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10.5 Going Forward: Opportunities and Challenges

Learning Objectives

  1. Show how to set up a successful carbon reduction strategy in a capital intense, mature industry.
  2. Show how one company created business value through a carbon reduction strategy.

While meeting its 2010 carbon reduction goals and still growing in sales and profits, 2011 looked to be another challenging year for the Bennett family. The death of Stanley Bennett, the rising cost of energy, and the sluggish US economy were presenting challenges for Oakhurst. According to Bill Bennett, competition is tough, and margins are thin; with fuel prices rising rapidly, 2011 will be a difficult year.J. Hemmerdinger, “Maine in a Bottle: Oakhurst Dairy Homogenizes Its Marketing Message,” Portland (ME) Press Herald, January 9, 2011, accessed January 20, 2011, http://www.pressherald.com/business/maine-in-a-bottle_2011-01-09.html. Government-set milk prices had been less than the cost of milk production for a couple of years. Many farmers had to make ends meet by selling hay, crops, or livestock for beef and blamed producers, including Oakhurst, for low prices. While Bill Bennett reflected that the “gripes against Oakhurst aren’t fair…the company pays at least market rates and even pays incentives to farmers who keep clean operations and take extra steps to minimize livestock overcrowding and milk contamination.”J. Hemmerdinger, “Maine in a Bottle: Oakhurst Dairy Homogenizes Its Marketing Message,” Portland (ME) Press Herald, January 9, 2011, accessed January 20, 2011, http://www.pressherald.com/business/maine-in-a-bottle_2011-01-09.html.

Oakhurst believed that its energy reduction and other sustainability programs had been successful, having an impact on reducing its carbon footprint while improving overall company profits. But the company wanted to do more. Bill Bennett highlighted how “the biggest single impact of dairy on the environment is not the energy we use at the plant but methane gas, over 75 percent released from the cows,”Elaine Pofeldt, “Oakhurst Dairy,” Center for Small Business and the Environment, http://www.aboutcsbe.org/docs/oakhurstdairy.pdf. Bennett and his team were encouraging their suppliers to start using methane digesters that harvest the energy in cow manure, but none have been able to invest in the technology yet. Bennett was also investigating feed additives designed to improve cows’ digestion, noting that “doing the right thing environmentally is always the right thing for your bottom line.”Elaine Pofeldt, “Oakhurst Dairy,” Center for Small Business and the Environment, http://www.aboutcsbe.org/docs/oakhurstdairy.pdf.

Jer-Lindy—Case Study

Jer-Lindy Dairy

Jerry and Linda Jennissen’s 140-cow herd in Minnesota is industrious, pumping out around 1,100 gallons of milk per day. But that’s not the only thing they’re producing. The 3,500 gallons of manure Jennissen’s animals leave behind turns out to be an asset of comparable value when it is converted into power through an anaerobic digester.

The technology first came to the Jennissen’s farm through a grant from the Minnesota Project, a program that encourages sustainable and profitable farming. The project hoped to partner with a mid- to small-sized farm to find the technology to make a digester work financially. Digesters have proven effective on farms with more than 300 cows, but approximately 96 percent of Minnesota dairies have between 50 and 200 cows.

“Digester technology is evolving fairly rapidly, and it needs to,” Jerry Jennissen says. “We viewed it as an opportunity, and we believe that we can make it work.”

By partnering with a nearby processor to add whey to the mix, the Jennissens hope to double gas production.

The digester extracts methane gas from the manure and converts it into power, which is used to run a generator. The electricity is sold on a grid. The remaining solids are separated out and used as bedding, and remaining liquids are used for fertilizer. Jennissen believes it is only a matter of time before technology like this comes to farms of all sizes.

“Things are changing so rapidly. Our digester was the third one in the state of Minnesota,” Jennissen says. “There are five now, one year later. I know of several more that are currently operating or in the planning stages.”

Figure 10.13 Milk Bottles

In announcing plans to celebrate the company’s ninetieth year in business, Bill Bennett stated, “Our story is of one of growth, innovation, service and success. We have been able to remain family-owned and independent while competing against dairies significantly larger than we are because we have a strong brand identity and people know what we stand for and that they can count on us to deliver a high-quality product.” By striving to protect and enhance “the natural goodness of Maine” through its sustainability strategies and community practices, Oakhurst has enhanced its profitability and gained a competitive advantage, a competitive advantage built on creating customer value that competitors find difficult to match. Still Bill Bennett faced many challenges as he planned for the future. While Oakhurst’s opportunities and challenges with its upstream partners (milk suppliers or farmers) align with Oakhurst’s previous strategic commitment to sustainability, can Oakhurst make this happen in the future? What are the possible tradeoffs in doing this with Oakhurst’s suppliers and partners? Can Oakhurst continue to capitalize on its brand of promoting “the natural goodness of Maine” when milk prices are squeezing farmer profits and forcing some out of business?

Key Takeaways

  • Commitment to sustainability requires continuous innovation with constant attention to alignment of sustainability efforts with corporate values, strategy, and profitability.
  • Environmental initiatives often come with an up-front investment presenting internal hurdles that, when overcome, can be worth the effort and expense.
  • Investing in sustainable operations can help to make a business more efficient and profitable and can generate brand loyalty.

Exercises

  1. What challenges face Oakhurst in 2011 and beyond? How do Oakhurst’s efforts to reduce carbon emissions through operation changes help address the challenges?
  2. How can your college or university lower its operating costs through sustainability efforts? If your school or college does not know their carbon footprint, suggest the Clean Air–Cool Planet (CA–CP) webpage (http://www.cleanair-coolplanet.org/toolkit/inv-calculator.php) to an administrator and consider downloading their carbon footprint calculator.
  3. The Natural Resources Defense Council’s November 2007 Report (see http://www.nrdc.org/policy) stated, “Although there are some exceptions, in most cases, locally produced food proves the best choice for minimizing global warming and other pollutants. In fact, another study showed that when you combined all locally grown food, it still produced less carbon dioxide emissions in transport than any one imported product. The effects all this pollution can have on our health may be reflected in high rates of asthma and other respiratory symptoms, as well as increased school absence days for children.” How does Oakhurst’s sustainable business model help to support the Natural Resources Defense Council’s findings that buying local not only helps Maine farmers but also helps the environment?
  4. What can you do to reduce your own carbon emissions? Could this reduce your costs and help you save money?