Sustainability benefits small businesses in China

Smita C. Thomas

Operational efficiency, created by “greening” business
operations, can create direct economic benefits for businesses in China, where
energy costs, as opposed to fixed labor costs in the US, can be a company’s main

For example, in Beijing, commercial electricity is about
twice as expensive as the
average in the United States
. On the other hand, the hourly cost of labor
is about four times cheaper in Beijing according to minimum wage reports.

Becoming green is often associated with, and does include,
visible changes such as green materials and paints. But more importantly, it
involves evaluating the less-visible, energy-consuming operating such as the
water heating systems, ventilation, air conditioning, equipment and lighting
systems; the choices made in water-consumption; transportation of personnel and
delivery services; and minimizing the production of waste.  These back-of-the-house systems incur the
highest operating expenses and cause long-term environmental impacts. Understanding
that operational efficiency is the key to being green is gaining importance not
just in China, but worldwide.

China’s Three Star building standards first published in
2006, and most recently updated in 2013, closely resemble the United States’ LEED
(Leadership in Energy and Environmental Design) requirements but have always
incorporated operational efficiency as a requirement.

A small business sets
an example

Photo by Smita C. Thomas

Gung Ho! Pizza was
founded in Beijing in 2010 by New Zealand natives Jade Gray and John O’Loghlen.
GHP, which recently graduated from start-up to growth mode, has three retail
stores in Beijing and the first franchise store expected by the end of the

Gung Ho! Pizza, a small business in Beijing, is purposefully
going green.

Inspired by Yvon Chouinard, the founder of Patagonia, an
outdoor clothing and gear company and global leader in environmental responsibility,
Beijing’s Gung Ho! Pizza founders Jade Gray and John O’Loghlen set out to be
the “Patagonia of Pizza” when they crafted their business plan in 2009.

Committed to the three pillars of sustainability ­– people,
planet and profit – GHP was already cutting a path to sustainability when I was
hired as Sustainability Advisor in 2013. In addition to being active in the
community and supporting environmental nonprofits and local charity
organizations, they have non-discriminatory policies, promote from within,
provide maternity and paternity leave and allow employees to bring their kids
to work one day a week.

GHP was one of the first small-to-medium enterprises in China
to publish a report
based on the Global Reporting Initiative guidelines, which provide methods for
measuring sustainability-related effects and performance.

GHP uses recycled paper for its pizza boxes, packaging and
menus. GHP also held a competition to design a sustainable pizza box and is
exploring viable options for it.

Operational efficiency

The costs savings of operational efficiency simply add up.
With the changes at Gung Ho! Pizza, the owners have noticed a marked

  ·  By using
high-quality electric bicycles for deliveries and traditional bicycles for
short trips, the company saved more than 1800 RMB per bike per year.

   ·  In 2013, GHP
recycled 42 percent of their waste and sold it to aggregators in China for more
than 4,000 RMB.

   ·  GHP replaced
disposable paper towels, cups and utensils with washable ceramic and glassware,
saving nearly 27,000 RMB a year.

GHP’s decision to focus on a green approach while renovating
their retail stores was a logical next step. Commercial electricity at GHP’s
Sanlitun location in Beijing costs 1.2 RMB (about 20 cents) per kilowatt hour. In
contrast, the average cost of electricity to commercial customers in the US is
about 10 cents per kilowatt hour. The high variable cost of electricity in Beijing
provided a compelling case to invest in energy efficiency.

From an environmental standpoint, improvement in efficiency
reduces pollution. China’s air pollution, a dire problem on the eastern
seaboard, is largely caused by the mix of fuel sources used in the production
of electricity. The majority—70 percent—of China’s electricity is generated with coal. By
comparison, 40 percent of the United States’ electricity comes from coal. Only
4 percent of China’s electricity is created through natural gas, which burns
much cleaner, compared to nearly
40 percent in the US
, and hydroelectricity and nuclear energy play
relatively negligible roles in China.

Given that China is steadily increasing goods output, it is important
to consider energy intensity, which measures the amount of energy required for
each dollar of GDP. In 2011, China’s energy
intensity was
24,708 Btu per dollar of GDP, while in the US it was a third
of that at 7,328. Reducing energy intensity creates economic benefit by
maintaining output but reducing consumption.

“The most obvious benefit is where we were wasting resources
earlier. Laura (Laura Xiao, the in-house environmental manager) helped identify
potential areas for savings in utilities – energy, water, waste” Jade Gray,
co-owner of GHP, said after GHP measured the energy consumption of several
major pieces of equipment in their stores.

“We discovered that 20-30 percent of the power in one retail
store was being used by an extraction fan. We realized we didn’t need that on
all day but only during rush hour,” he said. “We cut that off, and saw savings
of thousands of RMBs. Then by blocking draft at our doors and windows, we saved
10-20 percent on heating costs.”

GHP installed switchable power outlets, and LED and
fluorescent lamps in the staff areas and replaced the biggest source of
electricity consumption – the electric pizza oven – with a gas-fired oven.

But the company didn’t stop there. A simple payback analysis
was performed for an electric versus a gas dishwasher. The initial cost of the
gas dishwasher was about twice as much as the electric option. However, the
energy cost per wash of the gas dishwasher proved to be much lower than that of
the electric dishwasher. Because of the high cost of electricity, the capital
cost of investment in gas over an electric dishwasher would be recovered in one
to three years, depending on usage.

Indirect benefits

“An indirect benefit has been employee retention. (The
employees) have really taken the green initiative to heart. It has become
everybody’s passion…as long as we are driving it,” Jade said. “We are saving
money on employee retention.” 

GHP has management training in energy efficiency and
performs weekly spot checks to ensure everyone is on board.

“Another big impact on P&L [profit and loss] would be
marketing impact. It was never our intention to use our green initiative as a
marketing tool; but our social programs generated PR,” Gray said. “We have
created a media profile that we wouldn’t normally be able to afford. We are
trying to spread the word about our business, so we welcome that attention. “

Gung Ho! Pizza has purposefully integrated sustainability
into its business and reaped tangible rewards not only in terms of
environmental benefits, but also economic returns, improved employee retention,
and public relations.

ABOUT THE AUTHOR  Smita Chandra Thomas is a sustainability consultant specializing in building
energy analytics. Thomas has a Master’s in Architectural Technology (Building
Science) from the University of California in the US and is a LEED Accredited
Professional (2002). She has been practicing since 1997 as a building energy
efficiency consultant and researcher. For commercial buildings in particular,
her past work at US and multi-national firms includes sustainability consulting
to design teams and owners of marquee high-rise commercial buildings in New
York City such as the Bank of America headquarters and the New York Times
headquarters, consulting to US electricity and gas companies in designing and
implementing energy-efficiency programs for commercial building types including
retail buildings, and techno-economic analyses for programs and policy design
for US State and Federal entities. Ms. Thomas is currently running her
independent consultant practice Energy Shrink ( in Washington DC.