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Boon for Business

May 20, 2010
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Somewhere along the line, people have come to equate sustainability solely with environmental responsibility. But sustainability goes well beyond green initiatives.

What’s green and good and misunderstood all over? Yes, it’s a twist on that tired old black, white and red riddle, but do you know the answer?

If you guessed “Kermit the Frog,” sorry - as far as we know, folks understand him just fine. But if you guessed “sustainability,” you’re right on target. Somewhere along the line, you see, people have come to equate sustainability solely with environmental responsibility. But sustainability goes well beyond green initiatives.

The World Commission on Environment and Development (the Brundtland Commission) introduced the concept of sustainable development, or sustainability, when it published “Our Common Future” (also known as the Brundtland Report) in 1987. The commission defined the term as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” The definition encompasses three critical elements: environmental, economic and social well-being.

Suppliers Shine

One way retailers could improve performance in the sustainability arena is by sourcing private label products from sustainability-minded store brand suppliers - and communicating the “story” behind such products to consumers.

Portland, Ore.-based Coffee Bean International, a specialty coffee roaster that makes its products available for private labeling, is one company that clearly understands how all of the sustainability elements are connected.

“I think there are a lot of business cases written about companies that go full bore into the eco part, but ignore their bottom line,” says Sarah Beaubien, Coffee Bean International’s product innovation manager. “But it’s really important that we consider the economic and social parts.”

For its part, Coffee Bean International established a sustainability team to lead its efforts here. Dubbed SEED (an acronym for social, environmental and economic development), the team is open to ideas from all employees.

“Instead of being a high-level initiative that our CEO or our management team has demanded of us, we’ve let it happen where we’ve gotten the employees involved, and it’s been much more powerful,” Beaubien says. “People approach me every week and say, ‘Hey, I’ve got this idea about how we could save on paper towels,’ or whatever. It’s all these little ideas that keep growing and snowballing.”

The economic part of the sustainability equation encompasses trade practices that improve conditions in local communities, as well as in developing countries. It also includes green-minded practices that end up saving companies significant cash. “Often, you really look at the big picture, and you start to save on electricity or you start to save on waste,” Beaubien says. “It really does benefit the bottom line as well.”

Closely entwined with the economic aspect is the social portion of sustainability. To tackle this side, Coffee Bean International launched the “Project Direct” trade program, through which the company works directly with Peruvian and other farmers to attain higher prices for better-quality coffee.

“We go directly to the source and say, ‘What do you need to improve the quality of your product?’” Beaubien explains. “It’s mutually beneficial because what we offer to them is a premium on their product, so they have incremental improvement to quality, and we’ll pay them for that.”

Most often, the social and environmental aspects overlap, as is the case with Clearwater Paper Corp.’s decision to become the first U.S. tissue supplier to offer consumer products from responsibly managed Forest Stewardship Council (FSC)-certified forests. FSC Chain-of-Custody certification (by the Rainforest Alliance’s SmartWood program) ensures the quality pulp used to make the company’s private label tissue products comes only from suppliers that exercise environmentally and socially responsible forestry practices that follow FSC’s high standards. The effort works to conserve biodiversity and ensure sustainable livelihoods for generations to come.

“We process the certified material into consumer tissue products and pass on the added-value certified products to our retail customers, who sell private label tissue to consumers,” notes Bruce Woodlief, director of marketing for Spokane, Wash.-based Clearwater Paper. “The steps leading to certification require the development of lengthy procedures that enable our internal operations to track certified material, from incoming pulp to outgoing finished goods, that bears the seals of FSC and Rainforest Alliance.”

Also making an impact here is Allens Inc., a Siloam Springs, Ark.-based provider of canned and frozen vegetables. The company is committed to greener manufacturing practices, notes Patty Daniels, manager of grades and standards for the company.

“It is not only better for our planet, but a good business decision,” she says. “We have several programs at every level to make efforts in reducing our carbon footprint.”

Allens recycles and employs low-energy light bulbs, Daniels says, and has reduced the amount of water it uses. In addition, the company’s trucks are designed to conserve gasoline whenever possible, and its cans are 100 percent recyclable and “getting greener” with each new innovation.

“As a company that depends on a healthy environment and planet, sustainability is always at the forefront of what we do, not only from the agricultural aspect, but from the corporate one as well,” she adds. “We take great care in how our product is grown and harvested. … While we express support for fair trade farmers and the program as a whole, it is just one perspective of our business and product development. That could be said, too, for organic status - while sustainability starts at the field, it does not end with the harvest.”

Take the Lead

Of course, retailers also can have a powerful influence on suppliers when it comes to building a sustainability-minded product. But Gregory Unruh, author and professor of global business at Thunderbird School of Global Management in Glendale, Ariz., throws a wrench in that process, explaining that the exact criteria for a sustainable product have yet to be defined for each product class.

“We need to operationalize sustainability for every product class,” he contends. “The process to do that is very messy, and you have governments, NGOs, industry associations, companies and others promulgating their own definition of ‘sustainable.’

“Thus, the question, ‘What really counts?’ is a battleground right now,” he continues. “The 500-pound gorilla that just entered this process is Walmart, with its sustainability index that seeks to define what is sustainable and what is not for hundreds of products.”

Frederic Scheer, founder and chairman of Cereplast Inc., a bio-based resin manufacturer located in Seymour, Ind., believes companies need to go back to fundamentals defined by the United Nations, where truly sustainable products boast aspects designed to benefit environmental, economic and social well-being. But he admits it is extremely difficult to create a prioritizing system based on such a model.

Still, retailers could take number of steps to pave a positive path toward product (or packaging) sustainability. It all counts, stresses Shel Horowitz, ethical marketing expert and coauthor (with Jay Conrad Levinson) of Guerilla Marketing Goes Green: Winning Strategies to Improve Your Profits and Your Planet.

“Different sectors of the market will weight the factors differently,” Horowitz says. “For instance, I might choose to buy local rather than organic from the deep-green analysis of the impact of transportation, while someone who is concerned primarily about health might choose the reverse. The more of these factors you can claim, the more likely you are to make the sale - so if a product is both local and organic, and competitively priced, it has major advantages.”

At his company, Scheer strives for a low carbon footprint with fair manufacturing practices as two operating fundamentals - and suggests that retailers could ask for the same from their own store brand suppliers. He also says the company makes sure its “pricing will not create any kind of ‘social’ pressure due to a price structure’s displacing certain applications.”

Unruh stresses that sustainability should be viewed from a holistic standpoint that accounts for the entire product lifecycle.

“If you offer me a sustainable product in wasteful packaging, I can easily criticize you for not addressing an obvious sustainability flaw,” he says. “However, if I was forced to choose, for most companies it is more important to start with the product. Most of the impact will be in the production and consumption.”

One widely recognizable measure of product sustainability is carbon footprint. Here, Silver Springs, Md.-based Carbonfund.org offers the CarbonFree certification for products that meet strict criteria. The packaging for such products then is eligible to wear the CarbonFree label.

“Our CarbonFree certification signifies carbon neutrality, and we have a protocol that companies must follow in order to get our certification,” notes Emily Pugliese, program manager for the non-profit organization. “They have to calculate the carbon footprint of their product from cradle to grave, so they are looking at everything throughout the entire lifecycle of the product, from raw material extraction, manufacturing, transportation, distribution - the entire supply chain.”

Carbonfund.org relies on third-party consultants to attain an accurate calculation of a product’s carbon footprint, Pugliese explains. The manufacturer then offsets that to make the product carbon-neutral.

“It gets really detailed,” adds Claire Douglas, partnerships director for Carbonfund.org. “It’s been really educational for these companies. Not only are they getting the label, but through the process of that calculation, they’re digging deep into their supply chain and finding efficiency gains, which equates to cutting down on their costs.”

Douglas says the offsets take in three different project types: reforestation or forestry, renewable energy and energy-efficiency. The projects also are third-party validated to ensure they are additional, permanent, measurable and not double-counted.

Thus far, Douglas says, Carbonfund.org has certified almost 100 products, ranging from sugar to cell phone accessories. She advises retailers to start with just a few of their store brand products, perhaps in a complementary area such as natural and organic, and work with suppliers to build from that base.

“Perhaps do the organic and maybe one other kind of ‘generic’ product, like maybe [store] brand toilet paper or peanut butter or bread,” she says. “Just something really simple and maybe launched in just one region, and maybe do kind of A/B testing to see that this truly does equate to increased sales and that people are interested in this.”

On the packaging side, Horowitz recommends using recycled paper and plastic wherever possible, as well as natural dyes and inks instead of synthetic. “Use your packaging to discuss your environmental commitment,” he advises.

Retailers that find ways to use less packaging also have a sustainability advantage, notes Scott Testa, Ph.D., a retail consultant and a professor of business administration at Cabrini College in Philadelphia. He points to concentrated laundry detergent as a great example. The bottles not only take up less space on the shelf, but also cost less to transport.

“It’s really a perception issue to the consumer,” he says. “Quite frankly, there are some consumers who view concentrated packaging as more important than local sourcing.”

To help retailers and manufacturers address the packaging side of sustainability, this year's PACK EXPO International (slated for Oct. 31-Nov. 3 in Chicago) will offer a number of resources for private label brands. According to the event’s organizers, recyclable, renewable and biodegradable containers and materials will be featured throughout the show floor - and identified with the “Pack Expo Green” logo. Several of the event’s allied partners also will be addressing sustainability, and a Reusable Packaging Pavilion (sponsored by the Reusable Packaging Association) will put the spotlight on handheld containers, dunnage, pallets and other transport packaging solutions.

Eye on Consumers

Before embarking on a major sustainability-minded overhaul of individual store brand products or an entire store brand program, it’s also important for retailers to understand how consumers view product sustainability. And in the eyes of most consumers, the environmental piece is the easiest part of sustainability to understand and address.

According to “The Green Revolution,” a survey-based report from Grail Research of Cambridge, Mass., when asked about the first thing that comes to their minds when they think of green products, 83 percent of survey respondents said “made of recycled material;” 77 percent, “energy-efficient/uses renewable sources of energy;” and 71 percent, “made with natural ingredients.” Rounding out the top responses were “non-toxicity” (61 percent); [results in fewer] “greenhouse gas emissions” (61 percent) and “green certifications” (47 percent).

The survey also says price remains the greatest deterrent to the purchase of such products.

But new research from Mintel International Group, Chicago, suggests a growing number of consumers are willing to plunk down the extra cash for products viewed as environmentally friendly. In fact, more than one-third (35 percent) of respondents to a Mintel’s survey indicated they would pay more for greener products.

Clearwater Paper’s Woodlief agrees that the green consumer base is growing.

“Concern for the environment is increasingly becoming a purchase consideration for many consumers,” he says. “If consumers can feel good about making a purchase that positively affects the environment, they will - particularly if they do not have to forego product quality.”

But how can retailers best communicate a product or package’s green attributes to consumers? Labels that carry FSC’s Chain-of-Custody certification or Carbonfund.org’s CarbonFree certification are one avenue.

But even in these cases, some additional educational material might be called for.

One company that attained CarbonFree certifications for several of its products does a wonderful job here, Douglas says, including several pages of information about the certification process on its Web site. She adds that organizations such as Carbonfund.org are able to help retailers come up with ways to communicate the whole certification story to consumers.

For products that don’t go the certification route, Jeff Weidauer, vice president of marketing for Little Rock, Ark.-based Vestcom International, offers up some marketing tips.

“The ongoing challenge for store brands is the relative lack of marketing funds available to promote new products and support existing items,” he says. “The good news is that retail stores, particularly supermarkets, enjoy an audience that not only rivals most television advertising, but … is engaged in the shopping experience.”

Advances in digital printing technology allow retailers to use once-ignored areas such as the shelf edge to drive awareness and trial of products, Weidauer says.

“Whether grouping items in a section or putting them in line with the broader category, calling out specific products - through the use of shelf labels or molding strips that provide compelling information for the shopper - will drive awareness and trial,” he says, “while enhancing the shopper’s perception of the retailer as a supporter of sustainable products.”

But avoid “green washing,” as well as the use of “eco-friendly” and other descriptors that might bring unwanted attention from the Federal Trade Commission. Any product or packaging claims should be very specific (when in doubt, consult the FTC’s “Guides for the Use of Environmental Marketing Claims - commonly known as the “Green Guides,” available on the commission’s Web site, www.ftc.gov).

Scheer also advises retailers to check the veracity of and the scientific support for manufacturer-made package-related marketing claims by, for example, verifying with organizations such as the SPI Bioplastic Council.

“The important thing is to honestly address problems as you become aware of them, open dialogue with your critics and invite them to be part of the solution,” Horowitz stresses. “And approach your entire business with integrity and with the idea that your sustainability commitment is genuine. The public has a good nose for hypocrisy, and bullshit will come back to bite you - hard.” PLB

Sidebar: Logistics Matters

Although much less visible to the consumer than the product or packaging, product transportation is a huge part of the sustainability equation, as Dallas-based Greatwide Logistics Services knows quite well. The largest provider of dedicated refrigerated transportation in the United States, Greatwide has been recognized as a top carrier partner under the U.S. Environmental Protection Agency’s voluntary SmartWay Transport Partnership since 2006. The partnership strives to improve energy-efficiency, reduce greenhouse gases and air pollutant emissions, and enhance energy security. It also gives retailers another way to bolster sustainability efforts along their supply chains.

“Greatwide is able to work with retailers to achieve their desired environmental performance,” says Lance O’Daniel, the company’s finance manager. “And through Greatwide’s new Managed Transportation Services technology, which provides complete visibility of the supply chain, the company also is able to work with retailers to optimize their transportation network, minimizing empty miles.”

Although invaluable to the U.S. infrastructure, freight transportation is one of the largest consumers of diesel fuel, he adds. Through steps such as speed reduction, idle reduction, route optimization and fleet-age reduction, logistics suppliers can help retailers improve energy security and reduce their carbon footprint.

Sidebar: Leading by Example

Walmart and Whole Foods Market might be getting the most attention on the sustainability front, but they certainly are not the only retailers in the food, drug and mass merchandise space that truly are focused on product, packaging and operational improvements. Many, many others also have made meaningful progress here.

Hadley Barrows, a spokesperson for Minneapolis-based Target Corp., says Target’s sustainability story really began more than six decades ago, when the retailer’s founders made “an unwavering commitment to ethical business practices every day.”

“We take a holistic approach to sustainability that is integrated throughout the company and spans all of our operations, including merchandising, marketing, transportation and facilities,” Barrows says. “In addition, we are an active partner with government agencies, communities and environmental groups to make sure we’re working together to protect the environment.”

On the product side, Target recently consulted with the Monterey Bay Aquarium to eliminate farmed salmon from all of its stores. By ensuring that its salmon offerings are sourced in a sustainable way, Barrows says, the retailer helps to preserve abundance and species health and avoids harm to local habitats.

“We are promoting this move in stores and on the packaging,” she adds.

In addition, much of the packaging for Target’s owned brands is recyclable and made with recycled content and/or renewable resources. For example, Barrows says, compressed packs for some napkins and larger rolls of paper towels allow Target to reduce the amount of packaging and the number of cardboard cones it uses. And the company switched to a paperboard bellyband instead of a plastic bag for its Merona brand socks, eliminating 27,000 pounds of plastic each year.

Batavia, Ill.-based ALDI Inc. also has a strong commitment to sustainable business practices that help conserve natural resources while still allowing it to offer high-quality, low-cost products, stresses Martha Swaney, a company spokesperson. For starters, the retailer’s small-store format requires less energy and land to operate. And like Target, ALDI is committed to sustainable seafood sourcing. The retailer recently adopted the Global Aquaculture Alliance’s Best Aquaculture Practices standards for environmental and social responsibility, animal welfare, food safety and traceability of its seafood selections - and also partnered with the Sustainable Fisheries Partnership to develop and evaluate the sustainability of its seafood products and find sources of sustainably caught or farmed seafood.

“We also recycle 100 percent of the packaging used to deliver products to each of our stores,” she says.

But the biggest news on the sustainability front for ALDI is its new green store model (the first opened in Syracuse, N.Y. in 2008; the latest in Middleton, Ohio, in 2009).

“All our store models will follow most of that design going forward, including the use of recycled materials, LED lighting, energy-efficient refrigeration and motion sensors to automatically dim lights in areas of low foot traffic,” Swaney explains. “Our goal is to reduce utility usage by approximately 30 percent. As always, when we’re able to save money on costs such as utilities, we pass on the savings to our customers in the form of lower prices.”

Not to be outdone, Pleasanton, Calif.-based Safeway Inc. boasts investments in renewable energy, transportation mile reductions, fuel efficiency, solid waste reduction, packaging light-weighting and much, much more. Moreover, the company recently became the first U.S.-based retail grocery chain and private label manufacturer to sign on as a founding member of The Sustainability Consortium (TSC). The organization’s science-based work aims to build a more sustainable global supply chain.

“By joining TSC, our intent is to bring standardized methods to measuring life cycle analysis (LCA),” says Brian Dowling, Safeway’s vice president of public affairs. “With the myriad groups, associations and companies working on the subject, it seemed destined for duplication, contradiction and confusion. We want the work of TSC to become the defining standard for measuring opportunities and improvements in our industry.”

Safeway intends to use the LCA science TSC creates to identify opportunities within specifications, manufacturing processes and distribution channels to improve its environmental impact, Dowling notes. The retailer believes it must look at entire categories and “think big” to effect real change.

And Safeway’s efforts here fit in with an overall dedication to sustainable practices.

“The overall philosophy for our operations is simple: Support environmentally beneficial alternatives in all things we do,” Dowling says.

Dowling also says Safeway continues to focus on providing the products its shoppers want and the corporate responsibility they expect. From its locally grown produce and sustainable seafood to its O Organics and Bright Green brands, it is responding to consumers as their desire for more sustainable products grows.

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