A Glimpse into the Future of Retailer Sustainability

In our work helping retailers and retail suppliers embed sustainability into their business to build competitive advantage, CEOs ask us a lot of questions. These three may be the most common:

1. How serious are retailers about sustainability?
2. Will they hold suppliers accountable?  If so, when and how?
3. Where are retailers driving with sustainability?

The answer to the first question, “How serious are retailers about sustainability?” hasn’t changed for years, except to solidify.  Some retailers take sustainability more seriously than others, but on the whole retailers are getting smarter and tougher about sustainability as they realize it’s plain good business.  Suppliers often see variation in retailer commitment, but the long-term view verifies long-term commitment.   For example, this is what Walmart has been doing on sustainability for the past decade: 

Regarding the question of supplier Regarding the questions of supplier accountability, accountability, different retailers have different sustainability expectations for their vendors, but savvy suppliers are starting to realize that sustainability is inevitable and are taking steps to get ahead now. For one thing, retailers’ continual quest to squeeze inefficiencies out of their operations and their products creates a threat and an opportunity.  Those suppliers who proactively scan and improve their supply chains using sustainability as a tool will hold a competitive advantage over rivals who also get squeezed but have no strategy to find additional savings.  

Second, retailers are realizing that a well-managed company tends to be well-managed on all fronts, whereas a poorly-managed one carries likely unseen risks.  As one retail CEO frames it, suppliers who neglect or hide their poor sustainability performance are likely to be neglecting or hiding other bad things as well.  Expect retailers to shift over time away from suppliers with poor sustainability performance to those who embrace sustainability as an opportunity to learn, improve their business, and lead their sectors.

Third, seasoned observers of retailer behavior understand that today’s internal practice will become tomorrow’s supply chain expectation.  This is just good business in an era of transparency; as retailers pilot sustainability innovations to reduce risk, improve efficiency, and enhance quality and brand appeal, instead of keeping their successes secret a growing number are choosing to multiply the overall benefits (and minimize the overall risk) by cascading better practices through their supply chains. 

The third question about the future of sustainability at retail has several answers.  Greater transparency and supplier engagement are clear trends.  To identify others, watch where retailers invest collaborative energy.  Pre-competitive sustainability collaborations like The Sustainability Consortium (TSC) as well as those of industry groups like the Electronics Industry Citizenship Coalition, Dairy Management Inc. and the Sustainable Apparel Coalition are proving durable because they’re delivering real insights and real value to their member organizations.  The proliferation of these efforts implies that retailers see sustainability as a vital part of their future.  Suppliers who want to understand specific questions retailers will be asking would be wise to pay attention.

Another indicator of future direction is what retailers themselves say.  After surveying dozens of major retailers on their sustainability actions and plans, The Retail Industry Leaders Association (RILA) released its 2013 Sustainability Report. Though self-reporting always carries some risk of distortion, several consistent trends appeared.  For example, the report found growth in both the size of sustainability teams within retailers and the scope of sustainability issues retailers are addressing.  This implies that many retailers are graduating from the pilot phase of sustainability and institutionalizing the function as a driver of business value.

To support ongoing performance improvement, retailers are clarifying and strengthening their sustainability metrics. Most companies engaged in sustainability track basic indicators of efficiency like energy and material consumption, as well as waste generated.  But the leaders are not stopping there.  RILA identifies a growing number of retailers who plan to begin to measure water usage, renewable energy generation, and chemicals of concern over the next two years.

The research also found that sustainability is starting to spill over from retailers’ direct operations into their supply chains.  “Retailers are realizing that their in-store impacts are small compared to the impact of their supply chains,” notes RILA VP of Sustainability Adam Siegel, “So they’re planning to engage their supply chains through many mechanisms in the coming years.  Transparency—including disclosure of the social and environmental impacts of product supply chains—is growing.  Many already focus on transportation, chemicals of concern, and packaging; in the future, companies will be tracking all aspects of the product life cycle from design through disposal.”

For retailers and suppliers alike, the messages are clear:

1. Sustainability delivers business value.
2. Your competitors are doing it, or soon will be. 
3. Today is a great day to start, because the sooner you start, the faster you’ll reap benefits and the less ground you’ll have to make up. Tomorrow may be too late.

Why Retailers Care About Sustainability

Sustainability is often confused with “going green” but, while environmental improvement is part of the picture, sustainability is bigger than that. It’s a strategy for individuals and organizations to thrive for the long term.  Operating sustainably ensures an efficient, resilient and innovative organization that not only does less harm to people and the environment, but also does more good and makes a profit in the process. Because as many have pointed out, a business that loses money won’t be around to do anything very long.

Not sure what this means for your business, or what to do about it?  Imagine retail sustainability as a train. Retailers are driving forward on sustainability whether suppliers like it or not.  That leaves suppliers with just a few options: (1) stand in the track and try to stop it, (2) stand aside wait while it passes by, or (3) head to the station to meet it at the next stop.  The challenge for those who choose a wait & see strategy is that the train is picking up steam every year, and those who delay action too long face a real danger of never being able to catch up.

We appreciate that journey has been long, winding and rocky. In our daily work with retail suppliers, we’ve seen some of their largest customers do unpredictable things—they start talking about sustainability, then stop. They change drivers. They change course. They promise to reward suppliers who get with the program, then seem to forget that commitment when the time comes to deliver rewards.  This has caused plenty of uncertainty and frustration.

That Noise in the Background Just Got Relevant to Me

We have worked on both sides of the retailer-supplier divide. Our principals helped a major global retailer build its sustainability program, and we now help retail suppliers manage and anticipate these emerging sustainability expectations. Retailers are not relenting in their commitment to sustainability; if anything, retail leaders are realizing that the transparency, cost savings and collaborative innovation potential that sustainability delivers are as valuable in weak economic times as in strong. A close look at one retailer—Walmart—reveals that what appear to be short-term variations in commitment actually conceal a clear long-term trend.

Sustainability at Retail: Passing Fad or New Reality?

Those still dubious about Walmart’s commitment to sustainability may have missed this news: in late 2012, the company announced to the world that starting in early 2013, Walmart & Sam’s Club merchandise buyers would have environmental and social sustainability built into their business objectives and their performance evaluations.  

What does this mean for retail suppliers? It means retail buyers are going to expect new kinds of conversations and collaborations with suppliers who want to remain partners of choice. Many suppliers have already received surveys on their sustainability performance, and now need to act.

Why does building sustainability into business seem so difficult?  And what can be done?

The Bad News: The global supply chain is a complicated system.  Just defining, let alone delivering, “more sustainable products”—as several major retailers have pledged to do—is a challenge unrivaled in its scope, scale and audacity.  Many companies still don’t know exactly where the factories producing their goods are located, let alone whether the raw materials are sourced in a way that’s friendly to people and the environment.

The Good News:  Some of the best minds in the world have joined together in history-making efforts to find answers.  For example, The Sustainability Consortium has embarked on a decades-long journey to identify “hotspots”—places in the supply chain where hidden problems can lurk—and to create concrete recommendations for action that retailers and suppliers can take to improve sustainability while also reducing risk, improving cost and enhancing product quality.  Those insights are available directly to consortium members, and also form the foundation of supplier evaluation (and collaboration) efforts of member companies like Walmart.

More Good News:  These are not the only ways more sustainable practices can improve your business. Through years of research and work helping companies apply sustainability to improve their business, we’ve evolved this Sustainability Opportunity Map to highlight how you can use sustainability as both a lens to find new opportunities in your business and a tool to improve your business performance.

Sustainability Opportunity Map

7 Ways Savvy Companies Apply Sustainability to Improve Business 

1.  Risk Management

Unnecessary financial, legal and public relations risks—including raw material shortages, production interruptions, brand damage, and increased costs from compliance, litigation, insurance and financing—can arise from poor understanding or sloppy management of sustainability-related issues. On the other hand, high awareness and attention to sustainability can eliminate or mitigate these risks.

For example, resource scarcity can raise costs and cause conflicts which increase risk for both ongoing operations and long-term brands. To mitigate water-related risks in certain communities of operation, PepsiCo and Coca-Cola have both reduced their water footprints globally and engage with local communities in water-stressed areas to improve water quality and availability.

2.  Leadership Vision

While rank-and-file employees typically succeed by mastering a specialized skill and maintaining a laser focus on achieving immediate results, strategic leadership requires a different skill set and a broader, more long-term focus. Leaders must not only manage their own productivity, but also work for the good of the larger organization in both the short- and long-term. Business sustainability requires the same kind of strategic approach—i.e. seeing, planning and acting beyond what we call the me, here & now.

Sustainability leadership recognizes that no company is an island; every company is embedded in an environmental system and a community, on which its license to exist (and grow) ultimately depends. Effective strategic leaders also consider impacts beyond their company’s four walls—often including communities of operation and the supply chain—because these can impact the business. They also stay ahead of both customers and competitors by considering future impacts and opportunities, with an attention to long-term stewardship & growth of the business, and their legacy. Through sustainability, leaders can leave not only their company but also the world better off than when they found it.

More and more mainstream business leaders are weaving sustainability into their strategic visions for their companies. For example, Unilever CEO Paul Polman frames it simply: “Business has to decide what role it wants to play. Does it sit on the sidelines [or] start addressing these issues?  In Unilever we believe that business must be part of the solution … We believe that in [the] future this will become the only acceptable model of business. If people feel that the system … does not work for them, they will rebel against it. And if we continue to consume key inputs like water, food, land and energy without thought as to their long-term sustainability, then none of us will prosper.”[2]

3.  Employee Relationships

Employees in the 21^st Century are increasingly interested in working for companies whose values align with their own—measuring success not only in terms of the bottom line, but also in the positive impact the organization makes on communities and the environment. As Bob Willard[3] and others have convincingly demonstrated, employees who are invited to apply sustainability at work are happier, more productive, less likely to quit and more likely to become ambassadors for the company.

Savvy companies also recognize that sustainability is an indicator of high leadership potential.  Employees who care about sustainability are also more likely to who care about sustainability also tend to think strategically, assume responsibility beyond themselves, and collaborate and innovate to drive outcomes that benefit people, the planet, and the bottom line.

As Ingersoll Rand and others have discovered, employees taught to channel and focus sustainability can deliver business benefit. In a recent talent development program, hundreds of Ingersoll Rand employees around the world worked through the process of creating a culture of sustainability. As a result, employee engagement scores improved and dozens of cost saving and quality improvement projects were launched on two continents.

4.  Process and Resource Efficiency

As many companies have already learned, applying sustainability to manufacturing, packaging & distribution processes can reduce costs by driving resource and process efficiency. Retailers and their suppliers have saved millions of dollars through energy efficiency, waste reduction, and other initiatives, with many millions more remaining to be captured by those willing to look.  As one executive remarked to us recently, “We thought we were pretty good.  We had no idea how much potential there was until we really started looking.” Another executive echoed, “This isn’t even low-hanging fruit.  This is fruit lying on the ground.”

In one example of hundreds in the retail supplier universe, Procter & Gamble has established a team to reduce waste at manufacturing plants and distribution centers. The team creates value from waste by finding external partners who can turn waste and non-performing inventory into something useful. As P&G notes, “In [one] year alone, this small group of garbage gurus has diverted tens of thousands of tons from landfills, and has delivered tens of millions of dollars in cost recovery to the company by selling or donating materials to others who can reuse the materials.”[4]

5.  Enhanced Value for Customers & Consumers

Approaching product design from a sustainability perspective can improve the quality of products and services, creating additional value for customers, consumers, and the business.  This enhanced quality can take many forms—e.g. fresher food, products which feel more authentic to consumers, inherently safer chemicals, products which require less energy and other inputs to operate, more reliable and durable products, less wasteful packaging and components, and so on.  The added benefits this delivers to consumers can be especially valuable in categories driving toward commodification.

To determine whether sustainability would benefit your market positioning, ask yourself, “Are the customers we want tomorrow likely to care more or less about sustainability than the customers we have today?” Many business leaders have discovered sustainability to be an important differentiator to appeal to customers (and consumers) of the future, not just those of the past.

For example, Nike, Puma and Timberland—whose brands are all built to some degree on the attribute of innovation—have all recognized the value of being seen as forward-thinking and proactive on sustainability as a key element of product innovation.  Nike explains that sustainability is “not just about getting better at what we do – addressing impacts throughout our supply chain – it’s about striving for the best, creating value for the business and innovating for a better world.”[5] Puma says, “We are committed to working in ways that contribute to the world … by staying true to the values of being Fair, Honest, Positive and Creative in decisions made and actions taken.”[6]  And Timberland calls out its “constant pursuit of both bottom-line business value and social justice. Our commitment to sustainability [is rooted in our] core belief that business can create positive impact in the world.”[7]

6.  Supply Chain  Transparency & Collaboration

Creating more transparent, ethical and sustainable supply chains can not only reduce procurement costs but also improve quality, consistency and reliability of supply.  Because knowledge and power are so widely distributed in many product value chains, this is one of the most challenging aspects of business sustainability. Starting early can deliver competitive advantage that’s hard to duplicate, however.

For example, Safeway has analyzed its seafood sourcing practices in an effort to improve the quality, reliability and consumer appeal of its products, while creating industry-wide norms which improve standards for the entire market. To achieve this, the company collaborated with outside experts to assess the company’s seafood supply chain and establish priorities for vendors and Safeway’s own operations. Safeway now communicates regularly with all of its suppliers to discuss its commitment to sustainability, share recommendations to improve production practices, and explore ways to establish traceability for all products.[8]

7.  External Stakeholder Relationships

A powerful but often misunderstood mechanism to add value to business is through engagement with key external stakeholders (i.e. not employees or shareholders) on sustainability issues.  We divide these external stakeholders into three large buckets: authorizers, opinion shapers, and advisors.

Authorizers are typically government bodies with the power to enable, block and set the conditions and costs of business operation.  This group includes international and national regulatory agencies, local zoning authorities, and everything in between. 

Opinion shapers influence the context in which business operates, less formally than government but powerfully nevertheless.  They include members of the traditional media, bloggers and other commentators, and activist organizations like Greenpeace and Not For Sale, which alter the landscape by raising and focusing public consciousness on public interest issues like environmental destruction or human trafficking.

Advisors are experts outside the company who can help improve understanding of critical issues, help develop strategy, and serve as an external sensing mechanism for issues that may become future flashpoints, as well as opportunities to build competitive advantage.  They include researchers and other subject matter experts, who can often be found in local universities, consulting groups, or non-government organizations which collaborate with business, like the World Wildlife Fund or Social Accountability International.

Engaging authorizers and opinion shapers is not a new concept in the business world; many companies have government relations and public relations professionals dedicated to the purpose.  However, few companies appreciate the latent untapped value of building a collaborative relationship with advisors. In just one example among many, companies working with Environmental Defense Fund have uncovered hundreds of millions of dollars of savings[9] while improving their sustainability performance.

Over the coming months, we will discuss each of these value creation strategies in greater detail. In the meantime, to learn more about how to meet retailers’ rising expectations and apply sustainability in your business contact Cleargreen Advisors: info@cleargreenadvisors.com.

Fran Benjamin and Adam Siegel contributed to the research for this article as seen in Retailing Today 

http://dig.retailingtoday.com/2013-spring-wsn/

1 Recent news include the Sustainability Consortium, Walmart’s Sustainability Index, the Sustainable Apparel Coalition and other major industry initiatives.

2 http://www.unilever.com/sustainable-living/ourapproach/messageceo/

3 http://sustainabilityadvantage.com/

4 http://www.pg.com/en_US/sustainability/environmental_sustainability/ operations_suppliers/waste_reuse.shtml

5 http://nikeinc.com/pages/responsibility

6 http://about.puma.com/sustainability

7 http://responsibility.timberland.com/executive-commitment

8 http://www.prnewswire.com/news-releases/safeway-named-most-sustainable-seafood-grocer-by-greenpeace-usa-for-second-consecutive-year-150189635.html

9 http://business.edf.org/projects/green-returns 

The 5th floor of New York’s Museum of Modern Art is relatively unpopular with small children but one toddler dragged there on a recent visit made the best of it.  Supercharged with the kind of energy that would make him a welcome seatmate for someone else on an airplane, the boy howled and squirmed until his parents unleashed him to ricochet from stroller to sofa to various displays, with occasional pauses stare at a museum guard or a piece of art. 

The child’s hummingbird path triggered various thoughts ranging from, “It’s great to bring children in touch with modern art” to “Curious that he seems intrigued by everything but the artwork” to “Hmm … I wonder how wise it is to let a 3-year-old frolic in a room of unprotected masterpieces.”

Finally one painting—part of a Monet waterlily triptych—grabbed the child’s imagination.  He scrambled through the forest of legs, freezing within a few paces of the work to scan the vast and colorful canvas. 

“Impressive,” I thought, “Monet speaks to young and old alike.” 

Then the boy took a slow step forward, drawn perhaps by the mystery of intertwined water and reflected sky.  Ordinarily guards bark at anyone straying too close but by his stature and his silence, this boy was concealed among the throngs of visitors.  Closer and closer he approached, until he was 8 feet from the paintings.  Then 6.  He reached into his pocket.  Another step.  He was 4 feet away.

Suddenly, out of nowhere, he held a red marker—an arm’s length from the canvas and moving closer.  I imagined he was thinking, “This is nice, but it could use a bit more color in that spot there …”

I moved by instinct to restrain the boy but his father moved faster, swooping in and scooping up his child, pausing for only a moment as he spotted the pen in the boy’s hand.  The boy yelped as his father snatched the marker and tucked it out of sight. And in another flurry they were gone.

Anyone with children might now be wondering, “What was this parent thinking?”  Valid question.  But a more illuminating question might be, “What was the child thinking?”

One thing seemed clear: the boy sensed the presence of artistic creation and felt drawn to participate.  This creative impulse might be celebrated in another setting but alas, the world is a complicated place and context matters. Making chalk sidewalk drawings is different from taking crayons to grandma’s wallpaper.  And marking up a Monet is another level of artistic expression altogether.

Are We All a Bit Like the Child at MoMA?

At our best, humans are curious, adventurous, and driven to leave our creative mark on the world.  As a business professional I recognize that in a sense, we’re all “drawing” somewhere, anytime we build a house or invent a facial cream to counter the ravages of nature.  All our artifice—skyscrapers and sewer lines, pharmaceuticals and floor cleaners—is in continual tension with nature’s tendency to break down and recycle every bit of matter (and a fair amount of energy) on the planet.  To a great degree our civilization, by definition, stands against the flow of nature in order to endure.

The problem is unintended consequences—pollution, ecosystem destruction, climate destabilization, the slow poisoning of other creatures and our own children. It’s not that we’re all looking to cause trouble.  I don’t know many chemists who go to work thinking, “I want to invent a compound that causes cancer or changes animals from male to female once it gets loose in the environment” or mothers who stroll through supermarkets dreaming, “I’d like to buy a product that gives my children premature breasts and smaller genitals.”  Yet that’s what we’re doing.

Why? Because several embedded values undergird the structure of our economy, and color every decision made in it. We ourselves invented these values—sometimes centuries ago—but since they’ve formed the cultural backdrop we call “reality” for as long as anyone can remember, we don’t often imagine we could or should reexamine them. Three assumptions in particular are bright and alluring on the surface, but cast a dark and deadly shadow.

1. Faster is Better

The short-term thinking and time pressures built into our economic system help us innovate rapidly, but scientific & industrial innovations are advancing faster than our ability to fully grasp their impacts.  In our haste, we’re creating outcomes which we may spend generations understanding, and which our grandchildren may spend their lifetimes undoing. Sometimes we accelerate and “power through” a challenge just when we should slow down and think it over more carefully.

2. Novelty is Good

People—Americans especially—love shiny new things.  This love is matched only by an outsized fear of stifling “innovation & progress.”  It is perhaps a uniquely American habit to link “innovation & progress” so frequently and fervently that the two are often spoken in one breath, as if one is inseparable from the other, and indeed as if one is equivalent to the other. 

But our relentless drive for innovation is like a prospector digging haphazardly for gold. Sometimes there’s gold, but we could also uncover poisonous radon or explosive deposits of methane.  Some of our new creations are safe, some are not, and few of us really know which are which because most of our creations are untested.  In the name of “innovation & progress,” we are indeed innovating, but often the result is the opposite of progress. 

3. Cleverness is More Important than Wisdom

Our base of knowledge is skewed.  We excel at the craft of making new things, but haven’t mastered the art of understanding the complex, unseen, long-term impacts. We have an abundance of cleverness but a scarcity of wisdom.  Luckily, the gap may be narrowing.

For example, where once we held a simple faith in “better living through chemistry,” we’re now starting to see the combined and cumulative impacts of the 80,000 – 100,000 synthetic chemicals we use to grow our food, manufacture our products, and maintain ourselves, the spaces we inhabit, and the technologies on which we depend.  We’re slowly learning how little we know about these chemicals and how they combine in the environment over the long term.  Endocrine disruption research is uncovering unintentional changes in nature, including extra limbs and gender-bending among amphibians, yet precisely what we’re doing to ourselves is largely unknown.

The bottom line: we’re using intricate human and environmental systems as a sandbox but we’re only beginning to understand it all. Carbon balances.  Climate patterns.  Nutrient flows.  Genetic codes.  Ecosystem structures and functions.  Only in the last century did scientists began digging deep to explore the delicate structures which support (or fail to support) life.  Our life.  As with archaeology, appreciating the complexity will take decades.  But human induced changes have already been revealed.

Can We Do Better? 

The child at MoMA felt compelled to fulfill his creative destiny—a noble impulse within the proper constraints—but because he did not understand the larger context, he knew not what he did.  As is often true with children, he had trouble seeing beyond the me, here and now, so he could not appreciate the history, complexity and value embedded in the Artist’s creation. 

As trusted sustainability advisors, we help business leaders work more sustainably—i.e. in a way that would make their grandchildren proud, and grateful.  All great leaders eventually realize that this is ultimately the only long-term goal worth striving for, and like all true leadership it also requires looking beyond the me, here and now. 

The big question now:  Must we accept without question the lengthening shadows cast by the monuments of human progress, or can we pull ourselves together to build a future that we would recognize and want to leave for our grandchildren?  Will we be trapped by the assumption that because “this is the way things have always been” then “this is the way things must always be,” or will we recognize that what human minds have made, human minds can remake?  

We have proven ourselves enormously clever.   Can we also be wise?

This publication brings together a significant body of work on Sustainable Materials Management (SMM) that has been developed in recent years by the OECD’s Working Party on Resource Productivity and Waste and its predecessor, the Working Group on Waste Prevention and Recycling. The publication is based on reports developed by a number of authors:

Specifically, Chapter 1  reports of policy principles for SMM  drawn from an OECD report with the same title that was prepared by Dr. Lauren Heine (Lauren Heine Group, LLC, Bellingham, WA, US) and Mr. Marc Major (Cleargreen Advisors, Los Angeles, CA, US).

http://www.greenbiz.com/blog/2012/10/29/can-suppliers-meet-retailers-rising-sustainability-expectations

In Part 1 of this two-part series, Marc Major provided an overview of retailers’ efforts to embrace sustainability. This is Part 2.

As retailers lay out their sustainability expectations, supplier reactions vary. We’ve seen the full range of emotions famously described by Elizabeth Kubler-Ross’ five stages of grief — from denial and anger through bargaining and depression and finally to acceptance of the inevitable. In our experience, nimble and adaptable companies move through these stages relatively quickly, and the best transcend a negative mindset altogether to embrace the upside of sustainability.

This pattern does not surprise John Fojut. Vice President of Corporate Sustainability at Kohl’s Corporation, Fojut sees a clear segmentation among suppliers and their approach to sustainability. “Our vendors fall into 3 buckets. They either consider [sustainability] part of their core values, they see it as something that gives them competitive advantage, or they just see it as something they have to comply with.”

A positive attitude — rooted in the realization that improved environmental and social performance can help make any business smarter, stronger, and more profitable — is an excellent foundation for future growth. Why? Because long-term viability depends on continuous improvement and innovation, which includes enhanced sustainability.

Fojut observes that vendors who adopt a positive, proactive mindset are well-rewarded. “Instead of having to react and adapt to someone else’s priorities — like when some companies got surprised by the rising tide of consumer concern about social responsibility — [we’re all discovering it’s better to] get ahead of the curve and come together to agree on what’s important and what progress we want to drive.”

Overall, he reports, Kohl’s suppliers are making progress. “We’ve been talking about this for 5 years and we see some good movement. Suppliers are shifting from thinking it’s all about compliance to seeing that it can add value to their businesses.” Perhaps most significantly, suppliers are also starting to cascade sustainability upstream into the rest of the supply chain. “We have a sizeable group now asking their own suppliers sustainability questions. This is where we wanted it to go.”

Next page: Target takes aim at suppliers

Target Corporation is also holding itself and its suppliers accountable, according to Scott Lercel, Director of Social Responsibility & Sustainability. The company applies “a very robust vendor scorecard that provides our sourcing leadership with talking points with the vendors as they meet annually to review their performance, speak to their strengths and discuss how to elevate opportunities,” Lercel explains. “Our vendors take the scorecard very seriously.” Target currently measures vendors against their peers in the industry on metrics like quality, on-time shipping, and social compliance. Beginning next year the retailer will start rating vendors and factories on how they answered the scorecard’s sustainability questions.

Walmart is also working to engage suppliers, both through the company’s Sustainable Value Networks, which bring together experts for strategic planning purposes, and through the retailer’s new Live Better supplier scorecard. This scorecard, designed to measure supplier sustainability performance and let Walmart and Sam’s Club buyers integrate it into buying decisions, is something Walmart has been talking about since the 2009 announcement of a Sustainability Index and the launch of a Supplier Sustainability Assessment — a set of 15 simple sustainability questions Walmart sent to all suppliers.

Many suppliers who answered the 15 questions and heard little back from Walmart interpreted the non-response as a sign that the effort had died or been shelved, but in reality the public silence merely marked a prolonged gestation period. Knowing they couldn’t hold buyers and suppliers accountable until they had decent metrics, Walmart dived into deep development work with theSustainability Consortium (TSC) to create something that had never been done before: create a robust system to measure the sustainability of hundreds of key products across the store.

Doubters of Walmart’s commitment to sustainability would be wise to note the retailer’s latest Sustainability Milestone Meeting on September 13 – in which SVP of Sustainability Andrea Thomas pledged, “Both at Walmart and at Sam’s Club we’re integrating the Index [and scorecard] into major product categories this year, continuing on next year.” Shawn Baldwin, a SVP of merchandising at Sam’s Club, describes his enthusiasm for the new Live Better scorecard as a way to facilitate merchant-supplier communication and “get to the heart of the issue quicker.” He also pointed out a fact that no supplier should miss: “What we measure at Walmart and Sam’s gets done … what we recognize and incent for becomes part of our culture … and … starting the next fiscal year, every single merchant at Sam’s will have a component for sustainability on their performance review.

Next page: Act now, or wait and see?

Despite mounting evidence that commitment to sustainability is deepening and accelerating in the retail world, many suppliers have been slow to shift out of neutral gear. Some adopted “wait-and-see” holding patterns while the dust settled, reasoning that “once our customers sort out all these requests, initiatives and standards, then we’ll start moving.” Others made no secret of their plans to do as little as possible, because they assumed sustainability would fade in importance. The effective logic of this group was, “This is just another fad; retailers won’t care about this next year” and, “We get a different buyer every few years; the next one probably won’t care about this.”

If you are a retail supplier, a simple test will reveal whether the wait-and-see approach is right for you. We pose this question to all our clients who are on the fence about how seriously they should commit to sustainability: “Are you willing to bet the future of your business on the chance that retailers will suddenly stop caring about sustainability?”

To assess the likelihood that retailers will stop caring, we ask these three simple questions:

• Is the customer of tomorrow likely to care more or care less about sustainability than the customer of today?
• ·Are product contents and manufacturing locations likely to be more visible or less visible to retailers and the public 10 years from now?
• Are costs of essential inputs like energy, clean water, and raw materials likely to increase or decrease for the foreseeable future?

If you’re a wait-and-see company, your future viability may depend on a perfect storm of unlikely events—that retail buyers and the consumers to whom they respond will suddenly stop learning and caring about resource costs, the health of people and the planet, and the future of their children. We urge you to ask just one more question: Is that a risk you’re willing to take?

http://www.sustainablebrands.com/news_and_views/supplychain/leveraging-supply-chains-impactful-ghg-reductions

Mainstream media outlets are focusing on other things for the moment and regulatory momentum ebbs and flows, but greenhouse gas (GHG) emissions are still important in the long term, and remain high among corporate sustainability priorities.

As efforts to account for and reduce corporate GHG emissions have broadened over the last decade, companies have increased the financial scrutiny, rigor, and justification of these efforts — just like they would for any other investment. While some companies are still content to purchase carbon offsets or swap out a few light bulbs, those with more sophisticated GHG-management systems now use increasingly advanced methods of evaluating reduction opportunities. These companies don’t just want incremental reductions, they want smart reductions that improve their business while delivering GHG savings at the lowest cost.

At the same time, stakeholders increasingly expect companies to justify reduction projects and demonstrate their worthiness. In response, our clients are increasingly taking this more nuanced approach to the identification of worthwhile GHG reductions. This push for quality and depth has led many of our clients to looking beyond their four walls and into their supply chains for high-quality, low total cost improvement opportunities.

The still relatively new GHG Protocol Scope 3 Standard gives companies a framework to look beyond their direct operations and into the supply chain. This life cycle perspective acknowledges that direct manufacturing is not the only contributor to the total GHG emissions associated with bringing a product or service to market. Material sourcing, upstream processing, transport, consumer use, and end-of-life impacts also play a key role. This perspective resonates with forward-thinking companies because it’s a more holistic, long-term way to think about things. It represents the reality of doing business in a complex globalized economy. Companies that use this more comprehensive approach realize that anywhere from 75-95% of the GHG emissions associated with their products or services typically come from Scope 3 sources — i.e. those outside their four walls. In most industries, the common but outdated approach of managing only Scope 1 and 2 (S 1&2) emissions gets at only a sliver of the emissions associated with bringing a product to market — not a very good lever for companies looking to drive substantial GHG reductions and to be a catalyst for wider systemic change emanating beyond their immediate circumstances.

The practice of accounting for and addressing only S 1&2 emissions made sense when GHG management was a fledgling field. At that time, information gaps, lack of institutional capacity, undeveloped accounting tools, and amorphous  reporting standards made supply chain GHG management impractical if not downright impossible. That changed with the release of the GHG Protocol Scope 3 Standard and smart companies are adapting quickly, in anticipation of an increasingly GHG-constrained future. These companies understand that the question is not whether more expansive GHG accounting and mitigation will be required, but when.

Case Study: High-Impact Reductions Through Paper Sourcing at Macmillan

We helped Macmillan, one of the very early adopters of this broader lifecycle perspective to GHG management, apply this approach to identify and tackle its most substantial impacts. Bill Barry, head of Macmillan’s sustainability initiatives, wanted to ensure he was driving reductions for maximum impact so we worked with him to quantify life cycle GHG emissions associated with Macmillan’s books rather than artificially limiting our analysis to Macmillan’s internal emissions. As expected, purchased paper was by far the largest emissions generator in the system. In response to this finding, Bill and his team worked with both existing and new (via an RFP process) suppliers to re-evaluate sourcing standards, in some cases transforming longstanding business practices to better complement Macmillan’s sustainability criteria.

In Bill’s words, “Our approach was to disassemble the processes of an integrated paper mill and then rank the most volatile drivers of harvest, production, and transport in terms of a mill’s S 1&2 emissions together with other factors such as sustainable forestry practices. Not surprisingly — given the intense energy demands of paper production — those mills generating the highest percentage of their energy requirements through renewable sources had a distinct advantage. Surprisingly, even the use of recycled fiber did not offset this advantage; in one case, a 100% recycled sheet delivered to our printer had S 1&2 emissions that were 14 times that of a 100% virgin fiber sheet of the same specifications.”

The results of Macmillan’s paper sourcing efforts are impressive: The company decreased the emissions profile of its total supply chain by 20%. Put another way, the emissions reductions associated with this paper sourcing optimization are more than 150% of Macmillan’s direct S 1&2 emissions. Reductions of this magnitude would have been impossible without leveraging the high reduction potential opportunities in the supply chain. Simply put, Macmillan would not have been able to meet the ambitious sustainability goals it set for itself without pursuing supply chain emissions reductions.

Bill noted that Macmillan’s CEO, John Sargent, who drives the company’s commitment to sustainability, quickly and intuitively gravitated to the idea that driving reductions throughout the supply chain is the most impactful way to reduce Macmillan’s emissions. “The books we publish are not disposable consumer goods, but rather the medium through which the world of ideas and compelling stories resonate with readers and make a monumental contribution to society. It would be unseemly to curate such publishing assets and not be sensitive stewards of the natural resources that allow for their diffusion. From an emissions perspective, ‘it’s all about the paper.’ While we have many sustainability initiatives underway such as our recent migration to an all-hybrid vehicle fleet, the impact of strictly internal efforts is far less dramatic than what we have accomplished through our direct paper purchasing project. Impacting areas where we have influence can have more dramatic results than where we have direct control.”

It is certainly easier — and simpler — to focus on internal GHG-emissions reductions than to look into the supply chain for higher leverage opportunities that require working hand-in-hand with suppliers and customers. Internal emission reductions are familiar, tangible and easy to control. But while they are a good starting point for companies that are just beginning to tackle GHG-emissions reductions, they ultimately offer a very limited view — one that does not represent the full picture of the emissions associated with the sourcing, production, distribution and use of products and services. Supply chain emissions are much more complex, involving multiple stakeholders, jurisdictions, information sources, and data formats. But in this complexity lies real opportunity for those who pursue this approach. Companies that have the imagination, stamina, leadership and long-term perspective to tackle this challenge open themselves up to reduction innovations that dwarf what can be achieved through solely internal measures. 

Is sustainability here to stay? What retailers think

Retail suppliers are hearing a lot about sustainability lately. Recent news include theSustainability Consortium, Walmart’s Sustainability Index, the Sustainable Apparel Coalition and other major industry initiatives. But given a history of industry plans and programs which proved to be more trendy than durable, suppliers might be forgiven for wondering, “Is this just another fad, or something we should take seriously?” We found answers at three large U.S. retailers.

When determining whether the tide of sustainability is rising or falling, it’s tempting to look at these short-term variations for evidence because what’s recent is easily recalled and always seems more real. However, just as measuring the tide at 6 a.m. gives a very different reading than measuring it at noon, short-term swings can be misleading. The greatest danger for business leaders whose long-term viability depends on predicting the future (which is to say, almost all business leaders) is that short-term variations can mask clear long-term trends—like the slow but inexorable rise in sustainability awareness, along with interest and action among governments, consumers and retailers.

What’s driving this? Three major trends are converging to shape what many have described as a “new normal” for business. Escalating resource scarcity generates new business risks and raises costs. Increased transparency makes good things easier to share, but bad things (like toxic products or unsustainable manufacturing practices) are harder to hide. And growing consumer sensitivity to the sustainability impacts of products they buy is raising expectations for “good company behavior” and infusing a new sense of responsibility into buying behavior in general.

Business in the 21st century is changing, and strategies which worked to create wealth in the past will not necessarily work in the future.

Many leading retailers are awakening to this emerging reality and realizing that, in the words of Scott Lercel, Director of Social Responsibility & Sustainability at Target Corporation, “Sustainability is good for business … All major retailers seem to be looking at the sustainability space and how to integrate it into their current business model.” Why? One reason is that “driving operational efficiencies within your supply chain makes you more competitive and reduces operating costs.”

Moving Retailers to Collaborate

These leaders are not acting in isolation; the massive scale of the challenge has moved several retailers to collaborate in unprecedented ways. For the past few years, such unlikely bedfellows as Target, Walmart, Kohl’s, JC Penney, Nordstrom and Safeway have built uncommon partnerships like the Sustainability Consortium, the Sustainable Apparel Coalition and collaborations to get on the same page on sustainability. The result is what one participant (Walmart) describes as “a new retail standard for the 21st century.”

This promises major benefits not only to consumers—through more sustainable and ultimately affordable products—but also to suppliers—through reduced redundancy, contradiction, waste and frustration. Historically, suppliers working hard to comply with the responsible sourcing expectations of multiple retailers have faced what can most politely be described as a morass of different definitions, values and compliance mechanisms — all of which have caused audit fatigue and raised costs for suppliers, retailers and ultimately consumers. “Doing it consistently across the industry,” Lercel said, “can drive efficiencies and if we’re all asking the same thing across our industry we can drive change faster.”

Image of shopping cart by Nata-Lia via Shutterstock

http://www.greenbiz.com/blog/2012/10/08/sustainability-here-stay-what-retailers-think

 Why?

The answer varies. Some employee engagement efforts simply have poorly defined objectives and targets. In other cases employees perceive these programs as ineffective because they generate guilt without solutions, or address small issues while ignoring more substantial challenges. In the worst examples, employees see these programs as designed only to improve the company image or squeeze more production out of workers. Programs fitting any of these profiles seldom build sufficient buy-in or momentum to endure over time.

Part of the challenge to designing an effective employee engagement program is that the very word sustainability does not resonate with everyone. Many misunderstand it or find it abstract and removed from their everyday concerns and experience. To be effective, employee engagement around sustainability must be comprehensible and relevant to employees’ daily reality—it must be presented in a way that they can relate to their personal values, their families, their workplaces, and their broader personal and professional goals.

Companies often mistake prioritizing an initiative for getting employees deeply engaged. Effective sustainability engagement must connect to the heartbeat of the company which means it must connect to the values and priorities in the hearts of its employees. In the employee engagement trainings we run, we first ask employees to list the five most important things in their lives. The top three typically touch on family and friends, God, and some variation of financial security.

Making sustainability relevant and accessible means finding a hook that will resonate with each employee’s individual priorities. For some, it may mean, “my job is here next year so my family can be healthy and happy.” For others, “making products in a way that does more good and less harm.” And for those with children or an acute sense of their own legacy, it may mean “making decisions today that will make our grandchildren grateful—and proud.” There’s no single right answer.

And why is it so important to give people the flexibility to make it personal? Because “I care about this…and therefore I will take action” is a much easier step than “that’s an abstract idea that’s very far from what matters in my life…and therefore I will take action.” Personal connections and perceived responsibility drive ownership. Lukewarm affinity to an abstract idea does not.

One multinational client of ours wanted to engage employees on sustainability and had an idea where to start. Aluminum is a major raw material in their manufacturing, yet they had a problem with aluminum recycling in their plant. Their recycling rate was low and collection bins were consistently cross-contaminated—unexpected in a sophisticated plant that makes a complicated product with very high quality standards.

The plant manager addressed her employees, “You all are part of making some of the very best products in the world. You manufacture with precision and complexity most people can’t begin to understand. What I just can’t understand is why—given what we do and what we know—when it comes to our recycling, we can’t seem to put the round can into the appropriate round hole.” The answer was simple. It’s not that employees were incapable of performing the simple task of recycling. They just didn’t care so they didn’t bother.

But how could they bridge the gap and make sustainability relevant? What they did was connect the market impact of aluminum recycling to the cost structure of their products. Recycling can lower costs (reducing what we don’t want) and raise employment (increasing what we do want). With this knowledge, recycling rates significantly increased and cross-contamination decreased. Recycling ceased to be “something my supervisor encourages but I don’t really care about” and instead became “something I do because I know how it impacts me. 

If done well, employee engagement extends far beyond education, recycling, and small acts of conservation or reuse. We have worked with companies that have been able to effectively build upon their continuous improvement infrastructures—TQM, Lean, etc. —and provide employees the tools to apply their sustainability awareness, desire for action, and wisdom of processes and products. The results have been remarkable, with millions of dollars in savings and added value.

Employees are yearning to contribute to a sustainable company, sustainable future, and sustainable planet. We can truly engage them and harness their positive energy to generate positive results, or we can ignore this potential and let this opportunity—to improve our culture, our company, and our financial results—slip away.

 by Catherine Greener as posted in Sustainable Brands

http://sustainablebrands.com/news_and_views/jul2012/making-it-personal-engaging-employees-sustainable-success

This year’s topic -”The Management Challenge of Ethics, Citizenship, and Sustainability: A New Business Model”

June 20-21, 2012 - The Fairfax at Embassy Row, Washington D.C.

“Catherine will send you back to your organization with a clear understanding of employee engagement starting with your employee’s own values and building to action items that will not only improve morale, but save you money, along the way. Well-known locally and backed by years of experience nationally, her conversation on culture is going to be insightful and a lot of fun.”