The Verdant 360 Blog

It’s hard not dwell on the importance of Walmart’s announcement this week. I have not previously devoted three straight posts to the same topic, but I do feel that it is potentially the most significant approach to sustainable business practices we have seen to date. Walmart’s global reach and purchasing clout are unparallelled in the retail space. It has over 100,000 suppliers. For this reason alone any announcement around sustainability is important, but when you combine it with an actionable request (albeit voluntary) to complete a survey by a target date (in this case, October for U.S. based suppliers) and all of a sudden it forces a whole bunch of people to evaluate their sustainability positions.

Broken into four sections, the survey appears simple at first glance and some of the questions are fairly opened ended, but the sum of the survey, is that it requires an examination of sustainability practices and will allow for comparisons that were not previously possible. In this blog post  I will list the questions by section. In subsequent posts I will examine the survey on a section by section basis.

Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions
1. Have you measured your corporate greenhouse gas emissions?
2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)?
3. What is your total annual greenhouse gas emissions reported in the most recent year measured?
4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets?

Material Efficiency: Reducing Waste and Enhancing Quality
1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured.
2. Have you set publicly available solid waste reduction targets? If yes, what are those targets?
3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured.
4. Have you set publicly available water use reduction targets? If yes, what are those targets?

Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials

1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety?

2. Have you obtained 3rd party certifications for any of the products that you sell to Walmart?
People and Community: Ensuring Responsible and Ethical Production
1. Do you know the location of 100 percent of the facilities that produce your product(s)?
2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
3. Do you have a process for managing social compliance at the manufacturing level?
4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
5. Do you invest in community development activities in the markets you source from and/or operate within?

15 questions, simple enough, but when we dive into them by section in subsequent posts, you will see the answers may not be that simple.

-FR

Corporate Social Responsibility, Supply Chain, Sustainability, Uncategorized GHG's, Sustainability, Sustainable business practices, Wal-mart, Walmart, Walmart's Sustainability Index

Professor Rosabeth Moss Kanter thinks so. Professor Kanter, who The Times of London describes as one of the “50 most powerful women in the world” holds the Ernest L. Arbuckle Professorship at Harvard Business School. In a blog post on The Harvard Business Review site, Walmart’s Environmental Game Changer, she expresses the view that by nature of it’s market clout, Walmart has “transformed green standards from nice-to-have, to must-have.”  Walmart’s announcement puts pressure on their suppliers and their competitors. In the process it moves the consumer products marketplace towards a future in which consumers can make comparative buying decisions based on the knowledge of the product’s environmental and social impact. Here is how Professor Kanter describes Walmart’s decision,

Wal-Mart’s unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labeling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

It marks a change in how products will be labeled, how supply chains communicate their activities and in the information that will inform consumers make purchasing decisions. This is how Green To Gold author Andrew Winston describes it in a post How The Wal-mart Eco-Ratings will Save Money, also on the Harvard Business Review.

And this is the larger trend that’s coming. The combination of technology and rising consumer demands is creating a powerful movement toward greater transparency  about how a product is made, where it comes from, how much energy is used, and so on. Consumers are already starting to get a taste of this data — you can already download a number of iPhone apps and/or check websites like GoodGuide.com  to find product sustainability scores. Consumers will certainly want more, and they’ll want more coordination between all the groups starting to collect it. The world’s biggest retailer kicking off this initiative is a good start at harmonizing all these sources.

Sounds like a game changer to me.

-FR

Supply Chain, Sustainability Andrew Winston, Harvard Business Review, Professor Rosabeth Kanter, supply chain sustainability, Sustainability, Wal-mart, Walmart, Walmart's Sustainability Index

Leave it to Walmart to up the ante. Today the world’s largest retailer released a statement that should catch everyone’s attention. They have announced plans to create a product sustainability index that will eventually (they believe) be included on all products that are sold in Walmart stores. According to Walmart the index will give consumers a single source of data for the evaluation and comparison of a product’s sustainability. It reinforces Walmart’s commitment to leadership in the area’s of both sustainability and corporate social responsibility.

According to Mike Duke, Walmart’s President and CEO:

Customers want products that are more efficient, that last longer and perform better. And increasingly they want information about the entire lifecycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way.

We do not see this as a trend that will fade. Higher customer expectations are a permanent part of the future.

At Walmart, we’re working to make sustainability sustainable, so that it’s a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption.

The Walmart plan calls for a 3 phase approach to the development and implementation of the index. The first step is creation of a survey (sounds a little like the Verdant 360) that will ask questions around 4 areas.

1. Energy and Climate
2. Material Efficiency
3. Natural Resources
4. People and Community

Walmart will be asking it’s over 100,000 suppliers to respond to the survey. It is asking it’s U.S. base suppliers to respond by October of this year.

The second phase will be to create a consortium of universities to collaborate with suppliers, retailers, NGO’s and governments to create a global database of information of the cradle to grave impact of the products that are sold in Walmart stores. They intend to engage a software company create an open platform to power the index.

The Third and final phase will be to translate the data captured in phase two into a standard that informs consumers about the sustainability of products.

This is how the statement was reported in bloomberg.com today,

Wal-Mart’s unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labeling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

We will be discussing this for some time to come.

-Fred

Corporate Social Responsibility, Supply Chain, Sustainability Add new tag, Corporate Social Responsibility, supply chain sustainability, Walmart

The question of the ROI of sustainability is often talked about but not examined nearly as closely as it should be. Yesterday I was at a lunch seminar put on by Corporate Responsibility Officer (CRO) Magazine, Responsible & Sustainable Communications in the Age of Brand Risks. CRO Publisher Jay Whitehead moderated a very informative discussion between Mark Comolli of the Rainforest Alliance and Guy Boucher VP Sustainability at Domtar Paper. The discussion centered around Domtar’s efforts to effectively position their brand as a market leader in the development of sustainable paper sourcing through chain of custody certifications, primarily FSC Certification and Rainforest Alliance certification. In particular it focused on the collaboration between two organization that at first to have divergent interests

A lively discussion took place when the question of ROI was brought up during the question and answer period, and it is clear that ROI is on every-one’s mind. As company’s weigh the costs and associated benefits from the implementation of an effective sustainability strategy, I sense there is still feeling among many that sustainability is high cost low reward scenario. That may be changing, and it should be changing. The challenge is in demonstrating that there are direct ROI benefits from an effectively implemented sustainability strategy.

Interestingly, yesterday morning I received via my RSS feed the following report from the Aberdeen Group, The ROI of Sustainability: Making the Business Case. I highly recommend that you read it. Their research based on interviews with of 200 enterprises came up will the following conclusions.

Using six key performance indicators to distinguish Best-In-Class companies they found that those BIC companies achieved a 6% to 10% reduction in costs while making strides in in retaining customers.

Best-in Class-Performance

• 9% reduction in carbon footprint
• 6% reduction in energy costs
• 7% reduction in facilities costs
• 7% reduction in transportation/logistics costs
• 16% increase in customer retention

The survey showed that the companies identified as Best-In-Class shared the following characteristics:

Competitive Maturity Assessment

• The Best in Class are 52% more likely to incorporate sustainability metrics into value chain performance management
• 74& of the Best-In-Class have an organization wide sustainability policy compared to 58% of all others

The report also highlighted the need d to track, measure and communicate sustainability progress, successes, challenges and areas of opportunity.

-FR

Carbon Footprint, Corporate Social Responsibility, Supply Chain, Sustainability, Uncategorized Carbon Footprint, Chain of Custody, FSC Certification, Sustainability, The Rainforest Alliance

In his new book, Hot, Flat and Crowded, author and New York Times columnist, Thomas Friedman asserts that January 1, 2000 was day one, year one of what he calls “the Energy-Climate Era.” He postulates that that was the day five key problems; energy supply and demand, petropolitics, climate change, energy poverty and biodiversity loss reached critical mass. While it is easy to question the date Mr. Friedman has chosen, it is harder to dispute the evidence regarding the direct negative impact that each of his five identified key problems have had on our environment, our society and economy. What I am most impressed about in Hot, Flat and Crowded however, is that it speaks to the real driver of these problems which is- the unprecedented growth of the world’s population over the last 100 years.

As the population has exploded over this period we have also seen unprecedented economic growth, through industrialization, globalization , computerization and the rise of consumer driven societies. To paraphrase Tom, the world has become Hot, Flat, Crowded and Affluent (at the very least striving for affluence). All of which combine to put enormous pressure on the planet’s resources.

At the beginning of the 20th Century according to U.S. Census Bureau there were approximately 1. 6 Billion people on the earth, today 109 years later there are according to the U.S. CB  6.7 Billion people. The forecast for the year is 2050 9.5 Billion. The pressure this puts on the planet’s resources is tremendous.

Climate change may be the most talked about problem related to population growth but is not the only. Deforestation, resource depletion, water shortages, destruction of arable land, and energy shortages all present challenges today, and will get more challenging as the world’s population increases.

For business leaders it makes it all the more important that we develop and implement sustainable business practices. We are now in global competition for energy, materials, water and labor. We face reduced supply and higher prices for the first three. At the same time our labor costs are higher relative to developing economies. To be successful it is imperative that we operate more efficiently, reduce waste, look to alternative sources of energy and develop workflows and processes that are more automated and reduce our carbon footprint.

Many major corporations are beginning to get the supply chain ramifications of climate change.  In a July 2008 operations report entitled “Climate change and supply chain management”, McKinsey states, “Top companies regard climate change as an opportunity to get closer to suppliers—effectively reducing both costs and carbon in their supply chains.” The authors, Chris Brickman and Drew Ungerman go on to say, “Forward-looking companies are using such discussions as opportunities for supplier development, for example by transferring best practices in manufacturing, purchasing, and R&D—as well as energy efficiency—to key suppliers. This opens the possibility of still lower costs and improved operational performance, in addition to helping suppliers remove more carbon from their supply chains.”

Yes, the world the world is Hot, Flat and Crowded but  Tom Friedman is optimistic. His subtitle Why We Need A Green Revolution And How It Can Renew America, speaks to the opportunity that is presented to those who choose to participate. If  business leaders commit their businesses to positive organizational change we can renew ourselves, our businesses, our communities and our planet.

-FR

Supply Chain Carbon, Supply Chain, Sustainability

One of the biggest challenges I face when discussing supply chain sustainability is dealing with what I call “the big misconception.” That is, the perception among many business leaders that sustainability is a high cost low return investment. I believe, however, that the opposite is increasingly the case. By focusing on the positive return on investment and clearly identifying return opportunities, it can be demonstrated that direct ROI benefits can realized through:

• Operational Efficiencies
• Material cost reductions
• Recycling materials
• Carbon Footprint reduction
• Carbon Offsets
• Increased sales
• Increased partnering opportunities

Understandably in the current business environment any additional business expense will and should be scrutinized. But  given the enormous challenges associated with our planet’s growing population and the desire for much of that population to strive towards affluence, we must recognize that business as usual is a recipe for disaster.

The positive for business leaders is that there is tremendous opportunity for those who can innovate, implement and execute sustainable supply chain solutions. Sustainability is at it’s core about the efficient allocation of resources. Reducing carbon footprint across the supply chain potentially has direct bottom line benefits. Inherently, if you use less energy you spend fewer dollars. Not withstanding the current low energy prices, energy costs will rise and as they do the benefits associated energy efficiency will grow. Additionally due to increasing awareness many companies are making demonstrable sustainability plans a requirement for their business partners.

As business leaders it is incumbent on us to do what is right for our companies, our shareholders, our employees and our customers. Increasingly many business leaders are recognizing we need to extend this to our communities, locally and globally. By recognizing that the supply chain benefits realized through a well executed sustainability plan do indeed extend to shareholders, employees, customers and communities, we are demonstrating true business leadership.

In upcoming posts I will present profiles of a number of business leaders who have demonstrated just such leadership and show how they have demonstrated benefits that strike directly to the bottom line and beyond. -FR

Supply Chain Carbon Footprint, carbon offsets, recycling, Supply Chain, Sustainability