at Canaccord Genuity, is skeptical. "I don't think it makes a difference in their ability to get business," says Young, pointing out the industry's razor-slim margins. "There's not really a lot of room in there to worry about environmental impacts."
Field says it's a common misconception about the importance of sustainability. For many of Celestica's customers, he says, protecting the brand is paramount and drawing media attention because of ethical misconduct somewhere along the supply chain is something to be avoided. In that sense, Celestica's approach to sustainability is a key part of a customer's risk-mitigation strategy.
He says Celestica is also increasingly seeing sustainability showing up on requests for information from customers. "For some of our customers, sustainability and CSR related metrics account for the same number of points as key metrics like on-time-delivery and quality."
Finally, more customers are becoming aware that a "triple bottom line" approach is just good business. "We're proving time and again that when we eliminate waste, conserve energy, or retain skilled employees that it goes directly to the bottom line."
He recognizes that strong sustainability practices alone aren't enough to win business. "But it can be that cultural 'nose-ahead' at the finish line."
