When it comes to making sourcing decisions, Wal-Mart recognizes that what’s on the outside also counts
For 110 years, cans of Campbell's iconic condensed soup have facilitated water, energy and transportation efficiencies resulting from having cut the soups' heaviest ingredient, water, in half. Now, more than 40,000 lunchtimes later, the cans — which now feature pop-top lids and 30% recycled content — are being rewarded, along with similarly sustainable containers, for their efficiency.
This month, buyers for Wal-Mart Stores began looking at the packaging scores of the company's trading partners when making sourcing decisions. Metrics related to an individual item's greenhouse gas emissions, product-to-package ratio, space utilization, innovation, amount of renewable energy used in packaging production, and emissions related to the distance packaging materials are transported, are calculated online via Wal-Mart's scorecard. During the system's year-long pilot phase, more than 97,000 products have been entered into the scorecard by 6,371 distinct vendors. The tool was officially put into practice Feb. 1.
“We will favor — and in some cases even pay more for — suppliers that meet our standards and share our commitment to quality and sustainability,” said Lee Scott, president and chief executive officer of Wal-Mart, during a speech to store managers last month. “Paying more in the short term for quality will mean paying less in the long term as a company.”
The retailer has yet to quantify its progress toward achieving its goal of reducing the packaging in its vast supply chain by 5% by 2013. Wal-Mart projects that meeting its goal will save 667,000 metric tons of carbon dioxide emissions, conserve 66.7 million gallons of diesel fuel and take 213,000 trucks off the road annually.
“The information gathered this year has not been used to develop official data,” Kory Lundberg, spokesman for Wal-Mart, told SN. “We've made progress simply by developing and launching the packaging scorecard, which will help us meet the 5% goal. The trial run in 2007 gave our suppliers an opportunity to learn about the scorecard.”
As part of a separate effort to more tightly wring inefficiencies out of its greener supply chain, Wal-Mart forged a partnership with the Carbon Disclosure Project late last year. The two partners are measuring the amount of energy used to create products through the procurement and manufacturing stages and on through distribution. Through its effort, Wal-Mart hopes to determine the overall environmental impact of products and discover ways to drive energy efficiency. Its pilot is focusing on items in the soda, beer, milk, toothpaste, soap, DVD and vacuum cleaner categories.
“By engaging its suppliers in the CDP process, Wal-Mart will encourage its suppliers to measure and manage their greenhouse gas emissions, and ultimately reduce the total carbon footprint of Wal-Mart's indirect emissions,” said Paul Dickinson, chief executive of CDP, in a statement. Wal-Mart declined to share specifics about the test.
Although it's unclear whether the environmental efforts of major manufacturers are in direct response to prodding from Wal-Mart, many are making strides in tracking and improving the ecological impact of their products — from the raw materials used to create them, down through the way shoppers use these items at home.
The Procter & Gamble Co., for instance, is working to reduce the environmental footprint of its operation, according to Len Sauers, vice president of sustainability at P&G. Currently, 96% of the materials that enter its facilities leave as finished product, and of those that do not, half are recycled, he said.
“In the past five years we've reduced the environmental footprint of our plants by about 30%, and we've set a goal for an additional 10% going into the next five years,” Sauers related to attendees of the Grocery Manufacturers Association's Sustainability Summit last month. P&G tracks the environmental impact of its individual products through their respective life cycles.
“We look at the use of resources, emissions into the air, emissions into water, the ingredients, their transport, manufacturing the product, its packaging, use in the home and ultimately its disposal,” explained Sauers. “We use these as a guide to see where we can make the biggest impact.”
P&G realized that its energy footprint is driven, in large part, by the heating of water in consumers' homes to do laundry. It created Tide Coldwater as a result. Sales of the liquid laundry detergent contribute to P&G's goal of creating and marketing $20 billion in sales of sustainable innovation products.
Such products have experienced “a meaningful reduction in their environmental footprint, compared to a similar or alternate product,” said Sauers. “But what's important is that there are no trade-offs to the consumer. She still gets the product that performs as she expects, at a value she expects.”
By washing all of their clothes in cold water for an entire year, shoppers can save $63 on their utility bill. The savings coincide with the cost of a year's supply of the detergent, noted Sauers.
“If every U.S. household switched to Coldwater today, we'd eliminate 34 million tons of carbon dioxide” emissions, he said.
Wal-Mart is getting behind products like these. Last month, Scott pledged the retailer's commitment to “double the sale of products that make people's homes more energy-efficient.” Consumers seem to be on board. In October, Wal-Mart surpassed its yearlong goal of selling 100 million compact fluorescent light bulbs, three months early.
The retailer has also found success with extended-life paper products. The category is one of five that has its sales tracked as part of Wal-Mart's Sustainability Index.
Among the items in that category is P&G's Charmin Mega Roll, which combines four regular-size rolls of toilet paper on a single roll.
“A million consumers switched to the Charmin Mega Roll, so that's meant a significant decrease in the number of cores, less diesel fuel is used, fewer miles are traveled and over a half-million pounds of film is saved from going into landfills,” noted Sauers.
Losing Water Weight
Campbell's Soup is also taking a closer look at its environmental impact. From 1995 to 2005, it was able to reduce its use of water — its single largest ingredient by volume — by 15%, according to Doug Conant, president and CEO of Campbell's Soup. It's also well on its way to completing its five-year goal of achieving a 10% energy reduction by 2010.
“We're 7% complete,” Conant told Sustainability Summit attendees. Still, he recognizes there's room for improvement. “We realize we've got to assess our value chain in a much deeper fashion moving forward,” related Conant.
Unilever — the first big marketer to tap into the concentrated liquid laundry detergent trend, with its All Small & Mighty triple-concentrated formula — has also managed to shrink its carbon emissions to the tune of 30% over the last decade, according to Kevin Havelock, president of Unilever U.S.
The shelf and supply chain efficiencies resulting from distributing such products inspired Wal-Mart to make the decision, in October, to phase out conventional liquid laundry detergents in favor of concentrated formulas. The conversion will be complete in all Wal-Mart and Sam's Club stores this May.
Wal-Mart is also paying attention to innovations like those implemented by General Mills to tighten up the product-to-package ratio of its Hamburger Helper product.
By changing the shape of the noodles from curly to flat, General Mills was able to reduce the package size by 20%, and subsequently save 890,000 pounds of paper fiber every year, take 500 trucks off the road and reduce overall greenhouse gas emissions by 11%.
“Hamburger Helper has become the poster child around Bentonville,” Matt Kistler, senior vice president for sustainability at Wal-Mart, told attendees at GMA's summit last month. “It illustrates some true product innovation that has led to an even greater packaging reduction.”
Meanwhile, Coca-Cola is working on innovations like energy-saving coolers and the use of five hybrid-electric trucks.
“They plug in overnight, and then you take them off and they consume 30% to 35% less fuel — and when driven up to 30 miles per hour, it's totally electric,” said John Brock, president, CEO and director of Coca-Cola Enterprises. “We'll have 120 of these by the end of the year, and that dramatically reduces emissions.”
All food retailers stand to benefit from their respective trading partners' innovations, but without set standards they are left comparing apples to oranges.
Wal-Mart hopes to change that. It's set a target for itself to build a third-party audited framework of social and environmental standards for all major global retailers in the next three years.
Its current efforts are focused on creating social standards with CIES, the global retail and consumer goods network, and a number of global retailers. Wal-Mart hopes that their work will expand to encompass environmental standards.
“I stand ready to meet with the CEOs of our competitors and make socially and environmentally responsible sourcing a reality across the entire retail industry,” said Scott during last month's speech.
Small retailers, like Seattle's PCC Natural Markets, could stand to benefit.
“Sustainable packaging is something the food industry has yet to clearly define,” noted Paul Schmidt, director of merchandising for PCC. “We pay close attention to what we consider to be responsible packaging, which refers to the amount and sources of delivery and product packaging. When we conduct category reviews and evaluate new products, we look for minimally packaged products.”
PCC gives preference to local suppliers, since it reduces the amount of protective packaging required to ship product to its stores, said Schmidt. It also works with local growers who reuse their delivery boxes.
“We are fortunate that some suppliers allow us to buy products in single units, which they pack in reusable totes for delivery to our stores, instead of by the case,” noted Schmidt. If it were to receive cases of products, PCC would have to incur costs associated with storage.
Some of the retailer's sections are more package-intensive than others.
Its bulk foods department, for instance, allows shoppers to buy as little or as much as they need using reusable containers, while its prepared foods packaging isn't as environmentally efficient.
“PCC is committed to improving the packaging we do in-house, especially of our prepared foods, meat and seafood,” said Schmidt. “We are always looking for sustainable alternatives to the very limited commercially available options for our products.”
The retailer's job may be made a bit easier when a sustainable packaging rating system is put into place early next year.
TerraChoice Environmental Marketing, Ottawa, in conjunction with the Packaging Association of Canada, is developing standards for the system, which is meant to aid U.S. and Canadian product manufacturers in making decisions about the sustainable packaging materials they'll source.
“As it is now, there is a wide variety of manufacturers making claims about a lot of products, but there is no standard way of testing and defining what ‘green’ means in the packaging world,” said Scott McDougall, president of TerraChoice. A pilot release of the standards will be initiated within the next six months and will be published in final form in the beginning of 2009.