Sustainable Retail Management Will O’Brien April 6, 2010

Topics Drivers, Trends & Practices Environmental Footprint Business & Environment Industry Trends /Consumers Initiatives: – Australia – Europe – United States Implementation: – Engaging stakeholders – Best practices – Benefits Leadership Examples BMW General Electric Kingfisher Panasonic Starbucks Tesco Unilever Wal-Mart

Environmental Footprint Source: “Measuring Environmental Footprint: A Financial Services Industry Case Study”, 2008, UNC An environmental footprint is a measure of the amount of resources consumed and the amount of pollution; e.g., green house gas and waste created by an entity and by the firms that serve the entity, usually summarized by the equivalent are of land needed to assimilate these impacts.

Business & Environment

Business Has Traditionally Assumed an Infinite Capacity Planet Business principles based on assumption of infinite natural resources and waste absorption capacity “The concept of multiple industries collaborating on a ‘whole systems’ approach, recycling each other’s outputs into inputs is completely antithetical to the cult of the individual and the pioneer myth that so deeply characterizes American corporate culture.”* US antitrust legislation has not allowed “collaboration” *Oliver Kellhammer, MBA Student, Bainbridge Graduate Institute

Industrial Pollution

22 billion disposal diapers in landfill/year 100 million cell phone put out of service/year 2 million tons of e-products disposed/year 63 million computers in the U. S. became obsolete in 2005 Circuit boards - lead & cadmium Flat screen & switches - mercury What is in a Landfill?

80% of Toxic Wastes are from Electronics Products The electrical and electronic waste (WEEE) law, in 2005, EU authorities introduce legislation for free take back of waste goods by final owners and ensure that equipment producers are responsible for financing the collection, treatment, recovery and disposal of all waste. –30% of Fortune 500 companies’ business are in Europe Silicon Valley Toxics Coalition – Oregon Natural Step Zero-waste Coalition Green IT

Earth’s Systems Complexity, Cycles & Interconnections A system is a collection of interdependent parts (with flows and stores) enclosed within a defined boundary. The earth has four major systems – Lithosphere – soil, rock – Hydrosphere - water – Biosphere – living organisms – Atmosphere – air Human activity is disrupting these systems in complex, ways Dave McKay, 2009

CO 2 CH 4 NOx, others (CFCs, PFCs)

Retail Industry Trends Increasingly, the retail market is being taken over by multinational conglomerates with huge supply and distribution chains, inventory management systems and wide scale marketing plans. Retailers have to continuously collect customer information to detect their buying patterns so as to become more agile, responsive, and efficient in implementing solid customer relationship management. At the operational level, the efficiency of transport systems and the use and disposal of packaging have to be addressed. E-commerce and home delivery services are becoming indispensable elements in the competitive retail market. Ethical sourcing has gained significance amongst various stakeholders; although it increases the cost, the consumers are willing to pay a premium for adopting healthy environmental practices. With regard to this, retail companies need to establish long-term stable relationships with their suppliers and increase their transparency through reporting along the supply chain to minimize economic, social and reputational risk. Source: DJSI World

Triple Bottom Line

Green Lessons February 10, 2009 Karen Grimm, Chief Strategy Officer, Siddall, Inc. Senior Vice President, Chief Strategy Officer

A term used to capture behaviors, products and services designed to inflict minimal to no harm on the environment. Green

1. Understand their world

Why aren’t we embracing green? Life is hectic and times are hard – Green choices make life more complicated – Green choices can be more expensive

What Really Matters? Protecting the environment fell from 56% to 41% in one year Of the 20 issues raised, global warming is now ranked last Pew Research Center 2009

Why aren’t we embracing green? Solving the problem seems overwhelming – It’s hard to see how individual efforts make a difference People are confused and/or suspicious of information and claims The information provided isn’t relevant to the target

2.It’s not just what you say, it’s what you do. The American Consumer

What they say…. A vast majority of consumers say a company's environmental practices are important in making key decisions including: the products they purchase (79%), the products they recommend to others (77%), where they shop (74%), where they choose to work (73%), and where they invest their money (72%) Gfk Roper Study

What they do… So, what's keeping consumers from doing more? – 74% say greener products are "too expensive" – 61% say they don't work as well – 55% believe that many 'environmentally safe' products are not really better for the environment Gfk Roper Study

3. It’s not just what you say, it’s what you do. The Company

The Do’s Instill the “green” vision from the top down Set a timetable with key milestones – Share milestones (even small) along the way Be transparent and realistic

Initiatives - Australia Clearly defined global trend towards the mainstreaming of environmental and social criteria in the business arena means future success lies with businesses ensuring they are, and are seen to be, good operators. Financial performance is no longer the sole driver for business. Companies are focusing on a combination of economic growth, environmental balance and social progress. Employees, communities, activist groups, government, and increasingly financial institutions are putting pressure on companies to actively demonstrate they control their environmental and social risks and are improving their performance in these areas. Companies are publishing sustainability reports, or "Triple Bottom Line" reports, to communicate their environmental, social and economic performance to internal and external stakeholders. Source: The State of Sustainability Reporting in the Trade and Retail Sector A study to assist Australia trade and retail companies with the preparation of public environmental, social or sustainability report. KPMG Sustainability Advisory Services Environment Australia, Nov

Initiatives cont’d. Retailers Environmental Action Programme Stocking the Shelves with Green

LEADERSHIP EXAMPLES

Bayerische Motoren Werke AG, Sustainability is an integral part of BMW business principles and practices, which has led to a confirmation of its leadership position in the automotive industry. The company has been able to surpass its peers by exhibiting unparallel commitment to environmental issues. BMW strives to conserve environmental resources throughout its value chain from production systems to materials used in-bound and out-bound logistics, and recycling and disposal of used vehicles. The company has implemented efficient environmental management systems, and undertakes regular external and internal audits for its operations as well as for its suppliers. BMW has also included a package of multiple emission reduction measures in large parts of the car fleet (called Efficient Dynamics) in order to meet the challenges of global warming and fossil fuel reserves, which is illustrated by 25 percent decline in car fleet emissions in 2008 as compared with 1995 levels. Along with various initiatives undertaken to achieve environmental efficiency, the company also takes measures, such as 360 degree feedback and benchmarking of brands against that of peers, to strengthen its brand image and gain competitive advantage. Source: DJSI World

Kingfisher Kingfisher Plc is a London-based international home improvement retailer. The company's main retail brands run on the do-it-yourself (DIY) concept and include products such as complete kitchens, bathrooms and bedrooms. The company sets sustainability targets and regularly measures its progress through a social and environmental management system called 'STEPS'. Its "Future Homes" strategy for instance is designed to integrate sustainability into commercial operations, bringing innovative products to the market to help its customers adopt more sustainable lifestyles. In Kingfisher's specialized DIY home improvements stores (e.g. B&Q in the UK and Castorama in France) customers are increasingly enticed to choose from a wide range of green products. In 2008 this accounted for 7% of total sales. Source: DJSI World

Panasonic Electric Works Panasonic ‘s concentrated efforts to develop environment-friendly operations has resulted in operational excellence, which is evident from a sharp decline in greenhouse gas and dust emissions; and reduced electricity, water and waste consumption. The concept of restoring bio-diversity is also adopted at a strategic level in the company; e.g., the company constructed a 'Prosperous Park' including biotope in a building premise in Osaka in March In the social dimension, the promotion of labor practices within the organisation differentiates it from other companies. The company has established 'Diversity Promotion Office', and has been awarded Diversity Award Semi Grand prize. Source: DJSI World

Starbucks In 2004, with support from CH2M HILL, Starbucks voluntarily conducted an inventory of its greenhouse gas emissions in an effort to understand and evaluate its contribution to climate change. Using the WRI Greenhouse Gas Protocol, Starbucks limited the inventory to areas with the biggest environmental impact: retail, coffee roasting, administration operations and its distribution network. Based on the results, Starbucks made a commitment to reducing emissions by: Purchasing renewable energy—annually, five percent of the energy needed by its North America retail stores, generated by 11 large-scale windmills, and estimated to reduce CO2 emissions by two percent; Addressing the impact of its transportation operations—working with Business for Social Responsibility’s (BSR) Clean Cargo Group on ocean transportation and using the Clean Cargo tool to engage freight vendors; Monitoring roasting plant operations— an environmental team at each of the company’s four roasting plants are creating measures for reducing emissions and conserving energy; Taking leadership and raising awareness—by encouraging others to take action. Setting a reduction target—in fiscal 2005, the company established a gas emissions reduction target. Sources: Starbucks

Tesco - Carbon Labeling Jan. 23, 2007 Tesco, the largest supermarket chain in Britain, has announced that it will begin labeling all 70,000 products on its shelves with the amount of carbon generated from the production, transport and consumption of those items.

The Unilever Group Unilever is one of the world's leading food producers, and household and personal care product manufacturer. The company owns 270 manufacturing plants across six continents. It employs around 174,000 people in more than 100 countries worldwide. The company has out-performed others in the environmental and economic dimensions by strategically focusing on achieving a long-term sustainable business model. This is reflected through a decline in the ecological footprint of the company. The company has initiated the Sustainable Agricultural Initiative (SAI) and the Lead Agricultural Program to promote the adoption of a responsible approach towards farming practices and has also published guidelines for sustainable farming practices. Unilever has developed the 'Greenhouse Gas Profiling Tool' in order to assess the environmental impact of its new products. It also creates nutritional awareness among consumers by labeling the nutritional value of ingredients on packets. Source: DJSI World

Wal-Mart - Profitable Sustainability

Wal-Mart & Suppliers WSJ, July 17, 2009, “Wal-Mart to Assign New “Green” Ratings”

ENGAGING STAKEHOLDERS

Stakeholders

Engaging Stakeholders While executive support is a critical key component to business success, it is not the only form of leadership present in an organization. Business sustainability leaders understand the value in leveraging their internal resources as well as their key business relationships. Whether led by a sustainability executive or traditional management, the pursuit of long-term business sustainability enables: – Employees: Create incentives to lower costs, initiate process improvements, and stimulate innovation. – Customers: Establish expectations that are defining products and service attributes. – Suppliers: Align supply chain expectations to drive sustainable material requirements and efficiencies. – Local Community: Defined framework for initiatives carried out at the local level through partnership with community groups, local businesses, and governing bodies. – Investors: By comprehensive and accurate reporting; e.g., CDP, DJSI. – Others? Source : / /

BENEFITS

Benefits of Sustainable Operations The application of sustainable operations can result in significant business benefits including: Greater operational efficiencies Cost reduction Positive publicity; improved brand >incremental revenue Respect from the local community Staff loyalty Conservation of the environment

ADDITIONAL INFORMATION

Recommended Reading Books: Anderson (1998), Mid-Course Correction Brown, Christopher Stephen. (2005). Sustainable Enterprise Cunningham, William P. (2007), Environmental Science Doppelt, Bob (2003) Leading Change Toward Sustainability Elkington (1997), Cannibals with forks (The “Triple Bottom Line”) Epstein, Marc (2008), Making Sustainability Work Esty, Daniel C and Winston, Andrew S. (2006), Green to Gold Galea, Chris (August 2004). Teaching Business Sustainability Hawken, Paul (1999) Natural Capitalism Hawken, Paul (1993), The Ecology of Capitalism. Holiday et al, (2002), Walking the Talk McDonough/Braungart (2002), Cradle to Cradle Meadows, Donella H. (1992), Beyond the Limits Savitz, Andrew W. & Weber, Karl (2006) Triple Bottom Line Willard, Bob (2002), The Sustainability Advantage

Strategic Sustainability Consulting

Bentley University Global Business Symposium - Sustainability May 17 th Note: free for students; send me an if interested.

Additional Information