Green Pledge: Safeway

MICHAEL GARRY

Driven by the need to cut energy costs, as well as by a desire to improve the environment, many food retailers have embraced a wide assortment of “green” strategies in recent years. But only Safeway has legally bound itself to the cause of environmentalism.

In 2006, Safeway, Pleasanton, Calif., signed a contract with the Chicago Climate Exchange (CCX) committing it to reducing its carbon footprint — the amount of carbon dioxide it generates from energy consumption at its stores, warehouses and headquarters — by at least 39,000 tons, or 1.5%, per year from 2007 through 2010, 6% in all. The baseline year of comparison is 2000, when Safeway produced about 2.65 million tons of carbon dioxide. “That's a huge reduction for us,” said Joe Pettus, Safeway's senior vice president, energy operations, who joined the company to run its fuel-station operation but switched to energy management about four years ago.

Safeway, which operates 1,738 stores nationally, is the only retailer of any kind to make such a pledge with CCX. It also belongs to the California Climate Action Registry, for which companies voluntarily measure and report their carbon emissions.

The “cap-and-trade” CCX contract requires Safeway to at least hit its carbon-cutting targets each year. If the company falls short, it has to buy carbon credits from companies in the exchange that have exceeded their targets. But if Safeway exceeds its target, it can sell its excess credits to other companies. “Our intent is to make money doing this,” said Pettus. “We want to do the right thing and make it profitable.”

The key to the whole process is that Safeway's efforts are audited by the Financial Industry Regulatory Authority (FINRA), Washington, the largest non-governmental regulator for securities firms in the U.S. The retailer's 2007 carbon reduction is currently under review. “So you shouldn't believe us, but our independent auditors,” Pettus said.

How is Safeway reducing its carbon footprint? The retailer is taking steps similar to those of other supermarket operators, such as installing energy-efficient lighting and energy management systems in stores. But more than most other food retailers, Safeway has begun using alternative energy to drive its operations, including renewable sources such as wind and solar, as well as environmentally benign biofuels for its trucking fleet.

For being the only North American retailer to legally bind itself to carbon reduction, and for embracing alternative energy sources and other energy-saving measures, Safeway has been chosen to receive SN's 2008 Sustainability Excellence Award in the chain category.

TAPPING WIND

Safeway began its foray into renewable energy in 2005 by investing in wind energy and by joining the Environmental Protection Agency's Green Power Partnership. Since then, the company has purchased 87 million kilowatt-hours of wind energy annually (90 million this year). That is enough to power all of its 312 retail fuel stations, all of its stores in San Francisco and Boulder, Colo., and all of its corporate facilities.

As of July 8, 2008, Safeway ranked 7th on the EPA's list of top retail users of “green power,” generating 3% of its total electricity via renewable sources. The only other food retailer on the Top 10 list is No. 1-ranked Whole Foods Market, which now generates all of its electricity (509.1 million kWh per year) through green power.

Like most users of wind energy, Safeway does not literally have wind turbines at its locations, but buys wind energy credits that allow wind farms around the U.S. to offset the production of energy at fossil fuel plants. Pettus acknowledged that wind credits cost more than conventional electricity, though he did not specify what Safeway is paying for each. The incremental cost of wind, he added, is covered by “energy savings in other parts of the company.”

Although Safeway has not decided whether to increase its investment in wind energy to power additional stores, “we are committed to the program,” Pettus said.

In 2006, the year it joined CCX, Safeway formalized its sustainability activities under a program called the Greenhouse Gas and Sustainability Initiative. The program encompassed a variety of strategies that together resulted in the elimination of 320,000 metric tons of carbon dioxide that year, according to the “Green Power FAQs” section of Safeway's website. Its tactics included renewable energy purchases (eliminating 55,000 metric tons), strategic electricity purchases (120,000), efficiency initiatives and technologies applied to the trucking fleet (66,000) and technology, process improvements and education (79,000).

Safeway acknowledges on its website that the Greenhouse Gas and Sustainability Initiative was created in response to California's Global Warming Solution Act of 2006 (AB 32), which established emissions reduction goals for the state and set Jan. 1, 2011, as the date when regulations enforcing those goals will be adopted.

HARNESSING THE SUN

A year ago, Safeway announced that it planned to install solar photovoltaic panels on the rooftops of 23 California stores, beginning with a store in Dublin, Calif. Nine stores are now each equipped with more than 1,000 of the door-size panels. The solar technology produces about 7,500 megawatt-hours of electricity per year — enough to provide 20% of a store's average power usage and up to 48% during peak hours.

“For solar to work, you need a state subsidy and high electricity rates, and California has both,” Pettus said, adding that Safeway is considering installing panels on its distribution centers in the state.

According to a recent article in The New York Times, the best-case cost of solar-generated electric power is about 25 to 30 cents per kWh, compared with about 6 cents for coal-generated power. The cost of a solar power system for a store the size of a conventional Wal-Mart is $4 million to $6 million, the article said.

Pettus pointed out that Safeway's solar panels supply electricity directly to the stores on which they're installed; this is in contrast to retailers that lease their installations to the solar-panel installers, who in turn sell the electricity produced to an electric utility. “We own green tags, which says the electricity is going into our stores,” he said. “It costs us more, but it's the right thing.”

Overall, Pettus said, Safeway is “very happy” with the economics of solar energy and the return on investment it offers, though he declined to share any financial data.

In another major environmental initiative, Safeway announced in January a plan to use only soy-based B20 biodiesel to fuel its entire fleet of more than 1,000 delivery trucks — the only U.S. retailer to do so. B20 biodiesel consists of 20% biodiesel and 80% petroleum diesel. Using biodiesel instead of conventional diesel will eliminate 75 million pounds of carbon dioxide annually.

Pettus said that Safeway is not a supporter of ethanol-based fuel because of its impact on food prices, or of biodiesel made from palm tree oil. “Soy has not had as much impact on food prices,” he said.

Biodiesel fuel, noted Pettus, has passed muster with Safeway's truck drivers, who are very protective of their equipment. “They are suspicious of anything new, especially fuel, but they see no performance difference [with biodiesel],” he said. “They've totally embraced it.”

As with wind energy, Safeway pays a premium for using biodiesel, Pettus acknowledged. However, the higher lubricity of biodiesel may reduce maintenance costs, he noted. Both wind and biodiesel are contributing to the reduction in greenhouse gases that Pettus hopes Safeway will be able to capitalize on via CCX.

Beyond using alternative energy sources, Safeway has also applied numerous conventional energy-saving gambits. For its trucking operations, the retailer joined EPA's SmartWay Transport Partnership in 2006 and has since adopted such strategies as enforcing a five-minute idle policy, purchasing tractors with aerodynamic designs and using large-capacity trailers to limit the number of trips to stores.

At the store level, said Safeway spokeswoman Teena Massingill, the company is employing a new lighting design, including LED lighting, that has reduced energy consumption by roughly 107,000 kWh annually. Stores have also been upgraded with energy management systems that take advantage of “demand response” programs, which reduce energy usage when regional demand is greatest.

In the refrigeration area, cases have been retrofitted with “the most efficient motors available today,” said Massingill, as well as no-heat freezer doors. Safeway has installed advanced refrigeration systems that include an efficient compressor design and electronic controls. The distributed-system design helps lower overall refrigerant charge by about 35%.

Store employees are trained to follow a number of energy-saving procedures, including closing receiving and front-entry doors, keeping walk-in coolers shut and airtight, and using heavy electrical equipment during off-peak hours.

In California, Safeway diverts more than 85% of its total solid waste from landfill through recycling — well above the 50% mandated by the state. Nationally, its recycling programs divert almost 500,000 tons of waste.